FIDB Board Meeting for September 2005

FALKLAND ISLANDS DEVELOPMENT CORPORATION BOARD MEETING: SEPTEMBER REPORT

 

By J. Brock (FINN)

 

A meeting of the Falkland Islands Development board took place in the Chamber of Commerce Function Room at 0900 on Tuesday, 13 September 2005.  Cllr. Summers chaired the meeting.  The board meeting was divided into two parts:  Part one was where the public and press could attend and the other part where public and press were excluded.  This report will cover the public access part of the meeting.

 

After apologies, the confirmation of the minutes of the FIDB meeting held on 19 July 2005 was signed.  There were two discussions arising from the minutes of 19 July.  One of them concerned ending FIDC involvement with Byron-McKay in their efforts to develop port services.  FIDC General Manager Julian Morris mentioned that FIDC should be seen to work with and support local companies to develop their viable ideas.  Board member, Stuart Wallace asked whether FIG were involved in the tender process for the work Byron-McKay were doing and Julian Morris said they were very much involved and wished to encourage and support local businesses with the input and support of local users.  The discussion then revolved around whether, after having fully supported the project, there should be a gradual withdrawal of support or not.

 

The second item was about promotional bags for wool products.  FIDC had 5,000 bags for wool products designed and delivered at a cost of £3,000.00 which, according to Fiona Didlick, brought costs down considerably.  Julian Morris took responsibility for the purchase of the bags and said they could have cost as much as £10,000.00.  Cllr. Summers said that last time the discussion was for a more generic bag so that a variety of products - not just wool and that he thought the discussion was going back to the group before any purchase was made.  Mrs Didlick said that the idea was floated amongst users and producers and that they were willing to shoulder some of the costs

 

Designed bags were intended to add value to the products in them and that the 5,000 bags were produced on a trial basis.  Producers would say whether or not they could recover the cost of the bags that would be valued at 60p each.  Cllr Birmingham added that if a Jersey cost $100.00 then an extra $1.00 a bag wouldn’t be difficult to recover.  He further suggested that 1,000 bags could be put out for a trial and that producers could purchase the rest. 

 

Board Member, Stuart Wallace said that he didn’t think anyone would die in the ditch over £3,000.00 and he was happy to let the trial go ahead at a loss.  He also added that once the trial was over there should be feedback and the next lot of bags should be available on a commercial basis.  Cllr Summers stressed the importance of feedback.  Mrs. Didlick said that she expected to see the impact of the bags on pricing and on the perception of Falklands Wool as a quality product.

 

Personal and business declarations of interest regarding papers to be discussed   Stuart Wallace declared his interest in the Aquaculture paper as well as the one on FIMCO and Cllr. Luxton declared his interest on the meat paper as he is part owner of a farm.

 

The Aquaculture Paper produced by Julian Morris identified six species that appeared in the JDR Commercial Aquaculture Study.  They were American Lobster, Atlantic Cod, Oysters, Sable Fish, Scallops and Wolf fish.  Cllr Birmingham asked about the introduced species escaping and decimating the food chain of the indigenous species - and even the species.  He was assured by Mr. Morris that the tanks holding these introduced species would be land-based and therefore there would be no accidental introduction of the imported species into the habitat of indigenous species.  Cllr Birmingham had asked about involving Falklands Conservation in the project and Mr. Morris said they will be consulted when the project reached the commercial stage.  Cllr Summers said it didn’t matter a great deal but it would do no harm in putting it before Falklands Conservation and even the Director of Fisheries at this stage.

 

Stuart Wallace brought up the fact that the Tooth-fish option was not published in the report and said that even though Tooth-fish might be technically expensive to produce the profit might be worth the initial expenditure.  He was hoping the list wasn’t set in stone.  Cllr Summers said that Mr. Wallace had raised a valuable point and that he thought that at this stage the analysis was simplistic and that profit would warrant research.  As to what’s happening next, FIDC would pay to refine the proposal and have a more detailed study into each commercial species.  Julian Morris said that costs for phase 2 - the detailed species study - were included in the original approved funds.  Cllr Summers asked that the study paper be made available to the board.

 

The Activity Report went on to say that there were 40 applicants for the Aquaculture specialist and that the list would be shortened, with some applicants being brought in for a final interview before the successful candidate is chosen.  There would be a short list by the end of the week.

 

In Coastal shipping matters, two recent trips to the West Mr. Morris met 20 farmers and business owners and their individual situations were discussed.  The report goes on to say:  “A key issue of concern was wool shipments for the coming season.  The idea of a trial East-West link during the coming summer season was canvassed, for which there was widespread support.  Follow-up meetings have been held with the RBA who whilst understandably wary, were broadly cautiously supportive.  ISL are now appraising their schedule to see how this might work before discussing with customers on the West and Islands.” 

 

Several board members questioned word usage of “wary” and “broadly cautiously supportive.” And Mr. Morris said that there would be some problems to iron out before the trial service of a weekly ferry could commence.  The delivery of farm fuel would be no problem as is envisaged that there would be a dedicated ferry as well as the Tamar.  Board Member Ron Binnie suggested that the Rural Business Association and the Falkland Islands Development Board bring up the first proposal and work together on it.

 

A discussion about skins followed with the revelation that the consignment had missed the August St. Brandon Voyage but that the customer was still willing to take the shipment at a later date.  There is the possibility of a price reduction if the final customer chooses to dispute the timing.   Stuart Wallace brought up the question of skin quality and Julian Morris explained that Simunovic graded Falklands skins and put them in with their own skins of the same grade and shipped them on.  Cllr. Luxton brought up the fact that tanned skins originating in the Falklands and tanned in the UK still could raise a considerable profit even with the cost of tanning thrown in.  Tourists would want to buy the skins.  He suggested that they could retail for £40.00. 

 

The Mark of Origin, Civilian Air-bridge and Aquaculture Seminar drew little discussion but there was an item dealing with the Falkland Islands Meat Company (FIMCO) that was approved.

 

The next item on the agenda was Meat Marketing Development. Julian Morris said that FIDC owns all of the fixed assets and leases them to FIMCo at no charge.  His report went on to say: “In FIMCo’s 2005/06 FIG budget application there was no funding for the developing the local market, as FIMCo had not taken the decision to enter the market.  £25,000 was included in the FIDC budget to provide the additional equipment to service the local market if required.” 

 

Mr. Morris went on to say the decision to enter the local market was taken following the beef day when there was unanimous agreement that action was needed to help farmers deal with a surplus of livestock and local retailers who wanted to purchase more consistently supplied quality meat.  He continued:  “Growing local market sales volumes and margins to cover costs arising in the non-export period is one of the two strategic priorities. This growth will only be achieved by improving the total product offering to both retailers and consumers.  To do this, excellence has to be achieved at every stage of the supply chain.” 

 

“Initial market entry has been relatively smooth, with FIMCo seeking high qualities of processing, reliability and presentation,” Mr. Morris said.  “Whilst steps have been taken to improve underlying livestock, this is not easy.  However, sales are very encouraging, as is customer feedback.”

 

Some board members said that there should be lower over the counter costs for, rump steak, in that the fat depth on some of the animals was not deep enough to produce quality rump steak.  The meat had to be cut and processed differently in order to realize a better price.  Cllr. Summers brought up the fact that poor quality carcasses cost more money to butcher because more work had to be done on them to ensure standards of processing.

 

Funds have been approved for a meat multi deck and a refrigerated delivery vehicle To ensure that a constant temperature is maintained from the chiller to the customer.    Meat is currently meat delivered using a conventional Land Rover 110 at ambient temperature.  Whilst acceptable in the winter, in the summer an hour spent at +5-6 degrees will break the cold chain and: Reduce shelf life by a day and b. Reduce salability, as warmer meat bleeds into the trays more and the meat looses its bloom. 

 

A meat multi deck rather than a dairy chiller will improve: a. Shelf life by 2-3 days,   b. Re-format product by reducing waste, c. Improve sales by not having to open door, d. Access to markets such as the MoD. 

 

Investment items would be: Delivery vehicle, £10,000, Labelling, £3,000, Meat Multi decks, £5,000, Equipment, £3,500, Promotions, £3,500. Total, £25,000.  The payback, roughly estimated would be projected sales of £1,000 per week and £15,000 per annum with a payback over 19 months.  The grant was approved.

 

The Coastal Shipping Consultancy Report was carried out by Polarkonsult of Harstad, Norway with funds approved by FIDB in the April meeting.  Tim Cotter presented the following multi-media paper.

 

Following meetings of the New Haven working party, the information on the subject had been received from a number of different and diverse quarters.  The two main points we wanted Polarkonsult to address were that the basic configuration of a cargo vessel/ferry that would provide local shipping services around the Falkland Islands and that the types of infrastructure required together with indicative costs.

 

Polarkonsult’s  answers would give us a guide on the size and type of the vessel, indication of possible capital costs, indication of possible operating costs, availability of suitable vessels, whether we should containerise cargo or not and the possibility of converting the Tamar FI to cope with larger vehicles.  It was not FIDC’s preference to commission a new design, but an off-the-shelf solution if possible.

 

The consultative process was to be a reduced a basic desktop study as FIDC was to rely mainly on the input of local seafarers as to local conditions.  A variety of port combinations and base ports were considered to present a solution that maintained a regular service to the Islands but also included an East West link.

Strategic and policy issues included that the ship must be in the region of 40-50m long. This is principally due to the ability to cope with the bulk of the Falklands weather while maintaining a regular service. Much larger than this and the operation of the Islands re-supply becomes difficult due to increased draught. Smaller vessels were discounted because of operational limitations in bad weather. This point dispels any thought that the cross sound service could routinely be operated by a landing craft or similar. The 1988 PKF Coastal Shipping report came to the same conclusion. A vessel built to the smaller 24m or workboat limit to avoid MCA rules would also not be deemed viable. This is also the view of those with long experience in Falkland Islands coastal shipping.

 

The next is to gain any useful advantage over the current operation, a replacement vessel has to offer a roll‑on/roll-off (ro-ro). The capability for trucks and heavier plant would be a major step forward. This aspect was studied in detail by the report. Add to this a weekly East -West link is only possible by; dropping the existing individual farm/settlement delivery service to the West and not servicing the international trade to South America.

 

The Ferry operation should be between New Haven and Port Howard. Operation to Fox Bay from any port on the East would increase the journey time to the extent that the ship would require extra amenities for passengers. A shorter journey time would enable crossings to be made taking advantage of good weather windows. However, a regular service to Fox Bay would be possible. Optimum use has to be made of the road network to reduce shipping costs. There has been comment that the West road network might not cope with the extra traffic. This detail was beyond the scope of Polarkonsult’s brief but the Highways Engineer has stated that the West roads are rated for 38 tonnes in Summer and 15 tonnes in Winter. In any case, all heavier road movements (wool, plant and sheep) would be in the summer when the roads are rated at 38 tonnes. The East road network has coped with the transfer of freight traffic from ship to road and maintenance has been manageable.

 

The military have shown interest in using a ferry to service their sites on the West. They broadly agreed that duplication of shipping services is wasteful and unnecessary. However, while the proposed ship and freight configuration has the capacity to handle the probable military freight and fuel requirement, the success of any projected operation does not hinge on their inclusion.  Current developments in other shipping areas may totally eliminate the need for the coastal shipping vessel to travel to Chile except for periodic maintenance and inspection. Even so, any vessel would have to have the sea-keeping ability to do the voyage if required.  There is a possibility that a regular East West ferry service may reduce the demand on FIGAS both regarding freight and passengers

 

Operational and practical issues include the service to the other islands should be unaffected although the service may be could be more reliable and more frequent. This may be because their would be less demand on the vessel as total voyage steaming times would be far less.  The ability to carry trucks also gives the option to carry containers on trailers directly to farms. This could enable a farm to load a container, which could be transported directly to the buyer, eliminating handling in transit. There is no plan for this ship to carry containers as deck cargo as the handling would require at least a 15-20 tonne crane. In turn, this would require a bigger ship.

 

The vessel’s base would be not necessarily be Stanley or Mare Harbour and a number of different operating strategies and base ports are possible.  Shipping regulations limit the number of passengers on a non-passenger ship to 12. The Tamar FI operates the summer ferry service with a special dispensation for up to 30 under certain conditions. A replacement ship may not enjoy these benefits unless ship classed to carry passengers. There is a possibility of more than 12 passengers being carried routinely.  Bulk fuel could be stocked at Fox Bay or Port Howard and collected/distributed as required.

A twice a week service (e.g. Friday and Sunday) would enable people to make a complete round trip in a within a week or over a weekend.  There are regulations regarding the carriage of petrol, batteries, gas cylinders and other potentially hazardous materials on passenger crossings. These would have to be addressed

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their comments and thoughts.   FIDC does not agree with everything in the report. However, there are some clear conclusions that reinforce the views of local mariners especially on the vessel’s size and capability.

 

On FIDC has circulated this report to local principals currently involved in Falkland Islands coastal shipping for the grounds of increased complexity and associated costs, FIDC resisted Polarkonsult’s view that that a bow visor and ramp was desirable. Subsequent discussions indicate that in the context of the Falkland Islands, not only would this option be easier to manoeuvre into the shore for loading, but the extent and the cost of the shore infrastructure would be less.

 

Major points that FIDC doesn’t agree on include: The assumption that FIG/FIDC can afford £6M for a new build. This has probably been based on the European model where EU funds seems to be paying for a great many transport developments. The crewing level has no contingency for seatruck operation, live stock handing etc.  The terminal arrangements may be too complicated and expensive given our tidal range. The private sector is probably capable of constructing a simpler solution.

 

 

The costs of a new vessel were supplied and it is worth noting that Polarkonsult stated that the vessel size and cost of steel only accounts for some 20%. The cost of other details, crane, machinery, navigation equipment, accommodation etc. will still be the same. Therefore making the ship smaller will not save much on capital cost but would reduce operation capability while maintaining very similar operating costs.

 

Polarkonsult seem to have answered the first question on the type and size of vessel.. Their proposal is more complex than expected but the size and capability is broadly agreed. Ole Steen Knudsen proposed a similar but smaller vessel in the 1988 PKF report.  A typical shore infrastructure was described but the detailed engineering drawings have been excluded from the published version of the report. We acknowledge that it would be difficult to assess the cost of a similar structure here in the Islands.   Options on converting the Tamar FI and the availability of other vessels were addressed. In reality, there is no off-the-shelf vessel that could both serve as a ferry and have a sea-truck handling capability to serve the Islands.

 

In Conclusion, this report is not an absolute solution but should help us to focus on a practical improved transport option that may cost less than the present coastal shipping arrangement. However, to get the full benefit, the vessel requires a different configuration. This could be potentially achieved by: Converting the Tamar, Buying second-hand and modifying or Commissioning a new build.

 

In the discussion that followed Mr. Cotter’s report Julian Morris mentioned that some people wanted to bring a landing craft here but, due to the conditions and 20 mile stretch between Newhaven and Port Howard, it would not be practical.  A Ro-Ro Ferry with a bow ramp is preferred now that safety issues have been dealt with.  Mr. Binnie mentioned that he was unsure about the larger and smaller options but thought a vessel in between would be suitable.

 

Finally, in the financial discussion, funding from the European Investment Bank was mentioned.  At the April Board meeting the Chairman requested that FIDC look into the availability of funding from the European Investment Bank. Opportunities for funding from other bodies have also been investigated, a short description of these is also provided.   According to a report produced for the meeting, the funding available from the investment bank is in the form of loans, credit lines, equity and quasi-equity finance. The bank charges interest rates that vary from project to project, but are generally below LIBOR rates. Other charges include set up fees and commitment fees on funds not yet drawn down. Any organisation or company within the European Union or ACP/OCT countries may apply, but the EIB only directly finances very large projects. Funding for small and medium enterprises is provided through partnerships with local institutions such as banks and government agencies.

 

Other Funds come from the European Investment Fund.  This is similar to the Investment Bank but is used for projects that don’t qualify for EIB funding, and interest rates charged are at commercial levels. They include the OPEC Fund for International Development, provides loans and credit lines to fund projects in developing countries that are not members of OPEC. Interest rates depend on the projects financed and there are also set-up charges. And Inter-American Development Bank that Provides funding for projects in Latin America and the Caribbean to governments, development corporations and private companies. Borrowing nations must be members of the bank and rates are dependent on the current cost of raising capital.

 

There is a grant available from ProInvest, funded by the European Union 9^th EDF. This is aimed at strengthening the capacity of providers of microfinance in the ACP and OCT countries by providing an 80% grant for approved projects. However, the minimum amount funded is €250,000 which would mean that the minimum total project size is the equivalent of £212K.

The public section of the meeting ended at 1055.