Solid Progress in First-Half Results 2003

5 November
2002

Solid Progress in First-Half Results 2003

1st April 2002 30 September 2002

Resilient performance

• Orders received: 10.5 bn, down 6% on first
  half 2002, but up 15% on second half 2002.
• Sales stable at 10.8bn
• Operating margin improved to 5% (2002 H1
  4.5%, H2 3.5%)

Stronger financials

• Strong recovery in free cash flow from
  operations to (77)m

  (2002 H1 (474)m, 2002 H2
  (537)m)

• Net debt cut by 142m, reducing
  gearing to 84% (fiscal 2002: 112%)

Commenting on the results Pierre Bilger,
Chairman & Chief Executive Officer, said:

'We
have made solid progress over the past six months,
delivering a healthy improvement in operating income on
broadly maintained sales, with a strong recovery in net
income.

'The resilience of our performance, in a
challenging economic environment, is underlined by the
15 per cent growth in our order intake. As a result, we
expect orders received and sales for the full year to
be broadly in line with those of last year. The
positive dynamics of the transport, power retrofit,
customer service and transmission markets should offset
less favourable gas turbine, power plant, distribution
and marine markets.

'I
am particularly pleased by the marked turnaround in our
profitability, with our operating margin up by a full
one-and-a-half percentage points over the second half
of fiscal 2002. This improvement was delivered across
all our Sectors and reflects not only the improved
margins in our order intake, as our business mix
improves, but also the benefits that are beginning to
flow from restructuring and overhead reduction. This
gives us confidence in delivering a margin close to 5%
in March 2003 and puts us well on track to achieving 6%
by March 2005.

'Even more significant is the strengthening
of our financial position. We generated over 80
million of net cash from operating activities in the
first half, helped by stringent control of working
capital across the group. Our net debt has been cut by
more than 140 million, substantially reducing
our gearing from 112% to 84%.

'All the initiatives detailed in March in our

Restore Value plan have now been launched and we
have already raised 667 million through the
capital increase in July and the subsequent disposal of
our South African operations.

'Despite a generally much more difficult
economic environment, we remain confident of achieving
the key objectives outlined in the
Restore Value plan.

'I
have announced elsewhere today that Patrick Kron, a
non-executive director of ALSTOM, is to succeed me in
due course as Chairman and CEO. As I prepare to hand
over the leadership of the company to my successor, I
do so in the knowledge that our
Restore Value plan is on track and ALSTOM's
financial position is improving.'

-
ends -

A summary of ALSTOMs MD&A for the
six-month period is attached. A full copy of this
document, which takes precedence over this press
release, is available on ALSTOMs website,
together with a full set of accounts and notes (www.alstom.com).

Press enquiries:

G. Tourvieille/S. Gagneraud

(Tel. +33 1 47 55 23 15)

internet.press@chq.alstom.com

Investor relations:

E. Rocolle-Teyssier

(Tel. +33 1 47 55 25 78)

investor.relations@chq.alstom.com

ALSTOM: Summary of MD&A

Summary of results

The
actual figures for the first and second halves of
fiscal 2002 have been restated using 30 September 2002
exchange rates for order backlog, orders received,
sales and operating income. Adjustments have also been
made to order backlog, orders received, sales and
operating income for the first and second halves of
fiscal 2002, to reflect changes in business composition
and provide a basis comparable with the first half of
fiscal 2003.

On
a comparable basis, orders received increased by 15% in
the first half of fiscal 2003 against the second half
of fiscal 2002, with the order backlog and sales both
stable. Operating income and operating margin both
increased compared with the first and second halves of
fiscal 2002, reflecting improved margins in our order
backlog, better control of costs and the first results
of the restructuring launched as a part of
Restore Value. Net income after goodwill
amortisation was positive at 11 million for the
first half, compared with a gain of 92 million
and a loss of 231 million in the first and
second halves respectively of fiscal 2002.

Restore Value

After six months, we have achieved
significant progress in implementing our strategic plan
'Restore Value'.

• Restoring operating margin

Restore Value target is an operating margin of
6% in March 2005.

For
the first half of fiscal year 2003, the operating
margin was 5.0%, compared with 4.5% and 3.5%
respectively for the first and second halves of fiscal
2002.

We
are on track to achieve the
Restore Value target of an operating margin of
6% in March 2005. Our order backlog shows an
improvement in our business mix, with an increase in
higher-growth and higher-margin activities. We are also
on track to reduce annualised overheads by 250
million by March 2005.

On
a comparable basis, all sectors showed an improvement
in operating margin against those of the second half of
fiscal 2002, and are in line with the internal targets
established to meet the March 2005
Restore Value targets.

• Restoring positive cash flow

Restore Value target is to generate total free
cash flow from operations of 1.3 billion by
March 2005.

Net Cash from operating activities

The
net operating cash inflow in the first half was
83 million, compared with outflows of 238
million and 341 million in the first and second
halves respectively of fiscal 2002.

The
83 million included an exceptional cash outflow
of 574 million resulting from the application of
provisions and accrued contract costs on the GT24/26
gas turbines totalling 398 million, and from a
176 million cash outflow in customers
deposits and advances which finance work in progress on
three Power contracts and one Transport contract that
had previously benefited from exceptional
down-payments. Securitisation of existing receivables
fell by 152 million, compared with an increase
of 138 million and 2 million respectively
for the first and second halves of fiscal 2002.
Underlying free cash flow for the first half was
therefore positive by 809 million.

This improvement is mainly due to continuous
action across the ALSTOM Group to improve the cash
profiles of contracts, reduce working capital
requirements and secure a good level of customer
deposits and advances.

Free Cash Flow from operations (net cash from
operating activities, less capital expenditure)

Capital expenditure in the first half, net of
proceeds from minor disposals of property, plant and
equipment, was 160 million, compared with
236 million and 196 million for the first
and second halves respectively of fiscal 2002.

Free cash flow from operations in the first
half was negative by 77 million, compared with a
negative 474 million and a negative 537
million in the first and second halves respectively of
fiscal 2002.

Summary Cash Flow Indicators

• Restoring balance sheet: one-off
  proceeds

Restore Value target is to generate one-off
proceeds of 2.1 billion by March 2003 from real
estate sales, non-core disposals and a capital
increase.

Of
the 2.1 billion of one-off proceeds targeted in
March 2002, 667 million has already been
realised through the capital increase (617
million) in July and the disposal of our activities in
South Africa (50 million) in September.

Progress has been made on the sale and
leaseback of real estate. We received two offers for
the whole portfolio, which met our cash target but were
not on acceptable economic terms. We therefore decided
to divide the process into several separate
transactions. The portfolio has been reduced from 70
sites to 55 sites and the estimated proceeds revised
from 750 million to 600 million.
Negotiations are in progress and we now expect to
realise total proceeds of approximately 600
million, of which we expect to receive approximately
400 million by March 2003.

We
have received firm offers for several non-core
businesses. Active sales negotiations are underway
based on the offers received. We expect the total
proceeds realised from non-core business disposals to
be approximately 1,000 million before the end of
March 2003, compared with our initial estimate of
900 million.

Given the momentum to date, we remain in a
position to generate one-off proceeds of 2.1
billion by March 2003, as announced in
Restore Value.

• Restoring balance sheet: net debt and
  gearing ratio

Restore Value target is to achieve a gearing
ratio of 20% by March 2005, with no further
securitisation of future receivables.

Net
debt at 30 September 2002 fell by 142 million,
significantly reducing gearing from 112% to 84%. This
follows the reclassification as debt of 205
million preferred shares, whose contractual redemption
at 31
^st March 2006 was triggered by the capital
increase in July. Without this reclassification, net
debt at 30 September 2002 would have fallen by
347 million and the gearing ratio would have
been 75%.

Due
to the continuing improvement in free cash flow,
coupled with one-off proceeds, we are confident of
reaching the targeted gearing of 20% in March 2005 and
to close all future receivables programmes.

Sector Reviews

• Power

Order intake, up 19% on the previous period,
was very encouraging in spite of a generally difficult
market environment, especially in gas turbines.

The
gas turbine downturn was compensated for by excellent,
double-digit, growth in services and environment,
mainly in the US and Europe. Even in the United States,
the most severely affected of the worlds power
markets, our overall order intake topped 1.25
billion, principally in service, upgrade and retrofit
of our substantial installed base, providing further
evidence of the resilience of our portfolio.

Update on GT 24/26 Gas Turbine Issues

The
improvement programme is on schedule. We have now
satisfied contract requirements or negotiated
commercial settlements on over 70% of the units. We
have still to conclude settlements in respect of 22
units (including 7 units which are the subject of
litigation).

We
have established provisions to cover the anticipated
costs of making modifications to the turbines and for
the additional expenditure not already covered within
contract costs that we expect to incur in reaching
settlements with our customers, including the costs of
fulfilling contractual conditions.

Sales of GT 24/26 gas turbines (430
million) represented approximately 7% of Powers
sales during the first half of fiscal 2003, compared
with 14% during the first half of fiscal 2002. Sales of
GT 24/26 gas turbines do not contribute to the gross
margin, which means that Powers operating margin
will automatically improve with the phasing out of
these contracts.

T&D

T&D benefited from continuing growth in
Transmission, reflecting ALSTOMs focus on the
expanding systems and solutions market, but faced a
more difficult market in Distribution. Demand in
Western Europe was stable, but declined in the USA
mainly due to the energy management market. Despite
increased pressure on prices and adverse exchange
rates, overall orders were broadly in line with the
same period last year and sales increased.

• Transport

During the first half of fiscal 2003 the rail
market continued to experience sustained growth. In
Europe this is being driven by a recovery in
expenditure after the low investment of the 1990s and
the urgent need to replace ageing infrastructure,
coupled with increasing ridership, technology-led
advances in signalling and the growing trend towards
outsourcing of service. In the USA it reflects the
continuing substantial investment in urban
transportation.

UK Regional Trains

By
the end of September 2002, only 6 of the 119 trains
outstanding under our UK regional trains contracts had
yet to be delivered, compared with 29 at 31 March 2002.
These 6 trains will be delivered by the end of the
current calendar year.

• Marine

The
recovery of the cruise holiday market in the wake of 11
September is now well established. However, the
cruise-ship market has been impacted since April 2002
by the weakness of the US dollar against the euro, as
ship-owners (whose reference currency is the dollar)
postpone orders. The market has also stalled in the
last few months pending the outcome of takeover and
merger discussions involving the three major cruise
ship owners, which together account for the bulk of
new-build orders. Notwithstanding these issues, we
continue to see strong underlying interest in
cruise-ships.

Geographical
Analysis

The
geographical distribution of orders and sales was
broadly unchanged against the first half of fiscal
2002.

Vendor Financing

In
the past we provided certain financial assistance to
institutions which finance some of our customers and
also, in some cases, directly to our customers for
their purchases of our products. We refer to this
financial assistance as 'vendor financing'. It is no
longer our policy to provide such vendor financing
guarantees.

Vendor financing totalled 1,381
million at 30 September 2002, compared with
1,493 million at 31 March 2002.

A
detailed analysis of the Companys vendor
financing exposure and related provisions can be found
in note 16 of the Consolidated Financial Statements and
in the full text of the MD&A.

Contract Guarantees

External contract guarantees totalled
10,289 million at 30 September 2002, compared
with 11,535 million at 31 March 2002 and
10,825 million at 30 September 2001. They have
an average maturity of three years.

We
have observed a general contraction of the market for
such guarantees as some banks and insurance companies
are reducing their capacity in this activity. This
contraction has the effect of reducing our
customers expectations, which explains the
decrease in our accounts since September 2002 despite
an increase in orders received. We are examining with
our core bankers ways to ensure that alternative
bonding capacity is available for our
requirements.

A
comprehensive summary of ALSTOMs outstanding
contract guarantees can be found in note 15a of the
Consolidated Financial Statements and in the full text
of the MD&A.

Asbestos

The Company believes it has no
material liability in respect of current asbestos
personal injury cases. (See notes 6 & 17 of the
Consolidated Financial Statements and the full text
of the MD&A).

In
France such liabilities are covered by the social
security and publicly-funded systems. In the USA, the
businesses purchased from ABB are covered by an ABB
indemnity. For our other US businesses, we believe our
current liability is not material and we consider we
have good defences to the cases filed against us. We
have made no compensation payments.

Outlook

The
resilience of our first-half performance, in a
challenging economic environment, is underlined by the
15 per cent growth in our order intake. As a result, we
expect orders received and sales for the full year to
be broadly in line with those of last year. The
positive dynamics of the transport, power retrofit,
customer service and transmission markets should offset
less favourable gas turbine, power plant, distribution
and marine markets.

Improved profitability was delivered across
all our sectors in the first half and reflects not only
the improved margins in our order intake, as our
business mix improves, but also the benefits that are
beginning to flow from restructuring and overhead
reduction. This gives us confidence in delivering a
margin close to 5% in March 2003 and puts us well on
track to achieving 6% by March 2005.

Despite a generally much more difficult
economic environment, we remain confident of achieving
the key objectives outlined in the
Restore Value plan.

* * *

Forward-Looking Statements

This
Press Release contains, and other written or oral
reports and communications of ALSTOM may from time to
time contain, forward-looking statements, within the
meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities Exchange Act of 1934.
Examples of such forward-looking statements include,
but are not limited to (i) projections or expectations
of sales, income, operating margins, dividends,
provisions, cash flow, debt or other financial items or
ratios, (ii) statements of plans, objectives or goals
of ALSTOM or its management, (iii) statements of future
product or economic performance, and (iv) statements of
assumptions underlying such statements. Words such as
'believes,' 'anticipates,' 'expects,' 'intends,'
'aims,' 'plans' and 'will' and similar expressions are
intended to identify forward-looking statements but are
not the exclusive means of identifying such statements.
By their very nature, forward-looking statements
involve inherent risks and uncertainties that the
forecasts, projections and other forward-looking
statements will not be achieved. Such statements are
based on managements current plans and
expectations and are subject to a number of important
factors that could cause actual results to differ
materially from the plans, objectives and expectations
expressed in such forward-looking statements. These
factors include (i) the inherent difficulty of
forecasting future market conditions, level of
infrastructure spending, GDP growth generally, interest
rates and exchange rates; (ii) the effects of, and
changes in, laws, regulations, governmental policy,
taxation or accounting standards or practices; (iii)
the effects of competition in the product markets and
geographic areas in which ALSTOM operates; (iv) the
ability to increase market share and control costs
while maintaining high quality products and services;
(v) the timely development of new products and
services; (vi) the inherent technical complexity of
many of ALSTOMs products and technologies and
the ability to resolve effectively and at reasonable
cost technical problems that inevitably arise,
including in particular the problems encountered with
the GT24/26 gas turbines; (vii) risks inherent in large
contracts that comprise a substantial portion of
ALSTOMs business; (viii) the effects of
acquisitions and disposals; (ix) the ability to invest
in successfully, and compete at the leading edge of,
technology developments across all of ALSTOMs
Sectors; (x) the availability of adequate cash flow
from operations or other sources of liquidity to
achieve managements objectives or goals,
including our goal of reducing indebtedness; (xi)
timing of completion of the actions focused on cash
generation contemplated in ALSTOMs 'Restore
Value' programme; (xii) the inherent difficulty in
estimating future charter or sale prices of any
relevant cruise-ship in any appraisal of the exposure
in respect of the Renaissance matter; (xiii) the
inherent difficulty in estimating ALSTOMs
exposure to vendor financing which may notably be
affected by customers payment default; (xiv) the
unusual level of uncertainty at this time regarding the
world economy in general; and (xv) ALSTOMs
success at adjusting to and managing the risks of the
foregoing. ALSTOM cautions that the foregoing list of
important factors is not exhaustive; when relying on
forward-looking statements to make decisions with
respect to ALSTOM, investors and others should
carefully consider the foregoing factors and other
uncertainties and events, as well as other factors
described in other documents ALSTOM files from time to
time with the Commission des Opérations de Bourse
and with the Securities and Exchange Commission,
including reports on Form 6-K. Forward-looking
statements speak only as of the date on which they are
made, and ALSTOM undertakes no obligation to update or
revise any of them, whether as a result of new
information, future events or otherwise.