In making the announcement, Kenetech also cited delays and increased costs in bringing projects on line. The firm's stock closed down 25 cents to $6.125 a share in Nasdaq trading that same day, compared with an all time high of nearly $30. The announcement comes a month after Kenetech reported second-quarter earnings of $1.5 million, or four cents a share, down 65% from the 1994 quarter.
The following week, on the front page of the San Francisco Chronicle newspaper, was a column entitled "Can Kenetech survive this strong head wind?" by a leading business columnist on the paper, Herb Greenberg. He noted that Kenetech's stock had lost half its value in the previous four weeks and that the amount Kenetech is owed by customers had nearly doubled -- because of rumoured non-payment by several big customers in India.
Kenetech's announcement also came about a week before one of the main owners of its stock, Allstate Insurance Co of Northbrook, Illinois, filed to sell 220,720 shares. It is the second block of Kenetech stock that Allstate, which owns about one-tenth of Kenetech shares, has reported selling.
"While Kenetech has continued to grow, the pace of this growth has been below that which we anticipated," said company President Gerald Alderson after the job-cuts. He also cited delays and increased costs in implementing proposed projects, coupled with added pressure from regulators easing requirements on utilities to buy wind power. "The actions we took today represent Kenetech's continuing resolve to build a strong and prosperous company," Alderson said. "Eliminating these jobs is a painful but necessary step in this process."
Earlier this year, Kenetech had announced plans to more than double the number of wind turbines produced in 1995 compared with its 462 machine manufacturing output last year. But those estimates have been scaled back, partly so the company can cut inventory levels and improve profitability, although Kenetech is not saying by how much, says spokesman Bud Grebey.
Kenetech built 388 machines in the first six months of this year and has a backlog of about 1900. Grebey denies the company has had problems in ramping up production in Livermore, as reported by finance institutions (Windpower Monthly, September 1995), and also says he is not aware that Kenetech is having any problems in assembling turbines in India, as has been widely rumoured. "That's not happened, to my knowledge," he says. The company will also start shipping turbines to Costa Rica this year, he adds.
Furthermore, Kenetech is seeking to re-power up to 3410 of its older 56-100 turbines in the Altamont Pass with more than 1700 of the 33 KVS machines. Kenetech has filed for permits in both Alameda and Contra Costa Counties and hopes to increase the wind power produced in the Altamont Pass. In a bid to reduce the number of raptors killed, the new turbines have tubular towers. Kenetech estimates the re-powering is a $360 million investment. A draft environmental impact report will be ready by December 1, says Kenetech, which hopes to have finished the environmental review process by March.