The federal government’s newly formed

defence investment agency

completed its first deal on Tuesday with

Telesat Corp.

and

MDA Space Ltd.

, to equip the Canadian Armed Forces with enhanced military

satellite technologies

in the Arctic.

Through what the federal government calls a “

strategic partnership

” the initial investment of $2.92 million will go towards engineering and options analysis for its Enhanced Satellite Communications Project – Polar.

The total value of the project is estimated to reach $5 billion and will provide reliable wideband and narrowband connectivity to support domestic and continental operations

in the Arctic

.

“Here at home the Arctic is transforming at an unprecedented speed,” said national defence minister David McGuinty, during a press conference in Ottawa.

“Melting ice is opening new waters and attracting new activity, for Canada this is not a distant concern anymore, it’s a direct challenge to our sovereignty and to our security.”

Share values of Telesat, an Ottawa-based

satellite communications company

, and MDA Space, a

space technology company

based out of Brampton, Ont., surged following the announcement.

Telesat chief executive and president Dan Goldberg called Tuesday’s announcement “gamechanging” for

defence procurement and Canadian industry

.

“This is a capability that our CAF needs, that our allies need, this is something that has been identified a long time ago here in Canada as an essential capability, and in all truth has languished until now,” he said.

The federal government’s defence investment agency, established by Prime Minister Mark Carney in October, was created to streamline defence procurement processes, which face longstanding issues such as delays and bureaucratic hurdles.

Last June, Carney announced Canada would meet its two per-cent of GDP spending target under the North Atlantic Treaty Organization (NATO) this year and promises to meet the new defence pledge of five per cent by 2035.

Carney has also promised to prioritize made-in-Canada manufacturing and supply chains and to stop sending three quarters of Canada’s defence capital spending to America.

“It’s very nice to be able to have these types of announcements to demonstrate all this discussion and dialogue is actually leading to actionable activity,” said MDA Space chief executive Mike Greenley. “It shows that we really are changing in the government industry relationship, we are really doing things differently.”

The overall impact of increased defence spending has negative and positive economic implications, according to a recent report by the Royal Bank of Canada.

Positive impacts can happen through industrial development, innovation, and infrastructure channels. While negative impacts can happen from capital leakage, fiscal overspending, and the risk of diverting resources from more productive sectors of the economy.

Telesat shares were up more than 10 per cent at $44.14 in late morning trading in Toronto, while MDA shares were up about six per cent at $25.82.

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• Email: jgowling@postmedia.com