Skynet 5A Launch Has Paradigm, Astrium Breathing Easier

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KOUROU, French Guiana — The successful launch of the Skynet 5A military telecommunications satellite removes a large measure of financial pressure from the company that owns and operates all of the British military’s satellite communications systems, Paradigm Secure Communications, and its corporate parent, Astrium.

It also improves the company’s sales pitch to the U.S. Defense Department that the United States should join Britain, Canada, Portugal, Germany, the Netherlands, France and the NATO alliance as a Paradigm customer for jam-proof, secure SHF- and UHF-band telecommunications services.

Finding even a modest place in the market to provide commercial satellite services to the U.S. Defense Department probably would be enough to remove any remaining financial risk to the program that is still viewed outside Britain as daring — both for Paradigm and for the British Defence Ministry.

Skynet 5A, carrying up to nine UHF-band transponders and 15 SHF transponders, was successfully launched March 11 aboard an Ariane 5 ECA rocket from Europe’s Guiana Space Center here. The satellite weighed 4,700 kilograms at launch and will operate at 1 degree west longitude, one of six orbital slots at the disposal of the British Defence Ministry.

“We are responsible for all beyond-line-of-sight communications for the British Defence Ministry,” Paradigm Managing Director Malcolm Peto said. “It has been challenging from the start and some questioned whether we could actually pull it off. Some of our people have been working on this for 10 years.”

Built by Astrium Satellites, Skynet 5A is the first of a planned three or four Skynet 5 spacecraft to provide the British Defence Ministry with telecommunications services until mid 2021. In addition to owning and operating the Skynet 5 series, Paradigm has taken title to the four previous-generation Skynet satellites, Skynet 4C, 4D, 4E and 4F.

Including options, Paradigm’s contract, initially signed in 2003 and revised in December 2005, is valued at 3.66 billion British pounds ($7.1 billion) through May 2021. In addition to the satellites and operations, the work package includes an upgrade of Skynet ground stations and provision of mobile and fixed communications services for British troops using commercial satellite capacity.

The contract value presumes the construction of a fourth Skynet 5 satellite. Each Skynet 5 is expected to operate for 15 years.

The contract, which is complicated, has led to seemingly contradictory public statements from the British Defence Ministry and from Paradigm since its 2003 signing. The most recent figure of 3.66 billion pounds appeared to suggest that Paradigm was receiving a 44 percent increase in payment from the British Defence Ministry in return for a two-year extension of the contract, from 2018 to 2020.

Paradigm Business Development Director Paul Millington said this is not the case.

The contract, known in Britain as a Private Finance Initiative, is the first of its kind involving full outsourcing of military satellite telecommunications. Europe is trying to replicate the Skynet 5 public-private partnership model with its Galileo satellite navigation project, but is having trouble doing so.

Paradigm arranged for Skynet 5 to carry more capacity than required for its main British customer and has begun selling services to other governments.

To finance the work, Paradigm and Astrium and a banking consortium agreed to a financing scheme totaling 1.2 billion pounds and including 85 percent debt and 15 percent equity.

The debt facility, which corresponds to the cost of developing the Skynet 5 satellites and upgrading the existing Skynet ground infrastructure, is drawn down early in the project’s life. The British Defence Ministry’s payments rise as project milestones are reached. Getting Skynet 5A operational in orbit is the next milestone, set for the end of March under the contract.

With Skynet 5A successfully launched and early in-orbit reports positive, the financial risk of the project for Astrium immediately drops. Francois Auque, chief executive of Astrium — whose components include Astrium Services, Astrium Satellites and Ariane 5 prime contractor Astrium Space Transportation — said Paradigm is the company’s “main engine for growth of revenue and profitability today.” Paradigm is a subsidiary of Astrium Services.

Skynet 5B is scheduled for launch on an Ariane 5 late this year.

Skynet 5C, to be launched in 2008, is viewed as in-orbit spare capacity that permits Paradigm to forgo annual in-orbit insurance payments after each satellite’s first year in orbit.

“Building and launching Skynet 5C costs a bit more than what we would have paid in in-orbit insurance over the life of the program,” Millington said. “But it helped us to extend the contract’s duration from 2018 to 2020, and the addition of Skynet 5D will take us in to 2021.”

Paradigm already has ordered long-lead components of a Skynet 5D satellite, a launch that would extend the contract’s value to May 2021. The British Defence Ministry has agreed to pay about 53 million pounds to share in the risk associated with the Skynet 5D construction and launch.