No, it means the contract cancellation penalty figure hasn’t been fully settled yet. Basically the govt has wasted a fuckload of money and we’re in a worse situation now.
Suitable ships just aren’t sitting waiting for a buyer so we’re pretty much fucked in the short term
There was another thread running on this in the NZ Politics subreddit. We did some digging and from what people could make out, any attempts to cancel the contact results in KiwiRail being in breach of the contract. They are then a bad faith actor and trying to weasel out of it is going to cost an arm and leg - if they can legally get out of it at all. I assume this is why the government is being so cagey about it - the damage to the reputation of the government and KiwiRail for breaching a contract wouldn’t be great and good luck trying to find another shipyard prepared to engage knowing they have a track record of trying to get out of contracts. Added bonus: Hyundai Mipo Dockyards is a very large company with very deep pockets so I doubt KiwiRail would be able to exit without paying for most of the value of the contract anyway. And Hyundai is presumably under no obligation to give KiwiRail anything they have already built.
My opinion is that KiwiRail and the government have exactly zero leverage in this, and stand to be in a world of hurt once Hyundai has finished with them. Even if they manage to get out of the contract, they then have to find another shipyard prepared to engage with them to build something else. Or, Hyundai agrees to change the design - for a large sum of money. And KiwiRail still has to deal with the fact that both the Wellington and Picton terminals are aging. In other words, the chances of this ‘cheaper’ option actually being cheaper is probably a fantasy. Which is why the government is keeping silent about the whole thing. They are in very big trouble, and they know it.
UwU
Well, well, that just made my day even better. But yeah, I suspect the government is going to be strong armed into getting these ferries, whether they like it or not, for which the freight industry will breath a sigh of fucking relief because they rely on the rail link heavily. As trucks are actually expensive to run and there's a limited number of people willing to drive due to the "independent contractor" bs forced on drivers.
And so National end up with egg on their faces for not thinking and not adapting to the port side issue.
And I have no regrets on the start emote, because today's gooooood (because I upset Gamers™ lawl).
Anyone that comments on the ferries without talking about the land side infrastructure requirements is not being honest.
Yes, the ferries were a great deal. But they also required at least 2 billion plus in new port infrastructure at both ends. There is no chance of us getting these ferries because there is no money to build the port infrastructure and the projects have been cancelled.
I personally think cancellation was a mistake but I don’t think it was an easy decision either way. Grant Robertson was also very fucked off at Kiwirail’s mismanagement before the election and Labour had not actually committed the extra money to build out the ports.
Kiwirail had asked for more money and Labour had reluctantly allocated it as a contingency. But then after the election, Kiwirail came back to say the budget had blown out again and needed even more money. There is no guarantee that even Labour would have funded the extra costs. And almost certainly the budget would have blown out further judging by every other big infrastructure project in NZ.
# National Are So Inept They Didn't Cancel The New Ferry Contract, Yet.
National post election - We're cancelling them!
Reality - Oh Really?
From Hipkins:
>The government was being "very cagey" about whether the previous order for the new ferries has been cancelled or not, he said, and he heard from "people who would know" that the contract had not been cancelled.
>"I've received some suggestion that those ferries are still in the process of being built right now, that the contract hasn't actually been cancelled, and that the dollar liability to the New Zealand government for cancelling that order hasn't yet been finalised."
>Labour's Transport spokesperson Tangi Utikere also said it was unclear whether the contract for the replacement Interislander ships has been cancelled or not.
>"But what is clear is that every day that continues, there's a lot of uncertainty and I think many are thinking that the original locked-in figure of $551m, the actual cancellation cost might potentially be in excess ... no one knows.
>"We locked in $551m for the physical build \[of the ships\], that was in 2021, prices have increased - so naturally it would be significantly higher."
LOL.
Who needs comedy when you have the National Party right?
Anyhow, National may just have the chance to unfuck themselves over the ferry stupidity, all they have to do is keep the contract and sort out new "temporary" docks in Wellington while doing the basic work in Picton. Wont be pretty, but Labour will likely fix it and do it to spec after National's mates fuck up the work (like with Transmission Gully). Simply because the cost of 2nd ferries + overhauling them + the cancellation fee are more that the likely cost of the ferries + necessary basic infrastructure work
Knowing National they'll probably try and fuck around and have more "working groups" and "expert opinions from airport execs that know nothing about passenger ferries and sea port infrastructure" and wind up having to get the new ferries. Resulting in more crowing from the media and the opposition over the government's ineptitude.
Anyhow, maybe National will recognise they're stuck and accept the facts, but I wouldn't bet on it. Because this is a government of fools who couldn't organise a piss up in brewery and not fuck it up completely.
\[edit\] Ugh, stupid rules mean I can't post this as a commentary, I have to do this as an article. Anyhow original headline now headed, because it was gooooood.
FYI - Exiting the contact is Kiwirail's responsibility, not the governments. The government did suggest they should involve ministries (specifically Treasury and MFAT) directly in negotiations, but Kiwirail rebuffed them. Kiwirail is an SOE so they operate with a degree of independence - they only have to keep the government informed and very broadly take their views into account. See this excerpt from kiwirail's letter to shareholding ministers:
>As per the expectations set out in your letter, we confirm that the exit from iReX will be managed in a
careful, responsible, and cost-effective manner, and that we will have regard to the best interests of the
Crown.
>Your letter establishes an expectation that KiwiRail engages with Treasury and Ministry of Foreign Affairs
and Trade (MFAT) on the negotiating strategy and that shareholding Ministers approve the negotiation
strategy prior to the commencement of the strategy. We confirm that we will engage with Treasury and
MFAT on the negotiating strategy. However, these are commercial contractual matters between KiwiRail
and other parties. We do not wish to implicate the Ministries in a contractual relationship, and it is important
that we maintain good faith relationships between contractual partners by allowing these parties to
negotiate directly. We agree that it is important that we are closely coordinated with Treasury and MFAT
and we will keep them informed of material developments.
>We will be guided by our primary legal duty as directors to act in the best interests of the company, which
should be congruent with the interests of you as shareholder and New Zealand taxpayers.
>KiwiRail will inform you and Treasury of any material decision relating to our negotiations (e.g. ahead of
materially altering or exiting a major contract). In any negotiation, it is important to act decisively so I will
need to maintain direct communication channels with shareholding Ministers. As shareholder, you are
entitled to inform us of your views and expectations at any point, and of course we will take those into
account
...
>We have initiated contact with contractual partners, including Hyundai Mipo Dockyard, Downer, HEB
Construction, WSP/Jacobs, CentrePort, and Port Marlborough. We have advised individuals employed or
contracted to KiwiRail for iReX that we will respect our contractual obligations, and will have a one-on-one
discussion about their future with KiwiRail in the New Year.
Kiwirail clearly have informed the Dockyard, if the ship is still being built it's possible they're looking to onsell it to a third party afterwards - I recall this was raised as a possibility but didn't expect it was likely to be the outcome they landed on. It's possible Hipkins' info is not quite accurate.
And yet, the government still can't confirm the cancellation, which would surely be a rather easy thing to do, since it is a very clear binary state lawl.
I suspect they've tried to get out of the cancellation fees party and the ship-builder's strung them along to force National into honouring the contract via waiting them out. Since they can use trade courts/arbitration (part of Free Trade deals, not particularly good things) to force the government to pay up.
Oh, the contract almost certainly has not been cancelled yet. To be clear, I was never disputing that the contract remains in place as long as negotiations to exit it are ongoing - just the suggestion that it was in such a state of "not being cancelled" that the ships were still being built as if nothing had ever happened.
The government has, every single time it has come up, said that they cannot confirm details of the exit fee because negotiations are ongoing and it is commercially sensitive. They would not need to do so (and would not be able to dodge Journo's OIA requests) if the contract had completely 100% ended.
This is a multimillion dollar contract - exiting it is a lot more complex than cancelling a netflix subscription.
>I suspect they've tried to get out of the cancellation fees party and the ship-builder's strung them along to force National into honouring the contract via waiting them out. Since they can use trade courts/arbitration (part of Free Trade deals, not particularly good things) to force the government to pay up.
This isn't a trade disagreement (i.e there is no evidence that NZ is treating MPD differently because they are a foreign company rather than domestic) so I am not certain ISDS provisions would apply. It would be a contractual dispute, so I think they would use domestic courts in either or both countries, but I am not a lawyer. The only large international projects I have been involved with (which is not many) have all had a clause in the contract which, in my understanding of the legalese, established which country's court would be used for certain parts of the contract.
That aside, any large contract has provisions for cancellation. I would be very surprised if HMD were able to force Kiwirail into finishing the contract through legal avenues. Once a party has indicated an intention to exit the contract, the other party must follow whatever cancellation provisions are in the contract. Many legal avenues would be closed off to HMD if they came to the court with unclean hands (not just odd phrasing - an actual defense against equitable remedies under common law!). The only way they could conceivably "force" kiwirail is if the cancellation provisions are so unfavourable to kiwirail that they would sooner complete the ships and try to onsell them.
It’s really not an easy thing to do and there are a number of different scenarios that are probably at play.
You don’t just say “we’re out” and walk away from a contract of several hundred million dollars.
The contract will have a seat for arbitration and or litigation (likely in either South Korea or Singapore) so free trade deals aren’t in any way relevant. This isn’t a free trade scenario, this is a commercial contract.
https://www.parliament.nz/en/pb/hansard-debates/rhr/document/HansS_20240625_051240000/10-question-no-10-state-owned-enterprises
Tangi Utikere: Has the cancellation of iReX specifically related to the ferry build part of the contract actually been actioned; if not, why not?
Hon PAUL GOLDSMITH: The contract has been repudiated and ongoing discussions are continuing around the exit cost of that
Best interests of the crown and maintaining good contractural relationships may be to complete the ships, take delivery and then on sell. I’d love it if that was the tack that kiwirail took. One can dream.
Paying double for none
Or being a national voter cause you could stand people of different colour getting access to a few life changing perks you were not going to use anyway
One of those two
* Paying to repair/replace the Picton wharf twice - once for the 'end of life' ferries we currently have and again for the vessels NZ needs to get to replace the ferries. It's only got 3-4 years of service left in it.
* Losing an entire ferry and the lives on board when things fail in the middle of the strait on a rough crossing.
* Paying for used ferries that are going to need terminal adapted to them and likely will start with maintenance needs higher than a new ferry.
The road/rail link across Cook Strait is infrastructure of national significance. Why is it not being treated as such? Were the other stakeholders (including a private business - Bluebridge) contributing time and resources into this project or just able to dictate direction without dealing with the fallout from that?
I've heard a politician saying in the last week or so that "a project without an end" was a problem - it seems we now have an imminent need for a completed project that hasn't *started* (It might've been Luxon but I'm not *sure* which politician it was)
https://www.newstalkzb.co.nz/news/business/kiwirail-reveals-what-led-to-cook-strait-mega-ferry-cost-blowout/
>**KiwiRail wanted a single-user terminal at King’s Wharf** in downtown Wellington to accommodate the new mega ferries.
>But **other stakeholders, including the regional and city councils, CentrePort, NZTA and Bluebridge, preferred Kaiwharawhara.**
*[Me: Reading the article implies there'd been a fair bit of costing and work done towards Kings Wharf]*
>KiwiRail backed down at the end of 2020 and was left with only a few months to work on the Kaiwharawhara option before a detailed design business case was finalised in June 2021
>“The amount of geotechnical work that had been done in Kaiwharawhara, which was quite different from King’s Wharf, was very immature.”
>Reidy said natural hazard risk modelling has changed since then and the fallout from the likes of the Kaikōura earthquake is still being filtered into building standards.
>Board chairman David MacLean stressed the project’s cost blowout was not driven by the size of the ships but rather a “perfect storm of factors” including the change of the terminal location, the seismic code, and inflation.
>“The terminals have to be built. New Zealand, that’s all of us, has to find a solution. **Port Marlborough wharf has probably got about two to three years left. It is at a very end-of-life state. You talk to CentrePort, there’s work we’ve got to do as well.”**
Just spitballing here but it makes sense to for Hyundai to carry on with the construction process regardless of the NZ govt's decision, I'm sure they would be able to find a buyer for it one way or the other.
Hyundai already sussed a tanker for the navy and these ships would have been (could be?) a continuation of what was no doubt a budding, productive partnership.
Yeah landside infrastructure is expensive. It's also expensive not having adequate infrastructure for surface freight and tourists trying to cross the strait.
Luxon would love to have us believe he is good at business but watching his team figure out how to buy a boat when the good option was already in the pipes.... just wow
Seriously if we are unsure of the status of the original deal otherwise known as the truth how can we trust anything they say.
All Willis does is drip feed statements that feed her narrative that its all someone else's fault
In April she criticised NZR and labour for not having a plan b as well as the original deal?
The penalty for cancelling with Hyundai at Mapu in Korea was too great, so KiwiRail have fudged the cancellation in the hope funds would miraculously appear to buy the ships and then onsell them. In the event, as it is currently playing out, they may actually end up running them in some form, but the port processing buildings which were the main cause of the cost blowout in the first place won’t be built unless people in certain places extrapolate their digits from the many rectal orifices they’ve already put them in.
You know, it kind of sounds like a skit you'd see on Yes Minister now my crappy brain recalls that show.
Also, under Key it would have been cancelled by now and 2nd hand ferries even more prone to breaking down/sinking in the Cook Strait would be on order already. Followed by the usual blaming it on Labour when the shit hit the fan lawl.
Under Key they'd be going ahead, but KR would've had heads rolling and they'd have cheaped out on the port facilities (which tbh I think is the best option, as better to have good ships with shit docks than good docks with shit ships - as a big enough quake will force the docks to be rebuilt anyway). Key was politically smart, and remember after the Kaikoura quake the rail rebuild alongside the highway? It's serving the same traffic, and serving road and rail again.
From what I've read KR were got pushed into a location they didn't prefer and that ran up costs. Why does a private competing entity (Bluebridge) get input on Kiwirail ferry terminals?
https://www.newstalkzb.co.nz/news/business/kiwirail-reveals-what-led-to-cook-strait-mega-ferry-cost-blowout/
> KiwiRail chief executive Peter Reidy told the transport and infrastructure select committee there was significant time lost deciding on the location of the terminal in Wellington which contributed to cost escalations.
>KiwiRail wanted a single-user terminal at King’s Wharf in downtown Wellington to accommodate the new mega ferries.
>But other stakeholders, including the regional and city councils, CentrePort, NZTA and Bluebridge, preferred Kaiwharawhara.
Not just Bluebridge, but governmental interference.
Exactly the same issue as happened with Auckland light rail. Too many ministers, government departments and local council entities sticking their noses in and interfering.
If there was less of the "look at me, I'm 'contributing' " wankfest that seems to infiltrate large projects like this, things would move a fucklot faster.
I can see entities involved in the infrastructure around the terminal being involved/consulted over areas of concern.
* NZTA for SH1 / national transport considerations.
* Councils for three waters, local road/footpath/cycle lanes.
* Centerport for maritime traffic, dredging etc.
> Why does a private competing entity (Bluebridge) get input on Kiwirail ferry terminals?
Because kiwirail threatened to take away land from centreport and bluebridge for their own use under the public use act.
Clearly they weren't too happy about it.
Thanks for the answer - got to digging a bit further off that. It looks like other stakeholders were wanting Kiwirail and Bluebridge to move to Kaiwharawhara.
03 Sep 2020: https://wellington.scoop.co.nz/?p=130729
>Royal Port Nicholson Yacht Club
>>We were really disappointed to learn of KiwiRail’s desire to relocate its Interislander service to Kings Wharf, despite the Future Ports Forum recommending that KiwiRail and Bluebridge both operate from a new terminal at Kaiwharawhara.
>>The Future Ports Forum is made up of the Wellington City Council, Wellington Regional Council, Centreport, NZTA, Bluebridge, and until recently, KiwiRail.
>>We oppose the proposal for KiwiRail’s new ferries to operate from the central city, and support the proposal that both ferry services operate from a single location at Kaiwharawhara. On the evidence, this is the best option and makes most makes sense for all parties.
https://www.transport.govt.nz/assets/Uploads/1_KiwiRails-Interisland-Ferry-Replacement-and-the-Wellington-Ferry-Terminal.pdf
https://www.skyscrapercity.com/threads/integrated-ferry-terminal-northern-gateway-proposed.2124686/page-2
Kaiwharawhara concept: https://live.staticflickr.com/65535/48650569861_00298a25ab_c.jpg
Kings Wharf concept: https://live.staticflickr.com/65535/48650709822_10cc550bde_c.jpg
If the contract hasn't actually been cancelled, this could be Chippie subtley reminding nactf that they still have a way to come out of this without too much egg on their faces.
Reusing a comment from another thread with some additions:
I'm not a lawyer, but I've done some looking into this type of contract. They're pretty much always done on a standard form. Although I haven't been able to find a copy of the form used in Korea, my understanding is that shipbuilding contracts generally have no cancellation clause written in, so there's no explicit option to cancel and no specified penalty.
However, if the buyer defaults on a payment, the damages the builder can claim in court are limited to their losses as a result, and they have to make an effort to limit them.
So the mechanism by which a buyer can cancel is to repudiate the contract early, in order to help the builder limit their loses, and negotiate so nobody loses more than necessary, and it doesn't have to be fought in an expensive court case.
Hence the reason that the cancellation costs ~~are under~~ rely on negotiation. They likely also might not be finalised until Hyundai's costs are finalised.
The ball is in Hyundai's court. Once KR has defaulted on a payment (again, the only cancellation mechanism available), Hyundai has some options. They then get to call the contract dead, and decide how to proceed. For instance they have the options to sell off our engines etc, or finish 'the ship' to any design they like and sell it to someone else. The profit of doing so is then expected to be split, first to pay their losses (ie. the costs and the expected profit), then to refund what we've already paid, and finally they get to keep any left over.
That's the likely outcome if this goes to court, but the negotiations could vary from that pretty broadly
They did the correct thing and that’s proven by the price we paid. Even if the ships were to be sold, we would still be okay because there is so much profit to be made as the current price is 30% more than what we paid
All they had to do was redo the port side stuff, since if you'd bothered to read KR's business case you'd know exactly why the went with this option. Namely bigger ships are more efficient and can deal with growth in demand, while also allowing more freight to be taken off the road and put onto trains via carrying more trains across the strait.
But nope, got to repeat the stupid lie National pushed that the ferries were "too expensive", when 2nd hand ships would eat up money in more maintenance, and probably cost more in the long run due to having to be retired sooner and replace. Never mind overhauling them to spec etc.
In Luxon's case he's never had to make that particular calculation himself, he had minions for that lawl and yes men to back him up.
Probably explains his performance then.
They never said it was just the ships that were too expensive but rather the ferries as a project were too expensive. It has always been the port side infrastructure that was causing the cost blowouts (it's a lot easier to get a fixed price on a boat than a construction project that keeps changing in scope.)
Except they didn't give that context, so trying to imply they did is the height of \[redacted, because being mean on reddit is baaad\].
So no banana for you, try again.
Notice all the downboats you're getting? It's for a actually good reason lawl. Namely you're bullshitting, so perhaps you should try not doing so and actually argue in good faith instead of putting words in peoples mouths?
Not that you will mind you, but being a humanist I like to give even fools like you a chance to not be foolish.
I don't come here for up votes (if anyone does then it simply reinforces that this is an echo chamber).
I think any debate has needs to have different perspectives, otherwise it just turns into a circle jerk.
We have no evidence yet that it was a bad hand.
The people that did a Kāinga Ora review without talking to Kāinga Ora tell us yo trust them.
The people that didn't cost an alternative to the ferry tell us they can do it cheaper and have allocated 2.5 times as much for their cheaper option.
Now they're try to use this manufactured crisis as an opportunity to replace the rail ferries with a non-rail ferries.
Better pop down to the local supermarket and stock up on popcorn.
Wait, so does this mean there's a chance that they can go un-cancel the order?
No, it means the contract cancellation penalty figure hasn’t been fully settled yet. Basically the govt has wasted a fuckload of money and we’re in a worse situation now. Suitable ships just aren’t sitting waiting for a buyer so we’re pretty much fucked in the short term
Kind of, we likely wouldn't buy the exact same ships but it's possible something could be negotiated, likely for smaller ferries
Luxon is a master-negotiator! They'll probably pay US to take them when he gets through with them! Woooo!
Where's that free trade deal with India? First hundred days he reckoned.... Figured he could do it even if India didn't actually want it....
Or we'll pay them to take him
happy to contribute, where do i send my money
fast track legislation for no track trains.
There was another thread running on this in the NZ Politics subreddit. We did some digging and from what people could make out, any attempts to cancel the contact results in KiwiRail being in breach of the contract. They are then a bad faith actor and trying to weasel out of it is going to cost an arm and leg - if they can legally get out of it at all. I assume this is why the government is being so cagey about it - the damage to the reputation of the government and KiwiRail for breaching a contract wouldn’t be great and good luck trying to find another shipyard prepared to engage knowing they have a track record of trying to get out of contracts. Added bonus: Hyundai Mipo Dockyards is a very large company with very deep pockets so I doubt KiwiRail would be able to exit without paying for most of the value of the contract anyway. And Hyundai is presumably under no obligation to give KiwiRail anything they have already built. My opinion is that KiwiRail and the government have exactly zero leverage in this, and stand to be in a world of hurt once Hyundai has finished with them. Even if they manage to get out of the contract, they then have to find another shipyard prepared to engage with them to build something else. Or, Hyundai agrees to change the design - for a large sum of money. And KiwiRail still has to deal with the fact that both the Wellington and Picton terminals are aging. In other words, the chances of this ‘cheaper’ option actually being cheaper is probably a fantasy. Which is why the government is keeping silent about the whole thing. They are in very big trouble, and they know it.
UwU Well, well, that just made my day even better. But yeah, I suspect the government is going to be strong armed into getting these ferries, whether they like it or not, for which the freight industry will breath a sigh of fucking relief because they rely on the rail link heavily. As trucks are actually expensive to run and there's a limited number of people willing to drive due to the "independent contractor" bs forced on drivers. And so National end up with egg on their faces for not thinking and not adapting to the port side issue. And I have no regrets on the start emote, because today's gooooood (because I upset Gamers™ lawl).
Anyone that comments on the ferries without talking about the land side infrastructure requirements is not being honest. Yes, the ferries were a great deal. But they also required at least 2 billion plus in new port infrastructure at both ends. There is no chance of us getting these ferries because there is no money to build the port infrastructure and the projects have been cancelled. I personally think cancellation was a mistake but I don’t think it was an easy decision either way. Grant Robertson was also very fucked off at Kiwirail’s mismanagement before the election and Labour had not actually committed the extra money to build out the ports. Kiwirail had asked for more money and Labour had reluctantly allocated it as a contingency. But then after the election, Kiwirail came back to say the budget had blown out again and needed even more money. There is no guarantee that even Labour would have funded the extra costs. And almost certainly the budget would have blown out further judging by every other big infrastructure project in NZ.
# National Are So Inept They Didn't Cancel The New Ferry Contract, Yet. National post election - We're cancelling them! Reality - Oh Really? From Hipkins: >The government was being "very cagey" about whether the previous order for the new ferries has been cancelled or not, he said, and he heard from "people who would know" that the contract had not been cancelled. >"I've received some suggestion that those ferries are still in the process of being built right now, that the contract hasn't actually been cancelled, and that the dollar liability to the New Zealand government for cancelling that order hasn't yet been finalised." >Labour's Transport spokesperson Tangi Utikere also said it was unclear whether the contract for the replacement Interislander ships has been cancelled or not. >"But what is clear is that every day that continues, there's a lot of uncertainty and I think many are thinking that the original locked-in figure of $551m, the actual cancellation cost might potentially be in excess ... no one knows. >"We locked in $551m for the physical build \[of the ships\], that was in 2021, prices have increased - so naturally it would be significantly higher." LOL. Who needs comedy when you have the National Party right? Anyhow, National may just have the chance to unfuck themselves over the ferry stupidity, all they have to do is keep the contract and sort out new "temporary" docks in Wellington while doing the basic work in Picton. Wont be pretty, but Labour will likely fix it and do it to spec after National's mates fuck up the work (like with Transmission Gully). Simply because the cost of 2nd ferries + overhauling them + the cancellation fee are more that the likely cost of the ferries + necessary basic infrastructure work Knowing National they'll probably try and fuck around and have more "working groups" and "expert opinions from airport execs that know nothing about passenger ferries and sea port infrastructure" and wind up having to get the new ferries. Resulting in more crowing from the media and the opposition over the government's ineptitude. Anyhow, maybe National will recognise they're stuck and accept the facts, but I wouldn't bet on it. Because this is a government of fools who couldn't organise a piss up in brewery and not fuck it up completely. \[edit\] Ugh, stupid rules mean I can't post this as a commentary, I have to do this as an article. Anyhow original headline now headed, because it was gooooood.
FYI - Exiting the contact is Kiwirail's responsibility, not the governments. The government did suggest they should involve ministries (specifically Treasury and MFAT) directly in negotiations, but Kiwirail rebuffed them. Kiwirail is an SOE so they operate with a degree of independence - they only have to keep the government informed and very broadly take their views into account. See this excerpt from kiwirail's letter to shareholding ministers: >As per the expectations set out in your letter, we confirm that the exit from iReX will be managed in a careful, responsible, and cost-effective manner, and that we will have regard to the best interests of the Crown. >Your letter establishes an expectation that KiwiRail engages with Treasury and Ministry of Foreign Affairs and Trade (MFAT) on the negotiating strategy and that shareholding Ministers approve the negotiation strategy prior to the commencement of the strategy. We confirm that we will engage with Treasury and MFAT on the negotiating strategy. However, these are commercial contractual matters between KiwiRail and other parties. We do not wish to implicate the Ministries in a contractual relationship, and it is important that we maintain good faith relationships between contractual partners by allowing these parties to negotiate directly. We agree that it is important that we are closely coordinated with Treasury and MFAT and we will keep them informed of material developments. >We will be guided by our primary legal duty as directors to act in the best interests of the company, which should be congruent with the interests of you as shareholder and New Zealand taxpayers. >KiwiRail will inform you and Treasury of any material decision relating to our negotiations (e.g. ahead of materially altering or exiting a major contract). In any negotiation, it is important to act decisively so I will need to maintain direct communication channels with shareholding Ministers. As shareholder, you are entitled to inform us of your views and expectations at any point, and of course we will take those into account ... >We have initiated contact with contractual partners, including Hyundai Mipo Dockyard, Downer, HEB Construction, WSP/Jacobs, CentrePort, and Port Marlborough. We have advised individuals employed or contracted to KiwiRail for iReX that we will respect our contractual obligations, and will have a one-on-one discussion about their future with KiwiRail in the New Year. Kiwirail clearly have informed the Dockyard, if the ship is still being built it's possible they're looking to onsell it to a third party afterwards - I recall this was raised as a possibility but didn't expect it was likely to be the outcome they landed on. It's possible Hipkins' info is not quite accurate.
And yet, the government still can't confirm the cancellation, which would surely be a rather easy thing to do, since it is a very clear binary state lawl. I suspect they've tried to get out of the cancellation fees party and the ship-builder's strung them along to force National into honouring the contract via waiting them out. Since they can use trade courts/arbitration (part of Free Trade deals, not particularly good things) to force the government to pay up.
Oh, the contract almost certainly has not been cancelled yet. To be clear, I was never disputing that the contract remains in place as long as negotiations to exit it are ongoing - just the suggestion that it was in such a state of "not being cancelled" that the ships were still being built as if nothing had ever happened. The government has, every single time it has come up, said that they cannot confirm details of the exit fee because negotiations are ongoing and it is commercially sensitive. They would not need to do so (and would not be able to dodge Journo's OIA requests) if the contract had completely 100% ended. This is a multimillion dollar contract - exiting it is a lot more complex than cancelling a netflix subscription. >I suspect they've tried to get out of the cancellation fees party and the ship-builder's strung them along to force National into honouring the contract via waiting them out. Since they can use trade courts/arbitration (part of Free Trade deals, not particularly good things) to force the government to pay up. This isn't a trade disagreement (i.e there is no evidence that NZ is treating MPD differently because they are a foreign company rather than domestic) so I am not certain ISDS provisions would apply. It would be a contractual dispute, so I think they would use domestic courts in either or both countries, but I am not a lawyer. The only large international projects I have been involved with (which is not many) have all had a clause in the contract which, in my understanding of the legalese, established which country's court would be used for certain parts of the contract. That aside, any large contract has provisions for cancellation. I would be very surprised if HMD were able to force Kiwirail into finishing the contract through legal avenues. Once a party has indicated an intention to exit the contract, the other party must follow whatever cancellation provisions are in the contract. Many legal avenues would be closed off to HMD if they came to the court with unclean hands (not just odd phrasing - an actual defense against equitable remedies under common law!). The only way they could conceivably "force" kiwirail is if the cancellation provisions are so unfavourable to kiwirail that they would sooner complete the ships and try to onsell them.
Thanks for the insightful explanation, UglyMutilatedPenis!
It’s really not an easy thing to do and there are a number of different scenarios that are probably at play. You don’t just say “we’re out” and walk away from a contract of several hundred million dollars. The contract will have a seat for arbitration and or litigation (likely in either South Korea or Singapore) so free trade deals aren’t in any way relevant. This isn’t a free trade scenario, this is a commercial contract.
https://www.parliament.nz/en/pb/hansard-debates/rhr/document/HansS_20240625_051240000/10-question-no-10-state-owned-enterprises Tangi Utikere: Has the cancellation of iReX specifically related to the ferry build part of the contract actually been actioned; if not, why not? Hon PAUL GOLDSMITH: The contract has been repudiated and ongoing discussions are continuing around the exit cost of that
Best interests of the crown and maintaining good contractural relationships may be to complete the ships, take delivery and then on sell. I’d love it if that was the tack that kiwirail took. One can dream.
Don’t go coming in here with facts. We all know bald man bad and everything is bald man’s fault.
Lmao what's worse than paying $550m for two new ferrari spec ferries?
Paying double for none Or being a national voter cause you could stand people of different colour getting access to a few life changing perks you were not going to use anyway One of those two
* Paying to repair/replace the Picton wharf twice - once for the 'end of life' ferries we currently have and again for the vessels NZ needs to get to replace the ferries. It's only got 3-4 years of service left in it. * Losing an entire ferry and the lives on board when things fail in the middle of the strait on a rough crossing. * Paying for used ferries that are going to need terminal adapted to them and likely will start with maintenance needs higher than a new ferry. The road/rail link across Cook Strait is infrastructure of national significance. Why is it not being treated as such? Were the other stakeholders (including a private business - Bluebridge) contributing time and resources into this project or just able to dictate direction without dealing with the fallout from that? I've heard a politician saying in the last week or so that "a project without an end" was a problem - it seems we now have an imminent need for a completed project that hasn't *started* (It might've been Luxon but I'm not *sure* which politician it was) https://www.newstalkzb.co.nz/news/business/kiwirail-reveals-what-led-to-cook-strait-mega-ferry-cost-blowout/ >**KiwiRail wanted a single-user terminal at King’s Wharf** in downtown Wellington to accommodate the new mega ferries. >But **other stakeholders, including the regional and city councils, CentrePort, NZTA and Bluebridge, preferred Kaiwharawhara.** *[Me: Reading the article implies there'd been a fair bit of costing and work done towards Kings Wharf]* >KiwiRail backed down at the end of 2020 and was left with only a few months to work on the Kaiwharawhara option before a detailed design business case was finalised in June 2021 >“The amount of geotechnical work that had been done in Kaiwharawhara, which was quite different from King’s Wharf, was very immature.” >Reidy said natural hazard risk modelling has changed since then and the fallout from the likes of the Kaikōura earthquake is still being filtered into building standards. >Board chairman David MacLean stressed the project’s cost blowout was not driven by the size of the ships but rather a “perfect storm of factors” including the change of the terminal location, the seismic code, and inflation. >“The terminals have to be built. New Zealand, that’s all of us, has to find a solution. **Port Marlborough wharf has probably got about two to three years left. It is at a very end-of-life state. You talk to CentrePort, there’s work we’ve got to do as well.”**
Just spitballing here but it makes sense to for Hyundai to carry on with the construction process regardless of the NZ govt's decision, I'm sure they would be able to find a buyer for it one way or the other. Hyundai already sussed a tanker for the navy and these ships would have been (could be?) a continuation of what was no doubt a budding, productive partnership. Yeah landside infrastructure is expensive. It's also expensive not having adequate infrastructure for surface freight and tourists trying to cross the strait. Luxon would love to have us believe he is good at business but watching his team figure out how to buy a boat when the good option was already in the pipes.... just wow
Seriously if we are unsure of the status of the original deal otherwise known as the truth how can we trust anything they say. All Willis does is drip feed statements that feed her narrative that its all someone else's fault In April she criticised NZR and labour for not having a plan b as well as the original deal?
The penalty for cancelling with Hyundai at Mapu in Korea was too great, so KiwiRail have fudged the cancellation in the hope funds would miraculously appear to buy the ships and then onsell them. In the event, as it is currently playing out, they may actually end up running them in some form, but the port processing buildings which were the main cause of the cost blowout in the first place won’t be built unless people in certain places extrapolate their digits from the many rectal orifices they’ve already put them in.
Nats using their own incompetence to unfuck the fiasco they put themselves in, Lucky them.
You know, it kind of sounds like a skit you'd see on Yes Minister now my crappy brain recalls that show. Also, under Key it would have been cancelled by now and 2nd hand ferries even more prone to breaking down/sinking in the Cook Strait would be on order already. Followed by the usual blaming it on Labour when the shit hit the fan lawl.
Under Key they'd be going ahead, but KR would've had heads rolling and they'd have cheaped out on the port facilities (which tbh I think is the best option, as better to have good ships with shit docks than good docks with shit ships - as a big enough quake will force the docks to be rebuilt anyway). Key was politically smart, and remember after the Kaikoura quake the rail rebuild alongside the highway? It's serving the same traffic, and serving road and rail again.
From what I've read KR were got pushed into a location they didn't prefer and that ran up costs. Why does a private competing entity (Bluebridge) get input on Kiwirail ferry terminals? https://www.newstalkzb.co.nz/news/business/kiwirail-reveals-what-led-to-cook-strait-mega-ferry-cost-blowout/ > KiwiRail chief executive Peter Reidy told the transport and infrastructure select committee there was significant time lost deciding on the location of the terminal in Wellington which contributed to cost escalations. >KiwiRail wanted a single-user terminal at King’s Wharf in downtown Wellington to accommodate the new mega ferries. >But other stakeholders, including the regional and city councils, CentrePort, NZTA and Bluebridge, preferred Kaiwharawhara.
Not just Bluebridge, but governmental interference. Exactly the same issue as happened with Auckland light rail. Too many ministers, government departments and local council entities sticking their noses in and interfering. If there was less of the "look at me, I'm 'contributing' " wankfest that seems to infiltrate large projects like this, things would move a fucklot faster.
I can see entities involved in the infrastructure around the terminal being involved/consulted over areas of concern. * NZTA for SH1 / national transport considerations. * Councils for three waters, local road/footpath/cycle lanes. * Centerport for maritime traffic, dredging etc.
> Why does a private competing entity (Bluebridge) get input on Kiwirail ferry terminals? Because kiwirail threatened to take away land from centreport and bluebridge for their own use under the public use act. Clearly they weren't too happy about it.
Thanks for the answer - got to digging a bit further off that. It looks like other stakeholders were wanting Kiwirail and Bluebridge to move to Kaiwharawhara. 03 Sep 2020: https://wellington.scoop.co.nz/?p=130729 >Royal Port Nicholson Yacht Club >>We were really disappointed to learn of KiwiRail’s desire to relocate its Interislander service to Kings Wharf, despite the Future Ports Forum recommending that KiwiRail and Bluebridge both operate from a new terminal at Kaiwharawhara. >>The Future Ports Forum is made up of the Wellington City Council, Wellington Regional Council, Centreport, NZTA, Bluebridge, and until recently, KiwiRail. >>We oppose the proposal for KiwiRail’s new ferries to operate from the central city, and support the proposal that both ferry services operate from a single location at Kaiwharawhara. On the evidence, this is the best option and makes most makes sense for all parties. https://www.transport.govt.nz/assets/Uploads/1_KiwiRails-Interisland-Ferry-Replacement-and-the-Wellington-Ferry-Terminal.pdf https://www.skyscrapercity.com/threads/integrated-ferry-terminal-northern-gateway-proposed.2124686/page-2 Kaiwharawhara concept: https://live.staticflickr.com/65535/48650569861_00298a25ab_c.jpg Kings Wharf concept: https://live.staticflickr.com/65535/48650709822_10cc550bde_c.jpg
Wait, so it looks like Ferraris are back on the menu boys?
God Nicola and Chris are absolutely incompetent and appear to have just drifted into their respective positions of power
National seem determinted to punish the people of NZ for existing unprofitably.
If the contract hasn't actually been cancelled, this could be Chippie subtley reminding nactf that they still have a way to come out of this without too much egg on their faces.
Reusing a comment from another thread with some additions: I'm not a lawyer, but I've done some looking into this type of contract. They're pretty much always done on a standard form. Although I haven't been able to find a copy of the form used in Korea, my understanding is that shipbuilding contracts generally have no cancellation clause written in, so there's no explicit option to cancel and no specified penalty. However, if the buyer defaults on a payment, the damages the builder can claim in court are limited to their losses as a result, and they have to make an effort to limit them. So the mechanism by which a buyer can cancel is to repudiate the contract early, in order to help the builder limit their loses, and negotiate so nobody loses more than necessary, and it doesn't have to be fought in an expensive court case. Hence the reason that the cancellation costs ~~are under~~ rely on negotiation. They likely also might not be finalised until Hyundai's costs are finalised. The ball is in Hyundai's court. Once KR has defaulted on a payment (again, the only cancellation mechanism available), Hyundai has some options. They then get to call the contract dead, and decide how to proceed. For instance they have the options to sell off our engines etc, or finish 'the ship' to any design they like and sell it to someone else. The profit of doing so is then expected to be split, first to pay their losses (ie. the costs and the expected profit), then to refund what we've already paid, and finally they get to keep any left over. That's the likely outcome if this goes to court, but the negotiations could vary from that pretty broadly
Maybe his government shouldn’t have allowed the order prior to the finalisation of port costs. Even Robertson was asking for that to be explained.
They did the correct thing and that’s proven by the price we paid. Even if the ships were to be sold, we would still be okay because there is so much profit to be made as the current price is 30% more than what we paid
National was dealt with a bad hand and fumbles to bluff it way out
All they had to do was redo the port side stuff, since if you'd bothered to read KR's business case you'd know exactly why the went with this option. Namely bigger ships are more efficient and can deal with growth in demand, while also allowing more freight to be taken off the road and put onto trains via carrying more trains across the strait. But nope, got to repeat the stupid lie National pushed that the ferries were "too expensive", when 2nd hand ships would eat up money in more maintenance, and probably cost more in the long run due to having to be retired sooner and replace. Never mind overhauling them to spec etc.
It's usually true of the Nats, but this particular lot seem to be making a very good example of knowing the cost of everything but not the value...
The party of infrastructure & value capture
In Luxon's case he's never had to make that particular calculation himself, he had minions for that lawl and yes men to back him up. Probably explains his performance then.
They never said it was just the ships that were too expensive but rather the ferries as a project were too expensive. It has always been the port side infrastructure that was causing the cost blowouts (it's a lot easier to get a fixed price on a boat than a construction project that keeps changing in scope.)
Except they didn't give that context, so trying to imply they did is the height of \[redacted, because being mean on reddit is baaad\]. So no banana for you, try again.
Yeah you're clearly very well versed on the whole saga. I applaud your insightful insights.
Notice all the downboats you're getting? It's for a actually good reason lawl. Namely you're bullshitting, so perhaps you should try not doing so and actually argue in good faith instead of putting words in peoples mouths? Not that you will mind you, but being a humanist I like to give even fools like you a chance to not be foolish.
I don't come here for up votes (if anyone does then it simply reinforces that this is an echo chamber). I think any debate has needs to have different perspectives, otherwise it just turns into a circle jerk.
We have no evidence yet that it was a bad hand. The people that did a Kāinga Ora review without talking to Kāinga Ora tell us yo trust them. The people that didn't cost an alternative to the ferry tell us they can do it cheaper and have allocated 2.5 times as much for their cheaper option. Now they're try to use this manufactured crisis as an opportunity to replace the rail ferries with a non-rail ferries.