SNC-Lavalin wins US$597M contract to build three towns in rural Venezuela

MONTREAL - Canadian engineering giant SNC-Lavalin (TSX:SNC) says it will improve the quality of life for thousands of Venezuelans as it builds three small farming towns as part of a US$597-million contract to design and build a farmland irrigation system.

The Montreal-based company said Wednesday that the project includes an extension to an existing irrigation canal and associated infrastructure to serve 32,200 hectares of the Tiznados valley, about 300 kilometres south of Caracas.

SNC-Lavalin will also build 2,000 homes, schools, health and sports facilities as part of plans to build the new towns of Guaitoco, San Francisco and San Jose de Tiznados and 80 kilometres of paved and dirt roads.

"Quality of life will increase," said Riadh Ben Aissa, who is in charge of SNC-Lavalin's global construction operations. "They will have access to schools and medicines."

The company will also play a key role in rural development for about 16,000 people by establishing agricultural training courses and support for local farmers and agro-industrial workers.

"This is an extension of what we have been doing for the last couple of years," he said in an interview.

The new project is a followup to a 34.7 km irrigation canal that SNC-Lavalin completed last year along with a few houses, medical centre and schools.

In addition to extending the canal by 12.8-kilometres, the company will also design and build 32 kilometres of branches from the canal and infrastructure such as gates, farm intakes and water distribution systems.

It will also install 10,000 hectares of irrigation with dripping and "micro-aspersion" or sprinkling equipment, added project manager Marzio Lorenzini.

The work begins immediately and is expected to be completed in three years. About 1,000 local construction jobs will be created.

The project's initial phase was partially funded by Export Development Corporation of Canada. But the latest project is entirely funded by the Venezuelan government.

"It increases our presence in Venezuela," added Ben Aissa. "This is what we are looking for. This is where we have a very good expertise that we have developed over the last 100 years that we want to export and continue to export."

Venezuela's outspoken president, Hugo Chavez, is known for promoting socialist ideals - which sometimes involve using the country's oil revenues to help less fortunate countries and other times threatens heavy-handed intervention in the economy.

In January, for instance, Chavez threatened in his weekly radio address to take over farms or milk plants if owners refuse to sell their milk for domestic consumption and instead seek higher profits abroad or from cheese-makers.

Last week, Venezuela's state oil company said that it had stopped selling crude to Exxon Mobil Corp. (NYSE:XOM) in response to the U.S. oil company's drive to use the courts to seize billions of dollars in Venezuelan assets.

Both Chavez and Oil Minister Rafael Ramirez have previously said Exxon Mobil is no longer welcome to do business in Venezuela.

However, several Canadian companies continue to do business in the South American country. SNC-Lavalin has been present in Venezuela since 1975 and has completed the development of water resources in various regions.

It has also been heavily involved in the mining and oil&gas sectors. In 2006, it was awarded the engineering, procurement and construction management contract for an open pit gold and copper mine in a remove area of southern Venezuela. Two years earlier, it won a similar contract for a gold mine.

Venezuela's state-owned oil company also contracted SNC-Lavalin in 2006 to carry out a scoping study in a bid to boost oil production from the Orinoco Oil Belt in central Venezuela.

SNC-Lavalin is one of the world's largest engineering and construction companies, with offices across Canada and in 35 other countries, and is working on projects in some 100 countries.

Its shares gained 72 cents to $44.87 Wednesday on the Toronto Stock Exchange.