SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
Commission file number 0-25430
RIDGEWOOD ELECTRIC POWER TRUST IV
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-3324608
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
c/o Ridgewood Power Corporation, 947 Linwood Avenue, Ridgewood,
New Jersey 07450
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (201) 447-
9000
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Shares of Beneficial Interest
(Title of Class)
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 3 No ___
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
There is no market for the Shares. The aggregate capital
contributions made for the Registrant's voting Shares held by
non-affiliates of the Registrant at March 21, 1997 was
$47,680,000.
Exhibit Index is located on page 54.
<PAGE>
PART I
Item 1. Business.
Forward-looking statement advisory
This Annual Report on Form 10-K, as with 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 and are found, among
other places, at Items 1(c)(3), 1(c)(4), 1(c)(6)(ii) and 7.
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 these
cautionary factors that readers should consider are
described below at Item 1(c)(4) - Trends in the
Electric Utility and Independent Power Industries.
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>
(a) General Development of Business.
Ridgewood Electric Power Trust IV, the Registrant hereunder
(the "Trust"), was organized as a Delaware business trust on
September 8, 1994 to participate in the development, construction
and operation of independent power generating facilities
("Independent Power Projects" or "Projects"). Ridgewood Energy
Holding Corporation ("Ridgewood Holding"), a Delaware
corporation, is the Corporate Trustee of the Trust.
The Trust sold whole and fractional shares of beneficial
interest in the Trust ("Investor Shares") at $100,000 per
Investor Share, and terminated its private placement offering on
September 30, 1996. It raised approximately $47,680,000. Net of
offering fees, commissions and expenses, the offering provided
approximately $39,500,000 for investments in the development and
acquisition of Independent Power Projects and operating expenses.
The Trust has 941 holders of Investor Shares (the "Investors").
As described below in Item 1(c)(2), the Trust has invested
approximately $20.5 million of its funds to the acquisition of
interests in three Independent Power Projects and in capital
equipment and is actively seeking additional Projects for
investment.
Ridgewood Power Corporation (the "Managing Shareholder"), a
Delaware corporation, is the Managing Shareholder of the Trust
and as such has direct and exclusive discretion in the management
and control of the affairs of the Trust (subject to the general
supervision and review of the Independent Trustees and the
Managing Shareholder acting together as the Board of the Trust).
The Corporate Trustee acts on the instructions of the Managing
Shareholder and is not authorized to take independent
discretionary action on behalf of the Trust. The Independent
Trustees do not have any management or administrative powers over
the Trust or its property other than as expressly authorized or
required by the Declaration of Trust of the Trust (the
"Declaration") or the Investment Company Act of 1940, as amended
(the "1940 Act"). See Item 10 - Directors and Executive Officers
of the Registrant below for a further description of the
management of the Trust.
The Trust made an election to be treated as a "business
development company" under the Investment Company Act of 1940, as
amended (the "1940 Act"). On January 24, 1995, the Trust
notified the Securities and Exchange Commission of such election
and registered the Investor Shares under the Securities Exchange
Act of 1934, as amended (the "1934 Act"). On March 24, 1995 the
election and registration became effective.
As described below at Item 1(c)(6)(iii) - Business -
Narrative Description of Business - Regulatory Matters - the 1940
Act, effective October 3, 1996, the Trust, with the approval of
the Investors, withdrew its election to be a business development
company so that it could make investments together with other
programs sponsored by the Managing Shareholder without requesting
exemptive relief from the Securities and Exchange Commission.
The Trust covenanted to comply with most of the substantive
restrictions on business development companies, other than
certain transactions with affiliated persons, as described there.
Unlike other investment programs that the Managing
Shareholder has sponsored in the independent power industry, the
Trust consolidates its subsidiaries' financial statements with
its own for purposes of this Annual Report on Form 10-K.
(b) Financial Information about Industry Segments.
The Trust has been organized to operate in only one industry
segment: independent power generation.
(c) Narrative Description of Business.
(1) General Description.
The Trust was formed to participate in the development,
construction and operation of independent electric power projects
that generate electricity for sale to utilities and other users,
and in some cases, to provide heat energy or chilled water as
well to users.
Historically, producers of electric power in the United
States consisted of regulated utilities and of industrial users
that produced electricity to satisfy their own needs. The
independent power industry in the United States was created by
federal legislation passed in response to the energy crises of
the 1970s. The Public Utility Regulatory Policies Act of 1978,
as amended ("PURPA"), requires utilities to purchase electric
power from "Qualifying Facilities" (as defined in PURPA),
including "cogeneration facilities" and "small power producers,"
and also exempts these Qualifying Facilities from most utility
regulatory requirements. Under PURPA, Projects that are
Qualifying Facilities are generally not subject to federal
regulation, including the Public Utility Holding Company Act of
1935, as amended, and state regulation. Furthermore, PURPA
generally requires electric utilities to purchase electricity
produced by Qualifying Facilities at the utility's avoided cost
of producing electricity (i.e., the incremental costs the utility
would otherwise face to generate electricity itself or purchase
electricity from another source).
(2) The Trust's Investments.
(i) Providence Project.
The Trust and Ridgewood Electric Power Trust III, a similar
investment program sponsored by the Managing Shareholder
("Ridgewood Power III"), acquired in April 1996 all of the equity
interest in the Providence State Landfill Power Plant, located
near Providence, Rhode Island. Ridgewood Power III invested $7.1
million in the Project and the Trust invested $12.9 million,
which was the remainder of the $20 million investment in the
Project. The acquisition cost of the Project was approximately
$15.5 million (including a $3 million partial prepayment of
Project debt as a condition of obtaining the lenders' consents
and transaction costs) and the remainder of the investment by the
programs represents funds applied to operating reserves, working
capital and cash reserves for capital improvements and expansion.
The Project is encumbered by $6 million of debt maturing in
installments through 2004.
The Project burns methane gas (the major component of
natural gas) generated by the decomposition of garbage in the
landfill as fuel for a 12.3 megawatt capacity electric generation
plant. The facility has been in operation since 1990 and has a
long-term power purchase agreement with the local utility (a
"Power Contract") for 12.0 megawatts with New England Power
Company with a 23 year term remaining.
The Project leases the right to use the landfill site from
the Rhode Island Resource Recovery Corporation, a state agency,
for a royalty of 15% of net Project revenues (increasing to 15%
to 18% in 1006) until 2020. The Project in turn subleases those
rights to Central Gas Limited Partnership ("Gasco"). Gasco,
which is not affiliated with the Trust, operates and maintains
the piping system and other facilities to collect the methane gas
from the landfill and supply it to the Project. Gasco pays a
fixed rent, computed on the basis of the Project's generating
capacity, to the Project under the sublease, and the Project in
turn buys its fuel from Gasco at a formula price per kilowatt-
hour generated by the Project.
Since the Trust purchased the Project in April 1996, average
output from the existing eight engine-generator sets has risen by
approximately 33% from 9.2 Megawatts in the first three months of
1996 to 12.2 Megawatts in December 1996. A small amount of this
output is used for the Project's own needs. Recent output has
continued to approximate the 12.0 Megawatt maximum under the
Power Contract. In order to increase output to the maximum and
to allow engines to be rotated off-line for preventative
maintenance, an additional engine and generator set have been
ordered and should be installed at the Project in April 1997.
This will increase Project capacity by approximately 1/8 and
permit a more balanced operating rotation of engines. The entire
additional capacity will be sold under the existing Power
Contract.
Pump Services Project
On December 31, 1995, the Trust purchased a package of 11
irrigation service engines which have an aggregate power output
equivalent to 1.2 Megawatts (the "Pump Services Project") located
in Ventura County, California, for a cash purchase price of
approximately $354,000. The Trust purchased the Project from
Ridgewood Power III for the same price paid by Ridgewood Power
III for the assets to the unaffiliated seller. In 1996, the
Trust bought 9 additional engines with a rated equivalent
capacity of 1.2 Megawatts from unaffiliated sellers at a price of
$344,000.
The Pump Services Project has been operating since 1992 and
uses natural-gas-fired reciprocating engines to provide power for
irrigation wells which furnish water for orchards of lemon and
other citrus trees. The power is purchased by local farmers and
farmers' co-operatives at a price which represents a discount
from the equivalent price the customers would have paid to
purchase electric power. The Pump Services Project will provide
power equivalent to approximately 2.4 megawatts.
The Trust has entered into a management contract with the
prior operator of the Project based on the amount of pumping
power provided by each engine, computed on the basis of the
equivalent amount of kilowatt-hours of electricity that would
have been needed to provide that amount of pumping power. The
Trust receives all cash flow from the engines up to $.02 per
equivalent kilowatt-hour for the first 3,000 kilowatt-hours per
year, and $.01 per additional kilowatt-hour in that year. The
operator is responsible for all operating costs and receives the
remainder.
New England Hydro Projects
In April 1996 the Trust entered into a non-binding letter of
intent with Consolidated Hydro, Inc. to purchase 19 small
hydroelectric plants located in Maine and New Hampshire with an
aggregate capacity of 17 megawatts, for a price of approximately
$16 million. In order to increase diversification of investments,
the Managing Shareholder proposed that approximately one-half of
the portfolio be purchased by the Trust and that the remainder be
purchased by Ridgewood Electric Power Trust V ("Ridgewood Power
V"), a similar investment program organized in 1996 by the
Managing Shareholder.
On December 23, 1996, the Trust purchased a 50% interest in
the 14 hydroelectric projects located in Maine and Ridgewood
Power V purchased the other 50% interest. Each Trust paid
approximately $6,800,000 for its interest The jointly owned
partnership that acquired the Project also assumed a lease
obligation in the amount of $1,017,000. The partnership was
credited with all income relating to the projects from July 1,
1996 to the closing date and the seller was credited with
interest on the purchase price at annual rates of 6% to 8.5%
during that period.
The 14 hydroelectric projects have an aggregate rated
capacity of 11.3 megawatts. All electricity generated by the
projects over and above their own requirements is sold to either
Central Maine Power Company or Bangor Hydro Company under long-
term power purchase contracts. Eleven of the contracts expire at
the end of 2008 and the remaining three expire in 2004, 2007, and
2014.
The Trusts have entered into a five year operating and
maintenance agreement with Consolidated Hydro, Inc. under which a
subsidiary of Consolidated Hydro will manage and administer the
projects for a fixed annual fee of $307,500 (adjusted upwards for
inflation), plus an annual incentive fee equal to 50% of the
excess of aggregate net cash flow over a target amount of $1.875
million per year. The maximum incentive fee is $112,500 per
year; to the extent the annual net cash flow exceeds $2.1
million, the excess will be carried forward to future years; to
the extent that the annual net cash flow is less than $1.875
million, the deficit will be carried forward to future years. In
addition, the operator will be reimbursed for certain operating
and maintenance expenses.
The purchase of the remaining five hydroelectric plants
located in New Hampshire by the two Trusts for a price of
approximately $4.6 million has been delayed because of state
regulatory decisions that have created significant financial
strain on Public Service Company of New Hampshire, the purchaser
of the electricity output. The parties have suspended the
purchase for an indefinite time pending resolution of these and
other regulatory issues.
The Trust is actively seeking additional Projects for
investment, either by itself or in conjunction with other
programs sponsored by the Managing Shareholder if such programs
are authorized to do so.
If the Trust and another program with similar investment
objectives have funds available at the same time for investment
in the same or similar Projects, and a conflict of interest thus
arises as to which program will make the investment, the Managing
Shareholder will review the investment portfolio of each program.
It will make the investment decision on the basis of such
factors, among others, as the effects of the investment on the
diversification of each program's portfolio, potential
alternative investments, the effects investment by either program
would have on the program's risk-return profile, the estimated
tax effects of the investment on each program, the amount of
funds available and the length of time those funds have been
available for investment. If more than one program has funds
available for investment and the factors discussed above and
other considerations indicate that the Project has approximately
equal benefit for each Program, the Managing Shareholder will
generally allocate the opportunity to each program in order of
its organization date. In that event, the Managing Shareholder
will cause the oldest program to commit all of its reasonably
available funds to that opportunity; if those funds are
insufficient, the remainder of the opportunity will be offered to
each successive program with reasonably available funds until the
investment opportunity is exhausted. A similar process would be
followed for divestiture opportunities or competitive electricity
sales.
An additional conflict could arise where the entities make
investments in different forms, which would be the case where one
entity's investment took the form of equity and the other's took
the form of debt. Although it anticipates that this situation is
unlikely to arise, the Managing Shareholder, if practicable,
would attempt to resolve any conflict of this type by reference
to the terms negotiated by other debt or equity participants in
the relevant Project or similar Projects. Although the Managing
Shareholder believes these practices may reduce potential
conflicts of interest of this type, there can be no assurance
that the interests of the entities will not diverge.
(3) Project Operation.
Revenue from the Providence and Maine Hydro Projects is
earned under long-term power purchase contracts ("Power
Contracts") with the local electric utilities. The pricing
provisions of these Power Contracts based on a facility's net
electric output, with payment rates usually indexed to general
inflation indices.
The Maine Hydro Projects are licensed or operated as "run-
of-river" facilities, which means that the amount of water
passing through the turbines is directly dependent upon the
fluctuating level of flow of the river or stream. The Projects
have a very limited ability to store water during high flows for
use at low flow periods. As a result, these Projects are unable
to earn capacity payments and are often unable to produce high
output in the peak summer and winter months when spot electricity
rates are highest. Instead, they produce electricity at the
fixed rates provided in the Power Contracts.
The major costs of a Project while in operation will be debt
service (if applicable), fuel, taxes, maintenance and operating
labor. The ability to reduce operating interruptions and to have
a Project's capacity available at times of peak demand are
critical to the profitability of a Project. Accordingly, skilled
management is a major factor in the Trust's business.
The Trust, through the Managing Shareholder, operates the
Providence Project. The Managing Shareholder has organized
Ridgewood Power Management Corporation ("RPMC") to provide
operating management for facilities operated by its investment
programs. See Item 10 - Directors and Executive Officers of the
Registrant for further information regarding the Operation
Agreement and RPMC. The Maine Hydro Projects are managed by
their former owner, Consolidated Hydro, Inc., which owns other
hydroelectric facilities in the region, and the Pump Services
Project is managed by H&P, Inc., its former developer.
Electricity produced by a Project is typically delivered to
the purchaser through transmission lines which are built to
interconnect with the utility's existing power grid or, in the
EUA Projects, by direct connections.
The overall demand for electrical energy is somewhat
seasonal, with demand usually peaking in the summertime as a
result of the increased use of air conditioning.
The technology involved in conventional power plant
construction and operations as well as electric and heat energy
transfers and sales is widely known throughout the world. There
are usually a variety of vendors seeking to supply the necessary
equipment for any Project. So far as the Trust is aware, there
are no limitations or restrictions on the availability of any of
the components which would be necessary to complete construction
and commence operations of any Project. Generally, working
capital requirements are not a significant item in the
independent power industry. The cost of maintaining adequate
supplies of fuel is usually the most significant factor in
determining working capital needs.
The two major Projects owned by the Trust use landfill gas
or hydroelectric energy and are not subject to fuel price changes
or supply interruptions. Because the Maine Hydro Projects are
"run-of-river" hydroelectric plants, their output is dependent
upon rainfall and snowfall in the areas above the dams and output
has varied in the range of 30% over or 25% below the average
output from 1987 through 1995. Output is generally lowest in the
summer months and in the winter and highest in the spring and
fall.
The Pump Services Project's engines burn natural gas.
Hydrocarbon fuels, such as natural gas, coal and fuel oil, have
been generally available in recent years for use by Independent
Power Projects, although there have been serious supply
impairments for both oil and natural gas at times during the last
20 years. Market prices for natural gas, oil and, to a lesser
extent, coal have fluctuated significantly over the last few
years. Such fluctuations may directly inhibit the development of
Projects because of the anticipated effects on Project
profitability and may deter lenders to Projects or result in
higher costs of financing. See Item 7 - Management's Discussion
and Analysis of Results of Operation for additional information
regarding the effects of natural gas price increases.
In order to commence operations, most Projects require a
variety of permits, including zoning and environmental permits.
Inability to obtain such permits will likely mean that a Project
will not be able to commence operations, and even if obtained,
such permits must usually be kept in force in order for the
Project to continue its operations.
Compliance with environmental laws is also a material factor
in the independent power industry. The Trust believes that
capital expenditures for and other costs of environmental
protection have not materially disadvantaged its activities
relative to other competitors and will not do so in the future.
Although the capital costs and other expenses of environmental
protection may constitute a significant portion of the costs of a
Project, the Trust believes that those costs as imposed by
current laws and regulations have been and will continue to be
largely incorporated into the prices of its investments and that
it accordingly has adjusted its investment program so as to
minimize material adverse effects. If future environmental
standards require that a Project spend increased amounts for
compliance, such increased expenditures could have an adverse
effect on the Trust to the extent it is a holder of such
Project's equity securities.
Of the 14 Maine Hydro Projects, five operate under existing
hydroelectric project licenses from the Federal Energy Regulatory
Commission ("FERC") and four have license applications pending.
Changes to the other, unlicensed Projects may trigger a
requirement for FERC licensing. FERC licensing requirements have
become progressively more stringent and often require that output
of a Project that is being licensed or relicensed be restricted
in order to allow a more natural flow of water, that
archaeological and historical surveys be undertaken, that public
access to waterways be provided (sometimes requiring purchase of
property rights by the hydroelectric licensee) and that various
site improvements be made. These requirements can materially
impair a project's profitability. See Item 1(c)(6) - Business -
Narrative Description of Business - Regulatory Matters.
(4) Trends in the Electric Utility and Independent Power
Industries
As a consequence of federal and state moves to deregulate
large areas of the electric power industry and the existence,
spurred by PURPA, of private competitors to electric utilities
in the market for generating electricity, a number of
interrelated trends are occurring. In accordance with industry
usage, sales of electricity by generators to utilities or other
marketers of electricity are referred to as "wholesale"
transactions and sales by generators, utilities or others to end
users of electricity are referred to as "retail" transactions.
Continued Deregulation of the Generating Market.
The Comprehensive Energy Policy Act of 1992 (the "1992
Energy Act") encourages electric utilities to expand their
wholesale generating capacity by removing some, but not all, of
the limitation on their ownership of new generating facilities
that qualify as "exempt wholesale generators" and on their
ability to participate in Independent Power Projects. See Item
1(c)(6)(ii) -- Energy Regulation -- the 1992 Energy Act. Many
state electric utility regulators are considering plant to
further encourage investment in wholesale generators and to
facilitate utility decisions to spin off or divest generating
capacity from the transmission or distribution businesses of the
utilities. As a result, Independent Power Projects in the future
will face competition not only from other Independent Power
Projects seeking to sell electricity on a wholesale basis but
also from exempt wholesale generators, electric utilities with
excess capacity and independent generators spun off or otherwise
separated from their parent utilities. Large-scale Projects that
can sell large amounts of electricity or that have excellent
reliability records or favorable locations may have competitive
advantages over small-scale Projects (such as the Trust's),
Projects that cannot commit to deliver power on a firm commitment
basis or Projects that are located in electricity surplus areas
with insufficient transmission capacity.
Wholesale-level Access to Transmission Capacity.
Without access to transmission capacity, an Independent
Power Project or other wholesale generator can only sell to the
local electric utility or to a facility on which it is located
(or, in some states, which adjoins its location). The most
important changes occurring in the electric power industry are
the efforts of FERC to compel utilities and power pools to
provide nationwide access to transmission facilities to all
wholesale power generators. When combined with the increased
competition in the generating area, this is likely to create an
electricity supply market that may profoundly change the
operations of electric utilities, consumers and Independent Power
Projects.
The 1992 Energy Act empowered FERC to require electric
utilities and power pools to transmit electric power generated by
other wholesale generators to wholesale customers. This process
is referred to as "wheeling" the electric power. Essentially,
the generator contributes power to a utility or power pool and is
credited with that contribution, and the utility or power pool
serving the wholesale customer makes available that amount of
electric power to the customer and debits the generator.
Wheeling is effected between power pools on a similar basis.
FERC initially dealt with wheeling requests on a case-by-
case basis as constrained by provisions of the 1992 Energy Act
that require all costs of the transmitting utility to be
recovered in the transmission charge and that prohibit wholesale
competitors from wheeling power to customers of an electric
utility under generating contracts or tariffs. On April 24, 1996
the Federal Energy Regulatory Commission adopted Order 888, which
requires electric utilities and power pools to provide wholesale
transmission facilities and information to all power producers on
the same terms, and endorses the recovery by utilities of
uneconomic capital costs from wholesale customers who change
suppliers. The utilities would also be required to furnish
ancillary services, such as scheduling, load dispatch, and system
protection, as needed. These rights, however, would apply only
to sales of new electric power over and above existing utility
supply arrangements. Initial trade estimates are that up to 6%
of the entire U.S. market for wholesale power would be available
to Independent Power Projects and other wholesale generators
under the proposal.
Numerous regulatory issues must be addressed under this
proposal of which one of the most contentious is the treatment of
utility so-called "stranded costs." Utilities that own
generating plants with relatively high costs of production would
be under severe competitive and regulatory pressure to purchase
cheaper wholesale electricity, but in that event the utilities
would not receive sufficient revenue to meet debt service
requirements or other capital costs (the stranded costs) relating
to the high-cost plants. This might significantly impair utility
cash flows and some utilities might be at risk of insolvency in
that event. The FERC order would require some mitigation efforts
on the utility's part, but primarily would require wholesale
customers who acquire electricity from a new supplier to
compensate their former utility supplier for revenue lost. This
might require a customer who changes suppliers to pay a
substantial additional fee to the prior utility supplier, thus
inhibiting changes of supplier.
The order takes no action to modify existing power purchase
contracts. The order intends to create a competitive national
market in electricity generation and thus may create additional
pressure on electric utilities to seek changes to long-term power
purchase contracts, as described further below. The Trust has
developed its business plan in anticipation of the order and will
pursue its investment program to take advantage of opportunities
as they arise in the changing industry. The Trust is unable to
predict the consequences of the order on its eventual operations
or on the independent power industry.
State public utility regulatory agencies must also review
and approve certain aspects of wholesale power deregulation, and
those agencies are currently holding proceedings and making
determinations.
In addition to the FERC order or other Congressional or
regulatory actions that may result in freer access to
transmission capacity, agreements with Canada, and to a lesser
extent with Mexico, are leading toward access for those
countries' generators to U.S. markets. In particular, certain
Canadian suppliers, such as HydroQuebec (the Quebec provincial
utility) are already offering substantial amounts of electricity
in the U.S., and more may be offered if sufficient transmission
capacity can be approved and built. These agreements may also
afford access to those countries'' markets in the future for
Independent Power Projects. As a result, there is the
possibility that a North American wholesale market will develop
for electricity, with additional competitive pressures on U.S.
generators.
Conservation Initiatives.
In recent years many state regulators, at the urging of
citizens' groups and as contemplated by the 1992 Energy Act, have
required electric utilities to engage in least cost utility
planning, demand side management and other conservation programs.
These programs have the common effect of encouraging utilities
to look to conservation of electricity and the more efficient use
of existing capacity as means of meeting new demand, as well as
to purchases from Independent Power Projects or wholesale
generators and to building more generation capacity. There are
also reports that utilities are reducing their reserve capacity
levels to minimums and are more aggressively controlling dispatch
of power as a means of reducing new power purchases.
Proposals to Modify PURPA and Existing Power Contracts.
The independent power industry remains a creature of PURPA
in most respects. The prospects of increased competition to
supply electricity, availability of wheeling of wholesale power,
supply alternatives through the conservation initiative described
above and reduced rates of increase in electricity demand have
caused many electric utilities to advocate repeal or modification
of PURPA and changes to existing long-term Power Contracts with
Independent Power Projects. These utilities have alleged that
PURPA requires them to purchase electricity at higher prices than
they could acquire new capacity themselves and that existing
Power Contracts, signed when utilities anticipated much higher
fuel and capital costs and higher demand, provide for prices
substantially above current wholesale prices. The independent
power industry has pointed out that PURPA does not require
utilities to purchase new supplies from Independent Power
Projects at rates above alternative sources' prices (although a
few state regulators have imposed such requirements from time to
time) and that existing long-term Power Contracts were generally
entered into on the basis of good faith estimates by the
utilities of future conditions with the expectation that sponsors
would rely upon them.
To date, FERC has rejected proposals to modify existing
Power Contracts (except for contracts entered into under state
regulations mandating payment of prices greater than utility
avoided costs at the time the contracts were executed), and
FERC's rulemaking proposals are expressly based on the principle
that existing Power Contracts that comply with current law should
not be modified by FERC. Although proposals have been introduced
in Congress to amend or repeal PURPA, no such proposal has yet
been reported to the floor. However, there can be no assurance
that FERC or the Congress will not take action to reduce or
eliminate the benefits or PURPA for Independent Power Projects or
that they would not take action purporting to change or cancel
existing Power Contracts or that they would not take action
making compliance with those contracts economically or
practically infeasible. If any such action were to be taken, the
value of existing Independent Power Projects might be
significantly impaired or even eliminated. If such action were
to be proposed with any significant prospect of adoption, the
consequent uncertainty might have similar effects.
In a related phenomenon, some electric utilities that are
parties to long-term Power Contracts with rates substantially
above current replacement costs have entered into buy-out
arrangements with the owners of those Independent Power Projects.
Under these agreements, the Power Contracts are terminated in
exchange for a payment by the utility to the Project. Typically,
these arrangements have been limited to Independent Power
Projects with high costs of production or other factors that have
impaired their profitability, even with a firm Power Contract.
The Trust does not anticipate that it would invest in Projects
with the goal of soliciting or receiving a buy-out
arrangement, but it will consider potential arrangements if
conditions warrant.
In the absence of desired regulatory or legislative changes,
many utilities have aggressively taken action to abrogate
existing Power Contracts by alleging default by the generator or
Project deficiencies. Virginia Electric and Power Company
attempted to do so for a Project owned by another business trust
sponsored by the Managing Shareholder, alleging immaterial,
technical violations of the Power Contract. A federal district
court held that the utility did not have the right to terminate
the Power Contract on those grounds. While the case was on
appeal, that Trust accepted an offer from the utility to settle
the case by paying $3.75 million to the Trust in exchange for the
cancellation of the Power Contract. The settlement was concluded
on January 17, 1997. The case had no material effect on this
Trust or its business.
Retail-level Competition
An even more radical prospect for the electric power
industry is retail-level competition, in which generators would
be allowed to sell directly to customers by using (and paying a
fee for) the local utility's distribution facilities. Retail-
level competition presupposes the ability to wheel power in the
appropriate amounts at economic costs from the generating Project
to the electric utility whose wires link to the retail customer
(typically a large industrial, commercial or governmental unit)
and the ability to use the local utility's facilities to deliver
the electricity to the customer. In addition to the business and
regulatory issues arising from wholesale wheeling, retail-level
competition raises fundamental concerns as to the ability of
utilities to recover stranded costs at the generating and
distribution levels, the possibility that smaller customers will
have less ability to demand pricing concessions, incentives for
governmental agencies to act as intermediaries for consumers and
the functions of state-level regulatory agencies in a price-
competitive environment which may be inconsistent with their
traditional price-setting and service-prescribing roles.
Many states are experimenting with retail wheeling,
including New Hampshire, whose three-year pilot program would
allow up to 3% of state peak loads to be subject to retail
competition, and Michigan, which is proposing to allow
incremental growth in load demand to be supplied competitively.
The New Hampshire program may be abrogated, because it proposes
to split the burden of utility stranded costs between ratepayers
and the utilities in opposition to FERC's position that utilities
should not bear those costs. Many larger states, including
California, New York, Massachusetts, Pennsylvania and Florida
among others, are implementing large scale movements towards
various forms of retail deregulation. It appears that most
states will do so by the year 2000. These proposals are
currently the subject of intensive debate and restructuring, and
any such proposal is likely to undergo judicial review.
Regulators and industry participants currently have extreme
uncertainty as to whether and how far retail-level competition
will be authorized, the treatment of stranded costs, the extent
to which FERC's actions in the wholesale market will practically
compel retail-level competition and the effects of any change.
As of the date of this Annual Report, however, no state authority
has proposed or implemented any plan that would abrogate or
impair existing long-term Power Contracts with Independent Power
Projects. Instead, to the extent that long-term Power Contracts
have rates above current avoided costs, the excess is being
treated by most states as a form of stranded cost. Many states
are providing that all or most of the stranded costs will be
borne by ratepayers rather than Independent Power Projects or
utilities. Typically, the state will require customers who
change electricity suppliers to make payments to a fund used to
reimburse utilities in part for the burden of stranded costs.
Although this may lessen pressures on utilities to contest long-
term Power Contracts, it may deter retail customers from
switching to independent power suppliers.
Initial Effects of Trends
Although, as mentioned above, it is impractical to predict
all the consequences of the rapidly evolving trends in the
electric power industry, certain patterns are beginning to
emerge. First, as noted before, investment in new Independent
Power Projects and in new utility generating capacity in the
United States has substantially decelerated since 1993, as the
larger participants in the development process (including
developers, utilities, lenders and equipment suppliers) reassess
their positions. Indeed, many of the largest participants have
announced their intentions to concentrate their resources in
developing countries in Europe and Asia. Similarly, lenders are
more reluctant currently to extend large amounts of non-recourse
financing for development of Projects and are insisting on larger
equity investments by owners of Projects. The Trust believes
that because it is focused on the independent power industry
without competing business interests and because it seeks to make
substantial equity investments in Projects, it has the ability to
invest in attractive smaller Projects under these conditions.
In response to the current perceived slowing of electricity
demand growth, the prospect of wholesale competition and the
relatively higher prices currently payable under some long-term
Power Contracts, many electric utilities have refrained from
entering into new, long-term Power Contracts with Independent
Power Projects and have instead proposed to purchase electricity
from Qualifying Facilities or other generators under short-term
contracts. Competitive bidding by utilities, governmental units
and in states where permitted, large industrial and commercial
users for electricity supplies is becoming common. In 1995 and
1996, these competitive solicitations typically attracted large
numbers of bids at prices substantially below prior utility
prices. Although these solicitations cover a minuscule part of
the wholesale market, they indicate that there is currently
intense competition to sell new capacity from Independent Power
Projects. Certain state regulators, in response to these
conditions, have proposed or approved auctions to generating
businesses of the rights to supply utilities. In response to
these developments, the Trust currently seeks to purchase
Projects with existing long-term Power Contracts so as to
minimize exposure to volatile short-term markets. There is no
assurance that it will be able to acquire those Projects or to do
so on favorable terms.
As a consequence of these trends and industry participants'
reactions to them, many observers, including utilities, believe
that there are temporary, regional surpluses of electric
generating capacity. For example, in the spring of 1995, the
California public utilities commission projected that the state's
three largest utilities would not need additional generating
capacity until 2004, and that there was a current small surplus
of capacity. It should be noted, however, that the projections
also foresaw a rapid increase of demand for capacity in the ten
years following 2004. Similarly, on a nationwide level a 1995
estimate forecasted that 150,000 megawatts of capacity is
currently provided by fossil-fuel power plants that are over 30
years old and are approaching the ends of their expected useful
lives, that most nuclear power plants are facing relicensing
proceedings that normally require extensive reconstruction, and
that up to 10% of all U.S. generating capacity may be up
for replacement in the next 15 years. Accordingly, one of the
most important and difficult questions for determination is
whether the current reluctance to finance and build additional
generating capacity will lead to capacity shortages on a regional
or national basis in the next ten years. Further, as the supply
market becomes more fragmented and short-term, regulators and
customers are raising concerns as to the dependability of supply.
Another consequence of the current industry reluctance to
commit to long-term increases in capacity and the perceived
existence of regional surplus capacity is a short-term
orientation on the part of many industry participants. Recently,
many companies, including affiliates of fuel suppliers and
utilities, have applied to FERC to act as electric power
marketers, because they anticipate that if wholesale wheeling
becomes significant there will be strong demand for brokers or
market makers in electric power. It is uncertain whether power
marketers will become significant factors in the electric power
market. A related development is the creation of derivative
contracts for hedging of and speculation in electricity supplies.
A few developers and utilities are also considering the
construction of "merchant power plants," which would be built
without firm Power Contracts in hopes of marketing their output
on the anticipated short-term, competitive wholesale or retail
markets.
With these conditions in mind, many observers see two
primary strategies for Independent Power Projects to succeed in
the United States: first, Projects that have existing, firm,
long-term Power Contracts may do well so long as regulatory or
legislative actions do not abrogate the contracts. Second,
Projects that are low-cost producers of electricity, either from
efficiencies or good management or as the result of successful
cogeneration technologies, will have advantages in the
competitive market. The Trust intends to focus on both
possibilities and to maintain a focus on medium-to-long-term
results. It also will consider Projects selling power to retail
users rather than utilities.
Finally, there have been industry-wide moves toward
consolidation of participants and divestiture of Projects. A
number of utilities and equipment suppliers have proposed or
entered into joint ventures to reduce risks and mobilize
additional capital for the more competitive environment, while
many electric utilities are in the process of combining, either
as a means of reducing costs and capturing efficiencies, or as a
means of increasing size as an organizational survival tactic. A
number of large natural gas utilities have also acquired or are
considering acquiring electric utilities. Industry observers
have attributed this to the more entrepreneurial character of the
gas industry, which has already been deregulated, and to the fact
that natural gas is currently a preferred fuel for generating
plants, which may encourage the combination of the fuel suppliers
with fuel users to assure supply and reduce uncertainties. These
consolidations and acquisitions tend to create additional
competitive pressures in the electric power industry; however,
this trend is also encouraging the divestiture of small Projects
or Projects that are deemed less central to the operations of
large, consolidated businesses. This may make attractive
Projects available for investment by the Trust but may also tend
to depress the resale value of the Trust's Projects.
The Providence and Maine Hydro Projects have long-term Power
Contracts and the Trust intends to continue sales to the local
utilities under those contracts, with no current plans to seek
other customers. In the event that the Power Contracts were
terminated for any reason, the Trust might seek to sell
electricity to other customers, but its ability to do so
profitably cannot be assured.
The Pump Services Projects have short-term contracts with
their agricultural hosts that can be terminated on 30 days' prior
notice by either party. The profitability of each contract to
the Trust and the benefits to the host depend upon the price of
competing utility service and the efficient operation of the
Project. Accordingly, these contracts are sensitive to outside
market conditions. The Trust believes that the cost to its
customers of its irrigation pump service is currently
significantly less than the alternative costs of buying
electricity from utilities or other providers to drive the pumps,
and that it also offers superior reliability in many cases.
Electricity rates in California are expected to be volatile as
retail deregulation of the electricity industry proceeds and it
is possible that the Projects' cost advantage may be eroded.
5. Competition
There are a large number of participants in the independent
power industry. Several large corporations specialize in
developing, building and operating Independent Power Projects.
Equipment manufacturers, including many of the largest
corporations in the world, provide equipment and planning
services and provide capital through finance affiliates. Many
regulated utilities are preparing for a competitive market, and a
significant number of them already have organized subsidiaries or
affiliates to participate in unregulated activities such as
planning, development, construction and operating services or in
owning exempt wholesale generators or up to 50% of Independent
Power Projects. In addition, there are many smaller firms whose
businesses are conducted primarily on a regional or local basis.
Many of these companies focus on limited segments of the
cogeneration and independent power industry and do not provide a
wide range of products and services. There is significant
competition among non-utility producers, subsidiaries of
utilities and utilities themselves in developing and operating
energy-producing projects and in marketing the power produced by
such projects.
The Trust is unable to accurately estimate the number of
competitors but believes that there are many competitors at all
levels and in all sectors of the industry. Many of those
competitors, especially affiliates of utilities and equipment
manufacturers, may be far better capitalized than the Trust.
Competition to market its energy products is generally not a
factor in the current operations of the Trust since the major
Projects in which it invests and proposes to invest have entered
into long-term agreements to sell their output at specified
prices. However, a particular Project could be subject to future
competition to market its energy products if its Power Contract
expires or is terminated because of a default or failure to pay
by the purchasing utility or other purchaser due to bankruptcy or
insolvency of the purchaser or because of the failure of a
Project to comply with the terms of the Power Contract;
regulatory changes; loss of status as a Qualifying Facility; or
other reasons. It is impossible at this time to estimate the
level of marketing competition that the Trust would face in any
such event.
6. Regulatory Matters.
Projects are subject to energy and environmental laws and
regulations at the federal, state and local levels in connection
with development, ownership, operation, geographical location,
zoning and land use of a Project and emissions and other
substances produced by a Project. These energy and environmental
laws and regulations generally require that a wide variety of
permits and other approvals be obtained before the commencement
of construction or operation of an energy-producing facility and
that the facility then operate in compliance with such permits
and approvals. Since the Trust operates as a "business
development company" under the 1940 Act, it is also subject to
provisions of that act pertaining to such companies.
(i) Energy Regulation.
(A) PURPA. The enactment in 1978 of PURPA and the adoption of
regulations thereunder by FERC provided incentives for the
development of cogeneration facilities and small power production
facilities meeting certain criteria. Qualifying Facilities under
PURPA are generally exempt from the provisions of the Public
Utility Holding Company Act of 1935, as amended (the "Holding
Company Act"), the Federal Power Act, as amended (the "FPA"),
and, except under certain limited circumstances, state laws
regarding rate or financial regulation. In order to be a
Qualifying Facility, a cogeneration facility must (a) produce not
only electricity but also a certain quantity of heat energy (such
as steam) which is used for a purpose other than power
generation, (b) meet certain energy efficiency standards when
natural gas or oil is used as a fuel source and (c) not be
controlled or more than 50% owned by an electric utility or
electric utility holding company. Other types of Independent
Power Projects, known as "small power production facilities," can
be Qualifying Facilities if they meet regulations respecting
maximum size (in certain cases), primary energy source and
utility ownership. Recent federal legislation has eliminated the
maximum size requirement for solar, wind, waste and geothermal
small power production facilities (but not for hydroelectric or
biomass) for a fixed period of time. The Providence and Maine
Hydro Projects are small power production facilities that rely
upon Qualifying Facility status.
In addition, PURPA requires electric utilities to purchase
electricity generated by Qualifying Facilities at a price equal
to the purchasing utility's full "avoided cost" and to sell back
up power to Qualifying Facilities on a non-discriminatory basis.
Avoided costs are defined by PURPA as the "incremental costs to
the electric utility of electric energy or capacity or both
which, but for the purchase from the Qualifying Facility or
Qualifying Facilities, such utility would generate itself or
purchase from another source." While public utilities are not
required by PURPA to enter into long-term Power Contracts to meet
their obligations to purchase from Qualifying Facilities, PURPA
helped to create a regulatory environment in which it was common
for such contracts to be negotiated in the 1980's.
The exemptions from extensive federal and state regulation
afforded by PURPA to Qualifying Facilities are important to the
Trust and its competitors. The Trust currently believes that the
Providence Project and the Maine Hydro Projects are Qualifying
Facilities. Maintaining the Qualified Facility status of a
Project is of utmost importance to the Trust. Such status may be
lost if a Project does not meet the operational requirements of
PURPA, such as fuel use, minimum operating efficiency standards
and minimum use of thermal energy by customers of a cogeneration
Project. The Trust endeavors to comply with these requirements,
but there can be no assurance that a Project will maintain its
Qualified Facility status. If a Project loses its Qualifying
Facility status, the utility can reclaim payments it made for the
Project's non-qualifying output to the extent those payments are
in excess of current avoided costs (which are generally
substantially below the Power Contract rates) or the Project's
Power Contract can be terminated by the electric utility. The
Pump Service Projects do not sell electricity to utilities or
off-site customers and do not rely on interconnection with
utilities; therefore, they need not be Qualifying Facilities.
(B) The 1992 Energy Act. The Comprehensive Energy Policy Act of
1992 (the "1992 Energy Act") empowered FERC to require electric
utilities to make available their transmission facilities to and
wheel power for Independent Power Projects under certain
conditions and created an exemption for electric utilities,
electric utility holding companies and other independent power
producers from certain restrictions imposed by the Holding
Company Act. Although the Trust believes that the exemptive
provisions of the 1992 Energy Act will not materially and
adversely affect its business plan, the act may result in
increased competition in the sale of electricity.
The 1992 Energy Act created the "exempt wholesale generator"
category for entities certified by FERC as being exclusively
engaged in owning and operating electric generation facilities
producing electricity for resale. Exempt wholesale generators
remain subject to FERC regulation in all areas, including rates,
as well as state utility regulation, but electric utilities that
otherwise would be precluded by the Holding Company Act from
owning interests in exempt wholesale generators may do so.
Exempt wholesale generators, however, may not sell electricity to
affiliated electric utilities without express state approval that
addresses issues of fairness to consumers and utilities and of
reliability.
(C) The Federal Power Act. The FPA grants FERC exclusive
rate-making jurisdiction over wholesale sales of electricity in
interstate commerce. The FPA provides FERC with ongoing as well
as initial jurisdiction, enabling FERC to revoke or modify
previously approved rates. Such rates may be based on a
cost-of-service approach or determined through competitive
bidding or negotiation. While Qualifying Facilities under PURPA
are exempt from the rate-making and certain other provisions of
the FPA, non-Qualifying Facilities are subject to the FPA and to
FERC rate-making jurisdiction.
Companies whose facilities are subject to regulation by FERC
under the FPA because they do not meet the requirements of PURPA
may be limited in negotiations with power purchasers. However,
since such projects would not be bound by PURPA's heat energy use
requirement for cogeneration facilities, they may have greater
latitude in site selection and facility size. If any of the
Trust's electric power Projects failed to be a Qualifying
Facility, it would have to comply with the FPA.
The FPA also provides that any hydroelectric facility that
is located on a navigable stream or that affects public lands or
water from a government dam may not be constructed or be operated
without a license from FERC. Certain facilities that were
operating before 1935 are exempt, if the waterway is non-
navigable, or "grandfathered" and do not require licenses so long
as the facilities are not modernized or otherwise materially
altered. Licenses are granted for 50 year terms. All but two of
the Maine Hydro Projects (with a rated capacity of 2.1 Megawatts)
are subject to licensing. Of these 12 Projects, five (with a
rated capacity of 4.8 Megawatts) have current licenses that
expire from time to time between the years 2019 and 2046 and four
(3.1 Megawatts) are currently in the licensing process, which can
take from three to five years. The Trust believes that it will
obtain licenses for each of these. However, as noted above at
Item 1(c)(3) - Business - Narrative Description of Business -
Project Operation, the licenses may include onerous conditions.
Finally, five of the Maine Hydro Projects (with a rated capacity
of 3.5 Megawatts) are exempt, grandfathered or are not subject to
FERC licensing.
(D) Fuel Use Act. Projects may also be subject to the Fuel Use
Act, which limits the ability of power producers to burn natural
gas in new generation facilities unless such facilities are also
coal capable within the meaning of the Fuel Use Act.
(E) State Regulation. State public utility regulatory
commissions have broad jurisdiction over Independent Power
Projects which are not Qualifying Facilities under PURPA, and
which are considered public utilities in many states. Such
jurisdiction results in state requirements to obtain certificates
of public convenience and necessity to construct a facility and
could result in regulation of organizational, accounting,
financial and other corporate matters on an ongoing basis.
Although FERC generally has exclusive jurisdiction over the rates
charged by a non-Qualifying Facility to its wholesale customers,
state public utility regulatory commissions have the practical
ability to influence the establishment of such rates by asserting
jurisdiction over the purchasing utility's ability to pass
through the resulting cost of purchased power to its retail
customers. In addition, states may assert jurisdiction over the
siting and construction of non-Qualifying Facilities and, among
other things, issuance of securities, related party transactions
and sale and transfer of assets. The actual scope of
jurisdiction over non-Qualifying Facilities by state public
utility regulatory commissions varies from state to state. State
regulation of rates, classes of service, and entry into the
industry is likely to end as deregulation continues.
(ii) Environmental Regulation.
The construction and operation of Independent Power Projects
and the exploitation of natural resource properties are subject
to extensive federal, state and local laws and regulations
adopted for the protection of human health and the environment
and to regulate land use. The laws and regulations applicable to
the Trust and Projects in which it invests primarily involve the
discharge of emissions into the water and air and the disposal of
waste, but can also include wetlands preservation and noise
regulation. These laws and regulations in many cases require a
lengthy and complex process of renewing licenses, permits and
approvals from federal, state and local agencies. Obtaining
necessary approvals regarding the discharge of emissions into the
air is critical to the development of a Project and can be
time-consuming and difficult. Each Project requires technology
and facilities which comply with federal, state and local
requirements, which sometimes result in extensive negotiations
with regulatory agencies. Meeting the requirements of each
jurisdiction with authority over a Project may require extensive
modifications to existing Projects.
The Clean Air Act Amendments of 1990 contain provisions
which regulate the amount of sulfur dioxide and oxides of
nitrogen which may be emitted by a Project. These emissions may
be a cause of "acid rain." Qualifying Facilities are currently
exempt from the acid rain control program of the Clean Air Act
Amendments. However, non-Qualifying Facility Projects will
require "allowances" to emit sulfur dioxide after the year 2000.
Under the Amendments, these allowances may be purchased from
utility companies then emitting sulfur dioxide or from the
Environmental Protection Agency ("EPA"). Further, an Independent
Power Project subject to the requirements has a priority over
utilities in obtaining allowances directly from the EPA if (a) it
is a new facility or unit used to generate electricity; (b) 80%
or more of its output is sold at wholesale; (c) it does not
generate electricity sold to affiliates (as determined under the
Holding Company Act) of the owner or operator (unless the
affiliate cannot provide allowances in certain cases) and (d) it
is non-recourse project-financed.
The market price of an allowance cannot be predicted with
certainty at this time and there is no assurance that a market
for such allowances will develop. Projects fueled by natural gas
are not expected to be materially burdened by the acid rain
provisions of the Clean Air Act Amendments.
The Clean Air Act Amendments empower states to impose annual
operating permit fees of at least $25 per ton of regulated
pollutants emitted up to $100,000 per pollutant. To date, no
state in which the Trust operates has done so. If a state were
to do so, such fees might have a material effect on the Trust's
costs of generation, in light of the relatively small size of the
Trust's facilities as opposed to large utility generation plants
that might benefit from the cap on fees.
Based on current trends, the Managing Shareholder expects
that environmental and land use regulation will become more
stringent. The Trust and the Managing Shareholder have not
developed expertise and experience in obtaining necessary
licenses, permits and approvals, which will be the responsibility
of each Project's managers and Project Sponsors. The Trust will
rely upon qualified environmental consultants and environmental
counsel retained by it or by Project Sponsors to assist in
evaluating the status of Projects regarding such matters.
(iii) The 1940 Act
Since its Shares are registered under the 1934 Act, the
Trust is required to file with the Commission certain periodic
reports (such as Forms 10-K (annual report), 10-Q (quarterly
report) and 8-K (current reports of significant events) and to be
subject to the proxy rules and other regulatory requirements of
that act that are applicable to the Trust. The Trust has no
intention to and will not permit the creation of any form of a
trading market in the Shares in connection with this
registration.
On January 24, 1995, the Trust notified the Securities and
Exchange Commission (the "Commission") of its election to be a
"business development company" and registered its Shares under
the 1934 Act. On March 24, 1995, the election and registration
became effective. As a "business development company," the Trust
was subject to prohibitions and restrictions on transactions
between business development companies and their affiliates as
defined in that act, and required that a majority of the board of
the company be persons other than "interested persons" as defined
in the act.
In particular, Commission approval was required for certain
transactions involving certain closely affiliated persons of
business development companies, including many transactions with
the Managing Shareholder and the other investment programs
sponsored by the Managing Shareholder. The decision to co-invest
in the Providence Project with Ridgewood Power III required
approval of the Commission, which took more than eight months to
obtain. The decision to co-invest in the New England Hydro
Projects with Ridgewood Power V would also have required approval
of the Commission. There was no assurance that the necessary
approval for that co-investment or others could be obtained.
Accordingly, in September 1996 the Managing Shareholder
made a proxy solicitation requesting that the Investors in this
Trust approve a proposal to end the Trust's status as a business
development company. The purpose of the change was to allow the
Trust to invest with other programs sponsored by the Managing
Shareholder, with only the approval of the Trust's Independent
Trustees. The Independent Trustees may not be "interested
persons" (as defined by law) of the Trust or the Managing
Shareholder. The Managing Shareholder advised the Investors of
its belief that the change would end the delays and uncertainties
of seeking approval from the Securities and Exchange Commission
(the "Commission") for such transactions and therefore would
increase opportunities for the Trust to diversify its investments
and to increase the size and quality of the potential investment
pool.
A majority in interest of the Investors approved an
amendment to the Trust's Declaration of Trust by written consent.
The amendment and the termination of business development
company status became effective on October 3, 1996. In summary,
the amendment authorized the Trust to withdraw the business
development company election. It also defined a "Ridgewood
Program Transaction" as a transaction with a Ridgewood Program,
an entity controlled by a Ridgewood Program or Programs, or an
entity in which a Ridgewood Program or Program has invested, that
would otherwise be prohibited by the 1940 Act. The amendment
stated that Ridgewood Program Transactions will not be subject to
any provision of the 1940 Act or rules thereunder that would
restrict the Trust or entities the Trust controls or has invested
inform entering into Ridgewood Program Transactions. Instead, a
Ridgewood Program Transaction must be approved either by the
Managing Shareholder and a majority of the Independent Trustees,
or by a majority of the Independent Trustees and a Majority of
the Investors. No express standards for approval are specified,
although the Managing Shareholder and the Independent Trustees
are subject to the fiduciary requirements of Delaware law in
making their decisions.
The amendment also required the Trust to continue to comply
with all other requirements of the 1940 Act as if the Trust
continued to be a business development company, except that the
Trust would not be required to file any reports required of
business development companies with the Commission or any other
regulatory agency. With regard to the requirements that the
Trust will continue to adhere to, the Trust will not be able to
request exemptive relief from or to take actions requiring
approval by the Commission, and the Commission will not have the
ability to regulate the Trust under the 1940 Act, because the
Trust will no longer be subject to the Commission's authority
over business development companies.
The requirements of the 1940 Act that the Trust has promised
to comply with, and those that it will not be required to follow,
are listed in Exhibit 99 to this Annual Report on Form 10-K.
Some of those requirements that are particularly relevant to the
Trust's acquisitions of Projects are described below.
The Trust may not acquire any asset other than a "Qualifying
Asset" unless, at the time the acquisition is made, Qualifying
Assets comprise at least 70% of the Trust's total assets by
value. The principal categories of Qualifying Assets that are
relevant to the Trust's activities are:
(A) Securities issued by "eligible portfolio companies" that are
purchased by the Trust from the issuer in a transaction not
involving any public offering (i.e., private placements of
securities). An "eligible portfolio company" (1) must be
organized under the laws of the United States or a state and have
its principal place of business in the United States; (2) may not
be an investment company other than a small business investment
company licensed by the Small Business Administration and
wholly-owned by the Trust and (3) may not have issued any class
of securities that may be used to obtain margin credit from a
broker or dealer in securities. The last requirement essentially
excludes all issuers that have securities listed on an exchange
or quoted on the National Association of Securities Dealers,
Inc.'s national market system, along with other companies
designated by the Federal Reserve Board. Except for temporary
investments of the Trust's available funds, substantially all of
the Trust's investments are expected to be Qualifying Assets
under this provision.
(B) Securities received in exchange for or distributed on or
with respect to securities described in paragraph (A) above, or
on the exercise of options, warrants or rights relating to those
securities.
(C) Cash, cash items, U.S. Government securities or high quality
debt securities maturing not more than one year after the date of
investment.
A business development company must make available
"significant managerial assistance" to the issuers of Qualifying
Assets described in paragraphs (A) and (B) above, which may
include without limitation arrangements by which the business
development company (through its directors, officers or
employees) offers to provide (and, if accepted, provides)
significant guidance and counsel concerning the issuer's
management, operation or business objectives and policies.
A business development company also must be organized under
the laws of the United States or a state, have its principal
place of business in the United States and have as its purpose
the making of investments in Qualifying Assets described in
paragraph (A) above.
(d) Financial Information about Foreign and Domestic Operations
and Export Sales.
The Trust has committed funds to Projects located in Rhode
Island, Maine and California. Although the Managing Shareholder
from time to time considers potential projects located outside
the United States as potential investments for the Trust, the
Trust has not acquired any Project located outside the United
States.
(e) Employees.
The Trust has no employees. The persons described below at
Item 10 - Directors and Executive Officers of the Registrant
serve as executive officers of the Trust and have the duties and
powers usually applicable to similar officers of a Delaware
corporation in carrying out the Trust business.
Item 2. Properties.
Pursuant to the Management Agreement between the Trust and
the Managing Shareholder (described at Item 10(c)), the Managing
Shareholder provides the Trust with office space at the Managing
Shareholder's principal office at The Ridgewood Commons, 947
Linwood Avenue, Ridgewood, New Jersey 07450.
The following table shows the material properties (relating
to Projects) owned or leased by the Trust's subsidiaries or
partnerships in which the Trust has an interest.
Approximate
Square
Ownership Ground Approximate Footage of Description
Interests Lease Acreage Project of
Project Location in Land Expiration of Land (Actual Project
or Projected)
Provi- Providence,
dence Rhode Leased 2020 4 10,000 Landfill
Island gas-fired
generation
facility
Maine
Hydro 14 sites
in Maine n/a less n/a Hydro-
Owned than electric
25 facilities
Pump
Services Ventura Natural-
County, gas-fueled
California n/a nominal n/a engines for
Licensed irrigation
pumps located
on various
farms
Item 3. Legal Proceedings.
There are no legal proceedings involving the Trust.
Item 4. Submission of Matters to a Vote of Security Holders.
The Trust solicited the consents of its Investors to the
withdrawal of its election to be a business development company
and to the associated amendment to its Declaration of Trust as
follows:
1. A solicitation of consents was made by mailing to all
Investors of record on September 9, 1996 proxy materials and a
form of written consent. As of that date, there were 481.16669
Investor Shares issued and outstanding, of which 1 share was held
by the Managing Shareholder or its affiliates and which was
ineligible to vote on amendments to the Declaration of Trust.
Accordingly, 480.16669 Investor Shares were eligible to vote on
the amendment to the Declaration and 481.16669 Investor Shares
were eligible to vote on the withdrawal of the election under the
the 1940 Act.
2. The mailing was made beginning on September 9, 1996 and
ending September 11, 1996.
3. The final tabulation of written consents was made at and
after the close of business on October 2, 1996 and was as
follows:
Investor Shares (other than those held by the Managing
Shareholder or its Affiliates) voted
Consenting to the Conversion Proposal 250.1130
Declining to consent to the Conversion Proposal 8.3162
Consents with questions as to form and not
tabulated as consenting 67.0760
4. Accordingly, the holders of more than 50% of the outstanding
Investor Shares eligible to vote on the amendment to the
Declaration of Trust consented thereto.
5. The Managing Shareholder voted the one Investor Share owned
of record by it in favor of the withdrawal of the business
company election. Accordingly, the holders of more than 50% of
all outstanding Investor Shares as of September 9, 1996 consented
to the withdrawal of the business development company election
and the withdrawal was approved by a majority of the outstanding
Investor Shares under the provisions of the 1940 Act.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
(a) Market Information.
The Trust sold 476.8 Investor Shares of beneficial interest
in the Trust in its private placement offering, which concluded
on September 30, 1996. There is currently no established public
trading market for the Investor Shares and the Trust does not
intend to allow a public trading market to develop. As of the
date of this Form 10-K, all such Investor Shares have been issued
and are outstanding. There are no outstanding options or
warrants to purchase, or securities convertible into, Investor
Shares.
Investor Shares are restricted as to transferability under
the Declaration, as well as under federal and state laws
regulating securities. The Investor Shares have not been and are
not expected to be registered under the Securities Act of 1933,
as amended (the "1933 Act"), or under any other similar law of
any state (except for certain registrations that do not permit
free resale) in reliance upon what the Trust believes to be
exemptions from the registration requirements contained therein.
Because the Investor Shares have not been registered, they are
"restricted securities" as defined in Rule 144 under the 1933
Act.
(b) Holders
As of the date of this Form 10-K, there are 941 record
holders of Investor Shares.
(c) Dividends
The Trust made no distributions for the year 1995 and made
distributions as follows in 1996:
Year ended
December 31,
1996
Total distributions to Investors $1,659,928
Distributions per Investor Share 3,481
Distributions to Managing Shareholder $16,767
Distributions are made on a monthly basis. The Trust's
ability to make future distributions to Investors and their
timing will depend on the net cash flow of the Trust and
retention of reasonable reserves as determined by the Trust to
cover its anticipated expenses.
Subject to the other factors described in this Annual Report
on Form 10-K, the Trust's goal is to provide Investors with
annual distributions of net cash flow, as defined in the
Declaration of Trust, of 14% of their Capital Contributions to
the
Trust. Occasionally, distributions may include funds derived
from the release of cash from operating or debt service reserves.
For purposes of generally accepted accounting principles,
amounts of distributions in excess of accounting income may be
considered to be capital in nature. Investors should be aware
that the Trust is organized to return net cash flow rather than
accounting income to Investors.
Item 6. Selected Financial Data.
The following data is qualified in its entirety by the
financial statements presented elsewhere in this Annual Report on
Form 10-K.
Supplemental Information As of and for the
Schedule Period from Commencement
Selected Financial As of and for the of Share Offering
Data Year Ended (February 6, 1995)
December 31, 1996 through
December 31, 1995
(Restated)*
Total Fund Information:
Net sales $4,087,722 $0
Net income (loss) 72,769 (156,133)
Net assets (shareholders'
equity) 38,746,599 13,502,131
Investments in Project
development limited
partnerships, power
generation equipment
and developmental costs 21,055,251 832,236
Investment in electric
power sales contract
(net of amortization) 7,875,753 0
Total assets 52,274,481 13,890,163
Long-term obligations 5,440,260 0
Per Share of Trust
Interest:
Revenues $9,121 $0
Net income (loss) 153 (963)
Net asset value 81,264 83,295
Distributions to Investors 3,517 0
* Restated on consolidation and fair value principles. See Item 8 -
Financial Statements and Supplementary Data.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The following discussion and analysis should be read in
conjunction with the Trust's financial statements and the notes
thereto presented elsewhere herein. During 1995, the Trust had
not yet acquired any interests in Projects and its activities
were limited to organizational and offering efforts and to
initial review of potential investments.
12 months ended December 31, 1996 versus period from
February 6, 1995 to December 31, 1996.
The Trust acquired the Pump Services Project at the end of
1995 and acquired its interest in the Providence Project on April
16, 1996. The Trust closed on the acquisition of its 50%
interest in the Maine Hydro Projects on December 23, 1996.
Accordingly, the 1995 results reflected only income earned on
interim investments and Trust-level administration expenses,
while the 1996 results primarily reflect the results of the
Providence Project, and insignificant results from the Pump
Services and Maine Hydro Projects.
Total 1996 revenues from the operating Projects were
$4,349,000 and, after subtracting the $2,992,000 cost of sales,
the 1996 gross profit from operations was $1,357,000 (a 31.2%
operating margin). Other operating expenses, primarily
reflecting the costs of administering the Trust and carrying on
its investment program, totalled $1,994,000, as compared with
$454,000 in 1995. The 338.9% increase was caused primarily by
the $888,000 management fee (3% of net asset value) that was
charged for the first time in 1996 and a $323,000 (106.0%)
increase in the investment fee. The increase in the investment
fee was directly proportional to the higher level of sales of
Investor Shares in 1996. Because the offering has closed, no
investment fee is expected to be charged in 1997, which will
decrease operating expenses by $628,000. There was also a
$304,000 (441.7%) increase in general and administrative
expenses, reflecting the larger size of the Trust, the increase
in the number of Investors and the costs of the proxy
solicitation and related legal and accounting expenses. After
taking these increases in expenses into account, the operating
loss for 1996 increased by only $183,000 (40.2%) from 1995 to
1996.
Non-operating income in 1996 (up $700,000, or 234.6% from
1995) was made up of interest income on the Trust's uninvested
funds and a small amount of accrued income from the eight days on
which the Trust owned an interest in the Maine Hydro Projects,
net of $395,000 of interest expense on the debt encumbering the
Providence Project. As the Trust makes investments in 1997 and
distributes operating net cash flow to investors, the uninvested
funds are expected to be substantially reduced and interest
income accordingly is expected to fall significantly. However,
the Trust's share of income from the Maine Hydro Projects for the
full year of 1997 is expected to equal or exceed the decrease in
interest income, although no assurance can be made that this will
occur.
Distributions from the Providence Project for 1996 were low
(an 11.6% annualized return on investment) but within
expectations. At the time the Project was purchased its
profitability was low and the Trust planned to make major
investments and changes to operations to increase efficiency. As
discussed above, electric output has increased by an average of
33% in the 8-1/2 months in which RPMC has operated the Project.
Liquidity and Capital Resources.
As of March 21, 1997, the Trust had raised approximately
$39.6 million of funds from its offering, net of offering fees
and expenses. The Trust has invested approximately $12.9 million
in the Providence Project, approximately $6.8 million in the
Maine Hydro Projects, $.7 million in the Pump Services Project
and $.5 million in equipment and has approximately $18.8 million
available for further investment and Trust expenses. The Trust
believes that these funds will be adequate for its future
investment program.
Industry trends that may affect results of operations in
1997 and beyond are discussed above at Item 1(c)(4) - Business -
Trends in the Electric Utility and Independent Power Industries.
Item 8. Financial Statements and Supplementary Data.
Index to Financial Statements
Report of Independent Accountants F-2
Statement of Operations for Year Ended
December 31, 1996 and for Period
from Commencement of Share Offering
(February 6, 1995) through December 31, 1995 F-3
Balance Sheet at December 31, 1995 F-4
Statement of Changes in Shareholders' Equity for
Period from Commencement of Share Offering
through December 31, 1995 F-5
Statement of Cash Flows for
Period from Commencement of Share Offering
through December 31, 1995 F-6
Notes to Financial Statements F-7 to F-13
All schedules are omitted because they are not applicable or
the required information is shown in the financial statements or
notes thereto.
The financial statements are presented in accordance with
generally accepted accounting principles for operating companies,
using consolidation and equity method accounting principles.
This differs from the basis used by the three prior independent
power programs sponsored by the Managing Shareholder, which
present the Trust's investments in Projects on the estimated fair
value method rather than the consolidation and equity accounting
method. The financial statements for 1995 have been restated on
the same basis used for 1996. No material changes in net income
or cash flow resulted..
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Neither the Trust nor the Managing Shareholder has had an
independent accountant resign or decline to continue providing
services since their respective inceptions and neither has
dismissed an independent accountant during that period. During
that period of time no new independent accountant has been
engaged by the Trust or the Managing Shareholder, and the
Managing Shareholder's current accountants, Price Waterhouse LLP,
have been engaged by the Trust.
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) General.
As Managing Shareholder of the Trust, Ridgewood Power
Corporation has direct and exclusive discretion in management and
control of the affairs of the Trust (subject to the general
supervision and review of the Independent Trustees and the
Managing Shareholder acting together as the Board of the Trust).
The Managing Shareholder will be entitled to resign as Managing
Shareholder of the Trust only (i) with cause (which cause does
not include the fact or determination that continued service
would be unprofitable to the Managing Shareholder) or (ii)
without cause with the consent of a majority in interest of the
Investors. It may be removed from its capacity as Managing
Shareholder as provided in the Declaration.
Ridgewood Energy Holding Corporation ("Ridgewood Holding"),
a Delaware corporation incorporated in April 1992, is the
Corporate Trustee of the Trust.
(b) Managing Shareholder.
The Managing Shareholder was incorporated in February 1991
as a Delaware corporation for the primary purpose of acting as a
managing shareholder of business trusts and as a managing general
partner of limited partnerships which are organized to
participate in the development, construction and ownership of
Independent Power Projects.
The Managing Shareholder has also organized Ridgewood
Electric Power Trust I ("Ridgewood Power I"), Ridgewood Electric
Power Trust II ("Ridgewood Power II") and Ridgewood Power III and
Ridgewood Power V as Delaware business trusts to participate in
the independent power industry. The business objectives of these
four trusts are similar to those of the Trust.
The Managing Shareholder is an affiliate of Ridgewood Energy
Corporation ("Ridgewood Energy"), which has organized and
operated 46 limited partnership funds and one business trust over
the last 12 years (of which 25 have terminated) and which had
total capital contributions in excess of $190 million. The
programs operated by Ridgewood Energy have invested in oil and
natural gas drilling and completion and other related activities.
Robert E. Swanson has been the President, sole director and
sole stockholder of the Managing Shareholder since its inception
in February 1991. Set forth below is certain information
concerning Mr. Swanson and other executive officers of the
Managing Shareholder.
Robert E. Swanson, age 50, has also served as President of
the Trust since its inception in November 1992 and as President
of RPMC, Ridgewood Power I, Ridgewood Power II, Ridgewood Power
III and Ridgewood Power V since their respective inception. Mr.
Swanson has been President, registered principal, sole director
and sole stockholder of Ridgewood Securities Corporation, the
Placement Agent for the private placement offerings of the Trust
and those four trusts. In addition, he has been President, sole
director and sole stockholder of Ridgewood Energy since its
inception in October 1982. Prior to forming Ridgewood Energy in
1982, Mr. Swanson was a tax partner at the former New York and
Los Angeles law firm of Fulop & Hardee and an officer in the
Trust and Investment Division of Morgan Guaranty Trust Company.
His specialty is in personal tax and financial planning,
including income, estate and gift tax. Mr. Swanson is a member
of the New York State and New Jersey bars, the Association of the
Bar of the City of New York and the New York State Bar
Association. He is a graduate of Amherst College and Fordham
University Law School.
Robert L. Gold, age 38, has served as Executive Vice
President of the Managing Shareholder, RPMC, the Trust, Ridgewood
Power I, Ridgewood Power II, Ridgewood Power III and Ridgewood
Power V since their respective inceptions, with primary
responsibility for marketing and acquisitions. He has served as
Vice President and General Counsel of Ridgewood Securities
Corporation since he joined the firm in December 1987. Mr. Gold
has also served as Executive Vice President of Ridgewood Energy
since October 1990. He served as Vice President of Ridgewood
Energy from December 1987 through September 1990. For the two
years prior to joining Ridgewood Energy and Ridgewood Securities
Corporation, Mr. Gold was a corporate attorney in the law firm of
Cleary, Gottlieb, Steen & Hamilton in New York City where his
experience included mortgage finance, mergers and acquisitions,
public offerings, tender offers, and other business legal
matters. Mr. Gold is a member of the New York State bar. He is a
graduate of Colgate University and New York University School of
Law.
Thomas R. Brown, age 42, joined the Managing Shareholder in
November 1994 as Senior Vice President and holds the same
position with the Trust, RPMC and each of the other trusts
sponsored by the Managing Shareholder. He became Chief Operating
Officer of the Managing Shareholder, RPMC, and the five trusts in
October 1996. Mr. Brown has over 19 years experience in the
development and operation of power and industrial projects. From
1992 until joining the Managing Shareholder he was employed by
Tampella Services, Inc., an affiliate of Tampella, Inc., one of
the world's largest manufacturers of boilers and related
equipment for the power industry. Mr. Brown was Project Manager
for Tampella's Piney Creek project, a $100 million bituminous
waste coal fired circulating fluidized bed power plant. Between
1990 and 1992 Mr. Brown was Deputy Project Manager at Inter-Power
of Pennsylvania, where he successfully developed a 106 megawatt
coal fired facility. Between 1982 and 1990 Mr. Brown was
employed by Pennsylvania Electric Company, an integrated utility,
as a Senior Thermal Performance Engineer. Prior to that, Mr.
Brown was an Engineer with Bethlehem Steel Corporation. He has
an Bachelor of Science degree in Mechanical Engineering from
Pennsylvania State University and an MBA in Finance from the
University of Pennsylvania. Mr. Brown satisfied all requirements
to earn the Professional Engineer designation in 1985.
Martin V. Quinn, age 48, assumed the duties of Chief
Financial Officer of the Managing Shareholder, the Trust, the
other four trusts sponsored by the Managing Shareholder and RPMC
in November 1996. Under a consulting arrangement which
concluded on March 31, 1997, Mr. Quinn devoted a majority of his
time to the business of Ridgewood Power and RPMC while continuing
his other activities. On that date, he became a full-time
officer of Ridgewood Power and RPMC.
Mr. Quinn has 27 years of experience in financial management
and corporate mergers and acquisitions, gained with major,
publicly-traded companies and an international accounting firm.
He formerly served as Vice President of Finance and Chief
Financial Officer of NORSTAR Energy, an energy services company,
from February 1994 until June 1996. From 1991 to March 1993, Mr.
Quinn was employed by Brown-Forman Corporation, a diversified
consumer products company and distiller, where he was Vice
President-Corporate Development. From 1981 to 1991, Mr. Quinn
held various officer-level positions with NERCO, Inc., a mining
and natural resource company, including Vice President-
Controller and Chief Accounting Officer for his last six years
and Vice President-Corporate Development. Mr. Quinn's
professional qualifications include his certified public
accountant qualification in New York State, membership in the
American Institute of Certified Public Accountants, six years of
experience with the international accounting firm of Price
Waterhouse, and a Bachelor of Science degree in Accounting and
Finance from the University of Scranton (1969).
Mary Lou Olin, age 44, has served as Vice President of the
Managing Shareholder, RPMC, the Trust, and the other four trusts
sponsored by the Managing Shareholder since their respective
inceptions. She has also served as Vice President of Ridgewood
Energy since October 1984, when she joined the firm. Her primary
areas of responsibility are investor relations, communications
and administration. Prior to her employment at Ridgewood Energy,
Ms. Olin was a Regional Administrator at McGraw-Hill Training
Systems where she was employed for two years. Prior to that, she
was employed by RCA Corporation. Ms. Olin has a Bachelor of Arts
degree from Queens College.
Donald C. Stewart, age 52, serves as an advisor and
consultant to the Trust and is expected to be actively involved
in reviewing the Trust's acquisitions and operations. Mr.
Stewart has 25 years of expertise in the field of independent
power generation, fuel procurement, engineering and finance. Mr.
Stewart spent the first ten years of his business career as a
certified public accountant with a major international firm. He
has been the Chairman of Vermont Gas Systems, a regulated public
utility, President of Consolidated Power Company, a developer of
large scale cogeneration projects and President of Hercules
Engines, Inc., a manufacturer of industrial engines and
electrical generation equipment. Mr. Stewart has a Bachelor of
Science degree from Lehigh University.
Douglas R. Wilson, age 37, joined Mr. Stewart in October
1996 to provide financial advisory services for evaluating,
structuring and overseeing the Trust's investments. He has over
13 years of capital markets experience, including specialization
in complex lease and project financings and in energy-related
businesses. From January 1993 until October 1996, he was
associated with BTM Capital Corporation, the structured finance
unit of the Bank of Tokyo-Mitsubishi. Before that he earned a
Master's degree in Business Administration from the Wharton
School of the University of Pennsylvania from September 1990
through May 1992. He has a Bachelor of Business Administration
degree from the University of Texas.
(c) Management Agreement.
The Trust has entered into a Management Agreement with the
Managing Shareholder detailing how the Managing Shareholder will
render management, administrative and investment advisory
services to the Trust. Specifically, the Managing Shareholder
will perform (or arrange for the performance of) the management
and administrative services required for the operation of the
Trust. Among other services, it will administer the accounts and
handle relations with the Investors, provide the Trust with
office space, equipment and facilities and other services
necessary for its operation and conduct the Trust's relations
with custodians, depositories, accountants, attorneys, brokers
and dealers, corporate fiduciaries, insurers, banks and others,
as required. The Managing Shareholder will also be responsible
for making investment and divestment decisions, subject to the
provisions of the Declaration.
The Managing Shareholder will be obligated to pay the
compensation of the personnel and all administrative and service
expenses necessary to perform the foregoing obligations. The
Trust will pay all other expenses of the Trust, including
transaction expenses, valuation costs, expenses of preparing and
printing periodic reports for Investors and the Commission,
postage for Trust mailings, Commission fees, interest, taxes,
legal, accounting and consulting fees, litigation expenses and
other expenses properly payable by the Trust. The Trust will
reimburse the Managing Shareholder for all such Trust expenses
paid by it.
As compensation for the Managing Shareholder's performance
under the Management Agreement, the Trust is obligated to pay the
Managing Shareholder an annual management fee described below at
Item 13. Certain Relationships and Related Transactions.
The Board of the Trust (including both initial Independent
Trustees) has approved the initial Management Agreement and its
renewal. Each Investor consented to the terms and conditions of
the initial Management Agreement by subscribing to acquire
Investor Shares in the Trust. The Management Agreement will
remain in effect until January 4, 1998 and year to year
thereafter as long as it is approved at least annually by (i)
either the Board of the Trust or a majority in interest of the
Investors and (ii) a majority of the Independent Trustees. The
agreement is subject to termination at any time on 60 days' prior
notice by the Board, a majority in interest of the Investors or
the Managing Shareholder. The agreement is subject to amendment
by the parties with the approval of (i) either the Board or a
majority in interest of the Investors and (ii) a majority of the
Independent Trustees.
(d) Executive Officers of the Trust.
Pursuant to the Declaration, the Managing Shareholder has
appointed officers of the Trust to act on behalf of the Trust and
sign documents on behalf of the Trust as authorized by the
Managing Shareholder. Mr. Swanson has been named the President
of the Trust and the other principal officers of the Trust are
identical to those of the Managing Shareholder. The officers
have the duties and powers usually applicable to similar officers
of a Delaware business corporation in carrying out Trust
business. Officers act under the supervision and control of the
Managing Shareholder, which is entitled to remove any officer at
any time. Unless otherwise specified by the Managing
Shareholder, the President of the Trust has full power to act on
behalf of the Trust. The Managing Shareholder expects that most
actions taken in the name of the Trust will be taken by Mr.
Swanson and the other principal officers in their capacities as
officers of the Trust under the direction of the Managing
Shareholder rather than as officers of the Managing Shareholder.
(e) The Trustees.
The 1940 Act requires the Independent Trustees to be
individuals who are not "interested persons" of the Trust as
defined under the 1940 Act (generally, persons who are not
affiliated with the Trust or with affiliates of the Trust).
There must always be at least two Independent Trustees; a larger
number may be specified by the Board from time to time. Each
Independent Trustee has an indefinite term. Vacancies in the
authorized number of Independent Trustees will be filled by vote
of the remaining Board members so long as there is at least one
Independent Trustee; otherwise, the Managing Shareholder must
call a special meeting of Investors to elect Independent
Trustees. Vacancies must be filled within 90 days. An
Independent Trustee may resign effective on the designation of a
successor and may be removed for cause by at least two-thirds of
the remaining Board members or with or without cause by action of
the holders of at least two-thirds of Shares held by Investors.
Under the Declaration, the Independent Trustees are authorized to
act only where their consent is required under the 1940 Act and
to exercise a general power to review and oversee the Managing
Shareholder's other actions. They are under a fiduciary duty
similar to that of corporation directors to act in the Trust's
best interest and are entitled to compel action by the Managing
Shareholder to carry out that duty, if necessary, but ordinarily
they have no duty to manage or direct the management of the Trust
outside their enumerated responsibilities.
The Independent Trustees of the Trust are John C. Belknap
and Dr. Richard D. Propper. Mr. Belknap and Dr. Propper also
serve as independent trustees for Ridgewood Power I. Set forth
below is certain information concerning these individuals, who
are not otherwise affiliated with the Trust, the Managing
Shareholder or their directors, officers or agents.
John C. Belknap, age 50, joined OfficeMax Inc. in December
1995 as Executive Vice President and Chief Financial Officer.
From February 1994 to February 1995, Mr. Belknap was Executive
Vice President and Chief Financial Officer of Zale Corporation, a
1,200 store jewelry retain chain. From January 1990 to January
1994 and from February 1995 to December 1995, Mr. Belknap was an
independent financial consultant. From January 1989 through May
1993 he also served as a director of and consultant to Finlay
Enterprises, Inc., an operator of fine jewelry departments in
major department stores nationwide. Prior to 1989, Mr. Belknap
served as Chief Financial Officer of Seligman & Latz, Kay
Corporation and its subsidiary, Kay Jewelers, Inc.
From January 1990 until February 1994, Mr. Belknap consulted
in a variety of strategic corporate transactions, including
mergers and acquisitions, divestitures and refinancing. One such
transaction involved the recapitalization and change of control
of Finlay in May 1993. From 1979 to 1985, Mr. Belknap served as
Chief Financial Officer of Kay Corporation ("Kay"), the parent of
Kay Jewelers, Inc. ("KJI"), a national chain of jewelry stores
and leased jewelry departments in major department stores. He
served as Chief Financial Officer of KJI from 1974 to 1979 and as
its Assistant Controller from 1973 to 1974. Between 1970 and
1973, Mr. Belknap was a senior auditor at Arthur Young & Company
(now Ernst & Young), a national accounting firm. Mr. Belknap
earned BA and MBA degrees from Cornell University.
Dr. Richard D. Propper, age 47, graduated from McGill
University in 1969 and received his medical degree from Stanford
University in 1972. He completed his internship and residency in
Pediatrics in 1974, and then attended Harvard University for post
doctoral training in hematology/oncology. Upon the completion of
such training, he joined the staff of the Harvard Medical School
where he served as an assistant professor until 1983. In 1983,
Dr. Propper left academic medicine to found Montgomery Medical
Ventures, one of the largest medical technology venture capital
firms in the United States. He served as managing general
partner of Montgomery Medical Ventures until 1993.
Dr. Propper is currently a consultant to a variety of
companies for medical matters, including international
opportunities in medicine. In June 1996 Dr. Propper agreed to an
order of the Commission that required him to make filings under
Sections 13(d) and (g) and 16 of the 1934 Act and that imposed a
civil penalty of $15,000. In entering into that agreement, Dr.
Propper did not admit or deny any of the alleged failures to file
recited in that order.
The Corporate Trustee of the Trust is Ridgewood Holding.
Legal title to Trust property is now and in the future will be in
the name of the Trust, if possible, or Ridgewood Holding as
trustee. Ridgewood Holding is also a trustee of Ridgewood Power
I, Ridgewood Power II, Ridgewood Power III and of an oil and gas
business trust sponsored by Ridgewood and is expected to be a
trustee of other similar entities that may be organized by the
Managing Shareholder and Ridgewood Energy. The President, sole
director and sole stockholder of Ridgewood Holding is Robert E.
Swanson; its other executive officers are identical to those of
the Managing Shareholder. The principal office of Ridgewood
Holding is at 1105 North Market Street, Suite 1300, Wilmington,
Delaware 19899.
The Trustees are not liable to persons other than
Shareholders for the obligations of the Trust.
The Trust has relied and will continue to rely on the
Managing Shareholder and engineering, legal, investment banking
and other professional consultants (as needed) and to monitor and
report to the Trust concerning the operations of Projects in
which it invests, to review proposals for additional development
or financing, and to represent the Trust's interests. The Trust
will rely on such persons to review proposals to sell its
interests in Projects in the future.
(f) Section 16(a) Beneficial Ownership Reporting Compliance
Each of the members of the Board and each of the executive
officers of the Trust did not file on a timely basis as required
by Section 16(a) of the 1934 Act Forms 3 reporting their status
as directors or officers of the Trust and their beneficial
ownership. Mr. Brown and Mr. Quinn filed Form 3 in December 1996
and the remaining officers and directors did so in April 1997.
The number of transactions that were not reported on a timely
basis by each of these persons was zero.
(g) Ridgewood Management.
As discussed above at Item 1 - Business, RPMC has assumed
day-to-day management responsibility for the Providence
Project, effective April 16, 1996. Like the Managing
Shareholder, RPMC is wholly owned by Robert E. Swanson. It
has entered into an "Operation Agreement" under which RPMC,
under the supervision of the Managing Shareholder, will
provide the management, purchasing, engineering, planning
and administrative services for the Providence Project. To
the extent that those services were provided by the Managing
Shareholder and related directly to the operation of the
Project, RPMC will charge the Trust at its cost for these
services and for the Trust's allocable amount of certain
overhead items. RPMC will share space and facilities with
the Managing Shareholder and its Affiliates. To the extent
that common expenses can be reasonably allocated to RPMC,
the Managing Shareholder may, but is not required to, charge
RPMC at cost for the allocated amounts and such allocated
amounts will be borne by the Trust and other programs.
Common expenses that are not so allocated will be borne by
the Managing Shareholder.
Initially, the Managing Shareholder does not anticipate
charging RPMC for the full amount of rent, utility supplies and
office expenses allocable to RPMC. As a result, both initially
and on an ongoing basis the Managing Shareholder believes that
RPMC's charges for its services to the Trust are likely to be
materially less than its economic costs and the costs of engaging
comparable third persons as managers. RPMC will not receive any
compensation in excess of its costs.
Allocations of costs will be made either on the basis of
identifiable direct costs, time records or in proportion to each
program's investments in Projects managed by RPMC; and
allocations will be made in a manner consistent with generally
accepted accounting principles.
RPMC will not provide any services related to the
administration of the Trust, such as investment, accounting, tax,
investor communication or regulatory services, nor will it
participate in identifying, acquiring or disposing of Projects.
RPMC will not have the power to act in the Trust's name or to
bind the Trust, which will be exercised by the Managing
Shareholder or the Trust's officers, although it may be
authorized to act on behalf of the subsidiaries that own
Projects.
The Operation Agreement does not have a fixed term and is
terminable by RPMC, by the Managing Shareholder or by vote of a
majority of interest of Investors, on 60 days' prior notice. The
Operation Agreement may be amended by agreement of the Managing
Shareholder and RPMC; however, no amendment that materially
increases the obligations of the Trust or that materially
decreases the obligations of RPMC shall become effective until
at least 45 days after notice of the amendment, together with the
text thereof, has been given to all Investors.
The officers of RPMC are Mr. Swanson (President), Mr. Gold
(Executive Vice President), Mr. Brown (Senior Vice President and
Chief Operating Officer), Mr. Quinn (Senior Vice President and
Chief Financial Officer), Ms. Olin (Vice President), Joseph A.
Heyison, General Counsel, and Douglas V. Liebschner, Vice
President - Operations. Mr. Heyison, age 42, joined RPMC in
January 1996. He was previously of counsel to the law firm of De
Forest & Duer, concentrating in corporate finance, banking,
environmental law and securities. He is a member of the bars of
New Jersey, New York and Ohio and was graduated from the
University of Pennsylvania Law School in 1979.
Douglas V. Liebschner, age 50, joined RPMC in June 1996 as
Vice President of Operations. He has over 27 years of experience
in the operation and maintenance of power plants. From 1992
until joining RPMC, he was employed by Tampella Services, Inc.,
an affiliate of Tampella, Inc., one of the world's largest
manufacturers of boilers and related equipment for the power
industry. Mr. Liebschner was Operations Supervisor for
Tampella's Piney Creek project, a $100 million bituminous waste
coal fired circulating fluidized bed (CFB) power plant. Between
1989 and 1992, he supervised operations of a waste to energy
plant in Poughkeepsie, N.Y. and an anthracite waste coal burning
CFB in Frackville, Pa. From 1969 to 1989, Mr. Liebschner served
in the U.S. Navy, retiring with the rank of Lieutenant Commander.
While in the Navy, he served mainly in billets dealing with the
operation, maintenance and repair of ship propulsion plants,
twice serving as Chief Engineer on board U.S. Navy combatant
ships. He has a Bachelor of Science degree from the U.S. Naval
Academy, Annapolis, Md.
Item 11. Executive Compensation.
Through 1995, the executive officers of the Trust and the
Managing Shareholder were compensated by Ridgewood Energy. The
Trust was not charged for their compensation; the Managing
Shareholder remitted a portion of the fees paid to it by the
Trust to reimburse Ridgewood Energy for employment costs incurred
on the Managing Shareholder's business. In 1996 and in future
years, the Managing Shareholder has compensated these
persons without additional payments by the Trust and will be
reimbursed by Ridgewood Energy for costs related to Ridgewood
Energy's business. The Trust will reimburse RPMC at allocated
cost for services provided by RPMC's employees. Information as
to the fees payable to the Managing Shareholder and certain
affiliates is contained at Item 13. Certain Relationships and
Related Transactions.
As compensation for services rendered to the Trust, pursuant
to the Declaration, each Independent Trustee is entitled to be
paid by the Trust the sum of $5,000 annually and to be reimbursed
for all reasonable out-of-pocket expenses relating to attendance
at Board meetings or otherwise performing his duties to the
Trust. Accordingly, in January 1995 and following years, the
Trust paid each Independent Trustee $5,000 for his services. The
Board of the Trust is entitled to review the compensation payable
to the Independent Trustees annually and increase or decrease it
as the Board sees reasonable. The Trust is not entitled to pay
the Independent Trustees compensation for consulting services
rendered to the Trust outside the scope of their duties to the
Trust without prior Board approval.
Ridgewood Holding, the Corporate Trustee of the Trust, is
not entitled to compensation for serving in such capacity, but is
entitled to be reimbursed for Trust expenses incurred by it which
are properly reimbursable under the Declaration.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
The Managing Shareholder purchased for cash one full
Investor Share. By virtue of its purchase of Investor Shares, the
Managing Shareholder is entitled to the same ratable interest in
the Trust as all other purchasers of Investor Shares. No other
Trustees or executive officers of the Trust acquired Investor
Shares in the Trust's offering. No person beneficially owns 5%
or more of the Investor Shares.
The Managing Shareholder was issued one Management Share in
the Trust representing the beneficial interests and management
rights of the Managing Shareholder in its capacity as the
Managing Shareholder (excluding its interest in the Trust
attributable to Investor Shares it acquired in the offering).
The management rights of the Managing Shareholder are described
in further detail above at Item 1 - Business and below in Item
10. Directors and Executive Officers of the Registrant. Its
beneficial interest in cash distributions of the Trust and its
allocable share of the Trust's net profits and net losses and
other items attributable to the Management Share are described in
further detail below at Item 13 -- Certain Relationships and
Related Transactions.
Item 13. Certain Relationships and Related Transactions.
The Declaration provides that cash flow of the Trust, less
reasonable reserves which the Trust deems necessary to cover
anticipated Trust expenses, is to be distributed to the Investors
and the Managing Shareholder (collectively, the "Shareholders"),
from time to time as the Trust deems appropriate. Prior to
Payout (the point at which Investors have received cumulative
distributions equal to the amount of their capital
contributions), each year all distributions from the Trust, other
than distributions of the revenues from dispositions of Trust
Property, are to be allocated 99% to the Investors and 1% to the
Managing Shareholder until Investors have been distributed during
the year an amount equal to 14% of their total capital
contributions (a "14% Priority Distribution"), and thereafter all
remaining distributions from the Trust during the year, other
than distributions of the revenues from dispositions of Trust
Property, are to be allocated 80% to Investors and 20% to the
Managing Shareholder. Revenues from dispositions of Trust
Property are to be distributed 99% to Investors and 1% to the
Managing Shareholder until Payout. In all cases, after Payout,
Investors are to be allocated 80% of all distributions and the
Managing Shareholder 20%.
For any fiscal period, the Trust's net profits, if any,
other than those derived from dispositions of Trust Property, are
allocated 99% to the Investors and 1% to the Managing Shareholder
until the profits so allocated offset (1) the aggregate 14%
Priority Distribution to all Investors and (2) any net losses
from prior periods that had been allocated to the Shareholders.
Any remaining net profits, other than those derived from
dispositions of Trust Property, are allocated 80% to the
Investors and 20% to the Managing Shareholder. If the Trust
realizes net losses for the period, the losses are allocated 80%
to the Investors and 20% to the Managing Shareholder until the
losses so allocated offset any net profits from prior periods
allocated to the Shareholders. Any remaining net losses are
allocated 99% to the Investors and 1% to the Managing
Shareholder. Revenues from dispositions of Trust Property are
allocated in the same manner as distributions from such
dispositions. Amounts allocated to the Investors are apportioned
among them in proportion to their capital contributions.
On liquidation of the Trust, the remaining assets of the
Trust after discharge of its obligations, including any loans
owed by the Trust to the Shareholders, will be distributed,
first, 99% to the Investors and the remaining 1% to the Managing
Shareholder, until Payout, and any remainder will be distributed
to the Shareholders in proportion to their capital accounts.
The Trust did not make any distributions in 1995 to the
Managing Shareholder (which is a member of the Board of the
Trust) or any other person and made distributions in 1996 as
stated at Item 5 - Market for Registrant's Common Equity and
Related Stockholder Matters. The Trust paid fees to the Managing
Shareholder and its affiliates as follows:
Fee Paid to 1996 1995
Management fee Managing
Shareholder $888,209 $0
Cost reimbursements* RPMC 2,957,000 0
Investment fee Managing
Shareholder 627,561 304,697
Placement agent fee
and sales commissions Ridgewood
Securities
Corporation 315,493 172,674
Organizational,
distribution and
offering fee Managing
Shareholder 1,892,959 954,342
* These include all payroll, parts, routine maintenance and other
expenses (except for royalties for landfill gas but including an allocation of
RPMC overhead) of the Providence Project.
The investment fee equaled 2% of the proceeds of the
offering of Investor Shares and was payable for the Managing
Shareholder's services in investigating and evaluating investment
opportunities and effecting investment transactions. The
placement agent fee (1% of the offering proceeds) and sales
commissions were also paid from proceeds of the offering, as was
the organizational, distribution and offering fee (5% of offering
proceeds) for legal, accounting, consulting, filing, printing,
distribution, selling, closing and organization costs of the
offering.
The management fee, payable monthly under the Management
Agreement at the annual rate of 3% of the Trust's net asset
value, began on the date the first Project was acquired and
compensates the Managing Shareholder for certain management,
administrative and advisory services for the Trust. In addition
to the foregoing, the Trust reimbursed the Managing Shareholder
at cost for expenses and fees of unaffiliated persons engaged by
the Managing Shareholder for Trust business and for payroll and
other costs of operation of the Providence and Pump Services
Projects. Beginning in 1996, these reimbursements were paid to
RPMC. The reimbursements to RPMC, which do not exceed its actual
costs and allocable overhead, are described at Item 10(f) -
Directors and Executive Officers of the Registrant -- RPMC.
Other information in response to this item is reported in
response to Item 11. Executive Compensation, which information
is incorporated by reference into this Item 13.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K.
(a) Financial Statements.
See the Index to Financial Statements in Item 8 hereof.
(b) Reports on Form 8-K.
No Form 8-K was filed with the Commission by the Registrant
during the quarter ending December 31, 1996.
(c) Exhibits
3A. Certificate of Trust of the Registrant is incorporated
by reference to Exhibit 3A of Registrant's
Registration Statement filed with the Commission on
February 15, 1994.
3B. Declaration of Trust of the Registrant is incorporated
by reference to Exhibit 3B of Registrant's Registration
Statement filed with the Commission on February 19,
1994.
3C. Amendment No. 1 to Declaration of Trust. Page 76
10A. Asset Acquisition Agreement by and among Northeast
Landfill Power Joint Venture, Northeast Landfill Power
Company, Johnson Natural Power Corporation and
Ridgewood Providence Power Partners, L.P. , is
incorporated by reference to Exhibit 2 of the
Registrant's Current Report on Form 8-K filed with the
Commission on May 2, 1996.
10B. Agreement of Merger, dated as of July 1, 1996, by and
among Consolidated Hydro Maine, Inc., CHI Universal,
Inc., Consolidated Hydro, Inc., Ridgewood Maine Power
Partners, L.P. and Ridgewood Maine Hydro Corporation.
Incorporated by reference to Exhibit 2.1 of the
Registrant's Current Report on Form 8-K filed with the
Commission on January 8, 1997.
10C. Letter, dated November 15, 1996, amending Agreement of
Merger. Incorporated by reference to Exhibit 2.2 of
Amendment No. 1 to the Registrant's Current Report on
Form 8-K filed with the Commission on January 9, 1997
10D. Letter, dated December 3, 1996, amending Agreement of
Merger. Incorporated by reference to Exhibit 2.3 of
the Registrant's Current Report on Form 8-K filed with
the Commission on January 8, 1997.
10E. Operation, Maintenance and Administration Agreement,
dated November __, 1996, by and among Ridgewood Maine
Hydro Partners, L.P., CHI Operations, Inc. and
Consolidated Hydro, Inc. Incorporated by reference to
Exhibit 10 of the Registrant's Current Report on Form
8-K filed with the Commission on January 8, 1997.
10F. Management Agreement, dated as of __________, 1996,
between the Registrant and Ridgewood Power Corporation
Page 81
10G. Operation Agreement, dated as of April 16, 1996, among
the Registrant, Ridgewood Providence Corporation and
Ridgewood Power Management Corporation Page 89
The Registrant agrees to furnish supplementally a copy of
any omitted exhibit or schedule to agreements filed as exhibits
to the Commission upon request.
21. Subsidiaries of the Registrant Page 95
24. Powers of Attorney Page 96
27. Financial Data Schedule Page 97
99. Listing of Statutory Provisions
that the Trust Agrees to Comply with Page 99
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Signature Title Date
RIDGEWOOD ELECTRIC POWER TRUST IV
(Registrant)
By:/s/ Robert E. Swanson President and Chief April 14, 1997
Robert E. Swanson Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
By:/s/ Robert E. Swanson President and Chief April 14, 1997
Robert E. Swanson Executive Officer
By:/s/ Martin V. Quinn Senior Vice President and
Martin V. Quinn Chief Financial Officer April 15, 1997
By:/s/ Kathleen P. McSherry Controller April 15, 1997
Kathleen P. McSherry
RIDGEWOOD POWER CORPORATION Managing Shareholder April 14, 1997
By:/s/ Robert E. Swanson President
Robert E. Swanson
/s/ Robert E. Swanson * Independent Trustee April 14, 1997
John C. Belknap
/s/ * Independent Trustee April __, 1997
Richard D. Propper
As attorney-in-fact for Independent Trustee
<PAGE>
Ridgewood Electric Power Trust IV
Consolidated Financial Statements
December 31, 1996 and 1995
-F1-<PAGE>
1177 Avenue of the Americas Telephone 212 596 7000
New York, NY 10036 Facsimile 212 596 8910
[Letterhead of Price Waterhouse LLP]
Report of Independent Accountants
March 24, 1997
To the Shareholders and Trustees of
Ridgewood Electric Power Trust IV
In our opinion, the accompanying consolidated balance sheet and
the related consolidated statements of operations, changes in
shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Ridgewood Electric
Power Trust IV at December 31, 1996 and 1995, and the results of
their operations and their cash flows for the year ended December
31, 1996 and the period February 6, 1995 (commencement of share
offering) through December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are
the responsibility of the Trust's management; our responsibility
is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts an disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
As discussed in Notes 1 and 2, effective on October 2, 1996, the
shareholders of the Trust consented to end its election to be
treated as a Business Development Corporation under the
Investment Company Act of 1940. As a result, generally accepted
accounting principles for investment companies no longer applied
to the Trust and the Trust adopted generally accepted accounting
principles applicable to operating companies. The financial
statements of the Trust have been restated to reflect the
application of generally accepted accounting principles for
operating companies for the period from February 6, 1995
(commencement of share offering) to October 2, 1996..
/s/ Price Waterhouse LLP
-F2-
<PAGE>
Ridgewood Electric Power Trust IV
Consolidated Statement of Operations
Commencement
of Share Offering
February 6,1995
Year Ended through
December 31, December 31,
1996 1995
Restated
Net sales $ 4,087,722 $ ---
Sublease income 261,375 ---
Total revenue 4,349,097 ---
Cost of sales, including depreciation
and amortization of $747,452 in 1996 2,991,835 ---
Gross profit 1,357,262 ---
General and administrative expenses 372,415 68,752
Management fee 888,209 ---
Investment fee 627,561 304,697
Project due diligence costs 63,052 50,000
Other expenses 43,160 31,089
Total other operating expenses 1,994,397 454,538
Income (loss) from operations (637,135) (454,538)
Other income (expense):
Interest and dividend income 1,294,037 298,405
Interest expense (394,665) ---
Income from hydroelectric projects 99,224 ---
Net other income 998,596 298,405
Income (loss) before minority interest 361,461 (156,133)
Minority interest in the earnings
of the Providence Project (288,692) ---
Net income (loss) $ 72,769 $ (156,133)
See accompanying notes to the consolidated financial statements.
-F3-
<PAGE>
Ridgewood Electric Power Trust IV
Consolidated Balance Sheet
December 31, 1996 and 1995
1996 1995
Restated
Assets:
Cash and cash equivalents $ 22,685,829 $ 12,998,463
Maintenance reserve fund 394,070 ---
Accounts receivable, trade 1,065,181 ---
Other receivables 109,999 59,464
Spare parts inventory 383,810 ---
Prepaid royalty expense 144,535 ---
Total Current Assets 24,783,424 13,057,927
Investments:
Investment in hydroelectric projects 6,806,511 ---
Electric power equipment held for resale 455,182 455,182
Due diligence costs relating to
potential power projects 245,828 23,435
Machinery and Equipment: 11,889,451 353,619
Less- Accumulated depreciation (357,109) ---
Electric Power Sales Contract 8,266,096 ---
Less- Accumulated amortization (390,343) ---
Debt Reserve Fund 575,441 ---
Total Assets $ 52,274,481 $ 13,890,163
Liabilities and Shareholders' Equity:
Current maturities of long-term debt $ 538,191 $ ---
Accounts payable and accrued expenses 569,106 34,413
Due to affiliates 92,057 353,619
Total Current Liabilities 1,199,354 388,032
Long-term debt, less current portion 5,440,260 ---
Minority interest in the Providence
Project 6,888,268 ---
Shareholders' Equity:
Shareholders' Contributions
(476.8 and 162.1 shares
issued and outstanding at
December 31, 1996 and 1995,
respectively) 38,829,963 13,503,692
Retained deficit (83,364)
(1,561)
Total Shareholders' Equity 38,746,599 13,502,131
Total Liabilities and
Shareholders' Equity $ 52,274,481 $ 13,890,163
See accompanying notes to the consolidated financial statements.
-F4-
<PAGE>
Ridgewood Electric Power Trust IV
Consolidated Statement Of Changes In Shareholders' Equity
For The Year Ended December 31, 1996 and The Period February 6,
1995 To December 31, 1995
Managing
Shareholders Shareholder Total
Initial capital
contributions, net
(162.10 shares) $ 13,658,264 $ --- $ 13,658,264
Net loss for the period (154,572) (1,561)
(156,133)
Shareholders' equity,
December 31, 1992
(162.10 shares) 13,503,692 (1,561) 13,502,131
Capital contributions,
net (476.8 shares) 26,848,394 --- 26,848,394
Cash distributions (1,659,928) (16,767)
(1,676,695)
Net income for the year 71,041 728 72,769
Shareholders' equity,
December 31, 1996
(476.8 shares) $ 38,764,199 (17,600) $ 38,746,599
See accompanying notes to the consolidated financial statements.
-F5-
<PAGE
Ridgewood Electric Power Trust IV
Consolidated Statement of Cash Flows
For the Year Ended December 31, 1996 and the Period February 6,
1995 to December 31, 1995
1996 1995
Cash flows from operating activities:
Net income (loss) $ 72,769 $ (156,133)
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization 747,452 ---
Prepaid and accrued royalties- net 777,886 ---
Minority interest in earnings 288,692 ---
Equity in income of unconsolidated
hydroelectric projects (99,224) ---
Changes in assets and liabilities:
Increase in maintenance reserve fund (14,164) ---
Increase in accounts receivable, trade (418,433) ---
Increase in other receivables (50,535) (59,464)
Decrease in customer escrow fund 1,119,115 ---
Increase in accounts payable and
accrued expenses 343,508 34,413
Decrease in due from affiliate (261,562) ---
Other- net 76,628 ---
Total adjustments 2,509,363 (25,051)
Net cash provided by (used in)
operating activities 2,582,132 (181,184)
Cash used in investing activities:
Investment in the Providence Project,
net of minority interest and cash
purchased (8,817,823) ---
Investment in hydroelectric projects (6,707,287) ---
Capital expenditures (1,928,332) ---
Due diligence costs on potential
projects (222,393) (23,435)
Purchase of electric generating
equipment --- (455,182)
Net cash used in investing activities (17,675,835) (478,617)
Cash provided by (used in) financing activities:
Proceeds from shareholders' contributions 31,495,223 16,017,470
Selling commissions and offering costs
paid (4,646,829) (2,359,206)
Cash distributions to shareholders (1,676,695) ---
Payments to reduce long-term debt (331,953) ---
Increase in debt reserve fund (58,677) ---
Net cash provided by financing
activities 24,781,069 13,658,264
Net increase in cash and cash equivalents 9,687,366 12,998,463
Cash and cash equivalents,
beginning of period 12,998,463 ---
Cash and cash equivalents,
end of period $ 22,685,829 $ 12,998,463
See accompanying notes to the consolidated financial statements.
-F6
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
1. Organization and Purpose
Nature of Business
Ridgewood Electric Power Trust IV (the "Trust") was formed
as a Delaware business trust in September 1994, by Ridgewood
Energy Holding Corporation acting as the Corporate Trustee. The
managing shareholder of the Trust is Ridgewood Power Corporation.
The Trust began offering shares on February 6, 1995. The Trust
commenced operations on May 10, 1995.
The Trust has been organized to invest in independent power
generation facilities and in the development of these facilities.
These independent power generation facilities will include
cogeneration facilities, which produce both electricity and heat
energy and other power plants that use various fuel sources
(except nuclear). The power plants will sell electricity and/or
heat energy to utilities and industrial users under long-term
contracts.
"Business Development Company" Election
The Trust made an election to be treated as a Business
Development Company ("BDC") under the Investment Company Act of
1940. On January 24, 1995, the trust notified the Securities
Exchange Commission of such election and registered its
shares under the Securities Exchange Act of 1934 ("the 1934
Act"). On March 24, 1995, the election and registration became
effective.
On September 9, 1996, through a proxy solicitation the Trust
requested investor consent to end the BDC status. As of October
2, 1996, more than 50% of the investors' shares consented to the
elimination of the BDC status. Accordingly, the Trust is no
longer an investment company under the 1940 Act.
2. Summary Of Significant Accounting Policies
Accounting Changes
As a BDC under the 1940 Act, the Trust utilized generally
accepted accounting principles for investment companies. As a
result of the elimination of the BDC status, the Trust now
utilizes generally accepted accounting principles for operating
companies. In accordance with the generally accepted accounting
principles for BDC's, investments in power generation projects
ere stated at fair value in previously issued financial
statements. As a result of the elimination of the BDC status,
consolidation and equity method accounting principles now apply
to the accounting for investments. Accordingly, the financial
data for all prior periods presented has been restated to reflect
the use of consolidation and equity method accounting principles.
Principles of Consolidation and Accounting for Investment in
Power Generation
Projects
The consolidated financial statements include the accounts
of the Trust and affiliates owned more than 50%. All material
intercompany transactions have been eliminated.
The Trust uses the equity method of accounting for its
investment in an affiliate which is 50% owned because the Trust
has the ability to exercise significant influence over the
operating and financial policies of the affiliate but does not
control the affiliate. The Trust's share of the earnings of the
affiliate is included in consolidated net income.
-F7-
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
Use of Estimates
The preparation of the consolidated 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.
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.
Plant and Equipment
Plant and equipment, consisting principally of electrical
generating equipment, is stated at cost. Renewals and
betterments that increase the useful lives of the assets are
capitalized. Repair and maintenance expenditures that increase
the efficiency of the assets are expensed as incurred.
Depreciation is recorded using the straight-line method over
the following useful lives of the assets, which is 10 to 20
years. During 1996, the Trust recorded depreciation expense of
$357,109.
Intangible Asset
A portion of the purchase price of the Providence Project
was assigned to the Electric Power Sales Contract and is being
amortized over 15 years on a straight-line basis. During 1996,
the Trust recorded amortization expense of $390,343.
Electric Power Equipment Held for Resale
The Trust owns certain used electric power equipment that is
stated at cost, which approximates estimated net realizabe value.
Revenue Recognition
Power generation revenue is recognized based on power
delivered at rates stipulated in the power sales contract.
Interest and dividend income is recorded when earned.
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.
Offering Costs
Costs associated with offering Trust shares (selling
commissions, distribution and offering costs) are reflected as a
reduction of the shareholders' capital contributions.
Due diligence costs relating to potential power projects
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.
-F8-
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
3. Acquisitions
The Trust had the following investments in power generation
projects and electric power equipment:
Nature of Ownership 1996 1995
Ownership Interest
Project Name
Providence Project Partnerships 64.3% $12,850,000 $ ---
Maine Hydro Project Partnerships 50.0% 6,806,511 ---
California Pumping
Project Direct Ownership 100.0% 697,730 353,619
Electric Power Equipment Direct Ownership 100.0% 455,182 455,182
Providence Project
In 1996, Ridgewood Providence Power Partners, L.P. was
formed as a Delaware limited partnership ("Providence Power").
The Trust invested $12,721,500 and owns a 64.3% limited
partnership interest in Providence Power. In addition,
Ridgewood Providence Power Corporation, was formed as a Delaware
corporation ("RPPCorp."). The Trust invested $128,500 and owns
64.3% of the outstanding common stock of RPPCorp., which is the
sole general partner of Providence Power.
On April 16, 1996, Providence Power purchased substantially
all of the net assets of Northeastern Landfill Power Joint
Venture. The assets acquired include a 12.3 megawatt capacity
electrical generating station, located at the Central Landfill in
Johnston, Rhode Island (the "Providence Project"). The
Providence Project includes eight reciprocating electric
generator engines, which are fueled by methane gas produced and
collected from the landfill. The electricity generated is sold
to New England Power Corporation under a long-term contract.
The purchase price was $15,533,021 cash, including transaction
costs and repayment of $3,000,000 of principal on the senior
secured non-recourse notes payable. In addition, Providence
Power assumed the obligation to repay the remaining principal
outstanding of $6,310,404 on the senior secured non-recourse
notes payable.
Through ownership in RPPCorp. and Providence Power, the
Trust owns 64.3% of the Providence Project. The remaining 35.7%
is owned by Ridgewood Electric Power Trust III ("Trust III").
Ridgewood Power Corporation is the managing partner of the Trust
and Trust III.
The acquisition of the Providence Project was accounted for
as a purchase as of April 16, 1996, and the results of operations
of the Providence Project have been included in the Trust's
Consolidated Financial Statements since that date. The purchase
price was allocated to the net assets acquired, based on their
respective fair values. A portion of the purchase price
($8,266,096) was allocated to the Electric Power Sales Contract
and is being amortized over 15 years.
The following unaudited pro forma information has been
prepared assuming the Providence 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 formation and 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 Providence Project
subsequent to the acquisition.
-F9-
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
Pro Forma Information
(Unaudited)
1996 1995
Net sales $5,511,642 $4,146,000
Income from Operations 1,032,806 712,975
Net Income (Loss) 88,558 (28,696)
Maine Hydro Projects
On September 5, 1996, Ridgewood Maine Hydro Partners, L.P.
was formed as a Delaware limited partnership ("Ridgewood Hydro
L.P."). The Trust invested $6,740,570 and owns a 50% limited
partnership interest in Ridgewood Hydro L.P. In addition,
Ridgewood Maine Hydro Corporation, was formed as a Delaware
corporation ("RMHCorp."). The Trust invested $65,941 and owns
50% of the outstanding common stock of RMHCorp., which is the
sole general partner of Ridgewood Hydro L.P.
On December 23, 1996, in a merger transaction, Ridgewood
Hydro L.P. acquired 14 hydroelectric projects, located in Maine
(the "Maine Hydro Projects"), from a subsidiary of Consolidated
Hydro, Inc. The assets acquired include a total of 11.3
megawatts of electrical generating capacity. The electricity
generated is sold to Central Maine Power Company and Bangor Hydro
Company under long-term contracts. The purchase price was
$12,256,306 cash, including transaction costs. In addition,
Ridgewood Hydro L.P. assumed a long-term lease obligation of
$1,017,209. The Trust's 50% share of the cash consideration paid
was $6,128,153. The remaining 50% was paid by Ridgewood Electric
Power Trust V ("Trust V"). Ridgewood Power Corporation is the
managing partner of the Trust and Trust V.
The Trust's 50% investment in the Maine Hydro Projects is
accounted for under the equity method of accounting. The Trust's
equity in the earnings of the Maine Hydro Projects have been
included in the Consolidated Financial Statements since December
23, 1996.
The Maine Hydro Projects are operated by a subsidiary of
Consolidated Hydro, Inc., under an Operation, Maintenance and
Administrative Agreement. The annual operator's fee is $307,500,
adjusted for inflation, plus an annual incentive fee equal to 50%
of the net cash flow of a target amount The agreement has a five
year term and can be renewed for two additional five year terms
by mutual consent.
Summarized financial information for the Maine Hydro
Projects are as follows:
Balance Sheet Information at December 31, 1996
Current assets $ 2,115,375
Electric Power sales contract 12,665,615
Other non-current assets 800,000
Total assets $ 15,580,990
Due to Trust IV $ 113,194
Other current liabilities 1,076,483
Non-current liabilities 1,004,679
Partners' equity 13,386,634
Total liabilities and equity $ 15,580,990
Statement of Operations Information for the period
September 5, 1996 to December 31, 1996
Revenue $ 251,631
Operating expenses 53,184
Net income $ 198,447
-F10-
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
California Pumping Project
On December 31, 1995, the Trust acquired a package of
natural gas fueled diesel engines which drive deep irrigation
well pumps in Ventura County, California from an affiliated
trust. The engines' shaft horsepower-hours are sold to the
operator at a discount from the equivalent kilowatt hours of
electricity. The Trust receives a distribution of $0.02 per
equivalent kilowatt up to 3,000 running hours per year and $0.01
per equivalent kilowatt for each additional running hour per
year. The operator pays for fuel, maintenance, repair and
replacement. The initial acquisition included 11 engines with a
rated capacity of 1.2 megawatts. The purchase price of $353,619
was paid in 1996.
During 1996, the Trust acquired an additional 9 engines with a
rated capacity of 1.2 megawatts at a purchase price of $344,111.
At December 31, 1996, the Trusts total investment in the
California Pumping Project was $697,730.
4. Electric Power Equipment Held for Resale
The Trust purchased, from an affiliated entity, various used
electric power generation equipment to be held for resale or, in
the event a buyer is not found, for use in potential power
generation projects. The equipment is held in storage. At
December 31, 1996 and 1995, the cost of such equipment was
$455,182.
5. Long-term Debt
Following is a summary of Long-term Debt at December 31,
1996:
Senior secured non-recourse notes payable $5,978,451
Less - Current maturity 538,191
Total Long-term Debt $5,440,260
The senior secured non-recourse notes are due in monthly
installments of $90,738 including interest at 9.6%. Final
payment is due on October 15, 2004. The notes also provide for
additional interest equal to 5% of the annual net cash flow of
the Providence Project, as defined. No additional interest was
due for the eight and one half months ending December 31, 1996.
The notes are secured by a leasehold mortgage on Providence
Power's landfill lease agreements and substantially all of the
assets of Providence Power. In addition to the required
monthly payments, mandatory prepayments may be required if
certain events occur. The loan agreement also provides for a
cash funded debt service reserve and maintenance reserve. At
December 31, 1996, the cash balance in these reserve accounts
were $575,441 and $394,070, respectively. Additions and
reductions to these reserve accounts are defined in the loan
agreement. As of January 31, 1997, Providence Power's
obligations to maintain a cash balance in the maintenance reserve
account have terminated and the cash balance in the reserve
account has been released to Providence Power. The loan
agreement contains various covenants, including the maintenance
of a specified debt service ratio.
Scheduled repayments of Long-term debt principal for the
next five years are as follows:
Year Ended
December 31, Repayment
1997 $538,191
1998 592,193
1999 651,613
2000 716,995
2001 788,937
-F11-
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
6. Fair Value of Financial Instruments
At December 31, 1996, the carrying value of the Trust's
cash, debt service and maintenance reserves and notes payable
approximates their fair value. The fair value of the long-term
debt, calculated using current rates for loans with similar
maturities, also approximates its carrying value.
7. Electric Power Sales Contracts
Providence Power is committed to sell all of the electricity
it produces to New England Power Company ("NEP") for prices as
specified in the Power Purchase Agreement. The prices are
adjusted annually for changes in the Consumer Price Index, as
defined. The NEP agreement expires in the year 2020 and can be
terminated by either party under certain conditions in 2010. At
the time of the acquisition of the Providence Project, Providence
Power was required under the NEP agreement to maintain in an
escrow account cash to secure payment of the aggregate
differential to NEP in the event of default. At April 16, 1996,
the aggregate differential amounted to $1,065,989. In October
1996, the aggregate differential decreased to zero and the cash
held in escrow was released to Providence Power. For the eight
and one half months ended December 31, 1996, sales revenue under
the NEP Power Purchase Agreement amounted to $3,946,077.
The Maine Hydro Projects qualify as small power production
facilities under the Public Utility Regulatory Policies Act
("PURPA"). PURPA requires that each electric utility company,
operating at the location of a small power production facility,
as defined, purchase the electricity generated by such facility
at a specified or negotiated price. The Maine Hydro Projects
sell substantially all of their electrical output to two public
utility companies, Central Maine Power Company ("CMP") and Bangor
Hydro-Electric Company ("BHC"), under long-term power purchase
agreements. Eleven of the twelve power purchase agreements with
CMP expire in December 2008 and are renewable for an additional
five year period. The twelfth power purchase agreement with CMP
expires in December 2007 with CMP having the option to extend the
contract three more five-year periods. The two power purchase
agreements with BHC expire December 2014 and February 2017.
8. Landfill Lease and Sublease
Providence Power leases the Central Landfill, located in
Johnston, Rhode Island from Rhode Island Solid Waste Management
Corporation ("RISWMC"). The lease expires in 2020 and can be
extended for an additional 10 years. The lease requires
Providence Power to pay a royalty equal to 15% of net revenues,
as defined, for the first 15 years. For subsequent years, the
royalty is 15% of net revenues for each month in which the
average daily kilowatt hour production is less than 180,000 and
18% of net revenues for each month in which the average daily
kilowatt hour production exceeds 180,000. At the time of the
acquisition of the Providence Project, Providence Power made a
royalty prepayment to RISWMC of $925,000. For the year ended
December 31, 1996, royalty expense relating to the RISWMC lease
amounted to $588,456.
Providence Power subleases the Central Landfill to Central
Gas Limited Partnership ("Gasco"). Gasco operates and maintains
the landfill gas collection system and supplies landfill gas to
the Providence Project. The sublease agreement is effective
through December 31, 2010 and provides for the following:
1. Sublease Income - Gasco is to pay Providence Power an
annual amount equal to the product of $30,000 times the assumed
output capacity of each engine generator set in megawatts
-F12-
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
installed and operating by the joint venture. Income recorded
under the sublease amounted to $261,375 for the eight and one
half months ended December 31, 1996.
2. Fuel Expense - Providence Power agreed to purchase all the
landfill gas produced by Gasco and pay on a monthly basis $.01183
per kilowatt hour for the first 4,000,000 kilowatt hours, $.005
per kilowatt hour for kilowatt hours in excess of 4,000,000 and
$.05 per million BTU's of excess landfill gas. The price is
adjusted annually for changes in the Consumer Price Index, as
defined. Purchases from Gasco for the eight and one half months
ended December 31, 1996, amounted to $555,447.
9. Transactions With Managing Shareholder and Affiliates
The Trust also pays to the managing shareholder a
distribution and offering fee up to 6% of each capital
contribution made to the Trust. This fee is
intended to cover legal, accounting, consulting, filing,
printing, distribution, selling and closing costs for the
offering of the Trust. For the period ended December 31, 1996
and 1995, the Trust paid fees for these services to the
managing shareholder of $1,892,959 and $954,342, respectively.
These fees are recorded as a reduction in the shareholders'
capital contribution.
The Trust pays to the managing shareholder an investment fee
up to 2% of each capital contribution made to the Trust. The fee
is payable to the managing shareholder for its services in
investigating and evaluating investment opportunities and
effecting transactions for investing the capital of the Trust.
For the period ended December 31, 1996 and 1995, the Trust paid
investment fees to the managing shareholder of $627,561 and
$304,697, respectively.
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 3% of the
net asset value of the Trust payable monthly upon the closing of
the Trust.
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 each year
an amount equal to 14% 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 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.
Where permitted, in the event the managing shareholder or an
affiliate performs brokering services in respect of an investment
acquisition or disposition opportunity for the Trust, the
managing shareholder or such affiliate may charge the Trust a
brokerage fee. Such fee may not exceed 2% of the gross proceeds
of any such acquisition or disposition. No such fees have been
paid through December 31, 1996.
The managing shareholder purchased one share of the Trust
for $83,000. Through December 31, 1996, commissions and
placement fees of $172,674 were earned
by Ridgewood Securities Corporation, an affiliate of the managing
shareholder.
-F13-
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
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 Trust's power generation
projects. Ridgewood Management charges the projects 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
amount invested in projects managed by Ridgewood Management.
During the year ended December 31, 1996, Ridgewood Management
charged Providence Power $337,228 for overhead items allocated in
proportion to the amount invested in projects managed, and
charged Providence Power for all of the remaining direct
operating and non-operating expenses incurred during the period.
-F14-
EXHIBIT 3C
AMENDMENT NO. 1
TO
AMENDED AND RESTATED DECLARATION OF TRUST
OF
RIDGEWOOD ELECTRIC POWER TRUST IV
This AMENDMENT NO. 1 (the "Amendment") to the Amended
and Restated Declaration of Trust, dated as of August 31,
1995, of Ridgewood Electric Power Trust IV, a Delaware
business trust (the "Trust"), is made by Ridgewood Energy
Holding Corporation, a Delaware corporation which is the
Corporate Trustee of the Trust (the "Corporate Trustee"), as
of October 2, 1996.
RECITALS
The Corporate Trustee has entered into the Amended and
Restated Declaration of Trust, dated as of August 31, 1995
(the "Prior Declaration") for the benefit of the persons
admitted as Investors under the terms of the Prior
Declaration. Capitalized terms not defined in this
Amendment shall have the meanings assigned to them by the
Prior Declaration. The Prior Declaration, as modified by
this Amendment, is referred to as the "Declaration."
The Managing Shareholder has proposed to the Investors
that the Trust withdraw its election to be a business
development company under the 1940 Act and has submitted
this Amendment to authorize that withdrawal. The Managing
Shareholder also proposed that after the withdrawal of the
election the Trust continue to comply with all requirements
of the 1940 Act applicable to business development
companies, except for the prohibitions on transactions with
investment programs sponsored by the Managing Shareholder,
which would be governed by the provisions of this Amendment.
This Amendment was submitted to the Investors for their
consent on September 9, 1996 and the consents were tabulated
on October 2, 1996, at which time the Trust determined that
this Amendment had received the consent of the Investors
required under Sections 15.8(b) and 15.2(b) of the Prior
Declaration.
NOW THEREFORE, pursuant to the proposal of the Managing
Shareholder and the consent of a Majority of the Investors,
the Corporate Trustee adopts this Amendment to the Prior
Declaration as follows:
A. Authorization to Withdraw Business Development
Company Election.
The Prior Declaration is amended by adding the
following Section 1.10 after the existing Section 1.9:
1.10. Withdrawal of Business Development
Company Election. On and after the date of the
Amendment adopting this Section 1.10, the Trust is
authorized, empowered and directed to withdraw its
prior election to operate as a business
development company under the 1940 Act, effective
upon the filing of a notice of withdrawal with the
Securities and Exchange Commission.
B. Authorization to Enter into Transactions with other
Ridgewood Programs.
Section 1.8(i) of the Prior Declaration (empowering the
Trust to do business as a business development company) is
amended by replacing it in its entirety with the following:
(i) To engage in Ridgewood Program
Transactions, subject to the requirements of
Section 12.5(c)(iv).
Article II of the Prior Declaration is amended by
adding the following definition:
"Ridgewood Program Transaction" -- A
"Ridgewood Program Transaction" is any transaction
with either (a) an investment program sponsored by
the Managing Shareholder or an affiliate of the
Managing Shareholder (a "Ridgewood Program") or
(b) an entity controlled by a Ridgewood Program or
Programs or an entity in which a Ridgewood Program
has invested, that if the Trust were a business
development company would be prohibited for the
Trust or entities in which the Trust invests by
Sections 57(a) or 57(d) of the 1940 Act or rules
thereunder, as in effect from time to time.
The Prior Declaration is amended by adding the
following Section 12.5(c)(iv) after the existing Section
12.5(c)(iii):
(iv) Any Ridgewood Program Transaction.
C. Covenant to Continue Compliance with Other Business
Development Company Requirements.
The Prior Declaration is amended by adding the
following Section 9.7 after the existing Section 9.6:
9.7. Compliance with Certain Business
Development Company Requirements. Except as
provided in this Section 9.7, the Trust shall
comply with each provision of the 1940 Act
applicable to business development companies and
the rules thereunder, all as in effect from time
to time, as if the Trust continued to be a
business development company.
(a) Notwithstanding the foregoing, the
Trust in entering into Ridgewood Program
Transactions shall not be required to comply with
any provision of Sections 57(a)-(e) of the 1940
Act, or any other provision of the 1940 Act or
rule or order thereunder (other than Sections
57(k) and (l)) that would restrict the Trust from
entering into Ridgewood Program Transactions.
(b) The Trust shall not be required to
prepare and file with the Securities and Exchange
Commission or any other regulatory or self-
regulatory agency any report, certification,
finding or other document that would otherwise be
required under the 1940 Act, and shall not be
required to comply with Section 54 of the 1940
Act. Notwithstanding the foregoing, the Trust
shall maintain the books and records required of
business development companies under that Act.
(c) In the event that any or all of the
provisions of the 1940 Act applicable to business
development companies are modified or repealed,
such modification or repeal shall apply to the
Trust's obligations under this Section 9.7
concurrently. If any modification to the 1940 Act
would create multiple classes of business
development company or would otherwise create a
choice among differing regulatory requirements,
the Board shall determine which class or set of
regulatory requirements shall apply to the Trust.
(d) References in this Declaration to
rights, duties, obligations or other matters
prescribed by the 1940 Act shall mean rights,
duties, obligations or other matters arising under
this Section 9.7, to the extent it requires the
Trust to comply with the 1940 Act or rules
thereunder.
D. Conforming Changes to the Declaration
Sections 1.2(c) (authorizing the business development
company election) and 12.4(h) (empowering the Managing
Shareholder to take actions to maintain business development
company status) of the Prior Declaration are repealed:
E. Construction of Amendment.
The Managing Shareholder has power to construe this
Amendment and the effects of the withdrawal of the business
development company election and to act upon any such
construction. Its construction of those matters and any
action taken pursuant thereto by the Trust or a Managing
Person in good faith shall be final and conclusive.
IN WITNESS WHEREOF, the Corporate Trustee has executed
this Amendment as of the second day of October, 1996.
RIDGEWOOD ENERGY HOLDING
CORPORATION
By/s/ Robert E. Swanson
Robert E. Swanson, President
EXHIBIT 10.F.
MANAGEMENT AGREEMENT
AGREEMENT made as of the 3rd day of January, 1995 by
and
between RIDGEWOOD ELECTRIC POWER TRUST IV, a Delaware business
trust (the "Trust"), and Ridgewood Power Corporation, a
Delaware corporation (hereinafter referred to as the
"Management Company").
W I T N E S S E T H:
WHEREAS, the Trust is a business trust organized under
The Delaware Business Trust Act, as amended, and is engaged in
business as a business development company under the
Investment Company Act of 1940, as amended (hereinafter
referred to as the "Investment Company Act"); and
WHEREAS, the Management Company is the managing
shareholder of the Trust and will engage principally in
rendering management, administrative and investment advisory
services to the Trust and will register to become an
investment adviser under the Investment Advisers Act of 1940,
as amended; and
WHEREAS, the Trust desires to retain the Management
Company to render management, administrative and certain
investment advisory services to the Trust in the manner and on
the terms hereinafter set forth; and
WHEREAS, the Management Company is willing to provide
management, administrative and investment advisory services to
the Trust on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and
the covenants hereinafter contained, the Trust and the
Management Company hereby agree as follows:
ARTICLE I
Duties of the Management Company
The Trust hereby employs the Management Company to
furnish, or arrange for affiliates of the Management Company
to furnish, the management, administrative and investment
advisory services described below, subject to the general
supervision and review of the Board of the Trust for the
period and on the terms and conditions set forth in this
Agreement. The "Board" consists of the Management Company and
two Independent Trustees appointed pursuant to the terms and
conditions of the Declaration of Trust ("the Declaration") for
the Trust dated as of January 3, 1995. The Management Company
hereby accepts such employment and agrees during such period,
at its own expense, to render, or arrange for the rendering
of, such services and to assume the obligations herein set
forth for the compensation provided for herein.
(a) Management Services. The Management Company shall
perform (or arrange for the performance of) the management
and administrative services necessary for the operation of the
Trust, including providing managerial assistance to portfolio
companies of the Trust and such other services related to
investments in non-utility generating facilities which sell
electric and/or thermal power and in other non-utility
facilities which provide power- related products or services,
as shall be necessary for the operation of the Trust. The
Management Company shall also perform services related to
administering the accounts and handling relations with all
holders of beneficial interests in the Trust. The Management
Company shall provide the Trust with office space, equipment
and facilities and such other services as the Management
Company shall from time to time determine to be necessary or
useful to perform its obligations under this Agreement. The
Management Company shall also, on behalf of the Trust, conduct
relations with custodians, depositories, transfer agents,
other shareholder service agents, accountants, attorneys,
underwriters, brokers and dealers, corporate fiduciaries,
insurers, banks and such other persons in any such other
capacity deemed to be necessary or desirable. The Management
Company shall report to the Board as to its performance of
obligations hereunder and shall furnish advice and
recommendations with respect to such other aspects of the
business and affairs of the Trust as the Management Company
shall determine to be desirable.
(b) Investment Advisory Services. Pursuant to the
Declaration, the Management Company in its capacity as the
managing shareholder of the Trust is responsible for providing
investment advisory services in connection with the Trust's
power investments and in connection with the money market
securities or other non-power investments held by the Trust
(such investments being referred to herein as the
"Investments"). The Management Company shall also provide the
Trust with such investment research, advice and supervision as
the latter may from time to time consider necessary for the
proper supervision of the Investments, and shall advise the
Board of the investment program for the Investments and shall
determine from time to time which Investments shall be
purchased, sold or exchanged and what portion of the Trust's
assets shall be held in the various money market securities or
cash, subject always to any restrictions of the Declaration,
as amended from time to time, the provisions of the Investment
Company Act and the Trust's investment objectives, investment
policies and investment restrictions as the same are set forth
in the reports filed by the Trust under the Securities
Exchange Act of 1934, as amended. The Management Company
shall also make determinations with respect to the manner in
which voting rights, rights to consent to corporate action and
any other rights pertaining to the Trust's Investments shall
be exercised. The Management Company shall take, on behalf of
the Trust, all actions which it deems necessary to implement
its investment policies. Subject to the provisions of the
Investment Company Act and other applicable provisions of law,
the Management Company may select brokers or dealers with
which it or the Trust is affiliated to effect the purchase or
sale of Investments. The Management Company, in its sole
discretion, may engage professionals, consultants and other
persons whose expertise or qualifications may assist the
Management Company or the Trust in connection with the Trust's
business and, if such persons are not affiliated with the
Management Company, may treat the costs and expenses so
incurred as a Trust expense.
ARTICLE II
Allocation of Charges and Expenses
(a) The Management Company. The Management Company
assumes and shall pay the expense for maintaining the staff
and personnel necessary to perform its obligations under this
Agreement and shall at its own expense, provide the Trust with
office space, facilities, equipment and personnel necessary to
carry out its obligations hereunder. The Management Company
will bear the administrative and service expenses associated
with the management services it is to provide for the
Investments of the Trust pursuant to the terms of this
Agreement.
(b) The Trust. The Trust assumes and shall pay or
cause to be paid all other expenses of the Trust not expressly
assumed by the Management Company, including, without
limitation: expenses of portfolio transactions, valuation
costs (including the quarterly calculation of net asset
value), expenses of printing reports and other documents
distributed to the Securities and Exchange Commission and
holders of beneficial interests, Securities and Exchange
Commission and other regulatory fees, interest, taxes, fees
and actual out-of-pocket expenses of the Independent Trustees,
fees for legal, auditing and consulting services, litigation
expenses, costs of printing proxies and other expenses related
to meetings of holders of beneficial interest, postage and
other expenses properly payable by the Trust.
ARTICLE III
Compensation of the Management Company
(a) Management Fee. For the services rendered, the
facilities furnished and the expenses assumed by the
Management Company, the Trust shall pay to the Management
Company compensation which shall be at the annual rate of 3%
of the net asset value of the Trust determined in the manner
set forth in the Confidential Memorandum ("Memorandum") of the
Trust dated January 3, 1995. Such fee is payable monthly in
advance. To the extent that the Trust does not have cash or
readily marketable securities in an amount sufficient to pay
the management fee, the Trust will accrue such fee as a
liability and pay the accrued fee at such time as it has
sufficient cash available to it. Interest on the amount of
the accrued fee will be assessed at the annual rate of ten
percent (10%).
(b) Other Fees. In connection with the offering of
shares of beneficial interest in the Trust ("Shares"), the
Management Company is entitled to receive an organizational,
distribution and offering fee of 6% of each capital
contribution to the Trust to defray expenses incurred in the
offer and sale of the shares. In connection with the initial
management of the capital contributions, the Management
Company is also entitled to receive an investment fee of 2% of
each capital contribution to the Trust for services in
investigating and evaluating investment opportunities. If the
Management Company or an affiliate performs brokerage services
in connection with the acquisition or disposition of Trust
investments in the independent power industry (other than the
Trust's participation in or investments made through any
entity organized to develop multiple independent power
projects), the entity providing those services will be
entitled to a brokerage fee of up to 2% of the gross proceeds
of the acquisition or disposition. Ridgewood Securities
Corporation, an affiliate of the Management Company, is acting
as placement agent for the offering of Shares and is entitled
to a 1% placement fee from each capital contribution and, to
the extent it effects the sales of Shares as a broker-dealer,
to an 8% selling commission on each such Share. The Trust
will reimburse Ridgewood Energy Holding Corporation, the
corporate trustee of the Trust, for all actual and necessary
expenses paid or incurred in connection with the operation of
the Trust, including the Trust's allocable share of the
corporate trustee's overhead. All these fees and expenses are
to be paid pursuant to the provisions of the Declaration.
(c) Expense Limitations. In the event the operating
expenses of the Trust, including amounts payable to the
Management Company pursuant to subsection (a) hereof, for any
fiscal year ending on a date on which this Agreement is in
effect exceed any expense limitations applicable to the Trust
imposed by applicable state securities laws or regulations
thereunder, as such limitations may be raised or lowered from
time to time, the Management Company shall reduce its
management fee hereunder by the extent of such excess and, if
required pursuant to any such laws or regulations, will
reimburse the Trust in the amount of such excess; provided,
however, to the extent permitted by law, there shall be
excluded from such expenses the amount of any interest, taxes,
portfolio transaction costs and extraordinary expenses
(including but not limited to legal claims and liabilities and
litigation costs and any indemnification related thereto) paid
or payable by the Trust. Whenever the expenses of the Trust
exceed a pro rata portion of the applicable annual expense
limitations, the estimated amount of reimbursement under such
limitations shall be applicable as an offset against the
monthly payment of the fee due to the Management Company.
Should two or more such expense limitations be applicable as
at the end of the last business day of the month, that expense
limitation which results in the largest reduction in the
Management Company's management fee shall be applicable.
ARTICLE IV
Limitation of Liability of the Management Company
(a) As more fully described in Article 3 of the
Declaration, the Management Company shall not be liable for
any loss suffered by the Trust that arises out of any action
or inaction of the Trust, any Trust officers, agents or
affiliates, the Management Company, the Trustees, or any
affiliate of the Management Company or a Trustee, or any
director, officer or agent of those entities (collectively,
"Managing Persons") or out of any error of judgment or mistake
of law, if the Managing Person responsible, in good faith,
determined that such course of action was in the Trust's best
interest and such course of conduct was within the scope of
this Management Agreement or the Declaration of Trust and did
not constitute negligence or misconduct of the Managing
Persons involved.
(b) Indemnification. The provisions of Section 3.7 of
the Declaration are hereby incorporated by reference into this
Management Agreement and are expressly approved by the Board
of the Trust. The Management Company shall be entitled to
indemnification hereunder in each instance where the "Managing
Shareholder" is entitled to indemnification under said Section
3.7.
ARTICLE V
Activities of the Management Company
The services of the Management Company of the Trust to
be performed under this Management Agreement are not deemed to
be exclusive, the Management Company being free to render
services to others. It is understood that Trustees or
affiliates of the Trust (other than the Independent Trustees)
and holders of beneficial interest of the Trust are or may
become interested in the Management Company as directors,
officers, employees or shareholders of the Management Company
or otherwise and that the Management Company or its directors,
officers, employees or shareholders are or may become
interested in the Trust as Trustees (other than as an
Independent Trustee), holders of beneficial interests or
otherwise.
ARTICLE VI
Duration and Termination of this Contract
This Agreement shall become effective as of the date
first above written and shall remain in force until the second
anniversary thereof, and thereafter, but only so long as such
continuance is specifically approved at least annually by (i)
the Board of the Trust or the vote of a majority of the
outstanding voting securities of the Trust and (ii) a majority
of those Trustees of the Trust who are not parties to this
Agreement or interested persons of any such party, by a vote
cast in person at a meeting called for the purpose of voting
on such approval.
This Agreement may be terminated at any time, without
the payment of any penalty, by the Board of the Trust or by
vote of a majority of the outstanding voting securities of the
Trust, or by the Management Company, on sixty days' written
notice to the other party. This Agreement shall automatically
terminate in the event of its assignment.
ARTICLE VII
Amendments of this Agreement
This Agreement may be amended by the parties only if
such amendment is specifically approved by (i) the Board of
the Trust or the vote of a majority of the holders of
outstanding voting securities of the Trust and (ii) a majority
of those Trustees of the Trust who are not parties to this
Agreement or interested persons of any such party, by a vote
cast in person at a meeting called for the purpose of voting
on such approval.
ARTICLE VIII
Definitions of Certain Terms
The terms "vote of a majority of the outstanding voting
securities," "assignment," "affiliated person" and "interested
person," when used in this Agreement, shall have the
respective meanings specified in the Investment Company Act
and the rules thereunder.
ARTICLE IX
Governing Law
This Agreement shall be construed in accordance with
the laws of the State of New York and the applicable
provisions of the Investment Company Act. To the extent that
the applicable laws of the State of New York, or any of the
provisions herein, conflict with the applicable provisions of
the Investment Company Act, the latter shall control.
IN WITNESS WHEREOF, the parties hereto have executed
and delivered this Agreement as of the date first above
written.
RIDGEWOOD ELECTRIC POWER
TRUST IV
By: /s/ Robert E. Swanson
Robert E. Swanson
President
RIDGEWOOD POWER CORPORATION
By: /s/ Bruno Pettoni
Bruno Pettoni
Senior Vice President
EXHIBIT 10G.
OPERATION AGREEMENT
This Operation Agreement (the "Agreement") is made as
of the 16th day of April, 1996, by and among
Ridgewood/Providence Power Partners,, L.P., a Delaware
limited partnership ("Owner"), Ridgewood/Providence
Corporation, a Delaware corporation ("General Partner"), and
Ridgewood Power Management Corporation, a Delaware
corporation ("RPMC").
RECITALS
Some of the facts and circumstances surrounding this
Agreement are the following:
The Owner owns an independent power project. The
General Partner is responsible for the operation and
management of the Owner's project. The Owner and the
General Partner are beneficially owned by one or more
business trusts organized and managed by Ridgewood Power
Corporation.
Ridgewood Power Corporation ("Ridgewood Power") has
caused RPMC to be created in order to provide centralized
operation, management and other services for projects
beneficially owned by the business trusts, and has caused
the parties to enter into this Agreement. The project or
projects for which RPMC will provide services (the
"Projects") are listed on Exhibit A to this Agreement.
Section 1. Services of RPMC.
1.1. General. The Owner employs RPMC to provide the
services described below and RPMC agrees to do so.
RPMC shall provide operating personnel for the
Projects and will be responsible for all day-to-day
operations of the Projects. The services provided
by RPMC include, without limitation, management,
purchasing, engineering, planning, maintenance,
administrative, legal, financial, and regulatory
services, as well as any other services Owner
(through the General Partner) may need or request.
1.2. Responsibility. RPMC shall act on behalf of and
under the general direction of the General
Partner. Although the General Partner is
empowered to specify the responsibilities of RPMC,
to oversee RPMC and to direct RPMC to take action,
the General Partner shall not specify how RPMC is
to perform its obligations. RPMC is an
independent contractor and not an agent of the
General Partner or the Owner. Ridgewood Power is
authorized to act on behalf of the General Partner
in supervising RPMC.
Section 2. Reimbursement of RPMC.
RPMC shall charge Owner for all direct costs incurred
in connection with the Projects and shall also charge Owner
an allocable amount of RPMC's indirect costs and overhead as
described below.
2.1. Direct Costs. Costs and expenses paid by RPMC that
relate to a single Project shall be allocated to
that Project.
2.2. Multiple Project Costs and Other Indirect Costs.
Costs and expenses paid by RPMC that relate to more
than one Project or to Projects and to facilities
owned by other persons shall be allocated among the
Projects and facilities affected on the basis of
time records, comparative value of the work to each
Project or facility, size of each Project or
facility, number of employees affected, asset value
of Project or facility, investment in each Project
or facility or another reasonable basis approved
by RPMC and the General Partner. A share of
overhead and other indirect costs that do not
relate to identifiable Projects shall be allocated
to Owner on the basis of investment in each
Project or another reasonable basis approved by
RPMC and the General Partner. All allocations of
costs under this Section 2.2 shall be made
consistently with generally accepted accounting
principles, consistently applied.
2.3. Payment. RPMC shall be reimbursed by Owner for all
costs incurred by it and allocable to Projects
under Sections 2.1 and 2.2. RPMC may operate or
participate in a centralized cash management system
with Owner, Ridgewood Power and other entities
affiliated with Ridgewood Power and payments may be
made through that system without the need for Owner
to reimburse RPMC directly. If payments are not
made through that system, Owner shall reimburse
RPMC at least monthly and not later than 15 days
after receipt of a statement from RPMC.
2.4. Common Expenses with Ridgewood Power. If Ridgewood
Power provides space, facilities, personnel, goods
or services to RPMC that are used by RPMC in
performing its responsibilities under this
Agreement, RPMC shall not charge or allocate
charges to Projects or to other facilities that
RPMC manages in excess of the amounts, if any,
charged to RPMC by Ridgewood Power for those
items.
2.5. General Limitation. RPMC shall not be
reimbursed for any amount in excess of the actual
or properly allocated cost of the goods and
services it provides to the Projects.
Section 3. Indemnification.
3.1. Indemnification of Owner. RPMC shall indemnify and
hold Owner harmless from and against any claim,
liability, damage, expense, legal action, lien,
loss or other obligation arising out of the actions
or omissions of RPMC taken under this Agreement or
in connection with this Agreement or the Projects.
RPMC shall indemnify the partners of the Owner and
their directors, officers, employees, agents,
affiliates, successors and assigns on the same
basis as the Owner.
3.2. Waivers of Subrogation and Contribution. RPMC
waives any right of subrogation or contribution
against the Owner or other persons indemnified
under Section 3.1 in connection with any liability
or obligation satisfied by RPMC and relating to
RPMC's responsibilities under this Agreement.
Section 4. Term of Agreement.
This Agreement may be terminated at any time without
penalty by either the Owner or RPMC on 60 days' prior
written notice to the other parties. This Agreement may
also be terminated by action of any trust or investment
program that is a beneficial owner of equity securities of
the Owner if (a) the managing shareholder, general partner
or board of directors of the trust or program so decides or
(b) a majority in interest of the holders of equity
securities of the trust or program (excluding any management
share or other special equity security owned solely by a
managing shareholder or general partner) vote to terminate
this Agreement. In that case, this Agreement terminates 60
days after all parties are given written notice of the
decision to terminate.
Section 5. Other Matters.
5.1. Non-exclusivity. RPMC may perform services for
other persons affiliated or not affiliated with
Ridgewood Power. Owner and the General Partner
waive any objection to (a) the fact that now or in
the future Robert E. Swanson and other persons who
are directors, officers, employees or affiliates of
Ridgewood Power may have similar positions with
RPMC and may have a financial interest in RPMC and
(b) the fact that RPMC and its directors, officers
and employees may be employed by or have financial
interests in Ridgewood Power and its affiliates.
5.2. Assignment. This Agreement may not be assigned by
either party. Notwithstanding the foregoing, in
the event of an unapproved assignment, the
assignee shall also be responsible for performance
of assignor's responsibilities and both assignor
and assignee shall be liable to the other parties
for breach of this covenant.
5.3. Amendments. This Agreement can be amended only by
a writing signed by all parties. In addition, no
amendment that materially increases the obligations
of the Owner or the General Partner or that
materially decreases the obligations of RPMC shall
become effective until 45 days after notice of the
amendment together with the text thereof has been
given to all holders of equity securities of the
trusts or other investment programs that
beneficially own the securities of the Owner and
the General Partner.
5.4. Governing Law. This Agreement is governed by the
laws of New Jersey applying to contracts having
their most significant contacts with New Jersey.
5.5. Entire Agreement. This Agreement is the entire
agreement among the parties as to its subject
matter and supersedes all prior agreements among
them.
5.6. Captions and Counterparts. The captions of this
Agreement are for reference only and shall not be
used in construing its meaning. This Agreement may
be executed in counterparts, each of which shall be
an original and all of which shall be considered
to be a single document.
5.7. Jurisdiction and Venue. ALL LAWSUITS IN CONNECTION
WITH THIS AGREEMENT SHALL BE BROUGHT ONLY IN THE
STATE OR FEDERAL COURTS SITTING IN OR FOR THE COUNTY
OF BERGEN, STATE OF NEW JERSEY. THE PARTIES AGREE
THAT THOSE COURTS SHALL HAVE PERSONAL JURISDICTION
AND AGREE TO VENUE IN THOSE COURTS. PROCESS MAY BE
SERVED IN ANY MANNER PERMITTED BY THE RULES OF THE
COURT DESCRIBED IN THIS SECTION IN WHICH AN ACTION
IS BROUGHT.
IN WITNESS WHEREOF, the parties have signed this
Agreement as of the date first stated above.
RIDGEWOOD PROVIDENCE POWER PARTNERS, L.P., Owner
By: RIDGEWOOD/PROVIDENCE CORPORATION, General Partner
By:/s/ Thomas R. Brown
Name: Thomas R. Brown
Title: Senior Vice President
RIDGEWOOD/PROVIDENCE CORPORATION, General Partner
By: /s/ Thomas R. Brown
Name: Thomas R. Brown
Title: Senior Vice President
RIDGEWOOD POWER MANAGEMENT CORPORATION
By: /s/ Thomas R. Brown
Name: Thomas R. Brown
Title: Senior Vice President
EXHIBIT A
PROJECTS SUBJECT TO AGREEMENT
Providence Project at the Rhode Island State Central
Landfill
Exhibit 21 - Subsidiaries of the Registrant
Subsidiary corporations serving as general partners or managers of
limited liability entities are listed with those entities.
Name of Subsidiary Type of entity Jurisdiction of
organization
Ridgewood/Providence
Power Partners, L.P. limited partnership Delaware
Ridgewood/Providence
Corporation corporation Delaware
Ridgewood/Maine Hydro
Partners, L.P. limited partnership Delaware*
Ridgewood Maine
Corporation corporation Delaware*
*50% owned by Registrant
Ridgewood Pump Services
Partners IV, L.P. limited partnership Delaware
Ridgewood Pump Services
IV Corporation corporation Delaware
EXHIBIT 24
POWERS OF ATTORNEY
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the
undersigned, John C. Belknap, appoints Robert
E. Swanson and Martin V. Quinn, and each of them,
as his true and lawful attorneys-in-fact with full power
to act and do all things necessary, advisable or appropriate,
in his or their sole discretion, to execute on his behalf
as an Independent Trustee of Ridgewood Electric Power
Trust I and Ridgewood Electric Power Trust IV the Annual
Reports on Form 10-K for the year ended December 31, 1996
for each of the above-named trusts, and any amendments
thereto.
IN WITNESS WHEREOF, the undersigned has executed this
Power of Attorney this 1st day of April, 1997.
/s/John C. Belknap
John C. Belknap
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the Registrant's audited interim financial
statements for the year ended December 31, 1996 and is
qualified in its entirety by reference to those financial
statements.
</LEGEND>
<CIK> 0000930364
<NAME> RIDGEWOOD ELECTRIC POWER TRUST IV
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 22,685,829
<SECURITIES> 6,806,511<F1>
<RECEIVABLES> 1,065,181
<ALLOWANCES> 0
<INVENTORY> 383,810
<CURRENT-ASSETS> 24,783,424
<PP&E> 11,889,451
<DEPRECIATION> (357,109)
<TOTAL-ASSETS> 52,274,481
<CURRENT-LIABILITIES> 1,199,354
<BONDS> 5,440,260
0
0
<COMMON> 0
<OTHER-SE> 38,746,199<F2>
<TOTAL-LIABILITY-AND-EQUITY> 52,274,481
<SALES> 4,087,722
<TOTAL-REVENUES> 4,349,097
<CGS> 2,991,835
<TOTAL-COSTS> 2,991,835
<OTHER-EXPENSES> 2,283,089<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 394,665
<INCOME-PRETAX> 72,769
<INCOME-TAX> 0
<INCOME-CONTINUING> 72,769
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 72,769
<EPS-PRIMARY> 153
<EPS-DILUTED> 153
<FN>
<F1>Investment in power project partnership accounted
for on equity basis.
<F2>Represents Investor Shares of beneficial interest in
Trust with capital accounts of $38,764,199 less managing
shareholder's accumulated deficit of $17,600.
<F3>Includes minority interest in earnings of project.
</FN>
</TABLE>
EXHIBIT 99
LISTING OF STATUTORY PROVISIONS THAT THE TRUST AGREES TO COMPLY
WITH
The Trust has agreed with the Investors to continue to
comply with the following sections of the 1940 Act:
Section 55 (specifying types of assets in which the Trust
may invest)
Section 56 (requiring majority of directors to be persons
who are not interested persons) Section 57 (restricting
transactions with related persons) except for Ridgewood Program
Transactions
Section 59 (to the extent applying Sections 1, 2, 3, 4, 5,
6, 9, 10(f), 15(a), (c) and (f), 16(b), 17(f)-(j), 19(a), 20(b),
32(a) and (c), 34, 35(a)-(c), 36, 38(a) and (c), 39, 47, 50, 51,
52 and 53, but excepting the provisions described below)
Section 60 (applying certain Section 12 restrictions on
investment companies)
Section 61 (applying Section 18 limitations on capital
structure)
Section 62 (applying certain Section 21 limitations on loans
to certain affiliates)
Section 63 (applying certain Section 23 limitations on
distribution and repurchase of the Trust's securities)
Section 64 (applying Section 31 requirements as to books and
records and authorizing the Commission to prescribe risk
statements)
Section 65 (applying Section 48 provisions)
The Trust has not agreed with the Investors to comply with the
following statutory provisions applying to business investment
companies:
Section 33 (requiring filing of legal documents in
derivative lawsuits with the Commission)
Section 35(d) (allowing the Commission to challenge names of
business development companies as being misleading)
Section 36 (to the extent empowering the Commission to bring
actions for breach of fiduciary duty, but the Trust covenants
that Investors shall continue to have the right to bring an
action for such breach)
Section 37 (making larceny or embezzlement of Trust funds a
federal crime, although such actions will remain crimes under
other federal and state laws. The Trust cannot create federal
jurisdiction over a crime by agreement with the Investors.)
Section 38(b) (governing certain filings with the
Commission)
Section 40 (procedures for orders and proceedings)
Section 41 (hearing procedures)
Section 42 (power of Commission to investigate and bring
legal actions)
Section 43 (procedures for court appeals from Commission)
Section 44 (federal court jurisdiction)
Section 45 (public status of documents filed with
Commission)
Section 46 (annual reports of Commission)
Section 49 (criminal penalties)
