10.04.11

Globalstar’s curious new satellite order

Posted in Financials, Globalstar, Operators at 12:03 pm by timfarrar

Yesterday, Globalstar announced that it had “placed an order with Thales Alenia Space for an additional six satellites…in addition to the 25 satellites already ordered under the 2006 second-generation constellation contract”. The press release states that:

According to the terms of the contract these satellites will cost approximately EUR 55 million and should be delivered by mid-2013. The fast track delivery, agreed upon when the contract was signed in 2006, is due to the fact that Globalstar has previously purchased EUR 12 million in long lead items that facilitate the prompt manufacture of these six spacecraft. Additionally, the incremental purchase amount is particularly price competitive due to the fact that Globalstar has already prepaid over EUR 53 million as part of its 2009 COFACE financing. Thus, combined with the EUR 12 million long lead items, Thales has already received approximately EUR 65 million for these satellites. Further payments will not be made until Thales Alenia Space initiates the manufacturing process.

This wording is somewhat strange, because Globalstar is indicating that the low cost and fast track delivery are “according to the terms of the contract”, but there is no indication that TAS has agreed to this price and timescale (or even a quote from TAS welcoming this new order). Indeed the order was placed “nowithstanding the previously announced arbitration proceedings” which according to Space News concern “pricing terms for a second batch of 24 second-generation Globalstar satellites that Cannes, France-based Thales Alenia Space had agreed to build under a contract that has since been amended”. This arbitration panel will convene in January 2012 and Globalstar “wants the arbitration panel to oblige Thales Alenia Space to pursue work on the 24-satellite batch under [the] terms of the amended contract”.

Presumably, in the absence of a negotiated resolution of the dispute, the actual manufacturing cost and timeline for these satellites will therefore remain subject to the outcome of the arbitration proceeding. It is possible that because the order is for six more satellites to be “fast tracked”, some people might now speculate that the problem with the momentum wheels on the first 6 second generation satellites, launched last October, is more serious than previously disclosed. However, I suspect that the order timing (at the end of September) is more likely attributable to an existing contract deadline, together with Globalstar’s long planned requirement to supplement their constellation once the eight first generation spares, launched in 2007, reach the end of their life, and in that case Globalstar’s need for additional satellites would not be as urgent.

UPDATE (10/5): An 8-K filing by Globalstar confirms that TAS has rejected the order “because Thales believes that Globalstar has no right to place the order”. The 8-K also describes various amendments to the terms of the credit facility and seems to indicate (by its reference to final in-orbit acceptance of 18 satellites) that (at least for the time being) Globalstar does not intend to accept the first 6 second generation satellites, presumably because the momentum wheel problem is one of the issues under dispute that will be addressed in the arbitration.

2 Comments »

  1. ORBITRAX said,

    October 4, 2011 at 6:30 pm

    We believe you will find that the cost they are referring to is the price of the “contested amended contract” for the second 24 satellites.

    We believe that Thales has simply provided Globalstar Qty. 6 satellites at the Qty. 24 price. The contract for the second 24 was about €220MM. OR €9.166MM per satellite which is €55MM for six. Globalstar claims the contract for the second 24 is still valid, while Thales claims it was terminated by Globalstar for convenience. Now going to arbitration.

    Notwithstanding, this deal is a very good deal for Globalstar where they will receive the 6 additional satellites at the Qty. 24 pricing of the current “disputed” contract, irregardless of the ruling of the arbitration hearing on the remaining 18. Globalstar already has a fifth launch option with Arianespace, which we assume will take place from French Guiana in late 2013.

    The timeline for the “expedited delivery” is interesting as the 6 satellites will not be available even on “fast track production” until the middle of 2013. That figure includes the “long-lead time” assemblies already in house. Which might raise questions about how long Iridium can wait for “hosted payloads” without it effecting their 2015 launch prediction. We would assume that satellites would have to be delivered to Thales subcontractors in the US by mid-2014 in order to achieve an early 2015 launch.

    As far as any further failures goes. We attempt to ascertain the number of satellites in service through a process of averaging call availability versus non-availability via the Call Times Tool. We use the default phone location in the application and add the “call available” and “call unavailable” times over a four day period. Thus we are able to obtain a “average call availability” for the four day period. When satellites are removed from service, the average decreases, when satellites are added, the average increases. Not a 100% fool proof test, but close enough for estimates on satellite removal/addition given the 4 day period to average over.

    We have also been conducting satellite performance tests between the older 2007 launched satellites and the new second generation satellites. Generally, we have found a service link connection for voice now remains established to ~2,300 miles from a Gateway, vs about 1,600 miles for the first generation satellites. The Globalstar handset can be programmed to tell you which satellite it is connected to, and we use this feature to verify new vs. old satellites during connection. . We then compare this to the TLE sets in SaVi. You will also notice that there are periods in the CTT that it frequently shows satellite availability for ~23 minutes. We have derived, in our opinion, that this is connect time for a single second generation satellite, vs. the ~15 minutes of a 2007 satellite. Thus we expect voice and data connectivity coverage areas to closely mimic those currently provided for SPOT, which greatly expands potential coverage over open oceans.

    ORBITRAX

  2. timfarrar said,

    October 4, 2011 at 7:25 pm

    I don’t know how it is possible to conclude that Globalstar will “receive the 6 additional satellites at the Qty. 24 pricing of the current “disputed” contract, irregardless [sic] of the ruling of the arbitration hearing on the remaining 18″.

    Clearly if the arbitration found that the contract had been terminated then one would (at least) expect the price to be subject to renegotiation. The press release certainly doesn’t say that “Thales has simply provided Globalstar Qty. 6 satellites at the Qty. 24 price” or that Thales even agrees that the contract for any of the remaining satellites is still valid.

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