Satellite manufacturer Thales Alenia Space has rejected mobile satellite operator Globalstar’s order for an additional six satellites for its second generation LEO constellation claiming it is not valid.
On 3 October, Globalstar announced that it had…
Satellite manufacturer Thales Alenia Space has rejected mobile satellite operator Globalstar’s order for an additional six satellites for its second generation LEO constellation claiming it is not valid.
On 3 October, Globalstar announced that it had placed an order with Thales for six satellites in addition to the 25 satellites that the company has already ordered under the 2006 second-generation constellation contract.
According to Globalstar, under the terms of the contract these new satellites would cost approximately E55m and should be delivered by mid-2013. The reason for the low price is due to the fact that Globalstar says that it has already prepaid over E53m towards the new spacecraft as part of its 2009 Coface financing. The incremental E55m payment would not be made until the manufacturing process begins.
Globalstar added that the fast track delivery of the satellites is due to the company having previously purchased E12m in long lead items that facilitate the prompt manufacture of the spacecraft.
However, Thales believes that Globalstar has no right to place the order as it claims that the contract for the second batch of satellites has already been terminated by the mobile satellite operator.
Thales argues that as such, Globalstar is not entitled to the fixed pricing satellites provided under the contract and that the price of any second batch satellites ordered by the satellite operator is subject to equitable adjustment. Thales is also seeking a declaration and award of termination charges of E60.5m.
Globalstar has denied this claim and back in June 2011 filed a demand for arbitration against Thales in order to enforce the latter to be obliged to manufacture and deliver the second batch of satellites at a price in accordance with the amended and restated contract.
Globalstar has also contended that if Thales is correct in its assertion that Globalstar has lost rights to place an order, then the satellite operator should be entitled to an award of at least E395m.
A hearing consisting of a panel of three arbitrators has been scheduled for 24 January 2012 and the parties expect that the issues will be resolved shortly thereafter.
Thales would not comment further on the disagreement but did state that even if it did build the new satellites, it would have no impact on the construction of the Iridium NEXT constellation, which is due to be launched from 2015.
If constructed, the additional six satellites would further bolster Globalstar’s second generation constellation, particularly given that the first batch of six satellites that were launched in October 2010 have suffered problems with their momentum wheels that have led to one of the satellites being removed from service.
As for the remaining 18 satellites in the second batch contract, Globalstar informed SatelliteFinance that it has yet to decide on whether to exercise the option for them. These satellites are not covered under the US$586.3m Coface financing.
Meanwhile, Globalstar has announced that its chief financial officer Dirk Wild has resigned. Wild, who joined Globalstar in August 2010, will leave the company on 11 November 2011, allowing enough time for him to oversee the company’s next quarterly financial report.
Globalstar did not give a reason for his departure but said that Wild is leaving to pursue other career opportunities in southern Louisiana. The company has already begun the search for his successor.
