Reuters and Space News reported over the weekend that the National Geospatial-Intelligence Agency (NGA) had informed GeoEye it will be canceling parts of the 10-year, $3.8 billion EnhancedView contract because of budget cuts. NGA sent GeoEye two letters to explain the details.
According to Reuters:
The intelligence agency proposed an option under which GeoEye will get service revenue of $39.75 million for the three month ending November 2012, and a nine-month option providing for $119.3 million, contingent on funding. The government agency also decided not to provide additional funding for GeoEye's satellite beyond $181 million provided for in the contract, the company said in a regulatory filing.
According to Space News:
The U.S. government on June 22 told commercial Earth observation imagery provider GeoEye that it will be canceling key elements of a 10-year, $3.8 billion contract with the company because of expected budget cuts. The exact size of the funding gap between what GeoEye expected and what it will receive remains unclear. It depends in part on whether GeoEye meets new performance milestones, and in part on whether the U.S. Congress agrees to the apparent policy shift reducing the role of commercial suppliers in meeting U.S. government satellite-imagery demand.
On June 18th, DigitalGlobe issued a press release stating that NGA will be renewing the year 3 option of the current EnhancedView service level agreement (SLA) that extends from September 2012 through August 2013.
Again, according to Space News:
GeoEye had been awaiting word on whether its portion of EnhancedView would likewise be spared pending a resolution of the overall federal budget for the fiscal year beginning Oct. 1. The NGA letters make clear that this is not the government’s intention. The two letters deal with two funding streams that GeoEye had been relying on under EnhancedView.
Both news reports indicate that GeoEye is now in a tenuous position and that its viability is such that it may force the company into a merger or some consolidation of the two commercial earth observation satellite companies.