Deadline looms as Panama Canal, consortium seek end to cost dispute
By Lomi Kriel and Sonya Dowsett
PANAMA CITY/MADRID (Reuters) - The Panama Canal and a Spanish-led construction consortium expanding the major global waterway discussed options on Tuesday to keep the multibillion-dollar project afloat amid a dispute over costs, but any deal seemed unlikely ahead of a looming deadline.
The disagreement between the two parties over $1.6 billion in cost-overruns and how to maintain financing has already halted work on the project for two weeks and has delayed its projected completion until at least December 2015.
Delays could cost Panama millions of dollars in lost shipping tolls and are a setback for companies worldwide that are eager to move larger ships through the canal, including liquefied natural gas (LNG) producers that want to ship from the U.S. Gulf Coast to Asian markets.
On Wednesday, canal administrator Jorge Quijano set a target of no more than a week to reach a deal to jump-start the project, a deadline that will lapse in the coming hours.
Quijano had previously warned that the canal could terminate the contract with the consortium and push ahead with a third party if a deal proves elusive.
A major sticking point in the negotiations on Tuesday was converting a $400 million bond from insurer Zurich North America into backing for a loan so the consortium can secure a short-term cash injection needed to continue its work, sources familiar with the talks said.
The consortium took out the bond as a required insurance policy in case it did not finish the project. The bond is payable if the project is not completed by the consortium for any reason.
The insurer was ready to provide the loan if shareholders of the consortium, which is led by Spain's Sacyr and Italy's Salini Impregilo and includes a Belgian and a Panamanian company, shoulder the risk and are liable for repaying the loan, one source said. Continued...