A deal worth $280-million for MacDonald Dettwiler and Associates Ltd. is in jeopardy because of potential competition from one of the company's key customers – NASA.
In March, Richmond, B.C.-based MDA announced a preliminary deal with Intelsat SA, the world's largest operator of commercial satellites, to build a ground-breaking system to refuel and repair satellites while in orbit. Intelsat would be the anchor customer and also solicit business for MDA from the U.S. government, which operates a huge fleet of satellites and was a key underpinning of the deal's business plan.
The National Aeronautics and Space Administration, under budget pressure as the United States grapples with a massive deficit and debt, is now considering a commercial venture similar to MDA's plan, a change from what had been previously been billed as an experiment to stoke private sector interest in the technology. NASA's robotic refuelling mission, which itself depends on MDA robot technology, is set to launch on July 8 to the International Space Station, carried on the program's final space shuttle flight.
"Typically, it has been off-limits for NASA to compete with commercial enterprises," said Dianne VanBeber, a spokeswoman for Intelsat in Washington. "[NASA's]communication of that objective has been a surprise to many in the satellite industry."
NASA's strategy has shifted since February, 2010, when Frank Cepollina, the agency veteran working on the project, said the agency's goal was to test technology to encourage the private-sector to take on the daunting technical challenge. NASA itself would use the technology for space exploration.
Last month, however, Mr. Cepollina said NASA's focus had turned to fixed-orbit communications satellites – the market MDA is after – with "commercialization [as]the end goal."
On Tuesday, NASA spokesman Michael Curie said the agency "cannot speculate on [the]commercial applications."
If NASA goes ahead with a commercial project (it is soliciting partners to assess the situation and MDA is among the bidders), the MDA-Intelsat venture likely cannot proceed. MDA's business plan is dependent on winning some work servicing U.S. government satellites. If NASA is in the picture, such business probably won't go to the Canadian company.
"We would have very challenging competition for the important U.S. government market," said Steve Oldham, president of MDA's satellite servicing business.
MDA and Intelsat in March said they planned to spend six months "to finalize specifications and other requirements" before deciding whether to proceed with the project, which would take three and a half years to build. The September decision deadline has been extended until December, according to MDA, to consider potential changes to the project and assess NASA's ambitions.
For MDA, the loss of the Intelsat deal isn't necessarily a heavy blow, according to analyst Steven Li of Raymond James. He said investors have not yet factored the size of the large Intelsat contract into MDA's financial picture, given that the money wouldn't be banked for several years. He also said MDA looks well placed to win business from NASA, if the agency proceeds with a commercial effort, even if such an outcome is less lucrative than the MDA-Intelsat deal.
"This kind of venture is obviously uncharted territory in space," Mr. Li said. "You have to have as much discussion as you can."
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