United States

United States

SLUMP IN US MARKET HITS FINANCIAL RATINGS

In an indication that financial confidence in California wind company Kenetech is declining, a financial rating service, Standard & Poor, says it is watching its ratings of the San Francisco-based company's stock because of poorer earnings and cash flow caused by the slump in the US wind market and a longer transition to production of the firm's Model 33M-VS wind turbine than expected.

S&P's Ratings Group has a "Credit Watch" surveillance on Kenetech's Double B-Minus senior unsecured debt and Single B-Plus preferred stock, it was announced in mid June. S&P's action has negative implications. "Given the heavy working capital requirements generated by increased production and sales of wind turbine generators, a slowdown in the delivery of and payment for wind turbine generators could significantly erode the company's liquidity position and financial resources," states S&P. "É continued poor performance comes at a time when the company predicted that such difficulties would be behind them. With an increasing reliance on international sales, Kenetech faces a greater level of business and financial risk reflected in uncertain competitive, regulatory, and legal environments. Early successes in international sales, such as the company's activities in Spain, have come with difficulty and delay," it continues.

"The company believes that results from turbine and wind plant sales over the next few months will substantially improve financial performance," adds S&P, "but new operating and financial managers face the challenge of positioning the company to succeed in a potentially large international market, but one in which the company has limited experience." S&P will meet with Kenetech management within 60 days to review its business plan and financial forecasts. The extent of any ratings downgrade can be determined at that time, the rating agency said.

Meantime Kenetech denies rumours that the company has laid off employees. The company's Bud Grebey confirms that employment in the last eight months in "demand side management" has been halved, from 60 to 30, but on June 20 the company's entire full-time workforce numbered some 1200, no different from a month ago. A year ago, Kenetech employment was closer to 1000, adds Grebey. He stresses there have been no net layoffs in wind. On the contrary, Kenetech will open a manufacturing facility for making blades for its new 45 metre machine, the KVS-45, in west Texas. It has also acquired a manufacturing plant in Waco, Texas and will start making the KVS-45 machine there in October, says Grebey. The prototype is scheduled to be installed this autumn in Texas and commercial production will start in 1996. The Waco plant, acquired in June, will employ 250.

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