December 27, 2016 / 4:58 PM / a year ago

Peru says it will nix key Odebrecht contract if won through bribes

LIMA, Dec 27 (Reuters) - Peruvian President Pedro Pablo Kuczynski said he will terminate a $5 billion natural gas pipeline contract if it is found to have been won with bribes, even if corruption-plagued Brazilian builder Odebrecht exits the project.

In a videotaped interview with financial daily Gestion posted online on Tuesday, Kuczynski said some of the $29 million in bribes that Odebrecht recently acknowledged distributing in Peru may have been used to win the pipeline contract in 2014, which would trigger “termination of the contract” if true.

Kuczynski said he would apply a clause in the contract for the pipeline, the Southern Peruvian Natural Gas Pipeline, that allows Peru to seize the concession if corruption was part of the bidding process.

Last week Kuczynski’s government said Brookfield Asset Management Inc was close to buying Odebrecht’s 55 percent stake in the project, an announcement quickly overshadowed by revelations in a plea deal Odebrecht signed in the United States that it had bribed officials in Peru from about 2005 to 2014.

Odebrecht, at the center of Brazil’s biggest-ever graft scandal, must sell the 55 percent stake as a condition for bank funding to finance its construction.

Odebrecht’s junior partners on the pipeline project, Enagas SA and Grana y Montero, are considering buying part of Odebrecht’s stake to seal a deal with Brookfield ahead of a January financing deadline, Kuczynski said.

“Brookfield and the other companies have to evaluate with their shareholders and the banks that give them money if they can go forward or not” given the risk of losing the contract, Kuczynski said.

Grana did not immediately respond to requests for comment. Odebrecht, Brookfield and Enagas declined to comment.

Kuczynski’s government did not immediately respond to requests for additional comment.

Kuczynski’s government has refused to strip the corruption clause from the contract, which was a deal breaker for Sempra Energy in talks that collapsed in November. The government has said it would hold a new auction for the pipeline project if Odebrecht does not exit the project by mid January.

Prosecutors in Peru have been probing possible corruption in the pipeline contract, which Odebrecht and Enagas won in 2014 during the term of former President Ollanta Humala after their sole competitor was disqualified the day of the auction. Grana bought a 20 percent stake in the project from Odebrecht in 2015.

Prosecutors have said Humala took illicit funds from Odebrecht but have not pressed charges. Humala has denied wrongdoing.

Reporting By Mitra Taj

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