Israel’s Spacecom Eyes Space Systems/Loral for Amos 6

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TEL AVIV, Israel — Israel’s Spacecom, owner and operator of the Amos communications satellite fleet, is likely to select Space Systems/Loral over state-owned Israel Aerospace Industries Ltd. (IAI) to build its newest Amos 6 satellite, industry sources here say.

The Palo Alto, Calif.-based firm and IAI, Israel’s sole satellite producer, are in final negotiations with Tel Aviv-based Spacecom after beating out bids from European Astrium and Russia’s Reshetnev Information Satellite Services (ISS), producers of Amos 5.

A decision by Spacecom’s board of directors is expected within a month on the 4.5-ton satellite tentatively planned for launch aboard a Space Exploration Technologies Falcon 9 rocket by 2015.

Israeli government and industry sources conceded during interviews the week of April 16 that there would be grave consequences for Israel’s communications satellite industrial base if IAI, producer of the first four Amos satellites, fails to win back rights to build Amos 6. IAI lost its monopoly over the Amos line in 2008, when Spacecom could not refuse ISS Reshetnev’s much cheaper package offer to build, launch and insure Amos 5 in a prearranged orbital slot at 17 degrees east over a brand new African market.

Spacecom’s Russian-built Amos 5 was launched in December 2011 aboard a Proton Breeze-M rocket from Baikonur Cosmodrome in Kazakhstan.

Spacecom declined comment on what spokesman Joshua Shuman described as a very sensitive phase of the competition. “As a publicly traded company, they are not in a position to comment on your questions,” he said.

Loral spokeswoman Wendy Lewis declined to comment on the Amos 6 competition.

IAI and government space officials also refused to speak for the record about what many here characterized as a make-or-break deal for Israel’s future comsat production capabilities. Privately, however, they noted that since IAI’s Amos 5 loss, the firm has instituted sweeping efficiency measures to drive down costs of the nearly completed Amos 4 scheduled for launch later this year.

But despite draconian cost-cutting measures and production reforms, industry sources here estimated that Loral beat IAI’s best and final bid by a significant amount. Barring last-minute government subsidies or other incentives to narrow the gap, sources here said Spacecom has an obligation to its shareholders to pick Loral over IAI.

Ironically, IAI was a founding investor in Spacecom as a commercial vehicle for promoting the firm’s Amos satellite line and hand-picked David Pollack, a former IAI employee, as Spacecom chief executive. In May 2010, IAI sold its nearly 15 percent equity in Spacecom to Tel Aviv-based Eurocom Communications, a majority shareholder, thus relinquishing its corporate representation on the Spacecom board.

Aside from Amos 4, IAI has no other communications satellites in its backlog. Loss of a follow-on Amos 6 order could force the company to close down its comsat portfolio and consolidate research, development and production resources solely in the remote sensing sector.

At the same time, Israeli sources warned that a non-Israeli Amos 6 in Spacecom’s planned geostationary orbital slot of 4 degrees west — which includes the entire Middle East — could impact on national security.

“We believe Amos 6 should be and will be an Israeli satellite for a lot of good reasons, but at the end of the day, it all narrows down to a business case,” a prominent Israeli business executive told Space News April 18. He said IAI is prepared with alternative strategies for growth if it does not win against Loral.

“The fact that IAI made it to the short list against Loral, the world’s leading communication satellite, speaks for itself,” he added.

In an interview last year, a senior Israeli Ministry of Defense official said the Israeli government had traditionally supported IAI’s Amos program through direct production funding — as was the case with Amos 1 — or by long-term commitments to purchase satellite services. Under a July 2007 deal for the $365 million Amos 4, Spacecom agreed to pay IAI $100 million while the Israeli government committed to the remaining amount through prepurchases of satellite services for the projected 12-year life of the satellite.

The Israeli government assumed a hands-off approach to Spacecom’s Amos 5, primarily because its geostationary orbit over Africa did not materially service local needs. “Spacecom is a publicly traded company. The Russian-built Amos 5 was a pure business decision. But Amos 6 is a different story. There’s a national interest in preserving this capability within IAI,” the official said at the time.

Israel’s Ministry of Defense declined to address what commitments it has made to Spacecom’s Amos 6 or whether it is willing to underwrite additional incentives to bolster IAI’s competitiveness vis a vis Loral.