The deal's off - with two new mega-ferries for the Cook Strait no longer going ahead.

KiwiRail has confirmed it will terminate a contract signed in 2021 to build the new ships in South Korea.

The Government has turned down KiwiRail's funding request to cover the escalating cost for the new ships and port infrastructure.

Chief Executive Peter Reidy says this is 'disappointing news for him and the KiwiRail team.

"We'll focus today on our people and our customers, which we've been doing. And on Monday, we'll turn around and work with the Government on options."

LISTEN ABOVE

• 'KiwiRail must be s***ing themselves': Cook Strait ferry cost blowout lands with Nicola Willis
• Billion dollar blowout: Govt declines to fund Cook Strait mega-ferry project
• 'We'll explore other options': Minister Nicola Willis firmly turns down KiwiRail funding request