914024--12/6/2007--SHAW_GROUP

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{cost, contract, operation}

{capital, credit, financial}

{debt, indebtedness, cash}

{cost, regulation, environmental}

{regulation, government, change}

{customer, product, revenue}

{financial, litigation, operation}

{operation, international, foreign}

{condition, economic, financial}

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{cost, operation, labor}

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{investment, property, distribution}

{loss, insurance, financial}

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Our projects may encounter difficulties that may result in additional costs to us, including but not limited to, reductions in revenues, claims, disputes and the payment of damages. Our use of the percentage-of-completion accounting method could result in a reduction or elimination of previously reported profits. Our projects expose us to potential professional liability, product liability, warranty and other claims. Our failure to meet schedule or performance requirements of our contracts could adversely affect our profitability. Our dependence on joint venture or consortium partners, subcontractors and equipment manufacturers could expose us to the risk of loss. If our partners fail to perform their contractual obligations on a project, we could be exposed to loss of reputation and additional financial performance obligations that could result in reduced profits or, in some cases, significant losses. Demand for our products and services is cyclical and vulnerable to downturns in the industries to which we market our products and services. The U.S. government can audit and disallow costs reimbursed under our government contracts and can terminate contracts without cause. Each year some government contracts may be dependent on the legislative appropriations process. If legislative appropriations are not made in subsequent years of a multiple-year government contract, we may not realize all of our potential revenues and profits from that contract. Actual results could differ from the estimates and assumptions that we use to prepare our financial statements. Risks related to our Investment in Westinghouse could have an adverse effect on us. Non-compliance with covenants in our Credit Facility, without waiver or amendment from the lenders, could adversely affect our ability to borrow under the Credit Facility. Restrictive covenants in our Credit Facility may restrict our ability to pursue our business strategies. Because of the capital-intensive nature of our business, we are vulnerable to reductions in our liquidity. Our borrowing levels and debt service obligations could adversely affect our financial condition and impair our ability to fulfill our obligations under our Credit Facility. Our ability to obtain adequate bonding and, as a result, to bid on new work could have a material adverse effect on our future revenues and business prospects. Downgrades by rating agencies may require us to modify existing bonding facilities or obtain new bonding facilities. We are currently the subject of an SEC informal inquiry that could adversely affect our business. Lawsuits and regulatory proceedings could adversely affect our business. Our environmental and infrastructure operations may subject us to potential contractual and operational costs and liabilities. We are exposed to certain risks associated with our integrated environmental solutions businesses. The limitation or the modification of the Price-Anderson Act s indemnification authority could adversely affect our business. Environmental factors and changes in laws and regulations could increase our costs and liabilities and affect the demand for our services. Development and construction risks and other risks associated with our military family housing privatization contracts could impact our profitability and cause a loss of our investment. Our working capital requirements may increase as a result of our work associated with the military family housing privatization market. Our dependence on one or a few customers could adversely affect us. If we experience delays and/or defaults in customer payments, we could be unable to recover all expenditures. We face substantial competition in each of our business segments. Political and economic conditions in foreign countries in which we operate could adversely affect us. Work stoppages and other labor problems could adversely affect us. Foreign exchange risks may affect our ability to realize a profit from certain projects or to obtain projects. Our earnings could be negatively impacted if we write off a significant amount of intangible assets or long-lived assets. We may incur unexpected liabilities associated with acquisitions. Difficulties integrating our acquisitions could adversely affect us. Our failure to attract and retain qualified personnel, including key officers, could have an adverse effect on us. Changes in technology could adversely affect us, and our competitors may develop or otherwise acquire equivalent or superior technology. If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, investors could lose confidence in our financial reporting, which would harm our business and the trading price of our stock. We rely on our information systems in our operations. Failure to protect these systems against security breaches could adversely affect our business and results of operations. Additionally, if these systems fail or become unavailable for any significant period of time, our business could be harmed.

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914024--12/6/2007--SHAW_GROUP_INC