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Galileo Project: Finance

Volume 461: debated on Monday 18 June 2007

To ask the Secretary of State for Transport what estimate he has made of the (a) cost and (b) merits of funding the Galileo project through (i) public and (ii) private finance. (141149)

Galileo is a European Community project which the Government accept should be managed at European level.

The most recent Commission Communication, 16 May 2007, sets out 23-year net present values (NPVs) of:

i. €1.8 billion for a PPP as foreseen, except that four of the deployment satellites would be procured by the public sector, as risk mitigation; and

ii. €2.2 billion for the public procurement of 18 satellites, with a further 12 purchased by the private sector; and

iii. €1.0 billion for the public procurement of 30.

On 8 June Transport Council Ministers concluded that the current negotiations have failed. The Commission has been requested to submit detailed alternative proposals for taking the project forward to the October Council for decision. These should be based on an additional thorough assessment of costs, risks, revenues and timetable. The need for competition in a procurement strategy has been emphasised. The Commission was also requested to bring forward proposals for strengthening the public governance of the programme. The timetable for the programme, its funding, and its organisation are subject to these decisions.

The UK, jointly with the Netherlands and supported by Slovakia and Cyprus, submitted a minutes statement stressing our commitment to the PPP principle for major infrastructure projects, our concerns on the potential increased costs of public procurement, the need for a reassessment of the business case for Galileo, competitive procurement, sound risk management, and ensuring that any extra funds are kept within the current EU financial perspective.

The Department has not made a separate estimate of the costs and merits of funding the Galileo project through public and private finance.

To ask the Secretary of State for Transport whether the balance of risk between private and public sectors in the Galileo project is the same as that adopted by the Government in relation to domestic public private partnerships. (141150)

The proposed commercial public-private partnership (PPP) structure developed by the Galileo Joint Undertaking (GJU), and subsequently the European GNSS Supervisory Authority (GSA), on behalf of the European Community aimed to obtain best value for money by placing risks with those best able to manage them. Negotiations on risk allocation had not been concluded when the heads of terms, version 1, was signed in November 2006. On 8 June the Transport Council concluded that the PPP negotiations had failed and should be ended.

There are no UK PPPs directly comparable with the Galileo project.

To ask the Secretary of State for Transport what percentage of the total cost of the Galileo programme between 2007 to 2013 will be paid for by the UK. (141151)

The EC budget commitment for Galileo under the 2007-13 Financial Perspective will not be decided until after the summer.

The UK makes its contributions to the EC budget as a whole and not to individual spending programmes within it. Before taking account of the abatement, the UK contribution to the EC budget in 2007 is estimated to be 17.1 per cent. of the total. Over the period 2007-13, the draft EU Financial Regulation allocates €900 million, at 2004 prices, to the Galileo deployment phase.

The EU and the member states of ESA jointly fund the design and development programme for Galileo. As an ESA member state, the UK has committed €142 million to the design and development phase. This represents just under 17 per cent. of the subscription made to the programme by participating member states, and is comparable with contributions made by Germany, France and Italy. By the end of March 2007, payments to ESA amounted to just over half of the €142 million, leaving the remainder to be paid during 2007-13.

ESA has recently identified additional costs for the design and development phase. It is expected that the ESA executive will apply a rule that enables them to draw down up to 20 per cent. more than the original subscription made by the participating member state. ESA has also identified other additional requirements, the cost of which has not yet been scoped.

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. The Government remain committed to this principle.