SES Decides To Be First To Fly on Enhanced Falcon 9

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PARIS — Satellite fleet operator SES on Feb. 20 said it had agreed to be the inaugural customer aboard  an enhanced version of SpaceX’s Falcon 9 rocket, a decision that SES said followed a careful review of Falcon 9’s more-powerful first stage engine block.

SES officials had said in late January that they had yet to determine whether the risk tradeoffs favored being the first to fly with the more-powerful engine or letting someone else go first and taking a several-month-long delay in having SES-9 in service.

SES Chief Executive Karim Michel Sabbagh said the company only recently finished its Falcon 9 review and recommended to the SES board of directors that they take the earlier slot. The launch is scheduled to occur by June.

But in presenting its financial results and near-term forecast on Feb. 20, Luxembourg-based SES showed how sensitive future revenue levels can be to the timing of a single satellite’s launch, even for a company like SES, which currently has a fleet of 54 spacecraft.

SES in 2014, for the first time, surpassed Intelsat as the world’s largest fixed satellite services fleet operator when measured by revenue. Intelsat reported 2014 revenue of $2.47 billion. SES’s 1.92 billion euros – up 3 percent from 2013 — translates to about $2.55 billion using the average exchange rate for the year.

SES has seven satellites under construction and scheduled for launch between 2015 and 2017, but SES-9 is the only one scheduled for 2015. The satellite will operate from 108.2 degrees east over Asia and provide coverage for Northeast Asia, South Asia, Indonesia and the Indian Ocean region.

Of its 84 transponders, 53 are for new business, which is where SES’s growth comes from.

SES-9 is one of several satellites SES has ordered that will use electric propulsion to climb from the rocket’s drop-off point to final geostationary orbit 36,000 kilometers over the equator. Electric propulsion accords huge savings in a satellite’s launch mass compared to chemical propellant, but at a price: The satellite takes several months, not weeks, to reach its operating position.

Image from an SES-9 fact sheet
Image from an SES-9 fact sheet

That is the case for SES-9. The 53 transponders reserved for new business will not be generating revenue until between four and six months after launch, meaning their contribution to 2015 revenue will be heavily dependent on whether the launch occurs by June, as scheduled, or is delayed.

SES Chief Financial Officer Padraig McCarthy said during the conference call that if SES-9 is launched by June, SES’s average annual revenue between 2015 and 2017 is likely to grow by 4 percent. If the launch slips beyond June, the compound annual revenue growth will be just 3.5 percent.

That was not what the stock market wanted to hear, and despite a 10 percent increase in the SES dividend and the generally positive effects on SES of the rising U.S. dollar, the company’s shares fell by some 4.5 percent Feb. 20.

During the conference call and in its financial results, SES also said:

  • Its business in North America in 2014 fell by some 13.5 percent following lower revenue from the U.S. government. Unlike its European rival, Eutelsat of Paris, SES does not do much U.S. government business in the Middle East because it does not have Eutelsat’s concentration of orbital slots there.But the U.S. government is nonetheless a major SES customer. In an interview, Sabbagh suggested that investors look past the 2014 results to see that U.S. Defense Department commercial satellite procurement is finally changing. That means military contracts of longer duration than one year.

    Sabbagh said SES’s win of an exclusive contract for the U.S. Army’s Warfighter Information Network – Tactical program covers multiple years. He declined to specify its duration or the amount of capacity leased.

  • SES owns 45 percent of O3b Networks, whose 12-satellite constellation of Ka-band high-throughput spacecraft in medium Earth orbit began commercial service in 2014. Sabbagh said O3b would be cash-flow positive by early 2016, and that the company would be ordering eight more satellites in the coming months.Sabbagh said O3b conducted a demonstration with U.S. Central Command to show what O3b’s throughput could offer to off-load video streaming, in high-definition format, from an unmanned aerial vehicle. While no contract has yet been signed, he said the prospective military customer viewed the demonstration as “transformational.”
  •  SES will be among those bidding to host a U.S. government navigation payload to augment GPS services in North America. SES is providing a similar service to the European Commission in Europe on two satellites.