It is three and a half years since Sea Launch emerged from bankruptcy protection under the ownership of Russian rocket manufacturer Energia.
It has been a slow recovery, stymied by the launch failure of Intelsat-27 in February 2013. But, with its return…
It is three and a half years since Sea Launch emerged from bankruptcy protection under the ownership of Russian rocket manufacturer Energia.
It has been a slow recovery, stymied by the launch failure of Intelsat-27 in February 2013. But, with its return to flight scheduled to take place in May and plans for a new dual launch capability well under way, the company is optimistic about its future. SatelliteFinance’s Ed Ansell speaks with Sea Launch CEO Sergey Gugkaev about what lies ahead for the launch service provider.
Ed Ansell: Sea Launch said in 2013 that it was looking to secure 3-4 launches per year to reach a breakeven point – how has that gone and is it still your aim?
Sergey Gugkaev: From a financial perspective, yes, our target is still four launches per year.
We haven’t been able to secure the four launches for this year, and probably won’t for 2015. But we have a launch that will happen in less than a month with Eutelsat, we have an option for another launch with Eutelsat, and we have commitments from other customers who have supported us – Intelsat and EchoStar.
We will also be presenting our new dual launch capabilities in 2016 with the AngolaSat and Energia 100 satellites.
EA: So in terms of getting new contracts, you’ve said the dual launch capability will open up a new customer base, but are you concerned about not securing new launch deals in the meantime? And why do you think that is?
SG: There are two aspects to this: Am I concerned? Yes, we’re all concerned. We’re not doing as well as we’d planned. But do we see a good future for us? Yes, because we’re now working on expanding our market share with Russian satellites.
We had a delegation from a Russian satellite manufacturer that visited our home port facilities a couple of weeks ago, and we have been discussing potentially cooperating to launch Russian civil satellites.
EA: ILS has typically had a dominant position in this area – so have you managed to persuade not just the Russian civil market but also Roscosmos to work with you?
SG: Absolutely because the satellite manufacturer we have been talking to is 100% owned by Roscosmos. We’re not seeking to launch any military missions, for obvious regulatory reasons, but there are quite a few launches coming up on the civil manifest, weather satellites for example, that we are absolutely able to launch.
For Roscosmos and for other governmental bodies it’s always good to have a choice.
EA: How close are you in signing a deal with one of those, is it just early stage talks?
SG: We are in an early stage but as you know Russia’s reforming of its space industry is happening pretty fast. They’ve now moved into the new offices in Moscow and the new head of United Space and Rocket Corporation has already moved from Roscosmos. There is a wish from the higher officials in Russia to make this reform, and to make it as fast as possible in such a conservative industry as the space industry.
EA: In terms of how the reform will impact Sea Launch, do we know whether Energia is going to be part of United Rocket and Space Corporation? Seeing as the Russian government does not own the whole of Energia.
SG: For now Energia contributes 38% to this corporation, that’s what the government holds. We don’t know if Energia will sell the majority to URSC. That is something that is decided on the governmental side.
EA: But at the moment it must be difficult for Sea Launch to know how it might impact yourselves going forward – has it affected what your plans or do you just put it to one side and carry on with the plan you developed with Energia?
SG: No, we’re following closely what’s happening in Russia and what’s going on with this United Rocket Corporation, because it is supposed to not only provide a unique technical policy for the industry but also provide a business policy for all Russia-related space companies.
It’s hard to say how this will impact Sea Launch for now, but it might prompt quite important changes for all Russian vehicles.
EA: Deputy Prime Minister Dmitryi Rogozin recently mentioned Sea Launch and the potential for taking it over and maybe even moving the company back to Russia. Have you had any discussions with him on this or was it just an aside as part of wider talks on reforming Russia’s space industry?
SG: We didn’t have discussions with Mr Rogazin. It was a release that was based on his opinion on how Sea Launch should look like. The buyout of shares is one story, but he also said he wanted operations to be moved to Eastern Russia. There’s a big political component in this release, so for us it is quite hard to comment.
EA: But that’s an issue because if you’re moving to Russia then certain contracts and your relationship with the US could be affected. So are you going to try to discuss this with them or are you just keeping an eye on it and you’ll wait to see what happens?
SG: No, we’ll certainly be discussing these kinds of questions with Russian officials. There might be solutions and there might be some decisions in the middle.
EA: Has Sea Launch’s Ukrainian element – the maker of the rockets – been impacted by recent events? Is it something that concerns you?
SG: The last part of the production is carried out in the Ukraine and the export of the launch vehicle comes from the Ukraine to the US.
We don’t see a major issue in this chain. We’re in constant contact with our factory that’s based in the eastern part, which is Russian speaking and historically has always been very close to Russia, so unless something dramatic happens – and we all pray that it doesn’t – we think our supply chain will remain stable.
EA: And that’s quite an important aspect, because supply chain issues previously helped push Sea Launch into bankruptcy.
SG: Absolutely, and I mean the supply chain had financial problems from the beginning – we had delays from the factory, etc.
On the political side we had something similar in 2008, and there have been big statements from Russia and the US, like introducing sanctions, but it hasn’t affected us.
EA: On a brighter side, Russian export credit agency EXIAR has been very vocal about aggressively supporting the space sector. Have you had talks with them and, in your contract bids from now on, are you looking to add that as an integral part of your offering?
SG: We would certainly be very interested to introduce such an instrument in our proposition. We have been in contact with EXIAR. Around 80% of our rocket components come from Russia, so there are certainly things to be done in that respect.
EA: How much has SpaceX’s entry into the launch market made it difficult to bid on deals? They’ve undercut everyone and has that had a knock on effect in the wider launch industry?
SG: Absolutely, we feel that there will be more price changes in the market and companies will have to adapt themselves to it. Our response is that we are introducing this dual launch capability which will affect the final price for the customer.
EA: On the dual launch capability, ILS has been trying to get an arrangement with manufacturers like SSL and Boeing to make their products fit the Proton. Are you pursuing a similar compatibility capability for the Zenit?
SG: We will start with the two Yamal platforms that we will be launching, which are quite small. But we also have an ongoing RfP for the new fairing that we want to implement.
In addition, we have a reengineering programme that we are thinking about that will permit us to provide a more competitive price for customers.
EA: And is that beyond the dual fairing?
SG: It’s the dual fairing, the optimisation of our processes, and some of the direct and operating costs of our vessels. It’s a global programme and we certainly acknowledge that the market is changing. Our launch system is flexible enough to change a lot of things.
EA: France’s Arianespace has called on the US government to tap more international launches – do you agree with that?
SG: There have been those discussions since the beginning of the programme. I think for us at some point it has to be an either/or decision. I don’t think you can launch both civil Russian and civil US missions.
EA: So at the moment it makes more sense to target the civil Russian market than the civil US market?
SG: Right, we can’t be Russian and American at the same time.
EA: Lockheed Martin, which has struggled themselves to sign commercial deals, recently announced a refund or re-flight deal for their launches. Is this something that you would also look at to try to grow market share?
SG: Back in the day we had launch risk guarantees (LRGs), and Arianespace have always included a free refund, so the concept is there. But I don’t think we’ve necessarily thought about offering that.
I think it’s a selling point, but the thing is if you’re losing your satellite it’s a problem for you, and whether you launch the next satellite in 2-3 years you’ve already lost your business case. I think we’ll focus our competitive advantage on other things.
EA: Where do you see your competitive advantage and how are you pitching that?
SG: Well it will certainly be our heritage, our pricing, and our schedule is a big point for us that I think we are very competitive on. And we optimise each mission with different inclinations, etc.
EA: Orbital transfer time is a problem with SpaceX and its all-electric dual launches. How close can a Zenit take its launches, can you reduce that time?
SG: We absolutely do that type of optimisation and can cut the orbital transfer time in half.
Another one of our advantages is in launch availability. We’re not competing to launch with government missions like some of our competitors are.
EA: Have you looked at acting as a backup to other launches – given you have all this availability and flexibility there?
SG: We did do that for AsiaSat when they were nervous about their first launch on SpaceX. It’s a matter of timing and our rocket availability.
We’ve said in the past that we don’t want to be in this business just as a back up for everyone else, but if we have openings, we have extra hardware, or if we feel we could get our foot in the door with a customer, such as back them up and if that launch doesn’t happen then we’ll get another one instead, we will.
EA: Do you need to have a revolving credit facility, or have you organised one, to help finance the hardware supply – or do such facilities go through Energia now?
SG: We have refinanced all our external debts. That was a big financial event that happened at the end of 2013. That was not considered to be a revolving credit facility but rather financial support that we got from Energia.
We have four launch vehicles in different stages of production right now. We have a rocket coming out of the factory this summer and we have a block DM upper stage already at the home port waiting for the rocket – we’ve transported two block DMs from Ukraine, one rocket and two block DMs – the other block is waiting for a rocket. So we don’t have a lot of problems on the rockets coming up. Certainly we will need to think about the next order for hardware, but this will be another question.
EA: So you have four in the process, with one ready to arrive in the summer, and none of these include the rocket for Eutelsat. When will you need to order others, is it based on customer orders?
SG: It is based on orders that we have. As we get a customer we push the financing part to move faster.
EA: In terms of your relationship with Energia, has it put any pressure on you to secure any contracts? How much time do you have to secure others?
SG: We don’t have a problematic relationship with our parent company. They obviously know that we have had some problems in the past, they understand the market conditions, they understand that there’s a lot going on in the Russian space industry and there could be a lot of different set ups that could be in place after the URSC is established.
EA: Are you looking to undertake more Land Launch missions? If so, given the difficult nature of your working relationship with Space International Services (SIS), would you still consider partnering with the company again for a Land Launch mission?
SG: Absolutely. We certainly see a future for Land Launch as a party that holds the exclusive rights on the Zenit outside Russian SIS countries, former soviet countries.
As for SIS, we’re working on some legal issues that we have right now, the arbitration process is still ongoing and it might take as long as one more year. A decision might be made earlier than that. It’s difficult to predict.
EA: Would you have to work with them again or would you hope to be able to offer Land Launch on your own?
SG: It’s a question that needs to be thoroughly analysed in terms of legal consequences, but we are sure that we have a strong case regarding our exclusive rights on the Zenit.
What we certainly want to avoid is any dependence on SIS regarding the production. It’s a big thing for our customers, and we really value our relations with them, so we cannot be dependent on someone else. If we delay the launch then we want it to be our fault because our people are in charge of it. We don’t want something to fall beyond our commitments.
