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Boeing, SES Appear To Settle NSS-8 Replacement Dispute
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Boeing, SES Appear To Settle NSS-8 Replacement Dispute - 19-February-2010, 18:06

Boeing, SES Appear To Settle NSS-8 Replacement Dispute

From ... spute.html
PARIS — Boeing appears to have paid satellite fleet operator SES of Luxembourg about $23 million to settle a claim that Boeing violated a contract to rebuild a large SES-owned telecommunications satellite that was destroyed in a 2007 launch failure, according to financial statements from the two companies.
Neither SES nor Chicago-based Boeing has commented directly on the matter. Boeing said the settlement is confidential. SES spokesman Yves Feltes on Feb. 18 confirmed that “a mutually satisfactory agreement” had been reached with Boeing but declined further comment.
But in their 2009 year-end financial reports and investor conference calls earlier this year, both companies point in the direction of a settlement, for approximately that amount, of an issue that Boeing long dismissed.
The dispute began following the January 2007 on-pad launch failure of a Sea Launch rocket carrying the Boeing-built NSS-8 telecommunications satellite, which was owned by SES. SES subsequently said the NSS-8 manufacturing contract included an option under which SES could order Boeing to build a carbon copy of NSS-8 under essentially the same contract terms.
SES officials said that when they notified Boeing of their intent to exercise the option, Boeing resisted. Satellite prices had increased substantially from the time of the initial NSS-8 contract in March 2001. Boeing had long since lowered its profile in the commercial satellite market, saying prevailing prices could not justify a major Boeing presence.
Boeing offered a different version of events, as described in a July 2009 submission to the U.S. Securities and Exchange Commission (SEC): “New Skies [the former name of the SES division now called SES World Skies] did not exercise the option. Instead, New Skies purported to cancel the contract on April 27, 2007, maintaining that discussions between the parties regarding the never-exercised option amounted to a repudiation by BSSI [Boeing Satellite Systems International]. We vigorously disputed that characterization.”
Boeing said SES in May 2009 filed a dispute-resolution request with the International Chamber of Commerce in London, but never spelled out how much money SES was seeking in reparations. “We believe that SES New Skies’ claims lack merit and intend to vigorously defend against them,” Boeing said in the July 2009 SEC filing.
In a Jan. 27 conference call with investors, Boeing Chief Financial Officer James A. Bell said Boeing late in 2009 booked a one-time charge in its Network and Space Systems division relating to a “legal settlement associated with a contract” that, when combined with a write-down in the value of Boeing Delta 2 rocket hardware, totaled about $50 million.
In Boeing’s Feb. 8 filing with the SEC, the company refers to a “Dec. 23 confidential settlement agreement with respect to all claims” by SES relating to the NSS-8 replacement dispute.
In its Feb. 12 announcement detailing its financial results and a conference call with investors the same day, SES makes reference to a one-time charge and a one-time revenue gain in late 2009, with roughly a $4 million difference between the two. The company refers to a write-off, valued at 19 million euros ($27.2 million at year-end exchange rates), relating to payments made to Long Beach, Calif.-based Sea Launch Co., which since mid-2009 has been in Chapter 11 bankruptcy reorganization.
Partly offsetting this write-off, SES Chief Financial Officer Mark Rigolle said, was revenue resulting from “a settlement with one of our partners” that was valued at about $4 million less than the Sea Launch charge. Rigolle declined to disclose the partner’s identity, but added that “it’s a nice chunk of money that we are quite happy to have received.”
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