FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OFTHE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 199
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
June 30, 1999
<PAGE>
Ridgewood Electric Power Trust III
Balance Sheet
- --------------------------------------------------------------------------------
June 30, December 31,
1999 1998
------------ ------------
(unaudited)
Assets:
Investments in power generation projects ..........$ 23,408,374 $ 21,714,050
Cash and cash equivalents ......................... 1,069,716 2,414,916
Due from affiliates ............................... 152,031 30,071
Other assets ...................................... 8,628 98,359
------------ ------------
Total assets ....................................$ 24,638,749 $ 24,257,396
------------ ------------
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses ............. 28,328 $ 185,209
Due to affiliates ................................. 197,518 289,153
------------ ------------
Total liabilities ............................... 225,846 474,362
------------ ------------
Shareholders' equity:
Shareholders' equity (391.8444
shares issued and outstanding) ................... 24,499,809 23,876,239
Managing shareholder's accumulated deficit ........ (86,906) (93,205)
------------ ------------
Total shareholders' equity .................... 24,412,903 23,783,034
------------ ------------
Total liabilities and shareholders' equity .... $ 24,638,749 $ 24,257,396
------------ ------------
See accompanying notes to financial statements.
<PAGE>
Ridgewood Electric Power Trust III
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
Six Months Ended Three Months Ended
------------------------- -------------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
Revenue:
Income from power
generation projects .. $ 745,551 $ 668,407 $ 1,120,561 $ 410,372
Interest income ....... 34,633 48,765 8,874 166
Income from
arbitration award,
net ................. 1,488,805 -- 1,488,805 --
----------- ----------- ----------- -----------
Total revenue ........ 2,191,845 1,169,326 1,908,051 745,717
----------- ----------- ----------- -----------
Expenses:
Writedown of invest-
ments in power
generation projects .. -- 4,062,147 -- 4,062,147
Management fee ........ 297,288 352,002 148,644 176,001
Accounting and legal
fees ................. 21,973 35,988 9,080 11,493
Miscellaneous ......... 52,907 44,173 15,875 19,256
----------- ----------- ----------- -----------
Total expenses ........ 372,168 4,494,310 173,599 4,268,897
----------- ----------- ----------- -----------
Net income (loss) ..... $ 1,819,677 $(3,324,984) $ 1,734,452 $(3,523,180)
----------- ----------- ----------- -----------
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 .. (1,177,910) (11,898) (1,189,808)
Net income for the
period .............. 1,801,480 18,197 1,819,677
------------ ------------ ------------
Shareholders' equity,
June 30, 1999 ...... $ 24,499,809 $ (86,906) $ 24,412,903
------------ ------------ ------------
See accompanying notes to financial statements.
<PAGE>
Ridgewood Electric Power Trust III
Statement of Cash Flows (unaudited)
- --------------------------------------------------------------------------------
Six Months Ended
------------------------------
June 30, 1999 June 30, 1998
----------- -----------
Cash flows from operating activities:
Net income (loss) .......................... $ 1,819,677 $(3,324,984)
----------- -----------
Adjustment to reconcile net
income (loss) to cash flows
from operating activities:
Purchase of investments in power
generation projects, net ................. (1,694,324) (1,652,113)
Writedown on investments in power
generation projects ...................... -- 4,062,147
Changes in assets and liabilities:
(Increase) decrease in due from
affiliates .............................. (121,960) 6,711
Decrease in other assets ................. 89,731 8,114
Decrease in accounts payable and
accrued expenses ........................ (156,881) (17,169)
Decrease in due to affiliates ............ (91,635) (45,614)
----------- -----------
Total adjustments ........................ (1,975,069) 2,362,076
----------- -----------
Net cash used in operating activities .... (155,392) (962,908)
----------- -----------
Cash flows from financing activities:
Cash distributions to shareholders ....... (1,189,808) (1,190,457)
----------- -----------
Net cash used in financing activities .... (1,189,808) (1,190,457)
----------- -----------
Net decrease in cash and cash equivalents (1,345,200) (2,153,365)
Cash and cash equivalents, beginning of year 2,414,916 2,687,626
----------- -----------
Cash and cash equivalents, end of period ... $ 1,069,716 $ 534,261
----------- -----------
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. The year-end balance sheet data was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. 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 July and August 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 of 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. The panel also awarded the Trust interest on the award, net of
interest on EUA's counterclaim. The trust received payment from EUA in the
second quarter of 1999 and recorded income of $1,488,805 in the statement of
operations.
4. Providence EPA Matter
In June 1999, Ridgewood Providence Power Partners, L.P. ("RPPP"), a limited
partnership through which the Trust owns its limited partnership interest in the
Providence Project, settled the administrative proceeding brought by the Region
I office of the U.S. Environmental Protection Agency ("EPA") for approximately
$86,000. As previously disclosed the charges related to alleged recordkeeping,
training documentation and tank labelling violations and did not relate to any
discharge of pollutants or direct danger to the environment.
<PAGE>
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,
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
As summarized below, total revenue increased 76.6% to $2,064,000 in the first
six months of 1999 compared to $1,169,000 in the same period in 1998. Revenue
also increased to $1,780,000 in the second quarter of 1999 compared to $746,000
in the second quarter of 1998. Excluding the arbitration award income discussed
below, revenues decreased by 50.8% and 61.0% for the first six months and second
quarter, respectively of 1999 compared to the prior year.
Six months ended June 30, Three months ended June 30,
1999 1998 1999 1998
--------- ---------- ---------- ----------
Project
On-site Cogeneration:
Massachusetts ...... $ 371,000 $ 133,000 $262,000 --
Others ............. -- 96,000 -- 57,000
---------- ---------- ---------- ----------
Subtotal ........... 371,000 229,000 262,000 57,000
Providence ............. 221,000 344,000 93,000 177,000
Byron .................. 37,000 171,000 37,000 171,000
San Joaquin ............ 3,000 376,000 3,000 341,000
Ridgewood/AES .......... 36,000 -- 15,000 --
Arbitration award income 1,489,000 -- 1,489,000 --
Interest income ........ 35,000 49,000 9,000 --
---------- ---------- ---------- ----------
Total .................. $2,192,000 $1,169,000 $1,908,000 $ 746,000
========== ========== ========== ==========
Revenues from the Massachusetts on-site cogeneration project increased by
$238,000 to $371,000 in the first six months of 1999 compared to $133,000 in the
corresponding period in 1998. The increase was due to the absence of an engine
failure at the Globe facility in 1998 and the recovery of the related insurance
proceeds in the second quarter of 1999.
Distributions from the Providence facility declined due to increased engine
maintenance costs. The sharp decline in distributions from the Byron, San
Joaquin and other on-site cogeneration projects was due to unexpected engine
problems that decreased revenues and increased maintenance costs.
The increase in distribution income from Ridgewood/AES reflects revenue from
projects that entered operation in the second half of 1998.
Income of $1,489,000 from the arbitration proceedings against EUA was recorded
in the second quarter of 1999 when payment was received. The proceedings are
discussed in Legal Matters below.
In the second quarter of 1998, the Trust recorded a charge of $4,062,000 to
write-down the on-site cogeneration projects to their estimated fair value.
The management fee decreased from $176,000 in the second quarter of 1998 to
$149,000 in the second quarter of 1999 reflecting the reduced net assets of the
Trust caused by the write-down of the on-site cogeneration projects in 1998. The
decline in management fees from $352,000 in the first six months of 1998 to
$297,000 in the same period in 1999 was also due to the reduced net assets of
the Trust.
The Trust's other expenses did not change significantly from the first quarter
of 1998 to the first quarter of 1999.
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; two were delivered in July 1999 and the remainder are expected to
be delivered in August 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. The panel also awarded the Trust interest on the award, net of
interest on EUA's counterclaim. The Trust received payment from EUA in the
second quarter of 1999 and recorded income of $1,488,805 in the statement of
operations.
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. No material
changes in the Trust's remediation efforts or its plans for year 2000 compliance
have occurred.
<PAGE>
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. The panel also awarded the Trust interest on the award, net of
interest on EUA's counterclaim. The Trust received payment from EUA in the
second quarter of 1999 and recorded income of $1,488,805 in the statement of
operations.
In June 1999, Ridgewood Providence Power Partners, L.P. ("RPPP"), a limited
partnership through which the Trust owns its limited partnership interest in the
Providence Project, settled the administrative proceeding brought by the Region
I office of the U.S. Environmental Protection Agency ("EPA") for approximately
$86,000. As previously disclosed in the Trust's Annual Report on Form 10-K for
1998, the charges related to alleged recordkeeping, training documentation and
tank labelling violations and did not relate to any discharge of pollutants or
direct danger to the environment.
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 or 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.
<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
August 13, 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 six month period
ended June 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,069,716
<SECURITIES> 23,408,374<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,230,375<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,638,749
<CURRENT-LIABILITIES> 225,846<F3>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 24,412,903<F4>
<TOTAL-LIABILITY-AND-EQUITY> 24,638,749
<SALES> 0
<TOTAL-REVENUES> 2,191,845
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 372,168
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,819,677
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,819,677
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,819,677
<EPS-BASIC> 4,644
<EPS-DILUTED> 4,644
<FN>
<F1>Investments in power project partnerships.
<F2>Includes $152,031 due from affiliates.
<F3>Includes $197,518 due to affiliates.
<F3>Represents Investor Shares of beneficial interest
in Trust with capital accounts of $24,499,809 less
managing shareholder's accumulated deficit of $86,906.
</FN>
</TABLE>
