A fluidized bed reactor in which a heat exchanger is located adjacent the reactor with each enclosing a fluidized bed and sharing a common wall including a plurality of water tubes. A mixture of flue gases and entrained particulate materials from the fluidized bed in the reactor are separated and the separated particulate material is passed to the fluidized bed in the heat exchanger. Coolant is passed in a heat exchange relation with the separated materials in the heat exchanger to remove heat from the materials after which they are passed to the fluidized bed in the reactor. Auxiliary fuel is supplied to the heat exchanger for combustion to control the temperature of the coolant. When the system of the present invention is utilized to generate steam the coolant can be controlled to match the requirements of a steam turbine.