Treasury Minister Alfred Cannan said the £124m deal to buy the Steam Packet would end years of uncertainty.

He insisted there had been ’very positive feedback’ when he unveiled the proposals to Tynwald members this week.

Under the plans, which Mr Cannan said had unanimous support from the Council of Ministers, the government would purchase a 100% shareholding for £48.3m with a further £76m by way of a loan that effectively covers the Steam Packet’s debts.

Subsequently, future investors and partners would be sought but the Manx government will retain a controlling stake.

The newly state-owned ferry operator would be run as an arm’s length company, as far away as possible from political interference.

A new user agreement, reviewed every three years, will set out service levels and a new pricing mechanism.

Levels of fares have to commercially sustainable, insisted Mr Cannan.

He said we could expect the new user agreement to set out fare increases in line with CPI inflation rather than the higher RPI which is used at present.

No dividend will be paid out for the first few years so that the company can build up the cash reserves it needs to purchase new ships, at an estimated cost of £60m to £80m, by about 2023.

Current Steam Packet management and staff would continue to run the passenger and freight operations to ensure a smooth transition during the takeover.

Critics, however, have questioned the timing of the deal, and the cost.

Some suggested it was a government bail-out of a struggling company.

Asked why the deal was proposed now, Mr Cannan insisted the island had faced seven years of uncertainty with an extended current user agreement not running out until 2026.

He described the Steam Packet as 'well-run and highly profitable’ but said much of the profit was 'stripped out’ to service the debts with which its off-island owners had laden the company.

Mr Cannan added that the 'more than generous’ user agreement had allowed the ferry operator to 'maximise its profits with detriment to the island’.

He told the Manx Independent that the deal 'will put an end to the uncertainty around the ownership of the Steam Packet Company and bring an end to the asset stripping of profits from the company by City banks and hedge funds.’

'It will enable us, with stable ownership in place, to have a user agreement that will serve the island well for decades to come,’ he added.

The Treasury Minister insisted that much of the £124m outlay could, with refinancing, be back in the government account within 12 months.

Under the proposals, £76m would be paid by way of a loan, effectively covering the Steam Packet’s debts, and the remaining £48.3 would be equity financing to purchase the shareholding.

The Steam Packet will be asked to refinance the £76m by way of a public bond or commercial lending so that taxpayer will get that money back.

Potential investors and partners will be sought to reduce the final bill still further, while still ensuring that government retains a controlling stake through preferential shares or a majority shareholding.

Mr Cannan said: 'Our initial outlay of £124m will come from our cash reserves. But it is our intention to refinance this and restructure this so that the bulk of the money is back into the government account within the next 12 months.

'We are asking Tynwald for time to consider options for refinancing. We want to replace the money as quickly as possible, which should be within 12 months.’

The recommendation for a £5.1m bridging loan was added to solve a 'last minute glitch’, he admitted.

But he explained that the loan was proposed to deal with an issue of the Steam Packet holding funds in accounts on 30 and 90 days’ notice. The lending from government will go in and back out again.

Mr Cannan said the ships will be unencumbered with any associated debt when they are transferred to the new company. 'It’s all included in the deal,’ he said.

The Minister revealed that there is a £5.8m liability, potentially rising to £8m, relating to the Steam Packet staff pension fund.

He said this, too, was accounted for in the cashflow projections.

Steam Packet chief executive Mark Woodward said: 'If approved, this deal would consolidate the excellent relationship between the company and government and create a strong, long-term platform to deliver continued investment and sea services that meet the needs of the island.

'I am confident that these are positive proposals for both the Isle of Man economy and the Steam Packet Company.’