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 March 31, 1997
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>
<TABLE>
PART I. - FINANCIAL INFORMATION
RIDGEWOOD ELECTRIC POWER TRUST III
BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Assets
Cash and cash equivalents $ 3,223,940 $ 2,959,240
Investments in power
project partnerships 28,056,541 28,050,750
Due from affiliates 2,021 109,085
Deferred due diligence
costs 70,348 30,000
Interest receivable 16,162 0
Other assets 363,069 281,000
Total assets $ 31,732,081 $ 31,430,075
Liabilities and Share-
holders' Equity
Accounts payable and
accrued expenses $ 44,826 $ 41,136
Due to affiliates 465,752 0
510,578 41,136
Shareholders' equity
(391.8444 shares issued
and outstanding) 31,240,323 31,406,084
Managing shareholder's
accumulated deficit (18,820) (17,145)
Total shareholders' equity 31,221,503 31,388,939
Total liabilities and
shareholders' equity $ 31,732,081 $31,430,075
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST III
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS
ENDED MARCH 31, 1997 AND MARCH 31, 1996
(Unaudited)
<CAPTION>
Three months Three months
ended ended March 31,
March 31, 1997 1996
<S> <C> <C>
Income from power genera-
tion projects $ 993,034 881,507
Dividend and interest
income 46,182 71,354
Total income 1,039,216 952,861
Management fee 194,247 204,860
Project due diligence expense 3,692 0
Accounting and legal fees 9,097 10,414
Miscellaneous 4,595 2,925
Total expenses 211,631 218,199
Net income (loss) $ 827,585 $ 60,183
Allocation to:
Shareholders $ 819,310 $ 59,581
Managing shareholder 8,275 602
$ 827,585 $ 60,183
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST III
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
(Unaudited)
<CAPTION>
Three months Three months
ended ended
March 31, 1997 March 31, 1996
<S> <C> <C>
Cash flows from operating
activities:
Net income (loss) $ 827,585 $ 60,183
Adjustments to
reconcile net income
(loss) to cash provided
(used) in operating
activities:
Purchase of investments
in power generation
projects (5,791) (5,556,323)
Changes in assets &
liabilities:
Increase (decrease) in
due from affiliates 107,064 299,194
(Increase) decrease in
deferred due diligence
costs (40,348) (2,442)
(Increase) decrease in
interest receivable (16,162) 11,203
Increase in
other assets (82,069) 135,959
Increase (decrease) in
accounts payable and
accrued expenses 3,690 130,058
Increase in due to
affiliates 465,752 0
Total adjustments 432,136 (4,982,351)
Net cash used in
operating activities 1,259,721 (4,922,168)
Cash distributions to
Shareholders (955,021) (667,625)
Net cash provided by
(used in) financing
activities: (955,021) (667,625)
Net increase (decrease)
in cash and cash
equivalents 264,700 (5,589,793)
Cash and cash equivalents
- Beginning of period 2,959,240 10,972,576
Cash and cash equivalents
- - End of period $3,223,940 $5,382,783
<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 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
Interim Financials
The financial statements for the quarters ended March
31, 1997 and 1996, included herein have been prepared by the Trust
without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, these statements
reflect all adjustments (consisting only of normal recurring
entries) which are, in the opinion of management, necessary for a
fair statement of the financial results for the interim periods.
Certain information and notes normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Trust believes that the
disclosures are adequate to make the information presented not
misleading. These financial statements should be read in
conjunction with the financial statements and the notes thereto
included in the Trust's Annual Report on Form 10-K for the year
ended December 31, 1996 (Form 10-K).
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from the estimates.
Investments in power generation projects
The Trust holds investments in power generating projects, which
are stated at fair value. Due to the non-liquid nature of the
investments, the fair values of the investments are assumed to
equal cost unless current available information provides a basis
for adjusting the carrying value of the investments.
Revenue Recognition
Income from investments is recorded when received. Interest and
dividend income are recorded as earned.
<PAGE>
Ridgewood Electric Power Trust III
Notes to Financial Statements
Offering costs
Costs associated with offering Trust shares (selling commissions,
distribution and offering costs) are recorded as a reduction of
the shareholders' capital contributions.
Cash and Cash equivalents
The Trust considers all highly liquid investments with original
maturities of three months or less as cash and cash equivalents.
Due diligence costs relating to potential power project
investments
Costs relating to the due diligence performed on potential power
project investments, are initially deferred, until such time as
the Trust determines whether or not it will make an investment in
the respective project. Costs relating to completed projects are
capitalized and costs relating to rejected projects are expensed
at the time of rejection.
Income taxes
No provision is made for income taxes in the accompanying
financial statements as the income or losses of the Trust are
passed through and included in the tax returns of the individual
shareholders of the Trusts.
Reclassification
Certain items in previously issued financial statements have been
reclassified for comparative purposes.
3. Investments in Power Generation Projects
The following investments in power generation projects are
stated at fair value:
March 31, December 31,
1997 1996
Power generation projects:
JRW Associates, L.P. $ 5,305,298 $ 5,305,298
Byron Power Partners, 3,138,072 3,138,072
L.P.
Providence Power
Partners, L.P. 7,130,000 7,130,000
On-Site Cogeneration
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 On-Site Cogen-
eration Project
Partnerships 4,106,536 4,100,745
TOTALS $ 28,056,541 $ 20,050,750
JRW Associates, L.P. (known as San Joaquin Power Company)
On January 17, 1995, the Trust acquired 100% of the existing
partnership interests of JRW Associates, L.P., which owns and
operates an 8.5 megawatt electric cogeneration facility, located
in Atwater, California. The aggregate cost of the investment was
$5,305,298. The Trust received distributions of $148,117 and
$779,409 from the project for the periods ended March 31, 1997 and
December 31, 1996, respectively.
<PAGE>
Ridgewood Electric Power Trust III
Notes to Financial
Statements
Byron Power Partners, L.P. (known as Byron Power Company)
In January 1995, the Trust caused the formation of Byron Power
Partners, L.P. in which the Trust owns 100% of the existing
partnership interests. On January 17, 1995, Byron Power Partners,
L.P. acquired a 5.7 megawatt electric cogeneration facility,
located in Byron, California. The aggregate cost of the Trust's
investment in the partnership was $3,138,072. The Trust received
distributions of $99,793 and $428,540 from the project for the
periods ended March 31, 1997 and December 31, 1996, respectively.
Providence Project
In 1996, Ridgewood Providence Power Partners, L.P. was formed as a
Delaware limited partnership ("Providence Power"). The Trust
invested $7,058,700 and owns a 35.7 % limited partnership interest
in Providence Power. In addition, Ridgewood Providence Power
Corporation, was formed as a Delaware corporation ("RPPCorp.").
The Trust invested $71,300 and owns 35.7 % of the outstanding
common stock of RPPCorp., which is the sole general partner of
Providence Power.
On April 16, 1996, Providence Power purchased substantially all of
the net assets of Northeastern Landfill Power Joint Venture. The
assets acquired include a 12.3 megawatt capacity electrical
generating station, located at the Central Landfill in Johnston,
Rhode Island (the "Providence Project"). The Providence Project
includes eight reciprocating electric generator engines, which are
fueled by methane gas produced and collected from the landfill.
The electricity generate is sold to New England Power Corporation
under a long-term contract. The purchase price was $15,533,021
cash, including transaction costs and repayment of $3,000,000 of
principal on senior secured non-recourse notes payable. In
addition, Providence Power assumed the obligation to repay the
remaining principal outstanding of $6,310,404 on the senior
secured non-recourse notes payable.
Through ownership in RPPCorp. and Providence Power, the Trust owns
35.7 % of the Providence Project. The remaining 64.3 % is owned
by Ridgewood Electric Power Trust IV ("Trust IV"). Ridgewood
Power Corporation is the managing partner of the Trust and Trust
IV. The Trust received distributions of $242,427 and $562,427
from the project for the periods ended March 31, 1997 and December
31, 1996, respectively.
On-site Cogeneration Projects
On September 29, 1995, the Trust acquired a portfolio of 35
projects from affiliates of Eastern Utilities Associates ("EUA"),
which sell electricity and thermal energy to industrial and
commercial customers. The projects are held in eight limited
partnerships of which the Trust is the sole limited partner and is
the sole owner of each of the general partners. In the aggregate,
the projects have 13.7 MW of base load and 5.7 MW of backup and
standby capacity. The Trust paid a total of $11.3 million for the
projects and has invested additional amounts in working capital.
EUA operated the projects under a transition agreement until
January 1, 1996, at which time Ridgewood Power Management
Corporation, an affiliate of the Trust, assumed operational
control. The Trust received distributions of $502,697 and
$1,756,410 from these projects for the periods ended March 31,
1997 and December 31, 1996 respectively.
Ridgewood/ Rhode Island Power Partners L.P.
Ridgewood/ Rhode Island Power Partners Limited Partnership (the
"Partnership") leases three 1,400 kilowatt Cooper Superior gas
fired generator sets with heat recovery to a Rhode Island
manufacturing company under a lease expiring in 2006. Two
engines are in regular use and
<PAGE>
Ridgewood Electric Power Trust III
Notes to Financial
Statements
one engine is on standby. The partnership receives a monthly
fixed lease payment and a maintenance payment, which escalates
over the term of the lease. The Partnership is responsible for
maintaining the engines and related equipment. At the expiration
of the lease, the lessee may purchase the equipment from the
partnership for its fair market value. The Trust and customer are
currently in negotiations to revise the lease. The aggregate cost
of the Trust's investment in the partnership was $3,722,618. The
Trust received distributions of $164,189 and $572,970 from the
project for the periods ended March 31, 1997 and December 31, 1996
respectively.
Ridgewood/ Massachusetts Power Partners L.P.
Ridgewood/ Massachusetts Power Partners L.P. (the "Partnership")
owns two projects. The first is a 3.5 MW base load, simple cycle,
dual-fuel, combustion turbine powered plant with a heat recovery
steam generator which sells electric power and steam to a
manufacturing facility on whose site the plant is located. The
project includes two 1.6 MW Caterpillar diesel engine generator
sets to provide backup power. The project sells electric and
thermal energy to the manufacturing facility at the project's
production cost (as defined in the Energy Service Agreement) plus
a share of the savings (the difference between what the electric
and thermal energy would have cost the company absent the
cogeneration plant). The Energy Service Agreement expires at the
end of 2005. The aggregate cost of the Trust's investment in the
partnership was $3,223,881. The Trust received distributions of
$236,864 and $660,201 from the project for the periods ended March
31, 1997 and December 31, 1996, respectively. The Partnership
also owns a smaller group of four cogeneration generator sets
totaling 255 KW serving a residential complex in Worcester,
Massachusetts. The energy services agreement ("ESA") provides
that the partnership receives from the customer the cost to
purchase electricity and natural gas from the local utility, less
a guaranteed savings based on the utility's current rates. The
ESA expires in 2004.
Ridgewood/ Elmsford Power Partners, L.P.
Ridgewood/ Elmsford Power Partners, L.P. (the "Partnership") owns
one cogeneration project consisting of two 665 KW (1,330 KW total)
dual fuel Cooper Superior engine generator sets with heat recovery
and a Caterpillar 600 kilowatt standby diesel generator set. The
Energy Services Agreement ("ESA") expires in 2005 and provides
that the Partnership receives its production costs (as defined in
the ESA) plus a share of the excess of the customer's avoided cost
over production costs. The aggregate cost of the Trust's
investment in the partnership was $1,430,136. The Trust received
distributions of $34,761 and $160,940 from the project for the
periods ended March 31, 1997 and December 31, 1996, respectively.
The "Other On-site Cogeneration Project Partnerships"
The "other on-site cogeneration project partnerships" consist of
five partnerships, which own 30 of the 35 projects acquired from
Eastern Utilities Associates. These 30 projects represent
approximately one-third of the Trust's investment in the on-site
cogeneration projects. All thirty are gas-fired cogeneration
projects, located in California, Connecticut or New York. Their
energy service agreements have terms expiring between September
1996 and 2011. The projects represent 5.5 MW of base load
capacity. The largest project is 660 KW or 12% of the capacity.
The projects range in size from 30 KW to 660 KW. As of March 31,
1997 and December 31, 1996, the total cost of the Trust's
investment in the partnership was $4,176,884 and $4,100,745,
respectively. In 1996, the Trust wrote-off four small projects
amounting to $113,042. The Trust received distributions of
$66,883 and $362,299 from the projects for the periods ended March
31, 1997 and December 31, 1996, respectively.
<PAGE>
Ridgewood Electric Power Trust III
Notes to Financial
Statements
California Pumping Project
During 1995, the Trust acquired 11 natural gas fueled diesel
engines, which drive deep irrigation well pumps in Ventura County,
California. The aggregate purchase price was $353,619. On
December 31, 1995, the engines were sold to an affiliate at book
value and no gain or loss was recognized on the transaction.
4. Transactions With Managing Shareholder And Affiliates
The Trust pays to the managing shareholder a distribution and
offering fee up to 5% of each capital contribution made to the
Trust. The fee is intended to cover legal, accounting,
consulting, filing, printing, distribution, selling, and closing
costs for the offering of the Trust. For the periods ended March
31, 1997, December 31, 1996, and December 31, 1995, the Trust paid
fees for these services to the managing shareholder totaling zero,
zero and $860,195, respectively. These fees were recorded as a
reduction in shareholders' capital contributions.
The Trust also pays to the managing shareholder an investment fee
up to 2% of each capital contribution made to the Trust. The fee
is payable to the managing shareholder for its services in
investigating and evaluating investment opportunities and
effecting transactions for investing the capital of the Trust.
For the periods ended March 31, 1997, December 31, 1996 and 1995,
the Trust paid investment fees to the managing shareholder of
zero, zero, and $343,779, respectively.
The Trust entered into a management agreement with the managing
shareholder, under which the managing shareholder renders certain
management, administrative and advisory services and provides
office space and other facilities to the Trust. As compensation
to the managing shareholder, the Trust pays the managing
shareholder an annual management fee equal to 2.5% of the net
asset value of the Trust payable monthly upon the closing of the
Trust. For the periods ended March 31, 1997, December 31, 1996
and December 31, 1995, the Trust paid management fees to the
managing shareholder of $194,247, $794,026 and $482,309,
respectively.
Under the Declaration of Trust, the managing shareholder is
entitled to receive each year 1% of all distributions made by the
Trust (other than those derived from the disposition of Trust
property) until the shareholders have been distributed in that
year an amount equal to 14% of their equity contribution.
Thereafter, the managing shareholder is entitled to receive 20% of
the distributions for the remainder of the year. The managing
shareholder is entitled to receive 1% of the proceeds from
dispositions of Trust properties until the shareholders have
received cumulative distributions equal to their original
investment ("Payout"). In all cases, after Payout the managing
shareholder is entitled to receive 20% of all remaining
distributions of the Trust.
Where permitted, in the event the managing shareholder or an
affiliate performs brokering services in respect of an investment
acquisition or disposition opportunity for the Trust, the managing
shareholder or such affiliate may charge the Trust a brokerage
fee. Such fee may not exceed 2% of the gross proceeds of any such
acquisition or disposition. No such fees were paid through March
31, 1997.
The managing shareholder purchased one share of the Trust for
$84,000. Through the closing of the Trust's offering on May 31,
1995, commissions and placement fees of $390,844 were earned by
Ridgewood Securities Corporation, an affiliate of the managing
shareholder.
<PAGE>
Ridgewood Electric Power Trust III
Notes to Financial
Statements
In 1996, under an operating agreement with the Trust, Ridgewood
Power Management Corporation ("Ridgewood Management"), an entity
related to the managing shareholder through common ownership,
provides management, purchasing, engineering, planning and
administrative services to the power generation projects operated
by the Trust. Ridgewood Management charges the projects at its
cost for these services and for the allocable amount of certain
overhead items. Allocations of costs are on the basis of
identifiable direct costs, time records or in proportion to
amounts invested in projects managed by Ridgewood Management.
5. Arbitration and Litigation
The Trust's subsidiaries that own the on-site cogeneration
projects brought an arbitration proceeding in the amount of
$4,100,000 against Eastern Utilities Associates, Inc., the former
owner. The Trust claims breaches of representations and
warranties made by the former owner at the time the on-site
cogeneration projects were acquired. The former owner has
counterclaimed for approximately $550,000 for alleged unpaid
management services. The parties are in the process of selecting
arbitrators. The Trust has not reflected the amounts
claimed in its financial statements pending the outcome of the
arbitration proceeding.
In February 1997, the Trust's subsidiaries that own the San
Joaquin and Byron projects filed suit in the Superior Court of
California against Pacific Gas and Electric Company ("PG & E") for
breach of the power sales contracts. The Trust argues PG & E has
improperly withheld approximately $200,000 of capacity payments and also
has asked for declaratory relief to require PG & E to conform to the
contracts' terms in the future. The Trust has not reflected the
withheld capacity payments in its financial statements pending the
outcome of the suit.
On February 28, 1997 Michael Cutbirth, an individual, sued the Managing
Shareholder in the Superior Court of California, Kern County, claiming
unspecified damages (including a claim to an equity interest) for breach
of an alleged confidentiality agreement relating to the acquisition of
the San Joaquin and Byron Projects. The Managing Shareholder has
successfully removed the lawsuit to the United States District Court for
the Eastern District of California. Discovery has begun. The
Managing Shareholder believes that it has ample defenses to Mr.
Cutbirth's claims and that it will defend the action vigorously.
<PAGE>
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 forward-
looking statements.
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.
Dollar amounts in this discussion are generally rounded to the nearest
$1,000.
Three months ended March 31, 1997 versus three months ended
March 31, 1996
Results of Operations
The Trust carries its investment in the Projects it owns 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 to fund capital
expenditures. In addition, income and cash flow earned by
the Projects is seasonal, peaking in the third quarter of the year as
summer heat increases demand for electricity and electricity
prices are at peak levels and falling in the fourth and first
quarters, when demand for electricity is lower, prices for
electricity are at lower off-peak levels and equipment maintenance is
performed.
For the quarter ended March 31, 1997, the Trust's net income increased
to $828,000 from $60,000 for the same quarter in 1996. The increase of
$767,000 reflects an $847,000 increase in distributions received from
Projects in which the Trust has invested, a decrease of $86,000 (65.2%)
in interest income and a decrease of $7,000 (3.0%) in Trust expenses.
During the first quarter of 1997, the Trust received distributions from
the On-Site Cogeneration Projects and the Providence Project of $503,000
and $242,000, respectively. In the comparable quarter of 1996, no
distributions were received from the On-Site Cogeneration Projects and
the Trust did not own an interest in the Providence Project until the
second quarter of 1996. Distributions from the San Joaquin and Byron
Projects increased by $102,000. During the first quarter of 1997,
interest and dividend income decreased by $86,000 from the comparable
1996 quarter, as a result of the increase of the amount of cash invested
in Projects, which decreased the cash invested in short-term securities.
For the quarter ended March 31, 1997, the Trust's expenses decreased by
$7,000 from the same period in 1996. There were no material changes in
any of the expense categories.
Liquidity and Capital Resources
For the quarter ended March 31, 1997, net cash provided by operating
activities of $1,260,000 included $573,000 of cash which was transferred
to the Trust when the Trust changed its cash management procedures and
consolidated all significant cash balances at the Trust level. Cash
distributions to shareholders were $995,000 as compared to $668,000 in
the first quarter of 1996.
The Trust is in the process of obtaining a $500,000 line of credit,
which it plans to have in place in the third quarter of 1997. The line
of credit is being 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.
Other than investments of available cash in power generation Projects,
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's policy is to distribute as much cash as is
prudent to shareholders. Accordingly, the Trust has not found it
necessary to retain a material amount of working capital. The amount of
working capital retained will be further reduced by obtaining a line of
credit.
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, 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. 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 state 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 other states where it does business.
Legislative and regulatory action is unpredictable and 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,
which in turn could affect the Trust.
Natural gas prices, which peaked in early 1997, fell somewhat toward the
end of the first quarter of 1997. However, prices remain elevated and
have not moderated to the extent seen in prior late spring periods. If
the Trust is unable to obtain long-term supplies of gas at favorable
prices, it runs the risk of having to purchase gas at elevated prices
later in 1997. In that event, the profitability of Projects fueled by
natural gas could be significantly impaired.
<PAGE>
PART II - OTHER INFORMATION
Item #1 Legal Proceedings
The Trust's subsidiaries that own the On-Site Cogeneration
projects brought an arbitration proceeding in the amount of
$4,100,000 against the seller of those Projects, a subsidiary of
Eastern Utilities Associates, Inc., the former
owner. The Trust claims breaches of representations and
warranties made by the former owner at the time the on-site
cogeneration projects were acquired. The former owner has
counterclaimed for approximately $550,000 for alleged unpaid
management services. The parties are in the process of selecting
arbitrators. The Trust has not reflected the amounts
claimed in its financial statements pending the outcome of the
arbitration proceeding.
In February 1997, the Trust's subsidiaries that own the San
Joaquin and Byron projects filed suit in the Superior Court of
California for the City of San Francisco against Pacific Gas and
Electric Company ("PG & E") for breach of the power sales contracts.
The Trust argues PG & E has improperly withheld approximately $200,000
of capacity payments and also has asked for declaratory relief to
require PG & E to conform to the contracts' terms in the future. The
suit is in the early stages of discovery. The Trust has not reflected
the withheld capacity payments in its financial statements pending the
outcome of the suit.
On February 28, 1997 Michael Cutbirth, an individual, sued the Managing
Shareholder in the Superior Court of California, Kern County, claiming
unspecified damages (including a claim to an equity interest) for breach
of an alleged confidentiality agreement relating to the acquisition of
the San Joaquin and Byron Projects. The Managing Shareholder has
successfully removed the lawsuit to the United States District Court for
the Eastern District of California. Discovery has not yet begun. The
Managing Shareholder believes that it has ample defenses to Mr.
Cutbirth's claims and that it will defend the action vigorously.
Item #6 Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
No Current Reports on Form 8-K were filed by the Trust during
the first quarter of 1997.
<PAGE>
RIDGEWOOD ELECTRIC POWER TRUST III
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
May 14, 1997 By /s/ Martin V. Quinn
Date Martin V. Quinn,
Senior Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the Registrant's unaudited interim financial
statements for the three month period ended March 31, 1997 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,223,940
<SECURITIES> 28,056,541<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,242,123
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 31,732,081
<CURRENT-LIABILITIES> 510,578
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 31,221,503<F2>
<TOTAL-LIABILITY-AND-EQUITY> 31,732,081
<SALES> 0
<TOTAL-REVENUES> 1,039,216
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 211,631
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 827,585
<INCOME-TAX> 0
<INCOME-CONTINUING> 827,585
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 827,585
<EPS-PRIMARY> 2112.02
<EPS-DILUTED> 2112.02
<FN>
<F1>Investments in power project partnerships.
<F2>Represents Investor Shares of beneficial interest
in Trust with capital accounts of $31,240,323 less
managing shareholder's accumulated deficit of $18,820.
</FN>
</TABLE>
