Aging Telesat satellite running out of fuel as projected LEO costs soar

TAMPA, Fla. — Canada’s Telesat is bracing for a revenue hit in 2023 after being forced to retire its Anik F2 satellite from full service three years earlier than planned.

The aging Boeing-built satellite has been operating under a workaround mode for the past year after two of its four station-keeping thrusters suffered an anomaly.

One of the thrusters failed while the second continued to support operations with some constraints, Telesat said Aug. 5, enabling the company to avoid impacting Anik F2 customers that are mainly based in Canada.

However, this workaround required Anik F2 to use fuel faster than planned, which reduced the time it could maintain its position in geostationary orbit.

“We expected this approach would allow us to provide station-kept service until 2025,” Telesat CEO Dan Goldberg said during the company’s financial results call.

“But it now appears that we can only maintain station-kept service until the end of this year, at which point the satellite will be put in inclined orbit.”

Some services will be adversely impacted as early as February, Goldberg said, while “other services will degrade over time, depending on the size of the antennas receiving signals from the satellite.”

“As a result, beginning next year, we expect Anik F2 revenues will decline if we can’t find alternative ways to support the services.”

Mitigation techniques include adding tracking antennas at certain sites to extend customer service life, and repointing existing antennas to other Telesat satellites or third-party spacecraft.

Anik F2 currently represents about 8% of Telesat’s revenue, or around 50 million Canadian dollars ($39 million).

Telesat is set to lose around a third of Anik F2’s revenue next year if mitigation techniques are unsuccessful, Goldberg added.

This “likely would be somewhat offset” by reselling freed-up capacity for mobility services that Anik F2 would be able to support in an inclined orbit, he said.

Anik F2 launched in 2004 and was already operating beyond its 15-year design life when some of its thrusters malfunctioned.

There is still no known cause behind the failure and the satellite was not insured at the time, Telesat spokesperson Lynette Simmons said.

Mounting Telesat Lightspeed costs

Goldberg also disclosed higher costs and additional delays for Telesat Lightspeed, its proposed low Earth orbit broadband constellation.

During Telesat’s last financial update May 6, Goldberg said he expected to know where it stood with export credit agencies (ECAs) about completing the project’s financing by the end of June.

The company now expects to have that clarity in the fourth quarter and to have signed a term sheet by the end of the year, which Goldberg says is needed to “feel comfortable about making meaningful expenditures and moving forward with the program.”

Goldberg said Europe’s Thales Alenia Space, the constellation’s prospective manufacturer, was only able to send a final proposal for the project “a few weeks ago,” which was sent to ECA lenders earlier this week.

Pandemic-related supply chain issues have delayed and complicated plans for the constellation and other satellite projects across the industry.

Despite downsizing the proposed constellation by a third to 198 satellites earlier this year to keep within its $5 billion budget, Goldberg said delays and soaring inflation have increased costs by 5-10%.

To date, Telesat has lined up about 4.2 billion Canadian dollars to fund the project from existing financial resources and Canadian government funding, and had expected to substantially complete the final third of its cost with ECA debt.

However, Goldberg said the company will need to raise additional funds outside what it can secure from ECA lenders to cover increasing costs.

The company will also need extra funds to meet the so-far-unknown “contingent capital” needs of ECA lenders. These funds would be set aside to deal with schedule delays, cost overruns, and other issues that could affect the multi-year project.

“Although we’ve been disappointed with the supply chain challenges and inflationary pressures that we’ve encountered, we remain extremely bullish about the opportunity Telesat Lightspeed gives us to grow our business,” Goldberg said.

Goldberg also sees no impact on its negotiations with French state-owned ECA lender Bpifrance following Eutelsat’s plan to merge with OneWeb, a LEO broadband constellation that would compete against Telesat Lightspeed. Bpifrance is Eutelsat’s largest shareholder.

He said, fundamentally, “these export credit agencies are there to support their domestic exporters” to help create jobs and develop technologies.

Schedule adjustments

Goldberg also suggested during Telesat’s financial results call that the company could look beyond Thales Alenia Space as the constellation’s prime manufacturer.

He said “they’re a good prime contractor, I think they’ve got a great track record, but we’re not locked into Thales.”

Telesat intends to provide an update on the constellation’s timing and deployment plan once it has secured its financing.

The company’s last update in May pushed out Telesat Lightspeed service debut a year to 2026.

These delays also mean the company will likely need to request extensions for the deployment milestones tied to its spectrum licenses from the US and the International Telecommunication Union (ITU).

One of the Canadian company’s ITU filings for the project, relating to 72 satellites, requires Telesat to have 10% and 50% of the satellites in their assigned orbits by Jan. 1, 2023 and Jan. 1, 2026, respectively.

Telesat reported 187 million Canadian dollars in revenue for the three months to the end of June, a 3% decrease compared with the same period last year when adjusted for changes in foreign exchange rates.

Adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, fell 4% to 146 million Canadian dollars.

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