KiwiRail set to end Hyundai deal after ferry project canned

Wednesday, 14 February 2024

An artist’s rendering of one of the Hyundai Mipo Dockyard Interislander ferries which were set to replace the existing fleet. (File photo)

KiwiRail is set to cancel its contract with Hyundai Mipo Dockyard after the Government effectively pulled the plug on the build of two new Interislander ferries last year.

KiwiRail chief executive Peter Reidy said on Wednesday it had started discussions with Hyundai to enter a termination agreement for the contract, following the Government’s decision not to provide further funding for the Inter-Island Resilient Connection (iReX) project.

Reidy thanked those involved with the project to date but said it could not proceed without further Government funding.

“We respect the Government’s role as shareholder and funder to make this decision.”

He also thanked Hyundai, which had “continually shown its value and professionalism as one of the world’s leading ship builders, with work delivered to the highest quality”.

Finance Minister Nicola Willis said last year the Government had declined a request from KiwiRail for extra funding for the replacement of the Interislander ferries, pulling the plug on the project. (File photo)

In 2021, state-owned enterprise KiwiRail signed a $551-million contract with Korea’s Hyundai Mipo Dockyard to build two new ferries to replace the existing fleet.

The new ferries, which would have almost doubled passenger capacity and reduce carbon emissions, had been expected to arrive in New Zealand in 2025 and 2026.

In December, Finance Minister Nicola Willis announced the Government had rejected KiwiRail’s request for an additional $1.47 billion, some of which had been agreed to in principle by the prior Labour government, to cover the blow-out of the project.

After Willis’s announcement, KiwiRail said that without Government funding the project would be wound down and it could take “years” to provide an alternative solution to the increasingly troubled Cook Strait ferry service.

The Government has announced that it will appoint a Ministerial Advisory Group (MAG) to provide independent advice and assurance to ministers on the future options for a Cook Strait connection, Reidy said. The Ministry of Transport will also lead an assessment of long-term inter-island service requirements.

“Replacement options for the Interislander ferries are expected to be part of these broader reviews and KiwiRail will be working with our customers and the international shipbrokers on options to source suitable replacement ferries.”

The news comes as KiwiRail is set to appear before the Select Committee on Thursday for its annual review.