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Panama Canal Draws Line Under Contractor Spat

by Mike Godfrey, Tax-News.com, Washington

01 April 2014


The Panama Canal Authority (ACP) has announced that it has finalized an agreement with the contractor charged with the construction of the new locks at the Canal for a resumption of works.

The contract, awarded to Grupo Unidos por el Canal. S.A. (GUPC) in 2009, was originally projected to cost USD3.2bn but funds reportedly had ran dry by the end of last year. GUPC called for a further USD1.6bn in funding to resume work, and threatened to down tools indefinitely unless the Authority stumped up further cash.

After several weeks of dispute, on February 27, 2014, the Authority announced that talks towards an agreement had been completed. It said a conceptual agreement had been reached, subject to documentation, review, and final signature by the parties. This agreement has now been signed with some changes.

According to the Authority, under the revised agreement, the ACP and GUPC have agreed the following terms:

  • The contractor will finish the works in December 2015 – one year later than previously announced by the Canal in its provisional agreement;
  • The twelve lock gates will be delivered to Italy by February 2015 – three months later than provisionally agreed;
  • The Performance Bond for USD400m may only be released to Zurich North America. Newly, it has been agreed that the contractor will obtain financing for the same amount to complete the work;
  • GUPC will pay USD100m and ACP will advance USD100m (guaranteed), which will enable works to regain a normal pace;
  • The moratorium for the repayment of advances may be extended until 2018, subject to fulfillment of certain milestones and other conditions.

The agreement between the Panama Canal Authority and Grupo Unidos por el Canal. S.A. (GUPC) took effect after its signature on March 20, 2014.

TAGS: marine | Italy | construction | Panama | North America

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