Government unimpressed with KiwiRail’s maintenance of Cook Strait Interislander ferries

Transport Minister Simeon Brown met with KiwiRail yesterday.

Transport Minister Simeon Brown says the Government has been “highly unimpressed” with KiwiRail’s maintenance of its Interislander ferry fleet.

The future of the ferries was the first question Brown faced at a Transport and Infrastructure Select Committee meeting this afternoon.

Brown said the Government was committed to a resilient Cook Strait service but ministers also wanted to see KiwiRail maintain its existing ships to the appropriate standards.

“Which has been a significant issue that we’ve been highly unimpressed with coming into Government”, he said.

Yesterday, the Herald reported annual maintenance costs to keep the ferries running could almost double to $65 million by next year, and keeping the ferries afloat will be an “ongoing battle”.

A 2021 assessment of the fleet’s condition raised concerns about steel corrosion, metal getting weak and cracking, and prohibitive maintenance expenses.

The Herald asked KiwiRail for updated estimated maintenance costs but none were available.

Labour Transport spokesman Tangi Utikere asked Brown during today’s committee meeting whether he had received an update on the estimated maintenance costs.

Brown said he met with KiwiRail yesterday and was assured the costs would not reach the $65m.

“They [KiwiRail] have in recent months been improving their maintenance protocols significantly from the poor maintenance protocols that they had in the last few years because they understand, and have had it impressed upon them, the importance of having well-maintained Cook Strait ferries which has not been the case in the last few years.”

A contract was signed to build the new mega ferries in 2021.

Brown would not give an updated estimate of the maintenance costs for commercial reasons.

Interislander executive general manager Duncan Roy maintains KiwiRail will continue to run a safe and reliable service for passengers and their cars, and freight, while working with stakeholders on the ferry replacement project.

The project to replace the fleet with two mega ferries was left dead in the water in December after overall costs, including new terminals and wharf upgrades, ballooned to almost $3 billion and the new Government refused to fund the blowout.

A Ministerial Advisory Group (MAG) is looking into new options for the future of the ferry service.

KiwiRail is still working through the termination of a $551m fixed-price contract with Hyundai Mipo Dockyard (HMD), based in South Korea, that was signed in 2021.

Utikere asked how much money had been spent on cancelling the contract and whether the penalty would be at least $200m.

“There are commercial negotiations that need to be worked through”, Brown said.

KiwiRail has previously estimated that if the same contract were signed today, the cost could increase by as much as 40%.

Utikere asked Brown if he was aware of any plan by Hyundai to continue building the two mega ferries and sell them to someone else at a higher price than was negotiated with KiwiRail in 2021.

“What I’m aware of is that they have particular components of the construction materials and they are determining what next they do and ultimately that is the commercial imperative of that company as to what they do next,” Brown said.

The Herald has previously revealed engine parts for the mega ferries were built and tested before KiwiRail terminated its contract with HMD.

Brown noted there was a $7.5 billion multi-year capital allowance set aside in this year’s Budget.

Finance Minister Nicola Willis has previously said the Government remained ready to invest in a ferry solution for Cook Strait and this was one of the reasons a generous amount of funding is in the multi-year capital allowance.

Brown said the decision to cancel the mega ferry project was made after the extent of cost escalations for landside infrastructure was revealed when National got into Government.

“Which the ports have been very clear they were not prepared to invest in, meaning KiwiRail was leading the investment around the portside infrastructure. KiwiRail is a rail company [that was] having to build a port.”

It was not appropriate to continue with a project that had almost quadrupled in cost, Brown said.

Green Party transport spokeswoman Julie Anne Genter asked Brown why negotiations to exit the contract with Hyundai were taking so long.

“Those are a matter for KiwiRail,” he said.

Genter asked whether the MAG had provided alternative options to ministers and when the Government would make an announcement on the future of the ferry service.

Brown said the MAG has met with the Government several times but noted they reported to KiwiRail’s shareholding ministers who are Willis and Minister for State-Owned Enterprises Paul Goldsmith.

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.