Media Statement: ‘Governmentt Ferry decision a bad day for New Zealand’
Media Statement
Government Ferry decision a bad deal for NZ
The Government’s ferry replacement decision has been called ‘a bad deal for the New Zealand taxpayer’ by the nationwide rail advocacy network, The Future is Rail.
The Cabinet decision, being announced today, not to replace the aging and unreliable ferry fleet with rail-enabled ferries “adds enormous costs for a poor long-term outcome,” said the network.
“It also puts the future of rail in the South Island in jeopardy, places the North Island rail network on shaky ground, and adds enormously to the pressure our roading system is under,” says spokesperson Dave Macpherson.
“Thousands of Kiwis signed petitions urging the Government for rail-enabled ferries. South Island local and regional authorities raised strong concerns about the economic, social, and environmental impacts, and businesses advocated for the retention of the interisland rail link. Despite this, the need for rail-enabled ferries has been ignored,” says Macpherson.
“Today’s announcement to purchase two smaller non-rail ferries for $900 million, plus huge additional penalty and port-side infrastructure costs, may deliver Ms. Willis’ Corollas, but they’re not fit for purpose and will cost nearly twice what the larger iRex ‘Ferraris’ would have cost,” he said.
“Despite Government window-dressing, taxpayers will be getting less, but paying more.”
Let’s look at the Government’s new non-rail ferry project realistic estimated costs (see Appendix for details):
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$900m purchase of 2 smaller non-rail ferries
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$551m cancelled iRex contract for two ferries
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$469m sunk costs (other than ferry construction contract) for iReX project
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$500m portside facilities for new ferries
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$300m land purchase, construction for new ‘road-bridging’ facilities
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$200m replication of Kiwirail engineering facilities in South Island
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$17m annual ongoing costs of double handling of interisland freight at rail ferry terminals
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$1B reduction in value of KiwiRail’s Balance Sheet.
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$1Bpa Economic cost of slower, more expensive freight, greater roading damage, reduced road safety
“Throughout the world, investment is going into passenger rail and rail freight to move goods and people quickly, efficiently, and with low emissions. State-of-the-art trains, powered by renewable electricity and supported by modern transport hubs, are a core part of high-productivity supply chains.”
“This country needs similar forward-thinking, not more of the same-old, unsustainable transport practices of past decades,” Mr. Macpherson said.
“On top of all the other cuts to services and facilities, it’s a major slap in the face for the South Island and for the future of the whole country.”
“For everyone worried by potholes or concerned about the safety risks of large freight trucks on our highways and local roads, all we can say is ‘you ain’t seen nothing yet!’” says Mr. Macpherson.
“All of us will be paying for this short-sighted decision.”
Appendix to Media Statement
Details of the Government’s new non-rail ferry project costs:
One-off CAPEX Costs
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$900m purchase of 2 smaller non-rail ferries;
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$551m iReX ferries contract cancellation costs
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possibly $300m, based on likely tagged contingency;
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$469m sunk costs (other than ferry construction contract) for iRex project
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design, Picton / Wellington portside work, consents, etc – This includes the 2024 KiwiRail asset impairment charge on its Balance Sheet of $228 Million for Interisland under construction assets written off
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$500m portside facilities for new ferries
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upgrades, earthquake strengthening, terminals for new ferries, etc. at Picton & Wellington
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$300m land purchase, construction for new ‘road-bridging’ facilities
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including purchase of additional intermodal equipment for transfer of freight on and off rail at each end of the Strait
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$200m replication of Kiwirail engineering facilities
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now needed in South Island due to lack of rail connection with existing network, eg Woburn rail (Lower Hutt) track weld facility, upgrading locomotive overhaul facilities, likely duplication of maintenance equipment for separate networks that can no longer be practically or economically moved across Cook Strait
Ongoing Economic/Rail Operating Costs/Rail Revenue Loss
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$800m Economic cost of slower, more expensive freight, greater roading damage, reduced road safety
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$17m annual ongoing costs of double handling of interisland freight at rail ferry terminals
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$1B reduction in value of KiwiRail’s Balance Sheet
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plus possible material impairment to the current carrying value of rolling stock, rail infrastructure, plant, equipment and other assets on KiwiRail’s Balance Sheet. This is needed to ensure Balance Sheet carrying valuations reflect fair value due to a likely loss of freight traffic as a result of this decision which will likely require a material valuation downwards in Cash Generating Units (CGU) valuations. Indeed, on a CGU basis many assets on KiwiRail‘s Balance current sheet may be worthless post this decision.
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LIkely loss of up to 25% of KiwiRail freight due to exit from Domestic Freight if Kiwirails exits market
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Additional costs to the Wellington region as it has to carry more burden of the rail network since here may be little or no freight to share its infrastructure costs
NOTE:
While it is true there are likely to be some direct benefits to the Road transport industry (gross economic benefits from displacement of rail to road transport) not reflected above, the nett effects of road benefits when the disbenefits of abandoning rail are taken into account, will mean there will be significant economic and wellbeing loss to the nation a identified the Benefit of Rail to New Zealand ARA report in August 2024
And then there is this, corruption of the highest order…
https://www.rnz.co.nz/news/political/536285/fast-track-projects-speaker-rules-no-private-benefit-in-list
We haven’t got them yet nathan they might have hairs on them like the ten bridges up north, the Hutt Valley link minus Melling station, the twin Mt Victoria tunnels and the Grenada to Petone link.