Public Private Partnership (PPP)

for Development of Space Sector

Hossein Ghandeharian & Ali Shoamanesh

National Space Conference 17 - 19 September 2012

Islamabad, Pakistan

Telesat Corporate Overview

Use or disclosure of data is subject to

the restrictions on the title page

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Telesat Canada

Created in 1969

World’s first domestic operator

Core Business:

• Transponder leasing

• End-to-End Communication Services

• Satellite Operations

• Satellite Consulting

Communication Services offered in North & South America, Europe, Southeast Asia and Western Africa.

Use or disclosure of data is subject to

the restrictions on the title page

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Telesat Canada

Headquarters in Ottawa, Canada

Over $2 billion in assets

• 13 In-Orbit satellites (and 1 in Construction)

• Currently operating 25 Satellites

400 employees

Offices and Teleports across North & South America, Europe & Asia

• 10 Teleports

• 3 Internet Gateway hubs

• 5 VSAT (data) hubs

• Operating about 10,000 earth stations

Provider of Satellite Consulting Services for over 20 years

Telesat Headquarters

Montreal Teleport

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the restrictions on the title page

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Consulting Services (GSO and

NON-GSO)

Feasibility Studies

End-to-End System Design

Satellite System Procurement

• RFI Preparation

• RFP Preparation

• Bid Evaluation

• Procurement Negotiations

Satellite System Construction Monitoring

Insurance Technical Consulting

Investor & Lender Due Diligence

Next-Gen R&D

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the restrictions on the title page

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Operational Services

Satellite Operations

• TT&C and SCC Facilities

• Transfer Orbit Services

LEOP Network & IOT

Ground Station Construction

Flight Dynamics Software

Spectrum Management/Frequency Coordination

Training

Applications Development

Public Private Partnership (PPP)

for Development of Space Sector

Hossein Ghandeharian & Ali Shoamanesh

National Space Conference 17 - 19 September 2012

Islamabad, Pakistan

Approach in Preparation of this

Presentation

Provide a definition for PPP

Why PPPs are used in general

PPP’s benefits and challenges

PPP in space sector

PPP examples in the Canadian Space sectors

Lessons learned

Summary 8

PPP as a well-established approach for development &

exploitation of infrastructures in such government-driven market

sectors as road, maritime, aviation, recently finding more

applications in the space sector

Earlier space endeavors more through purely public funding, taking

high costs and risks to thrust pioneering technologies

More of recent space sector funding have shaped as PPP

structures, perhaps due to, e.g.:

government budgetary constraints

decline in government controlled industries and economies;

high growth of private sector;

technology is often more reliable, more focused in scale/less of

dramatic impact

Introduction

9

A umber of PPP patterns have developed over 20 years,

but the concept is still evolving, with few agreeing on what

in specific terms a PPP definition is

Some view PPP as a language game, “designed to ‘cloud’

other strategies and purposes, such as ‘contracting out’ or

‘privatization’ [3].

Despite the wide variety of PPP patterns, mostly underline

the more prominent & durable role of private sector,

primarily in sharing project financing and risks

A broad spectrum of PPP models, based on relative level

of responsibility assumed by the private partner, as follows:

PPP Definition

10

Typical PPP Models

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Models’ names reflect private partner responsibilities, indexed

according to partners level of engagement and risk share

Existing Services & Facilities Contracts

New Projects / Facilities Design

Build

Operate

Maintain

Build

Own

Operate

Transfer

Design

Build

Maintain

Design

Build

Build

Own

Operate

Design

Build

Operate

Service

Contracts

Management

Contracts Lease Concession Divestiture

Private Responsibility Public Responsibility

Source: Deloitte 2006 [Ref 2], originally adapted from The National Council for Public Private Partnerships

Sharing Benefits and Challenges

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Trade-offs between PPPs and Traditional Approaches [Ref 6]

Sharing risks and resources over project’s life-time results in

higher efficiencies/lower costs/improved revenues

In PPP, private sector has much stronger incentive and more

opportunities to optimize design, build, finance, and life-cycle

costs of operation, maintenance, etc., for a higher ROI

Combining more of various stages of design, build, finance,

operate, maintain helps a more cost effective implementation

Stronger customer focus, provided for by the private sector to

protect / maximize expected service revenues / customer base

High potential innovative developments/new sources of income

Improving program time-line and budgetary management,

expediting projects implementations

Reducing budgetary pressures, spreading cost of financing over

project lifetime, increase flexibility/potential for other opportunities

PPP Key Benefits

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Despite some good efforts, building closer partnerships

between public and private sectors, application of PPP

approaches to space projects has been slow due to [6]:

private sector concerned with higher risk space projects

some major space-related PPP attempts, were not successful,

e.g.:

European Galileo and Japanese QZSS navigation systems,

Japanese GX, and U.S. EELV launch vehicles, faced with:

schedule delays & cost increase, as in traditional approaches

+ high revenue risk and conflicts of interest, unique to PPPs

Examples of Space-Related PPP Challenges

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Key challenges:

i. conflicts of interest among parties,

ii. user satisfaction,

iii. private partner’s revenue risk,

whose negative effects reinforce each other in a spiral loop.

Space-Related PPP Challenges

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The Key Structures of the PPP Model [Ref.6]

One most notably controversial PPP attempt was by the European

Commission in 2000, initially believing it to be “an essential factor for

the success of the Galileo” navigation system

Galileo conceived as a 30-satellite geo-positioning system with higher

accuracy than GPS or GLONASS, at an estimated cost of €3.3 B

planned as a ‘concession’ PPP (DBFO*), with 2/3 of its deployment to be

financed by a private consortium that would also operate it with its funding

However, the PPP was inadequately conceived and prepared;

program’s governance was inadequate; division of roles was not clearly

defined; Member States intervened in the interest of their national industries

and held up decisions regarding composition of the consortium, locations of

system activity centers, ground infrastructure and HQs

Conflicts of interest triggered the spiral loop of schedule delays, low

user satisfaction, private partners’ revenue risks, resulting in (by 2007)

program being 5 years behind schedule and facing an overrun of €2.25 B

In 2007 the EU terminated PPP negotiations, taking a traditional public

approach for deployment, to re-attempt PPP for the operational phase!

Challenges of Galileo PPP Attempt

16 *DBFO: Design-Build-Finance-Operate

*Source: European Court of Auditors Special Report No 7, 2009,“The Management of the Galileo Programme’s Development and Validation Phase”.

PPP Skynet 5 System, developed and operated by Paradigm

Secure Communications (private), an EADS subsidiary, provide

MOD* (public) with secure military communications services.

Started in 1998 with a public budget of 3.7B pound; Skynet 5A

and 5B launched in 2007, 5C in 2008, 5D planned for 2012.

MOD reimburse Paradigm development and launch costs at

delivery milestones; schedule delays result in financial penalties.

Paradigm’s revenue is from MOD’s assured capacity, meeting

MOD nominal and surge requirements and, with MOD approval,

from sale of spare capacity to third party users, e.g., NATO

So far, operating successfully well; current contract to continue

until 2020

A PPP Case of Notable Success

17

*MOD: Ministry of Defence, U.K.

Comparisons of Skynet 5’s success vs. troubled Galileo PPP

attempt conclude that keys for successful PPPs in space sector

are [Ref 10]:

stable policy environment

experienced partners

secured market

The policy/regulatory environment is underlined as an effective

means of reducing conflicts that emerge from lack of experience;

for Skynet 5 PPP, visible policy/regulatory environment was built on

experiences from Skynet 4 that developed by traditional approach.

Another lesson learnt points to conflicts emerging from multiple

goals, as with Galileo, in contrast to Skynet 5’s single goal to

procure secure low cost communication services; as a corollary:

Skynet 5 vs Galileo Lessons

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Canada has been a pioneer in space sector PPP, especially in

satcom; as a matter of fact

Telesat Canada, the satellite carrier, operator, and service

provider, was created (1969) using a shared public-private

ownership, in effect for 20+ years until its privatization in 1993

Most pioneering development programs in Canadian satcom

conducted in some form of PPP, with Telesat playing key role

In June 1994, the Government’s Long-Term Space Plan II

(LTSP-II) established priority areas in the Canadian Space

Program and urged the Canadian Space Agency (CSA) to

promote PPP arrangements for their developments

Consequently, the CSA has extended PPP applications also to

non-commercial space programs, e.g., Earth observation

Canadian Perspective in Space PPP

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Telesat’s Anik F2 Ka-band payload and its hosted Payload

Flight Demonstration Program (PFDP) with a regenerative

on-board processor (OBP), launched in 2004, under the

auspices of the Canadian Space Agency (CSA), as part of its

mandate, helping companies develop satcom technologies [8];

Public Sector, in addition to the CSA, comprised of Industry

Canada (IC), providing for the National Satellite Initiative (NSI),

Communications Research Canada (CRC) for technical

advice and supervising various technologies aboard Anik F2,

and Infrastructure Canada for additional funding for the NSI.

Private Sector comprised of a consortium of Telesat Canada,

as the satellite owner, carrier, and operator, EMS Technologies

(now MDA) responsible for the development of the SkyPlex

digital OBP, and COM DEV, responsible for the development of

BEAM*LINK® analog processor multiplexing system.

Key Canadian PPP Examples

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Evaluating success of Anik F2:

Overall: Technologically a success; Anik F2 Ka payloads

and BEAM*LINK and SpaceMux components developed

and built within the initial grants and contributions budget

Telesat: Successful being the first to commercialize Ka-

band satcom and quickly commissioning its entire capacity

The government: Unsuccessful in fulfilling its objective of

providing Ka-band government services in remote areas;

unable to take advantage of Ka-band capacity credits, due to

lack of ground infrastructure and attention to real users needs:

some remote regions already have C- or Ku-band broadband

Internet for telemedicine and tele-education

targeted users do not see need to change equipment or to

Ka-band and are concerned about difference in cost

Key Canadian PPP Examples Cont’d

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RADARSAT-2, Canada’s 2nd-generation advanced technology

SAR* satellite, launched late 2007 into a sun-synchronous Polar

LEO for enhanced Earth observation (EO) applications, and

data continuity for Radarsat-1, while aiming to develop the EO

sector, much like that done for commercial satcom sector [9]:

PPP between the CSA (public) and MDA* (private):

At a cost of $528.8M, with 437.1M from the Government ($421.6M

from the CSA and $15.5M from the DND*) and $91.6M by MDA

Spacecraft and supporting ground system owned by private sector

(i.e., MDA) for full commercial exploitation.

For its investment recovery, the CSA will receive data products and

services during the lifetime of the mission; for every order filled, the

credit will be reduced accordingly by the corresponding price.

Key Canadian PPP Examples Cont’d

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*SAR: Synthetic Aperture Radar *MDA: MacDonald, Dettwiler and Associates Ltd *DND: Department of National Defence

Evaluating Radarsat-2 PPP Process

MDA: Successful in developing EO sector expertise, resulting in

acquiring a number of other contracts for other space programs.

Overall, may result in a profitable business for MDA.

CSA: Overall, successfully implemented, however, few issues

with security and clarity of roles and responsibilities resulted in:

additional cost/effort beyond what should have been required

short of some key original intent to develop EO business, as

launch delays prevented from being first to market

Some government stakeholders: Unsuccessful for the GoC:

the CSA had insufficient control over the project

the GoC absorbed all of the project risk and paid for most of

the system, and in the end does not own the system.

Key Canadian PPP Examples Cont’d

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*MDA: MacDonald, Dettwiler and Associates Ltd *GoC: Government of Canada CSA moving forward with a next gen satellite with a different model

Define project requirements as clearly as possible, identify most suitable

form of partnership, assess submitted bids carefully, and in addition:

assess private-sector capabilities

evaluate potential benefits

examine alternative ways of meeting its needs

investigate the appropriate risk allocation

consider affordability and likely value for money

outline a business case in the preparatory phase

allocate sufficient time to the preparation of the PPP

make available appropriate management resources preparing

and negotiating the PPP

ensure effective competition throughout the bidding project

provide for regular reviews necessary to make sure continued

offer of value for money

Public Authority Preparatory To-Do-List

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Source [Ref. 7], originally from the European Court of Auditors report on Galileo

Ensure common objectives as well as roles and responsibilities

of all stakeholders, including the users in a PPP are clearly

articulated early in project documentation and that all are

comfortably committed to fulfilling them to prevent conflicts later

and slowing down progress

Ensure any issues of importance (e.g., security) are given much

more priority and are addressed at the outset of the project to

facilitate communications/collaborations, minimize delays

Provide proper performance monitoring systems to measure

the long-term usage and benefits to all, especially the

committed users, and to accordingly assess whether the PPP

model is overall a good investment, i.e., measure maximum

benefits that is highly dependent on usage vs. costs

Lessons Learnt/Recommendations

25 Main source [Refs. 7, 8 & 9], evaluation reports on Anik F2 PFDP and Radarsat-2

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1. Public Private Partnership Handbook, ADB Working Paper, 2008

2. Closing the Infrastructure Gap: The Role of Public-Private Partnerships, Deloitte (2006): http://www.deloitte.com/dtt/cda/doc/content//ca_en_fas_infrastructure_gap_mar07.pdf

3. Khanom, N. A.: “Conceptual Issues in Defining Public Private Partnerships (PPPs)”, International Review of Business Research Papers, Vol. 6, No. 2, July 2010 pp. 150-163

4. Delivering the PPP promise: A review of PPP issues and activity, Pricewaterhouse Coopers, 2005

5. Public-Private Partnership and Community Participation on Applications of Space Technology for Socio-Economic Development, Economic and Social Commission for Asia and the Pacific, 2007

6. Masafumi Hashimoto: ‘Public-Private Partnerships in Space Projects: An Analysis of Stakeholder Dynamics’, M.Sc. Thesis, MIT, 2009

7. Laurence Nardon and Christophe Venet: ‘The Development of Public-Private Partnerships in the European Satcom Sector’, May 2011

8. ‘CSA - Evaluation report: Payload Flight Demonstration Program,’ September 2005, http://www.asc-csa.gc.ca/eng/publications/er-0405-0203.asp

9. ‘Evaluation of the RADARSAT-2, Major Crown Project’, Prepared for: the Canadian Space Agency, September 2009, http://www.asc-csa.gc.ca/pdf/mcp-5702-7823.pdf

10. Bochinger S, “What is really a PPP project?,” International Astronautical Congress 2008, Glasgow, Scotland

References

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