TAMPA, Fla. — Canada is willing to invest 50% more than originally planned to help finance flagship geostationary satellite operator Telesat’s Lightspeed Low Earth Orbit (LEO) broadband constellation.
Telesat announced last week that it had received a letter from the Canadian government agreeing to loan terms worth C$2.14 billion ($1.6 billion) for Lightspeed. This represents almost half of the $3.5 billion budget for the 198 satellite network.
The terms also include an exchange of warrants that would allow the government to purchase 10% of Lightspeed for $300 million, ahead of satellite deployments scheduled to begin in 2026 through SpaceX. This would value the constellation at $3 billion.
The deal replaces a C$1.44 billion interim investment agreement agreed in August 2021, which included a C$790 million loan and C$650 million in prepaid preference shares. It consists of
The variable rate on the new loan will be 4.75% above the Canadian Overnight Repo Rate Average (CORRA), compared to the fixed rate of 2% per year under the previous plan. Telesat will now take 15 years to repay the loan, compared to 20 years previously.
Telesat said on April 1 that the proposed investment is subject to a number of issues, including final documentation and whether the government is satisfied with other sources of funding for the satellite being built by Canada-based MDA. He said that certain conditions would be imposed.
The deal comes after Telesat switched manufacturers in August following production delays at Europe’s Thales Alenia Space.
MDA’s satellite is 75% smaller at 750 kg, but promises similar performance, allowing carriers to save $2 billion from Lightspeed’s original budget.
Telesat CEO Dan Goldberg said on April 1 that the government investment will save the company $750 million in borrowing costs.
Stephen Hampton, Telesat’s senior director of government affairs and public policy, previously said that the Export Credit Agencies (ECA) of Canada and France will provide the company with a total of approximately 3 billion yen in addition to Canadian federal and provincial loan commitments. He said he planned to loan the US dollars to Lightspeed.
The increased support from the Canadian federal government essentially replaces the investment required from Canada’s ECA, and the lower cost of the satellite constellation means Telesat will not need financing from France’s ECA. .
” [government of Canada] We are proactive about this because working with MDA allows us to make a much larger investment in Canada and have a more positive impact on Canada’s space ecosystem compared to previous approaches. “We’re working on it,” Hampton said. space news on mail.
He said the company still plans to raise about $1.6 billion of Lightspeed’s cost through Telesat stock, and there are active discussions with state partners about investing in the constellation. he added.
Telesat recently reported 2023 revenue of C$704 million, a 9% year-over-year decrease adjusted for exchange rate changes.
In an earnings call with investors on March 28, Goldberg noted that industry-wide declines in satellite TV will continue to drag on revenue in 2024.
He said Telesat is also preparing for further competition from SpaceX’s Starlink LEO broadband constellation in the enterprise connectivity market, particularly in the maritime space.
“The biggest driver of revenue loss in the enterprise sector is that customer requirements have shifted away from the enterprise. [geostationary orbit] LEO, or Starlink, is the first in the market,” Goldberg said.
“Business customers want affordable, low-latency broadband connectivity, something we’ve been talking about for quite some time. It’s happening fast. We don’t like to see Starlink cannibalize some of our GEO customer requirements, but this is a testament to the market acceptance of LEO and the persuasion we’re making with Telesat Lightspeed. It strongly proves a certain path.”
Telesat expects 2024 revenue to be between C$545 million and C$565 million.
Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) in 2023 was C$534 million, down 8% from the previous year.
As Lightspeed’s expenses increase this year, Telesat expects adjusted EBITDA in 2024 to be between C$340 million and C$360 million.
