9. Question No. 9—State Owned EnterprisesTANGI UTIKERE (Labour—Palmerston North) to the Minister for State Owned EnterprisesQuestion No. 9—State Owned Enterprises9. TANGI UTIKERE (Labour—Palmerston North) to the Minister for State Owned Enterprises: Does he stand by his answers to oral question No. 10 yesterday that the KiwiRail iReX contract with Hyundai has been repudiated and ongoing discussions are continuing around the exit cost of that"; if so was that repudiation a unilateral decision by KiwiRail or agreed by all parties?Hon PAUL GOLDSMITH (Minister for State Owned Enterprises): Yes I stand by my answer in full which included the quote "The ferries will not be coming because we are not going to spend $3 billion on an overall project." In response to the second part of the member's question repudiation of a contract occurs when one party to a contract is unwilling or unable to fulfil its obligation to another.Tangi Utikere: Is KiwiRail currently undertaking a disputes resolution or arbitration process with Hyundai regarding their ship building contract?Hon PAUL GOLDSMITH: Yes there are ongoing conversations and it's not in the interests of the company or the Government to outline the details of that. But yes there are ongoing discussions.Tangi Utikere: Is there a cap on KiwiRail's exposure in this dispute; if not what is the exposure of KiwiRail?Hon PAUL GOLDSMITH: Well I'm not going to go into the details of that but I can remind the member that the Government when it came in had a choice between two bad outcomes. One outcome was to risk paying for breaking the contract—for KiwiRail breaking the contract. The other risk was going ahead with a project that had got to $3 billion and rising. And so neither of those were very good options but we had to go with one and we didn't want to spend $3 billion.Rt Hon Winston Peters: In the interest of transparency could the Minister advise as to which Government was in power when the iReX contract was signed and is it also the case that of the contract when it comes to the ferries they only totalled less than 25 percent of the contract and the rest was for infrastructure that Labour had signed up to?Hon PAUL GOLDSMITH: Well I can advise the House that the Labour Government was in power and that the initial estimate of the cost of the project for two ferries was $700 million and it has crested $3 billion and was continuing to rise. And the primary driver of that cost was not the cost of the ferries; it was the cost of the fact that the ferries were bigger than the current ferries and rail-enabled and it required an enormous amount of very expensive work at the ports at both ends. And that's what we're trying to avoid.Tangi Utikere: Was Cabinet advised prior to announcing the cancellation of the contract with Hyundai that there is no exit provision for KiwiRail in the contract?Hon PAUL GOLDSMITH: I'm not going to go into the details of ongoing discussions but Cabinet had a simple decision as to whether it was going to continue to fund the project to the tune of all over $3 billion and we declined to make that decision.Rt Hon Winston Peters: Could I ask the Minister as to whether or not he's aware or not that his predecessor never saw the contract that he signed up to being raised now in terms of the provision of an exit clause?Hon PAUL GOLDSMITH: Well I can't tell the House what the previous Minister did or didn't see. But what I can tell—SPEAKER: Hold on. Hold on. I doubt that you'd be in a position Minister to say whether or not another Minister had seen something.Rt Hon Winston Peters: Yeah but he could.SPEAKER: Well that might be the case but he can't. So maybe ask the question again.Rt Hon Winston Peters: Can I ask the Minister as to whether or not he has been informed by Mr Hipkins as to that iReX contract as to whether Mr Hipkins and his party over there saw the contract in the first place and (b) looked at the opt-out clause being in it or not?Hon PAUL GOLDSMITH: No I haven't been informed of such by Mr Hipkins but I am shocked that they allowed a project like this to get to the extent that it might be costing $3 billion or excess.Tangi Utikere: Has Cabinet been advised that costs for exiting the contract could exceed $200 million?Hon PAUL GOLDSMITH: Well again those discussions are ongoing but Cabinet has been advised there may well be costs in exiting the contract. And like I say Cabinet was forced to choose between two bad outcomes: exiting a contract or continuing on with a ridiculously expensive project and we had to make a decision and we did make a decision.Tangi Utikere: What advice if any has the Government received regarding the reputational risk to New Zealand and KiwiRail of exiting the contract particularly if the Government had been warned that due to reputational damage of breaking the contract it may not be able to procure new ships for decades and it could also impact other Government ship procurements?Hon PAUL GOLDSMITH: Well the advice is it's never desirable to be breaking contracts but it's also not desirable to spend $3 billion on two ferries. And so we have to be careful with the way that we spend our money. This is why this is a Government that's inherited a Budget which is in a state of disrepair that we're trying to put back together again by making some sensible decisions about spending."