Panama Canal seeks billions this year

PANAMA CITY (Reuters) - The Panama Canal Authority will seek $2.3 billion in financing before the end of the year to pay for part of the biggest-ever expansion of the famous waterway.

The canal's administrator, Alberto Aleman Zubieta, told the Latin America Investment Summit on Tuesday that it is in talks with banks to pull a package together for a major part of the expansion that will cost $5.25 billion in total.

"We are looking at about $2.3 billion in financing for this project," Aleman said. "We are negotiating at this time with the banks to achieve the best package possible for the authority."

Aleman said the authority was also in talks with international lending institutions and that the financing would be a combined package with the private sector. Asked when he wanted to see it ready, he said: "The end of this year."

Aleman was bullish on the prospects of securing financing despite the ongoing U.S. credit crisis and troubles at some of Europe's biggest banks.

"The canal (has) very good credit, now there is a flight to quality projects and the canal is one of those projects."

He also said the rising cost of labor and raw materials in Panama caused by the country's sustained real estate boom would not cause the Authority to revise its cost estimates for the expansion in the short term and that contracts already awarded have come within the budget estimates.

The canal is a short cut between the Pacific and Atlantic oceans and saves ships a long haul around the southern tip of South America.

The centerpiece of the project will be the creation of a third set of locks that will allow the canal to handle ships carrying up to 12,000 shipping containers at a time, which do not fit in the canal today.

Four international consortia have been short-listed for the locks project, which will be awarded in October, including many of the world's largest engineering firms.

The expansion began in September 2007 and is scheduled to be completed in time for the centenary of the canal's opening in 2014.

Earlier on Tuesday, the canal awarded the latest contract in the project to Belgian firm Dredging International to carry out excavation work at the Pacific entrance of the canal. Dredging International bid $177 million for the project.

(For summit blog: summitnotebook.reuters.com/)

(Writing by Chris Aspin; Editing by Gary Hill)