Annex A
COST OF THE GALILEO PROGRAMME
DEFINITION PHASE
The definition phase of the Galileo programme,
which began in 1999 and was completed in 2001, was primarily funded
by ESA with other funds coming from the EC's Trans-European Networks
(TENS) and 5th research framework programme. The total cost of
the definition phase was €133 million (£91 million)
at 1998 prices, with ESA contributing €93 million (£63
million). ESA's budget is provided by subscriptions from member
states. The UK share of costs for this phase was €15.3 million
(£10.4 million).
DEVELOPMENT AND
VALIDATION PHASES
The Commission and ESA are partners on the current
development and validation phases, which are funded in equal measure
from the TENS budget and by ESA.
The budget for the cost of the development and
validation phases was previously set at €1.1 million (£750
million at 2001 prices). The UK is committed to making a direct
contribution of €126.7 million (£86.3 million) for this
phase through its subscription to ESA. Half of this has already
been paid. ESA's current estimate for the overall costs for the
Development and Validation phase is €1.5 billion (£1,023
million) at 2004 prices and this figure is expected to rise further.
Under its constitution ESA is entitled to draw down a further
20% from member states subscriptions when they know the available
funds have been exhausted for a particular programme. The UK's
contribution to this phase of Galileo through its subscription
to ESA is therefore expected to increase by up to €20 million
(£13.6 million).
DEPLOYMENT AND
COMMERCIAL OPERATING
PHASE
Overall Costs. Previously estimated costs for
this phase were €2.1 billion (£1.4 billion) of which
it had been proposed that no more than 1/3rd should come from
the Community budget (€700 million) and 2/3rds (€1.4
billionn) should come from the private sector under the terms
of a PPP (public private partnership).
Community Funding. Under the original proposals
it had been expected that the deployment (building and launching
of the satellites and establishment of the ground based facilties)
of the system would commence in 2006. Of the proposed Community
funding, €500 million would be allocated from the Financial
Perspectives for 2007-13 and €200 million would come from
the preceding Financial Perspectives (ending in 2006).
The Financial Perspective for 2007-13 initially
set the overall budget for the deployment and early commercial
operating phases of Galileo at €1 billion, at 2004 prices.
In May 2006, the European Parliament and the Council capped the
proposed public sector contribution for Galileo at €900 million
(at 2004 prices) in the budget compromise achieved on the financial
perspective 2007-13, Interinstitutional Agreement, subheading
1A ("Competitiveness for growth and employment").
The Galileo financial regulation [COM (2004)
477 Final of 14.07.2004] set out proposals to ensure Galileo was
adequately funded during its early deployment and commercial operation.
The regulation attained partial general agreement in 2005. The
figures in it were always intended to be indicative, as the exact
amount of the Community funds needed for this phase would not
be known until the conclusion of the negotiations on the PPP concession
contract. An assessment was to be presented to Council and Parliament,
as the budget authorities, once the main elements of the PPP contract
had been agreed, along with a revised draft regulation.
Given the current difficulties of the programme,
it will now be for Council to decide on future scenarios for taking
the programme forward. Once Council has taken a decision it is
expected that the Commission will then bring forward a revised
draft EC financial instrument on the funding of Galileo (during
2007-13) for the Council and the European Parliament to ratify.
There has been no political discussion of potential funding commitments
for the public sector beyond 2013.
SUMMARY
These costs are shown in tabular form below:
| | |
| |
| Phase | Status
| Original estimate | Current Estimate or total budget cost
| Direct UK contribution (ESA contributions)
|
| | |
| |
| 1. Definition phase (1998 prices): |
Complete | 80 (£54) | 133 (£91)
| 15.3 (£10.4)
(paid) |
| 2. Development & Validation phase (2001 prices):
| ongoing | 1,100
(£750)
| 1,502
(£1,023)
(current
estimate)
| 126.7
(£86.3)
(half paid)
|
| Total (phase 1 & 2): |
| 1,180
(£804) | 1,635
(£1,114)
| 142.0-162.0
(£96.7-£110)
|
| 3. Deployment and Commercial Operational phase (2004 prices):
| Not started | 2,100 (£1,430)
(2/3 of which from the private sector)
| 900
(£613)
(from the Financial Perspectives
2007-13)
| |
| Total for 3 phases: | 3,200-3,400
(£2,180-£2,315)
(public & private)
| 2,535
(£1,726)
(allocated from the public sector)
| 142-162
(£97-£110)
| |
| | |
| |
| | |
| |
In 2004 the estimated cost of the development and validation
phase of the project increased. The most significant increase
arose from the additional security elements that had not been
factored in, the need for an additional test satellite to secure
the Galileo signal frequency and an increase in labour costs.
The additional funds needed amounted to approximately €400
million. The EU agreed to provide half, mostly from a reallocation
of the TENs budget, while ESA asked individual Member States to
provide the other €200 million. The UK announced in May 2006
that it would provide an additional contribution to ESA of €31
million (£21 million).
OTHER FUNDING
In addition to providing 50% of the budget for the design
and development of the programme, the Commission have allocated
research and development funds for Galileo from under their Framework
Programme budget as follows:
|
| Phase | Status
| Budget for Galileo related Projects
|
|
| FP5—(up to 2001) | Allocated and complete
| €30 million (£20 m) |
| FP 6—(2002-06) | Allocated / not all schemes complete
| €110 million (£75 m) |
| FP7—(2007-13) | 1st call to be published shortly (€40m—2007)
| €340 million (£232 m) |
| Total budget | | €480 million (327 m)
|
|
| | |
EUROPEAN GEO-STATIONARY
NAVIGATIONAL OVERLAY
SERVICE (EGNOS) SUMMARY
OF PROGRAMME
COSTS
The United Kingdom has also contributed to the cost of the
separate EGNOS programme. Total EGNOS costs are shown below:
(Not all figures are at the same price base)
|
| Euros (€) million
| Sterling (£) |
|
| ESA Members States | 216.5 |
147.4 |
| European Commission | 187.1
| 127.3 |
| Other (including national air traffic services)
| 116.6 | 79.5 |
| Total | 520.2 | 354.2
|
|
| | |
The total United Kingdom element of this (including contributions
from NATS plc), funded through subscription to ESA is €55.68
million (£37.68 million).
The failure of the current concession negotiations for Galileo
has also affected the EGNOS augmentation programme since the concessionaire
was to have provided the long-term management and funding structure
necessary for the certification of EGNOS (as part of the integration
of EGNOS into the Galileo programme in accordance with the Transport
Council Conclusions of June 2003). These delays will entail further
costs, which are as yet unclear.
OPERATING COSTS
There are no definitive estimates of what the cost to the
public sector of the continuing costs of operating the Galileo
system might be and these costs would depend upon the exact nature
of the operating arrangement. However, the Commission estimated,
at the time of the December 2006 Transport Council that the gross
financial exposure to the public sector over the 20 year PPP concession
would be €8 billion (almost £5.5 billion—at 2004
prices). This exposure would be offset, to some extent by expected
revenue from the Galileo services.
FUTURE COST
ESTIMATES
In its Communication of 16 May 2007 the Commission put forward
some approximate figures, based on early assumptions and extrapolations
of data, for the cost of different future options for the procurement
and operation of Galileo. These figures are intended for comparative
purposes between the options. They indicate a total required public
sector budget commitment, including for infrastructure, availability
payments (or operating costs), and replenishment costs, over the
period 2007-30 of between €9 billion and €12 billion
(£6.1 billion-£8.2 billion), depending on which of the
options is chosen. The public sector costs in the period 2007-13
(the period of the current Financial Perspective) are estimated
at between €2.4 billion and €3.4 billion (£1.6
billion-2.3 billion) compared to the current budget of €900
million. The principle that EU member states would not be required
to fund the deployment and operational phases of the Galileo programme
from national budgets was agreed at the March 2002 Transport Council.
Any increase in the EU contribution to these phases would therefore
need to come from an amendment to the EU budget.
The costs of public sector support for the system would be
offset by revenue return from users of chargeable Galileo services.
Current Commission estimates, based on an independent assessment
for the GSA are for revenues of the period to 2030 of €10
billion. The United Kingdom believes that any such estimates can
only be very tentative. Uncertainties over the potential revenue
streams are one of the reasons given by the Commission in its
Communication for the collapse of the PPP negotiations.
Taking potential revenue returns into account, and allowing
for the delay in such returns being delivered compared to the
upfront investment, the Commission estimate that the discounted
cash flow (Net Present Value) public sector costs of the future
options they have so far considered range between €1.0 billion
(£0.7 billion) and €2.2 billion (£1.5 billion).
These overall estimates are highly dependent on the uncertainties
surrounding the revenue return estimate.
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