Telesat looks to more financing to complete Lightspeed

Telesat LEO satellite constellation

Telesat is adjusting its budget for Lightspeed after inflation and schedule delays are further pushing up the cost of the satellite constellation.

After saying three months ago that reducing the number of satellites to 198 (from 298) should keep to its $5 billion budget to about the same amount while meeting customer demand, CEO Dan Goldberg said in an update Friday (Aug. 5) that the company is seeing “an increase in the cost of the program.” The projected increase cost range is hundreds of millions of dollars.

Capital expenditures will be released at a later date when Telesat has more clarity about the costs, its quarterly guidance stated, as negotiations with export credit agencies (ECA) are persisting a quarter longer than the company expected. 

Goldberg further warned there is no guarantee as of yet that the additional financing negotiations will be completed, but noted any new financial pacts are subordinate to existing agreements such as with the governments of Canada and Ontario.

That said, he added that the constellation still has “strong support” from federal and provincial partners, and the company is looking to “completing the financing and commencing the full-scope construction of the program.”

“Although we’ve been disappointed with the supply chain challenges and inflationary pressures that we’ve encountered, we remain extremely bullish about the opportunity Lightspeed gives us to grow our business,” Goldberg said.

The delay first arose in late 2021, when potential manufacturer Thales Alenia Space told Telesat that pandemic-related supply chain issues would push the launch back at least a year to 2026. Telesat began discussing different configuration options for Lightspeed in March in an attempt to control costs. 

Goldberg added in the Friday investor call that Thales only sent its final proposal for Lightspeed “a few weeks ago,” which Telesat forwarded to the potential ECA lenders in early August. 

Telesat also may be examining other manufacturing options beyond Thales. Of the company, Goldberg said, “they’re a good prime contractor, I think they’ve got a great track record, but we’re not locked into Thales.”

He emphasized that Telesat’s special focus on government and corporate services for maritime, aerospace and enterprise-grade connectivity would keep customers “engaged with the market” when Lightspeed is ready.

“My expectation is, we get this financing going late this year. Once that’s done, we’re rolling. The customers will see that,” Goldberg said, adding that in-orbit demonstrations should increase the backlog for Lightspeed. That said, Telesat doesn’t aim to “own the market” in broadband as the opportunity is so large, at something like $420 billion around 2030 according to numbers Goldberg provided.

Telesat’s difficulties come amid huge shifts in the global broadband business in the past few weeks. As SpaceX sends Starlink satellites aloft in clutches by the dozen several times a month and approaches 2,000 operational satellites in orbit, much of its competition is in merger talks.

OneWeb and Eutelsat disclosed a memorandum of understanding in late July to bring together the two companies’ low-Earth orbit and geostationary satellites, respectively, subject to regulator and board approvals. The Financial Times reported SES and Intelsat are also talking over a merger deal, although spokespeople for the two companies said they would not comment on speculation.

Telesat is also forecasting a potential revenue hit in 2023 after an aging satellite, Anik F2, will need to be pulled from service in 2023, three years earlier than anticipated. This is due to two of its four thrusters having anomalies in recent weeks. (The first failed altogether, while the second is still functioning with restrictions.)

Anik F2 – which launched in 2004 and is three years past initial forecasts for its design life – is still serving its largely Canadian customer base for now. Adjustments to its operations to account for the lost thrusters, however, are causing it to use more fuel than expected. 

Goldberg said “station-kept service” will only be available until the end of 2022, “at which point the [geostationary] satellite will be put in an inclined orbit.”

Goldberg said some customers will see impacts in February 2023, and “other services will degrade over time, depending on the size of the antennas receiving signals from the satellite.”

Telesat is pursuing mitigation strategies, such as repointing some customer antennas to other Telesat satellites, or adding tracking antennas for Anik F2 in a few other cases. If these strategies do not work, however, Anik F2 revenues “will decline” by as much as a third. (The satellite’s current revenue contribution is $50 million, or about 8 percent of Telesat’s overall revenues.)

A media report from SpaceNews, quoting a Telesat spokesperson, said Anik F2 is not insured and that the cause of the thruster anomalies is still being investigated.

Telesat saw few changes year-over-year otherwise in its financials, with most variations being accounted for by currency fluctuations. Its quarterly consolidated revenue was $187 million, around $1 million less than the year before. Adjusted EBITDA was $146 million, declining by $1 million from Q2 2021. 

The company’s net loss was $4 million, compared with a $53 million profit last year, due to foreign exchange fluctuations, changes in the U.S. dollar’s value, and a gain on “extinguishment of repurchased debt,” according to Telesat documentation.

About Elizabeth Howell

Is SpaceQ's Associate Editor as well as a business and science reporter, researcher and consultant. She recently received her Ph.D. from the University of North Dakota and is communications Instructor instructor at Algonquin College.

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