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IHI to liquidate GX rocket venture after govt pullout

Saturday, January 16, 2010 12:39 PM

Jan. 16, 2010 (The Yomiuri Shimbun) -- IHI (OOTC:IHITF) Corp. plans to liquidate a joint venture to develop the GX rocket in the wake of the government's decision to stop funding the project last month, it was learned Saturday.

Sources said the heavy machinery maker is considering ending all operations by the end of March 31 after negotiating with other shareholders of the joint venture, including Galaxy Express Corp.

IHI is expected to book a 10 billion yen extraordinary loss to write off investment in rocket parts and other assets relating to the GX rocket development as a part of the joint venture, which was established in 2001 by Mitsubishi Corp., Kawasaki Heavy Industries, Ltd. and other firms.

IHI, which has a 40 percent stake in the joint venture, concluded the project would be commercially unsustainable without government involvement since the private sector, operating alone, would have to invest about 94 billion yen in additional funding.

The private sector has shouldered 43 billion yen of the about 70 billion yen already spent on the rocket development project.

The government canceled the project late last year in a process to eliminate wasteful spending.

The rocket, which would have been for launching small and midsize commercial satellites, was estimated to cost 8 billion yen per launch, which was judged too expensive to attract business from Russia and U.S. ventures.

The rocket was designed to be outfitted with a liquefied natural gas-powered (OOTC:LNGLF) engine.

The project started in 2003 with IHI, the state-run Japan Aerospace Exploration Agency and U.S. defense contractor Lockheed Martin Corp. (NYSE:LMT) taking part.

The rocket was originally expected to be developed at low cost over a short period of time. But with the program behind schedule and over budget, doubts grew about the rocket's ultimate commercial viability.

(Source: iStockAnalyst )


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