Fitch: Panama Canal Delay May Postpone Rise in U.S. Port Throughput

A significant delay in the construction project to expand the Panama Canal could postpone increases to throughput and related revenues for the Ports of Houston, Miami, New York, Savannah, Charleston and others on the Gulf of Mexico and Atlantic, Fitch Ratings says.

Any revenue losses associated with a significant delay are likely to have a smaller impact on ports that are already "big ship ready" as post-Panamax ships are increasingly being used on all-water routes from Asia to the East and Gulf Coasts via the Suez Canal. Other ports with ongoing projects to dredge their channels, increase their berth capacity, and become "big ship ready" in anticipation of larger ships coming through the Panama Canal may see pressured returns on their capital investment if they develop significant delays.

The consortium that was chosen to expand the Panama Canal, led by Sacyr, may stop work on the project by Jan. 20 if an agreement to increase their payment is not agreed upon. We view the ongoing negotiations between the consortium and Panamanian, Spanish and Canal Authority parties as a sign that a long construction delay could be avoided. The high profile nature of this project provides some incentive for the involved parties to find solutions to potential claims, to continue to perform, and ultimately to deliver the project. However, escalation of the conflict, or a protracted dispute where contracts are terminated or reassigned, could significantly increase project costs and delay completion.

Additional information is available on www.fitchratings.com.

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