Spacecom sues IAI for $138m

SpaceX explosion Photo: Twitter

Spacecom demanded $10 million compensation in a recent arbitration for the loss of the Amos 6 satellite.

On Monday, one year after the Amos 6 communications satellite blew up before being launched into space, Spacecom Satellite Communications Ltd. (TASE:SCC), owned by businessman Shaul Elovitch, filed a $138 million claim against Israel Aerospace Industries Ltd. (IAI) (TASE: ARSP.B1). The claim was in the context of the arbitration proceeding that has been taking place between the two companies over the past two months. The arbitration began when Spacecom said that it was entitled to $10 million compensation from IAI under the agreement signed by the companies.

IAI manufactured the satellite for Spacecom. The explosion itself, which completely destroyed the satellite, occurred last September at Cape Canaveral, Florida, two days before the planned launch using a rocket made by SpaceX, a company owned by billionaire Elon Musk.

In its announcement yesterday to the Tel Aviv Stock Exchange (TASE) and the Israel Securities Authority, IAI said that the demand was part of the arbitration proceeding between the two companies. According to IAI, the demand alleges that Spacecom suffered damage totaling $138 million, plus interest, as a result of the alleged breach of IAI's obligation to deliver a satellite on the stipulated date.

The IAI announcement went on to state that in the statement of claim, Spacecom had asserted its entitlement to $10 million in compensation, and was also seeking $32 million in additional compensation from IAI, plus interest.

Spacecom yesterday refused to respond to IAI's announcement. Sources associated with the company attributed this to the confidentiality of the arbitration proceeding.

In its response to the lawsuit, IAI stated, "IAI rejects the groundless allegations by Spacecom. The two companies have agreed on an arbitration proceeding concerning them. Given this proceeding, IAI was surprised by the statement of claim, in which Spacecom is demanding $138 million in compensation. IAI is astounded at the baseless arguments contained in the statement of claim, including the excessive amount, and rejects them completely. IAI will file its response accordingly."

Series of recommendations following the explosion.

IAI has an insurance policy for the Amos 6, and received $170 million in compensation for it when it exploded before being launched. This compensation was transferred to Spacecom.

The communications satellite was designed to expand Spacecom's business. For example, Facebook planned to use it to promote a venture for hooking up extensive areas in Africa to the Internet. Following the loss of the Amos 6, Spacecom reached agreement in recent months with US company Boeing for the purchase of a replacement satellite.

The traumatic explosion of the rocket that was to have borne the Amos 6 into space led to the forming of a special professional committee led by Ministry of Science, Technology, and Space director general Colonel (res.) Peretz Vazan to consider Israel's standing in the communications satellites sector. The committee recommended a series of measures for safeguarding IAI's communications satellite know-how and production activity. The main recommendation was budgeting tens of millions of shekels for a multi-year national plan in which IAI would develop four communications satellites.

Senior IAI sources, including CEO Joseph Weiss, have warned that it will be necessary to make fateful decisions about the company's communications satellite business, and that the professional committee's recommendations had not yet been implemented.

Published by Globes [online], Israel Business News - www.globes-online.com - on September 6, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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SpaceX explosion Photo: Twitter
SpaceX explosion Photo: Twitter
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