Boeing Sues Sea Launch Partners for $356 Million

sealaunchBoeing has filed suit against its Sea Launch partners, alleging they failed to pay it more than $356 million owed after the Sea Launch joint venture went into bankruptcy in 2009.

The lawsuit, filed in U.S. District Court in Los Angeles on Friday, targeted RSC Energia, a company partially owned by the Russian government, and two Ukrainian state-owned companies, PO Yuzhnoye Mashinostroitelny Zavod and KB Yuzhnoye.

Boeing said it partnered with the companies, as well as Norway’s Kvaerner Moss Technology, in 1995 to create Sea Launch, which focuses on launching commercial satellites into space.

The U.S. aerospace company said it provided substantial funding for the venture, and the partners agreed that, if it failed, they would reimburse Boeing their share of the funding.

Sea Launch emerged from bankruptcy in 2010. As part of the plan of reorganization, a subsidiary of RSC Energia increased its ownership to 95 percent from 25 percent, the lawsuit said. Boeing and Kvaerner, now called Aker Maritime Finance AS, split the remaining 5 percent….

Boeing said in its new lawsuit that RSC Energia owed at least $222.3 million and the Yuzhnoye companies owed at least $133.4 million.

Coincidentally, the suit was filed the day after a Sea Launch rocket dumped the Boeing-built Intelsat 27 satellite into the ocean in a failed launch attempt.

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UPDATE: The lawsuit will add to the problems of what appears to be an already troubled Sea Launch company. Anatoly Zak at has a summary of recent Russian media coverage of the company. Some of key points:

  • Sea Launch lost $100 million in 2011 in its first year launching after bankruptcy;
  • The company is having difficulty attracting the four launches per year required to break even;
  • Even before last week’s launch accident, RSC Energia asked the Russian government to take over Sea Launch and shift some federal launches to it, a proposal the government has not yet answered;
  • As an alternative, RSC Energia is considering selling the venture to a foreign entity located in Ukraine, United States, China and Australia.

So, it appears that Sea Launch might have some difficulty surviving. It is just one rocket company with two or three launches per year. The major impact of the company going out of business would likely be felt in Ukraine.

However, here’s the really scary part:

In the effort to cut costs, RKK Energia wrestled control over NPO Energomash producing RD-170/171 engines, which power the first stage of the Zenit rocket. As a result, it was able to force NPO Energomash to reduce the price for each engine from $16 to $10 million, bringing the legendary propulsion company toward the brink of bankruptcy. RKK Energia’s own debt was also continuing mounting and according to Nezavisimaya Gazeta had essentially been a disguised bankruptcy for several years.

NPO Energomash being pushed to the brink of insolvency is very bad. The company makes a range of engines for different launch vehicles, including the RD-180 used in United Launch Alliance’s Atlas V. That rocket is crucial for U.S. national security, and for NASA’s commercial crew program.

Meanwhile, Energia might already be essentially bankrupt. That company is so crucial to Russia’s space efforts, especially in terms of maintaining and supplying the International Space Station. And now its being sued for more than $200 million by Boeing.

All of this information provides a new perspective on the Russian government’s efforts to streamline and consolidate the nation’s space effort. If Energia and Energomash can’t make money under the current setup, then something is seriously wrong. The interesting question is whether consolidating the industry under the control of the government — as has been proposed — will save the industry or accelerate its decline.