GeoEye Inc. executives don’t see “any scenario” where the company would delay the first half-2013 launch of its second commercial high-resolution imagery satellite, GeoEye-2, after the National Geospatial-Intelligence Agency (NGA) said it would not exercise the full year EnhancedView Service Level Agreement option for this contract year starting Sept. 1.
EnhancedView is a program to provide NGA with satellite imagery.
“I don’t see any (scenario where it would make sense to delay launch),” GeoEye Chief Executive Officer Matthew O’Connell said yesterday during a conference call with investors. “We’re a pretty short putt from the cup right now. The thing is mostly paid for…all of our international customers are asking how soon we can get GeoEye-2 and they’re talking about some decent fees. So I don’t see any advantage to delaying it.”
In a Securities and Exchange Commission filing Friday, GeoEye said NGA informed it in a letter that the Agency, instead, proposed a three-month option from Sept. 1 to Nov. 30 in which NGA would pay $39.8 million, and a further nine-month option, based on the availability of funding, of $119.3 million.
“I don’t see any scenario where we would delay the launch,” Joseph Greeves, GeoEye executive vice president and chief financial offer, said during the conference call. “We have the funding, we’ve been on track…so we want an opportunity to monetize that asset.”
NGA also informed GeoEye in another letter it elected not to obligate additional funding for the development and launch of GeoEye-2, scheduled for launch in the first half of 2013. NGA is currently obligated to fund GeoEye $181 million under that agreement and GeoEye has invoiced NGA $111 million of that, which is due in 30 days. NGA also proposed new milestones for payment of the remaining $70 million, three of which would occur before the launch of GeoEye-2 and no additional cost sharing would be provided.
NGA provided GeoEye with a July 6 deadline to respond and it asks the company to enter discussions regarding these proposals. GeoEye said it intends to enter negotiations and provide the information in a timely manner.
The SEC filing follows the NGA informing DigitalGlobe [DGI] it planned to exercise its Service Level Agreement for EnhancedView for the entirety of option-year three, which also begins Sept. 1 (Defense Daily, June 25). DigitalGlobe is GeoEye’s main competitor to provide commercial satellite imagery to the federal government. EnhancedView is expected to be hit with substantial budget cuts and GeoEye’s announcement is the first shoe to fall.
DigitalGlobe rejected a $792 million hostile takeover bid by GeoEye in early May after GeoEye offered a merger, which was also rejected. According to DigitalGlobe President and CEO Jeffrey Tarr, GeoEye first approached in February with a conditional offer with what he said were GeoEye’s concern “about a disproportionate risk of budget cuts affecting GeoEye” (Defense Daily, May 8).
Congressmen and senators in November sent a letter to Defense Secretary Leon Panetta and Director of National Intelligence James Clapper warning against cuts to EnhancedView, saying it’s a program designed to save the government money and augment access to global imagery (Defense Daily, Nov. 29).