Ridgewood UK, LLC

      Consolidated Financial Statements

       December 31, 2002, 2001 and 2000


<PAGE>


      Report of Independent Accountants


To the Members of
Ridgewood UK, LLC:

In our opinion,  the  accompanying  consolidated  balance sheets and the related
consolidated  statements of operations,  comprehensive income (loss), changes in
members' equity and cash flows present  fairly,  in all material  respects,  the
financial  position of Ridgewood UK, LLC and its subsidiaries (the "Company") at
December 31, 2002 and 2001,  and the results of their  operations and their cash
flows for each of the three years in the period  ended  December  31,  2002,  in
conformity with accounting principles generally accepted in the United States of
America.  These  financial  statements are the  responsibility  of the Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements  based on our audits.  We conducted our audits of these statements in
accordance with auditing  standards  generally  accepted in the United States of
America,  which 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 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,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.



PricewaterhouseCoopers LLP
Florham Park, NJ
May 29, 2003


<PAGE>



Ridgewood UK, LLC
Consolidated Balance Sheets
--------------------------------------------------------------------------------

                                                     December 31,
                                             ----------------------------
                                                 2002            2001
                                             ------------    ------------

Assets:
Cash and cash equivalents ................   $  2,925,298    $  2,426,888
Accounts receivable, trade ...............      3,615,902       2,464,557
Other assets .............................        350,913         213,141
                                             ------------    ------------

     Total current assets ................      6,892,113       5,104,586
                                             ------------    ------------


Investment in Spanish landfill projects ..      1,370,564         766,335

Plant and equipment ......................     25,420,611      20,040,217
Less - Accumulated depreciation ..........     (4,204,739)     (2,287,288)
                                             ------------    ------------
      Plant and equipment, net ...........     21,215,872      17,752,929
                                             ------------    ------------


Electric power sales contracts and
 other intangibles .......................     21,865,668      19,891,901
Less - Accumulated amortization ..........     (3,716,837)     (1,976,152)
                                             ------------    ------------
      Electric power sales contracts and
       other intangibles, net ............     18,148,831      17,915,749
                                             ------------    ------------


     Total assets ........................   $ 47,627,380    $ 41,539,599
                                             ------------    ------------



Liabilities and Members' Equity:
Liabilities:
Current portion of long-term debt ........   $  1,118,497    $    609,550
Accounts payable and accrued expenses ....      2,523,437       2,444,681
Due to affiliates ........................        464,143         272,040
                                             ------------    ------------
     Total current liabilities ...........      4,106,077       3,326,271

Long-term debt, less current portion .....     19,842,782      13,878,183
Deferred income taxes ....................        918,249       1,081,202
Other non-current liabilities ............         77,699           --
Minority interest ........................      5,400,035       4,908,121

Commitments and contingencies

Members' equity ..........................     17,282,538      18,345,822
                                             ------------    ------------


     Total liabilities and members' equity   $ 47,627,380    $ 41,539,599
                                             ------------    ------------







      See accompanying notes to the consolidated financial statements.

<PAGE>



Ridgewood UK, LLC
Consolidated Statements of Operations
-------------------------------------------------------------------------------

                                            For the Year Ended December 31,
                                      -----------------------------------------

                                          2002           2001           2000
                                      -----------    -----------    -----------


Power generation revenue ..........   $ 9,120,088    $ 6,233,030    $ 5,559,304

Cost of sales, including
 depreciation and amortization of
 $2,978,809, $2,042,387 and
 $1,458,040 in 2002, 2001 and 2000      9,991,516      5,594,142      3,884,725
                                      -----------    -----------    -----------


Gross profit (loss) ...............      (871,428)       638,888      1,674,579

General and administrative expenses       451,224        240,540        192,041
Write down of investments in
 power generation projects ........       854,367           --             --
                                      -----------    -----------    -----------

     Total other operating expenses     1,305,591        240,540        192,041

Income (loss) from operations .....    (2,177,019)       398,348      1,482,538

Other income (expense):
     Interest income ..............        82,280        149,208        165,235
     Interest expense .............    (1,765,644)      (978,407)      (828,369)
     Equity income in Spanish
      landfill projects ...........        94,781         18,336           --
                                      -----------    -----------    -----------

       Other income (expense), net     (1,588,583)      (810,863)      (663,134)

Income (loss) before taxes ........    (3,765,602)      (412,515)       819,404

Income tax (benefit) expense ......      (168,847)       307,235        178,274
                                      -----------    -----------    -----------
Income (loss) before
 extraordinary loss ...............    (3,596,755)      (719,750)       641,130

Extraordinary loss from early
  extinguishments of debt .........          --             --           89,610
                                      -----------    -----------    -----------
Net income (loss) before
 minority interest ................    (3,596,755)      (719,750)       551,520

Minority interest in
 CLP Envirogas, Ltd ...............       779,603        170,920          --
                                      -----------    -----------    -----------

Net income (loss) .................   $(2,817,152)   $  (548,830)   $   551,520
                                      -----------    -----------    -----------






    See accompanying notes to the consolidated financial statements.

<PAGE>



Ridgewood UK, LLC
Consolidated Statements of Changes in Members' Equity
For the Years Ended December 31, 2002, 2001 and 2000
--------------------------------------------------------------------------------



Members' equity, January 1, 2000 .   $ 16,916,309

Net income .......................        551,520

Distributions ....................     (1,517,760)

Cumulative translation adjustment      (1,299,440)
                                     ------------


Members' equity, December 31, 2000     14,650,629

Net loss .........................       (548,830)

Contributions ....................      5,817,006

Distributions ....................     (1,066,940)

Cumulative translation adjustment        (506,043)
                                     ------------


Members' equity, December 31, 2001     18,345,822

Net loss .........................     (2,817,152)

Contributions ....................          4,491

Cumulative translation adjustment       1,749,377
                                     ------------


Members' equity, December 31, 2002   $ 17,282,538
                                     ------------




  See accompanying notes to the consolidated financial statements.



Ridgewood UK, LLC
Consolidated Statements of Comprehensive Income (Loss)
For the Years Ended December 31, 2002, 2001 and 2000
--------------------------------------------------------------------------------

                                        2002           2001           2000
                                    -----------    ------------   -----------
Net income (loss) ...............   $     --       $  (548,830)   $   551,520
                                                                   (2,817,152)

Cumulative translation adjustment     1,749,377       (506,043)    (1,299,440)
                                    -----------    -----------    -----------

Comprehensive loss ..............   $(1,067,775)   $(1,054,873)   $  (747,920)
                                    -----------    -----------    -----------



    See accompanying notes to the consolidated financial statements.

<PAGE>



Ridgewood UK, LLC
Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------

                                         For the Year Ended December 31,
                                   --------------------------------------------

                                        2002             2001           2000
                                   -------------    -------------  ------------

Cash flows from operating
 activities:
Net income (loss) ..............   $ (2,817,152)   $   (548,830)   $    551,520

Adjustments to reconcile net
 income (loss) to cash flows
 provided by operating
 activities, net of
 businesses acquired:
   Depreciation and
    amortization ...............      2,978,809       2,042,387       1,458,040
   Vesting of employee stock
    options ....................        309,217            --              --
   Minority interest in CLPE
    Holdings, Ltd ..............       (779,603)       (170,920)
   Writedown of investments in
    power generation project ...        854,367            --              --
   Equity in earnings in Spanish
    landfill projects ..........        (94,781)        (18,336)           --
   Changes in assets and
    liabilities, net of
    businesses acquired
     (Increase) decrease in
       accounts receivable,trade       (835,800)     (1,334,833)        761,017
     (Increase) decrease in
       other assets ............       (108,086)        716,373         672,968
     (Decrease) increase in
       accounts payable and
       accrued expenses ........       (167,553)        720,213      (3,339,811)
     (Decrease) increase in
       deferred income taxes ...       (259,482)        333,812         343,081
     Increase in other
      non-current liabilities ..         72,826            --              --
                                   ------------    ------------    ------------

       Total adjustments .......      1,969,914       2,288,696        (104,705)
                                   ------------    ------------    ------------


   Net cash (used in) provided
    by operating activities ....       (847,238)      1,739,867         446,815
                                   ------------    ------------    ------------


Cash flows from investing
 activities:
Capital expenditures ...........     (3,358,550)     (6,847,325)           --
Investment in Spanish landfill
 projects ......................       (395,887)           --              --
Cash paid for acquired
 businesses, net of cash
 received ......................           --        (3,627,867)           --
                                   ------------    ------------    ------------


  Net cash used in investing
   activities ..................     (3,754,437)    (10,475,192)           --
                                   ------------    ------------    ------------


Cash flows from financing
 activities:
Borrowings from bank ...........      5,504,004       3,438,589       2,468,383
Repayments of bank debt ........       (866,895)       (600,803)     (1,119,256)
Short term advances from
 affiliates ....................        192,103         272,040            --
Distributions to member ........           --        (1,066,940)     (1,517,760)
Cash contributions from member .           --         5,817,006            --
                                   ------------    ------------    ------------


  Net cash provided by (used in)
   financing activities ........      4,829,212       7,859,892        (168,633)
                                   ------------    ------------    ------------


Effect of exchange rate on cash
 and cash equivalents ..........        270,873        (101,923)       (252,061)
Net increase (decrease) in cash
 and cash equivalents ..........        498,410        (977,356)         26,121
Cash and cash equivalents at
 beginning of period ...........      2,426,888       3,404,244       3,378,123
                                   ------------    ------------    ------------


Cash and cash equivalents at
 end of period .................   $  2,925,298    $  2,426,888    $  3,404,244
                                   ------------    ------------    ------------




    See accompanying notes to the consolidated financial statements.


<PAGE>



Ridgewood UK, LLC
Notes to Consolidated Financial Statements                              Page 8
-------------------------------------------------------------------------------

1. Organization and Business Activity

On May 27, 1999,  Ridgewood UK, LLC was formed as a Delaware  limited  liability
company (the "Company"). The members of the Company are Ridgewood Electric Power
Trust V ("Trust V") and The  Ridgewood  Power  Growth Fund (the  "Growth  Fund")
(collectively the "Trusts"),  both Delaware business trusts.  Trust V is managed
by Ridgewood Renewable Power LLC, its managing  shareholder.  The Growth Fund is
managed  by  Ridgewood  Renewable  Power  LLC and  Ridgewood  Power VI LLC,  its
managing shareholders.

On June  30,  1999,  Trust V  contributed  $16,667,567  to the  Company  and the
Company's wholly- owned subsidiary, Ridgewood UK Ltd. ("UK Ltd."), purchased six
landfill  gas power plants  located in the United  Kingdom.  The total  purchase
price was $16,436,548 in cash,  including $617,567 of acquisition costs.  During
2001,  the Growth Fund  contributed  $5,817,006  to the Company in return for an
equity share of approximately  30%. Bank financing and approximately  $3,400,000
of the invested funds were used to acquire four landfill gas power plants with a
capacity of 5.3 megawatts.  The total purchase price of the acquired  plants was
approximately $5,800,000, of which $2,100,000 was assigned to the electric power
sales contracts acquired,  which will be amortized over the life of the contract
(15 years).  The remaining invested funds of $2,000,000 were used in the October
16, 2001 merger described below.

Under the terms of a merger agreement (the "UK Merger"), on October 16, 2001, UK
Ltd., through the issuance of approximately 24% of UK Ltd. shares and $2,000,000
cash, acquired certain of the assets and liabilities of CLP Services,  Ltd., CLP
Development,  Ltd and CLP Envirogas,  Ltd.  (collectively  the  "Management  and
Development  Companies") and the equity and debt of new landfill  projects.  The
Management and Development  Companies  previously developed the various landfill
gas projects  and managed and  operated the projects  after they were sold to UK
Ltd. As a result of the  acquisition,  UK Ltd. now  provides its own  operation,
management and development  services.  UK Ltd. was renamed CLP Envirogas Limited
in  2001.  Trust  V  and  the  Growth  Fund  own   approximately  70%  and  30%,
respectively, of the Company. The Company, in turn, owns approximately 76% of UK
Ltd.

The Company  owns 15 plants with an  installed  capacity of 25.5  megawatts  and
sells  the   electricity   under  15  year   contracts  to  a   quasi-autonomous
non-governmental  organization that purchases electricity generated by renewable
sources  on behalf of all  British  utilities.  The  Company  has 10  additional
projects under  development.  In the fourth quarter of 2002, the Company decided
not to continue the  development of two of the plants it received as part of the
2001 UK Merger.  As a result of this decision,  the Company recorded a writedown
of $854,367 to adjust the carrying  value of the projects to zero The  writedown
has been presented as a separate line item under other operating expenses in the
Consolidated Statements of Operations.

In addition to the plants located throughout the United Kingdom, the Company has
a 50% ownership in CLP Organogas SL ("Organogas"), a 2 megawatt plant located in
Seville, Spain. The Company obtained its interest in Organogas, as well as a 50%
interest in CLP  Envirogas,  SL,  ("Envirogas"),  a management  and  development
service company also located in Seville, Spain, as part of the UK Merger.

2. Summary of Significant Accounting Policies

Principles of consolidation
The consolidated  financial  statements  include the accounts of the Company and
its controlled  subsidiaries.  All material intercompany  transactions have been
eliminated.

The  Company  uses the  equity  method  of  accounting  for its  investments  in
affiliates  which  are 50% or less  owned  if the  Company  has the  ability  to
exercise significant  influence over the operating and financial policies of the
affiliates  but does not  control  the  affiliate.  The  Company's  share of the
earnings  of the  affiliates  is  included  in the  Consolidated  Statements  of
Operations.  Critical  accounting  policies and  estimates  The  preparation  of
consolidated  financial  statements  requires the Company to make  estimates and
judgements that affect the reported  amounts of assets,  liabilities,  sales and
expenses,  and related  disclosure of contingent  assets and liabilities.  On an
on-going basis, the Company evaluates its estimates, including provision for bad
debts,  carrying value of  investments,  amortization/depreciation  of plant and
equipment and intangible assets,  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  judgements  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.

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 Company
adopted  SFAS 141 on July 1,  2001,  with no  material  impact on the  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.  The Company  adopted SFAS 142 effective  January 1, 2002, with no
material impact on the 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
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 adjusted 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 Company will adopt SFAS 143
effective  January 1, 2003 and has assessed  that this  standard will not have a
material impact on the Company.

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 Company adopted SFAS
144  effective  January  1,  2002,  with no  material  impact  on the  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 Company will adopt
SFAS 145 effective  January 1, 2003 and has assessed that this standard will not
have a material impact on the Company.

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  Company  will adopt SFAS 146  effective  January 1, 2003 and has
assessed that this standard will not have a material impact on the Company.

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 Company adopted the disclosure provisions of
FIN 45  during  the  fourth  quarter  of 2002  with no  material  impact  to the
financial statements.

Cash and cash equivalents
The  Company  considers  all highly  liquid  investments  with  maturities  when
purchased  of three months or less as cash and cash  equivalents.  Cash and cash
equivalents consist of commercial paper and funds deposited in bank accounts.

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
contracts.  Adjustments  are made to reflect actual  volumes  delivered when the
actual information  subsequently  becomes  available.  Billings to customers for
power  generation  generally occurs during the month following  delivery.  Final
billings do not vary significantly  from estimates.  Interest income is recorded
when earned and dividend income is recorded when declared.

Foreign currency translation
The British Pound Sterling is the functional currency of the Company's operating
subsidiaries.  The consolidated financial statements of the Company's non-United
States  subsidiaries  are  translated  into United States  dollars using current
rates of exchange,  with gains or losses included in the cumulative  translation
adjustment  account in the members' equity section of the  Consolidated  Balance
Sheets.

Impairment of Long-Lived Assets and Intangibles
In  accordance  with the  provisions  of SFAS No.  144,  the  Company  evaluates
long-lived assets, such as fixed assets and intangibles,  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 discounted
cash flows attributable to the asset or the estimated fair value of the asset.

Plant and equipment
Plant and equipment,  consisting principally of electrical generating equipment,
is stated at cost. Major renewals and betterments that increase the useful lives
of the assets are capitalized.  Repair and maintenance expenditures are expensed
as incurred.  The Company periodically  assesses the recoverability of plant and
equipment,   and  other  long-term   assets,   whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.

Depreciation  is recorded  using the  straight-line  method  over the  estimated
useful  life of the  assets,  which  ranges  from 4 to 20 years  with a weighted
average of 15 years at  December  31,  2002 and 2001,  respectively.  During the
years ended December 31, 2002, 2001 and 2000, the Company recorded  depreciation
expense of $1,555,489, $1,105,191 and $730,635, respectively.

Electric power sales  contracts and other  intangibles A portion of the purchase
price of the landfill gas power plants was assigned to the electric  power sales
contracts  and is being  amortized  over the 15 year life of the  contracts on a
straight-line  basis.  During the years ended December 31, 2002,  2001 and 2000,
the Company recorded amortization expense of $1,423,320,  $937,196 and $727,405,
respectively.

The Company expects to record amortization expense during the next five years as
follows:

                                 Year Ended
                                December 31,         Amortization

                                   2003                $1,423,320
                                   2004                 1,423,320
                                   2005                 1,423,320
                                   2006                 1,423,320
                                   2007                 1,423,320

Supplemental cash flow  information
Total interest paid during the years ended December 31, 2002,  2001 and 2000 was
$1,765,644, $961,246 and $553,003, respectively.

For the year ended December 31, 2001 the Company paid income taxes of $27,385.

In  accordance  with the UK Merger  agreement,  on October  16, 2001 the Company
issued 3,500,000 shares of UK Ltd. to a minority member.

Significant customers
The  Company  sells  all of the  electricity  it  produces  to  quasi-autonomous
non-governmental  organizations that purchase electricity generated by renewable
sources (such as landfill gas power  plants) on behalf of all British  utilities
in order to meet British environmental protection goals.

Stock-Based Compensation
The  Company has a plan which  allows for the  granting  of stock  options.  The
Company  applies  FASB No. 123,  Accounting  for  Stock-Based  Compensation,  in
accounting for its stock option  grants.  Accordingly,  compensation  expense is
recognized  for fixed stock options as if the fair value of all stock options as
of the  grant  date  were  recognized  as  expense  over the  vesting  period in
accordance  with SFAS No. 123. The  outstanding  stock option grants vest over a
three year period and have an exercise life of ten years from the date of grant.
For the year ended December 31, 2002, the Company recorded  compensation expense
of $309,217.

Income taxes
The Company recorded a provision for United Kingdom income taxes of $307,235 and
$178,274 for the years ended December 31, 2001 and 2000, respectively on foreign
loss of $548,830 and foreign income of $551,520 for the years ended December 31,
2001 and 2000,  respectively.  For the year ended December 31, 2002, the Company
recorded an income tax benefit of $168,847 on foreign  loss of  $2,817,152.  The
income tax  benefit/provision  recorded is 30%, the statutory corporate tax rate
of the United Kingdom. At December 31, 2002 and 2001, the Company had a deferred
tax  liability  of  $918,249  and  $1,081,202,   respectively.  The  significant
component of the Company's  deferred income tax liability is attributable to the
accelerated depreciation on its plant and equipment.

The  Company  does  not  pay  or  record  United  States  income  taxes  on  the
undistributed  earnings  of  its  foreign  subsidiaries,  where  management  has
determined  that the earnings are  permanently  reinvested  in the entities that
produced them. The cumulative  undistributed  earnings are included in "Member's
Equity" on the  Consolidated  Balance  Sheets.  No  provision is made for United
States income taxes in the accompanying consolidated financial statements as the
United  States  income or loss of the Company is passed  through and included in
the tax returns of the members.

The following is a  reconciliation  of the income tax benefit computed using the
statutory foreign income tax rate to the actual income tax (benefit) expense and
its effective income tax rate.

                                              As of December 31,
                                         2002                     2001
                               ------------------------   ---------------------
                                  Amount        Percent    Amount       Percent
                                               of pretax              of pretax
                                                income                  income
                               -------------   --------   ---------    --------

Income tax benefit at
 foreign statutory rate .....   $(1,129,680)    (30.0%)   $(123,755)    (30.0%)
Amortization of foreign
 intangibles ................       524,528      13.9%      281,159      68.2%
Other .......................       436,305      11.6%      149,831      36.3%
                                -----------    --------     --------    -------
 Income tax (benefit) expense      (168,847)     (4.5%)     307,235      74.5%
                                -----------    --------     --------    -------


Reclassification
Certain items in previously issued financial statements have been reclassified
for comparative purposes.

3.  Long-Term Debt

Following is a summary of long-term debt at December 31, 2002 and 2001:

                                           2002                     2001
                                     ---------------          ----------------

Bank loans payable                      $20,961,279               $14,487,733
Less - Current maturity                  (1,118,497)                 (609,550)
                                     ----------------         ----------------
Total long-term debt                    $19,842,782               $13,878,183

                                     ----------------         ----------------

In 2001, the Company renegotiated the terms of its long-term debt with its bank.
The renegotiated bank loans are repayable in semi annual installments each March
31st  and  September  30th  through  September  30,  2014.  $10,305,507  of  the
outstanding debt bears interest at 7.17%,  while  $10,655,772 of the outstanding
debt bears interest at 7.82%. The notes are  collateralized by substantially all
of the assets of the projects and the credit  agreement  requires the Company to
maintain a debt service  coverage  ratio of 1.4 to 1. At December 31, 2002,  the
Company's outstanding debt was current and in good standing with its bank.

Scheduled principal repayments of long-term debt are as follows:

                                    Year Ended
                                    December 31,               Payment

                                        2003                 $ 1,118,497
                                        2004                   1,286,193
                                        2005                   1,462,658
                                        2006                   1,649,195
                                        2007                   1,793,586
                                     Thereafter               13,651,150
                                                              ----------
                                       Total                $ 20,961,279
                                                             ===========

4.  Fair Value of Financial Instruments

At December 31, 2002 and 2001, the carrying value of the Company's cash and cash
equivalents,  accounts  receivable,  accounts payable and accrued expenses,  and
long- term debt approximates their fair value.

5.  Electric Power Sales Contracts

The  Company  is  committed  to  sell  all of the  electricity  it  produces  to
quasi-autonomous   non-governmental   organizations  that  purchase  electricity
generated by renewable  sources (such as landfill gas power plants) on behalf of
all British utilities in order to meet British  environmental  protection goals.
The electricity prices are adjusted annually by a factor equal to the percentage
increase in the United Kingdom Retail Price Index.

6.  Acquisition of Businesses

Under the terms of the UK Merger,  on October  16,  2001,  UK Ltd.,  through the
issuance  of  approximately  24% of its shares  and  $2,000,000  cash,  acquired
certain of the assets and  liabilities of CLP Services,  Ltd., CLP  Development,
Ltd and CLP  Envirogas,  Ltd. and the equity and debt of new landfill  projects.
The Management and  Development  Companies  previously  developed the various UK
Landfill Gas Projects and managed and operated the projects after they were sold
to UK Ltd.  As a  result  of the  acquisition,  UK  Ltd.  now  provides  its own
operation,  management  and  development  services.  UK  Ltd.  was  renamed  CLP
Envirogas Limited in 2001.

In return for the stock issuance and $2,000,000 cash, UK Ltd. received plant and
equipment valued at approximately  $4,201,000, a 50% equity interest in landfill
projects  valued at  approximately  $744,000,  cash of $454,000 and other assets
with an  approximate  value of  $1,000,000.  In  accordance  with the UK  Merger
agreement, UK Ltd. assumed liabilities of approximately $3,058,000.  The Company
assigned the electric  power sales  contacts  and other  intangibles  acquired a
value of  $6,781,000,  which  will be  amortized  over  the 15 year  life of the
contact.

At October 16, 2001 the Management and  Development  Companies  acquired had net
assets of  approximately  $1,000  and had  recognized  no profit or loss for the
period of January 1, 2001 to October 16,  2001.  In  addition,  all the landfill
projects  acquired as part of the merger,  except one, were new construction and
were  near  completion.  The one  project  that was  completed  had  just  begun
operating.  Since the projects had no operating  results and the  Management and
Development  Companies  had no income or loss and had minimal  net  assets,  the
Company's  pro forma  results of  operations as if the merger had taken place on
January 1, 2001 would not be significantly  different than the Company's current
results as stated in the Consolidated Statements of Operations.


7.  Investments

The Company owns a 50% interest in CLP Organogas SL , a 2 megawatt plant located
in Seville,  Spain. The Company obtained its interest in Organogas, as well as a
50% interest in CLP Envirogas SL (collectively the "Spanish landfill projects"),
a management and development service company also located in Seville,  Spain, as
part of the UK Merger.  The Company  accounts  for its  ownership in the Spanish
landfill projects under the equity method of accounting.  The equity earnings of
the  projects  have  been  included  in  the  Company's  consolidated  financial
statements  from the date of  investment.  As  discussed in Note 10, the Company
transferred  its  interest in the  Spanish  landfill  projects  during the first
quarter of 2003.

8. Transactions with Affiliates

Through October 16, 2001, CLP Services  Limited  ("CLPS"),  provided  day-to-day
services to the projects.  CLPS was paid a flat fee of  approximately  1.2 cents
per kilowatt-hour for those services (adjusted for increases in the Retail Price
Index)  and was  eligible  for  bonus  payments  if a  project's  actual  annual
electricity output exceeds 90% of its capacity. CLPS was also paid approximately
$88,000 per year (also  adjusted  for  increases  in the Retail Price Index) for
management  services for the various companies owning the ten existing projects.
The gas extraction  and cleaning  systems for the landfills was operated by CLPS
for no additional  cost.  The  acquisition of CLPS by the Company on October 16,
2001 effectively terminated the agreement making the Company responsible for its
own operating expenses, which include development and administrative, operation,
labor and maintenance activities for all of its UK Projects.

At December 31, 2002 and 2001, the Company had outstanding payables, with the
following affiliates:

                                    2002               2001
                                -------------      -------------
  Trust V                          $ 245,334          $ 107,165
  Growth Fund                        218,809            164,875

From time to time, the Company 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.

9.  Agreements to Issue Additional Shares of UK Ltd

Certain  unrelated  shareholders  of UK Ltd. are attempting to renovate  certain
older  projects  in the  United  Kingdom.  Under  the  terms  of  the UK  Merger
agreement,  if they are successful in renovating these projects and the projects
meet  certain  performance  tests,  UK Ltd.  will be  obligated  to acquire  the
renovated  projects in exchange for the issuance of additional shares in UK Ltd.
The  number  of shares to be issued  is  dependent  on the  projected  financial
performance  of the renovated  projects.  If UK Ltd issues the maximum number of
shares to acquire the renovated  projects,  the  Company's  ownership of UK Ltd.
would fall from 76.3% to 63.5%. During 2002, the parties mutually agreed that UK
Ltd.  would not acquire the defined older  projects and would not be required to
issue any additional shares in relation to these projects.

Under the terms of the UK Merger,  certain  directors and employees of CLPS have
received  vested  options to acquire shares in UK Ltd. The price to exercise the
options is equal to the share price of UK Ltd. at the time of the merger. If all
the options were  exercised,  UK Ltd. would receive  approximately  $2.9 million
from the exercise of the options and the  Company's  ownership of UK Ltd.  would
fall from 76.3% to 67.2%.

10. Subsequent Event

During the first quarter of 2003, the Company entered into an agreement with one
of its  minority  shareholders.  Under the terms of the  agreement,  the Company
transferred  its 50% interest in the Spanish  landfill  projects in return for a
portion of the minority  shareholder's  interest in the Company.  As a result of
the  transaction,  the Company  increased its ownership in UK Ltd. from 76.3% to
88.3%.