The SNC-Lavalin did not name the unit but said the WB move relates a probe of the Padma bridge project, on which the SNC unit had bid.
“The allegations in the confidential report relate to the Padma Bridge project in Bangladesh, for which the Company’s subsidiary had bid,” reads a press release the company issued on Monday.
However, in a report headlined ‘World Bank suspends contract bidding by SNC-Lavalin Bangladesh subsidiary’, Canadian Business, a Canadian newspaper, identified the unit as the Canadian engineering giant’s Bangladesh subsidiary.
Led by the World Bank, an international consortium agreed in 2011 to lend Bangladesh up to $2.9 billion for the 6-km bridge over the Padma river.
A contract to build the bridge has not been awarded yet.
SNC-Lavalin bid for a project which has the scope to act as the owner’s engineer for the Bangladesh government in supervising the contractor responsible for construction of the bridge.
Following allegations of irregularities, the WB bank suspended its $1.2bn fund for the Padma bridge and launched an investigation of the bidding process in September 2011.
“The temporary suspension, which is effective immediately, is not a final decision but is an action taken by the World Bank to control interactions with the subsidiary concerned” with the investigation and final decision pending, said SNC-Lavalin.
According to WB regulations, the subsidiary named has the right to respond to the allegations outlined in the WB report before a final decision is taken, the company said, terming the report as confidential.
SNC-Lavalin said it intended to provide a comprehensive response to the allegations.
“We respect the World Bank’s decision to declare a temporary suspension on the subsidiary affected until this matter is concluded,” said the company’s interim CEO, Ian Bourne.
All ongoing projects and new bids by other subsidiaries and divisions will continue as usual, he added.
The company said it had launched its own internal investigation when the matter was first brought to their attention. “..we will continue to cooperate fully with the World Bank on this matter.”
The company has offices across Canada and in over 40 other countries around the world, and is currently working in some 100 countries.
The Royal Canadian Mounted Police raided several SNC-Lavalin locations last year following a World Bank referral, the bank said in September.
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.