Finalised deal to be signed by Friday whereby both the ACP and GUCP will invest $100 million to immediately resume construction
Further expenses to be concluded via arbitration
The Panama Canal Authority (ACP) announced that a deal should be signed within the coming week in regards to the completion of the Panama Canal expansion project.
The project resumed on Friday February 21st after a breakdown in communication as to who should pay US$1.6 billion in cost overruns to complete the project.
Both the ACP and the Grupo Unidos Por El Canal (GUCP) denied responsibility as to who would be financially responsible for the overruns, and as a result, construction grinded to an immediate halt.
Work continued after a preliminary deal was made last Thursday with a final conclusive arrangement to be made by the end of the week.
As part of the deal, ACP agreed that the consortium use a $400 million surety bond, taken out as an insurance policy if the policy should fail, with Zurich North America.
The conversion of the bond to a loan is expected to take around six weeks to arrange.
Both sides have therefore agreed to inject $100 million by Friday, so that construction may resume immediately.
The parties have agreed that the remaining $1.6 billion in costs be decided through international arbitration.
With the deal nearly set in stone, head of the ACP, Jose Quijano still remained hesitant to celebrate.
Speaking to reporters in Panama City he stated that the ACP was still cautious “as the relationship has not been very good with this contractor.”
“We will closely supervise whatever is happening in the field. All of the monies…will go directly into the project.”
He re-iterated that this money “cannot be siphoned out to the shareholders.”
He also made note that ACP were still not afraid to sever ties and continue on their own, should the consortium fail to comply with the agreement – “We remain prepared for another option.”
This includes a series of safeguards which would result in the immediate payback of all advances if the consortium fails to hold their side of the deal.
The Panama Canal Expansion, originally set for a 2014 completion date has now been pushed back to December 2015, at a total cost of $7 billion.
The Canal is expected to be open for commercial use by January 2016.