FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2000
Commission file Number 0-21304
RIDGEWOOD ELECTRIC POWER TRUST II
(Exact name of registrant as specified in its charter.)
Delaware 22-3206429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
947 Linwood Avenue, Ridgewood, New Jersey 07450-2939
------------------------------------------ ----------------
(Address of principal executive offices) (Zip Code)
(201) 447-9000
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Registrant's telephone number, including area code:
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 [ ]
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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Ridgewood Electric Power Trust II
Financial Statements
September 30, 2000
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Ridgewood Electric Power Trust II
Balance Sheet
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September 30, December 31,
2000 1999
------------ ------------
(unaudited)
Assets:
Investments in power generation projects .. $ 10,576,281 $ 10,274,790
Cash and cash equivalents ................. 116,514 537,541
Notes receivable from sale of investment .. 1,398,145 1,729,181
Other assets .............................. 2,818 3,306
------------ ------------
Total assets ............................. $ 12,093,758 $ 12,544,818
------------ ------------
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses ..... $ 44,735 $ 49,923
Borrowings under line of credit agreements -- 400,000
Due to affiliates ......................... 106,822 153,191
------------ ------------
Total liabilities ........................ 151,557 603,114
------------ ------------
Commitments and contingencies
Shareholders' equity:
Shareholders' equity (235.3775 shares
issued and outstanding) .................. 12,024,022 12,023,530
Managing shareholder's accumulated deficit (81,821) (81,826)
------------ ------------
Total shareholders' equity ............... 11,942,201 11,941,704
------------ ------------
Total liabilities and shareholders' equity $ 12,093,758 $ 12,544,818
------------ ------------
See accompanying note to financial statements.
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Ridgewood Electric Power Trust II
Statement of Operations (unaudited)
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Nine Months Ended Three Months Ended
------------------- ------------------
September 30, September 30,
2000 1999 2000 1999
-------- -------- -------- --------
Revenue:
Income from power
generation projects .... $433,281 $221,702 $113,996 $ 57,884
Other income ............ 22,416 -- 5,703 --
Interest income ......... 104,751 123,722 31,514 39,313
-------- -------- -------- --------
Total revenue ..... 560,448 345,424 151,213 97,197
-------- -------- -------- --------
Expenses:
Accounting and legal fees 42,863 38,972 21,570 12,519
Management fee .......... -- 55,607 -- --
Interest expense ........ 9,063 24,094 -- 8,705
Miscellaneous ........... 31,716 54,918 16,305 7,872
-------- -------- -------- --------
Total expenses .... 83,642 173,591 37,875 29,096
-------- -------- -------- --------
Net income .............. $476,806 $171,833 $113,338 $ 68,101
-------- -------- -------- --------
See accompanying note to financial statements.
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Ridgewood Electric Power Trust II
Statement of Changes in Shareholders' Equity (unaudited)
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Managing
Shareholders Shareholder Total
------------ ------------ -----------
Shareholders' equity,
December 31, 1999 ...... $ 12,023,530 $ (81,826) $ 11,941,704
Distributions ........... (471,546) (4,763) (476,309)
Net income for the period 472,038 4,768 476,806
------------ ------------ ------------
Shareholders' equity,
September 30, 2000 ..... $ 12,024,022 $ (81,821) $ 11,942,201
------------ ------------ ------------
See accompanying note to financial statements
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Ridgewood Electric Power Trust II
Statement of Cash Flows (unaudited)
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Nine Months Ended
-----------------------
September 30, September 30,
2000 1999
--------- ---------
Cash flows from operating activities:
Net income ................................. $ 476,806 $ 171,833
--------- ---------
Adjustments to reconcile net
income to net cash flows from
operating activities:
Additional investment in power
generation projects, net ................. (301,491) (11,420)
Proceeds from note receivable ............. 331,036 305,665
Changes in assets and liabilities:
Decrease in due from affiliates .......... -- 8,819
Decrease in other assets ................. 488 1,315
Decrease in accounts payable and
accrued expenses ........................ (5,188) (65,434)
(Decrease) increase in due to affiliates . (46,369) 246,680
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Total adjustments ........................ (21,524) 485,625
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Net cash provided by operating activities 455,282 657,458
--------- ---------
Cash flows from financing activities:
Cash distributions to shareholders ........ (476,309) (285,305)
Repayment of line of credit facility ...... (400,000) (450,000)
Borrowing under line of credit facility ... -- 150,000
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Net cash used in financing activities .... (876,309) (585,305)
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Net (decrease) increase in cash
and cash equivalents ...................... (421,027) 72,153
Cash and cash equivalents, beginning of year 537,541 --
--------- ---------
Cash and cash equivalents, end of period ... $ 116,514 $ 72,153
--------- ---------
See accompanying note to financial statements.
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Ridgewood Electric Power Trust II
Note to Financial Statements (unaudited)
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1. General
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, which consist of normal recurring adjustments,
necessary for the fair presentation of the results for the interim periods.
Additional footnote disclosure concerning accounting policies and other manners
are disclosed in Ridgewood Electric Power Trust II's financial statements
included in the 1999 Annual Report on Form 10-K, which should be read in
conjunction with these financial statements. Certain prior year amounts have
been reclassified to conform to the current year presentation.
The results of operations for an interim period should not necessarily be taken
as indicative of the results of operations that may be expected for a twelve
month period.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Dollar amounts in this discussion are rounded to the nearest $1,000.
Introduction
The Trust carries its investment in Projects at fair value and does not
consolidate its financial statements with the financial statements of the
Projects. Revenue is recorded by the Trust as cash distributions are received
from the Projects. Trust revenues may fluctuate from period to period depending
on the operating cash flow generated by the Projects and the amount of cash
retained by the Projects to fund capital expenditures.
Results of Operations
As summarized below, total revenue increased 62.3% to $560,000 in the first nine
months of 2000 compared to $345,000 in the same period in 1999, primarily
because of higher distributions from the Columbia projects. Revenue also
increased 55.7% to $151,000 in the third quarter of 2000 compared to $97,000 in
the same period in 1999, mainly due to the Monterey Project.
Project
-------
Nine months ended September 30, Three months ended September 30,
------------------- -------------------
2000 1999 2000 1999
-------- -------- -------- --------
Monterey ...... $224,000 $167,000 $114,000 $ 31,000
Columbia ...... 200,000 -- -- --
Pump Services . 9,000 54,000 -- 27,000
Other income .. 22,000 -- 5,000 --
Interest income 105,000 124,000 32,000 39,000
-------- -------- -------- --------
$560,000 $345,000 $151,000 $ 97,000
-------- -------- -------- --------
The nine months ended increase in Monterey revenue for September 30 is
attributable to higher energy sales. The improvement in the third quarter was
primarily due to lower legal fees associated with the proceedings with Pacific
Gas & Electric Company (see Legal Proceedings below).
The increase in revenues from Columbia reflects increased revenues at the
project level from disposal of construction and demolition material as well as
the timing of distributions from the project to the Trust.
The decrease in distributions from the Pump Services investment reflects the
lower sales and the higher cost of diesel and natural gas fuel in 2000.
Other income reflects the reimbursement of the Trust's legal defense costs from
a lawsuit that was dismissed in a prior year.
Interest income declined primarily because interest represents a smaller portion
of the constant monthly payment from the note received from the sale of the San
Diego project in 1997.
Total expenses decreased $90,000 (51.7%) to $84,000 fort the first nine months
of 2000 compared to the same period in 1999 reflecting a lower management fee,
which was waived beginning in April 1999.
Liquidity and Capital Resources
In 1997, the Trust and Fleet Bank, N.A. (the "Bank") entered into a revolving
line of credit agreement, whereby the Bank provides a three year committed line
of credit facility of $750,000. Outstanding borrowings bear interest at the
Bank's prime rate or, at the Trust's choice, at LIBOR plus 2.5%. The credit
agreement requires the Trust to maintain a ratio of total debt to tangible net
worth of no more than 1 to 1 and a minimum debt service coverage ratio of 2 to
1. The credit facility was obtained in order to allow the Trust to operate using
a minimum amount of cash, maximize the amount invested in Projects and maximize
cash distributions to shareholders. Borrowings under the credit facility of
$400,000 at December 31, 1999 were repaid in the quarter ended March 31, 2000.
Obligations of the Trust are generally limited to payment of the management fee
to the Managing Shareholder, payments for certain accounting and legal services
to third persons and distributions to shareholders of available operating cash
flow generated by the Trust's investments.
The Trust anticipates that its cash flow from operations during 2000 will be
adequate to fund its obligations.
Forward-looking statement advisory
This Quarterly Report on Form 10-Q, as with some other statements made by the
Trust from time to time, contains forward-looking statements. These statements
discuss business trends and other matters relating to the Trust's future results
and the business climate and are found, among other places, in the note to
financial statements and at Part I, Item 2, Management's Discussion and
Analysis. In order to make these statements, the Trust has had to make
assumptions as to the future. It has also had to make estimates in some cases
about events that have already happened, and to rely on data that may be found
to be inaccurate at a later time. Because these forward-looking statements are
based on assumptions, estimates and changeable data, and because any attempt to
predict the future is subject to other errors, what happens to the Trust in the
future may be materially different from the Trust's statements here.
The Trust therefore warns readers of this document that they should not rely on
these forward-looking statements without considering all of the things that
could make them inaccurate. The Trust's other filings with the Securities and
Exchange Commission and its Confidential Memorandum discuss many (but not all)
of the risks and uncertainties that might affect these forward-looking
statements.
Some of these are changes in political and economic conditions, federal or state
regulatory structures, government taxation, spending and budgetary policies,
government mandates, demand for electricity and thermal energy, the ability of
customers to pay for energy received, supplies of fuel and prices of fuels,
operational status of plant, mechanical breakdowns, availability of labor and
the willingness of electric utilities to perform existing power purchase
agreements in good faith. Some of the cautionary factors that readers should
consider are described in the Trust's most recent Annual Report on Form 10-K.
By making these statements now, the Trust is not making any commitment to revise
these forward-looking statements to reflect events that happen after the date of
this document or to reflect unanticipated future events.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Please refer to Item 3 of the Trust's Annual Report on Form 10-K for the year
1999 for a description of the litigation between Pacific Gas and Electric
Company ("PGE") and the Trust's subsidiary that owns the Monterey Project. As
previously disclosed in the Trust's most recent Quarterly Report on Form 10-Q
dated August 14, 2000, PGE dismissed without prejudice the litigation in the
California state courts and intended to file before the Federal Energy
Regulatory Commission ("FERC"). On October 16, 2000, PGE began a proceeding at
FERC requesting that FERC declare that the Monterey Project is not and has not
been a qualifying facility since 1991. Further, PGE might be entitled to cancel
the power purchase contract and end future capacity payments to the Project. In
addition, PGE is requesting over $800,000 in refunds from the project, alleging
that the Project was not entitled to preferential California natural gas
transportation rates given to qualifying facilities.
The Trust believes that it has a strong legal and engineering case that proves
that the Monterey Project has been and is a qualifying facility and that PGE is
not entitled to any relief. The Trust is defending the Project vigorously. The
administrative proceedings before FERC are likely to be prolonged, but PGE is
obligated to honor the existing power purchase agreement while they are pending.
Proceedings before an expert government agency should be materially less
expensive than the prior costs of litigation in California. There are, however,
many uncertainties in any agency proceeding and those costs might be
significantly higher than expected.
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SIGNATURES
Pursuant to the requirement 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.
RIDGEWOOD ELECTRIC POWER TRUST II
Registrant
November 13, 2000 By /s/ Christopher I. Naunton
Date Christopher I. Naunton
Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial
officer)
