August 10, 2010 – A $7.3 billion imaging contract awarded by the U.S. government to two commercial satellite operators will help accelerate the launch of new privately-owned reconnaissance spacecraft.
The contract covers commercial imaging services for the next decade and provides $3.8 billion GeoEye Inc. and $3.55 billion to DigitalGlobe Inc., including money to help build new satellites. The agreement is broken into one-year options pending the approval of Congress.
Both companies will receive up to $2.8 billion for imagery purchases, plus different levels of funding for infrastructure enhancements and satellite construction.
The deal was announced Friday by the National Geospatial-Intelligence Agency, and executives at the winning companies provided investors with details in conference calls Monday and Tuesday.
GeoEye and DigitalGlobe operate fleets of polar-orbiting satellites to collect high-resolution imagery for government and commercial clients around the world.
"Taken together, the two awards are clear evidence that the nation has made a large and long-term commitment to the commercial imaging providers and that we’re going to be a part of the national imagery system for a long time going forward," said Matthew O’Connell, president and CEO of GeoEye of Dulles, Va.
NGA provides satellite and airborne imagery from private and government-owned platforms to military users. GeoEye and DigitalGlobe satellites supplement the government’s secretive constellation of even more powerful imaging spacecraft.
The EnhancedView contract unveiled Friday covers services for the next 10 years.
GeoEye’s $3.8 billion award includes up to $337 million to go toward the development and launch of GeoEye 2, which will be the world’s most sensitive commercial remote sensing satellite. One-third of the government’s cost-sharing investment will be available in 2012, and the remainder will be transferred to GeoEye after the launch of GeoEye 2.
The combination of private and public financing should provide "more than sufficient capital" to complete construction of GeoEye 2, said Joseph Greeves, GeoEye’s executive vice president and chief financial officer.
With a resolution of 33 centimeters, or 13 inches, GeoEye 2 will be ready for launch by late 2012, according to O’Connell. The GeoEye 1 craft produces imagery with a resolution of 41 centimeters, or 16.1 inches.
"As GeoEye 1 set a new standard in resolution, GeoEye 2 will set an even newer standard," O’Connell told investment analysts Monday.
GeoEye, which also provides imagery to Google Maps, estimates GeoEye 2 will cost between $750 million and $800 million, more than the $502 million cost of GeoEye 1. The company has invested about $145 million the new satellite so far.
"With those new capabilities, plus the control moment gyros that are going to speed collection of points, you have added capability, and I think you have to pay more for that kind of capability," O’Connell said. "It’s going to be the best."
Lockheed Martin Corp. is charged with building GeoEye 2, but the operator has not selected a launch provider.
Valerie Webb, a GeoEye spokesperson, said the firm is not restricted to U.S. rockets despite the cost-sharing agreement with NGA. GeoEye 1 launched in 2008 on a Delta 2 rocket, while the older Ikonos satellite blasted off on an Athena rocket in 1999.
A third-generation GeoEye spacecraft should begin development in 2013 for launch in 2017, company officials said.
According to Jill Smith, president and CEO of DigitalGlobe, the company will immediately begin procurement of a new satellite named WorldView 3 for launch in 2014.
"WorldView 3 will be substantially the same as WorldView 2 and will, therefore, benefit from the extensive experience and the associated risk reduction already gained from building and launching WorldView 1 and WorldView 2," Smith said in a conference call Tuesday morning. "By accelerating WorldView 3, we are effectively increasing our total capacity and moving to a core long-term constellation of three WorldView satellites."
WorldView 1 and 2 were manufactured by Ball Aerospace and Technologies Corp. and launched on Delta 2 rockets. DigitalGlobe has not announced a spacecraft or launch contractor for the WorldView 3 mission.
The launch of WorldView 3 and upgrades to ground infrastructure will more than offset the expected end-of-life of the less capable QuickBird satellite, increasing the company’s overall capacity by 60 percent by 2015, DigitalGlobe officials said.
DigitalGlobe plans to drop the orbital altitude of WorldView 2 in September 2011, improving its peak resolution from 46 centimeters to 41 centimeters, or about 16.1 inches, for U.S. government clients. Imagery for other users will continue to be downgraded to 50 centimeters, or 19.7 inches, based on regulatory requirements, Smith said.
The NGA also has the option to order another altitude reduction after September 2013 to as low as 308 miles, close to the orbits of the WorldView 1 and QuickBird satellites.
Smith said the NGA will have access to 50 percent of the DigitalGlobe constellation’s capacity for the first four years of the EnhancedView contract. That will increase to 60 percent after the launch of WorldView 3.
DigitalGlobe says its $3.55 billion contract includes $750 million for value-added products, infrastructure improvements and other services.
"The U.S. government will have certain priority rights that may require some adjustments in our operational planning and certain product offerings," Smith said Tuesday.
Smith assured investment analysts the NGA deal will not come at the expense of the company’s business and international customers.
DigitalGlobe is also developing plans for the replacement of WorldView 1 later in the decade. WorldView 1 was launched in 2007, and WorldView 2 arrived in orbit in 2009.