Panama Canal Expansion Nearly Halts Over Payment Dispute
The construction of a third set of Panama Canal locks has nearly completely halted due to an on-going dispute over a cost overrun, according to a Panama Canal Authority (ACP) statement released on Feb. 5 (here). The consortium commissioned to complete the project, Grupo Unidos por el Canal (GUPC), said ACP abandoned negotiations in a Feb. 5 statement. The two sides have been meeting periodically to resolve the dispute since GUPC threatened to stop construction in late December (see 14012126). Failure to reach an agreement may delay completion by three to five years, said GUPC, citing an estimate by project insurer Zurich.
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“The circumstances require a balanced solution, reached in good faith, to pre-finance the $1.6 billion in costs necessary to complete the project, and separately provide time for international arbitration proceedings to allocate the ultimate liability for those costs under the Contract and applicable law,” said the GUPC statement. “To date, ACP has agreed to zero payments for the unforeseen circumstances affecting the project. GUPC also has reiterated the importance of prompt payment by ACP of a pending invoice for $50 million to facilitate additional payments for subcontractors and workers. ACP instead has been talking about a mysterious ‘Plan B.’” Led by the Spanish building company Sacyr, GUPC also includes Salini-Impregilo of Italy, Jan De Nul of Belgium and Constructora Urbana and SA (CUSA) of Panama. ACP officials remain willing to broker a “reasonable resolution” that is in the bounds of the contract, said the ACP statement.
“The Canal Administrator, Jorge Quijano, stated that ACP continues to try to find a solution, but stressed that the contractor must resume normal activity which is especially crucial during the dry season in Panama,” said ACP in its statement. The canal currently allows the passage of vessels that can carry up to 5,000 twenty-foot equivalent units (TEUs), but the expansion will make Post-Panamax vessels able to transit with up to 13,000 TEUs, the ACP says (see 14010810).
Email ITTNews@warren-news.com for a copy of the GUPC press release.