Taxpayers to dig for £20M for Liverpool Dock

[asitis]

18 hours ago, John Wright said:

intangibles to monetise things like the User Agreement, by McQuarrie.

Which is exactly why imo, we shouldn't have allowed this to continue as we have done, by inflating the purchase price to encompass this very principle !

As John says many of us don't understand the deal and I'm one of them, however technical people explain it, but it still seems to be contrary to some amount of common sense and due care of the public purse.

Having said that, having purchased the SPCO, we now appear to be having to further burden the taxpayers by being unable to use the company as part of an overall economic strategy ! It seemed to me a price worth paying if there were significant spin off benefits to both island business and residents access/egress and tourism. The fact we have now done exactly what we criticised others for, i.e. burden the company with debt, there is little chance of using the company in the manner I described. We may have fulfilled the critical lifeline as we wished but have again imo, missed several positive opportunities with the application of common sense !

 

 

[Mercenary]

14 minutes ago, asitis said:

Which is exactly why imo, we shouldn't have allowed this to continue as we have done, by inflating the purchase price to encompass this very principle !

As John says many of us don't understand the deal and I'm one of them, however technical people explain it, but it still seems to be contrary to some amount of common sense and due care of the public purse.

Having said that, having purchased the SPCO, we now appear to be having to further burden the taxpayers by being unable to use the company as part of an overall economic strategy ! It seemed to me a price worth paying if there were significant spin off benefits to both island business and residents access/egress and tourism. The fact we have now done exactly what we criticised others for, i.e. burden the company with debt, there is little chance of using the company in the manner I described. We may have fulfilled the critical lifeline as we wished but have again imo, missed several positive opportunities with the application of common sense !

 

 

In simple terms, price paid = value of the assets (boats) + the profit they would have received from remaining years (discounted a bit). Whilst this gave both parties some certainty over transition there was no way of stripping them/depriving them of above due to UA in place. 

[John Wright]

20 minutes ago, asitis said:

Which is exactly why imo, we shouldn't have allowed this to continue as we have done, by inflating the purchase price to encompass this very principle !

As John says many of us don't understand the deal and I'm one of them, however technical people explain it, but it still seems to be contrary to some amount of common sense and due care of the public purse

OK. I agree things like a User Agreement should never be allowed to be given a capitalised value or monetised. That’s easy to achieve. Any UA has terms that it cannot be sold or transferred and ends if control of the company changes.

With the UA in place before the SPCo was bought by IoMG it had a value at its start, when it had 25 years to run, which was much more than 19 years later, when it had only 6 to run.

The value is related to the income ( profit, not revenue ) that could be generated during its remaining life.

So let’s say, in inflation adjusted terms, the SPCo should generate £10 million a year. Over 25 years that’s £250 million, over 6 years it’s £60 million. So the value is related to those figures. However they aren’t the actual figure it’s worth. Any vendor is getting its money as capital and at an earlier date rather than income spread over time. Any purchaser is losing interest on the money it pays and is paying it now, and will want a return on its investment. So the figure is discounted.

When IoMG bought the major component of the purchase price was the value of the remainder of the UA.

IoMG had two options, wait for 6 years, pay nothing, then launch a new shipping line. Or negotiate a price and take over now. Then, whatever it pays it theoretically gets back in profit over 6 years. That’s theoretically revenue/capital neutral. It has cash flow implications. There is a risk if profit falls, and a possible benefit if it increases.

I can’t be arsed going back to look at how the purchase price was calculated. It was value of capital assets ( ships and stores and spares ) and the value of the remainder of the UA.

lets say the UA value was £70million and IoMG paid £60 million, and over 6 years got back £60 million in profit, its neutral over that 6 years. But IoMG gets certainty, earlier control, we get new boats ( the old  owners wouldn’t have ordered a new boat or boats ).

Of course, in real life, we had Covid, and two years of reduced profitability. But that was unforeseeable, and a classic business risk.

 

 

 

[asitis]

2 minutes ago, John Wright said:

IoMG had two options, wait for 6 years, pay nothing, then launch a new shipping line. Or negotiate a price and take over now. Then, whatever it pays it theoretically gets back in profit over 6 years. That’s theoretically revenue/capital neutral. It has cash flow implications. There is a risk if profit falls, and a possible benefit if it increases.

Thanks John, I do get all that I'm not stupid ( matter of opinion I agree LOL),

What grates with me is Government, being able to play with other peoples money, were not prepared to play any sort of hardball as a private company would have done, and it was easier to just open the public purse.

I can fully see cost neutral for the six years, but only because the burden to keep the status quo is being borne once again by the users ( taxpayers) !

[John Wright]

1 minute ago, asitis said:

Thanks John, I do get all that I'm not stupid ( matter of opinion I agree LOL),

What grates with me is Government, being able to play with other peoples money, were not prepared to play any sort of hardball as a private company would have done, and it was easier to just open the public purse.

I can fully see cost neutral for the six years, but only because the burden to keep the status quo is being borne once again by the users ( taxpayers) !

Cost neutrality means no taxpayer burden

[Dirty Buggane]

Which is something we the tax payers may never see, the level of incompetence shown by the people/team in charge of finances would not be allowed by any private company. And if they were to make the kind of fuck ups they seem to on a regular basis they would not find any employment in finance again,  But its not real money its all just squiggles on paper and has little or no relevance to them in terms of consequences for their actions.  

[Mercenary]

1 hour ago, asitis said:

What grates with me is Government, being able to play with other peoples money, were not prepared to play any sort of hardball as a private company would have done, and it was easier to just open the public purse.

To be clear, "hardball" in this instance means brinkmanship over reduced services and investment for remaining 6 years and a "hard" disruptive transition, and would likely mean a material difference to the services and standards received by the public/tourists. It is understandable Government would not want to go that route (they are considering the impact to IOM overall, not just the company), whereas a hedge fund owned company would only consider maximising value and return on their capital.

[Kopek]

Was buying a new Boat a necessity or an ego trip for the Govt backed entity?

How many more ego trips await us???

[finlo]

4 minutes ago, Kopek said:

Was buying a new Boat a necessity or an ego trip for the Govt backed entity?

How many more ego trips await us???

Wait until you see the Manannan's successor!

[John Wright]

11 minutes ago, Kopek said:

Was buying a new Boat a necessity or an ego trip for the Govt backed entity?

How many more ego trips await us???

Ben replacement was overdue, for lots of reasons. There really aren’t any that could come on the market that are the right size and configuration and age. 

CalMac fleet is clapped out. They’ve not had a sensible fleet renewal programme for 20 years.

One did come on the market after Manxman was ordered. A slightly younger sister ship from NZ. Snapped up by Guernsey who charter it to Condor. They paid more than IoMG paid for the Ben.

[Ringy Rose]

16 hours ago, Max Power said:

 

I can see your point, however we have had tremendous unforeseen political and economic upheaval just after the purchase. Costs have escalated dramatically, this would quite probably have had the effect of higher fares even if there hadn't been a takeover. 

I do think that fares are too high, and that there is a certain amount of profiteering, but it's not all down to that! 

I’ve been looking at travelling to the Continent and on many weekends in July DFDS will charge me over £300 for a Dover to Calais return with a car. For the same trip the Steam Packet will charge me £290 return from Douglas to Heysham with a car.

Ferry fares are high across the board, and whatever we think of the government ownership, we’d be paying a lot more and with less security if we were still reliant on the hedge fund owners. You only have to look at Condor Ferries to see that much.

[Banker]

16 hours ago, Non-Believer said:

The Steamie was bought for two reasons, firstly to stabilise the situation in regard to the Island's lifeline surface connections, that it needed doing is beyond question.

The second reason and let's not beat around the bush here, was as a cash cow for IoMG. No matter what the financing was/is, it's about revenue to pay off 25 years worth of fuck ups and that's why the prices are what they are.

However, WE have now paid for a Govt-commissioned Report which has produced a result indicating that one Govt Dept can firmly lays the blame for some of its woes at another Govt body, ie the Steamie. This could prove interesting. The farmers, a traditionally heavily-supported,  unassailable local body vs a Treasury desperate for revenue to pay itself and Govt.

Would anybody bet against the agricultural trade coming out of this with preferential rates for shipping? The problem being that if the current freight rates are damaging to one industry then they'll be damaging to all the others using freight too (as they already are) so there will be uproar if it's granted.

It isn’t a government commissioned report , it was commissioned by The report which was commissioned by the Manx National Farmers Union (MNFU), was conducted by Birnie Consultancy.

So it’s been designed to deliver what the farmers want to hear to a certain extent. If freight charges are reduced then profits will be reduced and ultimately the return to shareholders ie IOM taxpayers. So we subsidise fares similar to Scottish government but ultimately it all comes out of the same pot ie our taxes.

[Non-Believer]

1 hour ago, Banker said:

It isn’t a government commissioned report , it was commissioned by The report which was commissioned by the Manx National Farmers Union (MNFU), was conducted by Birnie Consultancy.

So it’s been designed to deliver what the farmers want to hear to a certain extent. If freight charges are reduced then profits will be reduced and ultimately the return to shareholders ie IOM taxpayers. So we subsidise fares similar to Scottish government but ultimately it all comes out of the same pot ie our taxes.

DEFA paid for it however, using our money and the price differentials aren't an invention of Birnie although as JW has pointed out, comparisons need to be careful.

But the result is that we will now have one Govt arm at odds with another Govt arm and if the farmers receive preferential terms as a result then others will be up in arms wanting the same.

It's a total mess that has been arrived at by the greed of trying to turn the SPCo into a revenue stream for the funding of other governmental "things" rather than the emphasis of it being a national service for the benefit of the Island.

It would be interesting to know if Govt employees receive preferential rates for Steamie travel though 😉

[Max Power]

40 minutes ago, Non-Believer said:

It's a total mess that has been arrived at by the greed of trying to turn the SPCo into a revenue stream for the funding of other governmental "things" rather than the emphasis of it being a national service for the benefit of the Island.

It would be interesting to know if Govt employees receive preferential rates for Steamie travel though 😉

The SPCo are merely paying back the loans, the only income to government has to be purely the corporation tax on annual profits, our share of VAT, and personal income tax from employees who are registered here. 

[Albert Tatlock]

7 minutes ago, Max Power said:

The SPCo are merely paying back the loans, the only income to government has to be purely the corporation tax on annual profits, our share of VAT, and personal income tax from employees who are registered here. 

...don't forget the profit on their bacon baps.