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, 1998
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
<CAPTION>
March 31, December 31,
1998 1997
<S> <C> <C>
Assets:
Investments in power
project partnerships $ 24,502,434 $ 24,613,978
Cash and cash equivalents 2,300,464 2,687,626
Due from affiliates 13,747 20,458
Other assets 17,056 14,162
Total assets $ 26,833,701 $ 27,336,224
Liabilities and Share-
holders' Equity:
Accounts payable and
accrued expenses $ 25,571 $ 38,537
Due to affiliates 246,324 340,373
Total liabilities 271,895 378,910
Shareholders' equity:
Shareholders' equity
(391.8444 shares issued
and outstanding) 26,627,223 27,018,776
Managing shareholder's
accumulated deficit (65,417) (61,462)
Total shareholders' equity 26,561,806 26,957,314
Total liabilities and
shareholders' equity $ 26,833,701 $27,336,224
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST III
STATEMENTS OF OPERATIONS (Unaudited)
<CAPTION>
Three months ended
1998 1997
<S> <C> <C>
Revenue:
Income from power genera-
tion projects $ 375,010 993,034
Interest income 48,599 46,182
Total revenue 423,609 1,039,216
Expenses:
Project due diligence expense --- 3,692
Management fee 176,001 194,247
Accounting and legal fees 24,495 9,097
Miscellaneous 24,917 4,595
Total expenses 225,413 211,631
Net income $ 198,196 $ 827,585
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST III
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)
<CAPTION>
Managing
Shareholders Shareholder Total
<S> <C> <C> <C>
Shareholders' equity,
December 31, 1997 $27,018,776 $(61,462) $26,957,314
Cash distributions (587,767) (5,937) (593,704)
Net income for the period 196,214 1,982 198,196
Shareholders' equity,
March 31, 1998 $26,627,223 $(65,417) $26,561,806
<FN>
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST III
STATEMENTS OF CASH FLOWS (Unaudited)
<CAPTION>
Three months ended
March 31, 1998 March 31, 1997
<S> <C> <C>
Cash flows from operating
activities:
Net income $ 198,196 $ 827,585
Adjustments to
reconcile net income
to cash flows from
operating activities:
Investment in working capital
of power generation
projects, net 111,544 465,752
Purchase of investments
in power generation
projects --- (5,791)
Changes in assets &
liabilities:
Decrease in due
from affiliates 6,711 107,064
Increase in
other assets (2,894) (138,579)
Decrease (increase) in
accounts payable and
accrued expenses (12,966) 3,690
Decrease in due to
affiliates (94,049) ---
Total adjustments 8,346 432,136
Net cash provided by
operating activities 206,542 1,259,721
Cash flow from financing
activities
Cash distributions to
Shareholders (593,704) (995,021)
Net cash provided by
(used in) financing
activities: (593,704) (995,021)
Net decrease (increase)
in cash and cash
equivalents (387,162) 264,700
Cash and cash equivalents,
beginning of year 2,687,626 2,959,240
Cash and cash equivalents
- - End of period $2,300,464 $3,223,940
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
RIDGEWOOD ELECTRIC POWER TRUST III
NOTES TO FINANCIAL STATEMENTS
1. General
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments, which consist of normal recurring
adjustments, necessary for the pair presentation of the results for the
interim periods. Additional footnote disclosure concerning accounting
policies and other matters are disclosed in Ridgewood Electric Power
Trust III's financial statements included in the 1997 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.
2. Subsequent Events
In April 1998, the Trust entered into an agreement to purchase an on-site
cogeneration facility (the "Dobbs House project") located near one of its
existing on-site cogeneration facilities in Los Angeles, California.
The total purchase price was approximately $590,000, including the
payment of liabilities that encumbered the project.
In May 1998, the Trust purchased generating equipment from Ridgewood
Electric Power Trust IV ("Trust IV") for $681,984. Trust IV is also
managed by the Managing Shareholder and is the majority owner of the
Providence Project. The Trust intends to use the equipment in an on-site
cogeneration project under development that will be located in the Great
Gorge ski area of New Jersey. The Trust's investment in this project is
expected to total approximately $2,000,000.
<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 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, except per share data.
Introduction
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.
Results of Operations
Quarter ended March 31, 1998 compared to the quarter ended March 31,
1997.
As summarized below, total revenue decreased 59.3% to $423,000 in the
first quarter of 1998 compared to $1,039,000 in the first quarter of
1997:
Project 1998 1997
On-site Cogeneration:
Massachusetts $ 163,000 $ 237,000
Rhode Island --- 164,000
Others 10,000 64,000
Subtotal 173,000 465,000
Providence 167,000 280,000
San Joaquin 35,000 148,000
Byron --- 100,000
Interest income 49,000 46,000
Total $ 424,000 $1,039,000
Revenues from the on-site cogeneration projects decreased by $292,000 to
$173,000 in the first quarter of 1998 compared to $465,000 in the
corresponding period in 1997. The $164,000 decrease in distributions
from the Rhode Island on-site cogeneration project reflects the sale of
the facility in December 1997. Distributions were $74,000 lower from the
Massachusetts on-site cogeneration project due to the release of certain
working capital reserves in 1997 that did not recur in 1998. The
decrease in distributions from the other on-site cogeneration facilities
reflects the shut-down of unprofitable projects in 1997 and write-off of
uncollectible receivables. Distributions from the Providence project
declined by $113,000 to $167,000 in the first quarter of 1998 from
$280,000 in the corresponding period in 1997 because of the need to
retain cash generated by operations for debt payments. The declines in
distributions from San Joaquin of $113,000 (76%) and Byron of $100,000
(100%) reflect a reduced level of cash flows from operations reflecting
the cost of starting up year round operations.
The Trust's expenses did not change significantly from the first quarter
of 1997 to the first quarter of 1998.
Liquidity and Capital Resources
During the first quarter of 1998, net cash provided by operating
activities decreased to $207,000 from $1,260,000 during the same period
in 1997. The decrease is primarily attributable to lower net income in
1998 as well as the funds received when the Trust changed its cash
management procedures and consolidated all significant cash balances at
the Trust level. Cash distributions to shareholders decreased to
$594,000 in the first quarter of 1998 from $995,000 in the same period in
1997 due to a decrease in the monthly cash distribution rate in July
1997.
During 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. There were no borrowings
under this line of credit in 1998.
In April 1998, the Trust entered into an agreement to purchase an on-site
cogeneration facility (the "Dobbs House project") located near one of its
existing on-site cogeneration facilities in Los Angeles, California.
The total purchase price was approximately $590,000, including the
payment of liabilities that encumbered the project. The purchase price
was paid from the uninvested net proceeds of the Trust's offering of
Investor Shares.
In May 1998, the Trust purchased generating equipment from Ridgewood
Electric Power Trust IV ("Trust IV") for $681,984. Trust IV is also
managed by the Managing Shareholder and is the majority owner of the
Providence Project. The Trust intends to use the equipment in an on-site
cogeneration project under development that will be located in the Great
Gorge ski area of New Jersey. The Trust's investment in this project is
expected to total approximately $2,000,000. The purchase price was paid
from the uninvested net proceeds of the Trust's offering of Investor
Shares.
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 is further reduced by the availability of the
line of credit facility.
The Trust anticipates that its cash flow from operations during 1998 and
line of credit facility will be adequate to fund its obligations.
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
sellers of those Projects, subsidiaries 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. In October 1997, the complaint was amended to
allege fraud by the sellers. A hearing is scheduled for the last three
weeks of June 1998. The former owner has counterclaimed for
approximately $550,000 for alleged unpaid management services. 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. Settlement negotiations are in an
advanced stage. The Trust has not reflected
the withheld capacity payments as revenue 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. Motions for summary judgment are
pending before the court and a trial date of late July 1998 has been set.
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
<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, 1998 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, 1998 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,300,464
<SECURITIES> 24,502,434<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,331,267
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,833,701
<CURRENT-LIABILITIES> 271,895
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 26,561,806<F2>
<TOTAL-LIABILITY-AND-EQUITY> 26,833,701
<SALES> 0
<TOTAL-REVENUES> 423,609
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 225,413
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 198,196
<INCOME-TAX> 0
<INCOME-CONTINUING> 198,196
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 198,196
<EPS-PRIMARY> 505
<EPS-DILUTED> 505
<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>
