Analysts predict that NRO deals will have a long-term impact on the satellite imagery sector

According to a new report by Quilty Analytics, which is a research and consultancy organization, the contracts recently given by the NRO (National Reconnaissance Office) for the commercial satellite imagery to Maxar Technologies, BlackSky, and Planet will certainly change the industry.

According to the June 1 report, the EOCL (Electro-Optical Commercial Layer) contracts “reaffirmed Maxar’s position as the government’s main supplier of very high-resolution images, while also indicating the heightened relevance of smallsat constellations from BlackSky and Planet.”

Despite the fact that Maxar’s contract is far larger than its competitors, the spy agency’s choice to issue 10-year contracts to the three corporations is important, according to the report. “All EOCL grantees’ capital attractiveness and credit quality are raised as a result of this prolonged timeframe.”

The contract with Maxar has a 5-year baseline value of $1.5 billion, with choices for an extra $1.74 billion in the second half. The contract with BlackSky includes a two-year base value of $72 million and options for potentially $1 billion. The contract’s worth has yet to be announced by Planet Labs.

According to Quilty Analytics, the EOCL grants also send a clear signal from the NRO that it wants to invest additional funds in commercial satellite imagery compared to the past.

“Assuming Planet’s deal is no worse than BlackSky’s two-year, $72-million baseline,” the study adds, “NRO’s yearly budget for commercial imagery will have increased by 24% above [Maxar’s previous contract] EnhancedView’s $300 million per year.  Notably, BlackSky and Maxar both firmly implied that there is tremendous upside beyond the standard contract.”

Quilty’s analysis has a few further takeaways:

Because the EOCL deal continues to rely on Maxar’s historical fleet of 4 imaging satellites, the annual fee remained intact at $300 million for the first 4 years, with the possibility of an increase to $340 million in year 5.

The EOCL contract does not cover Maxar’s upcoming constellation WorldView Legion, at least for the time being. “Maxar will be able to monetize 100% of the increased capacity with other agencies, foreign governments, the NRO, and commercial clients as a result of this.”

BlackSky’s baseline deal met estimates, but the company’s contract limit of nearly $1 billion over a 10-year period exceeded analysts’ projections and “implies the possibility for upside potential over the baseline award of contract.”

Maxar is still the government’s primary imagery provider, but it must now prepare for long-term competition from BlackSky and Planet, who are both developing fleets of 30 cm to 50 cm resolution satellites which will place them in direct rivalry with Maxar in a few years.

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