Panama says differences remain with Sacyr group over canal project
Deadline for reaching agreement to finish work on widening waterway expired on Tuesday
The administrator of the Panama Canal Authority (PCA), Jorge Luis Quijano, has said that deep differences remain between the PCA and the GUPC consortium – which is led by Spanish builder Sacyr, and has been contracted to widen the waterway – in their dispute over cost overruns.
In the absence of an agreement, work on the project has been frozen since February 5. In a statement released Tuesday, the PCA said this week was “key” in terms of taking a decision on how to proceed. Tuesday was the new deadline the PCA set for reaching an agreement.
The PCA has not ruled out taking over the project itself, although it has acknowledged that this would mean a delay in finishing it.
Last week, the PCA announced that the two sides had reached an in-principle agreement on a number of issues regarding the renewal of work on the waterway, which involves installing a third set of locks. The Panamanian press reported that talks were due to be renewed on Wednesday.
The possibility of an agreement centers on a proposal submitted weeks ago by Zurich, the main insurer of the project that involved converting a guarantee of 400 million dollars (292 million euros) into a loan to provide the necessary liquidity to finish the job. The PCA and the consortium would also provide a further 100 million dollars (73 million euros) in liquidity. The consortium would be given more time to return advances worth 784 million dollars (572 million euros) made by the PCA to finance the project, which is 72 percent complete.
Quijano said last week that Zurich also needed to come to the negotiating table to seal “certain aspects” of an agreement. Europa Press quoted Zurich sources as saying the insurer feels “comfortable” with its current level of “exposure” to the project because of reinsurance agreements it has entered into. However, the sources also expressed the company’s willingness to carry on talking to the PCA and the GUPC.
The consortium estimates the cost overruns at 1.6 billion dollars (1.2 billion euros). GUPC won the contract with a much lower bid than its rivals in the tender.