Panama Canal ready to nix contract if no consortium deal soon

Thu Feb 6, 2014 8:37pm EST
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By Lomi Kriel

PANAMA CITY (Reuters) - The Panama Canal is ready to pull the plug on a Spanish-led consortium's contract to expand the major world shipping route unless the two sides reach a deal quickly amid a spat over massive cost overruns, its administrator said on Thursday.

Jorge Quijano, head of the Panama Canal Authority, told Reuters the canal could itself obtain financing for the $1.5 billion needed to complete the project to build a new set of locks if necessary.

A canal official familiar with the process said if no agreement was reached in a "matter of days," the authority could ask insurer Zurich North America ZURN.VX to terminate the contract with Grupo Unidos Por El Canal, the consortium led by Spain's Sacyr (SCYR.MC: Quote) and Italy's Salini Impregilo (SALI.MI: Quote).

"We have made significant movements in our position to allow them to continue with the work, and if they don't agree, we cannot continue to just wait around," Quijano said in a telephone interview.

He says the project will be completed in 2015 "with or without" the consortium.

Quijano has held general talks with other companies about work still pending on the expansion, but declined to name them.

The multibillion dollar expansion project was plunged into doubt on Wednesday after talks between the canal administrator and a Spanish-led building consortium fell apart and work ground to a halt.

Live web cams of the construction site show trucks sitting idle amid stretches of mud alongside the canal.   Continued...

Panama Canal Administrator Jorge Quijano gestures as he speaks to the media during a break in a private meeting in Panama City January 21, 2014. REUTERS/Carlos Jasso