TT-Line's board initially rejected a request for an additional 50 million euro payment ($81 million) for the new Spirit of Tasmania vessels and offered an extra 30 million euro ($48.5 million) instead, a parliamentary inquiry has heard.
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TT-Line representatives, including company chief executive Bernard Dwyer and board chairman Michael Grainger, appeared before the Public Accounts Committee on Friday to provide detail about the delivery of the new Spirit vessels, and variation to the contact with shipbuilder Rauma Marine Constructions.
Mr Grainger said the contract price was first adjusted upwards in April 2022 by 8 million euros to cover steel price increases, and again the following month as the result of the invasion of Ukraine by Russia.
There were two changes to the contract regarding to construction milestones in the first half of 2023, and another change in August that year in relation to payment timelines.
"We were made aware of RMC's financial difficulty in October," Mr Grainger said
"They were having trouble paying their subcontractors, they made it quite clear that their costs had escalated to an extent that they couldn't continue, but they never came to us with a request for for additional funding."
He said TT-Line received approval from Tascorp in December to increase the vessel replacement credit line from $700 million to $990 million.
Mr Grainger said the increase was in recognition of the significant cost increases to planned port infrastructure upgrades in Devonport to accommodate the new vessels.
He said Treasurer Michael Ferguson was advised about this in mid-December, as well as TT-Line's concerns about RMC's financial situation.
Mr Grainger said RMC requested a renegotiation of the contract price on March 6, to increase the overall price by 50 million euros.
He said an offer by TT-Line to lift the price by 30 million euros was rejected by the company, and the board then agreed to its original request at a meeting on March 15.
Mr Grainger said Mr Ferguson was made aware of the outcome following the board meeting.
Mr Dwyer denied the additional payment was a bailout.
"If the yard had have gone into receivership, we would have lost total control," he said.
"We would have no control over whether we could buy a vessel or whether we could take this to another yard."
Mr Dwyer said it would have taken a long time to have funds for the project returned to TT-Line and a new shipbuilder would then need to be found.
"The government have said plenty of times that we need these vessels replaced in 2028," he said.
"We're ahead of that by at least two or three years, and to lose that would have been catastrophic for this company, it would be catastrophic for the tourism industry for the state, and for the freight industry as well."
Political reporter for Australian Community Media, based in Hobart.
Political reporter for Australian Community Media, based in Hobart.
