Australian operator renegotiates ferry deal with Finnish shipbuilder following delays

TT-Line Company, a government-owned ferry operating company in the Australian state of Tasmania, has renegotiated an existing contract with a Finnish shipbuilder for the construction and delivery of two new replacement ferries to be deployed on Bass Strait.

Tasmanian Premier Jeremy Rockliff revealed that TT-Line’s fixed-price contract with Rauma Marine Constructions (RMC) has been renegotiated, allowing the construction of the new Spirit of Tasmania ferries to proceed despite delays that have hampered the program.

TT-Line had earlier agreed to pay RMC an additional AU$81 million (US$54 million) beyond the contract price of AU$850 million (US$560 million) for the vessels, which will be named Spirit of Tasmania IV and V.

The Finnish government has meanwhile stated that it will match the additional payment amount by TT-Line and that it will underwrite the future financial viability of RMC.

TT-Line had also agreed to absolve RMC of any obligation to pay penalties if the delivery of the vessels is delayed.

The shipbuilder has been facing financial difficulties such as rising costs of materials caused in part by the ongoing Russia-Ukraine war. As a result, delivery of the first Spirit of Tasmania ferry has been moved from June to the third quarter of this year while its sister is scheduled to arrive in the first quarter of 2025.

Tasmanian Transport minister Eric Abetz said the TT-Line board considered extending the additional payment to RMC as “the only viable option” given the circumstances.

Mr Abetz explained that the alternative action of selecting a different shipyard for the ferries’ construction would have resulted in even higher costs as well as significant delay, as the vessels would now be “worth more” due to the increase in the prices of materials.

The delivery of the replacement Spirit of Tasmania ferries has been beset by numerous issues. In 2020, the German shipyard that TT-Line had originally selected to construct the ferries filed for insolvency, resulting in the cancellation of the shipbuilding contract.

RMC was awarded the contract in April 2021, and the ferries’ deliveries were set at 2023 and 2024, respectively.

However, the builder’s financial troubles began in 2022 when it suffered supply chain disruptions, which it blamed on the Covid-19 pandemic and the conflict in Ukraine.

RMC has since restructured, though it still faced financial difficulties well into 2023.

Meanwhile, TT-Line is also being scrutinised for the status of the berths that will accommodate the Spirit of Tasmania ferries once these enter service.

The next phase of the construction of the East Devonport ferry terminal was to be undertaken by a preferred contractor. However, in March of this year, TT-Line said it will issue a new tender for onshore infrastructure works after the original preferred contractor had imposed “significant price increases.”