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Transport Minister Tavish Scott today gave the go ahead for NorthLink Ferries Ltd to be awarded the six year contract for the lifeline ferry services to Orkney and Shetland.

The company will take over the routes from 6 July 2006. NorthLink Ferries Ltd is a new company formed to deliver the services following the appointment of Caledonian MacBrayne as preferred bidder in March. 

The new contract provides for:

• freight and livestock to be included for the first time
• a mid-week freight call-in at Orkney
• new livestock transporters from 2007
• an improved performance regime

Mr Scott said:

"Our aim all along has been to secure these vital lifeline ferry services to the Northern Isles for the long term. That is what we have delivered.

“These ferry links are crucial to the prosperity and wellbeing of the Shetland and Orkney communities they serve.

"I am confident that this contract offers the best value for public money and will deliver real improvements for anyone using the service.  Reducing freight rates for island businesses will benefit the economies of Shetland and Orkney and local crofters and farmers will welcome the new livestock container arrangements.  

"I expect the new company to build successfully on the service previously provided by NorthLink Orkney and Shetland Ferries Ltd."

BACKGROUND

1. The Northern Isles passenger and vehicle ferry services tender process began in April 2004, and involved a detailed local consultation in the spring and summer of that year.  The contract awarded is for a six year period as a public service contract under the EC Maritime Cabotage Regulation and guidelines for State aid in the maritime sector.

2. Bids were submitted by V-Ships UK Ltd and Caledonian MacBrayne which runs ferry services on the West Coast.  Handover from the current operator, NorthLink Orkney and Shetland Ferries Ltd is scheduled to take place during 6 July 2006.

3. The Caledonian MacBrayne tender includes plans for new livestock containers, as required in the Invitation to Tender.  The new operator will liaise closely with the livestock industry on their detailed plans and implementation arrangements.  For the 2006 livestock season, the stock boat arrangements have been secured.

4. NorthLink  Ferries  Limited, a  wholly-owned subsidiary of David MacBrayne Ltd,  will operate the services.  David MacBrayne Limited was a dormant company, wholly owned  by  Scottish  Ministers,  which  has  been activated to take over Caledonian MacBrayne’s ferry operating role. David MacBrayne Limited now owns NorthLink  Ferries  Limited  and  remains  in  the  ownership  of  Scottish Ministers,  as  does  Caledonian  MacBrayne  Limited  which  remains  a separate Company.

5. The budgeted subsidy for the first year of operation is  £31million, subject to adjustments as necessary in the light of actual inflation and other factors provided for in the grant agreement. Thereafter, the subsidy will be calculated according to the terms of the detailed grant agreement, which was issued in draft to the three companies invited to tender for the contract.