“It has been reported by Winston Peters side that the auto pilot was left on whilst skippers went for coffee. The Coffee has been denied but not the autopilot comment”
Welcome to 2nd Episode of “WHAT REALLY HAPPENED”
The scrapping of the iReX Interislander ferry replacement project was one of the early decisions made by the new coalition government, but several critical details have remained underreported. Here, we delve into the specifics of the decision-making process and its ramifications.
The Backstory
For years, KiwiRail has been seeking fund
ing for new ferries, recognizing that ships should ideally be replaced every 20 to 30 years. The fleet includes three aging vessels:
- Aratere: About 25 years old, built in Spain in 1998, and extended in Singapore in 2011. It is the only ferry currently equipped to handle rail, despite running aground recently.
- Kaiarahi: Built in Turkey in 1998 and chartered by KiwiRail since 2013.
- Kaitaki: Built-in 1995 for Irish Ferries, KiwiRail’s sixth owner since 2017.
These ships are deemed to be at the end of their useful lives by 2025. Additionally, the port facilities are also outdated and inefficient, requiring significant upgrades.
Project Termination
Despite the government’s focus on maintenance, a December cabinet paper emphasized that maintenance alone could not indefinitely delay the need for replacements. KiwiRail’s Interislander service performs about 3,800 trips annually, transporting around 850,000 passengers, 250,000 cars, and $14 billion worth of freight, with a projected annual freight volume increase of 1.4%.
Financial Struggles and Unviable Alternatives
In an attempt to fund the iReX project, KiwiRail explored various options, including the sale of surplus land and business units, such as Wellington Railway Station. However, these assets were deemed critical for current or future operations. Reallocating funds from other projects, like the Marsden Point Rail Link, was also considered but dismissed due to existing governance structures.
Other funding strategies, such as selling and leasing back ferries and rail assets, were found unattractive due to the advanced age and condition of the current fleet.
Infrastructure Delays
Delays in port infrastructure decisions would have rendered the new rail-enabled ships non-operational until 2027 at the earliest. Ministers were informed that delays and rising costs meant the terminals would be 22 months late, requiring a “reset” option to use the ships earlier, increasing the project’s price from $2.503 billion to $2.609 billion.
Descoped Project and Passenger Experience
KiwiRail assessed a “descoped” option using $750 million allocated before the last election but found it nonviable. This plan lacked passenger boarding ramps, necessitating bus transport onto the ferry, increasing turnaround times, and reducing capacity for rail freight and passengers. This would have also threatened the viability of the Christchurch to Picton rail line.
Public Good and Funding Model
The funding model for port terminals, treated as a business cost rather than a public good, was criticized. Unlike rail networks and roads funded through the National Land Transport Fund, port facilities are funded by KiwiRail. This approach should have recognized the public benefit of such infrastructure.
Competition and Market Dynamics
Treasury advised against viewing Interislander as the sole Cook Strait connection, noting that Bluebridge, the rival operator, could expand its fleet if iReX did not proceed. However, without new infrastructure, total capacity across the Strait would halve, impacting freight and passenger movement significantly.
Cost-cutting and Project Feasibility
KiwiRail managed to cut $230 million from the project through value engineering but still faced a $1.2 billion shortfall. The project relied on timely agreements and funding decisions, which were not forthcoming.
Contingency Planning and Practical Constraints
Since March 2023, officials prepared for potential project failure, emphasizing the importance of preserving design and management records for future reference. Selling the contracted ships was theoretically possible but impractical, as it would delay delivery and increase costs.
Climate Considerations
The December decision to cancel the project did not thoroughly assess climate impacts due to uncertainties about future solutions. The transition to modern, lower-emission ferries remains dependent on future decisions.
Conclusion
The cancellation of the iReX project underscores the complexities and challenges in modernizing critical infrastructure. With aging ships and ports, KiwiRail faces significant hurdles in maintaining and improving its vital services across the Cook Strait. The decision leaves many questions about the future of New Zealand’s interisland transportation network.