Taxpayers have shelled out to buy Caledonian MacBrayne’s largest ferry for an undisclosed amount from bankers.
Ferry and ports owner Caledonian Maritime Assets Limited (CMAL) has acquired the MV Loch Seaforth, which sails between Ullapool in Wester Ross and Stornoway on Lewis, from Lloyds Banking Group for an undisclosed amount.
The bank controversially financed the building of the ferry and leased it to CMAL, which is Scottish government-owned, for the past five years.
Under the initial deal, the ferry service to the Western Isles would have cost taxpayers at least £67 million by 2022 - but the bankers would still own the passenger ship.
Transport chiefs at first kept details of the taxpayer-funded lease deal secret.
But last year it emerged that the eight-year lease will cost around £36 million, on top of £31 million spent on upgrading harbours to accommodate the boat.
The government said today that the purchase of the lease would save public money in the long-term.
It also follows in the wake of shipbuilder Ferguson Marine being nationalised after administrators rejected three commercial bids.
The Scottish government, which is operating the firm under a management agreement, is now set to take formal ownership of the yard. Nearly £50m of taxpayer loans to Ferguson Marine have been written off.
Read more: Call for probe into CalMac ferries contracts
Ferguson went into administration following a dispute with CMAL over the construction of two £97m ferries.
Operated by Caledonian MacBrayne, the 116m-long (380ft) Loch Seaforth can carry up to 143 cars as well as 700 passengers.
Built in Germany at a cost of £42m, the ferry has been in service since 2015 and is the largest and fastest in CMAL’s fleet.
Islands Minister Paul Wheelhouse welcomed the acquisition of the Loch Seaforth.
He said the move would bring “considerable financial benefits” by delivering savings to taxpayers over the long-term when compared with a more expensive leasing arrangement.
Mr Wheelhouse, said: “Our ferry services are iconic transport links that play a vital role for our island economies, so it’s very important that we secure the MV Loch Seaforth for the future of the Clyde and Hebrides network. This vessel is the fastest major vessel in our fleet and has proved itself both highly reliable and a real workhorse, in carrying a very substantial number of passengers and a tremendous volume of freight annually since it entered service.
“Purchasing the Loch Seaforth outright will also bring considerable financial benefits by delivering savings to the public purse over the longer term when compared with a more expensive leasing arrangement.
Read more: Public owed £50m by collapsed Clyde shipyard
“Making sure these lifeline transport links continue to support the communities and businesses they serve, such as for the Outer Hebrides, remains at the very heart of our ferry operations. Therefore, I am very pleased that this transaction secures this crucial vessel for the future and in a way that will deliver best value for taxpayer’s money.”
When plans for a replacement vessel were approved by the Scottish Government in 2011, CMAL sought proposals for funding in the form of lease options from banks and other financial institutions to finance procurement of the vessel. Following a tender process governed by EU procurement rules, Lloyds Banking Group was appointed to provide the operating lease.
Kevin Hobbs, chief executive of CMAL said: “This deal makes MV Loch Seaforth a permanent part of our fleet and secures the long-term future of the vessel for the Western Isles. When launched, she was a welcome addition to the fleet, adding much-needed capacity and strengthening service resilience. I’m sure island communities will welcome the news that we have secured the vessel for lifeline ferry services.”
Read more: Ferry giant urged to act to ease island crisis
The deal struck with Lloyds did not allow CalMac to buy the vessel in 2022 and it was understood the terms of the contract also mean the ship has to be returned “as new”.
This meant that in less than three years’ time the ferry operator will need to negotiate a new lease or find a replacement vessel for the Stornoway to Ullapool route.
The MV Loch Seaforth last year broke down halfway to Stornoway, leaving 343 passengers and crew stranded for hours before power was partially restored.
Islanders say their requests for a two-ferry service were ignored as a single, privately-financed ferry was ordered.
CMAL is owned by the Scottish Government and in turn leases the vessel to publicly-owned operator CalMac.
The body has always cited “commercial confidentiality” for not revealing the full cost of the Seaforth deal.
Shipping specialist Professor Alf Baird, a serving member of the Scottish Government’s expert ferry group, said last year: “We seem incapable of making sensible decisions when it comes to the public procurement of ferries in this country.
“The Seaforth deal stands out because of all the upfront harbour costs you had but also the expensive way to access the finance and the fact they don’t currently have the option to buy the vessel at the end of the lease.
“I have likened this to a Private Finance Initiative deal as it seems it is the banks who do the best out of it and it all talks to a wider problem - our ferries are run more like a government department than a shipping company and the inefficiencies of this are clear for everyone to see.”
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