Photo: RNZ / Samuel Rillstone
The Coalition's Interislander ferry replacement project will cost less than what was contracted for under the previous Labour government, the Prime Minister has revealed.
New rail-enabled ferries were due to be delivered in 2026 after the then-Labour New Zealand First coalition struck a deal in 2018 for two mega rail-enabled ferries to be built in Korea.
The bigger ships meant new port infrastructure was required and the original price tag of $700 million rose to $3 billion by the time the new government was sworn in.
While the mega ships don't come cheap, it was the work required to make them fit in New Zealand ports that blew the budget, according to Finance Minister Nicola Willis.
The project to replace the Interislander ferry fleet, iRex, was cancelled by the Coalition in December after it declined KiwiRail's request for further funding.
KiwiRail had requested an additional $1.47 billion, a component of which had been agreed to in-principle by the previous government, to address cost escalations related to associated harbourside infrastructure in Wellington and Picton, including to accommodate new larger ferries.
Asked on Tuesday whether the ferries the Coalition is set to announce will be cheaper than Labour's iRex project, Christopher Luxon told Morning Report, "yes they will".
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He refused to go into any further details however, saying the public would have to "wait until the formal announcement where all the detail will be revealed".
That announcement is expected to be on Wednesday - the deadline set by deputy prime minister and New Zealand First leader Winston Peters for the alternative ferry plan to be made public.
New Zealand First has long campaigned for the ferries to continue to have rail enablement.
On Monday evening Labour leader Chris Hipkins told reporters he understood the new ferry project involved smaller boats that don't have rail capacity, and will cost more than what Labour had projected.
He said Willis' announcement this week will make her "look particularly stupid".
Willis on Tuesday kicked back at the comments by the Labour leader saying she wouldn't take that criticism from Hipkins.
"I'll tell you what looks stupid, letting a project blowout to 3.2 billion of which 80 percent was portside costs when you said it was about buying ships."
The Labour leader is standing by his comments though, because Nicola Willis will end up "paying more for less."
"The price of the ships - the new ships they're going to buy - are going to cost more for less," said Hipkins.
"So they're going to be buying smaller ships and those ships are going to cost more than the ships that they cancelled."
KiwiRail bosses last week - in a scrutiny hearing - confirmed the earlier iRex contract had been cancelled, but warned costs were yet to be settled, and negotiations were set to drag out into next year.
That cost will only add to the final bill for cancelling and replacing the previous project - unless the same company has been negotiated with for the Coalition's alternative plan.
The company in February confirmed to the government it was in the process of terminating the contract and the Korean company had been advised to stop all ship design and production.
Willis said the overall cost for the new ferries, including a breakfee, will be lower than the cancelled iRex project.
"I can confirm that even once the breakfee is taken into account the overall project costs will be lower than they would have been with project iRex."
She went on to add that one of the things "driving Cabinet" was making sure the government didn't have the kind of cost blowouts that had occurred with project iRex.
"A project that had already blown out to more than 3 billion dollars, and was set to blow out even further.
"Of course, we are taking into account the various costs."
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