SNC soars on result of federal election

JUMPS 14%

TORONTO • Shares of SNCLavalin Group Inc. surged amid optimism Justin Trudeau’s election win may pave the way forward for the embattled engineering firm.

Montreal-based S NC jumped more than 13 per cent, the most since Sept. 10, after Prime Minister Trudeau’s Liberal Party won a second term to lead Canada with a minority government. The company found itself in the middle of Canada’s biggest political crisis in years after the country’s ethics watchdog found Trudeau pushed for the company avoid a criminal trial over its dealings in Libya.

When asked whether a so-called deferred-prosecution agreement is more likely with the Trudeau Liberals back in power, Finance Minister Bill Morneau said on BNN Bloomberg TV Tuesday: “That’s a continuing discussion that the justice minister will have to have.”

Trudeau has always said his interest in SNC’s fate was based on his desire to avoid job losses.

Prior to this week, the stock had slumped more than 60 per cent this year after the company issued three profit warnings, wrote down the value of its Middle East energy business and lost a contract in Chile valued at

WE SEE NO REASON TO BE LONG SNC-LAVALIN.

$260 million. The shares closed Tuesday at $20.12, up 13.8 per cent.

Not everyone is optimistic about SNC prospects.

“We see no reason to be long SNC-Lavalin until better visibility is offered,” Frederic Bastien, an analyst at Raymond James said in a report published before the election results came in. The status of its court proceedings, the challenged fixedprice projects it has yet to substantially complete, and the earnings trajectory of its low-risk engineering and nuclear services businesses are all reasons to stay cautious, he added.

SNC said earlier this month it sees revenues from its power businesses tripling over the next 10 years, fuelled by appetite from North American utilities to digitize and modernize their grid networks, a company executive told Reuters at the time.

The opportunity in power comes as SNC is in the middle of a broader restructuring to turn its finances around after the company withdrew its 2019 forecast, announced plans to exit fixed-price contracts and 15 countries and explore options for its resources business.

SNC does not break out a specific figure for its power businesses, which the executive said generated about $2 billion to $3 billion annually, over the last five years.