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 March 31, 1999
Commission File Number 0-23432
RIDGEWOOD ELECTRIC POWER TRUST III
(Exact name of registrant as specified in its charter.)
Delaware 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)
(201) 447-9000
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 [ ]
<PAGE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Ridgewood Electric Power Trust III
Financial Statements
March 31, 1999
<PAGE>
Ridgewood Electric Power Trust III
Balance Sheet
- --------------------------------------------------------------------------------
March 31, December 31,
1999 1998
------------ ------------
(unaudited)
Assets:
Investments in power generation projects ....... $ 22,911,750 $ 21,714,050
Cash and cash equivalents ...................... 748,635 2,414,916
Due from affiliates ............................ 27,679 30,071
Other assets ................................... 6,238 98,359
------------ ------------
Total assets ......................... $ 23,694,302 $ 24,257,396
------------ ------------
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses ........... $ 46,809 $ 185,209
Due to affiliates ............................... 375,339 289,153
------------ ------------
Total liabilities ..................... 422,148 474,362
------------ ------------
Shareholders' equity:
Shareholders' equity (391.8444 shares issued and
outstanding) .............................. 23,370,468 23,876,239
Managing shareholder's accumulated deficit ...... (98,314) (93,205)
------------ ------------
Total shareholders' equity ............ 23,272,154 23,783,034
------------ ------------
Total liabilities and shareholders'
equity .............................. $ 23,694,302 $ 24,257,396
------------ ------------
See accompanying notes to financial statements.
<PAGE>
Ridgewood Electric Power Trust III
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
Three Months Ended
--------------------
March 31, March 31,
Revenue: 1999 1998
-------- --------
Income from power generation projects $258,045 $375,010
Interest income .................. 25,749 48,599
-------- --------
Total revenue ............ 283,794 423,609
-------- --------
Expenses:
Management fee ................... 148,644 176,001
Accounting and legal fees ........ 27,936 24,495
Miscellaneous .................... 21,989 24,917
-------- --------
Total expenses ........... 198,569 225,413
-------- --------
Net income ............... $ 85,225 $198,196
-------- --------
See accompanying notes to financial statements.
<PAGE>
Ridgewood Electric Power Trust III
Statement of Changes in Shareholders' Equity (unaudited)
- --------------------------------------------------------------------------------
Managing
Shareholders Shareholder Total
------------ ------------ -------------
Shareholders' equity, December
31, 1998 .................. $ 23,876,239 $ (93,205) $ 23,783,034
Cash distributions ........... (590,144) (5,961) (596,105)
Net income for the ........... 84,373 852 85,225
period
------------ ------------ ------------
Shareholders' equity, March
31, 1999 ................... $ 23,370,468 $ (98,314) $ 23,272,154
------------ ------------ ------------
See accompanying notes to financial statements.
<PAGE>
Ridgewood Electric Power Trust III
Statement of Cash Flows (unaudited)
- --------------------------------------------------------------------------------
Three Months Ended
--------------------------
March 31, 1999 March 31, 1998
----------- -----------
Cash flows from operating activities:
Net income .................................. $ 85,225 $ 198,196
----------- -----------
Adjustment to reconcile net income to
cash flows from operating activities:
Purchase of investments in power generation
projects, net .......................... (1,197,700) 111,544
Changes in assets and liabilities:
Decrease in due from affiliates ........ 2,392 6,711
Decrease (increase) in other assets .... 92,121 (2,894)
Decrease in accounts payable and accrued
expenses ............................ (138,400) (12,966)
Increase (decrease) in due to affiliates 86,186 (94,049)
----------- -----------
Total adjustments .................... (1,155,401) 8,346
----------- -----------
Net cash (used in) provided by
operating activities ..................... (1,070,176) 206,542
----------- -----------
Cash flows from financing activities:
Cash distributions to shareholders ......... (596,105) (593,704)
----------- -----------
Net cash used in financing activities ...... (596,105) (593,704)
----------- -----------
Net decrease in cash and cash equivalents .. (1,666,281) (387,162)
Cash and cash equivalents, beginning of year .. 2,414,916 2,687,626
----------- -----------
Cash and cash equivalents, end of period ...... $ 748,635 $ 2,300,464
----------- -----------
See accompanying notes to financial statements.
<PAGE>
Ridgewood Electric Power Trust III
Notes to Financial Statements (unaudited)
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 1998 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. Purchase of Caterpillar Power Modules
On February 19, 1999, the Trust made a $590,200 deposit for seven Caterpillar
power modules that are expected to be delivered in June 1999. The seven power
modules have a total price of $2,360,803 and a total capacity of 7.8 megawatts.
The Trust plans to rent the power modules to domestic and international
customers.
3. Arbitration Proceeding
In September 1995, the Trust acquired a portfolio of 35 cogeneration projects
from affiliates Eastern Utilities Association ("EUA"). In December 1996, the
Trust's subsidiaries that own cogeneration projects brought an arbitration
proceeding against EUA claiming that EUA had breached its representations in the
acquisition agreement and had also defrauded the trust through
misrepresentations, improper billing practices and violations of state fair
trade practice laws. In October 1998, the arbitrators awarded the Trust damages
of approximately $2,600,000 on its claims and awarded approximately $400,000 to
EUA for alleged unpaid management services thereon. In November 1998, EUA made a
payment of $2,210,184 to the Trust to liquidate the claims. After deducting
costs associated with the arbitration proceeding, the Trust recognized income of
$1,265,122.
In April 1999, the arbitration panel also awarded the Trust its attorneys' fees
and expenses incurred in prosecuting the claim, net of EUA attorneys' fees and
expenses, of $706,670. The panel also awarded the Trust interest on the award,
net of interest on EUA's counterclaim, of $807,511. The Trust has not recorded
the award in the financial statements pending payment by EUA.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Dollar amounts in this discussion are generally rounded to the nearest $1,000.
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, 1999 compared to the quarter ended March 31, 1998.
As summarized below, total revenue decreased 32.9% to $284,000 in the first
quarter of 1999 compared to $423,000 in the first quarter of 1998:
Project 1999 1998
- ------- ---- ----
On-site Cogeneration:
Massachusetts ........................ $109,000 $163,000
Others ............................... -- 10,000
-------- --------
Subtotal ............................. 109,000 173,000
Providence ............................... 128,000 167,000
San Joaquin .............................. -- 35,000
Ridgewood/AES ............................ 21,000 --
Interest income .......................... 26,000 49,000
-------- --------
Total .................................... $284,000 $424,000
======== ========
Revenues from the on-site cogeneration projects decreased by $64,000 to $109,000
in the first quarter of 1999 compared to $173,000 in the corresponding period in
1998. Distributions were $54,000 lower from the Massachusetts on-site
cogeneration project due to slightly lower revenues at the Globe facility caused
by an unscheduled outage. Revenues from the Providence and San Joaquin
facilities decreased by $39,000 and $35,000, respectively, due to higher
maintenance costs.
The increase in distribution income from Ridgewood/AES reflects revenue from
projects that entered operation in the second half of 1998.
The management fee decreased from $176,000 in the first quarter of 1998 to
$149,000 in the first quarter of 1999 reflecting the reduced net assets of the
Trust caused by the writedown of the on-site cogeneration projects. The Trust's
other expenses did not change significantly from the first quarter of 1998 to
the first quarter of 1999.
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 reflected 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 maintenance and capital expenditures. The declines
in distributions from San Joaquin of $113,000 (76%) and Byron of 100,000 (100%)
reflected a reduced level of cash flow 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 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 1999.
On February 19, 1999, the Trust made a $590,200 deposit for seven Caterpillar
power modules that are expected to be delivered in June 1999. The seven power
modules have a total price of $2,360,803 and a total capacity of 7.8 megawatts.
The Trust plans to rent the power modules to domestic and international
customers.
As discussed in Legal Matters below, in September 1995, the Trust acquired a
portfolio of 35 cogeneration projects from affiliates Eastern Utilities
Association ("EUA"). In December 1996, the Trust's subsidiaries that own
cogeneration projects brought an arbitration proceeding against EUA claiming
that EUA had breached its representations in the acquisition agreement and had
also defrauded the trust through misrepresentations, improper billing practices
and violations of state fair trade practice laws. In October 1998, the
arbitrators awarded the Trust damages of approximately $2,600,000 on its claims
and awarded approximately $400,000 to EUA for alleged unpaid management services
thereon. In November 1998, EUA made a payment of $2,210,184 to the Trust to
liquidate the claims. After deducting costs associated with the arbitration
proceeding, the Trust recognized income of $1,265,122.
In April 1999, the arbitration panel also awarded the Trust its attorneys' fees
and expenses incurred in prosecuting the claim, net of EUA attorneys' fees and
expenses, of $706,670. The panel had also awarded the Trust interest on the
award, net of interest on EUA's counterclaim. As of November 1998 that amount
exceeded $800,000. The Trust and EUA are currently disputing whether a portion
of that interest continues to accrue. The Trust has not recorded the award in
the financial statements pending payment by EUA.
Other than investments of available cash in power generation Projects and the
purchase of the Caterpillar power modules, 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 1999, proceeds
from the arbitration proceeding and line of credit facility will be adequate to
fund its obligations.
Year 2000 remediation
Please refer to the Trust's disclosures at Item 7 - Management's Discussion and
Analysis of its Annual Report on Form 10-K for 1998 for a discussion of year
2000 issues affecting the Trust. Since that report was filed, the only material
change in the Trust's year 2000 compliance is that the changes to the Managing
Shareholder's investor distribution system have been completed. Testing of those
changes has been rescheduled to late May 1999 in conjunction with a regularly
scheduled set of distributions. No other material changes in the Trust's
remediation efforts or its plans for year 2000 compliance have occurred.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As previously reported in the Trust's Annual Report on Form 10-K for 1998, an
award was made in the arbitration proceeding against the sellers of the On-Site
Cogeneration Projects. On April 26, 1999, the panel awarded the Trust $753,000
of attorneys' fees and expenses incurred in prosecuting its claims and awarded
the sellers $43,000 of fees incurred by them in prosecuting their counterclaims.
The Trust is in discussions with sellers' counsel as to payment of the net award
and as to payment of the balance of the interest and principal amount of the
panel's award. A proceeding is pending in the United States District Court for
the District of Massachusetts to confirm the arbitration panel's awards and
compel payment. The Trust has not reflected the amounts it claims in its
financial statements pending the court's decision. See Part I, Item 1 - Notes to
Financial Statements for additional information.
In April 1999, the arbitration panel also awarded the Trust its attorneys' fees
and expenses incurred in prosecuting the claim, net of EUA attorneys' fees and
expenses, of $706,670. The panel also awarded the Trust interest on the award,
net of interest on EUA's counterclaim, of $807,511. The Trust has not recorded
the award in the financial statements pending payment by EUA.
As previously reported in the Trust's Annual Report on Form 10-K for 1998,
Ridgewood/Providence Power Partners, L.P. ("RPPP"), a limited partnership
through which the Trust owns its limited partnership interest in the Providence
Project, is a defendant before Region I office of the U.S. Environmental
Protection Agency ("EPA")in an administrative proceeding to recover civil
penalties of up to $190,000 for alleged violations of operational recordkeeping
and training requirements at the Providence Project. Discussions are continuing
with EPA with regard to a settlement of the civil penalties for approximately
one-half of the original demand and for offset, in EPA's discretion, of a
portion of the penalties against future environmental improvements to be made by
the Trust. RPPP does not anticipate a material adverse impact from the
proceeding and does not anticipate the need to make further material capital
expenditures to remedy the items identified by the EPA. The Trust does not
anticipate that it will be liable for or will have to fund the costs of the
proceeding, although those costs will reduce cash flow from the Project.
Item 5. Other Information
Ridgewood Power Corporation has been the managing shareholder of the Trust. It
organized the Trust and acted as managing shareholder until April 1999. On or
about April 20, 1999 it was merged into Ridgewood Power LLC, a New Jersey
limited liability company, which thus became the Managing Shareholder of the
Trust. Ridgewood Power LLC was organized in early April 1999 and has no business
other than acting as the successor to Ridgewood Power Corporation. No material
change in the Trust's operations o r business will result from the merger.
Robert E. Swanson has been the President, sole director and sole stockholder of
Ridgewood Power Corporation since its inception in February 1991 and is now the
controlling member, sole manager and President of the Managing Shareholder. Mr.
Swanson currently is the sole equity owner of the Managing Shareholder but is
considering a transfer of 53% of the equity ownership to two family trusts. If
that transfer is made, he will have the power on behalf of those trusts to vote
or dispose of the membership equity interests owned by them and accordingly will
continue to have sole control of the Managing Shareholder. Further, Mr. Swanson
is designated as the sole manager of the Managing Shareholder in its operating
agreement.
Ridgewood Power LLC is also the managing shareholder of the other five business
trusts organized by Ridgewood Power Corporation to participate in the
independent electric power industry.
Similarly, Ridgewood Power Management Corporation, which operates certain
Projects on behalf of the Trust, was merged on or about April 20, 1999 into a
new New Jersey limited liability company, Ridgewood Power Management LLC. The
ownership and control of Ridgewood Power Management LLC are the same as those of
Ridgewood Power LLC and its only business is to be the successor to Ridgewood
Power Management Corporation. No material change in the operation of the
Projects is expected as a result of that merger.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
<PAGE>
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 17, 1999 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, 1999 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-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 748,635
<SECURITIES> 22,911,750<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 782,552<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,694,302
<CURRENT-LIABILITIES> 422,148<F3>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 23,272,154<F4>
<TOTAL-LIABILITY-AND-EQUITY> 23,694,302
<SALES> 0
<TOTAL-REVENUES> 283,794
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 198,569
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 198,569
<INCOME-TAX> 0
<INCOME-CONTINUING> 198,569
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 198,569
<EPS-PRIMARY> 507
<EPS-DILUTED> 507
<FN>
<F1>Investments in power project partnerships.
<F2>Includes $27,679 due from affiliates.
<F3>Includes $375,339 due to affiliates.
<F3>Represents Investor Shares of beneficial interest
in Trust with capital accounts of $23,370,468 less
managing shareholder's accumulated deficit of $98,314.
</FN>
</TABLE>
