Early Thursday morning, members of the Grupo Unidos Por El Canal (GUPC) resumed construction after a two-week long strike that threatened the future of one of the largest expansion projects of its kind, ever seen.
The consortium of builders, led by Spain’s Sacyr, released a statement saying that it had resolved all internal concerns and aimed to complete the project as fast as possible: “The restarting of the works is being done in a way that will enable it to reach full pace in the shortest time possible.”
The main debate as to who should reimburse a total of US$1.6 billion will be settled via arbitration.
The Panama Canal Authority (ACP) confirmed that works had resumed, saying that a final deal should be ironed out and signed by both parties in the next three days.
Head of the ACP, Jorge Quijano (right) said “We believe that with the discussion we had last night and the comments made, we can find a path out of this.”
Whether this final deal will involve the conversion of a $400 million bond taken out by the consortium with US insurance company Zurich has not been confirmed.
However, a Reuter’s source has said that Zurich does not wish to put its own money into the project, preferring that the banks associated with the consortium do so. These banks are asking for counter guarantees as each member of GUCP is liable for their own obligations.
Zurich has announced that they are in talks with both parties and comfortable with the amount of exposure that came with being associated with the project as there was limited risk.
It is likely that Spanish government-backed insurers Cesce will convert a $200 million bond to help cover financing issues.
The bond was taken out in 2009, when consortium leaders Sacyr took on the expansion project. This was to act not only as a safety net if the company failed to complete the expansion, but as a counter-guarantee to the Zurich bond.
If Zurich agrees to convert the insurance guarantee into a loan then Cesce must do the same.
Since the announcement that works have restarted, shares have risen in Sacyr by 4.3 percent. Salini Impregilo, another partner in the consortium of builders also rose by 3.2 percent.
With the works now back on track it is expected that the project will be completed by December 2015 at a total cost nearing $7 billion.
Speaking to Reuters, the Wood Mackenzie consultancy said that the total financial impact that the set backs have already had would have a “limited impact, as trade will carry on much as it does now.”
“But further delays threaten the investments of a significant number of groups that are set to benefit from expanded capacity on the waterway.”
