FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 2003
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.)
1314 King Street, Wilmington, Delaware 19801
------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(302) 888-7444 Registrant's telephone number, including area code:
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
The Ridgewood Power Growth Fund
Financial Statements
June 30, 2003
The Ridgewood Power Growth Fund
Consolidated Balance Sheets(unaudited)
- -------------------------------------------------------------------------------
June 30, December 31,
2003 2002
------------ -------------
Cash and cash equivalents ...................... $ 641,327 $ 919,903
Accounts receivable, net
of allowance of $250,961
and $327,491 .................................. 1,413,822 1,586,394
Current portion of note receivable ............. 200,000 200,000
Due from affiliates ............................ 2,020,543 1,726,435
Prepaid and other current assets ............... 625,075 483,135
------------ ------------
Total current assets .................. 4,900,767 4,915,867
Investments:
United Kingdom Landfill
Gas Projects .................................. 5,013,658 5,184,870
Plant and equipment ............................ 25,632,455 33,788,290
Construction in progress ....................... 1,183,122 1,543,911
Office equipment ............................... 803,619 1,042,367
------------ ------------
27,619,196 36,374,568
Accumulated depreciation ................... (3,393,100) (3,382,907)
------------ ------------
Plant and equipment, net ....................... 24,226,096 32,991,661
------------ ------------
Electric power sales contracts ................. 16,658,058 17,430,794
Accumulated amortization ....................... (577,427) (82,247)
------------ ------------
17,180,631 17,348,547
------------ ------------
Note receivable, less current portion .......... 7,383,020 6,549,822
Other assets ................................... 93,487 126,435
------------ ------------
Total assets ............................. $ 57,697,659 $ 67,117,202
------------ ------------
Liabilities and shareholders' equity:
Liabilities:
Accounts payable and accrued expenses .......... $ 1,186,821 $ 2,823,107
Current portion of long term debt .............. 4,036,012 5,030,468
Due to affiliates .............................. 986,478 558,254
------------ ------------
Total current liabilities ................ 6,209,311 8,411,829
------------ ------------
Loan payable, net of current portion ........... 6,715,007 8,002,169
Minority interest .............................. 12,610,108 14,387,234
Commitments and contingencies
Shareholders' equity:
Shareholders' equity (658.1067
investor shares issued and
outstanding) .................................. 32,400,930 36,512,134
Managing shareholders' accumulated deficit
(1 management share issued and outstanding) .... (237,697) (196,164)
------------ ------------
Total shareholders' equity ............... 32,163,233 36,315,970
------------ ------------
Total liabilities and shareholders' equity $ 57,697,659 $ 67,117,202
------------ ------------
See accompanying notes to the consolidated financial statements.
The Ridgewood Power Growth Fund
Consolidated Statements of Operations (unaudited)
- -------------------------------------------------------------------------------
Six Months Ended Three Months Ended
-------------------------- --------------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
----------- ----------- ----------- ------------
Revenues ........... $ 5,688,798 $ 2,293,769 $ 2,987,346 $ 1,397,919
Cost of sales ...... 2,895,467 1,773,671 1,479,560 1,109,453
----------- ----------- ----------- -----------
Gross profit ....... 2,793,331 520,098 1,507,786 288,466
General and
administrative
expenses .......... 1,054,834 817,126 525,203 448,223
Management fee
paid to the
managing
shareholders ...... 685,528 822,633 274,211 411,316
Provision for
bad debt .......... 150,791 -- (9,646) --
----------- ----------- ----------- -----------
Total other
operating
expenses ........ 1,891,153 1,639,759 789,768 859,539
Income (loss)
from operations ... 902,178 (1,119,661) 718,018 (571,073)
Other income
(expense):
Interest income .... 30,900 39,826 13,742 36,450
Interest expense ... (484,536) (190,370) (252,118) (137,836)
Equity interest in
income (loss) of:
United Kingdom
Landfill Projects (313,445) (381,963) (159,165) (159,998)
Sinai
Environmental
Services ........ -- (37,320) -- 63
Loss on sale
of equipment ..... (579,214) -- (579,214) --
Other income ...... 16,732 16,393 16,732 (62)
----------- ----------- ----------- -----------
Other income
(expense),net .. (1,329,563) (553,434) (960,023) (261,383)
----------- ----------- ----------- -----------
Loss before
income taxes
and minority
interest ......... (427,385) (1,673,095) (242,005) (832,456)
Provision for
income taxes ...... 117,754 -- 103,300 --
----------- ----------- ----------- -----------
Loss before
minority interest . (545,139) (1,673,095) (345,305) (832,456)
Minority interest
in the (earnings)
loss of
subsidiaries ...... (73,014) 220,833 19,154 142,213
----------- ----------- ----------- -----------
Net loss ........... $ (618,153) $(1,452,262) $ (326,151) $ (690,243)
----------- ----------- ----------- -----------
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, 2002 ... $ 36,512,134 $ (196,164) $ 36,315,970
Net loss ............. (611,971) (6,182) (618,153)
Cumulative translation
adjustment .......... (3,499,233) (35,351) (3,534,584)
------------ ------------ ------------
Shareholders' equity,
June 30, 2003 ....... $ 32,400,930 $ (237,697) $ 32,163,233
------------ ------------ ------------
The Ridgewood Power Growth Fund
Consolidated Statements of Comprehensive Loss (unaudited)
- -----------------------------------------------------------------------------
Six Months Ended Three Months Ended
------------------------- ---------------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
----------- ----------- ----------- ------------
Net loss ......... $ (618,153) $(1,452,262) $ (326,151) $ (690,243)
Cumulative
translation
adjustment ...... (3,534,584) 105,039 (365,843) 373,867
----------- ----------- ----------- -----------
Comprehensive loss $(4,152,737) $(1,347,223) $ (691,994) $ (316,376)
----------- ----------- ----------- -----------
See accompanying notes to the consolidated financial statements.
The Ridgewood Power Growth Fund
Consolidated Statements of Cash Flows(unaudited)
- ------------------------------------------------------------------------------
Six Months Ended
June 30, June 30,
2003 2002
----------- ------------
Cash flows from operating activities:
Net loss ................................ $ (618,153) $(1,452,262)
----------- -----------
Adjustments to reconcile net loss
to net cash flows from operating
activities:
Depreciation .......................... 1,402,172 720,472
Provision for doubtful accounts ....... 150,791 --
Minority interest in earnings
(loss) of subsidiaries ............... 73,014 (220,833)
Loss from United Kingdom
Landfill Projects .................... 313,445 381,963
Loss from investment in Sinai
Environmental Services ............... -- 37,320
Loss on sale of assets ................ 579,214 --
Changes in assets and liabilities:
Increase in accounts receivable,net . (200,811) (815,613)
Increase in due from affiliates ..... (294,108) (158,632)
(Increase) decrease in other
current assets .................... (227,050) 76,524
Decrease in other assets ............ 32,948 --
(Decrease) increase in accounts
payable and accrued expenses ...... (252,611) 1,691,990
Increase in due to affiliates ....... 310,187 751,925
----------- -----------
Total adjustments ............... 1,887,191 2,465,116
----------- -----------
Net cash provided by operating activities 1,269,038 1,012,854
----------- -----------
Cash flows from investing activities:
Capital expenditures .................... (472,551) (1,107,935)
Proceeds from note receivable ........... 25,571 --
Investment in United Kingdom
Landfill Projects ...................... -- (4,491)
Investment in Synergics Projects ........ -- (25,000)
Cash paid for acquired business,
net of cash received .................. -- (950,810)
----------- -----------
Net cash used in investing activities .. (446,980) (2,088,236)
----------- -----------
Cash flows from financing activities:
Repayments under bank loan .............. (908,249) --
----------- -----------
Net cash used in financing activities .. (908,249) --
----------- -----------
Effect of exchange rate on cash
and cash equivalents ........................ (192,385) 27,066
Net decrease in cash and cash equivalents .... (278,576) (1,048,316)
Cash and cash equivalents, beginning of period 919,903 1,048,316
----------- -----------
Cash and cash equivalents, end of period ..... $ 641,327 $ --
----------- -----------
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 2002 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.
The consolidated financial statements include the accounts of the Fund, the
Synergics Hydro projects and the limited liability company owning the Egypt
Projects. The Fund uses the equity method of accounting for its investment in
the United Kingdom Landfill Projects. The Fund's investment in the Synergics
Hydro projects was accounted for as a note receivable through November 22, 2002,
at which time, the Fund and Ridgewood Electric Power Trust V completed its
acquisition of the Synergics Hydro projects.
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:
Balance Sheet
June 30, December 31,
2003 2002
------------------ --------------------
Total assets $ 68,722,524 $ 47,627,380
------------------- --------------------
Members' equity $ 16,711,925 $ 17,282,538
------------------- --------------------
Statement of Operations
Six Months Ended Three Months Ended
June 30, June 30,
2003 2002 2003 2002
---------- ----------- ----------- ----------
Revenue $ 6,016,000 $ 3,764,000 $ 3,249,000 $ 2,081,000
Cost of sales 6,139,000 4,329,000 3,245,000 2,193,000
Other expense 921,000 708,000 534,000 420,000
Net income(loss) (1,044,000) (1,273,000) (530,000) (532,000)
3. Summary of Significant Accounting Policies
New Accounting Standards and Disclosures
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 is currently assessing the
impact that this standard may have on the Fund.
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 adopted SFAS 145
effective January 1, 2003, with no material impact on the consolidated financial
statements.
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 adopted SFAS 146 effective January 1, 2003, with no material
impact on the consolidated financial statements.
FIN 45
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees and Indebtedness of Others." FIN 45 elaborates on the
disclosures to be made by the guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also requires that a guarantor recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002; while the provisions of the disclosure
requirements are effective for financial statements of interim or annual reports
ending after December 15, 2002. The Fund adopted the disclosure provisions of
FIN 45 during the fourth quarter of 2002 with no material impact to the
consolidated financial statements.
FIN 46
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("FIN 46") which changes the criteria by which one
company includes another entity in its consolidated financial statements. FIN 46
requires a variable interest entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable interest
entity's activities or entitled to receive a majority of the entity's residual
returns or both. The consolidation requirements of FIN 46 apply immediately to
variable interest entities created after January 31, 2003, and apply in the
first fiscal period ending after March 15, 2004, for variable interest entities
created prior to February 1, 2003. The Fund adopted the disclosure provisions of
FIN 46 effective December 31, 2002 with no material impact to the consolidated
financial statements. The Fund will implement the full provisions of FIN 46
effective December 15, 2003.
SFAS 149
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 149 is generally effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after June
30, 2003. The Fund adopted SFAS 149 effective July 1, 2003, with no material
impact on the consolidated financial statements.
SFAS 150
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS No. 150
establishes standards for classifying and measuring certain financial
instruments with characteristics of both liabilities and equity. The Fund
adopted SFAS 150 effective June 15, 2003, with no material impact to the
consolidated financial statements.
4. Related Party Transactions
At June 30, 2003 and December 31, 2002, the Trust had outstanding payables and
receivables, with the following affiliates:
As of December 31,
Due To Due From
----------------------- --------------------------
June 30, December 31, June 30, December 31,
2003 2002 2003 2002
---------- ---------- ----------- ------------
Ridgewood Management . $ -- $ 179,402 $ 2,896 $ --
Ridgewood Power ...... 241,196 -- -- --
Trust IV ............. 71,000 -- -- --
Trust V .............. -- -- 1,576,402 1,490,549
Egypt Fund ........... 449,141 378,852 -- --
United Kingdom
Landfill Gas Projects -- -- 218,809 218,809
Other affiliates ..... 225,154 -- 222,436 17,077
From time to time, the Fund 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.
5. Cost of Sales
Included in cost of sales is depreciation and amortization expense of $1,402,172
and $720,472 for the six months ended June 30, 2003 and 2002, respectively. The
Fund recorded depreciation and amortization expense of $654,401 and $423,739 for
the three months ended June 30, 2003 and 2002, respectively, and has included
these expenses in cost of sales on the consolidated statement of operations.
6. Sale of Equipment
In the second quarter of 2003, the Fund's Egyptian operations sold the power
generating equipment at one of its on-site hotel accounts. The equipment had a
book value of $1,436,169 and was sold in return for a note in the amount of
$856,955. The note is scheduled to be collected bi-monthly over a two year
period. As a result of the transaction, the Fund recorded a loss of $579,214.
7. Transfer of Assets
In March 2003, Ridgewood UK, LLC ("Ridgewood UK"), entered into an agreement
with one of its minority shareholders. Under the terms of the agreement,
Ridgewood UK transferred its 50% interest in the CLP Spanish Landfill Projects
in return for a portion of the minority shareholder's interest in Ridgewood UK.
As a result of the transaction, Ridgewood UK increased its ownership in United
Kingdom Landfill Projects from 76.3% to 88.3%.
The minority interest was created through the issuance of shares of Ridgewood UK
in connection with the October 2001 acquisition of certain UK landfill projects,
the equity interest in the Spanish landfill projects and related companies. The
equity interest in the Spanish landfill projects had a carrying value of
$1,345,363 as of March 2003, which management believes approximated fair value.
The excess of the carrying value of the minority interest over the fair value of
the Spanish landfill equity investment has been credited on a pro-rata basis
against the value of other non-monetary assets acquired in the acquisition
(reduction of $676,929 and $558,412 to property, plant and equipment and
electric power sales contracts and other intangibles, respectively).
8. Foreign Currency
On January 30, 2003, the Egyptian government discontinued the regulation of its
monetary currency rate and decided to allow the currency rate to float. As a
result of this change in policy, the Egyptian pound decreased 15% against the US
dollar on January 30, 2003. At June 30, 2003, the Funds investment in the
Egyptian projects decreased by approximately 22% as a result of the decrease in
exchange rate.
9. Financial Information by Business Segment
The Fund's business segments were determined based on similarities in economic
characteristics and customer base. The Fund's principal business segments
consist of power generation and water desalinization.
Common services shared by the business segments are allocated on the basis of
identifiable direct costs, time records or in proportion to amount invested in
projects managed by Ridgewood Management.
The financial data for business segments are as follows:
Power
Six Months Ended Three Months Ended
----------------------- ------------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
---------- ---------- ---------- -----------
Revenue ......... $4,136,978 $ 772,619 $2,217,918 $ 541,287
Depreciation
and amortization 631,772 164,556 293,976 82,336
Gross profit .... 2,833,766 117,407 1,608,673 94,750
Water
Six Months Ended Three Months Ended
---------------------- -----------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
---------- --------- ---------- ----------
Revenue ......... $1,551,820 $1,521,150 $ 769,428 $ 856,632
Depreciation
and amortization 656,675 407,997 314,889 207,552
Gross profit .... 629,778 766,657 331,562 452,301
Corporate
Six Months Ended Three Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
--------- --------- --------- ----------
Revenue ......... $ -- $ -- $ -- $ --
Depreciation
and amortization 113,725 147,919 45,536 133,851
Gross loss ...... (670,213) (363,966) (432,449) (258,585)
Total
Six Months Ended Three Months Ended
----------------------- -----------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
---------- ---------- ---------- ----------
Revenue ......... $5,688,798 $2,293,769 $2,987,346 $1,397,919
Depreciation
and amortization 1,402,172 720,472 654,401 423,739
Gross profit .... 2,793,331 520,098 1,507,786 288,466
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, the
Synergics Hydro projects and the limited liability company owning the Egypt
Projects. The Fund uses the equity method of accounting for its investment in
the United Kingdom Landfill Projects. The Fund's investment in the Synergics
Hydro projects was accounted for as a note receivable through November 22, 2002,
at which time, the Fund and Ridgewood Electric Power Trust V completed its
acquisition of the Synergics Hydro projects.
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.
Critical Accounting Policies and Estimates
For a complete discussion of critical accounting policies, refer to "Significant
Accounting Policies" in Item 7 of the Fund's 2002 Form 10-K. There have been no
substantive changes to those policies and estimates.
Results of Operations
Three Months Ended June 30,2003, Compared to the Three Months Ended June 30,2002
Total revenues increased $1,589,000 to $2,987,000 in the second quarter of 2003.
The acquisition of the Synergic Hydro projects in the fourth quarter of 2002
provided the second quarter results with additional revenues of $2,095,000.
Revenues from the Egyptian operations decreased $506,000 primarily due to the
decrease in tourism, as a result of the war in Iraq. In addition, the exchange
rate of the Egyptian pound in 2003 was lower compared to 2002.
Gross profit increased from $288,000 in the second quarter of 2002 to $1,508,000
in the second quarter of 2003. The increase in the current quarter is a result
of the consolidation of the Synergics Hydro projects. The Synergics Hydro
Projects provided a gross profit of $1,577,000 for the quarter. Gross profit
from the Egyptian operations was a loss of $64,000, a decrease of approximately
$352,000 from the second quarter of 2002. The decrease in gross profit from the
Egyptian operations is primarily attributed to the decrease in revenues.
General and administrative expenses increased $77,000 to $525,000 for the second
quarter of 2003. The increase is primarily due to the consolidation of the
Synergics Hydro projects operations.
Interest expense for the second quarter of 2003 was $252,000 compared to
$139,000 in 2002. The increase is due to the debt assumed in the Synergics
acquisition and the outstanding borrowings under the credit line executed by the
Egypt projects in the third quarter of 2002.
In the second quarter of 2002 the Fund recorded an equity loss of $160,000 from
the United Kingdom Landfill Projects, compared to $159,000 in the second quarter
of 2003.
The Fund recorded a loss of $579,000 in the second quarter of 2003 as a result
of the loss incurred on the sale of equipment by the Egyptian operations.
The Fund's Egyptian subsidiaries have a ten-year income tax holiday that expires
in 2010. Accordingly, no provision has been made for Egyptian income taxes in
the periods presented. In the second quarter of 2003, the Fund incurred $103,000
in state income tax on behalf of certain of the Synergics Projects. No provision
is made for United States federal income tax as the income or losses of the Fund
are consolidated and passed through and included in the tax returns of the
individual shareholders of the Fund.
Six Months Ended June 30, 2003, Compared to the Six Months Ended June 30, 2002
Total revenues increased $3,395,000 to $5,689,000 for the first half of 2003.
The acquisition of the Synergic Hydro projects in the fourth quarter of 2002
provided the first half results with additional revenues of $3,897,000. Revenues
from the Egyptian operations decreased $502,000 primarily due to the decrease in
tourism, as a result of the travel alerts issued by various countries and the
unrest in the Middle East. In addition, the exchange rate of the Egyptian pound
in 2003 was lower compared to 2002.
Gross profit increased from $520,000 in the first half of 2002 to $2,793,000 in
the first half of 2003. The increase in the current year is a result of the
consolidation of the Synergics Hydro projects. The Synergics Hydro Projects
provided a gross profit of $2,854,000. Gross profit from the Egyptian operations
was a loss of $61,000, a decrease of approximately $581,000 from the first six
months of 2002. The decrease in gross profit from the Egyptian operations is
primarily attributed to the decrease in revenues and exchange rate.
General and administrative expenses increased $238,000 to $1,055,000 for the six
months ended June 30, 2003. The increase is primarily due to the consolidation
of the Synergics Hydro projects operations.
Interest expense for the first six months of 2003 was $485,000 compared to
$190,000 in 2002. The increase is due to the debt assumed in the Synergics
acquisition and the outstanding borrowings under the credit line executed by the
Egypt projects in the third quarter of 2002.
In the first half of 2003 the Fund recorded an equity loss of $313,000 from the
United Kingdom Landfill Projects, compared to $382,000 for the first half of
2002. The decrease in equity loss is a result of the higher revenues received as
a result of the United Kingdom Landfill Projects increased capacity and sale of
renewable energy credits in the current year.
The Fund recorded a $37,000 equity loss in Sinai Company in the first quarter 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 Fund's Egyptian subsidiaries have a ten-year income tax holiday that expires
in 2010. Accordingly, no provision has been made for Egyptian income taxes in
the periods presented. During the first half of 2003, the Fund incurred $118,000
in state income tax on behalf of certain of the Synergics Projects. No provision
is made for United States federal income tax as the income or losses of the Fund
are consolidated and passed through and included in the tax returns of the
individual shareholders of the Fund.
Liquidity and Capital Resources
Cash provided by operating activities for the six months ended June 30, 2003 was
$1,269,000 as compared to $1,013,000 for the six months ended June 30, 2002. The
increase in cash flow from operating activities is primarily the result of the
decrease in the net loss in 2003, offset by the outflows reducing accounts
payable in the current year.
Cash used in investing activities decreased to $447,000 during the first six
months of 2003 as compared to $2,088,000 in the first six months of 2002. The
decrease is primarily due to the Fund, through its Egyptian subsidiary,
investing $951,000 to increase its ownership in the Sinai Company to 53% during
the first quarter of 2002.
Cash used by financing activities for the first half of 2003 was $908,000
compared to $0 for the first half of 2002. The decrease in 2003 cash flow from
financing activities is due to the repayment of principal on the Synergics and
Sinai debt.
The Sinai Company, in which the Fund and its affiliates have a 53% ownership
interest, has outstanding loans and interest payable of 14,053,682 Egyptian
pounds (approximately $2,316,032). 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 has been in default since 1999
and has thus been classified as a current liability. The lender has not taken
any actions, as a result of the default, at this time.
On June 26, 2003, Ridgewood Renewable Power LLC, the Managing Shareholder of the
Fund, entered into a $5,000,0000 Revolving Credit and Security Agreement with
Wachovia Bank, National Association. The agreement allows the Managing
Shareholder to obtain loans and letters of credit for the benefit of the trusts
and funds that it manages. The agreement expires on June 30, 2004. As part of
the agreement, the Fund agreed to limitations on its ability to incur
indebtedness and liens and make guarantees.
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.
Management has identified deficiencies in the Fund's ability to process and
summarize financial information of certain individual projects and equity
investees on a timely basis. Management is establishing a project plan to
address this deficiency.
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
January 16, 2004 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 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-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure control and procedures to be designed under our supervision,
to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this quarterly report based on such
evaluation; and
c) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during the
period covered by the report that has materially affected, or is
reasonably likely to materially affect, the issuer's internal control
over financial reporting; and
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: January 16, 2004
/s/ Robert E. Swanson
- ----------------------
Robert E. Swanson
Chief Executive Officer
CERTIFICATION
I, Christopher I. Naunton, Chief Financial Officer of 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-15(e) and 15d-15(e)) for the registrant and we have:
a) designed such disclosure controls and procedures, or caused such
disclosure control and procedures to be designed under our supervision,
to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this quarterly report based on such
evaluation; and
c) disclosed in this quarterly report any change in the registrant's
internal control over financial reporting that occurred during the
period covered by the report that has materially affected, or is
reasonably likely to materially affect, the issuer's internal control
over financial reporting; and
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: January 16, 2004
/s/ Christopher I. Naunton
- ----------------------------
Christopher I. Naunton
Chief Financial Officer