PANAMA CITY The Panama Canal on Tuesday held talks over a new financing proposal with the Spanish-led consortium in charge of expanding the waterway and its insurer aimed at ensuring work continues on the project, which faces huge cost overruns.
Panama Canal Administrator Jorge Quijano said the consortium, led by Spanish builder Sacyr (SCYR.MC) and which had threatened to halt work on the project this week, had pushed back its deadline to the end of January.
Earlier this month, the consortium had vowed to stop work by January 20 unless the Panama Canal Authority (PCA) agreed to foot the bill for some $1.6 billion in unforeseen additional costs.
The canal is one of the world's most important shipping routes and halting construction on the project would be a setback for companies eager to move larger ships through the waterway such as producers of liquefied natural gas (LNG), who want to ship exports from the U.S. Gulf Coast to Asian markets.
"There is a proposal on the table which the parties have put forward," Quijano told reporters. "It could offer a pretty long-term solution so work can continue."
Following the meeting, Quijano said no deal had been reached but noted that insurer Zurich ZURN.VX in North America was now seeking to play a role in helping resolve the dispute.
"Zurich is right now checking the numbers proposed by the (consortium), but they're looking at the options that they too could participate in this," he said.
The PCA stressed earlier this month Zurich had $600 million in surety bonds for the project that canal officials say could be used to help finish the expansion if necessary.
Quijano said no further talks were planned on Wednesday but that the two sides would stay in touch, with another meeting possible on January 27 or even sooner.
He added the consortium had sent a letter advising the canal authority it would not halt work before at least January 31.
A PCA official said that work at the construction site was running at about 25 percent to 30 percent of capacity.
The PCA said this week it had turned down an offer by the European Commission to mediate the multibillion-dollar dispute. The entire project was due to cost about $5.25 billion, but the overruns could bump that up to nearly $7 billion.
The canal authority said last week it might take over a key part of the waterway's expansion if the consortium in charge of the project makes good on a threat to suspend work.
The consortium, which includes Italy's Salini Impregilo (SALI.MI), Belgium's Jan De Nul and Panama's Constructora Urbana, won a contract in 2009 to build a third set of locks, the main part of the project to double capacity of the near 50-mile transoceanic cargo route.
(Writing by Simon Gardner; Editing by Dave Graham, G Crosse and Lisa Shumaker)