Remote sensing satellite operators GeoEye and DigitalGlobe have received a huge fillip to their future business plans after both won lucrative ten-year contracts under the US National Geospatial-Intelligence Agency’s Enhanced View Program.
GeoEye signed…
Remote sensing satellite operators GeoEye and DigitalGlobe have received a huge fillip to their future business plans after both won lucrative ten-year contracts under the US National Geospatial-Intelligence Agency’s Enhanced View Program.
GeoEye signed a contract worth up to US$3.8bn, which includes US$336.9m towards the accelerated development of the company’s next-generation satellite, GeoEye-2, while DigitalGlobe inked a deal worth up to US$3.55bn. As part of its announcement, DigitalGlobe stated that it would immediately begin the procurement and construction of its next satellite, WorldView-3, which the company anticipates will be ready for launch by the end of 2014.
The bulk of both contracts is the US$2.8bn slated for commercial satellite imagery purchases. This portion of the agreement has a ten year term from September 1 2010 to August 31 2020, inclusive of nine one-year options exercisable by NGA. As with all government contracts, funding is subject to annual congressional budget approval.
Under the terms of GeoEye’s contract, the earth observation operator will receive US$150m per year as an extension of the NGA’s existing Service Level Agreement (SLA) to purchase commercial imagery. An additional award of approximately US$184m per annum will also be paid when GeoEye-2 becomes operational in 2013. To date, GeoEye has invested US$145m in the GeoEye-2 satellite program.
DigitalGlobe, on the other hand, will receive US$250m annually, or US$20.8m per month, for the first four contract years, increasing to US$300m annually, US$25m per month, for the remaining six years of the contract. The company is, though, obligated to make a portion of the image tasking capacity of the WorldView constellation available to NGA, including specified priority access rights, over the lifetime of the contract. On average, NGA will have access to approximately 50% of the WorldView constellation for the first four years, stepping up to approximately 60%, including WorldView-3, for years five through ten.
On top of the core commercial satellite imagery purchases agreement, the two operators will also receive a substantial payment for value added products, government focused infrastructure enhancements and other services. DigitalGlobe will be paid approximately US$750m for such services, while GeoEye will net US$700m.
Interestingly, as part of DigitalGlobe’s agreement, NGA has the option to require DigitalGlobe to lower the altitude of WorldView-2 to 496km, subject to receipt of regulatory approvals, at any time after September 1, 2013. To that end, DigitalGlobe has stated that it will lower the altitude of WorldView-2 from its current altitude of 770km to an altitude of 680km in September 2011.
The company admitted that this will result in a decrease in the amount of square kilometres collected by the satellite but believes the decrease will be offset by improved data capture capabilities on the ground resulting from its planned expansion to its regional ground terminal network.
The contract prompted both companies to revise their full year 2010 outlook upwards. GeoEye now expects its fiscal 2010 revenue to range from US$320m to US$330m, with adjusted EBITDA in the range of US$160m to US$170m. DigitalGlobe expects total 2010 revenue to be between US$340m and US$360m, with adjusted EBITDA between US$195m and US$210m.
