NewSat’s Losses Deepen as Creditors Circle
PARIS — Startup satellite operator NewSat Ltd. of Australia on Feb. 27 reported a sharp drop in revenue and deepening losses for the six months ending Dec. 31 and gave investors little hope for relief in the near term.
Industry officials said NewSat has entered a spiral that, if not reversed, likely will see it purchased by a strategic or financial investor interested in its satellite assets.
The forced auction or other disposal of NewSat’s satellite would be the first major loss for the U.S. and French export credit agencies in the decade since they both became major satellite telecommunications investors.
The company’s first fully owned satellite, Jabiru-1, is under construction by Lockheed Martin Space Systems of Sunnyvale, California. NewSat has been unable to keep up scheduled milestone payments, owes $21 million and is facing the risk of contract suspension. Lockheed in January issued a contract-termination notice to NewSat, after which NewSat has several months to make the required payments.
Launch services provider Arianespace of Evry, France, on Feb. 26 said it was “reserving all rights and remedies” with respect to $42.4 million in unpaid bills, NewSat said in its financial statement.
Southbank, Victoria-based NewSat said it was continuing negotiations with its export credit agency lenders, the U.S. Export-Import Bank and Coface of France, following a default on payment of 185.4 million Australian dollars ($151 million) in December.
NewSat is also in default on a convertible loan valued at 34.5 million Australian dollars.
In a letter accompanying the financial statement, NewSat’s auditor, Ernst & Young, said “there is significant uncertainty as to whether [NewSat] will continue as a going concern as [it] is dependent on the satisfaction of waiver conditions and the ongoing support of export credit agency lenders. These conditions indicate the existence of a material uncertainty that may cast significant doubt about the Group’s ability to continue as a going concern and therefore, the Group may be unable to realize its assets and discharge its liabilities in the normal course of business.”
In a letter to investors, NewSat said it hoped to work out an arrangement with the U.S. and French export credit agencies that would permit satellite construction to continue and allow the company to develop its business plan.
NewSat reiterated previous statements that it had booked prelaunch commitments for more than 600 million Australian dollars for Jabiru-1, but whether the company can remain viable long enough to see Jabiru-1 in operation is unclear.
In an agreement with fleet operator Measat of Malaysia, NewSat had agreed to purchase the equivalent of six 36-megahertz transponders on the Measat-3b satellite, launched in September, in exchange for Measat’s equivalent purchase of capacity on Jabiru-1. NewSat refers to Measat-3b as Jabiru-2.
NewSat said it was unable to sell as much capacity on this new satellite as planned, meaning that Measat may join the credit agencies, Lockheed Martin and Arianespace as those with claims against NewSat’s assets.
“The cost of unutilized Jabiru-2 capacity for the first quarter following its successful launch in September 2014 represented the major impact on the gross margin,” NewSat said. But the company said it was hopeful that it will “significantly grow revenues” in the first six months of 2015.
It said it was targeting a late-March agreement by its lenders to agree to waivers of the current financial covenants.
NewSat’s challenge from the start has been to leverage its success as a teleport operator to become a satellite fleet owner. The teleport business has soured with the reduction in oil and gas production and the loss of U.S. government business with U.S. troop withdrawal from Afghanistan.
The company reported that for the six months ending Dec. 31, revenue totaled 13.7 million Australian dollars, down 17 percent from the same period a year ago. The net loss for the period was 39.7 million Australian dollars, compared to a loss of 1.6 million Australian dollars a year ago.