FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 2002
Commission file Number 0-25935
THE RIDGEWOOD POWER GROWTH FUND
(Exact name of registrant as specified in its charter.)
Delaware 22-3495594
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
947 Linwood Avenue, Ridgewood, New Jersey 07450-2939
(Address of principal executive offices) (Zip Code)
(201) 447-9000
Registrant's telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
The Ridgewood Power Growth Fund
Financial Statements
September 30, 2002
The Ridgewood Power Growth Fund
Consolidated Balance Sheets (unaudited)
- -------------------------------------------------------------------------------
September 30, December 31,
2002 2001
------------ ------------
Assets:
Cash and cash equivalents ...................... $ 1,212,585 $ 1,048,316
Accounts receivable, net
of allowance of
$339,279 and $222,862 ......................... 1,629,188 597,727
Due from affiliates ............................ 208,856 181,832
Other current assets ........................... 237,102 213,106
------------ ------------
Total current assets ..................... 3,287,731 2,040,981
Plant and equipment ............................ 32,187,024 21,921,816
Construction in progress ....................... 1,463,720 4,527,094
Office equipment ............................... 1,022,969 913,363
------------ ------------
Total plant and equipment ...................... 34,673,713 27,362,273
Accumulated depreciation ................... (3,247,281) (1,401,263)
------------ ------------
Plant and equipment, net ....................... 31,426,432 25,961,010
------------ ------------
Investment in:
Synergics Projects ............................. 14,288,819 14,245,679
United Kingdom Landfill Projects ............... 5,398,337 5,500,719
Sinai Environmental Services ................... -- 1,086,913
------------ ------------
Total assets ............................. $ 54,401,319 $ 48,835,302
------------ ------------
Liabilities and shareholders' equity:
Liabilities:
Accounts payable and accrued expenses .......... $ 1,510,911 $ 373,868
Bank debt ...................................... 761,998 --
Due to affiliates .............................. 467,358 424,769
------------ ------------
Total current liabilities ................ 2,740,267 798,637
------------ ------------
Bank debt, less current portion ................ 5,256,558 --
Minority interest in the Egypt Projects ........ 8,972,511 8,722,889
Commitments and contingencies
Shareholders' equity:
Shareholders' equity (658.1067
investor shares issued and
outstanding) ................................. 37,616,987 39,479,962
Managing shareholders' accumulated
deficit (1 management share
issued and outstanding) ...................... (185,004) (166,186)
------------ ------------
Total shareholders' equity ............... 37,431,983 39,313,776
------------ ------------
Total liabilities and shareholders' equity $ 54,401,319 $ 48,835,302
------------ ------------
See accompanying notes to the consolidated financial statements.
The Ridgewood Power Growth Fund
Consolidated Statements of Operations (unaudited)
- --------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
-------------------------- ----------------------------
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Revenues .......... $ 4,351,994 $ 3,452,254 $ 2,058,225 $ 1,371,690
Cost of sales ..... 3,838,263 2,162,971 2,064,592 870,892
----------- ----------- ----------- -----------
Gross profit ...... 513,731 1,289,283 (6,367) 500,798
General and
administrative
expenses ......... 1,324,138 1,487,413 507,012 717,416
Management fee
paid to the
managing
shareholders ..... 822,633 1,233,950 -- 411,317
----------- ----------- ----------- -----------
Total other
operating
expenses ........ 2,146,771 2,721,363 507,012 1,128,733
Loss from
operations ....... (1,633,040) (1,432,080) (513,379) (627,935)
Other income
(expense):
Interest income ... 60,128 574,105 20,302 304,546
Income from
Synergics
Hydro Projects ... -- 993,685 -- 331,229
Interest expense .. (618,877) -- (428,507) --
Equity interest in
income (loss) of:
ZAPWORLD.COM ... -- (818,043) -- --
United Kingdom
Landfill
Projects ...... (484,021) 68,881 (102,058) 48,650
Sinai
Environmental
Services ...... (37,298) -- 22 --
Other income
(expense) ........ 7,439 -- (8,928) --
----------- ----------- ----------- -----------
Other income
(expense),net (1,072,629) 818,628 (519,169) 684,425
----------- ----------- ----------- -----------
Net loss before
minority interest (2,705,669) (613,452) (1,032,548) 56,490
Minority interest
in the loss
(earnings) of
the Egypt
Projects ....... 755,304 (200,083) 534,471 (110,686)
----------- ----------- ----------- -----------
Net loss .......... $(1,950,365) $ (813,535) $ (498,077) $ (54,196)
----------- ----------- ----------- -----------
See accompanying notes to the consolidated financial statements.
The Ridgewood Power Growth Fund
Consolidated Statement of Changes in Shareholders' Equity (unaudited)
- --------------------------------------------------------------------------------
Managing
Shareholders Shareholders Total
------------ ------------ ------------
Shareholders' equity,
December 31, 2001 ... $ 39,479,962 $ (166,186) $ 39,313,776
Net loss ............. (1,930,861) (19,504) (1,950,365)
Cumulative translation
adjustment .......... 67,886 686 68,572
------------ ------------ ------------
Shareholders' equity,
September 30, 2002 .. $ 37,616,987 $ (185,004) $ 37,431,983
------------ ------------ ------------
The Ridgewood Power Growth Fund
Consolidated Statements of Comprehensive Loss (unaudited)
- --------------------------------------------------------------------------------
Nine Months Ended Three Months Ended
--------------------------- ---------------------------
September 30, September 30, September 30, September 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net loss ......... $(1,950,365) $ (813,535) $ (498,077) $ (54,196)
Cumulative
translation
adjustment ...... 68,572 (1,908,365) (36,467) (1,710,721)
----------- ----------- ----------- -----------
Comprehensive loss $(1,881,793) $(2,721,900) $ (534,544) $(1,764,917)
----------- ----------- ----------- -----------
See accompanying notes to the consolidated financial statements.
The Ridgewood Power Growth Fund
Consolidated Statements of Cash Flows (unaudited)
- --------------------------------------------------------------------------------
Nine Months Ended
September 30, September 30,
2002 2001
------------ ------------
Cash flows from operating activities:
Net loss ................................ $ (1,950,365) $ (813,535)
------------ ------------
Adjustments to reconcile net loss
to net cash flows from
operating activities:
Depreciation .......................... 1,871,298 993,881
Minority interest in (loss)
earnings from Egypt Projects ......... (755,304) 200,083
Loss from unconsolidated
ZAPWORLD.COM ......................... -- 818,043
Loss (income) from United
Kingdom Landfill Projects ............ 484,021 (68,881)
Interest income from
Synergics Projects ................... -- (993,685)
Loss from investment in Sinai
Environmental Services ............... 37,298 --
Changes in assets and liabilities:
Increase in accounts
receivable, net .................... (833,574) (783,837)
(Increase) decrease in due
from affiliates ................... (191,899) 446
Decrease (increase) in other
current assets ..................... 112,413 (163,098)
Increase (decrease) in accounts
payable and accrued
expenses .......................... 1,140,242 (344,137)
Increase in due to affiliates ....... 207,464 4,175
------------ ------------
Total adjustments ............... 2,071,959 (337,010)
------------ ------------
Net cash provided by (used in)
operating activities .............. 121,594 (1,150,545)
------------ ------------
Cash flows from investing activities:
Capital expenditures .................... (1,613,359) (8,474,071)
Investment in United Kingdom
Landfill Projects ...................... -- (3,472,460)
Investment in Synergics Projects ........ (43,140) --
Cash paid for acquired business,
net of cash received ................... (950,810) --
------------ ------------
Net cash used in investing activities (2,607,309) (11,946,531)
------------ ------------
Cash flows from financing activities:
Borrowings under bank loan .............. 2,673,740 --
Repayments under bank loan .............. (23,756) --
Contributions from minority interest .... -- 3,913,493
Distributions to minority
interest in Egypt Projects ............. -- (899,982)
------------ ------------
Net cash provided by
financing activities ............... 2,649,984 3,013,511
------------ ------------
Net increase (decrease) in
cash and cash equivalents ................... 164,269 (10,083,565)
Cash and cash equivalents, beginning of period 1,048,316 15,328,703
------------ ------------
Cash and cash equivalents, end of period ..... $ 1,212,585 $ 5,245,138
------------ ------------
See accompanying notes to the consolidated financial statements.
The Ridgewood Power Growth Fund
Notes to the Consolidated Financial Statements (unaudited)
- -------------------------------------------------------------------------------
1. General
In the opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, which consist of normal recurring
adjustments, necessary for the fair presentation of the results for the interim
periods. Additional footnote disclosure concerning accounting policies and other
matters are disclosed in The Ridgewood Power Growth Fund's (the "Fund")
consolidated financial statements included in the 2001 Annual Report on Form
10-K, which should be read in conjunction with these financial statements.
The results of operations for an interim period should not necessarily be taken
as indicative of the results of operations that may be expected for a twelve
month period.
2. Summary Results of Operations for Selected Investments
Summary results of operations for the United Kingdom Landfill Projects, which
are accounted for under the equity method, were as follows:
Nine Months Ended Three Months Ended
September 30, September 30,
2002 2001 2002 2001
----------- ----------- ----------- -----------
Revenue ......... $ 5,810,000 $ 4,416,000 $ 2,046,000 $ 1,514,000
Cost of sales ... 5,289,000 3,176,000 1,837,000 1,133,000
Other expense ... 2,524,000 925,000 580,000 2138,000
Net income (loss) (2,003,000) 315,000 (372,000) 243,000
3. Summary of Significant Accounting Policies
New Accounting Standards and Disclosures
SFAS 141
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") 141, Business Combinations, which
eliminates the pooling-of-interest method of accounting for business
combinations and requires the use of the purchase method. In addition, SFAS 141
requires the reassessment of intangible assets to determine if they are
appropriately classified either separately or within goodwill. SFAS 141 is
effective for business combinations initiated after June 30, 2001. The Fund
adopted SFAS 141 on July 1, 2001, which did not have an impact on the
consolidated financial statements.
SFAS 142
In June 2001, the FASB issued SFAS 142, Goodwill and Other Intangible Assets,
which eliminates the amortization of goodwill and other acquired intangible
assets with indefinite economic useful lives. SFAS 142 requires an annual
impairment test of goodwill and other intangible assets that are not subject to
amortization. Other intangible assets with definite economic lives will continue
to be amortized over their useful lives. The Fund adopted SFAS 142 on January 1,
2002, which did not have an impact on the consolidated financial statements.
SFAS 143
In June 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations, on the accounting for obligations associated with the retirement of
long-lived assets. SFAS 143 requires a liability to be recognized in the
consolidated financial statements for retirement obligations meeting specific
criteria. Measurement of the initial obligation is to approximate fair value,
with an equivalent amount recorded as an increase in the value of the
capitalized asset. The asset will be depreciated in accordance with normal
depreciation policy and the liability will be increased for the time value of
money, with a charge to the income statement, until the obligation is settled.
SFAS 143 is effective for fiscal years beginning after June 15, 2002. The Fund
will adopt SFAS 143 effective January 1, 2003 and has assessed that this
standard will not have a material impact on the Fund.
SFAS 144
In August 2001, the FASB issued SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, which replaces SFAS 121, Accounting for the
Impairment of Long-lived Assets and for Long-Lived Assets to Be Disposed Of. For
long-lived assets to be held and used, SFAS 144 retains the requirements of SFAS
121 to (a) recognize an impairment loss only if the carrying amount is not
recoverable from undiscounted cash flows and (b) measure an impairment loss as
the difference between the carrying amount and fair value of the asset. For
long-lived assets to be disposed of, SFAS 144 establishes a single accounting
model based on the framework established in SFAS 121. The accounting model for
long-lived assets to be disposed of by sale applies to all long-lived assets,
including discontinued operations and replaces the provisions of APB Opinion No.
30, Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of segments of a business. SFAS 144
also broadens the reporting of discontinued operations. The Fund adopted SFAS
144 on January 1, 2002, which did not have an impact on the consolidated
financial statements.
SFAS 145
In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Correction.
SFAS No. 145 eliminates extraordinary accounting treatment for reporting gain or
loss on debt extinguishment, and amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. The Fund will adopt SFAS
145 effective January 1, 2003 and has assessed that this standard will not have
a material impact on the Fund.
SFAS 146
In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. SFAS No. 146 requires recording costs associated
with exit or disposal activities at their fair values when a liability has been
incurred. The Fund will adopt SFAS 146 effective January 1, 2003 and has
assessed that this standard will not have a material impact on the Fund.
4. Acquisition
On December 30, 2001, the Fund, through its Egyptian subsidiary, purchased a 28%
equity interest in Sinai Environmental Services S.A.E. ("Sinai Company"), a
1,585,000 gallons per day water desalinization plant, for 4,999,800 Egyptian
pounds (approximately $1,087,000). At December 31, 2001, the Fund accounted for
this investment under the equity method of accounting because it had the ability
to exercise significant influence, but not control. In February of 2002, the
Fund made an additional investment of 4,414,888 Egyptian pounds (approximately
$947,000) in Sinai Company to increase its ownership to 53% and gain control of
Sinai Company. As a result of the additional investment, effective February 16,
2002, the Fund accounts for its investment in Sinai Company under the
consolidation method of accounting.
In return for its investment the Fund received a 53% interest in the Sinai
Company, which at the time of acquisition, had plant and equipment with a net
book value of approximately $5,804,000, accounts receivable of $145,000 and
other assets with an approximate book value of $278,000. In accordance with the
purchase agreement, the Fund assumed approximately $379,000 and bank debt of
approximately $3,323,000. The loan bears interest at 13.5% per annum and is
collateralized by a lien on the assets of the Sinai Company. The provision of
the loan restricts the Sinai Company from paying dividends to its shareholders
or obtaining credit from other banks. The Company assigned the approximate
excess purchase price of $696,000 to plant and equipment, which will be
amortized over the 20 year life of the assets.
The determination of the final purchase price and allocation to the assets
acquired and liabilities assumed is still being assessed. The assets acquired
and liabilities assumed were recorded by the Fund at estimated fair values based
on information currently available and on current assumptions as to future
operations. The Fund expects to complete its review of the fair values of the
assets acquired and liabilities assumed in the year ended December 31, 2002 and,
accordingly, the allocation of purchase price is subject to revision.
5. Related Party Transactions
At September 30, 2002 and December 31, 2001, the Trust had outstanding payables
and receivables, with the following affiliates:
Due To Due From
------------------ ------------------
Sept 30, Dec 31, Sept 30, Dec 31,
2002 2001 2002 2001
-------- -------- -------- --------
Ridgewood Power Management LLC . $131,992 $ 85,276 $ -- $ --
Ridgewood Electric Power Trust V -- 86,321 7,427 16,597
Ridgewood Egypt Fund ........... 334,980 253,172 -- --
United Kingdom Landfill Projects -- -- 201,429 164,875
Other affiliates ............... 386 -- -- 360
-------- -------- -------- --------
Total ................. $467,358 $424,769 $208,856 $181,832
-------- -------- -------- --------
From time to time, the Trust records short-term payables and receivables from
other affiliates in the ordinary course of business. The amounts payable and
receivable with the other affiliates do not bear interest.
6. Long-Term Debt
Following is a summary of Fund's Egyptian subsidiary's long-term debt at
September 30, 2002:
September 30, 2002
----------------------
Bank debt $6,018,556
Less - Current maturity (761,998)
----------------------
Total long-term debt $5,256,558
----------------------
During the third quarter of 2002, the Fund's Egyptian subsidiary, executed a
term loan agreement with its principal bank. The bank provided a loan of
12,500,000 Egyptian pounds (approximately $2,674,000), which will mature on
March 31, 2007. The loan will be repaid in quarterly installments of 781,250
(approximately $167,100) starting June 2003. Outstanding borrowings bear
interest at the bank's medium term loan rate plus 0.5% (13.5% at September 30,
2002).
The Sinai Company, in which the Fund and its affiliates have a 53% ownership
interest, has outstanding loans and interest payable of 15,637,349 Egyptian
pounds (approximately $3,344,816). The loan bears interest at 13.5% per annum
and is collateralized by a lien on the assets of the Sinai Company. The
provision of the loan restricts the Sinai Company from paying dividends to its
shareholders or obtaining credit from other banks. The loan, which had been in
default since 1999, was amended during the third quarter of 2002. Beginning
February 2003, the loan will be repaid in semi-annual installments. The loan
will mature in February 2007.
Scheduled principal repayments of long-term debt are as follows:
Period Ended
September 30, Payment
------------- -------
2003 $ 761,998
2004 1,310,132
2005 1,417,082
2006 1,630,981
2007 898,363
Total $6,018,556
7. Subsequent Event
Beginning in late 1999, the Fund and Ridgewood Electric Power Trust V ("Trust
V") (collectively "Ridgewood Power") began negotiations with Synergics, Inc.
("Synergics") to buy nine existing hydroelectric generating plants (the
"Synergics Projects"). In the course of negotiations and due diligence,
Ridgewood Power learned that one of Synergics' lenders had declared a payment
default against Synergics and that the lender had agreed to discharge the debt
at a substantial discount from the face amount if payment were made by the end
of April 2000. In order to preserve the benefit of the lender's offer and to
allow completion of the acquisition on favorable terms, the Fund and Trust V,
through a joint venture, acquired the debt from the lender on April 28, 2000 for
a payment of $17 million to the lender. Trust V supplied $5 million of the
capital used by the joint venture to acquire the debt and the Fund supplied the
remaining $12 million. The Fund and Trust V own the joint venture in proportion
to the capital each supplied and neither has preferred rights over the other.
On November 22, 2002, through another joint venture owned in the same proportion
as the joint venture that acquired the debt of Synergics, the Fund and Trust V
acquired 100% of the outstanding stock of Synergics. The former shareholders of
Synergics Inc. received 100% of the outstanding shares of a subsidiary of
Synergics in exchange for selling the stock of Synergics to the Fund and Trust
V.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Dollar amounts in this discussion are rounded to the nearest $1,000.
Introduction
The consolidated financial statements include the accounts of the Fund and the
limited liability company owning the Egypt Projects. The Fund uses the equity
method of accounting for its investments in Zap World.com ("ZAP") and the United
Kingdom Landfill Projects. The Fund's investment in the Synergics Hydro projects
is in the form of a note receivable and, accordingly, the Fund's earnings are in
the form of interest income.
On December 30, 2001, the Fund, through its Egyptian subsidiary, purchased a 28%
equity interest in Sinai Company. At December 31, 2001, the Fund accounted for
this investment under the equity method of accounting because it had the ability
to exercise significant influence, but not control. In February of 2002, the
Fund made an additional investment in Sinai Company to increase its ownership to
53% and gain control of Sinai Company. As a result of the additional investment,
effective February 16, 2002, the Fund accounts for its investment in Sinai
Company under the consolidation method of accounting.
Results of Operations
Three Months Ended September 30, 2002, Compared to the Three Months Ended
September 30, 2001
Revenues increased by $686,000, to $2,058,000 in the third quarter of 2002, as
compared to the third quarter of 2001. $274,000 of the increase in revenues is
due to the acquisition of Sinai Company on February 15, 2002. The remaining
$412,000 increase is attributable to the increase in the capacity and number of
completed facilities of the existing operations in Egypt.
Gross profit decreased from $501,000 for the three months ended September 30,
2001, to a loss of $6,000 for the corresponding period of 2002. The decrease is
attributed to the increase in maintenance and depreciation expense as a result
of the completion of facilities and their operation, as compared to the prior
year when some facilities were still under construction.
The management fee decreased $411,000 due to the managing shareholder waiving
the third quarter 2002 management fee.
Interest income decreased by $285,000 from $305,000 in the third quarter of 2001
to $20,000 in the third quarter of 2002 due to lower average cash balances.
Interest expense for the third quarter of 2002 was $429,000, which is a result
of the outstanding bank debt incurred by the Sinai Company and the new bank loan
obtained by the Fund's Egyptian subsidiary.
The Fund recorded interest income from the note related to the Synergics
Projects of $331,000 in the third quarter of 2001. During the second half of
2001, drought conditions affected many of the Synergics Projects, reducing
revenues and cash flows recorded by Synergics. As a result of these reduced cash
flows experienced by Synergics, the Fund ceased accruing interest effective as
of October 1, 2001.
In the third quarter of 2002 the Fund recorded an equity loss of $102,000 from
the United Kingdom Landfill Projects, compared to an equity income of $49,000 in
the third quarter of 2001. The decrease in equity income is a result of the
United Kingdom Landfill Projects incurring an increase in maintenance costs to
repair some of the facilities, as well as an increase in general and
administrative expenses resulting from the UK projects being managed, developed
and operated internally. As a result of the increase in expenses and net loss
recognized, the UK projects received a larger income tax benefit as compared to
the prior year.
Nine Months Ended September 30, 2002, Compared to the Nine Months Ended
September 30, 2001
Revenues increased by $900,000, to $4,352,000 for the nine months ended
September 2002, as compared to the nine months ended September 2001. The
increase in revenues is a result of a $264,000 increase from existing operations
in Egypt and $636,000 due to the acquisition of Sinai Company on February 15,
2002. The increase in existing operation revenue is attributable to the increase
in the capacity and number of completed facilities.
Gross profit decreased from $1,289,000 for the nine months ended September 30,
2001, to $514,000 for the corresponding period of 2002. The decrease is
attributed to the increase in maintenance and depreciation expense as a result
of the completion of facilities and their operation, as compared to the prior
year when some facilities were still under construction.
The management fee decreased $411,000, from $1,234,000 for the first nine months
of 2001 to $ 823,000 for the first nine months of 2002, due to the managing
shareholder waiving the third quarter 2002 management fee.
Interest income decreased by $514,000 from $574,000 for the first nine months of
2002 to $60,000 for the corresponding period of 2002 due to lower average cash
balances. Interest expense for the first nine months of 2002 was $619,000, which
is a result of the outstanding bank debt incurred by the Sinai Company and the
existing Egyptian operations.
The Fund recorded interest income from the note related to the Synergics
Projects of $994,000 for the first nine months of 2001. During the second half
of 2001, drought conditions affected many of the Synergics Projects, reducing
revenues and cash flows recorded by Synergics. As a result of these reduced cash
flows experienced by Synergics, the Fund ceased accruing interest effective as
of October 1, 2001.
For the first nine months of 2001, the Fund recorded a loss on its investment in
ZAP of $818,000. In the beginning of the third quarter of 2001, the Fund entered
into an agreement with ZAP which resulted in the Fund selling its ZAP shares to
ZAP and certain of its shareholders. In exchange for the returned shares, the
Fund received a $1,500,000 interest bearing promissory note. The note calls for
installment payments to be made to the Fund until its maturity in 2003. The Fund
has received no payments on the note. Effective in the fourth quarter of 2001,
the Fund wrote down its entire investment in ZAP to zero. On March 1, 2002, ZAP
filed a voluntary petition for reorganization under Chapter 11 of the U. S.
Bankruptcy Code with the U.S. Bankruptcy Court in Santa Rosa, California.
In the first nine months of 2002 the Fund recorded an equity loss of $484,000
from the United Kingdom Landfill Projects, compared to equity income of $69,000
for the corresponding period of 2001. The decrease in equity income is a result
of the United Kingdom Landfill Projects incurring an increase in maintenance
costs to repair some of the facilities, as well as an increase in general and
administrative expenses resulting from the UK projects being managed, developed
and operated internally. As a result of the increase in expenses and net loss
recognized, the UK projects received an income tax benefit as compared to the
income tax expense incurred in the prior year.
The Fund recorded a $37,000 equity loss in Sinai Company in the first nine
months of 2002. The loss is for the period of January 1, 2002 to February 15,
2002, the period before the Fund increased its investment and became the
majority shareholder of Sinai Company. The loss is due to the high management
fees charged by Sinai Company's previous managing shareholder.
Liquidity and Capital Resources
Dollar amounts in this discussion are rounded to the nearest $1,000.
Cash provided by operating activities for the nine months ended September 30,
2002 was $122,000 as compared to a usage of $1,151,000 for the nine months ended
September 30, 2001. The increase in cash flow from operating activities is
primarily the result of the increase in accounts payable offset by the increase
in the net loss in 2002.
Cash used in investing activities decreased to $2,607,000 during the first nine
months of 2002 as compared to $11,947,000 in the first nine months of 2001. The
decrease is primarily due to the Fund developing more power plants in Egypt in
2001, $8,474,000, as compared to $1,613,000 in 2002. The Fund also made a larger
investment in the United Kingdom Landfill Projects in 2001, $3,472,000. The
Fund, through its Egyptian subsidiary, invested $951,000 to increase its
ownership in the Sinai Company to 53%.
Cash provided by financing activities for the first nine months of 2002 was
$2,650,000 compared to $3,014,000 in the first nine months of 2001. The decrease
in 2002 cash flow from financing activities is due to the $3,913,000 investment
in the Egypt Projects by the Ridgewood/Egypt Fund in 2001. In 2002, the cash
flow from financing activities was derived from borrowings under the newly
executed bank loan. As opposed to the $900,000 cash distribution made by the
Egypt Projects in 2001, there were no distributions made in 2002.
During the third quarter of 2002, the Fund's Egyptian subsidiary, executed a
term loan agreement with its principal bank. The bank provided a loan of
12,500,000 Egyptian pounds (approximately $2,674,000), which will mature on
March 31, 2007. The loan will be repaid in quarterly installments of 781,250
Egyptian pounds (approximately $166,100) starting June 2003. Outstanding
borrowings bear interest at the bank's medium term loan rate plus 0.5% (13.5% at
September 30, 2002).
The Sinai Company, in which the Fund and its affiliates have a 53% ownership
interest, has outstanding loans and interest payable of 15,637,349 Egyptian
pounds (approximately $3,344,816). The loan bears interest at 13.5% per annum
and is secured by a lien on the assets of the Sinai Company. The provision of
the loan restricts the Sinai Company from paying dividends to its shareholders
or obtaining credit from other banks. The loan, which had been in default since
1999, was amended during the third quarter of 2002. Beginning February 2003, the
loan will be repaid in semi-annual installments. The loan will mature in
February 2007.
Other than investments of available cash in power generation Projects,
obligations of the Fund are generally limited to payment of Project operating
expenses, payment of a management fee to the Managing Shareholder and payments
for certain accounting and legal services to third parties. The Fund ceased
making distributions to shareholders in the first quarter of 2001.
The Fund expects that its cash flows from operations will be sufficient to fund
its obligations for the next twelve months.
Item 4. Controls and Procedures
Based on their evaluation, as of a date within 90 days of the filing date of
this Form 10-Q, the Fund's Chief Executive Officer and Chief Financial Officer
have concluded that the Fund's disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as
amended) are effective. There have been no significant changes in internal
controls or in other factors that could significantly affect these controls
subsequent to the date of their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
Forward-looking statement advisory
This Quarterly Report on Form 10-Q, as with some other statements made by the
Fund from time to time, contains forward-looking statements. These statements
discuss business trends and other matters relating to the Fund's future results
and the business climate and are found, among other places, in the notes to
financial statements and at Part I, Item 2, Management's Discussion and
Analysis. In order to make these statements, the 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. The Fund's other filings with the Securities and
Exchange Commission and its Confidential Memorandum discuss many (but not all)
of the risks and uncertainties that might affect these forward-looking
statements.
Some of these are changes in political and economic conditions, federal or state
regulatory structures, government taxation, spending and budgetary policies,
government mandates, demand for electricity and thermal energy, the ability of
customers to pay for energy received, supplies of fuel and prices of fuels,
operational status of plant, mechanical breakdowns, availability of labor and
the willingness of electric utilities to perform existing power purchase
agreements in good faith. Some of the cautionary factors that readers should
consider are described in the Fund's most recent Annual Report on Form 10-K.
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.
PART II - OTHER INFORMATION
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE RIDGEWOOD POWER GROWTH FUND
Registrant
December 4, 2002 By /s/ Christopher I. Naunton
Date Christopher I. Naunton
Vice President and
Chief Financial Officer
(signing on behalf of the
Registrant and as
principal financial
officer)
CERTIFICATION
I,Robert E. Swanson, Chief Executive Officer of The Ridgewood Power Growth Fund
("registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the registrant;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and senior management:
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: December 4, 2002
/s/ Robert E. Swanson
- -----------------------
Robert E. Swanson
Chief Executive Officer
CERTIFICATION
I,Christopher I. Naunton, Chief Financial Officer of The Ridgewood Power Growth
Fund ("registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of the registrant;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and senior management:
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: December 4, 2002
/s/ Christopher I. Naunton
- ----------------------------
Christopher I. Naunton
Chief Financial Officer