Did Israel's space industry go up in smoke with Amos-6?

Yuval Azulai

Questions and answers about Spacecom's satellite, the causes and effects of the satellite blast, and future prospects.

First of all, was the Amos-6 satellite, which exploded on the launch pad last Thursday, insured?

Yes. Insurance covering the transfer of the satellite from its production facility, the Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1) Mabat plant in Yehud, to the launch site in Florida was provided to IAI on the British insurance market Lloyd's, via an international broker that deals with satellite insurance and can take on itself the huge risk of launching a satellite into space.

After the insurance funds are received, probably within 60 days, IAI will reimburse Spacecom Satellite Communications Ltd. (TASE:SCC) with the entire payment for the satellite's construction, approximately $195 million. However, insurance will not compensate Spacecom for the loss of revenue from contracts for the operation of Amos-6 that had already been signed, estimated at a further $200 million.

One of these contracts, totaling nearly $100 million, is for a Facebook initiative, aimed at enabling the company to provide satellite Internet to large parts of Africa. There are real concerns that this agreement will not be realized. Spacecom also insured Amos-6, insurance that was to cover damage to the satellite during the launch itself and during its operation in space.

So, the satellite is insured, but there is no insurance to compensate the dozens of engineers and technicians who worked to build this new satellite for over four years for their heartbreak.

What caused the satellite to explode, two days before the planned launch date?

The causes of the blast are still being examined, but it was probably a result of a malfunction that occurred during the fueling of the Falcon-9 rocket which was to carry the satellite into orbit. This was a rocket belonging to SpaceX, a US company owned by billionaire Elon Musk, which was to carry the satellite into space and then return to earth using a parachute. The launch was scheduled for Saturday morning; on Thursday afternoon, Israel time, the rocket was fueled when it was already carrying the satellite as part of preparations for the launch. Then, it underwent a standard motor ignition test, with the explosion probably occurring in the rocket's second stage and causing the destruction of both the Falcon-9 and the satellite.

How does this affect Spacecom, which was to operate Amos-6?

It will have a highly negative, and, according to some senior people in the Israeli space industry, even a devastating effect: Spacecom, controlled by Shaul Elovitch's Eurocom Group, had already lost the Amos-5 satellite, which was produced by a Russian company, after it lost contact with its ground station. Therefore, Amos-6 was of critical importance for the company, particularly against the backdrop of an impending $285 million deal in which the Chinese company Xinwei was to acquire Spacecom.

Now, following the loss of Amos-6, the future of the deal with the Chinese is unclear; according to estimates voiced during the weekend, the deal might even be cancelled. Spacecom's current operations are now based on three existing satellites, all produced by IAI: Amos-2, which will cease operating in the near future; Amos-3; and Amos-4. Nevertheless, Spacecom CEO David Pollack said that the damage was not critical, and that the company was looking to the future.

Could Spacecom acquire a new satellite quickly?

Yesterday, Pollack told "Globes" that the company was already examining the possibility of acquiring an alternative satellite to fill the gap left by the Amos-6 blast. This satellite will probably not be produced by IAI, although the latter could renew its program to build an Amos-6 backup satellite, which was discontinued one year ago at Spacecom's request. IAI could provide such a satellite in two-three years, but this is time Spacecom does not have, because it received Amos-6 after an 18-month delay. For this delay, IAI will have to pay Spacecom a $10 million penalty, independently of compensation for the satellite's destruction on Thursday,.

Since the weekend, Spacecom has been examining proposals from other satellite manufacturers worldwide, some of which have, as Pollack put it, a "second hand, zero mileage satellite". These are backup satellites produced alongside other satellites already successfully launched. Such satellites could be modified to match their missions. If it chooses to acquire such a "second hand" satellite, Spacecom could have it within 18 months.

What will happen with the deal to sell Spacecom to Chinese firm Xinwei?

This is still not entirely clear: the deal was estimated at $285 million and was contingent on the successful launch of Amos-6. Pollack told "Globes", "We received a message from them that they wish to continue talking with us. Other than that, I do not know much. I believe that we will hear more from them in the next few days."

Why did Spacecom choose SpaceX to launch the satellite, rather than launch it from the familiar launch pad in Kazakhstan, used for successful launches in the past?

In the last two days, sources in the Israeli space industry levelled harsh accusations at Spacecom executives who had preferred to launch using SpaceX's Falcon-9, rather than employ a Russian rocket considered reliable. These sources said that Spacecom had tried to save on launch expenses, and accepted a proposal from SpaceX that was tens of millions of dollars cheaper.

However, Pollack claims that the decision to launch with SpaceX was made due to malfunctions that occurred in launches in Kazakhstan in the past few years and due to advice that the company had received from insurance firms to avoid taking risks. "SpaceX had already carried out 28 successful launches into space, and its people are not rookies in this field. The company has an excellent, innovative launch vehicle with a high level of safety. As for the Russian company - insurance firms did not like the idea of us launching from there. This company (SpaceX - Y.A.) is now undergoing changes, and we are waiting see how it will stabilize in terms of safety issues," Spacecom's CEO said. Yesterday, he did not rule out the possibility that the future satellite which Spacecom will acquire will also be launched using the Falcon-9 rocket. "I have a high degree of faith in this launch vehicle, which will also be used to launch US astronauts into space," he said.

Why did Spacecom abort the construction of the Amos-6 backup satellite?

At the same time as Amos-6 was manufactured, IAI had also been producing a backup satellite, in case some malfunction resulted in the loss of the primary satellite. However, Spacecom claims that IAI delayed handing over Amos-6 to an extent that made the production of a backup satellite redundant. While IAI already has suitable parts and components (although not all of them) for the production of a replacement satellite for Amos-6, this would still be a long production process, and it is unclear whether Spacecom will be interested.

How will the loss of Amos-6 affect the Israeli space industry?

Besides the damage to Spacecom, this is a pivotal event for the space industry, in which image and prestige carry enormous weight. IAI has a problem with communications satellites which is not related to the Amos-6 blast: its missile and space plant has no further communications satellite orders, as opposed to orders for other, military and commercial, satellites that will keep the company very busy for the next few years. In the next few days, several dozen IAI engineers and technicians responsible for communications satellites will be shifted to other IAI satellite operations.

At the same time, even at a time when the future of Israel's operations in communications satellites is unclear and possibly in grave doubt, we should still not eulogize Israeli satellite industry: IAI has extensive military reconnaissance satellite and commercial satellite operations, and its facilities are busy manufacturing the Venus satellite, a satellite for ImageSat International NV and a satellite for Italy, as well as reconnaissance satellites.

How does Amos-6 differ from other communications satellites?

According to experts, while the Israeli communications satellite that exploded on the launch pad on Thursday was not unusual in comparison with other communications satellites worldwide, it was the largest and most advanced such satellite produced in Israel, that is at IAI. Since it was to be used by Spacecom for communications for a long time, it contained built-in capacity for modification for any future technological developments, which would have enabled it to stay effective for a long time. Moreover, Amos-6 had an innovative electric propulsion system, which was to be tested for the first time after launch into space. Since the satellite did not reach space, the viability of this new technology and other novel technologies installed in the satellite for their first trial in space conditions, was not tested.

Will Spacecom manage to salvage the Facebook deal?

This is unlikely, because it seems that Facebook will not wait for Spacecom: there are giant companies operating communications satellites and providing relevant services, which means that the dream deal between Spacecom and Facebook will not be realized. Pollack said, "This is one of the projects we most regret missing - it has a real value for humanity. Mark Zuckerberg will look for other solutions for his plans (to connect the African continent to the internet - Y.A.) and unfortunately there is enormous added value here that we have lost."

Published by Globes [online], Israel business news - www.globes-online.com - on September 5, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

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