By JOHN ROBERTSON
A diplomatic row is brewing with Faroe over Shetland’s lost millions in the crippled shipping line Smyril which the government there has had to step in to save.
SIC convener Sandy Cluness has written to the Faroese prime minister Kaj Leo Johannesen demanding to know how the government intends returning Shetland’s £4.2m investment in the company, without which it could not have built the new Norröna five years ago. The letter was despatched nearly two months ago but the Faroese have yet to reply.
According to a confidential council report seen by The Shetland Times, the convener asked Mr Johannesen and the Faroese government to start discussions on how the original investment can be returned and/or the Norröna resume her summer service to Shetland.
He told the prime minister Shetland had twice been prepared to put more money into Smyril for what Shetland believed were viable proposals for the company’s future. But the Smyril board had chosen to pursue other strategies which had not included Shetland and which made a loss.
Since the letter was sent on 28th November the Faroese government has essentially nationalised the company after more unexpected losses of nearly £5m due to fuel costs and low passenger numbers.
At an extraordinary general meeting the decision was taken to water down the value of the share capital by 70 per cent and for Smyril debt to be converted to new shares for two existing major Faroese shareholders. The Faroese government also pumped in an extra £3.7m. The result was that Shetland’s 16 per cent shareholding has been diluted to around seven per cent, worth less than £1.1m. All the directors have apparently been changed too.
Shetland’s interests had been represented at the meeting by a Faroese lawyer hired by Shetland Development Trust to vote on its behalf. But it lost out on both crucial votes.
Last year Smyril kicked the trust’s representative Bobby Hunter off its board of directors at the behest of the majority shareholders, Faroese firm Framtak and TF Holdings of Iceland.
The matter was due to be considered by the SIC development committee in private yesterday as we went to press. Mr Cluness denied there had been a falling out, and insisted the tone of the letter had been polite.