Construction work on a third set of locks for the Panama Canal remained halted for the 13th straight day on Monday, a day before the canal authority's self-imposed deadline to make a final decision on the project.
The administrator of the Panama Canal Authority, or ACP, Jorge Quijano, said last week that a tentative pact had been reached with the consortium responsible for the third-locks project, the centerpiece of a $5.25 billion canal expansion scheduled to be completed in 2015.
He told reporters that only one unresolved issue remained: getting the Zurich Insurance Group - the guarantor of the project - to convert a $400 million surety bond into a loan that would go toward completing the work.
"The negotiations must finish by next Tuesday at the latest," Quijano told lawmakers on Feb. 12 after stating that the ACP and the GUPC consortium - led by Spain's Sacyr and Italy's Impregilo - had reached a preliminary accord.
He told the legislators that the deal "could yield results" but that some final details had to hammered out and the agreement needed to be put in writing.
An ACP source told Efe Monday the autonomous agency was closely monitoring the situation, while sources close to GUPC said Tuesday was not an iron-clad deadline for wrapping up a deal and that the ball was currently in Zurich's court.
GUPC says it stopped work on the locks due to a cash-flow crisis stemming from cost overruns that it estimates at $1.6 billion.
The ACP does not accept that figure and says an international arbitration court should resolve the dispute, as specified in the contract.
Quijano told Panamanian lawmakers last week that a solution was was in sight and the work could resume in a matter of days if Zurich frees up the funds needed to finish the project, which is roughly 70 percent complete.
He noted that the tentative accord called for the ACP to grant GUPC an additional cash advance of $100 million and provide the consortium a grace period for repaying prior advances totaling $784 million.
GUPC would contribute $100 million of its own funds, while Zurich would provide an additional $400 million.
Even if the accord is finalized, completion of the expansion project will be pushed back until at least December 2015, Quijano said.
The contractual deadline for wrapping up the third set of locks was October 2014, but GUPC announced last year that it would have to move the finish date back to June 2015.
The project would face further unspecified delays if no agreement is reached and the ACP takes over the project, Quijano said, adding that the final cost would exceed the $3.12 billion price tag agreed with GUPC by an estimated $400 million.
That is the exact amount of the surety bond that Zurich issued in support of GUPC and which names the canal authority as beneficiary.
GUPC was awarded the third-locks project in 2009.
So far, the ACP says it has paid GUPC $2.83 billion, including repayable advances, plus an additional $160 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. EFE