June 10, 2016 / 10:32 PM / 2 years ago

Odebrecht misses deadline to transfer Colombia project, fines to begin

BOGOTA, June 10 (Reuters) - Construction firm Odebrecht has not yet found a company to take over a large portion of its $849.7 million majority stake in a project to make Colombia’s Magdalena River more navigable and will now begin paying fines for failing to start construction, the government said on Friday.

Odebrecht, Latin America’s largest engineering conglomerate, said in May it would relinquish 50 to 75 percent of its participation in the Navelena consortium, tasked with deepening the river to allow the passage of large shipping barges.

The project contract allows Brazil-based Odebrecht to pass the majority of its 87 percent stake in Navelena to another firm in extraordinary circumstances. Odebrecht had until Saturday, when construction was set to begin, to find a substitute.

Without an alternative company in place, Odebrecht will be required to pay fines of 20.86 million pesos per day, the equivalent of 30 minimum monthly salaries, Cormagdalena, the government agency overseeing the project said in a statement.

Odebrecht told Reuters it had no immediate comment on the matter.

Twelve multinational firms, their names kept confidential, had expressed interested in the stake, Cormagdalena said in a statement.

Should a substitute not be found within 30 days, Cormagdalena could begin the process of terminating the contract, the agency said.

The Navelena consortium, which also includes Colombian firm Valorcon, is set to fund most of the project and profit from toll charges for seven years after its upgrade of the waterway.

The head of Cormagdalena told Reuters last month he was confident Odebrecht would find a substitute and construction would go forward as scheduled.

The construction firm pulled out in a bid to preserve the credibility of the project as Odebrecht faces corruption allegations in Brazil, Cormagdalena said in a statement at the time.

Some Odebrecht executives are seeking plea deals with Brazilian prosecutors investigating a massive graft scheme in a probe that has targeted major political parties and contractors for the country’s state-controlled oil firm.

The Magdalena project, valued at 2.5 trillion Colombian pesos, is set to increase cargo transport on the river to some 10 million tonnes by 2029, in a bid to reduce freight costs and aid exports by commodities producers and agricultural companies.

$1 = 2,942.13 Colombian pesos Reporting by Julia Symmes Cobb; Editing by Cynthia Osterman

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