Homer Alaska - Business

Story last updated at 3:27 PM on Wednesday, February 29, 2012

Alaska Aerospace Corp. faces funding issues without contract



By JAMES BROOKS
Kodiak Daily Mirror

KODIAK (AP) — In a surprise announcement Monday morning, Rep. Alan Austerman declared in a press conference that if the Alaska Aerospace Corporation cannot sign a large commercial contract by the end of the year, it could close or sell the Kodiak Launch Complex.

"We have had conversations that if we can't get something together after this year, probably at the fall meeting of the aerospace corporation, we'd be looking at how we'd close it down, sell it off or whatever we'd end up doing," Austerman said at the weekly House majority press conference.

Austerman, the Republican House majority leader, represents Kodiak Island in the Alaska Legislature and is a non-voting member of the Alaska Aerospace Corporation board of directors.

In a telephone interview, he clarified his statement by saying that while the corporation is secure this year, thanks to $8 million inserted into the state budget by Gov. Sean Parnell, Alaska Aerospace must stand on its own.

"You can only go so far with the sustaining funds," Austerman said. "Either the governor cuts some kind of a business deal or I think that we have to take a hard look at closing it down or selling it off."

Other legislators have expressed concerns about state support for the aerospace corporation, but the governor's support makes funding appear likely for the next fiscal year. What comes after that isn't certain.

According to the corporation's latest strategic plan, from 1993 through 2011, Alaska Aerospace received approximately $26.6 million in state investment, $144.8 million in federal grants and $134.3 million in revenue from rocket launches.

The corporation has faced tough times before, but Austerman said he believes it is at its lowest point.

"I think the business plan probably has been a failure," he said. "I'm not sure if the industry across the state has been a failure."

Sixteen rockets have blasted off from the corporation's flagship facility at Narrow Cape, the most recent in late September, when a Navy communications satellite was lifted into orbit.

The Kodiak spaceport can only launch small-lift rockets, and it has so far failed to attract enough customers to break even financially without an increasing amount of state support. To increase revenue, the corporation has proposed expanding the spaceport to launch medium-lift rockets, which are becoming commercially more important.

Medium-lift business could help the corporation break even, but the expansion has been estimated to cost $125 million or more, and CEO Dale Nash said the corporation will not ask the state for additional funds without a contract in hand.

On Monday, Nash said it's too early to press the panic button.

"We are talking with a number of people about launches," he said. "I think there will be some action before too long."

Nash said he believes there will be "some movement" before the fall deadline mentioned by Austerman.

"Things don't happen overnight," he said. "We absolutely continue to talk. We will see if we can find an appropriate partnership between the state and industry out there."

He declined to comment on specific proposals.

In addition to the medium-lift proposal, Alaska Aerospace continues to push its small-lift launches. None are expected in 2012, but the corporation has a tentative agreement with Lockheed Martin for a "ride share" rocket each year from 2013 onward, carrying multiple small satellites from different groups into orbit together.

Closer to home, the corporation is considering the purchase of one or more drones that could be leased to groups in Alaska for aerial surveillance. The aerospace corporation also has small contracts involving its space tracking equipment.

In light of those programs, board member and Kodiak resident Tom Walters said he believes it's too early to say the corporation is losing.

"I'm feeling pretty confident that it's going to have a pretty good turnaround," he said. "You still have to have satellites, and there's a lot of business out there. Economically, it makes sense."

Sen. Joe Thomas, a Democrat who represents Fairbanks, is a non-voting member of the board alongside Austerman.

"There is a fair amount of concern," he said. "People certainly believe they should be more self-supportive, but they're in a tough business and they work very hard trying to make headway."

Thomas said he hopes the corporation signs a significant private contract in the next year, but even if it does, it should expect to see a "descending" level of support from the state.

"I think before next legislative session, they hopefully should have something," he said. "I think some contracts for some launches would be progress."

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