PARIS — Satellite fleet operator Telesat expects to decide by the end of the year whether to sell one of its in-orbit satellites as part of negotiations that began in mid-2008 and originally envisioned the sale of two spacecraft, Telesat Chief Executive Daniel S. Goldberg said.
The original scenario of selling two satellites for around $200 million was scuttled by Telesat’s decision in July to cancel its lease of the Telstar-10 satellite from APT Satellite Holdings of Hong Kong in exchange for about $69 million.
Telstar-10 was one of the two satellites whose sale had been under consideration by Telesat following a months-long search for a buyer. Telesat has declined to confirm the buyer’s identity.
In an Aug. 10 conference call with investors, Goldberg said talks on the sale of the second satellite will be resolved “one way or another, by the end of this year.”
Goldberg and Telesat Chief Financial Officer Michel Cayouette sought to assure Telesat bondholders that the company, in which Loral Space and Communications of New York has a 64 percent economic stake, is not under pressure to sell assets to raise cash.
Ending the Telstar-10 lease, he said, was prompted not by near-term cash needs but rather by concerns that sticking with the satellite, which will need to be replaced in the next two years, would mean a long-term commitment to an orbital slot registered to the Chinese government. The company concluded that retaining a long-term interest in the orbital slot, at 76.5 degrees east, “didn’t make sense.”
Telesat operates 11 satellites and is the world’s fourth-largest commercial fleet operator by annual revenue. Its Nimiq 5 satellite, which is fully booked to Bell TV — which in turn has leased part of the capacity to EchoStar Corp. for use by U.S. satellite television provider Dish Network — is scheduled for launch by an International Launch Services Proton-M rocket in mid-September.
Telesat recently ordered a replacement for its Telstar-14 satellite from Space Systems/Loral of Palo Alto, Calif. Telstar-14R will be launched in early 2011 into the Telstar-14 slot at 63 degrees west. It is the second straight satellite that Telesat has ordered from Loral and follows the Telstar 11N spacecraft launched in February.
Industry officials are closely watching Telesat to determine whether the company will turn to Loral as its default satellite manufacturer given Loral’s Telesat ownership stake. Should that happen, satellite manufacturers other than Loral will be less likely to submit bids for Telesat’s future satellites, industry officials said. Telesat and other industry officials agreed that the company received multiple bids for Telstar 14R.
For the three months ending June 30, Telesat reported revenue of 201 million Canadian dollars ($186 million), a 19 percent increase over the same period a year ago. Much of the increase was due to the addition of the Nimiq 4 satellite to the fleet. Nimiq 4 entered commercial service in October 2008.
EBITDA, or earnings before interest, taxes, depreciation and amortization, was 71 percent for the quarter, compared to 62 percent a year earlier.
The company said that as of June 30, its North American fleet was 83 percent full, while its international fleet — meaning those covering Central and South America and Asia — was 75 percent full.
Goldberg said Telstar 11N is now 40 percent booked, with most of the demand coming from customers interested in the satellite’s Atlantic Ocean and African coverage. He said the satellite’s fill rate is about what the company expected it to be.
Telesat’s backlog as of June 30 stood at 5.1 billion Canadian dollars, down from 5.3 billion Canadian dollars earlier this year. Goldberg said two-thirds of the decline was due to foreign-exchange effects, especially the weakening of the U.S. dollar.
Telesat expects its capital spending this year to total between 290 million and 315 million Canadian dollars, mainly on Telstar 14R milestone payments to Loral and for the final satellite and launch service payments for Nimiq 5.
