The critical infrastructure project was set to replace the current fleet, which has been plagued by breakdowns and reliability problems, safeguarding the rail and road connection between the North and South islands.
But its costs have escalated dramatically and the government yesterday drew a line in the sand.
The last publicly available cost estimate for the new ferries and portside infrastructure was $1.45b.
However, Finance Minister Nicola Willis revealed yesterday that costs for the iReX project had now doubled to just over $3b.
"The government remains committed to a resilient, safe and reliable Cook Strait connection.
"[However] agreeing to KiwiRail’s request would reduce the government’s ability to address the cost pressures that are impacting on New Zealanders, fund other essential projects and get the Crown’s books back in order."
KiwiRail says it cannot proceed without further government funding and now plans to scrap the project.
KiwiRail chief executive Peter Reidy said the board were told on Tuesday about the government’s decision not to provide service funding.
"We are disappointed but we obviously can’t proceed without further government funding."
He said the board had decided to discontinue the project.
"We’ve been in contact with [ship builder] Hyundai this afternoon and we will be terminating that contract, so we will not be building new ships," he told NZME yesterday.
Reidy said the board was about 60 per cent of the way through designs and steel was due to be cut in late January.
He said the ships were a critical part of New Zealand’s supply chain to move freight and people.
For alternative options, Reidy said KiwiRail would look at leasing ships.
"Any option is obviously going to take some time to work through," he said.
Yesterday’s bombshell comes after a string of high-profile incidents involving the ageing fleet, including a breakdown of the Kaitaki ferry near the heads of Wellington Harbour in January in which it drifted dangerously close to rocks with hundreds of passengers on board.
Marlborough Mayor says decision a ‘shock to the Picton community’
Marlborough Mayor Nadine Taylor said she was shocked and disappointed by news the mega-ferry project had been scuppered.
While the decision would not directly impact Marlborough’s ratepayers financially, it would have an impact on New Zealand’s long term inter-island infrastructure.
"This will come as a particular shock to the Picton community, who are most directly affected by this decision. The town has been very engaged in the new ferries project and have been a great supporter of it.
"A large number of workers had been expected to work on the iReX project over the coming years.
"I want to emphasise to Kiwis and overseas travellers that Picton is open for business. The Interislander and Bluebridge ferries are working as normal across Cook Strait.
"I would like to sit down with the new government and talk through what the future looks like for our inter-island infrastructure. There is no doubt that we need to invest in this national transport connection for the long term. The question now is how and when we will do that."
The mayor said Port Marlborough, which is wholly owned by Marlborough District Council, had robust agreements in place with KiwiRail that required the completion of early works at the Picton port and the reinstatement of any affected assets.
‘Reliability issues’ and concerns over continuing safety
Wellington harbourmaster Grant Nalder said there were reliability issues to consider given the current ferry fleet’s advanced age.
"From my point of view, that’s a concern over continuing safety of the service with the elder ships," he said.
Nalder presumed there would still be a plan to replace the ships.
Nalder said new infrastructure was needed with the existing plan to cope with the volume of freight and passengers and also the size of the new ships themselves.
"I’ll be watching with interest to see what the next iteration of the replacement plan is," he said.
A bit of ‘posturing’ going on, ‘common sense will prevail’
Transporting New Zealand interim chief executive Dom Kalasih said there was a "bit of posturing going on" but hoped common sense would prevail.
Kalasih said the organisation supported the government’s decision to "in essence hold KiwiRail to account on this cost blowout", but agreed the services must improve.
"We’ve had so many disruptions in terms of levels of service have been poor and even some safety concerns, so things need to change," he said.
On the flip side, it was public money and the public needed confidence it would be spent in a good way.
He believed the two parties would come to an agreement on a fair cost and did not believe New Zealand would be left with no inter-island shipping.
"I’m pretty confident there will be better ferries operating from better infrastructure from 2026," he said.
Ferry unions call for Willis’ resignation
Four ferry unions representing maritime and rail workers lashed out at the decision last night and called for Willis’ resignation.
Maritime Union of New Zealand national secretary Craig Harrison said it was not tenable that such a major decision with massive implications for the economy should be made in such a "fast and loose" manner.
"This is far more than a fiscal decision – this decision shows poor judgment and a total lack of understanding of the importance of a functioning Cook Strait connection to New Zealand’s supply chain."
Ongoing technical issues with Cook Strait ferries were a result of end-of-life vessels being used on a notoriously challenging crossing, resulting in a spate of serious incidents in recent years, he said.
"This government campaigned on getting our transport infrastructure sorted and their first move is to basically jeopardise the future of road and rail transport between the North and South Island."
