A project to replace the ageing Interislander ferry fleet will be wound down after the Government announced this afternoon it will not provide much-needed further funding for the Inter-Island Resilient Connection (iReX).
The project sought to replace the current ageing, diesel-fuelled fleet with two new rail-enabled diesel-electric hybrid ferries. The new ferries would have reduced emissions compared to the current fleet by up to 40%.
Wellington and Waitohi Picton would also have seen new terminal infrastructure, with it and the new ferries in operation later this decade, according to a KiwiRail report.
Finance Minister Nicola Willis said KiwiRail had requested an additional $1.47 billion to address cost escalations related to associated harbourside infrastructure. The previous government had agreed in-principle to cover part of this.
"The Government remains committed to a resilient safe and reliable Cook Strait connection, but the cost of this project has almost quadrupled since 2018 to approximately $3 billion," Willis said.
"It is also now the case that only 21 per cent of these costs are associated with the core project of replacing ageing ferries.
"Ministers do not have confidence that there will not be further increases and are concerned about the continued significant cost blow-outs and the changing nature of the investment they are being asked to make," Willis said.
"Furthermore, agreeing to KiwiRail's request would reduce the Government's ability to address the cost pressures that are impacting on New Zealanders, fund other essential projects and get the Crown's books back in order."
KiwiRail chairman David McLean said the project cannot proceed without further Government funding.
"The board will now oversee the wind down of the project and review our plans for the Cook Strait connection."
McLean said KiwiRail respects the Government's role as shareholder and funder to make the decision it did today.
He said the board acknowledges the disappointment KiwiRail's team and iReX's stakeholders will feel.
"We sought a strong outcome for New Zealand through this project for a more resilient State Highway 1 across Cook Strait for exporters, domestic freight forwarders, tourism and domestic commuters.
"We will work with the Government, our customers, ports and other stakeholders on the way forward. An alternative suitable long-term solution could take years to develop.
"In the interim, KiwiRail will continue to invest in the safety and reliability of the existing Interislander fleet, through strong asset management practices."
Willis said: "Ministers have made clear to KiwiRail that we expect KiwiRail to prioritise providing reliable, safe and enduring ferry services. Ministers, including State Owned Enterprises Minister Paul Goldsmith, will engage with the board and with officials about alternative options to ensure an enduring connection. The Government will also be taking advice on how best to understand how this situation unfolded in order to inform future decisions."
Year of woes for ageing fleet
Today's announcement comes after a particularly difficult year for Interislander.
It started in January when a ferry lost power in Cook Strait, issuing a mayday call.
In March one of its ships was out of commission for a month due to a gearbox fault, while in August passengers slept aboard due to a steering issue. And just last month one of the ferries was left with a large hole which spread across a metre in its hull, forcing passengers to rebook on other ferries.
Bluebridge has also encountered issues this year, causing more chaos for travellers and businesses.
Greater Wellington Regional Council chairman Daran Ponter said ahead of the announcement the iReX project was flawed from conception.
"My view is that Kiwirail undercut their proposal to start with. So the costs were undercooked, but also inflationary pressures have caught up with us all."
Almost prophetically, he told 1News: "It is for the Minister of Finance now to determine whether those need to be revisited in some form. Do we need such large ferries? Is there some other way of cutting this project?"
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