Favoring Speed Over Performance: SES Moves Forward with mPower

SES moved up its Q3 financial results by two days after Boeing disclosed a $315M satellite charge that investors immediately attributed to SES. Power-related issues on mPower 1-4 are worse than originally thought, meaning the satellites may not reach their 10-year design life. For SES, that means impaired 2024 revenues and EBITDA by 5%.

The company’s primary remediation plan is to launch two additional Boeing-funded satellites, but curiously, SES is also moving forward with the launch of mPower 5-6. Two satellites that the company presumably knows suffer from the same power glitch as the first four mPower satellites. Typically, “impaired” satellites are returned to the factory for remediation, a process that would likely delay their launch by a year or more. Could OneWeb’s rebirth, Amazon’s first satellite success, and the potential funding of a new competitor be the motivation for valuing speed-to-market over profit maximization?

Boeing’s move to pay for two more satellites (bringing the total fleet to 13 mPower satellites) is also highly unusual, notwithstanding Boeing’s marketing agreement to sell mPower services to the U.S. government. Satellite operators typically deal with manufacturer shortcomings through insurance, especially for defects that surface within the first year after launch.

This is the second instance in 12 months of satellite operators requiring concessions from manufacturers that fall short of contractual expectations. The first occurred in November 2022 when EchoStar, frustrated by two years of delays with its Jupiter-3 satellite, imposed a series of penalty payments upon Maxar Technologies amounting to $10M for every additional month of delay.

While production delays are not uncommon, and spacecraft anomalies are a known risk of the space business, satellite operators are becoming savvier about implementing penalties for manufacturing mistakes and costly delays. They remain extremely calculating in their decisions to buy new satellites these days, with the rapid pace of technological innovation creating a heightened risk of faster obsolescence for even the most cutting-edge spacecraft. There is no guarantee that a satellite will be economically useful at the end of a 10- or 15-year design life today, a shift that has upended the precedent. With long-term revenue projections obfuscated, operators may turn to manufacturers to pay up when clearer, near-term revenues are sacrificed by their blunders.

SOURCE: https://spacenews.com/ses-says-o3b-mpower-electrical-issues-are-worse-than-thought/