Rosyth – Zeebrugge service Water Freight Opportunities for Scotland 07/09/2011 Allan Hull – Route Director

History of the Rosyth/Zeebrugge service Route was inaugurated by Greek ferry operator Attica under the brand of Superfast in 2002 with 2 cruiseferries making 13 trips per fortnight. In order to achieve an 18 hour crossing they had to cross at 23 knots, which burnt over 100 tons per crossing. At their peak they were carrying 41,000 freight units and 180,000 passengers By 2005 they had reduced the service to a 1 ship operation as running costs were outstripping revenues. With a one ship operation they dropped to 100,000 passengers and 23,000 freight units and ultimately withdrew the service in September 2008 citing unsustainable losses

Route Development 2009 & Start up of service in May 2009, with Scottish Viking -Disappointing development in Freight revenue 50% below expectation -Passenger revenue 15% below expectation - Passenger concept not successful with Scottish Viking -During 2010 a careful increase in freight volumes was visible, passenger volumes (still) disappointing

Passenger Performance 2009 & 2010 YTD revenue: 15% below budget - Facilities on Scottish Viking not ideal revenue: 17% below budget - Low/Shoulder season very difficult - Service did profit from Ash Cloud

Freight Performance 2009 & 2010 YTD revenue: 50% of budget - Freight mix different from budgeted - More containers - More trade cars - Fewer (Accompanied) trailers - Resulted in lower average rate revenue: 87% of budget - Positive trend visible in market - Increase in volumes - Potential for increase in rates

Main areas of concern: -Scottish Viking vessel not ideal, alternative Ro/Pax vessel not available against an economically viable charter rate -As a commercial enterprise a loss giving service with no positive outlook could not be maintained passenger results were positively distorted by the impact of the Ash Cloud disruptions Last passenger sailing was on December 14 th 2010 ex Rosyth

Concept for Two pure Ro/Ro vessels to replace Scottish Viking -Change of service schedule to 4 departures/week in each direction -Change of service speed (29hrs crossing) to save bunker consumption -Organisational changes from Channel to North Sea management

RORO vessels Tor Finlandia Length162m Beam20.62m Capacity1900 lane metres Drivers12

RORO vessels Tor Cimbria Length145m Beam20.40m Capacity2026 lane metres Drivers12 RORO Vessels

Results -Budgeted result for 2011 was still loss making with breakeven expected in Support for additional frequency only marginally better than with 3 sailings and not enough to justify maintaining the 4 th sailing. -Significant increase in bunker prices in 2011 of over 40% resulted in BAF climbing from 3.9% to 18.6% which came on top of a stiff rate increase. This reduced the competitiveness of the route compared to Teesport and the Humber. -Service reduced to 3 sailings per week in May and one vessel removed to better balance costs against revenue. -The scale of the business does not warrant direct employment so all support functions are outsourced meaning there are few synergies.

Current schedule Schedule based on 23 hour crossings Minimal port stays – 4 to 6 hours

Outlook and challenges 2011 volumes now likely to be in line with 2010 volumes as capacity is broadly the same as with previous ROPAX vessel The lack of direct Scottish imports acts as a brake to developing volumes. A lot of Scottish exports are shipped through English ports in order to match the import collection Unaccompanied operators need scale to make best use of haulage combinations. This favours concentration around large hubs like the Humber and to a lesser extent, Teesport where there are multiple routes and daily schedules. The hinterland from Rosyth is relatively limited, making local haulage expensive as there is not enough daily mileage. This means hauliers are working on day rates. In theory there is enough volume in the Scottish/Near Continent market to support at least 4 sailings per week, but the economics of the route are very difficult, especially in the current environment of high fuel prices. Come 2015 this will become even more of an issue when the SECA limit is reduced to 0.1% from the current 1.0% pushing fuel costs even higher.

Conclusions -In principle there is enough volume to support a direct link between the Continent and Scotland but it is a niche market. -The further south in the UK the port of entry is the larger the available market becomes. Lower seafreight and higher frequencies counteracts the mileage savings of using more northerly ports. -High operating costs favour scale and economy over frequency and speed -The offer is very much geared to the unaccompanied market. Anything above the drivers legal rest period is seen as wasted time and money for a driver accompanied operator of which there are many in Scotland.