DigitalGlobe Awards $307M in Contracts for WorldView-3 Satellite

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PARIS — Commercial remote-sensing firm DigitalGlobe on Aug. 30 announced it has signed contracts valued at $307 million with Ball Aerospace and ITT Industries to build the WorldView-3 satellite’s platform and imager, respectively, with a launch scheduled in mid-2014.

The contracts, which were expected, will permit Longmont, Colo.-based DigitalGlobe to meet the conditions of a 10-year, $3.55-billion contract to provide imagery and services to the U.S. National Geospatial-Intelligence Agency (NGA).

DigitalGlobe’s principal competitor, GeoEye Inc. of Dulles, Va., won a $3.8 billion contract under the same NGA program, called EnhancedView, which requires the companies to deliver predetermined amounts of imagery in return for monthly payments by NGA.

Unlike GeoEye, which will be receiving $337 million in NGA funds to offset the cost of the GeoEye-2 satellite now under construction, DigitalGlobe did not seek a cost-sharing arrangement with the U.S. agency for WorldView-3.

DigitalGlobe Chief Executive Jill D. Smith told investors that allowing NGA to co-finance WorldView-3 might have aligned the company so closely to NGA’s requirements that DigitalGlobe’s non-U.S.-government customers would have suffered.

While NGA will have access to up to 60 percent of DigitalGlobe’s entire satellite capacity under the EnhancedView contract, the company is confident it can meet those requirements and still expand its business with other government and commercial customers.

“In a co-funding situation, there are certain restrictions that come with that, and imply perhaps a higher level of dedication to a single customer,” Smith said in an Aug. 9 conference call with investors to discuss the EnhancedView contract, which was awarded Aug. 6. “Given the growth outlook of the business, we feel that by owning and managing the infrastructure we will drive the best returns for our shareholders. Second, the financial strength of the company means we can fund it out of cash.”

In an Aug. 30 filing with the U.S. Securities and Exchange Commission (SEC), DigitalGlobe said it had signed a $180.575 million contract with Ball Aerospace & Technologies of Boulder, Colo., to build and integrate the WorldView-3 satellite, to be delivered by May 2014. The contract value is subject to penalty payments in case of late delivery, and incentive payments for early delivery.

Ball, which built the WorldView-1 and WorldView-2 spacecraft now in orbit, will use its BCP 5000 platform for the work.

DigitalGlobe said it signed a separate contract, valued at $126.5 million, with White Plains, N.Y.-based ITT to build the WorldView-3 optical imager, to be delivered to Ball by July 2013.

WorldView-3 will bear a strong resemblance to WorldView-2 in terms of its performance characteristics.

The NGA’s EnhancedView program appears to require different investments by the two imagery and service providers.

In DigitalGlobe’s case, the $3.55 billion is divided into two pieces. Payments in return for acceptable imagery quality and quantity will total $2.8 billion and be paid out by NGA at a rate of $20.8 million per month for the first four years, and $25 million per month for the remaining six years of the 10-year contract.

A second piece, totaling up to $750 million, is for value-added services that DigitalGlobe will provide to NGA. The U.S. agency already orders such services from DigitalGlobe, but it is done on an ad hoc basis. With the start of EnhancedView, NGA is quantifying the services it expects to order over 10 years in addition to the monthly image-delivery requirement.

Embedded in this $750 million is an undisclosed reimbursement by NGA of costs that DigitalGlobe will incur in expanding its global ground-reception infrastructure to meet EnhancedView’s terms.

Among other demands of the EnhancedView contract, NGA is requiring DigitalGlobe to lower the orbit of its WorldView-2 satellite, launched in 2009, to 680 kilometers from the current 770 kilometers in altitude. The closer view of the Earth will sharpen the satellite’s ground resolution to 41 centimeters, compared with 46 centimeters currently. The orbit change will occur by September 2011, according to DigitalGlobe.

NGA has the right to order a second orbit-lowering of WorldView-2, to 496 kilometers, after September 2013 and subject to U.S. regulatory approval. This would further sharpen the resolution of its imagery for NGA. For non-U.S.-government customers without special waivers, current regulatory restrictions limit the ground resolution to 50 centimeters, meaning DigitalGlobe degrades imagery resolution to that level before sale. DigitalGlobe has declined to disclose the planned orbit for WorldView-3.

While lowering the satellite’s orbit gives it a more precise view of the Earth, it also reduces its field of view. DigitalGlobe therefore will not be able to image as much territory per orbit as it does now with WorldView-2.

The change in orbit — plus the fact that EnhancedView gives NGA priority rights to 50 percent of all the company’s image-taking capacity, rising to 60 percent — “may require some adjustments in our operational planning and certain product offerings,” Smith said in the Aug. 9 conference call.

But offsetting this will be the enhanced capacity of DigitalGlobe’s ground network. The net result will be a 60 percent increase in DigitalGlobe capacity by 2015, after WorldView-3 is launched and the ground network is expanded. Non-NGA customers should see little or no reduction in their service, Smith said.