UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the thirteen weeks ended March 29, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-53132
KENETECH CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-3009803
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
500 Sansome Street, Suite 300
San Francisco, California 94111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415)
398-3825
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
On April 30, 1997, there were 36,829,618 shares of the issuer's Common
Stock, $.0001 par value outstanding.
Explanatory Note
On May 13, 1997, KENETECH Corporation filed its Quarterly Report on Form
10-Q for the thirteen weeks ended March 29, 1997 ("First Quarter 10-Q"),
with the Securities and Exchange Commission (the "Commission").
KENETECH Corporation is now filing with the Commission its amended
Quarterly Report on Form 10-Q/A. The sole purpose for filing the amended
Quarterly Report is to correct a typographical error in the last sentence
under the heading "Status" on page 22 of the First Quarter 10-Q. The
typographical error consisted of the omission of three words from the
above-referenced sentence.
2
<PAGE>
PART I - FINANCIAL INFORMATION
Part I
Item 1. Financial Statements.
KENETECH Corporation Consolidated Financial Statements Page
Consolidated Statements of Operations for the
thirteen weeks ended March 29, 1997 and March 30, 1996 4
Consolidated Balance Sheets, March 29, 1997 and
December 31, 1996 5
Consolidated Statement of Stockholders' Deficiency for
the thirteen weeks ended March 29, 1997 6
Consolidated Statements of Cash Flows for the thirteen
weeks ended March 29, 1997 and March 30, 1996 7
Notes to Consolidated Financial Statements 8-17
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 18-22
Part II
Item 1. Legal Proceedings. 23
Item 3. Defaults Upon Senior Securities. 23
3
<PAGE>
KENETECH CORPORATION
--------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
for the thirteen weeks ended March 29, 1997 and March 30, 1996
(unaudited, in thousands, except per share amounts)
March 29, March 30,
1997 1996
--------- ---------
Revenues:
Construction services ............................ $ 10,151 $ 10,895
Energy sales ..................................... 1,342 4,755
Maintenance, management fees and other ........... 487 7,270
Windplant sales .................................. -- 3,383
Energy management services ....................... -- 738
Interest on partnership notes and funds
in escrow ....................................... -- 668
-------- --------
Total revenues ................................. 11,980 27,709
Costs of revenues:
Construction services ............................ 9,970 9,309
Energy plant operations .......................... 1,715 14,473
Windplant sales .................................. -- 3,344
Energy management services ....................... -- 186
--------- ---------
Total costs of revenues ........................ 11,685 27,312
Gross margin ....................................... 295 397
Project development and marketing expenses ......... 21 1,982
Engineering expenses ............................... -- 2,602
General and administrative expenses ................ 5,686 7,117
--------- ---------
Loss from operations ............................... (5,412) (11,304)
Interest income .................................... 208 475
Interest expense ................................... (4,749) (5,734)
Equity loss of unconsolidated affiliates ........... (5) (187)
Gain on disposition of subsidiaries and assets ..... 52 --
--------- ---------
Loss before taxes .................................. (9,906) (16,750)
Income tax benefit ................................. -- --
--------- ---------
Net loss ..................................... $ (9,906) $(16,750)
========= =========
Net loss per common share - Primary and Fully diluted $ (0.33) $ (0.52)
Weighted average number of common shares used in
computing per share amounts - Primary and Fully diluted 36,830 36,638
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
KENETECH CORPORATION
--------------------
CONSOLIDATED BALANCE SHEETS
March 29, 1997 and December 31, 1996
(unaudited, in thousands, except share amounts)
ASSETS
March 29, December 31,
1997 1996
--------- ------------
Current assets:
Cash and cash equivalents ......................... $ 13,053 $ 17,208
Funds in escrow, net .............................. 4,581 5,221
Accounts receivable ............................... 17,504 17,940
Inventories ....................................... 131 135
Investment in power plant held for sale ........... 19,211 19,209
Deferred tax assets, net .......................... 4,300 4,300
Other ............................................. 3,197 3,986
--------- ------------
Total current assets ............................. 61,977 67,999
Property, plant and equipment, net ................... 24,173 24,735
Power plants under development ....................... 14,921 11,507
Investments in affiliates ............................ 13 32
Deferred tax assets, net ............................. 13,613 13,613
Other assets ......................................... 3,601 5,425
--------- ------------
Total assets ................................... $ 118,298 $ 123,311
========= ============
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable .................................. $ 20,058 $ 18,841
Bank loan payable ................................. 19,482 18,860
Accrued interest .................................. 16,765 13,462
Accrued liabilities ............................... 21,932 21,010
Debt associated with power plant
held for sale .................................... 16,578 16,578
Other notes payable ............................... 19,421 20,165
Senior secured notes payable ...................... 99,038 99,005
Accrued losses on contracts ....................... 1,699 1,699
--------- ------------
Total current liabilities ...................... 214,973 209,620
Accrued losses on contracts .......................... 455 897
Accrued dividends on preferred stock ................. 11,774 9,633
Other long-term obligations .......................... 1,043 1,061
--------- ------------
Total liabilities ................................ 228,245 221,211
Commitments and contingencies
Stockholders' deficiency:
Convertible preferred stock - 10,000,000 shares
authorized, $.01 par value; issued and outstanding
102,492, $115,547 liquidation preference ......... 99,561 99,561
Common stock - 110,000,000 shares authorized,
$.0001 par value; 36,829,618 issued and
outstanding in 1997 and 1996 ...................... 4 4
Additional paid-in capital ........................ 134,080 136,221
Cumulative foreign exchange ....................... 35 35
Accumulated deficit ............................... (343,627) (333,721)
--------- ------------
Total stockholders' deficiency ................... (109,947) (97,900)
--------- ------------
Total liabilities and
stockholders' deficiency ...................... $ 118,298 $ 123,311
========= ============
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
KENETECH CORPORATION
--------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
for the thirteen weeks ended March 29, 1997
(unaudited, in thousands, except share amounts)
<TABLE>
<CAPTION>
Effect of
Convertible Common Stock Additional Cumulative
Preferred Stock Series A Paid-In Foreign Accumulated
Shares Amount Shares Amount Capital Exchange Deficit Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 102,492 $99,561 36,829,618 $4 $136,221 $35 $(333,721) $ (97,900)
Preferred stock dividends -- -- -- - (2,141) -- -- (2,141)
Net loss -- -- -- - -- -- (9,906) (9,906)
------- ------- ---------- -- -------- --- --------- ---------
Balance, March 29, 1997 102,492 $99,561 36,829,618 $4 $134,080 $35 $(343,627) $(109,947)
======= ======= ========== == ======== === ========= ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
6
<PAGE>
KENETECH CORPORATION
--------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the thirteen weeks ended March 29, 1997 and March 30, 1996
(unaudited, in thousands)
March 29, March 30,
1997 1996
--------- ---------
Cash flows from operating activities:
Net loss ....................................... $ (9,906) $(16,750)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation, amortization and other ........ 1,097 3,578
Changes in assets and liabilities:
Funds in escrow, net ....................... 640 3,491
Accounts receivable ........................ 436 25,618
Partnership notes and interest
receivable, net ........................... -- 735
Inventories ................................ 4 (1,223)
Other assets ............................... 2,100 86
Accounts payable, accrued liabilities
and accrued interest ...................... 5,926 (8,524)
Accrued loss on contracts .................. (442) (1,157)
Estimated warranty costs ................... -- (966)
--------- ---------
Net cash (used in) provided by operating
activities ............................... (145) 4,888
Cash flows from investing activities:
Additions to property, plant and equipment .. -- (202)
Expenditures on power plants under
development ................................ (3,414) (1,146)
Investments in affiliates:
Contributions .............................. -- (1,814)
Distributions .............................. 10 512
--------- ---------
Net cash used in investing activities .. (3,404) (2,650)
Cash flows from financing activities:
Payments on other notes payable ............. (606) (4,442)
Proceeds from bank loan ..................... -- 3,850
Proceeds from issuance of common stock, net . -- 234
--------- ---------
Net cash used in financing activities ... (606) (358)
--------- ---------
(Decrease) Increase in cash and cash equivalents (4,155) 1,880
Cash and cash equivalents at
beginning of period ....................... 17,208 16,842
--------- ---------
Cash and cash equivalents at
end of period ............................. $ 13,053 $ 18,722
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
7
<PAGE>
1. General
The interim consolidated financial statements presented herein include the
accounts of KENETECH Corporation and its consolidated subsidiaries (the
"Company"). These interim consolidated financial statements should be read
in conjunction with the Company's consolidated financial statements and the
notes thereto for the year ended December 31, 1996. These interim
consolidated financial statements are unaudted but, in the opinion of
management, reflect all adjustments necessary (consisting of items of a
normal recurring nature) for a fair prsentation of the Company's interim
financial osition, results of operations and cash flows. Results of
operations for interim periods are not necessarily indicative of those for
a full year. The Company's thirteen weeks represent thirteen weeksd of
operations; accordingly the first quarters of 1997 and 1996 anded March 29,
1996 and March 30, 1996, respectively.
The consolidated financial statements of KENETECH Corporation and certain
subsidiaries as of March 29, 1997 and December 31, 1996 and for the
thirteen week periods ending March 29, 1997 and March 30, 1996, have been
prepared assuming the Company will continue as a going concern.
Intercompany balances and transactions for consolidated subsidiaries are
eliminated in consolidation. On May 29, 1996, the Company's windpower
subsidiary, KENETECH Windpower, Inc. ("KWI"), filed for protection under
chapter 11 of the Federal Bankruptcy Code and reported an excess of
liabilities over its assets. Although the Company continues to own the
common stock of KWI and provides certain services under the jurisdiction of
the Bankruptcy Court, the Company believes it is probable that such
ownership will not exist after completion of the bankruptcy proceedings.
Accordingly, as of May 29, 1996 KWI ceased to be accounted for as a
consolidated subsidiary of the Company and no activities of KWI have been
reflected in the consolidated financial statements of the Company since
that date. The Company's investment in KWI is recorded as zero in
"Investments in Affiliates" in the accompanying March 29, 1997 and December
31, 1996 consolidated balance sheets. Revenues and expenses of KWI from
January 1, 1996 through March 30, 1996 are reflected in consolidated
statements of operations and cash flows. KWI 1996 operations through March
30, 1996 reflect an excess of expenses over revenues of $10,014,000.
2. Significant Accounting Policies
Foreign Currency Translation: Assets and liabilities of certain non-U.S.
subsidiaries are translated at current exchange rates, and related revenues
and expenses are translated at average exchange rates in effect during the
period. Resulting translation adjustments are recorded as a component of
stockholders' deficiency.
Revenues: Revenues from Windplant sales and construction services are
recognized on the percentage-of-completion, cost-to-cost method. Costs of
such revenues include all direct material and labor costs and those
indirect costs related to contract performance such as indirect labor,
supplies and tool costs that can be attributed to specific contracts.
Estimated future warranty costs are recognized as units are sold and
adjusted as circumstances require. Indirect costs not specifically
allocable to contracts and general and administrative expenses are charged
to operations as incurred. Revisions to contract revenue and cost estimates
are recognized in the accounting period in which they are determined.
Provision for estimated losses on uncompleted contracts is made in the
period in which such losses are determined.
Revenues from sales of Windplant equipment where construction is the
responsibility of third parties are recognized under the units-of-delivery
method.
Certain deferred revenue represents the noncash portion of Windplant sales
which occurred prior to 1988 for which the Company provided purchase money
financing. Deferred revenue from such Company financed sales is recognized
as revenue when payments on the partnership notes or related funds in
escrow are received by the Company. Such deferred revenue is included in
maintenance, management fees and other revenues when recognized (zero in
1997 due to the deconsolidation of KWI and $6,000 in 1996).
Maintenance and management fees are recognized as earned under various
long-term agreements to operate and maintain the energy plants which the
Company has developed. Many of these fees are a percentage of owners'
energy sales which fluctuate based on production and price. Other revenues
include development fees earned under various independent power plant
development activities.
8
<PAGE>
2. Significant Accounting Policies (continued)
Energy sales revenue is recognized when electrical power or steam is
supplied to a purchaser, generally the local utility company or site host,
at the contract rate in place at the time of delivery. Certain contracts
have fixed prices for the first few years after which the prices are based
on the "avoided costs" price of utility purchasers.
Depreciation: Depreciation is recorded on a straight-line basis over the
estimated useful lives as shown below:
Buildings and improvements 30 years
Windplants 20 to 30 years
Cogeneration and substation facilities 30 years
Machinery and equipment 2 to 10 years
Furniture and fixtures 3 to 5 years
Leasehold improvements Shorter of estimated life or
term of lease
Income Taxes: The Company accounts for income taxes using the liability
method under which deferred income taxes arise from temporary differences
between the tax basis of assets and liabilities and their reported amounts
in the consolidated financial statements. Changes in deferred tax assets
and liabilities include the impact of any tax rate changes enacted during
the year and changes in the valuation allowance.
Accounts Receivable/Accrued Liabilities: Costs incurred and estimated
earnings in excess of billings on uncompleted contracts are included in
accounts receivable. Billings in excess of costs and estimated earnings on
uncompleted contracts are included in accrued liabilities (See Note 8).
Inventories: Inventories are stated at the lower of cost or market,
principally using the average-cost method. (See Note 9).
Power Plant Held for Sale: Power plant held for sale represents the
Company's share of a completed power plant (see Note 10).
Power Plants Under Development: Power plants under development include
project development costs, representing preconstruction costs incurred to
complete the design of windpower plants, independent power plants and
cogeneration facilities, to secure the necessary permits, to negotiate the
contracts to construct and operate the project, to obtain construction
financing and for other development services. Project development costs are
capitalized once a project has reached the design and permitting stage and
the Company has obtained a power purchase agreement or other enforceable
right to sell power. Such capitalized development costs are transferred to
construction in progress after construction begins. When it is probable
that future projects will not be completed or costs may not be recovered,
such costs are written off or reserved for. At March 29, 1997 the Company's
only project under active development is the Puerto Rico project.
Other Assets: Other assets include debt issuance costs of $3,256,000 at
March 29, 1997 and $3,860,000 at December 31, 1996 which are amortized on a
straight-line basis over the term of the related debt. Such amortization
expense was $513,000 and $357,000 respectively for the first quarters of
1997 and 1996.
3. Liquidity and Going Concern
The consolidated financial statements as of and for the thirteen weeks
ended March 29, 1997 have been prepared assuming the Company will continue
as a going concern. The Company incurred significant losses in the first
quarter of 1997 and for the years ending December 31, 1996 and 1995, has
negative working capital and its liquidity is severely constrained. Certain
lenders and creditors are seeking repayment and/or restructuring of the
amounts due them. In 1997 the Company expects to generate operating losses
before the sale of assets due to administrative expenses in excess of gross
margin and interest expense on debt. These factors raise substantial doubt
about the Company's ability to continue as a going concern in its current
form.
Management's plan to address its liquidity involves sales by subsidiaries
of their respective interests in the Puerto Rico construction contract and
the Puerto Rico project for which the Company expects to receive
substantial cash proceeds. However, management believes that such sales
will not generate sufficient proceeds to ultimately provide any return of
invested capital to the holders of the Company's stock. In addition, the
Company believes KWI will assert certain claims in bankruptcy against the
Company. There can be no assurance that the Company will be successful in
implementing its plan or that the Company will continue as a going concern.
Even if the Company is successful in implementing its plans, there can be
no assurances that the Company will continue as a going concern. It may
well be that the Company must consider alternatives such as commencement of
proceedings under the Federal Bankruptcy Code.
9
<PAGE>
4. Construction Subsidiary
The Company has announced its intention to dispose of its construction
subsidiary, CNF Industries, Inc. ("CNF"). Since the Company continues to
own the common stock of CNF and controls its operations, the consolidated
financial statements continue to reflect the consolidation of the assets,
liabilities, revenues and expenses of CNF. Since at March 29, 1997 the
Company had not finalized its plans for the disposition of CNF, the
Company's financial statements do not include any adjustment or reserves
that might result from the disposition. The Company's consolidated
statement of operations for the quarter ended March 29, 1997 and
consolidated balance sheet as of March 29, 1997 include the following
amounts relating to CNF:
Quarter ended March 29, 1997
(in thousands)
Revenues .......................... $ 10,151
Costs of revenues ................. 9,970
--------
Gross margin ..... ................ 181
General and administrative expenses 3,278
--------
Loss from operations .............. (3,097)
Other ............................. 41
--------
Loss before income taxes ......... $ (3,056)
========
As of
March 29, 1997
(in thousands)
Assets: Liabilities and owner's deficiency:
Current assets $18,557 Current liabilities $36,077
Property plant and Long term liabilities 1,043
equipment 3,725 Owner's deficiency (13,882)
Other long term assets 956
------- -------
Total assets $23,238 Total liabilities and equity $23,238
======= =======
CNF has a joint venture interest in the EPC contract for the Puerto Rico
project described above. The Company has signed a letter of intent to sell
this interest in the EPC contract and intends to dispose of its
construction subsidiary in 1997.
5. Net Loss Per Share
Net loss per share amounts for the quarters ended March 29, 1997 and March
30, 1996 were calculated as follows:
Primary and Fully Diluted
(in thousands, except per share amounts)
March 29, March 30,
1997 1996
--------- ---------
Net loss $ (9,906) $ (16,750)
Less preferred stock dividends (2,141) (2,141)
--------- ---------
Net loss used in per share calculations $ (12,047) $ (18,891)
========= =========
Weighted average shares used in per share
calculations 36,830 36,638
========= =========
Net loss per share $ (0.33) $ (0.52)
========= =========
Preferred stock dividends increase the net loss for the calculation of net
loss per share. Since the Company incurred net losses during the periods,
common stock equivalents are not included in weighted average shares used
in the calculations of net loss per share since they would be anti-dilutive
(reducing the amount of net loss per share).
10
<PAGE>
6. Cash Flow Information
Short term investments purchased with original maturities of three months
or less are considered cash equivalents. Additional cash flow information
is presented below:
March 29, March 30,
1997 1996
--------- ---------
(in thousands)
Supplemental cash flow information:
Cash paid (received) for:
Income taxes paid ...................... $ 60 $ 13
Income taxes refunded .................. (32) (420)
--------- ---------
Net cash flow from income taxes .......... $ 28 $ (407)
========= =========
Interest activity:
Interest paid ........................... $ 330 $ 2,768
Capitalized interest ..................... -- (337)
Interest accrued but not paid, net ....... 3,929 4,578
Interest paid but accrued in prior periods (23) (1,414)
Amortization of deferred financing costs . 513 139
--------- ---------
Interest expense ........................ $ 4,749 $ 5,734
========= =========
Capitalized interest charged to costs of revenues was zero for the thirteen
weeks ended March 29, 1997 and $337,000 for the comparable 1996 period.
7. Funds in Escrow
The Company has various debt and other agreements which have escrow fund
requirements and certain debt service payments are made from these escrow
accounts. The escrow account balances at March 29, 1997 and December 31,
1996 were as follows:
March 29, December 31,
1997 1996
-------- ------------
(in thousands)
Other notes payable $ 1,569 $ 1,581
Letters of credit collateral 458 1,086
Project collateral 2,554 2,554
-------- ------------
$ 4,581 $ 5,221
======== ============
As of March 29, 1997, funds in escrow were invested in short-term cash
investments with interest rates ranging from zero to 6.2%. As previously
discussed, KWI's funds in escrow are not reflected in either the March 29,
1997 or the December 31, 1996 balance sheet.
11
<PAGE>
8. Accounts Receivable
Accounts Receivable: Accounts receivable at March 29, 1997 and December 31,
1996 consisted of:
March 29, December 31,
1997 1996
-------- ------------
(in thousands)
Contracts - Billed:
Completed contracts $ -- $ 1,981
Contracts in progress 11,303 9,106
Retained 1,959 2,216
Contracts - Unbilled 3,300 2,782
Operations and other 942 1,855
-------- ------------
$ 17,504 $ 17,940
======== ============
At March 29, 1997 and December 31, 1996 billed and unbilled receivables did
not include any amounts from related parties. Operations and other
receivables include $33,000 from related parties at March 29, 1997 and
December 31, 1996. As previously discussed, receivables of KWI are not
reflected in the accompanying March 29, 1997 and December 31, 1996 balance
sheets.
A summary of costs incurred and estimated earnings on uncompleted contracts
at March 29, 1997 and December 31, 1996 is as follows:
March 29, December 31,
1997 1996
--------- ------------
(in thousands)
Costs incurred and estimated earnings
on uncompleted contracts $167,751 $ 151,850
Billings to date 172,942 157,346
--------- ------------
$ (5,191) $ (5,496)
========= ============
Such amounts were included in the consolidated balance sheets at March 29,
1997 and December 31, 1996 as follows:
March 29, December 31,
1997 1996
--------- ------------
(in thousands)
Costs incurred and estimated earnings
in excess of billings on uncompleted
contracts (accounts receivable) $ 3,300 $ 2,782
Billings in excess of costs and
estimated earnings on uncompleted
contracts (accrued liabilities) (8,491) (8,278)
--------- ------------
$ (5,191) $ (5,496)
========= ============
9. Inventories
Inventories (in thousands) at March 29, 1997 and December 31, 1996
consisted of:
March 29, December 31,
1997 1996
--------- ------------
(in thousands)
Unassembled parts and supplies $ 131 $ 135
========= ============
Unassembled parts and supplies consists of fuel and maintenance parts for
the Company's wholly-owned cogeneration facility. As previously discussed,
inventories of KWI are not included in the March 29, 1997 and December 31,
1996 balance sheets.
12
<PAGE>
10. Investment in Power Plant Held for Sale and Debt Associated With Power
Plant Held for Sale
Investment in power plant held for sale at March 29, 1997 and December 31,
1996 consisted of:
March 29, December 31,
1997 1996
--------- ------------
(in thousands)
Chateaugay power plant $ 19,211 $ 19,209
========= ============
The Company owns a 50% ownership interest in a 17.0 megawatt wood-fired
electric power plant it constructed in Chateaugay, New York in September
1993. Debt associated with this project held for sale at March 29, 1997 and
December 31, 1996 consisted primarily of tax-exempt bonds. In July 1991,
the Company entered into an agreement with the County of Franklin (New
York) Industrial Development Authority (the Authority) whereby the
Authority loaned the Company the proceeds of the Authority's Series 1991A
Bonds issued of $34,800,000 to finance the construction of the Chateaugay
project. The bonds are due July 1, 2021. As the Partnership makes debt
payments, the Company reduces its pro rata 50% share of the debt.
Accordingly, $16,578,000 was outstanding at March 29, 1997 and December 31,
1996.
11. Bank Loan Payable
On August 30, 1996, the Company entered into a $30,000,000 loan agreement
to be used for the Puerto Rico project being jointly developed by the
Company's development subsidiary. Amounts borrowed under this agreement
bear interest at the 90 day LIBOR plus 7.5%. This rate can change when the
project reaches certain milestones. The 90 day LIBOR rate was 5.77% at
March 29, 1997. The loan is collateralized by the stock of a special
purpose entity formed to hold through affiliates the Company's interest in
this thermal power plant. No further funds are available under this
agreement since the remaining funding capacity must accommodate accrued and
unpaid interest for the remaining term of the loan. The outstanding balance
on this bank loan was $19,482,000 at March 29, 1997.
13
<PAGE>
12. Other Notes Payable
Other notes payable at March 29, 1997 and December 31, 1996 consisted of
the following:
March 29, December 31,
1997 1996
--------- ------------
(in thousands)
Note bearing interest at 11.3%, due in equal
annual installments of principal and interest
through 2002, collateralized by a cogeneration
facility owned by the Company and requires an
escrow account. $ 8,506 $ 8,667
Borrowings under a $5,000,000 revolving credit
agreement bearing interest at 1% above the bank's
prime rate through April 30, 1997.(1) 166 166
Borrowings under a $7,500,000 term loan agreement
bearing interest at the bank's prime rate through
August 31, 1996 and at 1% above the bank's prime
rate thereafter, due in quarterly installments of
$267,857 plus interest through December 31, 2000
and $2,142,860 due on March 31, 2001.(1) 6,216 6,351
Borrowings under a $4,400,000 revolving loan
agreement, interest rate selected by the Company
from specified alternatives (7.5% and 7.4% at March
29, 1997 and December 31, 1996, respectively),
convertible to a 15-year term, loan payable
semi-annually, collateralized by land, building and
equipment.(1) 3,480 3,645
Borrowings under a $1,000,000 loan agreement,
due in 1999 bearing interest at prime plus 3%
(11.25% at March 29, 1997 and December 31, 1996). 919 641
Notes bearing interest at 7.0% due through 1999.(2) 74 504
Other obligations bearing interest at 8.2% to
9.9% due through 1999, collateralized by equipment. 60 191
--------- ------------
$ 19,421 $ 20,165
========= ============
(1) Facility associated with the Company's construction subsidiary. See above
discussion regarding defaults.
(2) The Company did not make the required principal and interest payment on
December 1, 1996 and the holders of the notes notified the Company of their
intention to accelerate the obligation to pay the unpaid balance of the
notes plus accrued interest. On February 21, 1997, the Company paid
$322,000 in full settlement of $460,000 of unpaid principal and interest.
14
<PAGE>
12. Other Notes Payable (continued)
The Company maintained a revolving credit agreement for working capital
purposes which was due to expire on May 30, 1996. This agreement required
the Company to meet certain financial ratios, net worth tests and
indebtedness tests. In April 1996 the Company renegotiated the revolving
credit agreement to provide for up to $5,000,000 for working capital
purposes for the Company's construction subsidiary (CNF) through April 30,
1997. The renegotiated agreement also provided a term loan of $7,500,000
which was used to pay the $5,000,000 outstanding at March 30, 1996 and to
provide cash collateral for up to $2,500,000 in outstanding letters of
credit. The loan becomes immediately payable upon the disposition of CNF.
The agreement requires CNF to meet certain net worth, financial ratio and
debt service coverage tests. At March 29, 1997 and December 31, 1996 CNF
was not in compliance with these covenants. The bank has issued a notice of
default letter which states that due to KWI's bankruptcy filing and certain
covenant violations it would not make any further advances under the
revolving credit agreement. CNF is prohibited from transferring cash to
KENETECH Corporation by provisions of this line of credit. CNF's cash and
cash equivalents totaled $1,660,000 at March 29, 1997.
Certain of the debt agreements provide events of default including
provisions which allow the lenders to accelerate repayment of the debt
should other debt of the Company experience an event of default which would
cause such other debt to be accelerated. Because of these provisions all
other notes payable are classified as current in the accompanying March 29,
1997 and December 31, 1996 balance sheets.
13. Senior Secured Notes Payable
In December 1992 the Company sold $100,000,000 of 12-3/4% Senior Secured
Notes due 2002. The notes were sold at a discount of $1,389,000. Such
discount is being amortized on the effective yield method through 2002. The
unamortized discount was $962,000 at March 29, 1997. Interest on these
notes is due June 15 and December 15 of each year. The Notes are
redeemable, at the option of the Company, beginning December 15, 1997 at
106% of par, beginning December 15, 1998 at 103% of par, and beginning
December 15, 1999 at par.
Under the terms of the note indenture, the Company is restricted from
paying cash dividends on its common stock and must comply with certain
covenants, the most restrictive of which place limitations on payments of
such dividends, repurchasing common stock, incurring additional
indebtedness, pledging of assets and advances or loans to affiliates.
The indenture provides for an event of default (including the acceleration
of the repayment of the Notes) should other debt of the Company be
accelerated because the other debt was in default. The Company did not pay
the interest due June 15 and December 15, 1996 totaling $12,750,000 and is
in default. The debt is classified as a current liability.
15
<PAGE>
14. Contingencies
Litigation: On September 28, 1995, a class action complaint was filed
against the Company and certain of its officers and directors (namely,
Stanley Charren, Maurice E. Miller, Joel M. Canino and Gerald R. Alderson)
in the United States District Court for the Northern District of California
alleging federal securities laws violations. On November 2, 1995, a First
Amended Complaint was filed naming additional defendants, including
underwriters of the Company's securities and certain other officers and
directors of the Company (namely, Charles Christenson, Angus M. Duthie,
Steven N. Hutchinson, Howard W. Pifer III and Mervin E. Werth). Subsequent
to the Court's partial grant of the Company's and the underwriter
defendants' motions to dismiss, a Second Amended Complaint was filed on
March 29, 1996. The amended complaint alleges claims under sections 11 and
15 of the Securities Act of 1933, and sections 10(b) and 20(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 thereunder, based on alleged
misrepresentations and omissions in the Company's public statements, on
behalf of a class consisting of persons who purchased the Company's common
stock during the period from September 21, 1993 (the date of the Company's
initial public offering) through August 8, 1995 and persons who purchased
the Company's preferred stock during the period from April 28, 1994 (the
public offering date of the preferred stock) through August 8, 1995. The
amended complaint alleges that the defendants misrepresented the Company's
progress on the development of its latest generation of wind turbines and
the Company's future prospects. The amended complaint seeks unspecified
damages and other relief. On December 4, 1996, with underwriters and their
counsel and the insurance carriers' counsel in attendance, a mediation
occurred in San Francisco in an attempt to settle the action; however, the
parties were unsuccessful. Plaintiffs' motion for class certification was
heard and taken under submission by the Court on January 31, 1997. By order
dated March 24, 1997, the Court granted the underwriter defendants' motion
to dismiss any claim based on section 11 of the Securities Act of 1933 that
would require tracing back to the initial public offering of KENETECH
securities. In addition, in separate orders dated March 24, 1997 and April
16, 1997, the Court granted plaintiffs' motion for certification of a
plaintiff class consisting of all persons or entities who purchased
KENETECH common stock between September 21, 1993 and August 8, 1995 or
KENETECH depository shares between April 28, 1994 and August 8, 1995,
appointed representatives of the certified plaintiff class, appointed
counsel for the certified class and denied without prejudice plaintiffs'
motion for certification of an underwriter defendant class. The Company
intends to continue to contest the action vigorously.
In January 1997, William L. Erdman filed an administrative action with the
California Department of Labor seeking payment of a bonus in the amount of
approximately $135,000 alleged to be due from KENETECH Corporation.
On January 6, 1996, a breach of contract action was filed in the Superior
Court for Middlesex County, Massachusetts, by Tennessee Gas Pipeline
Company ("Tennessee") against Pepperell Power Associates Limited
Partnership (the "Pepperell Partnership"), its general partner, KES
Pepperell, Inc. (each in whole or in part directly or indirectly owned by
KENETECH Energy Systems, Inc. ("KES"), a wholly-owned subsidiary of the
Company), and its other general partner, in connection with the termination
of a natural gas transportation agreement, seeking to recover alleged
unpaid charges of approximately $1,800,000. KES Pepperell, Inc. has filed a
counterclaim in the action and intends to contest the action vigorously. On
December 2, 1996, Tennessee filed another action in the Superior Court for
Middlesex County, Massachusetts, against KES Pepperell, Inc. and KES, among
others, seeking to recover an $810,000 payment made to the Pepperell
Partnership plus treble damages and attorneys' fees. KES Pepperell and KES
intend to contest the action vigorously.
16
<PAGE>
14. Contingencies (continued)
In October 1996, the Environmental Protection Agency (EPA) issued a final
air permit for the Puerto Rico project. On November 1, 1996, Hector Arana
and The Committee To Save The Environment of Guayanilla, a local
environmental group in Puerto Rico, filed an administrative agency appeal
with the environmental appeals board within the EPA contesting the issuance
of the air permit. The environmental appeals board has denied the appeal
and the air permit is now final and effective.
On March 13, 1997, Mision Industrial de Puerto Rico, Inc., the Union de
Trabajadores de la Industria Electrica y Riego (UTIER), Guayamenses
Pro-Salud y Buen Ambiente, Bartolome Diana, SURCCO, Inc. and Jose E.
Olivieri Antonmarchi (the Appellants) timely filed an appeal before the
Circuit Court of Appeal of Puerto Rico (No. KLAN 97-00236), appealing the
judgment entered against them on January 21, 1997, in the Ponce Superior
Division of the Court of First Instance of Puerto Rico (the trial court)
(No. JPE 96-0345) dismissing Appellants' complaint against the Puerto Rico
Electric Power Authority ("PREPA") requesting injunctive and declaratory
relief. Appellants are environmental groups, citizens and the union which
represents PREPA's electrical workers; they had brought their civil action
challenging the procedure used by PREPA to select two independent power
producers (one of which is the Company's wholly-owned development
subsidiary) to design, finance, construct, own and operate the Puerto Rico
project. The trial court held that PREPA's selection of the independent
power producers need not have been done through public bidding pursuant to
section 205 of PREPA's Organic Act. The partnership which holds the power
purchase agreement for the Puerto Rico project intervened in the action
before the trial court and intends to contest the action vigorously.
The Company is also a party to various other legal proceedings normally
incident to its business activities. The Company intends to defend itself
vigorously against these actions.
It is not feasible to predict or determine whether the ultimate outcome of
the above-described matters will have a material adverse effect on the
Company's financial position.
17
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Overview
--------
KENETECH Corporation ("KENETECH"), a Delaware corporation, is a holding
company which participated through its subsidiaries in the electric utility
market. As used in this document "Company" refers to KENETECH and its
wholly-owned subsidiaries (including KENETECH Windpower, Inc. (KWI) only
through May 29, 1996).
The Company develops, constructs, finances, sells and operates and manages
independent power projects. A wholly-owned development subsidiary is a
joint venture partner with an affiliate of Enron Corporation in a project
in late stage development in Puerto Rico. The project is a 507 MW (net)
natural gas cogeneration facility and associated liquified natural gas
facility which will produce electricity to be sold to Puerto Rico Electric
Power Authority pursuant to a 22 year Power Purchase Agreement dated March
10, 1995.
The power plant will be a combined cycle cogeneration facility consisting
of two combustion turbines capable of operating on LNG, LPG, or fuel oil to
generate electricity, and is expected to produce approximately 4 million
Mwh of electricity annually under baseload conditions. Steam generated will
also be used to convert seawater into fresh water in a desalination plant,
which is expected to produce approximately 4 million gallons of potable
water per day, of which approximately 1 million gallons per day will be
required by the project, with the remainder being available for sale to
local entities. This is the only project the Company (through its
wholly-owned development subsidiary) has in active development. The
Company's wholly-owned development subsidiary intends to sell its interest
in this project in 1997.
One of the Company's subsidiaries is a general contractor which has
constructed independent power projects since 1988. This subsidiary competes
for contracts for engineering, procurement and construction (EPC) and for
construction only. Historically, the Company has constructed all of the
thermal energy power projects it developed and recently has constructed all
of the Windplants it developed. Substantially all construction work
performed by the Company for third parties is competitively bid and most is
performed under turnkey contracts. This construction subsidiary has a joint
venture interest in the EPC contract for the Puerto Rico project described
above. The Company has signed a letter of intent to sell its interest in
this EPC contract and intends to dispose of its construction subsidiary in
1997. The chapter 11 filing of KWI discussed below has materially adversely
affected the Company's construction subsidiary and its ability to procure
contracts.
KWI manufactured wind turbines and designed and operated utility-scale wind
powered electric powerplants which incorporated large arrays of such
turbines. On May 29, 1996, KWI filed for protection under chapter 11 of the
Federal Bankruptcy Code and reported an excess of liabilities over the fair
value of its assets. Although the Company continues to own the common stock
of KWI and provides certain services under the jurisdiction of the
Bankruptcy Court, the Company believes it is probable that such ownership
will not exist after completion of the bankruptcy proceedings. Accordingly,
as of May 29, 1996 KWI ceased to be accounted for as a consolidated
subsidiary of the Company. The Company's financial statements exclude all
KWI activities after that date.
Cautionary Statement
--------------------
Certain information included in this report contains forward looking
statements within the meaning of the Securities Act of 1933, as amended,
and the Securities Act of 1934, as amended. Such forward looking
information is based on information available when such statements are made
and is subject to risks and uncertainties that could cause actual results
to differ materially from those expressed in the statements.
18
<PAGE>
Results of Operations
---------------------
The consolidated financial statements of KENETECH Corporation and certain
subsidiaries as of and for the quarterly periods ending March 29, 1997 and
March 30, 1996 have been prepared assuming the Company will continue as a
going concern. As mentioned previously, as of May 29, 1996 KWI ceased to be
accounted for as a consolidated subsidiary of KENETECH and no activities of
KWI have been reflected in the consolidated financial statements of the
Company since that date. The Company's investment in KWI is recorded at
zero in "Investments in Affiliates" in the accompanying March 29, 1997 and
December 31, 1996 consolidated balance sheets. Revenues and expenses of KWI
from January 1, 1996 through March 30, 1996 are reflected in the 1996
consolidated statement of operations and cash flows.
The Company incurred a net loss for the first quarter of 1997 of $9.9
million as compared to a net loss for the first quarter of 1996 of $16.8
million. This does not indicate an improvement in the Company's prospects.
Instead this loss reflects the ongoing effect of the events which occurred
in 1995. Sales of the Company's model KVS-33 turbine commenced in late 1993
and the Company believed this variable speed machine would generate
substantial growth for the Company. During 1995, mechanical problems with
the machines installed in 1994 and 1995 began to appear. Also, during 1995
the domestic electric power industry was subjected to the uncertainties and
pressures of deregulation, and the price which utilities would pay for
electric power based upon their avoided costs was at a historical low and
is expected to remain at these levels for the foreseeable future. As a
result, the Company incurred substantial costs and losses in fiscal years
1995 and 1996. In 1997 the Company expects to generate operating losses
before the sale of assets described above in "Overview" due to
administrative expenses and interest expense on debt in excess of gross
margin.
Quarters ended March 29, 1997 and March 30, 1996
<TABLE>
<CAPTION>
Quarter Ended
March 29, 1997 March 30, 1996
------------------------ ------------------------
(in millions)
Gross Gross
Revenues Costs Margins Revenues Costs Margins
-------- ----- ------- -------- ----- -------
<S> ............................ <C> <C> <C> <C> <C> <C>
Construction services ..............$ 10.2 $10.0 $ 0.2 $ 10.9 $ 9.3 $ 1.6
Energy sales <F1> ................ 1.3 -- 1.3 4.8 n/a 4.8
Maintenance, management
fees and other <F1>.............. 0.5 -- 0.5 7.3 n/a 7.3
Energy plant operations <F1>...... -- 1.7 (1.7) n/a 14.5 (14.5)
-------- ----- ------- -------- ----- -------
Total energy plant operations .. 1.8 1.7 0.1 12.1 14.5 (2.4)
Windplant sales .................... -- -- -- 3.4 3.3 0.1
Energy management services ......... -- -- -- 0.7 0.2 0.5
Interest on partnership notes
and funds in escrow .............. -- -- -- 0.6 n/a 0.6
-------- ----- ------- -------- ----- -------
Total ...............................$ 12.0 $11.7 $ 0.3 $ 27.7 $27.2 $ 0.4
======== ===== ======= ======== ===== =======
<FN>
<F1>
Maintenance, management fees and other revenues are earned by the Company for
maintaining and operating Windplants and thermal power plants owned by third
parties and from the sale of fuel to wood-fired electric power plants. Energy
sales are the revenues generated by Windplants and a thermal power plant owned
by the Company. Energy plant operations expenses are incurred to generate these
revenues. </FN> </TABLE>
19
<PAGE>
Construction services revenues (recorded under the percentage-of-completion
method) decreased to $10.2 million for the quarter ended March 29, 1997
from $10.9 million for the comparable period in 1996; accompanied by a
decline in the gross margin to 2.0% for the quarter ended March 29, 1997
from 15% for the comparable period in 1996. The gross margin for the first
quarter of 1996 was favorably impacted by the resolution of change orders
on another cogeneration project. The Company intends to dispose of its
construction business in 1997.
Energy plant operations, Windplant sales, Interest on partnership notes and
funds in escrow and Engineering expenses all declined significantly because
of the deconsolidation of KWI. As mentioned previously, on May 29, 1996 KWI
filed for protection under chapter 11 of the Federal Bankruptcy Code,
reported an excess of liabilities over the fair value of its assets, and
ceased to be accounted for as a consolidated subsidiary of the Company as
of that date.
Energy management services revenues decreased to zero for the quarter ended
March 29, 1997 from $0.7 million for the comparable period in 1996 because
this operation was sold in the second quarter of 1996.
Project development and marketing expenses decreased to $21 thousand for
the quarter ended March 29, 1997 from $2.0 million for the comparable
period in 1996. Project development expenses declined significantly since
the only project the Company has in active development is the Puerto Rico
project and expenditures for that project are being capitalized. The costs
expensed here represent expenditures to market assets and/or to keep
various assets marketable.
General and administrative expenses decreased to $5.7 million for the
quarter ended March 29, 1997 from $7.1 million for the comparable period in
1996 due to downsizing of the Company's operations partially offset by
severance payments and retention agreements.
Interest income decreased to $208 thousand for the quarter ended March 29,
1997 from $475 thousand for the comparable period in 1996 due to declining
cash and investment balances.
Interest expense decreased to $4.7 million for the quarter ended March 29,
1997 from $5.7 million for the comparable period in 1996 primarily due to
the deconsolidation of KWI.
Equity loss of unconsolidated affiliates. Equity investments in affiliates
resulted in a net loss of $5 thousand for the quarter ended March 29, 1997,
compared to a net loss of $187 thousand for the comparable period in 1996
due to the sale of the Company's interests in entities accounted for on an
equity basis and the deconsolidation of KWI.
Income taxes. The Company uses the asset and liability approach for
financial accounting and reporting for income taxes was recorded for the
quarters ended March 29, 1997 and March 30, 1996. Although a loss was
incurred, no tax benefit was recorded because of the uncertainty about the
Company's ability to utilize such a benefit.
20
<PAGE>
Liquidity and Capital Resources
-------------------------------
Operating activities
During the first quarter of 1997 operations activities used cash of $145
thousand. As previously stated, the Company expects a loss from operations
in 1997 before the sale of the assets described above in "Overview" due to
administrative expenses and interest on debt in excess of gross margin.
Investing activities
During the first quarter of 1997 the Company capitalized $3.4 million of
its development activities for the continued work on the Puerto Rico power
project.
Financing activities
During the first quarter of 1997 the Company paid $606 thousand of
principal on other notes payable.
Status
------
At March 29, 1997 the Company's working capital deficit is $153.0 million,
which is $149.8 million greater than at December 31, 1995 because debt
previously classified as long term is now classified as current due to the
Company's default on the interest payments on the senior notes and
resulting covenant violations in other debt instruments.
During 1996 the Company's liquidity became severely constrained as it
consumed its cash. On February 2, 1996 the Company announced that it would
not pay the dividend scheduled for February 15, 1996 on its preferred
stock. The Company paid no dividends on the preferred stock in 1996 or the
first quarter of 1997 and does not expect to be able to for the foreseeable
future. Under the terms of the preferred stock, dividends accrue until
paid. In December 1992 the Company sold $100.0 million of 12 3/4% Senior
Secured Notes due 2002. Interest on these notes is due June 15 and December
15 of each year. The Company did not make the 1996 payments and is in
default. The Company does not presently anticipate timely payment of 1997's
interest. Also, the borrowings under the $5.0 million revolving credit
agreement, the $7.5 million term loan agreement and the $4.4 million
revolving loan agreement (included in Other Notes Payable on the March 29,
1997 and December 31, 1996 balance sheets) are in default due to KWI's
bankruptcy filing, cross default provisions, failure to meet financial
covenants and the Company's default on the interest payment on the senior
secured notes. The Company does not expect to cure these defaults in the
foreseeable future.
The Company was able to continue its activities since it generated $13.5
million in 1996 by selling assets and drew $18.9 million from the $30.0
million Puerto Rico project loan obtained by a wholly-owned subsidiary.
This loan is collateralized by the stock of a special purpose entity formed
to hold through affiliates the Company's interest in the Puerto Rico power
project. No further funds are available under this agreement because the
remaining funding capacity must accommodate accrued and unpaid interest for
the remaining term of the loan. The development subsidiary's cash of $9.1
million at March 29, 1997 will be primarily consumed by the continued
development of the project. Of the Company's $13.1 million cash at March
29, 1997 $1.7 million is related to the construction subsidiary which is
prohibited by financial covenants from transferring cash to KENETECH. The
ability of the construction subsidiary to reestablish its backlog has been
severely hampered by the Company's financial condition and KWI's bankruptcy
filing. The Company has signed a letter of intent to sell its interest in
the EPC construction contract related to the Puerto Rico project and
intends to dispose of its construction subsidiary in 1997. There can be no
assurance that the construction subsidiary will be successful in selling
its interest in the EPC contract or disposing of its remaining assets.
Certain lenders and other creditors are seeking repayment and/or
restructuring of the amounts due them. The Company is unable to borrow
money and is delaying all payments except for essential services while it
attempts to raise cash through additional asset sales.
21
<PAGE>
There can be no assurances that asset sales will be consummated or that
substantial proceeds will be received. If the Company is unable to sell
assets its liquidity will be further constrained. It is expected that all
proceeds received from asset sales will be used in operations or paid to
creditors. Consequently, after, or as a part of a sale of the Company's
development subsidiary's interests in its only active development project,
the Company believes that it is likely that it will seek protection under
the Federal Bankruptcy Code.
Risks and Uncertainties
-----------------------
The consolidated financial statements as of and for the quarter ended March
29, 1997 have been prepared assuming the Company will continue as a going
concern. The Company incurred significant losses in 1996 and 1995, has
negative working capital and its liquidity is severely constrained. Certain
lenders and creditors are seeking repayment and/or restructuring of the
amounts due them. In 1997 the Company expects to generate operating losses
before the sale of assets due to administrative expenses in excess of gross
margin and interest expense on debt. These factors raise substantial doubt
about the Company's ability to continue as a going concern in its current
form.
Management's plan to address its liquidity involves the sale of the
Company's development subsidiary's interest in the Puerto Rico project and
its construction subsidiary's interest in the Puerto Rico construction
contract for which it expects to receive substantial cash proceeds.
Management believes that such sales will not generate sufficient proceeds
to ultimately provide any return of invested capital to the holders of the
Company's stock. In addition, the Company believes KWI will assert certain
claims in bankruptcy against the Company. There can be no assurance that
the Company will be successful in implementing its plans and that the
Company will continue as a going concern. Even if the Company is successful
in implementing its plans there can be no assurances that the Company will
continue as a going concern. It may well be that the Company must consider
alternatives such as commencement of proceedings under the Federal
Bankruptcy Code.
22
<PAGE>
Part II
Item 1. Legal Proceedings.
------------------
(a) See discussion under Note 14 of Item 1, Part I incorporated herein
by reference.
Item 3. Defaults Upon Senior Securities.
--------------------------------
(a) See discussion under Notes 12 and 13 of Item 1, Part I and
discussion under the heading "status" of Item 2, Part I incorporated
herein by reference.
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned therewith duly authorized.
KENETECH Corporation
By:
Date: June 4, 1997 Mark D. Lerdal
President, Chief Executive Officer,
and Director
By:
Date: June 4, 1997 Nicholas H. Politan
Chief Financial Officer, Vice President,
and Assistant Secretary
By:
Date: June 4, 1997 Mervin E. Werth
Corporate Controller, Chief Accounting
Officer, and Assistant Treasurer
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned
therewith duly authorized.
KENETECH Corporation
By: /s/ Mark D. Lerdal
Date: June 4, 1997 Mark D. Lerdal
President, Chief Executive Officer,
and Director
By: /s/ Nicholas H. Politan
Date: June 4, 1997 Nicholas H. Politan
Chief Financial Officer, Vice President,
and Assistant Secretary
By: /s/ Mervin E. Werth
Date: June 4, 1997 Mervin E. Werth
Corporate Controller, Chief Accounting
Officer, and Assistant Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000807708
<NAME> KENETECH CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-29-1997
<EXCHANGE-RATE> 1
<CASH> 17,634
<SECURITIES> 0
<RECEIVABLES> 17,504
<ALLOWANCES> 0
<INVENTORY> 131
<CURRENT-ASSETS> 61,977
<PP&E> 36,766
<DEPRECIATION> 12,593
<TOTAL-ASSETS> 118,298
<CURRENT-LIABILITIES> 214,973
<BONDS> 0
99,561
0
<COMMON> 4
<OTHER-SE> (209,512)
<TOTAL-LIABILITY-AND-EQUITY> 118,298
<SALES> 1,342
<TOTAL-REVENUES> 11,980
<CGS> 11,685
<TOTAL-COSTS> 17,392
<OTHER-EXPENSES> (5)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,749)
<INCOME-PRETAX> (9,906)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,906)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,906)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> (0.33)
</TABLE>
