Thank you. Good afternoon everyone, and welcome to SNC Lavalin’s 2014 second quarter earnings conference call.

With us today are Robert Card, president and chief executive officer, and Alain-Pierre Raynaud, executive vice president and chief financial officer. Our earnings announcement was released this morning, and we have posted a slide presentation on our website which we will refer to during our call.

Before we begin, I would like to ask everyone to limit yourself to two or three questions to ensure that all analysts have an opportunity to participate. You are welcome to return to the queue for any follow up questions.

I would also like to remind listeners that, as detailed on slide three, certain statements or comments made during today’s call and slide presentation may be forward-looking. Such statements or comments represent management’s best judgment and expectation as of today’s date; are subject certain risks, uncertainties, and assumptions, which are described in our financial documents; and cannot be guaranteed.

I’d now like to turn the conference over to Robert.

Merci, Denis, and thank you all for joining us today. I’m pleased to report that both the sale of AltaLink and the acquisition of Kentz remain on track.

We’re continuing to develop our Kentz integration plan and the expected acquisition benefits announced in June appear even more secure today. In spite of this good news, and while Q3 swung to a profit this year compared to a loss in Q2 2013, we are disappointed in our second quarter results, which were impacted by lower than planned revenues, principally in mining and power.

Additionally, while our project issues continue to be much lower in magnitude per project, we are still experiencing a significant collective impact from our challenging projects, resulting in a frustrating drag on earnings. I’ll also note that acquisition costs, particularly a mark-to-market adjustment of a foreign exchange hedge, also significantly impacted the quarterly results.

As a result, our SG&A savings, which are on plan with our expectations for the year, were not sufficient to offset these other factors. Let me then provide more color on each of the following topics: strategy, revenues, projects, and SG&A.

Regarding strategy, as noted above, the AltaLink sale process remains on track, and conditional approval from the Canadian government was received the week before last. We have confidence that the Alberta Utilities Commission will run a rigorous and demanding but fair process.

While the timing is up to the AUC, we are still optimistic about a decision late this year, and our joint SNC Lavalin/AltaLink and Berkshire Energy team is fully prepared to support the process moving forward at whatever pace the AUC decides is appropriate. I want to thank the team for their outstanding work throughout this project, and we continue to be very pleased with our partner in this transaction, Berkshire Energy, and are optimistic about our future relationship.

Also, as noted above, the [unintelligible] transaction process remains on schedule as per the scheme document. This is increasing the certainty of closing by the end of this month.

Across the board, our strategic rationale behind the acquisition is being affirmed as we progress through the transaction closing process. Those of you observing our industry are seeing an accelerating pace of consolidation among the larger players, like SNC Lavalin, and in this context, we remain comfortable with our approach in general, and are increasingly pleased with Kentz specifically.

The team is also engaged in our evaluation of Highway 407 to ensure that we are able to maximize value creation. We still expect that action may occur sooner rather than later within our original midterm of one to three year projection.

Other asset dispositions remain on track as well. Regarding revenues, we’re experiencing a general market softness and delays in project procurements, awards, and notices to proceed.

Specific shortfalls include mining and metallurgy and power. In mining, the overall market outlook continues to be challenged.

I spent a week in China in July visiting our many partners in mining, oil and gas, and power. While the opportunities with our partners were encouraging, my observations about the economy as a whole made me less optimistic about the timing of the mining market recovery.

Accordingly, we are now not anticipating recovery until late 2016. However, we do continue to see a lot of front-end activity in some major projects, like the Stornoway diamond mine announcement a few weeks ago.

The overall power market is good for us, as demonstrated by our several recent project wins and new power opportunities, and we remain optimistic about the market in general. However, we’re seeing delays or softness, particularly in eastern Canada, South America, and thermo.

We note that in the last few quarters, our thermo group has been selected for several projects for which we have not yet received notice to proceed. We are hopeful that some of these awards will convert soon, which will spark the beginning of a recovery in this segment.

To address these top line pressures, we launched a new marketing and sales initiative and received excellent feedback from [unintelligible] on this initiative as our business development summit in late [June]. Regarding project, the challenged legacy project backlog now represents about $600 million of our $8.2 billion backlog, and their percentage of the total continues to steadily decrease.

So far this year, we’ve avoided any of the singular major project surprises which challenged us in 2012 and 2013. However, we have experienced a number of unplanned costs that are smaller in magnitude, but which we don’t expect an offsetting claim recovery this year.

We expect this issue to continue to decrease over time as both our challenging revenue backlog decreases and our project and risk management systems continue to improve [unintelligible]. Regarding SG&A, and our Value Up program, we remain pleased with the results achieved to date and our trajectory through next year.

However, while these positive reductions are both significant and systemic, they did not offset the impact of the soft market conditions [unintelligible]. We are hard at work to bolster revenues, as I noted, and to both deepen and accelerate our planned SG&A savings.

In summary, while overall market conditions are presenting more challenges than we had hoped at the beginning of the year, we remain optimistic about the long term growth and profitability of SNC Lavalin and our progress in executing our strategic plan is serving to improve this outlook. Trying to ethics, compliance, and safety, we continue our relentless drive towards excellence on all fronts.

On the first of June, we successfully completed our transition to our new chief compliance officer, David Wilkins. We’re also grateful for the continuing contributions of former CCO Andreas Pohlmann, who, in his new role with his consulting firm, led the compliance aspects of the Kentz transaction and he continues to assist us with other ethics and compliance activities.

Our enhanced compliance framework is in place, and we have made good progress in securing our ethics and compliance environment with our business partner program, and we continue to maintain good cooperation with our [unintelligible] counterpart. Now turning to second quarter results, before Alain-Pierre discusses the results in detail, I’d like to provide a summary of the quarter, which, in spite of top line challenges, exhibited a further reduction in SG&A and a steady revenue backlog.

Earnings for the second quarter were $32 million, or $0.21 per diluted share, as compared to a loss of $38 million in 2013. Even though earnings were up year over year, they were meaningfully below our expectations for the reasons noted earlier.

While we expect these challenges to linger through the balance of the year, we are affirming our guidance. We note that the guidance does not include gains or expenses on the sale of AltaLink as well as the impact of the proposed acquisition of Kentz, including all acquisition-related costs.

Thus, while guidance reflects a specific AltaLink depreciation benefit, as announced last quarter, the Kentz acquisition cost for this quarter and the balance of the year are not included. We expect the Kentz acquisition to positively impact our mid to long term outlook while we work through the challenges in the legacy core business discussed earlier.

After we close the transaction, we expect to be in a better position to quantify the overall impact of these developments. SG&A expenses decreased by 9% to $208 million.

This line item continues to decrease as a result of our restructuring plan, system enhancements, and our Value Up program. Revenues were $1.7 billion, in line with Q1 of 2014, but lower than the $1.9 billion in Q2 last year, as the mining and metallurgy uncertain segments in the power market continue to be challenging, as discussed earlier.

While our backlog remains stable at just over $8 billion, Kentz is expected to raise SNC Lavalin’s overall backlog by well over $4 billion and our combined backlog will have a greater [unintelligible] contracts. Our cash position has decreased as compared to the beginning of the year, as it did in the same quarter last year.

Alain-Pierre will discuss this in more detail, but I’d like to note that we are comfortable with our position. Moving now to our segment results, starting with our REW segment, which includes mining and metallurgy, oil and gas, and environment and water.

As noted earlier, in mining and metallurgy, we continue to experience challenges from a sustained softening of the commodity markets. This quarter’s results, as compared to last year, were also impacted by the completion, or near completion, of a few major projects.

However, there are stronger prospects in uncertain subsegments, including fertilizers and specialty mining, such as our recent award in Quebec where we’re supporting the development of the province’s first diamond mine. Oil and gas revenues increased versus last year, mainly due to a provision taken last year on a fixed-price project in Algeria.

We’re seeing a growing volume of opportunities in oil and gas, and we expect to be in an even better position to win our fair share of projects after the Kentz transaction has been completed. The environment and water subsegment continues to be challenging, and has also been impacted by the mining market softening.

We bolstered leadership in environment and water this quarter with Gordon Johnson joining our team as managing director, and are optimistic about improvements in 2015. Though there have been some revenue challenges in power, as described above, we remain optimistic about this market.

We secured important long term projects this year, including the John Hart and Jimmie Creek projects in British Columbia and the largest fixed-price [EPC] contract ever issued by Manitoba Hydro. Also, while a firm commitment for a new nuclear power plant is difficult to predict, we are pleased with the progress being made on several opportunities, such as were noted in the memorandum of understanding signed in July with each of our two major Chinese partners.

In infrastructure and construction, packages activity has increased, mainly from certain transportation projects that are beginning to ramp up. We continue to see good prospects in this segment, particularly in Canada.

We reorganized infrastructure this year, creating an engineering consulting group and two construction groups. We are pleased to welcome Marc Rivard as our new EVP of the consulting group, which has exhibited good performance in several areas.

Operation and maintenance revenues decreased slightly, but earnings were up compared to last year, as a result of efficiency improvements and project execution. We continue to expect contributions from this subsegment to be higher than in 2013.

Finally, our ICI business continues to outperform. The increase in net income was driven by a higher net income from AltaLink and a higher dividend received from Highway 407.

We expect increased contributions from ICI in 2014. In conclusion, we are pleased with the significant progress we’ve made in executing our strategic plan, and we are poised to add significant value to the firm through both asset dispositions and capital allocation, including acquisitions.

We’ll continue to position our company and bid on, win, and profitably deliver important projects and reduce unnecessary SG&A costs. With that, I’ll pass the call over to Alain-Pierre to discuss our Q2 results in more detail.

Alain-Pierre?

Thank you, Bob. Good afternoon everyone.

I will start my presentation on slide six. As you know, on June 23, 2014, the company announced that it had reached an agreement with Kentz on the term of the cash acquisition for a consideration estimated at approximately UK1.2 billion or CAN2.1.

To finalize this acquisition in June 2014, the company entered into a recourse non-revolving acquisition credit agreement for an aggregate amount of $2.75 billion, comprised of an asset sale bridge facility of $2.55 billion, which matures no later than December 2015 and a term facility of $200 million, which matures no later than June 2016. Amounts drawn under the asset sale bridge facility and term facility bear interest at variable rates plus applicable margin.

This credit facility should be used only to fund the acquisition of Kentz and its related [unintelligible], fees, and expenses. In the second quarter of 2014, $70 million was drawn from this credit facility fund costs related to the proposed acquisition.

Its carrying value was $63.6 million at June 30, 2014. The table at the beginning of the slide shows the financial impact of the June 30, 2014 financial position and income statement.

As you can see, in the second quarter, we incurred $5.5 billion of professional fees and other related costs, and recorded an unfavorable mark-to-market [re-measurement] of the [foreign exchange hedge] of $20.4 million. It is anticipated that the acquisition will be completed in the third quarter of 2014 as the effective date of the scheme is expected on August 22, 2014.

Now, turning to slide seven, as you can see, our gross margin, [EBIT], and net income increased compared to last year, while revenue decreased. Let’s look at the details, starting at the top line.

Revenues for the first six months ended June 30, 2014 were $3.4 billion compared to $3.8 billion for the same period last year. The decrease is mainly due to the mining and metallurgy subsegment, which continued to experience challenges from continued softening of the commodity markets and the power segment.

While we have seen a lower volume of packages activity in power, due to the completion of certain projects, we have recently been awarded new projects such as John Hart and the Jimmie Creek project in British Columbia and the project in the northeast of Winnipeg, in Manitoba. The revenue decline drove down gross margin, but its effect has been offset by a better mitigation of our risk on projects.

The gross margin percentage stood at 21% for the first six months of 2014, compared to 14% in 2013. The gross margin amount for the first six months of 2014 was $705.6 million, compared to $538.2 million in 2013, reflecting higher gross margin from ICI and E&C.

The gross margin amount from E&C mainly reflected an increase in packages. The 2014 gross margin was positively impacted by the reversal in the first quarter of 2014 of a risk provision on the Libyan project recorded in the second quarter of 2013.

Furthermore, the gross margin in the first six months of 2013 was negatively impacted by the noncash provisions recorded on the project in Algeria and in Libya as well as additional cost on the [unintelligible] project recognized in the first six months of 2013. The increase in the packages gross margin was partially offset by a decrease in the services gross margin, mainly due to lower volume of activity, primarily in resources.

The gross margin amount from ICI mainly reflects higher contribution of AltaLink and the company [seizing] to depreciate and amortize AltaLink’s noncurrent assets, starting May 1, 2014, resulting from the classification of AltaLink’s assets and liabilities as held for sale at the [unintelligible], and without higher dividends received from Highway 407, partially offset by a lower contribution from [unintelligible]. For the first six months of 2014, selling, general, and administrative expenses decreased by 9.3% to $395.1 million.

This decrease is mainly attributable to cost savings resulting from the company’s restructuring plan implemented in the second half of 2013, as well as the [unintelligible] initiatives and [unintelligible] [Value Up program]. As mentioned, in the second quarter of 2014, the company incurred acquisition-related costs of $25.9 million, which includes a $20.4 million noncash unfavorable mark-to-market re-measurement of a foreign exchange derivative financial instrument and $5.5 million of professional fees and other related costs.

The consolidated EBIT for the first six months of 2014 was $283 million, compared to $103 million in 2013. The EBIT from ICI was $267 million compared to $177 million in 2013.

The increase was mainly due to higher contributions from AltaLink and Highway 407, partially offset by a lower contribution from [SKS], as I already said. The EBIT from E&C was $50 million compared to a negative EBIT of $74 million in 2013.

The positive variance in E&C EBIT was mainly due to the increased margin, partly due to better control of project risk and SG&A reduction. If we exclude the acquisition-related costs and restructuring costs, the E&C EBIT would have been $43.1 million, $117 million better than last year.

Net financial expenses increased to $114 million in the first six months of the year, compared to $68 million last year, representing a $46 million increase. $36 million of the increase is coming from ICI due to higher interest expense on additional [unintelligible] debt mainly related to AltaLink and [unintelligible] general partnership.

$10 million of the increase is coming from E&C, mainly reflecting an increase in other financial expenses, in part from the cost of the unsecured revolving credit agreement entered into in December 2013 and from the costs related to the additional financing available for the proposed acquisition of Kentz. Now, turning to slide eight, our efforts to contain SG&A expenses have resulted in a 9.3% decline in [unintelligible] expenses for the first six months of 2014 compared to 2013.

The slide also shows that we have succeeded in decreasing our G&A by about $20 million to $33 million every quarter, compared to the corresponding period of the previous year. The company continues to focus on its organizational structure and cost and its efforts to reduce them.

Slide nine presents the EBIT by segment. As you can see, the ICI EBIT is contributing $267 million of the total EBIT.

Power, mining, and metallurgy and OEM are positively contributing and overcompensate for the negative contribution from oil and gas, environment and water, and infrastructure and construction, which continue to be challenging. Slide 10 presents our revenue backlog by category of activity.

Our revenue backlog totaled $8.2 billion at the end of June 2014, in line with December 2013 and March 2014. The packages revenue backlog was $40.8 billion, an increase of about $414 million since December 31, 2013, net of the decrease of $301 million related to challenging legacy projects.

The book to bill ratio was 0.97 for the six months period ending June 2014, better than in 2013, and slightly below March 2014. As you can see on slide 11, the challenging legacy projects, including the company’s backlog, totaled $602 million, as of June 30, 2014, a 17% decrease from March 2014.

We continue to expect that most of this will be completed by the end of 2014. I also want to remind you again that most of these challenging legacy projects are running at zero margins.

Therefore, we expect to continue to improve the gross margin backlog as we reduce the zero-margin backlog related to these challenging projects. Slide 12 shows our financial position.

I want to bring to your attention to the two new lines called “assets and liabilities of disposal group classified as held for sale.” As announced in May, we entered into a binding agreement to sell 100% of our interest in [unintelligible] to Berkshire Hathaway Energy.

As the assets and liabilities of AHLP are expected to be realized through this transaction, the company now presents the aggregate amount of these assets and liabilities on two separate lines, [unintelligible] to our quarterly financial statements present the detail of what was regrouped under these two [unintelligible] lines. Note that there was no impact from the presentation of AHLP on our income and cash flow statements.

Therefore, we continue to present AHLP on a line by line basis in these statements. It’s also important to note that the net effect of AHLP will fluctuate, notably from equity injections and the net results of AHLP, until the closing of the transactions.

You can foresee on this slide that due to this new presentation, the property and equipment from ICI is now zero, as this was all related to AltaLink. And the non-recourse long term debt has significantly decreased to $509 million from $3.5 billion since most of it was also related to the AltaLink.

Lastly, on this slide, we can see that our cash and cash equivalents totaled $853 million at June 30, 2014, compared to $1.1 billion at the end of December 2013 and our recourse debt to equity ratio remains strong at 16%. If you can now turn to slide 13.

As just mentioned, our cash and cash equivalents totaled $853 million at the end of June 2014, compared to $1.1 billion at the end of December 31, 2013. As we can see, the EBITDA provides us with about $370 million.

The net change in noncash working capital items of negative $426 million is mainly due to a decrease in trade payables. The funds used for our acquisition of property and equipment was mainly due to $768 million from AltaLink with the corresponding $724 million increase in non-recourse long term debt.

Non-recourse long term debt also increased by $290 million as the [unintelligible]. While $140 million was paid for interest, $73 million for dividends, and $221 million for investments in deposit notes.

Now, turning to slide 14, the company is maintaining its 2014 EPS guidance in the range of $2.80 to $3.05. This outlook does not take into account the eventual gain on the sale of the company’s interest in AltaLink, as well as the impact of the proposed acquisition of Kentz, including all acquisition-related costs.

We expect the Kentz acquisition to positive impact our mid to long term outlook. This concludes my part of the presentation.

We can now open the lines for questions. Thank you.

Bob, how should we look at the current backlog, and the ability of the core E&C business to generate income for shareholders? I’m just thinking, based on the backlog that’s booked today, the margins inherent in that, assuming no additional provisions, but the SG&A savings, should we be confident that there is an opportunity for core E&C earnings to be positive for the remainder of the year?

Let’s say based on what you mentioned, we are expecting the growth in our revenues for the second part of the year. Accordingly, the gross margin will improve and SG&A will continue to decrease.

So all in all, we consider that we’ll be significantly above zero for E&C at the end of the year.

Just so I’m clear, so you expect to be significantly positive in E&C for the remainder of the year?

Yeah.

And then maybe just a question on the 407 potential disposal. How are you thinking about timing for this and liquidity needs for SNC at this point?

I just wonder, post the Kentz transaction, does SNC have additional need to redeploy into other acquisitions? Or are you looking at this more on an opportunistic basis for return to shareholder opportunity, whether that be in the form of cash dividend or some kind of share spinoff?

We don’t have a liquidity need. And so we are looking at, as we’ve said before, the criteria for this, trying to remember it all, but you know, one is our perceived stability in the base E&C business.

The other is the selling environment, which we see as largely favorable at this point in time, which is one of the drivers to pull it forward. Our ability to position the asset properly into that selling environment, that’s something we’re hard at work on now.

That’s what I was trying to say in my talk. And if we have a need for the proceeds, to do something that would be a driver as well, at this current time, the drivers are largely looking at the selling environment and our ability to position the asset to capture value in it.

So there’s no immediate plan, one way or another, what you would do with the proceeds? It’s just you’re looking at the better selling environment being today?

Right.

I’ll take another stab at the guidance, because it strikes me, Bob, your remarks are quite cautious, and the guidance implies kind of a doubling in year to date EPS to get at the midpoint. So what gets E&C significantly positive?

Is it kind of roll off of some of the challenges that you encountered year to date? Or is it overcompensation or a reversal of some charges, or something like that?

Well, our challenging project situation continues to get better, even though it’s frustrating. And we’re aggressively managing that issue, so we’re counting on that to be less bad.

We’re also looking at our backlog, as Alain-Pierre said in his response to Sara. We do expect a better back half of the year.

And when we issued our guidance, there were a number of significant up and down variables. We spoke with some of you about that early in the year.

We’re halfway through the year now, and those are closing in, so while the year looks more challenging than it did there, we have better visibility on the read through for the balance of the year.

And we don’t exclude to continue our disposal of assets. These actions are going pretty well, and let’s say we don’t exclude that from the guidance.

You’re speaking of the small routines?

Small, routine assets. You will also have that in order to allow us to confirm the guidance as we did.

Yeah, I guess there’s some cushion in there.

Asset sales in the E&C group? Because that’s what I’m really asking about.

No, that would be in ICI, yeah.

I guess the other question is you give color in the guidance about oil and gas, mining, and infrastructure going to be challenging, but you don’t mention power. What’s the outlook for power?

Well, power is actually pretty good. The way we’re organized internally for that, the power market continues to be strong.

I would say that the major change for us in power is there’s a lot of potential upside in power that we’ve yet to yield for the year. And that, coupled with some soft spots, has put us in a good but less good position than we’d hope to be in so far.

We’re expecting no further deterioration in the power market, and there are a number of upsides, potentially, in there.

And some of these upsides you’re talking about, these are kind of reversal of past charges that you’ve taken?

Not so much in power. Power is a fairly strong, basic market.

And as I said, we’ve been already awarded, in a way, I guess you’d say, we’ve been officially selected on several significant thermal projects, and we’re waiting for notice to proceed. So even one of several would be a benefit to us.

And we’re very hopeful that will happen.

Just switching to mining, I get the challenge on the revenue line, but you’re mentioning in the MD&A that you’ve reached the close on some significant projects. Some of your competitors are at the same stage, and they’re booking fairly significant closeout margins.

It doesn’t seem to be flowing through here, so how is execution in mining? Is there a possibility that some closeout margins come in on the back half of the year?

It is possible. Those are not key to our thinking about the year.

Mining is declining, but fairly stable, and what we’ve had is we’ve had some issues on closeouts where it isn’t clear that us and the client are eye to eye on what the closeout is. So there are some reserves there.

We’re not expecting a big reversal to happen this year on those. But no, overall, I’d say mining is solid in a weak market.

So I’m quite comfortable with the capability of our team to deliver outstanding product for the clients in that area.

Just in your MD&A, you mention some color about the restructuring of the environmental and water division. So I was just wondering if you could elaborate on this?

Sure, we have a good group of people there, who we feel did not have an adequate plan for the year, and so we’ve done a lot of work with that group. And as I said, we’ve brought in a new managing director for the group who we’re quite pleased with.

And so we think combining the recasting of how we look at the market with some fresh injection of talent, that we’re optimistic that things are going to get better there. That’s not a key part of our second half plan.

That’s more a 2015 look, but there’s no reason why we shouldn’t be doing a lot better in environment and water, from our view.

And does this restructuring preclude you from making an acquisition in the space?

No, we’ve said that’s certainly one of our targets. As we sort of flesh out our oil and gas business, as has been done in a huge way with Kentz, that’s the kind of thing that we’ll be training our eye on next, will be service-rich offerings in power and infrastructure, are some things that we’re looking for.

And just for the challenging legacy projects, obviously we saw a nice improvement in the quarter. I was just wondering whether you still target to be at $300 million by year-end, and whether you could give an update on the hospital projects?

I’ll let Alain-Pierre provide any exact numbers when I’m done, because I don’t want to get that wrong. But in general, what we’ve said before is happening.

So we’re really very confident that we’re going to be able to turn over MUHC, the big hospital in Montreal, at September 30. It’s really spectacular and going quite well.

The St. Justine also stays on track.

That’s the one that carries the most backlog into next year. The highway projects in the west are still making good progress on wrapping up, and we’re not seeing any major new negative news on the projects in North Africa.

The caution I would give is even when the backlog is zero, the risk hasn’t necessarily completely disappeared from these projects. So we have to get agreement from the client that we’re really done, and that can take some time, particularly in some institutional settings, where these projects exist.

So while we expect to be done with most of these this year, I don’t want to lead people to believe that the risk has gone to zero at that point. Our objective is to make it zero, but I just can’t be overcautious on it.

In order to complement what Bob says, we are pretty confident in our capability to deliver [unintelligible] on the right date, at the end of September. Let’s say considering the end of the year, before these times we will be in a position to recognize in the range of 50% of the $464 million you will see on slide 11 of the presentation.

Are you saying the backlog is going to be $300 million?

Slightly below. $200 million, $230 million.

Guys, we all know you’re dealing with these legacy projects, but are you coming across any surprises, Bob, with the jobs that have been secured under your leadership, whether it’s going in margins or execution, or just competitive pressures you’re seeing on the bidding front?

Well, not in particular. I would say there certainly is nothing that is out of normal for my 30-plus years in this business.

Most of the things that are transpiring, that are not on our “top six” list are still legacy projects that were bid in the 2010 era. So at this point, we don’t see any reason to suggest that we’re not well underway in fixing the problem.

I would just give you an example, you know, we have recently done a review of our Ma’aden project, where the whole executive team got together and we’re quite comfortable that’s going well. So that would be an example of a high-risk one, in my books anyway, in northern Saudi Arabia, that we’re happy with how that’s evolving.

And just a question on the completed legacy project in the oil and gas segment, the one that’s been hurting you. When does the warranty period actually expire?

I’m not sure, but I’m guessing 14 months from now. So it will be late next year on the warranty period.

I’m not expecting that to be a major risk, but you never know.

And are there any similar completed projects that might be at risk of surprising to the downside, based on, like, similar warranties?

Well, you always wonder. You know, warranties, you can never say there’s no risk.

Generally, our experience is on projects other than these, generally our warranty reserve, as was mentioned by a previous caller, is more than sufficient to cover. We did have one project that was done two years ago that just before the warranty expired recently, came up with a surprise on a control panel issue, as an example, which was disappointing and was a significant contributor to our series of small project problems this quarter.

Robert, to add to Sara’s previous question, you’re doing a great job on reducing SG&A. Can you give us an update on specific prospects that could build backlog and drive E&C earnings?

When we look at the pipeline risk, so recognize that we still have two weeks to go to close on Kentz, but we’re very enthused about the combination that we see. When we look at revenue synergies, when those of you who are on the call are meeting with us after the announcement of the acquisition, where we remind you that we did not base the economics of the acquisition itself on revenue synergies, but we see lots of opportunity there, as we’ve come to know each other well.

So I see that as probably the biggest single driver of upside in the near term. The mining business remains strong and the fertilizer segment, we happen to be strong in it.

But you know, these things are so much tied up in kind of the day to day economics, it’s hard to predict on it. So I’m kind of giving up predicting on that.

By the way, the Kentz revenue synergies extend well outside of oil and gas, so even though they’re principally in gas, there’s lots of mining and power overlap in the capability and market access with those two things. Power, we see significant potential upside opportunities.

We have to capture them, but we’re relatively well-positioned in the market and so that’s one that we’re interested in. Certainly while it’s small, environment and water I think we can do a lot better in.

And you know, our consulting group in infrastructure is performing well, and we see ways of expanding that as well, and we’re bidding a whole bunch of construction projects in infrastructure, and if those convert, that could make quite a huge difference. So we still have a huge pipeline of bids coming due in that area.

My second question, Robert, you mentioned you visited China recently. Did your trip relate to mining and [unintelligible] business opportunities?

And if that’s the case, how does SNC differentiate itself from competition in China?

Well, I wouldn’t say we have an exclusive edge, but maybe I’ll call it a leading edge, because others probably have it too. But virtually, every one of our business units has some sort of significant Chinese relationship.

We’ve been at it for quite some time. I think we’re really highly valued by our partners.

For example, Sinopec Engineering Group, which is the captive engineering group for all of Sinopec, the first or second largest oil and gas companies in China, depending on who you’re talking to, is our partner on the Ma’aden project, and they’re very pleased with that, and they’re into lots of different things, and we see lots of stuff we can do together with them. We also are working with two or three partners from CNPC, the other mega oil and gas company in China, in Alberta.

So just across the board, we see lots of opportunities with those partnerships. That’s why I took the time to go over there.

[CANDU] has a particular benefit and it’s very flexible in its fuel-burning capability. It burns dirt, essentially, and you can use it to close a fuel cycle in your nuclear program.

And China’s interested in that, because you’d say to optimize your spent fuel program, you would want one CANDU for every four light water reactors they’re building. If you did that, that would be a whole bunch of CANDU units.

Now, lots of countries have decided just to store their spent fuel and do nothing with it. China has to make a decision on what to do, but also, the Chinese are involved with us, if you read the MOUs in Argentina and in Romania.

And we see other developing nation alternatives as well, because again, CANDU doesn’t require enriched fuel, which makes it a lot better proliferation issue, and its power footprint is more amenable to a developing country grid structure than a larger light water reactor. That’s probably more than you wanted to know, but you have it anyway.

You’ve obviously been making very good progress on the SG&A reduction front. A couple of questions on that.

Wondering if you can talk about how much more room there is to go there, any specific targets you have. And then maybe also shed some light on what areas you’ve been focusing on specifically within the business, and are there some segments or some areas where you really haven’t gotten that yet in terms of the SG&A reductions, and those hold some promise?

I think the program that I credit Alain-Pierre with, who’s the designer and chief pusher of, is working out very well, and bearing in mind how this unfolds is right now we’re still spending quite heavily on systems development, while we’re doing these reductions. So as the systems developments get implemented, and largely 2015 will be the year where we start rolling off, not completely, but we start rolling off development costs and are more into the yield side of this, which is why we’re pretty confident we can continue the reductions into 2015.

In light of what we view as some soft and disappointing revenue figures, to make sure that we don’t get off guard with that, we’re taking a really hard look at how we can accelerate that, or what we might not have looked at yet in the way that we should. So we’ve got a taskforce busy taking a look at that while our basic program continues.

And we think there’s opportunities.

It’s exactly that. We are pretty confident on the continuum of the savings, just for the run rate impact.

Let’s say you’re [eight] of the current year, you will have the full impact in the following months, and next year will fully benefit from the savings. So it’s an ongoing process where we identify something, you start to implement these initiatives, this initiative has an immediate impact on our P&L.

It’s why we are decreasing, by $20 million quarter to quarter. And it will continue and be amplified next year, because you will have the full year impact.

It’s an ongoing process also because an initiative never stops. So we are trying to identify new room to increase our savings.

And as you know, we have two parts in our evaluate program, one which is really focused on how to transform and to make more efficient and effective the way we manage our operation, including some [lining] of organization and so on. And after that, we have a second part, which specifically focuses on SG&A.

All in all, combined, it means we are pretty confident in our ability to generate continuing momentum of savings over the next two years.

We’re really going after systemic business process savings, not just asking people to work harder. So that’s really important to us.

And as we’ve said before, it’s really about G&A savings and more efficiency in [S]. We are not targeting [S] as a major cut.

Was there a specific target that you had communicated at the outside, recognizing that it’s an evolving process and maybe you’re going after some areas that you didn’t originally anticipate? But did you ever put some kind of a target out there for us?

No, we haven’t, but in my talk, I said we’re on plan. So you can determine what our plan was for the quarter, which is what we achieved.

You can look back, but we don’t give one looking forward.

Secondly, I was wondering if you can give a bit more color around the issue in the oil and gas segment, or subsegment, this quarter. I guess two questions.

One would be is this a particular project that you’ve had issues on in the past? And then secondly, is it possible to give some sense for what the actual impact was, allowing us to sort of get a sense for what it would have looked like if you hadn’t had it?

Not sure we can give the impact. I can just say that the project in North Africa, which is reported finally in the segment, is a legacy project that really isn’t managed in the segment.

So when we look at the oil and gas group, if you were to ask them how things are going, they would be a lot more rosy than the segment reporting results. What the group is having to do, and doing quite a good job at, is those of you who were following us when I arrived in 2012, we had a lot of bad projects in that group as well.

It was the same story as we have in infrastructure now. And we’ve largely worked those projects through, and now we’re in the difficult job of replacing all of that bad backlog with good backlog.

So that’s why we think that we see this becoming increasingly positive, as the good backlog comes in and the bad backlog is fleshed out, and that’s a year further advanced, except for the Northern Africa project, than we’ve been talking about with our other challenged projects. So there’s a good-looking pipeline of projects out there, and again, with what we see in Kentz, we’re pretty enthused about it.

Did that answer your question?

And then just two other quick ones. The increase in the net financial expenses specifically to the E&C part of the business, you pointed to the Kentz acquisition facility, and then your December 2013 credit facility.

Is the Kentz piece the majority of that? And does that go away once you close that acquisition?

Kentz represents the majority of that. And part of it will disappear when we [unintelligible].

And then just on the hedging expenses and the transaction or acquisition-related expense of $25.9 million, there’s no tax impact on those, is that correct?

And that hedge will clear with the transaction. So it’s just a temporary expense.

Yes, as you know, we [unintelligible] through IFRS rules to mark-to-market the value of the hedge each month, and each quarter, when we disclose the results. So we are expecting that on August 22, when we will have to realize this option, or to resell it depending on the [unintelligible] situations, we’ll have the [unintelligible].

Before that, it’s just a mark-to-market situation.

I realize that it will clear once you close it, but is there a possibility of having some additional hedging related expense in the third quarter?

Once we’ll have closed, we will effectively buy the shares, and all the mechanisms put in place will disappear from our P&L.

The key thing is we capped our forex risk with the transaction.

Robert, I’m wondering if you could speak to outstanding claims and the potential for recovery, and magnitude.

We have substantial, material, whatever big word you want to use, claims out there. Our legal team is quite confident that substantial is a good word to use with them.

The real issue is timing on those. And so we didn’t build much into the plan, and we’re not expecting much to happen, but it could.

So that’s an upside that’s sitting there. If it happens, we have a sophisticated team that work on it now.

We’re fairly satisfied with how we’re set up to pursue them, and then we’ll be vigorously doing all we can to bring them in.

So the guidance is not contemplating any claims recovered in the second half of the year?

No. I mean, there could be nickel and dimes, but we’re not talking about big numbers, no.

In the [McGill] hospital, you’ll hand the keys over in September. What’s the probability you get signoff there and you can actually put that portion of the hospitals to bed?

Or do you think that there’s still the prospect that there’s lingering risks that go along with that, with the hospital?

Well, the mechanism on McGill is when we turn over the hospital, they owe us a rather huge progress payment. So we will be turning over the hospital not one second before the money is in the bank on the progress payment.

That’s currently slated for September 30. We will be ready for that transaction, and we’re assuming the client, who’s organizing very vigorously to step in on October 1 will be ready as well.

So that’s what we’re expecting. Certainly in my view, that’s not a big risk project at this standpoint.

Our main interest there is getting paid for the extra work we did. So I wouldn’t chalk that as something we’re particularly scared about the downside.

I hate to call upside getting paid for what you’re owed, but if that’s what you wanted to call it, that’s what it would be.

I think there were reports that you had put in claims for $200 million or something of that magnitude?

Yeah, big number. But I would just say, though, for any hospital aficionados on the phone, they’re getting a great deal, even if they pay us every penny we’ve asked for.

They’ll never get a hospital like that again for that kind of money. It’s a terrific deal.

And then lastly, just in terms of G&A, the roll off of systems costs in 2015, can you quantify what the total systems costs are that will come out?

We don’t give that number, but the expenses are substantial.

But we don’t disclose it.

What we use is, we say, “and you can expect more SG&A savings next year,” so you’ll just have to read what we think that means, but that’s why we’re comfortable that you should continue to see a downward trend.

And let’s say, [unintelligible], we are in line with our estimates for the system. No surprise.

Just a quick question going back to the 407 and essentially, I think, correct me if I’m wrong, you’re telegraphing that the reason why you’re monetizing is given the lower interest rate environment, and if the market doesn’t give enough value to the asset. But again, depending on whether it’s a full sale or something else, but could you maybe comment, what is your view on capital structure efficiency post something like that?

How do you envision that?

Maxim, we will continue to look at all options. So it really depends on where we are at that point in time.

You know, if we see a way to deploy the capital, like we did with Kentz, that we think is a value addition, and I think it has been and is going to be, then we’ll do that. If we don’t see that option, then we’ll do something else, which is a share buyback or a dividend or something.

What I’ve said in the past is I didn’t see us sitting on a heap of cash for an indefinite period with nothing in mind about what to do about it.

And then going back to your prior comments in relation to, you know, the big guys are getting bigger, does that play into your thought process in terms of capital deployment? Or is it really just finding the right fit and not just growing for the sake of growth?

Thank you for that. I’ll just continue to clarify.

We do not have an M&A model for the company. We’re designing a specific company that we think is going to be a tough competitor in the marketplace, and that’s what we’re going after.

So we don’t feel any particular pressure to do a deal just because it’s time to do a deal. So we have a very specific targeting.

We think we achieved it in Kentz, and we’ll be trying to achieve it in our other areas of need.

First, on power segment, I noticed the revenue from AltaLink is down about $100 million in the quarter. But I thought this was going to be a peak buildout year for them.

I’m just wondering what the outlook is for the work that you don AltaLink through the end of fiscal year 2014.

Well, I think it should be pretty good. So I have to admit that I’m not, even though I was just out there a week ago, up to speed on the being down for the quarter.

So I have to check that out. But there’s nothing that we see that suggests AltaLink is having a hiccup at the current time.

And then maybe just on the SG&A, how big a part does employee utilization play into the magnitude of SG&A right now? Just wondering, you talked about revenues being the softer environment, but that you were going after more process change.

I’m just wondering, is there something that can be done in terms of utilization if revenue doesn’t pick up as expected?

Well, that’s obviously a very important issue, and I think efficiency in deployment of the workforce is really important. I think that has been managed.

Of course, the best solution for all of that, that we’re working hard on, is more revenue. But it’s an aspect that we track closely in determining our overhead obligations.

Just real quick, I just want to come back to the thermal power plants that you see as driving that segment. These are usually sometimes a source of bane for [unintelligible] companies as they’re pretty cookie cutter jobs with lots of competition and fixed prices.

Anything you can provide that might make these a little different than your average thermal power combined cycle?

Well, our team has been quite successful. We think we’re kind of in the middle of, or wrapping up three of them that just come immediately to mind.

They’re all clearly in the profitability mode, so we have quite a bit of confidence in the team’s ability to make money at this. And the ones that are in the pipeline, that we’re hoping to get notice to proceed, certainly a good competitive process was done for them, but we’re feeling that, you know, we have an angle to produce returns on those.

Otherwise, we wouldn’t be doing it.

Are these in the U.S., or Canada?

The bidding environment is worldwide, but at least a couple of the ones we’re kind of waiting for are in the U.S.

Just to come back on the ICI, obviously it seems that you are much more disciplined in managing the portfolio and also at identifying the exit strategy. Just wondering if you see any opportunities to replace AltaLink and the 407, and if you could provide more color about the sectors you see some growth.

We’re reconfiguring ICI a bit to deal with the eventual post-AltaLink/407 environment to be more aggressive on the development front and not principally just following the P3 process around. So that development front will both be P3 type projects, where we’re providing an integrated solution for a client that really wants to just take it off balance sheet.

That can be an industrial client. We have interest there.

Or a government client. But also, we’ll be looking for the next AltaLink or 407.

And I’ve cautioned people, this is like nuclear power. You should never bet too much on this, because there’s a lot of people out there looking for that.

But I think what you get with SNC Lavalin is a company that demonstrated it knows what it looks like, and it knows what to do with it when it finds it. So we’ll be looking at assets that we think are parked in the corner, that if we did some capital improvements to, we could highlight them better, and that’s what we’ll be looking to do.

And for the nuclear, I understand that you signed some agreement, obviously recently, and it’s still a very long term process. You are currently at early stages.

So any color about the potential timing for those opportunities?

You know, color and timing on nuclear are hard to put together in the same sentence. I’ll just say that particularly the [unintelligible], I was in Romania last November, when the Chinese premier was there and signed the MOU with the Romanian government, and I’m pleasantly surprised, I guess I would almost say, that the schedule that was contemplated at that time for working through the issues to bring that plant to implementation is being pretty well met.

And our partner, CGN, which is one of the two big nuclear providers in China, is doing an excellent job with us of working through that project, and we’re optimistic about it.

And just for [Bruce] and Darlington, is it fair to assume that the next milestone will happen likely more after the election period?

I don’t know. You’d have to talk to Bruce in OPG for that.

But I would just say this, that the Darlington project continues to be an outstanding performer. We, and our partner is [unintelligible] there, are doing a great job, and I think if you talk to the client, they will say that they’re quite satisfied with how it’s working out.

We know that’s critical for the future of nuclear power in the province that we pull that off in time and schedule, and I’m pleased we’re still there. But we also have great relationships with Bruce, and we know they’re interested, and we stand ready to help them whenever they’re ready to go.