Wednesday 0ctober 17, 2001

WHAT INDUSTRIAL PROSPECTS FOR TECHNIP-COFLEXIP ?
Ministry hosts CGT delegation

A delegation of TECHNIP, IFP, COFLEXIP, CGG (Compagnie Générale de Géophysique) CGT unions had an interview on October 16 with the Head of the DIMAH (Directorate of Commodities and Oil and Gas) and his assistant, representing the French Ministry of Economy, Finance and Industry.
After several internal meetings and the issue of joint press releases, all the CGT unions had drawn up the following joint statement, which was handed to the representatives of the Ministry and which was used as guideline for the discussion:

"Further to July 10, 2001 statement, the C.G.T unions of IFP, TECHNIP, COFLEXIP and CGG groups request the Ministry of Economy, Finance and Industry to make commitments regarding the following issues:

• Creation of a new Shareholders' Pact for the TECHNIP-COFLEXIP Group between TOTALFINAELF, IFP and GDF, which requires a significant increase of the number of shares of each member of the pact in TECHNIP-COFLEXIP share-ownership.In order to be effective, this pact must be signed for at least 5 years. The decisive weight of French Authorities in IFP and GDF would allow the creation of such a pact.
  

• Integration of CGG with all its employees into the new TECHNIP-COFLEXIP Group in order to give a fully comprehensive scope to the large French oil and gas engineering, products and solution group created.

• To ensure perenniality of this new French Group, which is to be a leader in its business segment, it is necessary:

• to maintain technological links between IFP and TECHNIP-COFLEXIP,

• to support the Group in its commercial operations with a view to be awarded big international contracts in all its present fields of operation,

• to act to obtain that all contracts on a turnkey basis should be fully performed by teams in entities of the group located in France in order to preserve and to develop technological expertise in all the lines of business and to replenish the workload,

• to obtain assurance that the combination of the various firms will not have a downsizing impact on the staff or affect employees' rights and benefits and human resource policy, and that it will not lead to giving up some of the French sites in favour of relocation outside France, which would lead to staff cuts,

• to act towards public shareholders and towards banks to financially back the TECHNIP-COFLEXIP Group, should it get weakened further to this operation."

These requests have been elaborated upon by all the CGT representatives during the meeting, each party stressing the following items regarding its firm:

• TECHNIP: creation of a Shareholders' Pact, maintaining of expertise and complete performance of contracts on a turnkey basis, guarantee that the takeover will not boost the relocation process.

• IFP: stress on IFP duties towards industrial firms such as TECHNIP, CGG, COFLEXIP and request for support to enable IFP to get over the financial difficulties created by the operation allowing COFLEXIP takeover by TECHNIP (€205million necessary to purchase unlisted firms from ISIS Group).

• CGG: long-term integration of CGG in the TECHNIP-COFLEXIP group, increase of TECHNIP-COFLEXIP shares in CGG and development of technological interferences with COFLEXIP.

• COFLEXIP: commitments to the perenniality of the French sites, in particular the Le Trait site in French Normandy, in a district where unemployment ratios are high.

The basic statement made by the DIMAH Representative, regarding an operation which still appears strictly financial and the industrial perenniality of which has not been clearly demonstrated yet, is that French Authorities did not intend to prioritize the financial approach but that they intended to take industrial issues into account while championing French firms in this business segment.

TECHNIP-COFLEXIP SHAREHOLDERS' PACT

This suggestion has not been contemplated yet, but this proposal of creation of a new pact will be studied by the Ministry. We stressed the fact that it is necessary to increase the shares of French shareholders, IFP, GDF, TOTALFINAELF in TECHNIP-COFLEXIP, and to sign this pact for a minimum period of five years, to take into account the time necessary for restoring the financial status after such an operation, as well as the weakened financial position of the group against possible predators.

The Ministry representatives gave assurance that IFP, GDF, TOTALFINAELF will remain reference shareholders. It should be noted that the document issued by the COB (French stock exchange watch-dog Committee) stipulates that TOTALFINAELF will remain one of the group's shareholders for six months from July 2001.

INTEGRATION OF CGG IN TECHNIP-COFLEXIP

After reminding that it is stipulated that IFP guarantees CGG takeover by IFP after one year, which is a "safety net", the DIMAH Representative indicated that this question is open-ended and that nothing prohibits to contemplate another scheme in this period.

MAINTENANCE OF TECHNOLOGICAL LINKS BETWEEN IFP AND TECHNIP-COFLEXIP

The Ministry Representative laid stress on the strong will of French Authorities to maintain and strengthen these links, and he mentioned a few contracts recently awarded to TECHNIP as an illustration. Both firms must keep working jointly for projects. Regarding IFP's financial resources, the Ministry said that it has no intention whatsoever of leading IFP to bankruptcy.

AID TO THE GROUP'S COMMERCIAL POLICY

According to the DIMAH Representative, French Authorities provide some aid to domestic firms endeavouring to be awarded big contracts, as other countries do, some countries providing however much stronger and unrestrained support to their engineering companies.

With regard to the fact that several large contracts have been recently lost in France in particular, the Ministry remained unspecific regarding the part it might have played to see these contracts awarded to TECHNIP.

PERFORMANCE OF CONTRACTS ON A TURNKEY BASIS IN FRANCE

The Ministry Representatives noted our concern. They seem not to have quite assessed the actual volume of work hours relocated outside France, nor how much this does jeopardize the expertise in France, unless the performance of a number of contracts on a turnkey basis is maintained in France.

We requested that statements regarding this issue should be made via the representatives of Authorities who are members of the TECHNIP Board.

NO DOWNSIZING EFFECT AND NO IMPACT ON SITES

The Ministry declares that the Chairman and CEO of TECHNIP has made a commitment towards the Authorities to maintain the present number of Employees. But it has not been decided yet whether all sites are to be maintained.

This issue is still being discussed by the Ministry and TECHNIP-COFLEXIP top management. We reminded the Ministry Representative that in the past TECHNIP top management had a constant policy of staff downsizing after acquisitions.

The Ministry declared that its policy is to require that decision centers should be maintained in France, even when shareholders are non-French.

ACTION OF FRENCH AUTHORITIES FOR FINANCIAL BACKING IF NECESSARY

This issue was deemed to be outside the competence of our interlocutors who gave us assurance that this request would be transmitted to the Minister.

As a conclusion, the DIMAH Representatives undertook to transmit our requests and a meeting report summarizing our statements and arguments to the Minister, L. FABIUS.

A meeting attended by the Ministry and TECHNIP-COFLEXIP top management should take place during week 43. Our requests and statements should be discussed then.