Three big issues as the future of the Interislander is set to be revealed

Tuesday, 10 December 2024

A year after sinking KiwiRail’s plans to get new larger ferries, it’s decision time for the Government. Cabinet must decide what will happen to the Interislander.

A decision on the future of the main Cook Strait connection could arrive within the next 24 hours, but the prime minister is remaining tight-lipped about key details - or even timings - for replacing the ageing Interislander fleet.

The coalition ministers met to discuss the Interislander issue on Monday, a year after Finance Minister Nicola Willis dramatically cancelled the multi-billion upgrade project.

But on Monday, both Willis and Prime Minister Christopher Luxon refused to confirm or deny anything about the ferries situation - including whether the alternative plan would cost more than the $3 billion KiwiRail wanted to finish its original upgrade project.

The Interislander decision comes down to a few key sticking points:

• Will the Government be able to recoup any of the $551-million contract it signed with Korean ship builders Hyundai Mipo Dockyard?

• Will the state-owned transport company, KiwiRail, maintain its stake in the Cook Strait and continue to operate the Interislander?

• Will the new Interislander ships be “rail-enabled”? (Currently, the Aratere is the only rail-enabled ship which allows trains to roll on and off without needing to be craned onto trucks.)

In the year the Government has had to ponder this issue, it has received advice about a range of possible scenarios.

This has included buying second-hand, buying ships without the ability to carry trains, and even whether the KiwiRail should be operating a shipping service at all.

Why it matters

This is a issue which has led to cataclysmic warnings from the Opposition and lobby groups, who say the South Island could be “cut adrift” if the Government chooses a cheaper option.

The Labour and Green parties have predicted that the entire South Island train network would be condemned to collapse if it did not have a rail connection to the North Island.

On the other hand, the National and ACT parties have said the $1.5 billion cost-blow out on the project - to pay for the ships as well as port upgrades - was manageable.

It’s an issue which has also revealed a drift between coalition parties. NZ First has been a supporter of the railways and Peters has pushed the coalition parties to invest in rail enabled ferries.

The breakdown

In November, Peters revealed the Government had a deadline - this Wednesday - of confirming its new plan for the Cook Strait.

After the original plan ran over budget last year, other Government ministers questioned whether the cost of having rail-enabled ferries was worth it.

Before Willis ordered KiwiRail to backtrack on its contract for two new “mega-ferries”, KiwiRail did consider whether to “de-scope” it and remove the rail enablement. But KiwiRail boss Peter Reidy said they decided not to do that, as it would have driven up operational costs and costs for businesses in the long run.

Businesses such as Mainfreight have joined with the Rail and Maritime Union in calling for the Government to keep to the plan of having rail-enabled ferries.

“They understand that without rail we are going to have thousands of extra trucks on the road, just shy of 6000,” said union organiser Todd Valster.

As he gathered with a group of about 50 protesters outside Parliament on Monday, calling for investment in rail, Valster said he wasn’t hopeful the Government would listen.

KiwiRail acting chairperson Rob Jager confirmed during a parliamentary committee last week that the Government had asked for advice about breaking up KiwiRail, and moving its Cook Strait shipping service into its own company.

But Luxon refused, on Monday, to say if Cabinet had agreed to take that option. The Government could maintain ownership of the Interislander, if it was to become its own “Schedule 4A Company”.

The current Interislander fleet was set to be past its use-by date in 2029, Jager said. Initial advice had indicated they would need replacing in the next few years, but he said their lifesplan could be pushed to 2029 and they would continue to be safe and reliable.

The arguments

Green Party transport spokesperson Julie Anne Genter said she expected the Government’s decision to cancel the original “iRex” project could cost about $1 billion.

“The decision made by Nicola Willis and the coalition Government did not save money. It will cost New Zealand dearly in the medium and long term,” she said.

Labour transport spokesperson Tangi Utikere said not having rail-enabled ferries would “sever” the islands.

“It’s very clear that if rail enabled is not an option, then those extra prices will be put on to the consumers,” he said.

“People will have some tough decisions about whether or not they will actually transport freight at all between the North and South Island. And that will mean that the South Island Main Trunk Line will become redundant,” Utikere said.

During Monday’s post-Cabinet press conference, Luxon said there was “a great solution for the Cook Strait”. But he wouldn’t say whether it would cost less than the original option.

He also appeared to push back on Peters’ deadline, when the deputy prime minister said there would be an announcement on or by December 11.

Luxon said there was plenty of time, adding, “We’ve still got to the 31st of December”.