Orbital Blames Lost Satellite Deal on Ex-Im Closure

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WASHINGTON — As a second U.S. satellite manufacturer reported losing contracts because of the lack of export credit financing, industry executives argued that reauthorization of the  U.S. Export-Import Bank is essential for American companies to compete globally for many commercial satellite and launch contracts.

At a Sept. 21 Washington Space Business Roundtable panel session here, Ted McFarland, senior director for GEOComm at Orbital ATK, said his company lost a competition for the Azerspace-2 satellite with the government of Azerbaijan because Ex-Im could not provide financing after its authorization lapsed July 1.

“At the end of the competition, we were left without a key component in our win strategy,” he said of the loss of Ex-Im financing. “We got in the door and had an indicative letter from Azerbaijan, and then we lost it.”

McFarland said Orbital lost the contract to a “Canadian-backed enterprise,” a reference to California-based manufacturer SSL, which is owned by Canada’s MDA Corp. SSL has taken advantage of that ownership to seek financing from Export Development Canada, the Canadian export credit agency.

Orbital ATK and SSL were two of four companies that submitted bids earlier this year for Azerspace-2, along with Airbus Defence and Space and China Great Wall Industry Corp., according to statements by Azercosmos, Azerbaijan’s space agency. While there has been no public announcement of the contract, an Azerbaijani government official said in August that the country had selected a manufacturer.

Orbital is the second U.S. satellite manufacturer to report losing business as a result of the Ex-Im Bank’s lapse in authorization. Boeing Space and Intelligence Systems had a satellite order with Hong Kong-based Asia Broadcast Satellite (ABS) suspended because of the lack of Ex-Im financing, and company officials said recently that Singapore-based Kacific Broadband Satellite informed them not to submit bids unless Ex-Im financing was available.

“In the case of Boeing, we’ve lost sales. We’ve lost real jobs,” said Jeff Trauberman, vice president of space, intelligence and missile defense systems at Boeing, of the loss of Ex-Im financing.

Ken Betaharon, chief technology officer of ABS, confirmed that his company was looking at other options to build and finance the ABS-8 satellite originally awarded to Boeing. “We have started to look at other export credit agencies because we need to grow our business,” he said.

Betaharon said ABS is planning to buy four satellites, counting ABS-8, through 2017. “If the Export-Import Bank charter is not reinstated, unfortunately we’ll have to go elsewhere for them because we’re a small company,” he said. “We’re growing very quickly, but we don’t have the financial resources to implement our very ambitious plan.”

Panelists said that export credit financing, used rarely in the space industry until about five years ago, has now become a requirement for many satellite deals, particularly for smaller operators and nations like Azerbaijan. Trauberman said that they are now seeing explicit requirements in some bids to include such financing. “It’s entry table stakes,” he said.

“It’s an increasing trend we’re seeing,” McFarland added. “If you don’t have an export credit agency capability, you can’t even step up and play.”

John Schuster, former head of the structured finance division at the Ex-Im Bank, said by his calculations the bank led 19 satellite and launch deals since 2009 with a total value of more than $5 billion. He estimated those deals supported 10,000 jobs, including up to 7,000 with satellite manufacturers.

Schuster, now a principal with 32 Advisors, said that, in his experience, private lenders are unable to take over the financing previously offered by Ex-Im, and that even if they did, other nations’ export credit agencies would likely offer more attractive deals. “It’s unilateral disarmament,” he said. “I just can’t believe that we’re thinking this is a good idea.”

While American companies may be dependent on Ex-Im financing to win business, it was less clear that this dependence would be a major argument in the larger debate to reauthorize the bank. “We’re literally talking about thousands of peoples’ livelihoods, and that’s the only political answer we can leverage at this time,” said McFarland.

Schuster downplayed any adverse impact on reauthorizing Ex-Im based on the April bankruptcy of NewSat, the Australian company whose satellite manufacturing contract with Lockheed Martin was backed by Ex-Im. Lockheed later cancelled the contract and took possession of the satellite, leaving the bank with a significant loss.

He said that even with the NewSat loss, Ex-Im was still profitable overall. “If it hadn’t been that transaction that opponents would raise, it would have been another,” he said of those opposed to reauthorization of the bank. “They were just that dogmatically opposed to the bank in principle.”

Schuster said it’s unlikely a reauthorization of the bank will be included in a short-term continuing resolution needed to fund the federal government after Sept. 30. The next opportunities, he said, would be in a transportation bill in October or an omnibus spending bill for fiscal year 2016 Congress may take up late this year.