The magic touch of French satellite finance
It was a stunning announcement. Eighty-one satellites are to be built by the Franco-Italian company Thales Alenia Space (TAS) for Iridium's next-generation network.
The European manufacturer had beaten Lockheed Martin of the US to one of the great industry prizes of recent years. TAS will get some $2.1bn for their part in the $2.9bn project which probably counts as the world's biggest commercial space venture right now.
The American Iridium company currently operates 66 spacecraft in a low-Earth orbit, linking sat phones across the entire globe. The system also provides data links as well.
Not everyone has reason to use a satellite phone but Iridium's 360,000 subscribers clearly appreciate the service and their calls deliver very healthy revenues to Iridium.
The announcement was all the more remarkable considering Iridium's history. The original company you will remember went belly-up soon after going live, filing for Chapter 11 Bankruptcy in 1999.
It was then bought out of that predicament the following year by investors who paid a fraction of the cost of setting up the present constellation of satellites.
It's been a big turnaround.
Thales promises the satellites it provides for Iridium's Next network will offer an enhanced service while being fully compatible with the old system.
TAS says the first of the 800kg spacecraft should be ready for launch from 2015.
What was really striking, however, was the role played yet again by the French export credit guarantee organisation, Coface, in cementing Wednesday's big deal.
The Compagnie Francaise d'Assurance pour le Commerce Exterieur underwrites risk and has been particularly active in supporting the French satellite manufacturing sector.
Its commitment to projects like Iridium Next allows those projects to secure loans at very favourable rates. In what are tough economic times, Coface support has facilitated ventures that might otherwise not have been able to get financing.
TAS itself won a Coface-supported deal to build 24 satellites for another US sat-phone service provider, Globalstar. Coface backing was also important in Thales winning the contract to build 16 broadband satellites for start-up O3b which has its headquarters in the Channel Islands.
How Lockheed Martin, the losing bidder in the Iridium Next project, must be feeling is anyone's guess.
As a US manufacturer seeking work from an American company, Lockheed Martin would not have been able to bring export credit guarantees to the party. Obviously. It would not have been exporting.
So did Lockheed really stand a chance in its run-off with Thales? Is Coface's support for French exporters acting to distort the market? Questions I put to Matt Desch, CEO of Iridium. His response:
"This is a global market space. There is a lot of work here in this contract that American companies will be doing because Thales has, I think, selected a fantastic team of potential subcontractors which includes almost 40% of the business from North America. So I don't think this is anything but really good news for the space industry as a whole and, frankly, really good news for all those people who're going to be involved in this [project]."
Thales has certainly won friends in making sure a US workforce is heavily involved. Key partners will be Ball Aerospace and Boeing. Indeed, Ball will probably be involved in the final assembly of the spacecraft.
But there ought to be some wide eyes in other countries that want to support their space industries. It is clear they need to make sure their national manufacturers also have full access to all the modern financial tools being deployed so productively right now by the French.
The British space industry is jumping up and down on this issue, too. Thumb through the recent Space Innovation and Growth Strategy document, which sets out a 20-year vision for UK industry. Go to Recommendation four. It reads:
"The UK government should provide more capital guarantees and/or anchor tenancy agreements to allow UK-based operators to raise the necessary finance to buy satellites and fund launches so that they can enter new space-enabled service markets and grow their businesses. Although this need is not unique to the space sector, we ask government to note the high capital costs involved in the procurement and launch of individual satellites and the need for the UK to be first to market to exploit a growing export market."
We discussed in my last post the new UK Coalition's desire to back UK space, and the problems it might encounter as a result of the public deficit.
But the point about all of this is that support is not limited just to spending money. It is also about creating the right financial environment in which industry can thrive; and right now Coface is giving the French satellite manufacturers a huge leg up.
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