SES Global Negotiating Package Deal With Orbital

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  Space News Business

SES Global Negotiating Package Deal With Orbital

By PETER B. de SELDING
Space News Staff Writer
posted: 08 May 2007
03:53 pm ET


PARIS — SES Global is expected to contract with Orbital Sciences Corp. for the construction of four telecommunications satellites to be delivered at a rate of one per year starting in mid 2009 in a deal that could be a prototype for the satellite-fleet operator and its rivals , industry officials said.

The contract is expected to be valued at about $500 million for the four satellites, which would be nearly identical in size and power, with only their specific antenna contours differentiating one from the other.

Officials of Luxembourg-based SES Global discussed their new purchasing policy in general terms, without mentioning any contract winners, in May 2 conference calls with journalists and financial analysts. Industry officials subsequently said Orbital Sciences of Dulles, Va., will be awarded the contract in the coming weeks to replace spacecraft operated by SES Global’s U.S.-based SES Americom subsidiary.

By ordering nearly identical satellites from the same manufacturer, with a one-per-year delivery rate, SES Global officials said they will be able to save some 20 percent over the cost buying spacecraft individually via the competitive bidding process .

The company said it expects its four SES Americom spacecraft to cost less than $200 million each to build, launch and insure.

SES Chief Executive Romain Bausch said the first SES Americom satellite to be replaced with the new order will be the AMC-5, which is expected to continue to operate until 2011. Bausch said the company decided to advance the purchase date of the replacement satellite to take advantage of a favorable pricing environment that may not last. Locking in the low prices, he said, was worth the cost in earlier-than-planned capital expenditure.

“We are starting this procurement about six months earlier than we had planned to be able to take advantage of a quite attractive procurement contract,” Bausch said. “It’s also good to have a little head room given the current launcher market.”

The contract with Orbital Sciences likely will be structured to start with an order for two satellites — AMC-5R and a ground spare — and options for two others. Once AMC-5R is launched, the ground spare would be prepared for launch and one of the options converted to a firm order. The procedure would be repeated for the final satellite.

The two firm satellites, plus a larger spacecraft called NSS-8R for the company’s SES New Skies division, account for an increase of 318 million euros ($434 million) in capital expenses between 2007 and 2010 that the company announced May 2. SES Global has three satellites scheduled for launch this year. Including the two Americom satellites and one New Skies spacecraft, the company has eight spacecraft on order.

The new spending includes only the construction and launch of AMC-5R and NSS-8R, and the construction of the AMC-5R ground spare. It does not include an additional SES New Skies satellite likely to be ordered this year, nor does it include the QuetzSat satellite covering Mexico that SES Global plans to build in a partnership with satellite-television provider EchoStar Communications Corp. of Englewood, Colo.

Bausch said that in addition to QuetzSat, SES Global is actively participating in the auction of satellite operator Satmex of Mexico. SES Global is one of several bidders for the Mexican operator. Under the rules governing the auction, the winning bidder must agree to pay at least $569 million for Satmex or face sharing ownership of the company with the Mexican government.

Bausch said the SES team’s bid is expected to be high enough to keep the Mexican government out of the equity of the post-auction Satmex.

SES Global also is negotiating with the Arianespace launch consortium of Evry, France, and with at least one other launch-services provider on a long-term contract that would guarantee the satellite-fleet operator three launch slots per year for the foreseeable future. That is the number of satellites SES Global estimates it will need to launch, year after year, for the foreseeable future.

The planned C- and Ku-band NSS-8R spacecraft is a replacement for the NSS-8 spacecraft lost in a January Sea Launch rocket failure. New Skies is expected to ask SES Global’s board in June to approve a second satellite as well — in which case it may be smart to order both spacecraft from the same manufacturer, Bausch said.

For SES Global, the good news on pricing extends beyond the cost of satellite hardware. SES Global Chief Financial Officer Mark Rigolle said the company has been able to secure insurance coverage for the launch and first year’s operation of its satellites for a premium of 12 percent or less.

Once concluded, the SES Global-Orbital Sciences deal would offer still more proof that Orbital’s decision to take on established large-satellite manufacturers is paying off. Orbital Sciences has already booked three new satellite orders this year, including two from Intelsat of Bermuda and Washington. Intelsat and SES Global are by far the biggest global satellite-fleet owners.