(Adds Zurich signing, closing share prices)
By Sonya Dowsett
MADRID, March 14 A consortium led by Spain's
Sacyr has signed a deal to complete work on widening
the 100-year-old Panama Canal, it said on Friday, settling a
long-running dispute over cost overruns that had put the
multi-billion-dollar project in jeopardy.
Insurer Zurich, whose agreement was necessary to
get financial backing for the project, also said later on Friday
that it had signed the deal.
The Grupo Unido por el Canal (GUPC) consortium, which also
includes Italian company Salini Impregilo, said in a
statement that the accord sets a new December 2015 deadline to
complete the project, six months later than estimates given
earlier this year.
"Zurich worked diligently with the Panama Canal Authority
and GUPC to reach an agreement ... and fortunately the two sides
have had a successful negotiation," Zurich said in a statement.
Hold-ups on the engineering project, which involves the
construction of a third set of locks, have left trading nations
worldwide waiting anxiously to start moving a new generation of
large container ships and liquefied gas tankers along the
50-mile shortcut between the Atlantic and Pacific oceans.
Zurich's agreement was the last remaining step needed for
the deal to be wrapped up, said one source with knowledge of the
The dispute centred on $1.6 billion in cost overruns for the
work, which is 70 percent done. The builders and the canal
authority had blamed each other for the additional expense on
the project, which was supposed to cost $3.2 billion.
Sacyr's shares fell 4.4 percent on Friday, one of the main
percentage fallers on the benchmark IBEX index, before
Zurich confirmed it had signed the deal. Traders cited concerns
that without a Zurich signature the agreement was not
Shares in Salini Impregilo dropped 1.2 percent to 4.40
The project accounts for a quarter of Sacyr's international
revenue. The Spanish company declined to comment on Friday.
The terms of the deal as laid out in the consortium's
statement on Friday were in line with the preliminary agreement
reached in February.
The Panama Canal Authority and the consortium will each
contribute $100 million to get the work back on track while the
PCA will extend a moratorium on the refund of advance payments
until 2018, freeing up funds to complete the work, the
Under the terms of the agreement, a $400 million surety bond
from Zurich will be used as backing to obtain additional
funding, the consortium said. The consortium took out the bond
as a required insurance policy in case it did not finish the
Twelve lock gates, under construction in Italy, will be
delivered to Panama by the end of the year. Meanwhile, claims
relating to unexpected costs will be resolved in international
arbitration courts, the consortium said.
The GUPC consortium also includes Belgian firm Jan de Nul
Group and Panama's Constructora Urbana S.A.
(Editing by Anthony Barker)