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Deal to finish Panama Canal expansion project partially signed
[March 14, 2014]

Deal to finish Panama Canal expansion project partially signed

(EFE Ingles Via Acquire Media NewsEdge) Panama City, Mar 14 (EFE).- The agreement reached last month to resolve a dispute affecting the Panama Canal's third-locks project, which had been briefly stalled over cost overruns, has been partially signed, the waterway's authority said.

After its board of directors approved the agreement on Thursday, the Panama Canal Authority, or ACP, proceeded to gather the signatures of three of the four companies that make up the GUPC consortium responsible for the project: Spain's Sacyr Vallehermoso, Italy's Impregilo and Belgium's Jan de Nul.

Panamanian company Constructora Urbana's representative, who is currently out of the country, and insurer Zurich still must sign the accord for it to enter into force.

GUPC, which was awarded the third-locks project - the centerpiece of a $5.25 billion canal expansion - in 2009 with a $3.1 billion bid, is led by Sacyr and Impregilo, each of which has a 48 percent stake.

The consortium halted work on the project on Feb. 5, alleging a cash-flow crisis stemming from $1.6 billion in cost overruns that it insisted the ACP should cover, but it slowly resumed construction 16 days later.

On Feb. 27, the canal authority announced that it had reached a conceptual agreement with GUPC to inject fresh funds into the project and ensure its completion.

The accord, among other things, provided that GUPC would pay $100 million and ACP would advance $100 million to enable work on the new locks - to be completed by December 2015, 15 months later than the date specified in the contract - to regain a normal pace in March.

It also said a moratorium for the repayment of previous advances made by the ACP to the consortium may be extended until 2018, subject to fulfillment of certain milestones and other conditions.

The ACP also stated then that the conceptual agreement did not include any payment for the consortium's claims, which "must be processed through the mechanisms within the contract," and did not modify the price of the contract.

Construction of the third set of locks is about 70 percent complete and the ACP has paid the consortium some $2.8 billion to date, including $784 million in repayable advances and at least $160 million for cost overruns.

The Panama Canal, which was designed in 1904 for ships with a 267-meter (875-foot) length and 28-meter (92-foot) beam, is too small to handle modern ships that are three times as big, making a third set of locks essential.

The inter-oceanic waterway handles roughly 6 percent of global trade. EFE gf/mc (c) 2014 EFE News Services (U.S.) Inc.

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