Unredacted briefing blunder reveals hidden Cook Strait ferry costs
Thursday, 19 March 2026
The new Cook Strait ferries are officially priced at $596 million, but internal figures show the total could reach $716 million once delivery costs, contingency, and exchange rates are included.
Treasury has also warned the overall programme has just $31 million of headroom before breaching the Government’s $2 billion funding cap, raising fears of cost overruns.
Ferry Holdings, the Crown company buying the ships, says the public figure - announced by Rail Minister Winston Peters in November - covers only the ship contracts themselves, with expected cost overruns built into the wider programme budget.
Meanwhile, in the ministerial briefing accidentally made public over the weekend, KiwiRail calls the replacement ferry plan “not an economic option”, saying high port fees and parent company guarantees could damage its credit rating and limit borrowing for the wider rail network.
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The assessments came to light in a November 2025 Ferry Holdings Limited (FHL) briefing. It was released online last week, following an Official Information Act request, but heavily redacted.
Once posted on social media, the redactions were easily removed, prompting FHL to take the documents offline on Saturday.
Public vows vs. internal risks
The briefing is dated November 11.
Eight days later Peters publicly cited a $596 million fixed-price contract for two new ferries from the Guangzhou Shipyard International (GSI).
However, the internal briefing reveals the procurement cost is $715.9 million.
The $596 million figure represents only the core “ship contracts' price at anticipated exchange rates.
The internal total of $715.9m factors in an additional $120 million for contingency, exchange rates and other delivery costs.
Chief executive Sandip Ranchhod told The Post: “Contingency is only called upon if required by Ferry Holdings, and as such the price of the vessels is $596 million.”
He explained the reason why contingency was announced as “an all-of-programme number” was because “it is essential that commercial partners are not aware of specific contingencies allocated to their contract.”
The Government is relying on council-owned ports to fund a significant portion of infrastructure needed for the new ferries.
At the time of the briefing, negotiations with Port Marlborough and CentrePort were ongoing, with final deals not expected until mid-2026.
Officials noted that the ports are likely to seek to “maximise their benefits and secure favourable terms”, creating significant scope for cost escalation.
The briefing also suggested that “ministerial involvement may be necessary” to break deadlocks.
To manage these talks, FHL has relied on consultants from MinterEllison and PwC.
However, the Treasury suggested a professional negotiator might be necessary to secure terms that reduce taxpayer risk.
Ranchhod dismissed this need, noting that “the ports will be funding assets that they own, or have a shared ownership interest in.” He added, “We have not required a professional negotiator as negotiations have been positive and productive.”
Despite that optimism, the Treasury issued a stark warning that the programme has only $31 million in “headroom” before it breaches the Government’s absolute $2 billion cap.
Officials described the current total programme costs as “uncertain”.
Ranchhod clarified that this $31 million margin is the gap between the Government’s total funding and the $1.673 billion currently planned for the project.
He noted that $313 million is specifically set aside for potential cost overruns, established “using standard risk analysis and contingency setting processes.”
The ‘Waitohi Wharf Shuffle’
The briefing reveals that total infrastructure works ‒ and a $241.6m infrastructure contingency ‒ reach roughly $1.1 billion.
To stay within this budget, FHL is delivering only a 'minimum level' of transition infrastructure. This cost-saving measure forces a high-risk sequence in Picton that officials dubbed the Waitohi Wharf Shuffle.
Under this plan, the Interislander must shift berths twice — first to an interim transition berth and later to a longer-term transition berth. Private operator Bluebridge must also move its entire operation to accommodate the shifts.
Officials cautioned that this leaves little margin for error.
Treasury noted that completing the infrastructure on time for the new ferries’ arrival in 2029 requires relationships and cooperation with the ports, relationships that 'are not clear' to currently exist.
KiwiRail: “Not an economic option”
Perhaps most damaging is the assessment from KiwiRail, which described the replacement plan as “not an economic option” for the state-owned rail company.
The operator expressed fears that high port fees and parent company guarantees would damage its credit rating and restrict its ability to borrow for the rest of the national rail network.
KiwiRail also argued that “balloon payments” on port infrastructure - large deferred sums due decades later - should fall to FHL as the asset owner, not the operator, to avoid exposing KiwiRail to long-term financial liability.
It disputed PwC modelling that suggested the project is viable.
Ranchhod addressed these concerns, stating, “Modelling to reach agreement is a standard feature of negotiations' and noted that 'PwC’s modelling was based on information from KiwiRail.' He added that FHL is 'working closely with KiwiRail to ensure the operator remains economically viable for the future.'