Graham Corporation (AMEX: GHM) announced today that it received a letter of intent, valued at approximately $2 million, for two steam surface condensers to be installed in a new Kuwaiti ethylene production plant. Revenue from this project will be recognized on a percentage-of-completion basis and shipment is presently scheduled for the second fiscal quarter of 2007, which ends September 30, 2006.

Graham was awarded the contract by an Italian engineering, procurement and construction contractor ("EPC") in connection with a joint venture between a major U.S. chemical producer and a Kuwaiti petrochemical company. Ethylene, produced from oil or natural gas, is a building-block chemical used in the production of carpets, apparel, plastics, fibers, tires and numerous other consumer products. As global demand for these types of consumer products continues to rise, demand for ethylene and its by-products also rises. As a result, orders have continued to increase for Graham's custom designed, quality equipment for both new ethylene production plants and existing petrochemical plant upgrades, particularly in the Middle East and Asia.

Bill Johnson, President and CEO of Graham, commented, "Global ethylene demand is forecast to increase 5 to 6% per annum over the next 5 years, and some of the world's largest petrochemical plants are currently being developed in the Middle East to fill the capacity need. The Graham brand is well-known and respected in the Middle East, and we have a strong history of successfully working with EPCs on projects in this region. In the past several years, we have won a number of contracts for petrochemical plants in this part of the world."