MercoPress. South Atlantic News Agency

Panama Canal expansion discussions stall; Italian company demands an extra 1bn

“Impossible ... They are completely outside the contract and that's not going to happen,” said ACP Jorge Quijano.

The Panama Canal Authority, or ACP, said on Wednesday it would be “impossible” to meet the demands of Italian builder Impregilo, which has called on the government agency to make an additional payment of up to 1 billion dollars to cover cost overruns affecting a project to expand the international waterway.

 “Impossible ... They are completely outside the contract and that's not going to happen,” said ACP administrator Jorge Quijano.

He made his remarks during an appearance at Panama's National Assembly, where he was consulted on several proposals by Impregilo, a member of the Spanish-led GUPC consortium working on the 5.25bn expansion, made public on Wednesday in Rome and another presented on Tuesday in Panama by the international consortium.

In the statement released in Rome, Impregilo CEO Pietro Salini proposed that the ACP pay the consortium an additional $1 billion to finish up the project.

The administrator told lawmakers that the proposal presented on Tuesday in Panama by the GUPC also was unsuitable since it asks the ACP to advance 400 million, as the TVN television network reported on its Web page.

”The proposal by the GUPC is impossible ... The GUPC has the technical ability to finish this project ... (and) there is no negotiation outside the contract, at least under our administration,“ said Quijano, according to the Web page of the Panama America newspaper.

”The ACP could take control of the project given the inability of the GUPC to continue the expansion,“ Quijano told lawmakers, according to the Panamanian paper.

The consortium, which in 2009 obtained a 3.12 billion contract to construct a third set of locks, the centerpiece of the canal expansion, said last Wednesday that it would suspend work in three weeks if the ACP did not agree to pay an additional 1.6 billion to cover cost overruns.

Representatives of the ACP and the GUPC met Tuesday, a day after Spanish Development Minister Ana Pastor, who traveled to Panama to mediate the dispute, persuaded the parties to agree to a framework for resolving their differences.

The ACP expressed its willingness to advance a payment of 100 million and authorize a moratorium of two months on the payment of another 83 million it had advanced earlier to the GUPC, provided the consortium also put up 100 million and withdrew its threat to suspend work.

Quijano set forth other conditions for making the advance, including that the entire 283 million would be used to pay subcontractors and materials providers with an eye toward guaranteeing continuity in the project over the next ”two to four months.”

The GUPC, which is led by Spanish construction giant Sacyr Vallehermoso and also includes Impregilo, Belgium-based Jan de Nul and Panamanian firm CUSA, said on Tuesday that the construction of the third set of locks is more than two-thirds complete.

The Panama Canal designed 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.