Panama Canal Annual Report 2012

8/11/2019 Panama Canal Annual Report 2012

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Chairman of the Board of Directors

Roberto RoyChairman of the Board of Directors


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During this period, the Canal has tackled a new and signicant challenge, the designation of

the team that will lead the organization towards the Canal expansion. The appointment of the

Administrator and the Deputy Administrator dened the message of the Canal Authority to the

Panamanian people, clients and stakeholders, of assuring that the management of the waterway

will maintain its vision of offering quality and excellence in the services rendered to customers

while providing economic well-being to the country and benets to the worlds economy, and

ensuring best practices for environmental protection. The selection is representative of a certain

institutional continuity that shows the Board of Directors commitment to achieving high standards

for which this waterway has been recognized.

In addition, we identied the need to align the organizational structure of the Panama CanaAuthority to suit our customers and clients evolving needs, prepare to manage an expanded

Canal, and reect best business practices. As adaptability to change has always been a

characteristic of the interoceanic waterway, we have intensied the efforts to diversify ou

services,and simultaneously strengthen the core business of the organization.

The execution of the Expansion Program, which is almost midway of its completion, is only one

of the projects that are currently underway to continue providing better services every day

The Panama Canal has also continued to implement an aggressive modernization program

comprised of projects aimed at increasing the present Canal capacity, through the widening

and dredging of the entrances. These works are currently in progress and will also contribute to the

operation of the expanded Canal. This complementarity shows the Canals high professionalism

standards in carrying out two parallel functions, the successful operation of the existing Canal, and

the development of a agship mega-project in the engineering eld, as was clearly validated by

the Panama Canal 2012 International Engineering and Infrastructure Congress.

The nancial results for this period have been outstanding. Despite the global economic outlook

the efforts of the Panama Canal Authority to improve the services our route offers resulted in

greater throughput during this scal year, setting a new tonnage record for total revenues

while maintaining high standards of service. These results reect the tireless efforts of a workforcecommitted to the development of the organization and the growth of our country.

Message


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Rafael E. Brcenas P.Director

Guillermo O. Chapman, Jr.Director

Nicols CorcioneDirector

Jos A. Sosa A.Director

Ricardo De La Espriella T.Director

Marco A, Ameglio S.Director


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Jorge L. QuijanoAdministrator of the Panama Canal

Administrator of the Panama Canal


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Message

I am proud to present the Annual Report of the Panama Canal Authority (ACP) for scal year 2012. As required by our

practices of transparency and accountability, we have made every effort to accurately reect how the Panama Cana

fullls its mission of contributing to the sustainable development of the country, while expanding its leading role in the

worlds maritime trade.

At the end of scal year 2012, for a second consecutive year, the Panama Canal has set a new tonnage record of 333.7

million Panama Canal/Universal Measurement System (PC/UMS) tons. Beyond its historical signicance and the fact tha

it represents an operational indicator, this record demonstrates the countrys sustained effort and reiterated commitmen

to keep its most strategic resource, its geographical position, at a competitive edge and at the forefront of progress.

It is important to emphasize these operating results are the outcome of the determination of 10,000 men and women

who are aware of the responsibility that we embody, not only in managing and operating the Canal in an efcient, cos

effective and safe manner, but also our responsibility with the environment, our social environment, our customers, our

users and Panama.

Together with the new tonnage record, other indicators show that the Panama Canal provides quality service and it

is reected in the tonnage percentage and a reduction in Canal Waters Time. Direct contributions to the country also

maintained a positive rate for a second year in a row exceeding B/. 1,000 million for a total of B/. 1,032.3, which surpassed

by 8.6 percent the amount budgeted for scal year 2012.

While the Panama Canal implements operational actions that result in the efcient administration of the Canal, our

organization also prioritizes its environmental and social management. Specically this report, documents the many

education, water quality, reforestation, sustainable development and other projects that aim to have an impact on the

quality of life of the residents of the Panama Canal Watershed, as we work together to preserve it.

Sustainability also has a signicant role in ACPs human capital management and labor relations, pursuing to maintain

high equity and well-being standards for the Canals most valuable resource, its people. For instance, during this sca

year over 8,000 employees were trained.

Parallel to the effort to maximize the benets of our geographical position, we continue to reafrm our commitment

to support the principles of the United Nations Global Compact through various activities and examples of our daily

activities. Examples of this are contained in this document as are our responsibility towards each of our stakeholders, ou

environmental commitment, the community relations programs, the visitors centers- and I want emphasize the opening

of the new Center of Observation of the Canal Expansion on the Atlantic side as well as the communication strategies

aimed at our shareholders.

In the course of 2012, ve years of work in the Expansion Program have gone by and the progress and milestones are

included in this annual report. In abidance of Law 28 of July 17, 2006, which approvest the proposal for the construction o

a third set of locks in the Panama Canal, key steps have been taken to build a new bridge over the Canal on the Atlantic

side and the construction will begin next year.

As expected, the impact of the Panama Canal Expansion already transcends national boundaries. For Panama the

results are tangible. There is still a way to go, and a lot of potential to consolidate the Panama Canal in the developmen

of Panama.

I would like to highlight the administration of three distinguished Panamanians who contributed to the Canals history

and strengthened the pillars of this great Panamanian organization. They are Dr. Rmulo Roux, Engineer Alberto Alemn

Zubieta and Engineer Jose Barrios Ng. Thanks to their work at the Panama Canal during great part of this scal year

we managed to exceed the goals and achieve a transparent and seamless transition to a new administration. The

organization and all its employees owe them our deepest gratitude.

Along this path, I hereby commit to the promise of all Panama Canal workers to continue working in compliance with the

highest standards of excellence, discipline and passion for our country.


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Administration

Jorge L. QuijanoAdministrator

Manuel BentezDeputy Administrator

Luis AlfaroEngineering

lvaro A. CabalGeneral Counsel

Francisco Loaiza B.Human Resources

Ilya MarottaEngineering and Program

Management


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Esteban G. SenzOperations

Francisco J. Miguez P.Administration and Finance

Rodolfo SabongePlanning and

Business Development

Carlos VargasEnvironment, Water and Energy

Manuel DomnguezCorporate Communications

Ana Mara P. de ChiquilaniCorporate Affairs


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For ve centuries the route through Panama has been an important path for global

trade and transportation. Currently, the railroad, airports, highways, the pipeline, optic

ber communication cables, international techno parks, ports and the Panama Canal

jointly comprise the key infrastructure that interdependently and complementarily,

simultaneously exploit the unique geographical position of the Panamanian isthmus.

On December 31, 1999, after 85 years of U.S. administration, the Republic of Panama

assumed full administration, operation and maintenance of the Canal, in compliance

with the 1977 Torrijos-Carter treaties.

The waterway is now managed by the Panama Canal Authority (ACP), an autonomous

government institution with a constitutional mandate that makes the Canal an efcient

and cost effective entity that provides continuous and efcient services to world

maritime trade.

The more than 10,000 highly skilled employees that work in the Canal constitute the driving

force behind the Canals excellence. The Panama Canal is an inalienable patrimony

of the Panamanian nation and; therefore, it may not be sold, assigned, mortgaged

or otherwise encumbered or transferred. By law, after covering operating, investment,

modernization and expansion costs, surplus funds are awarded to the National Treasury.

During the 13 years of Panamanian management, direct contributions have exceeded

B/.7,609 million.

The Canal is a shortcut water passage to reduce shipping distances, and save time and

cost in the transportation of all types of goods. With about 80 kilometers in length, the

waterway connects the Atlantic and Pacic oceans at one of the narrowest points of

the American continent.

The Panama Canal, a two-way canal, operates three sets of locks that work as water

elevators that lift the ships to the level of Gatun Lake 26 meters above sea level to cross

the Central Mountain Range, and later lower them again to sea level on the other side

of the Isthmus of Panama.

The Canals three sets of locks, have two lanes, operate as water lifts to elevate ships 26

meters above sea level to the level of Gatun Lake, In their transit of the channel across

the Continental Divide, and the lower them back on the opposite side of the Isthmus.

Since its opening in 1914, more than one million vessels from around the world that reach

more than 80 countries through 144 maritime routes, have transited the waterway.

The Third Set of Locks, currently under construction as part of the Panama Canal

Expansion Program, will be ready by the year 2014. This project will double the

waterways capacity to meet the growing demand of world trade and to maintain the

Canal as the route of choice for international trade.

Company Profle


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Honesty / Transparency / Competitivenes / Loyalty / Responsibility / Reliability

l

l

Vision

MissionProducir en forma sostenible el mximo benecio de nuestra posicin geogrca.

OUR BUSINESS - This enterprise is charged with operating, maintaining and improving the Panama

Canal so that it remains the route of choice for our customers.

OUR COUNTRY - We bring wealth to Panama and contribute with our efforts to the nations welfare

its development and its progress, and to an improved standard of living for all Panamanians.

OUR CUSTOMERS - We build lasting relationships with our customers, understanding and anticipating

their needs, adding value and offering quality service.

OUR PEOPLE - We recognize that the Canal employee is the most important resource in achieving

service excellence. We recruit and promote the very best.

WORLD LEADER in services to the maritime industry and in sustainable development for the

conservation of the Panama Canal watershed.

CORNERSTONE of the global transportation system and driving force for the progress, developmen

and growth of Panama.

MODEL of excellence, integrity and transparency in our conduct; committed to the integra

development of our human resource team.

Corporate Values

Objective 1 - To increase protability in a sustainable manner for the benet of the country.

Objective 2 - To expand the range of services and products in order to exploit markeopportunities.

Objective 3 - To implement business practices that enhance good corporate governance.

Objective 4 - To efciently manage the volume and quality of the water resources of the PanamaCanal Watershed.

Objective 5 - To increase productivity through excellence in performance and the wellbeing ohuman resources.

Estrategic Objectives

During scal year 2012, the Ofce of General Counsel has received 660 informationrequests.In the category of alimony, 178 were received, out of which 176 have been resolved andtwo are in process for revision.In the general requests category (which encloses unions, employees, governmenentities, and general public) 482 were received. Of these, 456 have been resolved and26 are in process, waiting for information to answer requesters.

Inormation Request


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Operaciones

Operations


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The Panama Canal reached a new PC/UMS (Panama Canal

Universal Measurement System) tonnage record during scal year

2012, when it reached 333.7 million PC/UMS tons. This historic

milestone was the result of the determined effort of all Canal

employees, the effective management of its operations, and the

important role the route through Panama plays in international

maritime global trade by always providing world-class services to

its users.

The year 2012 was characterized by a global economic slow

down consequential of scal adjustments made by advanced

economies, nancial systems instability and the economic

uncertainty triggered by the crisis in Europe. At the same time, a

reduction in the demand in the leading economies affected the

emerging markets through a reduction in international trade.

The economy of the United States, the main user of the Canal,

showed signs of improvement, but at a less-than-optimal level.

Retail and vehicle sales, as well as exports have improved

signicantly; however, the 7.8 unemployment rate recorded in

September keeps the economy increase from developing to

desired levels.

On the other hand, China, the second most important user of the

Panama Canal and the worlds foremost exporter, is affected by

Europe and the United States low demand for imports. From the

beginning of 2012, economic indicators show a downward trend,

Operating Results

A N N U A L R E P O R T 2 0 1 2 13

which culminated in a decline of the increase

projections by the Chinese government, from

8.5 per cent to 7.5 per cent.Regardless of the

measures taken by the Chinese governmento stimulate its economy, such as more libera

credit policies and the development of massive

construction projects, their sustainability may be

put to test if European and American economies

do not improve. Nevertheless, China remained an

important player in the maritime ow through the

Canal during scal year 2012. If there is a recovery

in world trade in 2013, it is expected that Chinas

increase projections will be revitalized and the

transportation of cargo through the Canal will rise

The Panama Canal ended scal year 2012 with

14,544 transits, a 0.95 per cent decrease from the

previous year. Panamax vessel transits were 7,241

56.3 per cent of oceangoing vessels The PC/UMS

tonnage at the end of scal year 2012 was 333.7

million, a 3.6 per cent increase compared to sca

year 2011. The total cargo through the Cana

registered at 218.1 million long tons, a slight 1.9 pe

cent decrease compared to the previous yearToll revenues reached a record B/.1,852.4 million

a 7.1 per cent increase, as a result of larger vesse

transits.


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A N N U A L R E P O R T 2 0 1 2

Full Container Vessel

SegmentThe full container vessels segment performed well during scal year

2012, showing an increase in trafc gures as compared for scal

year 2011.A total of 3,331 container ships transited the Canal, with

a volume of 119.9 million PC/UMS tons and 12.2 million TEU (twenty

foot equivalent unit) invoiced. These gures reect a 2.9 percent

increase in transits, a 5.4 percent increase in tons and a 5.6 percent

increase in TEU volumes as compared to the previous year. Of

the total transits, 74 percent are in the 100 feet or more in beam

category; and vessels with over 900 feet overall length accounted

for 47.3 percent.

During scal year 2012, the full container vessels segment

accounted for B/.960.1 million in toll revenues. From this total, 93.9

percent correspond to TEU capacity and 6.1 percent to 7.4 million

loaded TEUs which transited effectively. It is noteworthy that this

segment comprised 51.8 percent of the total Canal toll revenues

in scal year 2012.

Containerized cargo imports at major ports on the East Coast of

the United States, the main country of origin and/or destination

of containerized cargo that transits through the Panama Canal,

increased in scal year 2012 compared to the previous year,

which contributed positively to increase cargo

volumes transits. Likewise, the global demand for

containerized cargo grew 3.4 percent in 2012.

The number of liner services in the route through

Panama remained fairly consistent, with 33

services at the end of scal year 2012, a one

service increase from the previous year. However,

the average deployed vessel size increased from

3,952 TEUs in 2011, to 4,078 TEUs in scal year 2012,

leading to an increase in TEU capacity, and thus

higher revenues.

Reefer Vessels SegmentIn scal year 2012, the reefer vessel segment

registered 1,116 transits, which represent 9.9

million PC/UMS tons and B/.50.6 million in revenues

from tolls. Transits, tonnage and tolls were down

24.5 percent, 20.8 percent, and 12.9 percent,

respectively, in comparison with scal year 2011.

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A N N U A L R E P O R T 2 0 1 2

The main driver for the downward trend is the transition of

cargo transportation from conventional refrigerated cargo

vessels to refrigerated containers on container vessels.

During 2012, three liner container services were introducedfor the transportation of refrigerated cargo from the west

coast of South America. These services are ECUMED

service of Maersk Line, as well as MSCs Ecuador Express

and Andean Feeder service, which compete directly for

the transportation of bananas in conventional vessels.

Low temperatures in countries like Ecuador and diseases

such as black sigatoka affected the quality of some banana

plantations during several months in scal year 2012. This

curtailed the supply of exportable bananas, which allowed

countries such as Colombia, Costa Rica and Panama to

increase their share in consumer markets.

Liquid Bulk SegmentFiscal year 2012 was an excellent year for the liquid bulk

segment. This segment registered 2,478 transits, 51.6 million

PC/UMS tons and B/.212.2 million in toll revenues, which

amount to increases of 6.7 percent in transits, 5.4 percent

in PC/UMS tonnage, and 8.1 percent in toll revenues over

scal year 2011.

These results are due to a 30.2 percent increase in transits

by vessels of 80 to 90.99 feet or more in beam, which was

reected in a 27.4 percent PC/UMS tonnage rise and

30.9 percent increment in toll revenues. In addition, the

volumes of cargo on board of these vessels also increased22.4 percent over the previous scal year.

Diesel, gasoline and miscellaneous petrochemicals are

among the main products that account for the increase in

trafc gures for this segment during scal year 2012. Diese

registered its biggest ows mainly in the routes from the Gul

of Mexico to Chile and Ecuador, while gasoline was driven

by exports from the Gulf of Mexico to Mexico, Guatemala

Chile, Japan, and Ecuador.

Chilean diesel imports, mainly from American reneries

located in the Gulf of Mexico, continued their remarkable

increase. This trade increased by 45.7 percent compared

to scal year 2011, which was already a record yea

for Chilean imports of this product. Chile continued to

endure hydroelectric generation problems due to a

lengthy drought, which along with the economic increase

prompted the increase in diesel imports to supply for the

rising electric generation demand.

Regarding the supply of distillate products such as diese

and gasoline, American reneries, mainly located in the

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A N N U A L R E P O R T 2 0 1 2

Gulf of Mexico, maintain large commercial inventories as a result

of a decrease in the demand and prices of these products in that

country. This situation allowed setting attractive export prices;

countries such as Chile and Ecuador took advantage of this

circumstance.

On the other hand, gas carrier ships, despite being a small sub

segment, registered good trafc indicators-41 additional transits-

22.0 percent over scal year 2011. In addition, this segment

was above the previous scal year in PC/UMS tonnage and toll

revenues, recording increases of 16.3 percent and 19.0 percent,

respectively.

Over the last scal year, the increment in trafc gures for the

gas carrier ships was driven by a 62.9 per cent increase in the

transit of vessels of 80 to 90.99 feet of beam, which replicated in

a 56.8 percent PC/UMS tonnage increase and 62.4 percent in tolls

revenues. These vessels carried mostly LPG (Liqueed petroleum

gas) and miscellaneous petrochemicals.

The amount of cargo transported by gas carrier ships through the

Canal during scal year 2012 was very similar to the levels of the

previous scal year. The 36.8 percent and 32.2 percent increase

in cargo for vessels of less than 80 feet and from 80 to 90.99 feet in

beam, respectively, helped offset the 14.3 percent cargo decrease

transported by vessels with 100 feet or more in beam.

The products which increased over the previous scal year were

the ammonium compounds (ammonia) originating in Venezuela

and Trinidad and Tobago with destination to Chile; and LPG from

Trinidad and Tobago bound for El Salvador, transported primarily

on ships with less than 80 feet and from 90 to 90.99 feet in beam.

Drybulk Carrier SegmentDuring scal year 2012, the drybulk carriers

segment recorded 83.4 million PC/UMS tons, the

highest level in vessel capacity tonnage since

scal year 1996. PC/UMS tonnage increased 4.2

per cent compared to 80.0 million tons of scal

year 2011. For the third consecutive year, dry bulk

carriers recorded the highest number of transits

of all vessel types transiting the waterway, with a

total of 3,339 transits.

Total toll revenues were B/.337.7 million, an 8.2

percent increase compared to scal year 2011,

mainly as a result of the transiting vessels increased

PC/UMS tonnage.

Cargo tonnage totaled 98.6 million long tons

without greater variations. On the other hand,

tonnage of in ballast vessel capacity increased 12

percent, which contributed to PC/UMS tonnage

increase for the period. Vessel transits with beams

over 100 feet accounted for 69 percent of total

dry bulk transits. In general, the average vessel

size increased 3 percent.

Grains remained as the top commodity

transported in bulk carriers, with 36.0 million long

tons; however, the cargo level was 8.1 percent

below the 39.1 million long tons recorded in scal

2010 2011 2012

Dry-Bulk Carriers

Full ContainershipTanker

Miscellaneous

Refrigerated Cargo

General Cargo

Vehicle Carrier

Container/Break-Bulk Vessel

Liquid-Gas Carrier

Fishing Vessel

Passenger Ship

Roll-on/Roll-off

0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Transit by Vessel Types(in thousands of transits)

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A N N U A L R E P O R T 2 0 1 2

year 2011. Exports from Brazil and Argentina increased

their participation in the Asian market in the period, with a

negative impact on U.S. exports, the main source of grain

moving through the Panama Canal.

Coal shipments remained stable at 13.9 long tons. The

main coal routes were from: Colombia to Chile and from

the U.S. Gulf of Mexico to Mexico, Chile, and Asia. Iron ore

from Brazil and Venezuela to China also remained at with

about 4 million long tons, while the route from the U.S. Gulf

of Mexico to China doubled to 1 million long tons. Strong

shipments of coke were also reported from the U.S. Gulf of

Mexico to Asia, as well as iron metal on the same route in

the opposite direction.

Vehicle Carriers SegmentThe main trafc indicators exceeded last scal years

gures. Vehicle carrier transits totaled 669 at the closing of

scal year 2012, 5.7 percent over scal year 2011. PC/UMS

tonnage registered 37.7 million, an 8.6 percent increase

from the previous year. Consequently, toll revenues

totaled B/.153.9 million, a 12.8 percent increase over scal

year 2011 for this segment.

The demand for maritime vehicle transportation rose

during the rst half of scal year 2012, due to the increase

in global car production and the restoration of vehicle

inventories in Asia. In addition, vehicle sales in the United

States and inventory restocking of Japanese and Korean

brands, which had slipped signicantly since the Japanese

earthquake, combined to spur the vehicle car carrier

demand.

For the second half of the scal year, the high demand

for maritime vehicle transportation, alongside intense

competition between South Korea and Japan for world

leadership of vehicle production and sales, were important

elements towards global recovery. These optimistic

projections were based on a stronger than expected

recovery in vehicle demand in the United States. As aresult, segment trafc remained dynamic, along with the

rise of vehicle ows in the main maritime trade routes.

Passenger Vessels SegmentAt the end of the 2011-2012 season, passenger vessel trafc

experienced a downward trend. The decline of this trafc

through the Panama Canal was mainly due to a strategic

decision by one of the major cruise lines to redeploy some

ships to Europe and Asia, in response to demand in these

destinations.

Passenger vessel transits were 211 at the end of scal yea

2012, a 6.2 percent decrease from the previous year

Furthermore, the vessels passenger capacity decreased

to 248,674. In contrast, vessel tonnage was 1.5 million, a

0.3 percent increase over the 2010-2011 cruise season

as a result of an increase in transits of vessels with beams

under 80 feet.

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A N N U A L R E P O R T 2 0 1 2

Toll revenues totaled B/.39.8 million, a 13.7 percent decline from the

B/.46.1 million in scal year 2011. The revenues for billed passenger

capacity represented 83.7 percent of the amount collected during

scal year 2012.

Throughout this season, ships of the major worldwide cruise lines

fullled their navigational itineraries through the Panama Canal. In

turn, smaller vessels also contributed to the Canal trafc statistics;

in general terms, the itineraries of these ships are of short duration

between the Caribbean islands and the east and west coasts of

Central America. It is worth mentioning that as in previous seasons,

the Canal destination maintained its tourist appeal, attracting

vessels with itineraries that included passage through Panama on

their maiden voyages.

Transit Operations PerformanceIt has been mentioned that the Panama Canal registered 333.7

million PC/UMS tons in scal year 2012, 11.6 million tons more than

for scal year 2011. This was accomplished at an operating cost

of B/.1.22 per ton, less than the established goal of B/.1.29. This is

the result of the improved quality service rendered to our clients

in terms of Canal waters time, the appropriate management of

resources, and the effort and dedication of the more than 10,000

Panama Canal employees.

Tolls Revenues and OtherMaritime ServicesTolls and other maritime services totaled B/.2,248.9

million, 5.5 percent higher than the revenues

recorded for scal year 2011, which were

B/.2,130.6 million.

Revenues for other maritime services (OMS)

amounted to B/. 395.4 million, 1.3 percent less

than scal year 2011 (B/.400.72 million), as a result

of less utilization of the transit reservation system.

322.1333.7

300.8350325300275250225200

1751501251007550250

Vessel Tonage(in millions of PC/UMS)

2010

2011

2012

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A N N U A L R E P O R T 2 0 1 2

Transit of Oceangoing VesselsA total of 12,862 oceangoing transits were registered (not including

small vessels), a reduction of 126 vessels or 1 percent compared

to scal year 2011 (12,988 transits). From this amount, 8,479 transits

were super-size vessels with a beam equal to or more than 91

feet, 315 more than the previous scal year (3.9 percent). Similarly,

4,383 were regular-size vessels with a beam of less than 91 feet,

a reduction of 441 transits (9.1 percent) compared to scal year

2011. Small vessels had a slight drop of 14 transits (from 1,696 to

1,682 transits) or 0.8 percent less compared to scal year 2011.

Transits of Panamax VesselsIn scal year 2012, a total of 7,241 transits of Panamax vessels were

recorded (beam equal to or more than 100 feet), an increase of

323 transits (4.7 percent) compared to scal year 2011 (6,918).This

increase is mainly perceived in the container ships (+147), dry bulk

(+88), and tankers (+56) segments. Panamax vessels represented

56.3 percent of oceangoing transits, compared to

53.3 percent in scal year 2011. Similarly, Panamax

vessels with overall length equal or more than 900

feet totaled 1,658, an increase of 114 (7.4 percent

when compared to scal year 2011 (1,544). These

vessels represent 12.9 percent of oceangoing

transits, compared to 11.9 percentof the previous

scal year. Panamax vessels, especially those with

overall length more than 900 feet, require more

time and resources. Despite the increase in the

complexity of the operations this represents, there

was an improvement in the service level provided

to our customers.

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Panamax Vessel Transits

6,918 7,2416,231

2010

2011

2012

Oceangoing Transits

12,989 12,86212,591

16,000

14,000

12,000

10,000

8,000

6,000

4,000

2,000

0 2

010

2011

2012

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A N N U A L R E P O R T 2 0 1 2

Service Rendering PerformanceThe service level rendered, measured based on PC/UMS

tons that transited within the time expectations for Canal

Waters Time (CWT), was 86.28 percent, higher than the

results for scal year 2011 (85.2 percent). This reduction is

mainly due to improved processes and, in a lesser extent,

to a reduction in the average arrival of vessels and a

reduced backlog, which allowed accomplishing transits in

less time than programmed.

Canal Waters Time and InTransit TimeCanal Waters Time (CWT), the time elapsed since a vessel

arrives at Canal waters, averaged 25.66 hours, a reduction

of 4.0 percent compared to scal year 2011 (26.74 hours).

This is the result of an improvement in our transit processes,

which allowed us to reduce both waiting and transit times.

The average CWT for booked vessels was 14.97 hours,

while for non-booked vessels this average was 34.49 hours.

In scal year 2011 these results were 15.20 and 39.02 hours,

respectively.

The average In Transit Time (ITT), the time elapsed since the

ship arrives to the rst lock until its departure from the last

lock, recorded 10.70 hours by the end of scal year 2012, a

26.81

Canal Water Time (CWT)Monthly Average and CumulativeAverage

36.0

30.0

24.0

18.0

12.0

CWT Monthly 2012

Oct. Nov. Dic. Jan . Feb. Mar. Apr. May. Jun. Jul. Ago. Sep.CWT Cumulative2012

Hours

23.72

27.0928.48 28.0627.32

28.26

25.6625.9326.20

25.63 25.98

26.7426.7927.2728.88

29.7729.1330.21

32.00

33.87

26.41

26.7027.40

CWT Monthly 2011 CWT Cumulative2011Percentaje of CP/SUAB Tonswith Good Service Level95%

90%

85%

80%

75%

70%Oct. Nov. Dic. Jan. Feb. Mar. Apr. May. Jun. Jul. Ago. Sep.

Percentage

79.08%

80.60%81.39% 82.19%

83.50%

84.85%85.73% 85.68%

85.20%84.85%85.10%84.38%83.91%

84.47%

80.78%83.51%

82.70%

85.56%

Accumulated 2012Accumulated 2011

81.09%

81.36%

82.30%

82.74%

86.28%

89.78%

20


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A N N U A L R E P O R T 2 0 1 2

1.33 percent increase over scal year 2011 results of 10.56

hours.

This cumulative average was slightly affected by theincreased number of larger ships (Super and Panamax),

especially those with overall length of more than 900 feet,

in addition to the programmed maintenance performed

at the locks, which required closing lanes in Gatun and

Miraores locks.

Customer SatisfactionAt the end of this scal year, the customer satisfaction

index was registered at 97.82 percent, 1.22 percent above

last scal year results (96.6 percent). Several efforts were

made to improve customer service and promote a change

in our organizational culture in customer satisfaction

matters.

We are conducting a survey among the Ship Masters

after each transit to gather their impressions on the service

received as well as their suggestions for improvement. We

have also improved the process for handling complaints

resulting in a more expedited response.

Maintenance ManagementPerformanceAs part of the Expansion Program, 98 deliverables (section

inside the navigational channel) were completed in the

Culebra Cut. This represents an execution of 140 percent

compared to the programmed goal. This success was

the result of a combined strategy of working concurren

In Transit Time (ITT) MonthlyAverage and Cumulative Average

12.0

11.5

11.0

10.5

10.0

9.5

9.0

8.5Oct. Nov. Dic. Ene. Feb. Mar. Abr. May. Jun. Jul. Ago. Sep.

Hours

10.71

11.49

11.05 10.95

10.7810.72 10.68 10.71

10.5610.5610.5210.5810.61

10.68

11.23

11.25

11.41

10.69 10.69

ITT Cumulative 2012ITT Monthly 2011ITT Monthly 2012ITT Cumulative 2011

10.8310.90

10.71

11.13

10.70

Oct-10 Nov-10 Dic-10 Ene-11 Feb-11 Mar-11 Abr-11 May-11 Jun-11 Jul-11 Agt.11 Sept.11

Dredging Operations ProgressReport (Expansion Works) FY2012

108.6%

127.1%

150%

140%

130%

120%

110%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

18.6%

8.6%

22.9%

38.6%

42.9%

54.3%

124.6%

64.3%

77.1%

%

o f P r o g r e s s t o D a t e a n d A n n u a l

100.0%

118.2%

84.2%

100.0% 100.0%

111.8%

104.7% 105.9%

114.3%

Goal FY2012Percentage of Progress Annual Percentage of Progress to Date

91.4%

140.0%

134.8%140.0%

Deliverables

18

16

14

12

10

8

6

4

2

0

21


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A N N U A L R E P O R T 2 0 1 2

drilling and blasting and dredging activities, followed by shoal

removal (small areas above design level) to nish the deliverables.

The inclusion of dredge Quibin I and the utilization of chartered

dredge Cornelius in the removal of shoals helped to achieve these

results.

The Dredging Division excavated 1.189 million cubic meters, of an

estimated total of one million cubic meters 118.9 percent of the

expected results, as part of the works under the Modernization

Program.

This outcome was due to the high production of chartered dredge

Cornelius, and the work of dredge Rialto M. Christensen, which

was working at the limits of the Expansion Program and was able

to remove material for both projects.

In September 2012 the new backhoe dredge was baptized with

the name of Alberto Alemn Zubieta. This ceremony was held at

NMC in Niew Lekkerland Shipyard, Holland, and it is estimated that

it will be arriving at the port of Cristobal in Panama on January

2013. Initial tests will begin in February to formally put it into service

in late March 2013.

Preparation for the Operation of theExpanded CanalSeventy three pilots (104.3 percent) and 28 tug captains (127.3

percent), which together represent 109.78 percent out of

the established goal of 92 employees, have been trained in

maneuvering Post-panamax vessels at the SIDMAR Simulation

Center. As part of the preparation for this training, negotiation

was undertaken with the Pilots Union and a variety of tests were

placed in the simulator with the different types of vessels, which

were validated for the pilot and tug captain training.

Specic Tasks ProgramA high level committee was created to identify

and follow up on specic tasks required to operate

the expanded canal.

Some of the tasks completed by the end of scal

year 2012 include establishing restrictions and

requirements for vessels to transit through the

new set of locks, based on the results of lockage

tests without locomotives and comments from

pilot unions and tug ofcers. The risk analysis for

the operation of the expanded canal was also

completed and presented to the Advisory Board,

and we continue following up on the identied

mitigation measures.

A contract is being prepared for the extraction of

submerged logs from Gatun Lake to expand the

anchorage area, which will be reduced by the

crossing of the navigational channel to the new

Atlantic locks.

Human resources needs and structures

requirements (docks, workers waiting areas,

landings, equipment, and power plants) are

being analyzed to handle the operations for the

expanded canal and to meet maintenance and

fuel supply requirements for oating equipment.

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A N N U A L R E P O R T 2 0 1 2

On the other hand, we are analyzing the infrastructure required

for the Maritime Trafc Control Center as well as transit processes

in order to improve the maritime services management, based on

a Service Oriented Architecture (SOA). We are also evaluating the

implementation of new transit support technologies.

With regards to dredging, we are developing a plan for the

day to day maintenance and improvement of the navigational

channels, and to tackle the sedimentation accumulated during

the expansion program.

Regarding safety, we are assessing the capacity required to respond

to emergencies, considering the new hydrocarbons that will transit

through the Panama Canal and the requirements to be ready for

a Tier-2 in the new facilities. We are also analyzing the safety tariffs

for the new Post-Panamax vessels, based on the increasing spill risk

factor, and a new tariff required for hazard materials. We are also

working in the changes required to provide re protection remen

response for facilities, equipment and systems, and as identifying

the resources needed to respond to new hazardous materials

(LNG).

Capacity Model for the Expanded

CanalWe continue developing a capacity model for the presentand the expanded Canal through a contract with Paragon

Consultora Ltda., from Brazil. Phase I of the model was completed

and it included the development of a scenario manager and a

scheduling model for the operation and vessel scheduling based

on information from the demand model for the

current, as well as for the expanded Canal.

This model will allow analyzing the Canals

operational capacity in different demand

scenarios, the infrastructure conguration and

navigation rules for both the present, as well as fo

the expanded Canal.

Beginning September, 2012, we proceeded with

Phase II of the project, which will include thesimulation of tugs, launches, line handlers, lane

outages, and full convoy scheduling mode (a

ships going in one direction and in the opposite

direction the following day).

23


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A N N U A L R E P O R T 2 0 1 2

Expansion


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A N N U A L R E P O R T 2 0 1 2

Five Years LaterSkills, knowledge, challenges, commitment, and achievements are

just some of the many day-to-day factors that make the Panama

Canal Expansion Program possible. The teamwork betweencontractors and ACP workers is a key element that together

with the design, construction, excavation, dredging, quality

assurance, good environmental management, documentation,

and occupational safety have made it possible to get to this point

meeting with world-class quality standards in all of the Programs

work fronts.

In its fth year, the Expansion Program, with over 12,000 active

employees working day and night shifts, reached a 47

percent progress rate at the end of scal year 2012. Signicantaccomplishments that were achieved during this year include

awarding 96 percent of the contracts; removing 42 of the 49

million cubic meters through dry excavation for the Pacic Access

Channel; and dredging 46 out of 53 million cubic meters from the

navigational channels. With regards to the combined excavated

and dredged total volume of 33 million cubic meters of the

projected 47.5 in the Pacic and Atlantic sides for the construction

of the new set of locks; structural concrete placements added

up to 1.2 of the 4.2 million cubic meters; and 115 tons out of the

foreseen 197 tons of rebar have been received.

Post-Panamax LocksThis component comprises the construction of two locks complexes,

one on the Pacic and another on the Atlantic side; each with

three levels and three water saving basins. This

project has a 33 percent progress rate. Grupo

Unidos por el Canal S.A. (GUPCSA), the consortium

in charge of this activity, has focused its efforts on

fabricating electromechanical components such

as valves and gates; conducting excavation and

dredging activities in the areas where the locks

are built; and, just as important, developing and

obtaining approval for concrete mix designs and

placement. During this period, the contracto

met all design requirements for the locks

gates, and valves, and obtained the necessary

certications to start fabrication. This enabled

GUPCSAs subcontractors Hyundai Samho

Heavy Industries Company Ltd. in South Korea

and Cimolai S.p.A. in Italy to proceed with the

fabrication of lock valves and gates, respectively

Hyundai for instance, has manufactured 47 valve

bodies and conducted factory acceptance

tests on 34 culvert valves; while Cimolai makes

progress welding and assembling blocks fo

the 16 gates now in process. These fabrication

activities are monitored by GUPCSAs resident

inspection services subcontractor SGS S.A. and

by ACPs Program Administration consultant

CH2M Hill Panam S. de R.L., which carries out this

25


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A N N U A L R E P O R T 2 0 1 2

task through its subcontractor, NDE Associates Inc. Meanwhile,

Hyundai subcontracted Bosch-Rexroth AG to fabricate hydraulic

cylinders for the valves.

Another major effort by GUPCSA is the excavation and dredging

activity. On the Pacic sector, the contractor reported the

removal of a cumulative volume of approximately 15.9 million

cubic meters from the area for the three lock chambers; lock

heads 1, 3, and 4; the middle and lower water saving basins;

the north wing walls and approach channel; and the dams.

The cumulative volume removed from the main excavation on

the Atlantic sector is about 14.8 million cubic meters and the

cumulative volume reported for the Atlantic entrance channel

is nearly 2.3 million. These activities are conducted at the locks

footprint where they are about to conclude- the lower and

middle water saving basins and at the Atlantic entrance channel.

No doubt one of the contractors main tasks has been pouring

structural concrete, with a total of 580,000 cubic meters poured

on the Pacic site. By the end of the scal year GUPCSA had

submitted and ACP approved two new structural marine concrete

mixes. For the Atlantic sector, this activity reported a cumulative

volume of about 652,000 cubic meters. The placement of lean

concrete as foundation treatment on the Atlantic site is nearly

complete, with only small sections remaining.

As part of the measures to improve its performance,

GUPCSA hired the Consorcio Borinquen S.A.to

build three dams and excavate the north Pacic

approach channel. This consortium completed

the excavation for the rst dam to the west as well

as the mapping; and cleaning of its foundation.

It also started the treatment of the exposed

foundation and applied dental concrete and

backll, based on its geological features. On

the second dam to the east, the consortium is

conducting dewatering activities and remove

overburden material to reach the design

excavation level for the foundation.

Another important task is the transportation of

aggregates from the Pacic to supply the Atlantic

site, where it is processed to obtain the ne

aggregates required to prepare concrete. By the

end of the scal year, the contractor has mobilized

a cumulative volume of 2.8 million cubic meters.

Likewise, the reinforcing steel supplier contracted

by GUPCSA, Mexican company ArcelorMittal,

has delivered a total of approximately 67,000 tons

to the Pacic site and about 48,000 to the Atlantic

site.

The quality assurance, environmental

management, and occupational safety efforts

Design and Construction of theThird Set of LocksDredging and Excavation Volumes

Actual vs Programmed through September 2012

Programmed Accumulated

50

45

40

35

30

25

20

15

10

5

0

AccumulatedVolume(Mm3)

Jan.

10

Mar.10

May.10

Jul.10

Sep.

10

Nov.10

Jan.

11

Mar.11

May.11

Jul.11

Sep.

11

Nov.11

Jan.

12

Mar.12

May.12

Jul.12

Sep.

12

Nov.12

Jan.

13

Mar.13

May.13

Jul.13

Sep.

13

Nov.13

Jan.1

4

Mar.14

May.14

Jul.14

33 Mm3

Actual Accumulated

26


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A N N U A L R E P O R T 2 0 1 2

have continued without interruptions by means of

audits, inspections, regular meetings, and a constant

presence on both the Pacic and Atlantic construction

sites. In order to keep Expansion Programs historical

documentation at the forefront of technology, this year

a remote control axial recording system was used while

ying over construction worksites to record progress on

high-denition video as if viewed from the helicopter

pilots viewpoint. This recording system was fabricated

by Canal specialists, who put their resourcefulness

and determination to test in order to manufacture the

device. The Panama Canal has held high level meetings

with senior management of the companies form the

consortium responsible for this project to follow up on

its performance, always stressing the importance of

complying with contract requirements and encouraging

the contractor to take any and all appropriate corrective

actions. GUPCSA submitted a schedule that estimates

the contract completion date in April 2015 (six months

after the contractual completion date), and they are

working to reduce delays.

Pacic Access ChannelA dry excavation is underway to connect the Pacic Locks

with the Culebra Cut through a new 6.1 km-long access

channel. Three of the four phases to accomplish this

work have been completed successfully; and the fourth

phase reected a 67 percent progress rate at the end o

scal year 2012. As part of this last phase, several majo

structures have been built, including a 1.8 km-long cellula

cofferdam and two cut-off walls, which consist of a 500

meter-long cement-bentonite structure and a 144 meter

long jet grouting wall, to reduce potential see page from

Gatun and Miraores Lakes, respectively. The purpose o

these structures is to allow dry excavation works for the

channel and the construction of a dam.

During this scal year, the contractor responsible fo

these works, the consortium ICA-FCC-Meco, comprised

27

Pacifc Access Channel (CAP4)Excavation Volumes Actual vs Programmed throughSeptember 2012

28

26

24

22

20

18

16

14

12

10

8

6

4

2

0


A

pr.10

May.

10

Ju

n.

10

J

ul.10

Ago.

10

Sep.

10

O

ct.10

Nov.

10

D

ic.

10

Jan.

11

Feb.

11

M

ar.11

A

pr.11

May.

11

Ju

n.

11

J

ul.11

Ago.

11

Sep.

11

O

ct.11

N

ov.11

D

ic.

11

Jan.

12

Feb.

12

M

ar.12

A

pr.12

May.

12

Ju

n.

12

J

ul.12

A

go.1

2

Sep.

12

O

ct.12

Nov.

12

D

ic.

12

Jan.

13

Feb.

13

M

ar.13

A

pr.13

May.

13

Programmed Accumulated Actual Accumulated

19.3 Mm3


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A N N U A L R E P O R T 2 0 1 2

of Ingenieros Civiles Asociados S.A. de C.V. (ICA), Fomentos de

Construcciones y Contratas S.A. (FCC), and Constructora Meco

S.A., removed a total of 7.8 million cubic meters of unclassied

material, for a cumulative volume of 19.3 million from the start of

the project. This volume represents a 74 percent progress rate.

The material was excavated from the access channel and the

footprint of the rst dam to the east.

The contractors most demanding task has been the construction

of the previously mentioned dam. The contractor is focused

on dewatering the area and the underground water level was

lowered in several areas of the dam footprint preparing the

foundation; placing rock ll in the inboard dam shell; placing

backll concrete in areas requiring leveling; and the stockpiling

and processing of rock from the projects excavations to produce

lters, chimney drains, and blanket lters for the dam, among

others. Further dam-related tasks included the construction of a 3

meter-deep concrete cut-off wall at the dams axis, of which 1,100

square meters have been completed, and grout-jetting works to

create a curtain below the dam to prevent seepage.

On the other hand, construction works have concluded for the

support operations building located west of Pedro Miguel Locks,

as well as the construction of additional drainage systems and the

paving of the existing ones west of the access channel. These

contracts lie on the main excavations footprint, making their

execution relevant to the project.

Navigational ChannelImprovementsWith the purpose of providing Post-Panamax

vessels the necessary draft to transit safely, another

component was included in the Expansion

Program, which encompasses the widening and

deepening of the existing navigational channels

in Gatun Lake and in the Pacic and Atlantic

entrances, as well as the deepening of CulebraCut. The work in Gatun Lake and Culebra Cut

includes dredging operations to remove 26.5

cubic meters of material and 8.7 million from

the Pacic entrance; whereas about 17.9 million

cubic meters must be dredged and excavated

for the Atlantic entrance.

Gatun Lake and Culebra CutThese works have been assigned to the Panama

Canals Dredging Division and contractors, who

have joined in the effort to reach the design depth

required to meet the Programs objectives. The

ACP has removed nearly 12.5 million cubic meters

from the beginning of the project with cutter-

suction dredges Mindi and Quibian I, dipper

dredge Rialto M. Christensen, and the chartered

backhoe dredge Cornelius. These works have

28


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A N N U A L R E P O R T 2 0 1 2

resulted in the completion of the Culebra and Chagres

Crossing reaches, both located in the Culebra Cut. On

the other hand, in March 2012, Dredging International de

Panam S.A. concluded its contract to dredge Gatun

Lakes northern reaches according to schedule.

This work included dredging the Bohio, Buena Vista,

Gatun, Pea Blanca and Balsa reaches, where a

cumulative volume of 4.0 million cubic meters were

removed with cutter-suction dredge DArtagnan.

In the meantime, Jan De Nul n.v.continues with the

dredging operations under its contract at the northern

entrance of the Pacic access channel, where abou

3.2 million cubic meters of material have been removed

In this way, the Panama Canals and its contractor

combined production reached a cumulative volume o

20.2 million cumulative cubic metersof removed materia

volume, a 78 per cent progress rate by the end of sca

year 2012.

Pacic Entrance

Close to 300,000 cubic meters are left to be dredged a

the sea entrance on the Pacic side. Dredging operation

Gatun Lake Deepeningand Widening and Culebra CutDeepeningDredging and Dry Excavation Volumes Actual vs Programmed through September 2012

VolumeAccumula(Mm3)

Fe

b.

07

May.07

Ago.

07

Nov.07

Fe

b.

08

May.08

Ago.

08

Nov.08

Fe

b.

09

May.09

Ago.

09

Nov.09

Fe

b.1

0

May.10

Ago.

10

Nov.10

Fe

b.

11

May.11

Ago.

11

Nov.11

Fe

b.

12

May.12

Ago.

12

Nov.12

Fe

b.

13

May.13

Ago.

13

Nov.13

Programmed Accumulated Actual Accumulated

20.2 Mm3

28

26

24

22

20

18

16

14

12

10

8

6

4

2

0

Pacifc Entrance Deepeningand WideningDredging Volume - Actual vs Programmed throughSeptember 2012

8.4 Mm3


Ago.

08

Oct.08

Dic.

08

Feb.

09

Apr.09

Jun.

09

Ago.

09

Oct.09

Dic.

09

Feb.

10

Apr.10

Jun.

10

Ago.

10

Oct.10

Dic.

10

Feb.

11

Apr.11

Jun.

11

Ago.

11

Oct.11

Dic.

11

Feb.

12

Abr.12

Jun.

12

Ago.

12

Oct.12

Dic.

12

10

9

8

7

6

5

4

3

2

1

0

Actual AccumulatedProgrammed Accumulated

29


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A N N U A L R E P O R T 2 0 1 2

by Dredging International de Panam S.A., covered around 11

km of the navigational channels;1.8 km north of the Bridge of

the Americas; and the rst kilometer of the new access channel

to the third set of locks. All dredging works were performed with

dredge DArtagnan, upon completion of its assignment in Gatun

Lakes northern reaches. The project has reached a 95 percent

progress rate with the conclusion of the widening and deepening

of control sector 7, that of sector 2A at design depth, plus the

extensive completion of sector 6, and the beginning of dredging

activities in sector 4.

Atlantic EntranceJan De Nul n.v., a Belgian company in charge of dredgingoperations at the sea entrance on the Atlantic side, ended

operations in control sectors 3A, 4A, 2B, 3B, and 5B with support

from the Filippo Brunelleschi, Charles Darwin and Al Idrisi hopper

dredges. All sectors were delivered prior to established contract

date on the projects schedule. Signicant progress has also

been made in the removal of the remaining volume in sector 3C.

This project registered a cumulative volume of nearly 17.4 million

cubic meters of removed material, for a 98 percent progress rate.

Raising Gatun LakesMaximum Operational LevelWith a view to guarantee an adequate water

supply for human consumption, as well as for the

expanded waterway, this Program component

consists in raising Gatun Lakes maximum

operational level 45 centimeters. The works

required to accomplish this goal continued

during this period and increased the projects

progress rate to 9 percent.

Atlantic Entrance Deepeningand WideningDredging and Dry Excavation Volumes -

Actual vs Programmed through September 2012

Fe

b.

10

Abr.10

Jun.

10

Ago.1

0

Oct.10

Dic.

10

Fe

b.1

1

Abr.11

Jun.

11

Ago.

11

Oct.11

Dic.

11

Fe

b.

12

Abr.12

Jun.

12

Ago.

12

Oct.12

Dic.

12

Fe

b.

13

Abr.13

20

18

16

14

12

10

8

6

4

2

0

AccumulatedVolume(m3)

Actual Accumulated

17.4 Mm3

Programmed Accumulated

30


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A N N U A L R E P O R T 2 0 1 2

One of the most signicant activities under this project, which

is performed by the Panama Canal,focused on extending the

Gatun spillway gates, completing 13 of the 14 gates. Review

and nal adjustment works were also completed on two new

gates fabricated by the ACP with the required dimensions. The

spillway has 14 gates, but the project includes a total of 16 so

as to have 2 additional gates available for maintenance and

emergency purposes. Additionally, raising Gatun Lakes level

requires other modications to structures in Pedro Miguel Locks

as well as Gatuns upper chambers. For this reason, proposals

for the acquisition of 32 submersible hydraulic cylinders are

being evaluated; designs have been made to modify other

components such as the conductor-slot drainage system, miter

gates, and yoke seal, among others; and specications for new

water level sensors are being prepared.

Administration and FinancingThe program management effort continued as planned with the

support of international experts in various areas. For instance,

CH2M Hill Panama R. de S.L., the program management services

consultant, worked jointly with the ACP on all construction aspects

for the new locks. Additionally, they continued providing supervision

and inspection services in South Korea and Italy

during the fabrication of the lock valves and

gates, respectively. With regard to legal advisory

services for international contracts, Mayer Brown

LLP provided guidance on several topics related

to the locks contract. Other contractors, such as

Shearman & Sterling, Willis Limited, Consorcio Post

Panamax, and URS Holding Inc., also provided

the respective project management support on

nancial legal issues; risk management; technica

consultancy on geotechnical aspects, dams

and concrete mixes; as well as dam construction

The ve credit facility lenders that provide

part of the funds required to execute the

Expansion Program continued receiving nancial

operational, environmental, and progress reports

as established in the common terms agreement

Meanwhile, the ACP complied with its paymen

commitments and debt service fees in Novembe

2011 and May 2012, respectively. Pursuan

to the agreement, in February 2012 a visit to

Expansion Program sites by credit facility lenders

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A N N U A L R E P O R T 2 0 1 2

representatives was prepared and coordinated. In June

2012, the ACP requested a B/.100 million disbursement

from the Interamerican Development Bank.

Projects Occupational SafetyWith the responsibility shouldered from the beginning,

for occupational safety management sets the norm to

keep work areas free of accidents, injuries, and diseases.

Monitoring contractor activities in the implementation of

safety and hygiene measures at work sitessuch as the

use of personal protection equipment; fall protection;

unhealthy (noise, dust) work conditions control; and

ergonomic risk evaluations, among others, is the constant

of these efforts. This task also includes reviewing safe

work procedures and plans, as well as specic audits.

To support this commitment, and as a corporate initiative,

the Program management consultant launched the

Dont Walk By campaign to raise workers awareness

regarding the need not to ignore or walk by an evident

risk without correcting or reporting it. On the other

hand, in an effort to draw attention to the importance

of occupational safety among ACP and contractor

employees, the second annual seminar under the slogan

Excellency in Safety Management at the Executive

Level was carried out. Another effort of the occupational

safety projects team was a workshop to promote

accident-prevention innovations. As a result from this

event, new initiatives were taken such as the visible

participation of senior management in health and safety

activities, and regular workshops for ACP employees

and contractors to promote benchmarking between

ACP and contractor personnel on the subject. The ACP

continues to permanently stress the consideration that

should be given to this component in order to preserve

the health and life of each and every worker playing a

part in the Programsexecution.

The Panama Canal Expansion Program received Spains

Consejo General de Relaciones Industriales y Licenciados

en Ciencias del Trabajo Prever 2011 Award under their

international category; an award that highlights labor

risk-prevention initiatives.

Environmental ManagementRelentlesswould be the appropriate term to describe

the effort that goes into environmental management.

Follow-up on the mitigation measures included in the

environmental impact study and the resolution issued

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A N N U A L R E P O R T 2 0 1 2

by the National Environmental Authority (ANAM for its

acronym in Spanish) which approved it, entails several

components, such as monitoring water and air quality,

and noise; managing solid wastes and hazardous

materials in work areas; working conditions; erosion

control; siltation migration; secondary containments for

fuel and lubricant storage; wildlife care and protection;

and ecological compensation, among others.

The reforestation program is executed in coordination

with ANAM and the Authority for Aquatic Resources

(ARAP for its acronym in Spanish) in the provinces of

Colon, Panama, Cocle, Herrera,and Chiriqui. At the end

of this scal year, the mangrove of the Chiriqui Viejo River

was included in the reforested areas, which amounted

to 565 planted hectares, 515 hectares of forest and 50

hectares of mangrove. All Expansion Program plantations

have been established and are in their maintenance

phase, which requires a 4 year period and includes yearly

cleanups, re protection, and replanting; among many

other activities. A new contract was awarded in February

2012 for the reforestation of 61 hectares of land within

the Tapagra hydrological protection zone, in Chepo,

Panama, with a reported 45 percent progress by the end

of the period. As it is generally known, the environmental

effort also involves rescuing and relocating wild life from

areas where the vegetation has been removed during

the waterways expansion works.

The independent consultant for this component

Environmental Resources Management Panam S.A.

made two scheduled semi-annual visits to project sites

and reforestation areas; and prepared the respective

reports on the verication of the implementation, and the

effectiveness of mitigation and social and environmenta

follow-up measures. These reports render account to the

credit facility lenders and ANAM.

Paleontological andArchaeological StudiesAs a result of the required excavation and dredging

activities during the Programs execution, some areas and

part shave become exposed that would not be visibleotherwise. This allows for performing paleontologica

rescues, and evaluating artifacts and other identied

cultural remains.

The required paleontological evaluations are a service

provided by personnel from the Smithsonian Institute fo

Tropical Research, who inspected throughout the yea

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a number of areas on the Atlantic and Pacic sectors, and in

the Culebra Cut.For example, they observed the stratigraphy

of sediments in the exposed rock and found a sh and mollusk

deposit where excavations for the locks are underway on the

Atlantic sector. Additionally, marine fossils have been recovered

at different locations, and a Culebra formation rock layer full

of organic matter found in a particular area in the excavations

for the construction of the Pacic locks. This area also had crab

remains and fossilized leaves, a rare nding that requires specic

research. A layer of freshwater mollusks and bivalve fossils

was found at Culebra Cut, in a Cucaracha formation. This is a

major scientic discovery, as it will help reconstruct the isthmus

environmental conditions during the Middle Miocene Era. Other

discoveries in the Cut included mammal and reptile fossils found

in the area of Lirio; teeth and bones of mammals were recovered

at Hodges; and turtle shells and crocodile teeth were found in the

area of the Centennial Bridge. In addition to recovering remains,

scientists also analyze, evaluate, categorize, and document

each nding for their preservation.

Archaeological inspections were also conducted in different

Program areas, albeit less than before, given that at most

work fronts dredging and excavation design levels have

been reached. A metallic remains deposit with railroad track

fragments, iron wheels with varying diameters, and an iron chain

were found in the construction site for the rst dam to the east

of the Borinquen dam, among others. Other

ndings took place in one of the Pacic locks

projects disposal sites, where there were four

World War II concrete bunkers; a number of mid-

twentieth century bottles; a 1912-1913 stone-lined

trench; an aluminum helmet; an iron ashtray; 12

glass bottles; 2 caskets; and an iron pick. An

archaeological evaluation performed at Dock

45 on the Atlantic sector reported nding a 5

feet-long Decauville wagon wheel axis with its

gear box, from the time of the French Canal. An

inspection conducted in the old Emperador Town

resulted in the recovery of several archaeological

cultural remains belonging to town residents,

such as industrial implements, ceramic, glass

bottles, and metallic artifacts; as well as in the

identication of 13 iron crosses in the cemetery

area, which date back to the French Canal Era

(1880-1903).

Public Relations,Communication, andHistorical DocumentationIf the eld work doesnt relent, communication

and historic documentation of Expansion

Program progress dont stop either. The task

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of informing about the development of this major Program

has become the permanent trend of those who generate all

sorts of communication instruments, such as brochures, iers,

leaets, writings, reports, presentations, photos, videos, and

recordings, among others. The preservation of documents for

future generations is another tremendous effort, one that requires

technical know-how and long-term vision to gure out how the

images and documents prepared today will be interpreted, so as

to ensure that they stand the test of time.

During an assessment of the communication activity from the

beginning of the Expansion, over 37,000 persons have received

assistance, including visits to the new locks construction sites and

to dredging and excavation areas on the Pacic and Atlantic

sectors; speeches and presentations to different international

and national audiences on the progress of the Program; fullling

requests from foreign and local media; responding the toll free

customer care line, 800-0714; and replying to emails received at

[email protected].

Art goes hand-in-hand with the Canal Expansion as it advances.

Various engineering activities have been depicted in oil and

watercolor paintings featuring the movement of heavy equipment

and Expansion workers, by the hands of local artists such as

George Scribner, Carlos Gonzalez Palomino, Jose Inocente

Duarte, Amalia Tapia, and Roberto Vergara.

Honoring the commitment to document the

evolution of this remarkable initiative, the ACP

published a second volume of the book titled

The Panama Canal Expansion: Portraits o

a Historic Undertaking 2010-2011. This book

compiles photos of the work sites, contracto

activities and equipment, and the Panamanian

workforce who contribute with their daily effor

to meet the goal and turn over this project, which

will render tangible benets and place Panama

in a leading international maritime trade position

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Environmental ManagementEnvironmental management refers to how we interact with nature

through instruments keen to making our actions sustainable. In this

respect, thinking of sustainability is thinking of life. This represents,

managing responsibly with balance between human activities,

social equality and environmental protection at different levels.

The Constitution of the Republic of Panama gives the Panama

Canal Authority (ACP) a mandate to shift from concept to action,

mainly to protect Panama Canal Watershed resources through an

integrated management approach. Water is a critical resource for

the sustainability of the business of the Panama Canal; therefore

the effort of the Panamanian society as a whole is required topreserve its quality and quantity. The Interinstitutional Commission

for the Panama Canal Watershed (CICH for its acronym in Spanish),

created in the year 2000, is responsible through close coordination

with State entities to integrate efforts, initiatives and resources for

the Watersheds conservation and management and to promote

its sustainable development. Strategic alliances are made through

the CICH and a community participative framework is established

for the water governance, building a sustainability culture.

The Panama Canals water governance approach is based

on a community structure of 6 Regional Advisory Councils and

30 Local Committees in 23 sub basins is organized under hydric

planning criteria. The year 2012 consolidated the

participatory process in the management of the

Watershed, for the eastern and western sectors o

Gatun Lake, which facilitated the strengtheningof local and organizational capabilities, resulting

in the development of annual action plans.

Part of the process and with the participation o

all interested stakeholders, a 25 year vision maste

plan was approved in the year 2007. It facilitates

a set of organized and concerted actions called

Sustainable Development Plan and Integrated

Management of the Water Resources in the

Panama Canal Watershed (DSGIRH Plan for its

acronym in Spanish).

The results of the plans implementation have

been satisfactory from its formulation. For sca

year 2012, it has facilitated the execution of

54 projects with an active participation of the

community and different government and

non-governmental institutions. The greates

investment has been concentrated in community

infrastructure projects that improve the quality o

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Education for Sustainable DevelopmentThe Environmental Conservation and Work Training Program

is carried out under a strategic partnership with the National

Institute for Human Development (INADEH), and the Ministry of

Education (MEDUCA). This program facilitates the insertion of the

Watershed population in the national labor market, and at the

same time it develops modules for good environmental practices

and community awareness. In the 2012 period, this program

was implemented in 65 educational and community centers in

training areas such as functional English, electricity, masonry, and

information technology. During six years of execution more than

5,300 youngsters have graduated and 10,368 certicates have

been issued.

It also notes the development of the annual missions and

environmental projects in programs such as Our Canal and its

Watershed (NUCA), Adequate Management of Solid Waste, and

Water Quality Assessment focused on 4th, 5th, and 6th graders,

respectively, in which more than 35,000 students and 1200

teachers actively participated. The capacity building approach

has reinforced the education of children and adults this year 2012.

This is the best guarantee of a sustainable future.

During the Environmental Workdays, which is an annual program

for the participation and interaction of students and teachers,

there were environmental contests, regional and interregional

encounters, as well as camps, and activities.

More than 10,000 students and 900 teachers from

110 schools participated in the activities. We may

conclude that during the 2012 period we hadthe participation of more than 50,000 students,

2,500 teachers for elementary, premiddle, and

middle levels, from 153 schools located within the

Panama Canal Watershed.

Panama Canal WatershedConservationFor consideration purposes, we have divided

the 339 thousand hectares of the Panama

Canal Watershed territory into eight work regions

established under hydric criteria. The Panama

Canal Watershed is one of the most important

areas for the Republic of Panama. It consists

of 42 corregimientos located in 7 districts of the

provinces of Panama and Colon. The Watershed

is an area dened by its sub basins that drain their

water to the Alhajuela, Gatun and Miraores lakes.

Six protected areas occupy 38.5 percent of

the Panama Canal Watershed territory onnatural elements, vegetable cover and the rich

ecosystems which make up the Watershed.

The Panama Canal in close collaboration with

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competent authorities focuses its conservation and

environmental restoration programs.

Watershed Vegetable Cover andSoil Use ProgramIn general terms, the forest cover of the Panama Canal

Watershed has shown a favorable tendency during

the 2008-2012 period, and despitethe extreme natural

climatic phenomena that contributed to the covers

reduction, there is natural regeneration and a positive

impact as a result of reforestation activities performed by

the Panama Canal in association with the communities

and local authorities. This joint participative and

integrated management approach with stakeholders

has played an important role in the conservation of the

environment and in the protection of water sources.

During the year 2012, the mature and secondary forest

cover was mainly reduced in the Chagres Nationa

Park, at the margins of the interoceanic route and the

headwaters of the Ciri Grande and Trinidad rivers

This was mainly due to the high precipitation during

Vegetable Cover and Soil Use in the Watershed, 2008 and 2012Cover Surface (ha) 2012 2012% Surface (ha) 2008 2008%

Mature Forest 84,082.2 24.3 85,609.2 24.80

Secondary Forest 82,217.9 23.8 82,941.9 24.00

Bushes and Stubble 31,279.2 9.1 31,213.6 9.00

Reforestation 8,212.8 2.4 6,330.5 1.80

White grassland 6,474.8 1.9 6,946.8 2.00

Crops 3,218.4 0.9 1,996.4 0.60

Grassland 75,823.7 22.0 77,874.7 22.60

Bare soil 1,461.2 0.4 406.6 0.10

Population 10,397.2 3.0 10,218.7 3.00

Mining 859.3 0.2 488.3 0.10

Water 41,292.6 12.0 41,292.6 12.00

TOTAL 345,319.3 100.0 345,319.3 100.0

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the climatic phenomenon La Purisima in the year 2010 and

the strong rains in the year 2011, as well as the construction of

infrastructure in the Transisthmian Corridor during the last ve

years. The 2009-2012 period showed a deforestation rate of -0.27

in comparison with the 2003-2008 period.

Water Quality and QuantityThe Panama Canal, as the water resources administrator for

the Panama Canal Watershed, is responsible for ensuring the

quality and availability of water for human consumption as well

as for the operation of the Panama Canal by means of complex

forecasting systems, together with water quality monitoring and

ood control and prevention programs.

Water QualityThe Water Quality Surveillance and Monitoring Program in the

Panama Canal Watershed comprises natural water at stations

located on tributary rivers and reservoirs in Gatun, Miraores and

Alhajuela. This generates the water resources physico chemical

and biological conditions data for better decision-making

regarding policies, programs, and projects that contribute to

sustainable use and efcient water management. With regards to

the monitoring of drinking water quality, samples were analyzed

for daily, monthly and quarterly assessments of processes with

products of the three water treatment plants managed by the

Panama Canal, Miraores, Mendoza and Monte Esperanza. These

included, among others, testing for metals, organic compounds,

pesticides, cyanobacteria, protozoa and other

biological indicators. In addition, wastewater

quality was followed up on by participating in

the characterization and monitoring of different

sewage discharges generated in the operations

of the Canal.

Production of Drinking WaterThe water resources of the Panama Canal

Watershed are the source for the water used by

the treatment plants managed by the Canal,

beneting approximately more than half a million

people in the cities of Arraijan, Colon, La Chorrera

and surrounding areas; as well as Panama City,

the district of San Miguelito and the Transisthmian

Corridor towns. The Mendoza Treatment Plant,

with a production capacity of 40 million gallons

per day, produces 31 million gallons supplying

water to 125,000 recipients who have lived for

more than 15 years without continuous access to

safe drinking water.

Climate ChangeRecently the Republic of Panama has experienced

some extreme climate events related to the

climate change that our planet lives today.An

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example of this was the climatic event that took place

in December 2010, La Purisima, caused by the 2010-

2011La Nia phenomenon, which brought heavy rainfall

for more than 21 days, causing harm to human and natural

systems, related to the loss of human lives, millionaire losses

in agricultural production, infrastructure, and a reduction

in drinking water production for the provinces of Panama

and Colon.

The Panama Canal has started looking for alternatives

to face the challenges and opportunities of climate

change through an integrating vision regarding social,

economic and environmental matters, including nancial

mechanisms to implement actions that facilitate the

application of mid to long term adaptation measures

based on a sustainability culture oriented towards risk

prevention.

Under this approach, the Canal is bound to reduce the

Watersheds social and natural systems vulnerability, the

adverse impact of climate change and other risks related

to global warming, in order to increase the populations

adaptation capacity to those events. The Green Route

Program includes concrete actions implemented by the

Panama Canal in the adaptation and mitigation of the

effects of global climate change.

The Green Route: The Routethrough PanamaIn a green economy framework, we are implementing a

comprehensive carbon management plan that includes

the development of a greenhouse gases baseline (GHG

for our operations and the establishment of a strategy fo

the reduction and compensation of these emissions. We

are trying to mitigate the impact of our activities and to

reduce its carbon footprint in a proactive way, through

the execution of reforestation projects and recovering

degraded areas.

The route through Panama is considered the green

maritime route of the world, because of its contribution

to fuel use reduction per transported cargo unit by the

vessels that transit through the Canal in comparison with

other immediate alternative routes, reducing in this way

the CO2emissions of the world maritime sector. With the

Panama Canal Expansion, we expect to have twice the

cargo that transits today avoiding the emission of more

than 160 million tons of CO2during the rst 10 years of the

new set of locks, between the years 2015 and 2025. The

Panama Canal offers the maritime industry a valuable

alternative for the transportation of great volumes o

cargo through an all water route, with safety, low costs

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and effective Canal waters time, in addition to reducing CO2

emissions and contributing with the international efforts to reduce

Documents

Panama Canal Annual Report 2012