Thales Alenia Space Foresees Little Financial Growth This Year

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WASHINGTON — Satellite and orbital-infrastructure builder Thales Alenia Space on March 18 reported 2.05 billion euros ($2.94 billion) in revenue for 2009, flat from 2008, and said it expects little or no revenue growth in 2010.

Reynald Seznec, chief executive of the Franco-Italian company, said new orders in 2009 totaled 2.2 billion euros, bringing the company’s backlog on Dec. 31 to 2.8 billion euros. This figure includes only partial contributions from several satellite programs for which Thales Alenia Space is prime contractor or co-prime but that are awaiting further financing.

These programs include the Yamal 401 and Yamal 402 telecommunications satellites from Gazprom Space Systems of Russia, which are in line for loan guarantees from France’s export-credit agency, Coface. Also awaiting a final financing round, including Coface backing, is O3b Networks of Britain’s Jersey Islands.

O3b, which is planning an initial constellation of eight broadband communications satellites in equatorial low Earth orbit, has made initial deposits to Thales Alenia Space to permit work to begin and expects to complete a $235 million equity-finance drive by June.

Seznec said the company, which in 2009 generated 39 percent of its revenue from commercial work, continues to struggle with the U.S. dollar’s valuation relative to the euro. “A euro at 1.5 or 1.6 dollars and we are almost out of the market — if we want to make a profit,” Seznec said. “We could dump, but that’s another issue. At 1.3-1.4 [dollars], where it is now, the exchange rate is feasible but still a super-tough situation for us. At 1.2 [dollars], we are break-even in foreign-exchange terms.”

Business that Thales Alenia Space expects in 2010 includes the co-prime contracting role, with Astrium Satellites, on the large Megasat Ka-band consumer broadband satellite. The French government has tentatively selected Megasat as one of the projects to be financed in part by a public bond issue this year as part of France’s economic stimulus package.

Seznec said the industrial contractors and satellite fleet operator Eutelsat of Paris, which has been backing the project, likely will need to participate in the Megasat financing. He said Megasat could be the second spacecraft to use the large Alphabus platform designed by Thales Alenia Space and Astrium with financing from the French and European space agencies. The first Alphabus is in production for mobile satellite operator Inmarsat of London.

Thales Alenia Space is also expected to be prime contractor for the Sicral 2 military communications satellite being financed by the French and Italian armed forces. The two governments this year contracted with Thales Alenia Space to build a Ka-band broadband satellite, called Athena-Fidus, which will be used by both nations’ armed forces.

An Astrium-Thales Alenia team made an unsuccessful bid to build 14 Galileo navigation and timing satellites, losing to OHB Technology of Germany. Seznec said Thales Alenia is bidding for subcontractor work from OHB on the project that could generate revenue of “several 10s of million to up to 100 million euros.”

Seznec said the Galileo contract is an example of the changing space-contract environment among European government institutions, led by the European Commission, which consider value for money to be more important than program incumbency or which government is financing how much of the program. The European Space Agency, for example, tends to distribute contracts to companies based on how much their host nations are contributing to the program in question.

“OHB had the best price. They met the other conditions. They were chosen,” Seznec said.

But he also voiced frustration that his company was not allowed to compete directly with OHB because, under Galileo program conditions, a given company was limited in how many work packages it could lead. Thales was already competing for the prime contracting role on two Galileo ground infrastructure efforts and was therefore limited, for the satellite work, to a subcontractor’s role in an Astrium-led bid.

“Let me express some frustration about this,” Seznec said. “We were not allowed to bid. But is it not us who has the most experience in Europe in building [satellite] constellations? Didn’t we have a platform that would fit very well with Galileo? Europe needs to take further steps” in its contract award policy.