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 The governments of Spain and Panama distanced themselves from the
dispute, saying it should be resolved by the Panama Canal Authority
and the consortium led by Spanish construction company Sacyr <SCYR.MC>.
Halting work on the $5.25 billion project to widen and deepen the
canal would be a setback for companies eager to increase cargo
volumes passing through the century-old waterway, especially the
first-ever liquefied natural gas (LNG) exports from the U.S. Gulf
coast to Asian markets as well as other bulk commodity shipments.
"We are talking about some additional funding that they would have
to put up and we could also provide," Jorge Quijano, the head of the
Panama Canal Authority which administers the waterway, told
reporters after meeting with visiting Spanish public works minister,
Ana Pastor, who is mediating.
"We have set out what we can do to contribute, as long as they also
contribute," he added.
There was no immediate word from building consortium Grupo Unidos
por el Canal (GUPC) on the proposal.
Earlier on Monday, Spain's ambassador to Panama, Jesus Silva, said
earlier his government would provide no financial help to Sacyr in
sorting out the row overshadowing one of the world's most important
maritime cargo routes.
Last week, Panamanian President Ricardo Martinelli accused the
consortium of "great irresponsibility" when it threatened to suspend
work on January 20 if the Panama Canal Authority did not pay for big
cost overruns.
The GUPC also includes Italy's Salini Impregilo <SALI.MI>, Belgium's
Jan De Nul and Panama's Constructora Urbana.
Arguing that the project to build a third set of locks for the canal
had suffered unforeseen setbacks, the GUPC said last week it had
faced $1.6 billion in added costs. It blamed the Panama Canal
Authority for carrying out flawed studies of the geological terrain.
Martinelli had earlier turned on Spain and Italy, saying their
governments had given him assurances that they would finish the $3.2
billion project to build the locks, prompting Pastor to fly to
Panama to seek an end to the impasse.
On Monday, both he and Pastor said their governments would stay out
of the spat.
"The canal authority and the consortium need to resolve all their
problems between themselves," Martinelli said after meeting with
Pastor. "We are sure that the meetings being held will resolve any
conflict."
"What the Panamanian government and the government of Spain want
most, what everyone wants, is for the Panama Canal expansion to be
finished," he added.
Pastor said she viewed the spat as "a problem between a private
entity and an independent entity," saying she was trying to help
make relations fluid to help the parties reach a deal.
If the parties fail to reach a middle ground to split the difference
over the cost overruns, the project could potentially be offered up
to other companies.
THIRD PARTY?
On Sunday, the PCA maintained a firm stance, again rejecting the
GUPC's arguments on the overruns, and referred the consortium to the
arbitration panels the two sides agreed on when the contract was
signed.
Quijano told Spanish newspaper El Pais that the two-page letter the
GUPC had submitted last week did not justify its demands and that
the consortium would need to provide more detailed information to
make a viable case.
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If work on the project did stop, the authority could take steps to
ensure it was completed regardless, "be it by a third party or by
the PCA," Quijano told the paper.
Sacyr won the canal contract in 2009 with an offer that was
considerably lower than that of at least one rival, as well as below
the $3.48 billion reference set by the PCA.
Less than six months later, Martinelli, Panamanian Vice President
Juan Carlos Varela and other top officials were already worried
about how the project was progressing, according to U.S. diplomatic
cables published by Wikileaks.
The canal expansion has been one of the top priorities for the
government of Martinelli, whose term ends mid-year.
Sacyr, whose debts at the end of September were three times its
market capitalization, has also staked a lot on the canal expansion.
The company made 55 percent of its revenue outside Spain in the
first nine months of 2013, and Panama contributed 25 percent of its
1.3 billion euros ($1.78 billion) in international sales, according
to its 2013 nine-month earnings statement.
Sacyr shares closed up 6.01 percent to 3.387 euros per share on
Monday, in heavy volume of 12 million shares, but are still down
from their level of 3.767 euros per share at the close of trade
December 31, before the consortium announced its threat to stop work
on the project.
The Panama Canal dispute has put a spotlight on another project in
the works in Central America, a $40 billion canal planned in
Nicaragua, which is also trying to cash in on the North American
energy boom.
In June last year, Nicaragua granted a 50-year concession to the
Hong Kong-based HKND Group to design, build and manage a canal aimed
at giant oil and gas-bearing supertankers, many heading from the
United States to Asia, that will not fit through the Panama Canal
even post expansion.
HKND is currently conducting feasibility studies and construction on
the project, viewed by many with skepticism, is not set to begin
until at least January 2015.
Manuel Coronel Kautz, the head of the Nicaragua Canal authority,
told Reuters on Monday Panama's impasse would not affect its own
project timetable.
"What's going on in Panama is totally off our radar," he said. "The
decisions to construct the Nicaragua canal were based on the
perspective of serving the vessels that can't pass through the
Panama canal."
(Additional reporting by David Adams in
Miami, Fiona Ortiz in Madrid and Gabriel Stargardter and Julia
Symmes Cobb in Mexico City; writing by Dave Graham and Simon
Gardner; editing by Nick Zieminski and David Gregorio)
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