The Kiwirail Interislander saga continues

Taxpayers are already on the hook for almost half a billion dollars, but that won't be the final bill

This morning, 1 News is reporting that the cancellation of the i-Rex ferries has so far cost taxpayers $484 million.

That's almost half a billion dollars.

That could probably fund thousands of new doctors, maybe complete a few hospital rebuilds, or how about money for our experienced police so they don’t have to go to Australia or get advice on picking up side hustles to make ends meet?

“As at September 2023, the Infrastructure and Investment Group (IIG) within Health New Zealand was responsible for over 110 health infrastructure projects worth a total of $7.7 billion. These projects are in various phases of completion and included the new Dunedin Hospital. Large hospital rebuilds were planned for Nelson and Whangarei.

The Government set aside $103 million in the budget to cover all capital cost pressures across multiple projects.”

Note, the $484 mn doesn't capture the full costs. I'll elaborate more later.

As a refresher, Nicola Willis cancelled the ferries as one of her first major decisions as Finance Minister.

At the time she made a big deal about the 200% cost increase from the 2021 detailed business case, which she labelled as a “blowout” (for maximum emotional impact, I imagine)

Never mind that it was due to seismic upgrades after stakeholders had agreed on the Wellington terminal location, and detailed seismic evaluation work took place.

I don’t know about you, but seismic fortification for a Wellington port seems like a good investment. And compared to 2021, costs had gone up.

That cost increase would mean that the Government would need to stump up $1.4bn extra to secure our North South link. Kiwrail's i-Rex plus terminals bill was about $3bn.

To give you a sense of scale,

• National intends to spend $70bn over the next 10 years to build roads, one of which will be the most expensive in the world.

• National’s road budget from 2023 blew out by 200-300% almost as soon as they got into Government.

• National and ACT secured $2.9 billion for landlord tax cuts before the election.

• Simeon Brown allocated $4bn over three years for pothole remediation.

At the time, Willis went on morning TV to do the rounds about how Kiwirail was reckless to try to buy Ferraris when we only needed Toyotas - giving an impression that she was looking after taxpayers money.

In my opinion, that's a bit cheeky.

She must have know that Kiwirail's board and executive team had secured the future proof boats at a fixed price of 40% less than market price. Hyundai had already built and tested the engines when she wrote a letter directing the contract cancellation.

The i-Rex ferries would have accommodated 40 rail wagons, 3000 lane metres for vehicles, and 1800 passengers accommodating the projected volume increases across the Straits.

She must have been aware, if she had listened to advice, that there was a risk Kiwirail would have failed in its obligation of care to South Korean shipmaker Hyundai-Mipo.

Now back to cost.

While 1News says $484 million has been flushed down the toilet because of Willis's decision to cancel without a back up plan, the truth is they haven't factored in the penalty clause.

Recent reports estimate that to cost upwards of $300mn. Then there is the price tag when we really have to buy the ferries again.

The analogy that comes to mind is we returned a Tesla Model Y that we secured for about half price, and now we'll find something on the level of a second hand Toyota Corolla. And pay more than a Tesla.

We could soon be in the $1,000,000,000 loss category.

Change, anyone?