Spirit of Tasmania Finnish shipbuilder RMC to be underwritten by its government after cost blowout from Ukraine war

The two new Spirit of Tasmania vessels are under construction in Finland. (Supplied: RMC)

Bass Strait is one of the world's most treacherous bodies of water.

And building modern ferries to make the voyage between Devonport and the Victorian port of Geelong has proven almost as unpredictable for the Tasmanian government.

While the two current Spirit of Tasmania vessels — built in 1998 — continue to operate, their two replacements remain under construction in a shipyard in Finland, where uncertainty continues to grow.

Last week, the Tasmanian government confirmed that Spirit operator, TT-Line, had agreed in March to pay an additional $81 million to Finnish shipbuilder Rauma Marine Constructions (RMC).

RMC had faced growing financial problems due, in part, to increasing material costs from the war in Ukraine.

This week, it was confirmed the Finnish government had committed to match this amount — and also to underwrite the future financial viability of RMC.

In return, TT-Line removed a key clause from the contract: RMC would no longer have to pay late fees.

The vessels are already behind schedule — and further delays remain a possibility.

Transport minister Eric Abetz told parliament that the TT-Line board had no other option.

"The board considered this the only viable option, as the alternative was to potentially go back to market for a new ship build. This would have cost more than we are now paying and resulted in a significant additional delay," he said.

"It is important to note that given the increase in materials, the vessels are now worth more."

Region calling for certainty over delivery date

Economist Saul Eslake estimated that every 12 months of delays would cost the Tasmanian economy $350 million.

Devonport mayor Alison Jarman told ABC Radio that it was frustrating for the region, with tourism operators keen for the increased traffic with the new vessels.

"If we could just get a real date, that would really be very helpful in the first instance," she said.

"It just gets hard when they keep telling us when, and then having to move that date."

In a statement, TT-Line said the process would be worthwhile in the long run.

"The vessels are going to have an expected 30-year life on Bass Strait, so a delivery delay of this magnitude is not a major cause for concern," the statement reads.

"For the obvious reasons it is important that the company does not rush any of this to ensure Tasmania has the best and most reliable ships we can to operate on Bass Strait between Devonport and Geelong."

Spirit saga drags on for seven years

It's the latest series of challenges facing the Spirit of Tasmania replacement builds.

When complete, they will increase passenger capacity from 1,400 to 1,800, bring the number of cabins from 222 to 301, and allow for 40-per-cent more passenger and freight vehicles.

But it's been a long journey so far.

The government first announced the new Spirits in 2017, and signed a $714 million contract with German shipbuilder FSG for their completion by 2021.

In early 2020, this contract was cancelled after FSG went under, and the government signed a memorandum of understanding with RMC.

Then-premier Peter Gutwein pulled out of this months later at the height of COVID, to instead investigate whether Australian companies, such as Austal in Perth, could do the work instead.

After another nine months, the government went back to RMC and the now $850m contracts were signed in April 2021 with promises of a first ship in 2023, and a second in 2024.

By late-2022, RMC was facing financial problems — blaming supply-chain disruptions caused by the COVID pandemic and the war in Ukraine — and the company restructured.

The financial issues persisted in 2023, and in December, TT-Line — a government company with an independent board — voiced its concerns verbally to Tasmanian treasurer Michael Ferguson.

"In this conversation, TT-Line did not provide formal advice or any specific details and appeared to base those concerns on marine industry intelligence," Mr Ferguson told parliament.

"There was no financial or other request at this time, or even any suggestion of the need for TT Line to take any action."

Payment timing becomes a political problem

The timing of TT-Line's decision to pay more to RMC has faced scrutiny since parliament returned last week, with the Labor opposition focusing its questions on the issue.

The government entered caretaker mode for the election on February 14, and TT-Line held a briefing with the government and opposition on February 29.

TT-Line then made its decision to pay $81 million to RMC — and to change the previously fixed price contract — on March 21. This was two days before the election.

Mr Ferguson was informed on April 5, after the Finnish government agreed to underwrite RMC.

On April 9, he was asked on ABC Radio Hobart whether the first ship would be delivered by August, as previously stated, and he agreed.

"At the time I took that question, I was working on what had been advised most recently to me," Mr Ferguson told parliament.

The delivery date has been pushed back — the first vessel is for the third quarter of 2024, and the second is due for the first quarter of 2025.

Labor leader Dean Winter questioned whether the government had "bungled" the contracts.

"How is it that the government of Finland knew more about a secret $80 million payment than you did?" he asked.

"Have you and your minority coalition government lost control of TT-Line and its board?"

Berth upgrades still need to be finished

Even when construction finishes on the two Spirit vessels, they aren't guaranteed to enter immediate service.

Local fit-out will need to occur, and berths at Devonport need to be upgraded to accommodate the significantly larger ships.

TasPorts is close to finishing its work, before it hands over to TT-Line.

But in March, TT-Line withdrew its preferred contractor status for the works due to "significant price increases", and has gone back to the market.

Premier Jeremy Rockliff said he expected the works would be finished in time, and that the state had contractual protection if the ships had faults.

"It is my expectation that all best efforts will be made to ensure there is appropriate infrastructure in place at East Devonport to support the arrival of the new ships," he said.

"The ships need to be fully compliant with all the contractual obligations.

"If the vessels do not meet all operational requirements at that time, TT-Line will not accept delivery and will require whatever remediation is required to ensure compliance with the contracts."

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