Revealed: $900 million set aside for smaller Interislander ferries

Tuesday, 10 December 2024

Stuff has seen a paper showing Cabinet has agreed to set aside $900 million for new Cook Strait ferries.

Stuff also understands that Winston Peters is set to take a new rail portfolio position.

The new ferries will be smaller than those the previous Government planned to buy for $551 million.

Stuff can reveal that Cabinet has agreed to set aside $900 million to buy new Cook Strait Ferries.

As part of the deal making between coalition parters, to get everyone on board with this new plan, sources have told Stuff that Prime Minister Christopher Luxon has agreed to give Winston Peters a new role and will give him ministerial responsibility for rail.

Ministers are expected to confirm their decision on Wednesday.

Stuff understands that as part of the new plan, agreed to by Cabinet, the ships will be smaller than the $551 million ships previously planned.

Stuff has seen part of a paper that went to ministers, which said $900m had been set aside for the ships, while extra has been set aside for landside development costs.

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

The upgrade project, known as iRex, had already been contracted and agreed to under the previous Government.

It signed a $551m contract with Korean ship builders Hyundai Mipo Dockyard to build two new mega ferries, which would be capable of carrying trains, passengers, cars and trucks across the Cook Strait.

But that plan was scuppered when the costs for port upgrades, which were needed to cater to the big new ships, blew out by $1.5 billion, taking the total cost of the project to over $3b.

Luxon declined to provide further details ahead of the formal announcement, saying: “I’d love to give you some answers but you need to wait until we make the announcement, which will be very shortly.”

Willis said the revised plan would significantly reduce overall costs compared to iRex.

When asked if consumers would bear the brunt of portside infrastructure costs, she responded: “We will be making announcements about our preferred ferry solution later in the week.”

Labour leader Chris Hipkins said the new plan would drive up costs in the long run.

“The ferries themselves are not going to be cheaper. So, they are going to be buying more expensive ships,” he said.

The paper seen by Stuff details that the ports are to fund as much landside infrastructure as possible - and should look to recoup those costs by passing them on to users.

“I think what they are doing is being a bit dishonest here by including cutting back on wharf and terminal upgrades and saying that’s somehow going to save money,” Hipkins said.

Maritime Union NZ National Secretary Carl Findlay expressed concerns about the impact on freight costs if the new ships weren’t able to carry trains. He said it would be “horrendously expensive”, with charges of $150 to $200 per container.

“If you look at the extra turnaround time for all the tonnage on these vessels, that’s an extra cost as well,” he said.

Cabinet also plans to establish a Schedule 4A Crown-owned company, similar to Kiwi Group, to manage ferry procurement.

ACT leader David Seymour caught himself for letting anything slip on Tuesday.

Asked what ACT agreed to create a Schedule 4A company, he replied: “Because this is going to be one of the most effective ways… um… what are you actually talking about?”

Ministers remain tight-lipped

Peters wouldn’t confirm if he was about to take on the new role, and others were equally tight-lipped on Tuesday.

“I reckon you better go and see your leak because you’ve got everything wrong,” Peters said.

His de facto deputy, Shane Jones, also wouldn’t be drawn on details - including on whether the ships would be rail-enabled.

“Let’s just taiho until āpōpō brings that result,” he said.

But he had a message for KiwiRail, telling it to “get their act together”.

When will that turnaround job be announced? Luxon, with little to say: “Again, we will talk about ferries when we are ready to make the announcement, as I said. We will have more to say about it very shortly.”

A decision is expected on Wednesday.