Finance Minister Nicola Willis speaks about KiwiRail cancelling its mega Cook Strait ferry contract with the South Korean shipyard Hyundai Mipo Dockyard.
Video / Mark Mitchell
Cook Strait independent ferry operator StraitNZ is calling for “a really upfront conversation” about who is going to pay for a proposed multi-user terminal, as its state-owned competitor Interislander comes under the financial microscope.
Shane McMahon, chief executive of StraitNZ, which operates two Cook Strait ferries under theBluebridge brand, said “we need to understand who will pay for the infrastructure”.
He added: “If there is no conversation about who will pay upfront, the danger for me, as one of the two ferry operators, is a third party building infrastructure without a focus on who is paying for that.
“If that cost is pushed down to us and ultimately our customers, it needs to be fit for purpose. The thing to be careful of in making it a multi-use facility is there is still significant expenditure whether it’s for one (operator) or both.
“That’s where we are saying let’s have a really upfront conversation about who is going to pay for that because I would hate to see a commitment to what could be billions of dollars at both ends of Cook Strait - without ultimately understanding who is going to pay for that.”
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The Interislander ferry service is operated by KiwiRail, a state-owned enterprise.
The idea of multi-operator-use terminals and ferry port upgrades at Wellington and Picton is not new. McMahon said discussions have been going on for years, and the latest round is the third iteration.
“We need to know we are going to be able to control our operation and not be impeded in any way. Today we build and pay for our own shore infrastructure. We work very closely with both ports to do that.”
Multi-operator precincts will be a hot potato on the table for the government-appointed ministerial advisory group providing independent advice and assurance on how KiwiRail is working to operate, maintain and replace its aged and breakdown-plagued Interislander ferry fleet.
Shane McMahon, chief executive, StraitNZ.
According to the advisory group’s terms of reference, shareholding ministers (the ministers of finance and state-owned enterprises) have made it clear KiwiRail must prioritise reliable, safe and enduring ferry services delivering current service levels up to and beyond 2026-2027.
The advisory group’s appointment follows the Government’s decision in December not to provide further funding for KiwiRail’s iRex project, which was to deliver two new mega-ferries and new terminal infrastructure at Wellington and Picton.
KiwiRail approached the Government for more funds because the project cost had blown out from $800 million in 2018 to well over $2 billion by late 2022. The blowout was on the infrastructure side.
KiwiRail cannot proceed with the iRex (Inter-island Resilient Connection) project without government funding. Negotiations are underway with South Korea’s Hyundai Mipo dockyard to terminate the agreement for the $555m contract for building two new Interislander ferries.
The ministerial advisory group was to “consider the constrained fiscal environment and value for taxpayers” in its work, the terms of agreement said.
“The Crown expects Cook Strait services to be provided on a market-driven basis and for Crown decisions as shareholders of KiwiRail not to distort market competition.”
A Treasury paper in 2021 said terminal infrastructure in Wellington and Picton was “in need of substantial upgrades to bring it up to modern safety standards and to be ready for the new ferries”.
StraitNZ was founded by Ōtorohanga businessman Jim Barker in 1992 as Strait Shipping.
Its current Cook Strait vessels are the Strait Feronia, and the Connemara.
They each make four Cook Strait crossings daily and carry about 35 per cent of total Cook Strait passenger volumes. The business also operates a road freight network which carries about 55-57 per cent of all road freight, said McMahon. The company employs up to 600 people, depending on the season.
KiwiRail’s ageing Interislanders Kaitaki, Aratere (rail-enabled) and Kaiarahi between them carry nearly 800,000 passengers and 250,000 vehicles a year.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
