Enfoques del riesgo.

CybAero is currently involved in business discussions in more than 10 countries on most continents. The discussions range from contracts over one or two systems for smaller applications up to several hundred systems in national programs. The majority concern civil service or commercial use, while a few involve military end use.

US Department of State (DoS)

During 2007, CybAero established a subsidiary in the US in order to coordinate a contract to be closed with the US Naval Research Laboratory, which was however laid down to focus on the development of the APID 60 during 2010. In 2012, the US became however extremely relevant again for CybAero since the US DoS posted a tender for the delivery of contractor- operated UAV systems amounting to around 1 bnUSD over a period of 5 years. The tender covered a mix of fixed wing and VTOL systems, mainly to be used in the context of securing US embassies around the world. In order to take part in the tender, CybAero started a formal cooperation with its current partner AeroVironment, which also should benefit the US-based company since they had been specialized on fixed wing UAVs before, where they are a US market leader as described earlier. During mid-2013, the US DoS however decided to cancel the tender since none of the bidding companies were able to entirely fulfill all specifications from the request. The agency has shortly after expressed its intent to reconsider its

requirements and to release a new request for proposal. In the two years since then, no news have however been released regarding the status of a potential new tender of this major contract. While it is likely that the DoS still has a need for these solutions, the cancelation of the tender and the long period of silence are somewhat strange. We therefore do not expect that the US DoS will become a major customer to CybAero during the foreseeable future. CybAero originally expected to hear news from the DoS the latest at the end of 2014, but a planned meeting with partner

AeroVironment during the next months might bring new insights into the matter.

UAE Armed Forces

The UAE is another example of an idle customer relationship, although in this case a contract had been signed. Already back in 2004, the UAE armed forces ordered 6 helicopter systems for surveillance tasks, at that time the APID 55, worth around 35 mSEK. Originally planned for the end of 2007, the production and delivery of the units however got delayed further and further. This was due to challenges to adapt the system for the harsh conditions in the desert. After some years, the contract has been declared idle and CybAero is in sporadic contact with the customer, expecting to sign a renewed contract once the discussions become more serious again. What is known about the customer is that they have bought a bigger number of systems from Schiebel in 2006, but seemed not entirely satisfied. Therefore, they only operate a fraction of the systems as of today, while they

The US DoS is a major potential client, but the earlier tender was canceled – with no news since then

CybAero received an order from the UAE in 2004 – but it remains idle until today

theoretically have a need for a much higher number of systems to be in service. This makes it possible that they still want to buy a number of systems from CybAero or another similar provider in the future. For CybAero, this raises three key questions. Firstly, whether the UAE would in such case insist on the fulfillment of the contract at the old conditions or whether a renewed contract would be closed, covering the delivery of systems based on the current product range and pricing. While the first scenario would lead to a legal dispute, the firm does not see this as a major risk. In our overview of prospects later, we therefore estimate the order size to be more in the area of 100 mSEK rather than the 30 mSEK from over a decade ago. The second question in connection is that of timing, meaning when the customer might want to renew its order. Currently, there are no indications for renewed discussions. Thirdly, it also has to be noted that the customer is a military organization, which needs to be kept in mind

regarding a potential ISP approval. As a result of the situation described, we do not expect that the UAE military will become a major customer to CybAero in the foreseeable future – at the same time, it might still be possible that the order gets renewed.

Indian Navy

The Indian Navy published an RFI in Q1 2015 for 50 vessel-based UAV systems with a potential order volume of around 1 bnSEK. As can be seen from the earlier description of the sales process, an RFI means that the customer has identified a need for the systems and likely has an initial budget on the way for it, and now wants to identify relevant vendors and initiate pre-sales discussions with them. It is likely that CybAero as well as a number of other competitors have responded to the tender, and it will be interesting to follow the further development. Saab has partnered with Indian business magnate Anil Ambani’s Reliance Group to place their bid. Given the stage of the process, the expected time to order could be up to two years.

Korean Navy

Another sales prospect in the pipeline is the Korean Navy. They have identified a need for 4 RPAS and agreed on a budget of around 100 mSEK, for which an RFQ has been published. The customer already owns a number of Schiebel systems, and it is therefore similar as in the case of the Chinese customs agency interesting to see that they are open to new

suppliers. At the same time, this tender process is a rather complex one as it has been redone 3 times since negotiations with the shortlisted supplier have not lead to a contract closure. CybAero and, according to their knowledge, both Schiebel and Airbus have replied to the most recent RFQ with their binding offers for the delivery of the systems. The firm expects that the result from the RFQ will be known in around 6 months, after which a final negotiation with the selected vendor(s) of another 6 months or so will follow. This means if the firm is selected as a vendor in the coming months, an order might be placed within around one year.

The following table summarizes the key sales prospects and their potential impact and likelihood for CybAero.

Both impact and likelihood are rather subjective and non-academic assessments, since a reliable prediction of the contract volume and

CybAero’s potential to win it is almost impossible from the outside. The US and India contracts are so big that they would generate significant revenues for CybAero, similar to the AVIC order. In the case of the idle UAE order, the individual order itself is not very big, but the customer has likely a need for an additional number of units after that which make the customer itself an extremely valuable prospect. For an explanation of how these prospects are included in the revenue forecast, please refer to the next chapter.

It should be noted that this is not a comprehensive list, meaning that there are always a number of other prospects around in different stages. One such example is the collaboration with AeroVironment, the firm’s partner on the US market. The US DoS is not the only sales prospect in this relationship - AeroVironment has an ongoing dialogue with a number of other UAV buyers who could be potential customers of CybAero’s VTOL systems, both in the US and other NATO countries. The partnership with AeroVironment is exclusive in the US, but not in the other countries. Additional tenders for RPAS are opening around the world, and especially also in the ASEAN region. An additional opportunity is that existing customer AVIC might place orders for additional systems above the currently signed “minimum” of 70 units, given that they are satisfied with the outcome of the first call-off orders and deliveries. The demand on the side of their customer base for such systems seems to be existing.