Michal: Penalties paid by shipyards cover rental costs

The ferry Leiger as it awaited handover in Turkey to TS Laevad, a subsidiary of the state-owned Port of Tallinn. (TS Laevad)
10/19/2016 6:10 PM
Source: BNS
Category: Business

As things stood now, the late delivery penalties meted out to the shipyards building the new ferries for Estonia’s island routes had covered the costs of the rent of substitute vessels, Minister of Economic Affairs and Infrastructure Kristen Michal (Reform) said on Wednesday.

Michal said that the penalties for the delays would be collected by deducting a corresponding amount of money from the payments to be made to the shipbuilders.

“That we will withhold these payments is possible and very likely,” Michal said in the Riigikogu, where he answered members’ questions.

The minister added that while lawyers would definitely find a way to argue over the terms of the contract, and while the possibility of arbitration existed also, the current state of affairs was such that the expenses for replacement vessels were, on the whole, covered by the penalties issued.

Valdo Kalm, CEO of state-owned Port of Tallinn, had said last week that if it should really happen that one or both of the new vessels would not arrive in Estonia even by the beginning of January, the operator would lease substitute ships for the penalties it stood to receive from the shipyards.

“The penalties paid by the shipyards cover most of the expenses for substitute vessels already now. This refutes the story that only two ferries will remain in service on the island routes,” Kalm said.

Port of Tallinn subsidiary TS Laevad began operating ferries between the mainland and Estonia’s big western islands on Oct. 1 under a ten-year contract, using the ferries St. Ola and Harilaid rented from businessman Vjatšeslav Leedo as well as the ferry Hiiumaa, which belongs to Leedo’s colleague, Olav Miil. The fourth vessel used for the service, Regula, was bought by TS Laevad for four million euros this summer.

Editor: Dario Cavegn

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