Page 4 - hisdeSAT Informe Anual 2019

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Dear Shareholders,

As usual, I shall start these lines about events at Hisdesat Servicios Estratégicos S.A. in 2019, with a summary of the
current situation and of management, which, if in previous years I praised with a nautical "BRAVO ZULU", for 2019
deserve even bigger applause, as it has achieved its strategic objectives as well as excellent financial results. In
large part this was due to the efforts and know-how of all those who have worked at the company in recent years.
Therefore "BRAVO ZULU" which you have worked for and deserve.

And this “job well done” has been carried out, as in the previous year, in a climate that was uncertain internationally
and unpredictable nationally. This makes the achievement even greater, although it is true that organisations
and companies that are vital to Hisdesat have continued making decisions that have helped us to achieve these
objectives and results. In sailing terms, the weather was middling, with heavy swell and gusty and shifting winds, but
despite the uncomfortable seas we have maintained very good speed towards our port, which is to provide today –
and guarantee for the future – the satellite communications and intelligence capabilities that the Ministry of Defence,
the Army and the Navy require, all with maximum effectiveness and while maintaining the company on an even keel.
Thus, in the SATCOM area, government security and defence satellite services continued to be provided to our
main clients, the Ministry of Defence and other state agencies, who have expressed their complete satisfaction
with us, something that is also true for the rest of our national and foreign clients. Regarding the new generation of
"SPAINSAT NG" satellites that will replace the current SPAINSAT and XTAR-EUR, after years of work coordinating
with the Ministry of Defence and companies in the space sector, this programme – the most ambitious and strategic
in the history of Hisdesat – has now been initiated. It will comprise two satellites placed 30° West and 29° East to
provide secure satellite communications capacity to the Ministry of Defence both nationally, and in areas of interest
and for international missions, on X-band, military Ka-band and UHF, covering command and control communications,
operations, intelligence and logistics, and linking ships, aircraft and manned or unmanned vehicles at a strategic,
operational and tactical level. Service will also be provided to other national and foreign government agencies.

The construction of SPAINSAT NG-I and NG-II was contracted on the 30th of April last year to a consortium of four
companies formed by Airbus Defence & Space Spain and France, and Thales Alenia Space in both countries. Airbus
DS Spain is the main contractor and integrator of the X-band payload, while Thales AS Spain is the main contractor
and integrator of the military and UHF Ka-band payloads. The consortium is led by Airbus DS Toulouse.
In July 2019, less than three months later, Hisdesat signed a contract with the Ministry of Defence for the use of these
satellites for a period of 15 years, which is the expected service life. The contract with the consortium was brought
forward to speed up construction and reduce the timeframe between the end of the current satellites’ service life
and the arrival of the new generation. The first satellite of the new generation has an expected on land delivery date
towards the end of 2023 or beginning of 2024, the period in which the capabilities of the former will become affected.
As before, this programme is supported by the Ministry of Industry, Trade and Tourism, which has provided it with a
preferential credit line to the tune of 750 million euros.

This programme, which is undoubtedly the most important in the history of Hisdesat, aims to cover defence
communication satellite needs until 2040. This necessitated setting the bar extremely high technically due to the
safety requirements for operating in Space, thereby optimising both the value of the satellites throughout their service
life and the invested resources. Far from looking for simple solutions, the approach was to make use of the best
and most advanced technology available – a challenge requiring high levels of technical prowess. The result is that
these will be the first satellites in the world able to cover these three bands, and the most advanced in Europe once
operational. This being the case, one must take note of the effort, perseverance, flexibility and high level of technical
and professional skill of all those involved: the Ministry of Defence, Industry and, of course, Hisdesat staff. To all of
them my congratulations and thanks; now the satellites must be built safely and on time, and up the end of last year
everything has been going according to schedule.

Bearing in mind the remaining useful life of the first generation and the delay in the start-up of the New Generation
Programme, work has been done to guarantee the continuity of services to the Ministry of Defence and other national
and foreign State agencies during this time. Hisdesat’s recommended solution is a process of extending the life of the
XTAR-EUR satellite. This so-called "Pathfinder" strategy consists of three lines of action: the purchase of the XTAR-
EUR satellite in order to have control over it, the acquisition of a Space Drone that will be placed on the satellite to
augment fuel levels, and the implementation, along with the Ministry of Defence, of an agreement that will cover the
resultant programme, which will likely be called "Blas de Lezo". In each of these three areas, steps have been taken
with different MOUs to ensure that, assuming it is considered technically feasible, this programme can be launched,
only pending guarantees of reliability for the Space Drone by its manufacturer.