SES-led consortium to design, deliver, and
operate innovative MEO-LEO network.
IRIS2 will expand SES’s network with 18 new MEO
satellites providing pole-to-pole global coverage, plus extended
access to LEO capacity, to keep pace with rapidly expanding
customer demand.
SES’s participation in IRIS2 is consistent with
our disciplined financial policy, benefiting from significant
public funding, which is frontloaded, and built-in protection
mechanisms.
Post Intelsat integration, SES Adjusted Free
Cash Flow expected to ramp to over €1 billion by 2027/2028
supporting existing deleveraging commitment, IRIS2 CapEx, and
expanding shareholder returns.
SES S.A. announces that the SpaceRISE consortium, led by SES,
has signed the Concession Contract with the European Commission to
design, deliver, and operate the innovative, multi-orbit IRIS2
sovereign connectivity system for a period of 12 years, with the
network expected to provide services from the beginning of
2030.
Infrastructure for Resilience, Interconnectivity and Security by
Satellite (IRIS2) will be European Union's (EU) preferred and
trusted network to provide reliable, secure, and cost-effective
communication solutions for governmental institutions, commercial
organisations, and European citizens.
SES’s contribution to IRIS2 will be to develop, procure, and
operate 18 new MEO satellites providing 100% pole-to-pole coverage
with carrier-grade connectivity solutions. SES will have rights to
commercialise the MEO capacity and part of the LEO capacity of the
IRIS2 system. The compelling combination of high throughput data
rates, low latency, service flexibility, and managed solutions will
cater to EU’s sophisticated requirements, as well as allied nations
and SES’s customers around the world.
With deployment of SES’s O3b mPOWER completed in 2027 and
subsequent commercial ramp up, the delivery of IRIS2 is well timed
to provide next-generation MEO capabilities to serve expanding
customer demand for SES’s high performance connectivity solutions,
underpinning profitable growth into the next decade. The IRIS2
satellites will form the foundation for SES's next-generation MEO
capabilities.
Adel Al-Saleh, Chief Executive Officer of SES, commented, “We
are delighted to secure this important contract as the European
Commission’s trusted partner for this flagship project to realise
the ambition of secure, sovereign multi-orbit-based network for
EU’s strategic communications autonomy. IRIS2 will bring a new
level of connectivity for the EU and its citizens in a public
private partnership structure which aligns all interests and
derisks the development phase with upfront public investment. IRIS2
will be Europe’s network of choice with the EU and Member States
being the constellation’s anchor customers.
IRIS2 enables the profitable expansion of our differentiated MEO
architecture into the next decade, while giving us access to LEO
with owners' economics, to keep pace with the rapidly growing
customer demand in our target segments where we have a strong right
to win, record of delivering value for our customers, and history
of growth execution. The contract terms we have agreed demonstrate
our commitment to disciplined investment, delivering required rate
of return, maintaining investment grade balance sheet metrics, and
returning cash to our shareholders.”
The Internal Rate Return (IRR) of the contract is expected to
exceed 10% and is underpinned by a strong commercial value
proposition and built-in protection mechanisms. The MEO offering,
complemented by access to LEO capacity, will serve a range of
government and commercial requirements including fixed government
connectivity; intelligence, surveillance, and reconnaissance; navy
and air force needs; mobile backhaul and trunking; enterprise and
cloud applications; global inflight connectivity; and connecting
cruise ships around the world.
The initial phases of IRIS2 will benefit from upfront public
funding with limited need for private financing in the early years
of design and procurement. In total, SES will contribute
approximately 50% of the MEO cost while having the benefit of
commercialising over 90% of the MEO capacity and part of the LEO
capacity.
The EU and Member States will be the anchor customers to the
IRIS2 constellation, while also attracting allied nations across
the world, underpinning revenue generation which is expected to
cumulatively be around €6 billion over the 12 years. Starting in
2025, SES expects to generate incremental revenue and EBITDA for
works related to the design and procurement phases. The Contract
also provides for the possibility to add hosted payloads for
commercial services, adding to the value proposition towards
customers.
The contract grants protections to support SES’s IRR including,
but not limited to, i) a rendezvous point in 12 months’ time to
validate the project cost, technical requirements, and delivery
timetable, whereby any party can exit in the event of excess
expected cost, not meeting technical requirements, and/or delays to
the in-service date; ii) mechanism to seek renegotiation to protect
the IRR for qualifying reasons, such as delay in start of service;
iii) certain protections from annual cost overruns; and iv) the
Commission will cover any extra cost resulting from launch failures
up to in-orbit validation.
Participation in IRIS2 is fully consistent with the principles
of SES’s financial policy. SES maintains its prior expectation to
have an Adjusted Net Debt to Adjusted EBITDA ratio of below 3 times
within 12-18 months after closing the Intelsat acquisition, which
is on track to complete during H2 2025. SES’s commitment to a
stable to progressive dividend is also reaffirmed with an annual
base dividend of at least €0.50 per A-share. SES intends to
increase the annual dividend as soon as the Adjusted Net Debt to
Adjusted EBITDA ratio is reduced to below 3 times which is expected
by 2027 as noted above.
The IRIS2 contract will be incremental to SES’s current
investment outlook (average of around €350 million per year on a
standalone basis and €600-650 million per year pro forma for the
Intelsat acquisition over 2025-2030), revenue, and profit plans.
The capital expenditure (CapEx) for IRIS2 of up to €1.8 billion
will start ramping from 2027 and have an average annual spend of
around €400 million over 2027-2030.
With the Intelsat acquisition, normalised Adjusted Free Cash
Flow (pre-IRIS2) is expected to ramp to over €1 billion by
2027/2028(1) driven by revenue and Adjusted EBITDA growth and
execution of synergies (approximately 70% of the expected total
annual rate of €370 million will be delivered by the end of Year
3). This level of cash generation will more than support the
incremental CapEx for IRIS2 while retaining financial flexibility
to increase shareholder returns and consider further balance sheet
strengthening.
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About SES
SES has a bold vision to deliver amazing experiences everywhere
on Earth by distributing the highest quality video content and
providing seamless data connectivity services around the world. As
a provider of global content and connectivity solutions, SES owns
and operates a geosynchronous orbit fleet and medium earth orbit
(GEO-MEO) constellation of satellites, offering a combination of
global coverage and high performance services. By using its
intelligent, cloud-enabled network, SES delivers high-quality
connectivity solutions anywhere on land, at sea or in the air, and
is a trusted partner to telecommunications companies, mobile
network operators, governments, connectivity and cloud service
providers, broadcasters, video platform operators and content
owners around the world. The company is headquartered in Luxembourg
and listed on Paris and Luxembourg stock exchanges (Ticker: SESG).
Further information is available at: www.ses.com.
1) Financial outlook assumes nominal satellite health and
launch schedule
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241216108829/en/
Richard Whiteing Investor Relations Tel. +352 710 725 261
richard.whiteing@ses.com
Suzanne Ong Communications Tel. +352 710 725 500
suzanne.ong@ses.com
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