PARIS — Canadian space hardware and services provider MDA Corp. said the shutdown of the U.S. Export-Import Bank, the strengthened U.S. dollar and rocket failures have all contributed to a reduced number of telecommunications satellite orders booked industry-wide in 2015.
Richmond, British Columbia-based MDA, which owns satellite builder Space Systems/Loral (SSL) of Palo Alto, California, said the dollar’s rise against the euro has so changed the competitive dynamic that the company is considering moving at least part of its satellite operations outside Silicon Valley, and perhaps outside the United States.
In a July 30 conference call with investors, MDA Chief Executive Daniel E. Friedmann said the company is applying maximum pressure to its supply chain to cut costs to meet the new pricing environment for satellites set by European competitors operating in euros. If suppliers do not respond, he said, MDA has the option of seeking alternatives outside the United States.
SSL outsources about 50 percent of the value of its satellites, Friedmann said. For the 50 percent made in-house, the company has embarked on a broad cost-cutting and efficiency program that should complete by early 2016.
If that is not enough to maintain its market share for geostationary-orbit telecommunications satellites, the company will consider “multiple alternatives, like moving products out of Silicon Valley, or out of the U.S. We expect to get that sorted out” by this autumn, Friedmann said. “We did not anticipate that our European competitors would get an overnight advantage in the teens, percentage-wise,” with the dollar’s rise against the euro.
SSL’s production facility is designed to handle seven new telecommunications satellite orders per year. When MDA’s Montreal facility is added in, the company can manage nine satellites per year.
The company booked nine satellites in 2014, giving it a safety margin for 2015. Given how the market is shaping up, it will need all of that margin and more.
Friedmann said that by MDA’s count, seven commercial geostationary telecommunications satellites have been ordered so far in 2015, far fewer than projected given the number of bid requests issued by prospective customers. Others have been announced, he said, but are not fully funded and are not considered firm. SSL has won just one of these.
Satellite orders often come in bunches — for example, 12 of the 25 satellites ordered in 2014 were contracted in the three months ending in September of that year.
Friedmann said the same may be true this year, but that there are headwinds that did not exist in 2014.
First is the U.S. Congress’ decision not to reauthorize the U.S. Export-Import Bank, which with France’s Coface has been the lead export-credit agency in terms of satellite and satellite-launch financings in the past few years.
Friedmann said Ex-Im’s July 1 closure, even if it is reversed by U.S. congressional decision in the autumn, is bad news for the entire telecommunications satellite industry.
Even if Canada’s Export Development Canada gets more satellite business in Ex-Im’s absence — the Canadian agency in the past has financed SSL-built satellites despite the California address — neither the Canadian nor the French agency can fill the gap left by Ex-Im, he said.
“Without Ex-Im, there is not enough money in the market to finance all the satellites,” Friedmann said.
And it is not just satellite builders. Numerous customers of launch service provider SpaceX of Hawthorne, California, have benefited from Ex-Im backing.
Recent failures of the Russian Proton and SpaceX Falcon 9 rockets have added more headwind to the market.
MDA’s geospatial information division markets Radarsat 2 data to customers worldwide and is prime contractor for the Canadian government’s three-satellite Radarsat Constellation Mission (RCM), due for launch in 2018.
Friedmann said the satellite work is on schedule, with no major issues. But MDA and the Canadian government have not yet signed a contract on MDA’s access to RCM imagery.
With no Canadian deal imminent, MDA has opened negotiations with other governments to form a de facto constellation using Radarsat 2 and these governments’ radar satellites — even if that means not marketing RCM.
“Radarsat 2 is more capable, in every way, than any of the RCM satellites,” Friedmann said. But a three-satellite constellation provides more-frequent passes over a given region, which is important for some customers. That is why MDA wants to partner with other satellite owners to complete the Radarsat 2 service offer.
MDA’s current estimate is that Radarsat 2, launched in late 2007, will in any event remain operational through the lives of the RCM satellites, meaning through 2025, he said.
“Yes, we are interested in doing a deal with the Canadian government to our mutual benefit,” Friedmann said. “But that has been very slow. We are negotiating in parallel with governments that have other assets. We’ll do the firs deal that makes sense. We just can’t wait for Canada.”