PowerGen takes full control of Kinetica

PowerGen, the privatised electricity generator, unexpectedly moved yesterday to take full control of Kinetica, its troubled gas joint venture with Conoco, which has been struggling under a burden of loss making supply contracts, writes Chris Godsmark.

The news did not impress investors, coming on top of analysts' downgrades. PowerGen shares dropped 17p to 586.5p.

Conoco, part of the giant US DuPont chemical empire, said the parting had been "entirely amicable". PowerGen will not pay any cash but will spend pounds 18m paying off Conoco's share of Kinetica's debts. Michael Harries, PowerGen's director of marketing, will be responsible for the gas business and Kinetica's managing director, Norman Ellis, will leave the company.

The "take or pay" contracts to buy gas at inflated prices, similar to British Gas's, will be shared roughly equally between PowerGen and Conoco. They account for about 80 per cent of the 960 million therms of gas sold by Kinetica last year.

Kinetica, formed in 1990, was caught out when the market price of gas crashed in 1995 from 20p a therm to less than 10p. PowerGen also confirmed plans to make a pounds 69m exceptional charge in its accounts this year to cover the losses. Kinetica lost about pounds 20m in 1995.