UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission File Number 0-25430
RIDGEWOOD ELECTRIC POWER TRUST IV
(Exact name of registrant as specified in its charter.)
Delaware, U.S.A. 22-3324608
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
947 Linwood Avenue, Ridgewood, New Jersey 07450-2939
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201)
447-9000
Indicate by check mark whether the registrant(1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
YES [X] NO [ ]
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST IV
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
September 30, December 31,
1997 1996
<S> <C> <C>
Assets
Cash and cash
equivalents $ 12,220,265 $ 22,685,829
Maintenance reserve
fund --- 394,070
Accounts receivable,
trade 1,125,017 1,065,181
Other receivables 57,280 109,999
Due from affiliates 71,189 ---
Spare parts inventory 383,810 383,810
Prepaid royalty
expense --- 144,535
Prepaid other 22,343 ---
Total current
assets 13,879,904 24,783,424
Investments:
Investment in
hydroelectric
projects 6,454,555 6,806,511
Investment in
biomass
power projects 7,097,114 0
Electric power
equipment held
for resale 461,582 455,182
Deferred due
diligence costs 515,061 245,828
Plant and
equipment: 14,341,670 11,889,451
Less-accumulated
depreciation (717,390) (357,109)
Electric power
sales contract 8,266,096 8,266,096
Less-accumulated
amortization (803,648) (390,343)
Debt reserve fund 597,365 575,441
Total assets $ 50,092,309 $ 52,274,481
Liabilities and
Shareholders'
Equity
Current maturities
of long-term debt $ 538,191 $ 538,191
Accounts payable
and accrued
expenses 407,947 569,106
Due to affiliates 354,984 92,057
Total current
liabilities 1,301,122 1,199,354
Long-term debt,
less current
portion 5,037,916 5,440,260
Minority interest in
the Providence
Project 6,611,577 6,888,268
Commitments and
contingencies
Shareholders' equity
(476.8 shares
issued and out-
standing at September 30,
1997 and December 31,
1996) 36,448,660 38,829,963
Retained earnings/
(deficit) 693,034 (83,364)
Total shareholders'
equity 37,141,694 38,746,599
Total liabilities
and shareholders'
equity $ 50,092,309 $ 52,274,481
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
RIDGEWOOD ELECTRIC POWER TRUST IV
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS AND QUARTERS
ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
(Unaudited)
<CAPTION>
Nine months Quarter Nine months Quarter
ended ended ended ended
September 30, September 30, September 30, September 30,
1997 1997 1996 1996
<S> <C> <C> <C> <C>
Net sales $ 4,850,561 $ 1,605,288 $ 2,429,141 $ 1,415,409
Sublease income 276,750 92,250 169,125 92,250
Total revenues 5,127,311 1,697,538 2,598,266 1,507,659
Cost of sales 3,434,865 1,066,018 1,853,278 1,126,544
Gross profit 1,692,446 631,520 744,988 381,115
General and administrative
expenses 286,784 50,000 151,215 98,653
Management fee 874,720 296,076 480,551 339,641
Investment fee 400 --- 626,561 105,630
Project due diligence costs 15,722 382 62,863 61,477
Other expenses 25,041 9,083 18,246 3,717
Total other
operating expenses 1,202,667 355,541 1,339,436 609,118
Income (loss) from
operations 489,779 275,979 (594,448) (228,003)
Other income (expense):
Interest and
dividend income 755,734 204,809 825,102 314,623
Interest expense (436,794) (135,600) (274,150) (148,511)
Income from
hydroelectric
projects 595,928 (177,771) --- ---
Loss from wood-
burning power
projects (214,213) (214,213) --- ---
Net other income 700,655 (322,775) 550,952 166,112
Income (loss) before
minority interest 1,190,434 (46,796) (43,496) (61,891)
Minority interest in
the earnings of the
Providence Project (414,063) (185,678) (180,633) (59,268)
Net income (loss) $ 776,371 $ (232,474) $ (224,129) $ (121,159)
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
RIDGEWOOD ELECTRIC POWER TRUST IV
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
SEPTEMBER 30, 1996
(Unaudited)
[CAPTION]
Nine months Nine months
ended September 30, ended September 30,
1997 1996
[S] [C] [C]
Cash flows from
operating activities:
Net income (loss) $ 776,371 $ (224,129)
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Depreciation and
amortization 773,586 550,000
Amortization of
prepaid and accrued
royalties- net 144,535 -
Minority interest
in earnings of the
Providence Project 414,063 180,633
Income from
unconsolidated
hydroelectric
projects (595,928) -
Loss from
unconsolidated
biomass
projects 214,213 -
Changes in assets
and liabilities,
net of effects of
Providence Project
purchase:
Decrease (increase)
in maintenance
reserve fund 394,070 (384,587)
Decrease (increase)
in accounts receiv-
able, trade (59,836) (1,116,498)
Decrease (increase)
in prepaid
royalties - (370,412)
Decrease (increase)
other receivables 52,719 (270,336)
Decrease (increase)
in debt service
reserve fund (21,924) (550,000)
Decrease (increase)
in spare parts
inventory - (403,810)
Decrease (increase)
in due from
affiliates (136,639) (150,786)
Increase (decrease)
in accounts payable
and accrued expenses (161,159) 500,279
Increase (decrease)
in due to
affiliates 328,377 2,400
Other-net (22,316) -
Total adjustments 1,323,761 (2,013,117)
Net cash provided
by (used in)
operating
activities 2,100,132 (2,237,246)
Cash used in
investing
activities:
Decrease (increase) in
investment in
hydroelectric
projects 947,844 (210,877)
Investment in
biomass power
projects (7,311,327) -
Purchase of Providence
Project capital
assets - (10,213,620)
Purchase of Providence
Project contract
rights - (8,266,096)
Capital
expenditures (2,452,219) (455,087)
Deferred due
diligence costs (269,233) (7,606)
Purchase of electric
generating
equipment (6,400) (13,837)
Net cash used
in investment
activities (9,091,295) (19,167,123)
Cash provided by
(used in) financing
activities:
Proceeds from
shareholders'
contributions - 31,374,961
Selling commissions
and offering
costs paid - (4,636,468)
Cash distributions
to shareholders (2,381,303) (1,231,574)
Issuance of
long-term debt - 6,310,404
Payments to reduce
long-term debt (402,344) (205,255)
Distribution to
minority interest (690,754) 6,819,137
Net cash provided
by (used in) financing
activities (3,474,401) 38,431,205
Net increase (decrease)
in cash and cash
equivalents (10,465,564) 17,026,836
Cash and cash
equivalents,
beginning of period 22,685,829 12,934,900
Cash and cash
equivalents,
end of period $12,220,265 $29,961,736
[FN]
See Accompanying Notes to Financial Statements
<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 discontinued its offering of shares in March 1995 and
commenced operations in September 1996.
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 ("the 1940 Act"). 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
Interim financial statements
The consolidated financial statements for the periods ended September 30, 1997
and 1996, included herein have been prepared by the Trust without audit
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, these statements reflect all adjustments (consisting
only of normal recurring entries) which are, in the opinion of management,
necessary for a fair statement of the financial results for the interim
periods. Certain information and notes normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Trust believes that the disclosures are adequate to
make the information presented not misleading. These financial statements
should be read in conjunction with the financial statements and the notes
thereto included in the Trust's Annual Report on Form 10-K for the year ended
December 31, 1996 (Form 10-K).
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 BDCs, investments in power generation projects were 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
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
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.
Use of estimates
The preparation of 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 useful lives
of the assets, which is 10 to 20 years. For the period ended September 30,
1997 and September 30, 1996, the Trust recorded depreciation expense of
$360,282 and $550,000, respectively.
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. For the period ended September 30, 1997 and September
30, 1996, the Trust recorded amortization expense of $413,304 and $0,
respectively.
Electric power equipment held for resale
The Trust owns certain used electric power equipment that is stated at cost,
which approximates estimated net realizable 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.
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
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.
3. Acquisitions
The Trust has made the following investments in power generation projects and
electric power equipment:
Nature of Ownership Sept. 30, December 31,
Project Name Ownership Interest 1997 1996
Providence Project Partnerships 64.3% $12,850,000 $12,850,000
Maine Hydro Project Partnerships 50.0% 6,454,555 6,806,511
Indeck Maine Limited Liability
Biomass Companies 50.0% 7,097,114 ---
Project
California Direct
Pumping Project Ownership 100.0% 811,948 697,730
Electric Power Direct
Equipment Ownership 100.0% 461,582 455,182
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.
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
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.
Actual ProForma
For the nine For the nine
months ended months ended
Sept. 30, Sept. 30,
1997 1996
Net sales $4,814,325 $3,841,108
Income from Operations 1,140,266 756,941
Net Income 1,160,416 539,472
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 made
investments and advances of $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 shareholder 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 has 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 in excess of
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
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 is as follows:
Balance Sheet Information at September 30, 1997
Current assets $ 1,196,042 Due to Trust IV $ 43,027
Electric power sales contract 11,910,208 Other current liabilities 326,894
Other non-current assets 853,823 Non-current liabilities 1,004,679
Partners' equity 12,585,473
Total assets $13,960,073 Total liabilities
and equity $13,960,073
Statement of Operations Information for the Nine Months Ended September 30,
1997
Revenue $3,415,684
Operating expenses 1,358,910
Depreciation & Amortization 780,123
Other Income/(Expense) (84,796)
Net income $1,191,855
10. Indeck Maine Biomass Projects
On July 1, 1997, through a subsidiary, the Trust purchased a preferred
membership interest in Indeck Maine Energy, L.L.C. ("Indeck Maine"), which
owns two electric power generating stations fueled by waste wood. The
aggregate purchase price was $7,275,450 and includes transaction costs of
$275,450. Each project has 24.5 megawatts of electrical generating capacity.
The Penobscot project is located in West Enfield, Maine and the Eastport
project is located in Jonesboro, Maine. Indeck Maine had a power sales
contract with the New England Power Pool, which expired on August 31, 1997.
The facilities were shut down in September and were reactivated in November
1997. The facilities are currently selling capacity and energy to Bangor
Hydro-Electric Company, a local utility ("BHC") on a month-to-month basis.
The preferred membership interest entitles the Trust to receive an 18%
cumulative annual return on its $7,000,000 capital contribution to Indeck
Maine from the operating net cash flow from the projects. Trust V also
purchased an identical preferred membership interest in Indeck Maine. After
payments in full to the preferred membership interests, any remaining
operating net cash flow is payable 25% to the Trust and Trust V and 75% to the
other Indeck Maine members.
The Trust's investment in Indeck Maine is accounted for under the equity
method of accounting. The Trust's equity in the loss of Indeck Maine for the
period July 1, 1997 to September 30, 1997 was $214,213.
The Penobscot and Eastport projects are operated by Indeck Operations, Inc.,
an affiliate of the other members of Indeck Maine. The annual operator's fee
is $300,000.
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
Summarized financial information for the Indeck Maine Biomass projects is as
follows:
Balance Sheet Information at September 30, 1997
Current assets $ 1,506,965 Current liabilities $ 631,354
Non-current assets 3,553,978 Non-current liabilities - 0 -
Members' equity 4,429,589
Total assets $ 5,060,943 Total liabilities
and equity $ 5,060,943
Statement of Operations Information for the Period July 1, 1997 to September
30, 1997
Revenue $2,046,803
Operating expenses 2,420,305
Depreciation & Amortization 54,924
$ (428,426)
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 hour up to 3,000 kilowatt-hours per year and $0.01 per equivalent
kilowatt-hour for each additional kilowatt-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. During the nine months ended September 30, 1997 the Trust
invested additional funds of $114,218 in the California Pumping project. At
September 30, 1997, the Trust's total investment in the California Pumping
project was $811,948.
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 September 30, 1997 and December 31, 1996, the cost of such
equipment was $461,582 and $455,182, respectively.
5. Long-term Debt
Following is a summary of long-term debt at September 30, 1997:
Senior secured non-recourse notes payable $5,576,107
Less - current maturity (538,191)
Total long-term debt $5,037,916
The senior secured non-recourse notes are obligations of Providence Power and
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
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
the Providence Project, as defined. No additional interest was due for the
nine months ending September 30, 1997 and 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 September 30, 1997 and December 31, 1996, the cash balance in
these reserve accounts were $597,365 and $969,511, 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
6. Fair Value of Financial Instruments
At September 30, 1997, 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 nine months ended
September 30, 1997 and September 30, 1996, sales revenue under the NEP Power
Purchase Agreement amounted to $4,814,325 and $2,417,188, respectively.
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 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
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
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.
The Indeck Maine projects do not have long-term contracts and attempt to sell
their capacity and output on a short-term basis in the competitive supply
market.
8. Landfill Lease and Sublease
Providence Power leases the Central Landfill, located in Johnston, Rhode
Island from Rhode Island Resource Recovery Corporation ("RIRRC"). 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 of the lease. 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 RIRRC of $925,000. For the nine months ended September
30, 1997 and September 30, 1996, royalty expense relating to the RIRRC lease
amounted to $707,470 and $362,578, respectively.
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 installed and operating by the joint
venture. Income recorded under the sublease amounted to $276,750 and
$169,125, respectively for the nine months ended September 30, 1997 and
September 30, 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 nine months ended September 30, 1997
and September 30, 1996 amounted to $643,276 and $347,654, respectively.
Transactions With Managing Shareholder and Affiliates
The Trust 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 nine months ended
September 30, 1997 and September 30, 1996, the Trust paid fees for these
services to the managing shareholder of $0 and $4,636,468, 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
<PAGE>
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
capital of the Trust. For the periods ended September 30, 1997 and September
30, 1996, the Trust paid investment fees to the managing shareholder of $400
and $626,561, 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. For the nine months ended September 30, 1997 and September 30, 1996,
the Trust paid management fees to the managing shareholder of $874,720 and
$480,551, respectively.
Under the Declaration of Trust, the managing shareholder is entitled to
receive each year 1% of all distributions made by the Trust (other than those
derived from the disposition of Trust property) until the shareholders have
been distributed 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 the proceeds from dispositions of Trust
properties until the shareholders have received cumulative distributions equal
to their original investment ("Payout"). In all cases, after Payout the
managing shareholder is entitled to receive 20% of all remaining distributions
of the Trust.
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 September 30, 1997.
The managing shareholder purchased one share of the Trust for $83,000. For
the nine months ended September 30, 1997 and September 30, 1996, commissions
and placement fees of $200 and $357,643, respectively, were earned by
Ridgewood Securities Corporation, an affiliate of the managing shareholder.
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. For the nine months ended September 30, 1997 and September 30,
1996, Ridgewood Management charged Providence Power $340,222 and $56,676,
respectively, 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.
ITEM II - MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q, like some other statements made by the
Trust from time to time, has forward-looking statements. These statements
discuss business trends and other matters relating to the Trust's future
results and the business climate. In order to make these statements, the
Trust has had to make assumptions as to the future. It has also had to make
estimates in some cases about events that have already happened, and to rely
on data that may be found to be inaccurate at a later time. Because these
forward-looking statements are based on assumptions, estimates and changeable
data, and because any attempt to predict the future is subject to other
errors, what happens to the Trust in the future may be materially different
from the Trust's forward-looking statements here.
The Trust therefore warns readers of this document that they should not rely
on these forward-looking statements without considering all of the things that
could make them inaccurate. The Trust's other filings with the Securities and
Exchange Commission and its Confidential Memorandum discuss many (but not all)
of the risks and uncertainties that might affect these forward-looking
statements.
Some of these are changes in political and economic conditions, federal or
state regulatory structures, government taxation, spending and budgetary
policies, government mandates, demand for electricity and thermal energy, the
ability of customers to pay for energy received, supplies of fuel and prices
of fuels, operational status of plant, mechanical breakdowns, availability of
labor and the willingness of electric utilities to perform existing power
purchase agreements in good faith.
By making these statements now, the Trust is not making any commitment to
revise these forward-looking statements to reflect events that happen after
the date of this document or to reflect unanticipated future events.
Dollar amounts in this discussion are generally rounded to the nearest $1,000.
Nine months ended September 30, 1997 versus nine months ended September 30,
1996
Results of operations
The consolidated financial statements include the accounts of the Trust and
the limited partnerships owning the Providence and California Pumping
Projects. The Trust uses the equity method of accounting for its investments
in the Maine Hydro Projects and the Indeck Maine Biomass Projects, each of
which are owned 50% by the Trust. The Trust's share of the earnings
and cash flow earned by the Maine Hydro Projects is seasonal, peaking in the
second and fourth quarters of the year (when high river flows generally
produce a greater amount of electricity) and falling in the first and third
quarters, when river flows are lower and equipment maintenance is performed.
The Indeck Maine Biomass Projects sell their capacity and output short-term in
the developing competitive market, either in bilateral transactions with
utilities or through the newly-created New England ISO auction process.
Accordingly, there is no assurance these projects will operate full time and
their cash flow is volatile.
For the nine months ended September 30, 1997, the Trust's net income increased
to $776,000 from a net loss of $224,000 for the same period in 1996. The
earnings for the nine months ended September 30, 1997, includes equity in net
income from the Maine Hydro Projects of $596,000, equity in the net loss of
the Indeck Maine Biomass Projects of $214,000, earnings, net of minority
interest, from the Providence Project of $743,000, a minor contribution to
earnings from the California Pumping Project of $36,000, interest and dividend
income at the Trust level of $575,000, less Trust-level expenses of $960,000.
The Trust's only investments in the first nine months of 1996 were the
Providence Project and the California Pumping Project and the Trust had
significant investment fee expenses relating to the share offering. The loss
for the nine months ended September 30, 1996, includes earnings, net of
minority interest, from the Providence Project of $325,000, a minor
contribution to earnings from the California Pumping Project of $12,000,
interest and dividend income at the Trust level of $600,000, less Trust-level
expenses of $1,161,000. The Trust-level expenses include investment fees,
management fees and general, and administrative and other expenses of
$627,000, $481,000 and $53,000, respectively.
Liquidity and Capital Resources
At September 30, 1997, the Trust had $12,220,000 of cash available for
investment in Projects. During the first nine months of 1997, cash flow
provided by operation activities amounted to $2,100,000. Distributions to
shareholders of the Trust amounted to $2,381,000.
During the first nine months of 1997, capital expenditures amounted to
$2,452,000, most of which related to the installation of a ninth generator
engine at the Providence Project.
During the third quarter of 1997, the Trust and its principal bank
executed a commitment letter for a revolving line of credit, whereby the bank
will provide a three year committed line of credit facility of $1,150,000.
Outstanding borrowings bear interest at the bank's prime rate or, at the
Trust's choice, at LIBOR plus 2.5%. The credit agreement will require the
Trust to maintain a ratio of total debt to tangible net worth of no more than
1 to 1 and a minimum debt service coverage ratio of 2 to 1. The credit
facility is being obtained in order to allow the Trust to operate using a
minimum amount of cash, maximize the amount invested in Projects and maximize
cash distributions to shareholders. The Trust expects to execute the
definitive credit agreement during the fourth quarter of 1997.
The Trust's policy is to distribute as much cash as is prudent to
shareholders. Accordingly, the Trust has not found it necessary to retain a
material amount of working capital. The amount of working capital retained
will be further reduced by obtaining a line of credit.
Certain Industry Trends
The industry trend toward deregulation of the electric power generating and
transmission industries has accelerated after the adoption of Order 888 by the
Federal Energy Regulatory Commission ("FERC") on April 24, 1996. A number of
major states, including California, have adopted proposals to allow "retail
wheeling," which would allow any qualified generator to use utility
transmission and distribution networks to sell electricity directly to utility
customers. Other states, such as Massachusetts, New Hampshire and New York,
are preparing their own initiatives. As a result, profound changes in the
industry are occurring, marked by consolidations of utilities, large scale
spin-offs or sales of generating capacity, reorganizations of power pools and
transmission entities, and attempts by electric utilities to recover stranded
costs and alter power purchase contracts with independent power producers such
as the Trust.
It is too early to predict the effects of these trends and others on the
Trust's business. A critical issue for the Trust, however, is whether any
action will be taken to modify its existing power purchase contracts or to
shift costs to independent power producers. To date, neither FERC nor the
California authorities have adopted measures that would impair power purchase
contracts and the Trust is not aware of any other such action by regulatory
authorities in other states where it does business.
Legislative and regulatory action is unpredictable and that at any time
federal or state legislatures or regulators could adopt measures that would be
materially adverse to the Trust's business. Further, volatile market
conditions could adversely affect the Trust's operations and the actions of
other industry participants, such as electric utilities, which in turn could
affect the Trust.
PART II - OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K.
The Trust filed a Current Report on Form 8-K to report the
acquisition of an interest in the Indeck Maine Biomass Projects, dated July 1,
1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
RIDGEWOOD ELECTRIC POWER TRUST IV
Registrant
Date: November 14, 1997 By /s/ Martin V. Quinn
Martin V. Quinn
Senior Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial
officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the Registrant's unaudited interim financial
statements for the nine months ended September 30, 1997 and is
qualified in its entirety by reference to those financial statements.
</LEGEND>
<CIK> 0000930364
<NAME> RIDGEWOOD ELECTRIC POWER TRUST IV
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 12,220,265
<SECURITIES> 13,551,669<F1>
<RECEIVABLES> 1,253,486
<ALLOWANCES> 0
<INVENTORY> 383,810
<CURRENT-ASSETS> 13,879,904
<PP&E> 14,341,670
<DEPRECIATION> <717,390>
<TOTAL-ASSETS> 50,092,309
<CURRENT-LIABILITIES> 1,301,122
<BONDS> 5,037,916
<COMMON> 0
0
0
<OTHER-SE> 37,141,694
<TOTAL-LIABILITY-AND-EQUITY> 50,029,309
<SALES> 4,850,561
<TOTAL-REVENUES> 5,127,311
<CGS> 3,434,865
<TOTAL-COSTS> 3,434,865
<OTHER-EXPENSES> 1,416,880
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 436,794
<INCOME-PRETAX> 776,371<F2>
<INCOME-TAX> 0
<INCOME-CONTINUING> 776,371
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 776,371
<EPS-PRIMARY> 1,628.29
<EPS-DILUTED> 1,628.29
<FN>
<F1>Investment in hydroelectric project partnership and corporation and in
wood-burning project limited liability company
accounted for on equity method in financial statements.
<F2>After deduction of minority interest in Providence Project
earnings of $414,063.
</FN>
</TABLE>
