EU to Pay Entire Bill for Galileo Corporate Partners Feared Project Risks

By Judy Dempsey

The European Commission said Thursday that the troubled Galileo satellite navigation system would be financed wholly by public money after the industrial consortium chosen to build and operate the ambitious technological project failed to reach terms. Michele Cercone, spokesman for Jacques Barrot, the EU transport commissioner and the official responsible for the Galileo project, said the eight- member consortium had failed to respond adequately to an ultimatum the commission made in March.

“At the moment, I would say that the reaction is definitely insufficient,” Cercone said.

He also said that the consortium was not prepared to carry any risks, nor provide the financing which would have been part of a special public-private partnership initiated by the commission. Instead, European taxpayers will foot the bill.

“This is what the consortium wants or plans the public authorities to do, to guarantee both the risk and the debts of Galileo,” Cercone said.

Barrot had asked the consortium to put aside its internal differences and agree on a chief executive, a location for its headquarters and a management structure – issues which were supposed to have been settled 18 months ago.

Consortium members had also feared they would not make an adequate return on their investment. The Pentagon’s rival Global Positioning System, or GPS, was funded wholly by U.S. taxpayers.

Though still on the drawing board, the Galileo project, which will eventually entail putting 30 satellites into orbit, is supposed to provide a navigation system of unprecedented accuracy. It is expected to offer at least the same performance as GPS, if not better. Only one satellite has been launched so far, and commission officials said that despite the setbacks, they were still hoping that the operational starting date of late 2010 or 2011 could be achieved.

Officials said the commission would put forward its own proposals next week to salvage Galileo and present them to a meeting of EU transport ministers early next month.

Galileo, which was announced with great fanfare in 2004, has already cost 1.2 billion of public money. Commission officials said an additional 2.2 billion of public funds would be required to cover the short-term costs. The private sector had initially agreed to finance up to 2.5 billion of the total 7 billion cost that would be spread over 20 years.

The consortium, consisting of European Aeronautic Defense & Space, Alcatel-Lucent and Thales of France, Finmeccanica of Italy, AENA and Hispasat of Spain, Inmarsat of Britain and TeleOp of Germany, had initially agreed to a private-public partnership with the commission.

The plan was that the consortium would gain long-term concession rights to operate Galileo and have a share in the profits. In recent months, though, the companies began to get cold feet because of the risks involved.

(c) 2007 International Herald Tribune. Provided by ProQuest Information and Learning. All rights Reserved.