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UPDATE 1-Galileo satellite project needs extra $2.5 bln-EU
January 18, 2011 / 5:24 PM / 7 years ago

UPDATE 1-Galileo satellite project needs extra $2.5 bln-EU

* The 3.4 bln euros plan needs extra 1.9 bln euro injection

* Galileo still on track for initial services in 2014

* Follows sacking of OHB-System boss over Wikileaks claim

* Cables show Galileo contractor saw final cost near 10 bln

(Adds Wikileaks detail)

By Pete Harrison

BRUSSELS, Jan 18 (Reuters) - European space programme Galileo is over budget and needs a further 1.9 billion euros ($2.5 billion) to make the satellite navigation system operational, the European Commission said on Tuesday.

The news comes a day after the boss of one of the companies involved in the project was fired over allegations he called it a waste of money and predicted an even bigger final bill.

Most recently billed at 3.4 billion euros across 2007-2013 -- Galileo has been slowed by disputes over funding that only ended when the 27-nation European Union agreed to invest public money when commercial backers withdrew in 2007.

The system of 18 or more satellites aims to be operational by 2014, rivalling the dominant U.S. Global Positioning System network and plans by China and Russia to launch their own systems.

About 1.2 billion euros of contracts were awarded last year to companies including Italy’s Finmeccanica SIFI.MI, Thales of France (TCFP.PA) and OHB Technology (OHBG.DE) of Germany. But not everything has gone according to plan.

“3.4 billion euros is not enough to complete the infrastructure resulting from the Galileo programme, owing to the increased cost of the development phase, the increased price of launchers, the lack of competition for the award of some packages...,” the EU’s executive Commission said in its mid-term review of the project.

“An additional financial injection of some 1.9 billion euros will be needed to complete the infrastructure of the Galileo programme.”

WIKILEAKS

U.S. diplomatic cables obtained by Wikileaks and published on Norway’s Aftenposten website last week quoted Berry Smutny, chief executive of satellite construction contractor OHB Technology unit OHB-System (OHBG.DE), saying the final cost of Galileo would balloon to 10 billion euros. Smutny was also quoted calling Galileo a “a waste of EU taxpayers’ money”.

On Monday, OHB’s board sacked Smutny over the alleged conversations, even though a week earlier it appeared to stand by his denial of the comments he was reported to have made.

Europe’s industry commissioner, Antonio Tajani of Italy, said on Tuesday he was committed to bringing Galileo to fruition, to compete in a market for satellite services estimated at 240 billion euros in 2020.

“Galileo will allow Europe to compete in the global space technology market and to impose itself as one of the leading players in a growing sector, characterised by increased internationalisation and the entry of emerging economies,” he said. (Additional reporting by Maria Sheahan in Frankfurt; Editing by Rex Merrifield and Andrew Callus) ($1=.7493 Euro)

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