(Reuters) - The World Bank has temporarily barred a unit of SNC-Lavalin, a big Canadian engineering company that is already facing a payments scandal, from bidding on new bank projects following an investigation into a Bangladesh bridge project.
In a statement on Monday, SNC said the World Bank’s move relates a probe of the Padma Bridge project in the South Asian country, on which the SNC unit had bid.
An international consortium, led by the World Bank, last year agreed to lend Bangladesh up to $2.9 billion for the 6-km (4-mile) bridge over the river Padma to link the country’s underdeveloped south with its capital, Dhaka, and the country’s main port.
The bank launched an investigation of the bidding process last September. A contract to build the bridge has not been awarded.
The World Bank’s move against the SNC subsidiary is more bad news for SNC, whose chief executive quit last week after an internal investigation revealed he authorized $56 million in payments for projects that did not exist. Canadian police are now investigating the payments.
“While we do not expect this World Bank decision will materially impact SNC directly, we view the news as negative, particularly given SNC’s recent findings with respect to its internal board investigation,” RBC Capital Markets analyst Sara O’Brien said.
She said she expected SNC’s stock, which is down 22 percent in the past three months, to come under more pressure.
The stock finished 2 percent higher at C$40.75 on the Toronto Stock Exchange on Monday. The news was released shortly before the market closed.
SNC, which is one of the world’s biggest engineering companies, said it intends to provide a “comprehensive response” to the allegations contained in the confidential World Bank report.
It did not name the unit affected by the World Bank suspension. The company declined to comment further saying the World Bank report was confidential.
The company said that “all ongoing projects and new bids by other subsidiaries and divisions will continue as usual”.
“We launched our own internal investigation when this matter was first brought to our attention and we will continue to cooperate fully with the World Bank on this matter,” newly appointed interim CEO Ian Bourne said in the statement.
The winning bidder on the bridge project was to act as engineer for the Bangladesh government, supervising the contractor responsible for the bridge’s construction.
The Royal Canadian Mounted Police raided several SNC-Lavalin locations last year following a World Bank referral, the bank said in September.
Reporting By Nicole Mordant in Vancouver; Editing by Peter Galloway