RIDGEWOOD POWER GROWTH FUND /NJ - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
_X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
OF 1934__ For the fiscal year ended December 31, 1999

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934__ For the transition period from _________ to _________

Commission File No. 0-25935

THE RIDGEWOOD POWER GROWTH FUND
(Exact Name of Registrant as Specified in Its Charter)

Delaware 22-3495594
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)

c/o Ridgewood Power Corporation, 947 Linwood Avenue, Ridgewood, New Jersey
07450
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (201) 447-9000

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Investor Shares of Beneficial Interest
(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]

There is no market for the Shares. The aggregate capital contributions made
for the Registrant's voting Shares held by non-affiliates of the Registrant at
April 13, 2000 was $64,294,170.

Exhibit Index is located on page __.

PART I

Item 1. Business.
Forward-looking statement advisory

As with some other statements made by or on behalf of the Ridgewood Power Growth
Fund (the "Fund") from time to time, has forward-looking statements. These
statements discuss business trends and other matters relating to the Fund's
future results, year 2000 remediation and the business climate and are found,
among other places, at Items 1(c)(3), 1(c)(4), 1(c)(5), 1(c)(6), 1(c)(7), and
2(b). In order to make these statements, the Fund 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 Fund in the future may be
materially different from the Fund's statements here.

The Fund 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. This Registration Statement discusses 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 these cautionary factors that readers should
consider are described below at Item 1(c)(5) - Trends in the Electric Utility
and Independent Power Industries.

By making these statements now, the Fund is not making any commitment to
revise these forward-looking statements to reflect events that happen after the
date of this document or to reflect unanticipated future events.

(a) General Development of Business.

The Registrant is the Ridgewood Power Growth Fund, which was organized as a
Delaware business trust in January 1998 to participate in the development,
construction and operation of independent power generating facilities and
capital facilities ("Independent Power Projects" or "Projects"). Ridgewood
Energy Holding Corporation ("Ridgewood Holding"), a Delaware corporation, is the
Corporate Trustee of the Fund.

The Fund has sold whole and fractional shares of beneficial interest in the
Fund ("Investor Shares") at $100,000 per Investor Share. Its offering began on
February 9, 1998 and is ongoing. As of April 13, 2000, it had raised
approximately $64,300,000. Net of offering fees, commissions and expenses, the
offering had provided as of that date approximately $53,400,000 for investments
in the development and acquisition of Projects and operating expenses. The Fund
has 1,143 record holders of Investor Shares (the "Investors"). As described
below in Item 1(c)(4), the Fund has invested or committed approximately $33.5
million of its assets as follows:

U.K. landfill gas generating stations ....................... $22,000,000
Egyptian resort electricity and water projects .............. 6,500,000
Mediterranean fiber optic cable project ..................... 1,500,000
ZapWorld.com (electric vehicles) ............................ 4,000,000

Total $33,500,000

The Fund is also contemplating a $10,000,000 investment in 10 operating
hydroelectric facilities with long-term sales contracts, currently owned by
Synergics Inc. and in additional projects in Egypt. The Fund is actively seeking
additional Projects for investment.

The Fund has two Managing Shareholders: Ridgewood Power LLC, a New Jersey
limited liability company ("Ridgewood Power") and Ridgewood Power VI LLC ("Power
VI Co"), which is also a New Jersey limited liability company. The Managing
Shareholders have direct and exclusive discretion in the management and control
of the affairs of the Fund. Both Ridgewood Power and Power VI Co are controlled
by Robert E. Swanson, who is the manager of each. The officers of Power VI Co
are also the same as those of Ridgewood Power and Power VI Co currently does not
conduct any business. It is anticipated that Ridgewood Power will take all
actions necessary to manage the Fund, without any participation by Power VI Co,
unless Ridgewood Power were to become unable to act as the Managing Shareholder
because of a possible reorganization of other, similar investment programs that
it manages. In that case, Power VI Co would be activated to serve as Managing
Shareholder. A further discussion of Ridgewood Power and Power VI Co is found at
Item 5(b) - Directors and Executive Officers - Managing Shareholders. In the
remainder of this Registration Statement, when a reference is made to the
"Managing Shareholder," it is to Ridgewood Power so long as it acts as Managing
Shareholder and to Power VI Co if Power VI Co is activated to serve as a
Managing Shareholder. The two Managing Shareholders and the Investors are
collectively referred to as the "Shareholders."

The Fund currently has three Independent Panel Members. Approval of a
majority of the Independent Panel Members is required for approval of
transactions between the Fund and other investment programs sponsored by the
Managing Shareholder. The Independent Panel Members do not exercise general
oversight of the Managing Shareholder or of the Fund and are not directors of
the Fund. The Independent Panel Members do not have any management or
administrative powers over the Fund or its property.

The Fund has a Corporate Trustee, Ridgewood Energy Holding Corporation. The
Corporate Trustee acts on the instructions of the Managing Shareholder and is
not authorized to take independent discretionary action on behalf of the Fund.
See Item 5 - Directors and Executive Officers of the Registrant below for a
further description of the management of the Fund.

The Managing Shareholders are controlled by Robert E. Swanson, who is
currently their sole manager and chief executive officer. For information about
the merger of the prior Managing Shareholder, Ridgewood Power Corporation, into
Ridgewood Power LLC, see Item 10(b) - Directors and Executive Officers of the
Registrant - Managing Shareholder. The following chart illustrates some of the
important relationships among the Fund, the Managing Shareholders and some of
their affiliates.

The Ridgewood Power Growth Fund and certain affiliates as of March 1, 2000 (some
entities and relationships omitted)

Robert E. Swanson Family trusts
x x (Mr. Swanson has
Sole manager x x sole voting and
Chief executive officer x x investment power)
Owner of 46% of equity x x Owners of 54% of equity
_________________X__________________X______________________________
x x x x x x
x x x x x x
x x x x x x
Ridgewood Ridgewood Power Ridgewood Ridgewood Ridgewood Ridgewood
Securities Management LLC Power LLC Energy Power VI Capital
Corporation Holding LLC Management
Corporation LLC

Operates power Corporate Manager
Placement plants for five Managing Trustee Co-Managing of two
agent power trusts Shareholder for all Shareholder venture
("Ridgewood ("RPMCo") of six six trusts (dormant) capital
Securities") trusts x of the funds &
("Ridgewood x Fund marketing
Power") x ("Power VI Co") affiliate
x x x ("Ridgewood
x x x Capital")
x x x x
______________________________x____________x_____________ x x
x x x x x x x x
x x x x x x x x
Ridgewood Ridgewood Ridgewood Ridgewood Ridgewood The Ridgewood x
Electric Electric Electric Electric Electric Power Growth x
Power Trust Power Trust Power Trust Power Trust Power Trust Fund x
I II III IV V (the x
("Power I") ("Power II")("Power III")("Power IV")("Power V") "Fund") x
x
________________________________X__
x x
x x
Ridgewood Capital Ridgewood Capital
Venture Partners Venture Partners II
(the "Venture Capital Funds")

Power I through V are referred to as the "Prior Programs."

(b) Financial Information about Industry Segments.

The Fund has been organized to operate in only one industry segment:
independent power generation and related capital, infrastructure and venture
projects.

(c) Narrative Description of Business.

(1) General Description. The Fund's investment objectives are:

providing capital appreciation over an extended period of time, either by
(a) selling all or some of the Fund's assets or (b) changing the Fund into a
more liquid investment (by combining with other companies, by a public offering,
by creating a market for the Investor Shares or otherwise) and

generating current cash flow for distribution to Investors to the extent
consistent with the capital appreciation objective.

The Fund intends to achieve its objectives by making equity investments in
"Projects" or in companies owning Projects or assets that may benefit from
industry deregulation. In many cases, the Fund may operate those Projects
itself. The Projects may include conventionally fueled, small to medium-size
independent electric power plants; landfill gas, biomass or other "waste" fueled
power plants that generate electricity or heat, or both,for sale while helping
to remedy environmental problems; cogeneration plants that produce electricity
and heat together for sale; other power generating facilities that produce
electricity, heat or motive power for sale or use; waste transfer stations,
pumping facilities and other facilities that contribute to the operation of
other Projects; o other types of capital projects, such as fuel plants,
processing facilities and recycling facilities, that are expected to have
consistent cash flows similar to those from independent electric power plants;
and equity interests in companies affected by the deregulation of the
electricity industry, including those with long-term or unconventional business
strategies.

The Fund will not invest in nuclear power facilities.

The Fund will try to invest in Projects that provide long-term cash flows.
Its investments will be structured for federal income tax purposes as "direct
participation" investments, so that income, gains, losses, deductions and
credits flow through to each Investor's personal tax return, and are subject to
tax only once. Investors will generally have limited liability for the Fund's
obligations and those of the Projects.

The Fund has decided to sell Investor Shares only to to "Accredited Investors"
(as defined by the Securities and Exchange Commission), which include

o individuals whose individual net worth, or joint net worth together with their
spouse's, exceeds $1,000,000 at the time of purchase;
o individuals whose income exceeded $200,000 in each of the two most recent
years or whose joint income with their spouses' exceeded $300,000 in each of
those years, if they reasonably expect to reach the same income level in the
current year;
o private pension funds or employee benefit plans that either have assets in
excess of $5 million or that have the investment decisions made by a plan
fiduciary that is a bank, savings and loan association, insurance company or
registered investment advisor;
o self-directed pension fund or employee benefit plan accounts, if the
investment decision is made solely by a person that is an Accredited Investor;
o banks, trust companies, savings and loan associations and certain other
financial institutions, whether acting as fiduciaries or for their own accounts;
or
o any other "Accredited Investor" as that term is defined in the Commission's
Regulation D (see DEFINITIONS-ACCREDITED INVESTOR).

The Fund may also in its discretion sell Investor Shares to certain Investors
who are not themselves accredited investors. These Investors must have family or
other relationships with other Investors who are themselves accredited
investors. The permitted relationships are defined by Rule 501(e) of the
Securities and Exchange Commission.

(2) Risk Considerations

General
Investment in the Fund involves substantial risks and potential conflicts
of interest and is suitable only for those persons who meet the investor
suitability standards on a continuing basis, have a substantial net worth, have
no need for liquidity from such investment, and are able to bear the loss of the
entire investment. Each prospective Investor should consider carefully the risk
factors attendant to the purchase of Shares, including without limitation those
discussed below, and each should review the investment with his own legal, tax
and financial advisors. In addition, each prospective Investor should understand
that the Subscription Agreement and the Declaration materially restrict
Investors from selling or otherwise disposing of their Shares.

Importance of Regulatory and Political Environments
Independent Power Projects, including cogeneration facilities, are
creatures of the regulatory and political process. Since the passage of PURPA in
1978, the Independent Power industry has grown, in large part, because
regulatory and political environments made it feasible to amass the large sums
of long-term capital needed to develop, construct and operate power plants. In
particular, the regulatory advantages currently provided by PURPA for Qualifying
Facilities are essential for the viability of most Independent Power Projects.
Modification or repeal of PURPA or the regulations thereunder could make some
Projects uneconomic.

In several states, including Massachusetts, Maine and California,
requirements may be imposed on sellers of electricity to purchase a minimum
amount of "renewable" power (generally, power from small hydroelectric plants,
geothermal, solar or wind plants, or plants that burn non-fossil fuels). These
requirements may be very advantageous for the types of Projects the Fund may
invest in, but adverse state or federal action might make those Projects
uneconomic in the future. Further, it is possible that future developments, such
as more stringent requirements of environmental laws and enforcement policies
thereunder, could affect the costs of and the manner in which Projects are
developed, built or operated. There can be no assurance that in such event the
Projects would be able to recover all or any of such increased costs or that
their businesses and financial conditions would not be materially and adversely
affected.

Deregulatory Initiatives
The Comprehensive Energy Policy Act of 1992 (the "1992 Energy Act") removed
certain restrictions imposed by the Holding Company Act on the ability of
electric utility holding companies and electric utilities to control their local
markets. Since passage of the 1992 Energy Act, FERC in its Order 888 of April
1996 has deregulated the wholesale market for electricity (the market for sales
to local utilities or distributors of electricity). Further, many states are
implementing plans to further encourage investment in wholesale generators and
to facilitate utility decisions to spin off or divest generating capacity from
the transmission or distribution businesses of the utilities. As a result,
Independent Power Projects in the future will face competition not only from
other Independent Power Projects seeking to sell electricity on a wholesale
basis but also from exempt wholesale generators, electric utilities with excess
capacity and independent generators spun off or otherwise separated from their
parent utilities.

On the other hand, by expanding the potential pool of Projects in which
electric utility holding companies and electric utilities are able to invest,
the 1992 Energy Act has resulted in increased competition from the holding
companies and utilities to develop promising Projects and in increased
competition in the sale of electricity by Independent Power Projects. Further,
the 1992 Energy Act and Order 888 introduced an element of competition in the
transmission component of the electric power industry by requiring electric
utilities to make available their transmission facilities to Independent Power
Projects where it is in the public interest and does not unreasonably impair the
reliability of electricity service. In April 1996, FERC adopted Order 888, which
required electric utilities and power pools to make transmission facilities and
information available on equal terms to all generators.

The deregulation of transmission may benefit the Fund in the future in that
deregulated transmission may give Projects in which the Fund participates access
to customers that are not geographically located near the Projects. If there are
limitations on transmission capacity, however, the Fund might have to compete
and bid for capacity in order to transmit electricity to distant customers if it
is selling in a competitive market or if it is selling "renewable" power to a
distant customer. In those events, the Fund might have to compete against
companies that are far larger and more diversified than itself or that have
lower costs of operation or access to transmission facilities. If the Fund were
unsuccessful in obtaining transmission capacity, it might not be able to sell
its output except to local utilities (or in some cases, local retail customers).
There is no assurance local customers would purchase that power or that the
local price would be as advantageous as the price more distant customers would
pay.

The large scale deregulation of transmission facilities is likely to have
other far-reaching effects which may be adverse to the Independent Power
industry, generally, or to the particular facilities owned by the Fund. In
particular, because the Fund anticipates investing in small scale facilities, it
may be difficult for it in the short run to market power to end users or over
long distances. As a result, it may suffer significant competitive
disadvantages.

State initiatives to deregulate and encourage competition in the businesses
of generating electric power and transmitting it to customers are also creating
significant risks. Further, jurisdictional disputes between federal and state
regulators and proposed congressional actions have hampered the creation of a
coordinated regulatory posture and have raised significant questions as to the
allocation of electric utility costs and obligations that may not be recovered
by utilities in a competitive environment. As a result, although it appears that
competitive generating markets will be created in many states and possibly
nationally, there is uncertainty as to the eventual regulatory environment and
the risks and opportunities it will create.

As various states implement retail deregulation, a number of additional
risks are posed for Independent Power Projects. In many states, local electric
utilities are being required or encouraged to sell their generating stations.
Often, large electric utilities, affiliates of natural gas marketers or other
large entities have purchased large quantities of these assets and thus
immediately become sizable competitors in the market to sell electricity. In
some other states, local electric utilities will be permitted to retain
generating assets and sell power to themselves. In that event, they may prefer
purchases from their own plants and opportunities for Independent Power Projects
to sell electricity in a competitive market may be stifled.

Further, in a competitive market, prices for electricity may be very
volatile. If a generator is nonetheless able to obtain a long-term Power
Contract, the prices under that contract may be inadequate to cover costs and
yield a return, or the generator may lose opportunities to sell electricity at
higher prices. If a generator is unable to obtain a long-term Power Contract and
sells its output under short term contracts on in a spot or auction market, the
prices received may be inadequate to cover costs or to permit the Project to
earn a return. Prices may vary so much as to make planning impossible. There is
no assurance that the generator will be able to obtain new Power Contracts so as
to keep its Project in continuous operation and the generator may have to absorb
significant costs of Project shutdown and restart as well as lay off and rehire
its workforce, as has occurred with two Projects located in Maine in which Power
IV and Power V have invested.

These factors have caused new investment in independent power plants in the
United States to be substantially reduced, have intensified the pressures on
larger market participants to consolidate, have created additional incentives
for generating efficiency and low-cost production of power, have tended to
depress the purchase prices of existing small-scale Projects and are likely to
have additional, unpredictable effects. Recently, a number of very large
utilities, natural gas companies and independent generation companies have paid
significant premiums over book value or other measures of value to purchase
large packages of power plants being divested by utilities and others have
announced plans to construct extremely large-scale merchant power plants. These
transactions or proposals have been in the range of hundreds of millions of
dollars to billions of dollars. This may indicate that these industry
participants have concluded that very large scale is a necessary competitive
advantage.

The Fund instead will attempt to follow a diversified strategy that does
not attempt to compete head-on with these types of competitors. The Fund
believes that in many cases emphasis on scale and purchasing market share may
lead to suboptimal returns. Instead, the Fund will seek to develop niche
markets, to engage in ventures with large utilities or other participants that
need its investments for financial or regulatory reasons or to acquire equity
interests in undervalued companies. Where possible, the Fund may invest in
existing Projects with long-term Power Contracts that are less exposed to
competitive forces, or in Projects with regulatory or tax advantages. There can
be no assurance, however, that these strategies will be successful or that the
Fund will not be competitively disadvantaged by its relatively small size.

Threats to Power Contracts
The Power Contract with the local utility, industrial host or other energy
purchaser is perhaps the most important contract to an existing Independent
Power Project. Many long-term Power Contracts between local utilities and
independent power producers now provide for rates in excess of current
short-term rates for purchased power and the utilities are treating their
contractual obligations as a form of stranded cost. There has been much
speculation that in the course of deregulating the electric power industry,
federal or state regulators or utilities would attempt to invalidate these power
purchase contracts as a means of throwing some of the costs of deregulation on
the owners of independent power plants.

To date, the Federal Energy Regulatory Commission and each state regulator
that has addressed the issue have ruled that existing Power Contracts will not
be affected by their deregulation initiatives. The regulators have so far
rejected the requests of a few utilities to invalidate existing Power Contracts.
Further, no action has yet been taken by federal or state legislators to date to
impair Independent Power Projects' existing power sales contracts, and there are
federal constitutional provisions restricting actions to impair existing
contracts. There can not be any assurance, however, that the rapid changes
occurring in the industry and the economy as a whole would not cause regulators
or legislative bodies to attempt to change the regulatory structure in ways
harmful to Independent Power Projects or to attempt to impair existing
contracts. In particular, some regulatory agencies have urged utilities to
construe Power Contracts strictly and to police Independent Power Projects
compliance with those Power Contracts vigorously. Predicting the consequences of
any legislative or regulatory action is inherently speculative and the effects
of any action proposed or effected in the future may harm or help the Fund.
Because of the consistent position of the regulatory authorities to date and the
other factors discussed here, the Fund believes that so long as it performs its
obligations under the Power Contracts, it will be entitled to the benefits of
those contracts.

In recent years, many electric utilities that have entered into long-term
Power Contracts have concluded that the prices set under those contracts are
disadvantageous to them under current conditions. Accordingly, they have often
attempted to exploit all possible means of terminating these Power Contracts
with Independent Power Projects, including requests to regulatory agencies and
alleging violations of even immaterial terms of the Power Contracts as
justification for terminating those contracts. The Fund's current investment
strategy includes the purchase smaller-sized Projects with existing long-term
Power Contracts. If the prices for electricity under those contracts are in
excess of the prices charged by alternative sources, or if the electric utility
purchasers under those contracts have other incentives to terminate those
contracts, the Fund may face material costs in contesting those utility actions.
Power II, which is a previous Power Trust sponsored by Ridgewood Power, is
currently defending a legal proceeding in California which involves such a
challenge. A second Power Trust, Power I, succesfully defended a similar
challenge in 1995-1997.

Other Aspects of Power Contracts
A generating facility which uses biomass or "waste" fuel, such as landfill
gas or waste coal, may be a Qualifying Facility under PURPA. However, in order
for a cogeneration facility using conventional fuel to be a Qualifying Facility
under PURPA and current regulations, at least 5% of a Project's total energy
output must be "useful" heat energy that typically is sold or made available in
the form of steam or hot water to an entity (the "Steam Host"). Under current
regulatory interpretations, heat energy is "useful" if its use has a business
purpose independent from the sale of electricity and there is some economic
justification for the use. Typically, a Project meets its PURPA requirements by
entering into a long term contract with a Steam Host which provides that the
Steam Host will take delivery of sufficient thermal energy to permit the Project
to meet the requirements of PURPA. If a cogeneration Project did not meet the
requirements for supplying heat energy to a Steam Host because, for example, the
Steam Host went out of business, or the thermal contract is otherwise
terminated, that cogenerating Project might lose its status under PURPA as a
Qualifying Facility. If as a result of this loss of status the cogenerating
Project became subject to federal and state regulation or its Power Contract
were terminated or modified, the cogenerating Project might incur material loss.
Although PURPA provides grace periods for a cogeneration Project to find an
alternative Steam Host, potential alternate Steam Hosts may be very limited or
non-existent because of the practical necessity for a Steam Host to be located
adjacent to the Project to minimize heat loss.

Under PURPA, electric power utilities are directed to purchase electricity
output offered to them by Qualifying Facilities at a price no greater than the
utilities' avoided costs of generating electricity from another source. The
Power Contracts for many existing Projects have been negotiated with the utility
as long term agreements to purchase the Projects' output. There can be no
assurance that the rates offered to a new Project or the other terms of a Power
Contract will be sufficiently favorable to induce development and construction
of a Project or permit profitable operation of a completed Project.

Many long-term Power Contracts provide for levelized rates over the life of
the contracts or shorter periods, which are designed to stabilize projected
revenues earned by an Independent Power Project. The effect of many levelized
rate contracts is to provide that the utility will purchase electricity from a
Project at higher rates in the earlier years in exchange for an agreement from
the Project to accept lower rates to be paid by the utility in later years. If a
Project experiences operational difficulties and produces less than the expected
volume of electricity in later years, it may be required to make cash payments
to the utility to compensate for such shortfall, thereby reducing available cash
flow to the Project owner.

Although there is some risk that a utility bound by a long-term Power
Contract may be unable to meet its purchase obligations, under current federal
law and current law in most states electric utilities are required to maintain
prudent financing structures and are reviewed periodically by their regulators
for compliance with these requirements. In addition, if state regulators
approve, the payments made by a utility to an Independent Power Project may be
included as allowed costs to be passed through to the utility's retail
customers, thereby giving the utility an additional source of revenue which can
be used to make payments to the Independent Power Project. Accordingly, failure
of a utility to meet payment obligations to an Independent Power Project which
is operating in compliance with its Power Contract has been a rare occurrence.

Most deregulatory programs treat Power Contracts with prices in excess of
market prices as "stranded costs" and provide for reimbursement to utilities for
those stranded costs for an extended period of time. During these periods, which
can range from three to ten years or longer in some instances, there may be some
assurance that the utilities will pay. However, retail deregulation may impose
other financial strains on electric utilities, which will be relegated to
maintaining the distribution network and delivering power to individual
residential, commercial and industrial locations. Those utilities will have to
downsize and reorganize their workforces and resources and compete in many cases
as suppliers of electricity. It is likely that some utilities may reorganize or
enter bankruptcy if they are unable to meet these challenges. In those cases,
the Fund may be unable to collect amounts due to it or may have its Power
Contracts abrogated in bankruptcy. Industrial and other retail purchasers of
power do not have an assured source of revenue from which to make payments under
the Power Contract and a Project selling to them must rely solely on the credit
of such purchaser. Consequently, although the Fund will conduct a business
review of each purchaser's creditworthiness prior to contracting with it, there
can be no assurance that it will remain in business over time or be able to
perform its payment obligations for the duration of the Power Contract.

In the event of a default or failure to pay by an energy purchaser under a
Power Contract because of its bankruptcy or insolvency, regulatory changes,
failure of a Project to comply with the terms of its contract or other events,
there can be no assurance that the Project will be able to obtain a Power
Contract with another purchaser or to obtain a Power Contract on terms as
favorable as those of the previous contract.

The Fund expects that if it were to invest in capital facilities or other
investments outside the electric power industry, those facilities would have
output contracts providing for long-term payments by a responsible customer or
customers for the facilities' production. These contracts would likely be
structured in a manner similar to Power Contracts with non-utility customers. In
that event, the Fund would be subject to the risks of the customers'
creditworthiness and the long-term anticipated demand for the products. With
regard to investments in other types of industries, such as Zap Power Systems,
Inc., the Fund's investment is subject to the many risks of any enterprise that
markets its products to consumers. In addition, Zap's business plan contemplates
marketing its bicycles and vehicles through dealers and franchisees. Zap's
ability to do so profitably will depend upon its ability to organize an
effective dealer and franchise system and to create a mass market through
advertising and marketing efforts for its products. Zap has no significant
experience in those areas.

Reliance on Fuel Supplies at Appropriate Prices
Since the cost of fuel is usually one of the largest components of a
Project's operating costs (especially so in the case of natural gas, coal or
oil-fired electric power Projects), the success of a Project may depend not only
on the availability of fuel supplies but also on the Project's ability to obtain
long term contracts for fuel and fuel transportation at appropriate prices.

The Fund will attempt to invest in Projects which have fuel supply
arrangements which closely match the fuel adjustment provisions of the Power
Contract with the utility, industrial user or other energy purchaser, so that
changes in Project fuel costs will be offset by corresponding changes in revenue
from the sale of energy. Existing Projects that do not have favorable fuel price
adjustment provisions in fuel supply contracts may have purchase prices or
values that are significantly discounted from those of other Projects.

If fuel prices payable by a Project are relatively high compared to the
contract price of energy, the Project may not be able to generate energy on an
economic basis. On the other hand, if a Project's economic returns are based
upon the ability to generate substantial fuel savings through use of
cogeneration and other more efficient power generation technologies, lower fuel
prices may tend to reduce the value of the fuel savings and may adversely affect
the financial performance of the Project. Since cogeneration and other more
efficient technologies often require higher capital costs than conventional
power plants, periods of very low fuel prices could result in fuel savings which
are insufficient to cover the additional capital costs, thereby creating losses
from the Project.

Small scale Projects may find it difficult or uneconomical to obtain
long-term fuel supply contracts and thus may be exposed to risks of fuel price
escalations. For example, after a relatively long period of depressed prices,
natural gas prices in many areas tripled between summer 1996 and the winter
months of 1996-1997. These increases adversely affected many small Projects
operated by Prior Programs, although RPMCo was able to negotiate one-year supply
contracts for many Projects it managed at a price substantially less than peak
prices. Because the Fund may be a relatively small consumer of fuel, it may be
difficult for it to economically hedge fuel prices or purchase reliable supplies
on a long term basis. In that case, the Fund may be exposed to the risk that
fuel price increases could reduce or even eliminate profitability of its
Projects.

A separate component of a Project's overall fuel requirements is the
availability, reliability and cost of transporting the fuel to the Project. For
example, Projects fired by natural gas may be dependent upon a single pipeline
for transportation of large volumes of natural gas, and may be adversely
affected by the costs of transportation on the pipeline or by outages, capacity
restrictions, priority allocations to other customers or other events affecting
the pipeline. Some Projects are designed to operate on alternate fuels (such as
using fuel oil when natural gas is unavailable) but these alternate fuels are
also subject to similar variables of availability, cost and transportation.

In contrast to the Power Contract, which is one of the first objectives
of a Project, the fuel supply contracts are frequently obtained relatively late
in the development process or in the operating stage. There is no assurance that
adequate fuel supply arrangements for a Project will be available from
dependable sources and at acceptable prices at the time required.

It should be noted that hydroelectric Projects and landfill-gas-fueled
Projects may have little or no net fuel expense. However, hydroelectric Projects
are dependent on rainfall and snowfall to create river flow and droughts can
severely limit or cease their output. Landfill gas-fired Projects often have no
alternate source of fuel, and federal regulations effectively limit their use of
alternate fossil fuels (such as natural gas) to 25% of total fuel use per year.
Therefore an interruption for any reason of the fuel supply from the landfill
(because of equipment problems, default by the fuel supply operator,
environmental requirements or routine maintenance, for example) may reduce or
eliminate the ability of the Project to operate.

Environmental Regulation
Projects in which the Fund will participate will be subject to
environmental regulation by federal, state and local government authorities. The
failure to comply and to maintain compliance with these regulations may
potentially result in substantial liability for pollution and other damages
under statutes and regulations relating to environmental matters. Thus, the
regulatory risks associated with the environment should be considered carefully
by Investors before investing in the Fund. Environmental regulation includes the
requirement that the Projects in which the Fund will participate obtain and
maintain various regulatory approvals, licenses and permits. The process
involved in obtaining these approvals can be quite time consuming and expensive,
resulting in delays in the development or construction of a Project or imposing
operating limitations on the Project. These factors could lead to increased
costs to the Fund. If the Fund invests in Projects that were developed by others
or that have an operating history, it may become liable for pollution and
environmental discharges that occurred before it took ownership of the Project
or that the Fund had no ability to affect. As a result, the purchase of any
existing Project or any Project located on land affected by previous activities
may subject the Fund to unpredictable and material contingent liabilities.
Although the Fund through its investigation of Projects will attempt to minimize
such contingencies, there can be no assurance that it can do so.

In addition, there can be no assurance that future environmental
legislation or regulations will not affect Project economics. The imposition of
more stringent environmental laws and more effective enforcement policies
thereunder could significantly increase the costs associated with the
development, construction and operation of any Project and, thus, substantially
reduce the return which Investors could anticipate with regard to the Fund's
interest therein. For example, ongoing implementation of Title V of the Clean
Air Act Amendments of 1990 will require all existing industrial sources of air
pollution to obtain new operating permits and to comply with additional daily
operational limits.

Identifying Projects
There is no assurance that there will be a sufficient number of attractive
potential Projects available to the Fund. In seeking to participate in Projects,
in many cases the Fund is likely to encounter significant competition from
construction companies, equipment vendors, electric and gas utilities and their
affiliates, other Project Sponsors and investment groups which participate in
the development, construction and operation of Projects. Many of these
competitors have greater experience in the independent power industry or project
development or have superior capital resources.

The consolidation of the independent power industry has resulted in
increased competition for acquire most available electric generating Projects in
the United States. The process of identifying and investing in Projects can be
protracted and during that period Investors' funds are held in U.S. Government
securities, in money market funds holding those securities or in short-term
commercial paper or money market instruments at lower yields than those
anticipated from the Projects. Factors that may cause delays include lack of
funds for the Fund to begin the acquisition process, variations in the
availability of Projects and funds available to other purchasers of Projects,
negotiations and environmental and regulatory delays caused by agency action or
the need to investigate or remediate conditions before investing funds. The Fund
seeks to reduce the period necessary to invest funds, primarily through the
Early Investor Incentive, which was instituted to allow programs to begin
acquiring Projects during their offering periods. The period from the closing of
the offering to 90% investment of available funds dropped from approximately 29
months in Ridgewood Power I to 9-1/2 months in Ridgewood Power III but was 22
months for Ridgewood Power IV and is over 24 months for Ridgewood Power V.

Need for Diversification
The Fund expects that it will participate in several Projects. However,
the size of each investment may depend upon a variety of factors, including,
among other things, the amount of funds available to the Fund, the size and
timing of the proposed investment, the availability of capital from other
investors, the ability of other investment programs sponsored by the Managing
Shareholders to participate, and the requirements of other participants in the
transaction. Based on prior experience, the Fund believes that the likely range
for each major investment by the Fund may be from 10% to 33% of the Fund's total
capital, and may exceed 33% if the Fund participates in certain larger scale
Projects. There can be no assurance that any Projects will earn a return and
failure of any Project to earn a satisfactory return may have an adverse effect
on the financial performance of the Fund as a whole if that Project represents a
significant portion of the Fund's investments.

Risks of Foreign Investments
The Fund may invest in Projects located outside the United States. The
Managing Shareholders and Prior Programs have not yet invested material amounts
in foreign Projects, although they have evaluated several proposals, have
expended funds on due diligence and exploratory investments and are developing
Projects in Egypt. Neither Managing Shareholder and none of their Affiliates has
any significant experience in evaluating, investing in, developing, operating or
disposing of Projects located outside the United States. Among the risks that
the Fund will encounter in making investments outside the United States are:
risks in relying upon unknown or little-known foreign businesses as partners or
operators of projects, increased costs for legal, accounting, environmental and
other services, exposure to unfamiliar systems of governmental regulation,
electricity pricing, taxation, employment relations and economic organization,
inability to obtain goods and services from abroad or local requirements to
purchase goods and services of unknown characteristics and quality from local
suppliers, credit risks in dealing with local businesses and customers, foreign
exchange risks such as depreciation of the local currency against the dollar or
inability to transfer money to the United States, governmental and business
corruption, kidnapping, extortion and other risks to the Fund's personnel, and
difficulty in selling or disposing of Projects or assets.
Utilization of Funds for Undesignated Projects

The Fund may direct a substantial portion of the net proceeds of this
offering of Shares to Projects that have not been designated in this
Registration Statement, as it may be supplemented from time to time, and the
Fund may be unable to or may decline to participate in any specific investments
described in this Registration Statement or any supplements thereto. Further,
the Fund's investment objectives are broad and grant a great deal of discretion
to the Managing Shareholder in determining whether a potential Project is within
the Fund's objectives. Therefore, prospective Investors may not be able to
evaluate the Projects in which the Fund participates before they purchase
Shares; nor will prospective Investors have any voice in the selection of
Projects after they purchase Shares, and the Fund may invest in Projects that
differ from those described in this Registration Statement or from those that
the Prior Programs have invested in. Consequently, Investors will be relying
upon the judgment of the Managing Shareholder for such decisions.

Projects Require Large Amounts of Capital and Time for Development and
Construction The Fund may commit a significant portion of its capital to a
single Project, and it is possible that additional capital may be required to
complete a Project or make necessary alterations or additions to such Project.
There can be no assurance that the Fund will have access to any such additional
capital or that the Project can obtain any such additional capital from other
sources on satisfactory terms. Further, to the extent the Fund participates in
larger Projects, extended periods of time (one to three years) may elapse before
the Project commences operation.

Construction
The Fund may invest in the development and construction of new Projects and
if it does so, it will be exposed to the risks that arise in the construction
stage of a Project. These risks include interruptions of supplies or work
stoppages; delays caused by changes in plans and specifications; inclement
weather; subcontractor non-performance; planning error; contractor insolvency;
cost increases; regulatory changes; and other construction-related matters.
Although the Fund will attempt to reduce those risks where possible by
contracting with responsible contractors or suppliers on a turnkey or
performance incentive basis (where these risks are assumed by others), it may
not be possible to do so effectively.

Financing and Leverage
Although the Fund does not intend to borrow any funds to make its equity
investments in Projects, certain Projects may require non-recourse construction
and/or long term financing in order to be viable. There can be no assurance that
such financing will be available at the time required on satisfactory terms and
conditions, and if not available, the Project may be abandoned and all amounts
invested in the Project to that point will likely be lost. Even if commitments
for construction and/or long term financing are obtained by a Project, there is
no assurance that the Project will be able to meet all of the conditions which
are typically required by project finance lenders in order to fund such
financing commitments. Further, even if construction or long term financing is
obtained, failure by the Project to obtain and maintain expected operating
parameters may lead the holders of the debt to foreclose on the Project and
eliminate the equity investment of the owners.

The Fund will seek to limit the risks of leverage by limiting the number of
investments in Projects with leverage and/or conducting its due diligence with a
focus on the adequacy of debt service coverage (excess of cash flow over
required payments of principal and interest) and debt service reserves, and by
focusing on acquiring Projects with a record of prior performance.

Limited Transferability of Fund Assets
The Fund's interests in many Projects in which it participates may be
illiquid. When the Fund initially commits funds to a Project, it may endeavor to
negotiate the right to sell all or part of its equity interests in a Project at
a later time without the consents of other participants. However, the interests
in Project Entities in which the Fund participates with other owners will
typically be closely held and the Fund's ability to transfer its interests in
such Project entities may be restricted or prohibited by their governing
documents, or by other agreements among Project participants or by covenants in
financing documents. Even if the Fund successfully negotiates the right to sell
its interest in a project without obtaining the consents of other participants,
the Fund may find that it is unable to sell or dispose of its interests in
Projects at the times it had planned or that such transactions would be
disadvantageous to the Fund. Successful sales would depend upon, among other
things, the operating history and prospects for the Projects to be sold, the
number of potential purchasers and the economics of any bids made by them and
the state of the independent power market. In addition, sales of substantial
interests in a Project may result in adverse tax consequences.

The Managing Shareholder will have full discretion to determine whether any
of the Fund Properties should be sold and which should be held and in what
proportions, and the Fund will have no obligation to sell all or a portion of
any asset for the benefit of Investors or to retain any asset for the benefit of
Investors. Investors may be required to remain in the Fund until it is
terminated and dissolved.

General Risks of Operation
The commencement of operation by a Project does not necessarily assure
recovery of or a profit on any investment made in such Project by the Fund. If
an electric generation Project or a capital project is completed and placed into
operation, it will be subject to the general risks of the industry, including,
but not limited to, equipment failures, fuel interruption, failure of the
Project to perform according to projections, loss of a Power Contract for not
maintaining a minimum required output availability or other breaches, decreases
or escalations in Power Contract or fuel supply contract price indices in an
unexpected manner, bankruptcy of a key customer or supplier, failure to obtain
required wheeling rights or use of transmission facilities at economic rates,
liabilities in tort (which may exceed insurance coverage), environmental
obligations, inability to obtain desirable amounts of insurance at economic
rates, acts of God and other catastrophes.

Joint Activity with Others
It is anticipated that the Fund will normally participate in a larger
Project jointly with one or more other entities through a joint venture or
partnership vehicle. To the extent that other participants in a Project cannot
fulfill their obligations or have divergent interests or are in a position to
take action contrary to the policies or objectives of the Fund, the Fund's
interest in such venture may be adversely affected. In certain cases, the Fund
may participate or be deemed to participate as a general partner of the entity
developing the Project, thereby exposing the Fund to general partner liability.
The Fund will seek to limit such exposures by interposing a limited liability
entity between the Fund and the Project, or by obtaining specific agreement from
other Project participants they will not seek recourse against Fund assets
(other than the Fund's investment in the Project) for any claims.

Although the Managing Shareholder will remain closely involved in all
aspects of the Fund's activities, the Fund in some cases (typically larger
Projects) will rely upon the advice of others as to the development or
management of Projects. Thus, a substantial amount of responsibility will be
placed on third parties who function as Project Sponsors or Project managers.
The success of any Project will, to a large extent, be determined by the quality
and performance of its Project Sponsors and managers. Project Sponsors and
Project development companies may have conflicting demands on their resources or
may be adversely affected by other developments at their affiliated or
associated entities. As a result, there is the risk that such Project Sponsors
or Project development companies or their other investors may be unable to
fulfill their responsibilities.

Limited Operating Experience
Although Ridgewood Power has participated in numerous independent power
projects and executive officers of Ridgewood Power and advisors to Ridgewood
Power have extensive backgrounds in the independent power industry and the
construction and operation of Independent Power Projects, Ridgewood Power has
limited expertise in the design, construction and operation of independent power
plants. There can be no assurance that Ridgewood Power's prior experience has
given it a comprehensive knowledge of the independent power industry sufficient
enough to result in successful or profitable operations of the Fund or that such
experience extends to all of the diverse areas of the independent power industry
or capital facilities developments in which the Fund may participate.

Power VI Co has no business track record or experience whatever, is not an
operating business and has no capital resources. Its officers are those of
Ridgewood Power and Ridgewood Power will make all of its personnel and other
resources available to Power VI Co as needed to allow Power VI Co to perform its
duties to the Fund.

Projects that the Fund will operate for its own account will be managed
under contract with the Fund by Ridgewood Power Management LLC ("RPMCo"), an
affiliate of the Managing Shareholder. Although many of the officers and
personnel of Ridgewood Power also serve as officers and personnel of RPMCo,
RPMCo was organized in January 1996 and thus has only limited operating
experience. Many of its personnel, although experienced, have been recently
hired by it. Further, RPMCo also manages the operations of Projects owned and
operated by the Prior Programs, and is currently subject to substantial demands
on its organizational and management resources. It is possible that the
management of Projects to be acquired by the Fund would be impaired by these
demands, although the Managing Shareholder believes that RPMCo will have
sufficient resources and experience to operate Projects for the Fund.

Delaware Business Trust
The Fund has been organized as a Delaware business trust having limited
liability of the Shareholders of the Fund. Not every state in which the Fund may
conduct business has enacted legislation recognizing the limited liability
provisions of the Delaware business trust. Accordingly, there is a risk that
investors will not have limited liability for activities of the Fund in those
states. Such risk is substantially, if not entirely, mitigated by the Fund's
conducting its activities and holding its interest in Projects in such states
through limited liability entities such as limited partnerships or limited
liability companies.

Limitations on Liability of Managing Persons to Fund
The Declaration provides that the Fund's officers and agents, the Managing
Shareholders, the Corporate Trustee, the affiliates of the Managing Shareholders
and their respective directors, officers and agents when acting for the Managing
Shareholders or their affiliates on behalf of the Fund (collectively, "Ridgewood
Managing Persons") will be indemnified and held harmless by the Fund from any
and all claims rising out of their management of the Fund, except for claims
arising out of the recklessness or misconduct of such persons or a breach of the
Declaration by such persons. Therefore, the right of an Investor to bring an
action against any of the Ridgewood Managing Persons for a breach of its or his
fiduciary responsibility or other obligations to the Fund may be limited.

Disparity in Shareholder Contributions
Power VI Co, in its capacity as a Managing Shareholder, and its key
employees and those of the Fund and Ridgewood Power, through the Key Employee
Incentive Plan, will receive, after the preferences to Investors, 25% of the
distributions of the Fund. The Managing Shareholders and employees will not be
obligated to contribute any cash to the Fund for that interest, except to the
extent that Fund Organizational, Distribution and Offering Expenses exceed the
Organizational, Distribution and Offering Fee payable to Ridgewood Poweror to
the extent the plan requires some monetary contribution by employees. Ridgewood
Power has purchased one full share as an Investor in the Fund.

Lack of Investor Participation in Management
Investors have no right to vote on who will act as Managing Shareholder
unless both Managing Shareholders resign, are removed by special action of the
Investors or are incapable of acting as Managing Shareholders because of
bankruptcy or legal disability. Similarly, Investors have no right to vote on or
select the Independent Panel Members of the Fund unless an Independent Panel
Member resigns or is incapable of acting. Therefore, Investors have much more
limited rights to participate in control of the Fund than would stockholders of
a corporation. The Managing Shareholder has the exclusive right to manage,
control and operate the affairs and business of the Fund and to make all
decisions relating thereto and has full, complete and exclusive discretion with
respect to all such matters. Investors have no right, power or authority to
participate in the ordinary and routine management of Fund affairs or to
exercise any control over the decisions of the Fund. Accordingly, no prospective
Investor should purchase any Shares unless the prospective Investor is willing
to entrust all aspects of management of the Fund to the Managing Shareholder.

Limited Transferability of Shares
Shares in the Fund are an illiquid investment. There is no market for the
Shares, and, because there will be a limited number of persons who purchase
Shares and significant restrictions on the transferability of such Shares, it is
expected that no public market will develop. Any change in the status of the
Shares would require compliance with multiple regulatory and tax requirements
and consent from a majority in interest of Investors. Investors will generally
be prohibited from selling or transferring their Shares except in the
circumstances permitted under Article 13 of the Declaration, and all such sales
or transfers require the consent of the Fund, which may withhold such approval
in its sole discretion. Accordingly, an Investor will have no assurance that he
or she can liquidate his or her investment in the Fund and must be prepared to
bear the economic risk of the investment until the Fund is terminated and
dissolved.

The Shares have not been, and are not expected to be, registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities law in a
manner that will make the Shares freely transferable by purchasers under such
laws and, therefore, cannot be resold unless they are subsequently registered
under the Act or an exemption from such registration is available and subject to
other limitations and conditions imposed by the Declaration. The provisions of
Rule 144 under the Act would be available to Investors in connection with such
resale, if the requirements of that rule are met, but the Fund has no current
intention to allow transfers to be made on the open market pursuant to the rule.

The illiquidity of and other significant risks associated with an
investment in the Fund make the purchase of Shares suitable only for an Investor
who has substantial net worth, who has no need for liquidity with respect to
this investment, who understands the risks involved, who has reviewed this
Registration Statement and the Exhibits hereto and the risks involved with his
or her tax, legal and investment advisors, and who has adequate means of
providing for his or her current and foreseeable needs and contingencies.

Voluntary Additional Capital Contributions
There will be no mandatory assessments of the Investors and the Managing
Shareholder. Investors may, however, be called upon on a voluntary basis to make
additional Capital Contributions after the expenditure of the Initial Capital
Contributions. If an Investor elects not to make a requested additional Capital
Contribution, the Managing Shareholder may determine that the Managing
Shareholder, other Investors or other persons may do so or may supply loans
instead, which may result in a dilution of that Investor's interest in the Fund.

Failure Of Fund To Perform Funding Obligations

Although the Fund anticipates that it will be able to perform all of its
commitments to invest in Projects, in certain instances there may be adverse
consequences to the Fund if it were to fail to do so. For example, a partnership
agreement or other instrument governing the Fund's participation in a Project
might provide that, in the event the Fund fails to make a capital contribution
to the partnership or particular Project as required under such agreement, the
Fund will forfeit its entire interest in the partnership or Project, as the case
may be.

Potential Conflicts of Interest
There are material, potential conflicts of interest involved in the
operation of the Fund. Some examples of these potential conflicts include

competing demands for management resources of the Managing Shareholder and
RPMCo;
o competing demands for allocating investment or divestiture opportunities among
programs;
o competing demands for opportunities to sell electric power in competitive
markets;
o conflicts between the interests of the Managing Shareholder and its Affiliates
in receiving compensation from the Fund for investment activities, operating
activities, and divestitures, as well as reimbursement for expenses, and the
interests of the Investors;
o conflicts relating to the allocation of costs and expenses among programs;
o conflicts arising from the fact that the Managing
Shareholder will not make a capital contribution in respect of its interests as
such in the Fund and that the Investors will supply all of the capital of the
Fund;
o conflicts between the interests of the Fund and other programs sponsored
by the Managing Shareholder and its Affiliates if those programs are co-owners
of Projects with the Fund;
o conflicts as to who will supply additional capital in the event the Fund were
to require additional contributions;
o potential interests of the Managing Shareholder or its Affiliates in competing
independent power or investment ventures;
o the lack of independent representation of Investors in structuring this
offering and in determining compensation; and
o conflicts between the interests of key employees and the Managing Shareholder
and those of Investors with regard to determining compensation under the Key
Employees Incentive Plan.

Material transactions between the Fund and other Programs sponsored by the
Managing Shareholder and its Affiliates must be reviewed and approved by the
Independent Review Panel. Although the potential conflicts of interest described
here and others cannot be eliminated, the Fund believes any such potential
conflicts will not materially affect the obligation of Ridgewood Power and Power
VI Co in their capacities as Managing Shareholders to act in the best interests
of the Investors and the Fund.

Tax Risks
There are tax advantages associated with an investment in the Fund, and
there are some tax risks associated with those tax benefits. The risks include,
but are not limited to, those discussed below.

(A) Partnership Tax Status of Fund
While it is the opinion of tax counsel to Ridgewood Power that the Fund
should be recognized as a partnership for federal income tax purposes, such
opinion is not binding upon the Service and no advance ruling from the Service
as to such status has been requested, and such a request is not contemplated. If
a secondary market for the Fund's Investor Shares develops, the Service, in the
event it audits the Fund, might attempt to treat the Fund as an association
taxable as a corporation. If such challenge were successful, the Investors would
be treated as if they were corporate shareholders and, therefore, would not be
entitled to deduct their proportionate share of the Fund's operating losses.

(B) State and Local Taxes
Each Investor may be liable for state and local income taxes payable in the
state or locality in which the Investor is a resident or doing business or in a
state or locality in which the Fund conducts or is deemed to conduct business.
Thus each Investor may be required to file multiple state income tax returns as
a result of his investment in the Fund.

The state of California has instituted a withholding requirement for
distributions from organizations taxed as partnerships (such as the Fund and
limited partnerships or limited liability companies used by the Fund to invest
in Projects) to tax partners located outside California. If the Fund earns
income in California, the portion of each distribution to a non-California,
taxable Investor that is attributable to California is subject to a withholding
tax of 7%, whether or not the Investor files a California income tax return. The
Fund believes that other states may follow California's example, in which case
much of the income component of distributions to an Investor would be subject to
state withholding taxes.

Each prospective Investor is urged and expected to consult with his
personal tax advisor with respect to the tax consequences connected with an
investment in the Fund.

(3) Business Plan and Development of Projects

Business Plan.
As deregulation of the electricity industry in the United States
progresses, the uncertainties and the financial stresses that deregulation may
create may have the effect of depressing the stock price of companies that have
long-term value. Opportunities may arise to invest in undervalued industry
participants or in other businesses having unique technological advantages. If
so, the Fund may invest its funds in acquiring majority or minority equity
stakes in those companies.

Advantages of Investing in the
Independent Power Industry
Because of historical factors, many existing independent power Projects
have long-term power sales contracts that can provide consistent cash flows to
Project owners over long periods of time. Further, the side effects of the
deregulation of the electricity industry, which is just beginning, are tending
to depress the purchase price of these Projects. Finally, in several years,
those side effects might make these Projects more valuable than the current
prices for the Projects would indicate. The Fund's decision to invest its assets
in the independent power industry is based on these trends.

In 1978, Congress passed the Public Utilities Regulatory Policies Act
("PURPA"), which was intended to create additional sources of electricity and
which also created the ability for companies other than electric utilities to
generate and sell electricity. Under PURPA, each electric utility must purchase
electricity generated by certain non-utility electric generating plants
("Independent Power Projects") at a price equal to the utility's "avoided cost."
This avoided cost basically is the estimated highest cost the utility would pay
otherwise to purchase additional electricity. PURPA also exempts Independent
Power Projects from many federal and state restrictions.

PURPA does not require utilities to enter into long-term contracts to
buy electricity from Independent Power Projects, but in the 1980's and early
1990's many utilities entered into long-term power purchase contracts from
Independent Power Projects. With changes in the industry, few if any new
long-term power purchase contracts are being entered into today.

Generating facilities with existing long-term contracts thus have
unique advantages in that those contracts are for extended terms at rates that
are often equal to or higher than current spot rates for electricity.
Nevertheless, the Fund believes that these facilities are sometimes undervalued
and can be excellent investment opportunities.

First, the deregulatory movement has made many potential competitors of
the Fund uncertain about the value of small generating facilities with long-term
contracts. The federal government and state governments are deregulating the
electric power industry. These changes will allow any company that generates
electricity to sell its output to any utility to which it can transmit the
electricity, and, in most states, eventually to any retail customer. This
movement will create pressures on local utilities to buy their electricity from
the cheapest competitive source. As a result, local electrical utilities with
high-cost generating facilities, such as malfunctioning nuclear power plants or
inefficient fossil-fuel units, will find that they will not be able to use those
facilities economically. Even so, those utilities will be obligated to pay off
the capital costs incurred to build and maintain those uneconomic plants. Those
costs are called "stranded costs."

Many long-term power purchase contracts between local utilities and
independent power producers now provide for rates in excess of current
short-term rates for purchased power and the utilities are treating their
contractual obligations as a form of stranded cost. There has been much
speculation that in the course of deregulating the electric power industry,
federal or state regulators or utilities would attempt to invalidate these power
purchase contracts as a means of throwing some of the costs of deregulation on
the owners of independent power plants. To date, the Federal Energy Regulatory
Commission and each state regulator that has addressed the issue have ruled that
existing power purchase contracts will not be affected by their deregulation
initiatives. To date, the regulators have rejected the requests of a few
utilities to invalidate existing power purchase contracts. There can be no
assurance that existing power purchase contracts will not be modified. However,
because of the consistent position of the regulatory authorities, the Fund
believes that so long as it performs its obligations under the power purchase
contracts, it will be entitled to the benefits of those contracts.

Facilities without long-term power purchase contracts may also be
attractive investments. Deregulation is encouraging electric utilities to sell
off many of their existing generating plants. In many cases, state regulators
are requiring electric utilities to sell many of their plants to separate
electric generating companies, so that a competitive market for buying and
selling electricity can be created. In other cases, electric utilities are
voluntarily selling their generating plants because they believe they can obtain
power on the open market more efficiently. As a result, there is a large number
of generating plants for sale today and it is expected that many more will be on
the market soon. This tends to depress the price of all existing plants.
Further, small electric generating plants may be less attractive purchases for
large corporations and investment groups with large amounts of capital to
invest, which may further depress their current prices. The Fund believes that
these market conditions may allow it to acquire small independent power plants
at attractive prices.

Finally, the uncertainties caused by deregulation and by past failures
of demand to meet projections have deterred investments in new generating
capacity. Further, as a competitive market in generating capacity is created,
market forces are discouraging many utilities and generators from keeping as
much generating capacity in reserve as they did in prior years. While some power
marketing groups are claiming that efficiencies created by deregulation will
meet needs for additional capacity, many electric industry engineers and
consultants have expressed fears that there will be shortages of generating
capacity within the next 10 years in many areas of the United States. It should
also be noted that as deregulation forces electricity prices lower, demand for
electricity should rise, other things being equal. In addition, many
nuclear-powered and conventional electric generating plants are coming to the
end of their useful lives.

With these factors shaping the future market, a few large independent
electric power companies and their backers have announced plans to build large
new generating stations without long term power purchase contracts. They
apparently think by the time those large investments in power plants go into
operation (currently estimated through 2002) those plants will be needed. The
Fund does not intend to join in building large new power generating facilities
without firm contracts for sale of the electricity, although if an attractive
opportunity existed it would do so. Instead, the Fund believes that if it
economically and efficiently operates and maintains small generating Projects,
those Projects will increase in value from their current somewhat depressed
levels if reserve capacity tightens in the industry.

In addition, many small independent power Projects have environmentally
beneficial features. For example, some small independent power Projects use
landfill gas to power their generators. Instead of having the methane gas
produced by rotting garbage flow into the atmosphere, where it may have powerful
"greenhouse" effects that increase global warming, the methane is burned to
produce electricity and water and carbon dioxide, which are less environmentally
destructive. Small independent cogeneration power Projects can save fuel. The
Fund will look for small Projects that have these kinds of environmental
benefits, not only because of the benefit to the environment but also because it
believes that its experience with these kinds of small Projects can make them
good investments.

Advantages to Investing in Other Capital Facilities
Environmentally beneficial independent power Projects often have
similar, non-electric power facilities related to them. For example, a trash-to
energy power plant may have a waste transfer station nearby. In investigating
small independent power Projects, Ridgewood Power has found that there are other
capital projects that are similar to independent power Projects and that often
(but not necessarily) have environmental benefits. These may meet the Fund's
goals for investment because they are expected to provide long-term, reliable
cash flows and have potential for long-term appreciation. Some of the types of
Projects that may fit this profile include:

Projects to convert waste fuel or biomass into useful fuels or chemicals;
Projects to generate electricity or heat to process or destroy harmful
industrial wastes; Projects that provide pumping power or other motive power
more efficiently than electric or other motors; infrastructure facilities such
as waste transfer stations; or other types of capital projects, such as fuel
plants, processing facilities and recycling facilities, that are expected to
have consistent cash flows similar to those from Independent Power Projects.

Advantages to Investing in Other Companies
Deregulation of the electricity industry, like the deregulation of the
natural gas industry in the last 15 years, is likely to have unpredictable
effects on many utilities and electric generating companies. Instead of having
assured markets and government-determined pricing, both electric utilities and
independent power producers without long-term Power Contracts will face rapidly
changing demand and supply for electricity. Smaller companies and companies with
long-term or unconventional business strategies may find that they are
undervalued by the stock market or that deregulatory uncertainties make it
difficult to attract capital and grow. This may create opportunities for the
Fund to acquire majority or minority equity interests in those companies on
favorable conditions. Although this type of investment is not the Fund's primary
goal, the Fund will take advantage of these opportunities if they arise.

Although the Fund's primary focus is to invest for long-term appreciation,
it might also elect to invest in equity securities with the purpose of gaining
control of a company, or for effecting a merger or business combination with the
Fund, its affiliates or non-affiliated parties, or for effecting the acquisition
of assets, or for sale to a successful bidder. The Fund might effect any of
these transactions on its own, together with Affiliates, or together with
non-Affiliates, and might do so with the encouragement or consent of management
or controlling equity holders of the company or without such consent.

If the Fund were to invest a substantial amount of its assets in equity
securities of other companies and did not actively own and operate power plants,
it might become an "investment company" subject to the requirements of the
Investment Company Act of 1940. The Fund does not intend to do so and will not
make investments that would require it to be regulated under that statute
without the prior consent of the holders of a majority of the Investor Shares
and the Incentive Shares issued under the Key Employees Incentive Plan
(collectively, the "Voting Shares").

The Prior Programs have not invested in majority or minority equity interests in
other operating companies because their primary investment objective is earning
current cash flow for distribution rather than long-term capital appreciation.
Neither the Managing Shareholder nor the Fund has significant experience in
making equity investments in other operating companies.

Basic Investment Approach
When the Fund makes investments in Independent Power Projects and in
other capital Projects, it concentrates on smaller Projects in which it can buy
at least a controlling equity interest (either together or with another program
sponsored by the Managing Shareholders). Those investments should be small
enough for the Fund to make several investments and to diversify its purchases.
Therefore, these types of investments are expected to be in the range of $2 to
$20 million per investment. Many institutional investors will not make
investments of less than $10 to $15 million, which may reduce competition for
the investments the Fund is focusing on. Also, larger companies may want to sell
their smaller Projects so they can focus their capital and other resources on
other investments. In some cases, electric utilities may wish to sell all or a
portion of their interest in a Project so that they can comply with federal
requirements limiting their investment in certain facilities regulated under
PURPA to 50% of the equity.

By making equity investments, the Fund often deleverages Projects. This
decreases risk to Investors and reduces financing expenses for the Projects, and
usually frees up funds held in amortization, maintenance or debt service
reserves that lenders required. This can make more cash flow available for
distribution to Investors and in the long term if the Fund is successful in
improving the operating results of the Project. After a period of successful
operation, or based on other factors, the Fund might conclude that the balance
of returns and risks to Investors would be improved if a Project was leveraged.
In that case, the strong equity position of the Fund might make such financing
easier to obtain.

Another advantage of the Fund's approach is that it is prepared to
provide equity financing of up to 100% of the amount needed to acquire or
develop a Project and can do so quickly, without the need of obtaining
additional financing from institutions. Institutional debt financing for
projects in North America can be difficult to obtain quickly.

Where possible, the Fund prefers to invest in Projects that are already
operating to reduce development risks and delays in earning cash flow. If the
Fund commits money to develop a Project, it prefers to invest in smaller
Projects or Projects with short development periods.

Where possible, the Fund will seek to have operating control over a
Project (or share operating control with another program sponsored by the
Managing Shareholders). Ridgewood Electric Power Trusts I through V (the five
other independent power industry programs sponsored by the Managing Shareholders
and referred to as the "Prior Programs") now own interests in over 40 Projects,
primarily in California, New York and New England. Over half of these Projects
(by number and by revenues) are managed by RPMCo, which is also wholly owned by
Robert E. Swanson.

RPMCo has over 35 employees, including engineering, operating,
accounting and legal specialists. The Managing Shareholders have found that
hiring other participants in or developers of Projects to manage the Projects,
or hiring third party managers, often leads to inefficient management and lesser
total returns to the Funds. Further, common management allows savings in fuel
purchasing, cash management and personnel, creates incentives for efficiency
over the entire portfolios of Projects, and allows RPMCo to gain valuable
operating and industry experience. RPMCo is only reimbursed for its costs, with
no profit factor.

The Fund may hire other persons to manage Projects, typically in cases
where the Projects are small and difficult to manage centrally. In some cases
the prior owner or developer may retain a significant ownership interest or
insist on continuing to operate Projects as a condition for selling them. In
those situations, the Fund will seek to obtain a preferred right to net cash
flow from the Project before the other owner or developer is entitled to cash
flow or compensation materially in excess of its costs.

The Fund will also attempt to include incentive provisions in any
management contract that will encourage the manager or operator to maximize the
return to the Fund. These types of provisions often give the manager a bonus if
it exceeds performance targets while reducing compensation somewhat (or allowing
the Fund to fire the manager) if the Project's performance does not meet
specified minimums.

Finally, in acquiring a Project, the Fund ordinarily will create a
subsidiary with limited liability for its owners to hold the Project or a small
group of similar Projects. This should reduce the Fund's liability for its
subsidiaries' operations and should isolate each Project to a reasonable extent
from liabilities of other Projects.

Investment Approach for Larger Projects
The Fund might be able to invest in Projects larger than the $20
million size described above. If it participated with larger companies in buying
or developing a Project, the Fund would probably buy a minority, non-control
equity interest. These types of transactions are heavily negotiated and there is
no typical structure for the Fund.

However, the Fund believes that it could be an attractive participant
in a purchase of a larger facility, because its investment objective is
long-term appreciation for its Investors and because it has ready cash for
investment. The Fund thus can participate quickly and effectively in
negotiations. Moreover, it can enter into complicated arrangements such as
partnerships with special allocations of accounting earnings or tax benefits,
where the Fund can receive cash flow while other participants are allocated
disproportionate amounts of earnings or tax items that may be more valuable to
them. Further, because the Fund is not related to any electric utilities, when
it invests in a Project it can help any electric utility co-owners to comply
with the 50% utility ownership limitation for certain Projects.

Timetable for Trust Investments
Although the amount of time needed to invest all the funds raised varies
significantly from program to program, the Fund estimates that it will
substantially complete its investments between 12 and 18 months after the
offering closes, which is anticipated to occur in the second quarter of 2000.

These time estimates for the length of the offering and the amount of time
needed to complete buying Projects may change significantly depending upon the
progress of the offering, the amount of funds raised and the availability of
attractive investments. One of the Prior Programs had approximately $14 million
of uninvested funds as of the date of this filing. As described below, Ridgewood
Power's policy is to present investment opportunities first to the
earliest-organized program with available funds. Therefore, the Fund may have to
wait until Prior Programs are fully invested before its funds can be applied to
Project investments. See Item 1(c)(2) - Risk Considerations - Identifying
Projects for additional factors that may affect the Fund's ability to invest
funds quickly.

Until funds from the offering of Shares are invested, they will be
deposited in bank accounts, in securities issued by or guaranteed by the U.S.
Government or its agencies or in money market funds or other funds invested in
those securities, or in investments rated AAA or Aaa or A1P1 or higher (for
money market or commercial paper instruments) by nationally recognized
securities rating organizations, or in securities that are prior to those
investments.

Distributions from Operating Projects
Until the Fund has invested in a significant amount of operating
Projects, it generally will make distributions of available cash flow from
interim investments and initial Projects quarterly to Investors. When cash flow
available from operating Projects reaches an appropriate level (usually within
18 to 36 months after the offering of Shares begins), the Fund will seek to make
quarterly or monthly distributions.

Distributions of available cash flow can vary depending upon Project
operating performance, fuel prices, unexpected operating or administrative
costs, environmental requirements, scheduled and unscheduled maintenance and
costs of equipment, fees and expenses payable to outside operators or Project
participants and Trust operating costs and liabilities.

The Fund's primary goal is to provide a capital appreciation
opportunity for Investors, both by investing in assets with appreciation
potential and by positioning itself for a future public offering, merger or
other corporate event. Subject to these and other factors described in the
remainder of this Confidential Memorandum, the Fund's secondary goal is to
provide Investors with annual distributions of net cash flow, as defined in the
Declaration of Trust, of 12% of their Capital Contributions to the Fund. Because
the Fund's policy is to distribute net cash flow, a substantial portion of many
distributions will include funds that represent depreciation and amortization
charges against assets. Occasionally, distributions may include funds derived
from operating or debt service reserves or proceeds of sales of Projects. For
purposes of generally accepted accounting principles, amounts of distributions
in excess of accounting income may be considered to be capital in nature, even
though the Fund is organized to return net cash flow rather than accounting
income to Investors.

Under current law and conditions Independent Power Projects have a
relatively assured source of revenues for the length of their power purchase
contracts. When those contracts expire or terminate, or if the Independent Power
Projects do not have fixed or formula price contracts, the cash flow prospects
for the Projects will depend on market conditions and are not predictable at
this time.

Sale or Disposition of Projects
The Fund's business plan is not currently geared toward selling or
otherwise disposing of Projects before the expiration or termination of existing
power purchase contracts. The Fund believes that at or before the termination of
those contracts there may be opportunities to sell or otherwise dispose of
Projects at a positive return for Investors and two Prior Programs have done so.
However, any estimate at this time of potential returns is speculative.

Future Liquidity Alternatives
Investor Shares are an illiquid investment. However, after the Fund's
business is well-established, which is anticipated to be approximately two to
five years after this offering terminates, the Fund will seek to make the
Investor Shares more liquid. Among the alternatives that might be available
would be events ("Liquidity Events") such as a change in the Fund to create a
publicly traded entity, either as the result of a business combination with
other similar programs sponsored by Ridgewood Power or by altering the existing
securities, tax and organizational law limitations on transfer and trading of
Investor Shares. Because these types of changes have significant and possibly
adverse federal income tax, federal and state securities law and business
effects, the Fund cannot and does not assure Investors that any such change can
be made and will do so only with the consent of a majority in interest of
Investors.

Ridgewood Power intends that the five Prior Programs (the prior
business trusts organized by Ridgewood Power to invest in the independent power
industry) will eventually combine into a single corporation that will have
tradable shares that will be listed or quoted on a major U.S. securities market.
The combined corporation, which would have more equity owners, greater assets
and more diversification of assets than any single program, might be
significantly more likely to develop a market for those equity interests. This
type of Liquidity Event has become a possibility because of the success of
Ridgewood Power since 1991 in organizing five Prior Programs with significant
assets and investor bases that could join with the Fund. One consequence of this
type of combination would be that unlike the Prior Programs, the resulting
combined corporation would not be treated as a partnership for tax purposes. As
a result, it would be taxed as a separate entity on its income and its
stockholders would pay income tax as well on any dividends it paid to them.

It is thus possible for the Fund at some future date to merge or
combine with the successor public corporation to the Prior Programs or to
participate in the original combination. Ridgewood Power currently intends to
include the Fund together with the five Prior Programs in the conversion into a
single corporation. If the Fund were large enough on its own, the Fund might
also convert itself into a taxable corporation with tradable shares, although
under current conditions this second alternative is unlikely.

As an alternative Liquidity Event, the Managing Shareholders and
Investors could amend the Declaration to permit free transferability of Investor
Shares. If the Fund is registered under the Securities Exchange Act of 1934, as
it anticipates, this would allow most Investors to offer their Investor Shares
to potential purchasers under Rule 144 of the Securities and Exchange Commission
as long as the sale takes place at least two years after purchase and several
prerequisites are met, or in most cases without prerequisites three years after
purchase. Finally, subject to further review of legal and tax issues, the Fund
might change its structure into one that continues to be taxed as a flow-through
entity (a business entity that is not taxed as a corporation and thus, like the
Fund currently, avoids double taxation of amounts distributable to Investors)
but that permits free transferability of Investor Shares. This might, but not
necessarily would, permit the creation of a trading market for the Investor
Shares.

Under current law and business conditions, there are significant legal,
tax and business consequences from electing any of these alternative Liquidity
Events and the Fund accordingly will not do so without amending the Declaration
after soliciting and receiving the consent of the holders of at least a majority
of the Investor Shares. Before the Fund undertakes any action or change that
would result in a Liquidity Event, it will solicit each Investor in writing by
means of a disclosure document describing all material aspects of the proposed
action.

In general, actions that would allow Investor Shares to be marketable
would raise the question for federal income tax purposes as to whether the
Investor Shares were readily tradable on a secondary market or its equivalent.
In that case, the Fund would be considered to be an "association" taxable as a
corporation. A combination of the Fund with other programs would raise the same
tax issues as to the combined entity and its securities.

Corporation tax status might have adverse effects on the net cash
return to an Investor, in part because a corporation's income is taxed at the
corporate level and dividends derived from that income are then taxed at the
Investor level. It is also possible, however, that because of depreciation
deductions or other tax provisions that the Fund might not have significant
taxable income so that these adverse effects would be less significant. It is
impossible to predict these factors at this time. It might be possible to
convert the Fund to a different type of taxable entity that is not taxable as a
corporation, but under current law it is likely that a restructuring of the
Fund's investments to a more passive form and reduction of the Fund's management
rights, if any, over Projects would be required.

In addition, if the Fund is to be combined with other investment
programs, the process of combining the entities, obtaining necessary owner
consents and making regulatory filings may be protracted and expensive and may
involve significant conflicts of interest between the combining programs. These
transactions, which are sometimes referred to as "rollups," require special
disclosure and fairness procedures to be undertaken, may require supermajority
votes of shareholders in each program to be obtained for approval and can be
extremely complex.

There are other alternatives that the Fund currently believes are less
desirable to Investors but that might be suggested if future market conditions
were favorable. The Fund might propose to the Investors that the Declaration be
amended to provide redemption rights to Investors. If the Investors were to
approve that proposal, the Investors would be offered the opportunity to redeem
their Investor Shares or to remain as equity owners in the Fund. Because the
Fund anticipates that most of its investments in Projects will be illiquid, the
Fund would not be able to redeem a portion of its Investor Shares until it could
sell Projects or portions of Projects. The Fund would confront significant
issues of fairness between redeeming Investors and the remaining Investors if it
were to fund redemptions by selling entire Projects. For example, if the most
liquid or attractive Project were sold to maximize or accelerate returns to
redeeming Investors, the remaining Investors might be relatively disadvantaged.
Accordingly, the Managing Shareholders believe that a redemption option is
currently less desirable. If redemption rights were authorized, the Managing
Shareholders would prefer to fund them by selling fractional interests in as
many Projects as possible to minimize conflicts of interest between redeeming
Investors and remaining Investors. Therefore, if redemption rights were
authorized, the attractiveness of this option would depend on the market for
Projects, and presumably on the market at that time for minority, non-control
interests in the Projects owned by the Fund.

Finally, a majority of the Investor Shares may cause the dissolution of
the Fund, either with the Managing Shareholders' consent or by removal of the
Managing Shareholders. Dissolution would cause the mandatory liquidation of the
Fund's investments, although the time constraints of a dissolution and the need
to sell all investments concurrently tend to significantly reduce total return.

No Investor should purchase Investor Shares with the expectation that
the Fund will elect to take or will be able to take any steps to make the Shares
tradable on any market or that any other means of allowing an Investor to sell
or "cash-out" his or her investment will be available.

Potential Investments
From time to time the Fund may identify potential investments for its
available funds. The Managing Shareholder anticipates that the Fund will review
and enter into preliminary investigations or indications of interest for a
significant number of potential investments that in fact the Fund will decline
to pursue or that will not be available for the Fund to invest in. This is a
necessary part of the process of winnowing potential investments to those that
the Managing Shareholder believes are the most advantageous for the Fund. Thus,
the identification of any potential investment is not an assurance that the Fund
will acquire the investment or that it will even enter into negotiations to
effect the purchase. Further, in Ridgewood Power's experience, as a result of
investigations of the investment and the process of negotiating an acquisition,
the terms of the transaction tend to change frequently and unpredictably. There
is no assurance that any proposed investment or any variant will occur, that the
terms of the investment will be the same or similar to those proposed by any
party from time to time or that any investment will be economically advantageous
to the Fund. Investors who purchase Investor Shares while any proposed
investment transaction is pending must do so with the understanding that the
final terms and conditions of the transaction may differ from those described in
this Registration Statement or elsewhere and that their purchases cannot be
contingent upon the final terms, if any, of the transaction.

(4) The Fund's Investments.

(i) United Kingdom Landfill Projects

The Fund and Power V are participating through a joint venture in the
United Kingdom Landfill Projects, which include owning five completed landfill
gas electric generation plants in Great Britain and developing up to 20
additional sites.

The estimated cost of the package of completed plants and the 20
developmental sites, if all the developmental plants are built, is $36 to $38
million. Power V supplied the first $16 million of the purchase price and
developmental equity and the Fund is supplying the remainder of the
developmental equity. To the extent that the Fund supplies capital, it will
receive an undivided interest in the entire package of operating and
developmental projects. Power V and the Growth Fund have organized Ridgewood
U.K. Limited, an English limited company ("Ridgewood U.K.") to act as a holding
company for the British projects.

The following five plants are currently in operation:

Project Location Current Price per Installed capacity
kWh (US$)
Chelson Meadow ........ Devon, England 4.57 2.85 megawatts
United Mines .......... Cornwall, England 5.26 2.85 megawatts
Whinney Hill .......... Lancashire, England 5.28 3.10 megawatts
Bellhouse ............. Essex, England 5.28 2.85 megawatts
Summerston ............ Glasgow, Scotland 5.26 2.85 megawatts
Total capacity ........ 14.5 megawatts

Each British plant has a 15-year long term power purchase contract with
the Non-Fossil Purchasing Agency Limited, a quasi-autonomous non-governmental
organization that purchases electricity generated by renewable sources (such as
landfill gas power plants) on behalf of all English utilities in order to meet
British environmental protection goals. The Summerston plant has a similar
15-year contract under the Scottish Renewables Order with Scottish utilties. The
electricity prices will be increased annually by a factor equal to any
percentage increase in the U.K. Retail Price Index.

The first five projects named above (which include both the electricity
generating plants and the gas collection and cleaning systems) have been or were
financed with long-term bank debt, in addition to the equity interest purchased
by the Fund and Power V. The loans are non-recourse against Ridgewood U.K.,
Power V, the Fund and their intermediate subsidiaries. The Fund and Power V have
also organized Ridgewood CLP Management Limited, an English company ("RW
Management"), which will be responsible for operating the five plants and any
additional plants that are developed. The principal stockholders of CLP Services
Limited, a new company ("CLPS"), organized by the stockholders of CLP, will own
non-voting stock in RW Management. RW Management will manage the plants at cost
and will not be intended to earn any profit. CLPS, will provide day-to-day
services under subcontract to RW Management. CLPS will be paid a flat fee of
approximately 1.2 cents per kilowatt-hour for those services (adjusted for
increases in the Retail Price Index) and will be eligible for bonus payments if
a project's actual annual electricity output exceeds 90% of its capacity. CLPS
will also pay approximately $88,000 per year (also adjusted for increases in the
Retail Price Index) for management services for the various companies owning the
five existing projects. The gas extraction and cleaning systems for the
landfills will be operated by CLPS for no additional cost. RW Management may
terminate the subcontract with CLPS if at the end of any year the projects in
the aggregate have not produced at least 90% of their capacity (adjusted for
loss of time for scheduled downtime, catastrophic failures not caused by CLPS or
failures to receive landfill gas not caused by CLPS), or at any time if it can
be shown that it is physically impossible for the plants as a whole to meet the
90% standard for the current year.

CLPS will proceed to develop as many of the 18 remaining sites as may be
feasible and will bear the developmental costs itself. Its principal source of
funds for doing so will be approximately $6.4 million contributed by its
stockholders from the purchase price paid by Ridgewood U.K. for the five plants
described above. As each remaining plant is completed and commissioned,
Ridgewood U.K expects that the bank will provide long-term finance for
approximately 55% of the plant's reasonable cost, although the bank has not yet
committed to do so. If full bank financing is obtained for a plant, Ridgewood
U.K. will have the option to buy the equity interest from CLPS. Power V has
provided the equity capital necessary for Ridgewood U.K to buy and develop the
seven plants named above. The Fund has committed to provide up to $24 million
additional to develop the 18 additional proposed plants through contributions of
capital to Ridgewood U.K. By doing that, the Growth Fund will obtain an economic
interest in each of Ridgewood U.K.'s plants proportionate to the share of
Ridgewood U.K.'s total capital that it contributes. Ridgewood U.K. expects to
contract with RW Management to operate the additional plants using CLPS on terms
similar to those for the five existing plants.

The purchase price for the first five plants, $15 million, was determined
by arms-length bargaining and was paid from proceeds of the Fund's prior private
placement offering. The price reflected the estimated value of the cash flow
from the five plants, assuming production meets the 90% standard, plus estimated
adjustments for the current assets acquired by Ridgewood U.K, interest at 5.25%
per year on those amounts from an assumed purchase date of April 1, 1999, and
retention amounts held against amounts due for completion of the Chelson Meadow
and Summerston plants. The purchase price was adjusted to reflect actual results
for the April - June 1999 period.

The Fund will invest in Ridgewood U.K. from proceeds of its offering of
Investor Shares.

(ii) Egyptian Projects

In late 1998, the Managing Shareholders organized the predecessor of
Ridgewood International Development LLC ("RIDCo") to be a project developer for
the Fund and the Growth Fund. RIDCo is owned by Robert E. Swanson and family
trust of Mr. Swanson's and he is the sole manager of RIDCo. Like RPMCo, RIDCo
acts on behalf of the Fund, hires personnel for Projects and is reimbursed for
its costs and allocable overhead. The President and chief operating officer of
RIDCo, beginning in January 1999, is Donald Stewart, who from May 1994 through
December 1998 acted as an acquisition consultant to the Managing Shareholder.
Mr. Stewart is reimbursed for his expenses but does not draw a salary. Instead,
upon successful completion of a development Project, he receives a commission
based on Project cost.

Mr. Stewart has over 25 years of experience in the field of independent
power generation and finance. Mr. Stewart spent the first ten years of his
business career as a Certified Public Accountant with KPMG, a major
international accounting firm. He also served as Chairman of Vermont Gas
Systems, a regulated public utility; Vice-Chairman of Consolidated Power
Company, a developer of large scale co-generation projects; and Chairman of
Hercules Engines, Inc., a manufacturer of industrial engines and electrical
generation equipment.

Mr. Stewart holds a Bachelor of Science degree in Engineering from Lehigh
University.

In the third quarter of 1999, the Fund and the Growth Fund organized an
Egyptian development company and have loaned approximately $10.6 million to the
company, secured by the company's stock. The Fund and the Power V have supplied
this capital and as soon as governmental formalities are completed, they will
exchange the loans for all of the equity in the development company.

The capital has been used to complete one infrastructure project at the Le
Meridien Hotel in Hurghada, Egypt. Hurghada is a developing tourist resort on
the western shore of the Red Sea in southeastern Egypt distant from most
population centers. RIDCo has entered into an agreement with the hotel to
provide an electricity and desalination plant with a capacity of five megawatts
and 142,000 gallons of fresh water per day and to operate the plant for 10
years. The hotel pays for electricity at a variable rate tied to fuel costs and
pays for distilled water at a flat rate per gallon, escalated for inflation
annually. Total investment in the plant, which began operation in March 2000, is
approximately $8.25 million.

RIDCo is also developing five additional Projects or groups of Projects.
One Project is being constructed to supply electricity only (8 megawatts
capacity) at the El Malha Touristic Association, a group of hotels and
developers building a resort community approximately 50 miles south of the
Egyptian-Israeli border on the Gulf of Aqaba. Estimated cost is $6 million and
operations are scheduled to begin in April 2000. A second project is located at
the tip of the Sinai Peninsula at Sharm-el-Sheikh, for desalinating water for
three hotels. Its estimated cost is $3.2 million and estimated capacity will be
3 million gallons per day. These projects are expected to be in operation by the
end of 2000.

A third group of Projects will also be located at Hurghada. Two generating
stations will provide 5.8 megawatts of electricity to two hotels, and a series
of desalination facilities will provide up to 3.4 million gallons per day of
water to those two hotels and three others. Estimated cost will be $8.5 million
and completion is expected in 2000.

The remaining two projects are to be located at Ras Sidr and Marsa Alam on
the western shore of the Red Sea. The Ras Sidr project is for desalinating water
only while the Marsa Alam project will provide both water and electricity.
Estimated costs are $2.9 million and $3 million, respectively. These Projects
are in due diligence and it is uncertain whether they will proceed to
completion. The additional $23.6 million of capital needed to fund these
commitments will be provided by the Fund and Trust V. The El Malha and
Sharm-el-Sheikh projects are supported by contracts with associations of resort
hotels organized under Egyptian law to develop new resort sites. The members of
each association are jointly responsible for the association's obligations,
which include amounts owed to the projects for electricity and water. Each
contract with the associations is for 10 years on terms similar to those of the
Le Meridien Hotel project.

The Fund's equity in the net losses of the Egyptian Projects for 1999 was
$198,000.

(iii) Mediterranean Fiber Optic Project

In September 1999, the Fund and the Growth Fund organized Ridgewood
MedFiber LLC and each of them contributed $1.5 million to the joint venture on
equal terms. Ridgewood MedFiber then invested the $3 million in a 25% equity
interest in Global Fiber Group, a newly organized developer ("GFG"), which is
exploring a proposal to construct a 3,600 kilometer (2,200 mile) long underwater
fiber optic cable among Spain, Southern France and Italy via the Mediterranean
Sea. Ridgewood MedFiber or its designees have first refusal rights to invest in
future telecommunications facilities developed by GFG. GFG's original management
was comprised of former executives of AT&T Corp.'s underwater cable division.

In February 2000, the original management, which had been unable to
obtain additional equity financing for the Project, agreed to withdraw from the
venture. Ridgewood MedFiber informally agreed with the managers to provide some
compensation for their interest, contingent upon completion of financing for the
Project. Ridgewood MedFiber has searched for other equity investors to allow the
Project to proceed, but to date has been unsuccessful. There is a high risk that
it will be unable to find additional equity investors and that the Project
therefore will not be developed, in which case the Fund will lose its entire
investment.

GFG had entered into an agreement with Alcatel Submarine Networks, SARL
("ASN"), a subsidiary of Alcatel SA, a major European telephone equipment
manufacturer. Each of GFG and ASN owns one-half of a joint venture to construct
the Project. The joint venture was organized to enter into a turnkey
construction contract with ASN and to have ASN operate and market the Project.

The estimated cost of the Project is approximately $500 million. The
joint venture had obtained a commitment from a major European bank and an
investment bank to sell a approximately $350 million of senior secured debt in
the Project. The remaining $150 million was to be equity financing.
Approximately 60% of that equity financing would be provided as a preferred
("mezzanine") equity interest in the joint venture and the remaining 40% ($60
million) would be provided by GFG and ASN as common equity. Each of GFG and ASN
would also receive an unspecified amount of common equity in the joint venture
as developers' compensation.

The Fund and Power V had tentatively budgeted an additional investment of
$18 million through Ridgewood MedFiber in the Project for the second quarter of
2000. That would be used to provide part of the $30 million common equity
investment by GFG. The Managing Shareholder expects that decisions about
financing and whether to proceed with the Project will be made by the end of
April 2000. Intensive negotiations are in progress with regard to the financing
and operation of the Project and there may be material changes to the
arrangements described here.

There are no current commitments or agreements to purchase the
communications capacity or facilities that the Project would provide. The
Project would be developed to meet the anticipated demand for high-speed global
communications links, b