FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2000
Commission file Number 0-25430
RIDGEWOOD ELECTRIC POWER TRUST IV
(Exact name of registrant as specified in its charter.)
Delaware 22-3324608
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
947 Linwood Avenue, Ridgewood, New Jersey 07450-2939
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(Address of principal executive offices) (Zip Code)
(201) 447-9000
----------------
Registrant's telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Ridgewood Electric Power Trust IV
Consolidated Financial Statements
June 30, 2000
Ridgewood Electric Power Trust IV
Consolidated Balance Sheet
- -------------------------------------------------------------------------------
June 30, December 31,
2000 1999
------------ -----------
Assets: (unaudited)
Cash and cash equivalents ...................... $ 1,503,221 $ 893,383
Accounts receivable, trade ..................... 649,820 613,002
Due from affiliates ............................ 785,447 442,432
Other assets ................................... 30,189 60,863
------------ ------------
Total current assets ........................... 2,968,677 2,009,680
------------ ------------
Investments:
Maine Hydro Projects ........................... 5,825,237 5,663,505
Maine Biomass Projects ......................... 5,655,175 5,825,271
Santee River Rubber Project .................... 3,910,080 4,090,601
Electric power equipment held for resale ....... 250,000 250,000
Plant and equipment ............................ 16,790,857 16,789,544
Accumulated depreciation ....................... (3,413,157) (2,957,855)
------------ ------------
13,377,700 13,831,689
------------ ------------
Electric power sales contract .................. 8,338,040 8,338,040
Accumulated amortization ....................... (2,335,877) (2,057,950)
------------ ------------
6,002,163 6,280,090
------------ ------------
Spare parts inventory .......................... 838,142 838,142
Debt reserve fund .............................. 685,110 666,346
------------ ------------
Total assets ................................... $ 39,512,284 $ 39,455,324
------------ ------------
Liabilities and Shareholders' Equity:
Liabilities:
Current maturities of long-term debt ........... $ 752,106 $ 716,995
Borrowings under line of credit facility ....... 500,000 --
Accounts payable and accrued expenses .......... 938,509 611,750
Due to affiliates .............................. 453,982 341,018
------------ ------------
Total current liabilities ...................... 2,644,597 1,669,763
Long-term debt, less current portion ........... 3,094,419 3,479,460
Minority interest in the Providence Project .... 5,791,536 5,924,813
Commitments and contingencies
Shareholders' equity:
Shareholders' equity (476.8875 investor
shares issued and outstanding) ................ 28,106,981 28,502,542
Managing shareholder's accumulated
deficit (1 management share issued and
outstanding) .................................. (125,249) (121,254)
------------ ------------
Total shareholders' equity ..................... 27,981,732 28,381,288
------------ ------------
Total liabilities and shareholders' equity ..... $ 39,512,284 $ 39,455,324
------------ ------------
See accompanying notes to consolidated financial statements.
Ridgewood Electric Power Trust IV
Consolidated Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
Six Months Ended Three Months Ended
-------------------------- --------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
Net sales ......... $ 3,644,548 $ 3,486,909 $ 1,870,769 $ 1,785,510
Sublease income ... 184,500 184,500 92,250 92,250
----------- ----------- ----------- -----------
Total revenues ... 3,829,048 3,671,409 1,963,019 1,877,760
Cost of sales ..... 3,091,687 3,086,051 1,510,889 1,564,062
----------- ----------- ----------- -----------
Gross profit ...... 737,361 585,358 452,130 313,698
General and
administrative
expenses ......... 490,888 351,449 346,347 168,818
Management fee .... 213,220 233,634 106,790 116,817
Other expenses .... -- 4,780 -- 4,780
----------- ----------- ----------- -----------
Total other
operating
expenses ........ 704,108 589,863 453,137 290,415
----------- ----------- ----------- -----------
Income (loss)
from operations .. 33,253 (4,505) (1,007) 23,283
----------- ----------- ----------- -----------
Other income
(expense):
Interest income .. 40,492 45,576 31,782 22,004
Interest expense . (194,496) (226,406) (95,157) (111,303)
Income from Maine
Hydro Projects .. 661,732 654,661 406,215 117,526
(Loss) income
from Santee River
Rubber Project .. (180,521) 63,835 (110,705) 71,267
Loss from Maine
Biomass Projects (170,096) (410,497) (88,248) (242,094)
----------- ----------- ----------- -----------
Net other
income (loss) ... 157,111 127,169 143,887 (142,600)
----------- ----------- ----------- -----------
Income (loss)
before minority
interest ......... 190,364 122,664 142,880 (119,317)
Minority interest
in the earnings
of the Providence
Project .......... (108,502) (83,452) (50,771) (18,149)
----------- ----------- ----------- -----------
Net income (loss) . $ 81,862 $ 39,212 $ 92,109 $ (137,466)
----------- ----------- ----------- -----------
See accompanying notes to the consolidated financial statements.
Ridgewood Electric Power Trust IV
Consolidated Statement of Changes in Shareholders' Equity (unaudited)
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Managing
Shareholders Shareholder Total
------------ ------------ ------------
Shareholders' equity,
December 31, 1999 ...... $ 28,502,542 $ (121,254) $ 28,381,288
Cash distributions ...... (476,604) (4,814) (481,418)
Net income for the period 81,043 819 81,862
------------ ------------ ------------
Shareholders' equity,
June 30, 2000 .......... $ 28,106,981 $ (125,249) $ 27,981,732
------------ ------------ ------------
See accompanying notes to consolidated financial statements.
Ridgewood Electric Power Trust IV
Consolidated Statement of Cash Flows (unaudited)
- --------------------------------------------------------------------------------
Six Months Ended
--------------------------
June 30, 2000 June 30, 1999
----------- ----------
Cash flows from operating activities:
Net income ............................. $ 81,862 $ 39,212
----------- ----------
Adjustments to reconcile net
income to net cash flows from
operating activities:
Depreciation and amortization ......... 733,229 739,190
Minority interest in earnings
of the Providence Project ............ 108,502 83,452
Income from Maine Hydro Projects ...... (661,732) (654,661)
Loss from Maine Biomass Projects ...... 170,096 410,497
Loss (income) from Santee River
Rubber Project ....................... 180,521 (63,835)
Changes in assets and liabilities:
Increase in accounts receivable,
trade ............................... (36,818) (583,751)
(Increase) decrease in due from
affiliates .......................... (343,015) 131,092
Decrease in other assets ............. 30,674 8,422
Increase (decrease) in accounts
payable and accrued expenses ........ 326,759 (43,891)
Increase in due to affiliates ........ 112,964 481,833
----------- -----------
Total adjustments .................... 621,180 508,348
----------- -----------
Net cash provided by operating
activities .......................... 703,042 547,560
----------- -----------
Cash flows from investing activities:
Loans to Maine Biomass Projects ........ -- (225,000)
Distributions from Maine Hydro
Projects .............................. 500,000 400,000
Distributions from Santee River
Rubber Project ........................ -- 182,950
Capital expenditures ................... (1,313) (292,195)
----------- -----------
Net cash provided by investing
activities ............................ 498,687 65,755
----------- -----------
Cash flows from financing activities:
Borrowing under line of credit
facility .............................. 500,000 --
Cash distributions to shareholders ..... (481,418) (915,071)
Payments to reduce long-term debt ...... (349,930) (318,021)
Increase in debt reserve fund .......... (18,764) (12,999)
Distribution to minority interest ...... (241,779) (289,083)
----------- -----------
Net cash used in financing activities .. (591,891) (1,535,174)
----------- -----------
Net increase (decrease) in cash and
cash equivalents ...................... 609,838 (921,859)
Cash and cash equivalents, beginning
of year ............................... 893,383 2,021,168
----------- -----------
Cash and cash equivalents, end of period $ 1,503,221 $ 1,099,309
----------- -----------
See accompanying notes to consolidated financial statements.
Ridgewood Electric Power Trust IV
Notes to Consolidated Financial Statements (unaudited)
1. General
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments, which consist of normal recurring adjustments,
necessary for the fair presentation of the results for the interim periods.
Additional footnote disclosure concerning accounting policies and other matters
are disclosed in Ridgewood Electric Power Trust IV's financial statements
included in the 1999 Annual Report on Form 10-K, which should be read in
conjunction with these financial statements. Certain prior year amounts have
been reclassified to conform to the current year presentation.
The results of operations for an interim period should not necessarily be taken
as indicative of the results of operations that may be expected for a twelve
month period.
2. Summary Results of Operations for Selected Investments
Summary results of operations for the Maine Hydro Projects, which are accounted
for under the equity method, were as follows:
Six Months Ended June 30,
2000 1999
---- ----
Total revenue ............... $2,855,000 $2,861,000
Depreciation and amortization 561,000 551,000
Net income .................. 1,323,000 1,309,000
Summary results of operations for the Maine Biomass Projects, which are
accounted for under the equity method, were as follows:
Six Months Ended June 30,
2000 1999
---- ----
Total revenue ............... $ 1,312,000 $ 575,000
Depreciation and amortization 118,000 90,000
Net loss .................... (340,000) (821,000)
Summary results of operations for the Santee River Rubber Project, which is
accounted for under the equity method, were as follows:
Six Months Ended June 30,
2000 1999
---- ----
Total revenue ............... $ 601,000 --
Depreciation and amortization -- --
Net loss .................... (2,166,000) (668,000)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Dollar amounts in this discussion are rounded to the nearest
$1,000.
Introduction
The consolidated financial statements include the accounts of the Trust and the
limited partnerships owning the Providence Project and the California Pumping
project. The Trust uses the equity method of accounting for its investments in
the Maine Hydro Projects, the Maine Biomass Projects and the Santee River Rubber
Project, which are owned 50% or less by the Trust.
Results of Operations
In the second quarter of 2000, the Trust had total revenue of $1,963,000, which
is comparable with total revenue of $1,878,000 in the same period in 1999. Total
revenues for the first six months of 2000 of $3,829,000 were also comparable
with total revenue of $3,671,000 in the same period in 1999. Cost of sales of
$1,511,000 in the second quarter of 2000 ($3,092,000 in the first six months of
2000) were also comparable with the cost of sales of $1,564,000 in the same
period in 1999 ($3,086,000 in the first six months of 1999).
General and administrative expenses in the second quarter of 2000 of $346,000
were higher than the $169,000 recorded in the same period in 1999, primarily due
to higher legal fees related to a potential investment that was abandoned in
prior years. General and administrative expenses for the first six months of
2000 of $491,000 were also higher than the $352,000 recorded in the same period
in 1999 for the same reason. Management fees of $107,000 in the second quarter
of 2000 ($213,000 in the first six months of 2000) were comparable to the
$117,000 in the same period in 1999 ($234,000 in the first six months of 1999).
Interest expense was reduced from $111,000 in the second quarter of 1999
($226,000 for the first six months of 1999) to $95,000 in the second quarter of
2000 ($194,000 for the first six months of 2000) due to lower borrowings
outstanding at the Providence Project.
Although equity income from the Maine Hydro Projects for the first six months of
2000 of $662,000 was comparable to $655,000 in the same period of 1999, income
in the second quarter of 2000 of $406,000 was substantially higher than the
second quarter 1999 income of $118,000. The river flows were higher in the
second quarter of 2000 compared to the prior year but lower in the first quarter
of 2000 compared to the prior year.
The equity loss from the shut-down Maine Biomass Projects decreased from
$242,000 in the second quarter of 1999 ($410,000 for the first six months of
1999) to $88,000 in the second quarter of 2000 ($170,000 for the first six
months of 2000) due to higher energy revenues and reduced maintenance costs.
The Trust recorded losses from its equity interest in the Santee River Rubber in
2000 ($181,000 for the first six months and $111,000 in the second quarter)
compared to income in 1999 ($64,000 for the first six months and $71,000 in the
second quarter) because the project was under construction in 1999, but was
fully staffed and undergoing testing in 2000.
The increase in the minority interest in the earnings of the Providence Project
from $18,000 in the second quarter of 1999 ($83,000 for the first six months of
1999) to $51,000 in the second quarter of 2000 ($109,000 for the first six
months of 2000) is a result of higher earnings from the Providence Project
caused primarily by lower maintenance costs.
Liquidity and Capital Resources
In 1997, the Trust and Fleet Bank, N.A. (the "Bank") entered into a revolving
line of credit agreement, whereby the Bank provides a three year committed line
of credit facility of $1,150,000. Outstanding borrowings bear interest at the
Bank's prime rate or, at the Trust's choice, at LIBOR plus 2.5%. The credit
agreement requires the Trust to maintain a ratio of total debt to tangible net
worth of no more than 1 to 1 and a minimum debt service coverage ratio of 2 to
1. The credit facility was obtained in order to allow the Trust to operate using
a minimum amount of cash, maximize the amount invested in Projects and maximize
cash distributions to shareholders. In the first quarter of 2000, the Trust
borrowed $500,000 under the credit facility.
As disclosed in the Trust's Annual Report on Form 10-K for the year 1999, the
Santee River Project did not operate at full capacity because of design and
equipment performance problems. The Project's general contractor, as required,
began repairs and modifications at its own cost in January 2000, but the Project
has required additional capital in order to pay for normal operating costs and
to allow the contractor to finish pre-operating testing.
In late May 2000, Environmental Processing Services, Inc., the Project's
developer, informed the Trust that the Project needed substantial additional
money to pay for its operating expenses while the repairs were completed and
during the testing. Intensive negotiations then began between Environmental
Processing, Ridgewood Power, the Project's bondholders and potential outside
funding sources. While these negotiations continued, the Project informed the
Trust on July 30, 2000 that it had run out of money and would be unable to make
payroll. After further discussions, the bondholders agreed to allow $275,000 to
be drawn from the debt service reserves for operating expenses and the Trust and
Ridgewood Electric Power Trust V advanced $92,000 and $183,000, respectively,
for that purpose. The Project is operating on an irregular schedule because of
raw material and operating cost delays, but it is possible that the
pre-operating test will be completed during the week of August 14, 2000. The
Project may or may not then shut down for an indefinite period while
negotiations for further financing continue. Although Ridgewood Power has been
informally advised that the Project has obtained an extension of a payment due
date on its bonds, the Project may enter bankruptcy or insolvency proceedings.
Ridgewood Power, the Project's bondholders, outside financing and management
sources and principals of Environmental Processing continue to discuss potential
financing alternatives. Any new financing from sources other than the Trust or
the results of a bankruptcy reorganization might dilute, subordinate or possibly
eliminate the Trust's equity interest. As of the date of this Quarterly Report,
the Trust believes that the Project can be refinanced on a basis that will
eventually allow the Trust to make a profit on the investment.
The Managing Shareholder announced a cessation of distributions in April 2000.
Obligations of the Trust are generally limited to payment of Project operating
expenses, payment of a management fee to the Managing Shareholder, payments for
certain accounting and legal services to third persons, repayment of borrowings
under the line of credit and distributions to shareholders of available
operating cash flow generated by the Trust's investments. The Trust's policy is
to distribute as much cash as is prudent to shareholders. Accordingly, the Trust
has not found it necessary to retain a material amount of working capital. The
amount of working capital retained is further reduced by the availability of the
line of credit facility.
The Trust anticipates that, during 2000, its cash flow from operations and the
line of credit facility will be adequate to fund its obligations.
Forward-looking statement advisory
This Quarterly Report on Form 10-Q, as with some other statements made by the
Trust from time to time, contains forward-looking statements. These statements
discuss business trends and other matters relating to the Trust's future results
and the business climate and are found, among other places, in the notes to
financial statements and at Part I, Item 2, Management's Discussion and
Analysis. In order to make these statements, the Trust has had to make
assumptions as to the future. It has also had to make estimates in some cases
about events that have already happened, and to rely on data that may be found
to be inaccurate at a later time. Because these forward-looking statements are
based on assumptions, estimates and changeable data, and because any attempt to
predict the future is subject to other errors, what happens to the Trust in the
future may be materially different from the Trust's statements here.
The Trust therefore warns readers of this document that they should not rely on
these forward-looking statements without considering all of the things that
could make them inaccurate. The Trust's other filings with the Securities and
Exchange Commission and its Confidential Memorandum discuss many (but not all)
of the risks and uncertainties that might affect these forward-looking
statements.
Some of these are changes in political and economic conditions, federal or state
regulatory structures, government taxation, spending and budgetary policies,
government mandates, demand for electricity and thermal energy, the ability of
customers to pay for energy received, supplies of fuel and prices of fuels,
operational status of plant, mechanical breakdowns, availability of labor and
the willingness of electric utilities to perform existing power purchase
agreements in good faith. Some of the cautionary factors that readers should
consider are described in the Trust's most recent Annual Report on Form 10-K.
By making these statements now, the Trust is not making any commitment to revise
these forward-looking statements to reflect events that happen after the date of
this document or to reflect unanticipated future events.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On June 2, 2000, Indeck Maine Energy LLC, the owner of the Maine Biomass
Projects, brought a complaint before the Federal Energy Regulatory Commission
(Docket No. EL00-80-000) requesting FERC to remove bid restrictions imposed on
Indeck by ISO-New England, Inc., the operator of the New England Power Pool.
Those restrictions capped the price that the ISO would pay for Indeck's electric
power output at approximately $810 per megawatt-hour, substantially less than
Indeck's own bids. The complaint also challenged the ISO's authority to impose
those restrictions. On July 26, 2000 FERC ordered the ISO "to remove the bid
restrictions previously imposed on Indeck." FERC found that the ISO had not
provided any evidence to support its conclusion that the Indeck power bids
materially affected the markets. That conclusion was a necessary condition for
imposing the restrictions.
Because of their cost structure, the Maine Biomass Projects currently run only
during power shortages in the summer and occasionally at other times when
transmission constraints or local problems require their use. Thus the lifting
of the bid restrictions will not result in revenue increases unless a power
shortage or similar situation occurs in the future. The Trust does not expect
any such situation to occur during the rest of the summer, although the weather
in particular is unpredictable.
The FERC order does not expressly lift the bid restrictions for earlier dates in
2000 and certain dates in 1999 on which the Projects sold power to the ISO and
there is some language in the order that could be read to say that FERC did not
invalidate the prior bid restrictions. The Trust believes that the order clearly
rejected the reasons given by the ISO for capping Indeck's prices on most of
those dates and also discredited the ISO's decision to impose caps retroactively
for the 1999 dates. The Trust intends to bring additional complaints at FERC to
clarify the order, to rescind the price caps for those prior dates on which the
Projects sold power and to recover additional compensation for those sales based
on the prices that Indeck had submitted. Until such proceedings are resolved
favorably to Indeck or unless a settlement with the ISO results, the Trust will
receive no additional revenue from the ISO for those prior dates.
In addition, the ISO has escrowed approximately $287,000 of Indeck's revenues,
based on the ISO's assertion that an overpayment was made for a price-capped
event in October 1999. The Trust expects to bring an additional proceeding in
the appropriate forum to recover the escrowed amount and to invalidate the caps.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RIDGEWOOD ELECTRIC POWER TRUST IV
Registrant
August 14, 2000 By /s/ Christopher I. Naunton
Date Christopher I. Naunton
Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial
officer)