Contributed by: Don WinnerAlthough the administrator of the Panama Canal Jorge Quijano announced that the pact between the Panama Canal Authority (ACP ) and the consortium Grupo Unidos por el Canal ( GUPC ) would sign an agreement on March 6th, the two sides still have not reached a final agreement that would ensure the completion of the project by 2015.
Despite the announcement, the pace of work remains low at 25% of capacity, just as it was in January 2014 when the GUPC consortium threatened to suspend work on the project completely, and they reduced the pace of construction.
Now 14 days after the closure of talks between the GUPC and the ACP was announced, and after having achieved a conceptual agreement subject to documentation, review, and final signature by the parties, it is still in the legal review process.
The conceptual agreement falls within the terms of the existing contract between the ACP and GUPC, and it discards any type of claims for payments (for cost overruns).
However, a source said the deal is close, but until documentation is signed, because of the sensitivity of the issue, it cannot be said there is a final agreement.
The source explained that when they went to put everything that was discussed into black and white (writing), discrepancies begin to emerge, however, the source stressed they are very close to getting the document signed this week, and that these discrepancies are almost closed.
The conceptual agreement establishes that the construction of the third set of locks should be completed by December 2015.
In addition, the twelve lock gates that are currently located in Italy must be transported to Panama no later than December 2014, and transported in staggered shipments.
The performance bond for $400 million may only be released to Zurich, in order to obtain additional financing to allow for the project to be completed.
It also includes that GUPC will inject $100 million into the project, and later the ACP will inject the same amount, which will allow a return to the normal pace of work during the month of March 2014.
It also indicates the moratorium on the repayment of advances granted to GUPC will be extended until 2018.
However, the extension of the moratorium is subject to GUPC having to meet certain milestones and other conditions, such as the delivery of the lock gates from Italy this year.
The agreement also establishes that the GUPC must formally and officially withdraw its warning letter of suspension, that they must deliver an updated schedule showing how they plan to work, in order to complete the project under the new plan.
The idea of the ACP authorities was to be able to advance work on the project during the months of the dry season, however this could not be achieved due to the problems that arose starting on 30 December 2013, when the GUPC sent a note to the ACP, that said if the ACP did not recognized their claims of $1.6 billion for cost overruns, they would suspend work on the third set of locks.
Work on the project was suspended for 16 days, and work on the project resumed on 20 February, after the ACP pressured the consortium, sending them a letter worded in strong terms, to notify them that if they did not obey and return to work, then the ACP would end the contract with the GUPC. (Panama America)
Editor's Comment: So, they are still trying to get the lawyers to agree on the wording of the new formal agreement. The GUPC simply does not have the money to keep working. They can't pay their workers or pay for the materials and services needed, which is why they are dribbling forward at only a 25% pace. The $400 million dollar performance bond will be used to help the GUPC secure new and additional funding so they can keep going on the project. And that might be the sticking point right there. Who in their right mind would give them funding, knowing they are going to be losing about $1.6 billion dollars on this project. Oh, I forgot about the governments of Spain and Italy - who will likely be helping their companies in order to save face. So isn't that nice, the taxpayers in Spain and Italy will be helping to fund the construction of the expanded Panama Canal, because their companies managed to get the contract through a low-ball bid process. Funny how things turn out...