Feds to lend Telesat $2.14B to help finance Lightspeed LEO satellite program

Handshake deal

The federal government has agreed to lend Telesat $2.14 billion to help finance the Ottawa-based telecommunications equipment provider’s low-Earth-orbit satellite constellation, the company announced Monday.

Telesat said the loan will carry a floating interest rate that is 4.75 per cent above the Canadian overnight repo rate average with a 15-year maturity. 

The money is officially being disbursed to Telesat LEO, a wholly owned subsidiary of Telesat that will own and operate the network of 198 LEO satellites. 

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As part of the agreement, Telesat LEO will provide the federal government with warrants for 10 per cent of the common shares of the company based upon an equity valuation of US$3 billion. 

“Telesat Lightspeed is a highly innovative and disruptive global broadband network and the largest space program in Canada’s long and distinguished history as a space-faring nation,” Telesat president and CEO Dan Goldberg said in a statement. 

“I am delighted with the engagement we have had with the Government of Canada on this flagship program, which will help bridge the global digital divide, create and sustain thousands of high-quality jobs in Canada, spur domestic innovation, investment and exports, and ensure that Canada is at the forefront of the rapidly growing New Space Economy.”

The deal, which is subject to Telesat reaching agreements with other lenders, marks the culmination of years of negotiations between the Ottawa-based firm and the federal government. 

Known as Lightspeed, Telesat’s LEO constellation is expected to begin launching in 2026 and comes with an estimated price tag of US$3.5 billion. It will be Telesat’s answer to LEO networks that have been launched or are in the works from competitors such as SpaceX and Amazon.

Goldberg said Monday Lightspeed “will revolutionize broadband connectivity for enterprise and government users and represents a highly compelling growth and value creation opportunity for Telesat and its stakeholders.”

Canadian aerospace firm MDA, which was already contracted to provide phased array antennas for Lightspeed, has agreed to build the entire constellation. The Brampton-based company, which was formerly known as MacDonald, Dettwiler and Associates and is best-known for creating the Canadarm, replaced European aerospace giant Thales Alenia Space as the lead supplier in a cost-cutting move last year.

In addition to the estimated US$2 billion in capital cost savings from changing suppliers for Lightspeed, Telesat says it expects to save up to US$750 million in financing costs over the life of the project.

The Lightspeed satellites will be located about 1,000 kilometres above the Earth’s surface, much closer than traditional satellites.

That will allow for lower latency, or lag time, which is expected to translate into better wireless service for customers in remote areas and mobile locations such as airliners and cruise ships.

Telesat to hire hundreds of workers as Lightspeed production ramps up

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