$424 million sunk in failed Interislander and terminal project

Thursday, 15 February 2024

Labour MP Arena Williams and Green MP Julie Anne Genter listen as KiwiRail top brass present to the Transport and Infrastructure Select Committee meeting on Thursday.

KiwiRail has confirmed it sank $424 million into its ditched iRex Interislander ferry project as it laid out some stark realities to a Parliamentary select committee.

The Transport and Infrastructure select committee was also warned on Thursday that it was still unknown if the existing Interislander ferries would hold out until new, second-hand ferries arrived. It also warned that the Picton wharf only had two or three years left in it, and said external forces were to blame for the iRex project blow out.

It comes shortly after the National-led Government pulled the pin on funding on KiwiRail’s $3 billion iRex project, for two new ferries and joining infrastructure in Picton and Wellington, citing large cost blow outs.

Work on the Wellington ferry terminal upgrade had already begun when the Government pulled the pin in December.

Finance Minister Nicola Willis, speaking outside the committee, said she had no regrets about pulling the pin.

“That project had blown out completely, a quadrupling cost. My view was it would keep blowing out in cost and have massive delivery risks,” she said. “I don't think those ships would have been up and running on time.”

Rongotai MP Julie Anne Genter, a committee member and Green Party transport spokesperson said the decision to scrap the project would cost the country “enormously”.

“Not only the wasted capital from cancelling the ship order at this point, but the ongoing costs and risk to the integrity of the freight connection between our two main islands.”

KiwiRail chief financial officer Jason Dale told the committee there were some costs it could not yet give, but $424m had been sunk into the iRex project before it was ditched.

KiwiRail board chair David McLean said KiwiRail was hoping to get new ferries to replace the ageing fleet but it was still unknown if existing ferries would survive until new ones could arrive.

Chief executive Peter Reidy said KiwiRail was now looking at second-hand replacement ferries but those were unlikely to be rail-enabled. It was crucial that replacement ferries had built-in mechanical redundancy. In January 2023, the Kaitaki lost all power due to a mechanical fault because there wasn’t a second cooling system.

“We have to have redundancy,” he said.

Reidy also blamed the huge cost blowout of the iRex project on external factors, largely outside KiwiRail control.

“It is not driven by the size of the ships, over $1 billion was caused by external factors,” Reidy said.

First of all was a delay as different parties including KiwiRail, CentrePort and the Greater Wellington Regional Council weighed up whether to put the new Wellington terminal at Kings Wharf, close to the city centre, or at the existing Kaiwharawhara site and whether to share the facility with private operator Bluebridge.

By the time Kaiwharawhara was chosen, and KiwiRail was going alone, seismic codes had increased and flood modelling had shown that the entire site had to be raised one metre. On top of that, labour and material costs increased by up to 25%.

The Transport and Infrastructure subcommittee is chaired by former Wellington Mayor Andy Foster, now a New Zealand First MP, as well as MPs from Labour, the Greens, National, ACT, and Te Pāti Māori.