SES secures EIB funding, tipped for ‘transformed investment case’

The EU’s European Investment Bank (EIB) has agreed a €300 million financing arrangement with satellite operator SES. The seven-year term loan will back investments related to the design, procurement and launch of three previously announced satellites that will deliver advanced broadcast and broadband services spanning Western Europe, Africa and the Middle East.

SES said the loan is the largest amount ever provided by the EIB to a Luxembourg-based company.

The project supported via EIB financing includes the procurement of three satellites from Thales Alenia Space to deliver video broadcasting as well as network services. Astra 1P and Astra 1Q will operate from SES’s prime TV neighbourhood of 19.2° East while SES-26 will serve at 57° East, enabling the operator to deliver satellite broadcast over Europe and Africa, and support connectivity needs for companies and governments across EMEA.

Two of the three satellites are fully software-defined satellites that will enable service reconfiguration and in-orbit adjustment to SES customers’ demands. All three satellites, when launched in 2024, will be operated from SES’s headquarters in Luxembourg.

Separately, analysts at Berenberg say that SES’s “investment case will be transformed” if it achieves three key objectives this year.

These are the launch of more O3b mPOWER MEO satellites with commercial services to start in Q3; to deliver improving revenue and EBITDA through the year before a return to growth next year; and to complete phase two of C-band clearance plan and receive post-tax proceeds equivalent to 75% of its market cap.

Berenberg noted that SES had made progress with its MEO plans with the launch of two O3b mPOWER satellites in December after repeated delays. SES is also on track to receive US$3 billion in C-band clearance payments this year.

The analysts said that investors are wary of SES reinvesting C-band proceeds in mergers and acquisitions, a concern heightened by rival Eutelsat’s merger with LEO startup OneWeb. SES has been linked with the possibility of a merger with Intelsat, and Berenberg said that significant synergies would have to be realised to justify this.

While noting that SES’s expected return to growth would justify a re-rating of its stock, Berenberg reduced its price target from €11.20 to €9.20 due to the recent weakness of the dollar against the euro.