Panama to sue over renewal of CK Hutchison contract

Panama City — Panama’s Comptroller General said it will take legal action against officials who authorised the renewal of a 25-year port concession to a company led by CK Hutchison.

The contract to Panama Ports Company for the Balboa and Cristobal ports near the Panama Canal, in which Hong Kong-based CK Hutchison has a 90% stake, was renewed in 2021.

The Panamanian government undertook an audit of the contract in January and in March a group led by US investment firm BlackRock announced a deal to buy CK Hutchison's majority stake in a $22.8bn global ports unit including the two ports in Panama, which is not yet final.

The audit has so far determined that Panama “left $1.3bn on the table”, comptroller-general Anel Flores told reporters, referring to tax incentives and benefits granted by the government in the contract.

In February, Panama’s attorney-general released a binding opinion finding that the port contract was unconstitutional. The Supreme Court will have the final say on the matter.

Once finished, the audit results will be submitted to Panama’s Maritime Authority, which oversees the ports, Flores said.

The audit is seen as a possible roadblock in BlackRock’s offer for CK Hutchison’s port business, which has been criticised by China. If Panama’s comptroller-general confirms irregularities in the concession renewal or the Supreme Court declares the contract to be unconstitutional, the concession could be revoked, according to lawyers and experts.

CK Hutchison shares fell 2.6% on the Hong Kong Stock Exchange on Tuesday as the main Hang Seng index gained 1.5% .

The conglomerate owned by Hong Kong tycoon Li Ka-shing has been caught in China’s crosshairs in the highly politicised deal. Last week it did not sign a contract as scheduled to sell its two Panama port operations as part of the broader deal as a result.

China’s market regulator has said it will undertake an antitrust review on the Panama port deal, and Hong Kong leader John Lee on Tuesday reiterated comments about the deal having to comply with local laws and regulations.

When asked if a deal without the Panama Ports would be a solution, BlackRock CEO Larry Fink told the Economic Club of New York on Monday the ports in question represent about 4% of the aggregated value of the entire transaction that will give the U.S. firm access to 43 ports in 23 countries, and “it’s going to be reviewed as one transaction”.

Fink said regulatory competition review could take nine more months, though he is optimistic the transaction will be approved.

However, he conceded that China could stop the deal as it is one of the major users of the ports and one of the 50 jurisdictions that will review the transaction.

US President Donald Trump, who has threatened to take control of the Panama Canal due to the presence of Chinese and Hong Kong firms in the Central American country’s maritime business, has hailed BlackRock’s port deal.

Fink stressed the purchase was driven by commercial interest rather than geopolitical considerations, adding he discussed the transaction with US policymakers after the talk with CK Hutchison became exclusive.

“Everything was done in the right order, it was not done politically, despite all the narratives it was done,” he said.

Reuters