In response to the criticism over the recent failure of a Proton launch that stranded two satellites in useless orbits, the Khunichev State Research and Production Space Center has released a detailed accounting of its operational structure.
Of particular interest is how the Khrunichev has grown to become the biggest company in the industry over the past five years by absorbing six other companies that had been its prime subcontractors. During this period, Khrunichev’s workforce has grown from 26,500 to 43,500, an increase of 17,000 employees or 64 percent.
The mergers and acquisitions have been part of the Russian government’s strategy to vertically integrate and consolidate its aerospace industry. Although Russian space officials have talked about this effort publicly, it’s been difficult to get a clear picture of exactly how this has been accomplished. Khrunichev’s statement provides excellent insight into part of that process.
The document is reproduced below.
Khrunichev Space Center — Facts and Figures Only
In recent years, Khrunichev Space Center (KhSC) has acquired six major businesses. With the addition of 17,000 new employees KhSC’s workforce has increased to 43,500 people. Thus, KhSC has become the largest company in the industry and the largest federal state unitary enterprise in the Russian Federation.
In 2007, in accordance with the Decree of the President of the Russian Federation, the first four companies were merged with the Khrunichev Space Center (DB “Khimmash”, Moscow Equipment Acquisition Company (MPKO) “Dlina”, “Voronezh Mechanical Plant” and PO “Polyet”). The last two of these companies were in particularly poor financial and economic situation. KhSC proved to be successful in restructuring their debt.
In July 2008, KhSC acquired a controlling stake in JSC “Proton-PM” (Perm). As a result of this transaction KhSC was able to establish control over the manufacturer of the Stage 1 engines for Proton launch vehicle and key components of the Stage 1 engines for the upcoming “Angara” launch vehicle family. In addition, this deal effectively returned JSC “Proton-PM” to state ownership.
On August 4, 2009, in accordance with Presidential Decree, KhSC received the shares of the Chemical Automation Design Bureau (Voronezh). Becoming the 100% owner of the DB KhA, KhSC has essentially completed the first stage of creating an integrated structure.
Presidential decree of June 11 2011 merged the Ust-Katavsky Carriage Works with KhSC.
Having completed this reorganization, Khrunichev Center has combined the efforts of its primary subcontractors.
With regard to KhSC’s financial and business performance indicators for 2011, they were as follows: sales volume of more than 43 billion rubles, compared to 36.2 billion rubles in 2010. It represented a 20% increase.
Over the past six years, sales volume has increased almost five-fold: from 9.6 billion rubles to 43.6 billion rubles.
Over the period of 2005 through 2011 the output of the space-rocket division has increased almost by a factor of three – from 11 articles in 2005 to 30 in 2011. Proton production rates increased from 6-7 launch vehicles in 2005 to up to 12 launch vehicles. Current plans call for manufacturing 12-13 launch vehicles per year.
Space launch services: Over the past five years more than 60 Proton vehicles (manufactured by KhSC) have been launched, placing into designated orbits over 80 spacecrafts in the interests of the Federal Space Program, Russian Federation Ministry of Defense and in the interests of commercial customers. Unfortunately, over the period of last two years a few launches of KhSC hardware resulted in failures — “GLONASS”, “Express-AM-4″, “Express-MD-2″ and “GEO-IK-2″ spacecrafts weren’t delivered to their designated orbits.
Khrunichev was also involved in a joint venture with U.S. company International Launch Services (ILS) which conducts marketing and sales of Proton and Angara launch services at the global market. At the time the company carried substantial debts on its books. Khrunichev paid back the debts, and in June of 2008 purchased the controlling stake in the company. That purchase essentially returned the commercial rights to these services to the Russian Federation.
If one needs to discuss KhSC operations at the commercial launch services market and the revenues which were secured for the country, it should be pointed out that hard currency revenues in 2011 amounted to 777 million dollars (in 2010 – 637 million dollars). These numbers represent 57-58% of the total company sales in 2011.
Since its entry to the global market (1996), Khrunichev Space Center earned for the Russian state nearly $ 6.5 billion.
During the world economic crisis of 2008 – 2009 the Center secured government support in the amount of 8 billion rubles to partially reimburse 10.5 billion rubles, which were invested by KhSC into revitalization of the recently acquired businesses.
The issue of arranging stable funding stream for the Angara LV development project was also successfully resolved, which should enable the first flight of Angara in 2013.
During the same time frame the entire cycle of testbed and the hot fire tests have been performed on all stages of Angara launch vehicle, and these tests proved the functionality of the created hardware. Moreover, the first stage of the future backbone of the Russian space industry has actually undergone “a baptism by fire” as part of two launches of Korean Launch Vehicle (KSLV).
Test article from ground infrastructure tests for the coming Angara launch system has all been shipped to Plesetsk Space Center. First launches of the light lift “Angara-1.2 PP” and heavy-duty “Angara-5″ are scheduled for 2013. Shipment readiness date for the light class launch vehicle for shipment to Plesetsk Cosmodrome is December 2012. “Angara-5″ LV should be 60% completed by the end of this year. At the beginning of the second quarter of 2013 it should be delivered to Plesetsk Space Center to support the first flight in the fourth quarter of the year.
A resolution of the Presidium of the Scientific-Technical Council of the Federal Space Agency titled “On possible applications of hydrogen in rocket and space technology,” adopted in 2005 entrusted KhSC with conducting R&D and presenting to the Federal Space Agency, Russian Ministry of Defense and TsNIIMash design proposals for the cryogenic upper stage for “Angara-A5″ launch vehicle.
In accordance with the Federal target program “Development of the military-industrial complex” KhSC is implementing comprehensive retooling and modernization program of its facilities. Several new production lines equipped with modern equipment meeting the highest standards of industrial design and ergonomics have been set up recently.
More than 11 billion rubles (representing a combination of KhSC equity and the influx of federal funds) have been invested in the program of modernization and upgrading production base over the period of 2006 – 2010. Most of the funds were spent on new equipment procurement, which was subsequently evenly distributed among all KhSC companies. Several production lines have been re-equipped with up-to-date equipment.