Yard snub over £61m demand to complete ferry contract

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By Hugh Boag

The Clyde shipyard where the new Arran ferry is being built this week claimed they need another £61 million to complete the work, but it seems unlikely they will get it.

Ferguson Marine (FMEL) and state-owned Caledonian Maritime Assets Ltd (CMAL) are involved in a bitter legal battle over the cost to complete the MV Glen Sannox and her yet unnamed sister ship at the Port Glasgow yard.

However, CMAL told the Banner they had already ruled out a compensation claim and again accused the yard of a ‘lower level of work than expected at this stage’ on the ferries.

It now seems unlikely that the Glen Sannox will be complete before the summer of 2020 and would then require at least two months of sea trials.

Owner Jim McColl, who is one of Scotland’s leading businessmen, has this week accused CMAL of failing to discuss seriously the yard’s demand for more than £61m in extra costs to be added to its £97m contract to build two ferries.

Mr McColl told the Financial Times that, if the money was not paid, the consequences would be disastrous for the yard, which has enjoyed a dramatic revival since Clyde Blowers rescued it from administration in 2014. ‘Our investment would be wiped out. The government’s loans would be wiped out. It would be a huge waste. ‘Someone would have to come in and try and get as much money back for the creditors that they could,’ he added.

Mr McColl warned that, should the £61m claim remain unpaid, the yard would not be able to finish the two ferries — and this would mean higher costs for CMAL. ‘It would [cost] a lot more to take those ferries and get them to completion than they would have to pay to settle a claim,’ he said.

There have been suggestions that there have been behind-the-scenes moves to have the ferries completed elsewhere, with Poland being considered a possible option.

The MV Glen Sannox was intended to go into service on the Ardrossan to Brodick route in 2018, but is now not expected to be ready until the middle of 2020 at the earliest, and that is before sea trials. The second vessel, known as Hull 802, is to serve the Uig Triangle, but remains under construction on a Ferguson slipway.

The vessels were ordered under a fixed-price design-and-build contract. But Mr McColl blamed the delays and increased costs on substantial late changes by CMAL to the ferries original specifications.

Kevin Hobbs, CMAL chief executive, said in March that the dispute was ‘sad and distressing’, but not the state company’s fault. ‘[Ferguson Marine] knew the requirements and what we needed from the vessels, their speed, capacity, dimensions … none of those have changed,’ Mr Hobbs told the magazine of the Institute of Directors Scotland.

A spokeswoman for CMAL said: ‘FMEL submitted a claim in December 2018. Our legal team analysed the claim and concluded that it does not contain valid grounds for compensation.  We provided an official response to FMEL in early March 2019.

‘Work continues on the vessels, but at a lower level than expected at this stage.  We do not believe that the current delivery date for MV Glen Sannox can be achieved.  We have not received an updated timeline from the shipyard.’

FMEL provided a timeline in June 2018 which included a revised delivery date of summer 2019 for MV Glen Sannox, and spring 2020 for Hull 802.

Much is likely now to depend on the next steps by the Scottish government, which has lent Ferguson Marine £15m for working capital and £30m for business development.

A Scottish government spokesman told the Banner: ‘An independent view of the legal merits of the claim submitted by FMEL has been carried out for the Scottish government. We have advised the interested parties of the outcome but, in keeping with normal practice, this opinion will not be shared further.

‘The next steps in this process are currently being finalised and we will update parliament in due course.’