Sacyr confident of reaching agreement to finish Panama Canal project

Sacyr, the Spanish builder heading a consortium that is working on a project to widen the Panama Canal, expects to reach an agreement with the administrator of the waterway on cost overruns, thus allowing the job to be completed.

“Work will continue; we are only looking at a scenario of an agreement. The work will be finished,” Sacyr’s chairman, Manuel Manrique, told reporters on Monday.

The consortium threatened to suspend work on the project at the start of the year over the cost dispute, which the Grupo Unidos por el Canal (GUPC) consortium estimates at 1.625 billion dollars (1.2 billion euros). Manrique explained Monday that “early warning” had not yet been withdrawn.

Manrique said the negotiations with the Panama Canal Authority (PCA) are focused “on different scenarios aimed at improving the cash flow” of the consortium to avoid freezing work. “The situation is better than a few days ago,” he added. A guarantee by the Spanish government is not one of those scenarios, after Public Works Minister Ana Pastor ruled out such an idea during her visit to Panama on January 6.

The Sacyr chief said the amounts of cost overruns in dispute are of a sizeable nature, such as the 500 million dollars the consortium is claiming for basalt. There are others of smaller amounts, between 10 and 50 million dollars, which could be resolved more readily.

Manrique insisted that there was no “conflict” per se with Panama, with the issue at stake being a “time lag” between the liquidity required to finish the project and the resolution of the discrepancies over costs, some of which will go to international arbitration while others will be dealt with within the terms of the contract signed with the PCA.

The project, which involves adding a third set of locks to the 80-kilometer-long waterway, is due to be completed in 2015, eight months behind schedule.

“There are offers on the table,” Manrique said. GUPC on January 7 proposed that the PCA advance the consortium 400 million dollars, with the consortium supplying 100 million dollars in cash flow. PCA had offered 183 million dollars in return for the consortium injecting 100 million and withdrawing its threat to freeze work on the project.

Manrique insisted that Sacyr’s financial solvency “would not be compromised” as a result of the canal project, adding that the builder is “financially solid.”

Sacyr and its partners won the tender for the project with a bid that was one billion dollars below the next lowest offer. That prompted US auction rival Bechtel to say that GUPC’s bid was not enough to even cover the cost of the cement involved, as revealed in the WikiLeaks cables from the US Embassy in Panama.

Manrique insisted the consortium’s bid was not “reckless,” and that the group received the most points for the technical aspect of its bid, which accounted for 55 percent of the valuation of offers. He also said “that no rival at the time made a formal claim” against the awarding of the contract to GUPC.