The Government will take another few months to consider options for replacing the ageing Cook Strait ferries after cancelling Labour’s project in December last year.
Finance Minister Nicola Willis, and the newly-appointed Minster for Rail Winston Peters, told reporters on Wednesday that a final decision wouldn’t be made until after March.
This means they have missed an informal deadline—December 11—set by Peters and backed up by other ministers, and will have to return to the issue in the new year.
In the meantime, Cabinet has agreed to a confidential “fiscal envelope” and set up a limited liability company to procure two new ferries within that budget.
Willis said the total budget was commercially sensitive but would need to be less than $3.2 billion, which was the estimated price of finishing Labour’s iRex project.
She said enough due diligence had been done to establish it was possible to build two new ferries and port-side infrastructure by 2029, plus pay a break fee, for less than that cost.
These are likely to be smaller, more basic ferries. Willis said she wanted “Toyotas not Ferraris”, and didn’t want to have to spend large amounts on infrastructure upgrades.
End of the track
David Seymour, leader of the Act Party, said it was highly unlikely that rail-enabled ferries could be procured within the $3.2 billion budget set by Cabinet.
Train carriages can be loaded directly onto existing ferries, effectively connecting the North and South Island railways. Labour ordered two rail-enabled ferries for $551 million and was planning to spend another $1.5 billion upgrading ports to facilitate them.
Willis canceled the entire project after discovering the port upgrade costs had doubled to $3 billion and could increase further. It is likely a cheaper alternative will require freight trains to be unloaded onto the ferry and reloaded back onto trains on the other side.
In a press release, the Act Party said indicative costs for an alternative were “approximately half” the $3 billion cost of iRex, of which the Crown had only committed to pay $2.2 billion.
This aligns with numbers reported by Stuff which suggested a set of ferries costing $900 million and a break fee of up to $300 million, plus minor port-side upgrades and sunk costs. When asked, Peters said this report was “drivel”.
Not angry, just disappointed
Despite the patchwork of hints, hard facts are still few and far between. Wednesday's announcement contained just three developments: Peters taking control of rail, a budget of less than $3 billion being set, and a decision being postponed until next year.
Ia Ara Aotearoa–Transporting New Zealand, a road freight association group, said its members were disappointed by the lack of certainty and failure to find an alternative.
"Frankly, a year on from the cancellation of the iReX project, we would have expected more progress to have been made towards the procurement of new vessels and portside infrastructure," chief executive Dom Kalasih said in a statement.
Labour leader Chris Hipkins said a year after the ferry replacement project was canceled, New Zealanders deserved to hear the government’s new plan.
“All we got today was an announcement about an announcement,” he said. The replacement ferries may be three or four years away, whereas Labour’s were planned for 2026.
“Nicola Willis still doesn't have any new ferries, still can't say how much it's going to cost, still can't say who's ultimately going to pay for it all; I think that’s hugely embarrassing”.
153 Comments
The biggest risk the Coalition is running in this delay is that there will not be a serious safety incident with loss of life. Because no matter what the public assurances of DNV audit on current ferry working life & Kiwirail on current ferry maintenance/management NZdrs will not forgive them.
It looks a lot like a solution agreed by a committee.
"Peters taking control of rail, a budget of less than $3 billion being set, and a decision being postponed until next year."
So they could be $2.9B and still meet that target? So maybe a bit cheaper, three years later and not as capable?
This is a terrible deal and I think there are going to be a lot of people very angry about this
Well, that is disappointing on multiple levels.
One because it looks at a cursory glance like the Labour side is correct - the govt can't find a solution (port renos + boats) which is more cost effective, or one which represents a better result for the country than the project they cancelled given the delay.
Secondly as I was looking forward to tracking down a third-party source which had run the numbers or sourced the numbers from the govt and compared both project's merits to look over. We can't do this if there's nothing released.
If nothing else, the new ferries plus the break fee are likely to cost more than the original, which is not great for our balance of payments as all that will go offshore.
Even if the port side infrastructure was expensive, at least most of that would go to local contractors so would provide stimulus and some would even get taxed back.
A shift to pay more for worse ferries and cheap out on the port side infrastructure seems like a false economy.
From what it looks like, they can't even get worse ferries and port side infra for less than the original plan and are hoping that kicking the can down the road will somehow solve things.
The portside infra was beyond expensive - the whole budget was initially $775m, it blew out to $2.6b and KR got a final warning from GR and Willis got told within a month of taking over the ministry that there was another $400m of cost added from when was briefed earlier in the same month.
At some point you have to quesiton how you go from $775m (of which the biggest chunk was boats) to such a massive escalation that shows no sign of going down. The fact it would be gone to local contractors is not a good enough reason to ignore absolutely stonking escalations that both party ministers had objected to.
The portside infrastructure included a lot of future proofing work that has been ignored for the past 50+ years. E.g. earthquake strengthening so the ferries are not out for months in the event of an earthquake. And given where the ports sit, i.e. on a very active fault line, almost a certainty in the next 50 years. (We've just been 'lucky' for the past 50 years.)
The big cost rises were just another example of how NZ Inc. doesn't invest enough in infrastructure.
I didn't realise that Wellington being on an active fault zone was only discovered between the initial budget being set at $775m and it blowing out to $3b. Perhaps they only found out in November when the cost projections escalated by $400m in one month.
That must be it.
It was a prudent and cost-effective solution to do all the portside work in one go.
This work was added in by the owners of said portside infrastructure, local government and central government departments. Kiwirail hadn't originally planned to do it all, only enough to get their new ferries operational.
Stakeholders wanted to build the new terminal at Kaiwharawhara to mitigate the impact on water sports at King's Wharf.
The problem is the proposed Kaiwharawhara site needed extensive earthquake remediation work, including something like 300 piles at 70m long for the building.
So the solution was to throw the baby out with the bath water and cancel the ferries themselves.
The original proposal was to build the port side infra at Kings wharf where it would have been a lot less expensive. If they had stayed there the costs would likely have escalated from the original estimate, but unlikely by nearly as much.
Kiwirail were told that they couldn't do that, and instead do it at Kaiwharawhara, I think where the current terminal is. It turns out that that location was a lot more expensive to build the new terminal to the earthquake standards demanded for new infra.
Calling it a cost blow out is a bit misleading, instead it's a cost increase due to being asked to build at a more expensive location.
The whole thing to me sounds like the Kiwirail execs still wanted Kings wharf, and were hoping that by showing how expensive Kaiwharawhara was that they could go back to the original cheaper location. Instead Willis, new to being a cabinet minister, cancelled the whole thing without taking a good look at alternatives first.
Absolute f***ing omnishambles clusterf***.
Economic mismanagement at ball shattering scale.
In the private sector, a decision like this and you would have been out the door before you got a chance to look at alternatives.
[Who] decides to cancel a nationally crucial project that has serious dollars committed without knowing what the alternative is?
He did.
"He noted the February 2023 bid for a further $2.6b - also highlighted in the timeline Willis released - had in fact been rejected by the government at the time."
https://www.rnz.co.nz/news/political/504745/national-labour-firing-broa…
I am saying you would be yelling if he approved the full amount .
He approved in principle a smaller amount that would allow the ferries to be built , but not fund the complete portside build. as it was close to the elction , he did not think it was fair to make it approved in full without an incoming new govt having a say .
I don't think he's necessarily a National spokesperson, but I think it's more the fact he used to work at the same multi-national corporate as Luxon (half a dozen reporting lines sideways and another half a dozen reporting lines down), which is where his bias for this Government likely lies.
Perhaps he's like others here who actually just get annoyed when oppositions suddenly grow spines and start issuing the kind of ultimatums they were too cowardly to do when they were actually in power, overseeing and actually responsible for the issues like this that are actually a legacy of their own decision-making.
I have no bias for either party. I do however have a low threshold for people who look for excuses to push their own barrows when it comes to things they cared not one iota about when it might have made their favourite team (red or blue) look bad at some point.
Still waiting on my West Auckland Light Rail.
That's what I said.
This has just been republished tonight which provides more details on Labours decisionmaking and consequences
https://www.rnz.co.nz/news/political/522218/interislander-how-labour-s-…
It's probably a good thing he waited until the party that prides itself in financial and business acumen was sworn in, so they could provide expert oversight and subsequently make a decision that provides the best long term financial outcome for the country.
Unfortunately they appointed someone who is demonstrably unqualified to hold the cheque book.
Government's ferry plan timeframes too long, road freight lobby group says
Love being 'back on track'. So much winning ...
Winston Peters doesn't agree with you about rail-enabled ferries being a big, expensive mistake ..... when told the Government appeared to be leaning towards non-rail-enabled ferries last month, Peters responded, “who said that’s going to happen? Let’s see what happens in the end.” Asked whether he would prefer rail-enabled ferries, Peters said: “Well, of course I would. Because for 100 years that’s what we’ve been planning to do.” Although he wouldn't say it was a bottom line.
"Old expensive technology that the rest of the world has moved on from."
Really? Even 'Mericans are looking at all the other countries that are extensively using trains and asking why they're not. Many 'Mericans are looking at China's 600 kmph trains and asking why they're so far behind.
Where is the evidence for a 4$bn cost?
i don't think they published anything yet, i was listening on News talk ZB and they verified this morning. i think national reviewed treasuries statement from labour it said cost could be as high as 4 billion, something like that.
I don't think GR knew about the $3b, as the incoming minister was briefed on $2.6b with a $400m increase less than a month later.
The bit GR was pushing back on was the escalation to $2.6b - from memory he told KR he wouldn't even fund all of it and they'd have to find some other way to meet the shortfall but he gave them enough of a commitment to keep it going. It's hard to believe he'd have just gone, "Oh, OK, no problems here" if they bought him a cost escalation post-election when KR were already on a final warning from him and he'd already had to cut 4% out of departmental budgets in the lead-up.
You've missed the point.
The previous plan would have future proofed the Cook Strait ferry services for $3-4 billion.
The current plan will kick the can down the road, for $2 billion, and we'll be having the same discussion in less than 20 years, maybe as little as 10 years if the coalition seriously penny pinches to sweep this under the carpet.
So a sticking plaster for $2 billion? Or a quality outcome for $3-4 billion?
Would I be right in guessing you'll be six foot underground when that next discussion starts?
And ideologically Labour are opposing this after their own finance minister had told them the escalation to $2.6b was unacceptable.
They'd be undoing his stance by pushing ahead with.
Golly it's funny how many people suddenly care about ferries now that their favourite team isn't in power anymore.
People have always cared about ferries, they are the critical link that connects both islands. Nobody piped up about them before because the solution was being worked through.
People are pissed off now because National has truly fucked up. They came in and in an ego and ideologically driven act of economic vandalism they burnt the plans for a workable solution with literally no alternative. That's why people are pissed off.
Only a die hard anti-Labour, Pro-National fanatic would be defending this debacle.
They came in an essentially followed the previous Finance Minister's point that they would not fund anymore cost escalations. The 'solution' was another $400m of cost escalation by the end of same month she was briefed in as incoming Minister.
Suddenly upholding the stance of the previous Labour Finance Minister is 'economic vandalism'. And you're calling others out here who are questioning how that even remotely stacks up as 'fanatics'?
Absolute idiots.... although it was their election promise, they would have been much better off, keeping the original deal, sucked up the extra costs and then they would have still been able to blame labour for all the cost overruns....
Now they are left holding the can, looking like retards, because they didn't do their due diligence....
Soon Mr Luxon will have to show how great a businessman he really is, and Willis will have to show that she actually got skills and not just soft lips...
Labour made mistakes, no doubt, but they had the best intentions
Costwise, I think nationals mistakes will add up to more than labour , by the time luxon and Willis are finished...
Imagine living with her .....
You need some ferries first (cart before the horse)?
If the deal had been honoured they would have arrived next year...now ? Meanwhile one small engineering failure or bad weather event and we are all going to see just how much this treasonous decision costs NZ.
But hey all of you who voted for these clowns...SUck it up 😭
The thing is, there is a loooong lag now because we have lost our place in the queue. Boat building now is big business, from what I hear many of the major ship builders have full pipelines for the next 3-5 years, including the ones who were going to build our boats.
So by the time we do a redesign (another year or two), then get in the queue, its like 2032 or later before they get delivered.
What a monumental cluster f**k, you are right.
From a facebook page,
"here’s a rundown of what we believe the real costs are:
$900m purchase of 2 smaller non-rail ferries
$551m cancelled iRex contract for two ferries
$469m sunk costs (other than ferry construction contract) for iReX project
$500m portside facilities for new ferries
$300m land purchase, construction for new ‘road-bridging’ facilities
$200m replication of Kiwirail engineering facilities in South Island
$17m annual ongoing costs of double handling of interisland freight at rail ferry terminals
$1B reduction in value of KiwiRail’s Balance Sheet.
$1Bpa Economic cost of slower, more expensive freight, greater roading damage, reduced road safety"
Willis demonstrated at the election she couldn't understand the PREFU. It'll be an almost certainty that she didn't even understand, nor seek advice about, the numbers behind the former ferry deal that were well above her head. Just steam rolled in and cancelled it because it was "Labour's".
Much like Ardern, she'll have a post-politics feature in Women's Weekly where she nonchalantly chuckles about it being her biggest political regret and how it shaped her as a politician/person.
Book: Peter principle
It's a darn good read. Every voter should read it. We might get better government if voters read it.
Nicola Willis called their bluff. Great.
The smart people would tell the government it will cost day one billion. Then surprise surprise not it is going to cost four billion. And they are so far in it has to be done. Cash in big.
Nicola must have sent a useful shock to the manipulators. Good on her.
Think ferries, Dunedin Hospital, Rail loop Auckland. SA local example, Otago Regional Council building.
"Willis canceled the entire project after discovering the port upgrade costs had doubled to $3 billion and could increase further. It is likely a cheaper alternative will require freight trains to be unloaded onto the ferry and reloaded back onto trains on the other side."
total cost had increased to $ 3.2 Billion, not just portside costs . I have not seen any evidence that they might climb higher still , and there was work prior to the election to reduce the cost to fit
Robertson's lower amount approved in principle.
and virtually none of the extra costs were because the ferries were rail enabled , of course Kiwirail had factored those costs in from the start, and they are not the major cost, earthquake allopwance is.
Not ignoring a huge further cost escalation in your rail provider's project is now 'pandering to the transport lobby'.
No, it smacks of basic scrutiny, which for all his faults, even Robertson could muster enough of to know that the ongoing escalations were unacceptable.
They're not that thrilled either ... RNZ: Government's ferry plan timeframes too long, road freight lobby group says
Act in haste, repent at leisure, ay Willis & Luxon?
But hey. Look on the bright side ...
This National Party ineptitude will run and run. And now there's absolutely no way the National Party can escape without egg all over their faces. Absolutely none.
The tax payer will end up paying $3 billion - and more. But worse, the solution will be a sticking plaster. So much for them being better managers of the NZ economy.
Probably guarantees they'll be a one term government. That said, Kiwis aren't that bright and have extremely short memories. Perhaps rising house prices, tax cuts for landlords, etc. is all they want. So who knows.
Just another example of why NZ is going nowhere fast.
The economic vandalism continues ...
Surprised Winston went along with it......
You are only as good as your last job, and his legacy will be a ferry/ train procurement disaster to the tune of , likely billions,
He didn't deserve that......
Or he is gonna go nuclear and blow up coalition blaming National for this disaster and harvest a few extra %...( I kind of wish for this last option)
The extra mucking around with rail to ferry to rail will be the difference between Aucklanders buying bulk goods in from Australia instead of from the South Island.
Cue protests from Nelson and Canterbury growers as they're priced out from most of their domestic market by jacked up freight costs
🙈
Having done the ferry crossing from Manitowoc to Michigan on the SS Badger. And seen how slow and unproductive that was even down to them still having to throw the anchor out to turn the ferry then because of liability insurance you cant load or unload your own vehicle so it takes hours. To having crossed the cook strait minimum a 100 times. They run it with way more efficiency and more enjoyable than the yanks
Once again senior Ministers can’t agree on a plan of action or costs. We’ll either end up paying way more than we originally would have or we’ll end up with something cheaper that is not at all fit for purpose. Either way the New Zealand taxpayer will pay, and pay. This is no different to when they “guaranteed” their three waters replacement would be cheaper for ratepayers and led to historic double digit rate rises right across the country. We deserve better.
Even I think this is going to be a balls up. To come out and say basically nothing and then hide behind the commercial sensitive clause, while inviting private proposals, really means they don't really know. This one decision may just anchor them down, and the opportunity for labour and co to feast out on this is going to eb very real for the Nats and Co. If it really starts to affect them in the polls then maybe Nicola will be the one they sacrifice.
I don't expect they'll be many (or any) private proposals.
Why? The fragile nature of the portside infrastructure would put them out of action for months in the event of a (now overdue) earthquake. Insurance costs would be significant.
But - of course - now that the government is already seriously embarrassed - there's every possibility the taxpayer will insure the 'private operator'. That would be a classic National Party ploy. Most people won't even notice it. Until it is way too late.
Quite frankly, I rarely follow interest.co.nz anymore. It has been largely hijacked by the politically blinkered Labour trolls as far as most of the comments sections go.
How can a project that started with a budget of $600 - $700 million but blew out to $3.3 billion (and still counting) have any remaining credibility? Yet Labour and their rabid, election-bitter supporters go, think 'that's still okay'. Amazing!
How can a project that started with a budget of $600 - $700 million but blew out to $3.3 billion
Optimism bias, change of scope, political interference, better information as the investigation progresses...
It is actually the norm. If you are genuinely interested why big projects blow out read '"How Big Things Get Done". The author found that for projects over $1B US, only 5% deliver to time and budget, if you also factor in which ones also delivered on the business case benefits then it drops to 0.5% of projects. Let that sink in, 99.5% of projects over $1B US do not deliver on time, to budget or benefits. This is based on data from over 16,000 projects.
There are good interviews online with the author if you are too lazy to read the book.
The boats alone were $450m, which means we are talking a more than 10x increase in the cost of the add-ons if the budget was initially $775m.
I'm sorry, at some point you have to question whether there is a capability issue, or someone has a problematic relationship with reality. A public project that ends up being underscoped by a factor of 10x is not merely 'over budget'. That kind of descriptor doesn't cut it.
No. You've missed a critical point.
The portside infrastructure is dilapidated. In the event of an earthquake, either end (or both!) could be out of action for months!
So what is the cost to NZ Inc. of ZERO ferry services for months and months?
Suddenly the long overdue upgrades to the portside infrastructure looks pretty cheap, ay? (And way cheaper than the billions being spent on Auckland's new train set.) I'll not add that once again political expediency (nay, stupidity) is once again destroying NZ.
Link to interview - https://www.youtube.com/watch?v=OiuHQQAgaFE
Stakeholders wanted to build the new terminal at Kaiwharawhara to mitigate the impact on water sports at King's Wharf.
The problem is the proposed Kaiwharawhara site needed extensive earthquake remediation work, including something like 300 piles at 70m long for the building.
That's why the budget was going to blow out. But rather than tell the stakeholders they cannot have their fancy new terminal, we cancelled the ferries......
In all these comments, not a single person has picked up on the salient point that Kiwirail wanted to move the ferry infrastructure away from Kaiwharawhara down to Queen’s wharf where it could have amalgamated with Bluebridge and kept costs minimised. Queen’s Wharf is also much more solid than the sludge bottomed Kaiwharawhara.
When Greater Wellington went “computer says no” Kiwirail had to then revise the costs to rebuild the Kaiwharawhara Infrastructure to cope with high likelihood of liquefaction which drove up the portside cost.
Easiest and cheapest solution would have been govt legislation to establish the ferry infrastructure at Queen’s Wharf, but Nicky No Boats decided not to be logical and cancelled the whole kit and caboodle.
I've mentioned it twice in the comments, albeit as you were probably typing this comment.
The reason cited if I recall, was to minimize disruption to water sports. However the real reason is probably driven by people who enjoy photo opportunities in front of taxpayer funded white elephant projects.
Agreed. I'd really like to understand more about not just Greater Wellington's involvement but also that of other commercial players that threw their oar into this decision. And this decision hasn't been reported on in any detail. Why is that? Something smells just a tad whiffy.
Indeed.
With Morgan Stanley Infrastructure Partners having a majority stake in BlueBridge's ferry service - and being KiwiRail's only competitor - one must wonder the same thing. How long before a National Party MP ... Or a NZ First one [hint, hint] ... joins the board?
More here: https://en.wikipedia.org/wiki/StraitNZ ... And you can see who was responsible for the budget blow out ... Hint: It wasn't KiwiRail that made the final decision.
It's been a case of epic mismanagement by all parties from the start, that's somehow missed all targets for time, cost and specification.
Quite often you can miss one of those, trading it off to meet the other two. To miss all three takes incompetence and self-interested meddling of a quite high degree.
Expecting those who got the project in to this position to get it out of it is unrealistic and is a good case for prying the hands of local and central government off any kind of infrastructure project, and legislating so it stays that way.
Finding grown-ups, like Singapore's infrastructure people, to manage the project while being away from political noise might be a good start.
It's been a case of epic mismanagement by all parties from the start,
Nope those National Party talking points do not fly either. National cancelled the ferries. If they had carried on they could have shared the blame or even completely blamed Labour.
They didn't, they cancelled them. They own it 100% from the point they cancelled it.
Barry Soper today quoting Luxon in Parliament ... Luxon laid it on with the trowel, declaring he was “very proud to be announcing an incredibly fantastic and credible plan to have a resilient and reliable crossing on the Cook Strait".
How can he say that when nothing was announced, don't trust him or Nicola Willis (where's the spreadsheet Nicola?) at all.
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