Unlocking growth potential through satellite and space asset leasing
Securing funding in the satellite and space sector has become increasingly difficult. Space Leasing International (SLI) offers a proven leasing model that enables companies to lease assets on a monthly basis rather than purchasing them upfront. We spoke with Praveen Vetrivel, SLI’s CEO, to find out more about how this approach frees up capital to support innovation.
Crispin Littlehales, Executive Editor, Satellite Evolution Group
Question: What prompted the creation of Space leasing International and how does its relationship with the Libra Group benefit customers? Praveen Vetrivel : Our parent company, Libra Group, entered the aerospace leasing market in 2004 with the creation of LCI. The strategy was born out of the group’s 25-year maritime legacy that has strong parallels with aerospace leasing. Our group’s shipping company is an owner of ships with a diverse portfolio. The ships are then chartered to shipping lines, usually for a specified period of time. By chartering a vessel for a limited time rather than owning it outright, the operator is insulated from market volatility and avoids substantial capital investment.
The group realized that exactly the same principles applied to aviation. At that time aviation leasing was facing external market pressures and the group saw a burgeoning commercial opportunity for the long-term. Initially, LCI invested in a mixed fleet of wide and narrow-bodied Airbus and Boeing aircraft. These in turn were leased to major airlines such as British Airways, Air France and Singapore Airlines. As with shipping, the key was to invest in a broad spectrum of asset classes. In each market there was not just an overall market cycle but ‘sub-cycles’ that affected different asset classes in different ways. All this experience feeds into where SLI is today.
In 2014, LCI diversified beyond fixed wing aviation and acquired a fleet of helicopters valued at around $1 billion from Airbus and AgustaWestland (now Leonardo). The, now well-proven, approach to asset finance was again applied. LCI took on the financial risk of owning the assets and they were leased to operators who welcomed the flexibility and lower risk associated with paying for usage of assets under an operating lease. LCI’s helicopters are leased to operators such as Avincis, Babcock and Omni in the offshore services, search and rescue, and emergency medical services sectors.
Having shown how the leasing principle can be applied to the maritime and aviation sectors we realized that there was a very clear gap in the market. The space economy exhibits many similarities to aviation, featuring manufacturers and operators that need to scale their businesses yet may not have the capital to do so. Furthermore, the space economy represents more than just spacecraft, antennas and satellites - it’s the infrastructure behind global connectivity, economic growth, national security, and scientific advancement. The space economy is projected to reach $1 trillion by 2040. By closing the gap between availability of
Praveen Vetrivel, CEO, SLI
put it to other uses. Secondly, they can continue to use the assets that they formerly owned.
The other mechanism by which we undertake saleand-leaseback agreements is to take over the contract at the point of purchase. So, an operator may have already ordered an asset or a fleet of assets then, at the point of purchase, decides that they would rather lease the assets. At this point the lessor, such as SLI, would acquire the assets from the manufacturer and lease them to the operator who can then make alternative use of capital originally destined for the purchase.
Sale-and-leaseback, or SLB agreements have been deployed for many years in other industries, notably real estate and heavy industrial equipment. It is a convenient way of liberating capital that is tied up in asset ownership.
Question: Can you provide a real-world example of the SLI model being applied by the space sector?
Praveen Vetrivel: Our first leasing project in the space industry was undertaken with RBC Signals, which is a global provider of Ground-Station-as-a-Service (GaaS). Their whole business is based on having a wide network of satellite ground stations strategically deployed across the globe. Inevitably, a GaaS provider has considerable demands on capital expenditure.
For RBC signals, leasing is a perfect route for rapid business development without a need for major capital expenditure. As a result, we became a strategic partner to RBC Signals and agreed to acquire up to 21 ground stations as they rolled out their ground station network.
By partnering with SLI, RBC Signals has been able to expand its infrastructure while maintaining preserving operational agility and reducing on-balance sheet expenditure.
We have already completed the purchase of 13 ground stations in six high-demand satellite communication regions around the world that are now leased to RBC Signals.
Our initial investment supported the construction of a new ground station in the Alaskan Arctic, a critical location
for monitoring climate change. In March this year, we acquired 10 satellite ground stations previously owned by Microsoft to ensure their continued operation by RBC Signals.
The ground stations we have acquired are located across five continents and support vital government and commercial communications around the world.
Question: What is the biggest challenge to getting companies in the satellite and space sector to use your service?
Praveen Vetrivel: That’s simple: it’s the unfamiliarity of this form of asset finance in the space sector. As in so many markets, it will take some creative early adopters to show others the simple financial sense of this approach. It is worth remembering that the aviation industry did not embrace leasing overnight. In 1976 less than two percent of commercial aircraft were leased. This rose to 15 percent by the early 1990s and 25 percent by 2000. Today more than 50 percent of commercial aircraft are leased rather than owned by the airlines.
We have already demonstrated how ground stations are an ideal candidate for leasing. When it comes to satellites, I believe that aviation leasing has been an ideal proving ground, so I would estimate that adoption in the space sector would be a little quicker.
Question: How do you see SLI evolving over the next 2-5 years?
Praveen Vetrivel: I do not have a crystal ball and am always much happier saying what we have done than what we will do! Suffice to say, however, within two years this company will expand its portfolio to embrace emerging aerospace technologies, in addition to growing our global portfolio of ground stations assets.
Our mission now? Help the space tech world see asset use in a whole new way. Built on ambition and breakthrough thinking, this industry is ready for its next evolution—bringing that same pioneering spirit to asset finance.
Ground Station Deadhorse, Alaska
