"The protocol provides for the development of discussions about complete solutions, including a proposal involving co-financing from ACP, GUPC and insurer Zurich, guarantor of the project,” the consortium said in a statement last week.
Meetings are planned this week to find a long-term co-financing which would enable GUPC to achieve completion of the works. In case no satisfactory conclusion can be agreed upon, the ACP has repeatedly said it would be ready to assume the continuation of the construction of the locks that have reached 65% of completion, while the total expansion programme is 72.3% complete.
Zurich has a $600m guarantee on the work that was issued in 2009 when GUPC won the bid for the contract with a $3.1bn proposal.
Spain’s Sacyr Vallehermoso , which is the leader in the consortium and joined by Italy’s Salini Impregilo, Belgium-based Jan de Nul and Panamanian CUSA, and its partners have filed a claim for $1.6bn in additional funding due to cost overruns. The ACP has refused to recognise the claim, but said it would pay the claims approved by the independent Dispute Arbitration Board (DAB) the last instance in terms of contract dispute which will meet next March to consider a $586m claim presented by GUPC.
The ACP has repeatedly said it will not negotiate out of the contract the cost of the project. The Canal Authority so far has paid GUPC $2.83bn, with $784m in advances to be repaid and $160m in approved costs overruns.
The consortium has reduced the pace of construction over the last two months by 70%, which would constitute a violation of the contract. Panamanian Minister of Labour Alma Cortés reported last week that "the works at the locks construction site maintain more than 90% of stoppage."
In discussion is a financial plan that would conclude the building of third set of locks as follows: Zurich would provide a $400m guarantee bonus, the ACP would yield $100m in advance payments, and the consortium would provide another $100m and $250m which could be disbursed once GUPC advances the works. The four contributions totalling $850m that GUPC would have available to finish building the new locks after a long and complex process of negotiation. A spokesman for GUPC said the deal was insufficient to fix the consortium’s alleged liquidity problems and insisted that GUPC requires $1.6bn to complete the work.
A Canal insider talking to Seatrade Global on condition of anonymity said that several options are considered, with Sacyr eager to continue the works. Unfortunately, there are strong disagreements amongst the members of the consortium since the beginning of the construction, which may endanger finding a financial solution that can be approved by all the parties.
However, even if this week’s negotiations fail construction will continues, but the process of the ACP bringing in another contractor to take over would result in further delays.
According to the canal insider, if the ACP and GUPC reach a financial agreement, the consortium will have to step up the pace of construction works again and taking advantage of Panama dry season that last until May. Considering any of the other options, he says, there would result in an estimated delay of up to four months, which would postpone commercial opening yet further.
Another delay would affect the shipping industry with revenue foregone since both shipowners and cargo owners would not be able to benefit from economies of scale provided by the transit of their post-panamax vessels through the Panama Canal. It was also impact ports on the US East Coast that have invested in new handling facilities to cater to these new larger vessels.
Copyright © 2024. All rights reserved. Seatrade, a trading name of Informa Markets (UK) Limited. Add Seatrade Maritime News to your Google News feed.
