Pressure on to find rail ferries Plan B

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

The Government and KiwiRail have to come up with a solution quickly on what to do about the inter-island rail ferry service.

In December the Government declined the state-owned rail operator’s request for an extra $1.47 billion for the Inter-island Resilience Connection, after learning the project’s cost had doubled again to almost $3bn. (It started out in 2018 as a $775m project.)

In rejecting KiwiRail’s request, Minister of Finance Nicola Willis noted the two ferries were only 21 percent of the total project cost — the rest being for infrastructure required for the new mega ferries at Picton, some of which had been already spent.

KiwiRail announced on Wednesday that it had started discussions to terminate its contract with a South Korean shipyard to build the two ferries. The $551m contract was signed in 2021.

KiwiRail had been hoping the deal could be rescued, with the ships still being built and then on-sold. It also considered cost savings by reducing the 100-year design life of the infrastructure at Picton.

CEO Peter Reidy said the cost of terminating the contract was commercially sensitive. It will no doubt be a very big number, though, putting more weight on a project that at this point is going nowhere.

When announcing there would be no more funding, Willis said the Government was committed to having a resilient ferry service for the Cook Strait. How to deliver that is now the conundrum.

In an op-ed in the New Zealand Herald this week, former Labour Minister of Transport Richard Prebble said the decision to cancel the new rail ferries was in effect a decision to cancel a railway.

An editorial in the NZ Herald earlier this week said given that it was now only a year from when the new ferries were expected, it was hard to see how KiwiRail would secure at least one new vessel without renegotiating the current deal with Hyundai.

How would we get another so quickly and for a 2021 price, the Herald asked, and what figure can you really put on future-proofing and safeguarding one of our most important trade and travel routes?

The current single rail ferry has a limited expected operating life, and is also insufficient on its own to handle all the potential rail freight on the Wellington-Picton to Christchurch line.

This is a problem the Government has inherited from its predecessor but it is one that it will have to find a solution to very soon. KiwiRail is scouting for ferries on the second-hand market and the Government has announced a ministerial advisory group, while the Ministry of Transport will lead an assessment of long-term inter-island service requirements.