RapidEye AG of Germany appears to be testing new limits to how far a stand-alone company can go in commercial Earth observation without the security of a long-term government sponsor.
After several years of financial struggle and a yearlong teething period following the August 2008 launch of the company’s five identical 150-kilogram satellites, RapidEye Chief Executive Wolfgang G. Biedermann says the company now sees light at the end of the financial tunnel.
While RapidEye has been able to count on support from German federal and regional governments, the company appears to have gone further than anyone else in weaning itself from guaranteed government backing.
Biedermann nonetheless says RapidEye, while not in financial trouble, would not turn away a strategic investor. Biedermann spoke to Space News staff writer Peter B. de Selding.
What was your revenue in 2009, the year your satellites became operational?
We did close to 10 million euros [$12.2 million] in revenue, which is OK but is certainly not what we had hoped for. It’s possible that as a start-up operator we underestimated some difficulties. Our constellation became operational in February 2009, and that’s when we started operations.
So most of the revenue came in the second half of the year?
Yes, we were still learning in the early part of the year, and we didn’t do much business until the latter half of 2009. We wanted to assure that we would be a reliable partner for our customers delivering quality data in a timely fashion. Therefore we were cautious in the beginning regarding our sales efforts and were directing many of our resources to learning the business with a new constellation.
We had a few quality and stability problems, which required us to recalibrate the satellites, install new software and implement a few corrective actions. We were able to get this straightened out, however.
Your five spacecraft are in good health?
Especially since the fourth quarter of 2009, our satellites have operated very well, and we are imaging about 3 million square kilometers per day. The issues we had in 2009 were resolved by software patches; there was nothing wrong with the hardware. In fact, because of the accuracy of the launch, we now expect to get easily nine years of service life from our constellation, and perhaps 10 years, compared to the engineered lifetime of seven years.
When do you start thinking about a second-generation constellation?
The additional operating life gives us more breathing room. We will start assembling requirements for a second-generation system late this year and spend most of 2011 refining them. We could then enter into contract negotiations with a supplier in 2012.
Did the slow start-up in 2009 force you to pause your hiring?
No, we are approaching 130 people now, as planned. We have funding from the State of Brandenburg that is conditioned on creating a certain number of full-time jobs in Brandenburg, and we are meeting those requirements.
What is the level of funding from Brandenburg?
We received a grant valued at about 37 million euros in return for creating 130 jobs in Brandenburg for at least five years. It is part of a broader German and European Union program of stimulating economic growth in the less-developed parts of Europe.
When does the five-year clock for your commitment begin?
In 2010.
What committed financial support do you have from the German Aerospace Center, DLR?
The DLR contribution amounts to nearly 15 million euros. We are now repaying DLR by delivering data to be used for scientific and research purposes. We owe them a certain number of square kilometers of imagery to be delivered during the lifetime of our constellation.
You also have a banking consortium created with the support of Export Development Canada (EDC) that supported you early on?
Yes, we were fortunate in finding bank support, and the consortium eventually included EDC. The consortium was responsible for more than 50 percent of our funding. The loan totals around 80 million euros, which we need to repay within five years.
Besides EDC, who is in the bank consortium?
KfW Bank, which has a special interest in supporting companies that are active in the former East Germany, was the first bank involved with us. They have good relations with EDC, which became involved because MDA Corp. of Canada is our prime contractor. Commerzbank of Germany is also part of the banking consortium.
We are now about halfway through 2010, your first full year of operations. How is the revenue line developing?
We expect that we will be cash-flow positive later this year and that our revenue for the year will reach about 25 million euros. I am relatively optimistic at this point that we will hit this revenue target. As for being cash-flow positive, I am optimistic about reaching this goal by the fourth quarter.
What factors explain such large growth from 2009 to 2010?
We had only half a year of full operations in 2009. This year we will have a full year. Also, we have to acknowledge that some potential customers were a little wary of us as a start-up. They wanted to see us up and running before making a large commitment. So that has taken a while but has now started.
In addition, we have had our data tested by agencies in Germany, the United States and China, and this has also helped customers become more comfortable with us.
Now these larger customers are coming forward?
Yes. Our first big breakthrough was with the Chinese government. It was a one-year contract, but we expect it to be renewed since we did our job well in 2009. We covered almost all of China’s territory with RapidEye imagery at 6.5-meter ground resolution in less than six months. It was something like 7.8 million square kilometers with less than 3 percent cloud cover from August through December 2009.
Is it reasonable to assume China will want regular updates?
Yes, and we hope to get another contract sometime this year. Our customer is the Ministry of Land Resources, which has a program calling for an annual refresh of perhaps one-half of China’s territory, or around 4 million square kilometers. I believe we can win this as a recurring business — but only if we continue to do a good job.
Where are you with the U.S. agency that coordinates Earth imagery purchases, the National Geospatial-Intelligence Agency (NGA)?
We expect to finalize an agreement with NGA this summer on a framework contract for regular coverage over large areas, probably along the lines of the indefinite-delivery, indefinite-quantity agreements they signed with other companies.
In what regions have you concentrated your sales efforts?
We have four focus areas so far: The first is China. Second is South America, especially Brazil. The U.S.A. is third and Europe is fourth. In 2010 we are making a push in Australia. We now have 17 or 18 distribution partners around the world.
Do you offer your distribution partners exclusive rights to their areas, or do you set up competitive arrangements?
We use both models depending on the market conditions.
Who is your biggest competitor?
It depends on the situation, but overall it is probably Spot Image and their Spot 5 satellite. They have the ability to generate 2.5-meter resolution imagery from the Spot 5, which also produces 10-meter multispectral imagery, so that is an advantage for them. But we have a constellation of five satellites, and that gives us advantages.
Would you like to have higher-resolution satellites?
Actually, at this point if I had to choose I would like to have more satellites. We often have to choose whether to have our satellites look left or look right, when doing both would have generated business. We have competing demands for the satellites’ time and have to decide which order to fill.
You have an annual insurance policy covering the in-orbit performance of your satellites. Is this a classic policy or does it include a deductible as we have seen with other companies with constellations?
It does include a deductible. We have a hot spare in orbit, which we can lose without an insurance payout.
Are you looking to be purchased by a larger company, or to attract strategic or institutional investors?
We are always looking for fresh money. Just like most start-up companies, we are cash constrained. Occasionally we feel the pressure that comes from not being able to do everything we’d like to do. We have had talks with potential investors, and certainly we are open to the possibility of having new investors.
Who owns RapidEye now?
Private investors in Germany have more than 80 percent of our share capital, and a group of five companies has a bit less than 20 percent.
