PARIS — Satellite in-orbit-servicing startup Effective Space Solutions of Britain and Israel on Jan. 17 said it had signed a contract to launch two of its refueling drones to two satellites owned by a single fleet operator in 2020.
The contract, valued at more than $100 million, has an implied value of more than $50 million for each satellite refueling effort, which the company has said typically will last around five years.
Each drone then will leave the customers’ satellites and go on to perform a similar mission for customers not yet signed.
The company was formed in 2013 by Arie Halsband, the former general manager of Israel Aerospace Industries’ space division. Effective Space Solutions maintains an R&D center in Tel Aviv.
Effective Space did not name the customer and also did not identify its financial backers.
But in an interview, Daniel Campbell, the company’s London-based business development manager, offered details of its business model and contract structure, as well as its planned Series B debt and equity financing round expected this year.
Who is the customer?
We cannot reveal the name but it’s a well-respected satellite operator that allows us to provide service on two of its satellites. The main geography for these satellites has a lot of competition. The customer sees life extension as key to secure its existing customer base. In the near future it will become a public announcement.
You would benefit and I can’t see how the customer would be hurt, by announcing the name.
We’re working on it! But we’re not there yet.
One drone will serve two satellites in 2020 or two separate drones?
Two separate drones. We can send both as a ride-share. Each drone will be dedicated to another satellite so in a sense we are not just announcing our first customer but also moving forward to having a fleet.
The drone stays attached to the satellite for how long?
For several years. We also have an option for extension under the contract, which relates to the health status of the satellite after the contracted years. In general, our discussions with customers point to requirements for around five years of life extension. Operators’ analysis shows us that between year 15 and year 20, the health of the satellite is preserved. We are dealing with satellites that have not had to use any of their [on-board] redundancies.
We can offer much shorter missions, such as a deorbiting, or a BIU [bringing into use, for regulatory purposes] mission relocations. For certain cases there are actually satellites that can use more than five years of life extension because of the nature of the launch or other things.
Does the drone then accompany the satellite to the graveyard orbit before detaching?
That’s one possible service. It depends on regulatory aspects as the operator sees them. The deorbiting itself may be something the operator would like to perform on its own before the technology is well-proven, using the propellant it has remaining for the deorbiting.
Where does the mating, the docking, occur: In the GEO box or in the graveyard orbit?
In the GEO box. And we are planning with the customer a docking that will ensure continuous service during operations.
There is no interruption of service?
The docking occurs during the customer satellite’s service. No specific outages beyond the usual stationkeeping maneuvers are expected.
Is your customer the same operator that signed an LoI with you in 2016?
Since that first LoI we have signed several other LoIs with operators. We took the most valuable LoI to date — with two satellites using two drones. You will notice that we are relating to a specific contract value, which shows that eventually it’s all about the value that can be contributed to the customer.
You mean the $100 million for the two satellites.
How does the contract work: Little or no down payment or milestone payment, and the revenue comes on completion of the docking?
We provide the service to the customer on an annual-fee basis. Most of the revenues are associated with the actual service. Based on circumstances, we do accept down payments and that is something that will be more common as these missions become more standardized.
So the contract will be helpful to you in attracting investors for your Series B but will not generate 2018 revenue — correct?
Right, but our respective legal teams made sure the contract, similar to any satellite contract, will be bankable. So in addition to attracting investors, it will also be a guarantee.
What is the status of your Series B: How much cash do you have now, how much do you need to service-revenue generation, and how do you get from here to there?
We have cash from previous rounds to make sure we are managing things with all our suppliers. We will need a Series B in 2018 to make sure we can do the full-scale deployment all the way to orbit and then to first revenue.
Will the Series B will take you to revenue generation?
Yes, and with more customers in the pipeline we hope to be able, very soon, to grow our fleet and take more missions.
Who are your financial backers now?
We have two strategic investors who are going to build a coalition in the coming through months, and this will involve not only equity but also debt. So it will be a Series B growth supported by debt and hopefully export credit. It’s an interesting coalition with an interesting group of members.
Can you name the strategic investors?
We can’t provide names yet.
You had planned a demonstration launch in 2018. Now you are going directly to the operational launches in 2020 as your first flights?
Yes, it took us some time but we came up with two space missions and now we have a concrete deadline that relates to the estimated end of life of the satellites and we are working toward that.
Access insurance, mission insurance, third-party liability: We are woking in the UK Space Agency and with [insurance broker] Marsh to make sure the liability caps would allow us to secure third-party liability and Marsh and the underwriters are supporting this.
Some people had thought that insurance would be a big challenge, but our experience suggests otherwise.