Maxar announced today that it had made the decision to terminate its contract with the U.S. Defense Advanced Research Projects Agency (DARPA) for the Robotic Servicing of Geosynchronous Satellites (RSGS) program.
It’s a tough decision to make considering how hard Maxar has worked to make inroads in U.S. Defense programs. And since DARPA programs are usually pushing the innovation envelope, it’s an even harder blow to withstand. The contract with DARPA was with Maxar’s SSL business unit.
After the merger of MDA and Digitalglobe, the resulting company, Maxar, was faced with significant capital expenditures for its WorldView Legion satellite constellation and what it saw as a manageable debt load.
However, the company recently announced that its flagship satellite, WorldView-4, had experienced a failure of its control moment gyros and they didn’t expect the spacecraft to recover. While Maxar will file an insurance claim for the satellite, the real damage is in the lost revenue the satellite was to generate and which can’t easily be replaced.
In a press release issued this morning Maxar said “this decision is consistent with Maxar’s commitment to disciplined prioritization of capital. Maxar remains confident in the potential of the on-orbit servicing market and the value of public private partnerships. SSL will also be terminating its associated contract with Space Infrastructure Services LLC, which SSL was awarded in June 2017 to develop a servicing spacecraft vehicle for the RSGS program.”
Space Infrastructure Services LLC was a spinoff company which MDA had created for some of its satellite servicing offerings. They then sold majority ownership in June 2017 to Finance Technology Leverage LLC. The loss of this contract will come as blow to Finance Technology Leverage LLC.
The press release also said “SSL remains unwavering in its commitment to its customers on all existing contracts.” That would mean another government robotic servicing program, NASA’s Restore-L Spacecraft, which will be used to service a government satellite in low Earth orbit, is unaffected. As well, their efforts at marketing robotic servicing kits will apparently continue.
Richard White, President of SSL Government Systems said of the decision, “while disappointed that we are unable to find an economically viable path to support RSGS and meet our return criteria, we are dedicated to partnering with the U.S. government to realize the full potential of in-space robotic servicing of spacecraft, as well as assembly and manufacturing in space. At Maxar, we are uniquely positioned to leverage technology and expertise from across our businesses to accelerate innovation for the new space economy. We are proud of our leadership in space robotics, including our pioneering work in NASA’s Restore-L mission to refuel LANDSAT-7, and we will continue to pursue leading-edge opportunities.”
Maxar’s shares on the TSX were up $0.19 as of publication time, trading at $7.80. Since hitting its 52 week low of $6.32 earlier this month, the stock has slowly begun moving upwards. The company is expected to report Q4 earnings and FY2018 results on February 25.
As I’ve mentioned elsewhere, I believe an important subtlety is being missed in yesterday’s announcement. Maxar’s public statement – that it is still interested in being a ‘partner’ with government in commercial space servicing – is, in my view, disingenuous. Because what they’ve done is dump their one, true, cost-and-risk sharing Partnership, a la COTS – ie a true ‘Partnership’, where both Partners have skin in the game, both Partners take on risks, both Partners take on costs – RSGS; and instead have now only gone with the ‘partnering’ concept that is, essentially, just straight contracting: where NASA takes on all the risk, and pays all the money. It is a fundamental abandonment of the entire innovative, pioneering, industry-creating business strategy that that part of MDA/Maxar has been on for many, many years; the part that made them a true pioneer. And that is what is being lost here. They are acting just like a Boeing or Lockheed-Martin now.
I hope I’m wrong.