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UPDATE 1-Cost overrun clash endangers huge Panama Canal extension project
January 1, 2014 / 11:25 PM / 4 years ago

UPDATE 1-Cost overrun clash endangers huge Panama Canal extension project

MADRID, Jan 1 (Reuters) - Work on the massive Panama Canal extension project may be suspended after a clash between the builders and the Panamanian authorities about $1.6 billion in cost overruns, according to a statement from the building consortium on Wednesday.

The cost overruns on the $3.2 billion canal extension, one of the world’s largest construction contracts, should be met by the Panama Canal Authority (PCA) under the terms of the contract, argued the consortium comprised of Spain’s Sacyr, Italy’s Impregilo, Belgium’s Jan De Nul and Panama’s Constructora Urbana, SA.

However, the PCA rejected the complaints by the consortium, known as Grupo Unidos por el Canal.

“Regardless of what kind of pressure is put on the PCA, we will maintain our demand that Grupo Unidos por el Canal respects the contract that they themselves accepted and signed,” the head of the PCA, Jorge Quijano, said in a statement.

The PCA added that if the consortium was not capable of honoring its agreements, the authority would initiate “mechanisms from the contract that would allow the work to be completed.” It did not explain what those would be.

The consortium said the overruns were the result of unforeseen events during construction, something which was “normal” in these kind of projects.

The group said it believes the PCA had “failed in its obligations as set out in the contract as well as in the inexactitude of the information provided to the consortium to carry out the project.”

Under the terms agreed, the PCA has another 21 days to comply with the requirements, it added, during which work will continue.

No one at Sacyr was immediately available for further comment.

Problems with the Panama project come at a bad time for Sacyr, whose total net debt stood at 6.9 billion euros at the end of September, more than three times its market capitalisation.

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