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Update: Panama Canal Expansion Work Suspended
Feb. 5 (Bloomberg) — The Panama Canal Authority broke off talks about a $1.6 billion cost overrun with the Sacyr SA-led group working to expand the waterway, Sacyr said, pushing its shares as much as 8.4 percent lower.
Sacyr and partners including Salini Impregilo SpA continue to seek a solution to finish the project in 2015, they said in a regulatory filing today in Madrid. The work, which is about 70 percent finished, needs $1.6 billion of additional financing to be completed, they said.
The builders and Panamanian authorities have been negotiating since the start of the year on the overrun, which amounts to about half the original contract price. Sacyr wants Panama to pay and had threatened to halt work on the waterway used for global transport of commodities unless it did so.
The company has since pulled back from its threat to stop the project as Panama said it would seek alternative ways of finishing the expansion.
Sacyr shares fell as much as 8.4 percent, the biggest intraday drop since Jan. 3, and were down 5.3 percent at 3.67 euros as of at 9:55 a.m. in Madrid.
Panama’s ambassador to Spain, Roberto Eduardo Arango, said yesterday the country needed a fallback plan to ensure the project was completed even if talks failed. Panamanian President Ricardo Martinelli vowed on Jan. 22 that the expansion would be finished.
The Sacyr-led group was hired to build locks on both sides of the 80-kilometer (50-mile) waterway, shortening voyages from the U.S. to Asia and potentially reducing transport costs for commodities such as liquefied natural gas.
– Emma Ross-Thomas, Copyright 2014 Bloomberg.
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