Panama says reaches initial deal to resume canal widening

Monday, 17 February 2014 00:00 - - {{hitsCtrl.values.hits}}

Reuters: The Panama Canal Authority said last week it had reached an initial agreement to resolve a weeks-long dispute over cost overruns on a project to widen the 100-year-old waterway that connects the Atlantic and Pacific oceans. The builders, led by Spain’s Sacyr, have stopped work on doubling the canal’s capacity while a dispute rages over $1.6 billion in cost overruns and extra financing for the work that is 70% done and due to be finished next year.

Delays could cost Panama millions in lost shipping tolls. For Sacyr – whose partners are Italy’s Salini Impregilo, a Belgian and a Panamanian company – the project brings in a quarter of international revenue. “We have preliminary agreements, there are still some issues to resolve and we are working in that direction,” the head of the Panama Canal Authority (PCA), Jorge Quijano, said. He said that did not mean the PCA had abandoned the alternative of handing over the contract to a third party and did not give details about what any agreement would involve. A spokesman for Sacyr declined to comment. A source familiar with the situation said no agreement had been signed but a deal could be sealed soon. An agreement was likely to centre on both sides bearing some of the additional costs and involve more bank loans, a second source with knowledge of talks said. Aside from the cost dispute, the two sides are negotiating over a deadline for the consortium returning $785 million in advance payments made by the PCA and the delivery date for 12 of 16 lock-gates, a major part of the project. Another sticking point is the role of insurer Zurich North America which may convert a $400 million completion bond into backing for another loan. Agreement on a date for delivering the lock gates was near, a third source with knowledge of the matter said, but issues around financing and Zurich’s role were yet to be resolved.