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ECONOMIC CONSIDERATIONS FOR A REUSABLE LAUNCH VEHICLE National Conference & Educational Workshop June 11-14, 2002 Phoenix, Arizona Presented by: Wayne A. Johnson Science Applications International Corporation Huntsville, Alabama wayne.a.johnson@saic.com Background

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ECONOMIC CONSIDERATIONS FOR A REUSABLE LAUNCH VEHICLE

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ECONOMIC CONSIDERATIONS

FOR A REUSABLE LAUNCH VEHICLE

National Conference & Educational Workshop

June 11-14, 2002

Phoenix, Arizona

Presented by:

Wayne A. Johnson

Science Applications International Corporation

Huntsville, Alabama

wayne.a.johnson@saic.com


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Background

  • NASA Space Launch Initiative (SLI)

  • Managed by NASA Marshall Space Flight Center

  • $4.85B FY02-FY06

  • Reusable Vehicle Concepts

  • Lower Technical/Business Risks

  • Increase Safety/Reliability

  • Technology Development

  • 22 Contracts Let Spring 2001

SLI overview animation


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FY06

FY99

FY00

FY01

FY02

FY03

FY04

FY05

Phase 2

Concept Development / Risk Reduction / Advanced Development

Phase 1

Concept Definition and Risk Reduction

STAS

Program Milestones

Focused Architecture Selections

Program ATP

IAR

SRR

FSD

Requirements Definition and Tool Development

NRA

Cycle II Procurement (NRA8-30 and In-House)

8-27

NRA 8-30 Award for TA1

NRA8-30 Release

Base Award

Option 1

NRA 8-30 Awards TA2-9

Base Award

Option 1

Option 2 (TA 2-9 as appropriate)

NRA 8-30 Awards for TA-10 Flight Demonstrations

Base Award

Option 1

Option 2

RFP Release

ATP

RFP

Development

Preliminary Design and Advanced Development

SLI Schedule

Courtesy: NASA


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Stakeholder Perspectives

StakeholderIssues

  • Industry

    • - Launch Providers

    • - Payload Manufacturers

  • Government

    • ISS Support

      • Crew Rotation

      • Logistics

    • Asset Deployment/Recovery

    • Reconnaissance

  • Financiers/Backers

    • Bankers

    • Brokers

    • - Insurers

Architecture Size

Market Demand

Launch Price

Safety/Reliability

Replacement $ < Shuttle $

Launch Price

Safety/Reliability

Return on Investment

Risk


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Acquisition Phase

  • DDT&E Costs

    • Mission Requirements

    • Trade Analyses

    • Prototypes/Test Units

  • Production Costs

    • Lean Manufacturing

    • Quantities/Element

  • Facilities (New/Refurbish)

    • Booster/Orbiter/CTV Processing

    • Mission Operations

    • Runway

    • Location(s)

  • Temporal (Time Phasing)

  • Debt Instruments

    • Private/Public Debt

    • Internal

    • Government Loans/Guarantees

  • Interest Rate

Time


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Operations Phase

  • Recurring

    • - Flight Operations

    • Propellants

    • Labor

    • Insurance

  • Non-Recurring Costs

    • - Ground Support Equipment

    • - Facilities Upgrades

  • Flight Rates

    • Quantities

    • Turn-Around Time

  • Operating Revenues

    • - Price/Flight

  • Facilities

    • - Mission Operations

?


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Advertising

Recreation

ISS

Missions

Health &

Medicine

Satellite

Servicing

Parcel

Deliveries

Defense

Transportation/

Tourism

Non-

Terrestrial

Mining

Communications

Media

(TV, Movies)

Applied

Sciences

Space

Agriculture

Space

Business

Parks

Energy

Earth

Observation

Space

Based

Utilities

Logistics

Support

Data

Networks

On-Orbit

Construction

Traditional

Emerging

Market Considerations


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Market Considerations (Cont’d)

  • RLV Faces Competition From Expendable Launch Market

    • Highly Reliable Launchers

    • More Launch Site Choices

    • Worldwide Competition

    • Government Subsidies

  • TumultuousCommercial Satellite Industry

    • - Mergers & Acquisitions

    • - Regulatory Policies in Emerging Markets

    • Uncertainty in Broadband Market

    • Excess Transponder Capacity

    • Terrestrial Competition

  • Negligible RLV Market for Small and Heavy Payloads

    • - Micro/Small Class (< 5K Lbs.) Best Launched with Expendables

    • - Heavy Payloads (>25K Lbs.) Are Few; Primarily DoD

  • Projections for Intermediate to Large Markets Are Flat

    • Long Range Forecasts are Difficult

    • Projections Needed to 2030 Time Frame for Most Business Cases

    • Technology and External Influences Can Cause Wild Swings


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Satellite Mass Growth Trend

Predicted satellite mass no greater than 20K lbs by 2020

Source: Futron, Inc.


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Financial Metrics

  • Cash Flow

    • The difference between incoming revenue and outgoing costs over a finite time period.

    • This is a good metric for insight into the amount of inflows/outflows, their rates

    • of increase/decrease, and provides temporal insights such as investment

    • recovery (break-even) time.

  • Discounted Cash Flow

    • A cash flow summary that has been adjusted to reflect the time value of money.

    • This concept takes into account the Present Value (PV) and Future Value (FV)

    • notions of financial analysis. The PV is what future money is worth in today’s terms.

  • Internal Rate of Return

    • - The the discount rate for which total present value of future cash flows equals the

    • cost of the investment. The IRR is a specific calculated interest rate that will

    • produce a Net Present Value (NPV) of zero.This is an excellent metric to use when

    • there is a large initial cash outlay.

  • Payback Period

    • The length of time required to recover the cost of an investment, usually measured in years.

    • Other things being equal, the investment with a shorter the payback time is better and are

    • generally considered less risky.


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Break-Even

Point

+

Cash Flows

0

Acquisition Phase

Operations Phase

-

Time

Cumulative Cash Flow Profile

Revenues

Exceed Costs

Max. Loss

Exposure

  • Government can wait longer to recoup investments; industry has shorter time impositions

  • Before/After Tax profiles can differ significantly


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Building a Shuttle Replacement Case

No Shuttle

Replacement

Shuttle

Yearly

Operations

Cost

RLV

IOC

Time

  • A replacement RLV system must prove to be less expensive

  • to operate (in the long term) than continuing Shuttle operations

  • Ongoing shuttle operations require safety and performance upgrades

  • RLV must be more reliable and safer then Shuttle


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A Modeling Approach

Sample Data Only


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Sensitivity Analysis

  • FSD Decision in 2006; constant fleet size

  • Production, Facilities, Operations costs, Launch Prices held constant

  • Steady State Operations 5 yrs Post IOC

All other factors equal, financial metrics are sensitive to acquisition costs


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Sensitivity Analysis

  • Acquisition and operations costs held constant

  • Constant market prices

  • 20 years of operation post IOC

  • Adequate Facility Capacity to Accommodate Higher Flight Rates

As flight rate is doubled, IRR improves to a maximum of 13% over the baseline


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Summary

  • Costs

    • - Acquisition

    • - Operations

    • - Phasing

  • Revenues

    • - Prices

  • Flight Rates

    • - Mission Types

    • - Processing Times

  • Markets

    • Elasticity

    • Emerging

  • Financial Metrics

    • - NPV

    • IRR

    • Payback Period


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