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Dan Friedmann, president and chief executive officer of MDA (LAURA LEYSHON FOR THE GLOBE AND MAIL/LAURA LEYSHON FOR THE GLOBE AND MAIL)
Dan Friedmann, president and chief executive officer of MDA (LAURA LEYSHON FOR THE GLOBE AND MAIL/LAURA LEYSHON FOR THE GLOBE AND MAIL)

Report on Business

For MDA, space pays Add to ...

In his cramped office, Daniel Friedmann spends a lot of time working on gas stations in space.

The CEO of MacDonald Dettwiler and Associates Ltd. wants to build the high-tech equivalent of a service station, load it up with fuel and spare parts, and launch it into orbit to come to the aid of aging satellites.

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It's an audacious idea that has the potential to revolutionize the space industry by allowing companies to squeeze extra years of life out of hugely expensive satellites. The bold concept is even more remarkable considering that just two years ago MDA was trying to get out of the space business.

In 2008, Mr. Friedmann struck a deal to sell MDA's space division to a U.S. firm. Ottawa, fearing a loss of sovereignty, spiked the sale. He still maintains the sale would have been the best deal for shareholders, but he quickly accepted the government's decision. "I just got on with life," he said.

In fact, he did far better than that. The veto turned out to be the boost that MDA's space business needed. Following the decision, Ottawa began to provide more support to space-related projects while MDA searched for ways to break into new markets.

It has scored a string of successes. Among the company's new projects is a satellite for Ukraine and unmanned surveillance planes for the Canadian military in Afghanistan. What really gets Mr. Friedmann excited, though, is the idea of building refuelling stations for satellites, a business that could deliver a revenue boost of $100-million a year to MDA.

"This is the last human infrastructure that has no service industry," Mr. Friedmann said in a rare interview at the company's spartan suburban Vancouver headquarters. Satellites provide vital services, from broadcasting television signals to providing online maps, but there is, as yet, no way to repair the orbiting devices, which cost hundreds of millions of dollars. "It's like getting some potholes in the road and abandoning the road."

If MDA succeeds in fixing those potholes, it will prove that a small Canadian firm can blaze a pioneering path in space, against competition from much larger rivals. In an unusual display of confidence, MDA told a major industry conference in March in Dubai that it wants to demonstrate the refuelling technology in space in 2013 and commence a commercial service immediately thereafter.

"It's real daring," said Peter de Selding of the industry journal Space News. "It does sound like they've got something, like they've gone further than anybody else. But things that take a lot of guts can fail as well. That's why they call it daring."





An earthbound direction

Confronted with an obstacle, Mr. Friedmann finds a way around it. Back in 1979, fresh out of the University of British Columbia with a master's degree in engineering physics, he interviewed for a job with MDA. He was rejected. He pestered the firm for another interview. He struck out again. Finally, desperate, he wrote a letter to John MacDonald, the company's co-founder. Impressed with Mr. Friedmann's academic work, Mr. MacDonald told the head of engineering to hire the 22-year-old kid.

"I think they may have been a little afraid of Dan," laughs Mr. MacDonald, who stepped down as MDA chairman in 1998. "He's got a mind like a steel trap. And he has a business mind - it's intuitive, he doesn't have to puzzle, he just knows what to do."

The company, described in an online job forum as an "interesting, challenging, low-paying" place to work, reflects Mr. Friedmann's austere style. He works in a modest office, a smidgen smaller, by design, than everyone else's. Around him is a rabbit warren of other offices, where engineers toil on space robotics and satellite projects. The few frills seem out of place. A volleyball net sags, unused, in a grassy courtyard; a lone foosball table sits idle in a drab cafeteria.

When it comes to compensation, Mr. Friedmann leads by example: His base salary has remained fixed at $435,000 during the past six years.

"It's the way it should be," he said in his first in-depth interview in almost a decade. "Our customers don't want to walk into the Taj Mahal - and our investors don't want to pay executives ridiculously. I'm pretty serious about treating the company's money as if it was my money."

MDA began life in 1969 as an electronics company that specialized in processing information relayed from space satellites. When Mr. Friedmann became CEO of MDA in 1995, he told Mr. MacDonald his goal was to drive the company to $1-billion in annual revenue, a tenfold increase from the $100-million or so it was doing at the time.

Mr. Friedmann knew that MDA needed something more than the space business to reach that goal. So he turned his sights to earth.

Building on the company's expertise in developing advanced software applications, Mr. Friedmann scored a deal to take over BC Online, a system previously run by the British Columbia government, which provided data such as land titles and property information. Other acquisitions followed. While the space business had once been MDA's jet fuel, the earthbound business of delivering property information quickly became the firm's primary propellant - and, just as Mr. Friedmann promised, sales hit $1-billion in 2006.

Meanwhile, after years of rapid growth, MDA's space business sputtered earlier this decade. The primary culprit was Ottawa's tight-fisted approach to space. In an industry where most participants depend heavily upon government projects and contracts are usually doled out on nationalistic grounds, government spending is crucial.

Seeing no great upside in the business without additional spending from Ottawa, Mr. Friedmann decided in 2008 to sell the space division to Alliant Techsystems Inc. of Minnesota for $1.3-billion.

That's when Ottawa stepped in. MDA owned Radarsat-2, a surveillance satellite built for $600-million, mostly with funds provided by the federal government. Selling its space division would mean handing ownership of Radarsat-2 to a U.S. firm. Prime Minister Stephen Harper feared a gaping hole in Canadian sovereignty if the country lost its prime surveillance vehicle for regions such as the Arctic, and he blocked the deal.

Implicit in the blocked sale was a promise by Ottawa to put more dollars into space projects. The money quickly began to flow. MDA won a deal to provide unmanned aerial vehicles to the Canadian military in Afghanistan, a victory the company then repeated with the Royal Australian Air Force.

This year, Ottawa backed Radarsat Constellation, the successor to Radarsat-2, bolstering the proposed $870-million project by putting $400-million of new cash into it. MDA is the lead designer.

Ottawa is helping in other ways too. Late last year, Export Development Canada, a financing arm of the federal government, provided a $254-million (U.S.) loan to the Ukraine government so it could buy a communications satellite from MDA. The loan was essential for MDA to beat out Thales, a much-larger French rival, and the deal was made official Friday.

As a result of the new government support as well as its own initiatives, MDA is punching well above its weight. "Size-wise, MDA's going up against juggernauts [like]Boeing, Lockheed," said Steven Li, an analyst with Raymond James. "They're winning more than their fair share, for the size of the company."

A complex operation

Mr. Friedmann wants even more, especially in space. "The Canadian space budget is the PR budget of NASA," he said. "We have no long-term space plan. China's going to space, India's going to space. It's where the action is, where new stuff gets developed, unless you want to be a military power. Every day we're slipping back."

A gas station in space would give MDA a cornerstone business, with revenues that would recur year after year, no matter who is in power in Ottawa.

The concept sounds simple. A satellite holds a constant orbit around Earth by firing a booster rocket to adjust its course, using a propellant called hydrazine. Once the hydrazine is gone, even if everything else is still working, the satellite's useful life is finished. But if MDA can design and launch a refuelling station, the life of the satellite could be extended, perhaps by years.

To actually do the refuelling, though, requires feats of technology. Picture a satellite hurtling through space at 11,000 kilometres an hour. The gas station would have to spot it, manoeuvre alongside, and connect to it by a probe or robotic arm. Then the robotic arm would have to open up the fuel valve to pump in hydrazine - that is, presuming the door isn't seared shut after a decade or more in space.

"It's a complex operation," Mr. Friedmann said. "It's not welding car doors."

Refuelling a satellite in space has been done only twice before, in tightly controlled experiments, both times using new satellites launched as part of the test, not ones that had spent years in orbit. The Japanese space agency accomplished a space refuelling in the late 1990s. In 2007, the Pentagon hired Boeing Co. - with MDA aboard as a subcontractor -and repeated the deed.

No one has ever captured a satellite already in orbit. Assuming it is technically possible, the next question is whether it is economically attractive. The possibility of a collision between the refuelling station and a satellite could wipe out any potential profits. Then there's the broader question of whether it's worth refuelling old satellites, given the possibility that other equipment might fail a year or two later.

"Satellite servicing is very much one of a kind," said Dominique Rora, a senior space underwriter at Axa Corporate Solutions, a specialty insurer in Paris. "We are all very much interested." But he cautions that making the technology work will require deep pockets and persistence.

MDA's great advantage is its mix of proven technologies. In addition to its long experience with satellites, it owns the robotics technology made famous in the Canadarm, as well as systems that allow a mobile service station to track and approach a target satellite. Putting these pieces together in a full satellite-servicing system is the trick.

According to analyst Paul Steep of Scotia Capital, MDA will soon make a decision on whether to proceed with the project. What it needs is a lead customer, probably in the communications satellite business, to help back the costs of a first mission. The all-in bill is likely to be several hundred million dollars.

One encouraging sign for the project is the frequent and enthusiastic mentions it earns from the normally reserved Mr. Friedmann. "It's a project that if you don't have a good shot, you probably don't talk about it," said Mr. Li, of Raymond James. "The fact Dan does talk about it, and spends a lot of time on it, tells me it's moving forward."

MDA will have to move quickly if it wants to stay ahead of state-backed competitors. Earlier this year, the German space agency awarded contracts to companies led by OHB Technology AG for preliminary work on a project similar to MDA's, with an estimated cost of about $260-million.

MDA hasn't yet talked about how much it might spend. Without any backing from the Canadian government - though using technology developed with government support - it would be the first public company to ever embark on such an ambitious mission.

For Mr. Friedmann, limited government support is just one more obstacle to overcome. Two years after being rejected in his bid to exit the space business, he is embracing its new possibilities. "Having had [the sale] blocked, my job is to do the best within the constraints - and we've done a good job of that."







A space service manual



Refuelling satellites already in orbit could extend their working lives by years. Here are the key numbers on MDA's proposal for service stations in space:



20 minutes



Estimated time the docking manoeuvre would take a communications satellite out of service.



1,500



Amount, in kilograms, of hydrazine that the system might carry, enough to provide five years worth of fuel to 10 satellites.



$16-billion



Estimated replacement cost of 65 satellites that ran out of fuel or failed in the past decade.



$36-billion



Cost to replace 136 satellites that are expected to be decommissioned early, from 2012-20, mostly because they run out of fuel.

Sources: MDA, Boeing Co. Note: artist’s impression of MDA satellite-service station concept is based on Boeing orbital express mission from 2007 on which MDA worked.



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