Iridium Boosts Payments as Dollar Loses Ground to Euro

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Mobile satellite services provider Iridium Communications is increasing its payments to satellite prime contractor Thales Alenia Space to account for dollar-euro currency fluctuations and to continue early work on the Iridium Next constellation while the full funding package is being assembled, Iridium said.

Accounting for current fluctuations, the McLean, Va.-based company now expects to pay Thales Alenia Space a total of about $164.2 million for six months of work on Iridium Next through November, the company said in an Aug. 9 filing with the U.S. Securities and Exchange Commission (SEC).

Iridium in June had agreed to pay the Cannes, France-based satellite builder $53 million for three months of work on the 81-satellite constellation while Iridium arranged its financing with a bank syndicate and with the French export-credit agency, Coface, which is providing guarantees for 95 percent of Iridium’s $1.8 billion in bank financing. Another $53 million payment, called an Authorization to Proceed, had been expected when the first expired.

Iridium said it has now paid Thales Alenia Space for the second three-month work period and made an additional $37.2 million payment to reflect the dollar’s decline against the euro.

In its SEC filing, Iridium estimates that Iridium Next will cost $3 billion, including the launch of 72 satellites, related ground infrastructure and insurance, assuming an average euro value of $1.30. The $1.2 billion in costs not covered by the bank syndicate will come from Iridium’s cash-flow generation, from selling space on Iridium satellites to government and other customers, and from selling Iridium warrants.

The satellites are scheduled to be launched into low Earth orbit between 2015 and 2017. In an Aug. 9 conference call with investors, Iridium Chief Executive Matthew J. Desch said the company’s current constellation continues to perform well, with seven in-orbit spares available when needed. The system will continue to function until Iridium Next is in service, he said.

Iridium said its recently modified contract with Chicago-based Boeing Co., which operates and maintains Iridium’s current satellites, calls for annual reductions in the price it pays to Boeing. The contract has been modified from a fixed-price model to one based on time and materials costs actually incurred by Boeing, with annual limits.

Iridium and Boeing have concluded a separate agreement, valid at least through 2019, for similar services once Iridium Next is launched.