Galileo exceeds budget by $468m

(Lloyds List via NewsEdge) Development costs for the Galileo satellite system have run 400 million euros ($468 million) over budget for "technical" reasons, according to European Union transport commissioner Jacques Barrot.

Barrot said the EU was forced to launch additional test satellites and make unforeseen modifications to the system for security reasons.

"The cost of the development and deployment phase of the Galileo program will be 400 million euros above the amount originally foreseen," Barrot said. "The main reason for this increase is of a technical nature."

Delays incurred before the development phase began, "obliged" the EU to construct and launch two additional experimental satellites to "guarantee the frequencies attributed to the Galileo system," Barrot said.

"New security specifications resulting both from work undertaken by the council for the security of Galileo and from discussions undertaken with the US led to the development of more elaborate and more costly equipment than initially foreseen," he explained.

The commission claimed that the development and deployment phase would cost 3.6 billion euros ($4.6 billion), all of which would be met by the EU and member-states.

Brussels is attempting to convince the industry to take on around two-thirds of the operational costs, which are expected to be considerably higher.

The EU has set aside 900 million euros ($1.1 billion) from its budget until 2013, which is only part of the 20-year concession contract.

In return for taking on risk, the EU is promising the industry access to a burgeoning market for satellite services, which the commission has estimated could be worth up to 400 billion euros ($510.3 billion)a year by 2020.

Galileo is supposed to be completely operational by 2010, but Barrot has raised the possibility that the start-up may be delayed.