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, 2002
Commission file number 0-24240
RIDGEWOOD ELECTRIC POWER TRUST I
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-3105824
(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.[X]
Indicate by check mark whether registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes ___ No X
There is no market for the Shares. The aggregate capital contributions made
for the Registrant's voting Shares held by non-affiliates of the Registrant at
March 31, 2003 was $10,550,000 and the number of shares of beneficial interest
outstanding at March 31, 2002 was 105.5.
Exhibit index is at page 28.
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 I (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.
The Trust therefore warns readers of this document that they should not
rely on these forward-looking statements without considering all of the things
that could make them inaccurate. The Trust's other filings with the Securities
and Exchange Commission and its offering materials discuss many (but not all) of
the risks and uncertainties that might affect these forward-looking statements.
Some of these are changes in political and economic conditions, federal
or state regulatory structures, government taxation, spending and budgetary
policies, government mandates, demand for electricity and thermal energy, the
ability of customers to pay for energy received, supplies and prices of fuels,
operational status of plant, mechanical breakdowns, availability of labor and
the willingness of electric utilities to perform existing power purchase
agreements in good faith.
By making these statements now, the Trust is not making any commitment
to revise these forward-looking statements to reflect events that happen after
the date of this document or to reflect unanticipated future events.
(a) General Development of Business.
The Trust was organized as a Delaware business trust on May 9, 1994. It
was organized to acquire all of the assets and to carry on the business of
Ridgewood Energy Electric Power, L.P. (the "Partnership"). The Partnership was a
Delaware limited partnership, which was organized in March 1991 to participate
in the development, construction and operation of independent power generating
facilities ("Projects"). The Partnership raised $10.5 million in a single
private offering conducted in 1991 and early 1992. Substantially all of those
funds were applied prior to 1995 to the purchase of interests in the Projects
described below, to the funding of business ventures that were unsuccessful and
to the paying the fees and expenses of the Partnership's offering and the
Partnership. On June 15, 1994, with the approval of the partners, the
Partnership was combined into the Trust, which acquired all of the Partnership's
assets and which became liable for all of the Partnership's obligations. In
exchange for their interests in the Partnership, the investors in the
Partnership received an equivalent number of Investor Shares (as defined below)
in the Trust. The Partnership was dissolved.
The Trust made an election to be treated as a "business development
company" under the Investment Company Act of 1940, as amended (the "1940 Act").
On May 26, 1994 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 July 15, 1994 the election and registration became effective. 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 "business development
company" 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
December 18, 2001. 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 is organized similarly to a limited partnership. Ridgewood
Renewable Power LLC (the "Managing Shareholder"), a Delaware 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. The Managing
Shareholder is not regularly elected by the Investors.
Ridgewood Energy Holding Corporation ("Ridgewood Holding"), a Delaware
corporation, 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
(collectively "Other Power Trusts"), which have been organized by the Managing
Shareholder:
o Ridgewood Electric Power Trust II ("Power II");
o Ridgewood Electric PowerTrust 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 The RidgewoodPower B Fund/Providence Expansion (the "B Fund").
In addition, the Trust is affiliated with the following Delaware
limited liability companies ("Ridgewood LLCs"), which have been organized by the
Managing Shareholder:
o Ridgewood Renewable PowerBank LLC
o Ridgewood Renewable PowerBank II LLC
With respect to the Ridgewood LLCs, the Managing Shareholder acts as the LLC's
Manager.
(b) Financial Information about Industry Segments.
The Trust operates in only one industry segment: independent electric power
generation.
(c) Narrative Description of Business.
(1) General Description.
The Trust was formed to participate in the development, construction
and operation of independent electric power projects. Many of these projects are
qualifying facilities or "QFs." Historically, producers of electric power in the
United States consisted of regulated utilities serving end-use retail customers
and certain industrial users that produced electricity to satisfy their own
needs. The independent power industry in the United States was created by the
Public Utility Regulatory Policies Act of 1978, as amended ("PURPA"), among
other things. PURPA 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 formula approved by state
regulatory commissions. Although one of the benefits of PURPA is the requirement
imposed upon electric utilities to purchase QF electric power, there are
nonetheless some QFs that do not have Power Contracts with electric utilities
because, among other reasons, current avoided cost is too low for the QF to
sustain operations, the power contract was "bought out" or such electric
utilities take the view that state implementation of PURPA no longer requires
such purchase of QF power. Southern California Edison Company ("SCE"), to whom
the Brea Project sells electric energy, has taken such a position. SCE was being
legally challenged by several QFs but the matter was not resolved and has
generally been subsumed in the general restructuring currently being conducted
by the California Public Utilities Commission ("CPUC"). See Section 4, Trends in
the Electric Utility and Independent Power Industries.
(2) Projects.
(i) Brea Project. In October 1994, the Trust purchased, for $3.1
million, an equity interest in Brea Power Partners, L.P., a partnership, which
owns and operates a 5-megawatt capacity electric generating facility fueled by
methane and other burnable gases created by the decomposing of garbage in a
landfill owned by the County of Orange, California (the "Brea Project").
On June 1, 1997, the Trust, through subsidiaries, acquired the general
partnership interest and the limited partnership interest owned by GSF Energy,
LLC, an indirect subsidiary of DQE Corporation, for a base price of $3,000,000,
and thus acquired the entire beneficial interest in the Brea Project. Ridgewood
Power Management, LLC ("RPM"), an affiliate of the Trust's Managing Shareholder,
operates and manages the day-to-day activities of the Brea Project. RPM is
reimbursed by the Trust for its actual costs incurred and allocable overhead
expenses but is not otherwise compensated.
The Brea Project is a QF. Electricity generated by the Brea Project,
over and above its own requirements, is sold to SCE under a long-term power
sales contract (a "Power Contract"). The energy price under the Power Contract
is the higher of 5.8 cents per kilowatt-hour or SCE's avoided cost, which is an
amount determined by a contract formula set forth in the Power Contract. The
Power Contract permits either party to terminate it no earlier than the end of
2004 on 5 years' advance notice. On March 23, 2000, SCE provided such written
notice to the Brea Project notifying that it was electing to terminate the Power
Contract as of March 23, 2005. After such termination, the Brea Project either
will have to enter into another long-term power contract, if available, or sell
its electric output in the competitive electric power market. There is no
assurance that Brea Project will be able to negotiate a long-term power contract
with profitable electric rates or sell its power to the market at a profit.
The purchase of the Brea Project did not include the landfill gas
collection system. Currently, GSF Energy LLC ("GSF") collects and sells landfill
gas to the Brea Project pursuant to an Amended and Restated Landfill Gas Sale
and Purchase Agreement ("Amended Gas Agreement"). GSF sells and collects such
landfill gas pursuant to a gas lease agreement with the County of Orange.
Pursuant to the prior gas agreement, the price paid by the Brea Project included
both a price per MMBTu for landfill gas delivered and a fixed annual payment. As
described further below, as a result of the Trust's development of the Olinda
Project, in 2001 RPM renegotiated the gas agreement with GSF and entered into,
on behalf of both the Brea Project and the Olinda Project, the Amended Gas
Agreement, which became effective and replaced the prior gas agreement on the
date that the Olinda Project became commercially operable and capable of selling
electric power. Pursuant to the Amended Gas Agreement, the Trust has rights to
all of the landfill gas generated at the Orange County landfill until the year
2018. Under the Amended Gas Agreement, the Trust pays GSF a fixed amount of
$60,000 per month and a 9.5% royalty from the revenues generated by the Olinda
Project. The $60,000 fixed payment escalates at the Consumer Price Index ("CPI")
and expires in 2005, at which time the Trust will pay GSF the greater of a 19%
royalty from the combined revenues of both the Brea and Olinda Projects or
$720,000 annually. As further detailed below, the Olinda Project is not
currently operating and, therefore, only the fixed fee is being paid. See also,
Section 4 "Trends in the Electric Utility and Independent Power Industries".
(ii) Olinda Project. In early 2001, the Trust decided to expand its
operations at the Orange County Landfill by developing and installing a
2.5-megawatt electric generating facility fueled by methane gas (the "Olinda
Project"). The total cost of the Olinda Project was approximately $3,000,000,
half of which has been financed. The Olinda Project was designed and built by
Stewart & Stevenson ("S&S"), an engineering and construction firm, for a cost of
approximately $2,500,000. The Olinda Project receives its landfill gas from GSF
pursuant to the Amended Gas Agreement.
The Olinda Project has yet to pay S&S in full for its services and is
holding $250,000 of the $2,500,000 due to problems that have developed at the
Olinda Project. The Olinda Project was completed substantially behind the
schedule agreed to by S&S and Ridgewood Olinda, LLC, the owner of the Olinda
Project. In addition, within several months of commercial operation, one of the
electric generating machines installed by S&S experienced a catastrophic
failure. Although S&S provided a replacement engine to Ridgewood Olinda, the
Olinda Project was subsequently shut-down in October of 2002 by the Orange
County electrical inspector due to S&S's failure to install proper electrical
switchgear or obtain a permit for the switchgear it did install. The engine
failure and switchgear problems highlighted significant other failures of S&S
including, but not limited to, S&S's failure to obtain final building permits,
failure to deliver operating manuals or provide training, and numerous other
problems or issues that have developed and which S&S has not yet satisfactorily
resolved to Ridgewood Olinda's satisfaction. As a result, Ridgewood Olinda
notified S&S that it would not be making any final payments until all issues and
problems have been resolved. S&S, naturally, believes that the problems
described by Ridgewood Olinda are not of their making or have been exaggerated.
Both Ridgewood Olinda and S&S, in an effort to avoid litigation, have agreed to
negotiate a settlement of all these issues. The parties have agreed to a
tentative settlement but definitive terms or agreements have not been finalized.
The Olinda Project began commercial operation on or about March of 2002
and had been selling its electric output in California to the California Power
Authority ("CPA") pursuant to a short-term (ninety-day) power sales contract.
Such short-term contract was extended by the CPA through December 31, 2002,
along with several other contracts with renewable (biomass) generators. Prior to
the expiration of such extension the CPA offered additional six-month extension
to several biomass generators but did not offer a similar extension to the
Olinda Project. In addition, the Olinda Project submitted a proposal to SCE in
response to SCE's request for proposals for short-term procurement. The Olinda
Project offered to sell SCE power pursuant to a five-year contract at prices
favorable to Olinda, but slightly above prices apparently submitted by other
renewable generators. SCE did not accept the Olinda Project's proposal.
Therefore, the Olinda Project does not currently have a long-term power
contract, but, even if it did, it could not operate under such contract until
the problems with the project caused by S&S, as outlined above, are fixed.
As a result of the problems experienced at the Olinda Project site in
Southern California including, but not limited to, the construction problems
with S&S and the fact that the Olinda Project does not currently have a power
contract, the Trust is considering relocating the electric generating equipment
of the Olinda Project from California to Rhode Island, to the site of a new
landfill gas development of the Trust's affiliate, the B Fund.
Ridgewood Olinda expects that after the operating problems are fixed,
the Olinda Project will operate under either short-term or long-term contracts
or will relocate the electric generating equipment to Rhode Island. See, Section
4 "Trends in the Electric Utility and Independent Power Industry" for further
information affecting the Olinda Project
(iii) Stillwater Project. In October 1991, the Trust acquired a 32.5%
equity interest with respect to a 3.5 megawatt (nominal capacity) hydroelectric
facility which was then under construction on the Hudson River in the village of
Stillwater, New York (approximately 30 miles northeast of Albany) at the site of
a pre-existing 800 foot wide masonry dam structure (the "Stillwater Project")
for a purchase price of $750,000. The Stillwater Project commenced commercial
operation in May 1993.
The Trust and affiliates of the general contractor and affiliates of
the equipment supplier formed Stillwater Hydro Partners, L.P. ("SHP") to
continue development of the Stillwater Project. The Trust's total investment was
$1,162,000. Debt financing for the Project was provided by the CIT Group/Capital
Equipment Financing Inc. ("CIT"). The CIT financing is a fixed rate 15-year term
loan in the principal amount of approximately $8,995,000, with the final payment
due in 2009. In addition to the fixed interest payments, CIT is also entitled to
receive, as additional interest, 22.5% of the available cash flow of the
Stillwater Project. The term loan is payable only by SHP, and is non-recourse to
the Trust.
The Trust now owns a fixed preferred partnership interest entitling it
to aggregate distributions of $1 million, plus a compound annual return of 12%
thereon until paid in full. Over the nine-year schedule of annual payments, the
Trust was to receive total payments, including the annual return, of
approximately $1,720,000. SHP is required to apply substantially all of SHP's
available cash flow after funding of debt service (up to a maximum amount each
year) to satisfy the payment obligation to the Trust, with any shortfalls to be
carried forward with interest into subsequent years.
The Stillwater Project's revenues are dependent upon water levels in
the Hudson River, which have fluctuated significantly during the last several
years. During low flow periods, generation is curtailed. For a variety of
reasons, power output during high flow periods has not reached projected levels.
In addition, even if water flow levels are optimal, the Project is unable to
generate the full projected output of 3.5 megawatts of electricity because of a
design defect. As a result, the Trust has only received a single partial payment
of $126,000 in 1994 and does not expect to receive any additional payments for
several years.
Electricity generated by the Stillwater Project is sold to Niagara
Mohawk Power Corporation under a long-term Power Contract, which expires in
2028.
(iv) Lynchburg Project. The Trust owned RW Power Partners, L.P. which
made an approximately $3.9 million equity investment (including without
limitation construction costs and cash advances) in a 3 megawatt electrical
generating facility that was constructed in an industrial park near South
Boston, Virginia (the "Lynchburg Project" also known as the "South Boston
Project"). The Trust shut down the Lynchburg Project in January 1997 and sold it
to an unaffiliated third party in December 1997 for a $700,000 promissory note
secured by the Project property and the right to receive 2% of any future gross
revenues from the Project. The buyer of the Lynchburg Project was unable to
operate it successfully and closed it in August 1999. The Trust wrote off the
mortgage as being uncollectible effective December 31, 1999.
(v) Mobile Power Units. Effective August 1999, the Trust purchased two
mobile electric generating units manufactured by Caterpillar Inc. (the "Units").
The Units combine a large diesel engine with a fuel tank, emission equipment, an
electric generator and control equipment on a single skid and therefore can be
moved to remote areas as a self-contained power plant. The owner of the Units is
Ridgewood Mobile Power I, LLC, a wholly-owned subsidiary of the Trust. The Trust
bought the Units from Hawthorne Power Systems, Inc. ("Hawthorne") of San Diego,
California (a Caterpillar distributor). Hawthorne manages the Units, which are
rented at fixed rates. Hawthorne receives 20% of the net rental revenues to
compensate it for marketing and managing the Units. Due to decreased demand and
an increase in competition and production of newer and more efficient mobile
models, the Trust experienced a decrease in rental revenue for the current year.
As a result of the change in these market conditions, the forecasted revenues
for the units are not expected to be enough to recover the units book value. In
2002, the Trust recorded a writedown of $209,251 to reflect the units fair
market value.
Additional information regarding the Projects is found in the Notes to
the Consolidated Financial Statements.
(3) Project Management and Operation
The Managing Shareholder has organized RPM to provide operating
management for the Projects, and has assigned day-to-day management of the Brea
Project and Olinda 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 Related Party Transactions for further
information regarding the Operation Agreement and RPM and for the cost
reimbursements received by RPM. The Stillwater Project is managed by its
remaining equity partners. Hawthorne manages the Mobile Power Units.
Customers that accounted for more than 10% of the consolidated revenue to
the Trust in each of the last three fiscal years are:
Calendar Year
2002 2001 2000
Southern California Edison 97.3% 94.6% 94.6%
(4) Trends in the Electric Utility and Independent Power Industries.
During the last several years, and particularly during 2002, there has
been significant activity and movement in the industry, as well as at state and
federal government, to increase the amount of renewable power that is supplied
to utilities and distribution companies that serve retail end-use customers in
various states. For example, in Massachusetts, legislation and regulations have
been passed requiring such retail electric suppliers to have in their electric
portfolio one (1%) "new renewable power" for 2003. This renewable generation
percentage requirement increases each year until the renewable generation amount
equals nine (9%) percent. In addition to Massachusetts, New Jersey, Nevada, and
California have passed similar renewable portfolio standards ("RPS") and
Connecticut is considering an RPS of its own.
In California, where the Brea and Olinda Projects are located, an RPS
was enacted which generally requires that retail electric sellers in the state
increase the renewable generation in their electric supply portfolio by one (1%)
percent per year, provided certain conditions are met, over a baseline level of
renewable generation to be determined by the California Public Utilities
Commission ("CPUC"). According to California's RPS, the annual incremental
renewable generation procurement requirement continues until renewable
generation comprises twenty (20%) percent of the aggregate electric supply to
retail users in the state. Such 20% target must be achieved no later than
December 31, 2017.
The RPS legislation in California provides for a specific approach to
the procurement of and investment in new renewable projects. According to the
RPS legislation, the CPUC and the California Energy Commission ("CEC") are to
work collaboratively to make necessary findings, determine appropriate
procedures and, ultimately, determine the methodology for renewable procurement
by California's investor-owned utilities ("IOU"). The RPS legislation requires
that such collaborative effort be completed and implemented by the end of 2003.
Therefore, the CPUC is currently holding workshops of interested parties, will
be accepting testimony and other materials and will be issuing an RPS
Implementation Plan on or about June 30, 2003. Issues to be considered during
this process include, but are not limited to, determining renewable generation
market price referents, IOU least cost, best fit strategy with respect to
renewable generation, establishing initial renewable generation baselines, and
reviewing and approving the IOUs renewable procurement plans.
RPM, as agent for the Brea Project and the Olinda Project, is
participating in these proceedings. While the immediate concern was for the
Olinda Project, which currently does not have a power contract, the Brea Project
is also impacted since it will need to sell its renewable power under the RPS
once the SCE power contract is terminated in March, 2005. After participating in
the CPUC workshops and other California RPS initiatives, the Trust has concluded
that the RPS program in California probably will not substantially assist
renewable projects, like the Brea and Olinda Projects, obtain profitable power
contracts nor is it likely to facilitate the sale of any renewable attributes
generated by such renewable facilities. For example, the California legislation
that created the RPS requires, among other things, that California IOUs pay no
more for renewable power than they would otherwise pay for non-renewable power.
Renewable power, however, is more expensive generally than fossil-fueled power.
The legislation requires that any excess above a fossil-fueled "benchmark" price
be obtained from the California Energy Commission through the "public goods
charge". However, there may not be sufficient "public goods charge" funds
available for the predicted renewable supply. In addition, the public goods
charge was a legislative creation and may likewise be terminated by legislation.
In effect, there is no guarantee that sufficient public goods funds, or any for
that matter, will be available to pay for a renewable generator's "above market
costs". In addition, the RPS legislation does not necessarily facilitate a RPS
trading program such that a renewable generator could sell its energy to one
customer and renewable attributes to another. As a result, and as mentioned
earlier, the Trust is also considering relocating the Olinda Project's electric
generating equipment to Providence, Rhode Island, to be part of a project being
developed by its affiliate, the B Fund. The market for renewable power in New
England is significantly more favorable than in California.
In addition to developments in California, the general trends in the
electric power industry have continued to reflect an attitude of caution and
restraint. Throughout the United States, memories of the California energy
crises, Enron Corp.'s bankruptcy, proceedings before the Federal Energy
Regulatory Commission ("FERC") regarding certain questionable practices of other
energy producers and marketers, as well as the generally poor U.S. and world
economy, have led many to call for a more regulated electric industry, with
strict reporting requirements and cost of service regulation. However, many
legislators, regulators and market participants have not disavowed deregulation.
In any event, such market change and reporting requirements, if adopted, may
impact less upon the Brea Project, which currently has a Power Contract with
SCE, as opposed to the Olinda Project, which, unless it obtains a power
contract, will be subject to selling its power, to the extent it can, in the
general electric market.
(5) Competition
The Brea and Stillwater Projects, as described above, are not currently
subject to competition because those Projects have entered into long-term Power
Contracts to sell their output at specified prices. The Olinda Project, however,
does not have a current long-term Power Contract, is subject to market
competition and is not currently operating. The Brea and Stillwater Projects,
likewise, will be subject to competition to market its electricity output once
the Power Contract expires or is terminated. However, as further detailed in
Item 1(c)(4), the California RPS Standard, if implemented in a manner that is
beneficial to renewable generation, may very well permit the Brea Project and
Olinda Project to market and sell their renewable power at favorable rates,
although such favorable rates can not be assured due to certain other
uncertainties. The process of deregulation in New York, where the Stillwater
Project is located, is still uncertain and it is difficult to estimate the level
of market competition that it would face in any such event.
The Units compete against numerous other fleets of mobile power
generation equipment on a regional and international level. Due to the increase
in competition and production of newer efficient mobile models, the Trust
experienced a decrease in rental revenue for the current year, thus, as
described above and in the Notes, prompted a writedown of the Trust's investment
in the Units.
6. Regulatory Matters.
The Projects are subject to energy and environmental laws and
regulations at the federal, state and local levels in connection with
development, ownership, operation, geographical location, zoning and land use of
a Project and emissions and other substances produced by a Project. These energy
and environmental laws and regulations generally require that a wide variety of
permits and other approvals be obtained before the commencement of construction
or operation of an energy-producing facility and that the facility then operate
in compliance with such permits and approvals.
(i) Energy Regulation.
(A) PURPA. PURPA, and the adoption of regulations thereunder by FERC,
provided incentives for the development of QFs meeting certain criteria. QFs are
generally exempt from the provisions of the Public Utility Holding Company Act
of 1935, as amended, the Federal Power Act, as amended, 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 QF 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 Energy Act has resulted
and may continue to 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. The Trust's Projects are not subject to material
state economic regulation except for requirements in California and New York to
supply the purchasing utility with information to confirm compliance with QF
fuel use and efficiency requirements and to make the Projects available for
audit and inspection to confirm QF compliance. The Trust believes that its
Projects meet QF standards. States also have authority to regulate certain
environmental, health and siting aspects of QFs.
(E) Mobile Power Units. The Mobile Power Units, as temporary on-site
units operated by the electricity consumer, are not subject to economic
regulation in California or most other jurisdictions.
(ii) Environmental Regulation.
The operation of Independent Power Projects is subject to extensive
federal, state and local environmental laws and regulations. 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 also include wetlands preservation, fisheries protection (at the
Stillwater Project) and noise regulation. These laws and regulations in many
cases require a lengthy and complex process of renewing or obtaining licenses,
permits and approvals from federal, state and local agencies. Obtaining
necessary approvals 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 Units, which do not have a fixed location, are subject to differing
air quality standards that depend in part on the locations of use, the amount of
time and time periods of use and the quantity of pollutants emitted. The Trust
believes that the Units as used comply with all applicable air quality rules.
The Managing Shareholder expects that environmental and land use
regulations may become more stringent or, at a minimum, remain constant. 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 co-owners of the Stillwater Project and as to all Projects
on 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.
(d) Financial Information about Foreign and Domestic Operations and
Export Sales.
The Trust has no foreign operations.
(e) Employees.
The employees of the Brea Project and the Olinda Project are employed
by RPM, the Trust is administered by the Managing Shareholder 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.
The following table shows the material properties (relating to Projects)
owned or leased by the Trust's subsidiaries or partnerships in which the Trust
has an interest. All of the Projects are described in further detail at Item
1(c)(2).
Est.Amount Approximate
of Land Square
Project Location Land (acreage) Footage
Brea Brea, CA Leased 2 6,000
Olinda Brea, CA Leased 2,000
Still Stillwater, Leased .75 N/A
Water NY and
Licensed
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 has 105.5 Investor Shares. 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. In addition, under federal laws regulating securities the Investor
Shares have restrictions on transferability when they 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 registered under the Securities Act of 1933, as
amended (the "1933 Act"), or under any other similar law of any state (except
for certain registrations that do not permit free resale) in reliance upon what
the Trust believes to be exemptions from the registration requirements contained
therein. Because the Investor Shares have not been registered, they are
"restricted securities" as defined in Rule 144 under the 1933 Act.
The Managing Shareholder has investigated the possibility and
feasibility of a combination of the Trust, the Other Power Trusts, and the
Ridgewood LLCs into a publicly traded entity. This would require the approval of
the Investors in the Trust and the Other Power Trusts after proxy solicitations,
complying with requirements of the Securities and Exchange Commission, and a
change in the federal income tax status of the Trust from a partnership (which
is not subject to tax) to a corporation. The process of considering and
effecting a combination, if the decision is made to do so, is very lengthy.
There is no assurance that the Managing Shareholder will recommend a
combination, that the Investors of the Trust or Other Power Trusts will approve
it, that economic conditions or the business results of the participants will be
favorable for a combination, that the combination will be effected or that the
economic results of a combination, if effected, will be favorable to the
Investors of the Trust, the Other Power Trusts, or the Ridgewood LLCs. After
conducting investigations during 2001, the Managing Shareholder concluded, and
informed the Investors, that given current market conditions caused by, among
other things, the general U.S. economic down turn, the September 11th terrorist
attacks, the Enron bankruptcy and general volatility in the independent power
business, it is preferable to delay significant expenditures pursuing any such
combination until market conditions, as described above, improve.
(b) Holders.
As of the date of this Form 10-K, there are 223 holders of record of
Investor Shares.
(c) Dividends.
The Trust made distributions as follows for the years ended December 31,
2002 and 2001:
Year ended Year ended
December 31, December 31,
2002 2001
Total distributions to Investors $1,052,499 $ --
Distributions per Investor Share 9,976 --
Total distributions to
Managing Shareholder 10,631 --
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 debt services reserves. Further, the Declaration
authorizes distributions to be made from cash flows rather than income, or from
cash reserves in some instances. For purposes of generally accepted accounting
principles, amounts of distributions in excess of accounting income may be
considered to be capital in nature. Investors should be aware that the Trust is
organized to return net cash flow rather than accounting income to Investors.
Item 6. Selected Financial Data (all amounts in $).
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 years 1998 through 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. The selected financial data for 1998 are derived from unaudited data.
Selected Financial Data
As of and for the year ended December 31,
2002 2001 2000 1999 1998
Total Fund Information:
Revenues $3,352,189 $4,379,154 $3,259,562 $3,114,503 $3,158,596
Net income 101,827 1,454,876 1,487,998 799,717 1,685,035
(A)
Net assets
(shareholders'
equity) 6,811,926 7,773,229 6,318,353 6,323,075 6,834,120
Investments in
Plant and
Equipment (net
of depreciation)4,671,615 4,922,297 2,688,320 2,920,044 2,401,543
Investment
in Power
Contract(net
of amortization) 473,091 788,489 1,103,887 1,419,284 1,734,682
Total assets 8,291,849 9,386,999 6,507,720 6,543,322 6,925,985
Long-term
obligations 952,607 1,227,674 -- -- --
Per Share:
Revenues 31,774 41,509 30,896 29,521 29,939
Net income 965 13,790 14,104 7,580 15,971
(A)
Net asset value 64,568 73,679 59,890 59,934 64,778
Distributions
to Investors 9,976 -- 14,008 12,300 12,420
(A) Includes writedown of investment of $422,019 ($4,000 per Investor Share).
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
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 Brea and Stillwater Projects are QFs under PURPA and currently sell their
electric output to utilities under long-term Power Contracts expiring in 2005
and 2029, respectively. During the term of the Power Contracts, the utilities
may or may not attempt to buy out the contracts prior to expiration. At the end
of the Power Contracts, the Projects will become merchant plants 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 Trust's
Projects to operate profitably.
All available cash flow from the Stillwater Project is being used to meet debt
service requirements. Distributions to the Trust will resume after repayment of
the bonds. Assuming normal water flows and no operational failures, the bonds
are expected to be repaid in 2008.
Additional trends affecting the independent power industry generally are
described at Item 1(c)(4).
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 5 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.
Results of Operations
The year ended December 31, 2002 compared to the year ended December 31, 2001.
Power generation revenue decreased 21% to $3,263,000 in 2002 from $4,141,000 in
2001, primarily due to the decrease in power generation revenue from the Olinda
Projects. Power generation revenue from the Brea project decreased by
$1,250,000, while the new Olinda expansion provided an increase of $372,000 in
2002. The decrease in revenue from the Brea project is attributable to the
higher energy prices charged during the first half of 2001 as a result of the
California energy crisis. Rental revenue from the Trust's Caterpillar rental
modules decreased by $150,000 or 63%, to $89,000 in 2002. The decrease in rental
revenue is due to the higher rental volume experienced in 2001, as a result of
the California energy crisis.
Gross profit, which represents total revenues reduced by cost of sales,
decreased from $2,450,000 in 2001, to $780,000 in 2002. The decrease is a result
of the higher energy prices charged during the California energy crisis in 2001,
as well as the Brea project experiencing greater repair and maintenance costs in
2002.
General and administrative expenses decreased $20,000, or 7%, to $252,000 in
2002 from $272,000 in 2001. The decrease primarily reflects the legal costs
associated with the Brea Project's dispute with SCE in 2001.
The $480,000 of bad debt expense in 2001 is associated with the sale of the Brea
Project's SCE receivables to AMROC.
During 2002, the Trust recorded $72,000 of project development expenses relating
to projects in California that it ultimately decided not to develop. Also during
2002, the Trust recorded a write down of $210,000 relating to the Caterpillar
rental modules.
The management fee paid to the Managing Shareholder decreased $9,000, or 10%, to
$78,000 in 2002 from $87,000 in 2001, which reflects the Trust's lower net asset
balance.
Income from operations decreased $1,441,000, or 90%, to $169,000 in 2002 from
$1,610,000 in 2001 as a result of the decrease in revenues and the increase in
repair and maintenance costs.
Other income (expense), net, decreased $88,000, or 57%, to $67,000 in 2002 from
$155,000 in 2001. The decrease in expense is a result of costs incurred in
issuing the "Notice of Solicitation of Consents" in 2001, offset by the increase
in interest expense paid in 2002 on the Olinda Project long-term financing. In
addition, the Trust recorded an equity loss from its investment in Stillwater of
$29,000 in 2001 compared to income of $37,000 in 2002 reflecting higher revenues
due to the increase in river flows. Interest income decreased $46,000 in 2002
due to the lower cash balances and lower interest rates.
Net income decreased $1,353,000, or 93%, to $102,000 in 2002 from $1,455,000 in
2001 as a result of the decrease in revenues and the increase in repair and
maintenance costs.
The year ended December 31, 2001 compared to the year ended December 31, 2000.
Total revenues increased $1,119,000, or 34%, to $4,379,000 in 2001 from
$3,260,000 in 2000. The increase in revenues is due primarily to higher energy
prices received from the Brea Project, which receives a rate equal to the higher
of the contract price or market price (as defined). During part of 2001, market
prices were higher than the contract price. Revenues in 2001 from the
Caterpillar rental modules were consistent with 2000 revenues.
Gross profit, which represents total revenues reduced by cost of sales,
increased $518,000, or 27%, to $2,450,000 in 2001 from $1,932,000 in 2000. The
increase in gross profit reflects the higher revenues in 2001 compared to 2000,
partially offset by higher maintenance costs at the Brea Project.
General and administrative expenses increased $178,000, or 191%, to $272,000 in
2001 from $93,000 in 2000. The increase primarily reflects the legal costs
associated with the Brea Project's dispute with SCE.
Provision for bad debt expense increased $146,000 to $480,000 in 2001 from
$334,000 in 2000. The bad debt expense for both periods reflects the loss
recognized on the sale of the Brea Project's SCE receivables to AMROC.
The management fee paid to the Managing Shareholder increased $17,000, or 24%,
to $87,000 in 2001 from $70,000 in 2000 which reflects the higher net assets of
the Trust.
Income from operations increased $176,000, or 12%, to $1,610,000 in 2001 from
$1,434,000 in 2000 which reflects the increased revenues of the Trust, partially
offset by the increased expenses.
Other income (expense), net, changed from income of $54,000 in 2000 to an
expense of $155,000 in 2001, a change of $209,000. The change was primarily
related to the costs incurred in issuing the "Notice of Solicitation of
Consents." In addition, the Trust recorded an equity loss from its investment in
Stillwater of $29,000 in 2001 compared to income of $12,000 in 2000 reflecting
lower revenues due to reduced river flows.
Net income decreased $33,000, or 2%, to $1,455,000 in 2001 from $1,488,000 in
2000, reflecting the increased revenues of the Trust, which was more than offset
by increase operating and other expenses.
Liquidity and Capital Resources
In 2002 and 2001, the Trust's operating activities generated $714,000 and
$2,127,000 of cash, respectively. The decrease in cash flow from operating
activities is primarily due to the decrease in net income, which is attributable
to the higher energy prices charged during the first half of 2001 as a result of
the California energy crisis.
Cash used in investing activities in 2002 and 2001 was $257,000 and $2,471,000,
respectively. Cash used in investing activities in 2002 and 2001 was for capital
expenditures relating to the Olinda Project expansion.
Cash used in financing activities in 2002 of $1,315,000 represented
distributions to shareholders of $1,063,000 and payments of $252,000 to reduce
long-term debt on the Olinda Project. Cash provided by financing activities of
$1,480,000 in 2001 represents the long-term project financing the Trust received
for the Olinda Project expansion. The Trust temporarily ceased making
distributions to shareholders in 2001.
Obligations of the Trust are generally limited to payment of a management fee 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 Trust's
significant long-term obligation is limited to $1,228,000 of long-term debt
related to the Brea expansion, which is guaranteed by the Trust. Scheduled
principal payments of the long-term debt are as follows:
2003 $275,000
2004 300,000
2005 327,000
2006 326,000
The Brea project has certain long-term obligations relating to its Power
Contract with SCE and its Gas Agreement with GSF (See Note 5 of the Consolidated
Financial Statements). These long-term obligations are not guaranteed by the
Trust. The Trust and its subsidiaries anticipate that during 2003 their cash
flow from operations will be sufficient to meet their obligations.
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, 2002
Expected Maturity Date
2003
(U.S. $)
Bank Deposits and Certificates of Deposit $ 1,989,000
Average interest rate 1.04%
Item 8. Financial Statements and Supplementary Data.
A. Index to Consolidated Financial Statements
Report of Independent Accountants F-2
Consolidated Balance Sheets at December 31,
2002 and 2001 F-3
Consolidated Statements of Operations for the
three years ended December 31, 2002 F-4
Consolidated Statements of Changes in
Shareholders' Equity for the three years
ended December 31, 2002 F-5
Consolidated Statements of Cash Flows for the three
years ended December 31, 2002 F-6
Notes to Consolidated Financial Statements F-7 to F-14
B. Supplementary Financial Information
Selected Quarterly Financial Data for the years ended December 31, 2002 and 2001
(Unaudited)
2002
- --------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------
Revenue .......... $ 539,000 $ 845,000 $1,235,000 $ 733,000
Income (loss) from
operations ...... (43,000) (87,000) 447,000 (148,000)
Net income (loss) (69,000) (194,000) 402,000 (37,000)
2001
- --------------------------------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
- --------------------------------------------------------------------------
Revenue .......... $ 1,074,000 $ 1,369,000 $ 1,192,000 $ 744,000
Income (loss) from
operations ...... (5,000) 707,000 676,000 232,000
Net income ....... 10,000 685,000 681,000 79,000
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
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.
Ridgewood Holding, which was incorporated in April 1992, is the
Corporate Trustee of the Trust.
(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,
sole manager and President 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 and operated 48 limited
partnership funds and one business trust (of which 25 have terminated) and which
had total capital contributions in excess of $190 million. The programs operated
by Ridgewood Energy have invested in oil and natural gas drilling and completion
and other related activities. 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 two 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 56, has served as President of the Trust since
its inception in 1991 and as President of RPM, the Other Power Trusts, 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. He also is Chairman of
the Board of the Ridgewood Capital Venture Partners I, II, III and IV venture
capital funds ("Ridgewood Venture Funds"). 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.
Robert L. Gold, age 44, has served as Executive Vice President of the
Managing Shareholder, RPM, the Trust, the Other Power Trusts and 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, 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.
Daniel V. Gulino, age 42, has been Senior Vice President and General
Counsel of the Managing Shareholder, RPM, the Trust and Other Power Trusts since
August 2000. 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.
Christopher I. Naunton, 38, has been the Vice President and Chief
Financial Officer of the Managing Shareholder, RPM, the Trust and Other Power
Trusts since April 2000. From February 1998 to April 2000, he was Vice President
of Finance of an affiliate of the Managing Shareholder. Prior to that time, he
was a senior manager at the predecessor accounting firm of
PricewaterhouseCoopers LLP. Mr. Naunton's professional qualifications include
his certified public accountant qualification in Pennsylvania, membership in the
American Institute of Certified Public Accountants and the Pennsylvania
Institute of Certified Public Accountants. He holds a Bachelor of Science degree
in Business Administration from Bucknell University (1986).
Mary Lou Olin, age 50, has served as Vice President of the Managing
Shareholder, RPM, Ridgewood Capital, the Trust, Other Power Trusts since their
respective inceptions. She has also served as Vice President of Ridgewood Energy
since October 1984, when she joined the firm. Her primary areas of
responsibility are investor relations, communications and administration. Prior
to her employment at Ridgewood Energy, Ms. Olin was a Regional Administrator at
McGraw-Hill Training Systems where she was employed for two years. Prior to
that, she was employed by RCA Corporation. Ms. Olin has a Bachelor of Arts
degree from Queens College.
(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 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 termination at any time on 60 days' prior
notice by a majority in interest of the Investors or the Managing Shareholder.
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. Swanson has been
named the President of the Trust and the other principal officers of the Trust
are identical to those of the Managing Shareholder.
The officers have the duties and powers usually applicable to similar
officers of a Delaware business corporation in carrying out Trust business.
Officers act under the supervision and control of the Managing Shareholder,
which is entitled to remove any officer at any time. Unless otherwise specified
by the Managing Shareholder, the President of the Trust has full power to act on
behalf of the Trust. The Managing Shareholder expects that most actions taken in
the name of the Trust will be taken by Mr. Swanson and the other principal
officers in their capacities as officers of the Trust under the direction of the
Managing Shareholder rather than as officers of the Managing Shareholder.
(e) Corporate Trustee
The Corporate Trustee of the Trust is Ridgewood Holding. Legal title to
Trust Property will be in the name of the Trust if possible or Ridgewood Holding
as trustee. Ridgewood Holding is also a trustee of the Other Power Trusts and of
an oil and gas business trust sponsored by Ridgewood Energy and is expected to
be a trustee of other similar entities that may be organized by the Managing
Shareholder and Ridgewood Energy. The President and sole stockholder of
Ridgewood Holding is Robert E. Swanson; its other executive officers are
identical to those of the Managing Shareholder. See -Managing Shareholder. The
principal office of Ridgewood Holding is at 1105 North Market Street, Suite
1300, Wilmington, Delaware 19899.
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
All individuals subject to the requirements of Section 16(a) have
complied with those reporting requirements during 2001.
(g) RPM.
As discussed above at Item 1 - Business, RPM assumed day-to-day
management responsibility for the Brea Project, effective June 1, 1997. Like the
Managing Shareholder, RPM is wholly owned by Robert E. Swanson. RPM will also
provide management services to the Olinda Project. RPM will charge 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 will
be borne by the Managing Shareholder.
The Managing Shareholder does not charge RPM for the full amount of
rent, utilities, 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; and allocations are made in a manner consistent with
generally accepted accounting principles.
RPM does not provide any services related to the administration of the
Trust, such as investment, accounting, tax, investor communication or regulatory
services, nor will it participate in identifying, acquiring or disposing of
Projects. RPM does not have the power to act in the Trust's name or to bind the
Trust, which will be exercised by the Managing Shareholder or the Trust's
officers.
The Operation Agreement does not have a fixed term and is terminable by
RPM, by the Managing Shareholder or by vote of a majority in interest of
Investors, on 60 days' prior notice. 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 the officers for the
Managing Shareholder, as set forth above.
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.
Ridgewood Holding, the Corporate Trustee of the Trust, is not entitled
to compensation for serving in such capacity, but is entitled to be reimbursed
for Trust expenses incurred by it, which are properly reimbursable under the
Declaration.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The Trust sold 105.5 Investor Shares (approximately $10.5 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 March 31, 1992. Further details concerning the offering are
set forth above at Item 1--Business. No person beneficially owns 5% or more of
the Investor Shares.
The Managing Shareholder of the Trust, purchased for cash in the
offering 1 Investor Share, equal to .9 of 1% of the outstanding Investor Shares,
and Mr. Swanson purchased an additional 2.1 Investor Shares. The total cost of
the 3.0 Investor Shares was $273,000. By virtue of its purchase of that Investor
Share, Ridgewood Power is entitled to the same ratable interest in the Trust as
all other purchasers of Investor Shares. No other executive officers of the
Trust acquired Investor Shares in the Trust's offering.
The Managing Shareholder was issued one Management Share in the Trust
representing the beneficial interests and management rights of Ridgewood Power
in its capacity as the Managing Shareholder (excluding its interest in the Trust
attributable to Investor Shares it acquired in the offering). The management
rights of Ridgewood Power are described in further detail above at Item 1 -
Business and in Item 10 - Directors and Executive Officers of the Registrant.
Its beneficial interest in cash distributions of the Trust and its allocable
share of the Trust's net profits and net losses and other items attributable to
the Management Share are described in further detail below at Item 13. Certain
Relationships and Related Transactions.
Item 13. Certain Relationships and Related Transactions.
The Declaration provides that cash flow of the Trust, less reasonable
reserves that the Trust deems necessary to cover anticipated Trust expenses, is
to be distributed to the Investors and the Managing Shareholder (collectively,
the "Shareholders"), from time to time, as the Trust deems appropriate. Prior to
Payout (the point at which Investors have received cumulative distributions
equal to the amount of their capital contributions), each year all distributions
from the Trust, other than distributions of the revenues from dispositions of
Trust Property, are to be allocated 99% to the Investors and 1% to the Managing
Shareholder until Investors have received annual distributions equal to 15% of
their Capital Contributions (a "15% Priority Distribution") and thereafter any
remaining distributions will be allocated 80% to the Investors and 20% to the
Managing Shareholder. Revenues from dispositions of Trust Property are to be
distributed 99% to Investors and 1% to the Managing Shareholder until Payout. In
all cases, after Payout, Investors are to be allocated 80% of all distributions
and the Managing Shareholder 20%.
For any fiscal period, the Trust's net profits, if any, other than
those derived from dispositions of Trust Property, are allocated 99% to the
Investors and 1% to the Managing Shareholder until the profits so allocated
offset (1) the aggregate 15% Priority Distribution to all Investors and (2) any
net losses from prior periods that had been allocated to the Shareholders. Any
remaining net profits, other than those derived from dispositions of Trust
Property, are allocated 80% to the Investors and 20% to the Managing
Shareholder. If the Trust realizes net losses for the period, the losses are
allocated 80% to the Investors and 20% to the Managing Shareholder until the
losses so allocated offset any net profits from prior periods allocated to the
Shareholders. Any remaining net losses are allocated 99% to the Investors and 1%
to the Managing Shareholder. Revenues from dispositions of Trust Property are
allocated in the same manner as distributions from such dispositions. Amounts
allocated to the Investors are apportioned among them in proportion to their
capital contributions.
On liquidation of the Trust, the remaining assets of the Trust after
discharge of its obligations, including any loans owed by the Trust to the
Shareholders, will be distributed, first, 99% to the Investors and the remaining
1% to the Managing Shareholder, until Payout, and any remainder will be
distributed to the Shareholders in proportion to their capital accounts.
In 2002 and 2001, 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:
Paid to 2002 2001 2000 1999 1998
Managing Shareholder $71,601 $87,406 $70,083 $76,332 $69,931
Cost
reimbursement
RPM $2,418,929 $1,842,315 $1,255,007 $1,334,451 1,434,588
The management fee, payable monthly under the Management Agreement at
the annual rate of 1% of the Trust's net asset value (until June 1994, of the
Trust's total capital contributions), began on the closing of the offering and
compensates the Managing Shareholder for certain management, administrative and
advisory services for the Trust. In addition to the foregoing, the Trust
reimbursed the Managing Shareholder at cost for expenses and fees of
unaffiliated persons engaged by the Managing Shareholder for Trust business and
for payroll and other costs of operation of the Trust's Projects. The
reimbursements to RPM, which do not exceed its actual costs, 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. Control and Procedures
Within the 90 days prior to the filing date of this Report, 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, with the exception of the matter noted below.
During the 2002 annual financial reporting process, management has
identified deficiencies in the Trust's ability to process and summarize
financial information of certain individual projects and equity investees on a
timely basis. Management is establishing a project plan to address this
deficiency in 2003.
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-14(c) of the Exchange Act as "controls and other procedures designed to
ensure that information required to be disclosed by the issuer in the reports
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.
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Financial Statements.
See the Index to Financial Statements in Item 8 hereof.
(b) Reports on Form 8-K.
None.
(c) Exhibits.
2A. Acquisition Agreement, by and between GSF Energy, L.L.C. and Olinda,
L.L.C., dated as of May 31, 1997. Incorporated by reference to Exhibit 2A in
Registrant's Amendment No. 1 to Current Report on Form 8-K dated June 1, 1997.
2B. Letter, dated as of May 31, 1997, supplementing Acquisition Agreement.
Incorporated by reference to Exhibit 2B in Registrant's Current Report on Form
8-K dated June 1, 1997.
3A. Certificate of Trust of the Registrant is incorporated by reference to
Exhibit 3A of Registrant's Registration Statement which was filed with the
Commission on May 26, 1994.
3B. Declaration of Trust of Registrant is incorporated by reference to
Exhibit 3B of Registrant's Registration Statement which was filed with the
Commission on May 26, 1994.
3C. Agreement of Limited Partnership of Ridgewood Energy Electric Power,
L.P. dated as of March 6, 1991 is incorporated by reference to Exhibit 3C of
Registrant's Registration Statement which was filed with the Commission on May
26, 1994.
10A. Management Agreement between the Registrant and Ridgewood Power
Corporation is incorporated by reference to Exhibit 10A of Registrant's
Registration Statement which was filed with the Commission on May 26, 1994.
10B. Stillwater Hydro Partners L.P. Amended and Restated Agreement of
Limited Partnership dated as of July 29, 1991 and letter of amendment thereof
dated as of May 16, 1994 is incorporated by reference to Exhibit 10B of
Registrant's Registration Statement which was filed with the Commission on May
26, 1994.
10C. Power Purchase Agreement dated as of September 19, 1989 between
Stillwater Hydro Partners L.P. and Niagara Mohawk Power Corporation and
amendment thereof dated as of August 28, 1990 is incorporated by reference to
Exhibit 10C of Registrant's Registration Statement which was filed with the
Commission on May 26, 1994.
10D. RW Power Partners L.P. Agreement and Restated Agreement of Limited
Partnership dated as of October 1, 1992 among Ridgewood Energy Electric Power,
L.P., Ridgewood Power Corporation and WE GEN, Inc. is incorporated by reference
to Exhibit 10D of Registrant's Registration Statement which was filed with the
Commission on May 26, 1994.
10E. The Registrant has terminated the agreement designated 10E in its
prior Annual Reports on Form 10-K.
10F. The Registrant has terminated the agreement designated 10F in its
prior Annual Reports on Form 10-K.
10G. Agreement of Limited Partnership of Brea Power Partners, L.P. dated as
of October 12, 1994 by and between Brea Power (I), Inc., GSF Energy Inc. and
Ridgewood Electric Power Trust I is incorporated by reference to Registrant's
Form 8-K filed with the Commission on October 27, 1994.
10H. Agreement, dated as of January 16, 1997, by and between RW Power
Partners, L.P. and Virginia Electric Power Company Incorporated by reference to
Exhibit 10H in the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997.
10I. Amendment to Transaction Documents, dated as of May 31, 1997, by and
among GSF Energy, L.L.C., Brea Power Partners, L.P. and Ridgewood Electric Power
Trust I. Incorporated by reference to Exhibit 10I in Registrant's Amendment No.
1 to Current Report on Form 8-K dated June 1, 1997.
10J. Parallel Generation Agreement, by and between Southern California
Edison Company and GSF Energy, Inc. (Brea Power Partners, L.P., assignee), as
amended. Incorporated by reference to Exhibit 10J in Registrant's Amendment No.
1 to Current Report on Form 8-K dated June 1, 1997.
10K. Partial Assignment and Assumption Agreement, dated as of November 29,
1994, by and between GSF Energy, Inc. and Brea Power Partners, L.P. Incorporated
by reference to Exhibit 10K in Registrant's Amendment No. 1 to Current Report on
Form 8-K dated June 1, 1997.
10L. Amended and Restated Gas Lease Agreement, dated as of December 14,
1993, by and between the County of Orange, California and GSF Energy, Inc., as
modified. Incorporated by reference to Exhibit 10L in Registrant's Amendment No.
1 to Current Report on Form 8-K dated June 1, 1997.
10M. Gas Sale and Purchase Agreement, dated November 29, 1994 by and
between GSF Energy, Inc. and Brea Power Partners, L.P. Incorporated by reference
to Exhibit 10M in Registrant's Amendment No. 1 to Current Report on Form 8-K
dated June 1, 1997.
10N. Support Agreement, dated as of November 29, 1994, by and among Brea
Power Partners, L.P., the Trust and GSF Energy, Inc. Incorporated by reference
to Exhibit 10N in Registrant's Amendment No. 1 to Current Report on Form 8-K
dated June 1, 1997.
10O. Amended and Restated Gas Sale and Purchase Agreement, dated June 11,
2001, by and between GSF Energy, LLC and Ridgewood Power Management, LLC, on
behalf of Brea Power Partners, L.P. and Ridgewood Olinda, LLC.
99.1. Certifications under Section 906 of the Sarbanes-Oxley Act.
Exhibits and schedules to these exhibits are omitted, and lists of the omitted
documents are found in their tables of contents. The Registrant agrees to
furnish supplementally a copy of any omitted exhibit or schedule to these
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 I (Registrant)
By:/s/ Robert E. Swanson President April 15, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
By:/s/ Robert E. Swanson President April 15, 2003
Robert E. Swanson
By:/s/ Christopher Naunton Vice President and April 15, 2003
Christopher Naunton Chief Financial Officer
RIDGEWOOD POWER LLC Managing Shareholder April 15, 2003
By:/s/ Robert E. Swanson President
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
I ("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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and senior management:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 15, 2003
/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, Christopher I. Naunton, Chief Financial Officer of Ridgewood Electric Power
Trust I ("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-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures 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 this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and senior management:
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 15, 2003
/s/ Christopher I. Naunton
Christopher I. Naunton
Chief Financial Officer
Exhibit 99.1
CERTIFICATION UNDER SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the
undersigned certifies that this periodic report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934,as
amended, and that information contained in this periodic report fairly presents,
in all material respects, the financial condition and results of operations of
Ridgewood Electric Power Trust I.
Date: April 15, 2003 /s/ Robert E. Swanson
--------------------------------
Robert E. Swanson
Chief Executive Officer
Date: April 15, 2003 /s/ Christopher I. Naunton
--------------------------------
Christopher I. Naunton
Chief Financial Officer
This certification accompanies this periodic report pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.
Ridgewood Electric Power Trust I
Consolidated Financial Statements
December 31, 2002, 2001 and 2000
Report of Independent Accountants
To the Shareholders of Ridgewood Electric Power Trust I:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows present fairly, in all material respects, the financial position of
Ridgewood Electric Power Trust I and its subsidiaries (the "Trust") at December
31, 2002 and 2001, and the results of their operations and their cash flows for
each of the three years in the period 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 audits. We conducted our audits 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 audits provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Florham Park, NJ
April 3, 2003
Ridgewood Electric Power Trust I
Consolidated Balance Sheets
- -------------------------------------------------------------------------------
December 31,
--------------------------
2002 2001
----------- -----------
Assets:
Cash and cash equivalents ................... $ 1,988,812 $ 2,848,041
Trade receivables ........................... 440,199 228,958
Due from affiliates ......................... 48,354 1,698
Other current assets ........................ 45,911 17,197
----------- -----------
Total current assets ................. 2,523,276 3,095,894
Investment in Stillwater Hydro Partners, L.P. 598,867 562,319
Plant and equipment ......................... 5,917,134 5,869,018
Accumulated depreciation .................... (1,245,519) (946,721)
----------- -----------
4,671,615 4,922,297
----------- -----------
Electric power sales contract ............... 2,207,778 2,207,778
Accumulated amortization .................... (1,734,687) (1,419,289)
----------- -----------
473,091 788,489
----------- -----------
Other non-current assets .................... 25,000 --
----------- -----------
Total assets ........................ $ 8,291,849 $ 9,368,999
----------- -----------
Liabilities and Shareholders' Equity:
Liabilities:
Current maturities of long-term debt ........ $ 275,067 $ 252,272
Accrued professional fees ................... 61,281 64,707
Accrued fuel expense ........................ 189,158 50,000
Due to affiliates ........................... 1,810 1,117
----------- -----------
Total current liabilities .......... 527,316 368,096
Long-term debt, less current portion ........ 952,607 1,227,674
Commitments and contingencies ............... -- --
Shareholders' Equity:
Shareholders' equity (105.5 investor
shares issued and outstanding)
6,833,966 7,785,656
Managing shareholder's accumulated deficit
(1 management share
issued and outstanding) .................. (22,040) (12,427)
----------- -----------
Total shareholders' equity ......... 6,811,926 7,773,229
----------- -----------
Total liabilities and
shareholders' equity .............. $ 8,291,849 $ 9,368,999
----------- -----------
See accompanying notes to the consolidated financial statements.
Ridgewood Electric Power Trust I
Consolidated Statements of Operations
- -------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------
2002 2001 2000
----------- ----------- -----------
Power generation revenue ...... $ 3,262,789 $ 4,140,580 $ 3,083,679
Rental revenue ................ 89,400 238,574 175,883
----------- ----------- -----------
Total revenue .............. 3,352,189 4,379,154 3,259,562
Cost of sales, including
depreciation and amortization
of $614,196, $552,722 and
$547,121 in 2002, 2001 and 2000 2,572,063 1,929,321 1,327,339
----------- ----------- -----------
Gross profit ................... 780,126 2,449,833 1,932,223
General and administrative
expenses ..................... 252,466 272,337 93,720
Provision for bad debt expense . -- 480,252 334,106
Project development costs ...... 71,601 -- --
Write down of investments
in power generation
projects ..................... 209,251 -- --
Management fee paid to
managing shareholder........... 77,734 87,406 70,083
----------- ----------- -----------
Total other operating
expenses ................. 611,052 839,995 497,909
----------- ----------- -----------
Income from operations ......... 169,074 1,609,838 1,434,314
----------- ----------- -----------
Other income (expense):
Interest income ............. 33,200 78,584 89,163
Interest expense ............ (118,606) (10,852) --
Other expense ............... (18,389) (193,379) (46,963)
Equity income (loss) from
Stillwater Hydro
Partners, L.P. ........... 36,548 (29,315) 11,484
----------- ----------- -----------
Other income (expense), net (67,247) (154,962) 53,684
----------- ----------- -----------
Net income ..................... $ 101,827 $ 1,454,876 $ 1,487,998
----------- ----------- -----------
See accompanying notes to the consolidated financial statements.
Ridgewood Electric Power Trust I
Consolidated Statements of Changes in Shareholders' Equity
For the Years Ended December 31, 2002, 2001 and 2000
- --------------------------------------------------------------------------------
Managing
Shareholders Shareholder Total
----------- ------------ -----------
Shareholders' equity,
January 1, 2000 ...... $ 6,350,004 $ (26,929) $ 6,323,075
Cash distributions .... (1,477,793) (14,927) (1,492,720)
Net income for the year 1,473,118 14,880 1,487,998
----------- ----------- -----------
Shareholders' equity,
December 31, 2000 .... 6,345,329 (26,976) 6,318,353
Net income for the year 1,440,327 14,549 1,454,876
----------- ----------- -----------
Shareholders' equity,
December 31, 2001 .... 7,785,656 (12,427) 7,773,229
Cash distributions .... (1,052,499) (10,631) (1,063,130)
Net income for the year 100,809 1,018 101,827
----------- ----------- -----------
Shareholders' equity,
December 31, 2002 .... $ 6,833,966 $ (22,040) $ 6,811,926
----------- ----------- -----------
See accompanying notes to the consolidated financial statements.
Ridgewood Electric Power Trust I
Consolidated Statements of Cash Flows
- -------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------------
2002 2001 2000
----------- ------------ -----------
Cash flows from operating
activities:
Net income .................. $ 101,827 $ 1,454,876 $ 1,487,998
----------- ----------- -----------
Adjustments to reconcile net
income to net cash flows
from operating activities:
Depreciation and amortization 614,196 552,722 547,121
Provision for doubtful
accounts ................... -- -- 334,106
Writedown of investments in
power generation project ... 209,251 -- --
Equity in (earnings)/loss
from unconsolidated
Stillwater Hydro
Partners, L.P. ............. (36,548) 29,315 (11,484)
Changes in assets and
liabilities:
(Increase) decrease in
trade receivables ....... (211,241) 168,804 (262,602)
Increase in other current
assets .................. (28,714) (3,825) (801)
Increase in other
non-current assets ...... (25,000) -- --
Increase (decrease) in
accounts payable and
accrued expenses ........ -- (34,693) (20,061)
Decrease in accrued
professional fees ....... (3,426) -- --
Increase in accrued fuel
expense ................. 139,158 -- --
Increase in due to/from
affiliates, net ......... (45,963) (40,548) (10,819)
----------- ----------- -----------
Total adjustments ....... 611,713 671,775 575,460
----------- ----------- -----------
Net cash provided by
operating activities ... 713,540 2,126,651 2,063,458
----------- ----------- -----------
Cash flows from investing
activities:
Capital expenditures ........ (257,367) (2,471,301) --
----------- ----------- -----------
Net cash used in
investing activities ... (257,367) (2,471,301) --
----------- ----------- -----------
Cash flows from financing
activities:
Proceeds from long-term
debt ....................... -- 1,500,000 --
Payments to reduce
long-term debt ............. (252,272) (20,054) --
Cash distributions to
shareholders ............... (1,063,130) -- (1,492,720)
----------- ----------- -----------
Net cash (used in)
provided by financing
activities .............. (1,315,402) 1,479,946 (1,492,720)
----------- ----------- -----------
Net (decrease) increase in
cash and cash equivalents ...... (859,229) 1,135,296 570,738
Cash and cash equivalents,
beginning of year ............... 2,848,041 1,712,745 1,142,007
----------- ----------- -----------
Cash and cash equivalents,
end of year .................... $ 1,988,812 $ 2,848,041 $ 1,712,745
----------- ----------- -----------
See accompanying notes to the consolidated financial statements.
Ridgewood Electric Power Trust I
Notes to the Consolidated Financial Statements
- -------------------------------------------------------------------------------
1. Organization and Purpose
Nature of Business
Ridgewood Energy Electric Power, L.P. (the "Partnership") was formed as a
Delaware limited partnership on March 6, 1991, by Ridgewood Power LLC, (formerly
Ridgewood Power Corporation) acting as the general partner. On June 15, 1994,
with the approval of the partners, the Partnership merged all of its assets and
liabilities into a newly formed trust, called Ridgewood Electric Power Trust I
(the "Trust"). Effective July 25, 1994, the Trust elected to be treated as a
"business development company" ("BDC") under the Investment Company Act of 1940
(the "1940 Act") and registered its shares under the Securities Act of 1934. In
connection with this transaction, the Trust issued 105.5 shares in exchange for
outstanding Partnership units. Ridgewood Power LLC is the sole managing
shareholder ("Managing Shareholder").
In November 2001, through a proxy solicitation the Trust requested investor
consent to end the BDC status. On December 18, 2001, the consents were tabulated
and more than 50% 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 invests in independent power generation facilities and other power
generation assets. These independent power generation facilities include small
power production facilities which produce electricity from landfill gas and
water.
Ridgewood Energy Holding Corporation, a Delaware corporation, 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.
2.Summary of Significant Accounting Policies
Principles of consolidation
The consolidated financial statements include the accounts of the Trust and its
controlled 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. The Trust's share of the operating results of the
affiliates is included in the Consolidated Statements of Operations.
Critical accounting policies and estimates
The preparation of consolidated financial statements requires the Trust to make
estimates and judgements 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/depreciation
of plant and equipment and intangible assets, and recordable liabilities for
litigation and other contingencies. The Trust basesits estimates on historical
experience, current and expected conditions andvarious other assumptions that
are believed to be reasonable under the circumstances, the results of which
form the basis for making judgements about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates under different assumptions or conditions.
New Accounting Standards and Disclosures
SFAS 141
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") 141, Business Combinations, which
eliminates the pooling-of-interest method of accounting for business
combinations and requires the use of the purchase method. In addition, SFAS 141
requires the reassessment of intangible assets to determine if they are
appropriately classified either separately or within goodwill. SFAS 141 is
effective for business combinations initiated after June 30, 2001. The Trust
adopted SFAS 141 on July 1, 2001, with no material impact on the consolidated
financial statements.
SFAS 142
In June 2001, the FASB issued SFAS 142, Goodwill and Other Intangible Assets,
which eliminates the amortization of goodwill and other acquired intangible
assets with indefinite economic useful lives. SFAS 142 requires an annual
impairment test of goodwill and other intangible assets that are not subject to
amortization. Other intangible assets with definite economic lives will continue
to be amortized over their useful lives. The Trust adopted SFAS 142 effective
January 1, 2002, with no material impact on the consolidated financial
statements.
SFAS 143
In June 2001, the 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
will adopt SFAS 143 effective January 1, 2003 and has assessed that this
standard will not have a material impact on the Trust.
SFAS 144
In August 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which replaces SFAS 121, Accounting for the
Impairment of Long-lived Assets and for Long-Lived Assets to Be Disposed Of. For
long-lived assets to be held and used, SFAS 144 retains the requirements of SFAS
121 to (a) recognize an impairment loss only if the carrying amount is not
recoverable from undiscounted cash flows and (b) measure an impairment loss as
the difference between the carrying amount and fair value of the asset. For
long-lived assets to be disposed of, SFAS 144 establishes a single accounting
model based on the framework established in SFAS 121. The accounting model for
long-lived assets to be disposed of by sale applies to all long-lived assets,
including discontinued operations and replaces the provisions of APB Opinion No.
30, Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of segments of a business. SFAS 144
also broadens the reporting of discontinued operations. The Trust adopted SFAS
144 effective January 1, 2002. The Trust recognized an impairment of certain
generating assets, totaling $209,251 in the 2002 consolidated financial
statements. Such a loss would have been recognized under SFAS 121, the
predecessor standard to SFAS 144.
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 Correction.
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 will adopt SFAS
145 effective January 1, 2003 and has determined that this standard will not
have a material impact on the Trust.
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 will adopt SFAS 146 effective January 1, 2003 and has
determined that this standard will not have a material impact on the Trust.
FIN 45
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees and Indebtedness of Others." FIN 45 elaborates on the
disclosures to be made by the guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also requires that a guarantor recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002; while the provisions of the disclosure
requirements are effective for financial statements of interim or annual reports
ending after December 15, 2002. The Trust adopted the disclosure provisions of
FIN 45 during the fourth quarter of 2002 with no material impact to the
consolidated financial statements.
FIN 46
In January 2003, the FASB issued FASB Interpretation No. 46, "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 January 31, 2003, and apply in the
first fiscal period beginning after June 15, 2003, for variable interest
entities created prior to February 1, 2003. The Trust will adopt the disclosure
provisions of FIN 46 effective June 15, 2003 and has determined that the
adoption will not have a material impact on the Trust's consolidated financial
statements.
Cash and cash equivalents
The Trust considers all highly liquid investments with maturities when purchased
of three months or less to be cash and cash equivalents. Cash and cash
equivalents consist of commercial paper and funds deposited in bank accounts.
Impairment of Long-Lived Assets and Intangibles
In accordance with the provisions of SFAS No. 144, Accounting for the Impairment
of Long-Lived Assets to be Disposed Of, the Trust evaluates long-lived assets,
such as fixed assets 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 discounted
cash flows attributable to the asset or 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. The Trust periodically
assesses the recoverability of plant and equipment, and other long-term assets,
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. At December 31, 2001, the Trust had
construction in progress of $2,449,052.
Depreciation is recorded using the straight-line method over the useful lives of
the assets, which are 5 to 20 years with a weighted average of 16 and 14 years
at December 31, 2002 and 2001, respectively. During 2002, 2001 and 2000, the
Trust recorded depreciation expense of $298,798, $237,324 and $231,723,
respectively.
Electric Power Sales Contract
A portion of the purchase price of the Brea Project was assigned to the electric
power sales contract and is being amortized over the life of the contract (7
years) on a straight-line basis. The electric power sales contract is reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. During 2002, 2001 and 2000,
the Trust recorded amortization expense of $315,398.
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. Interest income is recorded
when earned and dividend income is recorded when declared.
Supplemental cash flow information
Total interest paid during the years ended December 31, 2002 and 2001 was
$118,606 and $10,852, respectively.
Significant Customers
During 2002, 2001 and 2000, the Trust's largest customer, Southern California
Edison ("SCE"), accounted for 97%, 95% and, 95%, respectively of total revenues.
SCE is experiencing severe financial difficulty, see Note 8 for additional
discussion.
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 tax returns of the individual shareholders of the Trust. At December 31,
2002 and 2001, the Trust's net assets had a tax basis of $7,605,812 and
$8,288,186, respectively.
Reclassification
Certain items in previously issued consolidated financial statements have been
reclassified for comparative purposes.
3.Projects
Brea Power Partners, L.P. (known as the Brea Project)
In October 1994, the Trust invested in a limited partnership ("Brea
Partnership"), which acquired a 5 megawatt gas-fired electric generating
facility and related landfill gas processing facility. On June 1, 1997, the
Trust purchased the general and other limited partnership interests in Brea to
increase its ownership in the Brea Project to 100%. The aggregate purchase price
of the Trust's investments totaled $5,916,879 including, the assumption of
liabilities and acquisition costs.
Electricity generated by the Brea Project, over and above its own requirements,
is sold to SCE under a Power Contract. The Power Contract may be terminated by
either party no earlier than the end of 2004 on 5 years' advance notice. On
March 23, 2000, SCE provided such written notice to the Brea Project notifying
the Brea Project it was electing to terminate the Power Contract as of March 23,
2005. After such termination, the Brea Project will sell its electric output in
the competitive electric power market The landfill gas is produced from a
landfill owned by the County of Orange, California and is collected and sold by
GSF Energy, L.L.C. ("GSF") under a gas lease agreement between GSF and the
County of Orange.
Ridgewood Mobile Power I, LLC
Effective August 1999, the Trust, through a subsidiary, acquired two Caterpillar
mobile power modules with a total capacity of 2.35 megawatts for $710,241. These
modules are rented to domestic and international customers. As per an agreement
with Hawthorne Power Systems ("Hawthorne"), the Trust pays Hawthorne, a
California company that maintains a large fleet of similar rental modules, a fee
of 20% of gross rental revenues to arrange and administer the rental of the
units. The revenue from these modules is included as rental revenue and
Hawthorne's fee is included in cost of sales in the Consolidated Statements of
Operations.
Due to the increase in competition and production of newer efficient models, the
Trust experienced a decrease in rental revenue for the current year. As a result
of the change in these market conditions, the forecasted revenues for the mobile
power modules are not expected to be enough to recover the units' book value. In
2002, the Trust recorded a writedown of $209,251 to reflect the units fair
market value. The writedown has been presented as a separate line item under
other operating expenses in the Consolidated Statements of Operations.
Ridgewood Olinda, LLC (known as the Olinda Project)
In April 2001, the Trust formed Ridgewood Olinda, LLC. Ridgewood Olinda, LLC,
contracted with an unaffiliated engineering and construction firm to construct a
$3,000,000 2.5 megawatt expansion to the Brea Project. The construction of the
new addition was completed in the second quarter of 2002.
The Olinda Project began commercial operation on or about May of 2002 and had
been selling its electric output in California to the California Power Authority
("CPA") pursuant to a short-term (ninety-day) power sales contract. The
short-term contract was extended by the CPA through December 31, 2002, along
with several other contracts with renewable (biomass) generators. Prior to the
expiration of the extension, the CPA offered additional six-month extension to
several biomass generators but did not offer a similar extension to the Olinda
Project. In addition, the Olinda Project submitted a proposal to SCE in response
to SCE's request for proposals for short-term procurement. The Olinda Project
offered to sell SCE power pursuant to a five-year contract at prices favorable
to Olinda, but slightly above prices apparently submitted by other renewable
generators. SCE did not accept the Olinda Project's proposal. Therefore, the
Olinda Project does not currently have a power contract, but, even if it did, it
could not operate under such contract until the projects operating problems, as
discussed in Note 5, are resolved. As a result of the problems experienced at
the Olinda Project site in Southern California including, but not limited to,
the construction problems with the engineering and construction firm and the
fact that the Olinda Project does not currently have a power contract, the Trust
is considering relocating the electric generating equipment of the Olinda
Project from California to Rhode Island, to the site of a new landfill gas
development of the Trust's affiliate, the Ridgewood Power B Fund.
Stillwater Hydro Partners, L.P.
On October 31, 1991, the Trust acquired, for $1,000,000, a 32.5% general
partner's interest in a limited partnership whose sole business is the
construction, ownership and operation of a 3.5 megawatt hydroelectric facility,
located on the Hudson River in Stillwater, New York (the "Stillwater Project").
At the time of the investment, the project was under construction and commenced
operations in May 1993. Electricity generated by the Stillwater Project is sold
to the Niagara Mohawk Power Corporation under a long-term Power Contract that
expires in 2028.
On May 16, 1994, the Trust, as stipulated in the limited partnership agreement,
elected to exchange its general partner interest for a 32.5% limited partnership
interest and a priority distribution of available cash flow from the project in
the aggregate amount of $1,000,000. Such distribution is payable from available
cash flows in nine annual installments together with interest at 12% per year,
which were scheduled to begin in May 1995.
The ultimate ability of the project to meet its payment obligations to the Trust
is dependent on the actual operating performance of the Stillwater Project,
which, in turn, is largely dependent upon water levels in the Hudson River.
Since 1995, water levels in the Hudson River basin have frequently been below
normal. As a result of the low water levels, the operating results of the
project were insufficient to meet its debt payments, and accordingly, no
distributions were made to the Trust since 1994.
As a result, all available cash flow from the Stillwater Project is being
applied to meet debt service requirements. Until the current arrears in debt
servicing are paid, it appears likely that most, if not all, of the payments due
to the Trust will be carried forward, with interest, into subsequent years.
The Trust accounts for its investment in the Stillwater Project under the equity
method of accounting. The Trust's equity in the income/loss of the Stillwater
Project has been included in the consolidated financial statements since
acquisition.
Summarized financial information for the Stillwater Project is as follows:
Balance Sheet Information
December 31, 2002 December 31, 2001
------------------- -------------------
Current assets $ 225,380 $ 202,060
Non-current assets 8,549,483 8,911,576
------------------- -------------------
Total assets $8,774,863 $9,113,636
------------------- -------------------
Current liabilities $ 783,911 $ 964,925
Long-term debt 4,404,898 4,727,555
Other non-current liabilities 2,615,292 2,442,848
Equity 970,762 978,308
------------------- -------------------
Total liabilities and equity $8,774,863 $9,113,636
------------------- -------------------
Trust share $598,867 $562,319
------------------- -------------------
Statement of Operations Information
For the Year Ended December 31,
-----------------------------------------
2002 2001 2000
----------- ----------- -----------
Revenue .............. $ 1,384,041 $ 1,262,217 $ 1,415,315
Operating expenses ... 709,994 723,886 674,913
Other income (expense) 681,643 748,532 825,067
----------- ----------- -----------
Net loss ............. $ (7,546) $ (210,201) $ (84,665)
----------- ----------- -----------
Trust Share .......... $ 36,548 $ (29,315) $ 11,484
----------- ----------- -----------
4. Long-Term Debt
In August 2001, Ridgewood Olinda, LLC entered into an agreement, effective
December 2001, to borrow $1,500,000. The proceeds from the loan were used to
finance the 2.5 megawatt expansion of the Olinda facility. The collateralized
non-recourse notes are due in monthly installments of $30,906, including
interest at 8.68%. Final payment is due on November 30, 2006. The loan is
collateralized by the newly expanded portion of the Olinda facility.
Following is a summary of long-term debt at December 31, 2002 and 2001:
2002 2001
----------- -----------
Senior collateralized non-recourse notes
payable $ 1,227,674 $ 1,479,946
Less - current maturity ................ (275,067) (252,272)
----------- -----------
Total long-term debt ................... $ 952,607 $ 1,227,674
----------- -----------
Remaining scheduled repayments of long-term debt principal are as follows:
Year Ended
December 31, Repayment
2003 $ 275,067
2004 299,921
2005 327,022
2006 325,664
5. Commitments
In April of 2001, Ridgewood Olinda, LLC entered into an agreement with an
unaffiliated engineering and construction firm (the "firm") to construct the
expansion of the Olinda facility. The agreement, totaling $2,500,000, calls for
the construction of a 2.5 megawatt addition with a cost of $3,000,000. As of
December 31, 2002, Ridgewood Olinda, LLC had paid $2,250,000 of the agreed upon
cost. Ridgewood Olinda has yet to pay the firm in full for its services and is
holding $250,000 due to problems that have developed at the Olinda Project
Within several months of commercial operation, one of the electric generating
machines installed by the firm experienced a catastrophic failure. Although the
firm provided a replacement engine to Ridgewood Olinda, the Olinda Project was
subsequently shut-down in October of 2002 by the Orange County electrical
inspector due to the firm's failure to install a proper electric switchgear or
obtain a permit for the installed switchgear. The engine failure and switchgear
problems highlighted significant other failures of the firm, including, but not
limited to, the firm's failure to obtain final building permits, failure to
deliver operating manuals or provide training, and numerous other problems or
issues that have developed and which the firm has not yet resolved to Ridgewood
Olinda's satisfaction. As a result, Ridgewood Olinda notified the firm that it
would not be making any final payments until all issues and problems have been
resolved. The firm, naturally, believes that the problems described by Ridgewood
Olinda are not of their making or have been exaggerated. Both Ridgewood Olinda
and the firm, in an effort to avoid litigation, have agreed to negotiate a
settlement of all these issues. The parties have agreed to a tentative
settlement but definitive terms or agreements have not been finalized.
The Brea project has a long-term agreement to purchase landfill gas from its
supplier. The agreement expires in December 2018 and is adjust annually for
inflation.
Future minimum purchases under the agreement as of December 31, 2002 are as
follows:
Year Ended
December 31, Purchases
------------ ---------
2003 $ 746,640
2004 774,266
2005 720,000
2006 720,000
2007 720,000
Thereafter 7,920,000
6. Transactions With Managing Shareholder and Affiliates
On June 15, 1994, the Trust entered into a management agreement with the
managing shareholder, under which the managing shareholder renders certain
management, administrative and advisory services and provides office space and
other facilities to the Trust. As compensation to the managing shareholder, the
Trust pays the managing shareholder an annual management fee equal to 1% of the
net assets of the Trust payable monthly. During 2002, 2001 and 2000, the Trust
paid management fees to the managing shareholder of $77,734, $87,406 and
$70,083, respectively.
Under the Declaration of Trust, the managing shareholder is entitled to receive
each year 1% of all distributions made by the Trust (other than those derived
from the disposition of Trust property) until the shareholders have been
distributed a cumulative amount equal to 15% per annum of their equity
contribution. Thereafter, the managing shareholder is entitled to receive 20% of
the distributions for the remainder of the year. The managing shareholder is
entitled to receive 1% of the proceeds from dispositions of Trust properties
until the shareholders have received cumulative distributions equal to their
original investment ("Payout"). After Payout, the managing shareholder is
entitled to receive 20% of all remaining distributions of the Trust.
The managing shareholder and affiliates own, in the aggregate, 3.0 investor
shares of the Trust with a cost of $273,000. 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 an Operating 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 Brea and Olinda Projects. Ridgewood Management
charges the projects at its cost for these services and for the allocable amount
of certain overhead items. Allocations of costs are on the basis of identifiable
direct costs or in proportion to amounts invested in projects managed by
Ridgewood Management. During the year ended December 31, 2002, 2001 and 2000,
Ridgewood Management charged the Brea Project $181,563, $165,083 and $118,169,
respectively, for overhead items allocated in proportion to the amount invested
in projects managed. During the year ended December 31, 2002, 2001 and 2000,
Ridgewood Management charged the Olinda Project $14,214, $0 and $0,
respectively, for overhead items allocated in proportion to the amount invested
in projects managed. Ridgewood Management also charged the Brea and Olinda
projects for all of the direct operating and non-operating expenses incurred
during the period.
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.
7. Fair Value of Financial Instruments
At December 31, 2002 and 2001, the carrying value of the Trust's cash and cash
equivalents, trade receivables, and accounts payable and accrued expenses
approximates their fair value. The fair value of the long-term debt, calculated
using current rates for loans with similar maturities, does not differ
materially from its carrying value.
8. Sale of Trade Receivables
In January 2001, SCE informed the Brea Project, as well as numerous other
unaffiliated electric generating facilities in California, that it was
temporarily suspending payments to such facilities due to SCE's severe financial
problems. SCE did not pay the Brea Project for energy and capacity delivered to
SCE for the months of November and December 2000, January and February 2001. In
April 2001, the Brea Project entered into an agreement with a financial
institution whereby it sold, irrevocably and without recourse, its undivided
interest in all eligible trade accounts receivables for those months. Costs
associated with the sale of receivables of $480,252 and $334,106 for 2001 and
2000, respectively, primarily related to the discount and loss on sale, are
included in provision for bad debt expense in the Consolidated Statements of
Operations. SCE is current in its payments for energy and capacity delivered
after February 2001.