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Panama Canal reach agreement with GUPC to finish expansion

Panama Canal reach agreement with GUPC to finish expansion
The Panama Canal Authority (ACP) announced Thursday that it had closed negotiations with the consortium Grupo Unidos Por el Canal (GUPC) leading to a conceptual agreement subject to documentation, revision and signature by both parties.

“The conceptual agreement falls within the terms of the contract for the design and construction of the third set of locks and does not include any payment for claims,” said the ACP in a statement.  

According to Canal authorities, GUPC’s claims must remain within the contractual mechanisms, and should be processed as they had been before.  In other words, the ACP does not exclude claims but GUPC will have to respect the procedures and if rejected, go to the last instance and independent Dispute Arbitration Board (DAB).

“The contract price is maintained and is not modified by this agreement,” ACP said. 

“The conceptual agreement provides that the construction of the third set of locks is completed by December 2015; the 12 locks gates being built at Cimolai, in Italy, must be in Panama by December 2014 and transported by staggered shipments; the “Performance Bond” for $400m may only be released to Zurich North America, to obtain financing to complete the work; GUPC will pay $100m and the ACP will advance $100m, which will enable works to regain a normal pace in March and the moratorium for the repayment of advances [made by the ACP to GUPC] may be extended until 2018, subject to fulfilment of certain milestones and other conditions.

"We have reached a conceptual agreement that protects the interests of the Panama Canal, within the terms of the contract and respecting our position," said Panama Canal administrator Jorge L. Quijano. "The agreement is under review and pending signature; however, our commitment to Panama and our customers has been to inform these recent developments,” he added.

Quijano said that the third set of locks and the major contract of the waterway expansion “will be completed within the terms of the contract, as requested from the very first day," it is not clear yet when the agreement will be signed and if it will be sufficient to avoid eventual other threats by the consortium in charge of building the locks.  GUPC is formed by Spain’s Sacyr Vallehermoso, Italy’s Salini-Impregilo, Belgium-based Jan de Nul and the Panamanian company CUSA.

In December, the consortium began to slow down the works which reached only 25% by January and threating to stop all construction works if the ACP did not pay $1.6bn in costs overruns it presented but did not justify. On 5 February GUPC carried out its threat to stop all works. Works resumed only 21 February at the same time and on conditions that the two sides began negotiating the terms of a “long-term agreement”.