Profile: Reversal of Fortune

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  Space News Business

Profile: Reversal of Fortune

By BRIAN BERGER
Space News Staff Writer
posted: 18 September 2006
01:58 pm ET


Randy Brinkley

President, Rocketplane Kistler


I n the two years since Randy Brinkley began his tenure as the head of Kistler Aerospace, the company has emerged from bankruptcy, lost its financial backing, found a new majority owner, completed a merger, and finally won a make-or-break NASA competition that may just be the K-1 rocket’s best chance yet of getting off the ground.

When the former Boeing Satellite Systems president took over Kistler Aerospace in August 2004, the reusable rocket company was in Chapter 11 bankruptcy protection where it had to endure having a $227 million NASA flight demonstration contract yanked away after a successful protest by archrival Space Exploration Technologies (SpaceX), which objected to the way Kistler had been awarded the deal without a new and open competition.

Fourteen months after Brinkley signed on as chief executive officer, Kistler Aerospace was dealt another major setback when its main financial backer, New York-based Bay Harbour Management LLC , announced it would be “radically reducing” its investment. To many observers, it looked like the resilient Kistler, which has been trying to develop a low-cost reusable rocket for more than a decade, had finally run out of lives.

But Brinkley and his former Boeing colleague Will Trafton, Kistler’s chief operating officer, kept at it, hoping to find a new backer in time to propose the company’s K-1 rocket design as the solution to NASA’s need for an alternative to the soon-to-be-retired space shuttle for keeping supplies flowing to and from the space station.

They found that backer in George French, president and chief executive of Oklahoma City-based Rocketplane, who bought Kistler in February for an undisclosed sum. Two weeks later, a new company dubbed Rocketplane Kistler submitted its proposal for NASA’s Commercial Orbital Transportation Services (COTS) re-supply demonstration program.

In August, Rocketplane Kistler won one of the two awards. The other went to SpaceX.

Now Rocketplane Kistler will get $207 million from NASA intended to help it complete the K-1 and conduct a series of three confidence-building test flights culminating in late 2009 with a demonstration mission to the international space station.

Brinkley said Rocketplane Kistler intends to match NASA’s contribution two-for-one with outside investment. If the company can raise the money and successfully demonstrate the K-1’s ability to ferry cargo to and from the station, the company will be in good position by the end of the decade to compete for NASA station re-supply service contracts.

Brinkley, NASA’s former international space station program manager, spoke recently with Space News staff writer Brian Berger about his experience in the launch start-up business and the challenges that lay ahead.


Kistler was still in bankruptcy when you joined the company. Why did you go to work for such a long shot?

The K-1 has the inherent capability to truly impact access to space. Even though it was a long shot, I had great confidence in the technical team. I was also given strong assurances by Bay Harbour that they were going to be able come through with the financing, so I felt it really could make a difference in terms of access to space. Having spent six years of my life on the international space station program, I saw in Kistler a way to allow the space station to move forward and perform the science it was intended for.

When Bay Harbour pulled back its financial support in late 2005, why didn’t you quit?

To be fair to Bay Harbour, NASA’s change in leadership last year and the delays in getting the COTS procurement out the door created a great deal of uncertainty. Bay Harbour made an investment decision they felt appropriate. I certainly didn’t agree with it. I still believed in the inherent capability of the K-1 and felt that as we got closer to COTS, there would be an opportunity to find a strategic investor more inclined to go forward and that’s what happened with George French. He was one of Kistler’s original investors and owns Rocketplane, so he knows the space business. It was a good fit. Bay Harbour remains a minority investor.

Did Kistler have any serious suitors besides French?

We had several discussions along the way, but in our mind it was clear we were not going to be able to get the closure we needed in time to respond to the COTS request for proposals. We started talking with George French at the COTS industry day in December. We were able to complete the transaction in February literally only two weeks before our COTS proposal was due.

How much will it cost to complete the K-1 and conduct your COTS demonstration flights?

Around $600 million to finish the vehicles and complete three flights. That includes the construction of three K-1 orbital vehicles and two lower stages. We really only need one complete vehicle to conduct the demo, but we are building the other hardware in parallel because we want to be positioned at the end of the demonstration period to sell services to NASA and upgrade one of the upper stages to support human flights in the follow-on effort.

How much has been spent on the K-1 to date?

Since the beginning, about $800 million has been raised for Kistler, but only a little over $600 million was spent on the K-1. The other $200 million never made it to Kistler, but was absorbed along the way as part of the cost of raising money and a lot of other things. The financing was very expensive.

When is your next do-or-die financial milestone and how much money do you have to show NASA by then?

I won’t go into the details but we have already received authorization to proceed. We have two upcoming milestones the end of September. One is financial and the other is programmatic.

When do you expect to announce progress in your fundraising efforts?

Investors don’t like to disclose an investment before its finalized, and it’s not appropriate for us to discuss anything like that in advance. But I think we would make an announcement in October, consistent with concurrence from our first round investors.

Assuming COTS is a success, is there room for
Rocketplane Kistler and SpaceX both to sell re-supply services to NASA?

I think so. Our business case doesn’t assume that we get all of the launches, only about half. And it certainly would make sense for NASA to have two suppliers in the interest of assured access.

What guarantee is there that NASA ultimately will buy re-supply services commercially?

It’s a matter of economics. If Rocketplane Kistler or SpaceX can successfully demonstrate that we can provide reliable, affordable transportation to and from the station, it is in NASA’s and the taxpayers’ best interest to use us.

How important is commercial re-supply for the space station
to live up to its potential?

Tremendously important. Ferrying a half-kilogram of cargo to and from the station on the shuttle is probably four times more expensive than what’s being proposed for COTS. Every dollar NASA saves on international space station operations is a dollar that can be used for exploration. And whether we are talking about the shuttle or the Crew Exploration Vehicle , the price point of those systems makes it very difficult to attract commercial entities interested in doing microgravity research.

Is the K-1 going to be cheap enough to change the paradigm?

Cost is an important factor, but there are many others. Commercial entities interested in doing science on the station don’t want to wait two to three years to get through the approval and flight-manifesting process. Once we are operational, we can dramatically shorten those cycle times.

What markets are you targeting for the K-1?

Space station resupply is projected to be about 30 percent of our business. In addition to government and commercial satellite launches, there is also pent-up demand for flying microgravity payloads crowded out of the shuttle manifest. The fact that the K-1 can not only take payloads into space but bring them back down makes the vehicle attractive for free-flying microgravity payloads where the customers would like their payloads returned. On the government side, there is additional opportunity to fly technology demonstrations and return those payloads for post-flight analysis.

Additional markets represent significant upside potential. Until recently, few people would have taken Robert Bigelow seriously, but what he’s done to date is very impressive, and the private space stations he intends to build represent another market opportunity that’s not in our business plan, but represents a significant upside opportunity.