Panama Canal expansion in doubt as cost row halts work

MADRID/PANAMA CITY (Reuters) - A planned expansion of the Panama Canal, one of the world's most important shipping routes, was in doubt on Wednesday after talks between the canal administrator and a Spanish-led building consortium fell apart and work ground to a halt.

Group United for the Canal, a consortium led by Spanish builder Sacyr, said in a statement that the government's canal authority had broken off talks on who will pay some $1.6 billion needed to complete the ambitious project.

The Panama Canal Authority's head, Jorge Quijano, said the canal had held general talks with other companies about work still pending on the expansion, but was open to talks with the consortium. He said work at the expansion site had stopped.

Quijano told a news conference the consortium had been "inflexible" and that the project would be completed in 2015 "with or without" it.

He said the canal was evaluating its next steps, but a deal was still possible.

"The distance between the parties remained too great, mainly because the (consortium) has acted against the interests of Panama and its canal," Quijano said.

"It doesn't mean a deal is no longer possible, although the window is closing minute by minute."

The failure of the talks was the latest setback to a project mired in disputes since the consortium, which also includes Italy's Salini Impregilo as well as a Belgian and Panamanian firm, won a bid to double the capacity of the near 50-mile (80 km) transoceanic cargo route.

Disagreements over cost overruns had already reached international arbitration and talks between the two sides over how to find the additional cash to finish the project had been extended twice.

The project was originally expected to cost about $5.25 billion, but the overruns could raise it to near $7 billion.

Asked if the relationship with the canal had broken down definitively, Sacyr CEO Manuel Manrique told Spanish radio: "No."

Shares of Sacyr had risen as much as 6.8 percent on Tuesday in anticipation of a deal, but plunged over 8 percent on the news on Wednesday before recovering some ground. Salini Impregilo's shares were down over 1.0 percent.

In its statement, GUPC - the Spanish acronym by which the consortium is known - said the suspension of discussions meant the expansion and up to 10,000 local jobs were at risk.

Any delay in the project would be a setback for companies worldwide eager to move larger ships through the Panama Canal, including liquefied natural gas (LNG) producers who want to ship exports from the U.S. Gulf Coast to Asian markets.

(Additional reporting by Tracy Rucinski in Madrid, Alessandra Galloni in Rome; Editing by Simon Gardner, Kieran Murray and Bernadette Baum)

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