Foster Wheeler Gets Contract - Analyst Blog

Foster Wheeler AG (FWLT) has been awarded a contract by Daewoo Engineering Company for engineering, procurement, construction and commissioning of two circulating fluidized-bed (CFB) steam generators for PT Merak Energi in Indonesia. The terms of the agreement are not known. The business will be included in the company’s third quarter 2010 order bookings. The generators are expected to be deployed in the third quarter of 2012.

Foster Wheeler will supply two 60 MW CFB steam generators and provide consulting services for the project. The CFB steam generators will be designed to burn locally available coal.

The company’s Global Engineering & Construction Group operates worldwide and designs, engineers and constructs onshore and offshore upstream oil and gas processing facilities, natural gas liquefaction facilities and receiving terminals, gas-to-liquids facilities, oil refining, chemical and petrochemical, pharmaceutical and biotechnology facilities and related infrastructure, including power generation and distribution facilities, and gasification facilities.

The Global E&C Group provides engineering, project management and construction management services.

We believe that the world demand for energy will continue to grow over the long term and customers will continue to invest in new and upgraded capacities to meet that demand. In that regard, FWLT was successful in booking contracts for front-end engineering work, which frequently precedes significant work for engineering, procurement and construction.

FWLT 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 identifying new prospects where it believes it has significant differentiators.

In the long-term, the company believes that world demand for electrical energy will continue to grow and solid-fuel-fired steam generators will continue to fill a significant portion of this incremental generating capacity. CFB steam generators have the flexibility to burn a variety of fuels other than coal and produce carbon-neutral electricity when fired by biomass. In addition, the company’s steam generators can be designed to incorporate supercritical technology, which can significantly improve efficiency and reduce emissions.

The company’s operations are concentrated in four particular industries (oil & gas, oil refining, chemical/petrochemical and power). It may be adversely impacted by negative economic and other developments in these industries.

Worldwide operations involve risks that may limit or disrupt operations, limit repatriation of cash, increase taxation or otherwise adversely affect its business, financial condition, results of operations and cash flows.

 We currently have a Neutral recommendation on Foster Wheeler.