Panama Says Canal May Sign Deal Today to End Builder DisputeEric Sabo
The Panama Canal Authority may sign a contract as soon as today with builders led by Sacyr SA, ending a dispute over expanding the waterway that connects the Atlantic and Pacific oceans.
The contract may be signed today or tomorrow, Roberto Roy, minister for canal affairs, said at a conference in Panama City. The agreement calls for both parties to contribute $100 million each to continue the work, while Zurich Insurance Group AG will offer $400 million to back any additional bank loans for the contractors in a pledge to “jump start” the project, Roy said.
“The deal has basically been agreed to,” Roy said in an interview. “The contractors and the administrator had a final talk yesterday.”
Sacyr, based in Madrid, and its partners had 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. As part of the agreement that was announced last month but still not signed, the locks must be completed by December 2015. That’s a year later than the initial date, which would have coincided with the waterway’s centennial.
At the start of the dispute, the group led by Sacyr had threatened to suspend work over cost overruns that amounted to $1.6 billion, or about half the original budget. As a result of the conflict, Sacyr made a provision that reduced earnings before interest, taxes, depreciation and amortization by 182 million euros in 2013, it said on Feb. 28.
Milan-based Salini Impregilo SpA is among the builders doing the canal work.