Panama Selects Legal Advisers For Canal Expansion

by Mary Swire, Tax-News.com, Hong Kong

12 April 2007

The Panama Canal Authority (ACP) announced this week that it has selected law firm Shearman and Sterling LLP as its international legal advisor for its expansion financing needs. Shearman and Sterling joins Mayer, Brown, Rowe and Maw LLP, the law firm selected to advise the ACP in the procurement and contracting aspects of the Expansion Program.

Shearman & Sterling, which has offices in Abu Dhabi, Beijing, Brussels, New York, San Francisco, São Paulo and Tokyo, advises many of the world's leading corporations and financial institutions, governments and governmental organizations in a broad range of international transactions. In Latin America, the firm represented the first Brazilian company to register an IPO with the US Securities and Exchange Commission.

"Shearman & Sterling distinguishes itself as a market leader in infrastructure financing," said ACP Engineering and Programs Management Director Jorge Quijano. "Shearman & Sterling's project development and finance group enjoys a strong global reputation, especially in Latin America. We look forward to working with them as we develop the best plan to satisfy the ACP's financing needs."

The top-tier global firm will work closely with the ACP and its financial advisor, Mizuho Corporate Bank, to determine the most advantageous financing options for the ACP. The decision followed an evaluation of proposals from several world-class firms specializing in the financing of international infrastructure projects.

The Panama Canal Authority is the autonomous agency of the Government of Panama in charge of managing, operating and maintaining the Panama Canal. The ACP is governed by its organic law and the regulations approved by its Board of Directors.

The government says that its receipts from the all-important canal rose in 2006 by Balboas 200m by comparison with the previous year. Panama's finances will be dominated for years to come by the proposed expansion of the canal, expected to cost US$5.25 billion, with construction expected to be completed in 2014.

The Panama Canal Authority recently appointed Japan's Mizuho Corporate Bank as its financial adviser during the financing process for the expansion plan. Mizuho's contract includes a review of the Authority's Master Plan and expansion proposal, the provision of strategic counsel on financing structures and strategies, and the creation and implementation of an integrated financial model.

Under the expansion plans, two 3-chamber locks will be constructed at both ends of the canal. This will create a third lane of traffic wide enough to handle the largest of modern container ships and tankers. New approach channels will also be prepared, whilst existing channels will be dredged to ensure large craft can enter the system.

Canal users were shocked earlier in the year when the Authority announced swingeing toll increases. However, the canal continues to be wildly successful according to figures released last month by The Panama Canal Authority for Q1 of the fiscal year 2007, showing increases in net tonnage, total transits and transits of supers (vessels 91 feet or more in beam). Tonnage increased 11.7% – to 79.9 million PC/UMS tons from 71.5 million PC/UMS tons. Total canal transits increased 8% – to 3,568 transits from 3,299. Moreover, transits of supers, or larger ships that require greater time and navigation skills to transit the Canal, increased 14.6% – to 1,968 transits from 1,718.

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