Stmnt re E&C Business Area

RNS Number:4156G
Kvaerner PLC
5 July 2001


Project dispute and weak U.S. market create uncertainty over E&C earnings
 
LONDON, 5 JULY 2001: Kvaerner, the Anglo-Norwegian engineering and
construction Group, today announced that a dispute connected to the completion
of a project, and weak markets in America, are creating uncertainty over this
year's earnings of the E&C (Engineering & Construction) business area.

The dispute is related to the construction of a plant to recover zinc from
geo-thermal brine for CalEnergy Minerals LCC, in California.  The contract for
this project was signed in September of 1998.  The basic design of the plant,
together with the process design, was provided by the customer - and Kvaerner
undertook to build the plant according to the customer's specification and
instructions.     Despite extensive additional work undertaken by Kvaerner,
the plant has yet to reach the required performance levels.  CalEnergy has now
announced claims against Kvaerner of US$65 million in compensation and
damages. 

Kvaerner is of the opinion that it cannot be held responsible for a
performance shortfall caused by flaws in the original process provided by the
customer.  The Group is in negotiations with CalEnergy seeking payment for
monies withheld and compensation for variations to the original scope.  In the
event the parties cannot reach an agreement, Kvaerner will seek arbitration to
have CalEnergy's claim dismissed and will present a counterclaim of
approximately US$25 million. 

The project is covered under Kvaerner's professional indemnity insurance
policy. At this stage, it is too early to establish the impact that this
dispute may have on E&C's results for 2001.  

Furthermore, it is expected that weakening market conditions in the U.S.,
particularly in the metals sector, and inadequate performance in some of E&C's
operations in the region, will add to the challenges of the business area. 
This situation is likely to lead to lower results for the year than originally
anticipated. E&C expects to see an improvement again in 2002, partly as a
result of an increasing number of power plant contracts won recently that will
strengthen the order reserve, but these will not provide full revenue benefits
until next year.

Kvaerner's other main businesses are performing broadly as expected, but the
deterioration of the E&C results will weaken the Group's total results in
2001.  

For further information: 

Trond Andresen, Senior Vice President: [phone]/  [phone]
or Paul Emberley, Vice President, Group Communications, Kvaerner PLC: +44
(0)20 7339 1035 or [phone] or [e-mail] or visit
the Group web-site at http://www.kvaerner.com 

Notes to editors:

1. Kvaerner is a world-class Anglo-Norwegian engineering and construction
Group.  It meets the needs of its customers by adding value to their business
- through the provision of innovative, cost-effective solutions - for
challenges in the hydrocarbons, process and metals industries.  The Group's
activities are currently organised in two core business areas: E&C
(Engineering and Construction), and Oil & Gas.  Kvaerner is a Norwegian
registered business, but has a London, UK-based international headquarters. 
The Group has annual revenues in excess of US$6 billion, with some 35,000
permanent staff located in almost 35 countries throughout Europe, Asia and the
Americas.

2. The E&C business area of Kvaerner specialises in the provision of process
technology, design, engineering, project management, procurement and
construction to a number of industrial sectors on a worldwide basis: chemicals
and polymers, pharmaceuticals, oil and gas, water, energy, nuclear, minerals,
mining, steel and transportation.  Kvaerner's breadth of capability is unique
among its competitors.  It offers the complete range of services that are
necessary to realise global projects from conception to start-up.  These
services include a portfolio of advanced process technologies, research and
development, test work, a full range of engineering studies (including
bankable feasibility and environmental studies), total project management,
engineering and design, procurement, construction and maintenance services.   
Kvaerner E&C employs more than 9,000 people operating from over 30 offices
worldwide.  This global reach enables Kvaerner to tailor its services and
resources to suit individual client needs and market conditions to provide
cost-effective technical solutions.