BRUSSELS, Belgium — Luxembourg’s deputy prime minister told European governments that Luxembourg’s high-risk New Space investment strategy would not change despite the fact that its biggest early investment was wiped out.
Etienne Schneider, who is also Luxembourg’s economy and trade minister, said his only regret in the Planetary Resources failure — https://bit.ly/2z6lio0 — was that it happened so close to elections in Luxembourg.
“We have invested in different [space] startups. One of them, Planetary Resources, went wrong,” Schneider said here Jan. 23 at the European Space Policy conference, organized by Business Bridge Europe.
“It cost me 12 million euros [$15 million]. The only real problem I had with that was that it appeared a month before elections. But that was the only [regret], so it will not change our attitude. It does not change our risk profile. We still want to invest into these companies and we know the risk is high.”
After multiple negotiations, the government of Prime Minister Xavier Bettel and Schneider won re-election. The Planetary Resources episode was an election issue, but not a major one.
The two-day meeting here featured speaker after speaker lamenting the low risk tolerance of Europe’s industry, financial institutions, investors and governments.
In that context, Luxembourg looks like a pearl in a bowl of peas. Schneider recounted how satellite fleet operator SES was unable to find commercial insurance in 1985 for the launch of its first satellite.
The Luxembourg government passed a law to provide a state guarantee.
“It was the equivalent of 5% of our total annual budget that we gave as a guarantee for the launch of this company’s first satellite,” Schneider said, adding with understatement: “I must stay the risk paid out. We are a more or less one-third shareholder of the company and the money we earned, and the technology we developed, and the sector we developed in Luxembourg was really worth it.”
With SES as the motor, Luxembourg’s space sector now accounts for about $1.25 billion in annual revenue — 2% of the national gross domestic product. SES’s global revenue that year was 2.04 billion euros, or $2.44 billion.
From 19th century poverty, to iron and steel, then to financial services in the 1970s and SES in the 1980s — and now New Space. This is how Schneider sees the government’s latest investment focus.
Luxembourg passed a law that made clear that outer space resources mined and returned to Earth by commercial companies would remain the property of those companies rather than being considered part fo the global commons, as vaguely suggested by the 1967 U.N. Outer Space Treaty.
With a legal hurdle cleared, the next step was to create specific financial incentives for New Space startups in Luxembourg, or for existing startups to create subsidiaries in Luxembourg.
“We said it needs research and development grants, which we put into place,” Schneider said. “Dedicated research and development grants for all kinds of space companies in my country. The grants can be up to 100%. Normally it’s some 50% of the investment.”
Zero for two on space mining, on the extreme edge of risk spectrum
Deep Space Industries established a presence in Luxembourg and was recently purchased by U.S.-based Bradford Space to focus on small satellites. Unlike Planetary Resources, the disappearance of Deep Space Industries did not result in a cash loss for Luxembourg.
Space mining is an extreme example of a business requirement patient capital. Schneider said Luxembourg has such patience.
A venture-capital fund in which the Luxembourg government is an equity partner is the latest endeavor.
“I just believe it,” Scheider said of the New Space sector, despite its risks. “Politicians should not only look after their next elections. The aim of a politician is to see ideas for how the country can develop over 15-20 years. In the investments we are making now, we know there is no short-term return in money. But there is a return in that we get all these brains gathered around this initiative.
“So no: We will not change our high-risk attitude. We will continue with it, and continue to invest in companies and in the [space] infrastructure.”