Nesterov: Khrunichev Center is Facing High-Density Space Missions Program

The state-owned Khrunichev State Research and Production Space Center is one of the leading companies in the Russian space industry. Khrunichev manufacture Proton and Rockot launch vehicles. For the last several years the company’s engineers have been developing a new launcher named Angara.

Upper stages, modules for the International Space Station, small satellites and liquid-propellant jet engines are also developed, designed and manufactured in Fili, a district in Moscow housing the Khrunichev Center (KhSC). The KhSC participate in several international projects.

On the eve of the Day of Cosmonautics, the Center’s achievements of 2011, the future plans, the last-year setbacks and lessons learned, and the promising projects (including the international ones) are covered in his exclusive interview with the RIA Novosti press agency’s correspondent Alexey Peslyak by Vladimir Nesterov, KhSC General Director.

– What are the end results of the Space Center’s activities in 2011 and what are your goals for this year?

We anticipate a highly extensive program of spacecraft missions using our launch vehicles. These launches are either ordered by the Russian Government within the framework of the Federal Space Program or contracted commercially. The launch manifests will be very strenuous both at Baikonur and Plesetsk, the Russian launch bases.

Launches of the Rockot vehicle are expected to be resumed at Plesetsk in the nearest future as soon as the State Board come up with their go-ahead. These launches are to be performed within the framework of the Federal Space Program (two spacecraft of the Gonets constellation (‘Gonets’ means ‘Messenger’ in Russian) and one other spacecraft (for the Ministry of Defense) still to be defined, as well as launches, under a contract with the European Space Agency (ESA), of SWARM satellites designed to study the Earth’s magnetic field. We are planning to perform all these launches by August or September.

In addition, a third KSLV, a South Korea launch vehicle for which we manufacture the third stage, is to lift off in the fourth quarter of this year.

Now about spacecraft. Last year work continued on the Express MD2 satellite ordered by the Russian Space Communication Company (RSCC). This spacecraft is to be orbited later this year. The first satellite from this family, Express MD1, built and launched three years ago successfully operates in orbit today.

We will also continue our efforts aimed at building the Multipurpose Laboratory Module for the International Space Station. This module will feature absolutely new properties and functionality that will expand the ISS abilities in the field of research and engineering experimentation. In this effort we collaborate with Energia RKK, a Russian space-oriented corporation. We stick closely to the established schedule though not without problems. This totally new module is to be an extremely sophisticated item with a vast functional potential. It will contain a great number of newly-designed systems, which entails permanent updates of design documents. Still, we must make this endeavor a reality.

At present, an electrical simulator of the new module is at Energia and much will depend on what this simulator will show. The results of its tests will define the due date for the shipment of the flight article to the City of Korolev where Energia is located. There exists the due date — 2013 established by the authorities, there exists a governing document and we have been working in compliance with this directive.

As for the financial and economic results of the Center’s business activities in the last year, our sales exceeded 43 billion rubles compared with 36.2 billion in 2010, which means a growth of 20 percent. This is higher than the similar space-industry indicator of 12 percent and significantly higher than the country-averaged value.

The sales volume has grown almost five-fold over the last six years (since 2005) – from 9.6 billion to 43.6 billion rubles, a clear evidence of a stable increase of the company’s financial indicators over several years on run. If everything goes well then we expect to reach a sales volume of 52 or 53 billion rubles over this year.

If we now turn to our business in the launch services market and the money that Khrunichev have contributed to this country’s economy then we can say that the hard-currency inflow due to this activity amounted to $777million in 2011 (against $637 million in 2010), 57 or 58 percent of the company’s sales total in 2010. More generally, KhSC have contributed to the state’s economy almost $6.5 billion since we entered the world market.

– There were unsuccessful spacecraft launches in 2011 and, unfortunately, they have not passed over KhSC. What lessons have you learned that should help you avoid similar incidents in future?

In terms of the number of launches performed, the last year, unfortunately, happened to be not quite a success and there were a number of reasons behind this. Unlike the three foregoing years each with 14 or 15 launches, as low as ten is the number of launches of domestic spacecraft last year. This drop was caused by the failed missions since each of them required a detailed investigation. After each incident we were not able to resume lunches until the respective failure review board had completed their review and we had then met all action items prescribed by the board. Of course, we might have put the blame for the failure of some of our missions on our vendors and/or subcontractors. But anyhow, it is us, the prime contractor, who are in each case responsible for the end product and the end result.

In a word, we ran across outages that prevented fulfilling the launch manifest. Today we are doing our best to catch up with the backlog before the end of the first half of the year so that we make up for the schedule slip by the end of the summer.

Khrunichev is not alone within the space industry who were forced by the last-year problems to take measures aimed at preventing similar situations in the future. These steps include actions of our own alongside initiatives put forward by the Federal Space Agency. In particular, the Quality Management System will be submitted for re-certification by an outside auditor for compliance with international standards. Also, the production facilities will be restructured and reequipped and the production base will be renovated and retrofitted.

Subject to our re-equipment program more than 4000 new equipment units have been bought over the last four years and distributed among all our affiliations. We spent as much as 12 billion rubles for re-equipment of which amount some 8 billion rubles (about 3.7 billion rubles being our own money and 4.1 billion being allocated by the state budget) was used to retrofit the production facilities or to buy new machines. The remaining 4 billion was spent for capital construction.

The other measures include the renovation of our fleet of measuring, monitoring or diagnosing instruments, and of repair tools, the improvement of the existing manufacturing processes, and the development and introduction of new ones.

Since recently, Khrunichev have been creating facilities to house and support a team of Roscosmos quality inspectors.

– How far has the Angara project progressed? When will the maiden flight of this launcher take place?

Everything has been progressing in line with the master schedule without any engineering problems. The maiden flights of the Angara 1.2 [PP in English] light-lift launcher and the Angara 5 heavy-lift booster are scheduled for 2013. The light-lift launch vehicle is due to be available for shipment to the Plesetsk launch base in December this year. Angara 5 is to be about 60 percent ready before the end of this year and should be delivered to Plesetsk in the early second quarter of 2013 so that we can launch it in the fourth quarter.

The light-lift Angara will be the first to fly in order to ensure a successful launch of the heavy-lift Angara and in particular to verify the performance of Stages 1 and 2 of Angara 5. For the first of the two launches we made a special booster. After the launch of the heavy-lift Angara, light-lift Angaras will resume their flights though in a slightly modified configuration. More specifically, the Stage 2 diameter will be different.

Component-level tests of the launch vehicle components (i.e., the propellant tanks, the dry compartments, the main engines, the guidance and navigation system, and the telemetry system) have virtually been completed. These components are 99 percent ready. The tests of the RD 191 main engine to be installed on the URM 1 common core module have been completed, so this engine is available for serial production.

As far as the availability of the hardware required to support launches goes we believe that we will meet the due dates specified in the Presidential Edict.

However, since recently we have been feeling seriously concerned about a timely construction readiness of the ground structures. There appear signs of slips (compared to the existing schedule) in the commissioning of the ground infrastructure facilities, especially of the multipurpose launch complex.

– Your company are involved in several international projects. What has been implemented so far and what can be expected in the next two or three years?

I’d like to point it out that we have business relations with a total of 45 companies from 22 countries.

Today, the portfolio of rock-hard orders for Proton launch services includes more than 20 contracts and in addition we have contracts with the European Space Agency (ESA) for Rockot launch services that envisage four missions using Rockot launches at Plesetsk from 2012 through 2014. The first of these (the SWARM mission) is to be performed before the end of this year.

I would also like to remind that in collaboration with our South Korean partners we have built the Naro Space Center and developed and built Stage 1 of the KSLV-1 launch vehicle.

The Khrunichev Center have developed and built the 12 KRB cryogenic upper stage for the India’s GSLV launch vehicle. Hopefully this cooperation will continue.

– Today your Center is a major integrated business in the field of launch vehicle development and building. Since recently, the opinion can have been heard that companies should be integrated by production profile (so called ‘a horizontal integration’). What do you think of that? And what do you think, in general terms, about the steps undertaken by Roscosmos to re-structure the space industry?

I believe that the process started in 2007 with affiliating, to the Khrunichev Center, several companies involved in manufacturing Khrunichev’s space-oriented end products has proved its value.

Whereas in the past the fraction of our work in the creation of the Proton LV used to be about 30 percent, after the changes that followed the affiliation of the engine plants this fraction (in terms of product cost) has jumped up to 60 or 65 percent.

We have introduced in our company a unified price policy, a unified quality and reliability management policy, and one common balance. We treat very seriously any over- or underpricing of our subsidiaries’ products and keep this process under control.

The Khrunichev Center are a good example of setting up an efficient vertically integrated business, which fact is demonstrated by our financial and economic results.

A reasonable horizontal integration should be welcomed and it cannot be anything but useful. I side with Vladimir Popovkin, Head of Roscosmos and his desire to establish several major holdings integrated vertically and/or horizontally, a step that would open the way for optimizing the financial and economic component of space-oriented hardware production. Such steps should, in particular, bring about a reasonable distribution of labor and production and furthermore should eliminate duplication of efforts.

According to the plans known to me our company should complete vertical integration in 2013. The companies should be affiliated to us that make guidance, navigation and control systems. These include, among others, the Pilyugin Automation and Instrument-making Research and Production Center and MARS, a Moscow Specialized Design Bureau. The former make guidance and navigation systems for our boosters and the latter build similar systems for Breeze M and small satellites. Thus we will unite essentially all manufacturers of key components of launch vehicles and upper stages into a single vertically integrated business.

And then (providing that a respective decision is made by Roscosmos) we will, quite naturally, embark on the course of horizontal integration.

To this I would add that if you wish to set up a horizontal holding you should exercise a very careful and balanced approach to integration of companies operating in different areas of space technology. You should get a good understanding and come up with a prediction of the end result of such integration.

– Today your Center has become a major integrated company for design, development and production of launch vehicles. There has been some debate lately about the need for consolidating companies having similar product lines. They call it ‘horizontal integration’. Any thoughts on the subject? And, in a wider context, what do you think about the steps Roscosmos is taking to initiate reforms in the rocket-and-space industry?

– The process that got under way in 2007 has proved its practicality. It began with the consolidation by Khrunichev of a number of rocket component producers for Khrunichev’s end product.

Khrunichev’s own contribution to the final product used to be around 30%. Now that we have engine producers in the group, our share has reached 60-65% of the total value.

Our company operates based on a single pricing and quality/reliability policies. Khrunichev has a single balance sheet. We treat seriously any pricing ups and downs regarding the products our branches produce. We are monitoring and supervising the process.

Khrunichev is a good example of an efficient vertically integrated company, and our financial performance is a vivid testimony to that.

Reasonable vertical integration should be encouraged because its results can be only positive. I support V.A.Popovkin (Head of Roscosmos) in his drive to put in place several large vertically and horizontally integrated holdings to optimize the financials and economics of the space industry. Such steps, among other things, will streamline labor and production distribution and eliminate duplication.

The plans that are known to me indicate that our company is expected to complete vertical integration in 2013. In accordance with those plans, control system manufacturers, including the Academician Pilyugin Center for automated systems and instrumentation and the Mars Design Bureau will become our branches. Pilyugin designs and manufactures guidance, navigation and control systems for Proton while Mars is a producer of control systems for Breeze M upper stage boosters and Khrunichev’s small satellites. The consolidation process will result in bringing virtually all major component manufacturers for launch vehicles and upper stages under the umbrella on one vertically integrated structure.

After that, if Roscosmos so decides, we will proceed with horizontal integration.

At this point let me emphasize that any steps towards horizontal integration of companies engaged in various areas of the industry should be carefully weighed. We need to understand the potential outcome and its cost.

– What is your attitude to the existence of two separate positions, that of CEO and Designer-General? In many companies in the industry the two jobs are held by one person.

– “Two heads are better than one”, according to a Russian proverb. It is of course good for a company to have two leaders, one managing production issues and the other pursuing the company’s research and development strategy. I am fully supportive of this approach, but it needs to be implemented in a reasonable fashion. Each company has its specifics, each CEO is an individual with his/her character features and psychology. Extreme caution is a must.