Nicola Willis: Finance Minister defends the Government scrapping the Cook Strait mega-ferries

The Finance Minister is defending the Government's move to scrap the Cook Strait mega-ferries - and claimed costs would have blown out on the original project.

The Hyundai dockyard contracted to build the boats has received a total $222 million for the canned project, which includes a net $144 million final settlement.

$300 million had been provisioned.

Nicola Willis says the plans were not progressing well - and they were tied up in all sorts of additional complications. 

"There was a very reasonable reality that the port side of the infrastructure would not have been built in time for the ferries to have arrived, and that, therefore, they wouldn't have been able to be used."

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Episode Transcript

Speaker 1 (00:00):
Keeping track of where the money is flowing. The business hour.

Speaker 2 (00:04):
We'd hand the duplicy eleans for the trusted whole insurance solutions.

Speaker 1 (00:08):
Eustalks be.

Speaker 2 (00:11):
Even in coming up in the next hour. Shane Soally's
going to get us started on a reporting season. We'll
get you across hom Visa's big news and Gavin Gray
will do the UK for us right now at seven
past six, And of course Nikola Willis is the Finance Minister.
Hi Nikola, Hi, Heather, how was London?

Speaker 1 (00:25):
It was great. You know, when you're overseas you appreciate
what's wonderful about New Zealand. And I met with some
of the people who lend money to New Zealand to
invest in New Zealand and they had two pretty clear
messages for me. Number one was, please stick to this
plan of being sensible, reliable, responsible fiscal managers. That's why

(00:45):
we like you and that's why we lend to you
at good rates. Number two, Wow, New Zealand, you are lucky.
You live in a safe part of the world. You
are making things that the world wants to buy. You're
a country that's going to grow, and that's why we
want to invest in New Zealand, so they very reassuring.

Speaker 2 (01:01):
Did they give you any ideas well?

Speaker 1 (01:04):
They were very clear that they think that our agricultural
sector has big prospects, particularly in value added food, where
they think consumers will continue to want more sustainable products.
They'll clear that our tourism proposition is one that they
can see growing, and that our tech firms show up
very well. I was in New York and I met
with the Zero team there and they said that it's

(01:25):
not just them doing good stuff in America, that actually
a number of tech firms are turning up with export
opportunities into the United States, and they think New Zealand
has some pretty special source. Our firms are clever at
what they do.

Speaker 2 (01:37):
Why was Luxon really not on that phone call overnight?
I don't think it's because he was sleeping.

Speaker 1 (01:43):
Which phone call are you referring to?

Speaker 2 (01:45):
This is the overnight phone call with the Coalition of
the Willing, the one that happened at one am.

Speaker 1 (01:50):
I can't speak to that. I haven't talked to him
about it either, do you think.

Speaker 2 (01:53):
I mean, you know the man right, You know him
very well because you work with them all the time.
He's the kind of guy if there was an if
there was an awkward time zone, there's an awkward call
at an awkward time one am. He would get up
and do it if it was important, isn't he?

Speaker 1 (02:06):
Absolutely? But he's also a diligent person who takes advice
from his officials. So I haven't seen what that advice is.
I don't know what the background conspiracy theory.

Speaker 2 (02:14):
But the reason I'm asking you this is because I
think that actually the reason he wasn't on that phone
call is because it's an anti Trump phone call, and
we don't want to be in the anti Trump camp.

Speaker 1 (02:22):
In my experience, conspiracy theories and politics are almost always wrong.
What is much more likely is the benign, boring, practical
reality that it was at a bad time.

Speaker 2 (02:32):
Okay, why are we going to get High Yonda to
build the fairies?

Speaker 1 (02:37):
They are able to tender on the replacement theories, but
we're certainly not in a position to guarantee that they
will be.

Speaker 2 (02:45):
Didn't we given that?

Speaker 1 (02:46):
We?

Speaker 2 (02:46):
I mean, because we now know that we put two
hundred and twenty two million dollars into High Yonda for
the break fee in the deposit, why didn't we just
use that deposit and switch what theory we wanted and
say we don't want the big ones anymore, we want
some mediate ones.

Speaker 1 (02:57):
Well, we did look at doing that either. Of course,
Yonda's specialty isn't doing really big ships, and so initially
what we said is why don't you just repurchase the
stuff you've already got and turn it into smaller ones,
And they said, we worry about that because that will
create a liability for us, because you're actually asking us
to do something completely different from what we embarked on.

(03:18):
And they would have been unprepared to give us the
kind of liability guarantees and insurance that we needed for
those smaller ships with repurposed kit. So then it just
becomes a question of under what conditions would they fully
insure ships. And that's why they've been invited to submit
in a new tender. Of course, they haven't asked us
to give them the full price of the original ships.

(03:41):
We did manage to get some of that.

Speaker 2 (03:44):
Now, do you regret canceling those big fairies because we
have ended up Once you tally up how much we're
put into the deposit and then the break fee and
then the infrastructure costs and stuff we've spent six hundred
and seventy million dollars, we've got nothing for it.

Speaker 1 (03:57):
Well, no, because quite simply, if we'd forge to head
with that really broken, chaotic idea, it would have ended
up costing billions and billions of dollars, far more than
the cost of the now resized, more practical approach. Lest
we take a can of because at least.

Speaker 2 (04:15):
I mean, look, it would have been extremely expensive, but
at least at the end we would have two really
big fairies and all of the infrastructure. But now what
we've done, and sure it would be expensive, but now
we've just like literally frush six hundred and seventy dollars
seventy million dollars down the toilet. We've got laughing for it,
and we're going to have actually medium sized stuff.

Speaker 1 (04:33):
I doubt that very much. The plans were not progressing well.
They'd become tied up in all sorts of complication. There
was a very reasonable reality that the port side infrastructure
would not have been built in time for the fairies
to have arrived, and that they therefore wouldn't have been
able to be used. There were still questions being asked
by the harbor Master and picked in about whether or

(04:55):
not they would allow those large ships to have passage
through the Tory Channel. There were questions about how they
would operate. What we could see was an impending disaster.
It was very unlikely that those ships would have arrived
and been used in good time, and it was incredibly
likely that we would see further cost blowouts, further complications,

(05:16):
further problems into the future. We've now got a project
underway which will deliver fairies that are suited for the
purpose with port infrastructure that is needed, and it won't
be a gold plated plan that goes wrong.

Speaker 2 (05:29):
Have you got a gas meeting tonight?

Speaker 1 (05:33):
I meet with all of my colleagues regularly on a
number of issues and energy policy in New Zealand.

Speaker 2 (05:38):
As one that's come on, you've got a meeting yourself,
Chris Bishop, Christopher Luxen and Simon Watts have a meeting
in this hour, the six o'clock.

Speaker 1 (05:47):
No one really cares about meetings. What they care about,
isn't it in New Zealand right now? Too many people
are paying too much for electricity, too firms.

Speaker 2 (05:55):
But why are you having a meeting?

Speaker 1 (05:57):
You guys, listen, because we're not going to sit back
and have a situation where businesses across the country have
to close their operations because they can't access the energy
they need. We're not going to have a situation where
because the last government band gas exploration, we run out
of gas and run out of electricity. We are actively solving.

Speaker 2 (06:16):
So are you discussing the Frontier Report in this meeting?

Speaker 1 (06:20):
I've discussed the Frontier Report many times, but again for
your listeners, what this is about is how do we
make sure that we're actually getting enough new electricity generation built.
We acknowledging it can't all be wind, it can't all
be sola, it can't all be hard.

Speaker 2 (06:35):
But is this are getting on with it? This has
been like you know, we've had We've had a couple
of winters and nothing has been done. So are you
guys going to get a riggle on here? Yes? Are
we going to ration gas?

Speaker 1 (06:47):
Well, of course it's always been the case in New
Zealand that when there are gas shortages, agreements are forged
about how gas can be registributed. You saw that last
year with Method X, and those conversations are always ongoing.

Speaker 2 (07:01):
All right, Hey, Nicola, thank you as always appreciated, and
welcome back home. That's Nichola Willis, the Finance Minister. For
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