RIDGEWOOD ELECTRIC POWER TRUST II
947 LINWOOD AVENUE
RIDGEWOOD, NEW JERSEY 07450-2939
TEL. (201) 447-9000
August 14, 2001
Securities and Exchange Commission
Washington, D.C. 20549
Dear Commission:
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
transmitting herewith a Quarterly Report on Form 10-Q for the period ended
June 30, 2001.
If you have any questions, please contact the undersigned or our counsel, Daniel
V. Gulino, at this office.
Sincerely,
RIDGEWOOD ELECTRIC POWER TRUST II
/s/Christopher I. Naunton
Christopher I. Naunton, Vice President
and Chief Financial Officer
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2001
Commission file Number 0-21304
RIDGEWOOD ELECTRIC POWER TRUST II
(Exact name of registrant as specified in its charter.)
Delaware 22-3206429
(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)
(201) 447-9000
----------------
Registrant's telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Ridgewood Electric Power Trust II
Financial Statements
June 30, 2001
Ridgewood Electric Power Trust II
Balance Sheet (unaudited)
- --------------------------------------------------------------------------------
June 30, December 31,
2001 2000
------------ ------------
Assets:
Investments in power generation projects ....... $ 10,204,430 $ 10,751,582
Cash and cash equivalents ...................... 604,225 89,829
Notes receivable from sale of investment ....... 1,046,708 1,283,327
Due from affiliates ............................ 18,468 6,174
Other assets ................................... 13,800 4,398
------------ ------------
Total assets .............................. $ 11,887,631 $ 12,135,310
------------ ------------
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses .......... $ 33,120 $ 41,972
Due to affiliates .............................. -- 270,765
------------ ------------
Total liabilities ......................... 33,120 312,737
------------ ------------
Commitments and contingencies
Shareholders' equity:
Shareholders' equity (235.3775
shares issued and outstanding) ................ 11,937,210 11,905,591
Managing shareholder's accumulated deficit ..... (82,699) (83,018)
------------ ------------
Total shareholders' equity ................ 11,854,511 11,822,573
------------ ------------
Total liabilities and shareholders' equity $ 11,887,631 $ 12,135,310
------------ ------------
See accompanying note to financial statements.
Ridgewood Electric Power Trust II
Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
Six Months Ended Three Months Ended
-------------------- -------------------
June 30, June 30, June 30, June 30,
2001 2000 2001 2000
-------- -------- -------- --------
Revenue:
Income from power
generation projects ........... $134,806 $319,285 $134,806 $208,762
Other income ................... -- 16,713 -- 16,713
Interest income ................ 56,817 73,237 27,122 38,275
-------- -------- -------- --------
Total revenue ............ 191,623 409,235 161,928 263,750
-------- -------- -------- --------
Expenses:
Accounting and legal fees ...... 50,920 21,293 37,630 13,214
Management fee ................. 88,669 -- 62,976 --
Interest expense ............... -- 9,063 -- --
Miscellaneous .................. 20,096 15,411 13,699 10,512
-------- -------- -------- --------
Total expenses ........... 159,685 45,767 114,305 23,726
-------- -------- -------- --------
Net income ..................... $ 31,938 $363,468 $ 47,623 $240,024
-------- -------- -------- --------
See accompanying note to financial statements.
Ridgewood Electric Power Trust II
Statement of Changes in Shareholders' Equity (unaudited)
- --------------------------------------------------------------------------------
Managing
Shareholders Shareholder Total
----------- ------------ ------------
Shareholders' equity,
December 31, 2000 ............ $11,905,591 $ (83,018) $11,822,573
Net income for the period ..... 31,619 319 31,938
----------- ----------- -----------
Shareholders' equity,
June 30, 2001 ................ $11,937,210 $ (82,699) $11,854,511
----------- ----------- -----------
See accompanying note to financial statements
Ridgewood Electric Power Trust II
Statement of Cash Flows (unaudited)
- --------------------------------------------------------------------------------
Six Months Ended
------------------------
June 30, June 30,
2001 2000
--------- ---------
Cash flows from operating activities:
Net income ....................................... $ 31,938 $ 363,468
--------- ---------
Adjustments to reconcile net income
to net cash flows from operating
activities:
Return of (Additional) investment
in power generation projects, net ............... 547,152 (150,302)
Proceeds from note receivable .................... 236,619 218,483
Changes in assets and liabilities:
Increase in due from affiliates .................. (12,294) (2,361)
(Increase) decrease in other assets .............. (9,402) 2,735
Decrease in accounts payable and
accrued expenses ................................ (8,852) (35,111)
Decrease in due to affiliates .................... (270,765) (153,191)
--------- ---------
Total adjustments ............................... 482,458 (119,747)
--------- ---------
Net cash provided by operating activities ....... 514,396 243,721
--------- ---------
Cash flows from financing activities:
Cash distributions to shareholders ............... -- (238,554)
Repayment of line of credit facility ............. -- (400,000)
--------- ---------
Net cash used in financing activities ........... -- (638,554)
--------- ---------
Net increase (decrease)
in cash and cash equivalents ..................... 514,396 (394,833)
Cash and cash equivalents,
beginning of year ............................... 89,829 537,541
--------- ---------
Cash and cash equivalents,
end of period ................................... $ 604,225 $ 142,708
--------- ---------
See accompanying note to financial statements.
Ridgewood Electric Power Trust II
Note to Financial Statements (unaudited)
- --------------------------------------------------------------------------------
1. General
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, which consist of normal recurring adjustments,
necessary for the fair representation of the results for the interim periods.
The December 31, 2000 financial information has been derived from the audited
financial statements for the year ended December 31, 2000. The financial
statements should be read in conjunction with the audited financial statements
for the year ended December 31, 2000 which were included as part of Ridgewood
Electric Power Trust II's Annual Report on Form 10-K. The results of operations
for an interim period should not necessarily be taken as indicative of the
results of operations that may be expected for a twelve month period.
2. Legal Matters
As reported by the Trust in its Form 10-K for the year ended December 31, 2000,
Sunnyside Cogeneration Partners, L.P., which owns the Monterey Project, is under
a long-term power purchase and sale agreement with Pacific Gas & Electric
Company ("PG&E"). Due to the California energy crisis, PG&E was unable to pay in
full for electrical energy and capacity delivered in December 2000 and January
2001. Although partial payments were made by PG&E (15%) the full amount remained
due and outstanding. As a result of PG&E's failure to pay, the Monterey
Project's gas supplier refused to supply additional gas and the Monterey Project
shutdown operations. As a result of PG&E's failure to pay in full, the Monterey
Project, along with the Byron and San Joaquin Projects owned by Ridgewood
Electric Power Trust III, filed a lawsuit on February 6, 2001 against PG&E
seeking damages for breach of contract equal to lost net revenues for the
remaining term of the power contract.
On April 6, 2001, PG&E sought protection from creditors under Chapter 11 of the
Bankruptcy Code. As a result, the state litigation instituted by the Monterey
Project was automatically stayed pursuant to the Bankruptcy Code. Moreover, the
Bankruptcy Code provides PG&E with the ability to reject or assume executory
contracts, such as the power contract. On July 13, 2001, Sunnyside Cogeneration
Partners, L.P. entered into an agreement ("Agreement") with PG&E, which
agreement was one of three different amendments to power purchase agreements
that PG&E and Qualified Facilities ("QF") could voluntarily accept and which
were pre-approved by the California Public Utilities Commission. The Agreement
was approved by the Bankruptcy Court on July 13, 2001 and has an effective date
of August 1, 2001. Essentially, the Agreement, and related amendment to the
power purchase agreement ("PPA"), amends the energy pricing provision thereof to
substitute, for a term of five years, a fixed energy price for the short-run
avoided cost ("SRAC") energy rate calculation. No other provision of the PPA is
amended by virtue of the Agreement and upon expiration of the five-year term,
the SRAC methodology is reinstated. In addition, pursuant to the Agreement PG&E
has assumed the Sunnyside PPA in the bankruptcy proceedings, although Sunnyside
agreed to wait for PG&E's payment of the outstanding balance owed effectively
until the effective date of PG&E's plan of reorganization. The Monterey plant
has been operating and delivering electric energy to PG&E as of August 1, 2001.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations Dollar amounts in this discussion are rounded to the nearest
$1,000.
Introduction
The Trust carries its investment in Projects at fair value and does not
consolidate its financial statements with the financial statements of the
Projects. Revenue is recorded by the Trust when distributions are declared by
the Projects. Trust revenues may fluctuate from period to period depending on
the operating cash flow generated by the Projects and the amount of cash
retained by the Projects to fund capital expenditures.
Results of Operations
As summarized below, total revenue decreased 113% to $192,000 in the first six
months of 2001 compared to $409,000 in the same period in 2000, primarily
because of lower distributions from the Columbia and Monterey projects. Revenue
also decreased 63% to $162,000 in the second quarter of 2001 compared to
$264,000 in the same period in 2000, primarily due to the lower distribution
from the Columbia project.
Project Six months ended June 30, Three months ended June 30,
- ------- ---------------------- ----------------------
2001 2000 2001 2000
-------- -------- -------- --------
Monterey ............... $ -- $110,000 $ -- $ --
Columbia ............... 100,000 200,000 100,000 200,000
Pump Services .......... 35,000 9,000 35,000 9,000
Other income ........... -- 17,000 -- 17,000
Interest income ........ 57,000 73,000 27,000 38,000
-------- -------- -------- --------
$192,000 $409,000 $162,000 $264,000
-------- -------- -------- --------
The Monterey project did not operate for the majority of the first six months of
2001 due to the bankruptcy filing of Pacific Gas & Electric Company ("PG&E") and
related legal proceedings. Thus no distributions were made to the Trust in 2001.
The Monterey project did not make distributions to the Trust in the second
quarter of 2000 because of costs associated with scheduled major engine
maintenance and legal costs associated with the proceedings with PG&E (see Legal
Proceedings below).
The decrease in revenues from Columbia reflects decreased revenues at the
project level from disposal of construction and demolition material as well as
the timing of distributions from the project to the Trust. The increase in
distributions from the Pump Services investment reflects an increase in rates
charged to its customers in 2001.
Other income reflects the reimbursement of the Trust's legal defense costs from
a lawsuit that was dismissed in a prior year.
Interest income declined primarily because interest represents a smaller portion
of the constant monthly payment from the note received from the sale of the San
Diego project in 1997.
Total expenses increased $90,000 (375%) to $114,000 in the second quarter of
2001 compared to $24,000 in the same period in 2000, primarily due to the
resumption of the management fee. The increase in total expenses from $46,000 in
the first six months of 2000 to $160,000 in the same period in 2001 also
reflects the resumption of the management fee, which was waived during 2000.
Liquidity and Capital Resources
In 1997, the Trust and Fleet Bank, N.A. (the "Bank") entered into a revolving
line of credit agreement, whereby the Bank provides a committed line of credit
facility of $750,000. The line of credit facility expires in July 2002.
Outstanding borrowings bear interest at the Bank's prime rate or, at the Trust's
choice, at LIBOR plus 2.5%. The credit agreement requires the Trust to maintain
a ratio of total debt to tangible net worth of no more than 1 to 1 and a minimum
debt service coverage ratio of 2 to 1. The credit facility was obtained in order
to allow the Trust to operate using a minimum amount of cash, maximize the
amount invested in Projects and maximize cash distributions to shareholders.
Borrowings under the credit facility of $400,000 at December 31, 1999 were
repaid in the quarter ended March 31, 2000.
Obligations of the Trust are generally limited to payment of the management fee
to the Managing Shareholder and payments for certain accounting and legal
services to third persons. The Trust ceased making distributions to its
shareholders in the first quarter of 2001.
The Trust anticipates that its cash flow from operations during 2001 will be
adequate to fund its obligations, notwithstanding PG&E's financial difficulties.
(see Legal Proceedings below)
Forward-looking statement advisory
This Quarterly Report on Form 10-Q, as with some other statements made by the
Trust from time to time, contains forward-looking statements. These statements
discuss business trends and other matters relating to the Trust's future results
and the business climate and are found, among other places, in the notes to
financial statements and at Part I, Item 2, Management's Discussion and
Analysis. In order to make these statements, the Trust has had to make
assumptions as to the future. It has also had to make estimates in some cases
about events that have already happened, and to rely on data that may be found
to be inaccurate at a later time. Because these forward-looking statements are
based on assumptions, estimates and changeable data, and because any attempt to
predict the future is subject to other errors, what happens to the Trust in the
future may be materially different from the Trust's statements here.
The Trust therefore warns readers of this document that they should not rely on
these forward-looking statements without considering all of the things that
could make them inaccurate. The Trust's other filings with the Securities and
Exchange Commission and its Confidential Memorandum discuss many (but not all)
of the risks and uncertainties that might affect these forward-looking
statements.
Some of these are changes in political and economic conditions, federal or state
regulatory structures, government taxation, spending and budgetary policies,
government mandates, demand for electricity and thermal energy, the ability of
customers to pay for energy received, supplies of fuel and prices of fuels,
operational status of plant, mechanical breakdowns, availability of labor and
the willingness of electric utilities to perform existing power purchase
agreements in good faith. Some of the cautionary factors that readers should
consider are described in the Trust's most recent Annual Report on Form 10-K.
By making these statements now, the Trust is not making any commitment to revise
these forward-looking statements to reflect events that happen after the date of
this document or to reflect unanticipated future events.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As reported by the Trust in its Form 10-K for the year ended December 31, 2000,
Sunnyside Cogeneration Partners, L.P., which owns the Monterey Project, is under
a long-term power purchase and sale agreement with Pacific Gas & Electric
Company ("PG&E"). Due to the California energy crisis, PG&E was unable to pay in
full for electrical energy and capacity delivered in December 2000 and January
2001. Although partial payments were made by PG&E (15%) the full amount remained
due and outstanding. As a result of PG&E's failure to pay, the Monterey
Project's gas supplier refused to supply additional gas and the Monterey Project
shutdown operations. As a result of PG&E's failure to pay in full, the Monterey
Project, along with the Byron and San Joaquin Projects owned by Ridgewood
Electric Power Trust III, filed a lawsuit on February 6, 2001 against PG&E
seeking damages for breach of contract equal to lost net revenues for the
remaining term of the power contract.
On April 6, 2001, PG&E sought protection from creditors under Chapter 11 of the
Bankruptcy Code. As a result, the state litigation instituted by the Monterey
Project was automatically stayed pursuant to the Bankruptcy Code. Moreover, the
Bankruptcy Code provides PG&E with the ability to reject or assume executory
contracts, such as the power contract. On July 13, 2001, Sunnyside Cogeneration
Partners, L.P. entered into an agreement ("Agreement") with PG&E, which
agreement was one of three different amendments to power purchase agreements
that PG&E and Qualified Facilities ("QF") could voluntarily accept and which
were pre-approved by the California Public Utilities Commission. The Agreement
was approved by the Bankruptcy Court on July 13, 2001 and has an effective date
of August 1, 2001. Essentially, the Agreement, and related amendment to the
power purchase agreement ("PPA"), amends the energy pricing provision thereof to
substitute, for a term of five years, a fixed energy price for the short-run
avoided cost ("SRAC") energy rate calculation. No other provision of the PPA is
amended by virtue of the Agreement and upon expiration of the five-year term,
the SRAC methodology is reinstated. In addition, pursuant to the Agreement PG&E
has assumed the Sunnyside PPA in the bankruptcy proceedings, although Sunnyside
agreed to wait for PG&E's payment of the outstanding balance owed effectively
until the effective date of PG&E's plan of reorganization. The Monterey plant
has been operating and delivering electric energy to PG&E as of August 1, 2001.
SIGNATURES
Pursuant to the requirement 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 II
Registrant
August 14, 2001 By /s/ Christopher I. Naunton
Date Christopher I. Naunton
Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial
officer)