|
 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.
"The Panama Canal Authority reports that despite efforts to agree
with (consortium) Grupos Unidos por el Canal to resume work on the
new locks project, positions between the parties remain apart," the
canal authority said in a statement.
"Although last week the parties seem to have come to an agreement on
certain components during the talks, there were serious
disagreements at the time of putting it in writing," it added,
saying the parties agreed to resume talks on Wednesday morning.
Canal administrator Jorge Quijano last Wednesday 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 <SCYR.MC> and Italy's
Salini Impregilo <SALI.MI> and includes a Belgian and a Panamanian
company, shoulder the risk and are liable for repaying the loan, one
source said.
But the consortium's chief executive officers want the insurer to be
the primary risk-holder, which Zurich considers unacceptable, one
source said.
[to top of second column] |
A key issue centered on the share of the risk the Italian and
Spanish governments would take, one source said.
Spain's majority state-owned insurer Cesce, set up to financially
aid international expansion of Spanish companies, provided a
guarantee for the Sacyr bid in 2009.
Although Cesce has declined to comment on how much was guaranteed, a
source with knowledge of the operation said it was for $200 million
and helped underwrite the $400 million Zurich bond.
Officials at Zurich <ZURN.VX> were not immediately available for
comment. A spokesman for Sacyr declined to comment.
The parties also continued to debate a weekend proposal by the canal
authority that would allow work to restart immediately, with it and
the consortium each contributing $100 million.
But a source familiar with the negotiations said the consortium had
not yet accepted the deal and wanted to wait on an answer from
Zurich.
The overall expansion project, of which the consortium is building
the lion's share, was originally expected to cost about $5.25
billion, but the overruns could increase that to nearly $7 billion.
(Additional reporting by Jose Elias
Rodriguez and Danilo Masoni; editing by Simon Gardner, Ken Wills and
Lisa Shumaker)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright 2014 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
 |
