Russian regulatory approval of Aerojet Rocketdyne acquiring its 50 percent stake in Russian rocket motor manufacturer RD AMROSS from United Technologies Corp. [UTX] could be a challenge, according to the new head of Aerojet Rocketdyne.
Warren Boley, who was named CEO of GenCorp’s [GY] new Aerojet Rocketdyne division Monday, said yesterday in a conference call that he was “bullish” on approval, but that it wasn’t guaranteed.
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| The historic launch of Orbital’s Antares vehicle in April used Aerojet’s dual AJ26 main engine system. Photo: Aerojet. |
“I think the long pole in the tent will be getting Russian government approval for the change of control,” Boley said.
GenCorp’s $550 million acquisition of Rocketdyne from UTC subsidiary Pratt & Whitney was approved last week by U.S. regulators. Pratt & Whitney Rocketdyne had a 50 percent interest in RD AMROSS.
Boley said Aerojet Rocketdyne met with Russian liquid rocket engine manufacturer NPO Energomash, and that he doesn’t “anticipate a problem.” RD AMROSS is a joint venture between Rocketdyne and Energomash.
“(Energomash) recognizes what Aerojet Rocketdyne is all about,” Boley said. “They’ve expressed excitement about being part of that. I think this is perfunctory.”
Russian approval of Aerojet Rocketdyne’s portion of RD AMROSS could take three to 12 months, Boley said.
Meanwhile, the Federal Trade Commission (FTC) is investigating potential anti-competitive practices on the part of space launch services provider United Launch Alliance (ULA) and RD AMROSS related to the exclusive supply of the RD-180 rocket engine and if an agreement between the two is preventing other companies from competing for launch services, particularly in medium-lift space.
Orbital Sciences [ORB] claimed in a white paper that it was being denied the opportunity to compete in medium-class launch due to an “anticompetitive exclusive agreement” that is “unlawfully restricting access” to the RD-180 engine. In the medium-lift launch space, Orbital has developed the Antares launcher, which currently relies on the AJ-26 engine, an upgraded version of the Russian NK-33 engine developed by Kuznetsov.
Aerojet provides the AJ-26 to Orbital, but there are a limited number of the AJ-26/NK-33 engines remaining and Orbital says to be a long-term competitor in the medium-launch business, it wants to purchase the RD-180, for which it says there are no viable alternatives (Defense Daily, June 14).
“(Selling the RD-180) to Orbital, that needs to be done in the context of what ULA thinks they own, what intellectual property they have,” Boley said. “There are other Energomash products that RD AMROSS has the U.S. marketing rights to that, in my opinion, can make the Antares vehicle very attractive.”
Boley said he wants to “respect everyone’s intellectual property” in the Orbital/RD AMROSS/ULA discussions. ULA is a joint venture of Lockheed Martin [LMT] and Boeing [BA] to provide the federal government assured access to space.
“This is not an intellectual property issue,” ULA spokeswoman Jessica Rye said yesterday in an email. “The government of Russia has approved the export of the RD-180 exclusively for use on the Atlas program. RD AMROSS is a joint venture between Pratt & Whitney and NPO Energomash that has the ability to sell the RD-180 to ULA and the U.S. government, as well as the marketing rights for other NPO Energomash products to U.S. customers. ULA has an exclusivity agreement within its contract with RD AMROSS for RD 180’s to protects its investment and ensure schedule reliability to meet critical mission needs.”
Boley said there are 43 NK-33s in Aerojet Rocketdyne’s possession with approximately another 12 to 18 in Kuznetsov’s possession. Boley said Aerojet Rocketdyne has a contract to deliver 20 HJ-26s, the upgraded NK-33s, to Orbital as part of its Commercial Resupply Services (CRS) contract with NASA. Boley said Kuznetsov has indicated to Aerojet Rocketdyne its intention to restart NK-33 engine production that will be ready to be upgraded to HJ-26s.
The acquisition of Rocketdyne from Pratt & Whitney will bring “very significant” savings to the costs of rocket engines, Boley said. He added that Aerojet is already presenting savings to the U.S. government in the form of “lower overhead, lower information technology (costs), reduced redundancy and product purchase opportunities.”
Reuters Sunday quoted Boley saying Aerojet Rocketdyne promised the U.S. government savings of $1 billion over the next 10 years as part of the deal and possibly $2 billion more in later phases of the merger.
“We know that bringing these two companies together, we can do that,” Boley said yesterday. “We’re willing to stand up and be counted on that and we’re at the point of having the Defense Contract Management Agency (DCMA) and the Defense Audit Agency come and engage that.”