A new modeling approach for HEN retrofit design is discussed. The design task consists of a search for topology changes, called the diagnostic stage, followed by an evaluation stage and a cost optimization stage. Promising modifications are selected from the diagnosis stage and assessed in terms of the impacts on implementation cost, operability, and safety. The options deemed impractical are removed and the remaining ones are optimized together with the existing HEN to give the final HEN retrofit design. The new approach combines mathematical optimization techniques with a better understanding of the retrofit problem, based on thermodynamic analysis and practical engineering, to produce a systematic procedure capable of efficiently solving industrial-size retrofit problems. The network pinch concept provides new insights to the HEN retrofit problem and plays an important role in selecting promising modifications, forming the foundation of the new method. This concept, when applied to mathematical formulation, significantly simplified the mathematical models while maintaining good quality of solutions. This approach allows the design tasks to be automated with user interactions.