The collapse of the talks have been confirmed by Sacyr, the Spanish construction firm leading the GUPC consortium which is building the locks.
"Without an immediate solution, we face years of disputes in national and international tribunals," Sacyr said in a statement.
However, Sacyr adds that it will continue "to seek a solution for funding the completion of the project and completion of the works in 2015, even as the Panama Canal Authority broke off negotiations".
The Panama Canal Authority (ACP) may decide today to suspend the works license held by the Grupo Unidos por el Canal (GUPC) consortium temporarily or permanently, according to the Spanish newspaper El Confidencial.
The online Spanish news outlet says the talks, due to be completed last Friday, broke down over a request by the consortium not to return $784m paid up front by the ACP. It wants to repay the amount only after the construction work is completed.
Panama called for the advance to be returned last year, but GUPC threatened to suspend construction claiming more than $1.6bn in cost overruns. The ACP claims the builders are trying to renegotiate contract terms.
The recent talks, aimed at ending a dispute that has simmered since Panamanian officials rejected the contractors’ original concrete mix for the locks, has set back the target completion date from October 2014 to June 2015.
El Confidencial claims the ACP could now execute guarantees granted by financiers Scotiabank and HSBC plus insurance giant Zurich to proceed with the construction.
US engineering group Bechtel, which lost out to GUPC and has claimed the consortium’s bid was always too low to cover the cost of construction, could come back into the frame to finish building the new locks which will dramatically increase the capacity of the canal.
