Although Quijano says the Canal authority is still awaiting a formal comprehensive report from Grupo Unidos por el Canal (GUPC), the consortium building the third set of locks, on the root-cause of the leaks and a chronology of repairs, he remains committed to achieve commercial operations during Q2 2016.
Some severe water leakages appeared mid-August in the concrete sill of one of the lockheads separating the lower andmiddle chamber of the new Cocoli locks on the Pacific end of the canal.
“We would like to get from GUPC: These are the problems, their overall correction schemes and timeframe to correct them. Nearly 45 days have passed and we have neither received the full report of their findings nor a revised time-line giving us precise information on how long it would take to repair the cracks and if such works would modify the chronology of the forthcoming acceptance tests therefore reflecting a change in the delivery date of the locks if necessary,” he says. “Nevertheless there was a leeway of about two months [after December 15, 2015] in our estimations that would give us an additional buffer-time leading us to Q2 2016.”
GUPC and Montgomery Watzon Harza, the firm in charge of designing the new locks, are currently working on a strategy to repair the cracks for the sill that has developed the leaks. Both GUPC and Panama Canal Authority (ACP) engineers meet regularly on a weekly basis to assess the situation.
According to sources closed to GUPC and the ACP, the problem appears to come from the design. Since this is a design-build contract the contractor is responsible for the design as well as the construction. “According to their latest correspondence on the matter, there is not sufficient steel reinforcement in the sill area to adequately absorb the forces resulting from the load conditions that resulted from the stresses the sill was subjected to during the extreme condition testing,” explains Quijano.
The solution thus far presented is to reinforce the existing structures and seal the sill by inserting special diameter and tensile strength steel [steel 18, grade 80] that will strengthen the inner surface so it can take the required stress test. “Furthermore we have been informed by GUPC that they will also reinforce with additional steel three [Sills 1, 2 and 3] of the four sills in both the Atlantic and Pacific locks, although they have not failed, as a precautionary measure,” explains Quijano. The locks chambers will need to be emptied to perform the works. How long all this will take is still not clear. “GUPC has informed ACP that they will make every effort to stay within the present schedule for commercial operations. They recently began the reinforcement of sill 1 with material and equipment they have on hand. They have also informed us that the additional equipment and materials for the reinforcement of the other sills have been ordered and are on its way,” he adds.
The Canal administrator had returned the day before from a 10-day road show in the US and UK where Canal officials presented their proposal to possible investors of the Canal’s first ever bond issue. The $450m 20-year closed Thursday September 24, with a coupon of 4.950% coupon [2.2% spread over Treasury] and with repayment in four equal installments in the last two years 2034 and 2035. The issue was to finance the completion of the $570m third bridge over the Canal on the Atlantic side whose construction has reached 35% progress and should be completed by mid-2017.
This transaction, managed by Bank of America Merrill Lynch, was backed by credit ratings to investment grade A2 by Moody 's, A- by Standard and Poor's and A by Fitch Ratings, which are above those that Panama`s sovereign rating.
“We decided to go to the market for the first time because we could get attractive terms as it allowed for an amortisation schedule that would fit our current expansion programme debt repayment timetable,” explains Quijano. The issuance, which was oversubscribed at $2bn, came a few days after the Fed announced it would not increase the rates. “We were pleased to see that the rating agencies and the international capital markets have clearly recognised the financial strength, independence and growth potential [of the ACP]."
To finance the Canal expansion the ACP obtained a 20-year loan for $2.3bn from five development banks (IADB, JBIC, CAF, IFC and EIB) with a grace period of 10 years until 2019, during which only interest is paid.
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