OneWeb

Lord Callanan Excerpts

Wednesday 8th July 2020 Lords Chamber

[Lord Bowness]

To ask Her Majesty’s Government, further to the announcement on 3 July that they will (1) invest $500 million, and (2) take an equity share, in OneWeb, what safeguards are in their agreement with OneWeb to ensure that other shareholders and investors in that company are not hostile to the interests of the United Kingdom.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, the investment in OneWeb is still subject to US court approval and regulatory clearances. The Government undertook appropriate due diligence. We will continue to ensure that this ambitious acquisition safeguards the UK’s interests and maximises future opportunities for this innovative technology. The Government have a special share that provides them with the final say over any future sale of the company and over future access to OneWeb technology by other countries on national security grounds.

[Lord Bowness (Con) [V]]

I thank the Minister for his Answer. As I understand it, we are buying a share in a bankrupt British company whose manufacturing and assets base is in the United States under an agreement yet to be approved by a foreign court, i.e. one in New York state. Can the Minister specify the share that we are buying, tell us who the other parties are, and how the capabilities of the satellites which we propose to acquire compare with the US GPS and EU Galileo? Will there need to be much more expenditure to bring this acquisition and its assets up to that standard?

[Lord Callanan]

The Government will invest $500 million, on an equal basis with Bharti Global Ltd. As part of the agreement, a small equity stake will be held by existing OneWeb creditors. This is not specifically designed for global national positioning systems; these satellites operate in a lower orbit for a number of missions, but primarily for earth observations and tele-communications.

[The Deputy Speaker (Lord Alderdice) (LD)]

I understand that the noble Lord, Lord Willetts, is not with us, so I call the noble Lord, Lord Birt.

[Lord Birt (CB) [V]]

My Lords, I declare an interest as a former member of the board of Eutelsat. LEO is potentially a breakthrough technology, but it is also very high risk, as the collapse of OneWeb so vividly demonstrates. What scale of investment will be needed to build out a commercially viable constellation? How will that investment be funded, whether by debt or equity?

[Lord Callanan]

Given the commercial considerations, at the time I am unable to provide further detail on our ongoing discussions. However, we will have strong representation on the board, we will be fully involved in setting the strategic direction of the business, and we will of course be discussing the future of the business and the merits of bringing in additional shareholders with our partners in due course.

[Lord West of Spithead (Lab) [V]]

My Lords, I am convinced that we should capitalise on our world-leading satellite capability and, if possible, expand it. Although there are risks, putting Galileo in the shade would be very good news, and I congratulate the Government on this vision, albeit that it is high-risk. As we move on from the impact of Wuhan virus and Brexit, does the Minister agree that we must grasp the new technologies of AI, quantum engineering, the internet of things, big data et cetera, and that it is a disgrace that a country with the scientific capability of the UK does not have an equivalent of Silicon Valley? In 1946, it was decided that for national security we should develop an atom bomb. The cost was huge. Does the Minister agree that for reasons of national security, we should generate an equivalent of Silicon Valley and an ability to create a world-beating, resilient telecommunications network, even if the cost is huge, and, ditto, civil nuclear power?

[Lord Callanan]

The noble Lord asks a lot of questions and there is not time to address all of them. We are investing in this as a one-off strategic opportunity to own a satellite communications network, working with Bharti Global Ltd, and to support our ambition for the UK to be a pioneer of novel satellite technologies. We are delighted that our bid was successful.

[Lord Fox (LD) [V]]

As recently as last year, OneWeb raised $1.25 billion, then in March of this year, having launched only a fraction of the satellites that it needs, it filed for bankruptcy protection. Clearly, the American market was not prepared to back it any more. For now, the UK Government, along with Indian tycoon Sunil Bharti Mittal, have committed a further billion dollars. On recent experience, that will last about nine months. How much more will it cost the British taxpayer before the Minister and his colleagues realise that this is not a good investment?

[Lord Callanan]

As I have said, given commercial considerations, I am unable to provide further detail on ongoing discussions, but we will be discussing the future funding of the business, and the merits of bringing in additional shareholders, with our partners in due course.

[Baroness Falkner of Margravine (Non-Afl) [V]]

My Lords, I welcome the Government’s stake in OneWeb. It will help deliver high-speed broadband in the UK and the rest of the world. On the issue of risk, does the Minister agree that anyone setting up frontier firms knows that there is no gain without risk?

Turning to the golden share, the Minister said that national security was the consideration. What about a company’s record on theft of intellectual property, abuse of the workforce through modern slavery and other anti-competitive practices? Will they also be taken into account?

[Lord Callanan]

We will use our golden share to full advantage for the British taxpayer. We will take all those considerations into account, but primarily national security.

[Baroness Altmann (Con) [V]]

My Lords, what engagement have the Government had with the astronomy community in the light of OneWeb’s application to launch up to 42,000 new satellites into low-earth orbit and the disruptive reflections that have caused such concern among the astronomy community? Are the Government looking to introduce anti-reflective coatings such as DarkSat or VisorSat, which have been employed by SpaceX?

[Lord Callanan]

As the noble Baroness recognises in her question, this is novel, cutting-edge satellite technology which we are investing in as part of our focused research and innovation in the UK. We want to become a world leader in the space sector, and this provides us with suitable strategic geopolitical opportunities to do so.

[Lord Kilclooney (CB)]

My Lords, who are the other shareholders in OneWeb? What percentage does each shareholder have? Can the Minister confirm that this investment would not have taken place if we had not left the European Union?

[Lord Callanan]

Our membership or otherwise of the European Union is not relevant to this discussion. The other shareholders are, as I said, Bharti Global Ltd and some small shareholders. We have an equal shareholding with Bharti Global Ltd and a small shareholding is held by existing OneWeb creditors.

[Lord Stevenson of Balmacara (Lab) [V]]

My Lords, this is a very intriguing initiative, although a lot of the details remain opaque. Can the Minister confirm whether the Government intend to transfer some or all of the satellite manufacturing, which is currently based in the USA, to the UK? If so, how many jobs would that generate?

[Lord Callanan]

The noble Lord asks a very good question. Through this investment we will look to leverage our influence to set the strategic direction of the business, and of course we want to see direct manufacturing the UK by both the company and its supply chain expanded.

[Baroness Kramer (LD) [V]]

My Lords, numerous genuinely UK companies that are cutting-edge frontier businesses and high risk would welcome a $500 million investment from the UK Government. They have typically managed their businesses far better than OneWeb, which, as the Minister said, managed to put itself into bankruptcy. Where do they apply for the money?

[Lord Callanan]

This is, as I said, a one-off investment in a cutting-edge satellite technology company which has many applications that the UK can leverage, including defence applications and providing communications, resilience and remote operations where services are currently limited.

[Lord Razzall (LD) [V]]

My Lords, following up the question by my noble friend Lord Fox, are the Government not concerned that the American technological market, which undoubtedly loves these sorts of investments, was not prepared to put in the money and so the company was forced into Chapter 11 bankruptcy? Do the Government accept that very significant further investment will be required to get this off the ground? Are the Government prepared to do that—and, if so, for how much?

--- Later in debate ---

[Lord Callanan]

The noble Lord can be assured that appropriate due diligence was carried out, which showed that this investment will be commercially sound and is likely to make an economic return. As I said in response to earlier questions, we will of course discuss with existing partners and shareholders any new funding requirements for the business.