Bruce W. Wilkinson

Sure.

Operator

And our next question will come from the line of Roger Read with Natexis. Please proceed.

Roger Read - Natexis Bleichroeder

Good morning.

Bruce W. Wilkinson

Good morning Roger.

Roger Read - Natexis Bleichroeder

Bruce, it strikes to me the Offshore Construction piece has been hit pretty hard, so maybe let''s talk about what''s going really well in the power gen business?

Bruce W. Wilkinson

[Inaudible].

Roger Read - Natexis Bleichroeder

The 7% to10% margin, I mean obviously below what you got in the second quarter but above what we kind of thought of historically and I think which you indicated occurred back in the 70s and 80s. But what is about the second quarter that doesn''t appear to be sustainable meaning was if you could just kind of enlighten us a little bit there may be?

Bruce W. Wilkinson

Well, it may be that just the timing on a few things...there is...90 days in the 30-month construction project, a 90-day period will always have some good stuff and sometimes or more good stuff and bad stuff and maybe some of that. But frankly we had been struggling with some of the cost overruns on our construction side in the fossil business and we...I believe that we have got that going in the right direction and the other thing we''ve commented on the last couple of quarters has been the de-risking of that type of works so that…maybe if you go back two years ago, you would have probably 80% or 90% of the construction activity of B&W would have been of a lump sum nature. Today that''s reversed and it''s much more on a cost plus or a fee with target prices and incentives. So, I believe that is...we should...that is sustainable, that should continue. The other thing is we''ve been predicting, of course, that when you deny a reality and you don''t add due capacity in this country and you just run, run, run the most profitable plants the most of the time which is what we''re doing with the coal plants that the parts and service business should be entering a golden era.

Certainly, the service company of B&W had a fabulous quarter. I don''t have a reason to believe that that''s going to change. I don''t know it will all…it will be as fabulous every quarter, but the background conditions are such that it should continue. And finally too, I think it''s settled there, but it''s...BMW enterprise across all of it, including the nuclear part of it, has an enormous amount of different things going through the income statement compared to J. Ray, that''s may be 30 projects, and it''s a game of interest. And it''s a...and it''s the place where we instituted in the nuclear businesses years ago the Six Sigma discipline process and Lean Sigma. I think it''s being applied to the integration of the two businesses and that this quarter we began to reduce some of the unabsorbed operating expense. So, we are looking, I think, better at the system of where and how we do the manufacturing part of B&W, where we have unabsorbed expense and what we can do to change that. So, I think it''s a day in, day out betterment approach that once you have one unified management team overseeing what for many years was two stand-alone separate businesses that had no reason to talk to one another almost, I think we''re beginning to see some of that too.

So, I don''t...I''m not here to tell you that I don''t want to suggest that it was just a one-off quarter that can never happen again. I think it is at the high end of the range, but we used to say six to eight now we said seven to ten, that''s more on the high side than one point. So, I think I have growing confidence that we really are hitting on more and more cylinders in that business.

So, the other thing too, unlike some of the other boiler businesses, we''re not that dependent on big OEM projects. It''s true we need them, we can''t…just not build major projects forever and be sustainable, we don''t think that will happen. But the install base of B&W is enormous, its system out there is huge and the array of parts and service and even just things down to the ash business, some of the tube cleaning business, Diamond Power, we have a lot of things going for us that some of the others do not have.

So, basically I am pretty bullish about how they are performing and I think this margin was really on the high side, but I don''t want to...I think by raising our expectations, it suggests that we think that a lot of it is sustainable.