Orbital ATK self-funds first ViviSat mission but plans to revisit Wall Street options

Orbital ATK plans to go back to Wall Street in 12 to 18 months to secure backing for its second and third satellite life-extending spacecraft after opting to fund its first ViviSat mission internally.

Orbital ATK (NYSE:OA) plans to go back to Wall Street in 12 to 18 months to secure backing for its second and third satellite life-extending spacecraft after opting to fund its first ViviSat mission internally.

Speaking on the side-lines of Satellite 2016 in Washington DC, Tom Wilson, general manager of Orbital ATK’s ViviSat Strategic Venture, said the terms the company was initially offered by investors to fund the first ViviSat project were not ideal as its new technology was seen as a risk.

After working for nine months trying to attract financing, and garnering interest from some “major Wall Street-type investors” and significant interest from two investors in particular to fund the vehicle, Orbital ATK decided to make the sizeable capital outlay because it would create more value for the business in the future.

However, now that the first ViviSat customer has been secured and development of the mission extension vehicle is progressing, Wilson predicted there will be broader acceptance from the market for the system in 12 to 18 months’ time.

Wilson declined to comment on the identity of its first client, which is rumoured to be Intelsat (NYSE:I).

“We’ll see more interest, it will make the investors more comfortable,” Wilson said.

“The initial risk of the development will all be bought down. It should be a much better market to seek the financing.”

ViviSat is a separate operating entity within the Orbital ATK group at present, but Wilson said the plan is to seek outside investment further down the line and break it off into a joint venture.

He said the company was already looking to secure future customers and has term sheets drawn up with other operators that are interested in the service.

“We haven’t moved those to full contracts yet because we’re trying to make sure we get the first one all locked down and ready to go,” he said.

Wilson anticipates that demand for life extension services could increase as FSS players feel pricing pressure from LEO broadband constellations. He believes that extending the life of a fully depreciated asset that is still generating revenue, and the capex savings that will yield, will prove attractive to operators.

The first ViviSat vehicle is expected to launch in late 2018 and, after tests, will then hard dock with its first client at the end of Q1 2019. The mission extension vehicle takes over the altitude control of the satellite, which then no longer has to rely on its propulsion system.

ViviSat is a service, with customers paying for the duration that their satellite’s life is extended. According to Orbital ATK, 80% of satellites end their life in the same condition they started, so there will be plenty of candidates for its services.

A programme of five vehicles has been planned. After the first ViviSat mission the vehicles will be launched in pairs. The second and third will be launched in late 2019, and the fourth and fifth in late 2020.

Wilson declined to comment on how much it is spending on the first spacecraft. His CEO Dave Thompson recently said that total investment for calendar year 2016 will reach US$75m, split between three projects: the commercial satellite servicing programme, a next-generation launch system, and advanced ammunition.

The Vivisat concept dates back to before ATK merged with Orbital Sciences. Wilson said ATK first started thinking about ViviSat in 2008 and started developing a year later, before incorporating it in 2010 and unveiling at the start of 2011. The merger with Orbital Sciences “really pushed it over the fence from a technical perspective”, he said.