Contract Update

Costain Group PLC

("Costain" or "the Group")

Re AE&E Group GmbH & AE&E Inova AG

Costain is a major sub-contractor for the construction and delivery of a significant part of the Belvedere energy-from-waste facility in London. The contract has progressed well and is close to completion.

The ultimate customer for the Belvedere facility is Riverside Resource Recovery Limited ('RRRL'). The facility is a development project undertaken by Cory Environmental. RRRL entered into a contract with AE&E Inova AG ('AE&E Inova') for the construction of the facility and they, in turn, placed a £120 million sub-contract with Costain for a major part of the works.

AE&E Inova is a Swiss company owned by AE&E Inova Holding AG which in turn is owned by AE&E Group GmbH, a company based in Austria. Costain has been advised that AE&E Group GmbH has applied for 'insolvency proceedings under external administration'. Notwithstanding the insolvency of AE&E Group GmbH, AE&E Inova has advised Costain that it continues to trade and that the board of AE&E Inova will be meeting on 30 November 2010 to consider 'decisions regarding the future' of the company.

There are currently no overdue payments from AE&E Inova to Costain and the next stage payment, for £2.6 million, is due by 10 December 2010. AE&E Inova has confirmed that it intends to make the payment.

As a result of work in progress and milestone payments not yet certified or due, the value booked for work carried out to date is greater than cash received by £22 million. Costain has sought assurances from AE&E Inova that they will make all future payments due under the contract. However, Costain considers that there can be no certainty that such assurances can be obtained.

In light of the insolvency of AE&E Group GmbH, Costain is engaged in active discussions with both AE&E Inova and Cory Environmental regarding the financing and completion of the project.

Further announcements will be made as appropriate.

29 November 2010

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