Cancelling Interislander iRex ferries to cost $144 million

Friday, 15 August 2025

KiwiRail has agreed to pay South Korean shipyard Hyundai Mipo $144 million not to build the two ferries it had ordered from the firm, the Government has announced.

That is on top of an earlier deposit, and a “partial settlement payment” it made to the shipbuilder last year, that together cost $78m.

The coalition Government cancelled the contract for the two Project iRex ferries shortly after coming to power in 2023, citing a blow-out in the expected cost of the land-side infrastructure KiwiRail would need to support them.

Minister for Rail Winston Peters said the $144m payment to Hyundai was a “full and final settlement” to cover the costs the shipyard and its suppliers incurred.

The payment was “only fair as the decision to cancel Project iReX was never a reflection on Hyundai”, Peters said.

KiwiRail chief financial officer Jason Dale said the agreement with Hyundai Mipo was reached on Thursday night.

The state-owned enterprise declined to confirm the payments didn’t include any sum compensating Hyundai Mipo for profits it could have expected to earn from the ferry contract, saying the settlement was “commercially sensitive”.

Including the $222m KiwiRail has agreed to pay to the South Korean firm, the final cost for the entire cancelled iRex project would be $671m, Dale said.

However, it is not clear that entire sum will have been wasted.

Peters said the former government had spent $424m on iReX.

While large amounts had been spent on hordes of consultants, managers and communications people, the “built items” would all be kept and that would be detailed, he said.

A KiwiRail spokesperson said it wouldn’t be able to quantify the value of built infrastructure that would be reused until after it had finalised details of its new ferries and port agreements.

In March, Peters announced KiwiRail would get two smaller and cheaper rail-enabled ferries in place of the ferries it had agreed to buy from Hyundai in 2021.

No contract has been announced but the Government’s intention is the ships will be delivered by 2029 and will not require as much investment in new port infrastructure.

Peters would not comment on whether Hyundai Mipo was in the running to supply those alternative ships.

“We cannot comment on the current procurement process as the six shipyards invited into this process are competing with each other,” he said.

KiwiRail had originally agreed to pay Hyundai Mipo $551m for the two large iReX ferries, but the Government has set aside $900m for the smaller replacements, indicating the financial fall-out from the plan-change is likely to widen further.

Finance Minister Nicola Willis blamed the former government for the bill for cancelling the originally commissioned ferries, saying the coalition Government had “saved taxpayers billions” by stopping the iRex project.

“No Government should be advised of billion-dollar blow-outs in a major infrastructure programme upon being elected, as was the case after the 2023 general election,” Willis said.

“I am pleased that a more pragmatic solution is now in place that will ensure a safe, reliable Cook Strait service at an affordable price.”

Labour transport spokesperson Tangi Utikere suggested the Government was talking down the bill for binning the iRex project by focussing only on the final ferry-cancellation charge in its communications.

Nicola Willis’ “terrible decision-making” had cost $671m with no new ferries to show for it, he said.

“The $144m break fee is on top of money already paid to Hyundai, which takes the amount of taxpayer money National has poured down the drain to $222m.

“The rest is project management, land-side infrastructure and paying to wind down the project – totalling more than half a billion.”