HD Hyundai Mipo and New Zealand’s national railway group KiwiRail have completed negotiations on liquidated damages for the cancellation of a ferry construction contract signed four years ago. Including compensation, the shipyard will receive US$220 million.
KiwiRail announced on its official website that it has completed negotiations with HD Hyundai Mipo over the penalty for canceling the shipbuilding contract and finalized the settlement for withdrawing from the order for two 53,500 DWT RO-PAX vessels signed in 2021, marking the official termination of the project between the two parties.
The shipbuilding project is part of New Zealand’s “iReX Project”, which aims to improve port infrastructure between Wellington and Picton and optimize ferry operations between the North and South Islands.
According to the final agreement reached by both parties, KiwiRail will pay HD Hyundai Mipo a penalty of US$144 million, including the deposit and part of the settlement payment paid earlier, and HD Hyundai Mipo will ultimately receive US$220 million. This amount is equivalent to more than 70% of the order value.
KiwiRail revealed that the total cost of canceling the iReX ferry project was US$671 million, including compensation paid to HD Hyundai Mipo Dockyard and US$449 million for land infrastructure project management and termination costs.
In July 2021, HD Hyundai Mipo signed a contract with KiwiRail to build two 53,500 DWT Ro-Pax vessels. At the time, the contract was valued at US$370 million, with each vessel costing approximately US$185 million.
HD Hyundai Mipo originally planned to deliver the new vessels in 2025 and 2026, but the order was canceled due to the suspension of financial support from the New Zealand government. In 2024, the New Zealand government ceased funding for the iReX project, citing a more than fourfold increase in project costs.
KiwiRail, the purchaser, revealed that it had previously explored various options, including canceling the shipbuilding contract or selling the ferries to other operating companies. However, according to the latest news, KiwiRail ultimately decided to cancel the order.
Although KiwiRail has terminated the original shipbuilding contract, it still plans to proceed with the replacement of old ferries and port infrastructure improvement projects. A company representative said: “KiwiRail is committed to supporting the infrastructure upgrades needed in Wellington and Picton by 2029, with a focus on the introduction of two new ferries. By then, every effort will be made to ensure that the new vessels are successfully put into service at the right time.”