Jersey holds key to our sea links timebomb

WHILE we’ve been looking here over the last couple of weeks at big infrastructure issues like a longer airport runway and how to enhance the seafront to resolve some big ticket island problems, another potential strategic timebomb is sailing into view.

That’s right – what happens if or when Condor is sold? Clearly we can’t do without a ferry service. ‘Our sea links are one of the most important influences upon our community; an essential life-line to our neighbouring jurisdictions for the safe and affordable transportation of people and goods. Without them, our economic and social wellbeing is at risk.’

Actually, that quote is from the Isle of Man government, which last year invested around £124m. in buying the Isle of Man Steam Packet Company and putting together a long-term plan based on the social and economic needs of that community.

In short, crisis averted and a tailored package that covers things such as harbour use, fares and freight rates. A strategy, if you will, to safeguard a vulnerable community, using public funds to do so.

There are scale and fleet similarities between the Manx Steam Packet Co and Condor, yet I’m told by two separate sources that Condor’s owners are touting it for £300m.And the company has around £180m. of refinancing debt, so taking on Condor comes at a total cost approaching £500m.

This is a substantial sum and unlikely to appeal to any known ferry company, which will simply see an ageing fleet in need of replacement, the Liberation as a PR liability and passenger numbers in steady decline.

So unless the States of Guernsey was daft enough to buy it for that amount, Condor Ferries is likely to appeal only to an infrastructure fund, much like current owners Macquarie.

One of the traits of such funds, frequently used by those managing large pension schemes, is that they look for monopoly or near monopoly operations capable of generating RPI-plus returns each and every year.

Great if you’re a pensioner I suppose; less so if you have to buy the services from the provider, which prices on the basis of you having little choice in the matter.

In short, are lifeline services meeting vital community needs best provided by pension funds concerned with external investors, or in some other way that puts community requirements first?

Before you ask, no, I’m not advocating a sort of ‘Aurigny Ferries’ set-up, but government thinking is definitely in that direction – not least because it does need urgently to decide how best to protect the island’s sea links with the UK, Jersey and France.

And this is where matters become complicated. What, for instance, happens if no buyer comes forward? I assume the debt alone means Condor needs to continue trading, but it is first and foremost a freight operation. Would it become more – not less – profitable if it mothballed Liberation?

This might be fanciful, but it’s a possibility that’s certainly exercised them in Frossard House. And a lot of work has been done on whether Guernsey could launch a stand-alone service, what would be involved and whether vessels are available to enable it to do so.

The short answer is, yes, it can. Or could at the time this was last looked at in detail. But because of the size limitations of St Peter Port Harbour, which we discussed here last time, and reduced global shipbuilding capacity, there’s a chronic shortage of such assets available.

Could someone else operate a service for us? Again, yes, there is some interest from ‘proper’ ferry operators in doing so – but only if losses are underwritten or an adequate return guaranteed.

Which is why the Isle of Man has a pretty watertight agreement with its ferry company about services to be provided, fees to be charged and taxpayer subsidy to be paid.

But – and it’s a big but – where’s Jersey in all this? Its relationship with Condor is different through an operating agreement with the States there, which runs until August 2024.

That can be broken with three years’ notice, which would have to be given by 15 August 2021. Equally, if Jersey wants to stay with Condor, it has to say so by next summer and formally extend the agreement. The clock, as they say, is ticking.

So if our sister island doesn’t come on board with a new ferry service, any inter-island connectivity would have to be provided by Condor.

Yet the bulk of freight (and passengers) carried to the Channel Islands ends up in Jersey so a Condor that, in this scenario, you’re trying to replace would then become an incumbent competitor to the fledgling Aurigny Ferries, or whatever it’s to be called.

As I said, pretty complicated, and about to be debated by the States next week, when members will be asked to make £400,000 available to further explore whether other operators are interested in the Guernsey/CI route and the possibility of setting up a stand-alone service.

From what I’m told, Brittany Ferries, P&O and another well-known European ferry company are all interested in operating here, although it’s not clear how actively Policy & Resources or Economic Development have been babysitting them.

I’ve not been able to establish how closely Jersey’s been involved in this, which is pretty crucial because a full Channel Island operation will be much more appealing to the three operators.

So while all these loose ends remain, P&R’s default option – a stand-alone Guernsey ferry service – is actually the worst of all possibilities. A strategic timebomb indeed.