The Government has declined a KiwiRail request to contribute significant additional funding to address cost escalations in the project to replace the InterIslander ferry fleet, Finance Minister, Nicola Willis announced today.
KiwiRail had requested an additional $1.47 billion, a component of which had been agreed to in-principle by the previous government, to address cost escalations related to associated harbourside infrastructure.
“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,” Ms Willis says.
“It is also now the case that only 21% of these costs are associated with the core project of replacing ageing ferries.”
She said the Government did not have confidence that there will not be further increases and was concerned about the continued significant cost blow-outs and the changing nature of the investment they are being asked to make.
“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.”
Ms Willis said the decision was not a reflection on shipbuilder, Hyundai Mipo Dockyard, which was awarded the contracts to build two rail-enabled ferries. The bulk of the cost-escalation is related to upgrading harbourside infrastructure in Wellington and Picton, including to accommodate new larger ferries.
“I have been advised by the KiwiRail Board that, in light of the Government’s decision, it will now oversee the wind down of the project and review its plans for the Cook Strait connection,” she 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.
“In the meantime, we expect KiwiRail to continue focusing on providing a reliable ferry service and to prioritise existing services appropriately.”
