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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 [email protected] Background

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slide1
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

[email protected]

slide2
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

slide3
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

slide4
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

slide5
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

slide6
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

?

slide7
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

slide8
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
slide9
Satellite Mass Growth Trend

Predicted satellite mass no greater than 20K lbs by 2020

Source: Futron, Inc.

slide10
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.
slide11
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
slide12
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
slide13
A Modeling Approach

Sample Data Only

slide14
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

slide15
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

slide16
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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