Possible liability for ferry cancellation ‘has not been finalized’ – Hipkins

Labor leader Chris Hipkins said he would be “surprised” if the new replacement ferries cost less than the previous plan, and cancellation costs are still unknown.

Meanwhile, government ministers are raising the prospect of a “refresh” of the KiwiRail board following the president’s departure and following the grounding of one of the current ferries near the Picton terminal on Friday, apparently due to a steering problem.

In December, the coalition refused KiwiRail’s request for an additional $1.47 billion in funding for iReX, the project to replace its aging ferries and associated port infrastructure, after Finance Minister Nicola Willis described as a “major cost explosion”.

The two new ferries would have doubled passenger and vehicle capacity and tripled rail capacity, while reducing the carbon footprint by around 40 percent.

KiwiRail then confirmed the project would not go ahead. The government then established a ministerial advisory group to explore other options.

The group reported last week, with some media outlets suggesting it was recommending ships without rail capability. Some commentators have also suggested that KiwiRail is not the appropriate body to manage the ferries.

On Tuesday, ahead of National’s weekly caucus meeting, Prime Minister Christopher Luxon said shareholder ministers needed time to digest the report.

“But what you can be assured of is that we are going to have the right ships on the Cook Strait Ferry given the importance of this infrastructure.”

He declined to “go into detail” about whether the report recommended ships capable of carrying trains. Luxon said the state-owned company was still a suitable model for KiwiRail, but the government wanted to refresh the board.

“Yes, that’s true, but we expect this company to be well managed and well managed. And as you see, we want to refresh the board, we had to create a ministerial advisory group. You know , I think when you want to buy a house for $750,000 and you’re going to build it and it turns into a $3.2 million house, that’s a problem.

“We understand, it’s a difficult situation, we are very committed to putting the right ships on the Cook Strait Ferry, trust us, we will sort this out.”

Finance Minister Nicola Willis said the advisory group had looked at the issue of rail capacity in depth, but ministers were yet to make a decision on it.

“It’s up to us to have confidence in the board, the board decides who its officers and directors are, and as we announced over the weekend, the chairman of KiwiRail has taken his early retirement of this board of directors.

“We will refresh this position and we will look to refresh the board more broadly to ensure they have the skills and expertise to lead this organization into the future.”

Labor leader Chris Hipkins, however, said he did not think it was realistic not to have a rail link between the North and South Islands, as it would lead to “significant inefficiency” in the way goods are transported.

“Ultimately, we will probably end up with more freight on the roads of both islands, which will lead to more road damage and more traffic congestion, because it will become less economical to transport goods by rail if it does not there is no connection between the two islands.

He would be “absolutely stunned” if the government managed to secure new ferries at a lower price than it had previously agreed to, he said.

“We have ordered new ferries at a very, very competitive rate,” he said. “I would be absolutely amazed if they were able to get new ferries for less than we bought these two new ferries for.”

He said rising land infrastructure costs were a concern for the previous government.

“We hadn’t signed all of that, we were still talking with KiwiRail about how to reduce that cost,” he said. “But there are some harsh realities here. Even if you ordered three new smaller ferries instead of two big ones, the docks still need to be replaced, they’re very old. So let’s see what they bring in, but I don’t think so .they will get something cheaper than what was already going on.”

“Ultimately, I think it shows that they were wrong to react in such a knee-jerk way.”

The government was “very suspicious” about whether the previous order for new ferries had been canceled or not, he said, and he had heard from “people who would know” that the contract had not been canceled.

“I have received suggestions that these ferries are still being built, that the contract has not been canceled and that the dollar liability to the New Zealand Government for the cancellation of this order has not yet been finalized.”

Labour’s Transport spokesperson Tangi Utikere also said it was unclear whether the contract to replace the Interislander vessels had been canceled or not.

“But what is clear is that with each day that continues, there is a lot of uncertainty and I think many believe that the initial stuck figure of $551 million, the real cost of the cancellation could potentially be excessive…no one knows.

“We have blocked $551 million for the physical construction (of the ships), that is, in 2021 the prices have increased – so naturally they would be significantly higher.”

He said rail “absolutely” needs to be part of the solution to moving freight effectively and efficiently.

The issue of a proposed “refresh” of the KiwiRail board was a matter for ministers, he said, but “there has to be some accountability around that, which we all saw Friday night was unacceptable and so I will leave. people to form their own opinion on this subject.