SNC-Lavalin Wins Ottawa Light Rail Project Despite Scandals, Arrests

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The O Train in Ottawa. An international consortium that includes SNC-Lavalin was selected Wednesday to build Ottawa's $2.1 billion Confederation Line light rail transit project. (CP PHOTO/ Ottawa Citizen/ Wayne Hiebert)
The O Train in Ottawa. An international consortium that includes SNC-Lavalin was selected Wednesday to build Ottawa's $2.1 billion Confederation Line light rail transit project. (CP PHOTO/ Ottawa Citizen/ Wayne Hiebert)

MONTREAL - An international consortium that includes SNC-Lavalin was selected Wednesday to build Ottawa's $2.1 billion Confederation Line light rail transit project.

The Rideau Transit Group is being recommended to city council to design, build, finance and maintain the light rail project. Municipal officials are expected to approve the recommendation after receiving public comments.

The winning group includes SNC-Lavalin, Spain's ACS Infrastructure, EllisDon Corp., EllisDon Inc., Dragados Canada Inc. and Veolia Transportation Services Inc.

Construction is expected to begin next February and includes the widening of a section of Highway 417. It is expected to create about 20,000 jobs. Most of the construction will be completed by the end of 2017 but service isn't expected to begin until 2018, missing Canada's 150th anniversary.

Ontario Premier Dalton McGuinty participated in a news conference in Ottawa to announce the winning bid.

"Today is an exciting milestone for this important project. It will create jobs, help the environment by taking cars off the road and contribute to a better quality of life for the people of Ottawa," he stated in a news release.

The provincial government said it is providing up to $600 million towards rapid transit in the national capital, noting that the province is making its largest single investment in transit infrastructure in the city of Ottawa's history.

Alstom will provide the rail vehicles for the transit line because Canadian rival Bombardier (TSX:BBD.B) was a partner in Ottawa Transit Partners, which along with Rideau Transit Partners were losing consortium bidders. Bombardier was also part of a losing bid against Alstom in South Africa for a $5.8 billion rail contract.

Montreal-based SNC-Lavalin's (TSX:SNC) share of the project has not been disclosed but analysts said the selection should be positive for the engineering and construction giant and partners such as IBI Group, whose stock has been hurt by investors' concerns about weak results and the sustainability of its dividend.

The contract comes about two months after another SNC consortium was chosen by the B.C. government to design and build the $1.4-billion Evergreen Line Rapid Transit project.

The project, which will integrate into the existing SkyTrain system, will link the cities of Burnaby, Port Moody and Coquitlam with an 11-kilometre advanced light rapid transit line.

It also won a $500 million contract for the first phase of the Highway 407 East extension and Inmet’s (TSX:IMN) $1.2-billion Cobre Panama copper project.

"Together, these contracts further support our thesis that SNC’s credibility with clients is intact," Pierre Lacroix of Desjardins Capital Markets wrote in a research note.

"This should enable the company to continue winning new contracts, which is also a key factor in attracting and retaining top engineering expertise."

The Ottawa announcement comes less than a day after SNC-Lavalin announced that its executive vice-president of hydrocarbons and chemicals resigned, a little more than a year after joining the company.

SNC said Calgary-based Andy Mackintosh accepted a position with another undisclosed firm, adding that his departure was for personal reasons and was not related to last week's arrest of former CEO Pierre Duhaime on conspiracy to commit fraud and utter false documents in connection with a contract pertaining to the multibillion-dollar McGill University Health Centre.

Lacroix added that SNC-Lavalin was also getting close to booking $650 million to $750 million in work related to the Muskrat Falls hydroelectric project, which is awaiting final approval by the Newfoundland and Labrador government.

The Alberta government is also expected to release its decision shortly about AltaLink's proposed $1.4 billion Western Alberta Transmission Line. As AltaLink's owner, SNC-Lavalin is expected to perform a substantial portion of the engineering, procurement and construction on the project, he added.

SNC-Lavalin declined to comment until the contract is signed.

On the Toronto Stock Exchange, SNC-Lavalin shares fell 48 cents at $37 in afternoon trading while IBI shares were up 15 cents at $6.68.

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