SNC-Lavalin Group Inc. is selling a chunk of its minority stake in a group that owns a power plant in New York City, part of a wider plan to reduce the engineering giant’s presence in infrastructure-concession projects.
Montreal-based SNC said on Wednesday it has reached an agreement to sell 66 per cent of its minority interest in Astoria Project Partners II LLC, which owns the company that owns and operates the Astoria II thermal energy facility.
Proceeds of the sale – which is subject to the usual closing conditions, regulatory approvals and other factors – were not disclosed.
“While we view today’s announcement as a positive, we believe that this could be the first of a number of concessions to be monetized by the company in order to surface shareholder value,” Dundee Capital Markets analyst Maxim Sytchev said in a research note Wednesday.
Newly installed SNC chief executive officer Robert Card said in May that the company – in the midst of a major overhaul after a global bribery scandal – wants to focus on the resources sector while cashing out of its mature infrastructure-concession investments.
The real opportunity to create value for shareholders is SNC’s 100-per-cent ownership of Alberta electricity transmission company AltaLink, said Mr. Sytchev.
AltaLink could be spun off to SNC shareholders, or a passive or active shareholder could be brought in, he added.
Mr. Card has said he views AltaLink and the 16.8-per-cent stake in the 407 toll road in Ontario as core assets but that the company would look at reducing its positions through partnerships or other means.
SNC has so far “widely telegraphed” that it’s looking to exit Astoria I and II as well as its participation in the company that owns Malta International Airport, said Mr. Sytchev.
As part of its renewed focus on resources, SNC says it is targeting growth in such markets as oil and gas, mining and metallurgy, and environment and water; it is also looking to further growth in its existing clean power and infrastructure business as well as in integrated services such as project financing, engineering, construction and operations and maintenance.
“From overseeing financial close and construction, to several years of successful operation, SNC-Lavalin has now come full circle with Astoria II,” Gerry Grigoropoulos, acting executive vice-president of infrastructure-concession investments, said in a news release Wednesday.
“This sale would provide a good return on our monetized investment and represents the creation of value by selling certain investments when strategically and financially appropriate, and in rebalancing our portfolio of infrastructure investments.”
SNC invested $70-million (U.S.) in Astoria II four years ago for a 20-per-cent equity interest, said Mr. Sytchev.