Winston Peters, pictured during his media conference on the Cook Strait ferries in March. Photo / Mark Mitchell
Minister for Rail Winston Peters has opened the door for the part-privatisation of the new inter-island ferries and a Treasury paper said “several” private operators have expressed an interest in establishing a commercial competitor to Bluebridge with Government help.
Earlier this year, Peters took a paper to Cabinet, along with Finance Minister Nicola Willis and Transport Minister Chris Bishop, which confirmed a direction to Ferry Holdings, the publicly-owned company set up to procure two new inter-island ferries, to “consider options for ferry ownership and operation that will improve efficiency and recycle Government capital”.
“This could involve introducing experienced private-sector ferry operators from overseas or co-investment from infrastructure investment,” the paper said.
Recycling capital means bringing in new, private capital to replace the public capital spent buying the ferries, which would ply the Cook Strait route.
The paragraph made clear that this would only be considered once the new ships and port infrastructure had been established. The new ferries are not expected to be delivered until 2029.
The paper was released in draft form to the Herald under the Official Information Act. The Herald confirmed the same provision was in the final paper that was taken to Cabinet early this year to procure two new rail-enabled ferries.
Peters’ Cabinet colleague David Seymour thinks the Government should walk through that door and eventually privatise the ferries. Strangely, the strongest opposition to that may come from Peters himself, who, having opened the door to part-privatisation in the Cabinet paper, shut it again when approached for comment by the Herald.
In a statement, Peters strongly implied he would be very unlikely to consent to the ferries being privatised.
“It is entirely standard to consider the best use of assets when building and buying them. After all, we are about the best result for taxpayers and that involves considering every opportunity.
“Need we remind you, our position on public ownership of taxpayer-funded assets has been patently clear for decades and has not changed. If a third party wants to co-own our asset, then it tells us we have something of value and that should never be given lightly.”
Further details of ways to “recycle Government capital” were included in the paper, but they were redacted from what was released to the Herald.
The paper did say that some “interested parties” that had been approached as part of the Government’s work to procure the new ferries “may be approached when Ferry Holdings has a detailed understanding of options to attract an operator or a potential co-funder”.
Seymour thinks the ferries should be privatised.
He told the Herald “the Government doesn’t need to own the ships or the ports to deliver the service”.
“In fact, history shows us it’s better if Governments don’t. We wouldn’t oppose the Government getting its capital out of the ferry business to pay down debt or build other assets like better roads, in fact we’d welcome such a common-sense move,” he said.
Labour’s transport spokesman Tangi Utikere said that Willis had “botched” the ferry procurement project “to oblivion” so that they could be later sold.
“Selling off state-owned assets never goes well for National Governments, and that’s exactly what we’re seeing here,” Utikere said.
“Winston Peters is complicit in this, which goes against everything he has said in the past. Privatising ferries should not be an option for this Government, but they’re doing it anyway.”
Privatisation has been hanging in the air since the Government blocked additional funding for Labour’s iRex ferry replacement project in 2023, causing KiwiRail to pull the pin on a $3 billion project to buy two new ferries and substantially upgrade the ports of Wellington and Picton.
In December last year, Willis handed over responsibility for the project to Peters as the newly created Minister for Rail.
Back then, Peters and Willis said in a press release that the “working assumption” was that the new ferries would be purchased by the Crown and transferred to Interislander operator Kiwirail.
“The Government has not taken any decision on private sector involvement but is open to proposals to involve private sector capital or expertise,” they said in December.
In January, when asked whether he supported privatisation, Peters responded, “give me a break”.
The Government has committed to no asset sales this term, but the National Party has opened the door to seeking a mandate for asset sales at the election.
Peters’ Cabinet paper has left that debate open, allowing Ferry Holdings to look at private capital in future. Ministers would need to agree to any such proposal.
The paper laid out some of the options the Government had considered for the ferries. These options were suggested by the market after the Government said it was open to new ideas for the strait.
The paper noted that costs could be controlled by making the “maximum use” of existing infrastructure and not investing in large projects at the ports in Wellington and Picton.
It was the port infrastructure that was mainly responsible for the cost blowouts associated with iRex, which required new terminals to be built for the new mega-ferries. Picton will still receive some upgrades, but Wellington will not be significantly altered.
The paper included eight options suggested by the market and considered by the Government. This included buying pre-2010 used ferries that would have cost a third of the new vessels’ price – about US$50 million ($82m).
KiwiRail “ruled out” these ferries on comparative safety grounds, but the commentary noted that Interislander competitor Blubridge operated similar second-hand ferries, “which indicates this choice could be available to the Government”.
The Government looked at shorter ferries or a dedicated rail ferry.
A fifth option was sensitive enough to be redacted in its entirety.
The Government looked at several ways of shifting freight from Wellington. One option was to shift container operations from Wellington’s Centreport to other ports around New Zealand, most likely Napier.
What was then left would be seismically strengthened to be put to better use. This would involve a multi-user ferry terminal, used by both the Interislander and Bluebridge.
Officials are still looking at this option, with an appendix to Peters’ paper saying: “The proposal to relocate Cook Strait ferry operations to Thorndon Quay has merits. Government will continue to work with [Wellington port] CentrePort when they explore the optimal configuration and design of landside infrastructure”.
The Government even looked at moving most freight away from the Wellington-Picton ferries, allowing the purchase of small, passenger-only ferries, although it reckoned this was unviable.
The Government also considered a number of ways of introducing private capital to the strait.
“Several” operators approached the Government about establishing a concession on the strait of some kind. Options included a Public-Private Partnership, which would see the Government pay a private operator to build and run the service. The Government would claw back some of its costs through ferry operators.
Another option was to provide facilities to a private operator, along with guarantees of support if the service became unviable.
“Several ferry operators expressed interest in establishing a commercial competitor to Bluebridge, given they successfully operate with no Government subsidy. Their key requirement is long-term access to port facilities,” Treasury said.
Act and NZ First killed the idea. Chris Hipkins has offered a way to bypass them.