Maritime New Zealand has ordered Interislander's Aratere to stop operating until mechanical system failures are resolved and it is safe for passengers and crew.
Today MNZ imposed conditions on the ship to prevent it from sailing until surveyors are satisfied the ongoing problems have been resolved and the vessel is safe to operate.
The Wellington-bound Aratere suffered reduced power in the Tory Channel in the Marlborough Sounds about 7.20pm yesterday.
It is the second time in a month the newly refurbished ship, which received a $53 million makeover earlier this year, has had mechanical problems.
Maritime Safety inspectors had been monitoring the situation over the last 24 hours and staff were working with KiwiRail to resolve the issues, said maritime services general manager Sharyn Forsyth.
"Safety of the crew and passengers is paramount. We will be monitoring the situation closely and can assure the public that the vessel will not operate commercially until we are sure it is safe to do so," she said.
Transport Minister Steven Joyce supported the decision.
"It is a significant issue and a significant safety issue and that is a concern," he told TV3 today.
Inspectors were onboard the vessel this morning during a sea trial in Wellington Harbour when it experienced another failure thought to be unrelated to previous events, said Ms Forsyth.
Maritime New Zealand may also require further conditions to be met before allowing full commercial operations to resume, such as freight-only sailings or requiring a route through the northern passage of the Marlborough Sounds.
During yesterday's mechanical failure, the captain continued sailing into the Cook Strait at a reduced speed of three knots.
Power was restored to the engines shortly afterwards but another malfunction struck during the strait crossing.
A fuel control module failed when a pipe fractured, spraying out fuel vapour and setting off a fire alarm.
There was no fire but the ship's engines were shut down while an alternative fuel supply was switched on.
The Aratere then continued its crossing at up to 13 knots and was met by a tug at the heads of Wellington Harbour as a precautionary measure.
The ship berthed without assistance at 11.40pm, about two hours later than scheduled.
Interislander general manager Thomas Davis said the crew and 142 passengers aboard the KiwiRail-owned Cook Strait ferry were never in any danger and were kept informed throughout the sailing.
Mr Davis said the captain made several announcements during the voyage to reassure passengers.
The incident comes after the Aratere had a problem with its port shaft and needed assistance from tugs due to bad weather on October 6.
The Aratere returned to service in September after a five-month, $52 million refurbishment in Singapore that added a new bow and 30m to its mid-section, boosting its capacity.
Mr Davis said the problems were not directly linked to the ship's recent extension.
He apologised to passengers and freight customers who were disrupted but said safety was paramount.
"The causes of the incident will be identified and fixed before the ship sails again. We apologise to our customers, and are contacting them to move to other sailings.
"We are disappointed to have these disruptions in our service to our customers, and we are working hard to rectify them."
Interislander ships were professionally crewed and KiwiRail would co-operate with any investigations.