Sacyr SA pledged to complete its contract to expand the Panama Canal, edging back from a threat to suspend the project if the waterway’s authority didn’t offer compensation for unexpected costs.
“We are only contemplating the scenario of reaching an agreement,” Sacyr Chairman Manuel Manrique told reporters at company headquarters in Madrid yesterday. “The work will be completed. That is a commitment we will fulfill.”
Sacyr and Italian partner Salini Impregilo SpA threatened on Dec. 31 to halt work expanding the waterway if additional costs amounting to $1.6 billion -- about half the size of the initial contract -- weren’t met. Government officials have been trying to broker a deal, with Panamanian authorities suggesting they could get another builder to finish the work, and the companies have since scaled back their demands.
As Spain’s economy struggles to emerge from a five-year slump and the government continues to cut spending on public works, indebted Spanish builders are dependent on foreign projects for revenue. More than half of Sacyr’s revenue comes from abroad, and 25 percent of its nine-month international revenue came from Panama, according to the company’s latest earnings report.
Shares in Sacyr, which fell as much as 19 percent the day the suspension threat was announced, declined 1.2 percent at 12:33 p.m. in Madrid, valuing the company at 1.68 billion euros ($2.3 billion). Salini Impregilo fell 1.1 percent in Milan.
The Sacyr-led group is due to build locks on both sides of the 80-kilometer (50-mile) waterway, shortening voyages from the U.S. to Asia and potentially reducing transport costs for commodities such as liquefied natural gas. Even before the threat to stop work in 21 days if demands weren’t met, delays have pushed back the initial 2014 completion date to 2015.
Manrique said yesterday the construction would be finished next year, as he works toward an agreement. The group of companies has already invested $280 million to cover the additional costs of the project, which is almost 70 percent complete, he said.