NewSat is set to be one of Australia’s most amazing technology success stories. Who could have thought that a tiny dot.com company – and only one of a handful of the 250 or so that dotted the stock exchange list around the year 2000 still surviving – could become a significant global satellite player? It is very rare, but very exciting, to see Australia establish a high technology industry.
When chief executive Adrian Ballintine told me of his plans several years ago I described them to Business Spectator readers but they always seemed a long shot (Tracking NewSat’s satellite ambitions, December 19, 2011; The sky's no limit for NewSat, September 6, 2011). But last year on November 29 NewSat shares were suspended from trading while Ballintine put together the final leg of a massive capital rising. The raising was completed at the weekend so now everything is in place for the satellite to be launched in 2015.
In all, Ballintine had to raise some $600 million to fund the satellite, which will be launched and built by French and US satellite groups. Because of the US and French involvement, the export banks of both countries last year contributed a combined total of just over $400 million in loans to the project. That left another $200 million to be raised. Some $105 million has been raised in an equity placement at 40 cents a share supported by big overseas institutions and a number of large locals. In addition there are a series of other smaller capital exercises including $30 million in mezzanine debt, a special line of credit, some reductions in fees which all took time to arrange but in the end the company got there.
On the basis of a 40 cents share price NewSat is capitalised at $250 million. It has secured contracts for $680 million worth of satellite telecommunications usage. But that represents only 18 per cent of the capacity of the satellite and just under half of its capacity in the next three years.
In the broad the $618 million in contracts will cover most of the satellite’s cost. The remaining $3 billion in contract capacity revenue will be the major contributor to the profit of the group. There is a strong demand from telecommunications groups and the US military for satellite space.
NewSat achieved its credentials in satellites by operating satellite teleports out of Adelaide and Perth. Its operations were so successful in coordinating the US Afghanistan land forces that the US military asked NewSat to go the next step and extend its operation from simply operating satellite communication to owning a satellite or satellites.
As a result, US military has already signed one large contract and may well sign another. Paradoxically, this amazing new Australian industry has not been supported by the Australian military who believe the Chinese are far better custodians of their telecommunications data than the locals.
Ballintine says that as the satellite gets closer to selling its capacity he will be able to increase the price of space, so the $3 billion in theoretical revenue generation capacity may be greater. In all NewSat has some seven satellite places, which is a remarkable long-term asset. Once Jabiru-1 has sold most of its capacity, work will begin on Jabiru-3 with a similar exercise with the export import banks. Jabiru-3 will be helped by the cash flow from Jabiru-1.
It is worth remembering that way back in the dot.com era Steve Vizard was once a director of NewSat, but it had a different name at the time. Back then Ballintine himself was a joint owner with television star Eddie McGuire of a company known as SportsView, which had the AFL internet rights to most clubs. One can only wonder what the Ballintine-McGuire company would have been worth had Ballintine and McGuire held their ground and retained AFL internet rights. It was a case of correct thinking with the wrong timing.