While not out of the woods yet, the Galileo project took significant steps forward last week with signatures being attained from all the companies for the setting up of the Galileo Operating Company (Concessionaire). A leading satellite executive familiar with the situation but requesting anonymity due to the sensitivity of negotiations said, "what I can tell you is that when we finalized the agreement, the first six companies signed last week. The six partners signed the documents, the shareholder agreements, etc. Our Spanish friends could not sign at the time, and it is true that we were frightened that they may find a new reason for not signing the agreements. Finally, Aena signed on [March 16], and [on March 20] Hispasat signed, and we have received all the documents. Now the Concessionaire will be formed. This is purely administrative progress."

The Galileo project is entering a key phase in Europe amid concerns that the project will not be operational in 2011. According to a press report last week, European Union (EU) Transport Commissioner Jacques Barrot had written to the eight companies involved, expressing his concerns of how disputes between the different parties are causing damaging delays for Galileo. EU Transport Ministers have given all the companies involved until May to sort out the differences in terms of appointing someone to lead the company and have a legal structure in place for the operating company.

However, while there are still unresolved questions, the signing of the agreement is clear progress. In terms of some of the issues that now need to be solved, a source said "we have still a lot of hot topics in front of us such as voting on budgets, and appointing a president, for example. These are hot topics, which are not yet solved. But this is a first step and an important one."

In terms of how recent negotiations have gone, the source said "I have heard the Spanish side did not get what they wanted. But, they have signed. What I have heard is there were no concessions made by anyone. They signed because it is true that the program is in danger. But, we still have the Spanish ambitions in front of us. There are still potential obstacles involving Spain. However, these should not be solved politically. I think the Spanish case, while not being solved, is closed for the moment. I think the most important item now is industrial progress."

The source added that such problems were understandable given the sheer size and ambition for the project. "I think it is normal that [with] a program worth billions of euros over the next 20 years, that there will be a few industrial adjustments to be made. So, all the difficulties, be they economical, be they industrial, be they organizational, are understandable."

A Call To ESA

That the European Space Agency (ESA) should also take a more proactive role as disputes between parties in a project this size is understandable. "We would rather ESA be mandated, or be in charge of the overall development of the program," the source continued. "It is a program with such a complex nature, with such a high level of risk for the industry. There is no precedent for this in Europe, or even the world where an industry has taken the development risk of such a large program. So, the risk related to the development and design of the system should remain with ESA. If they are appointed to carry out this task, I think things will go fine. The role [of the companies in] the Concessionaire will become natural. The Concessionaire will procure the satellites. But the responsibility that everything works properly should remain with ESA," the source noted. "The politicians must make sure there is a clear industrial roadmap for the program with an end-to-end vision. If we have this roadmap, all the rest will become natural. When you have the roadmap, the governance of the project will become clearer. A lot of work needs to be done in terms determining the markets for Galileo."

‘Comments Welcome’

The comments of Commissioner Barrot may have done the trick. Patrick McDougal, Inmarsat’s vice president of corporate development, said the call to arms made by Commissioner Barrot had been most welcome.

McDougal said "we welcomed the comments made by Commissioner Barrot last week. Inmarsat has advocated the public ownership of some of these challenges and problems for several months. It had become apparent to us that it was simply not possible for the industry to solve these disputes purely at the industrial level. For lots of reasons, we have been urging people to step forward, put things on the table and start really uncovering what needs to be done, at both the industrial and political level, to get this program back on track."

With a large number of players involved in the project, the disputes in some cases are hardly surprising. In terms of where the core of the disputes are, McDougal commented, "I think there are some basic disconnects in this program that have been lurking underneath the surface, and that are now starting to come out. The most basic one is the asymmetry between a [public-private partnership] approach, which by definition is based on securing the best value for money and which is a very financially disciplined approach to a project, and the previous model of pan-European projects, in which every country expects to get its fair share. These are conflicting objectives, and we have struggled with these as there are a large number of industrial players involved. It has been impossible to resolve these industrial disputes because there is a lot of political motivation behind them."

Swept Under The Carpet

McDougal believes that there is now very little time to solve these issues. He said, "We are trying to force these issues to be resolved today. The easiest thing for any of these pan-European projects is to sweep the problems under the carpet and just manage it from crisis to crisis. We believe we cannot do that anymore. We have to face up to some of these issues, and that means some governments and companies are going to be disappointed. The question is whether enough resolve exists at the political level to make a decision like that and enforce it. I think the resolve is there and is growing, and I think the comments from Mr. Barrot are indicative of that. It is clear that the frustration has grown. People are beginning to ask the question that if we cannot solve this, what is Plan B? There is really is no attractive alternative. So, I think that has led to an increase in resolve."

Back-up plans are going to be have to put together. McDougal said, "There are Plans B, C, D, E, and we have begun to talk about some of those. But, it may not be in the form of a PPP. It would almost certainly lead to delays if we had to go down a different path. You can only go down a path long enough; if it is not working, it is not working. That is why I am happy to see these EU officials step forward like they are."

In terms of how he sees the differences between the parties, McDougal said "in absolute terms, the differences are significant, but in relative terms they are not huge. It is not just a question of euros; there are issues of national prestige. When you cross into that territory, it becomes much more difficult to have these rational compromises. It is not that unusual for big European projects to go through these kind of rocky times before there is some resolution. There needs to be some significant resolution pretty quickly though, or at least the Concession side will be in real danger."

ESA

ESA Director General Jean-Jacques Dordain also waded into debate. Asked what he thought about the commissioners’ concerns, he said "the negotiations between Galileo and the potential Concessionaire are not within the proposed calendar. Clearly, there are delays in those negotiations. I think Mr. Barrot simply aimed to highlight the fact that negotiations are not going as expected, especially in terms of the schedule. These delays in the setting up of the Concessionaire, and the signing of the contract with it, have an impact on our work on [in-orbit validation]. I need to have the Concessionaire in front of me to confirm the requirements of the first four satellites. I also need the Concessionaire in order to put pressure on the calendar, assuming as I am that it will want to generate income as soon as possible. Having read those comments from Jacques Barrot, I have to say that I am more than ready to help him in any way, so he can complete the negotiations with the Concessionaire as soon as possible."

–Mark Holmes