P&O had £100m to build new ships
Indications that company had no serious intention to bid for contract are dismissed.
(From The Orcadian dated October 19, 2000)

Indications that P&O Scottish Ferries had no intention of seriously bidding for the Northern Isles ferry contract were dismissed by a company spokesman this week, who said £100 million had been earmarked for new ships.

P&O lost out earlier this month to Northlink – the joint venture company led by Caledonian MacBrayne and The Royal Bank of Scotland – who have been chosen as the preferred bidders.

If the contract is ratified it will mean the end of a long relationship between Orkney and P&O.

In notes taken at a P&O board meeting back in July this year, the impression was given that P&O were not seriously interested in the contract because of its short length and the stipulation that new ferries were required.

Notes taken at the P&O European Forum on July 5 stated: “Companies have been asked to tender for a five year contract. This short period does not make it viable to introduce new tonnage without the guarantee of future extensions.”

The concerns were expressed earlier this year by P&O Scottish Ferries managing director Mr Terry Cairns. He said no shipping company would want to provide expensive purpose-built ships for the routes for a five year period without a clause that enabled them to sell them on to the next operator if they didn’t win a following contract.

“If we win it and it is a very short term contract we will have difficulty extracting money from P&O main board unless there was some sort of buy back contract with another operator coming in, picking up the ships on book value,” he said.

However, speaking this week, the company’s marketing and commercial director Mr Scott Colegate said that despite the reservations, P&O had given the go-ahead for £100 million to be spent on new ships.

“I would say five years does not make it a viable proposition, but having said that, we got approval to invest £100 million on new tonnage,” he said.