KiwiRail settles with Hyundai over cancelled ferries with $144 million payment

KiwiRail has settled with Hyundai Mipo Dockyard with a $144 million final payment following the cancellation of the Project iRex ferries.

In a press statement, Rail Minister Winston Peters was highly critical of previous media reporting that predicted a much larger figure for cancelling the contract for two large ships.

The decision to ditch Project iRex was among the first made by the Government after its formation in late 2023.

A procurement process has been under way for new ferries to be delivered by 2029, led by the Government’s new Ferry Holdings company.

“Doomsayers said cancelling the contract would cost the taxpayer the full $551m contract value,” he said.

“But these are some of the same people who accepted Project iReX ballooning from $1.45 billion when approved in 2021 to Treasury warning it was on course to $4b in 2023 thanks to eyes-bigger-than-their-mouths ambitions and absentee management. Even their criticisms blew out.”

He said the net $144m payment covered costs incurred by Hyundai and its global suppliers, and was fair given the decision to cancel Project iRex “was never a reflection on Hyundai”.

“As $300m was originally provisioned to cover the potential cost of exiting iReX commitments, including settling the contract with Hyundai, more funding is now available for other government projects.”

Rail Minister Winston Peters said the cancellation was not a reflection on Hyundai. Photo / Mark Mitchell

Ferry Holdings’ engagement with shipbuilders for new ferries is “progressing well”, said Peters, as is work on infrastructure at Picton and Wellington.

Finance Minister Nicola Willis said the forecast cost of the previous project had increased significantly by the time it was cancelled in December 2023. This was largely down to increases in the landside infrastructure costs.

“No government should be advised of billion-dollar blowouts in a major infrastructure programme upon being elected, as was the case after the 2023 general election.

“I am pleased that a more pragmatic solution is now in place that will ensure a safe, reliable Cook Strait service at an affordable price.”

Labour transport spokesperson Tangi Utikere said the settlement payment amount was “staggering”.

“Nicola Willis’ terrible decision-making has now cost taxpayers more than half a billion dollars in total – $671m – with no new ferries to show for it,” he said.

“The $144m break fee is on top of money already paid to Hyundai, which takes the amount of taxpayer money National has poured down the drain to $222m. The rest is project management, landside infrastructure and paying to wind down the project – totalling more than half a billion."

Last month, Peters announced agreements had been met with CentrePort, Port Marlborough and KiwiRail on the infrastructure scope.

“This is not our first regatta, as this no-nonsense infrastructure focus is what was supposed to happen in 2020 until poor management and a lack of oversight allowed iReX to blow out. We will save the taxpayer billions through our disciplined approach.

“The agreements entered into effectively mean the ports and KiwiRail are in, boots and all, with Cabinet’s preferred low-cost option.

“The focus of the agreements is primarily about the marine infrastructure. In Picton, new wharves and linkspans will be built while in Wellington we will be maximising the use of the existing Aratere infrastructure by modifying and strengthening the existing wharf to suit new ferries for the next 30 years and building a new linkspan.”

He said there was minimal scope for improvements to the yards.