Telesat secures $1.44 billion commitment from Government of Canada

satellite

Satellite communications company Telesat has secured a commitment of $1.44 billion from the Government of Canada, to help the company build its low-earth-orbit (LEO) satellite network.

Announced Thursday, the investment includes a loan of $790 million and a $650 million preferred equity investment in Telesat Lightspeed. The financing comes in addition to a $600 million service provider agreement with the federal government that enables internet and mobility service providers to acquire Telesat LEO capacity at reduced rates.

“The Government of Canada’s investment in Telesat Lightspeed underscores the program’s transformational ability to bridge the digital divide.”

Telesat said, with the federal commitments, it now has the financing agreements in place to fund its LEO network. This includes a $400 million commitment from Québec and $109 million from Ontario. Telesat said it has arrangements for $4 billion for the network, roughly $1.7 billion of which is a cash contribution from Telesat with the balance of the funded expected to come primarily from debt financing from “certain export credit agencies, with whom Telesat is in advanced discussions.”

Telesat’s LEO satellite network, called Telesat Lightspeed, is meant to have much lower latency (signal travel time between Earth and the satellites) compared to current communications satellites, allowing for faster internet speeds. The Ottawa-based company’s efforts pit it against the likes of Elon Musk and Jeff Bezos, who are working on their own internet satellite networks.

The company began working on LEO satellites in the last five years and is expected to launch its first satellites in the next few years. As Telesat moves closer to its launch, the company has been working to raising capital to finance the network as well as go public on the Nasdaq later this year.

As part of its $1.44 billion commitment, the Government of Canada is set to receive warrants that can be exchanged into common shares in Telesat. The $790 million loan comes with a 20-year term, and the $650 million is a payments-in-kind agreement for preferred equity, with an average term of approximately 14 years. As part of the deal, Telesat will commit to making “certain minimum capital and operating expenditures in Canada” and to create hundreds of full-time jobs, co-ops, and provide academic scholarships.

RELATED: Ontario commits $109 million towards Telesat’s race to launch low-earth-orbit satellite network

Telesat said it is committed to investing $1 billion of capital expenditures for its initial Lightspeed constellation in Canada and the lesser of $2.6 billion or 50 percent of “certain capital expenditures for its subsequent constellation.” This comes with incentives for additional Canadian investment in the subsequent Lightspeed constellation.

“The Government of Canada’s investment in Telesat Lightspeed underscores the program’s transformational ability to bridge the digital divide, position Canada at the forefront of the burgeoning New Space Economy, and deliver sustained and high-quality job creation and economic growth in Canada,” said Dan Goldberg, Telesat’s president and CEO. “With the funding announced today and other financing sources already in place, including the previously announced investment by the Government of Quebec, Telesat now has arrangements for approximately $4 billion in funding for the program. We expect to secure in the near term the remaining financial commitments required to fully finance Telesat Lightspeed.”

Meagan Simpson

Meagan Simpson

Meagan is the Associate Editor for BetaKit. A tech writer that is super proud to showcase the Canadian tech scene. Background in almost every type of journalism from sports to politics. Podcast and Harry Potter nerd, photographer and crazy cat lady.