MONTREAL – SNC-Lavalin is getting an earful from its largest shareholders about the engineering giant’s handling of internal problems that have sullied its reputation.
The Caisse de depot et placement du Quebec has become the second large investor to criticize how the Montreal-based company’s board has dealt with recent events, including $56 million of payments to unknown agents.
“Like other investors, many of our questions about recent events and the many allegations made about the company remain outstanding and we wish to express our discomfort,” Marie Giguere, vice-president of legal affairs, wrote in a letter dated April 30 to SNC chairman Gwyn Morgan.
The missive was sent just days before SNC faces shareholders in Toronto for the first time since the events led to the resignations of three senior executives, including its chief executive.
Canada’s largest pension fund manager said it would support SNC’s proposals, including remuneration paid for senior management such as nearly $5 million to former CEO Pierre Duhaime.
But it said SNC-Lavalin must better inform shareholders as investigations shed light on what happened.
“The Caisse expects more transparency in this respect going forward given the extremely serious nature of these allegations…and the measures that will be put in place to ensure these events don’t happen again,” she said.
Jarislowsky Fraser Ltd., SNC’s largest shareholder, also accused directors on Monday of failing to provide proper oversight leading up to an internal investigation into the overseas payments.
Duhaime was “relieved of his duties” for approving the payments requested by former vice-president Riadh Ben Aissa in breach of SNC’s code of ethics.
Ben Aissa sits in a Swiss jail on suspicion of corrupting a public official, fraud and money laundering tied to his dealings in North Africa. Justice officials said SNC’s former head of construction has been in custody since mid-April, stemming from an investigation the agency launched last May.
At its request, the RCMP executed search warrants at SNC-Lavalin’s Montreal headquarters, Switzerland’s federal prosecutor’s office has said.
Ben Aissa, who parted ways with SNC-Lavalin in February, was in charge of business dealings in his native Tunisia as well as Libya, where the company won lucrative contracts with the former regime of Moammar Gadhafi.
The whereabouts of former controller Stephane Roy weren’t known.
The shareholder angst was expressed as SNC-Lavalin continues to announce lucrative contracts that industry observers believe could ease investor concerns about the company’s ability to win new business.
SNC-Lavalin (TSX:SNC) said it has been awarded a five-year contract worth an estimated $1.6 billion to design and build portions of AltaLink’s transmission lines in Alberta.
The Montreal-based engineering giant said the engineering, procurement and construction (EPC) agreement extends its services to its fully owned AltaLink subsidiary that were set to expire on Wednesday.
SNC said it was awarded a portion of the new contract following a competitive bidding process launched by the Alberta Utilities Commission. It said an independent adviser who oversaw the process described the agreement as “fair to all participants.”
“This further demonstrates that we have a competitive value proposition for all of our transmission and distribution clients and further strengthens our track record of delivery,” stated executive vice-president Patrick Lamarre.
The contract to deliver transmission lines and substations will be based on need assessments and permitting.
SNC-Lavalin didn’t put a price tag on the contract, but Pierre Lacroix of Desjardins Capital Markets estimated it is worth $1.6 billion. That constitutes the lion’s share of the development project’s estimated $2 billion cost.
He described the contract win as a “significant development” for the embattled engineering giant even though it owns AltaLink.
“This contract, combined with recent wins (total value of $1.5-2 billion), should offset, to a reasonable degree, investors’ concerns about SNC’s ability to win new business following recent internal issues,” he wrote in a report.
The AltaLink development relates to a list of prospective projects directly assigned to AltaLink by the Alberta Electric System Operator (AESO). These include a $1.7 billion Southern Alberta Transmission Reinforcement project to connect it to 2,700 megawatts of proposed wind generation projects.
SNC-Lavalin has already won the Western Alberta Transmission Line (WATL) project expected to start in early 2013. The project is estimated to be worth about $1.4 billion.
SNC’s shares closed up $1.38, or 3.72 per cent, at $38.52 on the Toronto Stock Exchange.