Orbital ATK Loses Satellite Deal Over Ex-Im Bank Lapse
[Via Satellite 09-22-2015] A third satellite deal with a U.S. manufacturer has fallen through after the lapse of Export-Import bank authorization. Orbital ATK Regional VP for Business Development and Global Communications Ted McFarland said Sept. 21 that the company had a contract underway with Azercosmos, the national satellite operator of Azerbaijan, but that the agreement collapsed when Ex-Im bank support could not be secured.
“We just recently lost a deal because of lack of Ex-Im on Azerbaijan’s second satellite,” McFarland said during a Washington Space Business Roundtable (WSBR) event.
The failed contract was for Azerspace 2, a joint satellite or “condosat,” that will carry payloads for both Azercosmos and Intelsat, with the other half of the spacecraft designated as Intelsat 38. McFarland said the prospective customer clearly identified financing from the U.S. Export Credit Agency (ECA) as a must-have for the contract to follow through. Without it, Azercosmos turned to SSL, which has access to ECA funding in Canada, by way of its owner MacDonald Dettwiler and Associates (MDA).
“We got in the door. We had an indicative letter from Azerbaijan, and then we lost it,” McFarland said.
Since the expiration of Ex-Im authorization, U.S. satellite manufacturers have struggled to compete as aggressively in the global market. Boeing has had the most high profile losses, with two deals: one for Asia Broadcast Satellite’s ABS 8, and another for Kacific’s first satellite, Kacific 1. Jeff Trauberman, VP of space, intelligence and missile defense systems at Boeing, said the company has lost business and has much more at stake if Ex-Im bank remains out of reach.
“In the satellite space area, Ex-Im supports about 60 percent of international sales by all companies in the United States. They are currently funding several billion dollars of satellite programs in the Boeing customer set as well, and in our pipeline we have got another $3 billion of work that we are planning to capture that is going to be relying critically on Ex-Im support,” he said.
Trauberman added that Ex-Im bank resources support not only manufacturing, but also launch, ground services, and initial on-orbit operations. He described the current Ex-Im bank website page, which says in big letters “authority has lapsed” as “embarrassing,” and said that international competitors must be watching with “competitive glee” as members of U.S. Congress attempt to unilaterally disarm the bank.
“We have lost sales; you have heard about it and you’ll hear about it more. We have lost real jobs. You may have seen not long ago Boeing announced layoffs in its satellite division. Some part of that is attributed directly to the loss of this kind of business. These are high tech jobs and it’s really a shame to see them go,” he said.
The deals Boeing lost were for satellites that would use advanced technologies and payloads. ABS 8 is an all-electric satellite that would carry a mix of traditional and high throughput payloads. Kacific 1 is a Ka-band High Throughput Satellite (HTS) that, like Azerspace 2/Intelsat 38, was also planned as a condosat.
McFarland said that before Kacific went to Boeing, the company was first in talks with Orbital ATK. When the Asia-Pacific startup’s requirements grew beyond the small to medium sized geostationary satellites Orbital ATK specializes in, the company shifted to Boeing. McFarland said Ex-Im bank was an important tool for both nurturing new accounts and winning business from competitors in Japan, Russia, and Europe, and that Orbital ATK has another deal currently jeopardized for a Bangladeshi satellite.
“We are much, much smaller in scale than Boeing, but we feel it. Every satellite we sell we gave testimony for the Ex-Im renewal, and said it would cost about 228 jobs associated with our direct manufacturing business as well as our supplier base … we have now seen benefits of the ITAR regime being reviewed. We felt that might be the basis for renewed American competitiveness, but along comes this Ex-Im issue. We gain a little — we lose a lot,” he said.
ABS Chief Technology Officer Ken Betaharon lamented that without Ex-Im bank, the fast-growing operator will have to look elsewhere to buy new satellites. He attributed much of the company’s growth to Ex-Im bank support in the past.
“We have actually four additional satellites on the drawing board,” he said, adding that the goal is to obtain one this year, two in 2016 and another in 2017. “All of those, if the Ex-Im bank of the U.S.’ charter is not reinstated, unfortunately we will have to go elsewhere for it because we are a small company. We are growing very quick, but we don’t have the financial resources to be able to implement our very ambitious plan.”
Betaharon said two other ECAs have approached ABS to discuss future satellites. Both Boeing and Orbital ATK executives said that U.S. manufacturers are now hindered to the point that they cannot even bid on many deals because they require ECA support from the start.
John Schuster, a principal at 32 Advisors’ international trade and project finance practice, said that opponents to Ex-Im bank are arguing largely on principal, since the impact on U.S. industry has been too large to avoid noticing, and because Ex-Im bank actually turns a profit to the U.S. treasury, thereby not contributing to national debt.
“Our portfolio covers a diverse range of sectors. There was no sector where Ex-Im bank support was more critical to selling product than in the space industry — satellite, launch — it was more critical than any of them,” Schuster said.
The last major opportunity to reauthorize Ex-Im bank was in July. At the time, the Republican party delayed a highway transportation bill, pushing the discussion to October. Schuster said the return to discussion on this bill, and a budget reauthorization discussion this month, present the two next major opportunities to restore the bank.
Schuster estimated that Ex-Im bank has led to the direct creation of between 6,250 and 7,000 jobs for satellite manufacturers from 2010 to 2014. Including subcontractors, insurance and others, that number rises to 10,000. Assuming Ex-Im bank’s absence continues, Schuster said it would be no surprise to see enervated U.S. satellite manufacturers following General Electric’s example of moving jobs to countries that do have export financing.
“These companies that employ U.S. citizens, they are U.S. companies; they want to stay and employ Americans, [but] at the end of the day, satellite manufacturers, launch providers, everyone has a responsibility to their shareholders and they will move jobs overseas in order to get ECA support that is needed. It is for them to survive, not just during the hard times but almost every single year it is a critical part of their overall business,” he said. “My own sense is the lapse is far greater than the 10,000 jobs we’ve taken some credibility for. From my perspective the story of the bank, in terms of overall impact, is almost too big to calculate.”