Foster Wheeler Wins UAE Contract - Analyst Blog

Global Power Group, a subsidiary of Foster Wheeler AG (FWLT), won a contract to provide solar steam generator system to a plant located in Abu Dhabi, United Arab Emirates (UAE). The company will be designing and supplying the solar steam generator system for the plant and will also provide interconnecting piping, valves, primary I&C, steel structures, and site advisory services.

The solar steam generator system includes preheaters, drum-type evaporators, and superheaters. A concentrated parabolic trough technology is used to incorporate the device into a solar plant and have an installed power output capacity of 100 MWe (gross megawatt electric).

Foster Wheeler included the contract in its third-quarter 2010 bookings. However, the terms of the deal were not disclosed. Equipment delivery is expected to be made in the third quarter of 2011.

With rising need of using a sustainable means of energy production, the solar plant in UAE represents a significant development in the developing countries. Energy production from sun can be easily converted into electrical energy to reduce energy costs and supply electricity in remote areas, where infrastructure is limited.

Foster Wheeleroperates through two business groups: the Global Engineering and Construction Group (Global E&C Group) and the Global Power Group. Foster continues to be successful in booking contracts of varying types and sizes in key end markets. The company's success in this regard is a reflection of its technical expertise, its long-term relationships with clients, and its selective approach in pursuit of new prospects.

However, the company is subject to various environmental laws and regulations in the countries in which it operates. If it fails to comply with these laws and regulations, it may incur significant costs and penalties that could adversely hurt its business, financial condition, results of operations and cash flows.

Its business may be adversely affected by regional, national and/or global requirements to significantly limit or reduce greenhouse gas emissions in future. Major competitors of Foster Wheeler are Fluor Corporation (FLR) and Jacobs Engineering Group Inc. (JEC).

Foster Wheeler AG is based in Zug Switzerland, but its operational headquarters are in Clinton, New Jersey. The majority of Foster's revenues and new businesses originate from outside the United States. The company serves the following industries: Oil and Gas; Oil Refining; Chemical & Petrochemical; Pharmaceutical; Environmental; Power Generation; and Power Plant Operation and Maintenance.

We currently maintain our Neutral recommendation on Foster Wheeler. For the short term, the company has a Zacks #4 Rank (Sell).