The decision to try to buy the Steam Packet was made by the Council of Ministers last year.

Cabinet Office papers relating to the purchase have been released after a freedom of information request from Isle of Man Newspapers.

The Council of Ministers decided to reject an offer from the Steam Packet for a new user agreement and outlined seven principles for the purchase of the company in June 2017.

That meeting of CoMin came a month before Tynwald held no significant debate on the Steam Packet’s offer, to the surprise of many observers.

Rather, Tynwald voted unanimously to accept the proposal from Infrastructure Minister Ray Harmer that his department continue to negotiate with the company.

The motion paved the way for the purchase, as it instructed the DoI ’to continue negotiations with the company and to consider all other options for achieving a more effective solution that offers greater benefit to the island’.

At the June 2017 CoMin meeting, ministers agreed to seven principles that would apply to any ’proposed acquisition of the company’.

This is despite the government report to the July 2017 sitting of Tynwald on the offer stating that the company was not for sale and that options regarding purchasing the Steam Packet had not been explored further.

The seven principles were: 1. Any purchase of shares must represent good value for money - the company should not be purchased at any cost.

2. The investment by Isle of Man government in the company should be minimised i.e. it should be at the lowest amount possible to achieve government’s strategic objective.

3. ’Government shareholding should be such to give ongoing strategic control in relation to company ownership. This would aim to ensure control over any future sales.

4. There should be Isle of Man public involvement in the investment through either direct share holding or bond issue. IoMSPCo is a strategic asset directly affecting the whole island and its economy. Public involvement can help ensure a broad representation of views and buy-in from the public.

5. The company should be operated on a fully commercial basis with clear agreement on pricing, staffing and financing.

6. The operation should be at arm’s length within an agreed framework with no direct political involvement.

7. The framework for the operation of the company would provide that it be operated on a fully commercial basis with clear agreement on pricing, staffing and financing.’

On July 20, two days after Tynwald failed to debate the Steam Packet offer, CoMin met again. It is stated the shareholders of the Steam Packet had ’in advance of the debate’ advised that unless the Tynwald motion was ’amended to make explicit the authority to buy the company, no offer to purchase the company would be entertained’.

As the motion was not amended, CoMin was presented with three options.

Option one was to still attempt the purchase; option two was to continue talks and option three was a contingency plan.

The purchase of the company option meant Park Partners Ltd was engaged to provide a valuation of the company and to advise on the purchasing process. This also meant that there would be no further negotiations on extension of the user agreement.

However, option two, continued negotiations with the company over the user agreement, states ’to date there has been no negotiation of any offer’. It continues that only political advice had been given by officers and ministers to the company ’but nothing more than that’.

Key areas listed for likely improvement are, reduced terms or effective break clauses, reliable controls on debt and ownership, a better share of value created by the user agreement and the option to own rather than merely finance the vessels.

It also states that negotiation of a new user agreement cannot be undertaken during any potential purchasing discussions.

This could only occur in the event of the failure of negotiations to buy the company.

The final option was a contingency plan, which was completed with the engagement of Thames Head Shipping Advisors Ltd (THSAL).

This option saw the availability for replacement ’fast ferries and RoRo might be time-chartered but in the short term RoPax tonnage (such as the Ben-My-Chree) is not available’.

However, it is stated any replacement service would depend on the availability of a berth at Douglas and the Steam Packet being in breach of the user agreement.

replacement

THSAL noted that a new linkspan on another quay could be installed, and due to the age of the Steam Packet owned Victoria Pier (predominantly used by the Manannan) linkspan, it would not be wasted in future years as it could be used as a replacement for the Victoria Pier.

THSAL indicated this could cost £10m.

If the Steam Packet had ceased all operations, THSAL said the best course of action would be for any new operator to recruit or acquire the existing management and staff.

If not, it is suggested it would be best to contract in an existing ferry operator, however if they were in competition with the Steam Packet, a rival firm may have required a subsidy.

However, despite these plans, THSAL noted it was ever unlikely the Steam Packet would have violated the terms of the agreement.

It was further recommended to CoMin that it contact the Steam Packet shareholders to state its preferred way forward by July 21, 2017.

Parts of the most recent Council of Ministers’ papers were redacted (blanked out) from the Freedom of Information response. Isle of Man Newspapers has appealed against that.