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 September 30, 2000
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
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(Address of principal executive offices) (Zip Code)
(201) 447-9000
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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 [ ]
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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Ridgewood Electric Power Trust III
Financial Statements
September 30, 2000
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Ridgewood Electric Power Trust III
Balance Sheet
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September 30, December 31,
2000 1999
------------ ------------
(unaudited)
Assets:
Investments in power generation projects ....... $ 23,788,582 $ 23,202,879
Cash and cash equivalents ...................... -- 603,922
Due from affiliates ............................ -- 80
Other assets ................................... 107,604 7,416
------------ ------------
Total assets ................................. $ 23,896,186 $ 23,814,297
------------ ------------
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses .......... $ 265,856 $ 51,676
Borrowings under line of credit facility ....... 725,000 --
Due to affiliates .............................. 243,479 11,438
------------ ------------
Total liabilities ............................ 1,234,335 63,114
------------ ------------
Shareholders' equity:
Shareholders' equity (391.8444 shares issued and
outstanding) ............................. 22,766,267 23,844,706
Managing shareholder's accumulated deficit ..... (104,416) (93,523)
------------ ------------
Total shareholders' equity ................... 22,661,851 23,751,183
------------ ------------
Total liabilities and shareholders' equity ... $ 23,896,186 $ 23,814,297
------------ ------------
See accompanying notes to financial statements.
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Ridgewood Electric Power Trust III
Statement of Operations (unaudited)
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Nine Months Ended Three Months Ended
---------------------- ------------------------
September 30, September 30,
2000 1999 2000 1999
---------- --------- ----------- ----------
Revenue:
Income from power
generation projects $1,598,071 $1,501,445 $1,039,114 $ 833,038
Interest income ......... 17,138 47,194 -- 12,561
Income from arbitration
award, net ............. -- 1,496,598 -- 7,793
---------- ---------- ---------- ----------
Total revenue ......... 1,615,209 3,045,237 1,039,114 853,392
---------- ---------- ---------- ----------
Expenses:
Writedown of investments
in power generation
projects ............... 322,500 -- 245,000 --
Management fee .......... 444,199 445,932 147,309 148,644
Accounting and legal fees 96,937 31,147 22,914 9,174
Miscellaneous ........... 59,790 62,045 34,682 9,138
---------- ---------- ---------- ----------
Total expenses ........ 923,426 539,124 449,905 166,956
---------- ---------- ---------- ----------
Net income (loss) ........ $ 691,783 $2,506,113 $ 589,209 $ 686,436
---------- ---------- ---------- ----------
See accompanying notes to financial statements.
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Ridgewood Electric Power Trust III
Statement of Changes in Shareholders' Equity (unaudited)
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Managing
Shareholders Shareholder Total
------------ ------------ -----------
Shareholders' equity,
December 31, 1999 ...... $ 23,844,706 $ (93,523) $ 23,751,183
Cash distributions ...... (1,763,304) (17,811) (1,781,115)
Net income for the period 684,865 6,918 691,783
------------ ------------ ------------
Shareholders' equity,
September 30, 2000 ..... $ 22,766,267 $ (104,416) $ 22,661,851
------------ ------------ ------------
See accompanying notes to financial statements.
.
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Ridgewood Electric Power Trust III
Statement of Cash Flows (unaudited)
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Nine Months Ended
--------------------------
September 30, 2000 September 30, 1999
----------- -----------
Cash flows from operating activities:
Net income ................................. $ 691,783 $ 2,506,113
----------- -----------
Adjustment to reconcile net income
to cash flows from operating activities:
Additional investments in power
generation projects, net .................. (908,203) (2,953,878)
Writedown on investments in power
generation projects ...................... 322,500 --
Changes in assets and liabilities:
Decrease in due from affiliates .......... 80 6,215
(Increase) decrease in other assets ...... (100,188) 95,650
Increase (decrease) in accounts
payable and accrued expenses ........... 214,180 (145,207)
Increase (decrease) in due to affiliates . 232,041 (9,956)
----------- -----------
Total adjustments ......................... (239,590) (3,007,176)
----------- -----------
Net cash provided by operating activities . 452,193 (501,063)
----------- -----------
Cash flows from financing activities:
Cash distributions to shareholders ......... (1,781,115) (1,783,513)
Borrowings under line of credit facility ... 725,000 --
Payments on credit facility ................ -- --
----------- -----------
Net cash used in financing activities ..... (1,056,115) (1,783,513)
----------- -----------
Net decrease in cash and cash equivalents ... (603,922) (2,284,576)
Cash and cash equivalents, beginning of year 603,922 2,414,916
----------- -----------
Cash and cash equivalents, end of period .... $ -- $ 130,340
----------- -----------
See accompanying notes to financial statements.
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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 1999 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. Writedown of Investments in AES-NJ Projects
In the third quarter of 2000, the Trust determined that it would be unlikely to
recover its investment in the Spa Great Gorge Project, one of the cogeneration
projects owned by AES-NJ. The Spa Great Gorge Project was shut down earlier in
2000 due to the financial difficulties of the host company. As a result, the
Trust recorded a writedown of $245,000 in the third quarter of 2000 to reduce
the estimated fair value of the investment in the project to zero. As previously
reported in the second quarter on Form 10-Q report, the Trust recorded a
writedown of $77,500 for the Massapequa project to reduce the estimated fair
value of the project to zero.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of OperationsDollar amounts in this discussion are rounded to the nearest
$1,000.IntroductionThe Trust carries its investment in Projects 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 by the Project to fund capital expenditures.
Results of Operations
As summarized below, total revenue decreased 47.0% to $1,615,000 in the first
nine months of 2000 compared to $3,045,000 in the same period in 1999. Revenue
increased to $1,039,000 in the third quarter of 1999 compared to $853,000 in the
third quarter of 1999. Excluding the arbitration award income discussed below,
revenues increased by 4.2% for the first nine months of 2000 compared to the
prior year.
Nine months ended Three months ended
----------------- -------------------
September 30, September 30,
------------- -------------
Project 2000 1999 2000 1999
---- ---- ---- ----
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On-site Cogeneration:
Massachusetts .............. $ -- $ 371,000 $ -- $ --
Others ..................... 251,000 46,000 136,000 45,000
---------- ---------- ---------- ----------
Subtotal ............... 251,000 417,000 136,000 45,000
Providence ................. 486,000 354,000 246,000 133,000
Hawthorne .................. 275,000 -- 88,000 --
Byron ...................... 153,000 251,000 153,000 214,000
San Joaquin ................ 416,000 422,000 416,000 419,000
Ridgewood/AES .............. 17,000 57,000 -- 21,000
Arbitration award income ... -- 1,497,000 -- 8,000
Interest income ............ 17,000 47,000 -- 13,000
---------- ---------- ---------- ----------
Total ...................... $1,615,000 $3,045,000 $1,039,000 $ 853,000
---------- ---------- ---------- ----------
The Trust recorded revenues from the Massachusetts on-site cogeneration project
of $371,000 in the first nine months of 1999. The Trust recorded no revenues
from the project in 2000 because the facility is shutdown (see the 1999 Annual
Report on Form 10-K for information on the dispute with the host company).
Distributions in the first nine months of 2000 from the other on-site
cogeneration projects were primarily generated from the Elmsford facility which
had higher revenue in 2000 compared to the prior year.
Distributions from the Providence facility was higher in 2000 compared to the
prior year due to a decrease in engine maintenance costs. The decline in
distributions from the Byron plant was due to lower revenues in 2000.
The Trust recorded distributions of $275,000 and $88,000 in the first nine
months and third quarter of 2000, respectively, from its investment in Hawthorne
engines which were acquired in the second half of 1999, and began distributions
in the fourth quarter of 1999.
Income of $1,497,000 from the arbitration proceedings against EUA was recorded
in the second quarter of 1999 when payment was received.
The management fee of $147,000 and $444,000 in the third quarter and first nine
months of 2000, respectively, was essentially unchanged from the same periods in
1999. As discussed in Note 2 to the September 30, 2000 financial statements, the
Trust recorded writedowns of $323,000 for investments in the Massapequa and Spa
Great Gorge on-site cogeneration projects for the nine months ended 2000.
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. The Trust borrowed $350,000
under this line of credit in the first quarter of 2000 and an additional
$375,000 in the second quarter of 2000. These borrowings were repaid in November
2000.
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, repayment of borrowings under the line of credit facility 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 and reserves, including
cash held by unconsolidated subsidiaries, and the line of credit facility will
be adequate to fund its obligations in 2000. However, the Trust may need to
decrease distributions from the current level in the fourth quarter of 2000.
Forward-looking statement advisory
This Quarterly Report on Form 10-Q, as with some other statements made by the
Trust from time to time, contains forward-looking statements. These statements
discuss business trends and other matters relating to the Trust's future results
and the business climate and are found, among other places, in the notes to
financial statements and at Part I, Item 2, Management's Discussion and
Analysis. In order to make these statements, the Trust has had to make
assumptions as to the future. It has also had to make estimates in some cases
about events that have already happened, and to rely on data that may be found
to be inaccurate at a later time. Because these forward-looking statements are
based on assumptions, estimates and changeable data, and because any attempt to
predict the future is subject to other errors, what happens to the Trust in the
future may be materially different from the Trust's statements here.
The Trust therefore warns readers of this document that they should not rely on
these forward-looking statements without considering all of the things that
could make them inaccurate. The Trust's other filings with the Securities and
Exchange Commission and its Confidential Memorandum discuss many (but not all)
of the risks and uncertainties that might affect these forward-looking
statements.
Some of these are changes in political and economic conditions, federal or state
regulatory structures, government taxation, spending and budgetary policies,
government mandates, demand for electricity and thermal energy, the ability of
customers to pay for energy received, supplies of fuel and prices of fuels,
operational status of plant, mechanical breakdowns, availability of labor and
the willingness of electric utilities to perform existing power purchase
agreements in good faith. Some of the cautionary factors that readers should
consider are described in the Trust's most recent Annual Report on Form 10-K.
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.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Preceedings
On September 8, 2000, two investors filed lawsuits in Maryland Circuit Court,
Baltimore County, alleging that the Trust and the Managing Shareholder are
responsible for alleged written misrepresentations made to the Trust and to
other unaffiliated issuers by the investors' broker-dealer and registered
representative. These claims are similar to those made by three other investors
in 1999. The total amount invested in the Trust by these two additional
plaintiffs is $40,000. The Trust and the Managing Shareholder have made a claim
against their insurer for costs of defense and any liability associated with
these two lawsuits, which is currently under consideration by the insurer.
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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
November 13, 2000 By /s/ Christopher I. Naunton
Date Christopher I. Naunton
Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial
officer)
