Extracted from the Scottish Executive Website

Vital lifeline ferry services to Orkney and Shetland are to be secured through early retendering of the contract for the Northern Isles routes, it was announced today.

Transport Minister Nicol Stephen said that the decision to retender had been taken following financial difficulties faced by the operator NorthLink. Scottish Ministers and NorthLink have agreed new financial arrangements and early retendering to ensure the long term security of these important transport links.

Mr Stephen said:

“These are vital lifeline ferry services which are crucial to the prosperity and wellbeing of the Northern Isles and their communities. The steps we have taken today will secure these ferry services for the long term and ensure there will be no disruptions during the retendering process.

“The decision to retender early was taken following advice from NorthLink that they were unlikely to be able to complete their existing contract on current terms. We have since held detailed discussions with the company on the funding necessary to secure these important services in the meantime.”

“The specification for the new contract will be consulted on with the local communities and the European Commission. Subject to these consultations we intend that the contract should include freight and livestock.”

In order to secure the service, the Executive has provided an additional £13.4 million in total for the period from the start of trading to date. Future payments will be the minimum necessary based on Northlink’s trading and performance, to enable the company to continue operating services until the new contract is awarded in 2005.

An advert will shortly appear in the Official Journal of the European Union (OJEU) seeking expressions of interest for the new contract with a view to the new contract being in place as soon as possible in 2005. The specification of the new contract will be subject to local consultation and the European Commission.

NorthLink Orkney and Shetland Ferries Ltd is a joint venture between Caledonian MacBrayne and the Royal Bank of Scotland. NorthLink was awarded the five year contract in December 2000, to start in October 2002. The company receives an annual base subsidy under the EC Regulation and Guidelines for State aid in the maritime sector.

The £13.4 million includes  payments to NorthLink of around £1 million which the Executive made in 2002-03 towards costs incurred by the company as a result of the delayed completion of the new pier at Scrabster. These additional payments have been made from the Transport budget.