Maritime Union v Willis

Written By: - Date published: 12:16 pm, August 7th, 2024 - 49 comments
Categories: Environment, national, nicola willis, same old national, sustainability, transport, uncategorized, Unions - Tags:

National’s decision to cancel the replacement Cook Strait ferry project is developing into a full blown political crisis for the Government.

It started off as many National policy lurches do with claims that the previous Government had been profligate with public money and that it was the current Government who had to make the responsible decisions.

But they have been acting like cost accountants on speed. The swiftness of their actions coupled with the loudness of their claims is jarring.

And as time goes by the decision looks more like a ham-fisted anti rail attempt to grab a headline than a measured responsible decision to look after the country’s finances.

And the numbers keep racking up.

Remember that for the sum of $750 million the country was going to get two state of the art rail enabled ferries. The contract was described as a really good deal, negotiated at a time when ship yards were nervously looking for work.

The ferries were to be delivered by 2026. And after the Awatere recently experienced yet another catastrophe and ran aground 2026 seemed like a really good delivery date.

And the cancellation costs are considerable. On July 11, 2024 OneNews reported that the saga had cost us $484 million. This was made up of costs including terminal design, consenting, and enabling works, and a range of make good works undertaken after the cancellation of the project as well as design and procurement, the initial deposit for the ships’ build, and funding costs for the ships’ loan facility.

But this is not the end of the matter.

The Maritime Union estimates that the contract break cost will be in the vicinity of $300 million to $500 million.

And as said by MUNZ’s general secretary in this Newsroom article it gets worse.

From the article:

The Government wants to try to cut costs by buying ferries that have no rail capability. The implications of this for our economy and our freight market are far-reaching and range from longer loading times and thus reduced capacity across the strait, to eliminating rail’s competitive advantage in the market – and potentially KiwiRail’s viability as a competitive nationwide freight company altogether.

Figures we’ve worked up show that just the cost of double-handling a container at each end of the strait rather than rolling it straight onto and off of a rail-enabled ferry will add $150-$200 per container. 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.

And if rail can’t survive being hobbled like this, nobody seems to know what the cost of removing an entire mode of freight transport from the domestic market will be to freight customers and our economy. It would probably make sense to model that economic scenario before cutting rail from the strait. I’m sure the many New Zealand businesses that rely on domestic freight, rail or otherwise, would appreciate at least that small amount of due diligence and forewarning.

And the anticipated replacement ferries will still require enabling and strengthening works. Yesterday in Parliament Barbara Edmonds asked Nicola Willis if she was aware the E-Flexer ferries the ministerial advisory group recommends are at least 50 percent larger than the largest current ferry, and that they will need new wharfs and infrastructure. Willis responded by saying the recommendations were not in the public domain.

The decision is bizarre. I guess this is what happens when you get advice from an advisory board that includes a director of a trucking firm and Auckland airport, the Nelson Airport Chief Executive, and a former National MP.

And where is the rail expertise input into this decision making? Where are the advocates for sustainable and future focussed transport systems?

And the secrecy surrounding the matter is intriguing. Nicola Willis has refused to release correspondence between the Government and Kiwirail. I wonder why?

Half a billion dollars here, half a billion dollars there, pretty soon we are talking about real money.

The decision making is so bad that doctrinal anti-rail coupled with low grade financial analysis do not necessarily explain what has happened.

This issue is going to haunt the Government.

Stand by.

49 comments on “Maritime Union v Willis ”

  • Comments are now closed

  1. Bearded Git 1
    7 August 2024 at 12:50 pm

    Yes this is turning into a nightmare for National. They may simply brazen it out for the 2026 election by not making a decision at all because a report came out the other day saying that the three existing ferries could be patched up for use until 2029. [Luxon turning NZ into a Third World country]

    I used to work professionally as a cost accountant and I reject the slur above Mickysmiley.

    A cost accountant would have looked at ALL of the numbers and would have recommended not to cancel the order for the two rail-capable ferries.

  2. srylands 2
    7 August 2024 at 1:18 pm

    "It started off as many National policy lurches do with claims that the previous Government had been profligate with public money …."

    Are you seriously suggesting that the last Government was NOT profligate with public money?

    Also the Maritime Union is not a credible source for analysis. Of course they are going to oppose an end to a rail capability. Indeed they will blindly oppose anything that this government does. It is about as useless as citing the views of the teacher unions about the performance of the education system

    • Mike the Lefty 2.1
      7 August 2024 at 1:43 pm

      Ok Mr-latest-rightwing-troll-to-pop-his-head-out-from-under-his-bridge, if you believe the present government's analysis of the situation then you are dumber than the average troll.

      It isn't only the maritime union, it is freight companies too that want rail capability. Lack of rail capability increases their costs. Funny how National doesn't worry about increased costs for others, only for their own balance sheets.

    • mickysavage 2.2
      7 August 2024 at 1:56 pm

      "Also the Maritime Union is not a credible source for analysis"

      You mean the organisation who represents workers who spend their lives trying to make ports and ships work efficiently does not know anything?

    • gsays 2.3
      7 August 2024 at 2:35 pm

      When a comment does nothing more than attack the messenger it shows they don't have a relevant point to make.

      Not surprising, Willis has been a rank amateur and beyond defending on this issue.

      Smells like yet another example if this regime doing their donor's bidding.

  3. adam 3
    7 August 2024 at 2:42 pm

    Bullshit, scoring cheap political points by the Mammonite collective well call a government.

    This buggery of the country by once again with an utter failure to look to the future – is beyond a bloody joke!

    Can one liberal economist (right winger) explain to me why shafting infrastructure makes any sense economically? Why this country has to start a fresh on each major infrastructure decisions? Why is that liberals economics, as it stands, can't plan for the future?

    • Will 3.1
      7 August 2024 at 3:07 pm

      Hi Adam. There is quite a lot of material in the public domain supporting the decision to cancel IREX. I refer you to official advice outlined at Interislander: Officials' mistrust of KiwiRail led push to scrap project | RNZ News, which, amongst other concerns, calls into question Kiwirail's "claims about the benefits of rail-enabled ships".

      "KiwiRail's incentives are not likely to be aligned with delivering the most efficient Cook Strait crossing connection for passengers and freight. Rather KiwiRail has incentives to optimise its rail connection, which has had a significant impact on landside costs," that first briefing to Willis and Goldsmith said."

      There have also been questions raised by officials about KR's ability to run the InterIslander service (Government releases documents behind decision to cancel Cook Strait mega ferries – NZ Herald).

      As to the question of rail enablement (same Herald source as above):

      "Officials did not consider this would make a material difference to the amount of freight that would move from road to rail. A relatively small proportion of total rail freight was carried across Cook Strait and almost all of it could be done by road bridging. This is where containers are moved from trains by a vehicle that loads them onto the ferry. This is standard practice around the world, officials said."

      • roblogic 3.1.1
        7 August 2024 at 9:56 pm

        What a load of crap. National broke faith with NZ Rail & the Korean shipyard, and now is trying to sheet the blame for operational problems, that they caused by pulling funding.

        Boats rust. They only have 25 or so years in the sea before the steel degrades from exposure to salt water. A new coat of paint is not enough. The hull itself begins to lose integrity.

        There are good reasons for rail enabled ferries, not least of which is the unique geography of New Zealand, reducing double handling of freight, and the importance of a reliable, seaworthy extension of SH1 between the two islands.

        Luxon & Willis are putting lives at risk.

        • Will 3.1.1.1
          7 August 2024 at 10:55 pm

          National broke faith with NZ Rail & the Korean shipyard, and now is trying to sheet the blame for operational problems, that they caused by pulling funding.

          You may not be aware of some of the recent history around the funding for the IREX project. In fact the Labour government were very coy (and rightly so) about fully funding KR's requests for additional funding.

          Interislander: How Labour's compromise over iReX ferry project led to $100m 'cost burn' (msn.com).

          The KR board began asking for an extra $1.2bn in funding in February 2023. In September 2023 the government advised KR they would provide a further $750m, to which KR responded this was $200m less than "the minimum needed" and $550m less than the total, and "We have limited options to proceed with Project iReX without a minimum of $950 million of additional funding,"

          This was RNZ's conclusion:

          Labour has consistently said the ferry link between the North and South Islands is a crucial one – but when in power, senior ministers refused to provide the money KiwiRail said was necessary to achieve the goals the government was still saying it wanted to achieve.

          There are good reasons for rail enabled ferries,

          Not really. Certainly not that justify the cost of IREX. The official advice to the incoming government questioned the necessity for rail enabled ships, and that the project did not represent good value for money.

          Boats rust.

          Interislander ferries in better condition than expected, report finds (1news.co.nz):

          “It found the three vessels have been well maintained. While the ferries are ageing, it has concluded it is possible to keep the three vessels running at least until 2029,“ Roy said. The report found the hulls of the three vessels to be a particularly good condition for their age and Interislander said this was due to them not sailing in very heavy seas.

          Also:

          DNV assessed the hull condition of the fleet as “good” and found the vessels had a low hull fatigue age, given all of them were built in the 1990s. The ships’ actual ages in 2029 will range from 31 to 34 years old, but the projected hull ages will be 6.9 to 11.1 years old. (Quoted from 1 news source).

          • roblogic 3.1.1.1.1
            8 August 2024 at 4:35 pm

            So we are going to kick the can down the road and get smaller vessels hopefully sometime in the next 10 years.

            Pathetic.

            BTW the need for port upgrades, earthquake strengthening and repairs has not gone away. The IREX business case was justified.

            If you are worried about spending $$$, please justify tunnels under Wellington and $10 billion highways to Whangarei and doing massive unaffordable tax cuts.

            • Will 3.1.1.1.1.1
              8 August 2024 at 5:01 pm

              It's not 'kicking the can down the road'. It's acknowledging that rail enablement was convenient for a rail operator, but otherwise not so sensible. The decision to replace the current vessells on a like for like basis could/should have been made some time ago.

          • roblogic 3.1.1.1.2
            8 August 2024 at 4:50 pm

            Labour (Robertson) might have been reluctant and found the expanding costs to be an unpleasant surprise, but he was not about to screw over the whole South Island (and tourism) in the callous manner that we have seen from Nicola Willis

            • Will 3.1.1.1.2.1
              8 August 2024 at 5:03 pm

              No-one is being screwed over. Passengers still traverse the sea between the Islands. And the mail still get's through!

        • Ad 3.1.1.2
          8 August 2024 at 3:42 am

          +100

      • adam 3.1.2
        8 August 2024 at 4:12 pm

        WOW have not seen a straw man like that for a long time.

        You did not answer any of my questions. We have infrastructure needs, which rather than be solved – this government has chosen to score political points with.

        Water (their released plan around water is utter stupidity) and this project for starters. State housing is another. There is no planning for the future, for our country – just for corporations. This is not a government representing the populous, but a small group of already greedy.

        • Will 3.1.2.1
          8 August 2024 at 4:21 pm

          Your comment was under a post about IREX; I have responded in that context.

          We have infrastructure needs which rather than solve – this government has chosen to score political points with.

          Again, with reference to the IREX project, the incoming government was presented with substantial official advice that the project was not viable. My post at https://thestandard.org.nz/maritime-union-v-willis/#comment-2007326 outlines the significant concerns the previous government had about the project funding, despite their support for it ideologically. On the facts, it would have been irresponsible to continue.

          • lprent 3.1.2.1.1
            8 August 2024 at 4:55 pm

            It was also appears to have been presented with substantial evidence about the direct costs of aborting the IREX project exceeding the costs of continuing. Which is what this post was about. Most of the geo-engineering for the ports winds up as being the same for any project based on Wellington<->Picton.

            BTW: One of the issues with dropping the rail link is that doing the road bridging with the extra handling involved would probably make having the main trunk or any rail in the South Island nonviable. As soon as you double handle freight like that, you may as well load it on to freighter rather than a ferry and go direct to Wellington <-> ChCh, and probably just go Auckland to ChCh skipping the bits in between.

            looking at your other comment:-

            The problem with EOL on ships is that it is only an estimate of probability for end-failure (or any other hardware). It is not a prediction.
            Typically it will be expressed as a set of probabilities from failure this year until whenever. The estimates for this year might only be 5% or so, but it is non-zero. The accumulated probability for failure in 6.9 years might be something like 40%. But it rises exponentially towards and end-of-life.

            Typically, you will start planning for replacement about 10 years ahead for something like this. The reason is that it will take 5 years minimum to build the vessel (and more likely longer based on the current jams in shipyards worldwide).

            But it will also take a number of years to get the financing in place. For a starter it will take years for our penny-pinching government to untangle the existing contracts and pay up on the contract break fees. Then as a contract defaulter, they will have to put more of the money up front to get in a build queue. And that isn’t counting the time to design the altered vessel.

            Plus of course Nicola Willis has put her reproductive organs down on the block in making this pretty arbitrary and unconsidered decision as being a cost-saving. That looks increasingly unlikely to be saving of costs, it is more likely to inflate it. So she will effectively try to delay it so she isn’t Misuser of Finance when nothing happens on time and the bills come due.

            I’d expect that will be lucky to get the first vessel within 10 years unless a second hand one turns up on the market. The probablility of serious breakdowns in the link before then – probably about 90%.

            • Will 3.1.2.1.1.1
              8 August 2024 at 5:34 pm

              It was also appears to have been presented with substantial evidence about the direct costs of aborting the IREX project exceeding the costs of continuing. Which is what this post was about.

              Fair enough. But the final project cost is still unknown, and may never be known. The projected cost has already gone from $775m to $3b in just 5 years. On balance, the decision to cancel IREX is sound.

              Most of the geo-engineering for the ports winds up as being the same for any project based on Wellington<->Picton.

              Not if the new ferry's are not rail enabled. My argument is not with the need to upgrade the fleet, it is around the viability of rail enabling. As Steven Joyce pointed out (Interislander’s cancelled Cook Strait mega ferry contract could be renegotiated for smaller ships – A Capital Letter – NZ Herald), All over the world they were being retired, and virtually nobody was building new ones. The market had long since voted with its feet and we should too. Interestingly, at that time KiwiRail agreed.

              But Joyce points to something else that needs to be considered:

              "It is absolutely no surprise that the cost has blown out from $775 million to $3b in just five years. And all this for an Interislander operation that had revenue of just $151m in the last financial year and a surplus of $12m."

              The government was investing $3b in infrastructure on a business whose total revenue (not profit, revenue) was only $151m. That's not a financially sustainable position.

              • roblogic …
                8 August 2024 at 6:43 pm

                Rail is the low-carbon, efficient transport mode of the future.

                National's sabotage of the project was pure spite and ideology.

                • Will …
                  8 August 2024 at 8:44 pm

                  Rail will continue to do just fine. And the country will be saved from an expensive white elephant.

                  • roblogic …
                    8 August 2024 at 10:29 pm

                    The country isn't "saved" it's fucked because Willis threw away $1 billion for nothing. The project had initial BCR of 4.1 … even with the added costs and possible lower BCR of 1.3 it's a better deal than Simian's roads of no significance.

                    https://newsroom.co.nz/2024/08/06/ferry-fiasco-will-echo-for-decades-with-private-public-partnership/#comment-210699

                    • Will …
                      8 August 2024 at 10:35 pm

                      The project blew out from $775m to $3b in just 5 years. Who knows what it would have ended up costing. And for what

                      "Officials did not consider this would make a material difference to the amount of freight that would move from road to rail. A relatively small proportion of total rail freight was carried across Cook Strait and almost all of it could be done by road bridging. This is where containers are moved from trains by a vehicle that loads them onto the ferry. This is standard practice around the world, officials said."

                      https://www.nzherald.co.nz/nz/government-releases-documents-behind-decision-to-cancel-cook-strait-mega-ferries/UF33UY3VQ5ELRI5ME37TTXD5HQ/

                    • lprent …
                      9 August 2024 at 1:13 am

                      The relatively small amount of rail traffic was sufficient to meant that freight load was spread and could still get to and from the South Island after the 2016 Kaikoura earthquakes dropped a large chunk of SH1 into the water, blocked the (very long) emergency road route, and blocked part of the rail line.

                      Also notice this section and think about why the harbour and docks engineering was re-looked at for the IREX and caused the almost the entire projected cost blowout. It wasn't cost of the ferries. It was dealing with this.

                      Damage to docks briefly halted ferry traffic across Cook Strait;[6] more significantly, container shipping did not resume for over ten months.[62

                      Between that and road and rail damage around kaikoura, that was a lot of economic damage for most of the following year. Something in the range of a one or two billion dollars.

                      If you ever got into the basics of civil defence instead of being a parrot, you'd know exactly why we maintain a ferry system, adn alternate coastal freight system, rail system in the South Island and multiple roads. Same reason for why Transmission Gully road was put in.

                      If you'd look at what happened to relative freight loadings for 2017 and previous earthquakes affecting the upper SI, you'd know that the rail freight goes up drastically after earthquakes and did in 2017. The roads always get blocked around Kaikoura because of the geology and geography.

                      Doing a load and unload option in in either port is inherently much more risky for earthquake damage (especially in Wellington – look at what happened in the 1855 earthquake) than taking a rail wagon across.

                      Your lack of awareness about the implications of our unstable country seems a bit off for someone brought up here. You sound like you are used to some place that doesn't have regular earthquakes and is oblivious of the engineering that we have to deal with them. Just as a matter of personal interest (and you don't need to answer), are you a migrant to NZ?

                      The significiant cost escalations in the IREX project were mostly to deal with engineering changes to the ports and access to them. Specifically to prevent the next earthquake sequences from blocking all of the freight systems between the two islands.

                      You appear to have missed that detail completely. Regardless of what ferries go in, the docks for the ferries on both sides need to upgrading against earthquake risks to prevent freight stoppages that will significantly damage our internal economy.

                      The only real alternative freight alternative would probably be Auckland to ChCh direct. We're a bit light on good NI harbours below Auckland. Tauranga is really shallow for large container shipping. Napier, Gisbourne and New Plymouth are completely exposed. Upgrading any of them would be really expensive.

                      Mind you, Port Chalmers is a volcanic caldera….

              • lprent …
                9 August 2024 at 12:26 am

                The government was investing $3b in infrastructure on a business whose total revenue (not profit, revenue) was only $151m. That's not a financially sustainable position.

                Sure but stupidly wrong and poorly scoped. It is clear that you (and joyce) could do with some revision in basic economics.

                What you and Joyce are leaving off is that these are 30 years project. So you're trying to treat them as a business capital expenditure. But government doesn't operate that way.

                Think about that method of evaluating a project. Say Transmission Gully in Wellington has

                • at least $1.25 billion spent on it (probably more like $2 billion).
                • it doesn't have any direct revenue at all
                • there is no profit at all.

                So clearly it should have never been built. Nor should have any road in NZ. None of them, including the toll roads make a fucking profit. They are what is known as fucking infrastructure.

                Now could you explain to me how any company or local body makes a direct profit out of the say, the southern motorway in Auckland, the Waikato expressway, the motorway that extends up to Otaki?

                You can continue on to looking at the power grid, the trunk fibre networks, the sewerage systems, water systems, civil defence systems, the police, military and civil defence.

                Kiwirail doesn't make money or a profit. Roads don't make money or profits. Sewerage systems and clean water don't make money or profits. Godknows that the military, police, or civil defence doesn't make profits.

                These are all infrastructure projects. What they are assessed against is the common weal. If we don't have these services, then businesses and individuals that implicitly use them all of the time without paying for them directly don't make a profit and therefore don't pay the taxes that support them.

                Now I'm sure that you will try to make some argument about direct taxes like fuel taxes, RUC, water charges, etc. However I'd point out that in NZ absolutely none of 'direct' charges have or ever have come close to paying for the bulk of any infrastructure capital expenditure. We simply don't have the population densities that would be required to justify private business level of accounting for any infrastructure. Virtually no place in the world does.

                As an example, the direct road user charges (RUC) on heavy load lorries (the ones with the "H" on the back) would be at least 30 times higher to pay for the kinds of roads that are required to carry them continuously. Look at the Fourth Power Law, and consider what H lorries carry and pay compared to a SUV.

                Charges made on infrastructure charges aren't levied to do more than pay a small contribution towards the capital expenditures.

                Each of these projects are assessed against the return on investment to the economy. Which basically means that both you and Joyce are making a numbskull argument trying to equate business rules about capital expenditure to a completely different decision model, that of public or governmental capital expenditure.

                At this point I'd like to point out that I have worked my entire life in private businesses in NZ, have a Master of Business Administration from Otago and I actually passed my economics papers and understood the principles. Clearly neither you nor Joyce have bothered to do the latter point.

                Any credible economics course (ie not one done by the monkeys in Act or Atlas) you care to look at will point to the complete difference between micro economics and macro economics for investment decisions. The same for differences between private business economics and that of governments.

                Any management course doing any project investment will point to various ways of a determining discounted cash flow analysis for long projects, and how to look not only to direct revenue but also to strategic advantage 'revenues'. This isn't rocket science. It doesn't even compare with the kind of analysis with what I did in my basic BSc or what I routinely do while writing computer code. But it is basic in economics and management skills.

                It should also be basic for any politician – but so far Nicola Willis appears to not have these basic skills.

                Kiwirail is a wholly government owned monopoly. When it was privatised, the various private operators ran its business and maintenance into the ground, while still holding their hand out to the state for massive subsidies.

                The primary benefit for rail in the NZ economy is that it is way cheaper to maintain a continuous rail link through our long skinny country to carry freight. The biggest benefit is that it is way way cheaper to maintain railways than it is to maintain roads for lots of heavy traffic.

                The same applies to the Cook Strait, which is one of the more dangerous world. There aren't too many places in the world that run a ferry service on a channel that is effectively between two different oceans. As wikipedia succinctly points out

                The strait connects the Tasman Sea on the northwest with the South Pacific Ocean on the southeast. It is 22 kilometres (14 mi) wide at its narrowest point,[1] and is considered one of the most dangerous and unpredictable waters in the world.[2]

                The energy from daily tide differences alone is colossal.

                Basically you parroting a stupid and irrelevant argument without engaging your brain. If you want to make an argument with me, then for fucks sake pull your head out of your arse and use your brain for a change and come up with credible arguments. Comparing a government infrastructural capital decision to an argument that is similar to deciding to buy a new stapler isn't credible.

                • Will …
                  9 August 2024 at 11:12 am

                  "At this point I'd like to point out…"

                  You and I have a virtually identical professional history, and yet we come to very different conclusions. Let me just take two examples of where you are wrong:

                  "Kiwirail doesn't make money or a profit. "

                  This is not correct. Kiwirail is a commercial passenger and freight operator. Its customers are commercial operators and passengers to whom it charges commercial rates. Kiwirail operates assets worth in the vicinity of $2bn (Value of Rail | KiwiRail). It's ability to continue to operate services and maintain infrastructure is predicated on its ability to make a financial return. If you do a simple google search on kiwirail profitability, there are half a million results, ironically top of mine was this celebratory piece Kiwirail making big profits « The Standard. Kiwirail is a stateowned commercial enterprise. It is a monopoly rail operator, but not a monopoly freight or passenger service. Before spending $3b (and rising) on a highly dubious project, the ability of the organisation to fund that investment over the life of the infrastructure has to be a consideration.

                  They are what is known as fucking infrastructure.

                  Here, and through your comment "return on investment to the economy" you are losing sight of the issue. The IREX project is about rail enablement across the Cook Straight. It's justification on the basis of a return on investment to the economy is spurious. There are other ways of moving both passengers and freight, and that's before we even develop coastal shipping, which many here seem to advocate. And then there's the official advice that, even if you look at this purely as a "government infrastructural capital decision" leaves it looking like a dog.

                  • lprent …
                    9 August 2024 at 2:24 pm

                    Kiwirail is a commercial passenger and freight operator.

                    Exactly correct. However 'operator' does not mean that they are responsible for the rail and ferry land or most of the infrastructure.

                    Definitely not the point when you are looking at rail and interislander infrastructure upgrades. FFS read the wikipedia entry for Kiwirail. This is the current status

                    In 2021, the government launched the New Zealand Rail Plan, with funding for rail projects to come from the National Land Transport Fund (NLTF), and with KiwiRail remaining an SOE but paying Track Access Charges (TACs) to use the network.

                    Get that? Kiwrail is a wholly government owned operator running on NZ Government owned rail lines, including the ferry and docking systems. Upgrades are the responsibility of the government assets because they are infrastructure. Kiwirail implements thiose on behalf of the NLTF which is part of the MoT.

                    That has been the overall case since about 1995, and explicitly with variations since 2004 and 2019.

                    It's ability to continue to operate services and maintain infrastructure is predicated on its ability to make a financial return.

                    Sure that is the case for Kiwirail as a SOE. However Kiwirail is a operational unit that pays money to run their engines and wagons on the lines and land. It maintains the infrastructure for the MoT. It doesn't own much of it.

                    However most if not all of the land – rail lines, docks, loading areas, maintenance areas and ferry system are owned by the state. There are a couple of private areas, and organisations that run on the same lines – like Auckland Transport.

                    Kiwirail operates assets worth in the vicinity of $2bn (Value of Rail | KiwiRail).

                    WTF! You completely misread this. Those aren't assets.

                    These often hidden benefits are delivered to all New Zealanders through social, environmental and economic values which have been quantified in the Value of Rail in New Zealand report.

                    Benefits worth $1.7 billion – $2.1 billion

                    The benefits that are talking about are all national economic benefits not accounting assets.

                    • reduced congestion by taking cars and trucks off our roads
                    • reduced greenhouse gas emissions and air pollution
                    • improved road safety, including fewer injuries and fatalities
                    • lower road maintenance costs for taxpayers
                    • fuel savings.

                    Clearly your training was wasted on you. At least when it comes to the most significiant details.

                    Kiwrail Infrastructure and Engineering division previously known as ONTRACK is currently a subsidiary organisation that does the operations of maintaining and upgrading that for the state.

                    Its funding for maintenance and upgrades of the infrastructure comes from the National Land Transport Fund (NLTF) which is operated as a programme by Waka Kotahi. The and which is part of the Ministry of Transport – a core government department that raises revenue from leases, sales, taxes and charges.

                    So you're completely wrong. Kiwirail isn't making a profit to pay for rail infrastructure. Effectively most of the infrastructure and assets are paid for by the Ministry of Transport, in exactly the same way that roads are. The ferries and the ferry docks are part of that infrastructure and are the direct responsibility and owned by the core government.

                    Kiwirail, a government owned SOE, has a subsidiary that in effect maintains the rail system for the NTLF and MoT.

                    Today, the Ministry of Transport plays a critical role in New Zealand's transportation infrastructure, but its focus is more narrowly defined. Its mission is to "ensure a safe, efficient, and sustainable transport system that supports New Zealand's economic and social goals".[3]

                    You will find that if you look deeper, that includes things like making sure that roads don't get overloaded with trucks, that land transport links can be maintained across the whole of NZ, and that earthquakes can't kill land transport links.

                    You and I have a virtually identical professional history, and yet we come to very different conclusions.

                    Apparently I just read more deeply into relevant details than you do.

                    To be fair (what I say to indicate deep sarcasm), that is probably because my bachelors was in earth sciences so I'm hyper-aware of infrastructural catastrophe scenarios. Also I have spent time in the local military (and written code for training gear for a number of other militaries) which amongst other things is tasked with a number of civil defence tasks. That includes helping to maintain transport links in civil emergencies.

                    • Will …
                      9 August 2024 at 3:46 pm

                      “Kiwrail is a wholly government owned operator running on NZ Government owned rail lines,”

                      I’m no longer sure you understand how Kiwirail operates. Kiwirail “own and maintain the national rail network infrastructure” (About us | KiwiRail). That infrastructure is funded from a variety of crown sources.

                      Key to our disagreement is that the distinction you are trying to make around Kiwirails use of infrastructure. Kiwirail has commercial, paying customers, who make their own economic decisions about how they travel and move freight. Just because the government decides to waste $3bn+ on rail enabling the Cook Straight ferries doesn't mean an additional Kg of freight will travel on them. That's precisely the point the officials have made.

                      You are also making the error of claiming ‘benefits’ (eg "reduced congestion by taking cars and trucks off our roads") from rail that are already being delivered by the existing interislander services. Your final comment “That includes helping to maintain transport links in civil emergencies” is more of the same.

                      IREX is not about improved economic outcomes. It is an ideological nod to rail that has no sound economic basis, no matter how either of us applies our education.

                    • lprent []
                      9 August 2024 at 5:14 pm

                      FFS: You are reading a PR blub. It isn’t document about the subsidiary organisations. It is for Kiwirail Holdings Ltd. Which is exactly what its name says, a holding company.

                      It leases railway land from NZ Railways Corporation. Has several subsidiaries and divisions. Each is set up as a different legal entity and has different tasks.

                      One or more are meant to be profitable in their operations by business activities. They pay what is effectively track usage fee to the MoT. Their goal is to make a profit and to increase the use of freight etc. But they have little to nothing to do with infrastructure outside of usage, and certainly don’t own it as an asset.

                      One is therefor maintenance and upgrades of rail infrastructure – which was the old ONTRACK part. It isn’t meant to make a profit. It might be part of the Kiwirail Holding, but it has no income from business activities, no involvement in profit. The ONTRACK division (regardless of its current legal entity) gets funded directly by the NLTF and the MoT specifically to maintain and improve the rail infrastructure – regardless on who is using it. That is who is doing the ferry upgrades and port upgrades.

                      There are a host of entities who use the rail infrastructure. It includes the freight and passenger traffic from kiwirail holdings subsidiaries, services like Te Huia (run by the Waikato Regional Council), Auckland Transport, the organisation that runs the Wellington system, Freightways, Fonterra…

                      The problem you have is that you think that the whole of Kiwirail Holdings is a single profit making enitity. Which it is not. It is just a holding company for a cluster of specialist SOEs.

                      Ultimately all are controlled (as SOEs) by treasury and overseen by the Ministry of State Owned Enterprises. Ultimately treasury will hold the non-land assets, probably in yet another SOE

                      …the government decides to waste $3bn+ on rail enabling the Cook Straight ferries doesn’t mean an additional Kg of freight will travel on them. That’s precisely the point the officials have made.

                      No that was what they advised when the public service was asked a specific question, effectively about profits. They weren’t asked about economic benefits, which is a whole different question.

                      One of the classic ways to lie as a minister to to ask a question that is irrelevant, and then publicise the answer. Public servants will answer the question as given. If they are only asked if it will increase freight loads, they won’t proceed onwards to explain things like the effects on transport sustainability and reliability.

                      This makes it easier to foll the more credulous fools like you who don’t read anything in detail.

                      You are also making the error of claiming ‘benefits’ (eg “reduced congestion by taking cars and trucks off our roads”)

                      Dumbarse – that was a “quote” from your link that you clearly hadn’t read. It was to point out that you appear to have gotten your asset value of $2 billion from a line about economic benefits.

                      IREX is not about improved economic outcomes. It is an ideological nod to rail that has no sound economic basis, no matter how either of us applies our education.

                      Ok – that is an assertion of fact – Prove that with a link. Otherwise I will just terat tghat as being a lie by an idiot with little to no understanding of the issues. A gormless parrot who just makes up shit – like Nicola Willis does. Because they are just too wedded to their slogans and lazy to learn about reality.

                      You should be able to see it in the originating documents for IREX from around 2021/2. Or the earlier discussions about issues with the docks after the 2016 Kaikoura earthquakes when the ferry replacement started to be dicussed.

                      As far as I have ever been able to see, the IREX ferries were only replacing ferries for an existing service, including rail, that were nearly at the end of their life. There was a lot of discussion about how to harden the transport links in the lower NI and upper SI.

                    • Will …
                      9 August 2024 at 5:26 pm

                      As far as I have ever been able to see, the IREX ferries were only replacing ferries for an existing service, including rail, that were nearly at the end of their life.

                      And that illustrates perhaps perfectly that you have never understood the issues.

                      The existing fleet of three ferries is to be replaced with two new, larger, rail-enabled ships targeted to be in service from 2025 for the first ship, and 2026 for the second ship. A new terminal in Wellington and a major overhaul in Waitohi Picton are being delivered to accommodate the new ships.

                      project-irex-4940063.pdf (treasury.govt.nz)

                    • Will …
                      9 August 2024 at 6:09 pm

                      No that was what they advised when the public service was asked a specific question, effectively about profits. They weren’t asked about economic benefits, which is a whole different question.

                      I'll address this specifically. RNZ covered in detail the hesitation of the Labour government over agreeing to additional funding. Interislander: How Labour's compromise over iReX ferry project led to $100m 'cost burn' | RNZ News.

                      "Labour has consistently said the ferry link between the North and South Islands is a crucial one – but when in power, senior ministers refused to provide the money KiwiRail said was necessary to achieve the goals the government was still saying it wanted to achieve."

                      Kiwirail complained about the "prolonged period of infrastructure indecision to deal with the cost of the terminals". And this wasn't just about proximity to an election; Kiwirail had been pressuring the government more most of 2023 for more money. At one stage, Kiwirail considered "at the Labour ministers' urging, getting the private market to involved to help with funding". Grant Robertson even suggested that Kiwirail could try re-negotiating its ship-building contract.

                      So you can scoff at Willis' decision all you like, but it's abundantly clear that Robertson was viewing the project with much the same cynicism.

                    • lprent []
                      9 August 2024 at 6:57 pm

                      Not exactly. I am aware of the spin that National has put on it. But that is all that it is bullspin… The problem wasn’t the ferries or finance. It was the pandemic.

                      This was project that was approved for preliminary and exploratory funding (ummm) in 2017 or 2018. The orders for the ferries were to be done early because of the clogging issues at shipyards.

                      Then the pandemic then started to get in the way. That started in early 2020 (I just missed getting stuck in a task in the UK in December 2019 by flying home early because I was worried about reports from China)…

                      Ummm. There is a useful timeline in a OIA

                      There was a delay in signing of the actual ferry order as distracted as everyone was with the pandemic. The letter of intent was in late 2020 and then they clambered to sign it before the terms expired in June 2021.

                      Note that the ferries had nothing much to do with the cost blowouts. That came much later when they looked at ports and the approaches post the 2016 Kaikoura earthquakes.

                      In particular the geo-technical investigations on the ports. That is because most of the engineering talent for that is either in Auckland (most specialised engineering consultancy centres here) or offshore. It wasn’t readily available because of the pandemic because Auckland was locked down a lot, and the airports for even longer.

                      That was done in the second half of the 2022 after restrictions eased and the Omnicron outbreak subsided. The reports for the engineering around earthquake issues and design work was done after that.

                      That was what had the cost increases in it because it shifted from estimates to actual design after they figured out where the faults were and what the likely block points were.

                      The new price tag for the geoengineering work wound up on the treasury agenda early in an election year. Rotated around a few times before it got more funding out to past the expected and allocated funding to investigate alternatives. Wasn’t resolved before the election because there are other things that a government newly out of a pandemic and going into an election has to do.

                      Wound up on Willis’s desk while (presumably) she was still in election mode. So she canned it without a serious thought (presumably) while still in opposition mode, and well before she’d had time to think about the costs of canning it.

                      https://www.nzherald.co.nz/nz/grant-robertson-fires-back-at-nicola-willis-over-cook-strait-ferry-budget-blowout/HHZCLNPPINEXPJQAGGJOYSFUWQ/#google_vignette

                    • Will …
                      9 August 2024 at 7:24 pm

                      Thanks for the Georgina Campbell link – I hadn't seen that piece before. I have some sympathy for Robertson. He's mostly right when he says it was "KiwiRail that owned and managed the project." Although the assessments of Dom Kalasih and Nick Legget were fairly brutal.

        • roblogic 3.1.2.2
          8 August 2024 at 4:46 pm

          To answer your original question, I don't think any sane economist would question nation building and government spending under the present adverse global economic outlook.

          Austerity and trickle down were popular 40 to 50 years ago and it has impoverished the working class. The 1% love it however, and the redneck voter falls for their bullshit every time.

  4. gsays 4
    7 August 2024 at 3:35 pm

    "This issue is going to haunt the Government"

    That's where we come in.

    How to raise the awareness of the ineptitude and irresponsibility of Willis and co?

    This short sightedness will cost us for generations.

    Aside from importing some Bangladeshi students…

  5. SPC 5
    7 August 2024 at 4:00 pm

    History repeating

    Sell 50% of power company shares. Allow prices to double and boast of receiving as much in dividends as when there was 100% ownership.

    Wait for industry to say it has cost them international competitiveness (except for the foreign company – the smelter – that gets a lower price).

    End a rail enabled ferry service. Add cost to rail freight between the two islands. Then provide 50% of the capital for a new "profit making" ferry service.

    Bring in a partner for KiwiBank, so it can grow its market share (because the government was not prepared to do this to reduce profit extraction out of New Zealand by other banks – nor have a windfall profits tax).

    Meanwhile the cost of finance business without land/property to mortgage is too high because without a WPT there is no insurance scheme for loans to business. And without such loan finance companies formed by venture capital cannot grow and thus get sold offshore.

  6. Brett Cooper 6
    7 August 2024 at 6:12 pm

    National plan is to kill south island ferry. It's in there budget, $340 million cut to South Island rail in 2026 which is part of a $530m+ cut to Kiwirail that year.

    https://x.com/hellonearthis/status/1818130499795321140

    https://x.com/hellonearthis/status/1818146974987882774

  7. roblogic 7
    7 August 2024 at 7:16 pm

    I suspect some ruthless skulduggery at play with the big transport operators. I have a bit of inside knowledge that they have been investing in coastal shipping… now I know why.

    Scum

    • SPC 7.1
      7 August 2024 at 7:21 pm

      Sure, no future for rail to Wellington, so move it from NI ports to Lyttelton.

      And with GW, damage to coastal roads, again coastal shipping.

      There might be a future in plane to water transport as well, sea planes as well.

    • James Simpson 7.2
      8 August 2024 at 9:25 am

      Coastal shipping is a good thing. Anyone investing in that is the opposite of scum

      • roblogic 7.2.1
        8 August 2024 at 4:30 pm

        Sure, it's great in principle, but the Nats underhanded strategy is scummy.

        It looks to me like NACT1 have sabotaged the interislander ferries and burned $1 billion to pay off their mates in the trucking lobby

  8. thinker 8
    8 August 2024 at 5:17 pm

    Interislander ferry Aratere damaged berthing into Wellington harbour

    https://www.rnz.co.nz/news/national/524541/interislander-ferry-aratere-damaged-berthing-into-wellington-harbour

    Hopefully opening up the debate again and seeing the egg slip from Luxon's cap to his face.

    How on earth spending hundreds of millions of dollars bailing out of long-term projects is prudent economic Management, when the need for the outcomes of those projects remains beggars belief.

    Has anyone added up the total $ wasted in penalties of all the projects this government is bailing out of to fund landlord subsidies and tax cuts?

The server will be getting hardware changes this evening starting at 10pm NZDT.
The site will be off line for some hours.