Panama Canal Authority
April 24, 2006
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Relevant Information on the Third Set of Locks
Project
1 Project
Components
Third set of locks project objectives
. The objectives of the Canal
expansion are: (1) to make long term growing and sustainable
contributions to the Panamanian society, through the payments that the
Canal makes to the National Treasury; (2) to maintain Canal’s
competitiveness as well as the value of the Panama maritime route to
the national economy; (3) to increase the Canal’s capacity in order to
capture the growing demand with the appropriate level of service for
each market segment; (4) to increase Canal’s productivity, safety and
efficiency.
General description.
The third set of locks project is an integral Canal
capacity expansion program with three main components, as follows:
(1) the construction of two lock facilities – one in the Atlantic side and
one in the Pacific side – each with water reutilization basins; (2) the
construction of access channels for the new locks, as well as the
widening of existing channels; and (3) the deepening of the existing
navigation channels and the elevation of Gatun Lake’s maximum
operating level.
Locks location.
One new lock facilities will be located on the Pacific
side, to the Southwest of Miraflores Locks. The other new lock facility
will be located to the East of Gatun Locks. Both complexes will be
within the ACP patrimonial areas.
Number of lock levels.
Each one of the two new lock facilities will
have three levels or chambers, similar to the configuration of the
existing Gatún locks.
Locks dimensions.
Lock chambers will be 427 m (1,400’) long, by 55
m (180’) wide, and 18.3 m (60’) deep.
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April 24, 2006
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Maximum vessel dimensions.
The new locks will allow the transit of
vessels with a beam of up to 49 m (160’), an overall length of up to
366m (1,200’) and a draft of up to 15 m (50’).
Number of water reutilization basins.
Each of the chambers of the
new locks will have three water reutilization basins for a total of nine
basins each lock facility and a total of 18 water reutilization basins for
the entire project.
Dimensions of the water reutilization basins.
Each water
reutilization basin will be approximately 70 m wide, 430 m long and
5.50 m deep.
Dimensions of the new locks’ approach channels.
Two new channels
will be built to connect the new locks on the Pacific side with the
existing channels: (1) the north channel, which will connect the lock to
the Gaillard Cut channel, circumventing Miraflores Lake, will be 6.2
Km. long and (2) the south channel that will connect the lock with the
existing sea entrance on the Pacific Ocean, will be 1.8 Km. long. The
new channels will be 218 m (715’) wide, both on the Atlantic and
Pacific sides, which will allow post-Panamax vessels to navigate those
channels in one single direction at a time.
Dimensions of the widening and deepening of Gatun Lake and
Gaillard Cut channels.
Gatun Lake and Gaillard Cut channels will be
deepened by 1.20 m (4’), from level 10.4m (34’) PLD to level 9.1 m
(30’) PLD
1
. Gatun Lake channels will be widened to no less than 280
m (920’) on the straight portions and no less than 366 m (1,200’) on
the bends.
Dimensions of the widening and deepening of sea entrance
channels.
The navigational channels at the sea entrances on the
Canal’s Atlantic and Pacific sides will be widened and deepened to no
less than 225 m (740’) wide and 15.5 m (51’) deep, with the lowest
tide.
Elevation of Gatun Lake’s maximum operating level.
Gatun Lake’s
maximum operational level will be raised by approximately 0.45 m
(1.5’), from the actual 26.7 m (87.5’) PLD level to 27.1 m (89’) PLD.
Gate types.
The new locks will use rolling gates instead of miter gates
as the existing locks. For safety and redundancy, two rolling gates will
be installed at each end of each lock chamber. Rolling gates
maintenance will be performed inside the slot that they retract into,
which also serves as a maintenance dry dock.
The three components of the third set of locks project’s water
program.
(1) Raising Gatun Lake’s maximum operational level, (2)
deepening Gatun Lake’s navigational channel, and (3) three water
reutilization basins per each lock chamber.
1
PLD is the abbreviation of
Precise Level Datum
. It is the geodesic reference level used at the Canal.
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April 24, 2006
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Water reutilization basins’ yield.
With the water reutilization basins,
the third set of locks will reutilize 60% of water in each transit. The
third set of locks will use 7% less water per transit than each of the
existing lock lanes.
Gatun Lake’s channel deepening’s yield.
Deepening Gatun Lake’s
and Gaillard Cut’s navigational channels will allow the use of greater
lake storage capacity, which will increase the yield of the water supply
system by 385 million gallons (1,457 million litters) of additional
water per day. This will be enough water to perform approximately
2,550 additional lockages per year, or about 7 additional lockages per
day.
Gatun Lake’s elevation water yield.
Elevating Gatun Lake’s
maximum operating level will increase the lake storage capacity,
which will increase the yield of the water supply system by 165 million
gallons (625 million liters) of additional water per day. This will be
enough water to perform an annual average of approximately 1,100
additional lockages, or about 3 additional lockages per day.
Combined water program yield.
The combination of the three
components of the water program will allow the Canal’s water system
to provide 2,670 million gallons of additional water per day, an amount
of water equivalent to approximately 48.5 daily lockages or 17,700
transits per year
2
.
2
Cost estimate for the third set of locks project.
Cost estimate for the third set of locks project.
The project will have
an approximate estimated cost of $5,250 million, which includes
provisions for contingencies and inflation during the construction
period. This estimate assumes 2% average annual inflation.
3
Canal market
Main Canal market segments.
During FY 2005, the containerships
segment represented, with 98 million PCUMS tons
3
, a 35% of total
PCUMS tonnage transiting the Canal and 40% of its revenues. That
same year, the dry bulk segment represented a 55 million PCUMS tons
volume and 19% of revenues, while the vehicle carriers segment
generated 35 million PCUMS tons or 11% of revenues.
Key Canal route.
Within the containerized cargo segment, trade
between Northeast Asia and the U.S. East Coast has the highest
2
An equivalent lockage refers to the water required to transit a vessel from one ocean to the other through the existing Canal, or
approximately 55 million gallons per transit.
3
Cargo volume transiting the Canal is measured in PCUMS tons, PCUMS being the acronym for Panama Canal – Universal Measurement
System. A PCUMS ton is the unit used by the Canal to establish tolls, and measures vessels volumetric cargo capacity. A PCUMS ton is
equivalent to approximately 100 cubic fee of cargo space, and a 20-feet long container is equivalent to approximately 13 PCUMS tons.
Panama Canal Authority
April 24, 2006
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potential for Canal traffic growth. At present, this route represents over
50% of PCUMS volume of containerized cargo transiting the Canal.
Projected traffic growth for the expanded Canal.
In the most
probable scenario, Canal traffic will increase from the 280 million
PCUMS tons that transited through the Canal during FY 2005 to nearly
510 million PCUMS tons in FY 2025, which represents an 82%
growth. In the highest growth scenario, traffic will reach 585 million
PCUMS tons in 2025, while in the lowest growth scenario demand will
grow to almost 480 million PCUMS tons in FY 2025. This represents a
growth of between 72% and 110%, considering the lowest and highest
growth scenarios, respectively.
Growth forecast for containerized cargo transiting the Canal.
Most
probably, containerized cargo traffic will increase at an average annual
rate of approximately 5.6%, from 98 million PCUMS tons in 2005 to
close to 296 million in 2025. In the optimistic scenario, containership
demand would grow to reach 345 million PCUMS tons in 2025 and, in
the pessimistic case, to 279 million.
The advantages of post-panamax containerships
. These ships offer
scale economies that reduce shippers’ operational cost per TEU
4
by 7%
and 17%. Transcontinental routes where shippers may use post-
Panamax vessels hold an advantage over routes where these may not
be used, such as the Canal.
Other Canal segments’ growth projections.
In terms of PCUMS
volume, the vehicle carriers and cruise ships segments will have an
average annual growth of between 2% and 3%. The dry bulk segment
will grow at an average rate of about 1% per year during the next
twenty years.
Canal competitors.
In the containerships market segment Canal
competitors between Northeast Asia and the U.S. East Coast, are: (1)
the transpacific route combined with the U.S. Intermodal system of the
United States and (2) the Suez Canal route
Market share.
In the containerships route between Northeast Asia and
the U.S. East Coast, the Canal holds a 38% market share, while the
transpacific / Intermodal route holds 61% and the Suez Canal route,
1%. Should the Canal be expanded with a third set of locks, the
Panama route will increase its market share to about 49%. Otherwise,
Panama route’s market share will decrease to about 23%; that of the
Intermodal system will go up to 65%; and Suez’s to 12%.
The post-Panamax containerships fleet.
By 2011, the entire pos-
Panamax containerships fleet will consist of approximately 670 vessels
with a total capacity of about 4.6 million TEUs, twice the current
capacity of the post-Panamax containership fleet. Therefore, by that
same year, 37% of the world’s containerships fleet capacity will be in
vessels that cannot transit through the Canal due to their size.
4
One TEU (
twenty-foot equivalent unit)
is the term used to identify a 20’ long maritime container, or its equivalent.
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Few vessels represent many transits.
For market segments that
operate in itineraries, one single vessel repeats its route multiple times
per year. In January 2006, there were 36 liner services operating with
291 Panamax containerships in the Northeast Asia and the U.S. East
Coast route through the Panama Canal. These vessels represented
2,119 transits, more than 85 million PCUMS tons, and paid B/.377
million in tolls, which represents 33.8% of Canal revenues. In
conclusion, a reduced number of large vessels operating on permanent
rotations represent a major traffic and revenue volume for the Canal.
4
Canal capacity
Maximum sustainable capacity of the existing Canal.
With the
completion of a few remaining improvements, the Canal will have a
maximum sustainable capacity of between 330 and 340 million
PCUMS tons per year, equivalent to approximately 13,800 and 14,000
ocean going vessel transits per year. This maximum capacity is
determined by the capacity of the existing locks, and cannot be
increased further without the construction of the third ser of locks.
The date when the Canal will reach its maximum capacity.
The
present Canal will reach its maximum capacity between the years 2009
and 2012.
Present Canal utilization level.
Currently the Canal handles about
280 million PCUMS tons. Considering its maximum capacity of 340
million tons, the Canal is currently operating near 85% of its maximum
sustainable capacity.
Booking slots shortage.
Over 75% of Canal users request a
reservation slot to guarantee a particular transit date, and the number of
these requests is increasing. The Canal does not have enough booking
slots for all those requesting them. During the last two years, the Canal
could not provide a reservation to approximately 20% of the users who
requested them.
Canal capacity is exhausted.
Close to 50% of transiting vessels have
the maximum with that fits in the locks and over 10% have the
maximum length. Approximately 80% of the PCUMS tonnage that the
Canal handles transits in vessels of the maximum dimensions that fit in
the locks. Also, most Canal users already utilize the largest vessels
appropriate for the routes they serve.
Capacity of the Canal with the third set of locks.
The Canal,
expanded with the third set of locks, will have a maximum sustainable
capacity of approximately 600 million PCUMS tons per year.
Maximum vessel sizes that may be use the new locks.
The new lock
chambers will be able to transit post-Panamax containerships with a
366 m (1,200’) length, 49 m (160’) width and a 15 m (50’) draft in
tropical fresh water. This is equivalent to containerships with a
nominal capacity of up to 12,000, 20’ long containers, and tankers and
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dry bulk vessels of Capesize and Suezmax dimensions. Typical
Capesize and Suezmax sized vessels that would use the post-Panamax
lock, have a 130,000 to 170,000 tons dead weight; and are 270 to 280
m in length and 40 to 45 m in width.
5
Project execution
Commissioning.
The execution of the third set of locks project will
start in 2007 if it is approved by referendum during 2006.
Project Duration.
The execution of the project will take up to 8 years,
between 2007 and 2014. The third set of locks will begin operations on
2015.
Job generation during project execution.
Estimates are that
approximately 35,000 to 40,000 additional job positions will be created
directly and indirectly due to the projects construction activities.
During these works, the period when employment will be most intense
will be between 20109 and 2011. Among the jobs hat will be created
during this peak construction period, about 6,000 to 7,000 include
construction workers.
Job generation after project execution.
Between 10% and 15% more
jobs will be created in the economy if the Canal is expanded. It is
estimated that, without the expansion of the Canal, by 2025 there will
be 1.5 million employed people. The number of additional jobs created
due to the expansion will be between 150,000 and 250,000 jobs by the
year 2025.
Payments to the National Treasury during the construction.
During
the construction of the third set of locks, the Canal will continue
making contributions to the National Treasury in concept of rights per
ton and operational surplus. These payments will never be less than
those made to the National Treasury in 2005 of those that will be made
in 2006. In cumulative terms, the Canal will contribute over B/.6,000
million in concept of rights per ton and surplus during the construction
period, between 2007 and 2014.
Costs recovery.
Third set of locks project investments will be
recovered through Canal toll charges. In accounting terms, the
investment will be recovered in ten years or less.
Financing.
The financing of the third set of locks will be the result of
combining a reasonable tolls increase, implemented immediately after
the moment when the proposal is approved, with interim external
financing sources in order to meet the requirements during the peak
construction period. Therefore, the third set of locks project will be
financed through a mix of ACP capital contributions and external
financing. The amount to come from external financing will depend on
(1) investment amounts required by the project; (2) the need to build as
fast as it is technically and economically viable; (3) Canal revenues
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resulting from Canal traffic volumes and the price policy implemented
by ACP.
Financing will be temporary to cover peak construction needs.
Financing for the third set of locks project will be temporary to cover
the project’s peak construction periods, and it will be repaid within a
reasonable time after commissioning.
The source for the repayment of
this interim financing will be the Canal tolls
No need for State endorsement or guarantees.
The external
financing contracts undersigned by ACP for the third set of locks
project will not have the endorsement of the State, and will be solely
guaranteed by the cash flows that the project will generate. No State
guarantees will be utilized to back up the third set of locks project.
Different financing sources will be used.
ACP will use financial
markets different than those utilized by the State to finance its capital
programs.
6
Operational aspects of the expanded Canal
Existing locks will continue to operate.
The existing locks will
continue to operate during construction and once the third set of locks
begins operating. With proper maintenance, the present locks will
continue to work indefinitely. The third set of locks, due to the increase
in capacity, will allow adequate maintenance of the existing locks,
which will have been operating for 100 years by that time.
Positioning vessels with tugboats.
In the third set of locks, vessels
lockage process will be assisted with tugboats instead of locomotives,
as they it is done now.
Uninterrupted present Canal operations.
The Canal will continue to
work as usual and without traffic interruptions during the construction
of the third set of locks.
New locks will work with water flowing by gravity.
The new locks
and their water reutilization basins will work similar to existing locks,
where water flows by gravity, with no need for pumps.
Tolls collection.
Tolls will not be different regardless of which lock is
used.
Operations with and without basins.
The third set of locks will be
able to operate without the water reutilization basins and maintain its
efficiency, as well as its transit capacity. The third set of locks will
continue working even when water reutilization basins are under
maintenance.
7
Project environmental aspects
No reservoirs will be built.
The third set of locks project does not
require the construction of reservoirs. The expanded Canal will be able
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April 24, 2006
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to operate at full capacity without the need for additional water other
than that produced by the western area of the watershed with Gatun
and Alhajuela lakes. It will not be necessary to relocate any
communities. The project’s construction site is entirely located within
ACP operational and administrative areas.
Cultural and scientific resources.
Archaeological and paleontological
prospecting has been performed at the site of the new locks and
channels, and it has been determined that no major archaeological,
cultural or scientific findings are likely to occur in these areas. During
the construction, permanent supervision of all areas which may contain
cultural or scientific resources will be conducted, in order to detect and
rescue those of scientific interest.
Water quality.
Gatun and Alhajuela lakes will maintain their quality
of tropical fresh water with stable ecosystems, and their water will be
kept only to well within appropriate quality levels and standards to be
potabilized and used by the population.
8
The project’s economic and social yield
Project rate of return.
Based on the most probable demand
projection, investments on the third set of locks will generate an
internal rate of return in the order of 12%
5
.
Social profitability rate.
The social profitability rate of the third set of
locks project is between 11% and 14%. When studying the effects of
expanding the Canal on Panama’s poverty, conclusions where that if
the project is executed the number of poor people will decrease by over
one hundred thousand people in 2025, as opposed to the no-expansion
scenario.
Effect on the GIP.
The expansion of the Canal will allow Panama to
reach a gross internal product of B/.31,700 million in 2025, which
represents almost 2.5 times that of 2005, and is equivalent to over 5%
average annual growth for the next 20 years.
5
The third set of locks project generates an internal rate of return in the order of 12%, considering cash flows not affected by inflation, in 2005
dollars. Taking into account a 2% average possible annual inflation, the expansion program generates a 14% internal rate of return.