Thursday July 2, 09:40 PM
SNC-Lavalin invests $70 mln for U.S. power plant stake
OTTAWA, July 2 (Reuters) - SNC-Lavalin Group Inc said on Thursday it will invest $70 million for a 20 percent stake of Astoria Energy II, which is developing a natural gas power plant in New York City.
Canada's biggest
engineering company said the deal boosts the value of its infrastructure concession investments, an area seen having strong potential for growth thanks in part to heavy government stimulus spending on infrastructure programs.
The move comes after SNC announced a big debt offering last week, partly to fund the 'many infrastructure concession investment and business acquisitions opportunities' it sees.
It will also use the C$350 million, 6.19 percent debt offering to retire C$105 million in existing 7.7 percent debentures due September, 2010.
'The company is not only lowering its cost of debt capital but also building a war chest to fuel future growth,' said Canaccord Adams analyst Yuri Lynk said in a recent note.
'We believe management is currently bidding on numerous ICIs (infrastructure concession investments). With a number of traditional players in this arena crippled by the financial crisis, SNC-Lavalin likely faces fewer bidders on these projects.'
SNC is also overseeing the engineering, procurement and construction of Astoria's 550 megawatt thermal power facility, work it expects to complete in the summer of 2011. Montreal-based SNC has not disclosed the value of the contract, saying it is confidential.
Astoria Energy II has just closed financing for over $1 billion to cover project costs with 13 international financial institutions, including Export Development Canada, SNC said.
Astoria, which will own and operate the facility, won a 20-year power purchase deal with the New York Power Authority in July 2008, SNC said.
Shares in SNC-Lavalin gained 57 Canadian cents, or 1.3 percent, to close at C$43.42 on the Toronto Stock Exchange on Thursday.
($1=$1.16 Canadian)
(Reporting by Susan Taylor; editing by Rob Wilson) Keywords: SNC/ASTORIA
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