Government of Canada makes $1.44 billion investment in Telesat

Prior to its expected Initial public offering, Telesat is solidifying its finances to build its Low Earth Orbit (LEO) Lightspeed satellite communications constellation. This announcement brings another $1.44 billion to the $6.5 billion project.

In the announcement today, the company said the Government of Canada will provide a $790 million loan with a 20 year term and $650 million for a preferred equity investment.

The $650 million equity investment is in the form of a Payment-in-Kind (PIK) preferred equity. The government will “receive warrants that can be exchanged into common shares.” The PIK will have “an average term of 14 years.”

In return Telesat will do the following:

• Commit to investing in Canada $1 billion of capital expenditures for its initial Lightspeed constellation and the lesser of $2.6 billion or 50% of certain capital expenditures for its subsequent constellation, with incentives for additional Canadian investment in the subsequent Lightspeed constellation.
• Telesat will grow its Canadian employee footprint to at least 700 full time equivalent employees, largely in STEM, and will continue to support post-secondary students through new co-op opportunities and scholarships, with a focus on women in STEM programs.

Telesat also stated that with this investment they have “approximately $4 billion (of the needed $6.5B), including roughly $1.7 billion of cash contribution from Telesat (inclusive of investments made to date, cash on hand and proceeds expected from the U.S. C-band clearing process) and $0.4 billion investment from the Government of Quebec.” This also included the announcement last week by the Ontario government of a $109 investment in Telesat Lightspeed.

Telesat said the balance of the funding needed to capitalize the project will come primarily from debt financing “from certain export credit agencies, with whom Telesat is in advanced discussions.”

Dan Goldberg, Telesat’s President and CEO said “The Government of Canada’s investment in Telesat Lightspeed underscores the program’s transformational ability to bridge the digital divide, position Canada at the forefront of the burgeoning New Space Economy, and deliver sustained and high-quality job creation and economic growth in Canada. We applaud the Government’s recognition of the importance and promise of Telesat Lightspeed. With the funding announced today and other financing sources already in place, including the previously announced investment by the Government of Quebec, Telesat now has arrangements for approximately $4 billion in funding for the program. We expect to secure in the near term the remaining financial commitments required to fully finance Telesat Lightspeed.”

François-Philippe Champagne, Minister of Innovation, Science and Industry stated “Now is the time to bolster Canada’s position as a global leader in the new space economy. Through its partnership with Telesat, our government is creating more high-skilled jobs, enabling innovation and helping to unlock economic and social opportunities in Canada’s most rural and remote communities. Every Canadian should have access to affordable high-speed Internet. Today, we took a big step towards making that happen.”

The Telesat Lightspeed constellation will initially consist of 298 satellites.