UK senior civil servants have formally warned the government that its commitment to put $500 million into a joint venture with Bharti Global to buy bankrupt satellite operator OneWeb has a high risk of losing all the investment.
OneWeb is currently totally unprofitable and it is likely to need considerable further investments for satellite building and launches before it commences business. And even those business prospects are uncertain.
A Ministerial letter from the UK’s Department for Business, Energy & Industrial Strategy (BEIS) from Ms Sam Beckett (the Department’s acting permanent secretary) to the Secretary of State, Alok Sharma, warns that the UK’s National Security Strategic Investment Fund has scrutinised the proposed joint-venture and say that there could be a case where a positive financial return might be achieved. However, the letter warns “there remain a very broad range of uncertainties and possible outcomes around this case, so it is hard at this time to be confident in the underlying assumptions or the likely returns”.
The letter also warns that the UK’s Space Agency considers the project to have some “considerable uncertainties” in the financial model prepared for the UK’s finance ministry.
The letter adds that the central financial case behind the investment is “marginal” and that “there are significant downside risks, including that venture capital investments of this sort can fail, with the consequence that all the value of the equity can be lost.”
Beckett cautions that the project does not meet “the requirements of Value for Money as set out in” the government’s own guidelines.
The letter was sent on June 26th ahead of the purchase news and released on July 22nd.
July 17th also saw a 150-page document filed with OneWeb’s bankruptcy court outlining the way ahead as far as OneWeb’s post-bankruptcy reorganisation is concerned. A vote will be held on September 22nd to approve – or otherwise amend – the scheme. However, many, many pages of the document are redacted from public examination and financial projections were not included.