Friday, June 02, 2006

The CAP of the sky?

Lost in space?  An artists impression of a Galileo satellite.Mirroring the lacklustre performance of the “project” as a whole, bad news about the EU’s Galileo satellite navigation system continues to filter through the barriers. So persistent are the reports that the system is in trouble that, whatever the denials, there must be something in them.

It was, in fact, only just over a week ago that we recorded the latest in the gathering woes, with China poised to cream off whatever financial bonanza might accrue from sales of receivers, but now we hear from the AFX news agency, via Forbes that the whole system could be delayed as a result of a funding dispute with the launch contractors.

The primary source of this information is the French daily Le Monde, which is predicting a delay until 2010, two years behind schedule, because no agreement can be reached between the contractors and the commission as who should fund the early period of the system's post-launch operation, before the commercial exploitation is sufficient to make it self-funding.

This is a dispute which has been grumbling on since January - unrecorded by the British media – and stems from the inherent weakness of the commission's financing strategy and a gross underestimate of the costs involved.

Initially funded from diversion of funds from the EU's framework research programme, that source of funding is drying up as there are too many calls on a programme that has been limited by the budget agreement, and because, as a development project, the commission is finding it difficult to justify using funds which are supposed to be dedicated to research.

That leaves individual member states' contributions to the European Space Agency, which are by no means sufficient, with the gap to be filled by the launch contractors. There are eight of these, including EADS, Alcatel, Thales and Finmeccanica, all of whom are looking at having to find the best part of €2.5 billion (up from €2.2 at last estimate, against the original estimate of €1.5 billion) to fund what is, commercially, a highly risky venture.

Needless so say, they are balking at the risk and arguing that member states should share the burden. So far, though, they have been reluctant to do so and the EU, though its own resource, has only been able allocate €900 million from the 2007-2013 budget period.

Rainer Grohe, the executive director of Galileo Joint Undertaking, is taking a tough line in public, telling Le Monde that governments should not have to pay the full balance, but Thales, one of the lead contractors, is countering that many of the potential commercial applications for Galileo depend on political decisions that have not yet been made. On that basis, it considers that "European authorities" should cover the risks.

Despite emollient words from the commission and other official sources, there is no indication that a resolution is in the offing, hence the prediction that the operational date may slip to 2010 instead of 2008.

Such is the prestige riding on this venture that one expects there will be some sort of fudge but, hard money will be needed to keep it on track. At the moment, therefore, the description of "CAP of the sky" attributed by an anonymous wag, is looking to be all too appropriate.


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