UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission File Number 0-23432
RIDGEWOOD ELECTRIC POWER TRUST III
(Exact name of registrant as specified in its charter.)
Delaware, U.S.A. 22-3264565
(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)
Registrant's telephone number, including area code:(201) 447-
9000
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 [ ]
<PAGE>
PART I. - FINANCIAL INFORMATION
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST III
BALANCE SHEETS
(Unaudited)
<CAPTION>
<S> <C> <C>
September 30, December 31,
1996 1995
Assets
Cash and cash equivalents $ 3,198,285 $ 10,972,576
Investments in power
project partnerships 28,163,792 20,884,493
Due from affiliates 70,844 299,194
Other assets _____259,439 _____444,172
Total assets $ 31,692,360 $ 32,651,668
Liabilities and Share-
holders' Equity
Accounts payable and
accrued expenses $ 30,000 $ 72,442
30,000 72,442
Shareholders' equity
(391.8444 shares issued
and outstanding) 31,676,780 32,584,476
Managing shareholder's
accumulated deficit _____(14,420) _____(5,250)
Total shareholders' equity __31,662,360 __32,579,226
Total liabilities and
shareholders' equity $ 31,692,360 $ 32,651,668
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST III
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS AND QUARTERS
ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
(Unaudited)
<CAPTION>
Nine months ended September 30, 1996
Quarter ended September 30, 1996
Nine months ended September 30, 1995
Quarter ended September 30,
1995
<S> <C> <C> <C>
<C>
Income from power genera-
tion projects $ 2,198,445 $ 1,171,161 $
238,648 $ 238,648
Dividend and interest
income 199,244 (4,715)
897,310 331,838
Total income 2,397,689 1,166,446
1,135,958 331,838
Management fee 594,872 198,542
274,465 274,465
Project due diligence
expense 0 0
4,703 2,143
Administrative and
other expenses 42,075 10,468
72,038 71,135
Investment fee 0 0
343,779 3,418
Total expenses 636,947 209,010
694,985 351,161
Net income (loss) $ 1,760,742 $ 957,436 $
440,973 $ (19,323)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST III
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS AND QUARTERS ENDED SEPTEMBER 30, 1996
AND SEPTEMBER 30, 1995
(Unaudited)
<CAPTION>
Nine months ended September 30, 1996
Quarter ended September 30, 1996
Nine months ended
September 30, 1995
Quarter ended September 30, 1995
<S> <C> <C>
<C> <C>
Cash flows from operating
activities:
Net income $ 1,760,742 $ 957,436
$ 440,973 $ (143,596)
Adjustments to
reconcile net income
to cash provided (used)
in operating activities:
Changes in assets &
liabilities:
Increase (decrease) in
due from affiliates 228,350 (55,701)
0 0
Decrease (increase)in
interest receivable 51,233 30,000
(199,881) (88,229)
Decrease (increase) in
other assets 139,898 (28,583)
301,904 381,941
Increase (decrease) in
due to unconsolidated
subsidiary 0 0
0 0
Increase (decrease) in
accounts payable and
accrued expenses (42,442) 10,000
110,004 145,393
Net cash (used in) provided
by operating activities
before investments 2,182,616 941,735
518,998 295,509
Total adjustments 421,874 (44,284)
78,025 439,105
Return (purchase) of
investments in power
generation partnerships (7,279,299) 55,700
(21,405,206) (13,352,372)
Net cash (used in) provided
by operating activities (5,096,683) 968,852
(20,886,208) (13,056,863)
Cash provided by (used by)
financing activities:
Net proceeds from the sale
of Trust shares 0 0
14,794,500 (310,000)
Cash distributions to
Shareholders (2,677,608) (1,020,764)
(1,126,205) (455,675)
(2,677,608) (1,020,764)
13,668,795 765,675
Net increase (decrease)
in cash and cash
equivalents (7,774,291) (51,912)
(7,217,413) (470,166)
Cash and cash equivalents
- Beginning of period 10,972,576 3,221,614
18,237,615 24,442,677
Cash and cash equivalents
- - End of period $ 3,198,285 $ 3,198,285 $
11,020,202 $ 23,972,511
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
RIDGEWOOD ELECTRIC POWER TRUST III
NOTES TO FINANCIAL STATEMENTS
1. Organization and Purpose
Nature of business
Ridgewood Electric Power Trust III (the "Trust") was formed
as a Delaware business trust on December 6, 1993 by
Ridgewood Energy Holding Corporation acting as the Corporate
Trustee. The managing shareholder of the Trust is Ridgewood
Power Corporation. The Trust began offering shares on
January 3, 1994. The Trust commenced operations on April
16, 1994 and discontinued its offering of Trust shares on
May 31, 1995.
The Trust has been organized to invest in independent power
generation facilities and in the development of these
facilities. These independent power generation facilities
will include cogeneration facilities which produce both
electricity and thermal energy and other power plants that
use various fuel sources (except nuclear). The power plants
sell electricity and thermal energy to utilities and
industrial users under long-term contracts.
"Business Development Company" election
Effective April 16, 1994, the Trust elected to be treated as
a "Business Development Company" under the Investment
Company Act of 1940 and registered its shares under the
Securities Exchange Act of 1934.
2. Summary of Significant Accounting Policies
Investments in power generation projects
The Trust holds investments in power generating projects
which are stated at fair value. Due to the illiquidity of
the investments, the fair values of the investments are
assumed to equal cost unless current available information
provides a basis for adjusting the value of the investments.
The Trust had the following investments in power generation
projects:
<PAGE>
RIDGEWOOD ELECTRIC POWER TRUST III
NOTES TO FINANCIAL STATEMENTS
June 30, Fair Values
as of
1996 December 31,
1995
Power generation projects:
JRW Associates, L.P. $ 5,305,298 $ 5,305,298
Byron Power Partners, L.P. 3,138,072 2,958,072
Providence Power 7,130,000 ---
EUA Projects:
Ridgewood/Rhode Island PPLP 3,722,618 3,722,618
Ridgewood/Massachusetts PPLP 3,223,881 3,223,881
Ridgewood/Elmsford PPLP 1,430,136 1,430,136
Other EUA Project Partnerships 4,269,487 4,244,488
TOTALS $ 28,219,492 $ 20,884,493
Revenue Recognition
Income from investments is recorded when received.
Interest and dividend income are recorded as earned.
Cash and cash equivalents
The Trust considers monies invested in a U.S. Treasury Bills
Fund with daily liquidation privileges to be a cash
equivalent.
Due diligence costs relating to potential power projects
Costs relating to the due diligence performed on potential
power projects are initially deferred, until such time as
the Trust determines whether or not it will make an
investment in the respective project. Those costs relating
to an accepted project are capitalized and those costs
relating to a rejected project are expensed at that time.
Income taxes
No provision is made for income taxes in the accompanying
financial statements as the income or loss of the Trust is
included in the tax returns of the individual shareholders.
Reclassification
Certain items in previously issued financial statements have
been reclassified for comparative purposes.
<PAGE>
RIDGEWOOD ELECTRIC POWER TRUST III
NOTES TO FINANCIAL STATEMENTS
3. Recent Investment in Power Generation Project.
The Trust, together with Ridgewood Electric Power Trust IV,
formed a partnership, Ridgewood Providence Power Partners,
L.P. ("RPLP") to acquire certain of the assets of Northeast
Landfill Power Joint Venture, which owns and operates a 12.3
(net) megawatt landfill gas-fired electric generation
facility located in Johnston, Rhode Island. This
acquisition was completed on April 16, 1996. The Trust's
investment, including provision of funds to perform post-
acquisition improvements to the plant and increase the
salable electric power, was about $7.1 million for a 36%
interest in RPLP. Ridgewood Electric Power Trust IV
invested about $12.9 million for a 64% interest. As part of
the acquisition cost, RPLP assumed three non-recourse notes,
totaling $6.3 million, payable to insurance companies and
maturing in September 2004, at a 9.6% annual interest rate.
The monthly installments total about $2.1 million annually.
RIDGEWOOD ELECTRIC POWER TRUST III
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q, like some other
statements made by the Trust from time to time, has forward-
looking statements. These statements discuss business
trends and other matters relating to the Trust's future
results and the business climate. 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.
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.
Nine months ended September 30, 1996 versus nine months ended
September 30, 1995
Results of Operations
The Trust's net income of $2,198,445 for the first nine
months of 1996 reflects the effects of the winding up of its
investment efforts in April 1996 with the acquisition of a
34.1% interest in the Providence Project, a 12 megawatt
capacity electric power plant located near Providence, Rhode
Island and fueled by landfill gas. The 1996 period's net
income was comprised of $2,198,445 of income from the power
plants owned by the Trust and $199,244 of dividend and
interest income, while comparable period net income for 1995
of $1,135,958 was comprised of $238,648 of income from
newly-purchased power Projects and $897,310 of dividend and
interest income on funds awaiting investment. The Trust
anticipates that dividend and interest income for the
remainder of 1996 will be less than in the first nine months
of the year because of the reduced amount of Trust funds
earning interest.
Income and cash flow earned by the Projects located in
California is seasonal, peaking in the third quarter of the
calendar year as summer heat increases demand for
electricity and falling in the fourth and first quarters,
when the Trust tends to schedule major maintenance. In
addition, during the first quarter of 1996, cash flow from
the EUA Projects purchased by the Trust in late 1995 was
retained to increase working capital. The Trust made
additional capital contributions to fund capital investments
to these Projects.
The pattern of expenses changed from the first nine months
of 1995 to the 1996 period as the Trust ended its investing
activities and became an operating company. Total expenses
decreased 8.4% ($58,000) as the Trust began paying the
management fee ($595,000 in the 1996 period and $275,000 in
the 1995 period) to the Managing Shareholder and ceased
payment of the investment fee ($344,000 in the 1995 period).
The other major component of the expenses was administrative
and other expenses, which decreased by $30,000 (41.6%) from
the 1995 period to the 1996 period. The higher 1995 amount
reflected costs of setting up accounting and other systems
for the Trust as Projects were acquired.
The Trust does not consolidate its financial statements with
those of the Projects it owns and does not include the
Projects' revenue, expense and other items in its financial
statements. Revenue from Projects is only recognized as it
is received as distributions by the Trust, and thus revenues
may fluctuate as the result of delays or accelerations of
distributions from Projects.
Liquidity and Capital Resources
Substantially all of the Trust's remaining uninvested funds
were applied to the purchase of a 35.7% limited partner's
interest in a limited partnership which has acquired the
Providence Project in Rhode Island, as reported in the
Trust's Current Report on Form 8-K for April 16, 1996.
The Trust has contributed $1.6 million of funds which have
been reserved by the limited partnership for maintenance,
future capital improvements and expansion of the Project.
The Trust believes that those funds held in reserve,
together with funds contributed to the limited partnership
under the same terms and conditions by Ridgewood Electric
Power Trust IV, a similar program sponsored by the Managing
Shareholder, and future cash flow are adequate to fund all
contemplated improvements.
With the investment in the Providence Project, the Trust has
substantially completed its investment program. The Trust
anticipates that remaining capital needs for the other
Projects it owns will be limited to routine maintenance and
repairs that can be funded from operating cash flow.
Certain Industry Trends
The industry trend toward deregulation of the electric power
generating and transmission industries has accelerated after
the adoption of Order 888 by the Federal Energy Regulatory
Commission ("FERC") on April 24, 1996. A number of major
states in which the Trust has Projects, including
California, have adopted proposals to allow "retail
wheeling," which would allow any qualified generator to use
utility transmission and distribution networks to sell
electricity directly to utility customers. Other states,
such as Massachusetts and New York, are preparing their own
initiatives. As a result, profound changes in the industry
are occurring, marked by consolidations of utilities, large
scale spin-offs or sales of generating capacity,
reorganizations of power pools and transmission entities,
and attempts by electric utilities to recover stranded costs
and alter power purchase contracts with independent power
producers such as the Trust.
It is too early to predict the effects of these trends and
others on the Trust's business. A critical issue for the
Trust, however, is whether any action will be taken to
modify its existing power purchase contracts or to shift
costs to independent power producers. To date, neither FERC
nor the California, Massachusetts and New York authorities
have adopted measures that would impair power purchase
contracts and the Trust is not aware of any other such
action by regulatory authorities in states where it does
business.
It must be remembered, however, that legislative and
regulatory action is unpredictable and that at any time
federal or state legislatures or regulators could adopt
measures that would be materially adverse to the Trust's
business. Further, volatile market conditions could
adversely affect the Trust's operations and the actions of
other industry participants, such as electric utilities,
that affect the Trust.
<PAGE>
PART II - OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
None.
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.
RIDGEWOOD ELECTRIC POWER TRUST III
Registrant
Date: November 19, 1996 By /s/ Thomas R. Brown
Thomas R. Brown
Senior Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the Registrant's unaudited interim financial
statements for the six month period ended September 30, 1996
and is qualified in its entirety by reference to those
financial statements.
</LEGEND>
<CIK> 0000917032
<NAME> RIDGEWOOD ELECTRIC POWER TRUST III
<S> <C>
PERIOD-TYPE 9-MOS
FISCAL-YEAR-END DEC-31-1996
PERIOD-END SEP-30-1996
CASH 3,198,285
SECURITIES 28,163,792<F1>
RECEIVABLES 70,884
ALLOWANCES 0
INVENTORY 0
CURRENT-ASSETS 3,269,129
PP&E 0
DEPRECIATION 0
TOTAL-ASSETS 31,692,360
CURRENT-LIABILITIES 30,000
BONDS 0
COMMON 0
PREFERRED-MANDATORY 0
PREFERRED 0
OTHER-SE 31,662,360<F2>
TOTAL-LIABILITY-AND-EQUITY 31,692,360
SALES 0
TOTAL-REVENUES 2,397,689
CGS 0
TOTAL-COSTS 0
OTHER-EXPENSES 636,947
LOSS-PROVISION 0
INTEREST-EXPENSE 0
INCOME-PRETAX 1,760,742
INCOME-TAX 0
INCOME-CONTINUING 1,760,742
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET-INCOME 1,760,742
EPS-PRIMARY 4,493.98
EPS-DILUTED 4,493.98
<F1>Investments in power project partnerships.
<F2>Represents Investor Shares of beneficial interest in
Trust with capital accounts of $31,676,780 less managing
shareholder's accumulated deficit of $14,420.
</FN>
</TABLE>
