Maine has not provided any money for the new ferry service between Portland and Nova Scotia, but that may soon change. Negotiations now underway could lead the state to provide a loan or loan guarantees for the ferry operator, which avoided a cash-flow crunch when Nova Scotia’s government agreed last week to advance it more money.
The Finance Authority of Maine is working with an unidentified Maine bank to help the operator of the Nova Star obtain a $5 million line of credit that it needs to pay operating expenses for its service, which began May 15. The service has had a shaky start, with officials in Nova Scotia acknowledging that its passenger volumes have been lower than they had hoped.
While a commercial bank would provide the line of credit, the Finance Authority of Maine could guarantee all or a portion of the debt.
The quasi-state agency could potentially provide its own direct loan to the company for as much as $1 million from a program that provides loans to financially strapped companies and startups, said Bruce Wagner, the agency’s newly hired CEO.
As the ferry service grows, it will bring thousands of tourists to Maine and create jobs here and in Nova Scotia, said George Gervais, commissioner of the Maine Department of Economic and Community Development.
Building up the service will take an international effort, he said. While Maine can’t subsidize the service as Nova Scotia is doing, he said, state officials told the provincial government that they can help the ferry operator, Nova Star Cruises Ltd., secure private financing.
The state is also promoting the service in its tourism marketing efforts, Gervais said.
“We pledged to do all we can within our bounds to make this venture a success,” he said.
In a letter last summer to Nova Scotia Premier Darrel Dexter, Gov. Paul LePage said he would help the company secure a $5 million line of credit.
The company has been trying to secure the line of credit since November, when its agreement with Nova Scotia was finalized.
The Finance Authority of Maine can work with a bank to guarantee a loan, which lowers the risk to the lender, Wagner said. The agency would be responsible for paying the loan back if the ferry operator could not.
He said he expects that financing will be secured by the end of this summer.
Dennis Bailey, a spokesman for Nova Star Cruises, said the company is optimistic that it will get the financing soon, but it does not want to release any information until negotiations are complete.
Nova Star Cruises is registered in Canada and is a joint venture between Quest Navigation Inc., which is based in Maine, and ST Marine, a shipbuilder based in Singapore.
Nova Scotia has pledged $21 million over seven years to subsidize the service, with $12 million allocated for the first year. Already this year, the province has distributed $19 million to the company. The additional spending includes a $2 million loan that the province gave the company in March so it could fund a surety bond and clear U.S. regulatory hurdles, then start advertising and selling tickets.
Because Nova Star Cruises has yet to secure the $5 million line of credit from a Maine bank, the province agreed last week to advance the company an additional $5 million for operating costs, according to a statement by Michel Samson, minister of the Nova Scotia Department of Economic and Rural Development and Tourism.
“The company has encountered some early challenges, and we are working with it to get over the bumps of a first season toward long-term success,” Samson said.
The service’s passenger counts have been significantly lower than what it needs to reach the company’s projection of 100,000 customers this season, which runs until Nov. 1.
The ferry can hold 1,200 passengers and 300 cars. It has been carrying 200 to 300 people on weekends, and fewer than that on weekdays, Bailey said.
On Monday, a reporter in Portland counted 13 vehicles coming off the ferry, and a total of 32 passengers.
On the outbound ride to Nova Scotia, the ferry carried 29 vehicles. It was unclear how many passengers were in the vehicles. Ten passengers boarded the ferry without vehicles.
The ship has about 120 crew members and burns $40,000 in fuel every day.
The slow start was expected, Bailey said, in part because the operator didn’t start selling tickets until the end of March because it lacked a key federal permit. A cool and cloudy spring hasn’t helped. He said the company is confident that business will pick up substantially when the weather warms up and vacation season begins.
Gervais, the commissioner, said it’s too early to expect a full ship and it will take time for the service to develop a market.
The ship, which was built in 2011 but never put into service until now, has been praised for its elegant decor and luxurious, cruise-like accommodations.
Stewart Chiron, a cruise industry expert based in Miami, said the main problem with the ferry service may be that the American public isn’t very interested in traveling to Nova Scotia, despite heavy marketing by the ferry operator and Nova Scotia’s government.
“It appears they are trying to create a demand for a service that maybe people don’t want,” he said.
Tom Bell can be contacted at 791-6369 or at: