Cook Strait ferry project hit with Treasury warning over delays and cost increase risk
Monday, 4 May 2026
A critical government review slapped a high-risk “amber” warning on the Cook Strait ferry replacement programme, finding “back-to-front” planning and decaying port infrastructure have left the project exposed to delays and higher costs.
The Targeted Investment Review (TIR), completed by a Treasury-led team in September 2025 before ministers signed off on two new ferries from a Chinese shipbuilder, found the land-side works in Wellington and Picton carried “unacceptable levels of risk”.
A key plank of the Government’s reset plan was to save money through “maximum reuse” of existing assets at Wellington’s CentrePort.
But that strategy unravelled when the first condition assessments in more than five years found several assets earmarked for reuse were too degraded to salvage.
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That pushed Wellington infrastructure costs to about $167 million, including KiwiRail-specific works and road upgrades.
In Picton, where assets were also found to be nearing the end of their usable life, costs were estimated at $110 million. Marlborough ratepayers are now being consulted on whether the district council should borrow to fund terminal redevelopment.
Reviewers warned both figures could rise further, saying contingency allowances were likely to increase because of continuing uncertainty over the port works.
The risk that terminals will not be ready when the first ferries arrive in 2029 was judged serious enough for officials to order Ferry Holdings Limited (FHL) to prepare a formal fallback plan.
The report said there was a “reasonable risk of realisation” that infrastructure upgrades would miss the delivery date, and directed the company to develop a ‘Plan B’ by September to avoid disruption to the Cook Strait link.
The original iReX replacement project was cancelled in late 2023 after costs ballooned, largely because of expensive port upgrades. The Government’s replacement plan involves buying two custom-built, rail-enabled ferries from Guangzhou Shipyard International, with ministers pledging the total cost will stay below $2 billion.
Reviewers were scathing about how the programme began, saying it was launched through a political decision that bypassed normal “Better Business Case” processes.
“In essence, the programme has been established back to front,” the report said.
They also warned the compressed timetable for negotiating contracts may have cost the Crown a chance to secure better long-term operating value.
The programme received an amber confidence rating, meaning delivery is possible but significant issues require urgent management attention.
FHL is now racing toward a mid-2026 deadline to finalise agreements with CentrePort and Port Marlborough. The review found those commercial arrangements were still immature and needed a “satisfactory level of detail and clarity”.
Officials also said KiwiRail needed to be better integrated into the project, with the state-owned rail company assumed to be the future operator but not yet fully embedded in the delivery programme.
In a statement FHL chair Chris Mackenzie maintained that the programme “remains on track for operational delivery … in 2029”.
He confirmed that following “extensive due diligence”, the project will reuse rail and road marshalling yards, existing buildings, and other assets, though new linkspans are being procured for both ports. “All this remains within our funding envelope.”
“Final designs and delivery timelines are being confirmed through the commercial contracting process (expected to conclude in mid‑2026), with demolition already under way and strong competitive interest in construction contracts,” he said.
He said a “strong relationship” has been established with KiwiRail, with regular meetings.
Asked about fresh global supply-chain pressures after turmoil around the Strait of Hormuz pushed up shipping, insurance and energy costs, Mackenzie said no cost revision had been triggered.
Rail Minister Winston Peters said there were “tens of millions of headroom” remaining, on top of hundreds of millions in contingency funding.
“The build programme to 2029 is indeed tight, and we do not shy away from that.”