Cook Strait ferries face important challenges in the replacement process

The Cook Strait, a vital maritime link between New Zealand’s North and South Islands, has long been served by ferries that transport passengers, vehicles, and freight. Over the years, the Government has undertaken various initiatives to modernise this essential service, addressing challenges related to aging vessels and infrastructure.

But recent attempts to address this particular piece in the country’s supply chain have gone awry, causing headaches for the Coalition Government.

In 2018, the then Labour Government embarked on the Inter-Island Resilient Connection (iReX) project, aiming to replace the aging Interislander ferry fleet with two new rail-enabled ferries. These vessels were designed to enhance capacity and efficiency, accommodating more passengers, vehicles, and rail wagons.

A contract worth $551 million was awarded to Hyundai Mipo Dockyard in 2021, with the ferries scheduled for delivery in 2025 and 2026. However, the project’s scope extended beyond vessel procurement; significant upgrades to port infrastructure in Wellington and Picton were necessary to accommodate the larger ships.

By late 2023, the estimated total cost had escalated to approximately $3 billion, prompting the Government to reassess the project’s viability. Following the general election, newly minted Finance Minister Nicola Willis announced the cancellation of the iReX project, citing the substantial cost increase as the primary reason.

She highlighted that only 21% of the total projected expenditure was allocated for the ferries themselves, with the majority earmarked for extensive port redevelopment. This decision was met with criticism from various quarters, including opposition parties and unions, who expressed concerns over potential delays in modernising the ferry fleet and the financial implications of contract termination.

Maritime Union of New Zealand National Secretary Carl Findlay says the decision to cancel iRex was shortsighted, despite the cost blowouts. He says the landside infrastructure issues could have been reviewed and changes made if required.

“Regardless, the result of the cancellation means years of delay, will cost New Zealand more, and result in smaller, less capable ferries. Rail enabled ferries are essential to maintain the viability of New Zealand’s rail network, which is very important for both economic and environmental reasons.

“It is obvious none of this was thought through when the iRex deal was cancelled. As part of the ‘blue highway’ and an extension of State Highway 1, the presence of a New Zealand controlled public owned operator on the Cook Strait is vital for our supply chain security. The previous disastrous privatisation of rail in the 1990s should be a lesson.

“That being said, we have had constructive meetings with the Minister of Rail about the new ferries.”

The current Interislander fleet comprises vessels built in the 1990s, which have been experiencing increasing maintenance challenges. Incidents such as power losses and groundings have raised concerns about the reliability of these aging ships. For instance, there have been recent instances where ferries encountered mechanical issues, leading to service disruptions and highlighting the pressing need for fleet renewal.

The problem of a reliable Strait service was, until recently, compounded by the privately owned StraitNZ Bluebridge’s own reliability issues. In February, passengers booked on its Strait Feronia ferry said they were “stranded” after the ship stopped sailing due to an engineering problem.

However, StraitNZ reached an agreement in March to purchase a new (to Bluebridge) vessel – the Stena Livia – from Swedish shipping firm Stena Line. Currently operating between Germany and Latvia, the 17-year-old vessel is a sister ship to the Connemara, which joined the Bluebridge fleet in 2023.

StraitNZ chief executive Shane McMahon says securing the vessel is a significant milestone for the company.

In response to the cancellation of the iReX project, the Government initiated a new approach to secure replacement ferries. In December 2024, Ms Willis announced the establishment of a new company tasked with procuring two medium-sized rail-compatible ferries, expected to commence operations in 2029. The Government has also invited private sector proposals to explore alternative solutions, emphasising a commitment to cost-effectiveness and operational efficiency.

To oversee this critical project, Hon Winston Peters was appointed as the Minister for Rail. Leveraging his experience and expertise, Mr Peters embarked on a global search for suitable shipbuilders. During a visit to South Korea in early 2025, he engaged with Hyundai Mipo Dockyard, the shipbuilder originally contracted for the iReX project.

Reporting back that Hyundai expressed interest in bidding for the new, smaller ferries and indicated their capability to meet the specified requirements, he stated: “I’ve got a serious contender back in the ring of potential contenders for the tender for two replacement ferries for the Cook Strait.”

In February 2025, the Government appointed directors and board members to Ferry Holdings Limited, the entity responsible for negotiating long-term port agreements and ensuring the seamless delivery of cost-effective replacement ferries:

• Chris Mackenzie (Chairperson): Renowned for his role in negotiating the buyback of New Zealand’s rail assets in the late 2000s and serving as the Independent Chair of the Horizontal Infrastructure Governance Group during the Christchurch rebuild.

• Heather Simpson (Deputy Chair): Former Chief of Staff to the Prime Minister and an economics lecturer, bringing significant experience in executing complex tasks.
• Greg Lowe (Director): An experienced professional with a background in infrastructure projects.
• Captain Iain MacLeod (Board member): A mariner and ship master in New Zealand and the Pacific. Within the maritime community, he serves as a vice president and committee member of the NZ Merchant Services Guild.
• Katherine Rich (Board member): A former politician who has led industry associations and had strategic involvement in various NGOs. She is currently the CEO of Business NZ.

As of March 2025, the government has made a provision of NZ$300 million to settle claims arising from the cancellation of the iReX project. This allocation covers costs associated with terminated infrastructure contracts and potential break fees with Hyundai. While the exact figures are yet to be finalised, this provision underscores the financial implications of the project’s termination.

MUNZ says it has a constructive relationship with the Minister of Rail and, at this stage, is confident that the Minister has a good understanding of the importance of public owned, rail enabled ferries.

“We have not dealt with the new Ferry Holding’s directors but they appear to have the relevant range of skills to do the job. In saying that, the process of the cancellation of the iRex ferry project was a national embarrassment.

“Our Korean partners were informed shortly before the announcement by text message. MUNZ called for the resignation of the Minister of Finance Nicola Willis and we maintain this position. We do not see another private operator as a viable proposition for the Cook Strait and we would be surprised if that option is pursued.”

As the country awaits another announcement from Mr Peters by the end of March, MUNZ says mitigating any further ferry cancellations, delays or breakdowns won’t be achieved.

“Unfortunately, the only simple way of achieving this was to have continued with the iRex project, and we would be looking at new ferries coming into service shortly.

“Now the only option is to increase the maintenance budget for the existing ferries. Staff will act professionally to ensure safe operations. MUNZ will do our part to keep a close watch on health and safety practices.”