Two new rail ferries to replace aging Interislander fleet from 2029

Monday, 31 March 2025

Cabinet has agreed on the package which Minister of Rail Winston Peters says will deliver the appropriate ships and infrastructure for the job at a 'significant saving' for the taxpayer.

Rail Minister Winston Peters has promised plans to renew the Interislander ferry fleet, with two new ships from 2029, will cost less than the $900 million put aside last year.

Peters on Monday afternoon confirmed officials will start procurement for two new rail ferries from next month, due to enter service in 2029. His announcement comes about 15 months after Nicola Willis cancelled the $3.2 billion iRex project and vowed to come up with a cheaper alternative to replacing the ferries.

Peters has previously said the new solution would “save the country in excess of $2 billion”and a spokesperson for his office confirmed to Stuff the new ferries would cost less than the $900 million figure Willis got Cabinet to agree to last year when she was in charge of the portfolio.

Winston Peters announcing the plans for new Cook Strait ferries in Parliament.

Peters also outlined plans to replace Picton’s port infrastructure, and modify and reuse Wellington’s, so they can handle the vessels. At 200 metres long, the new ferries are longer than the current fleet but shorter than the cancelled 2021 ferries which he said created “significant infrastructure issues”.

He also batted off questions about the safety of the current ships in 2029. A report from Det Norske Veritas (DNV) concluded in mid-2024 that the current ferries will reach the end of their economic lives by 2029 and operating these vessels beyond then increases the risk of serious accidents, increased maintenance costs, and decreased reliability.

Peters said DNV also prepared “a comprehensive asset management strategy” for the ageing ships.

“The work that was done by the experts on the continuance of those ships since they would last until 2029 if they were maintained well,” Peters said.

The breakdown

Project iReX was initially intended to replace the existing fleet, which was planned to serve until around 2026.

The three ageing Interislander ferries: Kaitaki, 30 years old (top), Aratere, 26 years old (middle) and Kaiarahi, 27 years old (bottom).

But Cabinet decided not to provide further Crown funding for the project in December 2023, effectively leading to its wind-down. At the same time, Nicola Willis, who was the minister in charge of rail, got Cabinet to agree to establish a Ministerial Advisory Group (MAG) to provide independent assurance on future ferry services.

It signalled a shift from the Labour Government’s approach to ferry procurement. Under Labour, Kiwirail had entered into a contract with Hyundai Mipo Dockyard (HMD) for two new larger rail-enabled ferries (which means trains can drive directly onto and off the ferries).

It set aside $300 million to pay HMD for cutting the contract, and to cover a variety of exit costs which KiwiRail couldn’t fund it from its balance sheet. This included completing infrastructure works which were in progress on cancellation, like the new mechanical facility in Picton, exiting large-scale infrastructure contracts entered by KiwiRail before cancellation occurred, and any cancellation fee from exiting the ship procurement contract.

But declassified documents show the MAG explicitly recommended that the Government urgently renegotiate with the company last March 15. It stated that the least risk and cost option was to seek to keep the ship building slots contracted by KiwiRail with HMD.

However, this is not the direction Peters has taken since being named minister for rail in December.

Since then, he has set up a limited liability company, which is 100% Crown owned, to run a procurement process and manage the preferred option for a ferry service across the Cook Strait.

He has also appropriated $4 billion of new capital funding into the new company for ferry procurement, as well as funding for the design and establishment of the company and “interim procurement activity”.