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SNC Lavalin sees power revenues tripling over next 10 years: exec

Credit: REUTERS/CHRISTINNE MUSCHI

Canada's SNC-Lavalin Group sees revenues from its power businesses tripling over the next 10 years, fueled by appetite from North American utilities to digitize and modernize their grid networks, a company executive told Reuters.

By Allison Lampert

MONTREAL, Oct 11 (Reuters) - Canada's SNC-Lavalin Group SNC.TO sees revenues from its power businesses tripling over the next 10 years, fueled by appetite from North American utilities to digitize and modernize their grid networks, a company executive told Reuters.

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.

Montreal-based SNC, which was at the center of a political crisis engulfing Canadian Prime Minister Justin Trudeau this year , has faced pressure in the Middle East amid a dispute between Canada and Saudi Arabia. It was also hit in some of its resource and fixed price contract businesses, sending its stock down 60% year to date.

SNC does not break out a specific figure for its power businesses, which the executive said generated about C$2 billion ($1.5 billion) to C$3 billion ($2.3 billion) annually, over the last five years.

Alain Brière, SNC-Lavalin's vice president and general manager of intelligent networks & cybersecurity, added the power businesses represent about 10% to 12% of the company's revenue.

He could not estimate how much the power business would grow as a percentage of SNC's overall revenue.

SNC's power businesses include nuclear, electrical, hydro and transmission and distribution renewables.

Brière's bet on the power sector comes as North American utilities are expected to spend about $780 billion by 2025 in renewable energy and to modernize electricity infrastructure, according to a 2017 report by the International Energy Agency.

He spoke by phone on Thursday ahead of a three-day power grid forum next week in Montreal that will bring together executives from Hydro Quebec, Southern California Edison and other North American utilities.

North American utilities are looking to digitize and modernize aging analog grid infrastructure including substations and their transformers and other specific components.

Digital components provide better real-time data that allow a system to adjust if part of it fails, for example, during a snowstorm, he said.

Brière said the opportunities in power fit within the company's broader strategy of focusing on less-risky, higher-margin services contracts.

He said SNC would face competition from both traditional engineering firms along with tech companies for power contracts.

"You have the grid infrastructure to upgrade and the technology to manage the grid," Brière said. "(It's) between the plant and the plug that you have at home."

($1 = 1.3183 Canadian dollars)

(Reporting by Allison Lampert; Editing by Cynthia Osterman)

((Allison.Lampert@thomsonreuters.com; 514-796-4212; Reuters Messaging: allison.lampert.reuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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