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. (Reuters)