Mr BAYLEY - Thank you all for coming and congratulations for the COVID-19 turnaround. That is very impressive and very welcome. To continue the line of questioning on the vessel replacement, the annual report shows that $273.1 million of instalments have been paid. How many more instalments are to come, totalling how much?
Mr DWYER - Our instalments are based on a percentage completion each month.
Mr BAYLEY - Tied to completion?
Mr DWYER - Tied to milestones and percentage completed each month. We would be making payments as they do those completions up to the time they get to sea trials. That's the period of those. We haven't talked about the full cost of the vessels other than it's around $800 million. That doesn't change. It's a fixed-price contract.
Mr BAYLEY - The instalments will depend on the progress of the build?
Mr GRAINGER - That's why the yard will do everything it can to mitigate these minor delays because -
Mr BAYLEY - They want the payments.
Mr GRAINGER - They don't get payment until those events have happened.
Mr BAYLEY - The vessel replacement fund being managed by TASCORP we understand was exhausted in the last financial year. Can you confirm that's the case?
Mr DWYER - Yes.
Mr BAYLEY - That looked healthy on the Government's balance sheet but can you explain how that was used to fund the vessel purchases?
Mr DWYER - Any monies that we pay to the state Government, or anything, went into that vessel replacement fund and was locked in that vessel replacement fund and can only be used for the financing of these two vessel. Money was going into that fund, there was interest being generated on that money, that interest was paid into the fund as well. Some of these larger payments we were able to draw out of that fund to make as many payments as we can before we need to go into debt.
Mr BAYLEY - You have more payments to make so they'll come out of debt?
Mr DWYER - They'll come out of debt.
Mr BAYLEY - Should the TT-Line Vessel Replacement Fund Act 2017 now be repealed? What's your approach to that? What's your plan there?
Mr FERGUSON - I don't have a plan to repeal it but it's now completed its task. At some point in the future, thought should be given to winding that back as the company takes responsibility for the capital program in partnership with TASCORP.
Mr BAYLEY - Chair, when does the process to sell Spirits I and II do kick off? Does that happen when you have a locked-in date of delivery and likely details of completion?
Mr GRAINGER - No, it will certainly happened before that. Not the sale but the process will start before that. There's been a significant level of interest already. I'm not sure if you know we had the Interferry Conference here a couple of weeks ago and there were potential buyers from all over the world. Some had spent time on the Spirits and used the conference as another reason to have a look at the vessels.
There's been significant interest. From my knowledge, weekly there is someone putting their hand up to discuss the purchase of those vessels. There will be people coming out of the woodwork. The world knows that we are going to take delivery next year, so they'll be expecting those old ships to come on the market straight after we go into service. The interest will increase.
Mr BAYLEY - How long do you think it will take to close deals once you kick off the process?
Mr GRAINGER - How long does a phone call take?
Mr BAYLEY - Really, that quick?
Mr GRAINGER - We know what the ships are worth. It may come down to an auction. There is significant interest within the industry. That's quite exciting. We are expecting to get a reasonable price for the vessels, whatever that might be. You will see in our annual report what they're valued at. Everyone else in the world can see our annual report as well. They are good ships, they've been very highly maintained. The company does not compromise on the safety or operation of those vessels and never has done. That's going to stand us in good stead for the resale, so we are quite excited about the resale.
Mr DWYER - For any ferry owners listening to this around the world, you need to get in quick.
Mr GRAINGER - With your highest bid.
Mr BAYLEY - Returning to the sale of the Spirits I and II. What is the intention of the use of the proceeds? Is it to pay down debt that you have accumulated in purchasing the new vessels? Is it to return a dividend to the Government? What is the intention there?
Mr GRAINGER - I would love our CFO to answer that.
Ms SAYERS - To pay down debt, that has been our commitment with TASCORP.
Mr BAYLEY - In its entirety?
Ms SAYERS - Yes.
Mr BAYLEY - In terms of capacity on the replacement vessels - to get a handle on the increased capacity. It is fabulous that they are increasing both passenger and freight capacity -passenger going up from 1400 passengers to 1800. However, it is hard to find details on exactly what the capacity increase is in freight. From the State Growth website, it suggests that current vessels have a combined freight capacity of 175 TEUs, is that correct?
Mr DWYER - It depends on the configuration of the vessel and that is why it is really hard to hint because the vessel could be configured differently day in, day out. We could easily say it is 40 per cent increase on freight.
Mr BAYLEY - A 40 per cent increase on freight capacity?
Mr DWYER - Yes.
Mr BAYLEY - You have, according to State Growth, a 21 per cent share in market in freight in Tasmania. Will that provide you a capacity to boost that share component as well?
Mr DWYER - Frankly, we hope we do not boost our share - that the whole market grows at that percentage. That is the idea of putting more freight capacity on Bass Strait, so that businesses can invest and grow in Tasmania. So that there is more capacity, not us taking more market share of that.
Mr BAYLEY - Right, to growth the capacity across the board?
Mr DWYER - Yes, it is the major growth in that. The other part of the freight aspect is - I will go into some details if you do not mind -
Mr BAYLEY - Please.
Mr DWYER - On deck 5 of the new vessel, that is now going to 4.8 metres high. We do not have 4.8 metres high currently and we needed 4.8 metres to cope with the new regulations for freight of trailers in Australia. That will give us that capacity for the new regulations coming in, much more capacity in numbers but also even with the vessel so much safer for our crew especially in relation to that.
Mr BAYLEY - In terms of the increased freight and passenger capacity, how long do you see this meeting TT-Line's needs and the demands on the business?
Mr DWYER - Great question. Initially we expected to be absolutely flat-out, which is really what happened when these current vessels came on the run. They were almost running for a good 18 months. With these new ships being larger, we'll be able to take our current demand with fewer day sailings because we've got the capacity to just do it on the night sailings, so as demand increases we can then increase the day sailings. We've done our projections and they say that over a full year there's at least a 25-year ability in growth to actually take that. There would be nothing worse than us designing a vessel and in five years' time they were out of capacity.
Mr BAYLEY - It being obsolete. Totally, but you've got the capacity to manage sailings and step that up as demand increases.
Mr DWYER - Yes. There's two main pieces to that. One is these vessels are still fast vessels so we sail at about 24 knots normally. On a day sailing we sail at about 28 knots because we need the extra speed. With the investment in the shore infrastructure, and I am sure you know what's in Geelong, that three-level loading discharge means that we can drop our turnaround, from three hours to an hour and a half, so we can then be sailing more at a slower speed and still have, in a 24-hour period, two easy sailings instead of the creeping out every time we do a day sail.
Mr BAYLEY - And that will increase returns because of fuel use and the like as well?
Mr DWYER - Exactly right.
