The Panama Canal Authority, or ACP, said Wednesday it will not yield to "blackmail" and is looking for ways to restart work on a third set of locks for the inter-oceanic waterway, accusing the consortium tasked with the expansion of breaching its contract by making a unilateral decision to halt construction.

The GUPC consortium, led by Spain's Sacyr and Italy's Impregilo, "carried out its threat" to suspend the project after the ACP refused meet its demand for more than $1.6 billion to cover cost overruns, said canal administrator Jorge Quijano, who termed the demand "exorbitant and unsubstantiated."

"What we're not going to allow is for this project to be stalled for an excessive amount of time. We'll take the necessary steps at the right time," he told a press conference.

He reiterated that the ACP "will fulfill all the contract terms and finish (the expansion project) in 2015 with or without the GUPC," while denying that the canal authority had broken off the talks.

Quijano said the clock would start to run now that the work had been fully suspended and that the ACP had sent a letter to the consortium threatening possible cancelation of the contract, though he did not indicate how much time it had to resume work.

"I don't want to even insinuate that the next steps are easy. What I do want to make clear is that the Panama Canal will not let itself be blackmailed," the administrator said.

He warned that the ACP was ready to defend itself "in any court in the world" in the event the GUPC embarks on a legal battle.

The ACP's options include taking over the project, and Quijano said "there are companies that have already taken a look to see" the progress made thus far.

"There are all kinds of offers and we're going to wait for the right moment. We're not going to talk about that right now because we haven't hired anyone. Those are the steps that would come if necessary," he said.

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.

The GUPC, however, formally notified the ACP on Dec. 30 that it would suspend work Jan. 20 if the authority did not agree to pay the contractors $1.6 billion to cover cost overruns. Although the consortium did not halt work immediately when no agreement was reached, the two sides have been unable to strike a deal.

During talks between Jan. 7 and midnight Tuesday, the GUPC maintained an "inflexible" position and insisted that the ACP negotiate on the basis of "exorbitant and unsubstantiated figures" that were outside the scope of the contract, Quijano said.

The administrator said that every time an agreement was in sight the GUPC hardened its stance and returned to its initial proposal.

The consortium, for its part, said Wednesday in Madrid that even though the ACP had broken off the talks it was continuing to seek a solution to its cash-flow problem with a view to completing the project in 2015.

In a statement, the GUPC said the talks broke down while the parties were studying a proposal submitted by the consortium.

Under that proposal, the GUPC would provide $100 million in new funding and $400 million in newly financed funding, while the ACP would fork out an additional $100 million and extend a deadline for the consortium to repay $785 million in advance payments.

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. EFE