'A lot of work in the pipeline': Higher oil prices, infrastructure spending could fuel Canadian construction firms<\/a><\/li>\n<\/ul>\nBruce\u2019s comments come as he nears his three-year anniversary as head of Montreal-based SNC-Lavalin, the largest engineering and project management company in Canada. The firm is now entering the tail end of a long corporate transformation, analysts say, as the company looks to shake off criminal charges that have hobbled it for years.<\/p>\n
\u201cThey\u2019re finally surfacing,\u201d said Frederic Bastien, an analyst with Raymond James in Vancouver.<\/p>\n
The company\u2019s troubles began around 2012, when former CEO Pierre Duhaime stepped down without warning, after news that a former vice-president of the company was being investigated by police. By February 2015, RCMP had filed criminal charges against the company, including for fraud and corruption allegations tied to its operations in Libya.<\/p>\n
The company has long called for a deferred prosecution agreement (DPA), which would effectively free the company of charges without forcing it to admit wrongdoing. In exchange, it would have to pay a fine (analysts expect it could be around $200 million) and prove it has introduced sufficient protections to avoid a repeat of its past practices.<\/p>\n
Ottawa said it would introduce DPAs in its 2018 budget, though it didn\u2019t provide specific timelines for when they would come into force.<\/p>\n
Bruce believes SNC-Lavalin has earned the right to be invited into the DPA process, after the company has spent the last six years changing its operational processes, improving its ethics and compliance program and reshuffling its management team.<\/p>\n
\u201cWe hope that that would be afforded to us,\u201d he said.<\/p>\n
The absence of a DPA has been a consistent lag on the company stock, despite making substantial gains since Bruce took over as CEO, analysts have said. SNC-Lavalin’s stock price has risen from a low of around $35 per share in 2013 to well above $50 today, where it has remained for more than two years. The stock was trading up half a per cent at $56.31 on Thursday.
\n<\/strong><\/p>\n\u201c<\/strong>As long as the DPA is not settled I think there\u2019s a whole swath of investors that won\u2019t touch it,\u201d Bastien said. <\/p>\nStill, the company\u2019s potential future growth prospects look better than ever, analysts say, particularly following its $3.6-billion acquisition of U.K. firm WS Atkins, which extended the company\u2019s reach into the U.S. and Europe while deepening its engineering and infrastructure know-how.<\/p>\n
\u201cWe had a few gaps,\u201d Bruce said in justification of the deal. \u201cWe didn\u2019t really have a big strong presence in Europe, and we didn\u2019t have the real infrastructure engineering capability in the U.S.\u201d<\/p>\n
The acquisition was also seen as a move toward lower-risk sectors after the company\u2019s $2.1 billion purchase of Kentz Corp. in 2014, which widened its exposure to the oil and gas sector at a time when oil prices were collapsing.<\/p>\n
Bruce sees the nuclear and infrastructure divisions as the two major growth engines for the company in coming years. Analysts have also said it provides new opportunities in the consulting business, which has been lucrative for the firm.<\/p>\n
\u201cCompany-wise they\u2019re as good a company as they\u2019ve ever been, but the markets are tough,\u201d Bastien said.<\/p>\n
The company has also managed to win major new projects in Canada recently, helping to swell its project backlog to the largest in years.<\/p>\n
SNC-Lavalin\u2019s infrastructure expertise could give the company a leg up as it bids on major new public transit projects, analysts say. In February, the company won a project to build the $6.3-billion R\u00e9seau Express M\u00e9tropolitain light rail project in Montreal, one of the largest public infrastructure project\u2019s in the city\u2019s history.<\/p>\n
And there are plenty more project bids ahead. Bruce said the Trillium light-rail line in Ottawa, the Gordie Howe bridge in southern Ontario, and a handful of potential oilsands expansion projects could all provide major new revenue streams for the firm.<\/p>\n
Prime Minister Justin Trudeau introduced an ambitious infrastructure plan in 2016 as one of his political campaign provinces, planning to spend $186.7 billion on rail, road, sea and airport projects over the next 12 years. The plans also detail spending in so-called “social infrastructure” projects, and smaller subsidies for new bus fleets and waterworks developments. In its first years of implementation, the program has been criticized for widespread delays, with billions of dollars being reallocated to later years than planned. <\/p>\n
Bruce said that Ottawa\u2019s infrastructure spending plans are not necessarily a lifeline for EPC firms, but that it provides necessary cushion as companies bid on projects.<\/p>\n
\u201cCompanies are not looking at individual contracts being a \u2018must win\u2019 because there are a number of projects being kicked off.\u201d<\/p>\n
\u2022 Email: jsnyder@nationalpost.com<\/a> | Twitter: