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Telesat, Boeing Settle Dispute Over Defective Solar Arrays

Telesat expects its Anik F1 satellite to last until 2016 despite a solar-panel design flaw. Credit: Boeing artist's concept

PARIS — Satellite fleet operator Telesat of Canada and satellite builder Boeing have reached a settlement in their six-year dispute over whether Boeing committed “gross negligence” in delivering Telesat’s Anik F1 satellite with defective solar arrays, Telesat said Nov. 1.

In a filing with the U.S. Securities and Exchange Commission, Ottawa, Ontario-based Telesat said the two sides agreed to terms Oct. 26, just ahead of an arbitration proceeding that was to have commenced in November — six years after Telesat first filed for arbitration.

Telesat did not disclose the financial terms of the settlement but said it is “not material to Telesat Canada’s operations or its financial position or results.”

Telesat had originally sought some $395 million from Boeing Space and Intelligence Systems of El Segundo, Calif., alleging that Boeing knew of the solar-array defect aboard the initial series of 702 model satellites but did not inform Telesat of it. Anik F1 was launched in November 2000.

Telesat received an insurance payment in compensation for the defect, a fact that Boeing used to countersue, saying it should receive offsetting damages in the amount of Telesat’s insurance claim. Boeing also said it should receive in-orbit incentive payments from Telesat related to the Anik F1, which continues to operate in orbit.

Over the years, Telesat had reduced the amount of damages it was seeking — a recent figure was $77 million — and increased the estimated service life of Anik F1. The satellite is now expected to continue operations until 2022, but may need to shut down some transponders to save power depending on the evolution of the degradation of the solar arrays, which have a design flaw.

In the years since the dispute began, Telesat has been purchased by Loral Space and Communications of New York, which owns Palo Alto, Calif.-based Space Systems/Loral, a direct Boeing competitor in commercial satellite manufacturing.

Telesat has always denied it, but the Loral parentage has put pressure on the satellite fleet operator to purchase Space Systems/Loral products, and it has made Space Systems/Loral its sole supplier since the Loral acquisition.

Boeing in the interim has re-entered the commercial satellite telecommunications market with renewed force and a new satellite design.

Space Systems/Loral is about to be sold to MDA Corp. of Canada, an event that will remove any constraints on Telesat — the world’s fourth-largest commercial fleet operator by revenue — with respect to satellite manufacturers.

In a Nov. 1 conference call with investors, Telesat Chief Executive Daniel S. Goldberg said the company has now taken control of the Nimiq 1 satellite that up to now was leased to Bell Canada. Bell has leased the new Telesat Nimiq 6 satellite, which entered operations in June, freeing up Nimiq 1.

Goldberg said Telesat is in talks with several potential customers for Nimiq 1, which carries 32 transponders and has enough fuel to continue in operation until 2024. One possibility is to sell or lease the satellite to a satellite operator that has an available orbital slot and broadcast frequency rights compatible with Nimiq 1 but does not have a spacecraft ready to occupy the slot.

Goldberg said Anik G1, whose 16 extended-Ku-band transponders have been leased to Shaw Direct for television broadcasts in Canada for 15 years, is scheduled for launch on a Russian Proton rocket in January. The satellite, to operate over the Pacific Ocean region at 107.3 degrees west, features an X-band payload for commercial sales to military customers that has been leased to Paradigm Secure Communications, which also owns Britain’s Skynet military telecommunications satellites.

Anik G1 will be co-located with Anik F1 and will double Telesat’s capacity directed toward Latin America with 12 new C-band and 12 Ku-band transponders.

Goldberg said Telesat’s North American satellites were 91 percent full as of Sept. 30, while its international satellites were 82 percent full. The company reported backlog of 5.2 billion Canadian dollars ($5.2 billion).

For the three months ending Sept. 30, Telesat reported revenue of 220 million Canadian dollars, up 10 percent from the same period a year ago. EBITDA, or earnings before interest, taxes, depreciation and amortization, was 80 percent of revenue, up from 77 percent a year ago.

 

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Boeing Gains Ground in Longstanding Telesat Dispute

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