October 31, 2017 / 9:51 PM / a year ago

Odebrecht-led consortium might sue Peru over pipeline investment -junior partner

LIMA, Oct 31 (Reuters) - A construction consortium led by Brazil’s Odebrecht might sue Peru to make sure it recovers its investment in a $5 billion pipeline project that the government canceled early this year, Odebrecht’s junior partner in the group said on Tuesday.

President Pedro Pablo Kuczynski’s government rescinded the pipeline contract in January, when the consortium missed a key financing deadline as Odebrecht grappled with a growing graft scandal.

The government has refused to apply a clause in the pipeline contract relating to how to assess the value of the project’s assets and how compensation would be provided, said Luis Diaz, the chief executive of Grana y Montero , one of Odebrecht’s two partners in the consortium.

“So far, it looks like there is no consensus” with the government, Diaz said on a conference call with analysts following its quarterly earnings report. “We may end up in an international arbitration, which will, of course, delay the recovery of such investment.”

Peru’s energy and mines ministry, tasked with launching a new tender for the pipeline project next year, did not immediately respond to requests for comment.

Odebrecht’s spokesman in Peru said the process of transferring the project’s assets to state control has so far gone well and that it was too early to discuss potential legal action over compensation.

Any decision would have to be agreed upon by all three companies in the consortium, which also includes Spain’s Enagas , he added.

The dispute is part of the messy financial and legal fallout that Odebrecht and its partners have faced since the family-owned Brazilian company admitted late last year to having bribed officials to secure contracts across Latin America.

Last year, Grana told Reuters that the consortium would need to be paid at least $1 billion in compensation if the government withdrew the contract.

Shares in Grana, Peru’s biggest construction and engineering group, plummeted in the wake of the Odebrecht scandal but have recovered partially as it has trimmed its debt through asset sales and won new contracts in neighboring Chile and Colombia.

Diaz said that the company was bidding on “several projects” in Peru, including contracts related to the expansion of state-owned Petroperu’s flagship refinery, Talara. (Reporting By Mitra Taj, Editing by Rosalba O’Brien)

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