Your Daily Briefing Of Satellite

Your Daily Briefing Of Satellite Industry News

Galaxy 10R Propulsion Failure Won’t Affect Service and Revenues But May Threaten PanAmSat Sale

An artist's concept of Galaxy 10R that mulfunctioned last August 3

WILTON, Conn., Aug. 6, 2004/Satnews Daily/ — PanAmsat Corp. has assured customers and investors the xenon ion propulsion system (XIPS) failure of its Galaxy 10R satellite has not affected service to customers nor will it affect revenues or operations.

“We do not believe that this event will affect our contracted backlog because the remaining fuel for the backup bi-propellant propulsion system should provide ample time to seamlessly transition customers to a new or replacement satellite,” PanAmSat said in a statement. It added all its customer contracts would continue in effect on their terms on the new or replacement satellite.

On August 3, PanAmSat’s Galaxy 10R satellite, a Boeing model 601 HP spacecraft, experienced an unexpected shutdown of its secondary XIPS, an electronic propulsion system that maintains the satellite's in-orbit position. Boeing has determined the secondary XIPS system has permanently failed. As a result, the satellite is now expected to operate for up to another three years, compared with an original expectation for seven years.

PanAmSat said the satellite is operating normally on its backup bi-propellant propulsion system. Despite the absence of the secondary XIPS, PanAmSat said Galaxy 10R can operate normally on its available bi-propellant fuel for over three years.

Reports, however, have indicated that the technical troubles of the Galaxy 10R satellite could also threaten PanAmSat’s pending sale to three buyout firms.

In April, KKR agreed to buy PanAmSat for $3.55 billion cash. KKR later brought in two other buyout firms, Providence Equity and Carlyle Group, each of which will hold about 27 percent of the company when the deal is complete. The sale is expected to close on August 20.

Under the terms of agreement forged with the buyout firms, the permanent XIPS failure on Galaxy 10R could give the purchases the right not to consummate the deal. PanAmSat said the buyers are evaluating the impact of the technical failure.

The satellite failure will force PanAmSat to order a replacement satellite, construction of which must start no later than the fourth quarter this year so it could be launched in early 2007. The cost of building and launching a new spacecraft is estimated at $200 million.

PanAmSat said Galaxy 10R’s failure will result in acceleration to the 2004-2007 timeframe of planned capital expenditures to replace the satellite. Galaxy 10R is insured and PanAmSat will file a claim under its insurance policy to partially offset the replacement cost. The company has already lined up France’s Alcatel and Loral Space & Communications Ltd. to build the replacement satellite.