Two major difficulties with finding an optimal solution to the heat exchanger network synthesis problems are the large solutionspace and the uncertainty in the formulation of the annual cost function. In this work, to overcome the first difficulty a problem reduction technique was developed. The second difficulty was also removed by dividing the annual cost function into four cost items. The optimal network structure for minimum equipment cost is then obtained by repeatedly applying the problem reduction technique and the heuristics in turn. The efficiency and the superiority of the method is demonstrated by examining two selected example problems.