10-Q 1 t1q1.txt Microsoft Word 11.0.6359; UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2005 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 of (I.R.S. Employer incorporation or organizatio Identification No.) 1314 King Street, Wilmington, Delaware 19801 (Address of principal executive offices) (Zip Code) (302) 888-7444 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. Consolidated Financial Statements

See accompanying notes to the consolidated financial statements.

See accompanying notes to the consolidated financial statements.

See accompanying notes to the consolidated financial statements. Ridgewood Electric Power Trust I Note to the Consolidated Financial Statements (unaudited) ------------------------------------------------------------------------------- 1. General The accompanying unaudited consolidated financial statements of Ridgewood Electric Power Trust I (the "Trust") were prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial condition of the Trust have been included. Certain reclassifications have been made to the prior year's consolidated financial statements to conform to the current year's presentation. Operating results for the three month period ended March 31, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2005. The consolidated balance sheet at December 31, 2004 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles in the United States of America. For further information, refer to the consolidated financial statements and footnotes thereto included in the Trust's Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the U.S. Securities and Exchange Commission ("SEC"). The consolidated financial statements include the accounts of the Trust and its wholly-owned subsidiaries. All material intercompany transactions have been eliminated. The Trust accounted for its investment in Stillwater Hydro Partners, L.P. ("Stillwater") under the equity method of accounting through December 31, 2004. Accordingly, the Trust's share of the operating result of Stillwater is included in the consolidated statements of operations for the year ended December 31, 2004. Effective January 1, 2005, the Trust adopted Emerging Issues Task Force ("EITF") 02-14 and changed its method of accounting for its investment in Stillwater to the cost method. On January 1, 2005, Ridgewood Olinda and Ridgewood Rhode Island Generation LLC (RRIG") agreed to terminate their October 2003 engine lease agreement. On the same day, Ridgewood Olinda, RRIG and Ridgewood Power B Fund/Providence Expansion entered into a new agreement which provides Ridgewood Olinda a 15% membership interest in RRIG in exchange for the transfer of engines. As such, effective January 1, 2005, the Trust accounts for its investment in RRIG using the equity method of accounting. Defined terms that are not defined herein shall have the meaning ascribed to them in the Trust's Annual Report on Form 10-K 2. Summary Results of Operations for Stillwater Hydro Partners, L.P. Summary results of operations for Stillwater Hydro Partners, L.P., are as follows: Three Months Ended March 31, ------------------- 2004 ------------------- Revenue $ 235,000 Total expenses 337,000 ------------------- Net loss $ (102,000) ------------------- 3. Summary Results of Operations for Ridgewood Rhode Island Generation LLC. Summary results of operations for Ridgewood Rhode Island Generation LLC., are as follows: Three Months Ended March 31, ------------------- 2005 ------------------- Revenue $ 360,201 Total expenses 347,908 ------------------- Net Income $ 12,293 ------------------- 4. Brea Project As stated in the Trust's 2004 Annual Report on Form 10-K, on March 23, 2005, the power contract between the Brea Project and Southern California Edison ("SCE") terminated. On March 23, 2005, the Brea Project executed a new standard offer power contract with SCE which has a five year term and may be cancelled by the Trust at anytime for any reason upon providing SCE with thirty days advance written notice. Under a standard offer contract, the Brea Project will sell its electric energy to SCE at market prices. Also as stated in the Trust's 2004 Annual Report on Form 10-K, the Brea Project is required to comply with certain environmental regulations of the South Coast Air Quality Management District ("South Coast"), the air pollution control agency for Orange County and major portions of Los Angeles, San Bernardino and Riverside counties in Southern California. The South Coast promulgated Rule 1110-2 regarding air emissions from gaseous and liquid-fueled stationary engines which generally imposes very low air emissions levels on such engines, which include the generating engines used by and located at the Brea Project (the "Rule"). According to the Rule, existing and newly installed, electric, generating engines were required to be in compliance with the new emissions levels by January 1, 2005 or cease operations or, if operations continue, risk severe penalties from South Coast. Based on their configuration and operation at the time, the electric generating engines used by the Brea Project did not comply with the Rule. As a result, the Brea Project, received a short-term variance of the Rule's to June 30, 2005 to allow the Brea Project to install certain "control technology", which is intended to enable the Brea engines to operate at or below the emission levels required by the Rule. The control technology has been installed on one of the engines of the Project and initial testing in early June indicated that the control technology would allow the Project to meet the required emission standards. Subsequent to the initial testing but before final testing could be completed an unrelated electrical fault caused minor damage to the engine. Delay required to repair the damage may prevent final testing prior to the end of the current variance and, as a precautionary measure, the Trust has applied for an emergency variance to extend the current variance for a period of 15 days. Given that the Trust has acted in good faith to address the emissions compliance issue and that the control technology has a high likelihood of success, as demonstrated by the favorable initial tests, the Trust is confident that the emergency variance will be granted and that the Trust will be allowed to complete installation of the control technology on all the engines of the Project. . The Trust believes that the control technology will enable the Brea Project to operate for an indefinite period and maintain compliance with the Rule. So long as the Brea Project complies with the Rule, the Trust expects that it will generate and sell its electric output to SCE under its new standard offer contract. Under a standard offer contract, Brea will sell its output to SCE at essentially market prices, which currently are approximately $.06/kwh. Although current market prices under a standard offer contract are high compared to historical levels and the Trust can not guarantee that they will remain at such levels. 5. Ridgewood Olinda On January 1, 2005, Ridgewood Olinda and Ridgewood Rhode Island Generation LLC agreed to terminate their October 2003 engine lease agreement. On the same day, Ridgewood Olinda, Ridgewood Rhode Island Generation LLC and Ridgewood Power B Fund/Providence Expansion entered into a new agreement which provides Ridgewood Olinda a 15% membership interest in Ridgewood Rhode Island Generation LLC in exchange for the transfer of engines. Ridgewood Power B Fund/Providence Expansion holds the remaining 85% interest in Ridgewood Rhode Island Generation LLC. 6. Related Party Transactions Pursuant to an agreement with the Trust's projects, Ridgewood Power Management LLC ("Ridgewood Management"), an entity related to Ridgewood Renewable Power, LLC, the Managing Shareholder, through common ownership, provides management, purchasing, engineering, planning and administrative services to the projects owned by the Trust. Ridgewood Management is reimbursed by the Trust's the projects at its cost for the services it provides such projects 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. For the three months ended March 31, 2005 and 2004, Ridgewood Management charged the Brea Project $25,534 and $34,290, 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 with the other affiliates do not bear interest. At March 31, 2005 and December 31, 2004, the Trust had outstanding amounts due from the following affiliates: Due From --------------------------------------- March 31, December 31, 2005 2004 --------------------------------------- Ridgewood Power Management $ 33,362 $ 5,245 Other Affiliates 712 712 --------------------------------------- Total $ 34,074 $ 5,957 --------------------------------------- 7. Subsequent Events On June 14, 2005, the Managing Shareholder received notification from Wachovia Bank that its Line of Credit was extended through September 30, 2005. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following information should be read in conjunction with the accompanying consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and our Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended December 31, 2004, as filed with the U.S. Securities and Exchange Commission. 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 subsidiaries owning the Olinda Projects, which includes Brea Power Partners, L.P. ("Brea") and Ridgewood Olinda, L.L.C. ("Olinda"), and the mobile power modules. The Trust used the equity method of accounting for its 32.5% investment in Stillwater Hydro Partners, L.P., effective January 1, 2005, the Trust accounts for its investment in Stillwater under the cost method. Effective January 1, 2005, the engine lease agreement between Ridgewood Olinda and RRIG was terminated and Ridgewood Olinda received a 15% membership in RRIG. As such, the Trust accounts for its investment in RRIG using the equity method of accounting. Critical Accounting Policies and Estimates For a complete discussion of critical accounting policies, refer to "Significant Accounting Policies" in Item 7 of the Trust's 2004 Form 10-K. There have been no substantive changes to those policies and estimates. Outlook The Brea and Stillwater Projects are Qualified Facilties currently selling their electric output to utilities. Stillwater operates under a long-term Power Contract expiring in 2028. The Brea Project operates under a standard offer contract which has a five year term and is cancelable by the Trust at anytime upon providing thirty days advance written notice. Under a standard offer contract, the Brea Project will sell its electric energy at market prices. There can be no assurance that future market prices will be sufficient to allow the Brea Project to operate profitably. In addition, the Brea Project is currently working to comply with new emission standards imposed by South Coast. The Brea Project has received a variance through June 30, 2005 to continue to operate while it works toward completion of the installation of Control Technology. The Trust has applied for an emergency variance to extend the current variance for a period of 15 days. Although the Trust is expecting the Control Technology will reduce emissions to a continuously compliant level, there can be no assurance that the Brea Project will comply with the new regulations. 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 debt. Assuming normal water flows and no operational failures, the debt is expected to be repaid in 2010. RRIG has not yet procured a long-term contract for its electric power and is selling currently to the New England ISO and receiving the "spot price" for its power and renewable attributes. The Olinda Project is a member of RRIG and will be allocated profits and losses and will receive distributions in accordance with its ownership percentage. There is no guarantee that the current favorable market prices RRIG has experienced can be sustained or that an acceptable long-term power contract can be procured. Results of Operations Revenue decreased $62,000, or 10%, to $585,000 in the first quarter of 2005 from $647,000 in the first quarter of 2004. The decrease is attributable to the Brea Project curtailing operations, thus reducing power generation in the current period in order to install a portion of the emission modification equipment necessary to comply with the recently enacted South Coast air emission standards. Cost of revenue for the first quarter of 2005 was $460,000 compared to $461,000 in the first quarter of 2004. Although the net change in cost of revenue was consistent with the prior year, the Brea Project experienced an increase in repair and maintenance costs as a result of the modification of its engines as it continues to work towards emission compliance. Depreciation and amortization decreased by $98,000 in the current quarter as a result of the expiration of the power purchase agreement and the decrease in the value of the Brea Project, which recorded an impairment charge of $1,138,000 in the first quarter of 2004. Gross profit, which represents revenue reduced by cost of revenue, decreased from $186,000 in 2004, to $125,000 in 2005. The decrease is primarily the result of the Brea project generating lower revenue in the current period. General and administrative expenses increased $25,000 to $89,000 in the first quarter of 2005 from $64,000 in the first quarter of 2004. General and administrative expenses in both years consist of fees incurred by the Trust associated with retained professional firms to assist it with various projects, including, but not limited to, the process of obtaining the variance extension for the Brea Project. The management fee for the first quarter of 2005 was $6,000 compared to $9,000 for the first quarter of 2004. The decrease is the result of the Trust's lower net asset balance upon which the management fee is computed. In the first quarter of 2004 the Trust recognized an impairment charge on equipment used in power generation projects of $1,138,000, of which, $1,100,000 is the write down of the Brea Project and the remaining $38,000 is related to the mobile power modules. Income (loss) from operations improved by $1,054,000 to income of $30,000 for the quarter ended March 31, 2005. The increase in income is primarily the result of the decrease in the impairment of equipment used in power generation projects, partially offset by the decrease in gross profit in the current period. Interest expense decreased $7,000 from $20,000 for the first quarter of 2004, to $13,000 for the first quarter of 2005. The decrease is due to the lower balance of outstanding principal. Effective January 1, 2005, the Trust adopted EITF 02-14 and accordingly began to account for its investment under the cost recovery method. As a result, the Trust did not recognize equity income/loss from the Stillwater Hydro Project for the first quarter of 2005. The Trust recorded an equity loss of $33,000 for the first quarter of 2004. Effective January 1, 2005, the engine lease agreement between Ridgewood Olinda and RRIG was terminated and Ridgewood Olinda received a 15% membership in RRIG. Accordingly, the Trust recorded equity income of $2,000. Net income increased $1,096,000, to income of $19,000 in the first quarter of 2005. The increase in net income is primarily the result of the increase in income from operations described above. Liquidity and Capital Resources At March 31, 2005, the Trust had cash and cash equivalents of $744,000 an increase of $10,000 compared to December 31, 2004. The increase is the net effect of the $220,000 received from operating activities offset by the $132,000 of distributions paid to shareholders and $79,000 in repayment of loans. The Trust expects that its cash flows from operations and cash on hand will be sufficient to fund its obligations and any declared distributions for the next twelve months. The Trust has historically financed its operations from cash generated from its subsidiaries operations. Obligations of the Trust are generally limited to payment of the management fee to the Managing Shareholder, payments for certain administrative, accounting and legal services to third persons, and scheduled long-term debt payments related to the equipment at the Ridgewood Rhode Island Generation facility. Accordingly, the Trust has not found it necessary to retain a material amount of working capital. Cash provided by operating activities for the three months ended March 31, 2005 was $220,000 compared to $153,000 for the three months ended March 31, 2004. The increase in cash flow is in part due to the lower outstanding trade receivables at March 31, 2005. In the second half of 2004, the Trust decided to reduce its distributions in order to conserve cash in anticipation of the modification the Brea Project would require to comply with the impending stricter emission standards. Cash used in financing activities in the first quarter of 2005 of $211,000 represented distributions to shareholders of $132,000 and payments of $79,000 to reduce loans payable on the Olinda Project. Cash used in financing activities in the first quarter of 2004 of $495,000 represented distributions to shareholders of $422,000 and payments of $73,000 to reduce loans payable on the Olinda Project. On June 26, 2003, the Managing Shareholder of the Trust, entered into a $5,000,000 Revolving Credit and Security Agreement with Wachovia Bank, National Association. The agreement allows the Managing Shareholder to obtain loans and letters of credit for the benefit of the trusts and funds that it manages. On February 20, 2004, the Managing Shareholder and Wachovia Bank amended the agreement increasing the amount to $6,000,000. Recently, Wachovia Bank and the Managing Shareholder amended the Credit Agreement again to extend its expiration to September 30, 2005. As part of the Credit Agreement, the Trust separately agreed with Wachovia Bank to limit its ability to incur indebtedness, liens and provide guarantees. The Trust's significant long-term obligation is limited to $563,000 of loans payable through 2006 related to the equipment located at and contributed to Ridgewood Rhode Island Generation. In return for such contribution, the Trust received a 15% ownership interest in Ridgewood Rhode Island Generation LLC. The Brea Project has certain long-term obligations relating to its Gas Agreement, which requires the Brea Project to pay a minimum of $720,000 per year to its gas supplier through 2018. These obligations are not guaranteed by the Trust. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Trust's primary market risk exposure is limited interest rate risk caused by fluctuations in short-term interest rates and the market price of electricity. As the Brea Project now operates under a standard offer contract, the electricity generated will be sold at current market prices. The Trust does not anticipate any changes in its primary market risk exposure. The Trust does not trade in market risk sensitive instruments. Item 4. Controls and Procedures The Trust's Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness and design of the Trust's disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934 (the "Exchange Act"). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer each concluded that the disclosure controls and procedures were effective. There have been no significant changes in the internal controls or in other factors that could significantly affect these controls subsequent to the date that they completed their evaluation. The term "disclosure controls and procedures" is defined in Rule 13a-15(e) of the Exchange Act as "controls and other procedures designed to ensure that information required to be disclosed by the issuer in the reports, 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. 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 6. Exhibits Exhibit 32.1 - Section 1350 Certification of Officers SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant as duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RIDGEWOOD ELECTRIC POWER TRUST I Registrant July 15, 2005 By /s/ Douglas R. Wilson Date Douglas R. Wilson Executive Vice President and Chief Financial Officer (signing on behalf of the Registrant and as principal financial officer) 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 quarterly report on Form~10-Q of the registrant; 2.Based on my knowledge, this quarterly 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 quarterly report; 3.Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules~13a-15(e) and 15d-15(e)) for the registrant and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in the quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and (c) Disclosed in this quarterly report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and senior management: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: July 15, 2005 /s/ Robert E. Swanson Robert E. Swanson Chief Executive Officer CERTIFICATION PURSUANT TO RULE 13A-14 UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED I, Douglas R. Wilson, Chief Financial Officer of Ridgewood Electric Power Trust I ("registrant"), certify that: 1.I have reviewed this quarterly report on Form~10-Q of the registrant; 2.Based on my knowledge, this quarterly 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 quarterly report; 3.Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules~13a-15(e) and 15d-15(e)) for the registrant and we have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in the quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and (c) Disclosed in this quarterly report any change in the Registrant's internal control over financial reporting that occurred during the Registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and senior management: (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: July 15, 2005 /s/ Douglas R. Wilson Douglas R. Wilson Chief Financial Officer

RIDGEWOOD ELECTRIC POWER TRUST I 10-Q