These options were two medium-sized roll-on-roll-off passenger ferries, two medium-rail-enabled ferries, two large roll-on-roll-off ferries, and two large rail-enabled ships.
Three further options were developed in the 2021 detailed business case as part of KiwiRail testing its preliminary decision to go with the mega ferries.
These included two medium rail-enabled ships capable of being lengthened in the future and two medium rail-enabled ships brought into service in the mid-2020s with another ship added during the late 2030s as demand increased.
It would not have been the first time a ferry in the Interislander fleet was lengthened.
In 2011, the Aratere underwent a $52 million refit including a new bow and stern to increase its capacity from 360 to 600 passengers. The ship was cut in half to insert a new 30-metre midsection.
The Government is yet to announce its new plan to replace the fleet and is urgently progressing work to take a proposal to Cabinet after the Aratere ran aground in Picton. Photo / Tim Cuff
Concerns with these new options included that lengthening a ship would be more expensive than building a larger ship initially, and the fleet size would be halved for six months while each ship was taken out of service for the retrofit.
Purchasing two new ships initially and a third ship later would make the third ship more expensive because the benefits of scale would be lost compared with if they were all ordered at the same time, the report said.
Roll-on roll-off passenger ferries were inherently more complex for rail freight due to road bridging. This is where containers are moved from trains by a vehicle that loads them on to the ferry.
The report said this posed a greater risk to staff than directly loading rail wagons on to a rail-enabled ship.
The 2021 business case said two large, rail-enabled ships were still the correct choice.
“Two medium ships would not provide the required growth capacity, while three medium ships would be more expensive both in capital terms and to operate.”
While KiwiRail was still finalising its detailed business case for the two new mega ferries, it had already signed a letter of intent with Hyundai Mipo Dockyard in South Korea to build them.
“Sharply increasing steel prices mean today’s price for two medium ships would in fact be higher than that of the two larger ships which has been locked-in with KiwiRail’s preferred shipyard, Hyundai Mipo Dockyard (HMD) through the Letter of Intent (LOI) exchanged in December 2020,″ the business case said.
“KiwiRail has now finalised a price with HMD which is close to the LOI price representing a significant achievement in today’s very volatile steel and shipbuilding markets.”
Robertson wanted more information from KiwiRail on the cost and risk of alternative options.
He specifically wanted to know: “The extent to which seeking to renegotiate the shipbuilding contract to procure ferries that are more like-for-like with respect to the current fleet and/or are not rail-enabled would allow for landside infrastructure costs to be reduced and forecast with greater certainty”.
KiwiRail chairman David McLean replied to Robertson saying KiwiRail had considered three alternative options.
The option of three new medium rail-enabled ships was estimated to cost $3.02b, two new large ships which were not rail-enabled was $2.59b, and a “do minimum” scenario of procuring and running three second-hand ships was $1.34b, KiwiRail estimated.
All options, including retaining the mega ferries, were net present value (NPV) negative, meaning the cost of capital exceeds the long-term revenues it enables. The mega ferries had the highest benefit-cost ratio of 3.3.
McLean argued the mega ferries remained the best option.
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.
