SNC-Lavalin sidelined in proposed Pearson Airport-Union Station link

MONTREAL — The Ontario government has taken over full ownership and control over the proposed Air Rail Link from Toronto's union station to Pearson Airport, sidelining private sector partner SNC-Lavalin Group after the allies failed to secure financing for the project.

Shares in SNC-Lavalin, Canada's largest engineering firm, fell 1.5% to $46.30 in morning trading on the Toronto Stock Exchange.

Metrolinx, the province's regional transportation agency for greater Toronto and Hamilton, said Friday it has been asked by the Ontario government to build, own and operate the express rail line. It wants the service in place for 2015, when Toronto hosts the Pan American Games.

Metrolinx said it will assume responsibility for the project, including design, construction and operations. Metrolinx runs Go Transit, a commuter line in Toronto.

"While the province and the Union Pearson Air-Link Group (UPAG), a subsidiary of SNC-Lavalin, were able to make significant progress negotiating, financial market conditions prevented acceptable terms," Metrolinx said. "The government will continue to work with UPAG to build on the design and development work that has been completed to date."

Montreal-based SNC-Lavalin said it was disappointed by the outcome.

"Given the state of financial markets over the past few years, lenders, both in Canada and elsewhere, are reluctant to lend money for full revenue-risk projects," SNC said in a statement. "As a result, an agreement that met our own standards of risk tolerance could not be reached with interested lenders."

The engineering company said its relationship with the province remained excellent and that it would continue to provide support to deliver the project.

In June 2000, then federal transport minister David Collenette announced that Transport Canada would initiate a request for expressions of interest to determine private-sector interest in the development of the air-rail link. SNC beat out three rivals to snag the contract and was asked to design, construct, operate and maintain the line.

The number of people travelling between downtown Toronto and the airport is expected to balloon to 9 million from the current 5 million by 2020, Metrolinx said. The new line will take 1.2 million car trips off the roads in its first year of operation.

Financial Post