UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q
(Mark One)

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 1999

[ ] 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 410
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 May 10, 1999, there were 41,954,218 shares of the issuer's Common Stock,
$.0001 par value outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

KENETECH Corporation Consolidated Financial Statements Page

Consolidated Statements of Operations for the
periods ended March 31, 1999 and 1998 4

Consolidated Balance Sheets, March 31, 1999 and
December 31, 1998 5

Consolidated Statement of Stockholders' Equity (Deficiency) for
the period ended March 31, 1999 6

Consolidated Statements of Cash Flows for the periods
ended March 31, 1999 and 1998 7

Notes to Consolidated Financial Statements 8-12

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 13-16

Part II - OTHER INFORMATION

Item 1. Legal Proceedings. 17

Item 2. Changes in Securities and Use of Proceeds 17

Item 5. Other Information 17

Item 6. Exhibits and Reports on Form 8-K 17

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

KENETECH CORPORATION
--------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
for the quarterly periods ended March 31, 1999 and 1998
(unaudited, in thousands, except per share amounts)

March 31, March 31,
1999 1998
--------- ---------
Revenues:
Construction services ............................ $ 410 $ 2,894
Maintenance, management fees and other ........... 21 416
Energy sales ..................................... -- 177
--------- --------
Total revenues ................................. 431 3,487

Costs of revenues:
Construction services ............................ 56 2,170
Energy plant operations .......................... -- 1,264
--------- --------

Total costs of revenues ........................ 56 3,434

Gross margin ....................................... 375 53

Project development and marketing expenses ......... 61 357
General and administrative expenses ................ 2,161 845
--------- --------

Loss from operations ............................... (1,847) (1,149)

Interest income .................................... 830 101
Interest expense ................................... -- (3,615)
Equity loss of unconsolidated affiliates ........... -- (35)
Gain (Loss) on disposition of subsidiaries and assets 4,597 (67)
Other income ....................................... 62 --
-------- --------

Gain (Loss) before taxes ........................... 3,642 (4,765)
Income tax ......................................... -- --
-------- ---------

Net income (loss) ............................ $ 3,642 $ (4,765)
======== =========

Net income (loss) per common share - Basic and Diluted $ .09 $ (0.19)

Weighted average number of common shares used in
computing per share amounts - Basic and Diluted 41,954 36,830

The accompanying notes are an integral part of these consolidated financial
statements.

KENETECH CORPORATION
--------------------
CONSOLIDATED BALANCE SHEETS
March 31, 1999 and December 31, 1998
(unaudited, in thousands, except share amounts)

ASSETS
March 31, December 31,
1999 1998
--------- ------------
Current assets:
Cash and cash equivalents ......................... $ 65,805 $ 67,424
Funds in escrow, net .............................. 478 478
Accounts receivable ............................... 909 1,079
Investment in Chateaugay Project .................. -- 15,480
--------- ------------
Total current assets ............................. 67,192 84,461

Property, plant and equipment, net ................... 21 24
--------- ------------
Total assets ................................... $ 67,213 $ 84,485
========= ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities:
Accounts payable .................................. $ 1,875 $ 4,002
Accrued liabilities ............................... 7,982 8,871
Current taxes payable ............................. -- 2,100
Chateaugay Project debt ........................... -- 15,620
Other notes payable ............................... 6 1,071
Accrued dividends on preferred stock .............. 21,408 21,408
--------- ------------
Total current liabilities ....................... 31,271 53,072

Accrued liabilities .................................. 880 893
Deferred benefit for deconsolidated
subsidiary losses ................................... 34,800 33,900
--------- ------------
Total liabilities ................................ 66,951 87,865

Commitments and contingencies

Stockholders' deficiency:
Common stock - 110,000,000 shares authorized,
$.0001 par value; 41,954,218 issued and
outstanding in 1999 and 1998 ...................... 4 4
Additional paid-in capital ........................ 224,007 224,007
Accumulated deficit ............................... (223,749) (227,391)
--------- ------------
Total stockholders' equity (deficiency) .......... 262 (3,380)
--------- ------------
Total liabilities and stockholders'
equity (deficiency) .......................... $ 67,213 $ 84,485
========= ============

The accompanying notes are an integral part of these consolidated financial
statements.

KENETECH CORPORATION
--------------------

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
for the quarterly period ended March 31, 1999
(unaudited, in thousands, except share amounts)

Common Stock Additional
Paid-In Accumulated
Shares Amount Capital Deficit Total

Balance, December 31, 1998 41,954,218 $4 $224,007 $(227,391) $ (3,380)
Net income -- - -- 3,642 3,642
---------- -- -------- --------- ---------
Balance, March 31, 1999 41,954,218 $4 $224,007 $(223,749) $ 262
========== == ======== ========= =========

The accompanying notes are an integral part of these consolidated financial statements.

KENETECH CORPORATION
--------------------

CONSOLIDATED STATEMENTS OF CASH FLOWS
for the quarterly periods ended March 31, 1999 and 1998
(unaudited, in thousands)

March 31, March 31,
1999 1998
--------- ---------

Cash flows from operating activities:
Net income (loss) .............................. $ 3,642 $ (4,765)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation, amortization and other ........ 3 635
Accrued but unpaid interest ................. -- 4,696
(Gain) Loss on disposition of subsidiaries
and assets ................................. (4,597) (67)
Changes in assets and liabilities:
Funds in escrow, net ....................... -- 1,913
Accounts receivable ........................ 170 2,655
Inventories ................................ -- 15
Accounts payable, accrued liabilities
and accrued interest ...................... (2,681) (7,305)
--------- ---------
Net cash used in operating activities ... (3,463) (2,223)

Cash flows from investing activities:
Proceeds from sale of property .............. -- 2,810
Net proceeds on disposition of subsidiaries
and assets ................................. 2,909 --
Expenditures on EcoElectrica Project ........ -- (833)
--------- ---------
Net cash provided by investing activities 2,909 1,977

Cash flows from financing activities:
Borrowings on Hartford Hospital Project debt. -- 827
Payments on other notes payable ............. (1,065) (6)
--------- ---------
Net cash provided by (used in) financing
activities ............................ (1,065) 821
--------- ---------

Increase (Decrease) in cash and cash equivalents (1,619) 575
Cash and cash equivalents at
beginning of period ....................... 67,424 7,294
--------- ---------

Cash and cash equivalents at
end of period ............................. $ 65,805 $ 7,869
========= =========

The accompanying notes are an integral part of these consolidated financial
statements.

1. General

The interim consolidated financial statements presented herein include the
accounts of KENETECH Corporation ("KENETECH") and its consolidated
subsidiaries (the "Company"), but exclude KENETECH Windpower, Inc. ("KWI"),
which filed for protection under Chapter 11 of the Federal Bankruptcy Code
on May 29, 1996, reporting an excess of liabilities over its assets. As of
May 29, 1996, KWI ceased to be accounted for as a consolidated subsidiary
of the Company and the Company's financial statements exclude all KWI
activity after that date. KWI's Plan of Reorganization was confirmed by the
Bankruptcy Court on January 27, 1999. Although the Company continues to own
the common stock of KWI, the Company believes it will not realize any value
from its remaining interests in KWI other than certain tax attributes. KWI
will continue to be a member of the Company's consolidated group for income
tax purposes.

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, 1998. These interim
consolidated financial statements are unaudited but, in the opinion of
management, reflect all adjustments necessary (consisting of items of a
normal recurring nature) for a fair presentation of the Company's interim
financial position, results of operations and cash flows. Results of
operations for interim periods are not necessarily indicative of those for
a full year.

2. Significant Accounting Policies

Revenues: Revenues from 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.

Sales of projects are recognized at closing when proceeds from the sale are
received.

Maintenance and management fees are recognized as earned under various
long-term agreements to manage or operate and maintain certain energy
production facilities. Other revenues include development fees earned in
connection with various independent power plant development activities.

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.

Depreciation: Depreciation is recorded on a straight-line basis over the
estimated useful life of the asset.

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.

3. Liquidity

As of March 31, 1999, the Company had completed its activities to raise
funds for working capital purposes, had disposed of substantially all its
operating assets and had repaid substantially all of its indebtedness for
borrowed money. The Company currently has substantial cash balances, may
have substantial net operating income tax losses to carry forward to future
years and is managing significant litigation (see Note 9). Management is
currently charting the future direction of the Company. It is likely that
the Company's future business will be in the energy or real estate
industries. The Company has retained professionals to assist it in the
identification and evaluation of its business activities.

4. Net Income (Loss) Per Share

Net income (loss) per share amounts for the quarters ended March 31, 1999
and 1998 were calculated as follows:

Basic and Diluted
(in thousands, except per share amounts)

March 31, March 31,
1999 1998
--------- ---------
Net income (loss) $ 3,642 $ (4,765)
Less PRIDES dividends -- (2,141)
--------- ---------
Net income (loss) used in per
share calculations $ 3,642 $ (6,906)
========= =========
Weighted average shares used in per share
calculations 41,954 36,830
========= =========
Net income (loss) per share $ 0.09 $ (0.19)
========= =========

PRIDES (as defined in Part I, Item 8) dividends are added to the March 1998
net loss. The Company incurred net losses after PRIDES dividends for the
first quarter of 1998 therefore common stock equivalents are not included
in weighted average shares used in the loss per share calculation because
they would be anti-dilutive (reduce the loss per share). On May 14, 1998,
the PRIDES were mandatorily converted into 5,124,600 shares of common
stock, $.0001 par value, and dividends on the PRIDES ceased to accrue.

5. Investment In Chateaugay Project and Chateaugay Project Debt

As of December 31, 1998, the Company, through KENETECH Energy Systems,
Inc., owned a 50% indirect interest in a partnership (the "Chateaugay
Partnership"), which owned a 17.8 MW wood-fired electric generating station
developed and constructed by the Company in Chateaugay, New York (the
"Chateaugay Project"). The remaining 50% equity interest was owned by
affiliates of CMS Generation Company. The Chateaugay Project delivered
electric energy to New York State Electric & Gas Corporation under a
long-term power purchase agreement. Debt associated with the Chateaugay
Project consisted primarily of tax-exempt bonds. In July 1991, the
Chateaugay Partnership entered into an agreement with the County of
Franklin (New York) Industrial Development Authority (the "Authority")
whereby the Authority loaned the Chateaugay Partnership the proceeds of the
Authority's Series 1991A Bonds issued in the principal amount of
$34,800,000 to finance the construction of the Chateaugay Project. In
October 1998, the Chateaugay Partnership and the Authority signed a
Cooperation and Termination Agreement with respect to the proposed
termination of the power purchase agreement, the payment or defeasance of
the Series 1991A Bonds, and the disposition of the Chateaugay Project.

On March 24, 1999, the Chateaugay Partnership entered into and consummated
a number of agreements under which the Chateaugay Partnership (i)
terminated the power purchase agreement, (ii) received a payment from an
affiliate of Citizens Power LLC, a Delaware limited liability company, in
connection with such termination, (iii) sold substantially all its rights
in the Chateaugay Project to an affiliate of Boralex, Inc., a Quebec
corporation, (iv) terminated its relationship with the Authority pursuant
to the Termination Agreement, (v) satisfied in full all of its obligations
with respect to the Series 1991A Bonds, and (vi) terminated certain
agreements entered into in connection with the Chateaugay Project relating,
among other matters, to the operation and administration of the Project.

The Company has been released from the Chateaugay Project debt, and the
liabilities relating to the Chateaugay Project included in other notes
payable of $1,060,000 at December 31, 1998 have been paid in full. (See
Note 7). The Company received net cash of approximately $2,050,000.

6. Investment in Partnership and Associated Payable

As of December 31, 1998, the Company owned a 50% interest in the general
partner of a Dutch limited partnership. The partnership owned a windplant
in the Netherlands. In addition, a subsidiary of the Company had a payable
to the co-general partner of the partnership of approximately $1,549,000.
On January 14, 1999, the Company transferred its 50% general partner
interest to its partner, paid $200,000 to the partner and was released from
the remainder of the payable. The transaction accounted for approximately
$1,349,000 of the Gain on disposition of subsidiaries and assets.

7. Other Notes Payable

Other notes payable at March 31, 1999 and December 31, 1998 consisted of
the following:

March 31, December 31,
1999 1998
--------- ------------
(in thousands)
Borrowings under a $1,200,000 loan agreement,
due in 1999 bearing interest at prime plus 3%
(10.75% at December 31, 1998).................... $ -- $ 1,060(1)

Note bearing interest at 7.0% due in 1999........ 6 6

Other obligations bearing interest at 9.9%
due through 1999, collateralized by equipment.... -- 5
--------- ----------
$ 6 $ 1,071
========= ==========

(1) Repaid in full on March 24, 1999 (See Note 5).

8. Income Taxes

At March 31, 1999 and December 31, 1998, the Company had net deferred tax
assets for which a valuation allowance of an equal amount has been
recognized. The deferred tax benefit at March 31, 1999 and December 31,
1998 of $34.8 million and $33.9 million, respectively, consists of various
tax benefits through December 31, 1998 from the Company's deconsolidated
subsidiaries.

9. Contingencies

Preferred Stock Litigation: On May 6, 1998, Quadrangle Offshore (Cayman)
LLC, and Cerberus Partners, L.P. ("Plaintiffs"), filed a Verified Complaint
for Declaratory Judgment and Injunctive Relief, in the Court of Chancery of
the State of Delaware In and For New Castle County (Civil Action No.
16362-NC). Plaintiffs allege that they were beneficial owners of Preferred
Redeemable Increased Dividend Equity Securities, 8-1/4% PRIDES, Convertible
Preferred Stock, par value $0.01 per share (the "PRIDES") of the Company,
that mandatorily converted, on May 14, 1998, into Common Stock, par value
$0.0001 per share ("Common Stock") of the Company.

Plaintiffs filed an amended complaint on July 7, 1998. Generally, the
amended complaint alleges that the Company is currently in liquidation and
was in liquidation prior to May 14, 1998, that the plaintiffs are entitled
to receive the liquidation preference of $1,012.50 per share set forth in
the Company's Certificate of Designations, Preferences, Rights and
Limitations of PRIDES (the "Certificate of Designations") in any
distribution of assets the Company may make notwithstanding that the PRIDES
mandatorily converted and ceased to be outstanding on May 14, 1998, and
that the Company breached an implied covenant of good faith and fair
dealing under the Certificate of Designations. Plaintiffs are seeking,
among other things, (i) a declaration that they are entitled to receive the
liquidation preference in any distribution of assets before any
distribution is made to holders of Common Stock and that the mandatory
conversion of the PRIDES does not operate to eliminate their right to
receive the liquidation preference, (ii) related injunctive relief, and
(iii) other unspecified damages.

The Court of Chancery entered a Temporary Restraining Order in the action
on December 28, 1998 that restrains the Company from making payments from
the proceeds of the sale of the EcoElectrica Project interest in
satisfaction of any obligations not previously disclosed in the Company's
10-K or 10-Q or their attached exhibits (except to the extent necessary for
ordinary, customary and reasonable expenses) without first providing five
business days advance notice to Plaintiffs.

A bench trial in the action was held February 16-19, 1999 before the Court
of Chancery and a ruling on the merits is expected in the third quarter of
1999.

Shareholders' Class Action: 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 PRIDES (depository shares) during the
period from April 28, 1994 (the public offering date of the PRIDES) 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.

The Court has certified a plaintiff class consisting of all persons or
entities who purchased Common Stock between September 21, 1993 and August
8, 1995 or depositary shares between April 28, 1994 and August 8, 1995,
appointed representatives of the certified plaintiff class, appointed
counsel for the certified class and certified a plaintiff and defendant
underwriter class as to the section 11 claim.

There have been two unsuccessful attempts at mediation to settle the action
and one unsuccessful settlement conference. Defendants' motion for summary
judgement is pending and no trial date has been set.

Lease Litigation: On October 1, 1998, Mellon US Leasing filed suit in San
Francisco County Superior Court against the Company. The complaint alleged
that the Company had breached an equipment lease agreement and sought
damages of approximately $100,000 and other unspecified costs and relief.
The complaint was dismissed, without prejudice, on or about March 26, 1999.

Insurance Litigation: On January 29, 1999, Travelers Insurance Company
filed a complaint against KENETECH and CNF Industries, Inc. ("CNF") in the
Superior Court, Judicial District of Hartford, Connecticut. The complaint
alleges that the defendants failed to pay premiums and other charges for
insurance coverage and services. Damages are alleged to be in excess of
$1,118,246. On April 13, 1999, the Company filed a Motion to Dismiss
challenging the exercise of personal jurisdiction and a Request to Revise.
A hearing on the Motion and Request is pending.

Other: 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.

Settled Litigation

Westinghouse Litigation: C. N. Flagg & Co, Incorporated ("C.N. Flagg"), a
wholly-owned subsidiary of CNF, instituted legal proceedings against, among
others, Westinghouse Electric Corporation ("Westinghouse") in March, 1997,
in the U.S. Federal District Court in Minnesota (No. 97-617 JRT/RLE) to
recover compensation for a termination of convenience of a project C. N.
Flagg was building on behalf of Westinghouse. The parties have agreed to a
settlement and a stipulation of dismissal was filed on April 27, 1999. C.N.
Flagg has received approximately $690 thousand from Westinghouse after
payment of outstanding counter claims, liens and amounts to subcontractors
and suppliers to the project.

NTS Litigation: On May 6, 1998, National Technical Services, Inc. ("NTS")
filed a complaint in the Superior Court of California, County of
Sacramento, against CNF Constructors, Inc., among others, alleging breach
of contract related to labor and materials provided by NTS in connection
with a power plant being constructed by CNF Constructors, Inc. for the
Sacramento Power Authority. The parties have settled the action in exchange
for the payment of $457,000 to NTS and a dismissal with prejudice has been
filed.

10. PRIDES Dividend

On March 23, 1999, the Board of Directors of the Company determined,
pursuant to the terms of the Certificate of Incorporation of the Company,
to pay cash in an amount equal to all accrued and unpaid dividends on each
share of PRIDES, to and including May 14, 1998 (the "Mandatory Conversion
Date"), which resulted in a payment of $4.1775 per depositary share. The
payment was made on April 14, 1999, to the persons in whose names
depositary receipts evidencing the depositary shares were registered on the
books of the Depositary, ChaseMellon Shareholder Services, L.L.C., on the
Mandatory Conversion Date. The total payment by the Company was
$21,408,016.

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). Historically, the Company developed, constructed,
financed, operated, managed and sold independent power projects and
manufactured wind turbines.

The Company experienced severe constraints on its liquidity beginning in
late 1995. In an effort to relieve such constraints, KWI filed for
protection under Chapter 11 of the Federal Bankruptcy Code on May 29, 1996,
reporting an excess of liabilities over its assets. The Chapter 11 filing
of KWI materially adversely affected the Company's ability to procure new
business. As a result of liquidity constraints, the Company limited its new
development activities and focused all of its activities on raising funds
for working capital and to repay debt. As of May 29, 1996, KWI ceased to be
accounted for as a consolidated subsidiary of the Company and the Company's
financial statements exclude all KWI activity after that date. KWI's Plan
of Reorganization was confirmed by the Bankruptcy Court on January 27, 1999
and became effective, as later amended, April 8, 1999. Although the Company
continues to own the common stock of KWI, the Company believes it will not
realize any value from its remaining interests in KWI other than certain
tax attributes.

In December 1998, the Company sold its EcoElectrica Project interest for
$247,000,000. An additional payment of $5 million in cash, contingent on
the successful conversion of the local tax status of EcoElectrica, L.P.,
may occur during the first six months of 1999. This amount has not been
recognized in the accompanying financial statements.

As of December 31, 1998, the Company, through KENETECH Energy Systems, Inc.
("KES"), owned a 50% indirect interest in a partnership (the "Chateaugay
Partnership"), which owned a 17.8 MW wood-fired electric generating station
developed and constructed by the Company in Chateaugay, New York (the
"Chateaugay Project"). The remaining 50% equity interest was owned by
affiliates of CMS Generation Company. The Chateaugay Project delivered
electric energy to New York State Electric & Gas Corporation under a
long-term power purchase agreement. Debt associated with the Chateaugay
Project consisted primarily of tax-exempt bonds. In July 1991, the
Chateaugay Partnership entered into an agreement with the County of
Franklin (New York) Industrial Development Authority (the "Authority")
whereby the Authority loaned the Chateaugay Partnership the proceeds of the
Authority's Series 1991A Bonds issued in the principal amount of
$34,800,000 to finance the construction of the Chateaugay Project. In
October 1998, the Chateaugay Partnership and the Authority signed a
Cooperation and Termination Agreement with respect to the proposed
termination of the power purchase agreement, the payment or defeasance of
the Series 1991A Bonds, and the disposition of the Chateaugay Project.

The Company has been released from the Chateaugay Project debt. The
liabilities relating to the Chateaugay Project included in other notes
payable of $1,060,000 at December 31, 1998 have been paid in full. The
Company received net cash of approximately $2,050,000.

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.

Results of Operations
---------------------

The consolidated financial statements of KENETECH Corporation and certain
subsidiaries as of and for the quarterly periods ending March 31, 1999 and
1998 have been prepared assuming the Company will continue as a going
concern. The Company earned net income for the first quarter of 1999 of
$3.6 million as compared to a net loss incurred for the first quarter of
1998 of $4.8 million.

Quarters ended March 31, 1999 and March 31, 1998

Quarter Ended
March 31, 1999 March 31, 1998
------------------------ ------------------------
(in millions)
Gross Gross
Revenues Costs Margins Revenues Costs Margins
-------- ----- ------- -------- ----- -------
............................
Construction services ..............$ 0.4 $ 0.1 $ 0.3 $ 2.9 $ 2.2 $ 0.7

Maintenance, management
fees and other <F1>.............. 0.1 -- 0.1 0.4 -- 0.4

Energy sales <F1> ................ -- -- -- 0.2 1.2 (1.0)
-------- ----- ------- -------- ----- -------
Total ...............................$ 0.5 $ 0.1 $ 0.4 $ 3.5 $ 3.4 $ 0.1
======== ===== ======= ======== ===== =======

The revenues and expenses recorded during the first quarter of 1999
represent revenue realized and expenses incurred upon the settlement of
certain disputes involving construction projects (see Item 1, Note 9,
Contingencies). There were no revenues from active construction projects
for the quarter ended March 31, 1999, a decrease from $2.9 million for the
comparable period in 1998. The gross margin during the first quarter of
1998 resulted from change orders that were finalized during that period.
The Company's construction subsidiary is not working on any construction
projects, has no employees and is in the process of disposing of its
remaining assets and liabilities.

There were no maintenance, management fees and other revenues in the first
quarter of 1999 other than delayed collection of $83 thousand in
development and administrative fees, a decrease from $400 thousand during
the first quarter of 1998. On June 30, 1998, KENETECH Facilities
Management, Inc.'s (KFM), a wholly-owned subsidiary of the Company which
performed operations and maintenance of thermal power plants, sole
remaining contract with a third party expired and was not renewed by the
owner of the power plant. Additionally, in conjunction with the sale of the
Hartford Hospital Project, the operations and maintenance contract held by
KFM was terminated. As a result, KFM has no further business activity or
employees and will be wound up in due course.

There were no energy sales in the first quarter of 1999 because the Company
sold the Hartford Hospital Project in June 1998. Energy sales experienced
an excess of expenses over revenues of $1.0 million for the first quarter
of 1998 due to the sporadic operation of the Hartford Hospital Project
turbines.

Project development and marketing expenses decreased to $61 thousand for
the quarter ended March 31, 1999 from $400 thousand for the comparable
period in 1998. Project development expenses decreased because the Company
was only marketing the Chateaugay Project during the first quarter 1999,
but had actively marketed its interest in the EcoElectrica Project in 1998.

General and administrative expenses increased to $2.2 million for the
quarter ended March 31, 1999 from $845 thousand for the comparable period
in 1998 due principally to (i) an increase in legal expenses associated
with the PRIDES litigation, (ii) severance of several senior personnel,
(iii) additional expense due to preparation of the federal income tax
return earlier in the year than is customary, and (iv) a change of
accounting system and costs related to archiving files on a non-Y2K
compliant legacy system.

Interest expense decreased to zero for the quarter ended March 31, 1999
from $3.6 million for the comparable period in 1998 primarily due to the
repayment in December 1998 of the Senior Secured Notes (including accrued
interest) and the EcoElectrica Project development loan payable in
conjunction with the Company's sale of its interest in the EcoElectrica
Project.

The Company accounts for income taxes using the asset and liability
approach for financial accounting and reporting for income taxes. The
Company reported no income tax expense or benefit for the periods ended
March 31, 1999 and 1998. No tax benefit was recognized for the March 31,
1998 loss, since the valuation allowance was recorded. No tax expense for
the March 31, 1999 income was recognized because of the benefit of
available subsidiary losses. In the quarter ended March 31, 1999, the
Company made a $1.2 million federal 1998 extension payment.

Liquidity and Capital Resources
-------------------------------

Operating activities

During the first quarter of 1999, operating activities used cash of $3.5
million, principally for the items mentioned in the discussion of General
and administrative expenses above, making an extension federal tax payment
for 1998 and settling accounts payable associated with disputed contracts.

Investing activities

During the first quarter of 1999, investment activities provided cash of
$2.9 million, substantially from the sale of the Chateaugay Project.

Financing activities

During the first quarter of 1999 the Company repaid $1.1 million of notes
payable, substantially related to the Chateaugay Project (see Note 5 of
Item 1).

Future Activities

As of March 31, 1999, the Company has completed its activities to raise
funds for working capital purposes, has disposed of substantially all its
operating assets and has repaid substantially all of its indebtedness for
borrowed money. The Company currently has substantial cash balances, may
have substantial net operating income tax losses to carry forward to future
years and is managing significant litigation (see Item 1, Note 9,
Contingencies). Management is currently charting the future direction of
the Company. It is likely that the Company's future business will be in the
energy or real estate industries. The Company has retained professionals to
assist it in the identification and evaluation of business opportunities.

Effect of Year 2000

The Company recently upgraded its accounting system and other systems to be
Year 2000 compliant. The Company's historical tax and accounting systems
are not Year 2000 compliant and the cost to convert the current system to
be Year 2000 compliant is expected to exceed one million dollars. The
Company may require such historical data for purposes of a federal or state
income tax audit. Prior to the end of 1999, the Company will either
undertake such a conversion of its historical accounting and tax data or
will make such other accommodation to properly effect any audit required.
The Company has not assessed and cannot predict to what extent its results
of operations, financial condition or business may be adversely affected if
third parties with whom the Company has a material relationship are not
compliant.

Part II OTHER INFORMATION

Item 1. Legal Proceedings.

See discussion under Note 8 of Item 1 incorporated herein by reference.

Item 2. Changes in Securities and Use of Proceeds.

On May 4, 1999, the Board of Directors of the Company declared a dividend
of one preferred share purchase right (a "Right") for each outstanding
share of common stock, par value $.0001 per share, of the Company (the
"Common Stock"). The dividend was payable on May 13, 1999 to the
stockholders of record on May 5, 1999 (the "Record Date"). Each Right
entitles the registered holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating Preferred Stock,
par value $.01 per share, of the Company (the "Preferred Stock") at a price
of $10 per one one-thousandth of a share of Preferred Stock (the "Purchase
Price"), subject to adjustment. The description and terms of the Rights are
set forth in a Rights Agreement dated as of May 4, 1999, as the same may be
amended from time to time (the "Rights Agreement"), between the Company and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the "Rights
Agent").

The Rights are not exercisable until the earlier to occur of (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons (with certain exceptions, an "Acquiring Person") has
acquired beneficial ownership of 15% or more of the outstanding shares of
Common Stock or (ii) 10 business days (or such later date as may be
determined by action of the Board of Directors prior to such time as any
person or group of affiliated persons becomes an Acquiring Person)
following the commencement of, or announcement of an intention to make, a
tender offer or exchange offer the consummation of which would result in
the beneficial ownership by a person or group of 15% or more of the
outstanding shares of Common Stock (the earlier of such dates being called
the "Distribution Date"). The Rights will expire on May 4, 2009 (the "Final
Expiration Date"), unless the Final Expiration Date is advanced or extended
or unless the Rights are earlier redeemed or exchanged by the Company, in
each case as described below.

Shares of Preferred Stock purchasable upon exercise of the Rights will not
be redeemable. Each share of Preferred Stock will be entitled, when, as and
if declared, to a minimum preferential quarterly dividend payment of the
greater of (a) $10 per share, and (b) an amount equal to 1000 times the
dividend declared per share of Common Stock. In the event of liquidation,
dissolution or winding up of the Company, the holders of the Preferred
Stock will be entitled to a minimum preferential payment of the greater of
(a) $10 per share (plus any accrued but unpaid dividends), (b) an amount
equal to 1000 times the payment made per share of Common Stock. Each share
of Preferred Stock will have 1000 votes, voting together with the Common
Stock. Finally, in the event of any merger, consolidation or other
transaction in which outstanding shares of Common Stock are converted or
exchanged, each share of Preferred Stock will be entitled to receive 1000
times the amount received per share of Common Stock. These rights are
protected by customary antidilution provisions.

In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereupon become
void), will thereafter have the right to receive upon exercise of a Right
that number of shares of Common Stock having a market value of two times
the exercise price of the Right.

In the event that, after a person or group has become an Acquiring Person,
the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are
sold, proper provisions will be made so that each holder of a Right (other
than Rights beneficially owned by an Acquiring Person which will have
become void) will thereafter have the right to receive upon the exercise of
a Right that number of shares of common stock of the person with whom the
Company has engaged in the foregoing transaction (or its parent) that at
the time of such transaction have a market value of two times the exercise
price of the Right.

At any time after any person or group becomes an Acquiring Person and prior
to the earlier of one of the events described in the previous paragraph or
the acquisition by such Acquiring Person of 50% or more of the outstanding
shares of Common Stock, the Board of Directors of the Company may exchange
the Rights (other than Rights owned by such Acquiring Person which will
have become void), in whole or in part, for shares of Common Stock or
Preferred Stock (or a series of the Company's preferred stock having
equivalent rights, preferences and privileges), at an exchange ratio of one
share of Common Stock, or a fractional share of Preferred Stock (or other
preferred stock) equivalent in value thereto, per Right.

At any time prior to the time an Acquiring Person becomes such, the Board
of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price") payable, at the
option of the Company, in cash, shares of Common Stock or such other form
of consideration as the Board of Directors of the Company shall determine.
The redemption of the Rights may be made effective at such time, on such
basis and with such conditions as the Board of Directors in its sole
discretion may establish. Immediately upon any redemption of the Rights,
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.

Until a Right is exercised or exchanged, the holder thereof, as such, will
have no rights as a stockholder of the Company, including, without
limitation, the right to vote or to receive dividends.

Item 5. Other Information.

On or about April 29, 1999, Campus, LLC ("Campus"), initiated a tender
offer for up to two million shares of common stock ("Common Stock") of the
Company, together with certain legal rights for thirty cents ($.30) per
share (the "Offer"). Campus is interested in purchasing only shares of
Common Stock that were received by holders of the Company's preferred stock
(the "PRIDES") when the PRIDES were manditorily converted into Common Stock
on May 14, 1998.

The Board of Directors of the Company (the "Board") has recommended to the
targeted stockholders that they reject the offer of Campus for their Common
Stock. The Board believes that the fair market value of the Common Stock is
greater than thirty cents ($.30) per share, the amount of Campus's Offer.

Item 6. Exhibits and Reports on Form 8-k.

(a) Exhibits

3(i) Articles of Incorporation.

27 Financial Data Schedule.

(b) Reports on Form 8-k

The Company filed a Report on Form 8-k dated January 6, 1999 that
disclosed the sale of the Company's indirect interest in the
EcoElectrica Project under Item 2, Acquisition or Disposition of
Assets, and another Report on Form 8-k dated March 26, 1999 that
disclosed the declaration of the PRIDES dividend, paid April 14, 1999
under Item 5, Other Events.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

KENETECH Corporation

By:
Date: May 14, 1999 Mark D. Lerdal
President, Chief Executive Officer
and Principal Accounting Officer

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

KENETECH Corporation

By: /s/ Mark D. Lerdal
Date: May 14, 1999 Mark D. Lerdal
President, Chief Executive Officer
and Principal Accounting Officer