Negotiations to exit KiwiRail Cook Strait mega ferry contract will drag into next year

KiwiRail chief executive Peter Reidy, left, and acting chairman Rob Jager. Photo / Mark Mitchell

• KiwiRail bosses say negotiations to exit a $551 million shipbuilding contract for the two cancelled mega ferries will extend into next year.
• KiwiRail acting chairman Rob Jager says the process will take as long as it takes.
• The Government is expected to announce an alternative plan for Cook Strait by December 11.

KiwiRail bosses say negotiations to exit a $551 million shipbuilding contract for their cancelled mega ferries will extend into next year.

A scheme to replace the current ageing Interislander fleet with two larger rail-enabled ships was left dead in the water last December after overall costs, including new terminals and wharf upgrades, ballooned to almost $3 billion and the new Government refused to fund the blowout.

The Government is now poised to announce a decision on its alternative plan next week.

Meanwhile, KiwiRail is still negotiating the exit of the fixed-price contract to build the old ships signed in 2021 with Hyundai Mipo Dockyard (HMD) in South Korea.

KiwiRail bosses faced questions on their progress when they fronted the Transport and Infrastructure Select Committee this afternoon.

KiwiRail acting chairman Rob Jager during his appearance at today's select committee meeting. Photo / Mark Mitchell

Green Party transport spokeswoman Julie Anne Genter wanted to confirm if the shipbuilding contract with HMD had actually been cancelled.

KiwiRail acting chairman Rob Jager confirmed it had.

“We’re now talking about settlement of the contract,” he said.

It was not a good idea to set a timeframe for such complex commercial negotiations, he said.

“It’ll take as long as it takes.”

Jager said there were some relatively straightforward areas of the contract but other parts required a great deal more information which then needed to be assessed.

Labour Party spokeswoman for state-owned enterprises Arena Williams asked if KiwiRail had received any advice about the next stage of settling the negotiations.

KiwiRail chief executive Peter Reidy said they have had significant specialist maritime legal and technical advice from the UK.

“We aren’t at the stage yet of saying it’s going to mediation - we’re not there at all. It’s actually still going through the balance of the claim and what’s commercial and what’s not.”

Negotiations are ongoing to exit the shipbuilding contract for KiwiRail's now cancelled mega ferries. Image / KiwiRail

Labour Party transport spokesman Tangi Utikere asked if there was any indication of the length of time Kiwis would have to wait for the contract to be resolved.

“This is not going to necessarily be something that is wrapped up over the Christmas period, is it?” Utikere asked.

Jager confirmed it will extend into next year.

“With due respect, these are significant contracts.”

Last month, Deputy Prime Minister and NZ First leader Winston Peters told the House the Government would decide on the new plan for the ferries by December 11.

“It was always [December 11] or before so, we haven’t pushed any date out at all.”

Prime Minister Christopher Luxon was coy on that deadline and maintained an announcement would be made by the end of the year.

Deputy Prime Minister and NZ First leader Winston Peters has revealed the deadline for the Government's decision on the future of Interislander's Cook Strait ferries. Photo / Mike Scott

Transport Minister Simeon Brown told the Herald this week: “The Deputy Prime Minister has made clear there’s a timeframe we’re working towards.”

Asked whether that meant the ferry decision would go to Cabinet on Monday, Brown said: “It’s a timeframe we’re working towards and obviously it’s being led by the shareholding ministers.”

Brown confirmed the public could expect an announcement by Wednesday.

“We’re working through that at pace.”

Brown also appeared before the Transport and Infrastructure Select Committee earlier today.

Whether the new ferries would be rail-enabled was a topic of discussion.

Genter asked about the impact on freight costs and productivity if none of Interislander’s ferries were rail-enabled.

“Four of the five current ferries are not rail-enabled,” Brown replied.

“Last time I looked, there’s a range of freight operators who use both Interislander and the alternative in order to move their freight between the North and South Islands.”

Genter asked if Brown thought having one rail-enabled ferry was the same as having no rail-enabled ferries.

“No, because one is greater than zero that’s just numeracy,” Brown said.

Freight operators were focused on the most efficient way to move goods and there was a range of ways for them to do that, Brown said.

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.