Exhibit
      99.2


CONSOLIDATED
      FINANCIAL STATEMENTS AND


REPORT
      OF
      INDEPENDENT CERTIFIED


PUBLIC
      ACCOUNTANTS





RIDGEWOOD
      US HYDRO CORPORATION





December
      31, 2006






















C
      O N T E N T S








PageReport
                of Independent Certified Public Accountants
            
            
            3Consolidated
                Financial StatementsConsolidated
                Balance Sheets
            
            
            4Consolidated
                Statements of Operations
            
            
            5Consolidated
                Statement of Changes in Stockholders’ Equity
            
            
            6Consolidated
                Statements of Cash Flows
            
            
            7Notes
                to Consolidated Financial Statements
            
            
            8
                -
                18





















REPORT
      OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS











To
      the
      Stockholders


Ridgewood
      US Hydro Corporation








We
      have
      audited the accompanying consolidated balance sheet of Ridgewood US Hydro
      Corporation (a Delaware corporation) as of December 31, 2006, and the related
      consolidated statements of operations, changes in stockholders’ equity and cash
      flows for the year then ended.  These consolidated financial
      statements are the responsibility of the Company’s management.  Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audit.





We
      conducted our audit in accordance with auditing standards generally accepted
      in
      the United States of America as established by the American Institute of
      Certified Public Accountants.Those standards require
      that we plan and perform the audit to obtain reasonable assurance about whether
      the financial statements are free of material misstatement.  An audit
      includes consideration of internal control over financial reporting as a basis
      for designing audit procedures that are appropriate in the circumstances, but
      not for the purpose of expressing an opinion on the effectiveness of the
      Company’s internal control over financial reporting.Accordingly, we express
      no such opinion.An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, assessing the accounting principles used and
      significant estimates made by management, as well as evaluating the overall
      financial statement presentation.We believe that our
      audit provides a reasonable basis for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Ridgewood US Hydro
      Corporation as of December 31, 2006, and the results of their operations and
      their cash flows for the year then ended in conformity with accounting
      principles generally accepted in the United States of America.





The
      accompanying consolidated balance sheet of Ridgewood US Hydro Corporation as
      of
      December 31, 2005 and related consolidated statements of operations, changes
      in
      stockholders’ equity and cash flows for the years ended December 31, 2005 and
      2004 were not audited by us and, accordingly, we do not express an opinion
      on
      them.














Edison,
      New Jersey


November
      5, 2007





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          3
          -


Ridgewood
      US Hydro Corporation





CONSOLIDATED
      BALANCE SHEETS





December
      31,


(in
      thousands, except per share data)











ASSETS
            
            2006
            
            
            2005(unaudited)Current
                assetsCash
            
            $
            176
            
            
            $
            309Accounts
                receivable
            
            
            457
            
            
            
            694Due
                from affiliates
            
            
            173
            
            
            
            1,399Notes
                receivable - current
            
            
            124
            
            
            
            118Deferred
                income taxes - current
            
            
            -
            
            
            
            429Prepaid
                and other current assets
            
            
            201
            
            
            
            136Total
                current assets
            
            
            1,131
            
            
            
            3,085Notes
                receivable - noncurrent
            
            
            1,291
            
            
            
            1,415Property,
                plant and equipment, net
            
            
            1,155
            
            
            
            1,158Intangible
                assets, net
            
            
            4,626
            
            
            
            5,897Goodwill
            
            
            227
            
            
            
            227Total
                assets
            
            $
            8,430
            
            
            $
            11,782LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilitiesAccounts
                payable and accrued expenses
            
            $
            153
            
            
            $
            293Long-term
                debt - current portion
            
            
            432
            
            
            
            432Total
                current liabilities
            
            
            585
            
            
            
            725Long-term
                debt - noncurrent portion
            
            
            -
            
            
            
            432Deferred
                rent
            
            
            469
            
            
            
            369Deferred
                income tax liability, net
            
            
            857
            
            
            
            1,515Total
                liabilities
            
            
            1,911
            
            
            
            3,041Commitments
                and contingenciesStockholders’
                equityCommon
                stock, no par value; 1,000 shares authorized and
              100
                shares issued and outstanding
            
            
            20,257
            
            
            
            20,257Accumulated
                deficit
            
            
            (13,738
            )
            
            
            (11,516
            )Total
                stockholders’ equity
            
            
            6,519
            
            
            
            8,741Total
                liabilities and stockholders’ equity
            
            $
            8,430
            
            
            $
            11,782








The
      accompanying notes are an integral
      part of theseconsolidatedfinancial
      statements.


-
          4
          -


Ridgewood
      US Hydro Corporation





CONSOLIDATED
      STATEMENTS OF OPERATIONS





Years
      ended December 31,


(in
      thousands)











2006
            
            
            2005
            
            
            2004(unaudited)
            
            
            (unaudited)Power
                generation revenue
            
            $
            5,358
            
            
            $
            5,539
            
            
            $
            5,096Cost
                of revenues
            
            
            2,729
            
            
            
            3,099
            
            
            
            3,128Gross
                profit
            
            
            2,629
            
            
            
            2,440
            
            
            
            1,968Operating
                expensesGeneral
                and administrative expenses
            
            
            1,408
            
            
            
            1,364
            
            
            
            1,282Impairment
                of property, plant and equipment
            
            
            -
            
            
            
            79
            
            
            
            75Impairment
                of intangibles
            
            
            -
            
            
            
            23
            
            
            
            22Total
                operating expenses
            
            
            1,408
            
            
            
            1,466
            
            
            
            1,379Income
                from operations
            
            
            1,221
            
            
            
            974
            
            
            
            589Other
                income (expense)Interest
                income
            
            
            74
            
            
            
            82
            
            
            
            10Interest
                expense
            
            
            (44
            )
            
            
            (56
            )
            
            
            (86
            )Gain
                on termination of electric power sales contracts
            
            
            -
            
            
            
            -
            
            
            
            380Gain
                on sale of US Hydro note, net
            
            
            -
            
            
            
            -
            
            
            
            175Total
                other income, net
            
            
            30
            
            
            
            26
            
            
            
            479Net
                income before income tax (benefit)
              expense
            
            
            1,251
            
            
            
            1,000
            
            
            
            1,068Income
                tax (benefit) expense
            
            
            (77
            )
            
            
            137
            
            
            
            (773
            )Net
                income
            
            $
            1,328
            
            
            $
            863
            
            
            $
            1,841










The
      accompanying notes are an integral
      part of theseconsolidatedfinancial
      statements.


-
          5
          -


Ridgewood
      US Hydro Corporation





CONSOLIDATED
      STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY





Years
      ended December 31, 2006, 2005 and 2004


(in
      thousands)











Paid-in
            
            
            Accumulated
            
            
            Stockholders’capital
            
            
            deficit
            
            
            equityStockholders’
                equity, January 1, 2004
            
            $
            20,257
            
            
            $
            (8,447
            )
            
            $
            11,810Net
                income for the year
            
            
            -
            
            
            
            1,841
            
            
            
            1,841Stockholders’
                equity, December 31, 2004 (unaudited)
            
            
            20,257
            
            
            
            (6,606
            )
            
            
            13,651Cash
                distributions
            
            
            -
            
            
            
            (5,773
            )
            
            
            (5,773
            )Net
                income for the year
            
            
            -
            
            
            
            863
            
            
            
            863Stockholders’
                equity, December 31, 2005 (unaudited)
            
            
            20,257
            
            
            
            (11,516
            )
            
            
            8,741Cash
                distributions
            
            
            -
            
            
            
            (3,550
            )
            
            
            (3,550
            )Net
                income for the year
            
            
            -
            
            
            
            1,328
            
            
            
            1,328Stockholders’
                equity, December 31, 2006
            
            $
            20,257
            
            
            $
            (13,738
            )
            
            $
            6,519

















The
      accompanying notes are an integral
      part ofthese
      consolidatedfinancial
      statements.





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          6
          -


Ridgewood
      US Hydro Corporation





CONSOLIDATED
      STATEMENTS OF CASH FLOWS





Years
      ended December 31,


(in
      thousands)











2006
            
            
            2005
            
            
            2004(unaudited)
            
            
            (unaudited)Cash
                flows from operating activitiesNet
                income
            
            $
            1,328
            
            
            $
            863
            
            
            $
            1,841Adjustments
                to reconcile net income to net cash
              provided
                by operating activitiesDepreciation
                and amortization
            
            
            1,302
            
            
            
            1,597
            
            
            
            1,709Impairment
                of property, plant and equipment
            
            
            -
            
            
            
            79
            
            
            
            75Impairment
                of intangibles
            
            
            -
            
            
            
            23
            
            
            
            22Gain
                on termination of electric power sales contracts
            
            
            -
            
            
            
            -
            
            
            
            (380
            )Gain
                on sale of US Hydro note, net
            
            
            -
            
            
            
            -
            
            
            
            (175
            )Deferred
                income taxes, net
            
            
            (229
            )
            
            
            (168
            )
            
            
            (949
            )Deferred
                rent
            
            
            100
            
            
            
            110
            
            
            
            124Changes
                in operating assets and liabilitiesAccounts
                receivable
            
            
            237
            
            
            
            (177
            )
            
            
            61Prepaid
                and other current assets
            
            
            (65
            )
            
            
            8
            
            
            
            (5
            )Other
                assets
            
            
            -
            
            
            
            53
            
            
            
            (53
            )Accounts
                payable and accrued expenses
            
            
            (140
            )
            
            
            13
            
            
            
            196Due
                from/to affiliates, net
            
            
            1,226
            
            
            
            3,974
            
            
            
            (2,108
            )Total
                adjustments
            
            
            2,431
            
            
            
            5,512
            
            
            
            (1,483
            )Net
                cash provided by operating activities
            
            
            3,759
            
            
            
            6,375
            
            
            
            358Cash
                flows from investing activitiesCapital
                expenditures
            
            
            (28
            )
            
            
            -
            
            
            
            (2
            )Collections
                from notes receivable
            
            
            118
            
            
            
            109
            
            
            
            -Proceed
                from sale of note receivable, net
            
            
            -
            
            
            
            -
            
            
            
            3,975Net
                cash provided by investing activities
            
            
            90
            
            
            
            109
            
            
            
            3,973Cash
                flows from financing activitiesRepayments
                under bank loan
            
            
            (432
            )
            
            
            (471
            )
            
            
            (4,315
            )Cash
                distributions to stockholders
            
            
            (3,550
            )
            
            
            (5,773
            )
            
            
            -Net
                cash used in financing activities
            
            
            (3,982
            )
            
            
            (6,244
            )
            
            
            (4,315
            )Net
                (decrease) increase in cash
            
            
            (133
            )
            
            
            240
            
            
            
            16Cash,
                beginning of year
            
            
            309
            
            
            
            69
            
            
            
            53Cash,
                end of year
            
            $
            176
            
            
            $
            309
            
            
            $
            69Supplemental
                disclosures of cash flow information:Cash
                paid during the year forInterest
            
            $
            44
            
            
            $
            56
            
            
            $
            86Income
                tax
            
            
            252
            
            
            
            271
            
            
            
            102





The
      accompanying notes are an integral
      part of theseconsolidatedfinancial
      statements.


-
          7
          -


Ridgewood
      US Hydro Corporation





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS





December
      31, 2006


(dollar
      amounts in thousands)







NOTE
      A - DESCRIPTION OF BUSINESS





Ridgewood
      US Hydro Corporation (the “Company”), a Delaware corporation, owns and operates
      eight hydroelectric generating plants located in California, Virginia, Rhode
      Island and New York (the “US Hydro Projects”).  As of December 31,
      2006, seven of the US Hydro Projects sold their electric output to local
      utilities pursuant to power contracts and one sold its electric output in the
      wholesale market at the spot or day-ahead price.





Ridgewood
      Power Growth Fund (“Growth Fund”) and Ridgewood Electric Power Trust V (“Trust
      V”), entities with a common Managing Shareholder, Ridgewood Renewable Power LLC
      (“RRP”), own 70.8% and 29.2% of the Company, respectively.








NOTE
      B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





1.     Principles
      of Consolidation and Basis of Presentation





The
      consolidated financial statements include the accounts of the Company and its
      wholly-owned subsidiaries.  All material intercompany accounts and
      transactions have been eliminated in consolidation.





The
      consolidated financial statements include the accounts of Ridgewood Maryland,
      LLC, a related entity, whose only asset is a long-term note receivable from
      the
      Company.  This note is reflected as part of paid-in
      capital.





The
      2005
      and 2004 consolidated financial statements and related information included
      in
      these consolidated financial statements are unaudited.





2.     Use
      of Estimates





The
      preparation of financial statements in accordance with accounting principles
      generally accepted in the United States of America requires the Company to
      make
      estimates and judgments that affect the reported amounts of assets, liabilities,
      revenues and expenses, and related disclosure of contingent assets and
      liabilities.  On an ongoing basis, the Company evaluates its
      estimates, including bad debts, recoverable value of property, plant and
      equipment and recordable liabilities for litigation and other
      contingencies.  The Company bases its estimates on historical
      experience, current and expected conditions and various other assumptions that
      are believed to be reasonable under the circumstances, the results of which
      form
      the basis for making judgments about the carrying values of assets and
      liabilities that are not readily apparent from other sources.  Actual
      results may differ from these estimates under different assumptions or
      conditions.




-
          8
          -


Ridgewood
      US Hydro Corporation





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





December
      31, 2006


(dollar
      amounts in thousands)





NOTE
      B (continued)





3.     Cash





Cash
      balances with banks as of December 31, 2006 and 2005, exceed insured limits
      by
      approximately $76 and $209, respectively.





4.     Accounts
      Receivable





Accounts
      receivable are recorded at invoice price in the period in which the related
      revenues are earned and do not bear interest.  No allowance for bad
      debt expense was provided based upon historical write-off experience, evaluation
      of customer credit condition and the general economic status of the
      customers.





5.     Revenue
      Recognition





Power
      generation revenue is recorded in the month of delivery, based on the estimated
      volumes sold to customers at rates stipulated in the power sales
      contract.  Adjustments are made to reflect actual volumes delivered
      when the actual volumetric information subsequently becomes
      available.  Final billings did not vary significantly from
      estimates.





6.     Impairment
      of Goodwill, Intangibles and Long-Lived Assets





The
      Company evaluates intangible assets and long-lived assets, such as property,
      plant and equipment, when events or changes in circumstances indicate that
      the
      carrying value of such assets may not be recoverable.  The
      determination of whether an impairment has occurred is made by comparing the
      carrying value of an asset to the estimated undiscounted cash flows attributable
      to that asset.  If an impairment has occurred, the impairment loss
      recognized is the amount by which the carrying value exceeds the estimated
      fair
      value of the asset, which is based on the estimated future cash flows discounted
      at the estimated cost of capital.





The
      Company evaluates goodwill, and intangible assets with indefinite useful lives,
      under Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill
      and Other Intangible Assets.”  Under SFAS No. 142, goodwill and
      intangible assets with indefinite lives are subject to annual impairment tests
      through a comparison of fair value to carrying value.  The two-step
      approach to assess a reporting unit’s goodwill impairment requires that the
      Company first compare the estimated fair value of a reporting unit which has
      been assigned to goodwill to the carrying amount of the unit’s assets and
      liabilities, including its goodwill.  If the fair value of the
      reporting unit is below itscarrying
      amount, then the second step of the impairment test is performed, in which
      the
      current fair value of the unit’s assets and liabilities is used to determine the
      current implied fair value of the unit’s goodwill.


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          9
          -


Ridgewood
      US Hydro Corporation





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





December
      31, 2006


(dollar
      amounts in thousands)







NOTE
      B (continued)




7.     Property,
      Plant and
      Equipment





Property,
      plant and equipment, consisting of land and hydroelectric generation facilities
      (“HEGFs”), are stated at cost.  Renewals and betterments that increase
      the useful lives of the assets are capitalized.  Repair and
      maintenance expenditures are expensed as incurred.





The
      Company uses the straight-line method to depreciate the HEGFs over 30 years,
      the
      estimated useful life of the assets.





8.     Significant
      Customers





During
      2006, 2005 and 2004, the Company’s three largest customers accounted for 92.9%,
      91.2% and 90.9%, respectively, of total revenue.





9.     Income
      Taxes





The
      Company, for Federal income tax purposes, files on a consolidated basis using
      the accrual method of accounting on a calendar year basis.  For state
      income tax purposes, the Company generally files on an individual entity
      basis.  The Company uses the liability method in accounting for income
      taxes.  Deferred income taxes reflect, where required, the net tax
      effect of temporary differences arising between the carrying amounts of assets
      and liabilities for financial reporting purposes and amounts used for tax
      purposes.





10.   Comprehensive
      Income





TheCompany’s
      comprehensive income consists
      only of net income.





11.   Fair
      Value of Financial Instruments





At
      December 31, 2006 and 2005, the carrying value of the Company’s cash, accounts
      and notes receivable, accounts payable and accrued expenses and loans payable
      approximates their fair value.


-
          10
          -


Ridgewood
      US Hydro Corporation





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





December
      31, 2006


(dollar
      amounts in thousands)







NOTE
      B (continued)





12.   New
      Accounting Standards and Disclosures





FIN
      48





In
        June 2006, the Financial Accounting
        Standards Board (“FASB”)
        issued FASB Interpretation
        No. 48(“FIN 48”),“Accounting
        for Uncertainty in Income
        Taxes,”an interpretation ofStatement of Financial
        Accounting Standards (“SFAS”)No. 109,
“Accounting
        for Income
        Taxes.”FIN 48 clarifies the accounting
        for
        uncertainty in income taxes recognized in an enterprise’s
        financial statements in accordance
        with SFASNo.109
        and prescribes a
        recognition threshold and measurement attribute for the financial statement
        recognition and measurement of a tax position taken or expected to be taken
        in a
        tax return.FIN 48
        also provides guidance on
        derecognition, classification, interest and penalties, accounting in interim
        periods, disclosure and transition.FIN 48
        will be effective for theCompanybeginning
        January 1, 2007.TheCompanydoes
        not believe that the adoption of
        FIN 48 will have a material impact on its consolidated financial
        statements.





SFAS
      No. 157





In
      September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” to
      define fair value, establish a framework for measuring fair value in accordance
      with accounting principles generally accepted in the United States of America
      (“GAAP”) and expand disclosures about fair value measurements. SFAS No. 157
      requires quantitative disclosures using a tabular format in all periods (interim
      and annual) and qualitative disclosures about the valuation techniques used
      to
      measure fair value in all annual periods.  SFAS No. 157 will be
      effective for the Company beginning January 1, 2008.  The Company is
      currently evaluating the impact of adopting SFAS No. 157 will have on its
      consolidated financial statements.





SFAS
      No. 159





In
        February 2007, the FASB issued SFAS
        No. 159,“The
        Fair Value Option for Financial
        Assets and Financial Liabilities.”SFASNo.159
        expands opportunities to use fair
        value measurements infinancial reporting
        and permits entities
        to choose to measure many financial instruments and certain other items at
        fair
        value. SFASNo.159
        will be effective for the Company on
        January 1, 2008. The Company is currently evaluating the impact of adopting
        SFASNo.159
        on its consolidated financial
        statements.


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          11
          -


Ridgewood
      US Hydro Corporation





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





December
      31, 2006


(dollar
      amounts in thousands)







NOTE
      C - NOTES RECEIVABLE





In
      the
      fourth quarter of 2004, the Company’s Blackstone Project (“Blackstone”) and New
      England Power (“NEP”) agreed to terminate their 1989 power purchase
      agreement.  As per the terms of the Termination and Release Agreement,
      Blackstone now has the right to sell its production of electricity to any party
      it chooses.  In addition, beginning January 2005, NEP began paying
      Blackstone $16 per month and will do so through February 2010.  In
      addition, NEP has agreed to make a lump-sum payment of $1,000 to Blackstone
      on
      February 15, 2010.  These payments are being made to compensate
      Blackstone for the cancellation of the fifteen years remaining on the original
      agreement.  As a result of the new agreement, the Company recorded a
      net gain of $380 in the consolidated statement of operations in 2004, reflecting
      an impairment to electric power sales contracts of $1,262 to write down the
      carrying value of the preexisting power purchase agreement to zero and to
      recognize a long-term receivable of $1,642, representing the present value
      of
      payments to be received.  The Company recorded interest income on
      notes receivable of $74, $82 and $10 for the years ended December 31, 2006,
      2005
      and 2004, respectively, which is included in interest income in the consolidated
      statements of operations.








NOTE
      D - IMPAIRMENT OF GOODWILL, INTANGIBLES AND


LONG-LIVED
      ASSETS





The
      Company performed an annual review of goodwill in accordance with SFAS No.
      142
      and determined that no goodwill impairment was required for the years ended
      December 31, 2006 and 2005.  For the year ended December 31, 2006,
      there were no triggering events and the Company did not perform an impairment
      assessment for property, plant and equipment and amortized
      intangibles.  The Company performed an impairment test for each of the
      years ended December 31, 2005 and 2004 for property, plant and equipment and
      amortized intangibles and noted a decrease in the estimated future undiscounted
      cash flow of certain US Hydro Projects.  Based on the results of the
      tests, the Company recorded impairment expense of $79 and $75 for property,
      plant, and equipment for the years ended December 31, 2005 and 2004,
      respectively.  In addition, the Company recorded impairment expenses
      of $23 and $22 for amortized intangibles for the years ended December 31, 2005
      and 2004, respectively.





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          12
          -


Ridgewood
      US Hydro Corporation





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





December
      31, 2006


(dollar
      amounts in thousands)







NOTE
      E - PROPERTY, PLANT AND EQUIPMENT





At
      December 31, 2006 and 2005, property, plant and equipment at cost and
      accumulated depreciation were:





2006
            
            
            2005Land
            
            $
            186
            
            
            $
            186HEGF
            
            
            1,110
            
            
            
            1,0821,296
            
            
            
            1,268Less
                accumulated depreciation
            
            
            (141
            )
            
            
            (110
            )$
            1,155
            
            
            $
            1,158





For
      the
      years ended December 31, 2006, 2005 and 2004, the Company recorded depreciation
      expense of $31, $33 and $35, respectively, which is included in cost of
      revenues.








NOTE
      F - INTANGIBLE ASSETS AND GOODWILL





At
      December 31, 2006 and 2005, the gross and net amounts of intangible assets
      were:





2006
            
            
            2005Amortized
                intangiblesElectricity
                power sales contracts - gross
            
            $
            10,754
            
            
            $
            10,754Water
                rights - gross
            
            
            321
            
            
            
            32111,075
            
            
            
            11,075Less
                accumulated amortization
            
            
            (6,449
            )
            
            
            (5,178
            )Intangible
                assets
            
            $
            4,626
            
            
            $
            5,897Goodwill
            
            $
            227
            
            
            $
            227





-
          13
          -


Ridgewood
      US Hydro Corporation





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





December
      31, 2006


(dollar
      amounts in thousands)







NOTE
      F (continued)





Each
      electric power sales contract is amortized over the duration of the contract
      (from 4 to 22 years) and water rights are amortized over a period of 35 years
      on
      a straight-line basis.  During the years ended December 31, 2006, 2005
      and 2004, amortization expense totaled $1,271, $1,564 and $1,674, respectively,
      which is included in cost of revenues.  The Company expects to record
      amortization expense during the next five years as follows:





Year
                ended December
                31,2007
            
            $
            1,1772008
            
            
            1,1242009
            
            
            9622010
            
            
            9622011
            
            
            23








NOTE
      G - LONG-TERM DEBT





Of
      the
      Company’s original eight HEGFs, five were financed by a single term
      loan.  The borrower under the term loan is an intermediate,
      wholly-owned subsidiary of the Company whose only assets are the HEGFs that
      were
      financed.  The Company has a choice of variable or fixed interest
      rates on the term loan.  Variable rate is LIBOR (5.74% at December 31,
      2006) plus 1.75% or the Lenders Corporate Base Rate (as defined).  At
      the Company’s option, a fixed interest rate can be selected, payable on any
      portion of the debt in excess of $1,000,000, for any period of time from two
      to
      seven years.  Such fixed rate shall be based on the U.S. Treasury note
      rate at the date of election plus 2.75%.  The variable rate of 7.49%
      and 5.58% was the effective interest rate at December 31, 2006 and 2005,
      respectively.  This credit facility is collateralized by the assets of
      the HEGFs financed including, where appropriate, the interest in HEGFs held
      in
      the form of notes receivable (See Note C).  At December 31, 2006 and
      2005, the carrying value of hydroelectric plants and notes receivable was higher
      than the face value of the loan.





As
      additional compensation to the lender, the Company is required to pay an
      additional amount equal to 10% of the cash flow, as defined, of the financed
      projects plus 10% of any net proceeds, as defined, from the sale or refinancing
      of any of the financed projects.  The Company is also required to make
      an additional annual payment of 50% of excess cash flow, as
      defined.  No additional payments were required for the year ended
      December 31, 2006.





-
          14
          -


Ridgewood
      US Hydro Corporation





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





December
      31, 2006


(dollar
      amounts in thousands)







NOTE
      G (continued)





The
      following is a summary of term loan payable as of December 31, 2006 and
      2005:





2006
            
            
            2005Term
                loan payable
            
            $
            432
            
            
            $
            864Less
                current portion
            
            
            (432
            )
            
            
            (432
            )Total
                long-term portion
            
            $
            -
            
            
            $
            432





The
      remaining balance of the term loan payable as of December 31, 2006 is expected
      to be paid in 2007.








NOTE
      H - LEASE COMMITMENTS





The
      HEGF
      at Union Falls has leased the site at its facility under a noncancellable
      long-term lease which terminates in 2024.  Rent expense on a
      straight-line basis at this site was $295 for each of the three years in the
      period ended December 31, 2006.  The HEGF of the Company at the Box
      Canyon dam in Siskiyou County, California is owned subject to a ground lease
      which the Company has accounted for as an operating lease.  The lease
      terminates on December 31, 2010, at which time the Company is obligated to
      transfer the HEGF at the site to the Siskiyou County Flood Control and Water
      Conservation District.  The lease payment for Box Canyon for each of
      the three years in the period ended December 31, 2006 was $500.





Future
      minimum lease payments are as follows:





Year
                ended December
                31,2007
            
            $
            7002008
            
            
            7102009
            
            
            7212010
            
            
            7322011
            
            
            243Thereafter
            
            
            4,521$
            7,627





-
          15
          -


Ridgewood
      US Hydro Corporation





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





December
      31, 2006


(dollar
      amounts in thousands)







NOTE
      H (continued)





The
      Company has certain other leases that require payments based upon a percentage
      of the annual gross revenue of the respective hydroelectric plants less any
      taxes or other fees paid to the lessors.  There are no minimum rents
      required and these commitments are not included in the amounts presented
      above.  Rent expense for these hydroelectric plants for the years
      ended December 31, 2006, 2005 and 2004 was $11, $10 and $6,
      respectively.








NOTE
      I - RELATED PARTY TRANSACTIONS





Under
      an
      Operating Agreement with Growth Fund and Trust V (collectively, the “Trusts”),
      Ridgewood Power Management LLC (“Ridgewood Management”), an entity related to
      the managing shareholder of the Trusts through common ownership, provides
      management, purchasing, engineering, planning and administrative services to
      the
      Company.  Ridgewood Management charges the Company at its cost for
      these services and for the allocable amount of certain overhead
      items.  Allocations of costs are on the basis of identifiable direct
      costs, time records or in proportion to amounts invested in projects managed
      by
      Ridgewood Management.  During the years ended December 31, 2006, 2005
      and 2004, Ridgewood Management charged the Company $624, $581 and $489,
      respectively, for overhead items allocated in proportion to the amount invested
      in projects managed.  Ridgewood Management also charged the Company
      for all of the remaining direct operating and nonoperating expenses incurred
      during the periods.  These charges may not be indicative of costs
      incurred if the Company were not operated by Ridgewood
      Management.  Additionally, the Company records noninterest-bearing
      advances from and due to other affiliates in the ordinary course of
      business.  At December 31, 2006 and 2005, the Company had the
      following outstanding receivables, with the following affiliates:





Due
                fromDecember
                31,2006
            
            
            2005Ridgewood
                Management
            
            $
            104
            
            
            $
            7Growth
                Fund
            
            
            56
            
            
            
            987Trust
                V
            
            
            13
            
            
            
            405$
            173
            
            
            $
            1,399





-
          16
          -


Ridgewood
      US Hydro Corporation





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





December
      31, 2006


(dollar
      amounts in thousands)







NOTE
      J - INCOME TAXES





The
      provision for income taxes at December 31, 2006, 2005 and 2004 consists
      of:





2006
            
            
            2005
            
            
            2004CurrentState
            
            $
            152
            
            
            $
            305
            
            
            $
            176DeferredState
            
            
            (71
            )
            
            
            (82
            )
            
            
            (67
            )Federal
            
            
            (158
            )
            
            
            (86
            )
            
            
            (882
            )Income
                tax benefit
            
            $
            (77
            )
            
            $
            137
            
            
            $
            (773
            )





Deferred
      income taxes reflect the tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting purposes
      and
      the amounts used for income tax purposes.  The components of the
      Company’s deferred income tax assets and liabilities at December 31, 2006 and
      2005 are as follows:





2006
            
            
            2005Deferred
                tax assetNOL
                carryforward - noncurrent
            
            $
            1,578
            
            
            $
            1,319Notes
                receivable - current
            
            
            -
            
            
            
            4291,578
            
            
            
            1,748Less
                valuation allowance
            
            
            (406
            )
            
            
            (336
            )Total
                deferred tax asset
            
            
            1,172
            
            
            
            1,412Deferred
                tax liabilitiesAmortization
                and depreciation - noncurrent
            
            
            (2,029
            )
            
            
            (2,498
            )Net
                deferred tax liabilities
            
            $
            (857
            )
            
            $
            (1,086
            )





-
          17
          -


Ridgewood
      US Hydro Corporation





NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (continued)





December
      31, 2006


(dollar
      amounts in thousands)







NOTE
      J (continued)





The
      Company’s effective tax rate differs from the statutory Federal income tax rate
      for the years ended December 31, 2006, 2005 and 2004, as follows:





2006
            
            
            2005
            
            
            2004U.S.
                Federal income taxes at the statutory rate
            
            
            34
            %
            
            
            34
            %
            
            
            34
            %MD
                interest income, tax effect at partner level
            
            
            (40.2
            )
            
            
            (46.8
            )
            
            
            (103.8
            )State
                taxes, net of Federal benefit
            
            
            2
            
            
            
            12
            
            
            
            4.6Accounting
                fees adjustment
            
            
            -
            
            
            
            6.7
            
            
            
            (3.3
            )Other
            
            
            (2
            )
            
            
            7.9
            
            
            
            (4.2
            )Company’s
                effective tax rate
            
            
            (6.2
            )%
            
            
            13.8
            %
            
            
            (72.7
            )%





At
      December 31, 2006, the Company had a Federal net operating loss (NOL)
      carryforward of $3,447, which will be expiring in 2023 through
      2026.  The Company believes it is more likely than not that it will
      realize the benefit of its net operating losses.  Accordingly, a
      valuation allowance has not been recorded against the related deferred tax
      asset. The Company’s ability to realize the benefit of its net operating losses
      may be limited should the Company undergo an ownership change within the meaning
      of IRC Section 382.





In
      addition, at December 31, 2006, the Company had a state NOL carryforward of
      $8,779, which will be expiring in 2023 through 2026.  The Company does
      not believe it is more likely than not that it will realize the benefit of
      this
      NOL carryforward as it does not project there will be future taxable income
      in
      the entity and jurisdiction to which this NOL was
      generated.  Accordingly, the Company has recorded a valuation
      allowance against the full amount of the related deferred tax
      asset.








NOTE
      K - CONTINGENCIES





The
      Company is subject to legal proceedings involving ordinary and routine claims
      related to its business.  The ultimate legal and financial liability
      with respect to such matters cannot be estimated with certainty and requires
      the
      use of estimates in recording liabilities for potential litigation
      settlements.  Estimates for losses from litigation are disclosed if
      considered reasonably possible and accrued if considered probable after
      consultation with outside counsel.  If estimates of potential losses
      increase or the related facts and circumstances change in the future, the
      Company may be required to record additional litigation expense.










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