Government documents have been released relating to KiwiRail’s failed Inter-Island Resilient Connection (iReX) project.
It includes dozens of documents from the Treasury, the Ministry of Transport, the Ministry of Foreign Affairs and Trade and KiwiRail.
Documents relating to the iReX project are being released in two phases.
The first phase was released on May 10 and includes all official information relating to the project from September 20, 2022 to December 15, 2023, plus one Gateway review report that was produced in July 2022.
The second phase of the release will include all official information from December 15, 2023, to February 9, 2024, and is due to be released in the coming weeks.
The iReX project was set to replace Interislander’s three aging Cook Strait vessels with two larger rail-enabled ferries.
However, the Government canned the undertaking in December last year due to cost blowouts, declining a KiwiRail request to contribute an additional $1.47 billion towards the upgrade.
It was carrying a price tag of up to $3 billion related to harbourside infrastructure in Picton and Wellington
along with the two new Interislander ferries.
An indicative business case in November 2018 estimated the total project cost, including landside infrastructure, would come in at $775m.
But in November last year, KiwiRail advised the incoming Government of the most recent cost escalation with total project costs of approximately $3b.
Nearly 80% of the costs were associated with the harbourside infrastructure while the remainder was for building the two new Interislander ferries.
In July 2021, KiwiRail announced it had formally signed a NZ$551 million contract with Korea’s Hyundai Mipo Dockyard to build the new Interislander ferries.
KiwiRail is still negotiating an exit from the deal with reports it could run into hundreds of millions of dollars.
The first of the two new Cook Strait ferries were originally expected to arrive in 2025 and the second in 2026.
The only rail-enabled ferry currently is the Aratere which can carry a maximum of 27 sixty-foot equivalent wagons per sailing. The two new rail-enabled ships were expected to carry 40 sixty-foot equivalent wagons per vessel on up to three return sailings each per day –a 300% increase in capacity at peak.
KiwiRail operates around 3800 services a year, transporting about 850,000 passengers, 250,000 cars.
Around $15-$20 billion worth of freight travels the Cook Strait each year, with significant growth predicted.
Investment in the ferry terminal upgrades was also to be provided by Wellington’s CentrePort and Port Marlborough. KiwiRail also invested its own funds and had taken on $350 million in debt to support the procurement of the new ferries.
KiwiRail ‘looking to future’
KiwiRail chief executive Peter Reidy says the release of the documents show the extent of work undertaken to deliver the iReX project.
“iReX was a complex project designed to deliver an integrated transport system across the Cook Strait including two new ferries and upgraded port infrastructure.
“The terminal construction projects were complex, with both ports situated in seismically challenging environments. Among other factors, iReX costs were impacted by the heightened awareness of seismic risk and vulnerability following the Kaikoura earthquake, and unforeseen materials and labour cost increases in the post-Covid world,” Reidy says.
Reidy says when he re-joined KiwiRail in August 2022, he and the board immediately appointed a lead construction partner to review the infrastructure designs and prepare construction methodology and pricing.
KiwiRail also established an independent governance group, comprising people with significant civil construction and marine experience to oversee the project. This included formal reviews by external third parties and global experts. All analysis and information was regularly provided to the Ministry of Transport and Treasury, he says.
“In the current economic environment, and with the fiscal challenges facing New Zealand, KiwiRail understands, respects and accepts the decision by our shareholder, the Government, not to continue funding the project.
“A small amount of work in Wellington and Picton continues to ensure both sites are left operationally safe and functional for our existing operations and to get roads re-opened in Picton.
“KiwiRail is now looking to the future and working with all parties to deliver a reliable, safe and workable solution to delivering the iconic Interislander service,” Reidy says.
Meanwhile, a ministerial advisory group made up of transport and logistics experts has been formed to help direct the future of KiwiRail’s inter-island ferry service.
In February this year, State Owned Enterprises Minister Paul Goldsmith announced the appointment of Nelson Airport chief executive Mark Thompson to chair the advisory group. He is joined by a further two members, Mark Cairns and Roger Sowry.
