KiwiRail wants its ferry terminal in the central city, without its competitor

September 3, 2020 – Report from RNZ by Catherine Hutton

Plans to build a multi-use ferry terminal in Wellington are in jeopardy, following KiwiRail’s insistence it wants to move into the central city beside rival Bluebridge, but won’t share facilities with them.

An estimated billion-dollar investment for new wharves in both Wellington and Picton is needed to allow KiwiRail to switch its Interislander operation to two new larger rail ferries by 2024.

Two years ago, the Future Ports Forum, comprising representatives from the Wellington Regional Council, the Wellington City Council, Centreport, the Transport Agency, KiwiRail, and Bluebridge was set up to look at where to best situate the capital’s new Cook Strait ferry terminal.

It was agreed the new site would be shared by the Interislander, which KiwiRail owns, and rival Bluebridge.

The latest report from interested stakeholders, released in April, recommended Kaiwharawhara where the Interislander ferries currently dock.

Regional Council (GWRC) chairperson Daran Ponter said KiwiRail left the forum before the final report was released because they did not agree with the location.

“Because they were on the working group they had an understanding of where that report was going to land in terms of its recommendation, they clearly didn’t agree with Kaiwharawhara as the preferred recommendation and they pulled out in advance. Not helpful, but it’s an interesting way of doing business.”

KiwiRail chief executive Greg Miller denied leaving the forum, and said releasing the report did not make sense.

“What you are talking about is, ‘did we agree in the forum?’ and the fact is we didn’t agree in the forum, so we’d said no we don’t think that’s the best outcome and we made that very clear,” Miller said.

“Then you’d have to ask yourself, what was the benefit of the Future Ports Forum that couldn’t agree, when the two customers – Bluebridge and KiwiRail – couldn’t agree with the provider, that’s more the point.”

tructural engineers say the Kaiwharawhara site can be built to cope with earthquakes but geotech scientists are less sure.

Miller said it was the geotech report that made KiwiRail stop and think.

“Is this the best location on the port to put new ferries and a new terminal that is rail served? There’s also the motorway upgrade and the location on the port for future transport, which has always been a challenge at Kaiwharawhara, with road and rail location and for the passengers arriving from overseas and domestically, getting access to the Kaiwharawhara site,” he said.

Estimates for building new ferry terminals in both Picton and Wellington are vague – ranging somewhere between half a billion and a billion dollars.

Miller said the huge costs of having to remediate the site could not be ignored. “You can engineer your way out of many things, but what we’re told by the engineers is that the cost of mitigation is extremely high, so there is a cost component to this that you cannot ignore.”

KiwiRail prefers its new terminal to be at Kings Wharf, beside Bluebridge’s existing spot, and closer to downtown Wellington.

But GWRC chairperson Daran Ponter said while KiwiRail had zeroed in on the seismic issues at Kaiwharawhara, Kings Wharf also had problems.

Ponter said the 2016 Kaikōura earthquake showed how fragile the port was. The port received more than $600 million – the second biggest insurance payout in New Zealand’s history – for the damage suffered in that quake.

“Kings Wharf sits midway between the container terminal and the new BNZ centre, both of which were taken out in the November 2016 Kaikōura earthquake. So it would appear wherever you locate yourself around the Centreport site, you are potentially still open to being challenged by an earthquake.”

And documents suggest the lengths KiwiRail is prepared to go to get the site. An email seen by RNZ from their group general counsel, Jonathan Earl, to KiwRail managers in May raised the possibility of using the Public Works Act to secure it.

Ponter said that would be unprecedented and would effectively mean seizing land from regional ratepayers.

“Clearly KiwiRail are an acquiring authority under the Public Works Act, but Centreport itself is a public works. Because you can’t just use the Public Works Act because you like an option more than you like another. You’ve got to give good grounds for the option or for your preference.”

Miller denied that was an option they were pursuing.

“Well the Public Works Act is there to be used to acquire if we need to, and as I said to you we haven’t put in any time, effort into that because I do believe the relationship commercially long term is better to be resolved that way and that’s the way we’re going.”

Centreport is now preparing a third assessment report for a new site, but Miller said he was not keen to share a facility with Bluebridge at Kings Wharf because KiwiRail needed a single-use terminal.

“We needed a rail link span. We have far greater volumes of trucks and cars and passengers that we move, so we probably needed a greater area and how do you divvy up the cost in a single user terminal for that with a competitor?”

Ponter said regardless of KiwiRail’s preferences, ultimately the port company had to accommodate both operators.

In a statement, Bluebridge said it was aware of KiwiRail’s recent proposal to build another wharf adjacent to its site at Kings Wharf, and had provided feedback.

The report is due in the next two months.

In June, the State Owned Enterprises Minister Winston Peters told regional councils he wanted the forum to reconvene and find a solution.

Quake-hit Wellington wants biggest ships

The November 2016 quakes put Wellington’s container cranes out of action for 10 months. Now CentrePort is looking at investing to accept bigger container ships. But not everyone agrees, Thomas Coughlan reports.

Wellington’s CentrePort is at a crossroads. Flush with cash after more than $170 million of earthquake insurance payouts, the port now has an opportunity to reposition itself for the future. But its proposal to dredge the harbour entrance to welcome in much bigger container ships is being challenged by those worried it will waste money on ships that never come. However, the quakes have also ironically proven the worth of keeping ports open to provide a back-up if road and rail fail.

Even before the earthquakes, CentrePort’s future was uncertain. Container ships are getting bigger and bigger and Wellington runs the risk of falling behind.

The port currently supports ships with a capacity of 4500 containers, half the capacity of the Port of Tauranga, which hosts the 9640 container Aotea Maersk, the largest container ship to visit New Zealand.

The port has long had an eye on dredging the entrance to Wellington Harbour to allow the port to host ships with up to 6000 containers. The plan was put on hold after the earthquake, but is again on the agenda as the port recovers.

But figures in the industry question the wisdom of such massive capital outlay. If trade tensions bubbled over, the project could become a white elephant, forcing CentrePort, and its owners, the Wellington and Horizons Regional Councils to bump up port fees.

Detractors say the port should stick to what it’s good at: providing services for the 10 Cook Straight ferry sailings it hosts each day. They say attention should be paid to resilience and making sure that when the next big one hits, the main link between the North and South Islands is not cut off.

Wellington’s future has country-wide implications. Ninety-nine percent of New Zealand’s imports by weight arrive on ships and the Government is keen to increase the amount of coastal shipping in New Zealand as part of a push to take trucks off roads.

This is likely to form part of the Government’s second-stage General Policy Statement on Land Transport, which is due next year.

Scraping the bottom 

Shipping is an industry of maxims. Speak with anyone for long enough and they will give you one or two inviolable rules about how the industry operates.

CentrePort CEO Derek Nind is no exception. Speaking to Newsroom he said the major trend he had experienced in his career was the size of ships increasing.

“In my 25 odd years all we’ve seen are container ships getting bigger,” he said.

In shipping, capacity is measured in containers, which are known as TEUs or “20-foot-equivalent”. The harbour currently [handles] ships carrying roughly 4500 TEUs. With dredging, it could host ships of up to 6000 TEUs.

Container ships have grown massively in size. In 1996, the largest ship in the world carried 6000 TEUs. Now, new classes of container ships carry up to 21,000 on ships each as long as four rugby pitches.

Those sorts of ships are unlikely to visit New Zealand anytime soon. The current international trend for hubbing means that they tend to operate on routes between major trading centres, like Shanghai and Singapore.

Ships that stop over in New Zealand tend to be much smaller, although they are growing. Since 2016, Tauranga has hosted visits of the the 9640 TEU Aotea Maersk. Though relatively small by international standards, in 1996, it would have been the largest ship in the world.

Nind says the improvement would encourage ships sailing round New Zealand to call in to Wellington. In shipping terms, this is known as intermediacy and diversion. Wellington had good intermediacy to ships passing along the cost. Ships could call in to port and potentially only face a four or five hour diversion from their regular route.

“Intermediacy is if you’re calling at Tauranga and you’re calling at Lyttelton we’re a four hour deviation,” he said.

But dredging is expensive. Costings done under the leadership of former CEO Blair O’Keefe came to around $40 million. It wouldn’t be extensive. Wellington is a naturally deep harbour, but for a lip at the entrance, which bars larger ships from stopping at port.

With inland transportation costs currently high, Wellington is well placed to take advantage of logistics firms looking to [cut] costs by shipping products as close to their end destination as possible. CentrePort can take advantage of road and rail connectivity in the Lower North Island and ferries to the top of the South Island.

More maxims

But the programme has some detractors.

Annabel Young, Executive Director of the New Zealand Shipping Federation, thinks the port should stick to what it’s good at: inter-island ferries.

She backs this up with another maxim: “Ships go where the cargo is”.

“This is all driven by ‘where is the cargo and how much is there?,” she said.

Young is a former National MP and her sister is Nicola Young, a Wellington City Councillor and mayoral candidate. Young is concerned that without adequate cargo in Wellington, the port will be forced to recoup the cost of dredging by raising port fees.

“If they do the capital work and the ship doesn’t turn up, consumers will pay,” she said.

The question of cargo is a touchy one in New Zealand. After the Kaikoura earthquake, cargo destined for CentrePort was offloaded elsewhere before making its way to Wellington by truck or train.

CentrePort has taken some of that business back, although it still has some way to go. In the 2016 financial year it offloaded 131,645 TEUs, this more than halved to  51,750 in 2017 before bouncing back to 84,755 this year.

But the port is focused on making sure it’s the nexus for shipping in the Lower North Island, partnering with KiwiRail to develop rail connectivity. Nind said the port wants to be “the port of choice for Central New Zealand.

It has developed rail hubs in Whanganui and New Plymouth and leverages Wellington’s strong transport connections with Palmerston North. This encourages cargo to travel via Wellington, rather than Napier or other ports.

But even with these connections, Young says there is still a limit to the amount of shipping that will pass through the Lower North Island, based on the size of local industries. These are dwarfed by industries based in the highly productive “Golden Triangle” of Hamilton, Tauranga and Auckland.

Roll up and roll on… and another working group.

Young believed attention needed to be directed to the Cook Strait ferries.

The port is currently part of a working group comprised of the Wellington City and Regional Councils, ferry operators, and NZTA about the future of the Cook Strait connection.

The working group is currently looking at the possibility of combining the Interislander and Bluebridge terminals into one and looking at ways to ensure the ferries can continue to service both Wellington and Picton after a major earthquake.

State Highway 1 technically runs over Cook Strait, which means the Government and NZTA have a strong interest in making sure the connection is resilient. It services seven million tonnes of cargo and 1.2 million passengers each year.

Nind noted that the port was quick to have both the Interislander and Bluebridge terminals up and running after the Kaikoura earthquake.

Wellington — and the whole country — will hope the Port fares similarly next time.