Key transport connectivity on the line as KiwiRail goes back to the drawing board

Thursday, 14 December 2023

Key transport connectivity, moving freight across the Cook Strait, could be on the line after the Government pulled the plug on the $3 billion - and counting - Cook Strait mega ferry project.

KiwiRail has just three years - or less - to figure out how to replace its ageing and increasingly unreliable fleet of Interislander ferries.

Finance Minister Nicola Willis on Wednesday rejected a request from the state-owned enterprise for an extra $1.47 billion for the IReX project ‒two new ferries to replace the existing fleet and upgrades to ferry terminals in Wellington and Picton.

“What was meant to cost less than a billion dollars is now set to cost $3 billion. The project was meant to be about ferries, it turned into a port redevelopment.”

Speaking on RNZ on Thursday morning, KiwiRail chief executive Peter Reidy said it would not be possible to lease or find smaller ships that would also have rail capacity.

Connecting rail with freight was a key part of transport connectivity and critical to the supply chain across the country, he said.

“There’s billions of dollars of freight that goes across the Cook Strait, there’s over a million passengers we take over the Cook Strait, it means you disconnect the main trunk line.”

Part of the cost blow out was attributed to changes in the seismic code and flood modelling code, Reid said.

“Even the roading cost in the country has increased 23% over the last four years.

“It’s probably one of the most complex marine engineering projects this country would’ve done for some time.”

The KiwiRail board would meet next week to discuss options.

The decision eliminated the option of larger, more efficient lower-carbon ships for New Zealand, Reidy said.

Possible options included fewer ships or still building the two ferries and selling them. The physical construction was yet to begin. But it was a decision that would be made around the table with customers, the government, and the board, working through options with other stakeholders, he said.

The port work in Wellington would be demobilised, he said.

On Wednesday, Willis said she wasn’t sure $3b would have been the final bill.

“I don't have confidence that project IReX was only going to cost $3b. It has been my expectation that it would have continued to be a project plagued by blowout after blowout after blowout. And I'm calling time on that.“

Four unions representing maritime and rail workers condemned the government’s decision and called for Willis’ resignation.

The four are the Maritime Union of New Zealand representing seafarers, the Rail and Maritime Transport Union representing rail workers, the New Zealand Merchant Service Guild representing ship’s masters and officers, and the Aviation and Marine Engineers Association representing marine engineers.

Maritime Union of New Zealand National Secretary Craig Harrison said the decision showed “poor judgement and a total lack of understanding of the importance of a functioning Cook Strait connection to New Zealand’s supply chain”.

The ongoing technical issues with Cook Strait ferries were a result of end of life vessels being used on a notoriously challenging crossing and had resulted in serious incidents in the last few years, he said.

“The can has been kicked down the road for years and the upgrade has to happen now.”

After Willis’s announcement, KiwiRail’s chairperson David McLean said that without Government funding the project would be wound down - to the disappointment of all involved in the project - and it could take “years” to provide an alternative solution to the Cook Strait ferry service.

The clock is ticking on finding that solution. The current Interislander ferries are nearing the end of their 30-year working lives - and are becoming more difficult to maintain. 'They are an ageing fleet - you can't run them forever,' Wellington harbourmaster Grant Nalder said after Willis’ announcement.

Dom Kalasih, the interim chief executive of the road freight peak body Ia Ara Aotearoa Transporting New Zealand, said it was good that KiwiRail was being held to account over the burgeoning budget.

But he also said “substantial service improvements” were still required.

'Between $15-20 billion in freight travels across Cook Strait each year, so it’s important to put the cost increase in that context. With freight predicted to grow 1.4 per cent per year, it’s not an issue that can be put off.'

Infrastructure NZ chief executive Nick Leggett said a reliable Cook Strait ferry service was “vital” for the country’s supply chain.

“We need a guarantee of reliable ships running that route.”

On either side of the strait there was shock. Marlborough mayor Nadine Taylor said the Government’s decision was not only an issue for Marlborough, but for the whole country.

'There obviously needs to be investment in this link if we want to have a secure and safe transport link between the North and South Islands.'.

Wellington mayor Tory Whanau urged KiwiRail and the Government to come up with a solution “so that these important services can keep running”.

Labour’s finance spokesperson Grant Robertson said the Government now had to explain how it would ensure “a sustainable and reliable” ferry service.

Willis said the Government was planning to invest more in the future to ensure a reliable ferry service, one she argued would be better value for money than IReX.

“We want a resilient, safe and reliable Cook Strait service, and we are committed to ensuring that is available to New Zealanders.

But she added, “a resilient ferry service should not mean an open cheque book paid for by the taxpayer”.