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 September 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
ITEM I - FINANCIAL STATEMENTS
RIDGEWOOD ELECTRIC POWER TRUST I
BALANCE SHEETS
(Unaudited)
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Assets:
Investments in project development
and power generation limited
partnerships $ 7,026,987 $ 6,810,208
Cash and cash equivalents 772,442 327,322
Advances to RW Power Partners, L.P. --- 367,667
Other assets 3,093 ---
Total assets $ 7,802,522 $ 7,505,197
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses $ 50,519 $ 71,149
Due to affiliates 316,999 829,407
367,518 900,556
Shareholders' equity
Shareholders' equity
(105.5 shares issued
and outstanding) 7,450,813 6,628,753
Managing shareholder's
accumulated deficit (15,809) (24,112)
Total shareholders' equity 7,435,004 6,604,641
Total liabilities and
shareholders' equity $ 7,802,522 $ 7,505,197
<FN>
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST I
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS AND QUARTERS ENDED SEPTEMBER 30, 1997
AND SEPTEMBER 30, 1996
(Unaudited)
<CAPTION>
Nine months Quarter Nine months Quarter
ended ended ended ended
September 30, September 30, September 30, September 30,
1997 1997 1996 1996
<S> <C> <C> <C> <C>
Revenue:
Income from power
generating projects $4,713,091 $ 1,159,489 $ 489,501 $ 250,000
Interest and dividend
income 75,945 15,601 306 303
Total revenues 4,789,036 1,175,092 489,807 250,303
Expenses:
Accounting and legal
fees 24,546 8,698 40,000 7,500
Management fee 49,010 17,217 14,418 ---
Trustee fees 7,500 2,500 7,500 2,500
Write-down of limited
partnership investments 3,259,152 --- --- ---
Miscellaneous 9,869 640 5,313 3,134
3,350,077 29,055 67,231 13,134
Net income (loss) $1,438,959 $1,146,036 $ 422,576 $ 237,169
Allocation to:
Shareholders $1,424,570 $ 1,134,576 $ 418,350 $ 234,797
Managing shareholder 14,389 11,460 4,226 2,372
$1,438,959 $ 1,146,036 $ 422,576 $ 237,169
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST I
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND SEPTEMBER 30, 1996
(Unaudited)
Nine months Nine months
ended September 30, ended September 30,
1997 1996
<S> <C> <C>
Cash flows from operating
activities:
Net income (loss) $1,438,959 $ 422,576
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 31,528 (155,310)
(Increase) decrease in
other assets (3,092) ---
(Decrease) increase in
accounts payable and
accrued expenses (20,631) (3,500)
(Decrease) increase in
due to affiliates (176,269) 369,810
Total adjustments 3,090,688 211,000
Net cash provided by (used in)
operating activities 4,529,647 633,576
Cash flow used in
investment activities:
Investment in Brea Power
Partners, L.P. (3,445,931) ---
Investment in Ridgewood
Management Corp. G.P. (30,000) ---
Net cash used in
investment activities (3,475,931) ---
Cash flows used in
financing activities:
Cash distributions to
shareholders (608,596) (599,631)
Net cash used in
financing activities (608,596) (599,631)
Net increase (decrease) in
cash and cash equivalents 445,120 33,945
Cash and cash equivalents
beginning of year 327,322 5,643
Cash and cash equivalents
end of period $ 772,442 $ 39,588
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
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 financial statements
The financial statements for the three and nine months ended September 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 in 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:
Sept. 30, December 31,
Power generation limited partnerships: 1997 1996
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. 5,728,217 2,282,285
Ridgewood Management Corp. G.P. 30,000 ---
$ 7,026,987 $ 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 or South Boston 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 $3,390,664, $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 $3,390,664 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.
During the third quarter of 1997, the Trust entered into negotiations with a
privately-held, un-affiliated processor of waste oil to sell the Lynchburg
Project. The Parties have expressed their intent to sell the Project no later
than the end of 1997 for the purchaser's 8%, seven-year, promissory note of
$700,000, secured by a mortgage on the Project, and the right of the Trust to
receive 2% of the Project's gross revenues for an indefinite period. The
Trust would also provide 8%, seven-year debt financing of up to $125,000 to
finance additional capital improvements at the Project, secured by the
mortgage. There is no
<PAGE>
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
Notes to Financial Statements
assurance that this transaction will in fact occur as scheduled or on the
terms described above.
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.
The initial investment in Brea entitles the Trust to receive, in any year, the
lesser of the 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 $162,938, $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 owns 100% of the Olinda Project. The purchase price
of $3,000,000, included a cash payment to the sellers of $2,256,500,
intercompany payable of $627,676 and acquisition costs of approximately
$115,800. On August 31, 1997, the Trust invested an additional $475,932 in
Brea for working capital. The Trust's total investment in Brea, at September
30, 1997, is $5,758,217. 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.
The Trust received distributions from Brea Partnership of $1,159,489 for the
period June 1, 1997 to September 30, 1997.
Because the acquisition of 100% of the Olinda Project is recorded in the
unaudited balance sheet of the Trust as of September 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
pro forma 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 not reflect capital
equipment additions and changes in operating management which have been made
at the Olinda Project subsequent to the acquisition.
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
Notes to Financial Statements
Pro forma financial information
Pro Forma Income Statement Information
(unaudited)
Nine months ended Nine months ended
Sept. 30, 1997 Pro forma September 30, 1997
as reported adjustments Pro forma
Income from power
generating projects $ 4,713,091 $ 53,740 (a) $ 4,766,831
Total revenues 4,789,036 53,740 (a) 4,842,776
Net income 1,438,959 53,740 (a) 1,492,699
Year ended Year ended
December 31, 1996 Pro forma December 31, 1996
as reported adjustments Pro forma
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 from the Project which was
previously recorded by the Trust as a reduction in its investment in the
Project.
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.
<PAGE>
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
Notes to Financial Statements
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
September 30, 1997, December 31, 1996 and December 31, 1995, the Trust paid
management fees to the managing shareholder of $49,010, $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 September 30, 1997, December 31, 1996 and
December 31, 1995, the Trust made distributions to the managing shareholder of
$6,086, $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 had 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.
<PAGE>
Ridgewood Electric Power Trust I
(formerly Ridgewood Energy Electric Power, L.P.)
Notes to Financial Statements
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
and Olinda Projects. 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.
5. Revolving Line of Credit Facility
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 September 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.
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 Trusts' financial position or results of operations.
<PAGE>
ITEM II - 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 nine month periods ended September 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 nine 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 $4,713,000 for the first nine months of 1997 as
opposed to $490,000 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 $183,000 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.
For the first nine months of 1997, income from the Olinda Project increased to
$1,322,000 from $307,000 in the comparable 1996 period. The increase resulted
form the Trust's increased ownership in Olinda. Prior to June 1, 1997, the
Trust owned a cumulative 15% priority return on its $3,103,000 investment in
Olinda. On June 1, 1997, the Trust purchased additional partnership interests
and now owns 100% of the Olinda Project.
The Trust also earned interest of $76,000 in the first nine months of 1997 on
the cash funds distributed to it, as opposed to $300 of interest earned in the
1996 period. The increase in interest income resulted from investment income
on higher balances of cash and cash equivalents in the first nine months of
1997 as compared to the comparable period in 1996.
Total expenses for the first nine months of 1997 were $3,350,000, 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 agreement caused the impairment of the investment. Other
expenses amounted to $91,000 in the first nine months of 1997 as opposed to
$67,000 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 $35,000.
Liquidity and Capital Resources
During the nine months of 1997, the average balance of cash and cash
equivalents significantly increased. Two transactions significantly affected
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
in 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 the
Trust's principal 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 September 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.
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 #6 Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
<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
November 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 nine months ended September 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1997
<CASH> 772,442
<SECURITIES> 7,026,987<F1>
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 772,442
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,802,522
<CURRENT-LIABILITIES> 367,518
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 7,435,004<F2>
<TOTAL-LIABILITY-AND-EQUITY> 7,802,522
<SALES> 0
<TOTAL-REVENUES> 4,789,036
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,350,077<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,438,959
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,438,959
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,438,959
<EPS-PRIMARY> 13,639
<EPS-DILUTED> 13,639
<FN>
<F1>Investments in power project partnerships.
<F2>Represents Investor Shares of beneficial interest in
Trust with capital accounts of $ 7,450,813 less managing
shareholder's accumulated deficit of $(15,809).
<F3>Including write-down of investment of $3,259,152.
</FN>
</TABLE>
