Satmex Finances Improve, but New Satellite Remains in Limbo
PARIS — Satellite fleet operator Satmex of Mexico reported sharply higher revenue and operating income, and lower losses for the three months ending March 31 compared to a year earlier but gave no indication it has been able to work around its debt obligations to purchase a badly needed satellite.
Satmex paid Space Systems/Loral nearly $4 million in 2008 to begin work on a Satmex 7 satellite to replace the Solidaridad 2 spacecraft at 114.9 degrees west. Launched in October 1994, Solidaridad 2 is already in inclined orbit, meaning it no longer uses its remaining fuel to keep itself stable on its north-south axis. It is expected to be retired either this year or in 2010.
Satmex’s financial statement, dated May 15 and subsequently placed on the company’s Web site, shows Satmex made no fresh payments to Palo Alto, Calif.-based Loral. Satmex operates three satellites.
Satmex, which emerged from the Mexican equivalent of U.S. Chapter 11 bankruptcy protection in November 2006, is barred by covenants with its debt holders from making large capital expenditures. But company officials in January said they would continue to seek outside investment to proceed on Satmex 7.
Satmex debt as of March 31 was $409.7 million, with the bonds coming due in 2011 and 2013.
Satmex management in January had argued that it could not stand on the sidelines of growth opportunities in South America and let Solidaridad 2 retire without exhausting all possible Satmex 7 financing avenues.
For the three months ending March 31, Satmex reported revenue of about $30.9 million, up 15 percent from the same period a year earlier. Its operating income was $9.6 million, an eight-fold increase over the year-earlier period. The company reported a net loss of $5.3 million, compared to a net loss of $11.6 million a year ago. Backlog stood at $268 million as of March 31, with $79.5 million of it to expire in 2009 as it transfers to revenue, and $72.4 million to expire in 2010.
As of March 31, Satmex said it had a cash balance of $72.5 million, up from $58.2 million at Dec. 31.
Satellite operators active in Latin America in recent months have reported an improved satellite-lease market as some planned capacity has been delayed or canceled.
In addition to conventional sales to broadcasters, Satmex generates a sizable portion of its revenue from Hughes Network Systems of Germantown, Md., for Hughes’ consumer broadband service in the United States. Hughes is gradually shifting its business from leased capacity on Ku-band satellites to Hughes’ own Spaceway 3 Ka-band satellite.
Over time, Hughes officials say, they will reduce to a minimum the Ku-band capacity they purchase from other satellite operators. In 2008, Hughes represented 23 percent of Satmex’s satellite services revenue. It accounted for 21 percent of Satmex’s revenue for the first three months of 2009, according to Satmex.
In addition to the retiring Solidaridad 2, Satmex operates the Satmex 6 spacecraft, which apparently is in good health and was launched in 2006. Satmex 6 had been insured for $288 million under a policy set to expire in June.
Satmex 5, launched in December 1998, is insured for $90 million but the policy excludes its xenon-ion electric propulsion system, which is one of multiple defective xenon-ion power subsystems built in the 1990s by Boeing Satellite Systems International.
Satmex 5 has lost the use of one of its two xenon-ion power systems. Should the second be lost, the company would need to resort to using its backup chemical propulsion system to maintain the satellite stably in orbit. In that event, the satellite would be able to operate for nearly three years before being retired, Satmex said.