The Panama Canal Authority (ACP) has announced that work on the Panama Canal expansion project is expected to continue today.
The decision was made via a telephone conversation between executives of the Canal Authority and of GUCP – a consortium of builders led by Spain’s Sacyr Vallerhermoso.
An agreement has finally been reached in which the ACP will provide the GUCP with US$36.8 million, but only on the grounds that work resume immediately.
This money will be used to cover December invoices and cover any pending payments to suppliers.
Whilst an agreement has been reached, there is no certainty as to whether it is long term. ACP made note that whilst work was expected to restart that “there are still some issues on which an agreement has not been reached.”
The dispute between the ACP and the consortium of builders, which saw work halt more than two weeks ago, concerns the payment of a $1.6 billion overrun in construction costs that neither party will claim responsibility for.
There is still debate as to who will cover the rest of the costs.
One of the key propositions involves the conversion of a $400 million bond that GUCP took out with US insurers, Zurich, and convert this into a loan that will cover some of the costs.
However Zurich are unwilling to shoulder any risk that comes from such a decision, asking that GUPC make themselves liable to repay the debt and shoulder any risks that come with this.
More recently it was suggested that Spanish government-owned insurer Cesce were considering whether to change the status of a $200 million guarantee provided at the beginning of the build.
The guarantee was drawn up in case the GUCP failed to complete the project, and acts as a counter to that of the Zurich bond.
Both parties have allowed 72 hours to finalise these issues.
The expansion of the 50-mile cargo route has now been delayed till December 2015 at a cost of $7 billion.