GeoEye-2 Price Tag Rises on Ground System Upgrades

PARIS — Earth imaging firm GeoEye now expects its GeoEye-2 high-resolution optical satellite tv for pc will value as a lot as $850 million when funding in an improved floor community ordered by its U.S. authorities buyer is included within the invoice, GeoEye officers stated Nov. 9.

The price of GeoEye-2, beneath development by Lockheed Martin House Methods and scheduled for launch on a Lockheed Martin Atlas 5 rocket, is indicative of the inflation that has swept by means of your entire aerospace sector previously few years, GeoEye officers stated.

Launch costs particularly, they stated, have escalated considerably for the reason that firm contracted for the launch of the GeoEye-1 satellite tv for pc, which was positioned into orbit in September 2008 and entered operations in February 2009. GeoEye-1 value about $480 million.

The brand new GeoEye-2 value estimate is $50 million greater than earlier forecasts and displays an funding the corporate will make in floor infrastructure that can function with GeoEye-2.

In a convention name with buyers, GeoEye Chief Monetary Officer Joseph F. Greeves stated the ground-infrastructure funding might be financed by the U.S. Nationwide Geospatial-Intelligence Company (NGA), which in August contracted with GeoEye to buy $2.8 billion in items and providers over 10 years beneath a program referred to as EnhancedView.

GeoEye Chief Government Matthew O’Connell stated NGA will proceed to pay the equal of $150 million per 12 months — the identical quantity beneath EnhancedView’s predecessor program — till GeoEye is launched in 2013. As soon as the brand new satellite tv for pc is in service, and the bottom infrastructure enhancements are full, NGA funds will enhance by $174 million per 12 months for the seven remaining years of the contract.

A second piece of the EnhancedView contract, valued at as much as $702 million, is for value-added services. GeoEye’s competitor, DigitalGlobe of Longmont, Colo., which acquired the same EnhancedView award, has stated the value-added piece of the contract could also be affected by the extreme price range strain on U.S. authorities businesses.

The third slice of GeoEye’s EnhancedView contract, valued at $337 million, might be NGA’s contribution to the price of the GeoEye-2 program. A few third of this cost is due in 2012, when GeoEye-2 is delivered for testing, with the remaining quantity due as soon as the satellite tv for pc enters service in 2013, Dulles, Va.-based GeoEye stated in a Nov. 9 submitting with the U.S. Securities and Trade Fee (SEC).

GeoEye stated its three satellites — GeoEye-1, the principle breadwinner, scheduled to function by means of 2017; Ikonos, launched in 1997 and anticipated to be retired in late 2011; and OrbView-2, launched in 1997 and now of marginal worth — are working properly.

However the firm additionally stated it’s monitoring an image high quality subject on GeoEye-1 that was first detected in Might 2009 and now seems to have unfold. The problem, which restricts sure GeoEye-1 pictures to black-and-white mode inside what the corporate referred to as “a slim band of pixels inside a picture,” was overcome by altering the way in which the satellite tv for pc is operated.

Extra not too long ago, the corporate stated in its SEC submitting, “an adjoining band of pixels skilled the identical anomaly.” As with the unique incident, the issue doesn’t have an effect on black-and-white picture high quality, and GeoEye believes the same change in the way in which it operates the satellite tv for pc will maintain the issue. However any additional anomalies, particularly in the event that they require separate operational modifications, might have an effect on imagery assortment, the corporate stated.

GeoEye is also weighing whether or not the price of sustaining OrbView-2 in operational standing remains to be well worth the effort. The satellite tv for pc, which is previous its designed retirement date, has had a number of malfunctions which have pressured floor groups to position it into protected mode, resolve the problem after which return OrbView-2 to operations.

The newest episode occurred in September following a part malfunction. “The impression to our income of discontinuing the satellite tv for pc could be nominal,” GeoEye stated in its SEC submitting.

Ikonos, which continues to generate lower than $25 million in annual income, might be retired, and its buyer visitors moved to GeoEye-1, with out a lot hassle, Greeves stated throughout the convention name.

GeoEye reported that income for the 9 months ending Sept. 30 totaled $247.8 million, up 25.2 p.c over the identical interval final 12 months. The corporate stated full-year 2010 income needs to be between $325 million and $330 million. EBITDA, or earnings earlier than curiosity, taxes, depreciation and amortization, might be between 50 p.c and 55 p.c of income, with an operating-profit margin of 30 p.c.

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