Luxon & Willis Double Down on Ferries Debacle

Written By: - Date published: 6:46 am, December 13th, 2024 - 14 comments
Categories: Christopher Luxon, Dirty Politics, infrastructure, nicola willis, winston peters - Tags: , , ,

The day before today, Nicola Willis told the House that they would have to wait until the ferries announcement for the details about ferries cost etc. It was the same promise Luxon has been making in Parliament over the last weeks and months: the details are coming, the details are there.

But yesterday, as we all know, Willis would not divulge anything and it was clear why:

They do not want to give Kiwis an answer yet.

They said a new entity will be formed, they are starting a procurement process in March 2025, ferries would be smaller, and that they were relying on private firms to offer them solutions.

The expensive “independent advisory committee” that the government relied on for their preferred solution drifted to the background, although Willis answered shiftily that it would be released at some point.

A few days ago, Stuff’s Jenna Lynch said she cited Cabinet papers touting $900m for two non-rail enabled ferries:

As part of the new plan, agreed to by Cabinet, the ships will be smaller than the $551 million ships previously planned.

Stuff has seen part of a paper that went to ministers, which said $900m had been set aside for the ships, while extra has been set aside for landside development costs.

NOTE: That’s a 63% increase on the original cost for the ferries.

It also means the New Zealand government cancelled a contract where we could procure a next generation, size appropriate, and full functionality Mercedes for a Toyota price.

And is now trying to buy a basic, no-frills Toyota Corolla for the price of a Mercedes.

Nicola put down the cost difference to only two points: smaller ships and non “gold plated” ports.

It was frustrating to hear:

There are no gold plated ports and never were – most of the cost over-run, as she knows, was due to the need to seismic upgrade of the ports in Wellington and Picton.

And they are end of life ports so it was perfect timing to match the replacement of the 2029 end of life ferries.

Willis speaks for her audience and the surrogates that help National and ACT amplify their chosen messages – but it was infuriating to feel that she thinks so little of Kiwis to say such misleading words.

Luxon defended her today in Levin – claiming his government was doing a good job on the Cook Strait ferries solution, and telling reporters:

“We want good value for money and a resilient, robust service”

Today though I mainly want to highlight two key points:

1. PRIVATISATION

Although Winston Peters publicly shot David Seymour down after Seymour gloated about successfully privatising the Cook Strait ferry service, the fact is the government’s entire set up – a separate company, inviting private companies to tender, not ruling out privatisation – does have the hallmarks of privatisation preparedness.

As Carl Findlay noted earlier this year:

Putting a private, for-profit gatekeeper at the heart of our national freight system will increase costs to freight customers, see profits go offshore, and cost us much much more than spending the money on publicly owned rail-capable ferries upfront.

Peters needs to be seen to champion the solution – he made it clear in yesterday’s press conference he will want credit for the eventual solution.

A March 2025 procurement start means it will be a long process and one wonders what the government has done over the last 12 months, and how incompetent they have proven themselves to be.

i.e. Despite Peters’ denials, I wouldn’t bet on privatisation being ruled out yet.

2. RAIL ENABLED VS RAIL COMPATIBLE

In late June, it was reported that the government’s “independent” and handsomely paid ferries advisory committee had landed on the government’s preferred solution from the outset:

The group had reported back to Government and had recommended the purchase of new, slightly smaller, but not rail-enabled ferries.

The group was also expected to explore who else should be responsible for paying for upgrades to port infrastructure.

Importantly, National’s 2024 Budget also saw rail budget slashed – particularly in the South Island, leading to speculation it was not going to invest in rail.

Carl Findlay from the Maritime Union:

If they are pressed on the matter, the Government will tell you the iRex ferries were too big and that caused the land-side infrastructure costs to blow out.

But here’s the thing: the majority of any land-side savings that would come with their advised preferred option (said to be two E-Flexer class ships from Sweden-based multinational Stena Line) won’t come from having smaller ships.

… In fact, the smallest E-Flexers are only marginally smaller (and, in the 2024 market, likely to cost more) than the ‘mega’ ferries the Government has been deriding as too big and too expensive – and they’ll still need new wharfs.

The only land-side ‘savings’ with E-Flexers would mostly be the result of getting rid of rail capability and not having to upgrade the rail infrastructure at Wellington and Picton terminals.

We estimate those savings are likely to be in the low hundreds of millions of dollars.

A lot of money but still far less than is likely to be lost on the cancellation of iRex, and only a small portion of what will need to be spent on our ageing terminals regardless of what kind of ferries end up using them.

And to reiterate: any saving on removing rail capability will come at the expense of higher freight costs for New Zealand businesses and our economy and the risk of making our domestic freight market significantly less competitive.

He goes on to say:

Talk in the industry is that the Government’s plan is for a Private Public Partnership via a Schedule 4A company (where the Crown is the majority or sole shareholder) – probably in partnership with Stena Line and probably including some kind of ship-leasing and private operation arrangement.

This is likely the only way the Government could claim to have shifted some of the immense cost of this decision off their books.

Or at least muddy the political waters by pushing it out for future taxpayers and freight customers to deal with.

Yesterday, Willis would only use the words “rail compatible” – that is very different to rail enabled and industry experts estimate not having rail enabled will mean:

Kiwi businesses will be paying millions of dollars a year more to move rail freight between the islands.

This is an additional cost that would be locked in for a generation.

We don’t buy new ferries often.

In other words, this government is being true to form in every single policy area – whether health, Maori-Crown affairs, science and technology, freshwater protection, climate – it appears to be trying to make itself look good – at the expense of future generations and cost to taxpayers.

Is this acceptable, New Zealand?

Post-Script

Today, Winston Peters is retrieving the microphone from the Coalition government – he tells RNZ, rail-enabled ferries are a “no-brainer” and insists they will be the cheaper option for the Interislander replacements.

The government has also sneakily shifted the numbers – all prior reports were based on a ~$3bn Kiwirail i-Rex project.

But yesterday, the government introduced a $4bn figure – claiming that was what the old project would have cost – and today Peters says this is what he needs to stay under.

Sneaky.

Related Reading:

Nicola Willis’s Very Unserious Bungling of the Kiwirail Interislander Cancellation

Nicola Willis's Very Unserious Bungling of the Kiwirail Interislander Cancellation

14 comments on “Luxon & Willis Double Down on Ferries Debacle ”

  1. thinker 1
    13 December 2024 at 7:45 am

    The other thing they are doing is fragmenting the delivery of the solution.

    What made up the total of the labour package has now been sliced and diced, with the ports going to local communities to provide.

    That will make it harder for a future comparison with what happens against the labour package.

    And, even if someone does the numbers and finds this government wanting, they'll be able to pass blame onto the other entities.

    Labour has the numbers of it's ferry package. It needs to take those numbers and segment them to match the government's package: how much for the ferries, how much for Picton wharf, wellington wharf etc, so comparisons can keep being made on an Apple vs Apple basis.

    It's the only way to hold this lot to account.

    Reply
  2. SPC 2
    13 December 2024 at 9:39 am

    The ships Stena of Sweden use are roll on-off enabled

    BusinessDesk reports interest in the Chinese-built Stena E-flexer roll-on/roll-off passenger ferries, that can be modified from 190m to 240m according to customer requirements.

    Interestingly, Stena did also pitch a concept for a mid-sized rail ferry to Interislander (below is a depiction from its pitch brochure) but it missed out to firm Hyundai Mipo with its longer, wider mega ferries.

    The Hyundai price won it.

    https://newsroom.co.nz/2024/12/09/ferry-decision-youre-gonna-need-a-smaller-boat/

    — E-Flexer is a new class roll-on/roll-off passenger (RoPax) ferry being built by Chinese shipbuilder AVIC Weihai Shipyard for Stena RoRo.

    Stena RoRo: New LNG-electric ferry fitted with 'world's largest battery' delivered. Swedish shipping company Stena RoRo has taken delivery of a new E-Flexer roll-on/roll-off passenger (RoPax) ferry, which is powered by a multi-fuel engine and a battery package, from Chinese shipyard CMI Jinling (Weihai).

    https://en.wikipedia.org/wiki/E-Flexer-class_ferry

    These ships are shorter and narrower, but will cost towards $900M alright (without the Hyundai discount).

    Reply
  3. Adrian 3
    13 December 2024 at 9:50 am

    Interesting!. A mate of mine knows a lot about the Cook Straight and it’s ferries and buying them for existing operators and his primary concern is for a decent beam and length otherwise they are a bit too tender “ read ,hard to handle ‘for the conditions which are quite unique in the world. But of course Admiral “ No Boats “ Willis would know all about this.

    Reply
  4. gsays 4
    13 December 2024 at 9:58 am

    This is where we come in.

    Contact Peters and let him know how relieved we are for this project to be in such safe hands. A once in a generation opportunity to build infrastructure resilience.

    Also, a great chance for Labour to reach out (quietly) and agree to continue what Peters may start.

    This country is too small to have important projects like the ferry/port renewal used as a political football. Especially by rank amateur, post-modern finance ministers.

    Reply
  5. ianmac 5
    13 December 2024 at 10:11 am

    “Based on international benchmarking, the mean project cost overrun for similar projects is 32 percent (already exceeded by iReX), and the mean cost overrun of projects with over 50 percent overrun is 183 percent. On this evidence, the total cost of iReX could approach $4,000m.”

    That is the total of the $4billion figure splashed about. And no-one knows beyond that where the actual data came from.

    This is from Newsletters Newsroom today in an excellent column written by Jonathan Milne. Totally compatible with Mountain Tui's column above.

    https://newsroom.co.nz/2024/12/12/own-goal-govt-sets-new-4b-goalpost-for-ferries/

    Reply
    • ianmac 5.1
      13 December 2024 at 10:16 am

      And read the stirring support for from Peters in a 2020 report supplied by Felicity Anne Smith, under the Newsroom column re the big new ferries.

      27 MAY 2020
      ‘Government investment supports the acquisition of new Interislander ferries
      Rt Hon Winston Peters Deputy Prime Minister State Owned Enterprises

      State-Owned Enterprises Minister Winston Peters has welcomed KiwiRail’s announcement that it is seeking a preferred shipyard to build two new rail-enabled ferries for the Cook Strait crossing.
      “This Government is committed to restoring rail to its rightful place in New Zealand. Bigger, better ships, with new technology are yet another step on that journey,” Mr Peters said.
      “These will be the first brand-new purpose built ferries New Zealand has had in over 25 years.
      “Of the current ships, only the Aratere is rail-enabled, and an unwillingness from previous governments to invest properly in New Zealand’s rail infrastructure has meant the Aratere has had a number of costly technical and mechanical issues…….. (and much more.)

      Reply
      • ianmac 5.2.1
        13 December 2024 at 11:32 am

        Sorry Incognito. Thought that was this mornings edition. But pretty compelling as is Mountain Tui's.

        Reply
        • Incognito 5.2.1.1
          13 December 2024 at 11:46 am

          No need to be or say ‘sorry’; I merely wanted to alert you to the fact, no more, no less, rather than repeating my comment again in full.

          FWIW, I think that Newsroom is excellent, and they do some awesome work that should interest and excite anybody who has a critical conscience and half a brain.

          Reply
  6. tWig 6
    13 December 2024 at 10:45 am

    Sharon Murdoch's Stuff cartoon on this today is a laugh.

    The bridge of a ship, a gormless PM accidentally leaning on the bleeping autopilot, Willis looking under the running board saying, the start button’s somewhere round here, and an adamantine Admiral Winston "Nelson", one hand snugged in his uniform jacket.

    Reply
  7. Ad 7
    13 December 2024 at 12:14 pm

    This will take 3 terms to fix.

    Even with Winston's political skill and deep respect by rail management and unions.

    Hope he really extracts the rent out of Willis at Budget 2025.

    Reply
  8. Adrian 8
    13 December 2024 at 12:40 pm

    Did Winston threaten Luzon with pulling the plug on the CoC if he didn’t get the rail ministry. ? He is certainly acting like it, even to the point of saying to ignore anything Willis and Luxon said yesterday and telling Seymour to shut up because he doesn’t know what he’s talking about.

    Essential he is acting like the de facto PM. Good luck trying to get him to move over in a few months.

    Reply

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