The Russian satellite market received a boost with Russian Satellite Communications Co.’s (RSCC) plans to boost regional capacity through a strategy to develop a new fleet of satellites. According to CFO Dennis Pivnyuk, RSCC will operate 680 equivalent transponders by 2015, which more than doubles its current capacity of 283 equivalent transponders.
The expansion makes sense for RSCC and the population of Russia, as many people live in remote areas not in the reach of terrestrial means of communications technology, but the plan does not come without risk. Pivnyuk discusses RSCC’s strategy to address its need for public debt financing and what factors will shape the operators plans to capitalize specific markets.
VIA SATELLITE: What are the spending plans for these satellites?
Pivnyuk: The total investment program for eight spacecraft will exceed $1 billion dollars. We currently have the Express-AM4, AM5, AM6 and MD2 satellites under construction, with the total investment for these four satellites at about $700 million. The next stage of the RSCC satellite constellation development program includes four more satellites. These are Express AM7, AM8, Express-AT1 and Express-AT2. We have just signed contracts with Thales Alenia Space and ISS for the procurement of the AM8, Express-AT1 and AT2 satellites. The cost of manufacturing these three satellites is about $270 million. With the previous four satellites, the investment program amounts to around $970 million. We have sent the specifications for the Express-AM7 satellite to manufacturers and are waiting for proposals from them. It may take three or four weeks before we get any feedback from them. We see this satellite as a mid-sized one. The manufacturing costs of Express-AM7 will be between $100 million and $130 million.
VIA SATELLITE: How is this plan being financed?
Pivnyuk: The Russian government has subsidized $700 million of the total cost. This will cover the AM4, AM5, AM6 and MD2 satellites. The Express-AM7, AM8, AT1 and AT2 satellites will be funded through a public tender where we will choose a bank to provide financing. We will take a commercial structured loan and use the guarantee we received from French export credit agency Coface. The loan will cover all three satellites. We have yet to decide how to finance the AM7 satellite, but we know the Russian government will not subsidize it. We will either sell as much capacity as we can at a pre-launch basis to gain the funding for AM7 or go for a commercial loan again or probably do both.