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, 2004
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 (I.R.S. Employer Identification No.)
of Incorporation or Organization)
1314 King Street
Wilmington, DE 19801
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (302)888-7444
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
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 ___
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. [ ]
Indicate by check mark whether registrant is an accelerated filer (as defined in
Rule 12b-2 of the Act). Yes ___ No X
Exhibit Index is located on Page 27.
PART I
Item 1. Business.
Forward-looking statement advisory
This Annual Report on Form 10-K, as with some other statements made by Ridgewood
Electric Power Trust II (the "Trust") from time to time, includes
forward-looking statements. These statements discuss business trends and other
matters relating to the Trust's future results and business. 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. Some of the events that
could change the statements made herein include 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 and prices of fuels, operational status of generating plants,
mechanical breakdowns, volatility in the price for electric energy, natural gas,
availability of labor and the willingness of electric utilities to perform
existing power purchase agreements in good faith.
The Trust therefore warns readers of this report 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 offering materials discuss many (but not all) of the
risks and uncertainties that might affect these forward-looking statements.
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.
(a) General Development of Business.
The Trust was organized as a Delaware business trust on November 20, 1992 to
participate in the development, construction and operation of independent power
generating facilities ("Independent Power Projects" or "Projects") and sold
shares of beneficial interest in the Trust ("Investor Shares") in a private
placement offering (the "Offering") which ended on January 31, 1994, at which
time it had raised approximately $23.5 million. Net of offering fees,
commissions and expenses, the Offering provided approximately $19.4 million of
net funds available for investments in the development and acquisition of
Projects. The Trust has 541 record holders of Investor Shares (the "Investors").
As described below in Item 1(c)(2), the Trust (and its subsidiaries) own
interests in four Projects.
The Trust made an election to be treated as a "business development company"
("BDC") under the Investment Company Act of 1940, as amended (the "1940 Act").
On February 27, 1993 the Trust notified the Securities and Exchange Commission
of that election and registered its shares of beneficial interest (the "Investor
Shares") under the Securities Exchange Act of 1934, as amended (the "1934 Act").
On April 29, 1993 the election and registration became effective. Ridgewood
Renewable Power LLC (the "Managing Shareholder"), a New Jersey limited liability
company, is the managing shareholder of the Trust. The Managing Shareholder has
complete control of the day-to-day operation of the Trust and is not regularly
elected by the Investors.
As a BDC, the Trust was required to have a board of "independent trustees" that,
among other things, reviewed and consented to certain affiliated and other
transactions that the Trust may have considered doing. However, because the
Trust's funds were fully invested, such transactions were not likely to occur.
Moreover, the Trust had become more of an "operating company" as opposed to an
"investment company." As a result, there was no further need for the Trust to
maintain its BDC status. Therefore, on November 5, 2001, the Trust issued to the
owners of Investor Shares (the "Investors") a "Notice of Solicitation of
Consents," in which the Trust sought the consent of the Investors to withdraw
its election to be treated as a BDC under the 1940 Act and to make certain
amendments to the Trust's Declaration of Trust ("Declaration") required due to
such withdrawal, including, but not limited to, deleting the section of the
Declaration requiring independent trustees. Consents were tabulated at the close
of business on January 7, 2002. Based on such tabulation, a majority of Investor
Shares consented to such withdrawal and amendments. On January 10, 2002, the
Trust filed with the Securities and Exchange Commission a notification to
withdraw its election to be treated as a "business development company." As a
result of such withdrawal, the Trust now utilizes generally accepted accounting
principles for operating companies.
The Trust therefore does not have a "board of directors" that oversees the
day-to-day activities of the Trust, the Managing Shareholder serves that role
and, accordingly, the Trust does not have an audit committee or a nominating
committee as otherwise would be required by the applicable provisions of
Sarbanes-Oxley Act of 2002 if the Trust was organized such that it had a board
of directors. Accordingly, the Trust's Chief Executive Officer and Chief
Financial Officer effectively perform the functions that an audit committee
would otherwise perform.
Christiana Bank & Trust Company, a ("Christiana"), a Delaware trust company, is
the Corporate Trustee 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.
In addition, the Trust is affiliated with the following trusts organized by the
Managing Shareholder (the "Other Power Trusts"):
o Ridgewood Electric Power Trust I ("Power I");
o Ridgewood Electric Power Trust III ("Power III");
o Ridgewood Electric Power Trust IV ("Power IV");
o Ridgewood Electric Power Trust V ("Power V");
o The Ridgewood Power Growth Fund (the "Growth Fund");
o Ridgewood/Egypt Fund ("Egypt Fund"); and
o Ridgewood Power B Fund/Providence Expansion (the "B Fund").
In addition, the Trust is affiliated with certain Delaware limited liability
companies formed by the Managing Shareholder ("Ridgewood LLCs") and for which
the Managing Shareholder acts as Manager. These LLCs are:
o Ridgewood Renewable PowerBank LLC;
o Ridgewood Renewable Powerbank II LLC;
o Ridgewood Renewable PowerBank III LLC; and
o Ridgewood Renewable PowerBank IV LLC.
(b) Financial Information about Industry Segments.
The Trust operates in only one industry segment: investing in independent power
generation and similar energy projects. See Item 8, Financial Statements and
Supplementary Data for financial information about Industry Segments.
(c) Narrative Description of Business.
(1) General Description.
The Trust was formed to participate in the development, construction and
operation of Projects that generate electricity or related forms of energy for
sale to manufacturers, utilities and other users. The Trust also may invest in
facilities related to those Projects.
(2) Projects.
(i) Berkshire Project and B-3 Project.
On January 4, 1994, the Trust made an approximately $2.3 million equity
investment in Pittsfield Investors Limited Partnership ("PILP"), which was
formed to acquire the Berkshire Project, including the assets and business of
the Pittsfield Resource Recovery Facility. The Berkshire Project is a waste to
energy plant located in Pittsfield, Massachusetts. The Berkshire Project, which
has been operating since 1981, burns municipal solid waste supplied by the City
of Pittsfield ("Pittsfield"), surrounding communities and other providers. The
Trust's partners in the Berkshire Project were subsidiaries of Energy Answers
Corporation ("EAC"). EAC made an equity investment of approximately $1.3 million
in PILP and also serves as manager and operator of the facility. In addition, on
August 31, 1994, the Trust entered into the B-3 Limited Partnership, with
affiliates of EAC, the same firm with which the Trust participated in the
Berkshire Project. The Trust made an investment of approximately $4 million into
the B-3 Limited Partnership to construct a municipal waste transfer station
located in Columbia County, New York ("B-3 Project"). The B-3 Project is a waste
transfer station where municipal waste collected from nearby towns by smaller,
short haul trucks can be transferred to larger, long haul trucks for more
efficient transportation of the waste to distant landfills.
The Trust was entitled to an annual preferred distribution of available cash
flow, representing revenue from the Berkshire Project, (after funding debt
service, debt service reserves and operating and maintenance expenses) in an
amount equal to 15% of its investment. With respect to the B-3 Project, the
Trust was entitled to receive a cumulative priority return on the Trust
investment of 18% per annum, with any shortfalls being carried forward into
subsequent years. Due to financial difficulties, distributions from the
Berkshire Project ceased in the third quarter of 1998 and did not resume.
Moreover, certain key agreements were to expire at the end of 2004, making the
Berkshire Project's ability to continue operations thereafter uncertain. As with
the Berkshire Project, distributions from the B-3 Project were impaired by
repeated extensions of the closing deadlines for some local landfills and
capacity expansions at other local landfills. If waste can be cheaply deposited
at local landfills, there is less demand for consolidating the waste for
transfer to distant sites. As a result, on September 20, 2002 the Trust, sold
100% of its ownership interests in the B-3 Project and the Berkshire Project to
EAC. The acquisition agreement provided for the sale of 100% of the Trust's
ownership in the two projects in return for $1,200,000 cash and $5,000,000 of
interest bearing promissory notes. The notes bear interest at a rate of 10% per
annum, and will be repaid over a 17-year term. The notes are collateralized
solely by all the assets of the partnerships, without recourse to EAC.
During 2004, EAC has made all required payments under the notes. During 2004,
the key agreements of the Berkshire Projects that were scheduled to expire in
2004 were modified and extended. No other material events have occurred during
2004 with respect to these projects.
(ii) Monterey Project.
On January 9, 1995, the Trust purchased 100% of the equity interests in
Sunnyside Cogeneration Partners, L.P., which owns a 5.5-megawatt cogeneration
project located in Salinas, Monterey County, California (the "Monterey
Project"). The aggregate purchase price was approximately $5.2 million including
transaction costs. The Monterey Project has been operating since 1991 and uses
natural gas fired reciprocating engines to generate electricity for sale to
Pacific Gas and Electric Company ("PG&E") under a long term contract expiring in
2020 (the "Power Contract"). Thermal energy from the Monterey Project is used to
provide warm water to an adjacent greenhouse under a long- term contract that
also terminates in 2020. The Monterey Project is operated on behalf of the Trust
by its affiliate, Ridgewood Power Management LLC ("RPM").
The Monterey Project is a "Qualifying Facility" or "QF" under the Public Utility
Regulatory Policies Act of 1978, as amended ("PURPA"). PURPA, among other
things, requires utilities to purchase electric power from QFs, including
"cogeneration facilities" and "small power producers," and also exempts these
QFs from most federal and state utility regulatory requirements. In addition,
the price paid by electric utilities under PURPA for electricity produced by QFs
is 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). Pursuant to PURPA, and state
implementation of PURPA, many electric utilities have entered into long-term
power contracts with rates set by contract formulae approved by state regulatory
commissions. The Monterey Project entered into such contracts with PG&E. The
capacity and energy price paid by PG&E pursuant to the Power Contract were
determined pursuant to a contract formula approved by the California Public
Utilities Commission ("CPUC") with the energy payment originally based upon a
benchmark energy price adjusted for changes over time in a gas index; the so
called "Short Run Avoided Cost Methodology" or SRAC. Currently, however, the
Monterey Project is operating pursuant to an Amendment to the Power Contract
with PG&E, which provide, among other things, that the Monterey Project will
receive a fixed energy payment (as well as the required capacity payment) for a
term of five (5) years, until approximately August 2006. This amendment was
negotiated with PG&E as a result of its bankruptcy and was a negotiated attempt
by PG&E to deal fairly with the QFs it had under contract. The Monterey Project
operates profitability under the Amendment.
In order to execute the PG&E amendment with a fixed energy price, it was
necessary for the Monterey Project to procure its fuel, natural gas, at a fixed
price. The Monterey Project procured such supply of natural gas from Coral
Energy Services, Inc., ("Coral") a subsidiary of Shell Oil. In addition to the
gas supply agreement, Coral and the Monterey Project has a master re-sale
agreement, which also expires in August 2006. Such agreement enables the
Monterey Project to not take delivery of and sell back to Coral certain amounts
of natural gas once predetermined prices have been established. During 2004, the
Monterey Project, along with projects owned by Power III, sold back through 2006
to Coral some of the natural gas it had purchased. In 2004, the Monterey Project
earned $28,000 from such re-sales. Through 2006, it should earn an additional
$227,000 from the re-sale of gas back to Coral. Otherwise during 2004, the
Monterey Project operated normally, without any material incident.
Finally, upon expiration of the amendment, the formula contained in the original
Power Contract for determining the short-run avoided cost will once again
determine the energy price paid by PG&E to the Monterey Project and there is no
guarantee that such energy price at that time, or during the remainder of the
term of the Power Contract, will provide sufficient cash for the Monterey
Project to operate profitably. However, under the Power Contract, the Monterey
Project is also paid a capacity payment. However, the Trust believes that such
payment, along with an SRAC based energy payment, even if somewhat low, should
be enough for the Monterey Project to operate and have a positive cash flow,
although factors, such as the volatility of natural gas prices could materially
affect the ability of the Monterey Project to operate at a profit. In addition,
after the Power Contract expires in 2020 or terminates for other reasons, the
Monterey Project, under currently anticipated conditions, would be free to sell
its output on the competitive electric supply market, either in spot, auction or
short-term arrangements or under long-term contracts if those Power Contracts
could be obtained. There is no assurance that the Monterey Project could sell
its output or do so profitably. Because the Monterey Project is fueled by
natural gas normally purchased at market prices and because the Monterey Project
is relatively small-scale, it might have cost disadvantages in competing against
larger competitors that would enjoy economies of scale. The Trust is unable to
anticipate whether thermal sales from cogeneration would offset any possible
cost disadvantages in electric generation or whether in fact the Project would
have cost disadvantages after the Power Contract ends in 2020. It is thus
impossible to predict the profitability of the Monterey Project after the
scheduled termination of the Power Contract.
(iii) California Pumping Project
In 1995, the Trust purchased a package of irrigation service engines (the
"Pumping Project") located in Ventura County, California and also in 1995 the
Trust bought additional engines from unaffiliated sellers. The Trust's total
investment in the Pumping Project was approximately $952,000. RPM operates and
manages the Pumping Project on behalf of and for the benefit of the Trust.
The Pumping Project has been operating since 1992 and uses 10 natural-gas-fired
reciprocating engines with a rated equivalent capacity of 2 Megawatts to provide
power for irrigation wells that furnish water for orchards of lemon and other
citrus trees. The power is purchased by local farmers and farmers' co-operatives
pursuant to electric services contracts. Presently, the Pumping Project's rates
are approximately 85% of Southern California Edison Company's agricultural rate
of 12.2 cents/kwh. The discount was provided because of the low natural gas
prices experienced during most of 2002. However, natural gas prices have risen
and the Pumping Project is considering lowering the discount to 90% of SCE's
rate or even less, if natural gas prices continue to rise.
(iv) San Diego Project.
The Trust acquired its interest in the San Diego Project on March 21, 1994, when
it made an investment of approximately $2.3 million to acquire an 80% interest
in the Project. The Trust made additional capital contributions, totaling
approximately $1.2 million, to the Project to fund working capital and to
purchase various leased equipment. On June 25, 1997 the Trust sold its entire
interest in the San Diego Project to subsidiaries of NRG Energy, Inc. of
Minneapolis, Minnesota ("NRG"). The sale price was $6,200,000 in both cash and
notes. The notes were paid in full in 2003.
(3) Project Management and Operations.
The Managing Shareholder has organized RPM to provide operating management for
the Projects, and has assigned day-to-day management of the Monterey Project and
California Pumping Project to RPM. These services are charged to the Projects at
RPM's cost. See Item 10 - Directors and Executive Officers of the Registrant and
Item 13 - Certain Relationships and Party Transactions for further information
regarding the Operation Agreement and RPM and for the cost reimbursements
received by RPM.
The Monterey Project's revenue from its Power Contract consists of two
components, energy payments and capacity payments. Energy payments are based on
a facility's net electric output, with payment rates (other than during the 5
year amendment) usually indexed to the fuel costs of the purchasing utility or
to general inflation indices. Capacity payments are based on either a facility's
net electric output or its available capacity. Capacity payment rates vary over
the term of a Power Contract according to various schedules.
The Pumping Project sells its power to the farmers on whose land its engines are
situated under contracts terminable at any time on 60 days' prior notice to the
Trust. Although the Trust is at risk if many customers concurrently terminate
contracts, as might happen if an electric utility or other supplier were to
offer substantially discounted rates, the Trust believes that it is currently a
competitive supplier and that alternate customers can be secured in the event
contracts are terminated.
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.
Electricity produced by a Project is delivered to the purchaser through
transmission lines that are built to interconnect with the utility's existing
power grid. Steam produced by a Project is conveyed directly to the user by
pipeline and the energy produced by the engines in the Pumping Project is
applied directly to pumps.
Generally, revenues from the sales of electric energy from a cogeneration
facility will represent the most significant portion of the facility's total
revenue. However, to maintain its status as a QF under PURPA, it is imperative
that the Monterey Project continues to satisfy PURPA cogeneration requirements
as to the amount of thermal products generated. See Item 1(c)(6) - Regulatory
Matters, for an explanation of these requirements. Therefore, since the Monterey
Project has only two customers (the electric energy purchaser and the thermal
products purchaser), loss of either of these customers would have a material
adverse effect on the Monterey Project.
Customers that accounted for more than 10% of consolidated revenue to the Trust
in each of last three fiscal years are:
Calendar year
2004 2003 2002
Pacific Gas & Electric Co. 84.9% 77.7% 69.0%
(4) 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. 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.
Since energy is an undifferentiated commodity, competition is based almost
exclusively on price and ability to deliver. Given that the Projects may have
higher cost structures that large nuclear or fossil-fueled facilities, they
would need to compete on an alternative basis, such as their favorable
environmental profile.
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 invested
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 a
cogeneration facility's status as a QF due to failure to meet minimum steam
output requirements; 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.
(5) 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 operates in compliance with
such permits and approvals.
(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.
QFs 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, from state laws regarding rate or financial
regulation. In order to be a QF, 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 QFs if
they meet regulations respecting maximum size (in certain cases), primary
energy source and utility ownership.
The exemptions from extensive federal and state regulation afforded by
PURPA to QFs are important to the Trust and its competitors. The Trust
believes that each of its Projects is a QF. If a Project loses its QF
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 or the Project's Power Contract can be terminated by the
electric utility.
(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
1992 Energy Act may result in increased competition in the sale of
electricity.
(C) The Federal Power Act. The FPA grants FERC exclusive rate-making
jurisdiction over wholesale sales of electricity in interstate commerce.
Again, this will not affect the Trust's Projects unless they were to
attempt sales to other customers.
(D) State Regulation. State public utility regulatory commissions have broad
jurisdiction over Independent Power Projects which are not QFs under PURPA,
and which are considered public utilities in many states. In states where
the wholesale or retail electricity market remains regulated, Projects that
are not QFs may be subject to state requirements to obtain certificates of
public convenience and necessity to construct a facility and could have
their organizational, accounting, financial and other corporate matters
regulated on an ongoing basis. Although FERC generally has exclusive
jurisdiction over the rates charged by a non-QF 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-QFs and, among other
things, issuance of securities, related party transactions and sale and
transfer of assets. The actual scope of jurisdiction over non-QFs by state
public utility regulatory commissions varies from state to state.
(ii) Environmental Regulation.
The construction and operation of Independent Power Projects 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
that 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 modifications to
existing Projects.
The Trust's Projects must comply with many federal and state laws and
regulations governing wastewater and storm water discharges from the Projects.
These are generally enforced by states under permits for point sources of
discharges and by storm water permits. Under the Clean Water Act, such permits
must be renewed every five years and permit limits can be reduced at that time
or under re-opener clauses at any time. The Projects have not had material
difficulty in complying with their permits or obtaining renewals. The Projects
use closed-loop engine cooling systems, which do not require large discharges of
coolant except for periodic flushing to local sewer systems under permit and do
not make other material discharges to groundwater or streams.
The Trust's Monterey Project is subject to the reporting requirements of the
Emergency Planning and Community Right-to-Know Act that require the Projects to
prepare toxic release inventory release forms. These forms list all toxic
substances on site that are used in excess of threshold levels so as to allow
governmental agencies and the public to learn about the presence of those
substances and to assess potential hazards and hazard responses. The Trust does
not anticipate that this will result in any material adverse effect on it.
The Managing Shareholder expects that environmental and land use regulations may
become more stringent. The Trust and the Managing Shareholder have developed a
certain expertise and experience in obtaining necessary licenses, permits and
approvals, but will nonetheless rely upon qualified environmental consultants
and environmental counsel retained by it to assist in evaluating the status of
Projects regarding such matters.
(iii) Potential Legislation and Regulation.
All federal, state and local laws and regulations, including but not limited to
PURPA, the Holding Company Act, the 1992 Energy Act and the FPA, are subject to
amendment or repeal. Future legislation and regulation is uncertain, and could
have material effects on the Trust.
(A) Financial Information about Foreign and Domestic Operations and Export
Sales.
The Trust has invested in Projects located in California and has no foreign
operations.
(B) Employees.
The operating personnel of the Monterey and Pumping Projects are employed by RPM
and accordingly 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) - Directors and Executive Officers of the
Registrant - Management Agreement), 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
equity interest. All of the Projects are described in further detail at Item
1(c)(2).
Square
Ownership Ground Approximate Footage of Description
Interests Lease Acreage Project(Actual of
Project Location in Land Expiration of Land or Projected) Project
Monterey Monterey, Gas-fired cogen
CA Leased 2020 2 10,000 eration facility
Pumping Ventura Cy, Leased N/A N/A N/A Natural gas
Project CA or engines powering
licensed irrigation pumps
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
(a) Market Information.
The Trust sold 235.3775 Investor Shares of beneficial interest in the Trust in
its private placement offering of Investor Shares, which closed on January 31,
1994. There is currently no established public trading market for the Investor
Shares. 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, and
are restricted under federal and state laws regulating securities when the
Investor Shares are held by persons in a control relationship with the Trust.
Investors wishing to transfer Investor Shares should also consider the
applicability of state securities laws. 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 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 541 record holders of Investor
Shares.
(c) Dividends
The Trust made distributions as follows for the years ended December 31, 2004
and 2003:
Year Ended Year ended
December 31, December 31,
2004 2003
Total distributions to Investors $1,412,268 $1,412,268
Distributions per Investor Share $6,000 $ 6,000
Distributions to Managing Shareholder $14,265 $ 14,265
The Trust's decision whether to make future distributions to Investors and their
timing will depend on, among other things, the net cash flow of the Trust and
retention of reasonable reserves as determined by the Trust to cover its
anticipated expenses. See Item 7 Management's Discussion and Analysis.
Occasionally, distributions may include funds derived from the release of cash
from operating or restricted cash. Further, the Declaration authorizes
distributions to be made from cash flows rather than income, or from cash
reserves in some instances. Investors should be aware that the Trust is
organized to return net cash flow rather that 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. As described in such
financial statements, financial information for the year 2000 have been restated
to reflect the application of new accounting principles as a result of the
Trust's election to terminate its status as a business development company.
Selected Financial Data
As of and for the year ended December 31,
2004 2003 2002 2001 2000
Total Fund Information:
Revenue $2,514,798 $2,706,744 $3,075,114 $2,374,396 3,530,580
Net income (loss) 166,582 272,710 255,529 (1,088,887) 218,437
Net assets
(shareholders'
equity) 4,813,341 6,073,292 7,227,155 7,803,731 8,892,618
Investments in
Plant and
Equipment (net
of depreciation) 1,371,270 1,570,880 1,798,352 2,003,302 2,221,614
Investment
in Power
Contract(net
of amortization) 1,819,200 1,940,480 2,061,760 2,183,040 2,304,320
Total assets 5,017,021 6,307,760 7,561,005 8,216,155 9,595,529
Long-term
Obligations -- -- -- -- --
Per Share:
Revenue 10,684 11,500 13,065 10,087 15,000
Net income(loss) 708 1,159 1,086 (4,626) 928
Net asset value 20,449 25,802 30,704 33,154 38,163
Distributions
to Investors 6,000 6,000 3,500 -- 3,003
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Introduction
The following discussion and analysis should be read in conjunction with the
Trust's financial statements and the notes thereto presented below. Dollar
amounts in this discussion are generally rounded to the nearest $1,000.
Outlook
The Monterey Project is a QF as defined by PURPA and currently sells its
electric output to PG&E under a Power Contract expiring in 2020. During the term
of the Power Contract, the utility may or may not attempt to buy out the Power
Contract prior to expiration. At the end of the Power Contract, the Monterey
Project will become a merchant plant and may be able to sell the electric output
at then current market prices. There can be no assurance that future market
prices will be sufficient to allow the Monterey Project to operate profitably.
Although there have been and continues to be significant changes in the electric
industry including, but not limited to, the increased attention to renewable
generation, re-regulation of electric utilities, an increase in utility merger
activity and the development of regional transmission organizations, most of
those changes do not significantly impact upon the Monterey Project, which
currently has a long-term Power Contract with PG&E. Although market changes that
either strengthen or weaken PG&E will affect the Monterey Project over the long
term as such changes may impact PG&E's ability to pay under such Power Contract.
Moreover, how such changes impact the price of natural gas or electricity will
affect the Monterey Project when it begins operations under SRAC, rather than
under its Amendment.
The Pumping Project owns irrigation well pumps in Ventura County, California,
which supply water to farmers. The demand for water pumped by the project varies
inversely with rainfall in the area.
Significant Accounting Policies
The Trust's plant and equipment is recorded at cost and is depreciated over its
estimated useful life. The estimate useful lives of the Trust's plant and
equipment range from 3 to 20 years. A significant decrease in the estimated
useful life of a material amount of plant and equipment could have a material
adverse impact on the Trust's operating results in the period in which the
estimate is revised and subsequent periods. The Trust evaluates the impairment
of its long-lived assets (including power sales contracts) based on projections
of undiscounted cash flows whenever events or changes in circumstances indicate
that the carrying amounts of such assets may not be recoverable. Estimates of
future cash flows used to test the recoverability of specific long-lived assets
are based on expected cash flows from the use and eventual disposition of the
assets. A significant reduction in actual cash flows and estimated cash flows
may have a material adverse impact on the Trust's operating results and
financial condition.
Power generation revenue is recorded in the month of delivery, based on the
estimated volumes sold to customers at rates stipulated in the power sales
contract. Adjustments are made to reflect actual volumes delivered when the
actual information subsequently becomes available. Billings to customers for
power generation generally occurs during the month following delivery. Final
billings do not vary significantly from estimates.
The Trust has forward contracts for the purchase and resale of natural gas with
one supplier. These forward contracts have not been designated as hedges and are
recorded at fair value on the balance sheet in accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, with changes in
fair value recorded in the consolidated statement of operations.
Results of Operations
The year ended December 31, 2004 compared to the year ended December 31, 2003.
Power generation revenue decreased $192,000, or 7%, to $2,515,000 in 2004
compared to $2,707,000 in 2003. The decrease is primarily due to the decrease in
the California Pumping project's customer base, stemming from the result of the
change in current market conditions. Power generation revenue from the Monterey
project was consistent with the prior year.
Gross profit, which represents total revenue reduced by cost of revenue,
increased by $90,000 to $119,000 in 2004. The increase is primarily the result
of the reduction in the Monterey project's operating expenses partially offset
by the increase in fuel costs experienced by the California Pumping projects.
General and administrative expenses of $144,000 were consistent with the prior
year.
The management fee paid to the Managing Shareholder decreased by $17,000, or
16%, to $91,000 in 2004 from $108,000 reflecting the lower net assets of the
Trust on which the management fee is computed.
Loss from operations decreased $120,000, to $117,000 in 2004 from $237,000 in
2003, primarily due to the increase in gross profit from the Monterey project.
Other income (expense), decreased by $227,000, to $283,000 in 2004 from $510,000
in 2003. The decrease is primarily due to changes in the fair value of the
Trust's gas contracts which resulted in the recognition of an unrealized gain of
$278,000, in the current year, compared to $488,000 in 2003, as a result of
reflecting the fair value of its gas purchase contracts.
Net income decreased $106,000, to $167,000 in 2004 from $273,000 in 2003. The
decrease in net income is a result of the decrease in the unrealized gain
recognized on gas contracts partially offset by the increase in gross profit
from the Monterey project.
The year ended December 31, 2003 compared to the year ended December 31, 2002.
Power generation revenue decreased $368,000, or 12%, to $2,707,000 in 2003
compared to $3,075,000 in 2002. The decrease is primarily due to the higher
precipitation experienced in Southern California, thus reducing the California
Pumping project's operations, in addition to the reduced rates charged to its
customers as a result in the change in current market conditions in California.
Gross profit, which represents total revenues reduced by cost of revenue,
decreased by $115,000 to a gross profit of $29,000 in 2003. The decrease is
primarily the result of the lower revenues and corresponding decrease in cost of
sales from the California Pumping projects.
General and administrative expenses decreased $119,000, or 43%, to $157,000 in
2003 from $276,000 in 2002. The decrease is partially attributed to the
professional fees incurred in the sale of B-3 and PILP projects in 2002.
In 2002, the Trust recovered $157,000 relating to PG&E revenues from prior
years, which had been treated as uncollectible due to PG&E's filing for
bankruptcy protection.
The management fee paid to the Managing Shareholder decreased by $9,000, or 8%,
to $108,000 in 2003 from $117,000 reflecting the lower net assets of the Trust
on which the management fee is computed.
Loss from operations increased $145,000, to $237,000 in 2003 from $92,000 in
2002, primarily due to the decrease in gross profit from the California Pumping
projects.
Other income, net, increased by $162,000, to $510,000 in 2003 from $348,000 in
2002. The increase is primarily due to the Trust recording an unrealized gain of
$488,000, in the current year, for the increase in the market price of natural
gas, partially offset by the $190,000 of cash received in 2002 from the 1999
settlement of the Waukesha-Pierce litigation, as well as the $104,000 of equity
income received from the B-3 project, which was sold in 2002.
Net income increased $17,000,to $273,000 in 2003 from $256,000 in 2002. The
increase in income is a result of the unrealized gain on gas purchase contracts
partially offset by the decrease in gross profit from the California Pumping
projects in addition to the $190,000 of other income received in 2002 from the
Waukesha-Pierce litigation and the $104,000 of equity income received from the
B-3 project.
Liquidity and Capital Resources
In 2004 and 2003, the Trust's operating activities provided $221,000 and
$618,000 of cash, respectively. The decrease in cash flow is primarily the
result of the return of the Trust's certificate of deposit in 2003, which
secured certain standby letters of credit.
Cash generated from investing activities in 2004 was $417,000 compared to
$678,000 in 2003. The decrease is due to the maturity of one of the Trust's
notes receivable in 2003.
Cash used by financing activities was $1,427,000 for 2004 and 2003. The
disbursements represent distributions to shareholders.
On June 26, 2003, the Managing Shareholder of the Trust, entered into a
$5,000,0000 Revolving Credit and Security Agreement with Wachovia Bank, National
Association. The agreement allows the Managing Shareholder to obtain loans and
letters of credit for the benefit of the trusts and funds that it manages. As
part of the agreement, the Trust agreed to limitations on its ability to incur
indebtedness, liens and provide guarantees. On February 20, 2004, the Managing
Shareholder and Wachovia Bank amended the agreement increasing the amount to
$6,000,000. Subsequently, the agreement has been extended to September 30, 2005.
In August 2003, the Trust issued through its bank a standby letter of credit, in
the amount of $504,000 to secure the gas purchases for the Monterey project. The
Trust used the Managing Shareholder's credit facility to collateralize the
letters of credit. In August of 2004, the supplier of natural gas to the
Monterey project agreed to reduce the standby letter of credit to $230,000.
Obligations of the Trust are generally limited to payment of management fees to
the Managing Shareholder and payments for certain administrative, accounting and
legal services to third persons. Accordingly, the Trust has not found it
necessary to retain a material amount of working capital.
The Monterey Project has certain long-term obligations relating to its Gas
Agreement with Coral (See Note 6 of the Consolidated Financial Statements) and
its Power Contract with PG&E. The Monterey Project has a long-term operating
ground lease which expires in May 2021. These long-term obligations are not
guaranteed by the Trust. The Trust and its subsidiaries anticipate that during
2005 their cash flow from operations will be sufficient to meet their
obligations.
Off-Balance Sheet Arrangements
None.
Contractual Obligations in Tabular Form
Year Ended
December 31, Ground Lease Gas Purchase Gas Resale Total
2005 $ 299,896 $ 1,365,903 $ (131,355) $ 1,534,444
2006 299,896 910,602 (95,418) 1,115,080
2007 299,896 -- -- 299,896
2008 299,896 -- -- 299,896
2009 299,896 -- -- 299,896
Thereafter 3,398,821 -- -- 3,398,82
--------------------- ---------------------- ------------------ ----------------------
Total $ 4,898,301 $ 2,276,505 $ (226,773) $ 6,948,033
===================== ====================== ================== ======================
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Qualitative Information About Market Risk
The Trust's investments in financial instruments are short-term investments of
working capital or excess cash. Those short-term investments are limited by its
Declaration of Trust to investments in United States government and agency
securities or to obligations of banks having at least $5 billion in assets.
Because the Trust invests only in short-term instruments for cash management,
its exposure to interest rate changes is low. The Trust has limited exposure to
trade accounts receivable and believes that their carrying amounts approximate
fair value.
The Trust's primary market risk exposure is limited interest rate risk caused by
fluctuations in short-term interest rates. The Trust does not anticipate any
changes in its primary market risk exposure or how it intends to manage it. The
Trust does not trade in market risk sensitive instruments.
Quantitative Information About Market Risk
This table provides information about the Trust's financial instruments that are
defined by the Securities and Exchange Commission as market risk sensitive
instruments. These include only short-term U.S. government and agency securities
and bank obligations. The table includes principal cash flows and related
weighted average interest rates by contractual maturity dates.
December 31, 2004
Expected Maturity Date
2005
(U.S. $)
Bank Deposits and Certificates of Deposit $430,000
Average interest rate 1.04%
Item 8. Financial Statements and Supplementary Data.
A. Index to Consolidated Financial Statements
Index to Consolidated Financial Statements
Report of Independent Accountants F-2
Report of Independent Accountants F-3
Consolidated Balance Sheets at December 31,
2004 and 2003 F-4
Consolidated Statements of Operations for the
three years ended December 31, 2004 F-5
Consolidated Statements of Changes in Shareholders'
Equity (Deficit) for the three years ended
December 31, 2004 F-6
Consolidated Statements of Cash Flows for the three
years ended December 31, 2004 F-7
Notes to Consolidated Financial Statements F-8 to F-16
Ridgewood Electric Power Trust II
Consolidated Financial Statements
December 31, 2004, 2003 and 2002
<page>
Report of Independent Registered Public Accounting Firm
Managing Shareholder and Shareholders
Ridgewood Electric Power Trust II
We have audited the accompanying consolidated balance sheets of Ridgewood
Electric Power Trust II (the "Trust") as of December 31, 2004 and 2003 and the
related consolidated statements of operations, changes in shareholders' equity
(deficit) and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits. The consolidated financial statements of Ridgewood Electric Power Trust
II as of December 31, 2002 and for the year then ended were audited by other
auditors whose report, dated April 3, 2003, expressed an unqualified opinion on
those statements.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Ridgewood Electric Power Trust II as of December 31, 2004 and 2003, and the
consolidated results of its operations and its cash flows for the years then
ended in conformity with accounting principles generally accepted in the United
States of America.
/s/ Perelson Weiner, LLP
New York, New York
March 31, 2005, except for Note 11,
the date of which is June 14, 2005
<page>
Report of Independent Accountants
To the Shareholders of Ridgewood Electric Power Trust II:
In our opinion, the accompanying consolidated statements of operations, changes
in shareholders' equity and cash flows for the year ended December 31, 2002
present fairly, in all material respects the results of operations and cash
flows of Ridgewood Electric Power Trust II and its subsidiaries (the "Trust")
for the year ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States of America. 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 audit. We
conducted our audit of these statements in accordance with auditing standards
generally accepted in the United States of America, 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 and 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 audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Florham Park, NJ
April 3, 2003
<page>
Ridgewood Electric Power Trust II
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
December 31,
--------------------------
2004 2003
----------- -----------
<s> <c> <c>
Assets:
Cash and cash equivalents ......................................... $ 429,790 $ 1,218,009
Trade receivables ................................................. 215,645 224,497
Due from affiliates ............................................... -- 16,628
Current portion of notes receivable from transfer of investment in
Limited Partnership interests under contractual agreements ...... 363,240 444,555
Current portion of unrealized gain on gas purchase contract ....... 506,868 217,583
Other current assets .............................................. 52,462 41,569
----------- -----------
Total current assets ....................................... 1,568,005 2,162,841
Plant and equipment ............................................... 3,468,542 3,441,432
Accumulated depreciation .......................................... (2,097,272) (1,870,552)
----------- -----------
1,371,270 1,570,880
----------- -----------
Electric power sales contract ..................................... 3,032,000 3,032,000
Accumulated amortization .......................................... (1,212,800) (1,091,520)
----------- -----------
1,819,200 1,940,480
----------- -----------
Non-current portion of notes receivable from transfer of investment
in Limited Partnership interests under contractual agreements .. -- 363,240
Non-current portion of unrealized gain on gas purchase contract ... 258,546 270,319
----------- -----------
Total assets .............................................. $ 5,017,021 $ 6,307,760
----------- -----------
Liabilities and Shareholders' Equity (Deficit):
Liabilities:
Accounts payable and accrued expenses ............................. $ 11,186 $ 2,371
Accrued fuel expense .............................................. 71,606 81,679
Accrued professional fees ......................................... 59,189 66,561
Due to affiliates ................................................. 61,699 83,857
----------- -----------
Total current liabilities ................................ 203,680 234,468
Commitments and contingencies
Shareholders' Equity (Deficit):
Shareholder' equity (235.3775 investor shares issued
and outstanding) ................................................ 4,966,451 6,213,803
Managing shareholde's accumulated deficit (1 management
share issued and outstanding) ................................... (153,110) (140,511)
----------- -----------
Total shareholders' equity (deficit) ..................... 4,813,341 6,073,292
----------- -----------
Total liabilities and shareholders' equity (deficit) ..... $ 5,017,021 $ 6,307,760
----------- -----------
See accompanying notes to the consolidated financial statements.
<page>
Ridgewood Electric Power Trust II
Consolidated Statements of Operations
- -------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------
2004 2003 2002
----------- ----------- -----------
<s> <c> <c> <c>
Power generation revenue .................. $ 2,514,798 $ 2,706,744 $ 3,075,114
Cost of revenue ........................... 2,396,095 2,677,817 2,931,122
----------- ----------- -----------
Gross profit .............................. 118,703 28,927 143,992
----------- ----------- -----------
Operating expenses:
General and administrative ................ 144,197 157,404 276,306
Bad debt recoveries ....................... -- -- (156,938)
Management fee to managing shareholder .... 91,099 108,407 117,058
----------- ----------- -----------
Total operating expenses ... 235,296 265,811 236,426
----------- ----------- -----------
Loss from operations ...................... (116,593) (236,884) (92,434)
----------- ----------- -----------
Other income (expense):
Interest income ........................... 5,663 21,692 56,641
Interest expense .......................... -- -- (3,506)
Unrealized gain on gas purchase contract .. 277,512 487,902 --
Equity income from B-3 Limited Partnership. -- -- 104,497
Other income .............................. -- -- 190,331
----------- ----------- -----------
Total other income (expense) 283,175 509,594 347,963
----------- ----------- -----------
Net income ................................ $ 166,582 $ 272,710 $ 255,529
----------- ----------- -----------
See accompanying notes to the consolidated financial statements.
<page>
Ridgewood Electric Power Trust II
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
- -------------------------------------------------------------------------------
Shareholders Managing Total
Shareholder Shareholders'
Equity (Deficit)
------------- ------------- --------------
Shareholders' equity (deficit), $ 7,926,938 $ (123,207) $ 7,803,731
January 1, 2002
Cash distributions ............ (823,824) (8,321) (832,145)
Net income for the year ....... 252,974 2,555 255,529
------------- ------------- -------------
Shareholder' equity (deficit), 7,356,088 (128,973) 7,227,115
December 31, 2002
Cash distributions ............ (1,412,268) (14,265) (1,426,533)
Net income for the year ....... 269,983 2,727 272,710
------------- ------------- -------------
Shareholders' equity (deficit), 6,213,803 (140,511) 6,073,292
December 31, 2003
Cash distributions ............ (1,412,268) (14,265) (1,426,533)
Net income for the year ....... 164,916 1,666 166,582
------------- ------------- -------------
Shareholders' equity (deficit), $ 4,966,451 $ (153,110) $ 4,813,341
December 31, 2004
------------- ------------- -------------
See accompanying notes to the consolidated financial statements.
<page>
Ridgewood Electric Power Trust II
Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------
2004 2003 2002
----------- ----------- -----------
<s> <c> <c> <c>
Cash flows from operating activities:
Net income ....................................... $ 166,582 $ 272,710 $ 255,529
----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization .................... 348,000 348,752 348,662
Equity income from B-3 Limited Partnership ....... -- -- (104,497)
Unrealized gain on gas purchase contract ......... (277,512) (487,902) --
Changes in assets and liabilities:
Decrease (increase) in restricted cash ........... -- 550,000 (347,430)
Decrease in trade receivables .................... 8,852 30,585 12,788
(Increase) decrease in other current assets ...... (10,893) 5,582 (11,242)
Increase (decrease) in accounts payable and
accrued expenses ................................ 8,815 (153,665) 148,702
(Decrease) increase in accrued fuel expense ...... (10,073) 9,846 (95,566)
(Decrease) increase in accrued professional fees . (7,372) 8,423 2,662
(Decrease) increase in due to/from affiliates, net (5,530) 33,858 (128,644)
----------- ----------- -----------
Total adjustments ............................ 54,287 345,479 (174,565)
----------- ----------- -----------
Net cash provided by operating activities .... 220,869 618,189 80,964
----------- ----------- -----------
Cash flows from investing activities:
Distributions from B-3 Limited Partnership ....... -- -- 200,000
Cash received from transfer of investments, net .. -- -- 1,224,097
Proceeds from notes receivable ................... 444,555 677,528 522,938
Capital expenditures ............................. (27,110) -- (22,432)
----------- ----------- -----------
Net cash provided by investing activities .... 417,445 677,528 1,924,603
----------- ----------- -----------
Cash flows from financing activities:
Cash distributions to shareholders .............. (1,426,533) (1,426,533) (832,145)
----------- ----------- -----------
Net cash used in financing activities ........ (1,426,533) (1,426,533) (832,145)
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents ..... (788,219) (130,816) 1,173,422
Cash and cash equivalents, beginning of year ............. 1,218,009 1,348,825 175,403
----------- ----------- -----------
Cash and cash equivalents, end of year ................... $ 429,790 $ 1,218,009 $ 1,348,825
----------- ----------- -----------
See accompanying notes to the consolidated financial statements.
<page>
Ridgewood Electric Power Trust II
Notes to the Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. Description of Business
Ridgewood Electric Power Trust II (the "Trust") was formed as a Delaware
business trust on November 20, 1992. The managing shareholder of the Trust is
Ridgewood Renewable Power LLC (formerly Ridgewood Power Corporation). The Trust
began offering shares on January 4, 1993 and discontinued its offering of shares
on January 31, 1994.
The Trust was organized to invest in independent power generation facilities and
in the development of these facilities. These independent power generation
facilities include cogeneration facilities which produce electricity and thermal
energy and other power plants that use various fuel sources (except nuclear).
The power plants sell electricity and, in some cases, thermal energy to
utilities and industrial users under long-term contracts.
Christiana Bank & Trust Company, a Delaware trust company, is the Corporate
Trustee 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.
Effective April 29, 1993, the Trust elected to be treated as a "business
development company" ("BDC") under the Investment Company Act of 1940 ("the 1940
Act") and registered its shares under the Securities Exchange Act of 1934.
In November 2001, through a proxy solicitation the Trust requested investor
consent to end the BDC status. On January 7, 2002, the consents were tabulated
and more than two-thirds of the investor shares consented to the elimination of
the BDC status. Accordingly, the Trust is no longer an investment company under
the 1940 Act.
The Trust shall continue to exist until January 4, 2033 unless terminated sooner
by certain provisions of the Trusts Declaration.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Trust and its
wholly-owned subsidiaries. All material intercompany transactions have been
eliminated.
The Trust uses the equity method of accounting for its investments in affiliates
which are 50% or less owned if the Trust has the ability to exercise significant
influence over the operating and financial policies of the affiliates but does
not control the affiliate. Accordingly, the Trust's share of the operating
results of affiliates are included in the Consolidated Statements of Operations.
Use of Estimates
The preparation of consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America
requires the Trust to make estimates and judgments that affect the reported
amounts of assets, liabilities, sales and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Trust evaluates its
estimates, including provision for bad debts, carrying value of investments,
amortization and depreciation of plant and equipment and electric power sales
contract, and recordable liabilities for litigation and other contingencies. The
Trust bases its estimates on historical experience, current and expected
conditions and various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates.
New Accounting Standards and Disclosures
SFAS 143
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS 143,
Accounting for Asset Retirement Obligations, on the accounting for obligations
associated with the retirement of long-lived assets. SFAS 143 requires a
liability to be recognized in the consolidated financial statements for
retirement obligations meeting specific criteria. Measurement of the initial
obligation is to approximate fair value, with an equivalent amount recorded as
an increase in the value of the capitalized asset. The asset will be depreciated
in accordance with normal depreciation policy and the liability will be
increased for the time value of money, with a charge to the income statement,
until the obligation is settled. SFAS 143 is effective for fiscal years
beginning after June 15, 2002. The Trust adopted SFAS 143 effective January 1,
2003, with no material impact on the consolidated financial statements.
SFAS 145
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. SFAS No. 145 eliminates extraordinary accounting treatment for
reporting gain or loss on debt extinguishment, and amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under changed conditions. The Trust
adopted SFAS 145 effective January 1, 2003, with no material impact on the
consolidated financial statements.
SFAS 146
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. SFAS No. 146 requires recording costs associated
with exit or disposal activities at their fair values when a liability has been
incurred. The Trust adopted SFAS 146 effective January 1, 2003, with no material
impact on the consolidated financial statements.
FIN 46
In December 2003, the FASB issued FASB Interpretation No. 46, (Revised December
2003) Consolidation of Variable Interest Entities ("FIN 46") which changes the
criteria by which one company includes another entity in its consolidated
financial statements. FIN 46 requires a variable interest entity to be
consolidated by a company if that company is subject to a majority of the risk
of loss from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns or both. The consolidation
requirements of FIN 46 apply immediately to variable interest entities created
after December 31, 2003, and apply in the first fiscal period ending after March
15, 2004, for variable interest entities created prior to January 1, 2004. The
Trust adopted the disclosure provisions of FIN 46 effective December 31, 2002,
with no material impact to the consolidated financial statements. The Trust
implemented the full provisions of FIN 46 effective January 1, 2004 with no
material impact to the consolidated financial statements.
SFAS 149
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
the accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
149 is generally effective for contracts entered into or modified after June 30,
2003 and for hedging relationships designated after June 30, 2003. The Trust
adopted SFAS 149 effective July 1, 2003 with no material impact to the
consolidated financial statements.
SFAS 150
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
establishes standards for classifying and measuring certain financial
instruments with characteristics of both liabilities and equity. The Trust
adopted SFAS 150 effective July 1, 2003, with no material impact on the
consolidated financial statements.
Cash and Cash Equivalents
The Trust considers all highly liquid investments with maturities of three
months or less when purchased, to be cash and cash equivalents. Cash and cash
equivalents consist of commercial paper and funds deposited in bank accounts.
Cash balances with banks as of December 31, 2004, exceed insured limits by
approximately $322,000.
Trade Receivables
Trade receivables are recorded at invoice price and do not bear interest. No
allowance for bad debt expense was provided based upon historical write-off
experience, evaluation of customer credit condition and the general economic
status of the customer.
Impairment of Long-Lived Assets and Intangibles
The Trust evaluates long-lived assets, such as plant and equipment and
specifically identifiable intangibles, when events or changes in circumstances
indicate that the carrying value of such assets may not be recoverable. The
determination of whether an impairment has occurred is made by comparing the
carrying value of an asset to the estimated undiscounted cash flows attributable
to that asset. If an impairment has occurred, the impairment loss recognized is
the amount by which the carrying value exceeds the estimated fair value of the
asset.
Plant and Equipment
Plant and equipment, consisting principally of electrical generating equipment,
is stated at cost. Major 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 are 3 to 20 years with a weighted average of 15 years at
December 31, 2004 and 2003. During 2004, 2003 and 2002, the Trust recorded
depreciation expense of $226,720, $227,472 and $227,382, respectively.
Electric Power Sales Contract
A portion of the purchase price of the one of the Trust's projects was assigned
to the electric power sales contract and is being amortized over the life of the
contract of 25 years on a straight-line basis. During 2004, 2003 and 2002, the
Trust recorded amortization expense of $121,280.
Revenue Recognition
Power generation revenue is recorded in the month of delivery, based on the
estimated volumes sold to customers at rates stipulated in the power sales
contract. Adjustments are made to reflect actual volumes delivered when the
actual information subsequently becomes available. Billings to customers for
power generation generally occurs during the month following delivery. Final
billings do not vary significantly from estimates.
Forward Gas Contracts
The Trust has forward contracts for the purchase and resale of natural gas with
one supplier. These forward contracts have not been designated as hedges and are
recorded at fair value on the balance sheet in accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, with changes in
fair value recorded in the consolidated statement of operations.
Supplemental Cash Flow Information
No interest was paid during the years ended December 31, 2004 and 2003. Total
interest paid during the year ended December 31, 2002 was $3,506.
Significant Customer and Supplier
During 2004, 2003 and 2002, the Trust's largest customer, Pacific Gas and
Electric Company ("PG&E"), accounted for 84.9%, 77.7% and 69.0%, respectively,
of total revenue. During 2004, 2003 and 2002, the Trust purchased 100% of the
Monterey Projects' gas supply from one supplier.
Income Taxes
No provision is made for income taxes in the accompanying consolidated financial
statements as the income or losses of the Trust are passed through and included
in the income tax returns of the individual shareholders of the Trust.
Reclassification
Certain items in previously issued consolidated financial statements have been
reclassified for comparative purposes. This had no effect on net income.
3. Projects
Sunnyside Cogeneration Partners, L.P.
(a wholly-owned subsidiary, known as the Monterey Project)
On January 9, 1995, the Trust acquired 100% of the existing partnership
interests of Sunnyside Cogeneration Partners, L.P., which owns and operates a
5.5 megawatt electric cogeneration facility, located in Monterey County,
California. The aggregate purchase price was $5,198,058 including transaction
costs. Electricity is sold to PG&E under a long term contract expiring in 2020.
The acquisition of the Monterey Project was accounted for as a purchase and the
results of operations of the Monterey Project have been included in the Trust's
consolidated financial statements since the acquisition date. The purchase price
was allocated to the net assets acquired, based on their respective fair values.
Of the purchase price, $3,032,000 was allocated to the electric power sales
contract and is being amortized over the life of the contract of 25 years.
In August 2001, PG&E and the Monterey Project entered into an amendment to the
electric power sales contract for a term of five years, which would effectively
replace, for such 5 year term, the variable formula for determining the energy
price with a fixed energy price.
On December 31, 1998 the Trust, through subsidiaries, filed a legal complaint in
the Superior Court of California for Monterey County against Waukesha-Pierce,
Inc. and subsidiaries, alleging that the subsidiaries had not disclosed the
existence of an obligation of the Monterey project to Pacific Gas and Electric
Company and therefore breached a warranty in the acquisition agreement. The
claim was for approximately $273,000 plus interest and expenses.
Waukesha-Pierce, Inc. was included in the proceeding as a contractual guarantor.
On January 17, 1999, a separate action against Waukesha-Pierce, Inc. was filed
by the Trust's subsidiaries in the United States District Court for the Northern
District of Texas to enforce the guaranty. The parties agreed to dismiss the
Texas case without prejudice before material proceedings resulted. The
California case was settled in March 2000; Waukesha-Pierce Inc. agreed to pay
the Project approximately $190,000 and to cooperate with the Project in the
potential FERC proceedings involving the Monterey project discussed above and
the Trust agreed to cooperate with Waukesha-Pierce in releasing funds due from
PG&E to Waukesha-Pierce. In May 2002, the Project received settlement proceeds
of $190,306.
Pump Services Company, LP
(a wholly-owned subsidiary, known as the California Pumping Project)
In 1995, the Trust acquired a package of natural gas and diesel engines, which
drive deep irrigation well pumps in Ventura County, California. The engines'
shaft horsepower-hours are sold to farmers at a discount from the price of
equivalent kilowatt hours of electricity. The operator pays for fuel,
maintenance, repair and replacement. The project has an equivalent of 2
megawatts of power.
B-3 Limited Partnership and Pittsfield Investor Limited Partnership
On August 31, 1994, the Trust made a limited partnership investment in the B-3
Limited Partnership, ("B-3") which was formed to construct and operate a
municipal waste transfer station, located in Columbia County, New York. The
project commenced operations in January 1995.
In exchange for its investment, the Trust was entitled to receive annually a
preferred distribution of available net cash flow from the facility equal to 18%
of its investment. In the event that in any given year available net cash flow
from the project does not at least equal the amount of the preferred minimum
return, the amount of such shortfall was payable on a priority basis out of any
available net cash flow in subsequent years. The Trust was also entitled to
receive additional distributions from any net cash flow in excess of the 18%
return on its investment. The aggregate purchase price of the Trust's investment
in the partnership was $3,975,240.
Due to the protective rights of the other partner and in accordance with
Emerging Issues Task Force ("EITF") 96-16, Investor's Accounting for an Investee
When the Investor Has a Majority of the Voting Interest but the Minority
Shareholder or Shareholders Have Certain Approval or Veto Rights, the Trust's
50.5% ownership in B-3 was accounted for under the equity method of accounting.
The Trust's equity in the earnings of B-3 has been included in the consolidated
financial statements since acquisition in accordance with the terms in the
partnership agreement.
The partnership agreement required income (loss) earned by the partnership to be
allocated and distributed to the partners as follows:
1. Gross income is allocated as distributions declared have been allocated to
the partners.
2. The difference between distributions declared and net income before
depreciation is allocated to the partners according to partnership
interests
3. Depreciation expense is allocated to the partners proportionally according
to their original capital contributions to the partnership.
On January 4, 1994, the Trust made a limited partnership investment in the
Pittsfield Investors Limited Partnership ("PILP"), a facility that burns
municipal solid waste located in Pittsfield, Massachusetts. The Trust wrote off
its investment in PILP in 1998.
On September 20, 2002, the Trust, sold 100% of its ownership interest in B-3 and
PILP, to EAC Operations, Inc., the other limited partner of both entities. The
acquisition agreement provides for the sale of 100% of the Trus' s ownership in
the two partnerships in return for $1,200,000 cash and $5,000,000 of interest
bearing promissory notes. The notes bear interest at a rate of 10% per annum,
and will be repaid monthly over a 17 year term, of which the first two years of
payments will consist of interest only. The notes are collateralized by all the
assets of the partnerships.
The purchase price for B-3 was $3,400,000, of which $400,000 was paid in cash at
the time of closing. The purchase price for PILP was $2,800,000, of which
$800,000 was paid in cash at the time of closing.
Recovery of interest and principal under the promissory notes is dependent
solely upon the operating results of the limited partnership investments sold.
Consequently, in accordance with SEC Staff Accounting Bulletin Topic 5E, the
Trust has not recorded a gain on the sale of its ownership interest. The cash
proceeds received were recorded as a reduction of its investment in the limited
partnership investments and interest and principal received under the promissory
note will continue to be recorded as a reduction of the note receivable until
the carrying value has been reduced to zero. In the event the divested
businesses incur operating losses in future periods, a corresponding reduction
in the note receivable will be recorded as a valuation allowance.
The carrying value of the note at December 31, 2004 and 2003 was $363,240 and
$807,795 respectively.
Summarized financial information for the B-3 Limited Partnership for the period
ended September 20, 2002 is as follows:
Revenue $ 4,477,725
Operating expenses 4,343,054
-----------------
Net income $ 134,671
-----------------
Trust share $ 104,497
-----------------
4. Note Receivable from Sale of Investment
On June 25, 1997, the Trust sold its entire interest in a chilled water facility
to subsidiaries of NRG Energy, Inc. ("NRG"). As part of the consideration, the
Trust received an 8% promissory note in the amount of $2,700,000 payable monthly
over six years. In 2003, the Trust received the final payments under the
promissory note.
5. Operating Lease
The Monterey Project has a non-cancelable operating lease which expires in May
2021. Future minimum lease payments as of December 31, 2004 are as follows:
Year Ended
December 31,
- -----------
2005 $ 299,896
2006 299,896
2007 299,896
2008 299,896
2009 299,896
Thereafter 3,398,821
------------------
Total $ 4,898,301
------------------
Rent expense for the years ended December 31, 2004, 2003 and 2002 was $299,896.
6. Forward Gas Contracts
The Monterey Project has an agreement with a natural gas provider to purchase a
fixed quantity of natural gas at fixed prices through August 2006.
In order to limit its exposure to commodity price fluctuations, the Trust
entered into agreements to resell a fixed quantity of the natural gas it
purchases back to the same supplier at fixed prices through August 2006.
For the years ended December 31, 2004 and 2003, the Trust recognized unrealized
gains of $277,512 and $487,902, respectively, in its consolidated statement of
operations which represent the net difference between the market value and the
fixed contract price of the forward natural gas contracts. The Trust recognized
the fair value of these forward natural gas contracts at December 31, 2004 and
2003 of $765,414 and $487,902, respectively, in its consolidated balance sheets.
In addition to the letter of credit discussed in Note 7, the gas supply
agreement is collateralized by the Monterey Project's trade accounts receivable.
Future minimum purchase and sale commitments under the forward gas contracts as
of December 31, 2004 are as follows:
Year Ended
December 31,
- -----------
Purchase Resale Total Net
Commitments Commitments Commitments
------------------ ---------------- -----------------
2005 $ 1,365,903 $ 131,355 $ 1,234,548
2006 910,602 95,418 815,184
------------------ ---------------- -----------------
Total $ 2,276,505 $ 226,773 $ 2,049,732
------------------ ---------------- -----------------
7. Line of Credit Facility and Letters of Credit
On June 26, 2003, Ridgewood Renewable Power LLC, the Managing Shareholder of the
Trust, entered into a $5,000,000 Revolving Credit and Security Agreement with
Wachovia Bank, National Association. The agreement allows the Managing
Shareholder to obtain loans and letters of credit for the benefit of the trusts
and funds that it manages. On February 20, 2004, the Managing Shareholder and
Wachovia Bank amended the agreement increasing the amount to $6,000,000 and
extended the date of expiration to June 30, 2005. As described in Note 11 the
agreement has subsequently been extended. As part of the agreement, the Trust
agreed to limitations on its ability to incur indebtedness, liens and provide
guarantees.
In August 2003, the Trust issued through its bank a standby letter of credit, in
the amount of $504,000 to secure the gas purchases for the Monterey project. The
Trust used Ridgewood Renewable Power's credit facility to collateralize the
letters of credit. In August of 2004, the supplier of natural gas to the
Monterey project agreed to reduce the standby letter of credit to $230,000.
8. Transactions with Managing Shareholder and Affiliates
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 to the
Managing Shareholder an annual management fee equal to 1.5% of the net asset
value of the Trust as of the beginning of the year. During 2004, 2003 and 2002,
the Trust paid management fees to the Managing Shareholder of $91,099, $108,407
and $117,058, respectively.
Under the Declaration of Trust, the Managing Shareholder receives 100% of
current year profits until cumulative profits equal cumulative losses allocated
to the Managing Shareholder. Once cumulative profits equal cumulative losses
allocated to the Managing Shareholder, current year profits are allocated 99% to
the Managing Shareholder until the shareholders receive cumulative distributions
equal to their original investment ("Payout"). After Payout, the Managing
Shareholder is entitled to receive 20% of current year profits. Losses incurred
in any given year are allocated 1% to the Managing Shareholder, provided the
allocation of losses to the shareholders shall be limited to prevent the
shareholder from having a negative capital account.
The Managing Shareholder is also entitled to receive 1% of all annual
distributions made by the Trust (other than those derived from the disposition
of Trust property) until the shareholders have been distributed a cumulative
amount equal to 14% per annum of their equity contribution. Thereafter, the
Managing Shareholder is entitled to receive 20% of the remaining distributions
for the year. Once Payout is reached, the Managing Shareholder is entitled to
receive 20% of the distributions
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 incurred through
December 31, 2004.
The Managing Shareholder owns 1 investor shares of the Trust with a cost basis
of $100,000. The Trust granted the Managing Shareholder a single Management
Share representing the Managing Shareholder's management rights and rights to
distributions of cash flow.
Under the Management Agreement with the Trust, Ridgewood Power Management LLC
("Ridgewood Management"), an entity related to the Managing Shareholder through
common ownership, provides management, purchasing, engineering, planning and
administrative services to the power generation projects operated by the Trust.
Ridgewood Management charges the project at its cost for these services and for
the allocable amount of certain overhead items. Allocations of costs are on the
basis of identifiable direct costs, time records or in proportion to amount
invested in projects managed by Ridgewood Management. During the year ended
December 31, 2004, 2003 and 2002, Ridgewood Management charged Sunnyside
Cogeneration Partners $116,810, $120,252 and $132,810, respectively, for
overhead items allocated in proportion to the amount invested in projects
managed. During the years ended December 31, 2004, 2003 and 2002, Ridgewood
Management charged the California Pumping Project $19,704, $21,141 and $20,973,
respectively, for overhead items allocated in proportion to the amount invested
in projects managed. Ridgewood Management also charged Sunnyside Cogeneration
Partners and the California Pumping Project for all of the direct operating and
non-operating expenses incurred during the periods.
From time to time, the Trust records short-term payables and receivables from
other affiliates in the ordinary course of business. The amounts payable and
receivable do not bear interest. At December 31, 2004 and 2003, the Trust had
amounts due to affiliates of $61,699 and $83,857, respectively, to Ridgewood
Management. At December 31, 2004 and 2003, the Trust had amounts due from
another affiliate of $0 and $16,628, respectively.
9. Fair Value of Financial Instruments
At December 31, 2004 and 2003, the carrying value of the Trust's cash and cash
equivalents, trade receivable, notes receivable, accounts payable and accrued
expenses, accrued fuel expense, and accrued professional fees approximates their
fair value. The fair value of the letter of credit does not differ materially
from its carrying value.
10. Financial Information by Business Segment
The Trust's business segments were determined based on similarities in economic
characteristics and customer base. The Trust's principal business segments
consist of wholesale and retail.
Common services shared by the business segments are allocated on the basis of
identifiable direct costs, time records or in proportion to amount invested in
projects managed by Ridgewood Management.
The financial data for business segments are as follows:
Wholesale
------------------------------------
2004 2003 2002
---------- ---------- ----------
Revenue .............. $2,135,285 $2,104,050 $2,122,189
Depreciation and
amortization ....... 244,498 245,159 245,718
Operating income ..... 309,628 115,945 442,677
Unrealized gain on gas
purchase contract .. 277,512 487,902 --
Total assets ......... 4,076,309 4,033,297 3,838,577
Capital expenditures.. -- -- --
Retail
------------------------------------
2004 2003 2002
---------- ---------- ----------
Revenue ............... $ 379,513 $ 602,694 $ 952,925
Depreciation and
amortization ........ 103,502 103,593 102,944
Operating income (loss) (193,351) (94,224) 17,289
Unrealized gain on gas
purchase contract .. -- -- --
Total assets .......... 145,050 255,984 321,862
Capital expenditures .. 27,110 -- 22,432
Corporate
------------------------------------
2004 2003 2002
---------- ---------- ----------
Revenue .............. $ -- $ -- $ --
Depreciation and
amortization ....... -- -- --
Operating loss ....... (232,870) (258,605) (552,400)
Unrealized gain on gas
purchase contract .. -- -- --
Total assets ......... 795,662 2,018,479 3,400,566
Capital expenditures.. -- -- --
Total
------------------------------------
2004 2003 2002
---------- ---------- ----------
Revenue .............. $2,514,798 $2,706,744 $3,075,114
Depreciation and
amortization ....... 348,000 348,752 348,662
Operating loss ....... (116,593) (236,884) (92,434)
Unrealized gain on gas
purchase contract .. 277,512 487,902 --
Total assets ......... 5,017,021 6,307,760 7,561,005
Capital expenditures . 27,110 -- 22,432
11. Subsequent Events
On June 14, 2005, the Managing Shareholder received notification from Wachovia
Bank that its Line of Credit, as described in Note 7, was extended through
September 30, 2005.
B. Supplementary Financial Information (Unaudited)
Selected Quarterly Financial Data for the years ended December 31, 2004 and
2003.
2004
- -------------------------------------- ---------------- ----------------- ----------------- ------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- -------------------------------------- ---------------- ----------------- ----------------- ------------------
Revenue $633,000 $633,000 $665,000 $584,000
- -------------------------------------- ---------------- ----------------- ----------------- ------------------
Income (loss) from operations 15,000 (30,000) (18,000) (84,000)
- -------------------------------------- ---------------- ----------------- ----------------- ------------------
Net income (loss) 247,000 266,000 288,000 (634,000)
- -------------------------------------- ---------------- ----------------- ----------------- ------------------
2003
- -------------------------------------- ---------------- ----------------- ----------------- ------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- -------------------------------------- ---------------- ----------------- ----------------- ------------------
Revenue $669,000 $607,000 $759,000 $672,000
- -------------------------------------- ---------------- ----------------- ----------------- ------------------
Income (loss) from operations 18,000 (73,000) (101,000) (81,000)
- -------------------------------------- ---------------- ----------------- ----------------- ------------------
Net income (loss) 24,000 (70,000) 160,000 159,000
- -------------------------------------- ---------------- ----------------- ----------------- ------------------
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
The Trust dismissed PricewaterhouseCoopers LLP as its independent accountants on
January 14, 2004 and appointed Perelson Weiner LLP as successor, as reported in
the Trust's Current Report on Form 8-K dated January 20, 2004, incorporated
herein by reference.~There were no disagreements with PricewaterhouseCoopers LLP
for the year ended December 31, 2002 or for the interim period through January
20, 2004, whether or not resolved, on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements if not resolved to the satisfaction of PricewaterhouseCoopers LLP
would have caused them to make reference thereto in their report on the
financial statements for such years.
Item 9A. Controls and Procedures
The Trust's Chief Executive Officer and Chief Financial Officer conducted an
evaluation of the effectiveness and design of the Trust's disclosure controls
and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934
(the "Exchange Act"). Based upon that evaluation, the Chief Executive Officer
and Chief Financial Officer each concluded that the disclosure controls and
procedures were effective.
There have been no significant changes in the internal controls or in other
factors that could significantly affect these controls subsequent to the date
that they completed their evaluation.
The term "disclosure controls and procedures" is defined in Rule 13a-15(e) of
the Exchange Act as "controls and other procedures designed to ensure that
information required to be disclosed by the issuer in the reports it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the [Securities and Exchange] Commission's
rules and forms." The Trust's disclosure controls and procedures are designed to
ensure that material information relating to the consolidated subsidiaries is
accumulated and communicated to management, including the Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding the required disclosures.
Item 9B. Other Information.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) General.
As Managing Shareholder of the Trust, Ridgewood Renewable Power LLC has direct
and exclusive discretion in management and control of the affairs 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.
(b) Managing Shareholder.
Ridgewood Power Corporation 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. It
organized the Trust and acted as managing shareholder until April 1999. On or
about April 21, 1999 it was merged into the current Managing Shareholder,
Ridgewood Power LLC. In December of 2002, Ridgewood Power, LLC changed its name
to Ridgewood Renewable Power, LLC. Robert E. Swanson is the controlling member
and sole manager of the Managing Shareholder. All of the equity in the Managing
Shareholder is owned by Mr. Swanson or by family trusts. Mr. Swanson has the
power on behalf of those trusts to vote or dispose of the membership equity
interests owned by them.
The Managing Shareholder has also organized the Other Power Trusts as Delaware
business trusts or other Delaware limited liability companies. Ridgewood
Renewable Power LLC is the managing shareholder of the Other Power Trusts and
the manager of the Ridgewood LLCs. The business objectives of these trusts and
LLCs are similar to those of the Trust.
A number of other companies are affiliates of Mr. Swanson and the Managing
Shareholder. Each of these also was organized as a corporation that was
wholly-owned by Mr. Swanson. In April 1999, most of them were merged into
limited liability companies with similar names and Mr. Swanson became the sole
manager and controlling owner of each limited liability company.
The Managing Shareholder is an affiliate of Ridgewood Energy Corporation
("Ridgewood Energy"), which has organized limited partnership funds that have
invested in oil and natural gas drilling and completion and other related
activities. Other affiliates of the Managing Shareholder include Ridgewood
Securities, an NASD member, which has been the placement agent for the private
placement offerings of the eight trusts and four LLCs sponsored by Ridgewood
Renewable Power, LLC and the funds sponsored by Ridgewood Capital, which assists
in offerings made by the Managing Shareholder and which is the sponsor of
privately offered venture capital funds. Each of these companies is controlled
by Robert E. Swanson, who is their sole director or manager.
Set forth below is certain information concerning Mr. Swanson and other
executive officers of the Managing Shareholder.
Robert E. Swanson, age 58, has also served as Chief Executive Officer of the
Trust since its inception in 1991 and as Chief Executive Officer of RPM, the
Other Power Trusts and the Ridgewood LLCs, since their respective inceptions.
Mr. Swanson has been President and registered principal of Ridgewood Securities
and became the Chairman of the Board of Ridgewood Capital on its organization in
1998. In addition, he has been President 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.
Randall D. Holmes, age 58, has served as the President and Chief Operating
Officer of the Managing Shareholder, RPM, the Trust, the Other Power Trusts and
the Ridgewood LLCs since January 1, 2004. Prior to that, he served as the
primary outside counsel to and has represented the Managing Shareholder and its
affiliates since 1991.~ Mr. Holmes has over 30 years of acquisition,
development, financing and operating experience in the electric generation and
other industries. Mr. Holmes previously was counsel to Downs Rachlin Martin PLLC
in Vermont ("DRM"), to DeForest & Duer in New York and to Chadbourne & Parke in
New York.~ Mr. Holmes was also President of the Pepsi-Cola Operating Company of
Chesapeake and Indianapolis and was Vice President of Advanced Medical
Technologies.~ He was also a Partner with the New York law firm of Barrett Smith
Schapiro Simon & Armstrong where he specialized in financing transactions,
acquisitions and tax planning. DRM is one of the primary outside counsel to the
Trust, Managing Shareholder and their affiliates. Immediately prior to being
appointed President and Chief Operating Officer, Mr. Holmes was counsel to DRM.
He has maintained a minor consulting relationship with DRM in which he may act
as a paid advisor to DRM on certain matters that are unrelated to Ridgewood.
Such relationship will not require a significant amount of Mr. Holmes' time and
it is expected that such relationship will not adversely affect his duties as
President and Chief Operating Officer. Mr. Holmes is a graduate of Texas Tech
University and the University of Michigan School of Law and is a member of the
New York state bar.
Robert L. Gold, age 46, has served as Executive Vice President of the Managing
Shareholder, RPM, the Trust, the Other Power Trusts and the Ridgewood LLCs since
their respective inceptions. He has been President of Ridgewood Capital since
its organization in 1998. As such, he is President of the Ridgewood Venture
Funds. 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.
Douglas R. Wilson, age 45, was appointed Executive Vice President and Chief
Financial Officer of RPM, the Trust, the Other Power Trusts and the Ridgewood
LLCs as of 15 April 2005. Mr. Wilson has been associated with the Ridgewood
group of companies as a consultant and advisor since 1996 performing investment
evaluation, structuring and execution services for the Other Power Trusts and
for Ridgewood Venture Funds. Since May of 2002 Mr. Wilson has served as a
Director, CEO and Finance Director for CLP Envirogas Ltd. ("Envirogas") which
manages Ridgewood's UK landfill gas operations. Mr. Wilson has wide energy
industry experience including hydrocarbon and project finance lending and
investing and has participated in over $1 billion of financings. During his 22
years in the financial services industry Mr. Wilson has been with RepublicBank
of Dallas, Shearson-Lehman Brothers and Bank of Tokyo. Mr. Wilson is a graduate
of the University of Texas at Arlington and has an MBA from the Wharton School
at the University of Pennsylvania. It is anticipated that Mr. Wilson will
continue to serve as an executive and Director of Envirogas during the remainder
of its expansion phase which is estimated to be completed in 18-24 months.
During this period Mr. Wilson will devote approximately 20-25% of his time to
the affairs of Envirogas. It is not anticipated that this executive role at
Envirogas will adversely affect performance of his duties as Executive Vice
President and Chief Financial Officer.
Daniel V. Gulino, age 44, is Senior Vice President and General Counsel of the
Managing Shareholder, RPM, Ridgewood Capital, the Trust, Other Power Trusts and
the Ridgewood LLCs. He began his legal career as an associate for Pitney,
Hardin, Kipp & Szuch, a large New Jersey law firm, where his experience included
corporate acquisitions and transactions. Prior to joining Ridgewood, Mr. Gulino
was in-house counsel for several large electric utilities, including GPU, Inc.,
Constellation Power Source, Inc. and PPL Resources, Inc., where he specialized
in non-utility generation projects, independent power and power marketing
transactions. Mr. Gulino also has experience with the electric and natural gas
purchasing of industrial organizations, having worked as in-house counsel for
Alumax, Inc. (now part of Alcoa) where he was responsible for, among other
things, Alumax's electric and natural gas purchasing program. Mr. Gulino is a
member of the New Jersey State Bar and Pennsylvania State Bar. He is a graduate
of Fairleigh Dickinson University and Rutgers University School of Law - Newark.
(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.
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 is subject to amendment by the parties with the approval of a majority
in interest of the Investors.
(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. Holmes is the President of
the Trust and the other executive 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. Holmes 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) Corporate Trustee
The Corporate Trustee of the Trust is Christiana Bank & Trust Company. Legal
title to Trust Property is in the name of the Trust. Christiana Bank is also a
trustee of the Other Power Trusts. The principal office of Christiana Bank is
1314 King Street, Wilmington, DE 19801.
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
The individuals subject to the requirements of Section 16(a) may not have filed
a Form 3 for the year ended 2004 and~possibly prior years. However, each of
these individuals~have filed a Form 3 in~year 2005 and~will maintain compliance
with 16(a) as~required.
(g) RPM.
As discussed above at Item 1 - Business, RPM has assumed day-to-day management
responsibility for the Monterey Project, effective January 1, 1996 and operating
responsibility for the Pumping Project in October 1998 and had assumed certain
responsibilities for the San Diego Project in early 1997 until its sale. Like
the Managing Shareholder, RPM is controlled by Robert E. Swanson. It has entered
into an "Operation Agreement" with certain of the Trust's subsidiaries,
effective January 1, 1996, under which RPM, under the supervision of the
Managing Shareholder, provides the management, purchasing, engineering, planning
and administrative services for those Projects that were previously furnished by
employees of the Trust or by unaffiliated professionals or consultants and that
were borne by the Trust or Projects as operating expenses. To the extent that
those services were provided by the Managing Shareholder and related directly to
the operation of the Project, RPM charges the Trust at its cost for these
services and for the Trust's allocable amount of certain overhead items. RPM
shares space and facilities with the Managing Shareholder and its Affiliates. To
the extent that common expenses can be reasonably allocated to RPM, the Managing
Shareholder may, but is not required to, charge RPM 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 are borne by the Managing
Shareholder.
The Managing Shareholder does not charge RPM for the full amount of rent,
utility supplies and office expenses allocable to RPM. As a result, RPM'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.
RPM will not receive any compensation in excess of its costs.
Allocations of costs are made either on the basis of identifiable direct costs,
time records or in proportion to each program's investments in Projects managed
by RPM; all allocations are made in a manner consistent with generally accepted
accounting principles. The following table sets forth the cost reimbursement to
RPM.
2004 2003 2002 2001 2000
RPM Cost
Reimbursements 2,192,292 2,486,469 2,862,273 2,955,915 3,032,954
The Operation Agreement may be amended by agreement of the Managing Shareholder
and RPM; however, no amendment that materially increases the obligations of the
Trust or that materially decreases the obligations of RPM 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 executive officers of RPM are the same as those of the Managing Shareholder
set forth above.
(h). Code of Ethics.
The Managing Shareholder has adopted a Code of Ethics in March 2004 for itself,
the Trust, Other Power Trusts, Ridgewood LLCs and affiliates. The Code of Ethics
is attached hereto as Exhibit 10U.
Item 11. Executive Compensation.
The Managing Shareholder compensates its officers without additional payments by
the Trust. The Trust will reimburse RPM at cost for services provided by RPM'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.
Christiana, 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 Trust sold 235.3775 Investor Shares (approximately $23.5 million of gross
proceeds) of beneficial interest in the Trust pursuant to a private placement
offering under Rule 506 of Regulation D under the Securities Act. The offering
closed on January 31, 1994. Further details concerning the offering are set
forth above at Item 1 -- Business.
Ridgewood Renewable Power, the Managing Shareholder purchased for cash of
$121,800 in the offering 1.45 Investor Shares (.6 of 1% of the outstanding
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 such (excluding its interest in the
Trust attributable to Investor Shares it acquired in the offering). Additional
information concerning the management rights of the Managing Shareholder is at
Item 1 - Business and at 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
that the Trust deems necessary to cover anticipated Trust expenses, is to be
distributed to the Investors and the Managing Shareholder, from time to time, as
the Trust deems appropriate. Under the Declaration of Trust, the Managing
Shareholder receives 100% of current year profits until cumulative profits equal
cumulative losses allocated to the Managing Shareholder. Once cumulative profits
equal cumulative losses allocated to the Managing Shareholder, current year
profits are allocated 99% to the Managing Shareholder until the Investors
receive cumulative distributions equal to their original investment ("Payout").
After Payout, the Managing Shareholder is entitled to receive 20% of current
year profits. Losses incurred in any given year are allocated 1% to the Managing
Shareholder, provided the allocation of losses to the Investors shall be limited
to prevent the Investor from having a negative capital account.
The Managing Shareholder is also entitled to receive 1% of all annual
distributions made by the Trust (other than those derived from the disposition
of Trust property) until the Investors have been distributed a cumulative amount
equal to 14% per annum of their equity contribution in such year. Thereafter,
the Managing Shareholder is entitled to receive 20% of the remaining
distributions for the year. Once Payout is reached, the Managing Shareholder is
entitled to receive 20% of the distributions
In 2004 and 2003, as stated at Item 5 - Market for Registrant's Common Equity
and Related Stockholder Matters, as well as in prior years, the Trust made
distributions to the Managing Shareholder (which is a member of the Board of the
Trust) as stated at Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters. In addition, the Trust and its subsidiaries paid fees and
reimbursements to the Managing Shareholder and its affiliates as follows:
2004 2003 2002 2001 2000
Managing
Shareholder $91,099 $108,407 $117,058 $177,727 $ -0-
The management fee, payable monthly under the Management Agreement at the annual
rate of 2.5% of the Trust's prior year 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. Under the
Declaration of Trust, the annual rate fell to 1.5% per year beginning February
1, 1999. Beginning April, 1999, the Managing Shareholder waived the fee.
Effective January 1, 2001, it resumed payment of the management fee at the 1.5%
of net asset value annual rate.
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. Payroll and other costs of operation of the
Trust's Projects are reimbursed to RPM. The reimbursements to RPM, which do not
exceed its actual costs and allocable overhead, are described at Item 10(g) -
Directors and Executive Officers of the Registrant -- RPM.
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.
Item 14. Principal Accountant Fees and Services
Audit Fees
The aggregate fees billed for professional services rendered by Perelson Weiner
LLP for the audits of the Trust's annual consolidated financial statements for
the years ended December 31, 2004 and 2003 and the reviews of the Trust's
consolidated financial statements included in the Quarterly Reports on Form 10-Q
for the year ended December 31, 2004 were approximately $31,000 and $26,000,
respectively. The aggregate fees billed for professional services rendered by
PricewaterhouseCoopers LLP for the reviews of the Trust's consolidated financial
statements included in the Quarterly Reports on Form 10-Q for the year ended
December 31, 2003 was approximately $20,000.
Tax Fees
The aggregate fees billed for all tax services rendered by Perelson Weiner LLP
for the years ended December 31, 2004 and 2003 were approximately $25,000 for
each year. Tax services principally include tax compliance, tax advice and
planning (including foreign tax services, as well as tax planning strategies for
the preservation of net operating loss carryforwards).
Audit Related Fees
None.
All Other Fees
None.
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
The following documents are filed as part of this report:
(a) Financial Statements.
See the Index to Financial Statements in Item 8 hereof.
(b) Reports on Form 8-K.
None.
(c) Exhibits
3A. Certificate of Trust of the Registrant, is incorporated by reference
to Exhibit 3A to the Registrant's Registration Statement on Form 10
filed with the Commission on February 27, 1993.
3B. Amended and Restated Declaration of Trust of the Registrant, is
incorporated by reference to Exhibit 4 to the Quarterly Report on Form
10Q of the Registrant for the quarter ended September 30, 1993.
10A. Management Agreement dated as of January 4, 1993 between the
Registrant and Ridgewood Power Corporation, is incorporated by
reference to Exhibit 10 to the Registrant's Registration Statement on
Form 10 filed with the Commission on February 27, 1993.
10B. Limited Partnership Agreement of Pittsfield Investors Limited
Partnership (without exhibits), is incorporated by reference to
Exhibit 2(i) to the Form 8-K of Registrant filed with the Commission
on January 19, 1994.
10C. Asset Purchase Agreement between EAC Systems, Inc. and Vicon Recovery
Associates ("Vicon") dated as of December 23, 1992 (the "Asset
Purchase Agreement") (without exhibits), is incorporated by reference
to Exhibit 2(ii) to the Form 8-K of Registrant filed with the
Commission on January 19, 1994.
10D. First Amendment of Asset Purchase Agreement dated as of December 30,
1993 (without exhibits), is incorporated by reference to Exhibit 2(ii)
to the Form 8-K of Registrant filed with the Commission on January 19,
1994.
10E. Lease dated as of September 1, 1979 between the City of Pittsfield,
Massachusetts (acting by and through its Industrial Development
Financing Authority), is incorporated by reference to Exhibit 2(iv) to
the Form 8-K of Registrant filed with the Commission on January 19,
1994.
10F. Amended and Restated Solid Waste Disposal and Resource Recovery
Agreement dated August 6, 1979 by and among the City of Pittsfield,
Vicon and others (together with amendments dated October 26, 1984,
July 28, 1989 and December 29, 1993), is incorporated by reference to
Exhibit 2(v) to the Form 8-K of Registrant filed with the Commission
on January 19, 1994.
10G. Steam Purchase Agreement by and between Crane & Co., Inc. and Vicon
dated as of February 1, 1979 (with amendments), is incorporated by
reference to Exhibit 2(vi) to the Form 8-K of Registrant filed with
the Commission on January 19, 1994.
The Registrant is no longer a party to former Exhibits 10H through 10M because
of its sale of the San Diego Project. See Exhibits 10P-R.
10N. Acquisition Agreement dated as of January 9, 1995 among Sunnyside
Cogen, Inc., and NorCal Sunnyside Inc., as Sellers, and RW Monterey,
Inc. and Ridgewood Electric Power Trust II, as Purchasers, is
incorporated by reference to Exhibit 2(i) to the Form 8K of Registrant
filed with the Commission on February 16, 1995.
10O. Acquisition Agreement, dated as of March 31, 1995, by and among the
Trust and its subsidiary, Pump Services Corporation, as purchasers and
Donald C. Stewart, Union Energy Corp. and Donald A. Sherman as
sellers. Incorporated by reference to Exhibit 10O to the Annual Report
on Form 10-K of the Registrant for the year ended December 31, 1995.
10P. Partnership Interest Purchase Agreement, dated as of June 25, 1997, by
and among the Trust, RSD Power Corp., NRG San Diego, Inc., and NRG del
Coronado, Inc. Incorporated by reference to Exhibit 2.A. of the
Current Report on Form 8-K of the Registrant, dated June 25, 1997.
Exhibits and schedules are omitted, and a list of the omitted
documents is found at page 20 of the agreement. The Registrant agrees
to furnish supplementally a copy of any omitted exhibit or schedule to
the Partnership Interest Purchase Agreement to the Commission upon
request.
10Q. Purchase Money Promissory Note. Incorporated by reference to Exhibit
2.B. of the Current Report on Form 8-K of the Registrant, dated June
25, 1997.
10R. Security and Pledge Agreement, dated as of June 25, 1997, by and among
the Trust, RSD Power Corp., NRG San Diego, Inc., and NRG del Coronado,
Inc. Incorporated by reference to Exhibit 2.C. of the Current Report
on Form 8-K of the Registrant, dated June 25, 1997.
10S. Master Sale Agreement, dated August 8, 2001, by and between Sunnyside
Cogeneration Partners, L.P. and Coral Energy Resources, L.P. (the
terms of the actual transaction are subject to confidentiality
provisions).
10T. Acquisition Agreement, dated September 20, 2002, by and between the
Trust and EAC Operations, Inc.
10U. Code of Ethics, adopted March 1, 2004.
99.1. Certifications under Section~906 of the Sarbanes-Oxley Act.
The Registrant agrees to furnish supplementally a copy of any omitted exhibit or
schedule to agreements filed as exhibits to the Commission upon request.
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.
RIDGEWOOD ELECTRIC POWER TRUST II (Registrant)
By:/s/ Robert E. Swanson Chief Executive Officer July 15, 2005
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 Chief Executive Officer July 15, 2005
Robert E. Swanson
By:/s/ Douglas R. Wilson Executive Vice President July 15, 2005
Douglas R. Wilson and Chief Financial Officer
RIDGEWOOD RENEWABLE POWER LLC Managing Shareholder July 15, 2005
By:/s/ Robert E. Swanson Chief Executive Officer
Robert E. Swanson
CERTIFICATION PURSUANT TO RULE 13A-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Robert E. Swanson, Chief Executive Officer of Ridgewood Electric Power Trust
II ("registrant"), certify that:
1. I have reviewed this annual report on Form~10-K of the registrant;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules~13a-15(e) and 15d-15(e)) for the registrant and we have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which the Annual Report is
being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure controls and
procedures and presented in the Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by the Annual Report based on such evaluation; and
(c) Disclosed in the Annual Report any change in the Registrant's internal
control over financial reporting that occurred during the Registrant's most
recent fiscal quarter (the Registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely
to materially affect, the Registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and senior management:
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal control
over financial reporting.
Date: July 15, 2005
/s/ Robert E. Swanson
Robert E. Swanson
Chief Executive Officer
CERTIFICATION PURSUANT TO RULE 13A-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Douglas R. Wilson, Chief Financial Officer of Ridgewood Electric Power Trust
II ("registrant"), certify that:
1. I have reviewed this annual report on Form~10-K of the registrant;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules~13a-15(e) and 15d-15(e)) for the registrant and we have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which the Annual Report is
being prepared;
(b) Evaluated the effectiveness of the Registrant's disclosure controls and
procedures and presented in the Annual Report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by the Annual Report based on such evaluation; and
(c) Disclosed in the Annual Report any change in the Registrant's internal
control over financial reporting that occurred during the Registrant's most
recent fiscal quarter (the Registrant's fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely
to materially affect, the Registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to the
registrant's auditors and senior management:
(a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrant's ability to record, process,
summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal control
over financial reporting.
Date: July 15, 2005
/s/ Douglas R. Wilson
Douglas R. Wilson
Chief Financial Officer