PARIS — Loral Space and Communications has made a $6.5 million cash payment to MDA of Canada to compensate MDA for the loss of future orbital-incentive payments from a satellite built by Space Systems/Loral, which Loral sold to MDA in November, Loral said.
The Intelsat IS-19 satellite, launched in June 2012, suffered a partial loss of capacity when one of its solar arrays did not fully deploy. As is common in satellite contracts, Luxembourg- and Washington-based Intelsat had withheld a portion of the payment due Space Systems/Loral as orbital incentives.
Orbital incentives typically amount to 10 percent of a satellite’s contract price. They are paid out annually, with interest, by the satellite’s owner for the spacecraft’s scheduled 15 years of in-orbit service. A manufacturing defect discovered at any time during this period can reduce future orbital incentive payments.
Intelsat has received an $85 million insurance claim as a result of the solar array defect.
In a May 9 filing with the U.S. Securities and Exchange Commission, New York-based Loral said the IS-19 contract included $18 million in orbital incentives that would have accrued to MDA in the coming years.
The solar array deployment failure has reduced those expected payments by $6.5 million, resulting in the cash payment from Loral to MDA, Loral said. Any further reductions in the IS-19 incentive payments resulting from satellite defects discovered before Nov. 2 will result in corresponding additional Loral payments to MDA, Loral said.
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