Galileo - The Commercial Structure and Revenue Opportunity

Transcription

1 Galileo - The Commercial Structure and Revenue Opportunity Tony Poulter Global Head of Infrastructure, Government and Utilities 2002 PricewaterhouseCoopers. PricewaterhouseCoopers refers to the individual member firms of the world-wide PricewaterhouseCoopers organisation. All rights reserved.

2 Agenda Overview Market and Business Model PPP Structure Financing Conclusions

3 Overview Phase I : Galileo Operating Company Business Plan: Markets and Revenues Costs Cost-Benefit Analysis PPP structure Financing Phase II 2002: Designing the PPP Process: Procurement Plan Draft tender documents Performance regime Revenue generation mechanism EGNOS Integration

4 Market and Business Model

5 Galileo Services Open Access Free to air; Mass market; Simple positioning Commercial Encrypted; High accuracy; Guaranteed service Safety of Life Unencrypted; Integrity; Authentication of signal Search and Rescue Near real-time reception; Precise; Return link feasible Public Regulated Encrypted; Integrity; Continuous availability

6 Projected Global Navigation Satellite Systems Market Size Revenue by main application Annual Revenues - billion Other Trucks & Buses (route guide etc) Light Comm. Vehicles (route guide etc) Cars (route guide etc) Personal communications and location Source: Ovum Consulting Driven principally by personal location-based services and route guidance for cars and Light Commercial Vehicles

7 Projected Wireless Revenue Global turnover from Wireless Location-Based Services 50 Turnover ( billion) Source: EC Personal location-based services are forecast to take off as users increase reliance on and trust of new technology

8 How Revenue can be Generated for an Operating Company Royalties Service Revenues End User Service Charge Chip Manufacturers Chip Price Products Product Price Service Providers Revenues from: Royalties on chipset sales from Manufacturers Service Providers

9 Royalties on Chipset Sales Source of revenue while maintaining free Open Access Royalties Chip Manufacturers Chip Price Products End User Product Price Service Service Charge Service Revenues Galileo signals to be encoded: chipsets contain decoding software; Service Providers GOC to hold copyright in Revenues from: software; Manufacturers pay royalties: Royalties on chipset sales from Manufacturers up to 0.50 per chipset could Service Providers be reasonable

10 Service Revenues Commercial Services Royalties Service Revenues End User Safety of Life Services Service Charge Chip Manufacturers Chip Price Products Product Price Service Providers Public Regulated Service Royalties on chipset sales from Manufacturers Service Providers

11 Projected Revenues for the Operating Company Service Revenue Royalty Revenue 400 million Source: Ovum Consulting Early revenues principally from royalties. Service revenues develop as markets evolve.

12 Projected Revenue by Application Assumptions Estimated 2020 Revenues ( m) Personal Communications and Location-Based Services 3bn users world-wide 90% GNSS enabled 50% Galileo chipsets 0.35 royalty / chipset Aviation 360m ground-based navigation costs 50% savings from Galileo usage 50% of realised savings captured by Galileo Operating Company 50 Oil and Gas 20,000 units 0 Pers. Comms and Location Aviation Oil and Gas Police and Fire Vehicle Route Guidance Marine, Mining & Other 10,000 per unit per annum to service provider 25% to Galileo Operating Company Source: Ovum Consulting

13 Innovative Solutions Could Boost Revenues Assisted Global Navigation Satellite Systems Combination of navigation signal and communication signal via cellular networks could achieve: GNSS signal GNSS signal GNSS receiver Reduced time to position; Improved availability in urban areas; Handset with GNSS receiver Cellular Network Improved battery life; Base station

14 Projected Operating Company Costs million Deployment Replenishment Operating Source: PwC Phase I Analysis - Nov 2001 (2001 Prices) Deployment Cost (2006-8) 2.0 bn Average Annual Operating Cost 135m p.a. Replenishment Cost ( ) 1.8 bn

15 Projected Annual Free Cashflow million Proposed replenishment costs ,000-1,200-1,400 Source: PwC Phase I Analysis - Nov 2001 (2001 prices) Free cashflow breakeven projected in 2011

16 PPP Structure

17 Overview of the Model Private Sector Shareholders Public Sector Commercial Banks, Bonds & EIB Funding Equity Funding PPP Concession Debt Funding System Deployment Sales and Marketing System Maintenance System Operations EGNOS Provider Service Revenues Royalty Revenues Service Providers Equipment Manufacturers

18 Roles and responsibilities Bidding Implementation Operations Joint Undertaking/ Successor Body Procure PPP Co-ordination with ESA Development work Specify performance Regular monitoring of deployment Assist with market development Monitor performance Assess performance Specify performance for next generation Support to the concession Bidder / Concessionaire Business plan Revenue System procurement Financing System Contracts Financing System deployment and testing Market development Operate network to maintain signal performance Optimise revenues Co-operate with Regulator Maintain/ replenish system

19 Financing

20 Funding Sources & Uses Development Phase fully funded Development Public 100% by EC/ESA Deployment expected to be funded Partly by the Public Sector (up to 33%) Deployment Public 33% 90% Debt 10% Equity Concessionaire 67% Partly by Concessionaire PPP should facilitate 90% debt 10% equity

21 Financing Considerations We believe Galileo can be financed on this basis through a PPP structure providing there is an appropriate and bankable risk allocation Likely Allocation Risks Joint Undertaking Concessionaire System Contactor System Completion Demand - Licence & Regulator - System Performance Political Risk - PPP procurement process will propose an appropriate allocation of risk

22 Conclusions

23 Conclusions Strong commercial opportunity To capitalise on a rapidly growing market To mitigate risk through PPP To establish a financeable structure and practical process

24 Tony Poulter PricewaterhouseCoopers LLP makes no representation or warranty as to the accuracy and completeness of the information contained in this presentation. Any party considering participating in the Galileo concession should undertake their own independent investigation.