The Panama Canal Authority said it agreed with a group of companies led by Sacyr SA (SCYR) to end a budget dispute and complete the expansion of the waterway linking the Atlantic and Pacific Oceans by the end of next year.
Under the “conceptual” deal, which still needs to be signed, the canal authority and the group of companies will each provide $100 million to enable work to resume at its normal pace. The canal won’t pay the companies’ claims for cost overruns, while it may extend a moratorium for the repayment of advances until 2018, the authority said in an e-mailed statement late yesterday in Panama.
The two sides reached an outline deal on Feb. 12 to end the dispute over $1.6 billion of extra costs, even as the canal authority said it continued to explore alternatives to getting the expansion work finished. Madrid-based Sacyr and its partners have been in talks since the start of the year over the project to build a new set of locks, which would allow the canal to accommodate larger ships and help reduce transport costs for commodities such as liquefied natural gas.
As part of the agreement announced late yesterday, the locks must be completed by December 2015, a year later than the initial completion date, which was originally set to coincide with the waterway’s centennial. A set of lock gates that’s now in Italy must be delivered to Panama by December, the authority said in the statement. A $400 million bond may be released to insurer Zurich North America to obtain financing to complete the work, the authority said, without giving more details.
Indebted Spanish builders are increasingly reliant on foreign projects amid public-works spending cuts and a real-estate market struggling to absorb surplus homes. More than half of Sacyr’s revenue comes from foreign markets, and 25 percent of its 1.32 billion euros ($1.8 billion) of nine-month international revenue came from Panama, according to the company’s latest earnings report. Sacyr is due to report full-year earnings today and will hold a conference call at 1:30 p.m. in Madrid.
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