Panama Canal row could cause three year delay

Salini Impreglio wades into row with Panama Canal Authority

NEWS, Projects, Costs, Panama Canal, Panama Canal Authority, Row, Sacyr, Salini Impregilo

Italian builder Salini Impregilo has warned the Panama Canal Authority (PCA) that a failure to find a solution to the current financial wrangling could delay the development by up to three years.

For the past week, the PCA has been fighting with the consortium led by Spanish builder Sacyr over cost overruns in the plan to install a third set of locks for one of the world's most important cargo routes.

Impregilo said it had put forward two alternative solutions that involved the authority paying $1bn to the consortium, known as Grupo Unidos por el Canal (GUPC), to complete the work.

But that announcement from Italy prompted an immediate rebuff from the head of the PCA, Jorge Quijano.

The $1bn payment "is impossible. It is outside the contract," Quijano told reporters in Panama City.

The consortium had threatened to suspend work on the massive infrastructure project by 20 January unless the PCA paid for $1.6bn in cost overruns. The authority has rejected that demand but has said it is willing to consider detailed claims.

Quijano said the PCA had a plan ready to bring in a third party to finish the expansion if no deal is reached with the consortium to keep the project running in the weeks ahead.

But a statement from Impreglio said: "There is no alternative to honouring the contract and the law. PCA still has at its disposal hundreds of millions of dollars from the financial plan for contingencies and unforeseen events, which it has not yet used. Now is the time to do so."

The project was originally expected to cost about $5.25bn, but the overruns could raise it to near $7bn.

"The PCA’s threat to put in place the so-called Plan B- that is, to terminate the contract with the consortium and entrust the implementation of works to others- is not only illegal and against the terms of the contract, but it is also against the interests of the State of Panama and squanders the money of Panamanian citizens," the statement added.

"The alternative to the completion of the works by the current consortium would result in a delay of at least three years, the expected time for the construction of a new set of gates by any new contractor, even if it were ever possible to replace the consortium without further delays to the civil works."

In 2007, work began on the expansion, which will create a new lane of traffic along the canal and double its capacity. The overall project is 72% complete.

Should the sides fail to reach an agreement, the issue would pass to the international arbitrator, which is based in Miami.

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