Two new ferries to carry passengers, cars, trucks and trains across Cook Strait are one step closer to being built.

Rail Minister Winston Peters said Ferry Holdings has signed a letter of intent with its preferred shipbuilder, moving the project into the final stage of procurement.

“This is a key milestone because it means both sides are now working from the same page and can finalise the technical details before contracts are signed later this year,” Peters said.

The new ships will each be 200 metres long, with space for up to 1,500 passengers, 2.4 kilometres of lanes for vehicles, and capacity for 40 rail wagons. They will also use diesel-electric hybrid engines with battery power and advanced propulsion systems to reduce emissions and improve manoeuvrability in Cook Strait.

The ferries are due to be completed in 2029 and are expected to serve New Zealand for the next 30 years.

Significant infrastructure upgrades will also take place alongside the new builds. In Picton, new wharves and linkspans are planned, along with an overbridge at Dublin Street to separate road traffic from freight trains. In Wellington, the existing wharf will be extended to accommodate the larger ships.

Peters said the process had moved quickly, with Ferry Holdings completing a procurement programme in nine months that normally takes years. “We will show the taxpayer how we have saved billions by returning to a straightforward ferry replacement solution,” he said.

The announcement comes after the coalition Government cancelled Labour’s iReX ferry project, which ended up costing $671 million without delivering any ships. In August, KiwiRail reached a settlement with South Korean shipyard Hyundai Mipo Dockyard over the cancellation.

The Aratere Interislander ferry was recently retired to allow work to begin in Picton.

The name of the shipyard building the new ferries will be announced once the contracts are formally signed.