The Venezuelan government has hired Canadian construction and engineering giant SNC-Lavalin Group Inc. for a $606-million irrigation project aimed at turning an area of sparsely-populated savanna into 42,000 hectares of farmland.
It's an average-sized but strategically important deal for SNC, which is looking to expand its already-significant presence in infrastructure, including water distribution and treatment.
"This is a multifaceted project that we like very much," said Riadh Ben Aissa, executive vice-president of SNC. "It's an area of our expertise that we're focusing on and we want to grow."
In addition to the Venezuelan project, which will start immediately, SNC is also involved in other operations including wastewater treatment, desalination and transportation of water from aquifers in southern Libya to cities along the coast. The company does not separate out its revenues from specific areas such as water infrastructure, but a company spokeswoman said it's an important part of the business.
SNC had revenue of $4.7-billion in the first nine months of 2007 and an order backlog of $9.8-billion.
The new irrigation system in Venezuela will extend an existing canal that has just been completed by SNC, and will also include the design and construction of three new towns with schools, medical centres and roadways.
Located in the Tiznados district, about 300 kilometres south of the capital city of Caracas, the project will employ 1,000 workers and will take three years to complete.
"New socio-economic activity will be developed around these lands. There's nothing right now," Mr. Ben Aissa said. SNC will employ a large number of area residents in the project, and will also set up training and other support programs for local farmers. The development will create 2,000 permanent homes, and should draw new residents from other areas, he said.
One of the biggest challenges in the construction will be moving the materials in by road, he added.
"Because we are working in a remote area, I would say logistics is the main issue. We go in by road. It's a long journey," Mr. Ben Aissa said.
SNC currently has projects under development in 100 countries, and offices in 35 countries including Canada.
The company's geographic and industrial diversity make it an attractive investment, said Denis Durand, senior partner at investment firm Jarislowsky Fraser Ltd., which manages more than $57-billion in assets for institutions and high-net worth investors.
"I think they are very well spread out across the world, and this makes them resilient to a slowdown in the U.S. economy," said Mr. Durand, whose firm is listed by Bloomberg as SNC's largest investor with 25.6 million shares equalling a 17-per-cent stake.
However, urban planners are skeptical about the Venezuelan government's attempts to create these rural areas, said Clara Irazábal, assistant professor of urban design and planning at the University of Southern California. Such attempts to decentralize the urban and coastal areas of Venezuela, home to the majority of the population, have failed in the past, she added.
"This idea is called environmental determinism, that if you build it they will come. But in Venezuela the urban culture is engrained in people. The question is how to go against the will of the people and convince them to move," she said.
SNC-LAVALIN GROUP INC.
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