[Satellite TODAY 07-05-13] Australian satellite operator NewSat has secured financing to the tune of $611 million for its Jabiru 1 satellite project. The company worked with the Export-Import Bank of the United States and the French export credit agency Coface to secure the funding and selected Lockheed Martin to build the satellite. The Jabiru 1 spacecraft is expected to launch in 2015.

 

    "Executing the financing documents is a major achievement for NewSat, as the company expands from a reseller of satellite capacity to an owner of satellites,” NewSat Founder and CEO Adrian Ballintine said in a July 5 written statement.

 

    Financial services company Credit Suisse has initiated coverage of NewSat and written an in-depth report on the company’s prospects. It has launched coverage with an “outperform” rating, which means that NewSat could prove attractive to investors, Bradley Clibborn, a satellite equity analyst at Credit Suisse, said in a research note issued today.

 

    “The $611 million Jabiru 1 project is funded which materially de-risks the investment case and should assist pre-sales efforts to fill capacity.Following NewSat’s $108 million equity raising completed in Feb-2013, NewSat should soon be able to complete the financial close of its Jabiru 1 project funding with the Export Credit Agency (ECA) lenders. Funding covers all project costs including pre-launch opex, on-ground capex, financing fees, working capital, launch insurance, and a $25 million contingency in the budget. Export Credit Agency (ECA) financing forms the majority of the funding package ($399 million at ~3 percent p.a.) with $30 million convertible debt, a $25 million senior standby facility and equity supporting the balance,” Clibborn wrote. “Therefore we do not see further equity dilution as a risk to realizing value from the Jabiru 1 project.”

 

    Clibborn also expects the demand for capacity on Jabiru 1 will be strong with a projected growth from 4.5 percent to 9 percent each year through 2016. “Key drivers of demand are: 1) Mobile backhaul for telcos in regional areas of developing countries as mobile penetration and 3G data use rises; 2) VSAT solutions for enterprise including the energy and mining sectors where NewSat already has a strong track record; and 3) government and defence for VSAT and drones. In addition Jabiru 1 is positioned over the higher growth regions of the Middle East, Africa and Asia where satellite demand growth is more skewed to satellite data services (rather than supply to TV operators),” he said.

 

    The good news continue for NewSat as Clibborn foresees the market dynamics to be very favorable for the company. He says that in the eastern hemisphere, there are 47 satellite launches currently planned for the period between 2013 and 2015, and 32 planned retirements through the end of 2016. “After stripping out net supply growth of four satellites in India (which is effectively a closed market), we are expecting net growth in supply of around 11 satellites, which equates to a 17 percent supply increase. This is less than the 21 percent forecast growth in regional demand to 2016,” Clibbon wrote.

 

    While just two satellites have been announced for a 2015 launch, his analysis shows an an average of eight launches per year in the eastern hemisphere; thus, he predicts six more satellites to be announced for 2015. “This would equate to +5 percent of supply and would tip our eastern hemisphere (ex-India) supply-demand balance into marginal oversupply (2 percent),” he said. However, Clibborn is also realistic to the possibility that 2015 might just be below the average eight satellites due to the high number of launches planned for this year and the next: 24 in 2013 and 21 in 2014. “Satellites typically have a two-year lead time and therefore any additional 2015 launches would need to be announced in the next six months to meet the 2015 window. We therefore believe the markets in which Jabiru 1 will operate should remain broadly in supply-demand balance,” Clibborn wrote.

 

    In an interview with Via Satellite last year, Ballintine spoke about the operator’s plans and hinted that the company wanted to invest in a range of new satellites over the comings years. “On future satellites, there is a range of financial instruments we can look at. There are bonds and other equity options and, given the way we have structured the financing on Jabiru 1, there is no reason why we can’t work with Coface and Ex-Im Bank to help fund Jabiru 3, Jabiru 4 and Jabiru 5. We might use bonds or equity for the balance, or we might use other instruments to gain funding,” he said in June 2012.

 

    Ballintine believes the company has an “interestingly” different focus to most satellite operators. While about 80 percent of the satellite companies target the DTH market, “we are in the middle of oil and gas and mining and government,” he told Via Satellite. “From our perspective, in areas such as the Middle East and Africa, we feel there are great opportunities, but also you have countries like Indonesia and other areas of Asia which are very interesting for us as well.”

 

    Ballintine is also very optimistic to the potential of this new spacecraft and what it will mean for NewSat. “The Jabiru 1 satellite at 70 percent utilization is expected to generate more than $3 billion revenue over the 15 year life of the satellite. Considering satellites in the geography of Jabiru 1 are mostly in excess of 90 percent utilization, NewSat’s projections are realistic and achievable,” he said in a written statement last year.