05/23/2012 10:09 EDT | Updated 07/23/2012 05:12 EDT

SNC-Lavalin joint venture finalizes $1 billion Highway 407 extension contract

MONTREAL - A new SNC-Lavalin joint venture recently selected as preferred bidder by the Ontario government has finalized a $1-billion contract to extend the Highway 407 toll road east.

The 407 East Development Group General Partnership, a 50/50 joint venture between SNC-Lavalin and Cintra Infraestructuras, will design, build, finance and maintain Phase 1 of the new Highway 407 East.

"Once completed, the highway will allow for a better and more efficient transportation and flow of goods between Toronto and eastern Ontario," said chief financial officer Gilles Laramee.

The Montreal-based engineering and construction giant said Thursday that the project will be delivered using Ontario's "alternative financing and procurement" (AFP) delivery model.

The formal contract was announced a month after Cintra parent company Ferrovial said the partnership had been selected by Ontario as the preferred bidder.

Spanish-based Ferrovial is a 43.23 per cent partner in the 407 highway concession, while the Canadian Pension Plan Investment Board owns 40 per cent and SNC-Lavalin 16.77 per cent.

The fixed-price contract will extend the highway 22 kilometres east from Pickering to Oshawa. It also includes a 10-kilometre connection to Highway 401.

The project is expected to take about 3 1/2 years to complete. The partnership will maintain the highway for 30 years.

The second phase of the 65-kilometre extension will take the world's biggest toll road to Clarington, Ont.

SNC-Lavalin has been present in Ontario since the 1960s and has about 5,000 employees working out of 13 offices in the province.

The company's $500 million share of the contract represents about 18 per cent of its infrastructure and environment segment backlog and five per cent of its overall backlog.

Maxim Sytchev of AltaCorp Capital said the contract is further evidence that SNC-Lavalin continues to win work from various levels of government.

It has been recently retained to work on two sizable public-private partnership contracts in the United States — the $2.6-billion Ohio River Bridges project and a $4.70-billion Texas highway job.

On the Toronto Stock Exchange, SNC's shares were down 46 cents at $36.03 in morning trading Wednesday.