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 June 30, 1997
Commission file Number 0-24240
RIDGEWOOD ELECTRIC POWER TRUST I
(Exact name of registrant as specified in its charter.)
Delaware, U.S.A. 22-3105824
(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 I
BALANCE SHEETS
(Unaudited)
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Assets:
Investments in project development
and power generation limited
partnerships $ 6,551,056 $ 6,810,208
Cash and cash equivalents 659,272 327,322
Advances to RW Power Partners, L.P. --- 367,667
Other assets 4,941 ---
Total assets $ 7,215,269 $ 7,505,197
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses $ 42,905 $ 71,149
Due to affiliates 595,669 829,407
638,574 900,556
Shareholders' equity
Shareholders' equity
(105.5 shares issued
and outstanding) 6,601,087 6,628,753
Managing shareholder's
accumulated deficit (24,392) (24,112)
Total shareholders' equity 6,576,695 6,604,641
Total liabilities and
shareholders' equity $ 7,215,269 $ 7,505,197
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST I
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS AND QUARTERS ENDED JUNE 30, 1997
AND JUNE 30, 1996
(Unaudited)
<CAPTION>
Six months Quarter Six months Quarter
ended June 30, ended ended June 30, ended June 30,
1997 June 30, 1996 1996
1997
<S> <C> <C> <C> <C>
Revenue:
Income from power
generating projects $3,553,602 $ 147,001 $ 239,501 $ 222,001
Interest and dividend
income 60,342 29,264 3 3
Total revenues 3,613,944 176,265 239,504 222,004
Expenses:
Accounting and legal
fees 15,848 6,751 32,500 28,000
Management fee 31,793 7,209 14,418 ---
Trustee fees 5,000 2,500 5,000 2,500
Write-down of limited
partnership investments 3,259,152 --- --- ---
Miscellaneous 9,228 5,619 2,179 1,656
3,321,021 22,079 54,097 29,156
Net income (loss) $ 292,923 $ 154,186 $ 185,407 $ 192,848
Allocation to:
Shareholders $ 289,994 $ 152,644 $ 183,553 $ 190,250
Managing shareholder 2,929 1,542 1,854 2,598
$ 292,923 $ 154,186 $ 185,407 $ 192,848
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST I
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS AND QUARTERS ENDED JUNE 30, 1997
AND JUNE 30, 1996
(Unaudited)
Six months Six months
ended June 30, ended June 30,
1997 1996
<S> <C> <C>
Cash flows from operating
activities:
Net income (loss) $ 292,923 $ 185,407
Adjustments to
reconcile net income
(loss) to cash provided
by (used in) in
operating activities:
Writedown of limited
partnership investments 3,259,152 -
Changes in assets &
liabilities:
Decrease (increase) in
due from affiliates 320,648 (155,310)
(Increase) decrease in
other assets (4,940) ---
(Decrease) increase in
accounts payable and
accrued expenses (28,245) (13,500)
(Decrease) increase in
due to affiliates (186,719) 369,810
Total adjustments 3,359,896 201,000
Net cash provided by (used in)
operating activities 3,652,819 386,407
Cash flow used in
investment activities:
Investment in Brea Power
Partners, L.P. (2,970,000) 0
Investment in Ridgewood
Management Corp. G.P. (30,000) 0
Net cash used in
investment activities (3,000,000) 0
Cash used in
financing activities:
Cash distributions to
shareholders (partners
through June 14, 1994) (320,869) (391,425)
Net cash used in
financing activities (320,869) (391,425)
Net increase (decrease) in
cash and cash equivalents 331,950 (5,018)
Cash and cash equivalents
beginning of year 327,322 5,643
Cash and cash equivalents
end of period $ 659,272 $ 625
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
RIDGEWOOD ELECTRIC POWER TRUST I
NOTES TO FINANCIAL STATEMENTS
1. Organization and Purpose
Nature of business
Ridgewood Energy Electric Power, L.P. (the "Partnership") was formed as a
Delaware limited partnership on March 6, 1991, by Ridgewood Power Corporation
acting as the general partner. On April 30, 1991, Beale Lynch Power
Partners Inc. was admitted as co-general partner of the Partnership.
The Partnership began offering limited partnership units in the Partnership
on May 1, 1991. The Partnership commenced operations on September 16,
1991 and discontinued its offering of units on March 31, 1992.
On June 15, 1994, with the approval of the partners, the Partnership
merged all of its assets and liabilities into a newly formed trust,
called Ridgewood Electric Power Trust I (the "Trust"). Effective July 25,
1994, the Trust elected to be treated as a "Business Development Company"
("BDC") under the Investment Company Act of 1940 and registered its shares
under the Securities Act of 1934. In connection with this transaction, the
Trust issued 105.5 shares in exchange for outstanding Partnership units.
Ridgewood Power Corporation is the sole managing shareholder.
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 small power production facilities
which produce electricity from waste oil, landfill gas and water.
The power plants sell electricity to utilities under long-term contracts.
2. Summary of Significant Accounting Policies
Interim Financials
The financial statements for the three and six months ended June 30,
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
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 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.
<PAGE>
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
Notes to Financial Statements
Investments in project development and power generation limited
partnerships
The Trust holds partnership interests in power generating limited
partnerships, 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.
Offering costs
Costs associated with offering Trust shares (selling commissions,
distribution and offering costs) are reflected as a reduction of the
shareholders' capital contributions.
Cash and Cash Equivalents
The Trust considers all highly liquid investments with maturities when
purchased 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 Project Development and Power Generation Limited
Partnerships
The following investments in power generation limited partnerships are
stated at fair value:
June 30, December 31,
1997 1996
Power generation
limited partnerships:
Stillwater Hydro
Partners, L.P. $ 1,000,000 $ 1,000,000
RW Power Partners, L.P. 268,770 3,527,923
Brea Power Partners, L.P. 5,252,286 2,282,285
Ridgewood Management Corp. G.P. 30,000 ---
6,551,056 $ 6,810,208
<PAGE>
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
Notes to Financial Statements
Investments in power generation limited partnerships
Stillwater Hydro Partners, L.P.
On October 31, 1991, the Trust acquired a 32.5% general partner's
interest in a limited partnership whose sole business is the
construction, ownership and operation of a 3.5 megawatt hydroelectric
facility, located on the Hudson River in Stillwater, New York.
At the time of the investment, the project was under construction and
commenced operations in May 1993.
A distribution of $126,707 was received by the Trust in 1994.
On May 16, 1994 the Trust, as stipulated in the limited partnership
agreement, elected to exchange its general partner interest for
a limited partnership interest and a priority distribution of available
cash flow from the project in the aggregate amount of $1,000,000.
Such distribution is payable from available cash flows in nine
annual installments together with interest at 12% per year, which
were scheduled to begin in May 1995.
The ultimate ability of the project to meet its payment obligations
to the Trust is dependent on the actual operating performance of the
Stillwater Project, which, in turn, is largely dependent upon water
levels in the Hudson River. In 1995, the Hudson River basin experienced
a severe drought, resulting in Hudson River water levels substantially
below normal. As a result of the low water levels, the operating results
of the project were insufficient to meet its debt payments, and
accordingly, no distributions were made to the Trust in 1995.
Although increased precipitation in late 1995 and early 1996 brought
flow levels back toward the norm, high water flows damaged portions
of the facility, including the recently installed modifications for
capturing additional water flow.
As a result, all available cash flow from the Stillwater Project is being
applied to meet debt service requirements. Until water flows return to
expected levels, repairs are completed and the current arrears in debt
servicing are made up, it appears likely that most, if not all, of the
payments due to the Trust will be deferred and carried forward,
with interest, into subsequent years.
Electricity generated by the Stillwater Project is sold to
Niagara Mohawk Power Corporation under a long-term Power Contract
with a remaining term of 31 years. Niagara Mohawk has argued
before the New York Public Service Commission, the state agency
that regulates the electric utility industry, and the Federal Energy
Regulatory Commission ("FERC") that rates it pays to purchase electricity
under long-term Qualifying Facility contracts are uneconomic and that it
should be allowed to abrogate those contracts. In April 1995, FERC
rejected Niagara Mohawk's application and the New York State Public
Service Commission has also refused the requested relief. There
can be no assurance, however, that Niagara Mohawk would not succeed
in any future efforts to abrogate Qualifying Facility contracts.
RW Power Partners, L.P. (known as the Lynchburg project)
In October 1992, the Trust entered into a limited partnership
agreement to provide construction funding of a 3 megawatt project
using waste oil as its primary fuel source. Construction of the
project commenced in January 1993, and commercial operations
began in June 1993. Construction of a waste oil processing facility
began in 1994, and was completed in 1996. The total cost of the waste
oil processing facility was approximately $832,000. As of December 31, 1996
and 1995, the Trust funded $3,527,923 of the total cost of the original
project and the waste oil facility, a portion of which was funded
by the managing shareholder.
<PAGE>
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
Notes to Financial Statements
The Trust received distributions of $3,390,662, $208,000 and $163,188
from the limited partnership for the periods ended March 31, 1997,
December 31, 1996 and December 31, 1995, respectively. The Trust's
investment in and advances to the limited partnership amounted
to $3,895,590 and $3,845,740 at December 31, 1996, and 1995, respectively.
In exchange for its investment, the Trust has the right to receive annually
the greater of either 70% of net profits from the limited partnership
or a preferred minimum return of 22.5% on its total investment. In the
event that in any given year all net profits from the limited partnership
do not cover the amount of the preferred minimum return, the amount of such
shortfall will be payable on a priority basis out of any net profits in
subsequent years.
On January 17, 1997, the Trust settled the pending lawsuit between
its subsidiary, RW Power Partners, L.P. ("RWPP"), and Virginia Electric
Power Company ("Vepco"). RWPP had sued Vepco when Vepco attempted to
cancel the power purchase contract under which Vepco was required to
purchase electricity generated by RWPP at the Lynchburg project.
Under the settlement, Vepco paid RWPP $3,750,000 in cash and waived
a claim of $1,800,000 for prepaid capacity payments. After repayment
of $390,836 of intercompany payables, the Trust received a $3,390,662
distribution from the Lynchburg Project during the first quarter of
1997, which was recorded as income from power generating projects.
RWPP surrendered the power purchase contract to Vepco and agreed to the
entry of an order dismissing its lawsuit against Vepco. The settlement
permits RWPP to continue operating the generating station and the
associated waste oil treatment plant, but RWPP may not sell electricity
to Vepco, except at Vepco's request, and RWPP may only sell electricity
to investor-owned electric utilities for resale or use outside Vepco's
service area.
In addition, the facility may be operated for non-generating purposes
such as waste oil treatment and electricity may be generated for the
facility's needs. Vepco may cut the interconnection of the facility
with its lines and reconnection is permitted only for electricity sales
in compliance with the settlement agreement. RWPP may remove and sell
equipment. These restrictions apply to any future owner of the Lynchburg
facility.
As a result of the operating restrictions and cancellation of the power
purchase contract included in the Vepco settlement, the operation of the
Lynchburg Project facilities was suspended in January 1997. During the
first quarter of 1997, management of the Trust decided to sell the
Lynchburg Project facilities. Accordingly, the investment in the project
was written-down to its estimated net realizable value of $268,770 and a
$3,259,152 charge was recorded.
Brea Power Partners, L.P. (known as the Olinda project)
In October 1994, the Trust invested $3,103,479 for a limited partnership
interest in Brea Power Partners, L.P. ("Brea"), which owns the Olinda Project,
a 5 megawatt capacity electrical generating plant, located in Brea,
California, near Los Angeles. The Olinda Project includes three reciprocating
electric generator engines, which are fueled by methane gas produced and
collected from a nearby landfill. The electricity generated is sold to
Southern California Edison Company under a long-term contract which may expire
in 2004.
<PAGE>
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
Notes to Financial Statements
The initial investment in Brea entitles the Trust to receive, in any year, the
lesser of t he preference amount (as defined in the Partnership Agreement) or
98% of the annual distribution, plus 25% of the excess of the annual
distribution over the preference amount of Brea until the Trust receives a
cumulative 15% return on its original investment. After such time, the amount
the Trust receives decreases to 5% of net cash flows.
The Trust received distributions from Brea Partnership of $162,900, $796,501,
$859,801 and $117,600 for the five months ended May 31, 1997 and the years
ended December 31, 1996, 1995, and 1994, respectively. Of the cash
distributions $397,638 and $440,916 have been treated as a return of
investment capital during the years ended December 31, 1996 and 1995,
respectively. The Trust's investment in Brea at May 31, 1997 and December 31,
1996 amounted to $2,282,285.
On June 1, 1997, the Trust purchased the general and other limited partnership
interests in Brea and now own 100% of the Olinda Project. The purchase price
of $2,813,400 included a cash payment to the sellers of $2,256,500, assumed
liabilities of $441,100 and acquisition costs of approximately $115,800. The
Trust's total investment in Brea, net of intercompany advances to and from
Brea of $4,680,900 is recorded in the Balance Sheet at June 30, 1997. Brea
accounted for the acquisition as a purchase. The purchase price was allocated
to the net assets acquired, based on their respective fair values. A portion
of the purchase price ($2,370,700) was allocated to the electric power sales
contract and is being amortized over 7 1/2 and 15 years for book and tax
purposes, respectively.
Because the acquisition of 100% of the Olinda Project
is recorded in the unaudited balance sheet of the Trust as of June 30, 1997,
no pro forma balance sheet information is presented.
The following unaudited pro forma information has been prepared assuming the
Olinda Project was acquired as of the beginning of the periods presented. The
proforma information is presented for information purposes only and is not
necessarily indicative of what would have occurred if the acquisition had been
made as of those dates. In addition, the pro forma information is not
intended to be a projection of future results and does notreflect capital
equipment additions and changes in operating management which
have been made at the Olinda Project subsequent to the acquisition.
Pro Forma Information
(Unaudited)
Six Months Ended Year Ended
June 30, 1997 December 31, 1996
Total Revenue
As reported $3,613,9454 $ 609,537
Adjustments 53,740 639,653
Pro forma $3,667,685 $1,249,190
Net Income
As reported $ 292,923 $ 496,802
Adjustments 53,740 639,653
Pro forma $ 346,663 $1,136,455
The pro forma adjustments include distributions made to the former general and
limited partners, incentive and performance bonuses paid to the former
operator, liquidated damages paid by Brea under the gas purchase contract,
additional fuel costs required under the revised gas purchase contract and
amounts previously recorded by the Trust as return of capital.Pro forma
financial information
Pro Forma Income Statement Information
(unaudited)
Six months ended
June 30, 1997 Pro forma Pro forma
as reported adjustments
Income from power
generating projects $ 3,553,602 $ 53,740 (a) $ 3,607,342
Total revenues 3,613,944 53,740 (a) 3,667,684
Net income 292,923 53,740 (a) 346,663
Year ended December
31, 1996 Pro forma Pro forma
as reported adjustments
Income from power
generating projects $ 606,863 $ 242,015 (b) $ 1,246,516
397,638 (c)
Total revenues 609,537 639,653 (b)(c) 1,249,190
Net income 496,802 639,653 (b)(c) 1,136,455
Notes to Pro Forma Income Statement Information
(a) Includes additional distributions from the Project to the Trust of
$43,334 which were previously paid to the prior owner, plus $10,406 of net
additional cash flow resulting from termination of the operator incentive and
performance bonuses previously paid to the prior owner, net of additional fuel
costs required under the revised gas purchase contract.
(b) Includes additional distributions from the Project to the Trust of
$59,343 which were previously paid to the prior owner, plus $182,672 of net
additional cash flow resulting from termination of the operator incentive and
performance bonuses previously paid to the prior owner, net of additional fuel
costs required under the revised gas purchase contract.
(c) Includes $397,638 of cash received the Project which was previously
recorded by the Trust as a reduction in its investment in the Project.
<PAGE>
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
Notes to Financial Statements
Investments in project development limited partnerships
The Trust made investments in several limited partnerships with other
major participants in the power industry to provide access to
investments in larger projects in which these participants would take
the leading role in the acquisition or development of such projects.
In 1994, the Trust wrote-off its investment in these limited partnerships
of $814,669.
4. Transactions With Managing Shareholder and Affiliates
Prior to the BDC election, the Partnership also paid to the
general partners a distribution and offering fee in an amount up to
2.5% of each capital contribution made to the Partnership. This fee
was intended to cover legal, accounting, consulting, filing,
printing, distribution, selling, and closing costs for the offering
of the Partnership. These fees were recorded as a reduction in the
partners' capital contributions.
Prior to the BDC election in July 1994, the Partnership paid to the
general partners a management fee not to exceed 4.5% of each capital
contribution made to the Partnership. The fee was payable to the
general partners for their services in investigating and
evaluating investment opportunities and effecting transactions for
investing the capital of the Partnership.
Prior to the BDC election, the Partnership paid to the
general partners an annual administrative and overhead fee equal to
1% of the aggregate capital contributions of the Partnership.
During 1994, the Partnership paid administrative and overhead fees to
the general partners of $52,750.
On June 15, 1994, 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 1.0% of the net assets of the Trust payable monthly. In 1996,
management fees of $43,255 were waived by the managing shareholder.
For the periods ended March 31, 1997, December 31, 1996 and December 31,
1995, the Trust paid management fees to the managing shareholder of
$24,584, $49,255 and $86,510, 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 15% 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. For the periods ended March 31,
1997, December 31, 1996 and December 31, 1995, the Trust made
distributions to the managing shareholder of $1,819, $8,086 and
$8,151, respectively.
At December 31, 1996 and 1995, the managing shareholder and
affiliates owned, in the aggregate, 3.0 units of the Trust and made
capital contributions of $273,000.
In connection with the construction of the waste oil facility at the
Lynchburg Project, the managing shareholder advanced $570,000 in 1995 and
$260,000 in 1996 to the Trust to fund a portion of the Trust's investment
in the waste oil facility. No interest was charged on the advances.
When the Trust received the settlement proceeds in January 1997, all of
the outstanding advances were repaid to the managing shareholder without
interest.
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 Lynchburg Project. Ridgewood Management charges the project 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.
<PAGE>
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
Notes to Financial Statements
5. Revolving Line of Credit Facility
One June 6, 1997, Brea entered into a revolving credit agreement with Fleet
Bank, N.A. (the "Bank") whereby the Bank provided a five year committed line
of credit facility of $750,000 which decreases by $100,000 on each anniversary
of the facility. Outstanding borrowings bear interest at the Bank's prime
rate or, at Brea's choice, at LIBOR plus 2.5%. At June 30, 1997, there were
no borrowings outstanding under the credit facility. The credit agreement
requires Brea to maintain a ration of total debt to tangible net worth of no
more than 1 to 1. The Trust guaranteed the obligations of Brea under the
credit facility.
6. Contingencies
In December 1993, a subsidiary of the Trust engaged
Blackhawk Management Group, Incorporated ("Blackhawk"),a North Carolina
corporation whose sole owner and employee was the original developer
of the Lynchburg Project, to manage that Project under contract.
On June 9, 1994, the subsidiary terminated the management contract for
material breach and inequitable conduct by Blackhawk, which then sued
in the Circuit Court of Halifax County, Virginia on June 8, 1995.
The action claimed breach of contract by the Trust's subsidiary and
claimed compensatory damages of $3 million and punitive damages
of $1 million. The subsidiary has removed the action to the United
States District Court for the Western District of Virginia, Danville
Division. On July 25, 1997, that court entered summary judgment in favor of
the Trust's subsidiary as to all issues. The judgment has not been appealed
and is final.
From time to time, the Trust and its subsidiaries are engaged
in legal proceedings incident to the normal course of their
businesses. The Trust believes that the outcome of these proceedings
will not have a material impact on the Trust's financial position
or results of operations.
<PAGE>
RIDGEWOOD ELECTRIC POWER TRUST I
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 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.
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.
Comparison of the six month periods ended June 30, 1997 and 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.
Results for the first six months of 1997 were dominated by the settlement of
the litigation with Virginia Electric Power Company ("Vepco") involving the
South Boston Project (described at Part II - Item-Legal Proceedings) and the
related shutdown of the Project at the beginning of 1997. Income from power
generating projects was $3,554,000 for the first six months of 1997 as opposed
to $240,000 for the 1996 period, reflecting a $3,391,000 distribution from the
partnership owning the South Boston Project. The South Boston distribution
included $3,359,000 of net proceeds from the Vepco settlement (a settlement
amount of $3,750,000 less repayments of $391,000 of prior advances by the
Trust and the Managing Shareholder). The remainder of the South Boston
distribution ($32,000) in 1997 reflected cash flow earned in the last quarter
of 1996, as compared to a $80,000 distribution made to the Trust from that
Project in the comparable 1996 period. The Project's 1996 fourth quarter net
cash flow had been depressed because of higher than anticipated fuel costs and
the wind-down of operations in anticipation of the January 1997 settlement.
First half income from the Olinda Project increased to $163,000 in 1997 from
$160,000 in 1996. Olinda's income is seasonal and is normally low during the
first and fourth quarters of each year because electricity prices during these
off-peak periods are significantly lower, resulting in low margins.
Accordingly, the Project schedules maintenance and down periods where possible
in these quarters. In late spring and summer, demand and prices are higher,
leading to increased operating cash flow. The Trust also earned interest of
$60,000 in the first six months of 1997 on the cash funds distributed to it,
as opposed to no interest earnings in the 1996 period (because all available
cash had been distributed to Investors).
Total expenses for the 1997 first quarter were $3,321,000, of which $3,259,000
was a write-down of the Trust's investment in the South Boston Project to an
estimated net realizable value of $269,000. The termination of the power
purchase contract and the operating and sales restrictions contained in the
settlement caused the impairment of the investment. Other expenses totalled
$62,000 in the first six months of 1997 as opposed to $54,000 in the 1996
period. In 1996, the Managing Shareholder had waived the portion of the
management fee (computed at 2.5% of net assets per year) attributable to the
South Boston Project, while in 1997, it ended the waiver, causing an increase
of $18,000 in the first quarter.
Liquidity and Capital Resources
During the first half of 1997, cash and cash equivalents increased by $332,000
from $327,000 to $659,000. In the first half of 1997, two transactions
significantly effected the Trust's cash position. In the first quarter of
1997, the South Boston Project received $3,750,000 in the settlement of
litigation with Virginia Electric Power Company ("Vepco"). The Trust received
a $3,391,000 cash distribution from South Boston Project and received
repayment of a $368,000 advance to South Boston Project. The Trust used
$752,000 of the cash to repay amounts previously borrowed from the managing
shareholder and other affiliates, and $321,000 was distributed to shareholders
of the Trust. In the second quarter of 1997, the Trust purchased additional
partnership interests Brea Power Partners, L.P. ("Brea"), which is the owner
of the Olinda Project, a landfill gas-fueled electric generating station
located in Orange County, California. The purchase price was $2,813,000 and
the Trust now owns 100% of the Olinda Project.
On June 6, 1997, Brea entered into a revolving credit agreement with Fleet
Bank, N.A. (the "Bank") whereby the Bank provided a five year committed line
of credit facility of $750,000 which decreases by $100,000 on each anniversary
of the facility. Outstanding borrowings bear interest at the Bank's prime
rate or, at Brea's choice, at LIBOR plus 2.5%. At June 30, 1997, there were
no borrowings outstanding under the credit facility. The credit agreement
requires Brea to maintain a ratio of total debt to tangible net worth of no
more than 1 to 1. The Trust guaranteed the obligations of Brea under the
credit facility. 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.
Other than investments of available cash in power generation Projects,
obligations of the Trust are generally limited to making distributions to
shareholders of available operating cash flow generated by its investments,
payment of the management fee to the managing shareholder and payment of
certain accounting and legal services to third parties. The Trust's policy is
to distribute to shareholders as much cash as is prudent. 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 in
the future through use of the revolving line of credit facility.
<PAGE>
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
Notes to Financial Statements
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. Other states, such as Massachusetts, New Hampshire and
New York, are preparing their own initiatives. 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
California 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 that 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.
<PAGE>
PART II - OTHER INFORMATION
Item #1 Legal Proceedings
The previously pending lawsuit between RW Power Partners, L.P. (a subsidiary
of the Trust) and Blackhawk Management Company, Inc., in which Blackhawk
claimed that its management contract for the South Boston generating plant was
breached when RWPP fired Blackhawk in June 1994, was resolved on July 25, 1997
when the United States District Court for the Western District of Virginia
entered summary judgment in favor of RW Power Partners, L.P. on all of
Blackhawk's claims. The counterclaims of RW Power Partners, L.P. were
dismissed and no appeal was taken from the court's judgment. Accordingly, the
action did not impose any material liability on the Trust or its subsidiary.
Item #6 Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
A current report on Form 8-K was filed on June 16, 1997 reporting
the acquisition of all of the equity interest in Brea Power Partners, L.P.
<PAGE>
RIDGEWOOD ELECTRIC POWER TRUST I
SIGNATURES
Pursuant to the requirement of the Securities Exchange
Act of 1934, the registrant has duly cause this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
RIDGEWOOD ELECTRIC POWER TRUST I
Registrant
August 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 six months ended June 30, 1997 and is
qualified in its entirety by reference to those financial
statements.
</LEGEND>
<CIK> 0000924386
<NAME> RIDGEWOOD ELECTRIC POWER TRUST I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 659,272
<SECURITIES> 6,551,056<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 659,272
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,215,269
<CURRENT-LIABILITIES> 638,574
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 6,576,695<F2>
<TOTAL-LIABILITY-AND-EQUITY> 7,215,269
<SALES> 0
<TOTAL-REVENUES> 3,613,944
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,321,021<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 292,923
<INCOME-TAX> 0
<INCOME-CONTINUING> 292,923
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 292,923
<EPS-PRIMARY> 2,776
<EPS-DILUTED> 2,776
<FN>
<F1>Investments in power project partnerships.
<F2>Represents Investor Shares of beneficial interest in
Trust with capital accounts of $ 6,601,087 less managing
shareholder's accumulated deficit of $24,392.
<F3>Including write-down of investment of $3,259,152.
</FN>
</TABLE>
