UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
Commission File Number 0-25430
RIDGEWOOD ELECTRIC POWER TRUST IV
(Exact name of registrant as specified in its charter.)
Delaware, U.S.A. 22-3324608
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
947 Linwood Avenue, Ridgewood, New Jersey 07450-2939
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (201)
447-9000
Indicate by check mark whether the registrant(1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
YES [X] NO [ ]
PART I. - FINANCIAL INFORMATION
RIDGEWOOD ELECTRIC POWER TRUST IV
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1997 1996
Assets
Cash and cash
equivalents $ 21,635,276 $ 22,685,829
Maintenance reserve
fund 394,070 394,070
Accounts receivable,
trade 559,439 1,065,181
Other receivables 88,216 109,999
Spare parts inventory 383,810 383,810
Prepaid royalty
expense 0 144,535
Prepaid other 3,721 0
Total current
assets 23,064,532 24,783,424
Investments:
Investment in
hydroelectric
projects 7,092,082 6,806,511
Electric power
equipment held
for resale 461,582 455,182
Deferred due
diligence costs 309,100 245,828
Plant and
equipment: 12,855,525 11,889,451
Less-accumulated
depreciation (477,203) (357,109)
Electric power
sales contract 8,266,096 8,266,096
Less-accumulated
amortization (528,111) (390,343)
Debt reserve fund 575,441 575,441
Total assets $ 51,619,044 $ 52,274,481
Liabilities and
Shareholders'
Equity
Current maturities
of long-term debt $ 538,191 $ 538,191
Accounts payable
and accrued
expenses 545,937 569,106
Due to affiliates 383,492 92,057
Total current
liabilities 1,467,620 1,199,354
Long-term debt,
less current
portion 5,310,498 5,440,260
Minority interest in
the Providence
Project 6,697,675 6,888,268
Commitments and
contigencies
Shareholders' equity
(476.8 and 746.8
shares issued
and out- standing
at 03/31/97 and
12/31/96,
respectively) 37,870,396 38,829,963
Retained earnings/
(deficit) 272,855 (83,364)
Total shareholders'
equity 38,143,251 38,746,599
Total liabilities
and shareholders'
equity $ 51,619,044 $ 52,274,481
<FN>
See Accompanying Notes to Financial Statements
RIDGEWOOD ELECTRIC POWER TRUST IV
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS
ENDED MARCH 31, 1997 AND MARCH 31, 1996
(Unaudited)
Three months Three months
ended March 31, ended March 31,
1997 1996
Net sales $ 1,682,179 $ 2,439
Sublease income 92,250 0
Total revenue 1,774,429 2,439
Cost of sales,
including depreciation
and amortization
of $257,862 in
1997 1,188,235 0
Gross profit 586,194 2,439
General and administrative
expenses 103,296 20,464
Management fee 292,980 46,970
Investment fee 400 181,295
Project due diligence costs 5,479 0
Other expenses 7,454 0
Total other
operating expenses 409,609 248,729
Income (loss) from
operations 176,585 (246,290)
Other income (expense):
Interest and
dividend income 249,470 61,911
Interest expense (167,450) 0
Income from
hydroelectric
projects 227,197 0
Net other income 309,217 61,911
Income (loss) before
minority interest 485,802 (184,379)
Minority interest in
the earnings of the
Providence Project (129,582) 0
Net income (loss) $ 356,220 $ (184,379)
<FN>
See Accompanying Notes to Financial Statements
RIDGEWOOD ELECTRIC POWER TRUST IV
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
MARCH 31, 1996
(Unaudited)
Three months Three months
ended March 31, ended March 31,
1997 1996
Cash flows from
operating activities:
Net income (loss) $ 356,220 $ (184,379)
Adjustments to reconcile
net income (loss) to
net cash provided by
(used in) operating
activities:
Depreciation and
amortization 257,862 0
Amortization of
prepaid and accrued
royalties- net 144,535 0
Minority interest
in earnings of the
Providence Project 129,582 0
Income from
unconsolidated
hydroelectric
projects (227,197) 0
Changes in assets
and liabilities,
net of effects of
Providence Project
purchase:
Decrease (increase)
in accounts receiv-
able, trade 505,742 (16,972)
Decrease (increase)
in other
receivables 21,783 0
Decrease in
customer escrow
fund 0 0
Increase (decrease)
in accounts payable
and accrued expenses (23,169) (130,451)
Increase (decrease)
in due from
affiliate 291,435 0
Other- net (3,721) 0
Total adjustments 1,096,852 (147,423)
Net cash provided
by (used in)
operating
activities 1,453,072 (331,802)
Cash used in
investing
activities:
Investment in
the Providence
Project 0 (5,250,000)
Investment in
hydroelectric
projects (58,374) 0
Capital
expenditures (966,074) 0
Deferred due
diligence costs (63,272) 0
Purchase of
electric
generating
equipment (6,400) 0
Net cash used
in investing
activities (1,094,120) (5,250,000)
Cash provided by
(used in) financing
activities:
Proceeds from
shareholders'
contributions 0 7,951,685
Selling commissions
and offering
costs paid 0 (2,359,206)
Cash distributions
to shareholders (959,567) (291,000)
Payments to reduce
long-term debt (129,762) 0
Distribution to
minority interest (320,176) 0
Net cash provided
by financing
activities (1,409,505) 7,660,685
Net increase (decrease)
in cash and cash
equivalents (1,050,553) 2,078,883
Cash and cash
equivalents,
beginning of period 22,685,829 12,998,463
Cash and cash
equivalents,
end of period $ 21,635,276 $ 15,077,346
<FN>
See Accompanying Notes to Financial Statements
RIDGEWOOD ELECTRIC POWER TRUST IV
NOTES TO FINANCIAL STATEMENTS
1. Organization and Purpose
Nature of Business
Ridgewood Electric Power Trust IV (the "Trust") was formed as a
Delaware business trust in September 1994, by Ridgewood Energy
Holding Corporation acting as the Corporate Trustee. The managing
shareholder of the Trust is Ridgewood Power Corporation. The
Trust began offering shares on February 6, 1995. The Trust
discontinued its offering of shares in March 1995 and commenced
operations in May 1995.
The Trust has been organized to invest in independent power
generation facilities and in the development of these facilities.
These independent power generation facilities will include
cogeneration facilities, which produce both electricity and heat
energy and other power plants that use various fuel sources
(except nuclear). The power plants will sell electricity and/or
heat energy to utilities and industrial users under long-term
contracts.
Business Development Company Election
The Trust made an election to be treated as a Business Development
Company ("BDC") under the Investment Company Act of 1940 ("the
1940 Act"). On January 24, 1995, the Trust notified the
Securities Exchange Commission of such election and registered its
shares under the Securities Exchange Act of 1934 ("the 1934 Act").
On March 24, 1995, the election and registration became effective.
On September 9, 1996, through a proxy solicitation the Trust
requested investor consent to end the BDC status. As of October
2, 1996, more than 50% of the investors shares consented to the
elimination of the BDC status. Accordingly, the Trust is no
longer an investment company under the 1940 Act.
2. Summary Of Significant Accounting Policies
Interim Financials
The consolidated financial statements for the quarters ended March
31, 1997 and 1996, included herein have been prepared by the Trust
without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, these statements
reflect all adjustments (consisting only of normal recurring
entries) which are, in the opinion of management, necessary for a
fair statement of the financial results for the interim periods.
Certain information and notes normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Trust believes that the
disclosures are adequate to make the information presented not
misleading. These financial statements should be read in
conjunction with the financial statements and the notes thereto
included in the Trust's Annual Report on Form 10-K for the year
ended December 31, 1996 (Form 10-K).
Accounting Changes
As a BDC under the 1940 Act, the Trust utilized generally accepted
accounting principles for investment companies. As a result of
the elimination of the BDC status, the Trust now utilizes
generally accepted accounting principles for operating companies.
In accordance with the generally accepted accounting principles
for BDCs, investments in power generation projects were stated at
fair value in previously issued financial statements. As a result
of the elimination of the BDC status, consolidation and
equity method accounting principles now apply to the
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
accounting for investments. Accordingly, the financial data for
all prior periods presented has been restated to reflect the use
of consolidation and equity method accounting principles.
Principles of Consolidation and Accounting for Investment in Power
Generation Projects
The consolidated financial statements include the accounts of the
Trust and affiliates owned more than 50%. All material
intercompany transactions have been eliminated.
The Trust uses the equity method of accounting for its investment
in an affiliate which is 50% owned because the Trust has the
ability to exercise significant influence over the operating and
financial policies of the affiliate but does not control the
affiliate. The Trust's share of the earnings of the affiliate is
included in consolidated net income.
Use of Estimates
The preparation of consolidated financial statements in conformity
with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts
of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from the estimates.
Cash and Cash Equivalents
The Trust considers all highly liquid investments with maturities
when purchased of three months or less as cash and cash
equivalents.
Plant and Equipment
Plant and equipment, consisting principally of electrical
generating equipment, is stated at cost. Renewals and betterments
that increase the useful lives of the assets are capitalized.
Repair and maintenance expenditures that increase the efficiency
of the assets are expensed as incurred.
Depreciation is recorded using the straight-line method over the
useful lives of the assets, which is 10 to 20 years. For the
period ended March 31, 1997 and March 31, 1996, the Trust recorded
depreciation expense of $120,094 and $0, respectively.
Intangible Asset
A portion of the purchase price of the Providence Project was
assigned to the Electric Power Sales Contract and is being
amortized over 15 years on a straight-line basis. For the period
ended March 31, 1997 and March 31, 1996, the Trust recorded
amortization expense of $137,768 and $0, respectively.
Electric Power Equipment Held for Resale
The Trust owns certain used electric power equipment that is
stated at cost, which approximates estimated net realizable value.
Revenue Recognition
Power generation revenue is recognized based on power delivered at
rates stipulated in the power sales contract. Interest and
dividend income is recorded when earned.
Income Taxes
No provision is made for income taxes in the accompanying
financial statements as the income or losses of the Trust are
passed through and included in the tax returns of the individual
shareholders of the Trusts.
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
Offering Costs
Costs associated with offering Trust shares (selling
commissions, distribution and offering costs) are reflected as a
reduction of the shareholders' capital contributions.
Due diligence costs relating to potential power projects
Costs relating to the due diligence performed on potential power
project investments are initially deferred, until such time as the
Trust determines whether or not it will make an investment in the
respective project. Costs relating to completed projects are
capitalized and costs relating to rejected projects are expensed,
at the time of rejection.
3. Acquisitions
The Trust has made the following investments in power generation
projects and electric power equipment:
Nature of Ownership March 31, December 31,
Project Name Ownership Interest 1997 1996
Providence Project Partnerships 64.3% $12,850,000 $12,850,000
Maine Hydro Project Partnerships 50.0% 7,092,082 6,806,511
California Pumping Direct
Project Ownership 100.0% 780,834 697,730
Electric Power Direct
Equipment Ownership 100.0% 461,582 455,182
Providence Project
In 1996, Ridgewood Providence Power Partners, L.P. was formed as a
Delaware limited partnership ("Providence Power"). The Trust
invested $12,721,500 and owns a 64.3% limited partnership interest
in Providence Power. In addition, Ridgewood Providence Power
Corporation, was formed as a Delaware corporation ("RPPCorp.").
The Trust invested $128,500 and owns 64.3% of the outstanding
common stock of RPPCorp., which is the sole general partner of
Providence Power.
On April 16, 1996, Providence Power purchased substantially all of
the net assets of Northeastern Landfill Power Joint Venture. The
assets acquired include a 12.3 megawatt capacity electrical
generating station, located at the Central Landfill in Johnston,
Rhode Island (the "Providence Project"). The Providence Project
includes eight reciprocating electric generator engines, which are
fueled by methane gas produced and collected from the landfill.
The electricity generated is sold to New England Power Corporation
under a long-term contract. The purchase price was $15,533,021
cash, including transaction costs and repayment of $3,000,000 of
principal on the senior secured non-recourse notes payable. In
addition, Providence Power assumed the obligation to repay the
remaining principal outstanding of $6,310,404 on the senior
secured non-recourse notes payable.
Through ownership in RPPCorp. and Providence Power, the Trust owns
64.3% of the Providence Project. The remaining 35.7% is owned by
Ridgewood Electric Power Trust III ("Trust III"). Ridgewood Power
Corporation is the managing partner of the Trust and Trust III.
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
The acquisition of the Providence Project was accounted for as a
purchase as of April 16, 1996, and the results of operations of
the Providence Project have been included in the Trust's
Consolidated Financial Statements since that date. The purchase
price was allocated to the net assets acquired, based on their
respective fair values. A portion of the purchase price
($8,266,096) was allocated to the Electric Power Sales Contract
and is being amortized over 15 years.
The following unaudited pro forma information has been prepared
assuming the Providence Project was acquired as of the beginning
of the periods presented. The pro forma information is presented
for information purposes only and is not necessarily indicative of
what would have occurred if the formation and acquisition had been
made as of those dates. In addition, the pro forma information is
not intended to be a projection of future results and does not
reflect capital equipment additions and changes in operating
management which have been made at the Providence Project
subsequent to the acquisition.
Actual ProForma
March 31, March 31,
1997 1996
Net sales $1,679,485 $1,212,331
Income from Operations 403,341 259,625
Net Income 363,121 24,995
Maine Hydro Projects
On September 5, 1996, Ridgewood Maine Hydro Partners, L.P. was
formed as a Delaware limited partnership ("Ridgewood Hydro L.P.").
The Trust made investments and advances of $6,740,570 and owns a
50% limited partnership interest in Ridgewood Hydro L.P. In
addition, Ridgewood Maine Hydro Corporation, was formed as a
Delaware corporation ("RMHCorp."). The Trust invested $65,941 and
owns 50% of the outstanding common stock of RMHCorp., which is the
sole general partner of Ridgewood Hydro L.P.
On December 23, 1996, in a merger transaction, Ridgewood Hydro
L.P. acquired 14 hydroelectric projects, located in Maine (the
"Maine Hydro Projects"), from a subsidiary of Consolidated Hydro,
Inc. The assets acquired include a total of 11.3 megawatts of
electrical generating capacity. The electricity generated is sold
to Central Maine Power Company and Bangor Hydro Company under
long-term contracts. The purchase price was $12,256,306 cash,
including transaction costs. In addition, Ridgewood Hydro L.P.
assumed a long-term lease obligation of $1,017,209. The Trust's
50% share of the cash consideration paid was $6,128,153. The
remaining 50% was paid by Ridgewood Electric Power Trust V ("Trust
V"). Ridgewood Power Corporation is the managing partner of the
Trust and Trust V.
The Trust's 50% investment in the Maine Hydro Projects is
accounted for under the equity method of accounting. The Trust's
equity in the earnings of the Maine Hydro Projects have been
included in the Consolidated Financial Statements since December
23, 1996.
The Maine Hydro Projects are operated by a subsidiary of
Consolidated Hydro, Inc., under an Operation, Maintenance and
Administrative Agreement. The annual operator's fee is
$307,500,adjusted for inflation, plus an annual incentive fee
equal to 50% of the net cash flow in excess of a target amount
The agreement has a five year term and can be renewed for two
additional five year terms by mutual consent.
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
Summarized financial information for the Maine Hydro Projects are
as follows:
Balance Sheet Information at March 31, 1997
Current assets $ 1,062,717 Due to Trust IV $ 43,027
Electric power Other current
sales contract 12,416,194 liabilities 238,917
Other non-current Non-current
assets 800,000 liabilities 1,004,679
Partners'
equity 12,992,288
Total assets $14,278,911 Total liabilities
and equity $14,278,911
Statement of Operations Information for the period ending March
31, 1997
Revenue $1,441,852
Operating expenses 438,780
Depreciation & Amortization 511,818
Other Income/(Expense) (36,860)
Net income $ 454,394
California Pumping Project
On December 31, 1995, the Trust acquired a package of natural gas
fueled diesel engines which drive deep irrigation well pumps in
Ventura County, California from an affiliated trust. The engines'
shaft horsepower-hours are sold to the operator at a discount from
the equivalent kilowatt hours of electricity. The Trust receives
a distribution of $0.02 per equivalent kilowatt up to 3,000
running hours per year and $0.01 per equivalent kilowatt for each
additional running hour per year. The operator pays for fuel,
maintenance, repair and replacement. The initial acquisition
included 11 engines with a rated capacity of 1.2 megawatts. The
purchase price of $353,619 was paid in 1996. During 1996, the
Trust acquired an additional 9 engines with a rated capacity of
1.2 megawatts at a purchase price of $344,111. During the three
months ended March 31, 1997 the Trust invested additional funds of
$83,104 in the California Pumping projects. At March 31, 1997,
the Trusts total investment in the California Pumping Project was
$780,834.
4. Electric Power Equipment Held for Resale
The Trust purchased, from an affiliated entity, various used
electric power generation equipment to be held for resale or, in
the event a buyer is not found, for use in potential power
generation projects. The equipment is held in storage. At March
31, 1997 and December 31, 1996, the cost of such equipment was
$461,582 and $455,182, respectively.
5. Long-term Debt
Following is a summary of long-term debt at March 31, 1997:
Senior secured non-recourse notes payable $5,848,689
Less - Current maturity 538,191
Total Long-term Debt $5,310,498
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
The senior secured non-recourse notes are due in monthly
installments of $90,738 including interest at 9.6%. Final payment
is due on October 15, 2004. The notes also provide for additional
interest equal to 5% of the annual net cash flow of the Providence
Project, as defined. No additional interest was due for the eight
and one half months ending December 31, 1996. The notes are
secured by a leasehold mortgage on Providence Power's landfill
lease agreements and substantially all of the assets of Providence
Power. In addition to the required monthly payments, mandatory
prepayments may be required if certain events occur. The loan
agreement also provides for a cash funded debt service reserve and
maintenance reserve. At March 31, 1997, the cash balance in these
reserve accounts were $575,441 and $394,070, respectively.
Additions and reductions to these reserve accounts are defined in
the loan agreement. As of January 31, 1997, Providence Power's
obligations to maintain a cash balance in the maintenance reserve
account have terminated and the cash balance in the reserve
account will be released to Providence Power. The loan agreement
contains various covenants, including the maintenance of a
specified debt service ratio.
Scheduled repayments of long-term debt principal for the next five
years are as follows:
Year Ended
December 31, Repayment
1997 $538,191
1998 592,193
1999 651,613
2000 716,995
2001 788,937
6. Fair Value of Financial Instruments
At March 31, 1997, the carrying value of the Trust's cash, debt
service and maintenance reserves and notes payable approximates
their fair value. The fair value of the long-term debt,
calculated using current rates for loans with similar maturities,
also approximates its carrying value.
7. Electric Power Sales Contracts
Providence Power is committed to sell all of the electricity it
produces to New England Power Company ("NEP") for prices as
specified in the Power Purchase Agreement. The prices are
adjusted annually for changes in the Consumer Price Index, as
defined. The NEP agreement expires in the year 2020 and can be
terminated by either party under certain conditions in 2010. At
the time of the acquisition of the Providence Project, Providence
Power was required under the NEP agreement to maintain in an
escrow account cash to secure payment of the aggregate
differential to NEP in the event of default. At April 16, 1996,
the aggregate differential amounted to $1,065,989. In October
1996, the aggregate differential decreased to zero and the cash
held in escrow was released to Providence Power. For three months
ended March 31, 1997 and March 31, 1996, sales revenue under the
NEP Power Purchase Agreement amounted to $1,679,485 and $0,
respectively.
The Maine Hydro Projects qualify as small power production
facilities under the Public Utility Regulatory Policies Act
("PURPA"). PURPA requires that each electric utility company,
operating at the location of a small power production facility, as
defined, purchase the electricity generated by such facility at a
specified or negotiated price. The Maine Hydro Projects sell
substantially all of their electrical output to two public utility
companies, Central Maine Power Company ("CMP") and Bangor Hydro-
Electric Company ("BHC"), under long-term power purchase
agreements. Eleven of the twelve power purchase agreements
with CMP expire in
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
December 2008 and are renewable for an additional five year
period. The twelfth power purchase agreement with CMP expires in
December 2007 with CMP having the option to extend the contract
three more five-year periods. The two power purchase agreements
with BHC expire December 2014 and February 2017.
8. Landfill Lease and Sublease
Providence Power leases the Central Landfill, located in Johnston,
Rhode Island from Rhode Island Solid Waste Management Corporation
("RISWMC"). The lease expires in 2020 and can be extended for an
additional 10 years. The lease requires Providence Power to pay a
royalty equal to 15% of net revenues, as defined, for the first 15
years of the lease. For subsequent years, the royalty is 15% of
net revenues for each month in which the average daily kilowatt
hour production is less than 180,000 and 18% of net revenues for
each month in which the average
daily kilowatt hour production exceeds 180,000. At the time of
the acquisition of the Providence Project, Providence Power made a
royalty prepayment to RISWMC of $925,000. For three months ended
March 31, 1997 and March 31, 1996, royalty expense relating to the
RISWMC lease amounted to $238,769 and $0, respectively.
Providence Power subleases the Central Landfill to Central Gas
Limited Partnership ("Gasco"). Gasco operates and maintains the
landfill gas collection system and supplies landfill gas to the
Providence Project. The sublease agreement is effective through
December 31, 2010 and provides for the following:
1. Sublease Income - Gasco is to pay Providence Power an annual
amount equal to the product of $30,000 times the assumed output
capacity of each engine generator set in megawatts installed
and operating by the joint venture. Income recorded under the
sublease amounted to $92,250 and $0, respectively for the three
months ended March 31, 1997 and March 31, 1996..
2. Fuel Expense - Providence Power agreed to purchase all the
landfill gas produced by Gasco and pay on a monthly basis
$.01183 per kilowatt hour for the first 4,000,000 kilowatt
hours, $.005 per kilowatt hour for kilowatt hours in excess of
4,000,000 and $.05 per million BTU's of excess landfill gas.
The price is adjusted annually for changes in the Consumer
Price Index, as defined. Purchases from Gasco for the three
months ended March 31, 1997 and March 31, 1996 amounted to
$214,120 and $0, respectively.
9. Transactions With Managing Shareholder and Affiliates
The Trust also pays to the managing shareholder a distribution and
offering fee up to 6% of each capital contribution made to the
Trust. This fee is intended to cover legal, accounting,
consulting, filing, printing, distribution, selling and closing
costs for the offering of the Trust. For the period ended March
31, 1997 and March 31, 1996, the Trust paid fees for these
services to the managing shareholder of $0 and $613,860,
respectively. These fees are recorded as a reduction in the
shareholders' capital contribution.
Ridgewood Electric Power Trust IV
Notes to the Consolidated Financial Statements
The Trust pays to the managing shareholder an investment fee up to
2% of each capital contribution made to the Trust. The fee is
payable to the managing shareholder for its services in
investigating and evaluating investment opportunities and
effecting transactions for investing the capital of the Trust. For
the period ended March 31, 1997 and March 31, 1996, the Trust paid
investment fees to the managing shareholder of $400 and $181,295,
respectively.
The Trust entered into a management agreement with the managing
shareholder under which the managing shareholder renders certain
management, administrative and advisory services and provides
office space and other facilities to the Trust. As compensation to
the managing shareholder, the Trust pays the managing shareholder
an annual management fee equal to 3% of the net asset value of the
Trust payable monthly upon the closing of the Trust. For the
period ended March 31, 1997 and March 31, 1996, the Trust paid
management fees to the managing shareholder of $292,980 and
$46,970, respectively.
Under the Declaration of Trust, the managing shareholder is
entitled to receive each year 1% of all distributions made by the
Trust (other than those derived from the disposition of Trust
property) until the shareholders have been distributed each year
an amount equal to 14% of their equity contribution. Thereafter,
the managing shareholder is entitled to receive 20% of the.
distributions for the remainder of the year. The managing
shareholder is entitled to receive 1% of the proceeds from
dispositions of Trust properties until the shareholders have
received cumulative distributions equal to their original
investment ("Payout"). In all cases, after Payout the managing
shareholder is entitled to receive 20% of all remaining
distributions of the Trust
Where permitted, in the event the managing shareholder or an
affiliate performs brokering services in respect of an investment
acquisition or disposition opportunity for the Trust, the managing
shareholder or such affiliate may charge the Trust a brokerage
fee. Such fee may not exceed 2% of the gross proceeds of any such
acquisition or disposition. No such fees have been paid through
March 31, 1997.
The managing shareholder purchased one share of the Trust for
$83,000. For the year ended March 31, 1997, commissions and
placement fees of $263,883 were earned by Ridgewood Securities
Corporation, an affiliate of the managing shareholder.
Under an Operating Agreement with the Trust, Ridgewood Power
Management Corporation ("Ridgewood Management"), an entity related
to the managing shareholder through common ownership, provides
management, purchasing, engineering, planning and administrative
services to the Trust's power generation projects. Ridgewood
Management charges the projects at its cost for these services and
for the allocable amount of certain overhead items. Allocations
of costs are on the basis of identifiable direct costs, time
records or in proportion to amount invested in projects managed by
Ridgewood Management. For the period ended March 31, 1997 and
March 31, 1996, Ridgewood Management charged Providence Power
$131,289 and $0, respectively, for overhead items allocated in
proportion to the amount invested in projects managed, and charged
Providence Power for all of the remaining direct operating and
non-operating expenses incurred during the period.
RIDGEWOOD ELECTRIC POWER TRUST IV
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q, like some other statements made by
the Trust from time to time, has forward-looking statements. These
statements discuss business trends and other matters relating to the
Trust's future results and the business climate. In order to make these
statements, the Trust has had to make assumptions as to the future. It
has also had to make estimates in some cases about events that have
already happened, and to rely on data that may be found to be inaccurate
at a later time.
Because these forward-looking statements are based on assumptions,
estimates and changeable data, and because any attempt to predict the
future is subject to other errors, what happens to the Trust in the
future may be materially different from the Trust's forward-looking
statements.
The Trust therefore warns readers of this document that they should not
rely on these forward-looking statements without considering all of the
things that could make them inaccurate. The Trust's other filings with
the Securities and Exchange Commission and its Confidential Memorandum
discuss many (but not all) of the risks and uncertainties that might
affect these forward-looking statements.
Some of these are changes in political and economic conditions, federal
or state regulatory structures, government taxation, spending and
budgetary policies, government mandates, demand for electricity and
thermal energy, the ability of customers to pay for energy received,
supplies of fuel and prices of fuels, operational status of plant,
mechanical breakdowns, availability of labor and the willingness of
electric utilities to perform existing power purchase agreements in good
faith.
By making these statements now, the Trust is not making any commitment
to revise these forward-looking statements to reflect events that happen
after the date of this document or to reflect unanticipated future
events.
Dollar amounts in this discussion are generally rounded to the nearest
$1,000.
Three months ended March 31, 1997 versus three months ended
March 31, 1996
Results of Operations
The consolidated financial statements include the accounts
of the Trust and the limited partnerships owning the
Providence and California Pumping Projects. The Trust uses
the equity method of accounting for its investment in the
Maine Hydro Projects, which are 50% owned by the Trust. The
Trust's share of the earnings and cash flow earned by the
Maine Hydro Projects is seasonal, peaking in the second and
fourth quarters of the year (when high river flows generally
produce a greater amount of electricity) and falling in the
first and third quarters, when river flows are lower and
equipment maintenance is performed.
For the quarter ended March 31, 1997, the Trust's net income
increased to $356,000 from a net loss of $184,000 for the
same quarter in 1996. The current quarter's earnings
include equity in net income from the Maine Hydro Projects
of $227,000, earnings, net of minority interest, from the
Providence Project of $233,000, a minor contribution to
earnings from the California Pumping Project of $3,000,
interest and dividend income at the Trust level of $215,000,
less Trust-level expenses of $322,000.
The Trust's only investment in the first quarter of 1996 was
the California Pumping Project and the Trust had significant
investment fee expenses relating to the share offering. The
1996 first quarter reflects expenses for investment fees,
management fees and general and administrative expenses of
$181,000, $47,000 and $20,000, respectively.
Liquidity and Capital Resources
At March 31, 1997, the Trust had $21,635,000 of cash
available for investment in Projects. During the first
quarter of 1997, cash flow provided by operation activities
amounted to $1,453,000, of which $960,000 was distributed to
shareholders of the Trust and $320,000 was distributed to
the minority interest in the Providence Project.
During the first quarter of 1997, capital expenditures
amounted to $966,000, most of which related to the
installation of a ninth generator engine at the Providence
Project.
The Trust is in the process of obtaining a $500,000 line of credit,
which it plans to have in place in the third quarter of 1997. The line
of credit is being obtained in order to allow the Trust to operate using
a minimum amount of cash, maximize the amount invested in Projects and
maximize cash distributions to shareholders.
The Trust's policy is to distribute as much cash as is prudent to
shareholders. Accordingly, the Trust has not found it necessary to
retain a material amount of working capital. The amount of working
capital retained will be further reduced by obtaining a line of credit.
Certain Industry Trends
The industry trend toward deregulation of the electric power
generating and transmission industries has accelerated after
the adoption of Order 888 by the Federal Energy Regulatory
Commission ("FERC") on April 24, 1996. A number of major
states, including California, have adopted proposals to
allow "retail wheeling," which would allow any qualified
generator to use utility transmission and distribution
networks to sell electricity directly to utility customers.
Other states, such as Massachusetts, Maine and Rhode Island,
are preparing their own initiatives. As a result,
profound changes in the industry are occurring, marked by
consolidations of utilities, large scale spin-offs or sales
of generating capacity, reorganizations of power pools and
transmission entities, and attempts by electric utilities to
recover stranded costs and alter power purchase contracts
with independent power producers such as the Trust.
It is too early to predict the effects of these trends and
others on the Trust's business. A critical issue for the
Trust, however, is whether any action will be taken to
modify its existing power purchase contracts or to shift
costs to independent power producers. To date, neither FERC
nor state authorities have adopted
measures that would impair power purchase contracts and the
Trust is not aware of any other such action by regulatory
authorities in states where it does business.
It must be remembered, however, that legislative and
regulatory action is unpredictable and that at any time
federal or state legislatures or regulators could adopt
measures that would be materially adverse to the Trust's
business. Further, volatile market conditions could
adversely affect the Trust's operations and the actions of
other industry participants, such as electric utilities,
which in turn could affect the Trust.
PART II - OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
An Amendment No. 1 to Current Report on Form 8-K,
was filed during this quarter for the purpose of including audited
financial statements for the Maine Hydro Projects.
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
Date: May 14, 1997 By /s/ Martin V. Quinn
Martin V. Quinn
Senior Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial
officer)