* Internal probe launched into C$35 mln in payments
* 2011 net income seen 18 pct lower than forecast
* Results hurt by disrupted Libyan projects
* Shares fall as much as 24 pct in busy trading
* Company says results to come as soon as possible (Adds more analyst comment, background)
By Nicole Mordant
Feb 28 (Reuters) - Shares of SNC-Lavalin Group Inc tumbled on Tuesday after it revealed a probe into tens of millions of dollars of mysterious payments and warned that the impact of Libya's civil war would push its 2011 profit well below earlier forecasts.
The Canadian engineering and construction company, which also may delay the release of quarterly financial results, did not say whether the internal probe was in any way related to its extensive business dealings with the now-deposed regime of former Libyan dictator Muammar Gaddafi.
SNC, a century-old company with operations in about 100 countries and revenues of C$6.3 billion ($6.3 billion) in 2010, lost about a quarter of its market value after the Tuesday announcement.
Earlier this month, Montreal-based SNC suspended two company executives who Canadian newspapers said had ties with the family of the Libyan leader, who was killed by rebel forces last year after being driven from power.
In a carefully word statement on Tuesday, SNC said it expected to record payments of about C$35 million "relating to certain payments" in the fourth quarter that were linked to construction projects that were unrelated to the expenses.
SNC's board has started an independent investigation into the payments, and the company has retained lawyers. A company spokeswoman declined to comment further.
"They can't afford to be anything but 100 percent diligent on anything that raises any red flags right now," said Versant Partners analyst Neil Linsdell.
"If what we know today is the extent of it, the sell-off is overdone. Obviously the market is suggesting that there is more, or at least, it is afraid that there is more," he said.
Analysts said the probe had the potential to sully SNC's reputation and could pose an obstacle to winning future government contract awards, the lifeblood of an engineering and construction company that ranks as one of the world's biggest. "If none of the charges were related to Libya, we could view this development in a less negative light," Macquarie Capital Markets analyst Gareth Tingling said in a note to clients. "We are becoming concerned that 2011's events may affect SNC's ability to win business in 2012 and possibly beyond," he said.
This is not the first time SNC's foreign dealings cast an unflattering spotlight on the company. Canadian police confirmed last September that they were investigating employees of SNC for possible corruption involving a US$1.2 billion World Bank bridge project in Bangladesh. An RCMP spokesman declined to comment on the status of the probe.
SNC said earlier this month that two executives, Riadh Ben Aissa, an executive vice-president who had been with the company for nearly 27 years, and Stephane Roy, a vice-president of finance, were no longer working for the company.
Canadian media said the two had ties to Gaddafi's son, Saadi Gaddafi, and Ben Aissa had worked extensively in Libya.
On Tuesday, SNC said it expects to record a loss of about C$23 million on projects in Libya in the fourth quarter as it revises its "net financial exposure" to the North African country.
During last year's civil war, SNC suspended work in Libya, which includes a prison, an airport and a large water project, but it has said it plans to restart operations.
All told, SNC sees 2011 profit coming in about 18 percent below the company's earlier forecast, or C$80 million less than targeted.
Revised cost forecasts on some projects in its infrastructure and environment unit and in its chemicals and petroleum unit added to pressure on its profit forecast, the company said.
Afterwards, the shares fell as low as C$36.56 in busy trading on the Toronto Stock Exchange, a loss of 24 percent.
SNC, which had a market value of more than C$7 billion before Tuesday's decline, said it was working toward releasing its fourth-quarter and full-year 2011 results "as soon as reasonably possible" and at least before March 30. The company was scheduled to release its earnings on Friday.
At least one analyst said the sharp drop in SNC's share price was overdone.
"We are trying to dissociate the Libyan impact from the rest of the business...," Alta Corp Capital analyst Maxim Sytchev said. "Looking out to 12-24 months, I think the earnings power of the rest of the businesses is very strong," he said.
In 2010, Libyan projects contributed around 6 percent of revenue at SNC, which also has large operations in Canada and around the world in sectors including power, mining, oil and gas and infrastructure.
$1=$1.00 Canadian Reporting by Nicole Mordant in Vancouver and Abhiram Nandakumar in Bangalore; Editing by Frank McGurty