Engineering giants vie for $5bn Panama Canal deal

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The Independent Online

Teddy Roosevelt called the construction of the Panama Canal "by far the most important action I took in foreign affairs during the time I was president." Yet it was also one of the most bruising. His detractors derided the massive project as the worst brand of America's buccaneering, gun-boat, diplomacy. The New York Times labelled it "an act of sordid conquest."

Yet nearly a century after it stirred such controversy, the 50-mile passage cut through the isthmus of Panama to connect the Pacific and Atlantic oceans – one of the world's most ambitious engineering feats ever undertaken – is is need of a makeover.

A clutch of European and Asian construction and engineering giants, including Ferrovial, the owner of Heathrow airport, are putting the finishing touches on proposals to be submitted this week to the Panama Canal Authority (ACP) to cut a new third lane running alongside the two existing channels that are now too narrow to accommodate the world's largest ships.

Interested bidders must provide detailed information proving their financial and technical capabilities by tomorrow to be able to enter the formal auction process for the $5.25bn (£2.54bn) project. The proposals are the first stage of the bidding process. Because of its sheer magnitude, companies are required to partner up in consortia.

The Spanish construction giants FCC and ACS have teamed up to put together a bid, while Italy's Impregilo has joined with Sacyr Vallehermoso of Spain, the Dutch giant Jan de Nul, and the Panamanian group Cusa to form a rival group. Ferrovial is examining the project, as is the domestic rival Acciona, but is still undecided whether it will enter the auction.

The project will be paid back through an increase in the fees paid by ships passing through the channel, which last year generated a total of $1.7bn for the ACP. Today, the canal handles 5 per cent of global shipping traffic with more than 14,000 ships passing through its locks, but it is rapidly reaching capacity. Fed by increasing demand from the east coast of the United States for cheap Asian goods, it will reach its maximum traffic load, on current trends, by 2012, raising the spectre of a bottleneck of freighters queuing up on either side of the isthmus.

The canal is no longer able to handle the newest generation of super-freighters, which have become too wide and heavy to pass through its locks. Under the project, a third lane will be dredged up alongside the two now in operation, doubling capacity. There will be a new set of locks fitted on either end to accommodate today's larger ships.

Freighters were once built especially to fit through the canal. Called "Panamax" ships, they were designed to fit within the dimensions of the locks – 33.5 metres wide and 320 metres long. In recent years, however, an increasing number of super-freighters, not surprisingly labelled "post-Panamax", have been built. The new locks will be 55 metres wide and have a length of 427 metres.

"World commerce is dependent on the canal. And as we continue to stay the course on our expansion plans, we foresee the new lane of traffic along the waterway influencing the future of shipping," Dani Kuzniecky, chairman of the ACP, told the Panama state news agency. "We are fully committed to this project and believe that expansion will fuel growth in the logistics and transportation sectors throughout the region – and the benefits will be felt all over the world."

Companies and port authorities are already gearing up for the increase in traffic that the expansion will allow, especially in Florida, which is where many ships from Asia unload their goods.

Yet as demand for commodities and other goods being fed by China and India continues to grow, even larger ships are now being built that are already beyond the canal's new spruced-up dimensions.

The expansion is slated to be completed by 2014, marking 100 years since the French crane boat Alexander La Valley, tiny by today's standards, became the first vessel to sputter through the newly cut passageway.