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The Skikda thermal power plant, one of SNC-Lavalin's projects in Algeria
The Skikda thermal power plant, one of SNC-Lavalin's projects in Algeria

Construction

With glowing hearts, an Algerian city rises Add to ...

It's not every company that can boast it built a city.

SNC-Lavalin Group Inc. has won a contract to handle design and engineering, and manage construction, at a new city that will house 80,000 people in eastern Algeria.

The deal for La Ville Nouvelle de Hassi Messaoud, near Algeria's biggest oil field, is one of the biggest services contracts ever for the Montreal-based engineering giant, a spokeswoman for the company said Thursday.

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The contract is expected to be signed within a few weeks, she said, adding that details on the project are being withheld until the deal closes.

Brenda McCabe, a professor of civil engineering at the University of Toronto, said SNC-Lavalin is in a special position, getting a crack at designing every aspect of a new urban community. "It's exciting," she said. "It's not every day you get to build something like this from scratch."

There are challenges with such a project. "It's a huge project that will require a huge effort. The challenge will be to take all the technologies that are known and create something that is sustainable."

And there are risks that come with the higher margins that usually go with services contracts, such as the types of warranties that are put on designs and whether a company is willing to take a chance on innovative technologies rather than sticking with the tried and true, she said.

SNC-Lavalin beat four rivals from Europe and North Africa with a winning bid of $31.2-billion dinars ($508.3-million), according to tsa-algerie.com, a French-language news site in Algeria.

"This is something, for our homegrown expertise to be recognized in this way. Eighty-thousand people, that's a lot of people," said Michel Boisvert, an urban planning professor at the Université de Montréal.

"What is important to keep in mind here is ensuring that a new city of this size is a place where quality of life is top of mind. It must not simply turn out to be a kind of satellite to the oil fields."

There is an existing town with a similar name, Hassi Messaoud, which means "blessed well" in Arabic.

Pierre Lacroix, an analyst with Desjardins Securities, said he believes this is the largest project ever of this kind for SNC-Lavalin. He doesn't anticipate that the company faces any major challenges with something of this size and scope.

SNC-Lavalin has the resources to combine its expertise in such areas as infrastructure, water treatment, transportation and bridges, he said.

"Obviously, from the logistics point of view, this is huge."

According to tsa-algerie.com , the new city will be Algeria's first modern oil field city. It is to be built over an eight-year period. Total cost of the new city of Hassi Messaoud has been estimated at about $6-billion (U.S.).

Map: La Ville Nouvelle de Hassi Messaoud View Hassi Messaoud in a larger map

The massive urban-planning project is part of a boom in Algeria's rapidly expanding oil and gas sector. SNC-Lavalin, whose presence in the country goes back 40 years, has been a key player in the energy business there.

Last month, it was chosen by Algeria's state-owned oil and gas company - Sonatrach - to build a natural gas processing facility, a contract valued at $1.2-billion (Canadian).

SNC-Lavalin is also a significant owner of such facilities as power plants and pipelines in the country.

Foreign energy companies have benefited over the past 15 years from the opening up of the country's energy sector to outsiders.

SNC-Lavalin has also been the target of terrorism in the country.

It was the victim of a terrorist attack last August in which 12 of its employees were killed in a bus bomb blast.

The company has offices across Canada and in over 35 countries around the world and has projects in about 100 countries.

With files from Reuters

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