Panama to cancel US$1bn Odebrecht hydro contract

Panama has announced it will rescind a US$1bn contract with Odebrecht for the Chan II hydroelectric project as the fallout from Brazil's biggest ever corruption scandal widens.

In a statement, Panama's government said it is "adopting necessary actions" to cancel a 50-year concession to build and operate the plant, awarded to Odebrecht in 2014.

The Brazilian firm will also be barred from bidding for upcoming infrastructure projects, including a fourth bridge over the Panama Canal and a new metro line, the government said.

Planned for Valle del Riscó, in Bocas del Toro province, the 214MW Chan II plant is slated to begin generating electricity in 2019.

Odebrecht holds a 77% stake in the project alongside Panama's state power utility Egesa. Upon its completion, Odebrecht will assume full control of the plant.

The government said the bidding ban would only be lifted when Odebrecht fully cooperates with local investigators and pays for damages.

Earlier the government said a team of prosecutors had travelled to the US seeking details about alleged Odebrecht graft in the Central American nation.

In a plea bargain with US authorities, Odebrecht admitted to paying more than US$59mn in bribes to secure contracts in Panama from 2010 to 2014.

In total, the company paid US$788mn in bribes for projects in 12 countries from 2001 onwards, according the US Department of Justice.

On Tuesday, Peruvian President Pedro Pablo Kuczynski said his government could seize Odebrecht's concession to build the US$5bn Sur Peruano natural gas pipeline.

Kuczynski said a decision would hinge on an investigation into whether illicit payments were made to secure the contract in 2014.

Odebrecht has been a prime target of Brazil's three-year Lava Jato graft probe, blamed for tipping the country into a spiraling economic and political crisis.

In March, the company's former CEO Marcelo Odebrecht was sentenced to 19 years in prison for bribery, money laundering and organized crime.

Odebrecht said earlier this month it had signed a plea bargain with local prosecutors and agreed to pay a fine of US$2bn over 20 years.

ALSO READ: Odebrecht's trail of bribes in LatAm