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 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>
and Italy's Salini Impregilo <SALI.MI>.
"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.
The consortium is at odds with the canal over who will pay for $1.6
billion in unforeseen costs it says it has incurred in part because
of what it says were flawed geological studies done by the canal
authority. The canal denies those claims.
While both parties have agreed to resolve claims through
international arbitration, the consortium still needs immediate cash
to continue its work.
The canal authority has said it is still open to reaching a deal
with the consortium, and two sources said on Thursday that the
consortium was still in contact with the canal in a bid to restart
talks.
The work brings in a quarter of Sacyr's international revenue,
helping it offset a sharp economic downturn at home.
Quijano said the canal would be able to raise the necessary funds
whether or not insurer Zurich pays out all of a $400 million bond
taken out as insurance against the consortium not completing the
project.
Including that bond, the canal authority said it has existing bonds
and guarantees of about $1.2 billion.
"Whatever we don't have we will get," Quijano said. "We're having an
accident here and we expect (Zurich) to come to the plate."
Any delay in the project would be a setback for companies worldwide
eager to move larger ships through the Panama Canal, including
liquefied natural gas (LNG) producers that want to ship from the
U.S. Gulf Coast to Asian markets.
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The project has been mired in disputes since the consortium, which
also includes a Belgian and a Panamanian firm, won a bid to double
the capacity of the near 50-mile (80-km) transoceanic cargo route.
The overall expansion project was originally expected to cost
about $5.25 billion, but the overruns could increase that to nearly
$7 billion.
The canal authority said it has already paid the consortium $2.8
billion of the $3.12 billion it bid for the most important portion
of the project, which is to build a new set of locks.
A canal official familiar with the process said the authority would
not need to turn to a giant construction company if the contract is
rescinded, as 67 percent of the locks portion is already complete.
The consortium has said the canal authority is being "unjust" to
expect it could fully cover the cost overruns, which officials and
diplomats had worried were inevitable after its contract bid
undercut the nearest competitor by $1 billion.
It said it has offered a co-financing proposal including $800
million in new and existing funds, while asking the canal authority
to put in $100 million.
But Quijano said that the consortium had in reality only offered
$100 million. He said the remainder consisted of $300 million in
loans the GUPC had taken out over the past few years and converting
the $400 million Zurich completion bond into backing for another
loan.
A major sticking point in the consortium's proposal called for
extending the moratorium on repaying the canal authority a $784
million advance until as late as the end of arbitration, which
Quijano called unacceptable.
He said he was willing to extend the moratorium, which he has
already delayed for a year so GUPC could fight its claims, until at
least the end of 2015, if not longer.
"That's enough for them to carry on with the work and complete the
work," he said. "We cannot pay for all of GUPC's deficiencies and
... bad decisions made along the line."
Negotiations were further complicated because Impregilo had taken
over the lead from Sacyr, he added.
(With reporting by Jose Elias Rodriguez
and Sonya Dowsett in Madrid and Danilo Masoni; editing by Simon
Gardner and Lisa Shumaker)
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