KiwiRail has reached a settlement agreement with South Korean shipyard Hyundai Mipo Dockyard (HMD) following the coalition Government’s cancellation of the iReX ferry project.
Chief financial officer Jason Dale said the state-owned enterprise effected an agreement with Hyundai for a full and final settlement to exit the contracts for two rail-enabled ferries that were signed in 2021.
“After constructive negotiations we have concluded a settlement agreement with HMD for a final amount of $144 million. Including previous payments, this brings the total paid to HMD to $222 million and the final cost for the entire iReX project to $671 million.”
Project iReX was launched to replace KiwiRail’s ageing Interislander fleet with two large, rail-enabled ferries. The plan also included major upgrades to port infrastructure at Wellington and Picton.
The morning’s headlines in 90 seconds, Trump rates chances of success ahead of meeting Putin, the haul of stolen gear police want to return, and Baby Shark lawsuit thrown out. (Source: 1News)
The ships were due to cost $551 million, with the delivery of the two ferries set to occur in 2025 and 2026.
Approved in 2021, the contract was cancelled with Hyundai in December 2023 shortly after the coalition Government came into power, citing Treasury warnings of costs associated with the ferries and required port upgrades ballooning.
Minister for Rail Winston Peters said the $144 million final settlement payment was to cover the costs incurred by Hyundai and its global suppliers.
“That is only fair as the decision to cancel Project iReX was never a reflection on Hyundai.”
Around $300 million was originally provisioned to cover the potential cost of exiting the iReX commitments, Peters said, adding that more funding was now available for other Government projects as a result of the lower settlement cost.
He also hit out at media reports and the Opposition for suggesting the final settlement could be more than $300 million.
“Doomsayers said cancelling the contract would cost the taxpayer the full $551 million contract value, 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 $4 billion in 2023 thanks to eyes-bigger-than-their-mouths ambitions and absentee management.”
Finance Minister Nicola Willis said the settlement ended “yet another sorry chapter in the story of the previous government’s mismanagement of the Crown’s books”.
“It signed up to purchase two big new ferries without giving sufficient consideration to the port infrastructure needed to support ships of a much bigger size.”
She said the cost of the project “had almost quadrupled” by the time of its cancellation in December 2023.
“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.”
The Government set up a company, Ferry Holdings Ltd, to lead the procurement process of two new ferries by 2029. It is currently in talks with several shipyards to find a preferred build partner for the new ships.
The new ferries will be approximately 200m long and 28m wide, with capacity for 1500 passengers and 2.4km of lanes for cars, trucks, and 40 rail wagons each.
The final sailing for the Aratere, which is leaving service to allow for work on port infrastructure upgrades, is on Monday.
Cancellation of iReX ‘terrible decision-making’ – Labour
Labour’s transport spokesperson Tangi Utikere said the cancellation of the previous contract for the Interislander ferries was “terrible-decision-making” by Finance Minister Nicola Willis.
“The $144 million 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 $222 million. The rest is project management, landside infrastructure and paying to wind down the project – totalling more than half a billion.”
He accused the Prime Minister and Willis of having “absolutely no clue what they’re doing and “just making things worse”.
“The amount of taxpayer money they’ve wasted with absolutely nothing to show for it makes a mockery of every time they’ve said they can’t afford something. People are struggling with the cost of living while Nicola Willis and Christopher Luxon’s economic decisions run aground and sink.”
Green Party co-leader transport spokesperson Julie Anne Genter said the exit from the Hyundai ferry contract showed “wastefulness and short-term thinking” by the coalition Government.
“We could have had new ferries by next year and millions of dollars left over to spend on critical infrastructure if it weren’t for this irresponsible Government. This is a missed opportunity and a massive mark against this Government’s credibility.”
Genter said the $550 million deal for the two new rail-enabled ferries was one of the best the country had ever signed up to.
“This Coalition Government tore it up and will likely be forced into signing a deal that leaves us worse off in the short and long term. The Government must stop cutting corners and commit to funding a transport network that works for people and planet.”
