Work picks up on Panama Canal expansion as new bond deal reached

Work picks up on Panama Canal expansion as new bond deal reached

CONSTRUCTION of the crucial third set of locks to expand the Panama Canal has resumed after new cash infusions and a restructured performance bond was agreed to in a way that diffused a dispute over US$1.6 billion in cost overruns.

“The plan is totally feasible. But I′m always very cautious because the relationship with this contractor has not been good,” said Panama Canal Authority (ACP) administrator Jorge Quijano.

Speaking to reporters during a conference call, he said the deal reached will enable the Spanish-led consortium responsible for the construction work to quickly exceed previous production levels, reported the American Shipper.

The ACP hopes to make up ground lost during the bitter two-month standoff with contractor Grupo Unidos por el Canal (GUPC), which sought reimbursement for the cost overruns that it claimed wiped out cash reserves.

According to the contractor, the lack of adequate funding made it difficult to pay contractors and suppliers building the locks on the waterway′s Atlantic and Pacific entrances.

The international consortium since December has laid off workers and scaled back work to a quarter of the normal pace, until finally halting construction three weeks ago when the negotiations came to a standstill.

The latest round of delays will postpone the project′s completion until December 2015, despite vessel operators making preparations in advance for larger ships to transit the canal. Completion was originally scheduled for October 2014.

Mr Quijano was quoted as saying, “I′m not concerned at all with how we are perceived by our customers because we have been very transparent.

“The comments that I′ve received have been very supportive. We are very conscious of how we impact others because we are part of the maritime transportation chain.”

He reiterated that ACP did not give in to GUPC′s demands for more money, and that the agreement simply lays out the schedule for proceeding with the work and provides financing assistance while both sides try to resolve billing liability on a separate track.

The combined delays have added $300 million to the cost of the $5.2 billion project, he said. GUPC is already on the hook for $54 million in penalties for not completing the locks by the October 2014 due date.

Mr Quijano said ACP will have to put in its own claims through the dispute resolution process for the lost toll revenue caused by the delays.