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Thursday, April 24 2014 @ 01:49 AM EDT

Panama-Guide Top Level Category - The Expansion of the Panama Canal

On 22 October 2006 the citizens of Panama voted to expand the Panama Canal to allow for more transits and bigger ships. The Panama Canal Authority has started to execute the project and is following a comprehensive plan that will take eight years to complete at a cost of $5.25 billion dollars. While this is a subject of tremendous importance to the Republic of Panama and its people, the international maritime industry will benefit directly from the expansion through lower shipping costs, and global consumers will eventually benefit from the greater capacity and efficiency of the Panama Canal. The articles in this section document the details of the construction of the Panama Canal expansion project as it is executed. Articles are added to with the most recent information on top, and older articles get pushed toward down as new material is added. If you require additional information about this or any other category of information regarding the Republic of Panama please take advantage of our powerful in-house search engine. And if you still can't find what you're looking for we even take requests! Welcome aboard, and please remember to tell your friends about Panama-Guide.com, the #1 English Language Website about the Republic of Panama. Salud.
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The Road To The Gatun Locks Collapsed - Sinkhole

Canal ExpansionThe roadway of one of the roads used to access the Gatun Locks on the Panama Canal sank yesterday afternoon, near the area where work is being done to expand the Panama Canal, apparently due to damage caused by two large pipes that pass through the area. (more)

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SUNTRACS Strike - A New Threat To The Expansion Of The Panama Canal?

Canal ExpansionWork on the project to expand the Panama Canal could be interrupted again, if the SUNTRACS construction workers go on strike. (more)

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Will the Panama Canal Expansion Be Complete Before 2016?

Canal ExpansionA Panama Canal expansion, scheduled for completion by December, 2015, may not meet its deadline, says a new American Farm Bureau Focus on Agriculture feature.

Writer Stewart Truelsen for AFBF says almost all work on the canal was suspended at the beginning of the year, with the exception of some excavation. Cranes, costing $40 million each, he reports, were not moving.

Only four of the new gates are in Panama, while a total of 16 are needed. They come from Italy and won't all arrive until the end of the year, he says.

"To make matters worse, this is the dry season in Panama. In a month or so the rainy season will take hold and make work more difficult. What happened? Simply put, contractors ran out of money," he writes.

International hold-ups?

Critics contend that the $5.25 billion project to build a third set of locks was seriously underbid, Truelsen reports.

The contractors – a consortium from Spain, Italy, Belgium and Panama – were likely held up by the debt crisis in Europe, Truelsen says. An agreement to resume work, however, was reached in late February.

U.S. agriculture has a big stake in the eventual outcome, too, as tonnage through the expanded canal is expected to double by 2025. According to the USDA, 17% of world grain shipments pass through the Panama Canal and 90% of them are from the U.S.

An analysis by Rabobank forecasts a 12% drop in the cost of transporting grain from the Corn Belt to Asia when the new locks are in use.

This will make U.S. grain more competitive with Brazil, Argentina and grain-exporting countries in Eastern Europe, Truelsen explains.

The canal expansion could cause other changes in shipping agricultural products. For example, in recent years, more grain, oilseeds and grain products have been loaded on container ships, and the trend is expected to continue. At the same time, the expansion could boost Gulf and East Coast ports that have been losing business to the Pacific Northwest, Truelsen says.

"The Panama Canal route is so important to world trade that China claims to have reached a $40 billion deal with Nicaragua to build a longer canal through that nation to accommodate even larger ships," Truelsen notes.

"In any event, American agriculture should be an important beneficiary of the Panama Canal expansion, if American highways, waterways and ports are properly maintained and upgraded to take advantage of it," he says, "and that's a big 'if.'" (Farm Futures)

Editor's Comment: There are a lot of people in the United States and around the world who are looking hard at the project to expand the Panama Canal. The GUPC has acted with incredible irresponsibility - primarily in the way they underbid to snatch up the contract, then by trying to hold the Panama Canal Authority hostage, and to use methods of extortion and blackmail in an attempt to extract $1.6 billion from the Panamanian people. No matter what, the Panama Canal expansion project will be completed - eventually. However every month of delay will cost Panama money, and will negatively impact those customers who are looking forward to using the newly expanded waterway.

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Panama Canal expansion critical to the U.S. [Commentary]

Canal ExpansionBy Gene E. Bigler (Baltimore Sun) Work on the expansion of the Panama Canal, led by a European consortium, resumed recently after a disturbing interruption of the project because of a cost dispute. Completion of the work may now have been set back to December 2015 or later. The visit to the canal last November by Vice President Biden, Baltimore Mayor Stephanie Rawlings-Blake and several others from major port cities demonstrated how much we have at stake in Panama. Yet since we turned the canal over to the Panamanians at the end of 1999, most of the rest of us have failed to realize that U.S. global competitiveness may depend even more now on how well the big ditch continues to work for us.

The government of Panama entrusted the job of running the canal to the Autoridad del Canal de Panamá (The Panama Canal Authority), and the ACP professionals have done a tremendous job of operating and modernizing the canal for over 13 years, and U.S. concerns for what was once Ronald Reagan's hot button political issue have all but disappeared. Now with about two thirds of our seaborne trade depending on the $5.25 billion enlargement, the U.S. stakes in Panama have again been dramatically revived.

U.S. interests in the Panama Canal had already been raised a lot. Most of us just did not know about it. When the Panamanians took control in the 1990s, they launched a comprehensive modernization program that widened channels, provided lighting for 24-hour operations, improved navigation aids to increase safety and upgraded equipment to speed transits. Then they introduced a new system of reservations and bidding to determine the place of ships in transit instead of the old first come, first served U.S. practice. Increasingly since 2000, ships have been able to cross the isthmus more rapidly and safely, and the Panamanians have also increased environmental protection and restored some of the watershed the U.S. had allowed to deteriorate.

Yet the success of the ACP in running the canal only tells part of the story of the new advantages for the U.S. When the security of the canal was threatened by terrorism after the 9/11 attacks, the ACP and the government of Panama quickly turned to the U.S. to develop a new security system in which other stakeholders now also share the burden. Panama then took the lead in convincing the International Maritime Organization to adopt the U.S. proposal that has become the new standard for global maritime security, the International Shipping and Port Security Code.

The government of Panama also took advantage of the U.S. return of territory by opening up the former Canal Zone for development of a new hemispheric shipping and logistics hub for which we in the U.S. are also the major beneficiaries after the people of Panama. The four sleepy little ports that moved a couple of hundred thousand containers a year under U.S. control have been transformed into mega terminals that will move over 8 million containers, mostly to U.S. consumers or customers, this year.

The expansion project launched in 2009 to double the capacity of the canal will make the inter-oceanic connections there all the more valuable. Ports all over the U.S. have launched expansion, dredging and other improvements worth at least $12 billion to accommodate the larger ships that will be docking thanks to the canal's new third set of locks, now about 70 percent complete. The reputation of American business is also at stake because the job of managing the expansion project was awarded to the CH2M Hill Inc. of Colorado.

Most importantly, the success of President Obama's drive to deepen our economic revival depends greatly on the effort to boost U.S. export competitiveness, and nowhere is this more important than for the big new ships needed for growing liquefied natural gas exports. Clearly, the U.S. needs to do whatever possible to keep the work on track. The world needs to know that we still trust the ACP to get the expansion completed with the same competence and reliability with which it has run the canal.

Gene E. Bigler is a retired foreign service officer and former professor who has followed U.S.-Panama relations closely since 1968.

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Panama Canal signs deal to end expansion dispute, awaits consortium

Canal ExpansionBy Lomi Kriel PANAMA CITY (Reuters) - The Panama Canal Authority has signed a deal to end a major dispute over the multibillion-dollar expansion of the waterway, an official said on Thursday, raising hopes that the consortium behind the project will follow suit before the week is out.

The building consortium and insurer backing the plan to expand one of the world's major trade arteries could sign the accord as early as Friday, an official close to the negotiations told Reuters, speaking on condition of anonymity.

The canal and the consortium led by Spanish builder Sacyr and Italy's Salini Impregilo , reached an initial deal in late February to complete work on a project stymied over $1.6 billion in cost overruns.

The deal foresees the consortium finishing work by December 2015, and the sides had been due to sign off on it last week.

Officials from the consortium, which is building a third set of locks for the waterway, said this week that a final agreement would be inked soon, but the canal is still waiting.

In a statement, the Panama Canal Authority repeated that the deal foresaw the consortium and the canal each injecting $100 million for immediate cash flow needs to fully resume work.

The accord would also extend repayment of advanced payments made by the Panama Canal Authority to the consortium that are worth $784 million until 2018 at the latest.

The Panama Canal Authority also agreed that the consortium could use a $400 million surety bond through insurer Zurich North America as backing to seek financing.

The expanded waterway connecting the Atlantic and Pacific oceans was originally due to open this year, but disputes over the funding and delays have pushed that deadline back.

Limited work on the project resumed last month after a two-week stoppage. The dispute has fanned fears of delays that could cost Panama millions of dollars in lost shipping tolls.

The delays are also a setback for companies eager to move larger ships through the canal, including liquefied natural gas producers that want to ship from the U.S. Gulf Coast to Asia.

The overall project, of which the consortium is building the lion's share, was first expected to cost about $5.25 billion, but the overruns could increase that to nearly $7 billion.

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ACP and GUPC Still Have Not Signed Formal Agreement

Canal ExpansionAlthough 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...

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ACP appreciates the support received during work stoppages

Canal ExpansionThe Panama Canal Authority (ACP ) acknowledged the support received from multiple sectors, from both organizations and Panamanians in general, during the last two months while an agreement was sought to standardize the construction of the third set of locks.

"The support and confidence in all of us who are part of the ACP was a tremendous motivator, and those voices served to reaffirm our intention of reaching an agreement that would protect the interests of Panama and the Canal," said ACP manager Jorge Luis Quijano.

Multiple civic groups, labor unions, and teachers unions expressed their support for the managers of the ACP through public statements in the middle of the negotiations to reach an agreement with the contractor for the construction of the Third Set of Locks.

"Now that we have gotten past this stage, all of us at the ACP reiterate our commitment to continue managing, operating and expanding the Panama Canal to efficiently service the world, and to benefit Panama," Quijano said. (Telemetro)

Editor's Comment: Practically everyone in Panama stood shoulder-to-shoulder with Quijano and the ACP during this crisis. It was clear that the GUPC was trying to take advantage of the situation, and the normally contentious Panamanians came together as Panamanians, to support the ACP against the actions of the GUPC to basically extort money through blackmail. The GUPC - comprised mostly of foreign companies - had no chance of winning the public argument in Panama.

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Panama Canal says deal with consortium to be signed next week

Canal ExpansionBY LOMI KRIEL (Reuters) - The Panama Canal Authority said on Friday it expects to sign a financing deal next week to finish work on expanding the waterway and end a dispute over cost overruns that has held up the multibillion-dollar project.

Following bitter wrangling with the Spanish-led building consortium since the start of the year, the authority announced a preliminary deal Thursday night. Canal Administrator Jorge Quijano said he expected the agreement to be signed on Thursday.

The deal with the construction group led by Spanish builder Sacyr and Italy's Salini Impregilo foresees work finishing by December 2015 and would require the canal and the consortium to immediately each inject $100 million.

Both sides have agreed to continue disputing the $1.6 billion in extra costs through international arbitration. In the meantime, the deal gives the consortium immediate cash to resume work.

The expanded waterway connecting the Atlantic and Pacific oceans was originally due to open this year, but disputes over the funding and delays have pushed that deadline back.

Mistrust over the process still lingers, and canal chief Quijano was far from jubilant as he discussed the accord with reporters in a conference call from Panama City.

"I'm always very cautious because the relationship has not been very good with this contractor, I must admit," he said.

"We will very closely supervise whatever is happening in the field. All of the monies ... will go directly into the project. It cannot be siphoned out to the shareholders," he added.

Quijano said he expected the $100 million cash injections to be in place by next Friday, and stressed the consortium would not be "getting any more money from me."

The overall canal expansion, of which the Grupo Unidos Por el Canal (GUPC) consortium is building the lion's share, was first expected to cost around $5.25 billion. But the overruns could increase that bill to nearly $7 billion.

The agreement with the GUPC envisages extending repayment of advanced payments made by the canal authority to the consortium worth $784 million until 2018 at the latest.

Antonio Tajani, the European commissioner for industry and entrepreneurship, said the deal was "crucial."

"This is one of the most important infrastructure (projects) in the world," he said in an interview.

SETBACKS

As part of the deal, the Canal Authority agreed that the consortium could use a $400 million surety bond through insurer Zurich North America as backing to seek financing.

However, the Zurich part will take up to six weeks to arrange, for which reason the $100 million cash injections were necessary to jump-start work at full capacity, Quijano said.

Limited work on the project resumed on February 21 after a two-week stoppage. The dispute has fanned fears of delays that could cost Panama millions of dollars in lost shipping tolls.

Holdups in the prestigious project posed a setback for companies worldwide that want to move larger ships through the waterway that links the U.S. Gulf Coast to Asian markets.

Following the deal, Quijano said the newly expanded waterway would begin operating commercially by January 2016.

But he cautioned that if GUPC does not comply with the agreement, the canal will find other ways to complete the work.

"We remain prepared for another option," Quijano said.

The agreement contains safeguards related to the payback of the advances so that if the companies fail to comply they have to return the money straight away, he added.

Sacyr, which receives a quarter of its international revenue from the canal project, reported on Friday a net loss of 496 million euros ($679 million) for 2013.

Editor's Comment: Sounds to me like this deal will simply further delay the inevitable. I expect the GUPC will lose their bid to suck another $1.6 billion out of the project for what they are calling "cost overruns" - but in fact they simply under bid the contract (in order to get it) and now that they have it, they are using their entrenched position to try to force the ACP to pay them more. So - this is a delaying tactic. The ACP is perfectly ready to toss the GUPC out on their asses. The GUPC overplayed their hand. They also over estimated their negotiating power and position. They have lost on every front, so with this deal they are limping back to work, confident in the knowledge they are now "Quijano's bitches" who are working for free in Panama. The shareholders in the GUPC companies should rightfully be going nuts. I still think there's no way in hell the GUPC ends up finishing this project. I think they will walk off for good, once the $1.6 billion dollar question is eventually answered by arbitration, with a resounding no.

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Panama Canal expansion in doubt yet again as saga grinds on

Canal ExpansionBY LOMI KRIEL AND SONYA DOWSETT (Reuters) - A deal to resume work on the multibillion-dollar Panama Canal appeared in doubt on Thursday, just hours after an apparent breakthrough, in the latest twist in a protracted dispute over massive cost overruns.

The Panama Canal Authority said late on Wednesday that the Spanish-led consortium expanding the major world waterway had agreed to restart work first thing on Thursday after a two-week stoppage.

It said they had given themselves three days to iron out remaining issues such as how to continue financing the project.

While workers gathered at the site on Thursday, works were still idle on Thursday afternoon. Local media said Panama's President Ricardo Martinelli pointed at the consortium, whose main partners are Spanish builder Sacyr and Italy's Salini Impregilo.

"It seems there is some internal difference between the different contractors," local media cited Martinelli as saying.

Officials have in the past cited a power struggle between the two main members of the consortium, saying Salini Impregilo wanted to take over the lead role from its Spanish partner.

The delay in the project, which centers on a dispute over $1.6 billion in cost overruns that the consortium wants the Panama Canal to pay for, could cost Panama millions of dollars in lost shipping tolls.

Delays are also a setback for companies worldwide that want to move larger ships through the waterway that links the U.S. Gulf Coast to Asian markets.

Earlier on Thursday, the consortium issued a statement saying the parties were engaged "in intense discussions and made progress Wednesday on key issues that would allow funding, resumption of works and payments of subcontractors and workers".

Sacyr was unavailable for comment on why work had not resumed. However a source with knowledge of the matter said he understood there would be a "ramp-up" period and that engineers needed to evaluate the site.

A key part of negotiations is the role that insurer Zurich plays and whether it will convert a $400 million surety bond, taken out by the consortium in case the project wasn't completed, into backing for a loan to help raise the $1.6 billion funding needed to finish the project, sources with knowledge of the matter said.

Zurich does not want to put money into the project but has asked banks to do so, another source familiar with the matter said. The banks are asking for counter-guarantees, the source said. The parties of the consortium are each liable for their own obligations, not jointly, the source said.

Shares in Sacyr rose 4.3 percent on Thursday after news of the agreement to restart work. The project represents a quarter of the company's international revenue.

Salini Impregilo shares gained around 3.2 percent.

Zurich said it was in talks with both parties and was comfortable with its level of exposure to the project, which it said was limited due to reinsurance mechanisms and was well within its risk tolerance.

"As the discussions are still ongoing, we are not in the position to provide any further details," it said in a statement.

SPAIN STEPS IN

The Spanish government is likely to agree to change the status of a $200 million state-backed guarantee it gave heavily-indebted Sacyr in 2009 when Panama awarded it the contract, turning it into backing for finance to finish the project, sources told Reuters on Wednesday.

The guarantee was originally drawn up by Spanish state-backed insurer Cesce as a counter-guarantee to the Zurich bond. The government insurance bonds must be changed if Zurich changes its insurance into backing for a loan.

Cesce and Spain's Economy Ministry declined to comment. Italian state-backed export credit agency Sace, also a part of the guarantee scheme with Zurich, was not immediately reachable for comment.

There has been disagreement within the Spanish government over whether to interfere with the private project, one source with knowledge of the matter said, but it is likely to tweak the conditions of the guarantee because the Sacyr-led contract is such a high-profile one for Spanish business.

Spanish builders are working on big engineering projects around the world, from a train linking the Islamic holy cities of Mecca and Medina, to a metro in Riyadh, Saudi Arabia. Overseas construction has been one of the few bright spots for companies as the domestic economy splutters.

Under Wednesday's deal, the Canal had agreed to pay the consortium $36.8 million to cover work done in December once works resumed.

The project to expand the nearly 50-mile (80-km) transoceanic cargo route was originally expected to cost about $5.25 billion, but that could increase to nearly $7 billion.

Officials and diplomats expressed concern in 2009 when the contract was awarded to the consortium over its ability to complete the work, since its winning bid for the work was $1 billion lower than that of the nearest competitor

The Wood Mackenzie consultancy said on Thursday it expected the cost overrun dispute to be resolved with limited disruption, but cautioned that longer delays would affect U.S. liquefied natural gas producers and created a tighter LNG shipping market.

"If the delays last 6-12 months, it will have limited impact, as trade will carry on much as it does now," Andrew Buckland, senior LNG shipping analyst at Wood Mackenzie, said in a research note.

"But further delays threaten the investments of a significant number of groups that are set to benefit from expanded capacity on the waterway."

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GUPC Promises To Restart Work On Panama Canal Expansion Tomorrow

Canal ExpansionFinally, the Grupo Unidos por el Canal (GUPC) has agreed to the repeated calls by the Panama Canal Authority, and tonight after more than five hours of meetings, they promised to resume work on the project to expand the Panama Canal on Thursday morning, said the ACP in a press release.

The ACP announced that when work resumes on the project, they will pay the GUPC $36.8 million, for work billed during December 2013.

This money will be used to pay the paychecks for the workers, as well as to cover other obligations to suppliers.

Another 72 hours were given as a deadline, in order to agree on points such as the delivery dates for the lock new gates, an implementation schedule, a schedule for repayment advances, and other key aspects for the development of the project.

These decisions, adds the ACP statement, occurred during telephone conversations between the ACP and the directors of Impregilo, Sacyr Vallehermoso, Jan de Nul and Constructora Urbana, the companies composing the GUPC.

The press release ends by saying there are still some topics upon which the sides have not yet reached an agreement, but it does not say what they are. (TVN)

Editor's Comment: The GUPC finally came to the realization that if they didn't get back to work, then the ACP really would (no shit) throw them off the job, hire someone else to complete the project, then sue them for the excess costs. They went into this gaggle thinking they had a strong negotiating position, and acted like they could use a combination of extortion and blackmail to simply demand 1.6 billion dollars - above and beyond the contract they signed.

The answer from the ACP was simple. No.

Over the ensuing six weeks, the GUPC came to realize exactly how incredibly weak their negotiation position is, in reality. Now they will be forced to meekly return to work, after having been kicked in the balls. They might be able to finish the project, but they will take a loss doing so. The $1.6 billion simply is not going to happen.

Silly Europeans, thinking they could come to the land of the "juega vivo" and get over.

In short, they got their asses handed to them. They signed the low-ball contract for $3.118 billion then tried to force the ACP to pay them 50% more. Nope. Not going to happen that way, fellas.

Forget about making a profit. They will be lucky if they can get out of this without taking massive losses. So who's low-balling who now? The ACP flipped their gambit on its head. Books will be written about these negotiations for use in future business management classes. The GUPC will be used as an example of how not to do shit, while the ACP has proven themselves to be more than capable of dealing with this situation, admirably.

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Deadline looms as Panama Canal, consortium seek end to cost dispute

Canal ExpansionBy Lomi Kriel and Sonya Dowsett (Reuters) - The Panama Canal and a Spanish-led construction consortium expanding the major global waterway discussed options on Tuesday to keep the multibillion-dollar project afloat amid a dispute over costs, but any deal seemed unlikely ahead of a looming deadline.

The disagreement between the two parties over $1.6 billion in cost overruns and how to maintain financing has already halted work on the project for two weeks and has delayed its projected completion until at least December 2015.

Delays could cost Panama millions of dollars in lost shipping tolls and are a setback for companies worldwide that are eager to move larger ships through the canal, including liquefied natural gas (LNG) producers that want to ship from the U.S. Gulf Coast to Asian markets.

"The Panama Canal Authority reports that despite efforts to agree with (consortium) Grupos Unidos por el Canal to resume work on the new locks project, positions between the parties remain apart," the canal authority said in a statement.

"Although last week the parties seem to have come to an agreement on certain components during the talks, there were serious disagreements at the time of putting it in writing," it added, saying the parties agreed to resume talks on Wednesday morning.

Canal administrator Jorge Quijano last Wednesday set a target of no more than a week to reach a deal to jump-start the project, a deadline that will lapse in the coming hours.

Quijano had previously warned that the canal could terminate the contract with the consortium and push ahead with a third party if a deal proves elusive.

A major sticking point in the negotiations on Tuesday was converting a $400 million bond from insurer Zurich North America into backing for a loan so the consortium can secure a short-term cash injection needed to continue its work, sources familiar with the talks said.

The consortium took out the bond as a required insurance policy in case it did not finish the project. The bond is payable if the project is not completed by the consortium for any reason.

The insurer was ready to provide the loan if shareholders of the consortium, which is led by Spain's Sacyr and Italy's Salini Impregilo and includes a Belgian and a Panamanian company, shoulder the risk and are liable for repaying the loan, one source said.

But the consortium's chief executive officers want the insurer to be the primary risk-holder, which Zurich considers unacceptable, one source said.

A key issue centered on the share of the risk the Italian and Spanish governments would take, one source said.

Spain's majority state-owned insurer Cesce, set up to financially aid international expansion of Spanish companies, provided a guarantee for the Sacyr bid in 2009.

Although Cesce has declined to comment on how much was guaranteed, a source with knowledge of the operation said it was for $200 million and helped underwrite the $400 million Zurich bond.

Officials at Zurich were not immediately available for comment. A spokesman for Sacyr declined to comment.

The parties also continued to debate a weekend proposal by the canal authority that would allow work to restart immediately, with it and the consortium each contributing $100 million.

But a source familiar with the negotiations said the consortium had not yet accepted the deal and wanted to wait on an answer from Zurich.

The overall expansion project, of which the consortium is building the lion's share, was originally expected to cost about $5.25 billion, but the overruns could increase that to nearly $7 billion.

Editor's Comment: The ACP simply can't afford to keep negotiating with GUPC. At some point in time, the ACP is going to have to pull the plug. They will probably make a public statement this afternoon that negotiations with the GUPC have officially ended without a deal, and the GUPC has failed to build the third set of locks as required and specified under the contract. And because the GUPC walked off of the job and stopped working, that means the ACP can then exercise the clauses in the contract which were put there exactly to protect the government of Panama from the sort of shenanigans the GUPC is trying to pull. They will then hire someone else to finish the project, or at the very least to manage the process for them, because the many of the same subcontractors and employees will still be doing the same work, but just answering to a different boss.

My prediction holds. I think the GUPC is toast, and they will be finished today. Remember this whole thing started almost two months ago. It's time to end it, one way or the other. And the "billion dollar bitch slap" foretold the way things were going to go.

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Billion Dollar Bitch Slap? Panama Canal Authority Will Announce A Final Decision Today

Canal ExpansionThe Panama Canal Authority (ACP) should make a final decision today on the contractual conflict it has with the consortium Grupo Unidos por el Canal (GUPC), which has stalled work to expand the waterway.

Earlier, the administrator of the ACP, Jorge Luis Quijano, said communications with the GUPC never broke down, and during a long teleconference they managed to reach some agreements, and he said there was a significant amount of progress being made.

Editor's Comment: Let's see what they come up with. Considering that one of the lawyers representing the GUPC slapped president Ricardo Martinelli in the face at a private wedding on Saturday night - things are not looking so good for them right now. There are not many "billion dollar bitch-slaps" in the world, but that might have been one of them...

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ACP Still Trying To Reach An Agreement With GUPC

Canal ExpansionThe administrator of the Panama Canal Authority (ACP), Jorge Luis Quijano said at no time have they suspended communications with Grupo Unidos por el Canal (GUPC), the consortium responsible for the project, when speaking about the contract dispute that has been dragging on for months, and he said they have established a "long conversation" that could resolve the majority of the issues that remain on the negotiating table.

"We have advanced significantly in the negotiations," said Quijano.

In fact, Quijano reported the GUPC has accepted the ACP will not pay any money out of the contract, and everything that will be negotiated from now on will be made withing the parameters of the contract, after the consortium insisted on demanding they be paid a specific amount of money outside of the contract, he said.

"Now the GUPC has accepted we will not pay them a single nickel of the claims they were making outside of the contract," said the Administrator of the Panama Canal Authority, Jorge Luis Quijano, during his appearance before the plenary session of the National Assembly.

"Maybe we'll lose some of their claims and that will be paid, but not outside of the contract," said Quijano.

The manager said he participated in a conference call with the senior executives of the three major international companies.

Losses To The Canal Because Of The Conflict

The culmination of the expansion of the Panama Canal will be delayed at least until December 2015 which means there will be "lost profits" of more than 95 million dollars, only if they are able to reach an agreement with the GUPC consortium in charge of the project to get them to resume work in the short term.

According to the contract, the construction of the third set of locks of the Panama Canal should be ready by next October, but last year the Grupo Unidos por el Canal (GUPC) , the consortium in charge of the work, announced a delay to June 2015.  

Quijano said the new (additional) six-month delay in the project comes as a result of "two or three months" of a slow pace of work, and "two weeks of total paralysis" on the job site, counting this week during which the negotiations continue, seeking a consensus agreement.

This delay will generate a "loss of earnings of $95.3 million", that is to say, the profits the Canal will not receive "starting from the middle of 2015 when we expected them to finish the project," he added.

The Legal Status Of The Workers On The Expansion Project

Quijano made it clear that the ACP has no connection with the workers, because the employment relationship is maintained with GUPC, however, recognizing that the ACP is responsible to this liability in the labor payment bond "that's another 50 million dollars," and according to Quijano, by priority, the first to receive any compensation for debt cancellation labor liabilities are employees.  

"And the labor liabilities the GUPC may have at any time is well below the figure of 50 million, meaning that workers should have no problem in accessing solutions to their labor liabilities," he said.  

Quijano made ​​it clear they are fully prepared to finish this conflict in favor of Panama, and he said the expansion will be completed. (Panama America)

Editor's Comment: So, the GUPC has given up trying to coerce $1.6 billion out of the ACP, by using threats and extortionist tactics, which are outside of the contract? In that case, they have finally come to the realization that the ACP will - in fact - toss them off the job and carry on without them.

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Panama Rallies Behind Engineer in Fight Over Canal

Canal ExpansionPANAMA CITY — He has the weight of Panama's pride and a good chunk of global commerce on his shoulders.

Yet weeks of acrimonious, late night negotiations to rescue the Panama Canal's $5.25 billion expansion haven't taken a toll on Jorge Quijano. The canal's top administrator wakes up at 5 a.m. each day for a brisk 40-minute walk along the bluff atop which sits the century-old plantation home where he resides as successor to the 17 American governors who lorded over the canal zone until 1979.

"I wish there were more crises like this," jokes Quijano, who claims to be growing more fit even as he struggles to find a way out of a dispute over $1.6 billion in cost overruns.

"I've never felt healthier, stronger or more confident."

The extra mettle is needed. Last week, work on the construction of a third set of locks, already nine months behind schedule, was stopped after talks broke down on how to finance the charges. A consortium led by Spain's Sacyr SA and Italy's Salini Impreglio blames Quijano's poor planning and is demanding payment, while the canal says the companies are responsible for the unforeseen costs.

With a lengthy legal battle looming, ports around the world that have spent billions on upgrades in anticipation of a quicker route for giant container ships and tankers between Asia and the Eastern U.S. seaboard are bracing for further delays.

While both sides say they're still open to an agreement, the window for a deal is closing fast, Quijano said in an interview at the canal's office. Meanwhile, he says a plan B that he and his staff have been working quietly on since October is being readied, though he's not disclosing any details.

Panamanians are cheering Quijano on. Since the crisis erupted, the nation of 3.4 million has rallied almost unanimously behind the 61-year-old engineer, thrusting him into the media spotlight to defend the canal, which is almost synonymous with the nation's identity. They applaud him for standing up to public attacks by contractors that he likens to "extortion" and "terrorism."

Quijano likes to point out that the talks broke down on Feb. 4 — 125 years to the day after another European digger from France went bust and declared bankruptcy while working on the canal.

U.S. engineers, riding on the coattails of a military invasion ordered by President Theodore Roosevelt, were then left to complete the work. Washington ran the 50-mile (80-kilometer) waterway and adjacent areas as an overseas territory until President Jimmy Carter agreed in 1977 to cede control gradually.

Ironically, given the resentment the decades-long occupation still stirs here, Americans may have another chance to step in.

That's because U.S. firms have expressed the most interest among international companies in completing the 30 percent of work that remains, Quijano said. One candidate is Englewood, Colorado-based CH2M Hill, the canal's main project consultant and which Quijano says has the know-how and resources to finish the job according to its original design. Tellingly, as talks stalled last month, Quijano gave the U.S. ambassador to Panama a personal tour of the construction.

What's not in doubt is Panama's determination to finish the job in 2015, he said.

"If necessary I'll get down there with you holding a pick and shovel," Quijano, the son of a diplomat who has spent part of his childhood in Japan and Malaysia, recently told a group of workers to celebrate the canal's centennial anniversary.

Quijano joined the canal in 1975 shortly after graduating from Lamar University near the Texas Gulf Coast, an area whose booming natural gas industry stands to be one of the biggest beneficiaries of an expanded canal. He climbed through the ranks, earning a reputation as a hard-charging engineer who held his American managers accountable to their commitment to hand it over in tip-top shape.

"He's an engineer's engineer," said Joe Reeder, a former US Under Secretary of the Army who served as the canal's American chairman in the 1990s. "He's a good listener, very studious and drills down to operate based on the facts."

Reeder says that Quijano shies away from the cameras and would have preferred to manage the dispute quietly through the arbitration mechanisms set forth in the contract. But the same cool and collected temperament serves him well in the media dogfight the dispute has become.

"You want someone who can throw a body blow when it's been richly earned as is the case here," said Reeder, who believes the European consortium's aggressive stance against the canal in the media belies the shakiness of its claims.

Appointed to a seven-year term in 2012, Quijano runs a business that has blossomed since the Americans handed over full control of the canal at noon on December 31, 1999.

Average time to cross the canal has fallen below 24 hours, a feat the Americans, who managed the canal more like a break-even utility, tried but were never able to achieve, Reeder said. The safety record has also improved and revenues have more than tripled under Panamanian management to $2.4 billion last year.

The canal is the linchpin of Panama's economy, providing almost $1 billion in direct contributions to the government and related activities generate nearly 20 percent of the nation's gross domestic product. Almost 6 percent of global commerce passes through the canal.

But not everyone has praise for Quijano, least of all the consortium, which blamed his "inflexibly rigid" position for an impasse that put at risk 10,000 jobs and threaten to blemish Panama's reputation as a magnet for international investment.

It says the extra costs resulted largely from problems with studies conducted by the Panamanian authority before work began and says geological obstacles encountered while excavating have prevented it from getting the basalt needed to make the vast amounts of concrete required. The canal says all bidders had access and ample time to study the canal's preliminary work before the auction.

In the absence of a deal, the consortium is promising years of litigation and can assert some powerful leverage by withholding delivery of massive lock gates made in Italy that would be costly to build from scratch.

Even supportive Panamanians question whether Quijano, who as the top engineering executive oversaw the expansion program's design, doesn't share part of the blame for the selection of a consortium that raised eyebrows when it was awarded the contract by the canal's board of directors in 2009 with a bid $1 billion below that of its nearest rival, San Francisco's Bechtel Group Inc.

"This is a very delicate moment for Panama," said Juan Carlos Navarro, one of three front-runners in May's presidential race, told the AP. "Later there will be time to do a complete analysis of what went wrong and assign responsibilities. But right now everyone needs to support Quijano and demand that the expansion is completed."

Part of Quijano's popularity stems from the canal's track record of not wading too deeply into Panama's messy politics. Panama's constitution guarantees the canal financial and operational autonomy, and a string of canal administrators, all of them trained by the Americans, has built a reputation for above-the-fray decision making that Panamanians jealously safeguard.

Even Panama's President Ricardo Martinelli, a billionaire businessman not known for ceding the spotlight easily, had to back down after meeting with Spanish officials in the early days of the crisis, a move that was widely criticized. Last week he called on Panamanians to "close ranks" behind Quijano.

"Too bad our politicians don't have the same integrity" as Quijano, said Leonel Martinez, a 58-year-old taxi driver who worked as a stevedore in the canal until the Americans pulled out. "Whatever happens we can't let them defraud us." (NY Times)

Editor's Comment: Remember Alberto Alemán Zubieta was the Administrator of the Panama Canal Authority, the position currently held by Quijano, until 2012. He was the person at the helm when they decided to select the GUPC consortium to build the third set of locks. And also remember Alberto Alemán Zubieta was the President of the Panamanian company Constructora Urbana (CUSA) which is part of the GUPC consortium. Zubieta climbed to his position atop the Panama Canal with the help of the former President Ernesto Perez Balladares (1994 - 1999) from the Partido Revolucionario Democratico (PRD) political party, which is currently not in power in Panama.

It's ironic for this article to quote the PRD presidential candidate Juan Carlos Navarro with regards to assigning blame for this crisis - because the blame does not rest on Quijano's shoulders, but rather those of the PRD's Alberto Alemán Zubieta, who with the complicity of the former PRD President Martin Torrijos (2004 - 2009), decided to give the massive $3.118 billion contract to - himself.

The ACP "above-the-frey" of Panamanian politics? Don't be absurd. It's just disguised or camouflaged slightly better than normal, and it's harder for most people to pick out the chunks in the soup, but those chunks are still there.

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Panama president blames former canal chief for crisis

Canal ExpansionPanamanian President Ricardo Martinelli Monday blamed the Panama Canal's former administrator for the current crisis surrounding its massive expansion project -- where work has been halted over a billion-dollar payment dispute.

Martinelli said Alberto Aleman Zibieta was "responsible for what has happened," referring to the row over who will cover $1.6 billion in cost overruns in the project to enlarge the 80-kilometer (50-mile) waterway linking the Atlantic and Pacific oceans.

Aleman Zibieta, a Panamanian engineer, was in charge of the independent Panama Canal Authority in 2009 when it awarded the largest contract in the expansion project -- worth some $3.2 billion -- to the GUPC consortium led by Spanish company Sacyr.

The GUPC bid was $363 million lower than budgeted by the canal authority and well below bids from competing companies.

In an interview on Panamanian television, Martinellii suggested Aleman Zibieta and the canal authority should have anticipated the GUPC was underbidding.

"Everyone here knew the state of the company Sacyr, that it was having financial problems," Martinelli said, dubbing the current situation "the chronicle of a death foretold."

The canal authority and the GUPC consortium have locked horns since December over the overruns on widening the canal to accommodate massive cargo ships in the century-old waterway, which handles five percent of global seaborne trade.

GUPC claims unforeseen geological difficulties have forced them to spend much more on cement than expected. They say that they based their estimates on data provided by the Canal Authority that was incorrect.

The canal expansion is one of the world's most ambitious civil engineering projects and was due to be completed next year -- but the builders have said completion may now be delayed up to five years.

The original canal, built by the United States mostly with workers brought in from the Caribbean, was completed in 1914.

The canal generates $960 million a year for Panama, nearly 10 percent of the country's total annual income. (expatica.com)

Editor's Comment: Called it! Martinelli and the CD was courting Zubieta to be their presidential candidate, even though he's a PRD guy. Zubieta said no, and therefore here we are today. If Zubieta had said yes, then there would be no conflict, and Zubieta would have been Panama's next president. Martinelli is one vengeful dude. Now he's going to be blaming the whole mess on Zubieta and the PRD, which is actually accurate.

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One Last Proposal by the ACP (Before They Give The GUPC The Yuca)

Canal ExpansionTime is running out for the negotiations between the Panama Canal Authority (ACP) and Grupo Unidos por el Canal (GUPC) to find a solution to the crisis that has paralyzed work on the third set of locks.

Last Friday, the consortium composed of the Spanish company Sacyr, Italy's Salini Impregilo, Belgium's Jan de Nul, and the Panamanian company CUSA sent the ACP a proposal, which they said "reflects our continuous efforts to accommodate the ACP's concerns during the negotiations."

The ACP responded with a counter-proposal, that would be their last, in its effort to find a solution to the crisis that has already been dragging on for more than a month, with its origins in cost overruns - not recognized by the ACP - of $1.6 billion dollars in the project to build the third set of locks, the largest single contract of the expansion program.

The ACP's proposal suggests, as requested by the consortium, an extension of the deadlines for repayment of advances, without giving further details on these.

A quick resolution to the conflict is key to the project. Work has stopped since last Wednesday, after a deadline expired and the negotiating parties were unable to reach an agreement.

The administrator of the ACP, Jorge Luis Quijano , said the institution would be willing to take over the project and to complete it by 2015, as currently scheduled, but in order to do it they must act quickly to take advantage of the short dry season. (Prensa)

Editor's Comment: I predicted a long time ago that the ACP would boot the GUPC, hire someone else to finish the job, and then sue the GUPC companies for failure to perform. In that way, the Panamanian people will basically get the $7 billion dollar project for $5.25 billion - and the low ball bid gets turned around and stuffed right up the GUPC's ass. Remember, they were hired by the PRD (for a reason). Can you spell "yuca?" Now do it about 1.6 billion times. Yuca, yuca, yuca, yuca... There's a whole lot of yuca coming down.

Panamanian Spanish Lesson: When someone get's screwed over, Panamanians will say "se le metio la yuca" which literally means "they stuck the yuca in him." As in, they stuffed it up his ass. Yucas typically have a pointy end, but then they get thick at the base, and are about as big as your forearm - perfect for stuffing up someone's ass - and not something normal people would consider enjoyable. This expression is often used when someone thinks they were going to get over because they were going to try to be clever or slick, but then the tables were turned and the person who thought they were going to get over, gets hosed instead. They get in trouble or go to prison or what have you. In this case the ACP is pulling the old yuca trick to the GUPC. Silly Spaniards, thinking they could "out slick" the Panamanians on their home court...

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Exclusive Interview: Panama Canal Project Won't Be Held Hostage By Contractor Shutdown

Canal ExpansionBy C. J. Schexnayder (Engineering News-Record) - For the past six weeks the Panama Canal Authority (ACP) has been negotiating a reported $1.6 billion in cost overruns with the contractor building the locks for the waterway's Third Lane Expansion.

On Feb. 5, the contractor consortium, Grupo Unidos Por el Canal (GUPC), stopped work on the project, citing a breakdown in negotiations that threatens the original mid-2015 completion date of the $5.2 billion project. GUPC consists of Spanish construction firm Sacyr Vallehermoso S.A., Italy’s Impregilo S.p.A., Jan De Nul n.v. of The Netherlands and Panama's Constructora Urbana S.A.

ACP Administrator Jorge Luis Quijano, an industrial engineer who has headed the expansion since it began, spoke at length to ENR about the project status and its current options. He reiterated the intention to complete the project by its planned finishing date next year “with or without the assistance of the contractor.”

ENR: What is the current status of the project?

Quijano: We are at a stage right now where [contractors] have stopped work. They say they have not stopped work, but there is no work happening at all. On Feb. 5, there was maybe 1% of work being done by a few subcontractors, but a day later, work is completely at a standstill. [GUPC is] saying they haven't formally notified us that they have stopped work. For me, that has really zero value since it is a de facto work stoppage. We know for a fact they have told workers to go home. They have told subcontractors to stop work. We even have subcontractors ask us if they are going to be paid or not.

We have left a little window of opportunity for continuing to exchange views with the contractor to see if an amicable resolution is possible. However, the more time that passes, the less likely that is to happen. We sent [the contractor group] a four-page letter on Feb. 5 asking them to substantiate their actions because, to us, this is a hostile act and it needs to be resolved immediately. They have already wasted enough time. They began slowing down in November and they continued to keep slowing it down until now they've brought it to a total halt yesterday.

ENR: Is this action sufficient grounds to break the contract and move forward without GUPC?

Quijano: The contract is very clear that if work is stopped or significantly reduced—or any part of the work is substantially reduced—that is sufficient grounds to take them off of the job. We feel very strongly about their actions, and if they decide not to settle this and not return to work, they leave us very little option but to default them.

We are looking at the next few days that will be critical in our decisionmaking process. As time passes, we have less and less of a chance to have a negotiated solution. We are not closing the door but they are leaving us with very little room to maneuver. But we are not going to be held hostage for their work stoppage; we are going to take action. I'd say we are coming to the end of the road and we not talking about weeks to get this taken care of, let's put it that way.

ENR: How long has this situation been developing?

Quijano: This is not the first time we have been at this juncture with the contractor. This is the first time [GUPC has] taken a hostile position by stopping the work but in December 2012, [the contractor] was having similar cash flow issues. They came to us and requested relief by asking for a moratorium on paying back their lines of credit. They wanted some relief so they could last until the return on some of the claims they had made for cost overruns. We agreed and they did not pay back any of their lines of credit in 2013. They took the whole year and didn't win a single claim they put in to the dispute arbitration board.

They had whole year of non-repayment, which amounts to about $300 million to us, to continue work and have the time to substantiate the claims they felt they could win. The moratorium ended in December 2013 and they have to start repaying—and they have to do so very quickly at the rate of about $39 million a month.

According to the contract, they have to continue to work while these claims are being evaluated. This is costing them more than what they expected and what they want to do is make us pay for all the expenses. This is not a cost-plus project.

What we have put on the table is a further deferral of the repayment program, extending the moratorium significantly so they can continue the work. But even with that, they still have not agreed to continue the work. They did not accept that offer and, instead, asked for a moratorium to 2020.

ENR: Several times you have mentioned a 'Plan B' to complete the job without GUPC; what does that entail?

Quijano: Plan A is to continue working with the contractor and finish the job according to the contract. Plan B is to go ahead with the work without this contractor. We don't see any other alternative. It is either one or the other. Some have suggested that we don't have the construction know-how to handle it, but we're not going to construct it.

What remains to be done? About 30% of the work. What remains to be done in concrete? About 20%. All the designs for the project have been completed. Those designs are ours. The amount of work that remains is backfill and about 900,000 cubic meters of concrete (out of the 4.4 million cubic meters total). Outside of that, it is only the electro-mechanical work. And all of the electro-mechanical work was going to be done with sub-contractors. Even GUPC had planned to do that.

Our Plan B is very simple; work with all the subcontractors who were [already] going to perform the electro-mechanical work. We need a small general contractor on the Pacific side. We need a small general contractor on the Atlantic side. These will be needed to continue to provide the general services and construction management activities. But it is not the same size of a project we had in 2009. Taking this job from here onward is not the same as starting from scratch.

ENR: Fabricating new gates for the locks would take longer than a year. What arrangements are there to procure the gates that have already been made?

Quijano: The new locks have 16 gates in total. We already have four gates here along with all the electromechanical elements for them. Four gates have been completed in Italy, and are awaiting transportation. Another four gates are going to be ready in a month's time. And the last four gates will be ready by June at the very latest.

We don't expect Cimolai [the subcontractor in Italy] to give us the gates they have already fabricated for free. Unlike GUPC, Cimolai has done an outstanding job by continuing to work. [The firm is] very professional and we have a very good relationship with [it]. I feel we will continue our working relationship with [Cimolai].

There is very little use for these gates other than in the new locks. They cannot be sold for any other project, and if they are scrapped, it will bring in maybe one-tenth of what they are actually worth.

If the [GUPC] plan is to hold onto those gates and force us to look elsewhere to fabricate [new ones] from scratch, that to me is extortion. And it affects far more than just the Panama Canal. The canal is not being done just for Panama, it is being built for the world. The United States is the number one user. China is number two, and Latin America is the third biggest user. There is a lot of international interest to see this project is completed.

ENR: GUPC won the locks job with a bid of $3.12 billion, more than $1 billion under the next lowest bid submitted by the consortium of Bechtel and Taisei Mitsubishi. Is there reason to believe this was underbid?

Quijano: At the time we fully analyzed this and we fully believed the amount bid was an adequate amount. We had hired consultants who drew up a range of what the bids were expected to be. And we set an estimated range of $3.1 billion and $3.6 billion, which would depend on how each bidder saw the risk.

Many people compare GUPC's bid to Bechtel's bid but forget this was a design-build project; you bid on the basis of your design and the amount of risk you feel comfortable taking. But GUPC is now asking for $1.6 billion, which is far more than the difference in those two bids.

ENR: There were concerns when ACP chose to join both sets of locks into a single contract due to the size and complexity of the job. Was that a factor in the issues you are facing now?

Quijano: Because it was design-build we thought it was much better to have both [sets of locks] done by one general contractor than by two. The design had to be the same for both and by having one contractor do it, you could actually cut down on the time.

We felt [GUPC] could handle it if [it] had done the work with diligence from the very beginning, but, I regret to say, [the contractors] did not. We started to notice that about a year into the program. We started to get the impression they would not be able to complete the job in the allocated time we had allotted.

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ACP Responds With A New Proposal

Canal ExpansionThe Panama Canal Authority (ACP) responded to the latest approach in the press made by the Grupo Unidos por el Canal (GUPC), with a counter offer to continue the construction of the third set of locks, which has been paralyzed for three days.

" As we prepare to take the actions permitted under the contract to reactivate work on the project, we remain open to the possibility of reaching an agreement, and for that we are making this effort," said the administrator of the Panama Canal, Jorge Luis Quijano, in a press release.

According to the ACP, the proposal sent to the consortium does not increase the original contract price of $3.118 billion, nor does it accept or admit any claim (for cost overruns), which, if given, most follow the contract process (to be resolved).

(In the counter-offer) it is also understood that the parties will have to provide additional financial resources so that work on the project can be restarted as soon as possible, but no dates or details of the procedures were offered.

The offer, subject to review and approval by the parties, establishes specific dates for the delivery of the gates, by GUPC, and for the final completion of the work.

The two sets of locks (one on the Pacific side and one on the Atlantic side of the Panama Canal) require a total of 16 lock gates. Of these, four have already been transported to Panama. The remaining 12 are in Italy. Eight are still in different phases of the manufacturing process, and four have been completed and are ready.

The ACP also proposed to further extend the repayment period for the $748 million that the ACP paid in advance to the consortium, "to the extent that GUPC meets the required delivery dates."

Executives from the multilateral financial institutions who provided $2.3 billion dollars for the expansion program visited the ACP and toured the work site during the day yesterday.

The government of the United States, which administered the Panama Canal between 1914 and 1999, also urged the ACP and the GUPC consortium yesterday to reconcile the differences that have disrupted construction of the third set of locks.

"We hope for a rapid resolution of the current work stoppage, and the full resumption of activity in the expansion of the Canal," said a State Department spokesman, quoted by the DPA news agency. (Prensa)

Editor's Comment: The ACP is doing two things at once. They are getting ready to either take over the project or hand it to someone else to finish, while at the same time they have to listen to the GUPC continue to chatter and whine. So they tossed out this "new" counter proposal, which in fact does not contain anything all that new or different. The fundamental facts on the ground remain the same. The GUPC won the contract through a low-ball bid, and they fully intended to try to jack the ACP for the necessary $1.6 billion dollars from day one. The ACP knew what they were doing, and is sticking to their guns by simply saying no, and forcing the GUPC to complete the project as required by the terms of the contract. The GUPC simply can't do that (the money isn't there) so they will walk away. That opens the door for the ACP to sue them for the additional costs of completing the project, the $1.6 billion dollars lacking in GUPC's lowball bid. This all sort of boils down to little more than a game of high stakes chicken - with the Panama Canal in the middle. Not to worry though, because it will be built, albeit with some delay.

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The ACP Has A "Plan B" To Finish Panama Canal Expansion Project

Canal ExpansionJorge Luis Quijano , administrator of the Panama Canal Authority (ACP), said he was confident the project to build a third set of locks as part of the project to expand the Panama Canal would be done in 2015 "with or without the Grupo Unidos por el Canal," the contractor for the project, who stopped working on the project completely on this most important aspect of the expansion program.

Quijano made ​​his first public statements after the deadline imposed by the GUPC expired and the parties were unable to reach a negotiated solution to the problem, to avoid a complete shutdown of work on the project.

Flanked by the Vice Presidents of the ACP, in a packed press room, Quijano said "the project can be saved for 2015."

In order to achieve that, "we have to act fast, because the dry season is ending," said Quijano. Much more work can be done during the months of the dry season (mid December to mid April) than during the rainy season.

While declining to go into details, Quijano said the ACP has a Plan B and there is no fear about the work that is left to be done. Right now the entire expansion project is about 70% completed.

Inside the halls of the ACP it is understood the slowdown of progress on the project and the recent cessation of activity by the GUPC is sufficient reason for termination of contract.

In fact , according to the contract, if the consortium "abandons all or a substantial part of the works, or demonstrates the intention not to continue the execution of their duties," is cause for termination of the contract.

However, Quijano refused to discuss further details of the strategy followed by the entity.

"We are going to observe all of the legal steps to be sure that our decisions, after having made a complete and total analysis of the situation, are correct and within the terms of the contract for us to continue this project."

About the eventual takeover of the project, Quijano said they would take action "at the appropriate time" and he said "we have to work with a cool head, although we have a warm heart."

The ACP does not want to make any false steps which could cause the loss of the $400 million performance bond held by the Zurich American insurance company.

Yesterday, both Quijano and the GUPC raised the tone their rhetoric, while the two sides exchanged accusations regarding the causes of the crisis.

With the protocol of negotiations having expired, both sides took off the gloves which in recent weeks had left them making diplomatic pronouncements about the good intentions all around.

Quijano, who has been summoned to speak before the National Assembly, spoke of "threats" and "blackmail," and he said because of the "the intentions of the GUPC against the best interests of Panama and the Canal," they were unable to reach an agreement, due to the "inflexible position of the consortium," that "who tried to negotiate exorbitant numbers that were not sustained, outside of the contract."

Meanwhile, the GUPC spoke about the "unreasonably rigid position" of the ACP, and they warned a breakdown in the negotiations would lead to "years of litigation and arbitration" and cause delays on the project of between three to five years, which would leave a "continuous shadow on the ACP and the Panama Canal."

Paradoxically, both sides said they were open to a possible reconsideration, although Quijano acknowledged that confidence has deteriorated. (Prensa)

Editor's Comment: Boy, I called that one. Now they ACP will very carefully and slowly pick their way through the legal minefield. They will find a way to boot the GUPC, take over the project, cash in the $400 million performance bond, and then sue the GUPC for the rest of the cost of the project. Boy, are the lawyers going to feed off of this one. The only thing I don't know yet is what contractor is going to pick it up. It will either be Odebrect or Bechtel, but I don't know which...

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Panama says canal work suspended, company denies

Canal ExpansionA dispute over a $1.6 billion cost overrun in the Panama Canal's expansion took a new twist Wednesday after a Spanish company leading the project denied it halted work over the spat.

The Panama Canal Authority said the consortium led by Spanish builder Sacyr had halted work after negotiations broke down, but the company later announced that it made a "final offer" to prevent a shutdown.

The two sides have locked horns since December over unforeseen expenses in a project to widen the canal to accommodate massive cargo ships in the century-old waterway, which handles five percent of global maritime trade.

Panama Canal Authority administrator Jorge Quijano said the "inflexible position" of the consortium known as Grupos Unidos por el Canal (GUPC) had derailed the negotiations.

"They put a threat on the table, and today (Wednesday) they carried it out," he said.

"We demand the work be restarted immediately," Quijano said, adding that a proposal to cancel the GUPC contract is still on the table.

In a statement, Sacyr said the Panama Canal Authority had decided to "break off negotiations" but company president Manuel Manrique later said that the company would keep the talks alive.

"What happened is that the ACP (canal authority) rejected our last proposal without proposing a viable alternative, and this is why we released the statement," Manrique told Spain's Cadena Ser radio.

"But later we sent a letter proposing to continue and so we will see what happens... We have made a final offer to the canal (authority)," he said, adding that there was "no concrete date" to suspend the work.

"This depends on the response" from the canal authority, Manrique added.

The project to widen the canal, one of the biggest civil engineering operations in the world, is due to be completed next year but GUPC has said that the dispute threatens to delay completion by up to five years.

In its earlier statement, Sacyr said the collapse of the talks "puts in danger the widening of the canal and up to 10,000 jobs."

Sacyr said that if a solution were not found immediately, Panama would face years of litigation before national and international courts "on the events which have brought this project to the edge of failure."

'Bad' for world economy

The European Union's industry commissioner, Antonio Tajani, who has mediated the dispute, warned that "the interruption of the works would be bad news for employment, for the worldwide economy, for the expansion works of the canal."

Spain's Public Works Minister Ana Pastor called for an agreement be found quickly "because what is at stake is infrastructure that has an impact not only on the economy (of Panama) but also the world economy."

The canal facilities are being widened to permit the passage of ships carrying up to 12,000 containers, twice the current limit.

But the disputed contract to build locks, due initially to be completed this year, was already running nine months late and since the beginning of this year work has slowed down further.

GUPC says that unforeseen costs total $1.6 billion (1.2 billion euros) beyond the initial $3.2 billion value of the contract.

GUPC is in dispute with the Panama Canal Authority mainly over who was responsible for the quality of geological information and who should bear the cost of problems and delays arising from unexpected geological difficulties.

The consortium is proposing that the two sides each pay half of the extra costs until the project is completed.

They would then go before an international arbitration court for a decision on who is responsible for the unforeseen costs and who should pay.

Tajani said the breakdown was unexpected as the Panamanian president had said the previous day that the parties were "very close" to an agreement.

The consortium warned at the end of December that it would suspend work in three weeks' time if Panamanian authorities did not provide the extra finance demanded, and the deadline for progress in the talks ended on Tuesday.

The canal, completed in 1914 to offer a short cut and safer journey for maritime traffic travelling between the Pacific and Atlantic oceans, is about 80 kilometers (50 miles) long and is used by 13,000-14,000 ships each year. (Bangkokpost.com)

Editor's Comment: Man, this should go into the Business Management textbooks on how not to conduct business. First the GUPC guys win the contract by putting in a low-ball bid. Their management of the project has been crap from day one. Now they are talking about geological studies that were supposedly faulty. What happened to their original argument about the concrete being the cause of them falling behind?

The truth of the matter is GUPC gambled, and lost. The mistakenly calculated the ACP would capitulate to their demands, which they timed to fall just a few months before the upcoming presidential elections. They never thought for a moment the ACP would tell them to pound sand, refuse to hand over the $1.6 billion they were basically trying to extort from them, toss them off of the project, and hire someone else. Yeah, there were lots of surprises in the way this went down for the GUPC.

Oh, and when Martinelli told the press the two sides were about to reach an agreement - in reality the decision to tell them to fuck off had already been reached. That was just a play by Martinelli to put some psychological separation between him and Quijano. In fact, they are consulting about this every day, and making decisions together. Now Martinelli can look right at the television cameras and say "I support the independent decisions being made by the Board of Directors of the Panama Canal Authority." He appointed the majority of them, so they are doing his bidding. Trust me on this one - Martinelli is the hard edged negotiator who is making the big play calls here, from the sidelines. He does the "who, me?" thing better than anyone.

Regarding the jobs in Panama - this will just be a short delay. The GUPC had about 5,000 workers and right now about 70% of them are off the job. The ACP will bring in someone else, and those guys will hire the same workers, who will go back to work. Big deal, carnival is coming up, so they will take a break then go back to work.

Regarding economic impact - instead of spending $5.25 billion to expand the Panama Canal, the government of Panama will now be spending more than $7 billion. Most of that money stays in the country in the form of salaries, services, supplies, logistics, etc. So it's just more money flowing through the washing machine. No big deal.

Regarding the additional expense - the Panama Canal generates its own income. The traffic through the Canal will pay for the expansion. Again, no big deal.

Almost everyone quoted in this article from Spain, Italy, and the European Union don't want the GUPC to be tossed off the project. The governments of Spain, Italy and the EU will not be screaming bloody murder. The ACP will quietly execute clauses in their contract with the GUPC, take over the project, and hire someone else. Then, they will sue the GUPC for about $1.6 billion dollars (the additional expense of finishing the project.)

Sacyr said the ACP "rejected our last proposal without proposing a viable alternative." Yup, that's officially the end of negotiations. They were due to fail at some point anyway, and that failure came today. I expect there are phones ringing at Bechtel right now, and there are other companies sharpening up their pencils to take over this project - which will still have about $1.6 billion dollars left of juice in it. That's billion. With a "B".

So now Sacyr is saying "no wait, we're not done yet." Yes, you are. Pack your bags and get out. Game, set, and match.

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Panama Canal officials say work on major expansion halted by financial dispute

Canal ExpansionPANAMA CITY (AP) — Panama Canal officials say work on major expansion halted by financial dispute.

Editor's Comment: That's it. That's the end of the story. It's appearing on practically every news outlet, all over the place. The talks between ACP and the GUPC have broken down, as in done, over, not going to talk any more. And now the ACP has announced that work on the third set of locks has stopped (completely.) Prior to this the GUPC had already laid off most of their workforce at the end of December 2013 (for lack of money to pay them) so work on the project had already fallen to a snail's pace. And now work has stopped.

So, that's it. As I have been predicting for weeks, the GUPC is now toast. The next thing you will hear out of the ACP is a press release about how they are going to be executing or exercising several protective clauses in their contract with the GUPC, which allow them to take over the project in the event something like this happens.

Of course, the ACP will be very careful to stay within the framework of their contract - because they know eventually they will be suing the companies participating in the GUPC for the additional costs associated with their failure to build the project for the price they submitted.

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Talks Break Down in Panama Canal Contract Dispute

Canal ExpansionBy Sonya Dowsett (Reuters) - A planned extension of the Panama Canal, one of the world's most important shipping routes, was thrown into doubt on Wednesday after a group of companies said its talks with Panama's government over how to expand the canal had fallen apart.

Group United for the Canal, a consortium led by Spanish builder Sacyr, said in a statement that the government's canal authority had broken off talks on who will pay some $1.6 billion needed to complete the ambitious project. The Panama Canal Authority said it would hold a news conference at 9 a.m. local time.

The breakdown in talks is the latest setback to a project mired in disputes since the consortium, which also includes Italy's Salini Impregilo as well as a Belgian and Panamanian firm, won a bid to double the capacity of the near 50-mile (80 km) transoceanic cargo route.

Disagreements over cost overruns have already reached international courts and talks between the two sides over how to find the additional cash to finish the project had already been extended twice.

It was unclear whether Wednesday's breakdown was final. In its statement, GUPC - the Spanish acronym by which the consortium is known - said the failure of the talks meant the expansion and up to 10,000 local jobs were at immediate risk.

But the company said it was still seeking a solution for completion of the project, which had been scheduled for 2015.

If the partnership between Panama and the builders is indeed abandoned, it would likely mean further delays while Panama seeks financing and a new construction group.

That in turn, would be a setback for companies worldwide eager to move larger ships through the Panama Canal, including liquefied natural gas (LNG) producers who want to ship exports from the U.S. Gulf Coast to Asian Markets. Delays could also cost Panama millions of dollars in projected revenue from toll charges.

Last month, Panama President Ricardo Martinelli said that Panama had the resources to complete the expansion of the Canal even if talks with GUPC ended.

"We will finish the Canal in 2015 no matter what happens, rain, thunder or lightening," Martinelli told an audience of international investors and executives gathered in Davos, Switzerland. He did not give details as to who would pick up the work or the tab.

Shares in Sacyr plunged over 8 percent on the news before recovering some lost ground while Salini Impregilo fell 1.9 percent.

"I wouldn't be surprised if Panama already had a plan B," said a Madrid-based trader who asked not to be named. "As for Sacyr...they'll push forward with new contracts, but everything they do will be looked at with a magnifying glass from now on."

MONEY RUNS OUT

Disputes over the expansion of the Canal set in almost immediately after GUPC won the bid in 2009. At the time, officials and diplomats expressed concerns over the consortium's ability to complete the project since its requested tab was $1 billion lower than the nearest competitor.

Over the past months, the two sides had been discussing how to fund the $1.6 billion needed to complete the project through a co-financing deal. Disputes about liabilities for the cost overruns, which tally with the amount the consortium say it will cost to finish the work, are being fought out within the terms of the contract and may end up in international arbitration courts.

Spain's public works minister flew out to Panama earlier in the year to mediate talks while the European Commissioner for Industry Antonio Tajani had also offered to mediate negotiations, an offer rejected by the Panamanians.

In its Wednesday statement, the Spanish-led consortium said the Panama Canal Authority had broken off the latest talks, but it did not spell out why. The GUPC said that, in its latest proposal, it had offered $800 million in new and existing funds, while asking the Panama Canal to put in $100 million in funds. It also asked the Canal to extend the deadline by which the consortium needs to return $785 million in advance payments made by the Canal in order to free up cash.

"It is unjust and impossible for the PCA and Panama to expect that private companies will finance $1.6 billion in costs on a project that was to be fully funded by PCA," the consortium said in the statement. It said the Panama Canal had not paid a pending $50 million invoice that had meant to cover salaries this week for subcontractors and workers.

"Without an immediate resolution, Panama and the PCA face years of disputes before national and international tribunals over their steps that have pushed the project to the brink of failure," the consortium added.

For Sacyr, which has 48 percent of the consortium, the work brings in a quarter of its international revenue. Like most Spanish builders, the company relies heavily on foreign orders to offset a sharp economic downturn at home.

Sacyr has provided 476 million euros in cash advances and guarantees to the project. One analyst said this was the worst-case scenario in terms of what losing the project would mean for the builder.

"But the actual impact will only be determined after several years in the courts if there is no final agreement," said Juan Carlos Calvo, analyst at Espirito Santo, adding that losing the contract would not represent a cash outflow for Sacyr as it affected cash advances already paid.

Any loss of the contract would also affect insurer Zurich , which had been involved with discussions. The insurer had proposed converting $600 million of surety bonds into a loan that would free up money to help complete the project a source with knowledge of the matter had said.

Editor's Comment: As predicted. The Panama Canal Authority had all (100%) of the negotiating power, while the GUPC had almost none. Their threats to walk off of the job (originally on 20 Jan, twice extended) fell on deaf ears, because they had, in fact, already laid off most of their work force at the end of the year. So, in fact, they had already stopped working.

Now the ACP can simply hire someone else. They can now spend the $1.5 billion (or more) needed to finish the Panama Canal expansion project. They also have the GUPC companies by the balls - one in each hand - because of the contract they signed. The ACP will be able to argue in international courts that the GUPC should have been able to build the project according to the contract they signed, and they should be able to squeeze the companies for the money necessary to actually build the damn thing. So, who's fucking who now, bitch? Welcome to Panama, where screwing over foreigners is a favorite pastime...

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Deadline looms in Panama Canal dispute talks

Canal ExpansionBy Marcus Hand - The deadline is looming in negotiations between the Panama Canal Authority (ACP) and lock gate contractor Grupo Unidos por el Canal (GUPC) with the Panamanian president Ricardo Martinelli saying they are very close to an agreement.

Talks over resolving a dispute over $1.6bn in cost overruns on the Panama Canal expansion project were extended until 4 February.

"They are very close to arriving at a happy conclusion ... But I prefer for us to give time to the parties, who have set tomorrow as the final day, so that it may be they (who announce results), but I'm sure that they are close to arriving at an agreement," the president told reporters on Monday.

"I'm sure that the parties, before tomorrow, can arrive at an agreement that will be satisfactory for (them all). I understand that they are on the verge of getting there."

As the deadline approaches neither party has yet made a public statement on the outcome of the talks. (seatrade-global.com)

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' There is a window of understanding '

Canal ExpansionThe administration of the Panama Canal and its largest contractor have engaged in what is expected to be the last and final attempt to not break the $3.1 billion dollar contract signed in 2009.

Yesterday, the Grupo Unidos por el Canal (GUPC) and the Panama Canal Authority (ACP) agreed to extend until Tuesday, the negotiation process to find a solution to the problems of insolvency faced by the consortium, and to complete construction of the third set of locks.

Jorge Luis Quijano, ACP Administrator, was optimistic in what could be the outcome of the process of conversation.

"There is a small window of understanding and we must seize it. We are willing to listen, and there is an opportunity to approach," said Quijano, who avoided revealing details due to a confidentiality agreement entered by the parties.

This newspaper (La Prensa) learned that the negotiation focuses on two aspects. The ACP would be willing to extend the moratorium (grace period) for prepayments of $783 million the consortium has received. However, the point in question would be how much time to give the GUPC for the grace period.

Furthermore, they are exploring the possibility that the GUPC might get $400 million from international banks, to use as a financial security support - for the same amount - from the insurance company Zurich American. (Prensa)

Editor's Comment: Who knows. Work in progress. I still won't be surprised if they can't reach a deal and the GUPC is eventually gone for good...

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Panama Canal, Contractors Extend Talks On Dispute

Canal Expansion(Fox News Latino) PANAMA CITY, PANAMA – The Panama Canal Authority, or ACP, said Friday that talks aimed at resolving a dispute with the contractors building a third set of locks for the waterway will continue through Feb. 4.

Though the parties set a deadline of Feb. 1 to reach agreement, they have now decided to continue negotiations through the weekend, the ACP said in a statement.

Discussions between the ACP and the GUPC consortium began Jan. 7.

Zurich Insurance Group, the guarantor of the expansion project, joined the process last week and will be part of the extended dialogue, the ACP said.

GUPC, which is led by Spanish construction giant Sacyr and Italy's Impregilo, confirmed Friday that talks would continue and that a threatened work stoppage would be delayed until at least Feb. 5.

The consortium formally notified the ACP on Dec. 30 that it would suspend work Jan. 20 if the canal authority did not agree to pay the contractors an additional $1.6 billion to cover cost overruns.

Since then, the date of the possible shutdown has been postponed twice.

"The objective of the negotiations has been, and continues to be, to reach an a long-term accord for the realization of the Panama Canal expansion project in the shortest time and at the lowest cost, within the contract and the law," GUPC said Friday.

Talks "center on a plan of co-financing the costs for the completion of the project. The ultimate responsibility for the additional costs will be decided through international arbitration proceedings," the consortium said.

Both the ACP and GUPC want to complete the third set of locks and the most convenient way would be "to finish together," but only within the terms of the original contract, canal administrator Jorge Quijano has said.

The ACP said on Jan. 7 it would advance the GUPC $100 million and give the consortium a grace period of two months to repay a previous advance of $83 million, provided the contractors also put up $100 million and withdraw their threat to suspend work.

The consortium countered by proposing the ACP fork out an additional advance of $400 million while also pledging to contribute $100 million of GUPC funds to keep the project running.

Another proposal, presented unilaterally by Impregilo and made public on Jan. 9, called for the canal authority to make an additional payment of between $500 million and $1 billion to the GUPC to cover cost overruns.

Quijano rejected both of those formulas as "outside the contract."

The contract for the locks, which is the centerpiece of a $5.25 billion canal expansion, was awarded to GUPC in 2009 and calls for the ACP to pay the consortium a total of $3.12 billion.

So far, the ACP has paid GUPC $2.83 billion, including repayable advances, plus an additional $180 million for cost overruns.

The Panama Canal, which was designed in 1904 for ships with a 267-meter (875-foot) length and 28-meter (92-foot) beam, is too small to handle modern ships that are three times as big, making a third set of locks essential.

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Panama Canal says extends talks with consortium to February 4

Canal ExpansionBy Lomi Kriel (Panama City) (Reuters) - The Panama Canal Authority said on Friday it had extended a window for talks with a Spanish-led consortium expanding the waterway aimed at ensuring work continues on the project, which faces huge cost overruns.

The authority said it had agreed to continue talks until February 4 with the consortium, which had threatened to stop work on the project unless the canal foots the bill for $1.6 billion in unforeseen additional costs.

Earlier this month, the consortium, which is led by Spanish builder Sacyr, announced it could stop work by January 20. But it later said it would not call a halt on the project before at least the end of January.

"The parties agreed to continue meeting over the weekend to further evaluate the options aimed at reaching an agreement," the Canal Authority said in a statement.

Italy and Spain are both committed to finding a rapid solution to the dispute, Italian Prime Minister Enrico Letta and his Spanish counterpart Mariano Rajoy said on Monday.

The consortium also includes Italian builder Salini Impregilo, Belgium's Jan De Nul and Panama's Constructora Urbana.

Halting construction on the expansion would be a setback for companies eager to move larger ships through the century-old waterway, such as liquefied natural gas (LNG) producers who want to ship exports from the U.S. Gulf coast to Asian markets.

The canal and the consortium have traded proposals and counter-proposals to find ways to raise financing to keep work going while they deal with the cost overruns via arbitration.

The project was originally expected to cost about $5.25 billion, but the overruns could raise the cost to near $7 billion.

Work began on the expansion in 2007. The project, which is some 72 percent complete, will create a new lane of traffic along the canal and double its capacity.

Editor's Comment: Overall, the project is 72% complete. The progress on the largest contract to build the third set of locks - which is at the center of this conflict - is currently 65% complete. The GUPC has practically stopped working already, having laid off the majority of their employees. This is the second time they have agreed to extend their threat to stop working on the project. They clearly overplayed their hand, and now if they walk off the job they will be facing legal actions by the ACP for breach of contract. They keep talking, but in the end of the day there's no way in hell the ACP is just going to hand them (anywhere near) $1.6 billion dollars. My prediction remains. I think the GUPC will eventually be gone, and the ACP will hire someone else to finish construction.

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GUPC and ACP Continue To Negotiate As Deadline Approaches

Canal ExpansionNow with only two days remaining before the deadline set by the consortium Grupo Unidos por el Canal (GUPC) and their threat given to the Panama Canal Authority to walk off the job, representatives from both sides met today to continue efforts to negotiate a deal.

On Thursday, 29 January 2014, representatives from consortium - led by the Spanish company Sacyr - resumed negotiations with the insurance company Zurich American and the ACP.

The GUPC extended their original deadline of 20 January 2014 until 1 February 2014, of a threat to stop work on the project unless the ACP recognizes their demand for $1.6 billion dollars in cost overruns they are claiming.

Roberto Roy, Panama's Minister for Canal Affairs, said the best option continues to be for the consortium to finish the project.

He said they are making their last efforts for the original plan under the contract, to be that which takes place.

For his part, the President of the Republic, Ricardo Martinelli, said as the government he supports all decisions made by the Board of Directors of the Panama Canal. (Panama America)

Editor's Comment: Let's see what happens on Saturday, 1 February 2014. I think the ACP is just going to sit there and look at their watch, to see what the GUPC does when their "deadline" arrives. If they keep working, then all of this was just unnecessary drama. If they actually do walk off of the job, then they violated the contract and they open themselves up to a whole bunch of really expensive legal ramifications. In short, GUPC doesn't have any negotiating position to speak of. The ACP is holding all of the cards. What poor business practices by the GUPC members...

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Panama Canal Authority hit with second cost dispute

Canal ExpansionBy Rebecca Conan - A US$44mn claim against the Panama Canal Authority (ACP) filed by a consortium led by Mexican construction company ICA has gone to arbitration.

The claim is for supposed cost overruns in relation to the group's excavation contract as part of the US$5.25bn Panama Canal expansion, according to a report from the ACP.

The claim is due to what the consortium calls "different site conditions, modifications to the contract, work interruptions and late responses from the ACP."

The consortium, consisting of ICA, Costa Rican company MECO and Spain's Fomento de Construcciones y Contratas (FCC), was awarded a US$290mn contract to excavate the canal's Pacific entrance in January 2010.

Works were meant to wrap on January 31, 2015 but the consortium is seeking an extension, in addition to payment of the extra costs.

Following attempts to resolve the dispute, the case was referred to arbitration in October last year.

This is the second cost dispute to hit the canal expansion, with the ACP currently locked in negotiations with Grupo Unidos por el Canal (GUPC) in relation to a US$1.6bn overrun on construction of the third set of locks.

GUPC and the ACP have until February 1 to reach an agreement, after which GUPC said it will halt work. (Business News Americas)

Editor's Comment: However this article fails to point out the major - significantly important - difference in these two disputes. This complaint filed by ICA is being done within the framework of their contract with the ACP. The GUPC tried basically blackmail the ACP by demanding payment of $1.6 billion for "cost overruns," and it was done outside of the previsions allowed for in their contract. This tells me the ICA probably has a pretty good case, and the GUPC probably has a relatively weak case. I suspect the GUPC knows if they go through the normal channels as specified in the contract, they will lose their case.

So the fact that the ACP was "hit with" another claim really doesn't mean all that much. Compare the $44 million dollar ICA claim to the $1.6 billion dollar GUPC claim, which is much (much) larger. This one is small potatoes, comparatively speaking. And in the end the decision (if there is one) in favor of ICA will probably be less than the $44 million claimed.

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Italy, Spain say want rapid end to Panama Canal dispute

Canal Expansion(Reuters) - Italy and Spain are both committed to finding a rapid solution to a dispute which is threatening to halt work on widening the Panama canal, Italian Prime Minister Enrico Letta and his Spanish counterpart Mariano Rajoy said on Monday.

"We think it is absolutely fundamental that we manage to solve this controversy, this is a primary interest for Italy and Spain," Letta said at a joint news conference with Rajoy in Rome.

A consortium of construction companies, led by Spain's Sacyr, has threatened to halt work on expanding the Panama Canal unless a dispute over cost overruns is resolved.

Rajoy echoed Letta's words, adding that a halt in the works would cause "serious damage."

Editor's Comment: Yeah, serious damage to the economies of Italy and Spain. The largest two companies in the GUPC consortium hold a 96% stake in the project. When those companies make money, they pay taxes to these two governments. So yeah, if the ACP tosses them off of the job then it would be very bad for both Italy and Spain...

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Panama Canal Expansion Delays Will Slow Flow Of New Money To Government Coffers

Canal ExpansionThe delay in the construction of the third set of locks has caused the postponement for at least a year of the entry of additional revenues from the ACP to the state coffers of the Panamanian Government.

The newly expanded Panama Canal was supposed to go into operation this year (in 2014) meaning in 2015 the government of Panama would have started to receive the benefits of the project, thanks to increases in tolls and additional traffic.

But thanks to a delay of at least eight months caused by faulty concrete pourings by the Grupo Unidos por el Canal (GUPC), the country would end up seeing the first $1.5 billion in estimated revenue during 2016.

This would be an optimistic projection, according maritime industry sources, because there might be additional delays caused by the most recent crisis due to a liquidity for the GUPC consortium.

The consortium responsible for the construction of the third set of locks is currently working only at 25% capacity, after declaring serious cash flow problems, leading to a process of negotiation with the Panama Canal Authority (ACP) and the insurer for the project, Zurich American .

The three sides are participating in talks with an eye towards finding a funding mechanism that will allow for construction on the project to continue.

This week will be crucial in this process.

The ACP said they can take over the project and complete the work by 2015, if the GUPC walks off the job. (Prensa)

Editor's Comment: Currently the Panama Canal - before the expansion - receives a total of about $3 billion per year from all sources, tolls, services, selling water and electricity, etc. Of that total, $2 billion is spent on operations and maintenance. The vast majority of the money stays in Panama, so the benefit to the country of Panama is indirect. The remaining $1 billion or so is turned over to the government of Panama to be spent as part of the general budget. Again, these are the numbers right now, before the expansion. 3-2-1.

After the expansion those number will increase to 5-3-2. Meaning, the Panama Canal will be receiving a total of about $5 billion per year from all sources. They will be spending about $3 billion per year on operations and maintenance, and the remaining $2 billion or so will be turned over to the Panamanian government. So yeah (obviously) the sooner the newly expanded Panama Canal is opened, the better it will be for the government of Panama, and in turn all Panamanian citizens.

$2 billion dollars per year is a whole lot of money for a small little country like Panama. Look at it like this - that's enough money to pay for the entire (new) Metro Subway system project ($1.8 billion) - generated by the newly expanded Panama Canal in only one year. So every year they could take that same money and expand the system with Phase II, Phase III, Phase IV, etc. And all the while, most of the money being spent on the Metro subway system will be plowed right back into the Panamanian economy, where it will around and around like water in a washing machine.

These are some of the reasons why everyone is so bullish on Panama. They own a massive money making machine...

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