LEXINGTON, Mass., June 26 /PRNewswire/ -- Raytheon Company (NYSE: RTN)
today announced that it has several preliminary estimates of the cost to
complete two Massachusetts construction projects for Sithe Energies Inc., that
were abandoned by Washington Group International (WGI) and which Raytheon is
completing pursuant to performance guarantees. Some of these preliminary
estimates assume significant increases in liquidated damages, construction
management costs and project contingencies, which would cause the total
liability to be higher than the March 2001 estimate. Raytheon now expects the
eventual liability on these two projects to range between $450 million and
$700 million, compared to the earlier estimate of $325 million.
    Raytheon has assembled a team of project management experts to conduct
critical reviews of the construction schedule associated with each of the
estimates it has received. Optimizing the construction schedule would have a
material favorable impact upon the size of any incremental charges related to
the Sithe projects.
    "What is most important is that the Raytheon team focuses its full
attention on getting these projects back on schedule in order to minimize the
impact of WGI's abandonment," said Daniel P. Burnham, Raytheon's chairman and
chief executive officer. "Further precision with respect to both timing and
cost will require completion of a more refined construction schedule."
    As previously disclosed, Raytheon sold its engineering and construction
business to WGI on July 7, 2000, and had guaranteed performance of certain
projects to the project owners. WGI announced in March 2001 that it had severe
liquidity problems.  Raytheon took over performance of the two Sithe projects
in March 2001, following the abandonment and default by WGI of its obligations
with respect to those projects. Raytheon previously disclosed a potential
liability of up to $450 million for 50 construction projects for which it has
performance guarantees, including $325 million for the two Sithe projects. As
was described at the time, Raytheon's analysis was based on estimates provided
by WGI of the cost to complete them.
    Under the sale agreement for Raytheon's former engineering and
construction business, WGI is required to indemnify Raytheon for all amounts
expended by Raytheon to complete the projects, and Raytheon is entitled to
full cash reimbursement for these amounts and full set-off against any WGI
claims against Raytheon. Due to the bankruptcy filing by WGI, Raytheon does
not intend to recognize for accounting purposes the value of its claims
against WGI, although it intends to pursue all avenues to maximize its
recovery.
    With headquarters in Lexington, Mass., Raytheon Company is a global
technology leader in defense, government and commercial electronics, and
business and special mission aircraft.

    Note: Raytheon will hold a teleconference beginning at 8:00 a.m. EDT to
review the Sithe projects and other issues related to its former engineering
and construction business on June 27.  The dial in number for the call is 212-
231-6022.  There will also be a live webcast of the call available at
http://www.raytheon.com.

    Forward-looking statements
    This news release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act concerning the company's
financial results, future plans, objectives and expected performance.
Specifically, statements in this release that are not historical facts,
including statements accompanied by words such as "believe," "expect,"
"anticipate," "estimate," "intend," or "plan" are intended to identify
forward-looking statements and convey the uncertainty of future events or
outcomes.  The company cautions readers that any such forward-looking
statements are based on assumptions that the company believes are reasonable,
but are subject to a wide range of risks, and actual results may differ
materially.  Important factors that could cause actual results to differ
include, but are not limited to: the effects of WGI's bankruptcy filing; the
final determination by the company of the required expenditures to complete
the projects, the confirmation of the actual physical progress completed at
the time of WGI termination, the impacts associated with the re-mobilization
of the projects and WGI compliance with its contractual obligations and
cooperation with Duke Fluor Daniel in its assumption of the construction
activities. Further information regarding the factors that could cause actual
results to differ materially from projected results can be found in the
company's most recent filings with the Securities and Exchange Commission,
including Raytheon's Form 10-K for the year ended December 31, 2000 and Form
10-Q for the quarter ended April 1, 2001.

     Contacts:
     David Polk (News Media)
     781.860.2386

     Timothy Oliver (Investor Relations)
     781.860.2167

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