ILS Lands Launch Contracts
International Launch Services (ILS) announced a contract today for the launch of two SIRIUS Satellite Radio satellites on the Proton Breeze M vehicle. ILS has conducted three launches for Sirius in the past (photo is launch of Sirius 3).
Under the terms of the deal, Sirius expects to launch SIRIUS FM-6 under the contract announced today. Sirius FM-6 is currently under construction at Space Systems/Loral and is anticipated to be launched in the fourth quarter of 2010. In their most recent call Sirius announced intentions of their next launch taking place in the first half of 2009.
The Proton booster and the Breeze M upper stage are built by ILS’ Russian partner, Khrunichev Space Center of Moscow. The Proton vehicle launches from the Baikonur Cosmodrome in Kazakhstan.
“We thank SIRIUS for selecting Proton, and for its long-term relationship with ILS,” said ILS President Frank McKenna. “We launched SIRIUS’ initial constellation of three satellites in 2000. Proton has the ideal performance for SIRIUS, with both its heavy-lift capability and its flexibility to carry spacecraft to various orbits.”
ILS is a joint venture of Space Transport Inc., along with Khrunichev Space Center and RSC Energia of Moscow. ILS has exclusive rights to market the Proton, Russia’s premier heavy-lift vehicle, to commercial satellite operators worldwide. The Proton has a heritage of 333 missions since 1965.
Proton builder Khrunichev is one of the cornerstones of the Russian space industry. It was created from the merger of the Khrunichev Machine-building Plant and the Salyut Design Bureau 15 years ago. The company includes among its branches a number of key manufacturers of launch vehicle and spacecraft components in Moscow and in other cities of the Russian Federation.
via Central Daily
Position – Long Sirius
Tyler,
How many sats does Sirius currently have in space?
How many are on the ground?
How many are in production?
What are the values of each sat?
What technological value/interest would the sats bring to lets say a Google, Apple, Microsoft, etc.?
Should we, as Sirius investors, be looking beyond the merger decision in terms of a sale of Sirius as a company?
I think we are to focused on the currents and not looking to the future of this company. Mel is no dummy. I am sure he has plan B, C and D ready if the merger is denied. Do you agree?
SI…
Sirius has three satellites in space with one ground spare. The ground spare is paid for.
Sirius has two sats in production
Sats are over $250m each
Sats could bring a value to an outside company, but it would depend on capability. Currently they broadcast on the SDARS band. An outside company would have to want to be in the SDARS business
Yes, other sales are possible even if the merger happens. Yes, this should be a consideration.
Mels always has his next moves planned. it is how he has done business for years.
Tyler, it is my opinion as a person who has owned and sold a few companies, that in general you always design and develop a property to do more then just what your business needs. One of the main concerns being resale of a property. So I have little doubt the newer satilites have a far more reaching capability.
Tyler,
I remember reading somewhere, several years ago, that the sats are worth a billion a piece. $250m sounds to low.
SI….
Sats cost abot $250m to construct and $95 million to launch.
Sirius has a fully paid for ground spare and a launch already secured.
They have contracted two additional satellites (FM-5 and FM-6), and two additional launches.
FM-5 will be geo-stationary
FM-6 configuartion has not been announced
Ground spare is identical to birds already in orbit.
FM-5 launch is Q2 2009
It has already been said that XM 5 that is currently being built has the capability to tune the Sirius band as well. I will assume that the new Sirius satellites (and possibly the old as well) have the ability to tune the XM band as well.
As you said, Mel always has a plan B, plan C, plan D and plan E, and possibly a few other letters in there as well. I would be surprised if the satellites are limited to tuning just the SDARS band.
XM recently conducted a sale and leaseback of one of their satellites. Why would another company buy the satellite if it was useless as anything other than an SDARS sat? If XM goes out of business, that company is stuck with a satellite that tunes only XMs spectrum? Useless to anyone except who buys the spectrum. That limits your options way too much to be a sound business decision. Im sure there are other capabilities out there…
SIRIUS FM-6 is going into a HEIO orbit, like the previous 3. FM-5 is going into the GEO orbit.
The info on FM-6 going into HEIO was stated in their 8-K last August. The cost is $169, plus today we learn that the cost for launch will be $95 million. Add in whatever they pay for insurance (typically in the $40 million range). Total cost will be in the neighborhood of $300 million for each satellite. I broke it down in the forums on Orbitcast if you’re interested in seeing it laid out. I researched it quite extensively and all the numbers add up.
As for FM-6… note that it says that it is going into an “inclined elliptical orbit”…
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Item 1.01 Entry into a Material Definitive Agreement
We have exercised an option under our existing satellite purchase agreement with Space Systems/Loral, Inc. to purchase an additional satellite. Space Systems/Loral will design and construct the satellite, which is expected to be one of the most advanced and powerful satellites ever built.
Construction of this satellite is expected to be completed in 2010. The satellite is expected to be launched into an inclined elliptical orbit to complement our existing satellites, which were also manufactured by Space Systems/Loral. Our unique hybrid constellation, consisting of satellites operating in a highly inclined geosynchronous orbits in combination with one satellite operating in a geostationary orbit, will provide unparalleled redundancy, enhanced coverage and exceptional performance.
The aggregate cost of designing and building this satellite will be approximately $169 million. A substantial portion of this purchase price will not be paid until 2009 and following the launch and successful completion of on-orbit testing of this satellite.
http://www.sec.gov/Archives/ed.....690_8k.htm
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>>>XM recently conducted a sale and leaseback of one of their satellites. Why would another company buy the satellite if it was useless as anything other than an SDARS sat?
Brian, XM still owns XM-4 — the satellite they did the leaseback on.
They very much still own the satellite, however they “sold” the two transponders on it to an LLT (Limited Liability Trust), who leased them back to XM.
Essentially, the LLT is made up of several “investors” who will be paid back the money they “loaned” XM, plus a good interest rate, over the next 9 years.
The leaseback was for only 9 years — which has XM depreciating it at a quicker rate over those 9 years too. However, the satellite will continue to operate for another 5-6 years or so beyond that.
Regardless of the outcome of the merger. I believe the real value of both companies are the satellites. They are already constructed and flying with spares on the ground. The question is who wants them more? Google, Apple, Microsoft, AT&T, Verizon…..the list is endless.
>>> Why would another company buy the satellite if it was useless as anything other than an SDARS sat? If XM goes out of business, that company is stuck with a satellite that tunes only XMs spectrum?
A sale and leaseback is a financing arrangement, not someone purchasing property because they plan to use it or sell it to someone else.
It is essentially the same thing as using the satellite (actually, the satellite’s transponders in this case) as collateral for a loan, something both companies have effectively done via sales of securities which are collateralized by their respective asset bases.
I guess we know where at least a billion in synergies will come from if they merge. To that person who thinks the synergies would only be a few hundred million this should totally set that to rest a FrontMED.
Some Clarity….
SATELLITES
Ground Spare – Fully Paid For
FM-5 – $250m – Was half way paid for in Q3 2007. Perhaps $75m to $100m to go
FM-6 – Contracted, but not yet started. $160m cost
LAUNCHES
Sirius already has a launch paid for (I will refer to this as launch 1). They can schedule this launch any time between now and 2010. It is anticipated that this already paid for launch will be for FM-5
Sirius has contracted two additional launches (launch 2 and launch 3). One for $95m and one for $98m.
FM-6 would likely use the $95m launch.
This leaves one additional launch that does not have a satellite attached to it. If Sirius decides to launch the ground spare they can do so. If they contract a new satellite they can do so.
INSURANCE
Sirius has not bought launch insurance for the launch that is already paid for, nor either of the two new launches. Launch insurance will vary depending on the cost/value of the satellite being launched.
CAPEX COSTS COMING UP (estimates)
FM-5 Payments Remaining – $85m
Launch 1 Payments – $0
Launch 1 Insurance – $45m
TOTAL – $130m between now and Q2 2009
FM-6 Payments – $160m
Launch 2 Payments – $95m
Launch 2 Insurance – $35m
TOTAL – $290m between end of 2008 and undetermined date
FM-7 (not announced) Payments – $160m
Launch 3 – Payments – $98m
Launch 3 Insurance – $35m
TOTAL – $293m dates undetermined
GRAND TOTAL – $713m over next 4 years (estimated) or capex of $178.25m per year.
Your costs came to roughly the same that mine did — in the neighborhood of $700 million still owed, or $1 billion still owed if they replace all 3 satellites in HEIO.
A few corrections (small things)…
First — the standard cost for launch insurance in telecommunications satellites is “20-23% of the cost of the satellite and launch vehicle”. The average is about $40-50 million, I low-balled my estimate at $40 million. However, if you are estimating $35 million, you are a bit too low…
“Launch insurance rates for large telecommunications satellites typically run around 20-23 percent of the value of the satellite and the launch vehicle, depending on the history of the vehicle and the satellite design.”
http://www.space.com/spacenews.....11205.html
Second, the cost of designing and manufacturing Sirius FM-6 is $169 million — not $160 million.
“The aggregate cost of designing and building this satellite will be approximately $169 million.”
http://www.sec.gov/Archives/ed.....690_8k.htm
Third, the total cost of designing, manufacturing AND launching FM-5 is $260 million… not $250 million. They were “halfway” through the payments on FM-5 as of 9/30/07 — and are now $234 million of their way through the payments on FM-5 and FM-6 as of 12/31/07.
“The aggregate cost of designing, building, launching and insuring the launch of the satellite will be approximately $260 million.”
http://www.sec.gov/Archives/ed.....ex99-1.htm
How the remaining amounts owed on FM-5 and FM-6 are split, no one knows since Sirius didn’t differentiate how the $234 million paid to date was split.
Regardless, as I mentioned previously — I posted a lengthy post on this on Orbitcast. Complete with links, numbers and estimates. And my numbers came fairly close to yours in the end…
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Homer…
I was working mostly from memory when I used the numbers, but it appears to be close.
A few things to consider on the replacement front.
1. If they decide to use the current ground spare instead of constructing an FM-8 then they would have to pay a launch and insurance. This would be $98m + $35M to $40m….call it $135m. This would bring the total to $835m, but they would no longer have a ground spare.
2. Current sats could be utilized as in orbit spares. No one expects them to up and die in 2012.
3. They could work on a new ground spare which would take them to the $1 billion range, but they may not need to begin that for some time.
Capex will be a thing to watch over the next few years
Of course, if there is a merger things change in a big way.
Nice post Tyler and Homer. I had thought that Sirius said that their in orbit satilites were having some problems with some circuit failures on their solar arrays, and that they were cutting the life of them from 15 to 13 years. Now sence they lunched them in 2000 that gives them to at least to 2013 to get them into orbit. I have to ask whats the rush to put these new satilites in orbit. Do you think Sirius is having more problems with them then they are letting on, or do they just want the newer satilites with a load of new technical capabilities. For me it doesn’t make any sence to put a satilite that cost about 300 million in orbit any sooner then need be. Assuming it takes 4 to 6 months to get it to a geocentrical orbit and run test before it is ready for use, that still gives them till 2012 or at least 2011 (as a safty buffer if something goes wrong). At about 20 million a year per satilite I think it is worth waiting as long as possible with in reason to a chance something going wrong. I have no problem with them building them and letting them sit. But every year there in orbit is a year off that 15 year obital life span.
John
The circuitry problems were not the thing that changed the “lifespan” as much as what they are planning on doing with FM-5.
The failures are not a very big problem, and did not change the useful life.
From Sirius’ SEC Filing
“In June 2006 we entered into an agreement with space systems loral to design and construct a new satellite. In connection with this agreement, we adjusted the useful lives of two of our in-orbit satellites to 13 years to reflect the way we intend to use and operate the constellation. We continue to expect our spare satellite to operate effectively for 15 years from the date of launch.”
Sirius can not wait until satellites fail to get new things in place. Additionally, by staggering the launches a bit, the costs are spread out.
I,m sorry that was my mistake I read the SEC filing wrong. But I still personally disagree with them putting a satillite up 3 years before it is needed at a cost of 20 million per year. I understand you dont want to wait till it is no longer working to put one up. In general though these satilites as you know have back-up system, after back-up system. They dont just go dead (baring some catastrophic failure) without them knowing ahead of time. I will concede that Mel has more information then I and knows what he is doing more then I. That must be one hell of a deal to waste 100 million by putting one up 3 (2009 launch) years before needed, and one 2(2010 launch) years before needed. Although I did see one analyst who thinks the 2010 will be pushed back to 2012.
Tyler it seems odd to me the staggering to spread cost out. The longer they wait to spend the less interest they will pay. With each year they get more financially stable and able to absorb the cost. Once again though I will concede that Mel knows more then I do and must have reasons for doing what he does. He is after all, well known for his ability to cut cost. I will also say you agreeing with this, might mean I am missing something on this.
John,
One advantage is that they can begin having a more staggered replacement timetable going forward.
FM-5 will give them added capability, and being a geo station sat, will give them a hybrid constellation.
FM-6 will begin the eliptical bird replacement, and that will likely be late 2010 or into 2011.
Further, when they replace a bird in orbit, they can have an in-orbit spare ready to roll.
Tyler, I see what you are saying, but that one in orbit ready to roll cost them about 20 million a year. That is for **me** is a thorn.