Iridium has secured a deal to sell 51% of its air traffic management hosted payload joint venture to its Canadian partner for US$150m over five years.
The deal will see Nav Canada, a private sector investment firm that owns and operates Canada’s civil…
Iridium has secured a deal to sell 51% of its air traffic management hosted payload joint venture to its Canadian partner for US$150m over five years.
The deal will see Nav Canada, a private sector investment firm that owns and operates Canada’s civil air navigation service, acquire a majority stake in the Aireon JV in five tranches, subject to various project milestones.
Under the first tranche of this plan, Nav Canada acquired a 5.1% stake in Aireon for US$15m on 19 November. The fifth and final tranche for a stake in what Iridium claims will be the largest commercial hosted payload in history is scheduled for late 2017.
Aireon will take up around 80% of the hosted payload space on the next-generation LEO constellation that the satellite operator plans to launch from 2015 to 2017. It aims to use satellite technology to increase the surveillance capability of air navigation service providers (ANSPs) and reduce their dependence on radar. As current radar-based systems cover less than 10% of the world, the space-based system will enable ANSPs to track flight paths from pole to pole for the first time.
Harris Corp is building the payload for the venture under a US$114m contract. Iridium has said it expects Aireon will pay out one time hosted payload fees of around US$200m to Iridium.
Although Nav Canada will effectively be Aireon’s first customer, the hosted payload is continuing to receive international interest from other ANSPs, including the US Federal Aviation Administration (FAA).
Chris Metts, the FAA’s vice president of programme management, said it is working with Iridium as the operator develops the project’s technical and operational requirements.
“This technology could be transformative for the aviation industry and the FAA is committed to ensuring that the technical performance of the space-based ADS-B (Automatic Dependent Surveillance-Broadcast) system meets the agency’s needs,” said Metts.
In an interview with SatelliteFinance magazine back in August, Iridium CEO Matt Desch said that, because its hosted payload system was “a very flexible platform”, it could announce further ventures later this year.
“There is still a possibility of additional payload announcements, as we are still looking at a couple of different opportunities, although these will have to be nailed down before the end of this year to be feasible,” said Desch at the time.
Iridium has yet to announce how it will use the remaining 20% of hosted payload space that will be available on its second generation constellation in terms of weight and power.
Raymond James analyst Chris Quilty said the operator’s deal with NAV Canada, which values Aireon at approximately US$300m and Iridium’s stake at US$2 per share, represented a crucial milestone for the joint venture.
“We are pleased with this morning’s NAV Canada announcement and believe that follow-on announcements with NAV Canada and other ANSPs will more clearly establish the substantial value this effort has for Iridium,” said Quilty.
“While investors currently seem unwilling to give Iridium credit for the Aireon effort, we believe pending announcements over the next several months will eventually accrue to the stock thereby providing some positive news for a stock that is badly in need of positive momentum.”
Further details of the stake acquisition agreement between Iridium and NAV Canada will be released with the satellite operator’s financial results for the year ending 31 December 2012.
The satellite operator hired Fieldstone Partners and NEXA Capital Partners to assist in the financing activities.
Iridium’s stock closed unchanged at US$5.61 per share following the announcement.
