SNC-Lavalin Group (SNC) is fighting attempts by a third party to draw on letters of credit (L/Cs) put up by Canada's largest engineering company to guarantee work it was carrying out in Libya.

The attempts, alongside other problems with fixed-price projects in North Africa, have caused SNC to book a surprise quarterly loss and forced it to cut its annual profit forecast.

Risk provision

The company says it has booked a 47 million Canadian dollar (C$47 million) risk provision after an unexpected attempt to draw this amount under L/Cs covering advance payment and performance in favour of a client on a Libyan project that stalled in 2011.

SNC claims it is not aware of any claim relating to the advance payment or performance and says it is seeking to clarify the situation surrounding this attempt to draw on the L/Cs and will use all legal and other means available to prevent any draws.

The company has declined requests to identify the project in question, but before the fall of the former Libyan leader, Muammar Qaddafi, SNC was working on several Libyan projects,including an airport, a prison and a massive water project.

Additional woes

Also in respect of its North African operations, SNC has booked a loss of C$70.1 million relating to a claim received alleging late penalties under a fixed-price project in Algeria.

SNC has now revised its net income forecast for 2013 to C$220-235 million, whereas it had anticipated earnings of C$340-355 million earlier this year.

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