MoD Agrees to Babcock Purchase of Devonport Naval Repair Yard
(Source: UK Ministry of Defence; issued June 28, 2007)
The Ministry of Defence has agreed to the transfer of ownership of Devonport Management Limited (DML), the submarine and warship maintenance yard in Devonport, to Babcock International Group, subject to satisfactory completion of the necessary regulatory approvals.

The yard was put up for sale in 2006 by Halliburton KBR, Weir Group and Balfour Beatty. It currently employs some 4800 staff carrying out refits and overhauls of sophisticated warships such as frigates, destroyers and the Royal Navy's flotilla of nuclear-powered submarines. MOD retains a Special share in the business.

Minister for Defence Equipment and Support, Lord Drayson said:

"This announcement marks a significant step forward in realising our plans to see a vibrant and sustainable UK maritime industry, as laid out in the Defence Industrial Strategy."

Following this announcement, MOD and Babcock will enter negotiations on a formal agreement covering the operation of the yard, which is expected to reach conclusion next year.


Babcock International Group currently runs the MOD's naval base on the Clyde and owns a surface ship support yard at Rosyth. (ends)

KBR Announces Completion of DML Shipyard Sale
(Source: KBR; issued June 28, 2007)
HOUSTON --- KBR today announced it has completed the sale of its interest in Devonport Management Limited (DML) to Babcock International Group plc. KBR's ownership in DML was 51%. The gross proceeds of the sale to KBR are approximately $350 million, resulting in an estimated gain of $93 million.

"Long-term involvement in DML is not core to KBR's business, so this sale is a logical transaction that aligns with KBR's corporate strategy overall," said William P. Utt, KBR Chairman, President and Chief Executive Officer. "KBR continues to enjoy a successful and productive relationship with the Ministry of Defence (MoD) and looks forward to continuing to be a key supplier to the MoD for its services programs and to growing our overall presence in the UK."

The UK Defence Industrial Strategy (DIS), announced in December 2005, seeks to rationalize existing surface and subsurface vessel programs. In both the surface ship and submarine market segments, the MoD seeks to achieve an integrated design, construction, operation and maintenance activity. This program is commonly referred to as "through life support."

Additionally, the MoD is expected to complete the work on its existing contract, rationalizing its active submarine fleet. Further, the next class of nuclear submarines, the Astute class, will not require any nuclear refueling during their service life and will incorporate the latest materials and systems designed to minimize maintenance intervals and costs.

With the reduction in submarine retrofit and refueling streams, and the customer's objective of purchasing an integrated through life support solution, coupled with the requirement to consolidate the primary dockyards in the UK to reduce cost, KBR believes it is appropriate to divest this business so that the company may focus more clearly on its engineering, construction and services offerings to its industrial governmental and military customers.

Over the past several years, in response to the reduction in the submarine retrofit and refueling backlog, DML management has actively pursued other business lines that include non-submarine activity such as warship support, private yacht design and construction, military vehicle assembly and other heavy equipment maintenance activities. These non-retrofit and refueling activities now account for approximately 50% of DML's revenues.

KBR is a global engineering, construction and services company supporting the energy, petrochemicals, government services and civil infrastructure sectors. We offer our wide range of services through our Energy and Chemicals (E&C), Government and Infrastructure (G&I), and Ventures business segments.


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