Q&A | OHB CEO Fuchs says Arianespace needs to reassess shareholder roles
As both a satellite prime contractor and a major component supplier for Europe’s Ariane and Vega rockets, OHB SE of Germany is in the thick of the discussion on Europe’s future space policy – to be set this year by the European Commission – and the evolution of the Arianespace launch consortium.
What is more, OHB Chief Executive Marco R. Fuchs is president of the Eurospace grouping of space companies.
Arianespace is preparing to enter a new era as a company owned by Airbus Safran Launchers. In addition to the European Commission’s space policy, expected by December, the 22-nation European Space Agency has scheduled a December meeting of its ministers to set a mid-term policy and budget direction.
Fuchs spoke with Space News staff writer Peter B. de Selding.
The EU Commission is scheduled to produce a space policy late this year. Has the EU been consulting Eurospace members?
My 3-year term as Eurospace President ends on July 1, but I can say that up to now, there has been an active consultation with Eurospace, which represents the European space manufacturing industry and is therefore a major stakeholder. We will soon formalize soon contribution, which is very much expected by the Commission.
Is Eurospace proposing any fundamental difference between ESA and the Commission?
No, and I don’t think it should change. ESA has a lot of technical capability and the commission does not want or plan to duplicate that. But the commission, especially with satellite navigation and Earth observation, represents much of the user community.
ESA-Commission relations are getting easier now that things are moving along with Galileo and Copernicus. The debates are not as complex as they were a few years ago. It is programmatically clear how Galileo will be completed. Copernicus, as we saw with the recent launch, appears to be in a good position. And the Commission’s space budget seems stable.
Is Eurospace submitting detailed program advice – for example, on whether EU funds should be used to support the Guiana Space Center spaceport?
We are not going into these kinds of details. They don’t need our advice on that.
Eurospace has been critical of the commission’s Horizon 2020 research program for distributing limited financial resources over too many projects. Is that still a problem?
We now have program clusters in Horizon 2020, which will give some focus. For example, there is a cluster for electric propulsion. It’s always a debate between conflicting interests: The larger companies want larger programs and in orbit demonstrations. The smaller companies want a greater number of programs. We need to find a balance.
Horizon 2020 is evolving. I think they are listening to industry ideas. It’s not so easy for the commission to say: Let’s do in-orbit demonstrations. That would create overlap with ESA. I understand the commission’s point. I also understand industry’s point: We are lobbying the commission in a similar way we lobby ESA. But it’s not the same animal.
The European Space Agency’s 22 governments meet in December to set mid-term policy goals. With the launcher issues already settled, do you expect any major new program initiatives?
ESA briefed industry in mid-May and gave us an overview of what they want to propose to member states.
There are no major new programs. It is about continuity, evolution and finishing things up. The fact that Ariane 6 milestones are scheduled for September and well under way means there is no big drama.
The debate will be around exploration and crewed spaceflight. We appreciate the efforts made by ESA’s director-general to initiate innovative concepts, even within the constrained budgetary environment. This should of course be further confirmed by operational projects in the future.
So I don’t expect major surprises at the conference, which is the right thing to do at this stage. We are now having conferences every two years. This didn’t used to be the case.
The political leaders of three German states – Baden-Wuerttemberg, Bavaria and Bremen — wrote the chancellor urging support for space policy. They did this for the last ESA ministerial as well. Do any other governments in Europe this?
I am not aware of any. In Germany, industrial policy is done strongly at the Länder level, not only for space but for other sectors as well. The tradition is that state governments do industrial policy, so it’s not unusual to see state governments pushing policies to the federal government. The German level of participation to Ariane 6 was decided mainly because Bavaria pushed for it.
Wouldn’t this be useful in Italy, the U.K. and maybe Spain?
It’s possible, but the Länder are really powerful within the German Federal government and they are also powerful in the political parties. The German political system is based on the legislative competence of the Länder and we have in addition to the Bundestag quasi a governors’ council as the second chamber of Congress, the Bundesrat. Chancellor Merkel will take this letter seriously.
The letter highlights the importance of space, with telecom, Earth observation, and human spaceflight. It is basically political support for the government to say, space is important. It helps Economics Minister Gabriel to negotiate with Finance Minister Schäuble.
OHB is developing the SmallGEO line of geostationary orbiting telecommunications satellites. The first will be launched for Hispasat of Spain. Are you marketing it already?
The first satellite for Hispasat is still completing testing so we are carefully marketing it. We want to show that the first one works.
When is the launch?
The satellite should be ready for a launch before the end of the year. We have just completed the thermal-vacuum tests and will proceed with antenna testing in a compact antenna test range.
Europe’s Vega small-satellite launcher has a perfect record over its first six launches. But the cost remains an issue. How is Vega doing from where you sit?
We are optimistic about Vega. Launchers are all about cadence: If you do two per year, it is very hard. If you do 10 per year, that would be fantastic.
We are still in the early stage, when institutional launches are very important and where everybody tries to get the price down. We are in charge of two satellites to be launched by Vega: OptSat [Israeli-built high-resolution optical Earth observation satellite for the Italian Defense Ministry], and the Italian Prisma hyperspectral observation satellite.
Germany’s minister responsible for space, Brigitte Zypries, recently said Germany would build a second Vega first stage/Ariane 6 strap-on booster production line at your MT Aerospace facility in Augsburg. Isn’t this only if MT demonstrates a 20-30 percent cost savings with new technology?
It’s both. Germany has pledged 23 percent of the ESA budget for Ariane 6 and will finance, on its own, the second production line. This decision demonstrates the government’s confidence that the new technology will generate the expected cost savings. MT Aerospace is developing the so-called infusion-based production method in cooperation with the Center for Lightweight Production Technology (ZLP), a national research center that is part of the German Aerospace Center, DLR. We believe this new technology is cheaper and more efficient than today’s used carbon fiber processes.
The heavy-lift Ariane 6, to debut in 2020, is tied to Vega by the Ariane 6 strap-on boosters, which are the same as Vega’s first stage. Is it on schedule?
Yes, it seems that it is going very well. The design work is progressing in a very collaborative way between the prime contractor, Airbus Safran Launchers, and the main subcontractors, including us. The ESA Program Implementation Review should be completed in September.
Is there a concern at OHB, as at Avio, about the future landscape dominated by Airbus Safran Launchers, which will become a 74 percent owner of Europe’s Arianespace launch provider?
With ASL about to buy the shares held by the French space agency, CNES, Arianespace’s structure and independence have changed. We always felt comfortable with CNES as a shareholder, because it made Arianespace a public-private partnership. That meant obligations on the public side, even beyond CNES and France. This has been, in my view, a good connection. Just think about what happens if a major problem occurs, such as launch failures or a dramatic change in foreign exchange.
Obviously things have been decided differently and life changes. But we, as a shareholder, do have an interest in minority shareholder protections, such as super-majority requirements in certain cases.
As a minority shareholder you cannot have a strong influence on day-to-day business. But the small shareholders do represent the supplier industry and the second product – Vega – through Avio. They are also the industrial representation from other participating and financing nations. There needs to be a balanced package for minority rights within the new shareholder structure, which is what we are discussing with ASL. This needs to be concluded soon.
We are not naïve about the balance of power. But to keep Arianespace as a separate legal entity, it should also have a purpose and identity of its own.
Is the debate over the price of Arianespace shares?
No, we are not at all in pricing discussions. OHB does not intend to sell its shares or buy shares. We want to understand what we have. What does it mean to have 8.3 percent of a company that is now majority owned by ASL at 74 percent, and Airbus with another nearly 4 percent?
So we are basically shareholders of a company in which ASL and Airbus own 78 percent.
Arianespace was created as a joint venture of suppliers. What is now 78 percent ASL and Airbus used to be a more diverse shareholder group, with a large number of individual companies which, because of mergers, are now all in one pocket.
For the other companies the question is: What does it mean to be shareholders of the remaining 22 percent? Are we shareholders or is this more like a supplier council?
We need to talk about what our shares mean. Is the company about making money? Is it about protecting supplier interests? About keeping governments active in the business?
The question for us is: What are the rights and obligations attached to the shareholding? It cannot be the same as it was before, with a company now with a clear majority that can consolidate and totally control Arianespace. They cannot simply buy the majority stake, which they have, and then say nothing has changed for us.
Might you want to purchase shares to get beyond your current 8.3 percent?
I don´t know if that would be a good investment or not. We want to keep our shares. Airbus would have to make squeeze-out and a mandatory buyout offer if Arianespace was a listed public company. There would be no debate about this.
It is not a public listed company, but the underlying reasoning here — that if you buy stock beyond a certain threshold you are obliged to make an offer to the remaining minority – is something that ought to be discussed.
Is it odd that Avio, Vega’s prime contractor, has just a 3.4 percent of Arianespace?
What is the difference between 3 percent and 13 percent and 23 percent? I have no idea. If the governance says that with 51 percent you do what you want, then there is no difference.
Having Avio at 3.4 percent looks small. But I expect Avio would not put in money into a company to get to 13.4 or 23.4 without understanding what these additional shares would buy them in terms of power and return.
We need a catalogue that says that at least some issues need to be decided by a super majority.
What’s your position on future Galileo navigation satellite orders? ESA’s ITT went out in May and the new batch should be decided by the end of the year.
We are working on a proposal. The proposals are due July 19. We are working on a competitive proposal, as are others. I expect proposals from Thales Alenia Space and from Airbus in addition to ours.
OHB and SSTL of Britain are bidding jointly again?
Yes. We are successful together with SSTL, and will bid with them.