Tuesday, November 16, 2010

GeoEye-2 Price Tag Rises on Ground System Upgrades

GeoEye expects its GeoEye-2 high-resolution optical satellite will cost as much as USD 850 million after the investment in an improved ground network ordered by its US government customer is included in the bill, GeoEye officials said.

The new GeoEye-2 cost estimate is USD 50 million higher than previous forecasts and reflects an investment the company will make in ground infrastructure that will operate with GeoEye-2.

The cost of GeoEye-2, under construction by Lockheed Martin Space Systems and scheduled for launch on a Lockheed Martin Atlas 5 rocket, is indicative of the inflation that has swept through the entire aerospace sector in the past few years, GeoEye officials added.

Launch prices in particular, they said, have escalated substantially since the company contracted for the launch of the GeoEye-1 satellite, which was placed into orbit in September 2008 and entered operations in February 2009. GeoEye-1 cost about USD480 million.

In a conference call with investors, GeoEye Chief Financial Officer Joseph F. Greeves said the ground-infrastructure investment will be financed by the US National Geospatial-Intelligence Agency (NGA).

GeoEye Chief Executive Matthew O’Connell said NGA will continue to pay the equivalent of USD150 million per year — the same amount under EnhancedView’s predecessor programme — until GeoEye is launched in 2013. Once the new satellite is in service, and the ground infrastructure enhancements are complete, NGA payments will increase by USD174 million per year for the seven remaining years of the contract.

A second piece of the EnhancedView contract, valued at up to USD702 million, is for value-added products and services. GeoEye’s competitor, DigitalGlobe, which received a similar EnhancedView award, has said the value-added piece of the contract may be affected by the severe budget pressure on US government agencies.

GeoEye is also weighing whether the cost of maintaining OrbView-2 in operational status is still worth the effort. The satellite, which is past its designed retirement date, has had several malfunctions that have forced ground teams to place it into safe mode, resolve the issue and then return OrbView-2 to operations.


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