4 Global satellite navigation system
| (25879)
11834/04
COM(04) 477
| Draft Regulation on the implementation of the deployment and commercial operating phases of the European programme of satellite radionavigation
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| Legal base | Articles 155(1) and 156 EC; co-decision; QMV
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| Document originated | 14 July 2004
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| Deposited in Parliament | 13 August 2004
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| Department | Transport |
| Basis of consideration | EM of 20 August 2004
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| Previous Committee Report | None; but see (24831) 12058/03, (25400) 6470/04, (25606) 8926/04: HC 42-xxi (2003-04), para 1 (26 May 2004) and (25690) —, (25715) 9941/04: HC 42-xxii (2003-04), para 12 (9 June 2004)
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information requested
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Background
4.1 The European Community has a two-phase policy for developing
a global navigation satellite system (GNSS). The first phase,
GNSS 1, is the European Geostationary Navigation Overlay System
(EGNOS) programme. The second phase, GNSS 2, is the programme,
named Galileo, to establish a new satellite navigation constellation
with appropriate ground infrastructure. It is based on the presumption
that Europe ought not to rely indefinitely on the GPS (the US
Global Positioning System) and GLONASS (the Russian Global Navigation
Satellite System) systems, augmented by EGNOS. Galileo is being
carried out in conjunction with the European Space Agency (ESA).
4.2 The Galileo programme has four phases:
- the definition phase, which
ran from 1999 to 2001, during which system architecture was designed
and services to be offered decided;
- the development and validation phase which runs
from 2002 to 2005 and covers development of the satellites and
the system's ground components, as well as validation in orbit.
This phase is under the management of the Galileo Joint Undertaking
(JU), which has been set up for a period of four years;
- the deployment phase covering 2006 and 2007 —
building and launching of the satellites and establishment of
the entire ground-based component; and
- the commercial operating phase due to begin in
2008 — management of the system as well as its maintenance
and updating.
The deployment and operational phases of Galileo
will be run under a public-private partnership (PPP) concession
under the control of the Community's Galileo Supervisory Authority.
4.3 Over the last five years we have reported to
the House on many aspects of the Galileo project, most recently
in May and June 2004.[3]
The matter has also been debated twice in European Standing Committee
A, the last occasion being 7 June 2004.[4]
The document
4.4 It has been agreed that the public sector share
of the costs of the deployment phase and of the initial stages
of the operational phase (while income streams build up) should
be no more than one-third. Indications from the consortia bidding
for the PPP concession are that this share is achievable —
provided that they have some guarantee of income levels. The draft
Regulation is intended to ensure that the programme is adequately
financed during its early years until income streams have developed
sufficiently to meet all operating costs. It provides for €1,000
million (£675.49 million), in a new line in the Community
budget, to be used by the Supervisory Authority to part-finance
the deployment and operating phases during the period 2007-2013.
The Government's view
4.5 The Minister of State, Department of Transport
(Dr Kim Howells) tells us:
"A key aim of the UK Government for the Galileo
programme is to ensure the creation of an effective, value for
money, Public-Private Partnership for the deployment and operating
phases. This will reduce as far as possible any future financial
risk to the public purse and allow the appropriate sharing of
project risks between the public and private sector. Levering
in private finance to fund the deployment of the satellite constellation
and ground infrastructure, through the formation of the PPP, will
help ensure that the right incentives are in place for project
risks to be effectively managed, improving the value for money
of the project as a whole. In order to achieve this, it will be
necessary for the consortia that are bidding for the PPP concession
to demonstrate that the programme will be capable of generating
sufficient income when operational to secure an adequate return
on this investment.
"A number of assumptions have been incorporated
into the Commission's proposal and the Government intends to question
the realism of these. In particular this includes the timetable
for deploying the satellite constellation and therefore the full
operational capability of the system — which we and ESA
now expect to be later than the Commission's estimate of 2008.
"The original stated aim of the Galileo project
was to have no public subsidy beyond the deployment stage of this
programme. Whilst this is now clearly unrealistic it is very concerning
that the Commission is seeking to commit an extra €1,000
million before the Concession negotiations for the PPP have been
completed. It is also unclear as to how the Commission has derived
this figure and we will therefore be probing the basis for the
assumption that the public sector finance requirement will be
no more than €1,000 million, divided equally between the
deployment and operating phases. We will therefore stress that
agreement to the proposal must await a full assessment of the
outcome of the concession bidding process."
4.6 On costs the Minister also says:
"The Commission's proposal is intended to ensure
that the programme is adequately funded until it is able to meet
all costs from revenue. It has been drafted on the assumption
that the bids from the potential operators of the PPP concession
will provide the anticipated private sector funding of at least
2/3 of the deployment costs and an increasing proportion of the
operating costs that will rise to the full requirement by 2012.
However the financial assumptions underlying the Commission's
estimate of the costs should in our view be treated with extreme
caution and must be reviewed once better estimates emerge."
4.7 On the budgetary provision in the draft Regulation
the Minister says:
"The Commission is proposing a budget of €1,000
million for the deployment and operation of Galileo over the period
2007 to 2013. This is a considerable increase in comparison to
the current Trans European Networks programme expenditure of €550
million in total for the development phase (this sum is matched
by funding from the European Space Agency, of which the UK contributes
€95 million). However, it will not be possible to agree this
budget until the overarching negotiations on the new Financial
Perspective have been agreed.
"The UK, along with five other Member States
(Germany, France, the Netherlands, Austria and Sweden), believes
that the Union's priorities can be funded by a budget stabilised
at 1% of EU GNI. The level of funding available for Galileo will,
therefore, need to be consistent with this. The total level of
funding agreed may impact on both the nature of targets and potentially
the balance of priorities of the programme.
"The UK is legally required to contribute to
the EC budget under terms of the treaties establishing the EU
(as of course are all other Member States) and would therefore
meet a portion of the costs of the Galileo programme. Currently
our contribution stands at about 17% (it varies annually) meaning
that €1,000 million of new spending on Galileo would have
significant financial implications for the UK. It is not expected
that there will be any specific call on member states to contribute
to this programme and it will be subject to the normal process
of approval for the budget. By separating the funding for Galileo
into a separate budget line, instead of it being a part of the
Trans European Networks budget, the proposal will improve visibility
of the costs of the programme."
4.8 Finally the Minister tells us that the Transport
Council on 9-10 December 2004 will consider a Decision on the
selection of a concessionaire to manage the deployment and operational
phases of the Galileo programme. The extent of the public sector
contribution will depend on the outcome of this process and the
Government expects that negotiations with at least one of the
consortia bidding for the concession will continue into 2005,
and that it will be well into 2005 at the earliest before the
draft Regulation can be finalised and firm figures incorporated.
Conclusion
4.9 We have been concerned from time to time about
apparently precipitate decisions on the Galileo programme and
continue to be concerned about the danger of a slide towards a
commitment to excessive public sector participation in the costs
of the next phases of the programme. We realise that, because
of both the likelihood that negotiations on the concession will
continue into 2005 and the need to know also the outcome of the
Financial Perspective negotiations, this draft Regulation will
not be ready for adoption for some time to come. But we expect
that discussion at the December 2004 Transport Council will be
significant in regard to the future of Galileo.
4.10 So we should like the Minister to inform
us, in November 2004 and in sufficient time for us to consider
the matter fully again before the Council meeting, of where matters
stand on:
- this document;
- selection of a concessionaire;
- the transparency of costs and the probable
total cost;
- negotiations with non-Member States about
participation in Galileo; and
- the Joint Action to establish a Security and
Safety Board and a Centre for Security and Safety.[5]
4.11 Meanwhile we do not clear this document.
3 See headnote Back
4
See Stg Co Deb, European Standing Committee A, cols 3-26. Back
5
See (25690) -, (25715) 9941/04: HC 42-xxii (2003-04), para 12
(9 June 2004). Back
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