WEBVTT 1 00:00:11.970 --> 00:00:16.020 Hello, my name is Nic Desjardins, and I'm a portfolio manager with Canso. 2 00:00:17.220 --> 00:00:18.420 Before working at Canso, 3 00:00:18.660 --> 00:00:22.680 I served as an aerospace engineer in the Canadian Air Force. As such, 4 00:00:22.980 --> 00:00:24.570 I worked on various flight lines, 5 00:00:24.930 --> 00:00:28.500 but was also employed at the Canadian Space Agency as a robotics instructor, 6 00:00:28.890 --> 00:00:32.460 where I taught astronauts and mission controllers how to operate the Canada arm 7 00:00:32.520 --> 00:00:33.840 on the International Space Station. 8 00:00:34.350 --> 00:00:37.950 I believe we have a very successful history of finding value and investing in 9 00:00:37.950 --> 00:00:38.783 space at Canso, 10 00:00:39.600 --> 00:00:43.440 and the reason behind that is we were quick to recognize that the industry is in 11 00:00:43.440 --> 00:00:44.160 turmoil. 12 00:00:44.160 --> 00:00:47.280 Because of the complexity and the costs involved with sending an object in 13 00:00:47.280 --> 00:00:47.700 orbit, 14 00:00:47.700 --> 00:00:51.510 space has traditionally been left to governments and traditional satellite 15 00:00:51.510 --> 00:00:55.440 operators. But things are changing very fast. For one thing, 16 00:00:55.590 --> 00:00:59.310 advancements have resulted in a significant reduction in the cost of satellites. 17 00:00:59.370 --> 00:01:04.140 This has obviously opened the door to new startups. Satellite launches have also 18 00:01:04.140 --> 00:01:07.560 become a lot cheaper. Between 1970 and 2000, 19 00:01:07.890 --> 00:01:12.690 the average cost to launch an object into space was almost $19,000 per kilogram. 20 00:01:13.080 --> 00:01:14.970 Because of advancements in launch vehicles, 21 00:01:15.330 --> 00:01:20.250 that cost has dropped at approximately $3,000 and is even expected to 22 00:01:20.250 --> 00:01:23.220 fall to $500. Taken together, 23 00:01:23.400 --> 00:01:27.630 the combination of advancements and reduced launch costs have improved the 24 00:01:27.630 --> 00:01:32.160 feasibility of many space-based activities and revive investments in space. 25 00:01:32.910 --> 00:01:33.780 To that effect, 26 00:01:34.110 --> 00:01:38.370 the global space economy is expected to expand from about $1.1 trillion to 27 00:01:38.370 --> 00:01:42.870 $1.5 trillion annually in the next twenty years. Naturally, 28 00:01:43.230 --> 00:01:45.240 some of this growth will be led by governance, 29 00:01:45.270 --> 00:01:49.020 but some of it will also come from commercial investments. In fact, 30 00:01:49.170 --> 00:01:52.140 investments in space have already hit record levels last year, 31 00:01:52.410 --> 00:01:55.950 reaching an all-time high of almost $9 billion, 32 00:01:56.250 --> 00:01:58.740 which is a 50% increase compared to the year before. 33 00:01:59.910 --> 00:02:04.470 Government budgets for space have also reached an all-time high of $83 billion 34 00:02:04.470 --> 00:02:09.060 last year, which is a 10% increase over 2019. Now, 35 00:02:09.060 --> 00:02:11.850 to put those numbers in perspective, last year alone, 36 00:02:11.850 --> 00:02:16.770 the FCC received requests for over 80,000 new satellites, 37 00:02:16.770 --> 00:02:19.410 the first commercial satellite service mission was completed, 38 00:02:20.100 --> 00:02:23.220 the first private rocket reached the International Space Station, 39 00:02:23.970 --> 00:02:28.320 the C-band spectrum auction in the U.S. drove 13 new communication satellite 40 00:02:28.320 --> 00:02:29.153 contracts, 41 00:02:29.310 --> 00:02:34.170 and almost 1300 satellites were launched compared to 800 the year before. 42 00:02:34.740 --> 00:02:36.960 Satellites can take many different forms. 43 00:02:37.200 --> 00:02:40.950 One way to differentiate between them is to classify them in terms of the 44 00:02:40.950 --> 00:02:42.090 altitude of their orbit. 45 00:02:42.420 --> 00:02:47.130 60% of operational satellites today orbit around the earth in a region called 46 00:02:47.250 --> 00:02:49.320 "Lower Earth Orbit" or LEO, 47 00:02:50.010 --> 00:02:53.670 which encompasses orbits up to 2000km. 48 00:02:54.300 --> 00:02:57.900 This is where you will find Hubble, the International Space Station, 49 00:02:58.350 --> 00:03:02.890 and the former space shuttle. Given this proximity to the Earth's surface, 50 00:03:02.980 --> 00:03:07.540 LEO is also well-suited for weather and earth observation satellites. Now, 51 00:03:07.540 --> 00:03:12.160 there's also a very special orbit at an altitude of 36,000km above the 52 00:03:12.160 --> 00:03:15.880 equator called the "Geostationary Orbit" or GEO for short, 53 00:03:16.510 --> 00:03:20.290 where satellites appear to be stationary above a given point on Earth. This is 54 00:03:20.290 --> 00:03:24.550 due to the fact that GEO satellites spin around the Earth at the same rate as 55 00:03:24.550 --> 00:03:29.410 the Earth rotates on its axis. Therefore, to someone on earth looking up, 56 00:03:29.620 --> 00:03:33.280 the satellite appears as a fixed point in the sky. Now, 57 00:03:33.280 --> 00:03:37.120 satellite TV providers were very quick to take advantage of this perceived fixed 58 00:03:37.120 --> 00:03:41.140 position by keeping their customers' antennas aimed at a fixed point in the sky 59 00:03:41.380 --> 00:03:44.350 instead of having to track a moving satellite. Finally, 60 00:03:44.830 --> 00:03:49.180 the region between LEO and GEO is referred to as "Medium Earth Orbit". 61 00:03:49.870 --> 00:03:53.230 There's very little to say about this region because it is pretty much a 62 00:03:53.230 --> 00:03:55.330 catchall between LEO and GEO, 63 00:03:55.780 --> 00:04:00.400 and does not have any real distinguishable properties. Obviously, 64 00:04:00.790 --> 00:04:02.620 the further away from Earth a satellite is, 65 00:04:02.830 --> 00:04:06.700 the better its view of our planet becomes. At 36,000km, 66 00:04:06.700 --> 00:04:09.850 a GEO satellite has a broad view of the Earth, 67 00:04:10.570 --> 00:04:14.380 while at under 2000km, a LEO satellite has a very limited 68 00:04:14.380 --> 00:04:19.090 view. So, for example, a well-placed GEO communication satellite can, 69 00:04:19.090 --> 00:04:23.320 in theory, broadcast over North America and South America at the same time, 70 00:04:23.890 --> 00:04:27.730 which would be impossible for a LEO satellite. GEO satellites, however, 71 00:04:27.820 --> 00:04:31.000 are very expensive. Including launch, 72 00:04:31.000 --> 00:04:34.420 a GEO satellite can cost upwards of $500 million. 73 00:04:35.020 --> 00:04:38.770 This means that it usually takes 10 years for a fixed satellite operator to 74 00:04:38.770 --> 00:04:43.300 recover their costs, which is why they're built to last 15 years on average. 75 00:04:44.440 --> 00:04:48.850 As a result, GEO satellites are contracted for their entire fifteen-year life. 76 00:04:49.990 --> 00:04:52.270 When one of these satellites approaches the end of its life, 77 00:04:52.780 --> 00:04:56.200 contracts are renegotiated, and a new satellite is ordered to replace it. 78 00:04:57.280 --> 00:05:01.780 This entails that fixed satellite operator revenues and expenses are, 79 00:05:02.110 --> 00:05:06.490 or at least were, very predictable. However, along the way, 80 00:05:06.490 --> 00:05:10.030 something happened. Households found new ways to watch TV. 81 00:05:10.510 --> 00:05:12.670 This led to cable and satellite TV cutting, 82 00:05:13.030 --> 00:05:16.840 which in turn has destabilized the fixed satellite operator's business model. To 83 00:05:16.840 --> 00:05:21.160 make things worse, satellite constellations are also becoming more feasible. 84 00:05:21.370 --> 00:05:22.203 Now, simply put, 85 00:05:22.390 --> 00:05:25.990 a satellite constellation is a number of satellites working together to maintain 86 00:05:25.990 --> 00:05:27.970 complete coverage of the Earth's surface. 87 00:05:28.240 --> 00:05:31.120 The number of satellites required to do this depends on the constellation 88 00:05:31.120 --> 00:05:33.610 altitude. Because of their higher altitude, 89 00:05:34.120 --> 00:05:38.560 a minimum of three GEO satellites are required to maintain complete coverage. 90 00:05:39.520 --> 00:05:43.210 Obviously, the lower the altitude, the more satellites are required. 91 00:05:44.020 --> 00:05:45.070 In the 1990s, 92 00:05:45.130 --> 00:05:49.690 a number of satellite constellations like Iridium and Globalstar raised billions 93 00:05:49.690 --> 00:05:52.720 of dollars to launch hundreds of satellite in orbit. Sadly, 94 00:05:52.720 --> 00:05:57.380 these constellations went bankrupt because of one fundamental error-they 95 00:05:57.380 --> 00:06:02.270 all grossly overestimated the demand for satellite communication. Yet, 96 00:06:02.660 --> 00:06:03.860 despite these failures, 97 00:06:04.130 --> 00:06:07.580 it appears again as though a new generation of startups wants to relive the 98 00:06:07.580 --> 00:06:10.160 errors of the past. At last count, 99 00:06:10.250 --> 00:06:14.120 there are close to ten proposed constellations vying to be the first to offer 100 00:06:14.120 --> 00:06:17.360 broadband internet to the world. For example, 101 00:06:17.750 --> 00:06:22.700 Starlink has committed $10 billion to launch a constellation of 12,000 102 00:06:22.700 --> 00:06:23.533 satellites, 103 00:06:23.810 --> 00:06:28.160 and Telesat has committed $5 billion to launch their very own constellation of 104 00:06:28.160 --> 00:06:32.900 300 satellites. Now, if there is one thing that investors should recognize, 105 00:06:33.260 --> 00:06:35.150 is that markets hate uncertainty, 106 00:06:35.810 --> 00:06:39.170 and I think no one can argue that there is not a lot of uncertainty in the 107 00:06:39.170 --> 00:06:42.260 commercial space sector at this time. However, 108 00:06:42.590 --> 00:06:46.340 investors should also recognize that with uncertainty comes a potential for 109 00:06:46.340 --> 00:06:49.790 outsized returns. The way I look at it right now, 110 00:06:50.240 --> 00:06:53.600 fixed satellite service operators are caught in a perfect storm between 111 00:06:53.600 --> 00:06:57.110 cord-cutting and constellation euphoria. For one thing, though, 112 00:06:57.530 --> 00:06:59.960 despite the cord-cutting phenomenon in North America, 113 00:07:00.380 --> 00:07:02.780 other parts of the globe are still relying on satellites. 114 00:07:03.440 --> 00:07:07.640 Countries that did not take part in copper cable and fiber optic cable laying 115 00:07:07.640 --> 00:07:11.420 over the last half-century are now trying to catch up to their growing need for 116 00:07:11.420 --> 00:07:16.130 communications. GEO satellites are still a very viable option for these 117 00:07:16.130 --> 00:07:20.180 countries and have therefore been a focus of fixed satellite operators for the 118 00:07:20.180 --> 00:07:21.050 last decades. 119 00:07:21.440 --> 00:07:24.620 Fixed-satellite operators have also responded to cord-cutting by launching 120 00:07:24.620 --> 00:07:27.560 satellites designed to meet our increased need for broadband. 121 00:07:28.400 --> 00:07:31.880 And this is where I think it gets fascinating because outside of Telesat, 122 00:07:32.450 --> 00:07:36.560 not one fixed satellite operator has jumped on the LEO Constellation bandwagon. 123 00:07:37.280 --> 00:07:38.960 So just like in the 1990s, 124 00:07:39.260 --> 00:07:43.310 the one industry that really should be driving this new initiative has decided 125 00:07:43.310 --> 00:07:46.490 to stay on the sidelines. Other than space being fascinating, 126 00:07:46.760 --> 00:07:50.030 given what is taking place in the industry in terms of advancements, 127 00:07:50.030 --> 00:07:52.130 our constantly growing need for communication, 128 00:07:52.610 --> 00:07:56.360 and a somewhat outdated business model of fixed satellite operators being pitted 129 00:07:56.360 --> 00:07:59.630 against a renewed interest for commercial satellite constellation, 130 00:08:00.350 --> 00:08:05.030 I hope that I was able to convince you of why space is a worthy consideration 131 00:08:05.030 --> 00:08:07.610 from an investment standpoint. Thank you.