Panama Canal, consortium make new proposals to rescue expansion

PANAMA CITY/MADRID Fri Feb 7, 2014 8:38pm EST

A man walks between cranes during a tour organized by the Panama Canal authorities of the Panama Canal Expansion project construction site on the Pacific side in Panama City February 5, 2014. REUTERS/Carlos Jasso

A man walks between cranes during a tour organized by the Panama Canal authorities of the Panama Canal Expansion project construction site on the Pacific side in Panama City February 5, 2014.

Credit: Reuters/Carlos Jasso

PANAMA CITY/MADRID (Reuters) - The companies working to widen the Panama Canal and the waterway's administrator on Friday each made new proposals aimed at reviving the multibillion dollar project, after talks broke down this week amid a cost spat and work ground to a halt.

Grupo Unidos Por El Canal (GUPC), led by Spanish builder Sacyr (SCYR.MC), said it was pushing for a settlement with the Panama Canal Authority (PCA) to resume the work, which would double the capacity of the century-old waterway.

The widened canal would allow bigger ships to ferry cargo such as grains, chemical products and vehicles between the Atlantic and the Pacific oceans.

The consortium said its proposal took into account the concerns of the canal authority "while providing the funding necessary to finish the third set of locks."

It declined to comment on the details of the proposal it sent on Thursday to the PCA.

The Canal Authority said it had sent the consortium a counterproposal based "on the parties contributing financial resources to resume work as soon as possible."

Its proposal does not increase the contract price or accept any of the consortium's claims. It also sets specific dates for the delivery of a new set of lock gates and completion of the works, and would extend a moratorium on repayment of advances "to the extent that the GUPC meets the required delivery schedule".

The consortium's request for an extension to a moratorium on repaying a $784 million advance until the end of arbitration, which is aimed at settling a dispute over $1.6 billion in cost overruns, has been a major sticking point.

GUPC wants to delay the repayment to free up funds to finish the project.

Delays to a 2015 completion deadline could cost Panama's government millions of dollars in toll revenue.

The PCA's head, Jorge Quijano, told Reuters in an interview on Thursday that the Canal was ready to pull the plug on the contract unless a deal is reached quickly.

He said he had held general talks with other companies about the work pending on the expansion, but declined to name them.

Multilateral lenders to the project toured the site on Friday and also received a presentation from the canal authority that included details of the works stoppage by the consortium.

The canal authority has disbursed the $2.3 billion loaned by the group of development banks for the project.

If the talks fail, the Canal could ask insurer Zurich North America (ZURN.VX) to terminate the contract with GUPC, which also includes Italy's Salini Impregilo (SALI.MI), Jan De Nul from Belgium and Panama's Constructura Urbana (CUSA), a canal official familiar with the process said.

(Additional reporting by Sonya Dowsett and Jose Rodriguez; Editing by Elinor Comlay, Simon Gardner and Lisa Shumaker)

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