LEXINGTON, Mass., Oct. 11 /PRNewswire-FirstCall/ --
Raytheon Company (NYSE: RTN) and its turbine vendor are pursuing a solution to
fix a previously disclosed issue that developed approximately three weeks ago
on turbines on the two Massachusetts power projects that the company is
completing.  The modifications involve changing combustor baskets and liners
to a different configuration.  This will have an impact on the schedule for
performance testing, particularly at the Mystic Station site in Everett, Mass.
    In addition, the latest schedule outlook for the two projects has been
hurt by a productivity level that has not met the company's expectations and
has increased the risk with respect to the cost estimate on the projects.  The
company's preliminary assessment indicates a potential cost impact in the
range of $70 million - $75 million.  The company will finalize this estimate
and discuss the details on Oct. 24, 2002, during its quarterly conference
call.  As has been the case, bringing these complex projects to conclusion
involves additional risks, the most significant of which is the uncertainty
with the turbines.
    Construction continues in all areas of both the Mystic Station plant and
the Fore River plant, in Weymouth, Mass.  The number of construction workers
is being reduced each week as construction moves forward toward completion.
Construction is approximately 91% complete at Mystic and 84% complete at Fore
River.  Startup and commissioning activities are also continuing in all areas
leading up to the firing of the turbines, which will need to be modified, as
described above, before firing can take place.  Significant progress continues
to be made on oil flushing for Mystic Block 9.  The first fire of Block 9 is
now anticipated to be early December and late November at Fore River.  This
would support a performance test by mid January 2003 for both projects.
    Under the contract, if the Mystic plant is not accepted by January 14,
2003, a liquidated damages payment of $68.1 million will be required.  This
payment pre-funds the liquidated damages to the maximum amount specified by
the contract.  This would be a cash event with the ultimate cost impact being
a function of the number of days past January 14, 2003 a successful
performance test takes place, at the contractual rate of $410,000 per day.
There is a similar provision in the Fore River contract requiring a cash
payment of $59.8 million on February 25, 2003.  In the case of Fore River, the
final cost impact would be assessed at $180,000 per day for each day a
successful performance test is delayed past February 25, 2003.  In both cases,
Raytheon expects to recover the difference between the pre-funded payment and
the actual liquidated damages incurred based on successful completion of
performance testing.

    Red Oak Project
    As disclosed previously, final reliability testing continues and punch
list items are being completed.  The company expects the completion of these
closeout activities will result in an increase to the final project costs as
shown in the table below.

    Ratchaburi Project
    The final power island, Block 3, is finishing testing.  The company
expects formal turnover will occur before the end of October following the
commissioning of Blocks 1 and 2, which is now taking place.  The final
closeout activities are expected to result in an increase in the project
costs, as shown below.

    Project Management Office & Other Costs
    As disclosed previously, there are costs associated with the program
management organization that represent $7 million - $8 million per quarter.
The company also continues to allocate a portion of its interest costs to
discontinued operations, consistent with the estimated cost of funding its
engineering and construction obligations.  This is expected to be
approximately $21-$22 million per quarter through 2002.

                             Discontinued Operations
                                   ($ Millions)

    Q3 2002 Estimated costs:

    Mystic/Fore River                      $70 - 75
    Red Oak                                 14 - 15
    Ratchaburi                                3 - 4
    Interest                                21 - 22
    PMO                                       7 - 8

    Gross Range                          $115 - 124

    Tax effect                             (40 - 43)

    Net Range                               $75 - 81


    Continuing Operations
    The company expects to meet its previously disclosed guidance for 2002
third quarter earnings from continuing operations of $0.56 per diluted share.
At the end of the quarter, the company's net debt was approximately $6.2
billion, $0.6 billion better than its planned net debt level of $6.8 billion.

    With headquarters in Lexington, Mass., Raytheon Company is a global
technology leader in defense, government and commercial electronics, and
business and special mission aircraft.

    Forward-Looking Statements
    Certain statements made in this release, including any statements relating
to the company's future plans, objectives, and projected future financial
performance, contain or are based on, forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Specifically, statements that are not historical facts, including statements
accompanied by words such as "believe," "expect," "estimate," "intend," or
"plan," variations of these words and similar expressions, 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.  Given these uncertainties, readers should not rely on
forward-looking statements.  Forward-looking statements also represent the
company's estimates and assumptions only as of the date that they were made.
Important factors that could cause actual results to differ include, but are
not limited to: the performance of critical subcontractors and suppliers; the
timing of project completion and customer acceptance of the Massachusetts
Projects; the timing and cost associated with the ultimate resolution of the
turbine combustor issues at the Massachusetts Projects; the company's lack of
construction industry expertise resulting from the company's sale of RE&C; the
continued decline of craft labor productivity at the Massachusetts Projects;
the company's inability to recover amounts required to be paid in connection
with pre-funded liquidated damages; risks inherent with large long-term fixed
price contracts, particularly the ability to contain cost growth; and the
ultimate resolution of contingencies and legal matters.  Further information
regarding the factors that could cause actual results to differ materially
from projected results can be found in the company's filings with the
Securities and Exchange Commission, including "Item 1 - Business" in the
company's Annual Report on Form 10-K for the year ended December 31, 2001 and
in the company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 2002 and June 30, 2002.

     News Media Contact:
     David Polk
     781.860.2386
     617.470.3204
     Investor Relations Contact:
     Timothy Oliver
     781.860.2167

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