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LETTER TO OURSHAREHOLDERSTHE BEST IS YETTO COME2005 was a very good year. The fundamentals are in place for 2006 to be aneven better year.With a much stronger capital structure, we have been increasingly able to focuson doing what we do best: safely delivering cost-effective, technically advancedequipment, facilities and services that meet or exceed our clients’ expectations.We are managing the challenges of a buoyant market - intelligently addingcapacity and making the best use of our global network of skilled resources.A strong marketAdditionally, the market outlook is positive, and I believe that we are very wellpositioned to capitalize on all of these opportunities. Most of the markets weserve are either in, or are entering, an investment phase. Our clients’ oil and gasspending continues to grow and investment in petrochemicals remains strong.Many refiners are planning investments focused on expanding capacity,upgrading lower-value products to higher-value products, such as transportationfuels, or investing to enable their refineries to process lower-quality, cheapercrudes. Our leading delayed coking technology is ideally suited to achieving thetwo latter objectives.With high oil and gas prices, the economics of solid-fuel power generation haveimproved significantly. We believe we have a strong competitive position insolid-fuel power generation. Our leading-edge circulating fluidized-bedcombustion technology is proven at utility scale, and also offers our industrialclients the opportunity to burn cheaper opportunity fuels, such as biomass andpetroleum coke, cleanly and efficiently.A significantly stronger companyGoing into 2006, we are in an even stronger position than we were a year ago,in terms of our markets, our backlog, our client base, our operations, and mostimportantly, the strength and motivation of our team.I have never been more optimistic about the future of Foster Wheeler.Raymond J. MilchovichChairman, President & Chief Executive Officer11FW 2005

“We have optimized our global resource baseto be flexible and responsive to our clients”Courtesy: ORYX GTL12FW 2005

GLOBAL ENGINEERING &CONSTRUCTION GROUPA STRONG OUTLOOKPositive expectationsGlobal economic growth drives the demand for ourclients’ products, which in turn drives our clients’investment in new or expanded production facilities.With global economic growth expected to remainstrong throughout 2006 and into 2007, theinvestment outlook for oil and gas, petrochemicalsand refining gives us confidence that 2006 should beanother good year for our Global E&C business.“It’s hard to remember a time when so many ofour markets were in such a strong investmentphase all at the same time. Investment inupstream oil and gas, LNG and petrochemicalscontinues to be strong and, during 2005,refining has come ‘back into fashion’ too.“We have had a very successful year, with verystrong new order bookings, and projects safelyand successfully completed. Having united allfour of our engineering and constructionoperating units - Continental Europe, UnitedKingdom, Asia Pacific and North America under one leader, we have optimized our globalresource base to be flexible and responsiveto our clients, most of whom operate on aworldwide scale.”Umberto della SalaChief Executive Officer,Global Engineering & Construction (E&C) GroupWe are well-placed to capitalize on theseopportunities. Many of these projects will be largeand technically complex, ideally suited to our skillsand expertise.11911110395782002 2010 2015 2020 2025WORLD OIL CONSUMPTIONMillion Barrels Per DaySource: U.S. Department of Energy,Energy Information Administration13FW 2005

GLOBAL ENGINEERING &CONSTRUCTION GROUPBuilding relationshipsOur technical experts are working with a numberof oil and gas, chemical and refining clients whoare currently evaluating their investment options.Building close working relationships with our clientsat the very early stages of a project - helping themwith feasibility studies, or selecting the right processconfigurations and technologies - positions us wellfor the next stages of a project’s development: thefront-end engineering design (FEED) and thenthe engineering, procurement and construction(EPC) phase.We have been very successful in 2005 in impressingour clients at these early stages and then successfullysecuring the EPC phase too.Meeting growing oil & gas demandIncreasing demand for oil and gas, decliningoutput from existing fields and high oil and gasprices are encouraging producers to invest in newor expanded production facilities, including oil andgas processing, liquefied natural gas (LNG) andgas-to-liquids facilities.Our in-depth technical expertise in oil and gaspositions us well for the FEED phase of majordevelopments. Securing the FEED phase thenpositions us for follow-on EPC work, ourcore business.14FW 2005For example, having successfully completed theFEED for a major upgrade of ENOC ProcessingCompany’s Jebel Ali gas condensate refineryin Dubai, we have now been awarded theengineering, procurement and constructionmanagement contract.Oil and gas projects are often large and technicallycomplex - ideally suited to our skills and expertise.Saudi Aramco called us “the obvious choice” forthe FEED for its Khurais project in Saudi Arabia,one of the world’s most significant oil projects,which will increase light crude production by1.2 million barrels per day.Success in LNGWe are one of a small group of contractors whohave designed and built facilities for liquefyingnatural gas.We successfully completed the new Qalhat LNGplant in Oman in 2005, with our joint venturepartners, and are leading a joint venture carrying outthe engineering, procurement and constructionmanagement for the addition of a fifth LNGprocessing train at Woodside’s Karratha complex inAustralia. This will be the first onshore LNG plantto be designed and built in modular form.Additionally we are executing the FEED and EPCphases of a debottlenecking project to increase theproduction capacity of PETRONAS’ MLNG DuaLNG liquefaction plant in Malaysia.

Courtesy: Woodside Energy Ltd.“Foster Wheeler was the obvious choice for this work based on itsprevious experience on the Haradh and Qatif projects and its ability tomeet the fast-track schedule with the required quality of personnel.”Salman Al-Aradi, Manager, Khurais Producing Facilities Projects Dept., Saudi Aramco15FW 2005

“We have been very pleased with the quality of the front-end designcarried out by Foster Wheeler and the commitment shown by their team.We selected them for the EPC phase because of the quality of their teamand their EPC and refining track record.”Hussain Sultan, Group Chief Executive, ENOC, & Board Member, EPCL16FW 2005

GLOBAL ENGINEERING &CONSTRUCTION GROUPA new dawn for refiningLeading upgrading technologyThe global refining system is stretched: it isstruggling to meet the demand for light products,such as transportation fuels, and is producingheavier products, such as fuel oil, for which demandis declining. Additionally, many refiners are planningsignificant expansion projects and some are evenplanning to build new refineries.We have our own leading SYDECSM delayedcoking process technology and have supplied thistechnology for more than 50 delayed coking plantsin 15 countries. Together with our technical knowhow and experience in designing and constructingdelayed cokers, this places us in an excellentcompetitive position to address this market.This supply/demand imbalance has widened pricedifferentials between heavier, higher-sulfur crudesand lighter, sweeter crudes, and between light andheavy products.We are working with a number of clients on cokerprojects, some at a very early stage, while othershave moved into the FEED or EPC phases. Forexample, we are working on the FEED for BP’snew coker at its Castellón refinery in Spain.Widening price differentials have significantlyimproved the economics of some refineryinvestments: upgrading refinery residue to highervalue transportation fuels, or modifying refineriesto process cheaper, heavier crudes. We believe manyrefiners will decide to make such investmentsin 2006.The combination of our track record and verystrong technology offering positions us well tocapitalize on these upgrading opportunities. Weoffer a number of upgrading technologies, the keytechnology being delayed coking.In Chile, having successfully completed thefeasibility study and FEED, we are now the EPCcontractor for the new coker complex at stateowned oil company ENAP’s Aconcagua Refinery.Clean fuelsWe continue to work with clients who are movingtowards producing cleaner transportation fuels tomeet increasingly stringent product qualitylegislation in locations including Bahrain, Greece,Italy, Lithuania, and New Zealand. Some ofthese clean fuels projects use our own hydrogenproduction technology and fired heaters designedand supplied by us too.17FW 2005

GLOBAL ENGINEERING &CONSTRUCTION GROUPA key role in chemicalsThe pharma sectorWe have developed a very strong position in thissector, particularly in the Middle East and Asia. Weare working on a number of major investments forclients including PETRORabigh, a Saudi Aramcoand Sumitomo joint venture, SABIC and its affiliateEastern Petrochemicals Company (SHARQ),Sipchem, Borouge, Lucite International, Shell,ExxonMobil and The Kuwait Olefins Company.In the pharmaceutical sector, client investment hasfocused on plant upgrading and improvementprojects rather than major new production facilities.We have secured work in these areas in 2005, andthere are now indications of some renewed interestin more significant plant investment in the keypharmaceutical investment hubs - Singapore,Ireland and Puerto Rico.We are also successfully converting awards for thefront-end phases of projects into wins for the EPCphase. For example, following our earlier FEEDwin, we have now been selected as the EPCcontractor for the offsites and utilities for the majorexpansion of SHARQ’s petrochemical facility inSaudi Arabia. We prepared the FEED for the entireexpansion and we are also providing overallmanagement for the expansion program.A powerful combinationIn Singapore, we are working on the basicengineering design for a groundbreaking newchemical plant for Lucite International, the first of aseries of similar plants planned by our client. Lucitehas stated that it plans to extend this phase throughto the implementation phase, with our appointmentas EPC contractor.18FW 2005We work together with our Global Power Group onselected power opportunities, where our specializedengineering and construction skills and our GlobalPower Group’s leading-edge boilers deliver awinning combination.For example, we are the EPC contractor for amajor expansion at Lomellina Energia’s waste-toenergy plant in Italy. The existing plant, the firstinstallation of its kind in Europe, is an integratedfacility for recyclable materials recovery andrefuse-derived fuel production, composting andelectricity generation.We designed, built, started up and operate, withpartners, the original plant, which has been incommercial operation since 2000. The plantincludes a Foster Wheeler circulating fluidizedbed boiler, selected because of its excellentenvironmental performance.

“Foster Wheeler is one of the world’s biggest and most respectedengineering and construction contractors. Their long experience of workingin Singapore, combined with strong operations in both the UK and locally inSingapore, make them the ideal partner for Lucite International in thisgroundbreaking new plant we are building.”Neil Sayers, VP for Manufacturing, Technology & SHE, Lucite International UK Limited19FW 2005

“We are strongly positioned to deliver state-of-the-art,cost-effective products and services that meetthe needs of our customers”20FW 2005

GLOBAL POWER GROUPA BRIGHT FUTUREA positive outlookThe demand for power can be directly linked toa region’s economic prosperity and world netelectricity consumption is expected to nearly doubleover the next two decades.Most industrialized countries have coal reserves and,worldwide, the price of coal has remained relativelystable over the past two years, at a time when oil andgas prices have risen sharply.“Interest in coal as a primary fuel choice forglobal power generation is increasingsignificantly as a result of escalating andvolatile oil and gas prices, and becausemany countries are increasingly concernedabout the security of their energy supply.Additionally, continued technologicaladvances have improved both the efficiencyand environmental performance of coalfired power generation.“Foster Wheeler has been at the forefrontof these advances and I am optimisticabout the business outlook in solid-fuelpower generation. We are stronglypositioned to capture these significantgrowth opportunities by delivering state-ofthe-art and cost-effective products andservices to meet the new powergeneration, repowering and service needsof our industrial and utility customers.”Bernard H. CherryChief Executive Officer, Global Power GroupToday, coal is the leading source for producing theworld’s electricity, accounting for over 40 percent ofthe power generated in 2003. In fact, in major targetmarkets such as the United States and Europe, coalaccounts for more than half of the electricitygenerated. In the long term, coal is expected tomaintain this dominant and important role.26,01823,67721,40018,87514,2752002 2010 2015 2020 2025WORLD NET ELECTRICITYCONSUMPTIONBillion Kilowatt HoursSource: U.S. Department of Energy,Energy Information Administration21FW 2005

GLOBAL POWER GROUPOptimizing our businessDuring 2004, we consolidated our power businessesinto one Global Power Group in order to realize thefull potential of our talented power teams andmanufacturing facilities in the U.S., Europe, andAsia. In 2005, we have seen promising results fromthis reorganization, with projects completed whichmeet or exceed our clients’ expectations, keystrategic wins and a high level of repeat business.To support our growing business, we are almostdoubling production capacity at our highlysuccessful boiler pressure parts manufacturingfacility at Xinhui, China, a Foster Wheeler majorityowned joint venture. This state-of-the-art facilityhas been producing boiler pressure parts since it wascompleted in 1997 and has earned a reputation forachieving world-class quality and on-time delivery.This expansion further enhances our ability to offerhighly competitive value-added solutions to ourclients worldwide.Clean and efficient powerIn leading industrialized countries, high oil andgas prices and growing electricity demand arestimulating market growth for large coal-firedpower plants. Increasingly stringent plant emissionlegislation, together with an added focus on thereduction of greenhouse gases, has resulted in amarket preference for supercritical utility boilers.22FW 2005Supercritical boilers operate at higher pressures thanconventional boilers, offering higher efficienciesand, therefore, reduced greenhouse gas and otheremissions. We are actively marketing oursupercritical technology for new-build power plantsand for repowering of existing facilities.A double world-first in PolandWe are a market leader in CFB technology, havingsold more than 250 CFB boilers worldwide.We have received full notice to proceed fromPoludniowy Koncern Energetyczny (PKE), one ofPoland’s largest electricity utilities, for the design,supply and erection of the circulating fluidized-bed(CFB) boiler island for a new 460 megawatt (MW)power plant at Lagisza in southern Poland.This represents a double world-first: the world’slargest CFB boiler and the world’s first supercriticalCFB unit. This marks a further advance in theapplication of our CFB boiler technology to utilityscale power generation. By integrating our provenclean combustion CFB technology with oncethrough supercritical steam technology, we will beproviding our client with a cutting-edge engineeringsolution for the clean and efficient combustion ofsolid fuel.

“As one of the largest utilities in North America, AEP’s continuedconfidence in Foster Wheeler products and services confirms ourreputation as a superior supplier to the global power industry.”Bernard H. Cherry, Chief Executive Officer, Global Power Group23FW 2005

“The diversity of fuels used in electricity generation is of national importance,particularly with oil and gas prices reaching record levels. Like its sister plantat Lough Ree, the new West Offaly plant uses the very latest technology,which is delivering major improvements in efficiency and is moreenvironmentally friendly.”Tadhg O’Donoghue, Chairman, ESB24FW 2005

GLOBAL POWER GROUPOne of the world’scleanest power plantsTests at JEA’s Northside Generating Station inJacksonville, Florida, U.S., have further confirmedthat the facility, which started up in 2001, is one ofthe world's cleanest coal-based power plants.As part of the U.S. DOE’s Clean Coal TechnologyDemonstration Program, two old, inefficient unitsfueled by oil or gas, were retired and replaced bytwo new, state-of-the-art 300 MW Foster WheelerCFB boilers. These are among the largestoperating CFB boilers in the world. This project,winner of Power magazine’s Powerplant of the YearAward in 2002, has demonstrated the excellentenvironmental performance of our utility-scale CFBtechnology on a range of high-sulfur coals, andblends of coal and high-sulfur petroleum coke.Delivering fuel flexibilityWe are also seeing growth in the solid-fuel boilermarket in the industrial sector, again driven by highand volatile oil and gas prices. Industrial CFBboilers allow industrial clients to utilize coal andother lower-cost, difficult-to-burn solid fuels, suchas demolition wood, agricultural by-products, andwaste derived from refuse.2005 saw the completion in Ireland of Lough Reeand West Offaly, two state-of-the-art peat-burningCFB power plants for the Irish state-ownedElectricity Supply Board (ESB). We were theengineering, procurement and constructioncontractor and CFB boiler supplier for both units.The new 150 MWe West Offaly power station is thelargest peat-fired power station in the world.A growing service businessThese results clearly demonstrate that our CFBtechnology can be used at utility scale to offerelectricity producers the flexibility to use a variety ofabundant and lower-cost solid fuels, while cuttingemissions to a fraction of federal limits.Conventional coal-fired boilers require expensiveadd-ons to clean pollutants from flue gases aftercombustion, but CFBs capture most pollutantsinside the boiler during combustion.In the U.S. and Europe, power plant owners arerunning their ageing solid-fuel-fired generation fleetharder because these plants currently have lowergenerating costs than oil- or gas-fired plants.Consequently, owners are now more willing toinvest to keep their older solid-fuel-fired plantsrunning reliably and in compliance with new andmore stringent plant emissions standards.25FW 2005

GLOBAL POWER GROUPThis trend is delivering further opportunities forour growing boiler parts and service business, wherewe have focused strongly on providing flexible,responsive and cost-effective services from ourregional service centers. This regional service centermodel has been very successful for us in the U.S.and we are now starting to replicate this servicemodel successfully in Europe.Leading environmental solutionsOur environmental products and relatedconstruction services business is also benefiting fromincreasingly stringent plant emission legislation,which is driving investment in add-on pollutioncontrol systems, such as low-NOx combustionsystems, selective catalytic reduction (SCR) systems,and fl

Foster Wheeler is a global engineering and construction contractor and power equipment supplier focusing on safely delivering cost-effective, technically advanced services, facilities and equipment that meet or exceed our clients' expectations. 2005 has been an excellent year for Foster Wheeler. A company committed to excellence, we have applied creativity, discipline and a drive to succeed .