But surely the least favourable change for the Company would not be just a tinkering with the fare structure or fuel surcharge, for example, but a successful challenge to the very legality of the User Agreement.

IOM Steam Packet Company (IOMSPC) CEO, Mark Woodward informed the Manx Herald the possible challenge, to the User Agreement, by Seaside Shipping is of little concern to the Company compared to the scrutiny by the Office of Fair Trading (OFT) or Tynwald Select Committees. In essence, the impression we gained is the IOMSPC expect the Government to stand by, and uphold, the agreement made with the Company; and so they do not consider the agreement to be facing any realistic threat.

This stance would be understandable had the evidence, given at yesterday’s Tynwald Select Committee hearing (Tue 2^nd June), demonstrated no concern with the scrutiny, by politicians, in the past year; and the potential for OFT intervention in the affairs of the Company.

It was made clear - during evidence given by Mr Woodward, IOMSPC Chairman, Robert Quayle and two Directors of Macquarie IOM (MIOM) Dyson Blogg and Gordon Parsons – the Company is concerned by the level of scrutiny; as it is, apparently, having an impact on investor and shareholder confidence.

It is impossible to judge this concern relates to anything other than the application and interpretation of the User Agreement; and worries that changes could come about which are less favourable for the Company.

But surely the least favourable change for the Company would not be just a tinkering with the fare structure or fuel surcharge, for example, but a successful challenge to the very legality of the User Agreement.

The Manx Herald contacted a spokesman from Seaside Shipping to inquire if a challenge is still planned; and was informed the case is still ongoing and they think they have a strong case.

Returning to the subject of the Select Committee hearing, this was essentially arranged to question the IOMSPC about the accounts for the year ending 31^st March, 2007, and the draft accounts for 2008; which had not been available when the Committee published their report in November 2008.

A number of questions had been sent, in writing, to the Company in advance and written responses provided; and this was the opportunity to explore these in more depth. On a number of occasions, during the session, Mr Woodward said the answer the Committee was seeking was in the written responses; but Mr Rodan requested, for the record, they be given verbally.

Mr Quayle informed the Committee the Company was delighted to come and thanked them for the invitation.

Committee Chairman, Steve Rodan SHK, set the tone of the questioning from the beginning, querying turnover and profitability figures, and it soon became apparent where the main areas of concern were for the Committee.

Macquarie has quite a complex company structure, with many levels of management, and the Committee expressed the concern money was flowing out of the IOMSPC to pay substantial management fees, £2.9m recently; and this was having a negative impact on the Company’s running costs and thus the fares charged to customers.

Mr Dyson and Mr Parsons disagreed and said shareholders were the ones being disadvantaged as the fees were paid before any dividend was paid; so as has happened in this year, and for next year, no dividend will be paid as there is insufficient profit to pay both. Mr Dyson, following further questioning, on this subject, by Committee advisor, Professor Baird, said they would perhaps reflect on the questions, and answers given and come back with a revised answer.

Asked by Graham Cregeen MHK what services MIOM provided to the Company to warrant their fees; Mr Bogg explained they assist the Directors with strategy, capital investment decisions, business opportunities, refinancing debt and business performance etc.

The Committee suggested it appeared they were providing some services they would expect the Board and management to perform.

The Company’s ability to sustain the level of debt, and meet interest payments, was queried; especially, as Mr Rodan suggested, the Company is highly leveraged.

Mr Parsons stated him and his fellow Directors have a fiduciary duty to ensure the Company is a going concern; and Mr Bogg added they undertook the necessary work to ensure the debt can be paid when it is due. Mr Woodward, at this point, interjected the Committee was straying from its remit and was touching on issues which are commercially sensitive. Mr Rodan noted what he was saying.

How Macquarie structured itself was also thought, by Mr Quayle, to be a matter for them and their shareholders and not for the Committee or the IOMSPC. However, if was acknowledged by Mr Woodward if some simplification and improvements could be made, and savings identified, then it would be likely they would happen.

When the planned refinancing of the Company’s substantial debt, in 2010, was discussed Mr Bogg said the “regulatory uncertainty”, created by the current level of scrutiny, is causing the lenders and shareholders to question “whether the government of the IOM is committed to the User Agreement going forward.”

Furthermore, he explained, it could affect the Company’s ability to make investment in the business and run it if the profitability is hit. So any doubts raised about the User Agreement are a serious issue for the Company.

Juan Turner MLC suggested this is no threat to the agreement; but Mr Parsons said they had to understand the banks involved are at some distance to the IOM and just see regulatory scrutiny. They justifiably worry what is the purpose of the scrutiny if no change is anticipated. So it has an effect on their perception of the matter.

Mr Turner, in response, asked if he agreed “good scrutiny can be of assistance”; to which Mr Parsons concurred.

Mr Rodan reassured Mr Quayle the Committee is only looking at the accounts and will not be making any recommendations when they report back to Tynwald.

Mr Woodward informed the Committee the business has to adapt to different market conditions, brought about by the changing economic climate, and the arrival of Manannan has coincided with a downturn in passenger numbers when it had been expected to deal with a growth in traffic.

However, he explained Macquarie, and the pension fund shareholders, take a long term view; and are looking for stable and steady returns over a long period. Companies, such as the IOMSPC, are seen to satisfy these criteria.

It was pointed out no dividends were currently being paid because of lower profits but over time a reasonable, and not excessive as maybe being suggested, return would be paid to the pension companies.

Drawing the session to a close Mr Quayle said he was intrigued by the inclusion of Treasury officials in the Committee and thought it unusual.

Mr Rodan assured him they were offering advice in a professional capacity and were not acting as government advisors; to which Mr Quayle sought confirmation there was a total separation between the Committee and the Government. Mr Rodan said that was so and they were advising purely on matters of interpretation of the financial information.

Mr Quayle thanked him and for the “favourable hearing” they had received. He stated the IOMSPC has provided a good service to the Island for a long time and intended to go on providing the service for a long time to come.

Mr Rodan thanked Mr Quayle and his colleagues for the open and forth coming manner in which they dealt with the Committee’s written and oral questions.

The Manx Herald spoke to Mr Woodward after the hearing and asked him, in addition to the Seaside Shipping case, about the new boat and plans for the other fast craft.

Manannan will become the core service provider, he said, but Snaefell will be retained to give flexibility to the service and to reduce the need to charter vessels at TT time etc. However, Viking will be released at the end of its current charter and this will provide a saving to the Company.

Mr Woodward is adamant the Manannan is the right boat for the job and they have no concerns with its ability to operate a reliable service in the Irish Sea. In fact the Company is anticipating a request to increase the wave height restriction on fast craft to allow the boat to sail in up to 4m high seas. He also pointed out a full stability pack was fitted by the Company during its recent refit.

When asked, considering the extra capacity on the boat, and the evidence given earlier the number of passengers has dropped, if special offers would be introduced to encourage additional business, he stated they already have and prices are cheaper than they were 15 years ago.

Manx Herald readers may have a different view and comments on this subject will undoubtedly make interesting reading.

The Committee’s report is expected to be included on the July Tynwald Order Paper.