July 14, 2016 / 10:42 PM / 2 years ago

Two groups in the running for stake in Colombia's Magdalena project

BOGOTA, July 14 (Reuters) - Two international groups are in the running to take over much of construction firm Odebrecht’s $851.3 million majority stake in a project to make Colombia’s Magdalena River more navigable and will have between 30 and 60 days to finalize funding proposals, 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.

There are now two international groups, made up of multiple companies, which could take over the stake, Cormagdalena, the government agency overseeing the project said in a statement, down from 16 original possible bidders.

“Up to this point, in a preliminary evaluation, both groups comply with contract requirements, but they will not obtain guarantees from Cormagdalena until they have closed on financing,” the statement said.

The companies names are being kept confidential.

The project contract allows Brazil-based Odebrecht to pass the majority of its 87 percent stake in Navelena to another firm in extraordinary circumstances.

The company paid fines of 20.86 million pesos per day, the equivalent of 30 minimum monthly salaries, for 30 days for failing to find a substitute by a June deadline.

Should one of the two groups not be approved to take over the stake by August 30, Odebrecht could face contract termination proceedings, the statement said.

Navelena, 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 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 = 2,936.53 Colombia pesos Reporting by Julia Symmes Cobb; editing by Grant McCool

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