Replacing Cook Strait ferries to cost $1.86 billion

Wednesday, 19 November 2025

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A $600 million deal with a Chinese shipyard will bring the cost of replacing the Cook Strait ferries to $1.86 billion, the Government has confirmed.

Rail Minister Winston Peters was at CentrePort in Wellington on Wednesday afternoon to confirm, nearly two years after the Government cancelled the previous iRex project due to cost blow outs, Ferry Holdings Limited had agreed to purchase two ferries from Guangzhou Shipyard International for $596 million.

The total cost of replacing the KiwiRail-run Interislander ferries will now be $1.86b, with the central government contribution being less than the $1.7b it had allocated for the project.

“We are still buying what New Zealanders want: two new ferries. We are buying exactly the type of ferries people want, big enough to carry freight and families for the next 30 years, designed for comfort and freight capacity and meeting modern safety requirements,” Peters said.

KiwiRail had said the final cost for the cancelled iRex project was $671m, including $222m in payments to formerly contracted shipbuilder Hyundai-Mipo. However, at least $85m of the iRex work was able to be reused in the replacement project.

Adding this sunk cost to the new project means the overall cost of replacing the ferries could reach $2.5b, near the estimated $2.9b to $3.1b cost of iRex when it was cancelled by Finance Minister Nicola Willis in December 2023.

However, both Peters and Willis, citing a Treasury estimate, have claimed the iRex project could have blown out to $4b, if nothing was done.

On Wednesday, Peters said the Government had effectively saved New Zealanders $2.3b.

“We saved $2.3 billion in the process of retainingrail ferries, and have now secured the ferry contract and the path to completion in 2029. We did what we said would do,” Peters said.

The funding spent on portside infrastructure would be recovered over the life of the new ferries through port fees paid by KiwiRail, and the new ferries were “expected to build sufficient reserves to buy new ferries again in 30 years”, he said.

Two diesel-electric powered rail-enabled ferries, 200 metre-long and 28m wide, will be bought from Guangzhou Shipyard International.

The ferries will have 11 decks and an increased capacity - accommodating 1530 passengers and 2.4km lanes for trucks and 40 rail wagons.

Ferry Holdings Limited, the Crown-owned firm created by the Government to acquire the ferries and manage the portside infrastructure build, would purchase two new linkspans, which bridge the gap between a quay and ferry, for the Picton and Wellington ports.

“They're much safer, they're much better powered. They've got more thrusters, they've got far greater security,” Peters said.

Ferry Holdings chairperson Chris Mackenzie said while the ferries would be slightly smaller than the cancelled iRex ferries, the capacity would be the same due to more efficient use of space.

The ferries would also have greater manoeuvrability, and redundancy in its motors, so it could safely return to port if there was an issue.

There would be no issue moving through the Marlborough Sounds, he said.

“We have done a whole lot of modelling on the vessel … the wave energy because of the design of the bow is less.”

As previously announced, there would be the maximum possible reuse of existing port infrastructure when undertaking upgrades for the new ferries.

At Picton’s Port Marlborough there would be a new wharf, linkspan, vehicle access bridge, and passenger walkway. n addition there would be a rail overbridge built at Dublin St to reduce local traffic.

The estimated cost of works at Picton was $531m.

At Wellington’s CentrePort, a dual-level linkspan and “approach structure” would be built, as would a new passenger walkway, as initial plans to reuse the existing linkspan were found to be infeasible.

The estimated cost of works at Wellington was $325m.

Contracts between Ferry Holdings and the two port operators were yet to be settled, as were the contracting of construction firms for the infrastructure.

Nonetheless, Peters insisted the cost estimates would hold as the “frivolous borrow and hope days are over”.

CentrePort chairperson Lachie Johnstone said it was “great progress” to have contracts for the new ferries settled, as it enabled the port to progress the infrastructure build.

The need for more new infrastructure than initially anticipated was due to the ships being slightly longer and wider than earlier thought, he said. But there was no reason why that could not be solved.

Speaking of the cost, he said there may be “instances in the future where that is under some pressure, and we'll just have to work through that in a pragmatic way”.

Separately on Wednesday, the Australian newspaper reported that global investment bank Morgan Stanley was considering a sale of Bluebridge ferry operator StraitNZ, which holds half of the Cook Strait freight market, and 30% of the passenger market.

Peters will travel to China next week to “acknowledge” the deal struck between Guangzhou Shipyard International and Ferry Holdings.

He will be joined by Mackenzie and Ferry Holdings ships programme director Massimo Soprano.

iRex a ‘pyramid scheme’

The announcement on Wednesday was held at the empty, cavernous office of the former iRex project staff, a location chosen to illustrate the “contrast” between the formerly large team and the smaller Ferry Holdings team.

“It was the scene of the iRex pyramid scheme,” Peters said. “We have shifted from wasteful spending to waste-not, want-not.”

Labour Party transport spokesperson Tangi Utikere said the ships Peters had announced cost more and were inferior.

“Winston Peters has swept the $671 million that was spent in cancelling the ferries under the rug here,” he said. “This is a botched deal.”

China ‘dominates’ shipbuilding market

Peters announced last month that Guangzhou Shipyard International would be contracted to build the ferries, after a nine-month procurement process.

Brain Hart, deputy director of the China Power Project at Washington-based thinktank Center for Strategic and International Studies, said “cost and speed” were likely the deciding factors behind the Government’s choice of a Chinese shipyard.

Each year Chinese shipyards captured more of the global market, he said, the result of Chinese policymakers using subsidies, tax incentives, and other investments to make the yards more competitive, catapulting China from 5% of the global market share in 2000 to 53% in 2024.

“The reality is that, right now, options outside of China are limited and may not be as cost-competitive.”

But he said buyers needed to be aware that “doing business with China’s shipyards risks boosting China’s naval modernisation”.

“China is very intentionally fusing its commercial and naval shipbuilding industries to speed up and sustain its naval modernisation.

“Guangzhou Shipyard International is a subsidiary of China State Shipbuilding Corporation, which describes itself as the ‘leading force’ behind China’s naval modernisation, and GSI is situated on Longxue Island, a key shipbuilding base that is producing some of the Chinese navy’s newest experimental vessels.”

The United States deems Guangzhou Shipyard International to be part of China’s military-industrial complex and has applied restrictions on investing in the shipbuilders and required US funds to divest. Trading with the shipbuilders has not been restricted.

Peters has previously said there would be “due diligence at all points” of the ferry acquisition.

Intelligence Agencies Minister Judith Collins has said the security agencies would be involved in the procurement process, as is normal in such circumstances.

*CORRECTION: This story previously said iRex was estimated to cost $2.6b when it was cancelled. That earlier estimate had been updated to $2.9b - $3.1b by the time it was scrapped. (Thursday, November 20, 2025 at 11:15am)