Finance minister warns of Interislander ferry cost blowout

Photo: RNZ / Rachel Thomas
Photo: RNZ / Rachel Thomas
Finance Minister Nicola Willis says she has already met twice with KiwiRail bosses over a "major cost blowout" in the project to replace the Interislander ferries.

KiwiRail first announced its plans to replace the fleet of three ageing Cook Strait ferries by 2024 with two new hybrid-electric ones, purpose built with a much larger capacity, in early 2019.

The state-owned enterprise in January confirmed a larger $8.6 billion government investment to improve the ferry and rail infrastructure on both sides of the Strait had been approved under the fast-track consenting process.

The two new ferries would mean double the passenger and vehicle capacity and triple rail capacity, while reducing the carbon footprint by about 40 percent - with emissions reductions increasing in future with battery capacity and cleaner fuel upgrades.

However, Willis said costs had blown out to many times what was initially scoped.

"There has been a major cost blowout in the ferry replacement project, not only has the cost gone many times beyond what was initially scoped by the outgoing government, but the ferries themselves now are only a fraction of the total cost," she said. "I was shocked to receive information about this during the period of the caretaker government.

"I'm not going to go into those figures today, however I am working to make them as transparent as possible as soon as possible. However, what I can tell you is that the figure presented to me is far bigger than what's been in the public domain previously."

She said she had met with KiwiRail's chair and chief executive soon after, and since becoming Finance Minister and received a briefing on the matter had met with them again.

"This was meant to be a project to replace the ferries: great, we should relpace the ferries," she said. "But what it's become is a massive redevelopment ... of port infrastructure, with massive cost implications that were not well thought through when the size of these boats were first considered and when they were first commissioned.

"They are massive costs they go well beyond what was initially signed up to and that creates some real implications in terms of the value for money for this project."

The need for the new ferries has become more urgent in the meantime with one of the old ones losing power in Wellington harbour in January, just two days after confirmation of the project's approval. The event saw the Kaitaki drift dangerously close to Red Rocks on the capital's south coast in rough evening conditions.

Another ferry, the Kaiārahi, also sustained damage during berthing last month, with a metre-long hole ripped in the hull above the water line.

The delivery date for the replacement vessels has also been pushed out to 2025 and 2026, while main construction works on the terminal were expected to begin in middle of this year.

Willis said the new government was taking advice on how to manage the project and no decisions on its future had been made, but put the blame for the cost increases on the outgoing Labour government.

"I think the way that these costs have eben able to blowout like this reflects real incompetence by the outgoing government both in the way the project was scoped and designed from the beginning, the way it's been managed, and the massive cost imposition it now presents for the taxpayer."

RNZ has sought comment from Labour.