Sea Launch Coping with Russian, Ukrainian Price Hikes

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  Space News Business

Sea Launch Coping with Russian, Ukrainian Price Hikes

By PETER B. de SELDING
Space News Staff Writer
posted: 18 September 2006
02:15 pm ET




PARIS — A sudden, sharp increase in labor and raw materials costs in Russia and Ukraine has forced Sea Launch Co. to renegotiate already signed contracts with its suppliers and accept hefty price increases in new contracts, Sea Launch President Rob Peckham said.

But Peckham denied allegations made by competitor Arianespace that Sea Launch’s new Land Launch venture would miss its mid-2007 debut by up to a year and leave customers scrambling to find replacement launches.

He also said the price increases would not affect commercial customers. “We will deal with this in the family,” Peckham said. “The discussions we are having with our suppliers will not have an impact on contracts we have already signed. Our word is our bond.”

Arianespace Chief Executive Jean-Yves Le Gall, in a Sept. 6 news briefing and Sept. 13 interview, said Sea Launch customers are approaching Arianespace to secure backup options in the event Land Launch’s schedule collapses because rocket hardware is unavailable.

Sea Launch and Land Launch use the identical Ukrainian- and Russian-built rocket system, the Zenit-3. Sea Launch is in the middle of its most successful year — four launches have been performed and two more are planned before January. Its manifest for 2007 is also full. Sea Launch has signed contracts for six Land Launch missions . A seventh, for Israel’s Amos 3 satellite, was contracted through a Russian organization.

Land Launch is scheduled to test its system with the launch of a similar vehicle, the Zenit-2, late this year by placing a Russian government satellite into low Earth orbit. Peckham said this launch will be followed by the mid-2007 launch of PanAmSat’s PAS-11 telecommunications satellite.

Le Gall said the demands placed on Zenit-3 manufacturers by its Sea Launch and Land Launch manifests, coupled with the cost increases in Russia and Ukraine, have caused customers to come to Arianespace looking for launch opportunities.

The Evry, France-based Arianespace is facing its own cost increases in Russia. The company is purchasing Russian Soyuz rockets that, starting in late 2008, will operate from Europe’s Guiana Space Center in French Guiana.

But Le Gall said Europe’s Soyuz initiative from the start has paid its Russian suppliers well enough to absorb the kind of cost increases now washing through the Russian economy. Le Gall said commercial Soyuz launches from French Guiana are priced at between 35 million and 40 million euros ($44 million to $50 million). For the larger Zenit-3 rocket used for Land Launch, he said, introductory prices have been as low as $28 million.

“We have always given Soyuz builders more favorable financial terms than what they [Sea Launch] have paid [ their Ukrainian prime contractor] Yuzhnoye and the other suppliers,” Le Gall said. He said the price differential explains why Soyuz contractors have not asked Arianespace to renegotiate contracts in recent months.

In a Sept. 7 interview here, Peckham declined to discuss prices but conceded that the Sea Launch and Land Launch operations in 2007 and 2008 would be limited in part by the lack of rocket hardware.

“I have been spending 80-90 percent of my time on this specific issue,” Peckham said of the cost increases reported by his suppliers. “We think it will take about two years to be absorbed, and that by 2009 the entire system will have adjusted to the new cost environment. But as we speak today I can tell you that we are sticking with plans to launch PAS-11 in the third quarter of 2007.”

Two Land Launch customers told Space News they had concerns about the schedule, but that for the moment they were assuming the company would not permit a dramatic slip in its schedule.

“We have been very upfront with our customers about our situation from the beginning,” Peckham said. “In the past at Sea Launch we have refrained from signing contracts when we weren’t sure of our ability to deliver. The same applies to Land Launch. We will not sell what we do not have.”