$222 million paid to shipyard for canned Interislander replacements

Friday, 15 August 2025

After a year of delays, the government confirmed plans to buy two new Cook Strait ferries but offered few details on their costs, rail compatibility, or who's building them. Winston Peters, as Minister for Rail, faces pressure to deliver answers.

The Government has paid $144 million to cancel a deal it had with Hyundai to build two new Interislander ferries. That’s on top of $78m already paid to the shipyard.

The sum of KiwiRail’s settlement with the Hyundai Mipo Dockyard was revealed on Friday, through a joint statement from Rail Minister Winston Peters and Finance Minister Nicola Willis.

As part of its iRex project, which Willis cancelled when the Government came to power, KiwiRail had ordered two new rail-enabled ferries.

It had agreed to buy the ships for $551m.

Peters said the $144m settlement was reasonable - and he noted it was less than what Labour had speculated it would cost to break the contract.

The ministers’ statement was released while Willis was offshore, and Prime Minister Christopher Luxon had no public engagements. It also didn’t note the other $78m paid to Hyundai.

KiwiRail Chief Financial Officer Jason Dale confirmed the total payments so far.

“Including previous payments, this brings the total paid to Hyundai Mipo Dockyard to $222m and the final cost for the entire iReX project to $671m,” he said.

As part of that $671m bill, $449m had been spent on port infrastructure and project management costs, as well as wind-down costs.

Ministers Winston Peters and Nicola Willis.

KiwiRail ordered the ships in 2021. The first ship was scheduled to arrive this year, and the second was due next year.

Peters said the deal was cancelled not because of that deal, but because the budget to upgrade port infrastructure had blown out by $1.5 billion, taking the total cost of the project to over $3b.

“The net $144m final settlement payment is to cover the costs incurred by Hyundai and its global suppliers, and that is only fair as the decision to cancel Project iReX was never a reflection on Hyundai,” he said in Friday’s statement.

He said Labour shouldn’t criticise the Government for this cost.

A drawing of what had been ordered in 2021.

“Doomsayers said cancelling the contract would cost the taxpayer the full $551m contract value, but these are some of the same people who accepted Project iReX ballooning from $1.45b when approved in 2021 to Treasury warning it was on course to $4b,” he said.

Willis also blamed this all on the Labour Government.

“The settlement with Hyundai ends yet another sorry chapter in the story of the previous government’s mismanagement of the Crown’s books,” she said.

But Labour’s transport spokesperson, Tangi Utikere, said the break fee showed ministers had “absolutely no clue what they’re doing”.

“The amount of taxpayer money they’ve wasted with absolutely nothing to show for it makes a mockery of every time they’ve said they can’t afford something.

“They can find more than half a billion dollars to botch a ferry project, but can’t find any money to build homes, create jobs or fund the health system properly,” he said.

Earlier this year, Peters promised there would be two new ships from 2029.

The Government had budgeted $900m for the two new ships.