Port operator APM Terminals, part of Denmark’s A.P. Moller-Maersk, has dropped Mexico’s ICA construction firm from a $300 million port project after it ran out of cash and could not continue work, two people familiar with the matter said.
ICA, which has defaulted on debt payments, was dismissed at the end of December from the project to build a new container terminal in the major Mexican Pacific port of Lazaro Cardenas, the people said.
As early as 2013, ICA’s liquidity problems caused delays, forcing APM Terminals to negotiate an extension to the project deadline with the government, one of the people said. The project is nearly two-thirds complete, the person added.
Representatives for ICA and APM Terminals did not immediately reply to requests for comment.
The cancellation of the Lazaro Cardenas contract raises questions about ICA’s immediate prospects after it said it would default on two separate interest payments totalling about $37 million in order to privilege operations.
The company, hit by a sinking peso that makes its substantial dollar debt more expensive, has said it would present a preliminary restructuring plan in February.
The project to design, build, and operate a new container terminal in Lazaro Cardenas for 30 years was awarded in 2012 to a consortium led by APM Terminals, ICA said at the time.
ICA, APM’s sole partner with a 5 percent stake, was given the initial civil construction phase, which included dredging a channel and building a wharf, container yard, rail facilities, offices and a water treatment plant.
The Mexican company was hired for the first phase of what was laid out as a three-stage $900 million expansion of the cargo port. Successful completion of the first stage could have secured ICA more work in the latter phases.
Strikes broke out after ICA’s work ground to a halt. It has since restarted and the terminal should begin operating from July, one of the people said. Civil construction work will be completely finished by the end of this year, the person added.
(By Alexandra Alper And Dave Graham, Additional reporting by Noe Torres; editing by Grant McCool)