An agreement dated 18th March 1901 between the Portmadoc, Croesor & Beddgelert Tram Railway Company, H.W.A Littledale (successor to Mary Elizabeth Littledale, the tramway's major creditor) and George Dia and William Glover representing the fledgling Portmadoc, Beddgelert & South Snowdon Railway (PB&SSR) provided for the sale of the tramway to the PB&SSR for £10,000. James, Cholmeley Russell who held a smaller mortgage was not included in the agreement as he was to be paid off. Part of the agreement that was to have significance in later years was that the Cambrian Railways should now assume responsibility for the level crossing at Porthmadog.
On 17th August 1901 the Portmadoc, Beddgelert & South Snowdon Railway Co. was incorporated by Act of Parliament. The Act required the completion of the purchase of the tramway within 12 months of the Act, which was achieved, ending the first phase of the tramway's existence, with the Portmadoc, Croesor & Beddgelert Tram Railway Company being dissolved. The non-parliamentary section of the line tramway continued throughout all this as it had done before, being unaffected by the changes.
The plans of the PB&SSR included reviving the long forgotten extension to Borth-y-gest, which would now be extended to Black Rock Sands. The line from Porthmadog to Beddgelert (and beyond) was to be electrified, and the Act gave powers to build dams and generating stations, although these powers were separated from the railway by the North Wales Power Act of 15th August 1904, leaving the company as merely a railway undertaking, which in turn had its powers to construct the line extended to 1909.
From Croesor Junction, where the new line met the existing tramway to the Aberglaslyn pass, most of the earthworks were completed by 1909. Further north tunnelling work had been carried out in the Aberglaslyn Pass, and with the exception of an embankment across the fields south of Beddgelert, most of the earthworks require dot reach Beddgelert were in place. By 1909 there were concerns over how the railway was being funded by the North Wales Power & Traction Co (who had taken over the electrical powers in 1904) and work came to a halt as the powers to construct the railway lapsed in 1909.