The space monster setting NewSat in motion

NewSat will soon launch Australia's first Ka-band satellite and is inking hundreds of millions in new contracts. With future projects set to follow, Australian investors will be taking notice.

NewSat chief executive Adrian Ballintine has a different set of blueprints to choose from for his next satellite. But that doesn’t make the launch of Jabiru-1, Australia’s first Ka-band satellite, any less of a triumph.

Ballintine sat down with some industry and governmental heavyweights at a roundtable in Washington DC overnight (US time) to mark a successful conclusion of sorts for NewSat’s six-year odyssey to get a bird of its own in the sky.

In attendance for the roundtable were chairman and president of US Export-Import Bank Fred Hochberg, Lockheed Martin president of commercial ventures Linda Reiners and Australia’s Ambassador to the United States and former defence minister Kim Beazley.

This isn’t just a set of firsts for NewSat and Australia; it’s also the first time US Ex-Im Bank and Lockheed Martin have worked together on a commercial satellite.

In the commercial satellite industry, the $650 million Jabiru-1 – appropriately named by Ballintine after a native Australian stork with a wingspan of up to 230cm – is a monster. It will cover the Middle East/North Africa, Sub-Saharan Africa and South Asia.

Ka-Band is the highest level of frequency services of the Ku-Band and C-Band frequencies typically offered by satellite companies. While they all have their pros and cons, Ka-Band allows greater broadband capacity bandwidth and can operate in areas with Ku-Band and C-Band services without interference.

To get Jabiru-1 off the ground, Ballintine secured $US291 million ($280.3) in financing from US Ex-IM bank – ahead of mining magnate Gina Rinehart mind you, who’s still looking for billions of Roy Hill iron ore dollars – and $US108 million from France’s COFACE, on February 25.

To seal the deal, NewSat also had to double the number of shares on issue with a $110 million capital raising, conducted by Credit Suisse and Baillieu, at 40 cents a pop. The ASX-listed company hadn’t traded in about three months as Ballintine fought to finally get the financing in place; the highly dilutive raising was a 23 per cent discount to the previous trading price.

But NewSat and its shareholders are poised to benefit from going hard early. Jabiru-1 will provide an estimated $US3 billion in additional revenue over its 15-year life and annual margins of $US180 million, for a company with a $206 million market cap.

Perhaps most importantly, it will finally give NewSat a legitimacy that will make the launch of its next satellite much easier for the company and its shareholders.

“From the middle of this year on, we’ll be making some inroads into Jabiru 3,4 and 5,” Ballintine tells Business Spectator. “I’m very keen to use those instruments that have little dilution.”

Jabiru-1 is set to be one of the largest commercial satellites in the world – or rather, one of the biggest circling it. The next one is almost certainly going to be noticeably cheaper and Ballintine says NewSat will “definitely” have more funding options available to reward its register.

At the moment, Jabiru-1 is presold to about 18 per cent for a total of $621 million. But it’s expected to generate $US3 billion in revenue over the course of its 15-year lifetime, based on a 70 per cent fill rate.

Ballintine expects the satellite to be 70 per cent filled by the time of its launch by France’s Arianespace in mid-2015.

“Seventy per cent is a reasonable expectation,” says the NewSat boss. “Satellites generally are 74 per cent filled and satellites in the geographies in which we are selling they are about 90 per cent full. So I think 70 per cent is a very reasonable ask.”

The satellite communications industry is also a finite industry. There are only a certain number of orbital slots available for satellites that have 15-year lifespans. NewSat has eight spots and Ballintine says he’s unlikely to sell them.

To put that $US3 billion over 15 years – about $US200 million per year on average – into perspective, let’s compare it to the three major satellite companies in the world, which are IntelSat and SES from Luxemborg, and Eutelsat from France.

IntelSat and SES are the two leaders, both generating about $US2.5 billion in revenue from 53 and 54 satellites respectively. That translates into revenue per satellite of about $US47.1 million and $US58.1 million respectively.

As mentioned before, Jabiru-1 is a monster.

The sales that NewSat’s first bird is likely to book from here will be about about 40 per cent to the US government, particularly for defence purposes, 40 per cent to the oil, mining and gas industry and another 20 per cent to the telcos.

The reason why defence departments love satellite technology over others is pretty intuitive; there isn’t a chord anywhere that the enemy can cut.

However, some of the capacity NewSat would be highly unlikely to sell straight up would be that derived from Jabiru-1’s pocket aces – it’s two steerable beams.

Unlike those on conventional satellites, steerable beams can easily provide service to buyers much quicker than traditional providers, booked years in advance. As such, satellite companies that boast this technology can charge staggering premiums for the service.

Many investors, particularly in Australia, have long been sceptical about Ballintine’s ambitions. The share price is still stuck at 40 cents from the capital raising.

But as Jabiru-1 moves closer to its launch date, and NewSat continues to ink hundreds of millions in new contracts, with a cheaper and more easily funded satellite to follow, some investors might finally take another look – or simply look up.

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