Georgina Campbell is a Wellington-based reporter who has a particular interest in local government, transport, and seismic issues. She joined the Herald in 2019 after working as a broadcast journalist.
ANALYSIS
The Government has refused to say whether the cost of building new smaller ships to replace Interislander’s ageing fleet will be cheaper than the $551 million mega ferry contract.
However, ministers have assured that overall their new plan will cost “significantly less” than iReX (the name for the now-cancelled mega ferry project).
iReX was left dead in the water in December after overall costs, including new terminals and wharf upgrades, ballooned to almost $3 billion and the Government refused to fund the blowout.
The cost blowouts were predominantly due to the portside infrastructure needed to support the rail-enabled ships which would be nearly 40 metres longer and at least five metres wider than those in the existing Interislander fleet.
The cost of the mega ferries themselves accounted for about 20% of the overall project costs when the Government pulled the plug on iReX.
It’s possible the Government could end up paying more money to build smaller ships in the current economic climate than to build the mega ferries but the overall cost would be a lot less than iRex because the expensive portside infrastructure would not be needed.
A Ministerial Advisory Group has been tasked with looking at the future of Cook Strait ferry services.
Ministers received a report from that group with alternative options last week - the same week Aratere ran aground.
Finance Minister Nicola Willis was interviewed by Newstalk ZB Drive host Heather du Plessis-Allan about this on Monday night. The interview was very revealing.
Asked whether the contract for the mega ferries has been cancelled, Willis said they were still in negotiations with South Korean shipbuilder Hyundai Mipo Dockyard.
Du Plessis-Allan probed as to whether those negotiations were so complex because of the cost of cancelling the contract.
Willis replied: “And also this question of whether or not Hyundai Mipo Dockyard would be appropriate to build smaller ships in future.”
The Ministerial Advisory Group has provided a range of options and costs “but the key thing of course is who we go with, the specifications, and as a Cabinet, we are working through all of that”, Willis said.
She would not be pressed for more details about these costs due to commercial sensitivity and said the Government was working with shipbuilders.
Du Plessis-Allan asked whether the new ships could potentially be more expensive than the fixed-price $551m contract signed with Hyundai Mipo Dockyard for the mega ferries.
“I tell you what will be a heck of a lot cheaper, and that’s the cost of the infrastructure required at port to take the ships”, Willis said.
The Government was also asked about this in Question Time today by Labour Transport spokesman Tangi Utikere.
He asked Minister for State Owned Enterprises Paul Goldsmith whether he could guarantee the Government’s replacement ferries would be cheaper than those to be delivered in the cancelled iReX project and if not, why not.
Goldsmith replied: “While the Government has not made a formal decision around the purchase of new ferries, as the Prime Minister has said, the Government is absolutely committed to ensuring we get great new ships on the Cook Strait. In doing so, we definitely expect the total cost of any such project to be significantly less than the $3b which was the cost of project iReX when it was cancelled by KiwiRail.”
Labour MP for Christchurch Central Duncan Webb made a point of order noting the question was specifically about the cost of the ferries not the cost of the overall project.
Deputy Prime Minister Winston Peters then noted Utikere had mentioned the iReX project in his question which was not just about the ferries but the supporting infrastructure as well.
Utikere moved on after Speaker Gerry Brownlee said Goldsmith’s answer started with the point the Government had not made a formal decision so “it’s hard to expect there would be a further qualification inside the answer”.
The fact that ministers are unwilling to specifically answer whether the new ferries would be cheaper to build than the mega ferries suggests at least some of the options in front of them are more expensive.
Willis also revealed in the interview with du Plessis-Allan that KiwiRail has received an independent assessment that the current Interislander fleet could keep operating safely and reliably until at least 2029.
She said there was no question she would like to see replacement ships before then but KiwiRail needed to make sure it was operating and maintaining its ships properly in the meantime.
The mega ferries were not due to arrive until 2026 so they would not have prevented the Aratere grounding.
During an urgent debate in Parliament today about Interislander, Transport Minister Simeon Brown said KiwiRail must take responsibility for the maintenance of its ferries.
“Over the last number of years, when the last Government were in charge, there was so much focus on the big shiny new ferries and they lost sight of the focus on actually maintaining what they already had.”
Brown said Kiwirail lost sight of their number one job to keep New Zealanders safe going across Cook Strait on the Interislander.
“We’ve seen incident after incident in that regard where the safety of New Zealanders has been put at risk by KiwiRail.”
Brown said the Transport Accident Investigation Commission recently made the point to him that there were a large number of ships of this age that operate around the world and which operate safely.
It might be difficult to square the expert advice that the fleet can continue running until at least the end of the decade with another report that said keeping the three ferries afloat will be an “ongoing battle”.
This other assessment of the fleet’s condition raised concerns about steel corrosion, metal getting weak and cracking, and prohibitive maintenance expenses.
This was part of the 2021 business case for the mega ferries. Two matters need to be considered when reading it in hindsight.
Firstly, this is a business case for why the fleet needs replacing. It’s building a case for the mega ferries not extending the life of the existing ferries.
Secondly, it could be possible the picture was so grim because KiwiRail had not kept up with maintenance to the extent it should have.
KiwiRail has since enhanced its maintenance programme and may need to do even more, considering the expectation from this Government it will operate and maintain the fleet for a few years to come.
The man is now in a critical but stable condition in hospital.