SpaceRISE to develop and operate Europe's IRIS2 connectivity network under new EU contract

SpaceRISE to develop and operate Europe's IRIS2 connectivity network under new EU contract
by Erica Marchand
Paris, France (SPX) Dec 23, 2024

SES S.A. has announced that the SpaceRISE consortium, led by SES, has secured the Concession Contract with the European Commission to design, deploy, and manage the IRIS2 sovereign connectivity system. The project, which will run for 12 years, aims to deliver advanced multi-orbit satellite communications, with services set to begin by 2030.

The Infrastructure for Resilience, Interconnectivity, and Security by Satellite (IRIS2) will serve as the European Union's trusted communication network. It will deliver secure, reliable, and cost-effective connectivity solutions for government entities, commercial organizations, and European citizens.

SES will contribute by developing, procuring, and operating 18 new medium Earth orbit (MEO) satellites, offering 100% global coverage, including the poles. SES will also retain commercialization rights for the MEO capacity and a portion of the low Earth orbit (LEO) capacity. The system's capabilities - including high throughput, low latency, and flexible services - will address EU and allied nations' growing needs for secure communications while supporting SES customers globally.

Adel Al-Saleh, Chief Executive Officer of SES, said, "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 will leverage SES's next-generation MEO architecture, enhanced by access to LEO capacity, to address diverse applications such as government fixed connectivity, military intelligence and surveillance, mobile backhaul, enterprise cloud applications, and inflight connectivity.

The contract terms prioritize financial sustainability, with an expected internal rate of return (IRR) exceeding 10%. SES will fund approximately 50% of the MEO satellite development cost while gaining the right to commercialize over 90% of its capacity. Total revenue over the 12-year contract is projected at euro 6 billion. Upfront public funding will cover early design and procurement phases, reducing private financing requirements.

Key financial protections in the agreement include a 12-month project validation period, safeguards against annual cost overruns, and mechanisms to ensure IRR stability. The European Commission will also cover costs stemming from launch failures during in-orbit validation.

SES's financial outlook remains aligned with its strategic goals. Participation in IRIS2 supports the company's financial policies, with expectations to maintain an Adjusted Net Debt to Adjusted EBITDA ratio below 3x by 2027, following the completion of the Intelsat acquisition in the second half of 2025. SES reaffirmed its base dividend of euro 0.50 per A-share, with plans to increase it once the debt ratio target is achieved.

The capital expenditure for IRIS2 is anticipated to total euro 1.8 billion, ramping up from 2027 with an average annual spend of approximately euro 400 million through 2030. SES projects over euro 1 billion in free cash flow by 2027-2028, which will comfortably accommodate IRIS2 investment alongside increased shareholder returns and balance sheet flexibility.