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Panama Canal Says Sacyr-Led Group Will Restart Expansion

Feb. 20 (Bloomberg) -- A group led by Sacyr SA plans to restart work on the Panama Canal expansion project today after it paralyzed construction for almost two weeks in a dispute over $1.6 billion in cost overruns. Sacyr’s shares rose 4.2 percent.

The waterway’s authority said it agreed to pay the builders, including Milan-based Salini Impregilo SpA, $36.8 million in back pay once work begins on the third set of locks originally budgeted at $3.1 billion. Talks will continue for 72 hours to determine delivery dates for the new gates, a construction schedule and other aspects of the $5.25 billion project, the Panama Canal Authority said.

“The decision was made today during telephone conversations, but there are still some issues on which an agreement has not been reached,” the canal authority said in an e-mailed statement late yesterday. Sacyr agrees that the authority’s statement is accurate and declined to comment further, a company spokeswoman said in an e-mail.

“This a positive gesture by the Panama Canal Authority,” Pablo Ortiz de Juan, an analyst at Interdin in Madrid, said by phone today. “If the payment is made and the work resumes, I’d like to think we’re close. What remains is the commitment of the public insurers.”

The builders suspended work to expand the canal on Feb. 7, making good on a threat issued in December, as they demanded help from the waterway’s management to finance about half the initial budget to build a new set of locks, which will allow the canal to accommodate larger ships and help reduce transport costs for commodities such as liquefied natural gas.

The expansion project was originally expected to be finished by the end of 2014, on the waterway’s centennial. The completion date has since been pushed back almost a year, according to the most recent projections by the Panama Canal Authority.

Sacyr shares traded at 4.11 euros as of 9:44 a.m. in Madrid, extending the gain this year to 9.1 percent. Salini Impregilo rose 2.1 percent in Milan.

To contact the reporter on this story: Eric Sabo in Panama City at esabo1@bloomberg.net

To contact the editor responsible for this story: Bill Faries at wfaries@bloomberg.net

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