KiwiRail chief responds to Govt refusal to fund mega-ferries project

The Government has this morning reiterated its decision to scupper KiwiRail's latest Cook Strait ferry project, including building larger ferries, after costs blew out for harbourside infrastructure in Wellington and Picton.

KiwiRail has been forced to cancel the plan for new mega-ferries after the Government described the project as a "budget blowout".

The state-owned enterprise for rail requested an additional $1.47 billion, a component of which had been agreed to in principle by the previous government.

Chief executive Peter Reidy told Breakfast he's "disappointed" by the decision to withhold funding for the project.

"We thought this was the best option for capacity, for safety, resilience, and most importantly, fit for future assets."

He agreed with Finance Minister Nicola Willis' statement that there have been "increased costs" since the proposed project budget.

"The design cost was $1.45 billion, and yes the costs have increased, and the estimate range now is $2.8 to $3 billion," Reidy said.

"We understand the problem, it's a problem to be solved for New Zealand… but what we're talking about is ships that can handle the Cook Strait for exporters," he said.

Reidy said the option of building new ships has been "on the table for many months" and KiwiRail was confident this was the best option.

"It's a connectivity for New Zealand, it plays a key part, so we just need to say 'alright, what's the next option?'" he said.

He said the ships were in the design phase, and they were "about 60% through the design phase".

"We haven't cut steel so we're about 60% through design. So now we need to sit down with Hyundai and figure out the options with that," he said.

Finance Minister Nicola Willis told Breakfast she wants to see better value options for the Cook Strait ferry services, using the metaphor of a "Toyota Corolla or secondhand Tesla" rather than opting for a "Ferrari".

"The Ferrari is not the only car in the garage," she said.

Willis said: "The Government remains committed to reliable, safe ferry services" but also wants the best deal for the taxpayer.

"The design of these boats is very large — it had blown out the cost of the infrastructure costs needed to support them," she said.

"The Toyota Corolla option, the reliable option, or maybe a secondhand Tesla option, let's make sure we're getting the best value possible for New Zealand taxpayers.

"Let's do this right."

Willis said the Government was looking into the options and "from a practical perspective, they are going to have to replace the current ships because they're coming to the end of life".

Willis said a solution is needed that works for all port users and infrastructure that fits the criteria.

"When this project was signed up to, it was only meant to cost $775,000 million, that was the basis. Now it's going to cost almost four times that at $3 billion," she said.

She said she was concerned that New Zealand taxpayers would be handcuffed to a project that goes "wildly off course".

"Ultimately, what you care about when you catch the ferry to Picton is; does is arrive there on time, is it safe and is it a good, cost-effective service."

Keeping with the car comparisons, National MP Chris Bishop described the cost decision as "the sensible option".

"Frankly, we were buying a Ferrari solution when… sometimes the old, secondhand Toyota Corolla does the job, you know, those old reliables… so that's more what we're going for, the sensible option rather than the gold-plated option," Bishop said.

Labour MP Kieran McAnulty said it was quite common in the last few years to have cost blowouts in infrastructure projects.

"I wouldn't say that the ferries we've got now could really be called as reliable as a secondhand Corolla.

"There's plenty of those crapping themselves around the country at the moment… and the ferries are no different," he quipped.

McAnulty said if money wasn't spent on upgrades now, governments would have to spend more later.

In Picton, work on the redevelopment was still ongoing on Thursday. The old terminal has already been closed with a temporary terminal in place.

Port Marlborough chief executive Rhys Welbourn said he was disappointed about the decision. His port has been a key partner to the KiwiRail project.

"There has been some early works started here in Picton and with the announcement the project’s been withdrawn we’ll have to look at how we scale those down," he said.

The port had planned to contribute $100 million towards the Picton infrastructure.