The Crown company set up to buy two new Cook Strait ferries expects to spend around $13 million in its first 16 months of operation.
Ferry Holdings has budgeted for expenses of $13.4m, including $4.5m for staff, $6.5m for consultants and $467,000 for contractors.
The recently released budget shows spending of some $2m in the four months from March to June, and a further $11m for the current fiscal year, 2025/26.
The funds cover the hiring of nearly two dozen fulltime staff, a range of contractors and consultants, and a newly signed lease for offices in Wellington’s Lambton Quay.
The company was established in March after the coalition Government scrapped a previous ferry replacement plan, known as Project iRex, which had a huge cost blowout.
The ferries are needed to replace the old and ailing Interislander freight and passenger connection between the North and South Islands, operated by state-owned KiwiRail.
Consultants signed up to work for Ferry Holdings include PwC for commercial advice, KPMG for financial management and Beca for advice on port infrastructure.
Further key consultants are focused on providing specialist advice related to the ships.
Danish consultancies Knud E Hansen and OSK Design will provide advice on the design and process for the build of the ships, and lead the design of the ships’ interiors and fit-outs, respectively.
French brokers BRS Shipbrokers will provide commercial maritime expertise across the ship procurement and build phases.
Permanent chief executive for the Ferry Holdings, Sandip Ranchhod, will begin work in late September.
Ranchhod recently worked for City Rail Link, where he was the commercial manager and was previously general manager of programme procurement.
Recent hires include: marine manager, engineering manager, ship project manager, GM commercial and finance, GM enabling services and project manager ships interior.
Board chairman Chris Mackenzie said contracts may be fixed-term or permanent, depending on the job.
It is not clear if and for how long the company will endure past the estimated ferry delivery in 2029.
Mackenzie described Ferry Holdings as a lean organisation, operating to a high commercial standard.
“That means the right people and resources with the desired expertise at the right time focused on ship procurement and port agreements,” he said.
He noted that Ferry Holdings’ planned staffing is substantially smaller than the numbers engaged for the iRex programme, which was run by state-owned enterprise KiwiRail.
In May, the company announced six shipyards have been shortlisted and invited to tender in a request for proposal process (RFP).
Mackenzie said the ships will be contracted for by the year’s end, for delivery in 2029 – the point at which the current ferries reach their estimated end of life.
In late May, Ferry Holdings’ ship programme director Massimo Soprano and four advisers – two from Knud E Hansen and two from BRS – toured the six shortlisted shipyards.
Soprano was also the ship programme director for KiwiRail and ran procurement for the now abandoned iRex ferries.
Mackenzie declined to release the cost of the overseas shipyards visits; he claimed the information is “commercially sensitive”.
Labour’s transport spokesman Tangi Utikere criticised the plan over which Ferry Holdings is presiding.
He said the abandoned iRex plan – conceived by the 2017 coalition Government of Labour and New Zealand First and progressed under the last Labour Government – was “clear” and “sensible”.
And he warned that costs for ferry replacement will continue to mount under the current Government: “New Zealanders are paying more by the day for inferior ferries and portside infrastructure to what was planned.
“Not content with wasting $671m, the costs keep mounting for this Government’s chaotic ferry plan. We still don’t know how much they’ll cost, who will be supplying them – perhaps the same shipyard as the cancelled ferries? And they’re spending millions more on consultants.”
The ferry programme is intensely political, and Ferry Holdings’ ability to replace the scrapped iRex project with boats and infrastructure that is both cheaper and fit for the job is important in upholding the Government’s reputation.
When the current Government took power in late 2023, the cost of iRex had exploded from roughly $1.5 billion for ships and infrastructure to a cost likely approaching $4b, according to the Treasury.
The cost of port infrastructure to accommodate the large, rail-enabled ships on order was the main reason for the projected overrun.
But the decision to scrap that plan has also been inordinately expensive for the Crown.
A sunk cost of $222m was paid to Hyundai Mipo Dockyard of South Korea, $144m of which was a break fee for the cancelled order. That spending has bought nothing.
A further $449m was spent on port infrastructure in Picton and Wellington and project management costs to December 2023, as well as project wind-down costs. Some of that infrastructure has value, but it’s not clear exactly how much.
Minister for Rail Winston Peters told the Herald he doesn’t “take lectures from the Labour Party on cost control”.
He said Ferry Holdings’ budget and staff is “meagre” – in marked contrast to the previous cohort working on iRex – a project begun when Peters was in Government with Labour, but which he maintains spiralled out of control after 2020 when Labour governed alone.
“They filled an entire floor at CentrePort and another at the Wellington Railway Station with about a hundred staffers, with consultants sufficient to fill the Titanic ... they were so bad at it that those ferries would have arrived in 2026 without anywhere to berth,” he maintained.
He said taxpayers will ultimately “save billions” through the current plan.
Ferry Holdings is what’s known as a Schedule 4A company, owned and capitalised by the Government. Some $4m of funding has been provided to date and a further $9.4m has been approved by ministers for the Treasury to transfer to cover the company’s spending between now and June 2026.
The Government has also given Ferry Holdings the job of exploring models and options for privatisation of the inter-island ferries.
Two of the partners in the Government coalition are at odds in their views, broadly, on privatising state assets. The Act Party is enthusiastic about this option, while it is not well liked by Peters and his NZ First Party.
Kate MacNamara is a South Island-based journalist with a focus on policy, public spending and investigations. She spent a decade at the Canadian Broadcasting Corporation before moving to New Zealand. She joined the Herald in 2020.