UPDATE 1-Bechtel COO sees 20-25 pct growth in 2010 bookings

* Margins under pressure in "cutthroat" environment

* Project revenue backlog down 5 pct to $82.1 bln (Adds executive quotes, background, byline)

By Braden Reddall

SAN FRANCISCO, March 31 (Reuters) - Bechtel, the largest U.S. engineering company, expects new bookings in 2010 to grow by 20 to 25 percent from their depressed level last year, Chief Operating Officer Bill Dudley said on Wednesday.

In an "extremely challenging" 2009, the company said new bookings plunged to $20.3 billion from a record $35 billion the previous year. Revenue fell 2 percent to $30.8 billion, Bechtel said in its 2009 annual report released on Wednesday, and Dudley expects 2010 revenue to remain around that level.

The privately held company, which does not report profits, said its backlog of project revenue declined 5 percent to $82.1 billion in 2009.

Dudley said profit margins had taken a bit of a hit, with clients believing that declining prices for many materials should be reflected in what Bechtel charges them.

"It's a tough time in the market for us. Our margins are down slightly, but I wouldn't say they've changed significantly," Dudley said in a phone interview with Reuters. "With our margins being so low, there's not too much room to move."

In its annual report, Bechtel said the global recession started to affect its industry at the end of 2008, forcing clients to rein in spending and leading to the postponement of some projects and a slowdown of many already in progress. Bechtel also cited a "cutthroat environment" in bidding.

As an example, Dudley noted Bechtel lost out to Spain's Sacyr Vallehermoso (SVO.MC) and Italy's Impregilo (IPGI.MI) for the Panama Canal expansion. While he would have liked to get the job, he did not regret letting them win. [ID:nN08387395]

"I don't look at that as 'I wish I'd sharpened my pencil' -- we couldn't have sharpened it that sharp," he said with a laugh. "It wouldn't have held a point."

Bechtel, which manages projects from nuclear reactors and oil refineries to government services and transport, remains concerned about weakened U.S. power demand and growing government deficits around the world.

"All those things worry us in terms of what's that going to mean for future work for us," Dudley said. "But fortunately for us, so far, we have selected prospects to go after that look to be moving forward, so we're fairly bullish at the moment."

He added that he felt better about Bechtel's outlook now than he did at the start of the year.

The San Francisco-based company competes with companies such as Fluor Corp (FLR.N), Jacobs Engineering Group Inc (JEC.N), URS Corp (URS.N) and AECOM (ACM.N).

Like Bechtel, those companies in general are bracing themselves for more challenges in 2010. [ID:nN25207770]

Yet despite the recession, Bechtel was hiring last year, reporting 49,000 employees in the annual report, or 5,000 more than a year before. Dudley said most of the new hires were hourly "craft" workers attached to its projects.

Dudley said Bechtel was doing early engineering work on four liquefied natural gas (LNG) projects in Australia, which had not yet been added to its backlog.

He was upbeat about prospects for new shipping ports and said Bechtel was also building on its communications infrastructure background to expand in power transmission construction, which would "have to happen" as the U.S. power mix changes to more natural gas and renewables.

Due to the anticipated growth in shale gas in the years ahead, he said there would be no more U.S. LNG terminals built, arguing there were probably too many already. Bechtel's refinery business would also continue to decline, he added. (Reporting by Braden Reddall; Editing by Tim Dobbyn, Gary Hill)