Sacyr has $574m at stake in Panama contract
Madrid, January 11, 2014
Sacyr, the Spanish building company leading a consortium to expand the Panama Canal, said it risks losing $574 million in guarantees and advance payments if a spat over cost overruns at the multi-billion dollar project is not resolved.
In an 8-page document sent on Friday to Spain's stock market regulator but which had not been made public until Saturday, the firm also detailed for the first time its claims of $1.6 billion in extra costs and said the canal extension would not be completed until June 30, 2015 at the earliest.
The consortium warned earlier this month it would halt work from January 20 on a third set of locks for the century-old waterway, one of the world's largest building contracts, unless the Panama Canal Authority footed the bill.
In an interview with Reuters, Sacyr Chairman Manuel Manrique on Friday played down the row and said the company was making progress in talks with the canal operator over financing to avoid a damaging work stoppage.
Sacyr said the guarantees it provided on the contract were worth $445.5 million as of December 31, 2013 and it had also made advance payments worth $128.4 million.
The company said it registered in 2012 a 665-million-dollar income based on cost overruns it had not yet been paid but hoped to cash in. It added it did not register any additional income linked to its claims as of September 30, 2013.
The consortium, which made a 289-million-dollar loss in 2012, has been paid 2.05 billion dollars for the work completed so far, or 66 percent of the $3.2 billion contract, as well as 784 million dollars in advance payments.
Sacyr insisted in the document it had over the last five months repeatedly asked the canal authority to start a constructive dialogue over the overruns which, it said, arose only after the work started.
"The overruns that are being claimed correspond to situations that appeared after the work started, which is when the inaccuracy of the information provided to the consortium to execute the project was verified," the Spanish firm said.
It added that the canal operator and international experts audited the overruns in March 2013 and said they were "real, reasonable and in line with the market."
Among the main claims brought by Sacyr is an $880 million extra cost due to "fundamental and irreversible changes" to the original project made by the Panama Canal Authority.
Another $497 million overrun arose because the basalt found locally, in contradiction with the documentation provided at the time of the tender, was not right for the mix of concrete planned for the locks, meaning the consortium had to bring in basalt from elsewhere.
A further $120 million, which was added to the cost of building a temporary dam, was originated by inaccurate geologic information in the contract, Sacyr also said. -Reuters