Stock values of Kenetech Corp., parent of Kenetech Windpower, plummeted and its bond ratings were downgraded to triple C this week as executives struggled to rescue the company from its financial troubles.

On December 4, Standard & Poor's Corp. lowered its rating on Kenetech senior secured debt from "single B-minus" to "triple C" and its preferred stock to "single C" from "triple C". On December 6, the value of Kenetech's common stock dropped 30% to close at $1.75/share. The company reported net income of only $773,000 through September 30 of this year and reported $220 million of rated outstanding debt and preferred stock.

As the WEEKLY went to press, an eight-member team of Kenetech executives was meeting with the company's board of directors to hammer out a plan--to be announced this week--for the company's future. A new corporate president, Richard Saunders, has been appointed and is reporting directly to the company's board, effectively removing chief executive officer Gerry Alderson from direct management of operations. With a new decision-making team in place, Kenetech hopes to pull out of its current downward spiral.

News organizations and wind industry insiders around the country are speculating about Kenetech's financial future, noting the company's credit and cash flow problems. However, over the last several months, Kenetech spokespeople have remained optimistic that the firm would weather its current troubles and resume successful operations. Investment analysts have expressed similar views, noting that the company has a number of options at this point and its outlook is not entirely gloomy.


In comments filed with the Minnesota Public Utilities Commission (PUC) December 1, the Izaak Walton League of America urged the PUC to require Northern States Power Co. (NSP) to take advantage of the low cost wind resources available in the region by developing an additional 400 MW of wind power. The League submitted the comments in response to NSP's 15-year resource plan.

The League also asked the PUC to refuse NSP's request to slash its energy efficiency goals. NSP's resource plan, filed with the PUC in July, proposes to cut energy efficiency programs by over 50%.

The Leauge's analysis of NSP's plan argues that wind power is NSP's cheapest future resource. Compromise legislation regarding storage of nuclear waste at NSP's Prairie Island nuclear plant requires NSP to invest in an additional 400 MW of wind--on top of the 425 MW required to allow the waste storage-- if wind power is found to be the utility's cheapest option (see WIND ENERGY WEEKLY #597, May 23, 1994).

"NSP's own analysis shows no difference in costs between a plan that includes more wind and one that relies exclusively on fossil fuels," said William Grant, director of the League's Midwest Office. "NSP ignores the value of wind in terms of its guaranteed zero fuels cost and zero risk of costs from future air pollution, regulation, or taxation, which make wind power the most risk-averse investment in NSP's portfolio and the best bet for NSP's customers."

Grant called NSP's proposed slash in efficiency programs "clearly unacceptable for a company that is anticipating the need to build over 3,000 MW of new power plant capacity in the next decade, especially in light of Minnesotas strong statutory preference to get everything we can from cost-effective energy efficiency first." NSP's analysis concludes that customers are not as eager to invest in energy efficiency as once thought.


The investment advisory firm Standard & Poor's (S&P) said November 27 that electric utility revenues will drop by six percent to 16 percent if retail wheeling, under which retail customers can pick and choose among electricity suppliers, becomes a reality.

S&P examined two scenarios, according to Knight-Ridder Financial News, and found that in the more pessimistic case, utility industry revenues would be reduced by $26 billion. In a less severe case, with regulators permitting greater recovery of stranded investments, the loss in revenues would be $10 billion.

Utilities that would be hit hardest, S&P said, are those with expensive generating plants and large numbers of industrial customers. They include Cleveland Electric Illuminating Co., PECO Energy Co. (Penn.), Toledo Edison, Public Service Electric & Gas (N.J.), Southern California Edison, United Illuminating, Detroit Edison, Ohio Edison, Tucson Electric Power, and Long Island Lighting Co.

Those viewed as least vulnerable include Idaho Power, Kentucky Utilities, Empire District Electric, Puget Sound Power & Light, PacifiCorp, Portland General Electric, Public Service of Oklahoma, Washington Water Power, PSI Energy, and Duke Power.

S&P sees a national spot market for electric power developing, with greater use of short-term contracts and with power prices tending to become more uniform across the country after an initial break-in period.

Meanwhile, another study, released December 1, appeared to challenge the conventional wisdom that radical cost-cutting is the means to profitability for utilities. A survey of U.S. and Canadian utilities by Mercer Management Consulting of Boston found that those that focused on growth enjoyed the most favorable stock price valuations.

Gerry Yurkevicz of Mercer, discussing the study's findings, said, "I can't say that reducing costs to become competitive is a bad thing, but the rewards are almost double for the utilities that are profitable growth companies, rather than just cost- cutters." Utilities, he added, need to focus on developing new products and services for customers, and on better execution of long-term business strategies.

In other related news :


A new report from the international panel of experts researching climate change contains "the strongest statements that have ever been made" by scientists, according to Robert Watson, lead U.S. climate negotiator and associate director of the White House Office of Science and Technology Policy (OSTP).

The report was released in Madrid November 30 by the Intergovernmental Panel on Climate Change (IPCC) after arduous drafting sessions in which panel delegates from oil-producing nations sought word-by-word changes in an effort to temper conclusions that might damage the fossil fuel industries, according to press reports.

Recent advances in climate science, panel members said, makes it evident that "human activities, mostly fossil fuel use, land use change, and agriculture" are changing the composition of the earth's atmosphere, and that the climate can be stabilized only if greenhouse gas emissions are reduced "substantially" from 1990 levels. During the next century, the group said, average global temperatures will increase by two to eight degrees Fahrenheit as carbon dioxide concentrations in the atmosphere double.

Voluntary initiatives proposed by the Clinton Administration as a first step toward cutting U.S. emissions, Watson said, have stalled because of Congressional unwillingness to provide funding. While the U.S. has joined with more than 80 nations in a treaty pledging to freeze emissions at 1990 levels by the year 2000, several major industrial nations including the U.S. now appear unlikely to meet that goal.

In other climate news, the IPCC's Working Group II has released a new summary report for policymakers on "Impacts, Adaptations, and Mitigation Options" that argues that "significant reductions [in emissions] . . . are technically possible and can be economically feasible." According to Global Change magazine, the report says reductions can be achieved in part by shifting toward a less carbon-intensive mix of fuels.

"Major options," the article said, "include introducing more efficient generation of electricity, switching from high- to low- carbon fuels (from coal to gas, for example), limiting CO2 and methane emissions from fossil fuel cycles (such as cutting emissions of natural gas from pipelines), and shifting from fossil fuels to nuclear or renewable energy."