The Panama Canal Authority on Tuesday offered a compromise proposal to the contractor building giant locks for a third entrance to the waterway in hopes of forestalling a threatened suspension of work over disputed reimbursements for cost overruns. But GUPC responded with a counter offer seeking more money.
The ACP said it would advance Grupo Unidos por el Canal (GUPC), the international consortium responsible for the $3.2 billion lock project, an additional $100 million to help with its cash flow and keep the project moving. Repayment of the advance must be guaranteed by a letter of credit from a bank.
To date, the ACP has provided more than $700 million in advances to GUPC for the project. GUPC is scheduled to repay $83 million in advances, but the APC also said it is willing to extend the deadline by two months.
In exchange, the ACP said GUPC must commit $100 million of its own funds to pay subcontractors and suppliers, and ship to Panama the four lock gates constructed in Italy for which the ACP has already paid 75 percent of the cost. The $283 million total must be placed in an account to pay the subcontractors, with payments made against delivery milestones outlined in the contract. The lock gates, for example, were supposed to be delivered in November.
Construction has slowed in recent weeks; GUPC has released some workers to preserve cash. Last week, the group threatened to stop work on Jan. 19 if its claims for $1.6 billion in unforeseen expenditures are not met, setting of a diplomatic effort between Spain and Panama to resolve the issue. Spanish Public Works Minister Ana Pastor is in Panama trying to mediate the dispute.
Sacyr, the lead company in the consortium, is based in Spain. It was one of Spain's largest construction companies, but suffered financially by being overextended when the construction bubble in Spain burst six years ago.
The ACP, which has remained adamant that GUPC's accusations of non-payment of expenses are without merit, said GUPC must rehire laid off workers and cancel its notice to suspend work.
GUPC rejected the APC's offer, saying it needed another $500 million up front to continue working on the project, according to Bloomberg
and other news outlets. It made no mention of matching the amount to help pay subcontractors. GUPC also said the two sides have agreed to go to arbitration.
The locks are the last major component of the Panama Canal expansion that needs to be completed. The expansion is more than 70-percent complete and is scheduled to be finished in mid-2015, with commercial operations expected to begin in the fourth quarter if there are no further construction delays.
The ACP says it has paid about $2 billion so far to GUPC plus an additional $150 million to $160 million for cost overruns.