Finance Minister Nicola Willis has revealed the potential cost to the taxpayer is now "many times" what the Government initially signed up to.
"The financial situation of this project is extremely troubling," she said.
The matter appears to have been considered so pressing that Willis met with the state-owned enterprise’s top brass about it before she was even sworn in as the Finance Minister, the Herald can reveal.
KiwiRail is replacing its increasingly unreliable and ageing Interislander fleet with two new rail-enabled ferries under the Inter-island Resilience Connection project (iReX). The last publicly available cost estimate for the new ferries and the portside infrastructure was $1.45 billion.
The stakes are high after Kaitaki narrowly avoided disaster this year when it lost power in the middle of Cook Strait with 864 people on board and started drifting towards Wellington’s rocky South Coast.
Doubt has been cast over whether new terminals will be ready in time for the arrival of the mega ferries in 2026, but KiwiRail maintains the necessary port infrastructure will be in place.
KiwiRail has completed a major review of the project after an undisclosed cost blowout, including value engineering, and has said it will take time for ministers in the new Government to consider the project and be brought up to speed.
Last Thursday she received written briefings from KiwiRail regarding the iReX project and met with McLean and Reidy again later that evening.
"I am concerned that this blowout reflects casual incompetence by the outgoing Government in its approach to the scoping, management and delivery of major infrastructure projects," Willis said.
"Our Government will be much more careful stewards of taxpayers’ money."
The question of how to manage the project is an ongoing consideration for the incoming Government, Willis said.
"We are still taking advice, and decisions are yet to be taken."
Before the election, the previous Government put funding options on the table to ensure the programme could continue but it’s not clear what those were.
KiwiRail defends claims Cook Strait ferry service standards will drop
In a briefing to incoming Transport Minister Simeon Brown, Ponter said delivery costs for the new ferry terminal in Wellington have "skyrocketed" since initial funding was agreed.
"We understand that lower service standards are now planned," Ponter said. "Government needs to be eyes wide open to what is being delivered and commit the necessary funding to ensure reliable passage across Cook Strait as a critical part of New Zealand’s transport and tourism infrastructure."
However, iReX programme director David Warburton said the new purpose-built ferries will improve customer service and reliability.
"They cater for 30 years of tourism and trade growth, increasing passenger capacity by 50 per cent, can carry 40 per cent more trucks, and increase rail capacity by almost 300 per cent.
"This is not a reduction in service."
Ponter told the Herald the problem was not the ferries themselves, with a $551 million contract having already been signed with a South Korean shipyard, but rather the landside infrastructure that he said KiwiRail did not have enough money for.
He said lower service standards could arise from problems such as insufficient space for rail vehicles to get onto the new ferries, which potentially had implications for ship turnaround times.
KiwiRail has reported work on portside infrastructure on both sides of Cook Strait is well under way.
A temporary terminal building has been built in Picton in preparation for the main works beginning next year.
Underground services have been moved and reconnected, there has been a switch to a new marshalling yard for private vehicles, a temporary "load out" jetty at Westshore has been installed, and work to construct two new commercial jetties has been completed.
In Kaiwharawhara, the old arrivals building has been demolished, levelling work at Kaiwharawhara Point undertaken, and a new passenger vehicle marshalling yard constructed.
Construction on a temporary jetty used to barge material to the main wharf construction site will be finished before Christmas.
