MV Glen Sannox (2017)



MV Glen Sannox is a dual-fuel car and passenger ferry constructed at Ferguson Marine in Port Glasgow for CMAL to lease to Caledonian MacBrayne, planned to serve the Ardrossan to Brodick crossing. On 1 June 2017 her name was chosen from a shortlist by public ballot and recalls an earlier Arran ferry.

The ship is to be the first of two Scottish ferries capable of operating on either marine gas oil or LNG, offering benefits of a marked reduction in carbon dioxide, sulphur and nitrous oxide emissions. Ferguson Marine was announced as preferred tenderer on 31 August 2015. Initially expected to enter service in summer 2018, the ship only began its sea trials in February 2024. It has been the subject of continuing political scandal known as the "ferry fiasco" regarding increased costs and lengthy delays.

Ferguson Marine (FMEL) was a new company, formed in September 2014 when Jim McColl rescued the shipyard from bankruptcy. The industry standard design and build fixed price contract required a bank-backed guarantee to protect interim payments, and give the builder an incentive to meet contract times and quality standards. When FMEL revealed that they could not provide this warranty, Scottish Government ministers decided to take the risks which were set out in a paper by CMAL. Defective work had to be redone, causing delays. In July 2017, FMEL claimed £17.5 million for additional costs. CMAL dismissed the claim as not valid, but delays and claims increased. The ship's launch was delayed to 21 November 2017, with it then expected to begin operation in late 2018 or early 2019. The dispute escalated, in August 2019, FMEL went into administration, having been paid £83.25 million in contract payments, and £45 million in loan payments from the Scottish Government. The shipyard was then nationalised, and renamed Ferguson Marine (Port Glasgow) Ltd. Further delays were announced, some due to complications with the vessel's LNG powerplants, as of 28 June 2024 delivery was planned for 19 August 2024, with the most recent delay being absorbed into the planned eight weeks of crew familiarisation trials, aiming for the ship to enter service in September.

History

 * See also Ferry fiasco for the political controversies surrounding the construction of these units.

The State-owned enterprise CalMac, originally Caledonian MacBrayne Ltd, was formed in 1973 as a vessel owner and operator providing most of the ferry services to the Firth of Clyde and the Hebridean islands off the west coast of Scotland. In 2006, its roles were split to satisfy EU competition rules. As Caledonian Maritime Assets (CMAL) it continued to own the Caledonian MacBrayne fleet and order new ships, while CalMac Ferries Ltd (CalMac) was created as a separate company which successfully bid in open competitive tender for the contract to operate the services. Many of CalMac's ferries had been built by Ferguson Shipbuilders, which five years earlier had employed 300 people, but it had struggled to compete and CalMac orders were won by the Remontowa shipyard in Gdańsk, Poland. In 2011 Fergusons successfully bid for two small ships for CMAL, funded by the Scottish Government's Low Emissions Hybrid Ferries project.

Ferries Plan
The Scottish Government's Ferries Plan, which its executive agency Transport Scotland published in December 2012, included indicative proposals for two new vessels. International emissions regulations tightened, and cleaner liquefied natural gas (LNG) fuel was adopted by ferry operators in Northern Europe, particularly Norway. The Danish island of Samsø invited tenders for the first in the EU, and in June 2013 Remontowa was awarded the contract for this dual-fuel ferry, to be delivered in October 2014. David MacBrayne Ltd bid to operate a ferry connecting Gotland in Sweden, with detailed proposals drawn up by CalMac, but in May 2014 this bid was reported unsuccessful.

To prepare the Vessel Replacement and Deployment Plan (VRDP), Transport Scotland held tripartite monthly meetings with CMAL and CalMac, starting in October 2013. By agreement, CalMac led development of programmes for the major vessels. In early July 2014 the Scottish Government, using CalMac's initial analytical work, authorised the procurement of two new major ferries, aiming to name the preferred bidder in nine months. CMAL's head of vessels said then that this timetable was a "hugely challenging". It left CalMac only three weeks to produce its Specification of Technical and Operational Requirements. They quickly adapted work done for the Gotland ferry bid, but made some errors such as including irrelevant description of passenger cabins. The exceptionally large and detailed specification now had to be made more concise as part of CMAL's tender documents.

Ferguson Shipbuilders had been struggling to get orders. Cash flow problems, and difficulties in arranging financial bonds (or refund guarantees) left it unable to bid for several major contracts. The workforce was reduced to 77, then on 15 August 2014, a month before the Scottish independence referendum, the yard went bankrupt, and the administrators KPMG immediately laid off 70 workers. The First Minister of Scotland, Alex Salmond of the SNP, personally intervened and persuaded businessman Jim McColl, one of his Council of Economic Advisers, to buy out the shipyard. McColl's Clyde Blowers Capital, previously deterred by the yard's debts, now took over its assets and business, and formed Ferguson Marine Engineering Ltd. (FMEL) as a new subsidiary. On 30 September Deputy First Minister Nicola Sturgeon announced that FMEL had been given the order for a third hybrid ferry. Government ministers had given CMAL a letter of comfort allowing the contract to go ahead without a refund guarantee.

CMAL's draft specification was disputed by CalMac, who said on 14 October that it only met 20% of their requirements. The compromise eventually specified in the tender documents meant wider ships which would need improvements to ports.

Vessel procurement process
The start of the vessel procurement process was publicly announced on 15 October 2014 by the Transport Minister Keith Brown. The pre-qualifying questionnaire (PQQ), issued by CMAL on 17 October, invited shipbuilders to demonstrate their capability for detailed design, construction, testing, and delivery of two 100 metres long ROPAX ferries. The questionnaire emphasised the requirement for Bank Refund Guarantee bonds before work started, and requested evidence from a bank confirming its willingness to provide these guarantees. Following discussion with CMAL, FMEL said on 9 December that guarantees from its parent company Clyde Blowers Capital (CBC) would be inappropriate, so it intended to provide Bank Guarantees and would "endeavour to provide Guarantees to levels that provide the security you require."

Of the six shipbuilders shortlisted for the invitation to tender (ITT), only Remontowa had built a dual-fuel LNG engined ferry. The ITT included a 135-page "Specification of Operational and Technical Requirements" (SoR) for the vessels, which were to be dual-fuel LNG engined. Under the industry standard BIMCO design and build New Build Contract, shipyards bid a fixed price to take responsibility for designing and building ships to meet the specification, and the full risk for this remains with the builder throughout the construction period. Bidders were required to accept the terms of the draft contract included with the ITT, or provide comments and/or propose amendments to this draft.

The ITT, issued on 10 December 2014, required refund guarantees on behalf of the Builder by "a first class international bank". FMEL wrote that they had no comment to make "at this time". When FMEL told local MSP Stuart McMillan that they could not provide these guarantees, he wrote to the deputy first minister John Swinney. In early February 2015 transport minister Derek Mackay responded; "While CMAL's board in line with standard industry practice has a preference for refund guarantees it has on occasion taken alternative approaches to ensure that ship yards, including Ferguson under its previous owners, were not excluded from bidding for those government contracts." This letter was taken by McColl as suggesting that "alternative approaches were acceptable. On this basis FMEL proceeded with the tender." CMAL say they had "no awareness of, or involvement in, these exchanges."

Tenders were submitted by 31 March 2015, then evaluated on cost and quality by CMAL with assistance of a consultant naval architect. CalMac gave technical input. The FMEL design was heavy, with large engines, and the two ship contracts totalled £109.8m. Their bid mentioned a lighter version, on 17 May the consultant asked for details, enabling FMEL to price each ship contract at £50.25m, eventually negotiated down to £48.5m each, a total of £97m. The assessment placed the Remontowa bid second, FMEL's was "the highest quality bid received but also the highest price. Taken together, the FMEL tender achieved the highest overall evaluation score". On 20 August the Transport Scotland Ferries Unit wrote asking the transport minister to approve in principle award of the contracts by CMAL before the tenders expired on 31 August.

Transport Scotland (TS) told CMAL on 21 August that FMEL would be named as preferred bidder at the end of the month. Also on 21 August, FMEL's lawyers said that refund guarantees could not be arranged by CBC, and instead proposed guarantees from its subsidiary, the holding company Ferguson Marine Engineering (Holdings) Limited, but CMAL required independent refund guarantees as specified. Negotiations were far from concluded, and CMAL told TS that announcing the preferred bidder would "materially reduce their negotiating hand"; TS offered CMAL a letter of comfort if needed. On 31 August, First Minister Nicola Sturgeon visited the shipyard and named FMEL as preferred tenderer for the £97m contract, MacKay said it was for dual-fuel ferries, "allowing them to use cleaner fuel and future-proofing them for the advent of tighter regulations around sulphur emissions." Erik Østergaard, Chair of CMAL, said "Subject to agreement on all points, we hope to be in a position to finalise the award of the contract later in September."

CMAL understood that government ministers wanted the ferries built in Scotland by FMEL. On 25 September the CMAL board considered there were "too many risks involved around the refund guarantee matter which are still to be resolved and to that end the Board are not in a position to award the contract to FMEL at this stage." Next day, Østergaard emailed TS that CMAL could not recommend the level of unsecured risk, and proposed rejecting the deal; putting the project on hold, or "re-opening the contract negotiations with Remontowa (with whom we have a track record of doing business) or even a second yard in parallel while continuing negotiations with FMEL." Initially FMEL proposed an unusually small final milestone instalment, reducing their incentive to complete, but on 29 September they increased it to 25%, which with insurance backed guarantee coverage at 25% left CMAL at risk for around half of payments made pre-delivery. CMAL produced a paper setting out the risks. On 9 October TS confirmed that Scottish ministers had noted and accepted the risks and, as CMAL's sole shareholder, approved award of the contracts. Ministers approved £10.6m loan funding to CMAL, with special provisions to protect against the risks and repayments only due after completed ferries were in service. MacKay and Swinney signed off on the contract, and on 16 October contracts were signed between CMAL and FMEL, which MacKay publicly announced that day at the SNP's annual conference in Aberdeen.

In its 2022 report, Audit Scotland said the Builder’s Refund Guarantee (BRG) is "an integral part of shipbuilding contract and is the main source of financial security for a ship buyer", giving the shipbuilder "a significant incentive to build a quality product as the buyer can cancel the contract and claim a full refund of all payments if the ship does not meet its required specification." The contract "places full responsibility and risk for the design and build of the vessels with the shipbuilder and does not allow the buyer to intervene in the running of the project." The lack of a full refund guarantee transferred some of the risk from FMEL to CMAL, so "the contract was not effective when problems emerged."

Construction – Ferguson Marine Engineering Ltd.
The build strategy of Ferguson Marine Engineering Ltd. (FMEL) was to construct vessels 801 (Glen Sannox) and 802 (Glen Rosa) concurrently until they were ready for launch, then complete work on 801 (for May 2018 delivery) before focussing on 802 (for July 2018 delivery). Their dates programme and schedule for payments, initially drafted on 21 August 2015, included 15 milestone events and payments for each vessel to aid their cash flow, rather than the usual five or six. CMAL agreed to this. The contract, signed on 16 October, required the shipbuilder to provide CMAL with detailed drawings and plans 30 days before construction started, and FMEL’s project plan allowed three months to design the relevant hull section, but the agreed milestone schedule had 15 December 2015 as the start of cutting steel. Around then, CMAL informed TS of delays by FMEL in organising work.

To mark the start of construction, the first steel for both vessels was cut on 16 February 2016 at a ceremony attended by transport minister Derek Mackay. Problems increased as FMEL did construction work "at risk", without approval of drawings by CMAL, and without regulation approvals required by the classification society (Lloyd's Register) and the Flag Authority (MCA). Delays built up as incorrect work had to be re-done. TS informed Scottish ministers that the vessels were likely to be late, CMAL said it had cash flow problems due to contract problems and was assisted by accelerated payments and a loan. The vessel's bulbous bow was rough rather than smooth, and condemned by Lloyd's as not fit for purpose, but left uncorrected at the time of the launch. Glen Sannox was launched on 21 November 2017 by the then First Minister Nicola Sturgeon, but was substantially incomplete at the time. The bridge (and other) windows were painted on, and the funnels were not operational, but only for show for the launch.

In July, FMEL had claimed £17.5 million for additional costs, CMAL argued that the claim was not valid, but the amount claimed was increased. In August 2018, new Cabinet Secretary for Transport Michael Matheson said it had been confirmed that the ship was to be delivered in June 2019, followed by two months of crew familiarisation and sea trials. CMAL took legal advice, and completely rejected the claim in March 2019, but FMEL did not contest this in court. The Scottish Government commissioned an independent view in May 2019, and concluded in June 2019 that there was no legal basis for CMAL to pay more than the £97 million fixed price for the contract. In August 2019, FMEL went into administration. By then, FMEL had been paid £83.25 million in contract payments, and £45 million in loan payments from the Scottish Government.

Construction – Ferguson Marine (Port Glasgow) Ltd.
On 16 August 2019 Derek Mackay, now the finance and economy secretary, announced a nationalisation plan to take the shipyard into public ownership.

A report produced after nationalisation indicated that Glen Sannox should be handed over to Caledonian Maritime Assets Ltd (CMAL) in the last quarter of 2021 and that completing the two ferries was likely to increase the total cost to over £207 million. In April 2020, Ferguson Marine contracted with International Contract Engineering, a marine design consultant, to revise the design and outfitting of Glen Sannox in advance of her eventual delivery.

On 10 August 2020, tugs moved Glen Sannox to the Garvel dry dock in Greenock for remedial work including replacement of the bulbous bow, paintwork repair and removal of marine growth. After additional work, the ship returned to the Fergusons shipyard in Port Glasgow on 9 September 2020.

In October 2022, it was announced that Glen Sannox would initially operate only on marine gas oil, as vacuum sensors required for the LNG system were not available.

Further delays to both ferries and increasing costs of £250 million, subsequently rising to £340 million by September 2022, have resulted in controversy surrounding the contract and the lack of transparency in the decision-making process. The Scottish Government announced that key documents relating to the decision-making process had gone missing.

In September 2023, a failed safety audit meant that MV Glen Sannox was further delayed: among other issues, the Maritime and Coastguard Agency (MCA) insisted on the installation of additional staircases as a condition of approving a safety audit. The work meant that planned sea trials of the Glen Sannox were delayed until the first quarter of 2024, raising doubts over whether the ship will be available for the start of the 2024 summer season. Meeting MCA safety regulations ultimately meant that the passenger capacity of both ferries had to be cut from a planned 1,000 to 852. The ship began manufacturer's sea trials on 13 February 2024.

Delivery is planned for 19 August 2024.

LNG and port infrastructure
Marine diesel oil is relatively cheap but very polluting, marine gas oil is cleaner but more expensive. Liquefied natural gas (LNG) is the cleanest burning fossil fuel, with around 20% lower emissions than marine gas oil. LNG is currently shipped  to the Grain LNG Terminal in Kent, then taken by road tankers to five off-grid networks in Scotland, including Stornoway, Oban and Campbelltown. In this way, LNG (from Qatar) is to be brought to Troon and Ardrossan for the ferries. On 24 May 2023, CalMac awarded Molgas Energy UK Ltd the contract to supply and deliver the LNG to the new ferries.

Service
Glen Sannox is being built for the Ardrossan to Brodick crossing. She was originally intended to serve as a running mate to MV Caledonian Isles on the Ardrossan–Brodick and the Ardrossan–Campbeltown crossings. In May 2023, it was announced that Glen Sannox's sister vessel, MV Glen Rosa, would also serve the Arran route. However, the two new Arran ferries will initially be operating between Troon and Brodick for the first two or three years of their career, due to the planned upgrade works for Ardrossan harbour.