15IO Euro.bk. 36

RNS Number:4069C
Kvaerner PLC
20 April 2001


An open letter to the shareholders of Kvaerner ASA

LONDON, 20 APRIL 2001: Kvaerner, the Anglo-Norwegian engineering and
construction Group today published an open letter to all its shareholders:

Dear shareholder

THE AGM ON 4 MAY 2001 COULD BE CRUCIAL FOR THE FUTURE OF KVAERNER
A new board of directors is to be elected at the Kvaerner AGM on 4 May. It is
crucial that a board be elected which will work to the benefit of all
shareholders. We would urge all shareholders to attend and vote at the AGM.
You can also appoint the Chairman or the President & CEO of Kvaerner as your
proxy.
Aker RGI and Aker Maritime, both controlled by Kjell Inge Rokke, have
presented plans that involve Kvaerner acquiring Aker Maritime's oil and gas
business for about NOK 4 billion. This will be funded by a private placement
of preference shares with Aker Maritime. In addition, Mr Rokke has proposed
that Kvaerner should transfer its Shipbuilding operations to a company in
which Aker RGI could be the majority shareholder and Kvaerner the minority
shareholder. He has made it clear that these two proposals are interdependent,
and that he is not willing to discuss them separately.
The board and management take the view that implementing these plans could run
counter to the best interests of Kvaerner and its shareholders. The workforce
and their unions are also strongly opposed to these proposals.
WHY?
- Since Aker Maritime sold its deepwater expertise and international presence
to a French company last autumn, it has little to offer Kvaerner Oil & Gas
within those areas in which Kvaerner has ambitions for further growth. The
proposals accordingly do not represent a positive contribution to Kvaerner's
industrial development.
- As presented, the proposals could involve the transfer of substantial assets
from Kvaerner's shareholders to Aker Maritime, a company controlled by Mr
Rokke.
- In our view, the estimates presented by Aker Maritime for possible savings
and synergies from a merger are very exaggerated and take no account of the
costs and loss of revenues, margins and jobs which would follow from a
contraction in market share for the merged business.
- The board believes that the proposed form of payment is unfavourable for
Kvaerner shareholders, with the exception of those who also hold shares in
Aker Maritime. It will have a diluting effect and restrict the Company's
financial flexibility.
- The proposal to collaborate with Aker RGI over the remaining shipyards could
be worth considering - but on an independent basis, not tied to a possible
acquisition of Aker Maritime's oil and gas operations, and on terms other than
those proposed by Mr Rokke.
A new board will have to adopt a position on these proposals. The present
board takes the clear view that an investment of NOK 4 billion in Aker
Maritime's remaining oil and gas operations would both be financially wrong
and unfortunate, and represent a blind alley for Kvaerner.

KVAERNER'S OBJECTIVES AND STRATEGY
When Kjell Almskog took over as chief executive of Kvaerner just over two
years ago, the objectives we set were to bring the Group back onto an even
keel and to establish it as one of the world's leading suppliers of industrial
technology, engineering services and products for the oil and gas industry as
well as the process and metals sectors.
Last year's operating profit of more than NOK 1.2 billion and a halving of the
Group's interest-bearing debt over the past two years show that we have come a
good way towards meeting the first objective of the turnaround. An important
factor in the financial restructuring has been the share issues implemented in
the past two years. A good deal remains to be done, however, and we are well
aware that the shareholders have so far seen little to celebrate in terms of
share price and dividend.
We are now going to move on. We will build shareholder value by creating a
profitable Norwegian player with the strength to compete internationally in
selected regions and market areas. Among the most important challenges are
securing positive progress for results and long-term growth in our oil and gas
business. We intend to do this by:
- strengthening profitability through improved operation and better
co-ordination between the Engineering & Construction (E&C) and Oil & Gas (O&G)
business areas;
- taking greater advantage of E&C's strong global position and exploiting its
extensive existing expertise in pipelines, refining and other land-based
process plants for the oil and gas industry;
- strengthening our technological platform through the acquisition of small
technology-oriented companies which complement the existing operations and
product portfolio;
- strengthening our presence in selected regions such as the Gulf of Mexico,
Brazil, western Africa and the Caspian, with a particular focus on subsea
production in deep water - an area which is expected to show strong growth;
- assessing alliances and partnerships with large companies.
In our view, acquiring Aker Maritime's remaining operations will not help us
to reach our objective of improved results and long-term growth. On the
contrary, an acquisition could require Kvaerner to devote substantial
resources to a restructuring of the North Sea business, where there is excess
capacity today and where no particular growth is expected in the coming years.
This would in the event have to be undertaken at the expense of the
international commitment planned by Kvaerner.
Some people claim that it is unrealistic to believe that Kvaerner, after all
the problems we have been through, will be capable of successfully reaching
the goal of becoming a strong international player in oil and gas. We do not
agree with that. We believe Kvaerner today has a good foundation for success
with the strategy drawn up by the Company's present board and management for
its future development.
Our subsea and product operations in the oil and gas sector are already
experiencing strong growth in both revenues and profitability, and we rank
among the world leaders in several technology areas. However, we want to
expand this portfolio even further. Through E&C, we already occupy a strong
global position for pipelines, refining and other land-based process plants
for the oil and gas industry. 
Substantial value remains to be taken out through better integration between
this business area and offshore operations in Kvaerner Oil & Gas, in such
fields as engineering services, procurement, shared premises and information
technology.
As head of ABB's oil and gas division, Kjell Almskog was the principal
architect behind the leading international position built up over a decade by
this company in our type of industry. Mr Almskog believes that Kvaerner is
better placed today than ABB was when he took over responsibility for its oil
and gas division.
We are convinced that Kvaerner is on the right course, and that the
shareholders will note this in future through positive results and a better
share price. But that will only happen if the Company has a board which looks
after the interests of all the shareholders.
There is every reason to be on guard in a position where some Kvaerner
shareholders - those who are also minority shareholders in Aker Maritime - are
offered an extra premium if they accept Mr Rokke's proposal.
We would urge Kvaerner's shareholders in the strongest possible terms either
to attend the AGM on 4 May or to appoint the Chairman or the President & CEO
as their proxy.
INFORMATION MEETING AHEAD OF THE AGM
Kvaerner will be holding an information meeting for shareholders, analysts,
journalists and other interested parties at 10.00 local time on Tuesday 24
April 2001 in the Felix Conference Centre at Aker Brygge in Oslo, and you are
most welcome to attend. We will provide a detailed presentation of Kvaerner's
strategy and our view of the proposals presented by Aker Maritime. No advance
registration is required to attend this meeting.

Yours faithfully

Christian Bjelland              Kjell E Almskog              
Chairman                        President & CEO

London, Friday April 20, 2001


For further information:

Paul Emberley, Vice President Group Communications, Kvaerner PLC: +44 (0)20
7339 1035 or  +44 (0)7768 813090 or paul.emberley@kvaerner.com or
www.kvaerner.com 

Note for editors:
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.

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