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Marine Log

August 18, 2006

BC Ferries still negotiating for replacement ferry

British Columbia Ferry Services Inc. (BC Ferries) announced first quarter results that show net earnings before extraordinary gains of Canadian $14.9 million for the three months ended June 30, 2006. Net earnings in the same quarter last year were C$14.4 million.

BC Ferries typically generates higher net earnings in the spring and summer quarters, which are subsequently reduced by net losses in the last two quarters of its fiscal year.

Insurance proceeds of Canadian $67.9 million, net of deductible, resulting from the March 22, 2006, grounding and subsequent sinking of the Queen of the North were received in May 2006. In accordance with generally accepted accounting principles, C$6.6 million of the insurance proceeds were recorded in fiscal 2006 to offset insurable losses. An extraordinary gain of C$61.3 million was reported in the first quarter of fiscal 2007 and will be used in the purchase of a replacement vessel for the Queen of the North.

Canadian press reports have named the replacement vessel as the two year old Sonia, managed by TTT Tomasos Transport & Tourism, part of Italy's Tomasos Group. The 117-meter Sonia, built in 2004, carries 1,200 passengers and crew and 220 vehicles and has a speed of 22 knots, But the BC Ferries quarterly report says only that it "it is continuing to negotiate an agreement for a replacement vessel."

During the three months ended June 30, 2006, revenues increased by 0.7 per cent to C$146.2 million, while total expenses increased by 0.4 per cent to $131.3 million, compared to the first quarter last year. In the same period, C$23.5 million was invested in vessels, terminals and information systems to increase operating efficiencies and improve customer service.

"All of our retained earnings are invested in our vessel, terminal and infrastructure revitalization programs to improve safety and the quality of ferry service for our customers," said BC Ferries' President and CEO, David L. Hahn.

Capital expenditures included:

  • C$15.3 million in vessel upgrades and modifications, including part of a C$38.2 million mid-life upgrade to the Queen of Surrey. The upgrade, which prepares the vessel for another 20 years of service, included safety, structural and mechanical improvements, as well as enhanced and expanded passenger amenities.
  • C$5.6 million in marine structures.
  • C$1.4 million in software development to make improvements in areas such as reservations and retail and food services.
  • C$0.9 million in terminal and building upgrades.

On June 19, 2006, as a result of the continued high cost of fuel and the large balance in the fuel deferral accounts, the BC Ferry Commissioner approved an additional fuel surcharge of 3.2 per cent on BC Ferries' major routes connecting Vancouver Island to the Lower Mainland and 9.6 per cent on all other routes, except the Mill Bay Brentwood Bay run, effective June 22, 2006.

"The cost of fuel remains a major concern for BC Ferries," said Hahn. "We are continuing our efforts to reduce fuel consumption by implementing a wide variety of fuel saving measures ranging from operating our vessels more efficiently to installing new, more fuel-efficient engines on some of our vessels and fuel monitoring systems on others."

Over the past three years, BC Ferries' annual fuel consumption has decreased by more than 7 million liters or 5.6 per cent.

BC Ferries' fuel consumption reduction plan is available at:http://www.bcferries.com/files/AboutBCF/BCF_Fuel_Savings_Plan.pdf

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