Financing the Project
Section 3.3.
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Direct Investment and the Chunnel

  1. Channel Tunnel Example
  2. Channel Tunnel Financing
  3. Selling Moonrock (and the Channel Tunnel!)
  4. Selling Anything
  5. Raising Financing - the main options

1. Channel Tunnel Example

This has been raised a number of times in the Artemis mailing lists and, having spent four years working on the Tunnel project, perhaps some of my views may be relevant.

This project cost about $18b, with a planned budget of about $12-14b.

The project was originated by governmental action to get the paperwork together to allow a binational connection, and produce something to sell - a lease on that connection. Then they offered the lease for nothing to anyone with a good plan. The lease was for 50 years' duration, so the plan had to build and run the connection to make a profit in that time.

The main attraction to investors was the fact that the French and British governments would also underwrite the project costs. This meant that should anything go very seriously wrong (such as a local war stopping the project, a major debt crisis, or a main contractor going bust) then they would pick up the tab to a certain value.

The winning consortium had to go to 200 (yes, two hundred) banks to get the money together. Most of them were Japanese.

Unlike the Japanese tunnel built previously, the UK-FR version had the following major differences:

  1. Fast-track construction.
    A 7-year project. The Japanese tunnel took at least twice as long.

  2. A completely new trainset.
    State-of-the-art train engines and wagons, the largest in the world. Very high-tech stuff, with the body shells built to an accuracy of +/- 1mm, for example. Able to gain power from three types of track systems (UK, tunnel, FR). High-speed capability. Each train weighs about 700 tonnes.

  3. Very much more complicated in-tunnel systems.
    This was a safety requirement placed on the lease. This meant that a great deal more stuff other than track went into the tunnels. For instance, a firemain system able to pump water at the required rate at a distance of 12 miles from the main, and a ventilation system capable of extracting the smoke from the same distance.

  4. There are actually three tunnels.
    Plus 200 connecting passages between them. Plus special 'piston-relief' ducts to reduce the forward pressure created by the train at high speed. About 400 special 20-ton airlock doors.

  5. The most complex tunnel monitoring system in the world.
    Able to detect about seven types of gas, wall movement, airspeed, etc.

This is why at times people drew comparisons of the Lunar Landings with this project.

The reason for the very high publicity profile was due to trouble maintaining the confidence of the banks to pay the extra cost.

In the end, the construction gains beat every world tunneling speed record going at the time.

The main unproven technology was:

  1. The train designs. They caused the project to be delayed as they were difficult to build.
  2. Use of sprayed concrete. (new Australian tunneling method).
  3. The actual surveying. This allowed two tunnels to join to an accuracy of 4" after 11-mile drives was down to simple surveying.

As the Artemis Project goes, these are the comparisons:

  1. We are only after 1/10th the budget.
  2. We too need a fast-track program.
  3. Unlike Apollo, we too do not have a blank check.
  4. We also need private financing.
  5. We too can use largely off-the-shelf technology and techniques.
  6. Unlike the Channel Tunnel, it has been done before.


2. Channel Tunnel Financing

To get $18b together, the CT had the advantage of two governments underwriting the bill. This provided an escape clause if the worst happened (like a major seabed collapse).

To reduce risk, a lot of pre-survey work was done on the seabed. Having said this, there were some serious delays at the very start with unforeseen conditions in the rock.

There was a proven market - make it safe, make it fast travel, and sell it at the right price and customers will use it. The figures are simple to work out for the 50-year lease.

Apart from the above, there was very little collateral on the investment. All the investors would be left with if it went wrong would be some big holes in the ground, and a lot of trains and track that wouldn't run on anyone else's system (except perhaps the French railways).

Most of the money went on the following:

  1. Concrete and metal
  2. Wages
  3. Trainsets

....all of which were pretty useless if the project failed.

To get the 200 banks to agree meant convincing them that the proejct could work. This meant detailed engineering plans, and detailed economic plans.

  1. Proving that it could be built in the time and on cost.
    This was done by demonstration of simple techniques and calculations.

  2. Proving that people would use it.
    This was done by market surveys, and surveys of competitor's business. They had to provide evidence that people wanted faster travel, and not by boat. The speed from London to Paris was only a very small factor, since flying is the same cost and faster.

  3. Elimination of any risks.
    This meant providing contingency plans to handle things like unknown conditions, and major construction hazards. A lot of this was handled by providing surveys and expert opinion on these surveys.

  4. Keeping the technology simple.
    Where possible, individual kit was made as simple as possible. The fact that the entire systems created were very complex and new was ignored. The aerodynamic problems in the tunnel system were computer modelled, and then modelled using an analog computer model. They all turned out to be too complex to understand! The ventilation system therefore underwent a lot of pure science investigation after it was built!

  5. The most comprehensive site saftey program ever devised.
    This meant a minimum of about three days intensive training for the most humble employee, up to paramedic level for anyone suitable and enthusiastic enough. On-site hospital and special rescue teams. Independent auditors had power to halt the project, and people could be (and were) instantly fired if they did something unsafe. The sad fact that is that, although 6 people died on the project, this compares to a national construction industry average of one per week over the 7-year project period. There is no such thing as an accident.

So all the above were required to convince the backers to put the money in. The project is pretty high-risk considering the level of investment. It is often thought the main reason for investing was the fact that a lot of the money went into subsidiary companies in which the banks had shares anyway. There was also a lot of business promotion which came out of being able to say your company was involved. So maybe the real financial risk worked out to be a lot less than it appeared.

Artemis crossover

We need the same detailed arguments above, plus the idea of the money invested going to companies who would benefit from the publicity. The high profile and media coverage helps.

The fact that this project was also a long-term dream coming true also helps the excitment level. I personally do not think that the best media coverage was obtained:

  1. Some of the construction scenes were very similar to the film-sets from the Alien movie! They really were unreal and awe-inspiring (like the massive undersea crossover cavern -- 11 miles out and under the sea. About 60 feet high and 700 feet long. At times, there were 6 simultaneous tunnel drives on the go, and the logistics and muck-removal operations meant the construction train system was the second busiest in the world at the time. A lot of very impressive movies could have been made. Some were- like a time-lapse sequence showing a 500-ton tunneling machine passing through the crossover over a period of a few days. A lot of opportunities were missed, however, despite the fact that about 6 videos were produced.

  2. On the engineering side, the magnitude of the project was not really appreciated even by people directly involved (and I worked alongside the core planning teams who had to coordinate the logistics of about 200 major subprojects working to tight time constraints, cost constraints, and unknown engineering constraints). Even the people right at the top of the teams would have to admit that they were gobsmacked by the fact that the project was really twice as big as what they knew.


You can get the investment for very high cost, high risk projects with the right arguments. Remove the risk by displaying competence and pre-analyzed options.

  1. Ensure that the investors have a stake in the project supplier companies.
  2. Make the most of media coverage to get credo and advertising points.
  3. Make the most of the media opportunities during the project.


3. Selling Moonrock (and the Channel Tunnel!)

The CT was dug in stuff called 'Chalk Marl.' This is a soft chalky material, a virtually ideal tunneling medium. The famous 'White Cliffs of Dover' are made from the strata just above this vein.

People on the project were often asked to get pieces of the stuff for those outside! The public exhibition centre still sells the stuff at about $10 per 200g! It seems appropriate to mention one can pick up this stuff all over the immediate area in the UK, since that's what you are walking on.

The point is, certain bits of it came from certain locations which you could not get to. That made them special.

Now the tunnel is lined with concrete, you cannot get the best bits. Now, a good lump from the UK-FR transition zone is much prized, as is a piece of one of the tunnel boring machines.

A piece of the track (I have one) is also much prized. The company magazine that was published and distributed free during the construction phase ran to about 30 issues. Before the end of the project, a full set would auction at about $400 to people on the Tunnel Project itself.

A limited (2000-off) set of medals were produced and given to people working on the project. About 7 sets were produced, and are much prized.

So, even if everyone is selling Moonrock, certain bits of it will be more valuable than others.

It is proven that you can sell common British chalk at a vast profit. Image what the prospects for moonrock sales are!


4. Selling anything

Hey, here is a piece of chalk like what we will be tunneling in the future, how much? Nil.

Here is a license for an action figure for a project that has not started yet, how much? Nil.

Here is a license for the film rights to a project which has not started yet, how much? Not much.

The point is, you will not be able to convince people to invest very heavily in the design and tooling costs for promotional materials for a project which nobody knows about, and which has not yet started.

The project has to have an official go-ahead before anything can be sold on the promotional side. Anything.

The public will not buy a dream, but they will buy a piece of a possible reality if all goes well. The prices rise as the project progress rises.

For this reason, any promotional licenses must be sold on a limited timespan basis:

  1. Post-announcment of project start
  2. Pre-launch phase
  3. Launch period phase
  4. First mission period (the most valuable)
  5. Established Lunar Base period (most valuable if achieved)
  6. Ongoing operations (let's wait and see!)


Be very careful about assumptions made on selling anything in advance of the project start. Until the general public agrees that this is a real project that will happen, they will not place any value on the merchandise.

Film rights are much better, since an imaginary film can be made in advance. However, it would be much better to sell TV documentaries during the project phase. Why make fiction out of reality, you may devalue the reality that way!

We must concentrate on getting the core project financed and approved to start before any merchandise can be sold generally. Sure, we will buy the stuff, but nobody else will.


5. Raising Finance -- the main options

The Channel Tunnel was high risk (probably higher than Artemis), and cost ten times the price. It was still done through private finance. Thus we should have a better chance than the CT project in theory, even if we were relying on direct investment. We're not, so this goes even more in our favor.

However, the financial mechanisms were well-established:

During the project, key milestones will affect the share price. We have to provide those milestones, and make them known to investors:

  1. Project launch.
    Very public, sets the opening price of shares.

  2. Stage one contract issue.
    This is where key elements of the project hardware are sent to tender. Shares in Artemis and the contracting companies are affected.

  3. Media rights issue.
    This is the selling of film and TV rights to various companies. The shares in these companies change, and also those of the Artemis Project. Any successful film and TV production means income to both Artemis and the licensee, so the share price goes up accordingly.

  4. Second rights issue.
    This is the bulk of shares, sold on the basis that the basic project contracts are in place, and key milestones such as spacecraft design and project infrastructure setup have been completed. This money pays for the building of spacecraft, the launch ticket etc. People buy a share in a rocket launch which aims to increase the value of the shares by sale of later merchandising rights. People are buying into the share values of the media rights issue. It's complex and may not work.

  5. Sale of merchandising rights, stage two.
    These are the hot shares. The project has financing, and hence the value of these licenses is much higher. Their sale increases the price of Artemis Project shares and underpins the launch costs. The purchasers of these rights are selling the dream to the public. They will want full access to the project in accordance to what their purchased rights offer them. This can range from use of the Artemis logo to the right to make a film to one of our scripts.

etc, etc... I hope you get the idea. We have to use proven financial mechanisms to raise the cash.

We need a finance expert. Experts in share issues etc. These people are very expensive. We will only be able to pay them in terms of shares, but at least this delivers a built-in incentive scheme!

We need to simplify the above mechanisms, to make them much clearer to the investors. However, there are some key stages:

  1. Selling the idea that early shares have value.

  2. Setting a price for the early licenses sold to the media.

  3. Waiting for conditions.
    Watching the price of stage b) shares rise to a level where we can realistically offer stage d) shares if there is public interest.

  4. Shares in the hardware construction phase.
    These are contracts signed with the builders of the spacecraft. We buy spacecraft, and then a launch ticket.

  5. Shares in the launch.
    With this comes the publicity options, and the new licenses to cover the launch period.

  6. Media rights in the landing project.
    The launch was successful, and the landings are on. The media rights should go through the roof. Live and recorded licenses are for sale to the highest bidders. We may wish add caveats to the recorded material and simply sell broadcast rights again and again. There is a great deal of scope for options to be studied nearer the time.

  7. Post-landing media rights.
    This covers spin-up products such as 'how-it-was-done' films and all the rest of the usual products.

    The above stages are indicative, and since the time of writing, our understanding of the options on revenue-generation is being updated through a mixture of market examples and recent developments in the commercial space market.

    It should be understood also that, since the time of writing, the possibilities for revenue generation look better all the time as the markets realise that commercial space is worth investing in. It is probably fair to say that the value of space business, dollar for dollar (not accounting for inflation) over the next 5 to 10 years will exceed that of the Apollo Program. Commercial funding too, not federal.

    In fact, the concluding statement should be that we need to now incorporate the notion of 'competition' for funding from other developers of the New Frontier. The race has begun, the revenue streams are starting to appear, and the prospects down the line (perhaps 5 years from now) are for vastly different launch prices and launch service providers from what we have assumed in the Reference Mission. We need to review our business plans as and when the reality of the markets change. At last they are, and in our favour.

Financing the Project

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