DEMARCHE REQUEST: ENSURING FAIRNESS BY BIDDERS IN

UNCLAS STATE 068878

SENSITIVE
SIPDIS
PLEASE PASS TO ECON AND COMMERCIAL COUNSELORS

E.O. 12958: N/A
TAGS: EWWT BEXP ECON EFIN ETRD PM SP FR IT
SUBJECT: DEMARCHE REQUEST: ENSURING FAIRNESS BY BIDDERS IN
THE PANAMAL CANAL EXPANSION PROJECT


1. (SBU) Summary and action request. Please see para 2
for action request. Response requested by July 7. The
Panama Canal Authority (ACP) is expected to announce next
week the winner of the nearly $4 billion third set of locks
contract. This project is the centerpiece of the Canal,s
overall expansion plan. The three consortia bidding on this
project are led by Bechtel (U.S.),ACS (Spain) and Sacyr
(Spain). We are concerned that the Sacyr group may have used
the Spanish, French, and Italian credit agencies to guarantee
a $50 million performance bond that Sacyr would otherwise not
qualify for ) thereby disadvantaging the other competitors
and masking Sacyr,s ability to complete this vital project.


2. (SBU) ACTION REQUEST FOR MADRID, ROME, AND PARIS:
Embassy Action officers are requested to immediately
approach the appropriate government authority that supervises
the named export credit agencies and ask whether those
agencies of Spain (Secretaria de Estado de Comercio - CESCE),
France (Compagnie Francaise D,Assurance pour le Commerce
Extereur - COFACE),and Italy (Servize Assicurativi del
Estero - SACE) guaranteed, insured, or in any way backed a
$50 million performance bond for the consortia led by
troubled Spanish firm Sacyr to construct the nearly $4
billion third set of locks on the Panama Canal. Please report
back by July 7, by either cable slugged to the Department and
to Embassy Panama or by email to Marsha Singer in WHA/CEN and
Joel Reifman, Economic Counselor, Panama, and Jim Bangert,
Economic Officer Panama.


3. (SBU) Background: A consortium led by Spanish firm
Sacyr Vallehermoso S.A., in direct competition with consortia
led by Bechtel (U.S.) and ACS (Spain) has bid to build the
roughly nearly $4 billion third set of locks, centerpiece of
the Canal expansion project. Other leaders of the Sacyr
group include Impregilo S.p.A. (Italy) and Jan de Nul n.v.
(Belgium). As part of the process, the Panama Canal Authority
has asked for a $50 million performance bond from all of the
three consortia to verify their respective financial
soundness. We understand that Sacyr is nearly bankrupt and
is being propped up by the Spanish government. We further
understand that their condition was so dire that they could
not qualify for a $50 million performance bond on the open
market, and the 3 European credit agencies specified above
had to provide guarantees for Saycr,s performance bond.
However, at this point ) we have not confirmed the actions
of these three agencies.


4. While obtaining a guarantee from these agencies likely
does not violate, on its face, the terms of the ACP,s
bidding proposal, the fact that the guarantees ) if they
exist* could mask the true condition of Sacyr is of concern.
The USG is supporting U.S. firm Bechtel in its efforts to
obtain this enormous contract and bring jobs to the United
States. Concurrently, we wish to ensure that an otherwise
fair and transparent bidding process is not wrongfully
manipulated by the Sacyr consortium. If Sacyr is concealing
its true financial condition, with the support of European
governments, we wish to bring that fact to the attention of
the ACP before they announce the winner of this
once-in-a-century project.


5. The Department thanks you for your prompt assistance.
CLINTON