Table
of Contents
 
 UNITED STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
DC 20549
 
 FORM
10-K
 (Mark
One)
 x
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the
fiscal year ended December 31, 2007
 or
 
 o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For the
transition period from ________ to _______
 
 Commission
file number:  0-23432
 
 RIDGEWOOD
ELECTRIC POWER TRUST III
 (Exact Name of
Registrant as Specified in Its Charter)
 Delaware
              
              22-3264565(State
      or Other Jurisdiction of
                Incorporation
      or Organization)
              
              (IRS
      Employer Identification Number)
 
 1314
      King Street, Wilmington, DE 19801(Address
      of Principal Executive Offices, including Zip Code)
 
 (302)
      888-7444(Registrant’s
      telephone number, including area code)
 
 SECURITIES
REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
 
 None
  SECURITIES
REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
 Investor
      Shares of Beneficial Interest(Title
      of Class)
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
 Yes 
oNo x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.
 Yes 
oNo 
x
 
 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 xNo 
o
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definition of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
   Large accelerated
      filer   o
              Accelerated
      filer   o
              Non-accelerated
      filer   o
              Smaller reporting
      company   x(Do not check if a
      smaller reporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
 Yes 
o    No 
x
  There is
no market for the Investor Shares. The number of Investor Shares outstanding at
January 31, 2008 was 391.8444.
  
 Table of Contents
  FORM
10-K
  TABLE
OF CONTENTS
 
 PART
I
  
 PageItem 1.
              Business
              1Item 1A.
              Risk Factors
              5Item 1B.
              Unresolved Staff Comments
              8Item 2.
              Properties
              8Item 3.
              Legal Proceedings
              9Item 4.
              Submission of Matters to a Vote of Security
      Holders
              9PART
      IIItem 5.
              Market for Registrant’s Common Equity, Related Security Holder
      Matters and
                Issuer Purchases of Equity Securities
              9Item 6.
              Selected Financial Data
              9Item 7.
              Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
              9Item 7A.
              Quantitative and Qualitative Disclosures About Market
      Risk
              12Item 8.
              Financial Statements and Supplementary Data
              12Item 9.
              Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure
              12Item 9A.
              Controls and Procedures
              12Item 9B.
              Other Information
              13PART
      IIIItem 10.
              Directors, Executive Officers and Corporate
      Governance
              13Item 11.
              Executive Compensation
              15Item 12.
              Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters
              15Item 13.
              Certain Relationships and Related Transactions, and Director
      Independence
              16Item 14.
              Principal Accountant Fees and Services
              16PART
      IVItem 15.
              Exhibits and Financial Statement Schedules
              17SIGNATURES
              19
  Table of Contents
 Forward-Looking
Statements
 
 Certain
statements discussed in Item 1. “Business”, Item 3. “Legal
Proceedings” and Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and elsewhere in this Annual Report on
Form 10-K constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.
 
 These
forward-looking statements generally relate to the Trust’s plans, objectives and
expectations for future events and include statements about the Trust’s
expectations, beliefs, plans, objectives, intentions, assumptions and other
statements that are not historical facts. These statements are based upon
management’s opinions and estimates as of the date they are made. Although
management believes that the expectations reflected in these forward-looking
statements are reasonable, such forward-looking statements are subject to known
and unknown risks and uncertainties that may be beyond the Trust’s control,
which could cause actual results, performance and achievements to differ
materially from results, performance and achievements projected, expected,
expressed or implied by the forward-looking statements. Examples of events that
could cause actual results to differ materially from historical results or those
anticipated include changes in political and economic conditions, federal or
state regulatory structures, government mandates, the ability of customers to
pay for energy received, supplies and prices of fuels, operational status of
generating plants, mechanical breakdowns, volatility in the price for electric
energy, natural gas, or renewable energy. Additional information concerning the
factors that could cause actual results to differ materially from those in the
forward-looking statements is contained in Item 1A. “Risk Factors” and
Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations”, and elsewhere in this Annual Report on Form 10-K.
The Trust undertakes no obligation to publicly revise any forward-looking
statements or cautionary factors, except as required by law.
  PART
I
 ITEM 1.  BUSINESS
 
 Overview
 
 Ridgewood
Electric Power Trust III (the “Trust”) is a Delaware trust formed on December 6,
1993 primarily to make investments in projects and businesses in the energy and
infrastructure sectors. Ridgewood Renewable Power LLC (“RRP” or the “Managing
Shareholder”), a New Jersey limited liability company, is the Managing
Shareholder. As the Managing Shareholder, RRP has direct and exclusive control
over the management and operations of the Trust.
  The Trust
has focused primarily on projects fueled by natural gas and renewable sources of
fuel. These projects allow the Trust to develop secure long-term positions in
attractive specialty markets for products and services provided by its projects
and companies. As of December 31, 2007, the projects in which the Trust had
investments were located in the United States. As of that date, the Trust had
investments in a landfill gas-fired electric generating project with total
capacity of 13.8 megawatts (“MW”) and in two electric cogeneration projects with
total capacity of 14.2MW. The Trust’s cogeneration facilities (the
"Norcals") suspended operations in the fourth quarter of 2007 and are expected
to remain closed at least until May 2008. If the
Norcals were to remain closed on a permanent basis, and effectively terminate
their agreements with their customer, the Norcals, but not the Trust, may be
obligated to pay significant termination fees.
  The Trust
initiated its private placement offering in January 1994, selling whole and
fractional investor shares of beneficial interests of $100,000 per share
(“Investor Shares”). There is no public market for Investor Shares and one is
not likely to develop. In addition, Investor Shares are subject to significant
restrictions on transfer and resale and cannot be transferred or resold except
in accordance with the Trust’s Declaration of Trust (“Declaration of Trust”) and
applicable federal and state securities laws. The offering was concluded in May
1995, and after payment of offering fees, commissions and investment fees, the
Trust had $32.9 million available for investments and operating expenses. As of
January 31, 2008, the Trust had 391.8444 Investor Shares outstanding, held by
839 shareholders.
  Managing
Shareholder
  RRP, via
a predecessor corporation, was founded in 1991 by Robert E. Swanson. As the
Managing Shareholder, RRP has direct and exclusive control over the management
of the Trust’s operations. With respect to project investments, RRP locates
potential projects, conducts appropriate due diligence and negotiates and
completes the transactions in which the investments are made by the
Trust.
 
 In
addition, RRP performs (or arranges for the performance of) the operation and
maintenance of the projects invested in by the Trust and the management and
administrative services required for Trust operations. Among other services, RRP
administers the accounts and handles relations with the shareholders, including
tax and other financial information. RRP also provides the Trust with office
space, equipment and facilities and other services necessary for its
operation.
  As
compensation for its management services, the Managing Shareholder is entitled
to (i) an annual management fee, payable monthly, equal to 2.5% of
the Trust's prior year net asset value, and (ii) a 20% interest
in the cash distributions made by the Trust in excess of certain threshold
amounts expressed in terms of shareholder returns. The Managing Shareholder is
also entitled to receive reimbursement from the Trust for operating expenses
incurred by the Trust, or on behalf of the Trust and paid by RRP, as the
Managing Shareholder. RRP has arranged for administrative functions required to
be performed for the Trust to be performed by an affiliate, Ridgewood Power
Management LLC (“RPM”), and at RPM’s costs, such costs are reimbursed to
RPM by the Trust. RRP also serves as the managing shareholder (or managing
member, as appropriate) of a number of affiliated trusts and investment vehicles
similar to the Trust and, through RPM, provides services to those entities
similar to those provided to the Trust.
  1
 Table of Contents
  Affiliates
of RRP act on behalf of a number of investment vehicles in the oil and gas and
venture capital sectors in a manner similar to that for which RRP serves on
behalf of the Trust.
  Business
Strategy
  The
Trust’s primary investment objective is to generate cash flow for distribution
to shareholders and capital appreciation from one or more of the acquisition,
development, ownership and operation of interests in electricity generation and
other infrastructure projects and companies. The Trust generally seeks to invest
in projects and companies that provide products or services through a number of
small facilities and that offer opportunities for expansion either through
increasing production at existing sites or through the establishment of
additional sites. These projects often involve development, construction and
operating risk but, once established, may be able to effectively “lock-in” the
customer (or customers) served by the project, which would prevent competitors
from dislodging the Trust’s projects. The Trust focuses on markets in which
projects can be developed and built quickly and can be standardized as to their
design, equipment and construction. By following this strategy, the Trust seeks
to take advantage of attractive market opportunities while streamlining the
development process and diversifying across a number of projects in order to
contain the exposure of the Trust to the risks inherent in such
projects.
  Projects
and Properties
  The
following table is a summary of the Trust’s investment portfolio as of December
31, 2007 detailing the nature of the business and the portion of the
investment owned by the Trust.
 Company
              Trust
                Interest
              Leased/
                Owned1
              Purpose
              Structure2San
      Joaquin Project3
              100%
              Leased
              Electricity
      generation
              Steel
      building/
                concrete
      slabByron
      Project3
              100%
              Leased
              Electricity
      generation
              Steel
      building/
                concrete
      slabRidgewood Providence4
              35.7%
              Leased
              Electricity
      generation
              Steel
      building/
                concrete
      slab
 
 1
              Refers
      to the locations on which the Trust’s projects are located and not the
      projects themselves.
  2
              Describes
      the type of structure in which the projects of the Trust are
      housed.
  3
              Located
      in Northern California.
  4
              Co-owned
      with Ridgewood Electric Power Trust IV (“Trust IV”). The facility is
      located in Rhode Island.
 
 San Joaquin Project and Byron
Project
  In
January 1995, the Trust acquired 100% of the existing partnership interests of
JRW Associates, L.P., which owned and operated an 8.5MW electric cogeneration
facility located in Atwater, California (the “San Joaquin Project”).
  In
January 1995, the Trust caused the formation of Byron Power Partners, L.P. in
which the Trust owns 100% of the partnership interests.  In January
1995, Byron Power Partners, L.P. acquired a 5.7MW electric cogeneration facility
located in Byron, California (the “Byron Project”).
  The Byron
Project and the San Joaquin Project (collectively the “Norcals”) are fueled by
natural gas and sell their electric output to Pacific Gas & Electric Company
(“PG&E”) under power contracts that expire in 2020. Thermal energy from the
San Joaquin Project is used to provide steam to an adjacent food processing
company under a long-term contract that also expires in 2020. Thermal energy
from the Byron Project is used to evaporate brine from oil and gas wells under a
long-term contract that also expires in 2020.
 
 The
Norcals’ contract prices with PG&E were determined pursuant to a contract
formula approved by the California Public Utilities Commission with the energy
payment originally based upon a benchmark energy price adjusted for changes over
time in a natural gas price index; referred to as the Short Run Avoided Cost
Methodology ("SRAC").  In 2001, the Norcals entered into amendments to
their power contracts, which provided for, among other things, that the Norcals
would receive a fixed energy payment (as well as the required capacity payment)
for a term of five years, until August 2006.  Upon expiration of the
amendment, through the remainder of the term of the contract, the SRAC formula
contained in the original contract is being used to determine the energy price
paid by PG&E.
  2
 Table of Contents
  The
Norcals entered into agreements with Coral Energy Services, Inc. (“Coral”), a
subsidiary of Shell Oil, to procure its natural gas fuel at a fixed price
through August 2006. Coral and the Norcals also had master re-sale
agreements, which also expired in August 2006. Such agreements enabled the
Norcals to not take delivery of, and to sell back to Coral, certain amounts of
natural gas once predetermined prices have been established. During the
contracts, the Norcals re-sold gas back to Coral.
 
 The
ability of the Norcals to operate profitably is largely dependent on the price
of natural gas. If natural gas prices are at a level where operating costs
exceed the revenues the plants can generate, the plants may temporarily close.
Historically, the Norcals have been closed during portions of winter and spring.
Because of current natural gas prices, the Norcals suspended operations in
November 2007 and are expected to remain closed until at least May
2008.
  The
plants are operated and maintained by RPM, on an at-cost basis.
 
 Ridgewood
Providence
  Ridgewood
Providence Power Partners, L.P. (“Ridgewood Providence”) was formed in February
1996 as a Delaware limited partnership and, in April 1996, Ridgewood Providence
purchased substantially all of the net assets of Northeastern Landfill Power
Joint Venture. The assets acquired included an electrical generating station and
associated gas treatment system, located at the Central Landfill in Johnston,
Rhode Island. At December 31, 2007, Ridgewood Providence consisted of nine
reciprocating engine/generator sets with a total capacity of 13.8MW, which are
fueled by landfill methane gas produced by, and collected from, the landfill.
Since 1990, electricity generated by Ridgewood Providence has been sold to New
England Power Service Company under a long-term electricity sales contract. The
contract expires in 2020 but becomes a market-rate contract in
2010.
  Ridgewood
Providence occupies the site and uses the gas from the landfill under the terms
of a long-term agreement with the Rhode Island Resource Recovery Corporation
(“RIRRC”), a Rhode Island public corporation that owns and operates the
landfill.
 
 In April
2002, the Managing Shareholder formed Ridgewood Rhode Island Generation LLC
(“RRIG”) for the purpose of utilizing a portion of the supply of gas from the
landfill that is in excess of the quantity that could be used by Ridgewood
Providence. The project owned by RRIG reached full operation in October 2005 and
has a capacity of 8.5MW. RRIG has rights to gas from the landfill for the
purpose of operating the RRIG project under a long-term agreement with RIRRC.
Other than an environmental indemnity agreement involving RIRRC, RRIG and
Ridgewood Providence (among others), there is no commercial relationship between
RRIG and Ridgewood Providence. The landfill currently generates more gas
than can be utilized by the combined projects of Ridgewood Providence and RRIG.
Operations and maintenance support for both Ridgewood Providence and RRIG are
provided by RPM, on an at cost basis.
 
 In August
2003, Ridgewood Gas Services, LLC (“RGS”), a subsidiary of the Trust and Trust
IV, entered into separate agreements with RIRRC and Central Gas Limited
Partnership (“CGLP”) (each of which owns a gas collection system on the landfill
that is used to provide landfill gas to Ridgewood Providence and RRIG) to
provide gas collection and management services to those entities. RGS
acquired the CGLP gas collection system and terminated the services agreement
with CGLP effective December 31, 2007.
  Pursuant
to the terms of an Environmental Attribute Agreement between Ridgewood
Providence and RIRRC, Ridgewood Providence is required to pay 30% net revenue
royalties, which are derived from the sale of Renewable Portfolio Standards
Attributes and certain other environmental attributes (“RPS Attributes”)
relating to Ridgewood Providence. The term of the agreement coincides with
the Central Landfill lease agreement, which expires in 2020 and provides for
extensions of additional ten year terms.
 
 In 1997,
Massachusetts enacted the Electric Restructuring Act of 1997 (the
“Restructuring Act”), which among other things, requires that all retail
electricity suppliers in Massachusetts (i.e. those entities supplying electric
energy to retail end-use customers in Massachusetts) purchase a minimum
percentage of their electricity supplies from qualified new renewable generation
units powered by one of several renewable fuels, such as solar, biomass or
landfill methane gas. Beginning in 2003, each such retail supplier must
obtain at least one percent of its supply from qualified new renewable
generation units. Each year thereafter, the requirement increases one-half of
one percentage point until 2009, when the requirement equals four percent of
each retail supplier’s sales in that year. Subsequent to 2009, the increase in
the percentage requirement will be determined and set by the Massachusetts
Division of Energy Resources (“DOER”).
 
 In
January 2003, Ridgewood Providence received a “Statement of Qualification” from
the DOER pursuant to the Renewable Portfolio Standards (“RPS”) adopted by
Massachusetts. Since Ridgewood Providence became qualified, it has been
able to sell to retail electric suppliers the RPS Attributes associated with its
electrical energy. Retail electric suppliers may purchase RPS Attributes
associated with renewable energy and not necessarily the energy itself. Thus,
electrical energy and RPS Attributes are separable products and need not be sold
or purchased as a bundled product.
 
 During
2004, Ridgewood Providence became qualified to sell RPS Attributes in
Connecticut under a similar RPS program, except that the Connecticut program
does not have a “vintage” prohibition, which in Massachusetts disqualifies the
amount of
a facility’s generation of electric energy measured by its average output during
the period 1995 through 1997. Thus, Ridgewood Providence can sell the 86,000
megawatt hours (“MWhs”) that are ineligible under Massachusetts standards into
the Connecticut market. During 2007 and 2006, Ridgewood Providence sold its
“vintage” RPS Attributes pursuant to agreements with various power
marketers.
  3
 Table of Contents
  Similar
agreements have committed Ridgewood Providence to sell a portion of its 2008
“vintage” RPS Attributes to such designated parties at certain fixed quantities
and prices. Pursuant to the terms of these agreements, Ridgewood Providence is
only required to deliver the specified RPS Attributes it generates and is not
obligated to produce, nor is it subject to penalty if it is unable to produce,
contracted quantities.
 
 Ridgewood
Providence and several of its affiliates have an agreement with a power marketer
for which they are committed to sell RPS Attributes derived from their electric
generation. The agreement provides such power marketer with six separate annual
options to purchase such attributes from 2004 through 2009 at fixed prices, as
defined. If Ridgewood Providence and its affiliates fail to supply the required
number of RPS Attributes, penalties may be imposed. In accordance with the terms
of the agreement, if the power marketer elects to exercise an annual option and
Ridgewood Providence  and its affiliates produce insufficient RPS
Attributes for such option year, Ridgewood Providence and its affiliates face a
penalty, which is adjusted annually for the change in the consumer price index,
among other things, of up to approximately $3.8 million, measured using factors
in effect at December 31, 2007, for that option year and any other year in which
an option has been exercised and insufficient RPS Attributes have been produced.
Pursuant to the agreement, Ridgewood Providence is liable for 8% of the total
penalty, but may be liable up to 100% in the event of a default of its
affiliates. The power marketer exercised its option to purchase 2008 RPS
Attributes.
 
 Ridgewood
Providence and the Trust, along with Trust IV and RRIG, are evaluating expanding
the generation facilities at the site. If such expansion were to occur, the
Trust may make an additional investment in Ridgewood Providence.
 
 Other
Investments
 
 On-site
Cogeneration Projects
 
 In 1995,
the Trust purchased a portfolio of 35 projects from affiliates of Eastern
Utilities Associates ("EUA"), which sell electricity and thermal energy to
industrial and commercial customers. The projects were located in California (18
sites), Connecticut (6 sites), Massachusetts (2 sites), New York (8 sites) and
Rhode Island (1 site).  The projects used natural gas fired turbines
or reciprocating engines to produce electrical energy and/or heat for industrial
uses or air conditioning under a variety of individual customer circumstances.
Their energy service agreements had terms expiring between September 1996 and
2011. The Trust shut down all but two of the projects beginning in 2001 through
2003. The remaining projects ceased operations in the fourth quarter of
2006.
 
 In 1997,
the Trust formed a joint partnership, Ridgewood/AES Power Partners, L.P. with
AES-NJ Cogen, Inc. (“AES-NJ”) to develop cogeneration projects. During 2003, the
Trust sold its interest in the joint partnership for $100,000 cash, a $150,000
interest bearing promissory note ("Promissory Note"), and a $74,000 interest
free note ("Interest Free Note"). The Promissory Note receivable bore interest
at a rate of 10% per annum, and was fully paid monthly over a four year term.
The Interest Free Note was repaid over a six month term.
 
 On
February 19, 2008, the Trust received a distribution of $494,000 related to the
bankruptcy of Globe Manufacturing Corporation (“Globe”), which occurred in
January 2001. The Trust had filed a claim against Globe totaling $4 million and
is unable to determine if any of the remaining claim will be
satisfied.
 
 Significant
Customers and Supplier
 
 During
2007 and 2006, the Trust’s largest customer, PG&E, accounted for 100% and
97% of total revenues, respectively. During 2007 and 2006, the Trust
purchased all of its gas from Coral.
 
 Project
Feedstock/Raw Materials
 
 The
investments of the Trust each convert a raw material into a finished product and
the arrangements for obtaining these raw materials are a key element in the
business of the Trust. The cogeneration facilities use natural gas as fuel.
Unless contracted for otherwise, the price charged for the gas is based on
current market conditions. The landfill facility consists of reciprocating
engine generator sets that use methane-containing landfill gas as fuel. Gas is
collected from the landfills as it is produced through natural anaerobic
digestion of the waste. Ridgewood Providence does not own or operate the
landfill but has arrangements with the site owner/operator, which gives the
project certain rights, including the right to occupy the compounds and use the
gas from the landfill. These arrangements are set out in long-term agreements
that include provisions for royalty payments from the project to the landfill
operations as compensation for granting of these rights.
 4
 Table of Contents
  Competition
 
 Power
generated from the Norcal projects and Ridgewood Providence is sold pursuant to
long-term contracts, and as a result, these facilities do not face competition
in the sale of their finished product. Ridgewood Providence competes with other
renewable energy producers for the sale of its RPS Attributes.
 
 Government
Incentives and Regulation
  Projects
of the Trust have been subject to energy and environmental laws and regulations
at the federal, state and local levels in connection with development,
ownership, operation, geographical location, zoning and land use of a project
and emissions and other substances produced by a project. These energy and
environmental laws and regulations generally require that a wide variety of
permits and other approvals be obtained before the commencement of construction
or operation of an energy-producing facility and that the facility then operates
in compliance with such permits and approvals. The projects of the Trust also
operate under Qualifying Facility Certifications issued by the Federal Energy
Regulatory Commission. The Trust considers these regulations to be routine and
does not consider the cost of compliance to be material.
 
 Ridgewood
Providence qualifies for incentives because of its use of renewable fuel, as
described under “Projects and Properties – Ridgewood Providence”,
above.
  Insurance
  The Trust
has in place, either directly or through investee companies, insurance typical
for activities such as those conducted by the Trust. These policies
include property and casualty, business interruption and workman’s
compensation insurance, which the Trust believes to be
appropriate.
 
 Employees
  The Trust
does not have employees. The activities of the Trust are performed either by
employees of the Managing Shareholder, its affiliates or those of the specific
investments of the Trust.
  Offices
  The
principal office of the Trust is located at 1314 King Street, Wilmington,
Delaware, 19801 and its phone number is 302-888-7444. The Managing Shareholder’s
principal office is located at 947 Linwood Avenue, Ridgewood, New Jersey, 07450
and its phone number is 201-447-9000.
  ITEM 1A. RISK FACTORS
  In
addition to the other information set forth elsewhere in this report, you should
carefully consider the following factors when evaluating the Trust:
  RISKS
INHERENT IN THE BUSINESSES OF THE TRUST
 
 The
Trust’s Ridgewood Providence business depends on the production of landfill
methane gas from the landfill sites on which they operate and access to that gas
production.
  The
electricity production of Ridgewood Providence is typically limited by the
available amount of landfill methane gas used as fuel by the project. A number
of factors influence the amount of landfill methane gas produced by a landfill
site including the quantity and makeup of the waste deposited into the site by
the landfill operator, the manner and sequence of the waste deposition, the
non-waste materials used to support the landfill structure and the amount of
liquid in the landfill. A number of factors also influence the ability of the
Trust’s personnel to gain access to gas that is being produced by a landfill
including the land filling strategy and practices of the landfill site operator.
To the extent that these factors limit the production of landfill methane gas or
the ability of the project to collect and use that gas, Ridgewood Providence may
not maintain profitable output levels.
 
 The
Trust’s Ridgewood Providence business is subject to interruption of its business
operations.
 
 The
electric generating plant owned by Ridgewood Providence is located on property
owned by the landfill from which Ridgewood Providence derives the methane gas to
power its plant. If the landfill expands in the direction of the electric
generating plant, it is possible that the site on which the electric generating
plant is located may be included in such expansion. If such an expansion occurs,
Ridgewood Providence might have to relocate or abandon the electricity
generating plant.  Were this to occur, Ridgewood Providence could face
a temporary or permanent loss of the revenues from this plant.
 5
 Table of Contents
  The
projects of the Trust are subject to regulatory changes (including changes in
environmental regulations) that could significantly reduce revenues or increase
expenses of the Trust.
 
 Ridgewood
Providence derives a significant portion of its income from renewable energy
incentive programs sponsored by state governments. Should states reduce,
eliminate or change the compliance requirements for these programs, such changes
could have a materially adverse impact on the financial performance of the
Trust’s investment in Ridgewood Providence.
 
 Regulatory
changes, such as emission control changes, could impact the daily operations of
the Trust’s projects. Such changes could increase costs at affected
projects or prevent certain projects from operating.
  The
Trust’s projects sell at open market prices or at prices determined using
market-based formulas and could be adversely impacted by unfavorable changes in
market prices.
  Ridgewood
Providence currently sells electricity at fixed prices under a long-term
contract but, beginning in 2010, is scheduled to sell electricity at market
prices.  If market prices for electricity fall sufficiently, it may not be
able to operate profitably. Ridgewood Providence also sells a portion of
its RPS Attributes it produces at market prices. These market prices are highly
dependent on the available supply of RPS Attributes. The supply of available RPS
Attributes is anticipated to increase in the coming years. If this increase
in supply results in a decrease in the market prices for RPS Attributes,
the profitability of Ridgewood Providence would decline.
  The
prices which the Norcals sell electricity depend on a formula based on the
market price of natural gas. Higher prices for natural gas could result in
higher electricity prices, but the contract formula does not fully compensate
for the higher fuel prices. As a result, if energy prices increase, the Norcals
may not be able to operate profitably.
  The
operations of the Trust have limited capital, and have limited access to new
capital.
  The
Trust’s investments, but not the Trust itself, have in the past utilized debt
financing. Debt financing could increase the variability of results and could
increase the financial risk of the Trust. In such cases, the rights of the Trust
to the cash flow of the projects would typically be subordinated to the
obligations of the projects under the debt facilities, which could limit the
Trust’s ability to receive cash distributions from its investments.
 
 The
projects of the Trust depend on the near-continuous operation of their
equipment. Should the productivity of some or all of this equipment be
compromised or should the equipment fail altogether, the Trust would be
adversely affected. The Trust may also experience difficulty in hiring qualified
operating personnel.
  The
primary equipment of the Trust includes reciprocating engine generator sets.
This equipment is subject to mechanical failure that the Trust may not be able
to predict and that can render specific projects inoperable for considerable
periods of time. This risk also extends to failures of the electricity grid near
the Trust’s projects that could prevent the affected project or projects from
delivering its electricity. In addition, the Trust may experience price
increases for, or difficulty in obtaining, spare parts for its projects and in
identifying and hiring personnel qualified to operate, maintain and repair the
specialized equipment that make up parts of its projects.
  The
Trust is, and may in the future become, involved in litigation that may be
resolved unfavorably.
 
 The Trust
faces an inherent business risk of exposure to various types of claims and
lawsuits that may arise in the ordinary course of business. Additionally, if the
Norcals were to become closed on permanent basis, these projects, but not the
Trust itself, may be in breach of their contracts with PG&E and could be
subject to claims. Although it is not possible to predict the timing, nature or
outcome of such claims or lawsuits should they arise, any such claims or
proceedings, or any claim or proceeding discussed herein under Item 3. “Legal
Proceedings”, may be disposed of unfavorably to the Trust. An unfavorable ruling
could include money damages or injunctive relief and could result in a material
adverse impact on the Trust's business or financial condition. Generally, for
accounting purposes, the Trust's results of operations would be impacted for the
period in which the matter is ultimately resolved unfavorably to the Trust or an
unfavorable outcome becomes probable and reasonably estimable. In addition,
while the Trust maintains insurance coverage with respect to certain claims, the
Trust may not be able to obtain such insurance on acceptable terms in the
future, if at all, and any such insurance may not provide adequate coverage
against any such claims.
 
 RISKS
RELATED TO THE NATURE OF THE TRUST’S SHARES
  The
Trust’s shares have severe restrictions on transferability and liquidity and
shareholders are required to hold the shares indefinitely.
  The
Trust’s shares are illiquid investments. There is currently no market for these
shares and one is not likely to develop. Because there may be only a limited
number of persons who purchase shares and because there are significant
restrictions on the transferability of such shares under the Trust’s Declaration
of Trust and under applicable federal and state securities laws, it is expected
that no public market will develop. Moreover, neither the Trust nor the Managing
Shareholder will provide any market for the
shares. Shareholders are generally prohibited from selling or transferring their
shares except in the circumstances permitted under the Declaration of Trust and
applicable law, and all such sales or transfers require the Trust’s consent,
which it may withhold at its sole discretion. Accordingly, shareholders have no
assurance that an investment can be transferred and must be prepared to bear the
economic risk of the investment indefinitely.
  6
 Table of Contents
  Shareholders
are not permitted to participate in the Trust’s management or operations and
must rely exclusively on the Managing Shareholder.
  Shareholders
have no right, power or authority to participate in the Trust’s management or
decision making or in the management of the Trust’s projects. The Managing
Shareholder has the exclusive right to manage, control and operate the Trust’s
affairs and business and to make all decisions relating to its
operation.
 
 The
Trust’s assets are generally illiquid and any disposition of Trust assets is at
the discretion of the Managing Shareholder.
  The
Trust’s interest in projects is illiquid. The Managing Shareholder has full
discretion to determine whether any project, or any partial interest, should be
sold and the terms and conditions under which such project would be sold.
Consequently, subject to shareholder approvals as detailed in the Declaration of
Trust, shareholders will depend on the Managing Shareholder for the
decision to sell all or a portion of an asset, or retain it, for the benefit of
the shareholders and for negotiating and completing the sale
transaction.
  The
Trust indemnifies its officers, as well as the Managing Shareholder and its
employees, for certain actions taken on its behalf. Therefore, the Trust has
limited recourse relative to these actions.
  The
Declaration of Trust provides that the Trust’s officers and agents, the Managing
Shareholder, the affiliates of the Managing Shareholder and their respective
directors, officers and agents when acting on behalf of the Managing Shareholder
or its affiliates on the Trust’s behalf, will be indemnified and held harmless
by the Trust from any and all claims rising out of the Trust’s management,
except for claims arising out of bad faith, gross negligence or willful
misconduct or a breach of the Declaration of Trust. Therefore, the Trust may
have difficulty sustaining an action against the Managing Shareholder, or its
affiliates and their officers based on breach of fiduciary responsibility or
other obligations to the shareholders.
  The
Managing Shareholder is entitled to receive a management fee regardless of the
Trust’s profitability and also receives cash distributions.
  The
Managing Shareholder is entitled to receive an annual management fee from the
Trust regardless of whether the Trust is profitable in that year. The annual
fee, payable monthly, is equal to 2.5% of the Trust's prior year’s net asset
value. In addition to its annual management fee, the Managing Shareholder, as
compensation for its management services, will receive 20% of the Trust’s cash
distributions to shareholders upon the shareholders having received a certain
minimum level of distributions as set out in the Declaration of Trust, even
though the Managing Shareholder has not contributed any cash to the Trust.
Accordingly, shareholders contribute all of the cash utilized for the Trust’s
investments and activities. If the Trust’s projects are unsuccessful, the
shareholders may lose 100% of their investment while the Managing Shareholder
will not suffer any investment losses because it did not contribute any capital.
None of the compensation to be received by the Managing Shareholder has been
derived as a result of arm’s length negotiations.
  Cash
distributions are not guaranteed and may be less than anticipated or
estimated.
  Distributions
depend primarily on available cash from project operations. At times,
distributions have been delayed to repay the principal and interest on project
or Trust borrowings, if any, or to the Trust’s other costs. The Trust’s taxable
income will be taxable to the shareholders in the year earned, even if cash is
not distributed.
  Because
the Managing Shareholder manages other electricity generation and infrastructure
trusts, it may have conflicts of interest in its management of the Trust’s
operations.
  Shareholders
will not be involved in the management of the Trust’s operations. Accordingly,
they must rely on the Managing Shareholder’s judgment in such matters. Inherent
with the exercise of its judgment, the Managing Shareholder will be faced with
conflicts of interest. While neither the Trust nor the Managing Shareholder have
specific procedures in place in the event of any such conflicting
responsibilities, the Managing Shareholder recognizes that it has fiduciary
duties to the Trust in connection with its position and responsibilities as
Managing Shareholder and it intends to abide by such fiduciary responsibilities
in performing its duties. Therefore, the Managing Shareholder and its affiliates
will attempt, in good faith, to resolve all conflicts of interest in a fair and
equitable manner with respect to all parties affected by any such conflicts of
interest. However, the Managing Shareholder is not liable to the Trust for how
conflicts of interest are resolved unless it has acted in bad faith, or engaged
in gross negligence or willful misconduct.
 7
 Table of Contents
  TAX
RISKS ASSOCIATED WITH AN INVESTMENT IN SHARES
  The Trust
is organized as a Delaware trust and the Managing Shareholder has qualified the
Trust as a partnership for federal tax purposes. The principal tax risks to
shareholders are that:
  ·
              The
      Trust may recognize income taxable to the shareholders but may not
      distribute enough cash to cover the income taxes owed by shareholders on
      the Trust’s taxable income.
 
 ·
              The
      allocation of Trust items of income, gain, loss, and deduction may not be
      recognized for federal income tax
purposes.
 
 ·
              All
      or a portion of the Trust’s expenses could be considered either investment
      expenses (which would be deductible by a shareholder only to the extent
      the aggregate of such expenses exceeded 2% of such shareholder’s adjusted
      gross income) or as nondeductible items that must be
      capitalized.
 
 ·
              All
      or a substantial portion of the Trust’s income could be deemed to
      constitute unrelated business taxable income, such that tax-exempt
      shareholders could be subject to tax on their respective portions of such
      income.
 
 ·
              If
      any Trust income is deemed to be unrelated business taxable income, a
      shareholder that is a charitable remainder trust could have all of its
      income from any source deemed to be
taxable.
 
 ·
              All
      or a portion of the losses, if any, allocated to the shareholders will be
      passive losses and thus deductible by the shareholder only to the extent
      of passive income.
 
 ·
              The
      shareholders could have capital losses in excess of the amount that is
      allowable as a deduction in a particular
year.
 
 Although
the Trust has obtained an opinion of counsel regarding the matters described in
the preceding paragraph, it will not obtain a ruling from the IRS as to any
aspect of the Trust’s tax status. The tax consequences of investing in the Trust
could be altered at any time by legislative, judicial, or administrative
action.
 
 If
the IRS audits the Trust, it could require investors to amend or adjust their
tax returns or result in an audit of their tax returns.
  The IRS
may audit the Trust’s tax returns. Any audit issues will be resolved at the
Trust level by the Managing Shareholder.
 
 If
adjustments are made by the IRS, corresponding adjustments will be required to
be made to the federal income tax returns of the shareholders, which may require
payment of additional taxes, interest, and penalties. An audit of the Trust’s
tax return may result in the examination and audit of a shareholder’s return
that otherwise might not have occurred, and such audit may result in adjustments
to items in the shareholder’s return that are unrelated to the Trust’s
operations. Each shareholder bears the expenses associated with an audit of that
shareholder’s return.
  In the
event that an audit of the Trust by the IRS results in adjustments to the tax
liability of a shareholder, such shareholder will be subject to interest on the
underpayment and may be subject to substantial penalties.
  The tax
treatment of the Trust cannot be guaranteed for the life of the Trust. Changes
in laws or regulations may adversely affect any such tax treatment.
  Deductions,
credits or other tax consequences may not be available to shareholders.
Legislative or administrative changes or court decisions could be forthcoming
which would significantly change the statements herein. In some instances, these
changes could have substantial effect on the tax aspects of the Trust. Any
future legislative changes may or may not be retroactive with respect to
transactions prior to the effective date of such changes. Bills have been
introduced in Congress in the past and may be introduced in the future which, if
enacted, would adversely affect some of the tax consequences of the
Trust.
  ITEM
1B.  UNRESOLVED STAFF COMMENTS
  Not
applicable.
 
 ITEM
2.  PROPERTIES
  Information
regarding the Trust’s properties is contained in Item 1. “Business”, under the
heading “Projects and Properties”.
 8
 Table of Contents
  ITEM 3.  LEGAL
PROCEEDINGS
  On August
16, 2006, the Trust and several affiliated entities, including the Managing
Shareholder, filed a lawsuit against the former independent registered public
accounting firm for the Trust and several affiliated entities, Perelson Weiner
LLP (“Perelson Weiner”), in New Jersey Superior Court. The suit alleged
professional malpractice and breach of contract in connection with audit and
accounting services performed for the Trust and the other plaintiffs by Perelson
Weiner. On October 20, 2006, Perelson Weiner filed a counterclaim against the
Trust and the other plaintiffs, alleging breach of contract due to unpaid
invoices in the total amount of approximately $1,188,000. Discovery is ongoing
and no trial date has been set. The costs and expenses of the litigation
are being paid for by the Managing Shareholder and affiliated management
companies and not the underlying investment funds, including the
Trust.
 
 ITEM4.  SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
  None.
 
 PART
II
 
 ITEM 5.  MARKET FOR
REGISTRANT’S COMMON EQUITY, RELATED SECURITY HOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
  Market
Information
  There has
never been an established public trading market for the Trust’s Investor
Shares.
  Holders
  As of
January 31, 2008, there were 839 holders of Investor Shares.
  Dividends
  Trust
distributions for the years ended December 31, 2007 and 2006 were as
follows (in thousands, except per share data):
  2007
              
              
              2006Distributions
      to Investors
              
              $
              500
              
              
              $
              1,651Distributions
      per Investor Share
              
              
              1,276
              
              
              
              4,200Distributions
      to Managing Shareholder
              
              
              5
              
              
              
              17
 
 ITEM6.  SELECTED
FINANCIAL DATA
 
 Not
required.
 
 ITEM
7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
  The
following discussion and analysis should be read in conjunction with the Trust’s
Consolidated Financial Statements and Notes which appear elsewhere in this
Annual Report on Form 10-K. This discussion contains forward-looking
statements that involve risks, uncertainties and assumptions. The Trust’s actual
results could differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth in
Item 1A. “Risk Factors” and elsewhere in this Annual Report on
Form 10-K.
  Overview
 
 The Trust
is a Delaware trust formed on December 6, 1993 primarily to make investments in
projects and businesses in the energy and infrastructure sectors. RRP, a New
Jersey limited liability company, is the Managing Shareholder. As the Managing
Shareholder, RRP has direct and exclusive control over the management and
operations of the Trust.
  The Trust
has focused primarily on projects fueled by natural gas and renewable sources of
fuel. These projects allow the Trust to develop secure long-term positions in
attractive specialty markets for products and services provided by its projects
and companies. As of December 31, 2007, the projects in which the Trust had
investments were located in the United States. As of that date, the Trust had
investments in a landfill gas-fired electric generating project with total
capacity of 13.8MW and in two electric cogeneration projects with total capacity
of 14.2MW. The Trust’s cogeneration facilities suspended operations in the
fourth quarter of 2007 and expect to remain closed until at least May 2008. If the
Norcals were to remain closed on a permanent basis, and effectively terminate
their agreements with PG&E, the Norcals, but not the Trust, may be obligated
to pay significant termination fees.
  The
Trust's projects derive their revenue primarily from the sale of generated
electricity and sales of related RPS Attributes. For the year ended December 31,
2007, Ridgewood Providence derived 38%, or $5.2 million, of its annual revenues
from the sales of RPS Attributes. As discussed in Item 1. "Risk Factors", the
Trust is anticipating an increase in the coming years in the available supply of
RPS Attributes. If this increase in supply has an adverse affect on prices for
these attributes, profitability would decline at Ridgewood
Providence.
  The
Trust’s accompanying consolidated financial statements include the accounts of
the Trust and its wholly-owned subsidiaries. The Trust’s consolidated financial
statements also include the Trust’s 35.7% interest in Ridgewood Providence,
which is accounted for under the
equity method of accounting, as the Trust has the ability to exercise
significant influence but does not control the operating and financial policies
of the investment. The remaining 64.3% of Ridgewood Providence is owned by Trust
IV.
  9
 Table of Contents
  Critical
Accounting Policies and Estimates
 
 The
discussion and analysis of the Trust’s financial condition and results of
operations are based upon the Trust’s consolidated financial statements, which
have been prepared in conformity with accounting principles generally accepted
in the United States of America. In preparing these financial statements, the
Trust is required to make certain estimates, judgments and assumptions. These
estimates, judgments and assumptions affect the reported amounts of the Trust’s
assets and liabilities, including the disclosure of contingent assets and
liabilities, at the date of the financial statements and the reported amounts of
the Trust’s revenues and expenses during the periods presented. The Trust
evaluates these estimates and assumptions on an ongoing basis. The Trust bases
its estimates and assumptions on historical experience and on various other
factors that the Trust believes to be reasonable at the time the estimates and
assumptions are made. However, future events and their effects cannot be
predicted with absolute certainty. Therefore, the determination of estimates
requires the exercise of judgment. Actual results may differ from these
estimates and assumptions under different circumstances or conditions, and such
differences may be material to the financial statements. The Trust believes the
following critical accounting policies affect the more significant estimates and
judgments in the preparation of the Trust’s consolidated financial
statements.
 
 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 electric power sales
contract. Adjustments are made to reflect actual volumes delivered when the
actual volumetric 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.
 
 Accounts
Receivable
 
 Accounts
receivable are recorded at invoice price in the period 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.
  Plant
and Equipment
  Plant and
equipment, consisting principally of electrical generating machinery and power
generation facilities, is stated at cost less accumulated depreciation. Renewals
and betterments that increase the useful lives of the assets are capitalized.
Repair and maintenance expenditures are expensed as incurred. Upon retirement or
disposal of assets, the cost and related accumulated depreciation are removed
from the consolidated balance sheets. The difference, if any, between the net
asset value and any proceeds from such retirement or disposal is recorded as a
gain or loss in the consolidated statement of operations.
 
 Depreciation
is recorded using the straight-line method over the useful lives of the assets,
which ranges from 5 to 20 years.
  Impairment
of Intangibles and Long-Lived Assets
  The Trust
evaluates intangible assets and long-lived assets, such as 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 impairment has
occurred is made by comparing the carrying value of an asset to the estimated
undiscounted cash flows attributable to that asset. If 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 analysis requires
estimates of the amount and timing of projected cash flows and, where
applicable, judgments associated with, among other factors, the appropriate
discount rate. Such estimates are critical in determining whether any impairment
charge should be recorded and the amount of such charge if an impairment loss is
deemed to be necessary.
  Gas Contracts
 
 In August
2001, the Norcals entered into agreements to purchase natural gas, at fixed
prices, over a five-year term in connection with entering into an amendment
fixing the sales price of electric power sales contracts for a similar term.
These contracts were entered into in order to minimize the impact of fluctuating
energy prices. The Trust determined that these contracts were derivatives as
defined under Statement of Financial Accounting Standards (“SFAS”) No. 133,
"Accounting for Derivative Instruments and Hedging Activities", as amended. The
Trust designated the derivatives as non-hedge instruments. Accordingly, the
values of the contracts based on the differences between contract prices and
market value prices were recognized as an asset or a liability in the
consolidated balance sheets. Changes in the carrying value of the contracts were
reflected as a component of cost of revenues in the consolidated statements of
operations. During the third quarter of 2006, the Norcals completed their
contractual agreements to resell the purchased gas back to their gas supplier
and therefore, there is no longer any value recorded on the consolidated balance
sheets associated with these contracts.
 10
 Table of Contents
  Management
Fees
  The Trust
is charged management fees from its Managing Shareholder. Unpaid management fees
accrue interest at 10% per annum. The Managing Shareholder has periodically
waived its right to receive a portion of fees and related interest, as well as
various professional service fee reimbursements. Any waived management fees,
interest or reimbursements are deemed capital contributions at the time of
waiver.  The shareholders of the Trust other than the Managing
Shareholder are allocated 99% of each contribution and the Managing Shareholder
is allocated 1% so that the amount of the contribution allocated offsets the
allocation of the recorded expense.
 
 Income
Taxes
 
 No
provision is made for income taxes in the Trust’s consolidated financial
statements as the income or losses of the Trust are passed through and included
in the income tax returns of the individual shareholders of the Trust. 
Effective January 1, 2007, the Trust adopted Financial Accounting Standards
Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (“FIN 48”) with no impact on its consolidated financial
statements. FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with SFAS No.
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.
 
 Results
of Operations
 
 Revenues
decreased by $0.2 million, or 5.6%, from $3.8 million in 2006 to $3.6 million in
2007.  This decrease was attributable to decreased revenues at the
Norcals and cogeneration.  The Norcals suspended operations in the
fourth quarter of 2007 and the cogeneration facilities ceased operations in the
fourth quarter of 2006.
 
 Cost of
revenues decreased by $1.2 million, or 21.7%, from $5.5 million for 2006 to $4.3
million in 2007. This decrease was primarily attributable to decreased costs of
$2.5 million related to the effect of accounting for gas contracts which expired
in August 2006, as natural gas prices decreased during 2006, partially offset by
$0.7 million of increased fuel costs in 2007 at the Norcals.
 
 Gross
loss of $1.7 million in 2006 decreased by $1 million to a gross loss of $0.7
million for 2007. This was primarily due to decreased costs of revenues
attributable to the accounting for gas contracts partially offset by lower
revenues of $0.2 million.
 
 General
and administrative expenses increased by $0.5 million from $0.1 million in 2006
to $0.6 million in 2007. This increase was primarily attributable to higher
professional fees.
  The
management fee due to the Managing Shareholder for 2007 and 2006 was $0.3
million. The management fee was for certain management, administrative and
advisory services, office space and other facilities provided to the Trust. In
2007 and 2006, the Managing Shareholder waived its right to receive $0.4
million and $0.1 million, respectively, of unpaid accrued management
and professional fees.
  In 2007,
the Trust recorded an impairment of $3.7 million related to its remaining
balance in plant, equipment and intangibles at the Norcal projects. The
Trust did not record any impairments in 2006.
 
 Liquidity
and Capital Resources
 
 At
December 31, 2007, the Trust had cash and cash equivalents of $1.9 million, an
increase of $0.5 million from December 31, 2006. The cash flows for the year
2007 were $1 million provided by operating activities, $13,000 provided by
investing activities and $0.5 million used in financing
activities.
 
 In 2007,
the Trust’s operating activities generated cash of $1 million compared to $2.7
million in 2006, a decrease of $1.7 million, primarily due to cash flows
from gas contracts that expired in 2006 that did not recur in 2007.
 
 In 2007,
the Trust used cash of $0.5 million in financing activities as compared to $1.7
million in 2006; both amounts represent cash distributions to
shareholders.
 
 Future
Liquidity and Capital Resource Requirements
  The Trust
expects cash flows from operating activities, along with existing cash, cash
equivalents and borrowing capabilities will be sufficient to provide working
capital and fund capital expenditures for the next 12 months.
  Off-Balance
Sheet Arrangements
  None.
  11
 Table of Contents
  Contractual
Obligations and Commitments
 
 At
December 31, 2007, the Trust’s contractual obligations are as follows (inthousands):
 
 Payments
      due by periodContractual
      obligations
              
              Total
              
              
              Less
      than
                1
      year
              
              
              1 -
      3
                years
              
              
              3 -
      5
                years
              
              
              More
      than
                5
      yearsGround
      operating leases
              
              $
              2,309
              
              
              $
              173
              
              
              $
              346
              
              
              $
              346
              
              
              $
              1,444
 
 Recent
Accounting Pronouncements
 
 SFAS
157
  In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS 157"), to define fair value, establish a framework for measuring fair
value in accordance with generally accepted accounting principles and expand
disclosures about fair value measurements. SFAS 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 157 will become effective for the Trust
beginning January 1, 2008. In February 2008, FASB issued Staff Position 157-2,
Effective Date of FASB
Statement No. 157, which delays the effective date of SFAS 157
for nonfinancial assets and nonfinancial liabilities for the Trust until January
1, 2009, except for items that are recognized or disclosed at fair value in the
financial statements on a recurring basis. The Trust is currently evaluating the
impact of adopting SFAS 157 on its consolidated financial
statements.
 
 SFAS
159
  In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”), which expands
opportunities to use fair value measurements in financial reporting and permits
entities to choose to measure many financial instruments and certain other items
at fair value. SFAS 159 will become effective for the Trust beginning
January 1, 2008. The Trust is currently evaluating the impact of adopting
SFAS 159 on its consolidated financial statements.
 
 SFAS
160
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements — an amendment of ARB No. 51
(“SFAS 160”).  SFAS 160 requires that ownership interests in
subsidiaries held by parties other than the parent, and the amount of
consolidated net income, be clearly identified, labeled, and presented in the
consolidated financial statements within equity, but separate from the parent’s
equity. It also requires once a subsidiary is deconsolidated, any retained
noncontrolling equity investment in the former subsidiary be initially measured
at fair value. Sufficient disclosures are required to clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. SFAS 160 will become effective for the Trust beginning
January 1, 2009. The Trust is currently evaluating the impact of adopting
SFAS 160 on its consolidated financial statements.
 
 ITEM 7A. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Not
required.
  ITEM 8.  FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
  The
consolidated financial statements of the Trust, including the notes thereto and
the report thereon, are presented beginning at page F-1 of this Form
10-K.
  ITEM 9.  CHANGES IN
AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  None.
 
 ITEM 9A.  CONTROLS
AND PROCEDURES
 
 Evaluation
of Disclosure Controls and Procedures
  Under the
supervision, and with the participation of the Trust’s management, including its
Chief Executive Officer and Chief Financial Officer, the Trust evaluated the
effectiveness of the design and operation of disclosure controls and procedures
(as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the
period covered by this Annual Report on Form 10-K.
  The Trust
previously reported the following material weaknesses:
 
 (i)
                  a
      lack of sufficient personnel with relevant experience to develop,
      administer and monitor disclosure controls and procedures to enable the
      Trust to comply efficiently, or on a timely basis, with its financial
      reporting obligations,(ii)
                  inadequate
      disclosure controls and procedures, including inadequate record retention
      and review policies that would enable the Trust to meet its financial
      reporting and disclosure obligations in an efficient and timely
      manner.
 12
 Table of Contents
  During
the fourth quarter of 2007, the Trust expanded its disclosure controls and
procedures. The Trust documented many of its existing informal procedures,
established a compliance-focused disclosure committee, formalized monthly
closing procedures and implemented a corporate whistleblower policy. Management
of the Trust believes that it has corrected the weakness regarding inadequate
record retention and believes that these improvements in disclosure controls and
procedures, coupled with those implemented earlier in 2007, when fully
operational, will correct the remainder of the previously reported weaknesses in
its disclosure controls and procedures.
  As of
December 31, 2007, the Trust was still delinquent in its filings with the SEC.
As a result, the Trust’s Chief Executive Officer and Chief Financial Officer
concluded that, as of the end of the period covered by this report, the Trust’s
disclosure controls and procedures were not effective.
  Management’s
Report on Internal Control over Financial Reporting
 
 The
Trust’s management is responsible for establishing and maintaining adequate
internal control over financial reporting.  The Trust’s internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
 
 Management
of the Trust, including its Chief Executive Officer and Chief Financial Officer,
assessed the effectiveness of the Trust’s internal control over financial
reporting as of December 31, 2007.  In making this assessment,
management of the Trust used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal
Control — Integrated Framework.
 
 While no
material weaknesses were noted during their assessment using those criteria, it
was noted that many of the Trust’s current disclosure procedures and controls
were only recently put into place and were not operational during the entire
year. Based on this, the Trust has not sufficiently demonstrated compliance with
its procedures related to internal control over financial reporting.
Accordingly, management of the Trust concluded that as of December 31,
2007, the Trust’s internal control over financial reporting was not effective.
To mitigate the impact of this lack of effective internal control over
financial reporting, the Trust’s Chief Executive Officer and Chief Financial
Officer expanded their review of the disclosures contained in this Form 10-K by
reviewing additional supporting materials and conducting interviews of
management.
  This
Annual Report on Form 10-K does not include an attestation report of the Trust’s
registered public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Trust’s registered public accounting firm pursuant to temporary rules of the SEC
that permit the Trust to provide only management’s report in this Annual
Report.
  Changes
in Internal Control over Financial Reporting
 
 The
Trust’s Chief Executive Officer and Chief Financial Officer have concluded that
there was no change in the Trust's internal control over financial reporting (as
such term is defined in Rule 13a-15(f) under the Exchange Act, as amended) that
occurred during the quarter ended December 31, 2007 that has materially
affected, or is reasonably likely to materially affect, the Trust’s internal
control over financial reporting.
 ITEM9B.  OTHER
INFORMATION
  None.
 PART
III
 
 ITEM10.  DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  The
Trust’s Managing Shareholder, RRP, was originally founded in 1991. The Managing
Shareholder has very broad authority, including the authority to elect executive
officers of the Trust.
  Each of
the executive officers of the Trust also serves as an executive officer of the
Managing Shareholder. The executive officers of the Trust are as
follows:
 
 Name, Age and Position
      with Registrant
              Officer
      SinceRandall
      D. Holmes, 60President
      and Chief Executive Officer
              2004Robert
      E. Swanson, 60Chairman
              1997Jeffrey
      H. Strasberg, 50Executive
      Vice President and Chief Financial Officer
              2007Daniel
      V. Gulino, 47Senior
      Vice President, General Counsel and Secretary
              2000
 13
 Table of Contents
  Set forth
below is the name of and certain biographical information regarding the
executive officers of the Trust:
  Randall D. Holmes has served
as President and Chief Executive Officer of the Trust, the Managing Shareholder
and affiliated Power Trusts and LLCs since January 2006 and served as Chief
Operating Officer of the Trust, the Managing Shareholder and affiliated Power
Trusts and LLCs from January 2004 until January 2006. Prior to such time, Mr.
Holmes served as the primary outside counsel to and has represented the Managing
Shareholder and its affiliates since 1991. Immediately prior to being
appointed Chief Operating Officer, Mr. Holmes was counsel to Downs Rachlin
Martin PLLC (“DRM”). DRM is one of the primary outside counsel to the Trust, the
Managing Shareholder and its affiliates. He has maintained a minor consulting
relationship with DRM in which he may act as a paid advisor to DRM on certain
matters that are unrelated to the Trust. Such relationship will not require a
significant amount of Mr. Holmes’ time and it is expected that such relationship
will not adversely affect his duties as President and Chief Executive Officer.
Mr. Holmes is a graduate of Texas Tech University and the University
of Michigan Law School. He is a member of the New
York State Bar.
  Robert E. Swanson has served
as Chairman of the Trust, the Managing Shareholder and affiliated Power Trusts
and LLCs since their inception. From their inception until January 2006, Mr.
Swanson also served as their Chief Executive Officer. Mr. Swanson is the
controlling member of the Managing Shareholder, as well as Ridgewood Energy and
Ridgewood Capital, affiliates of the Trust. Mr. Swanson has been President and
registered principal of Ridgewood Securities since its formation in 1982, has
served as the Chairman of the Board of Ridgewood Capital since its organization
in 1998 and has served as President and Chief Executive Officer of Ridgewood
Energy since its inception in 1982. Mr. Swanson is a member of the New
York State and New Jersey State Bars, the Association of the Bar of the
City of New York and the New York State Bar Association. He is a graduate of
Amherst College and
Fordham University Law School.
 
 Jeffrey H. Strasberg has
served as Executive Vice President and Chief Financial Officer of the
Trust, the Managing Shareholder and affiliated Power Trusts and LLCs since May
2007. Mr. Strasberg also serves as Senior Vice President and Chief Financial
Officer of Ridgewood Capital and affiliated LLCs and Ridgewood Securities and
has done so since April 2005. Mr. Strasberg joined Ridgewood Capital in 1998
where his initial responsibilities were to serve as interim Chief Financial
Officer of various portfolio companies in which Ridgewood Capital Trusts had
interests. Mr. Strasberg is a Certified Public Accountant and a graduate of the
University of Florida.
  Daniel V. Gulino has served as
Senior Vice President and General Counsel of the Trust, the Managing
Shareholder and affiliated Power Trusts and LLCs since 2000 and was appointed
Secretary in February 2007. Mr. Gulino also serves as Senior Vice President and
General Counsel of Ridgewood Energy, Ridgewood Capital, Ridgewood Securities and
affiliated Trusts and LLCs and has done so since 2000. Mr. Gulino is a member of
the New Jersey State and Pennsylvania State Bars. He is a graduate of
Fairleigh Dickinson University and Rutgers University School of
Law.
  Board
of Directors and Board Committees
  The Trust
does not have its own board of directors or any board committees. The Trust
relies upon the Managing Shareholder to perform the function that a board of
directors or its committees would otherwise perform. Officers of the Trust are
not directly compensated by the Trust, and all compensation matters are
addressed by the Managing Shareholder, as described in Item 11. “Executive
Compensation”. Because the Trust does not maintain a board of directors and
because officers of the Trust are compensated by the Managing Shareholder, the
Managing Shareholder believes that it is appropriate for the Trust not to have a
nominating or compensation committee.
  Managing
Shareholder
  The
Trust’s management agreement with the Managing Shareholder details how the
Managing Shareholder is to render management, administrative and investment
advisory services to the Trust. Specifically, the Managing Shareholder performs
(or may arrange for the performance of) the management and administrative
services required for the operation of the Trust. Among other services, the
Managing Shareholder administers the accounts and handles relations with
shareholders, provides the Trust with office space, equipment and facilities and
other services necessary for its operation, and conducts the Trust’s relations
with custodians, depositories, accountants, attorneys, brokers and dealers,
corporate fiduciaries, insurers, banks and others, as required.
 
 The
Managing Shareholder is also responsible for making investment and divestment
decisions, subject to the provisions of the Declaration of Trust. The Managing
Shareholder is obligated to pay the compensation of the personnel and
administrative and service expenses necessary to perform the foregoing
obligations. The Trust pays all other expenses of the Trust, including
transaction expenses, valuation costs, expenses of preparing and printing
periodic reports for shareholders and the SEC, postage for Trust mailings, SEC
fees, interest, taxes, legal, accounting and consulting fees, litigation
expenses and other expenses properly payable by the Trust. The Trust reimburses
the Managing Shareholder for all such Trust expenses paid by the Managing
Shareholder.
  As
compensation for the Managing Shareholder’s performance under the Management
Agreement, the Trust is obligated to pay the Managing Shareholder an annual
management fee described below in Item 13. “Certain Relationships and Related
Transactions, and Director Independence”.
 14
 Table of Contents
  Each
investor in the Trust consented to the terms and conditions of the Management
Agreement by subscribing to acquire Investor Shares in the Trust. The Management
Agreement is subject to termination at any time on 60 days prior notice by a
majority in interest of the shareholders or the Managing Shareholder. The
Management Agreement is subject to amendment by the parties upon the approval of
a majority in interest of the investors.
  Section
16(a) Beneficial Ownership Reporting Compliance
  Section
16(a) of the Exchange Act, requires the Trust’s executive officers and
directors, and persons who own more than 10% of a registered class of the
Trust’s equity securities, to file reports of ownership and changes in ownership
with the SEC. Based on a review of the copies of reports furnished or otherwise
available to the Trust, the Trust believes that the filing requirements were met
during the year ended December 31, 2007.
 
 Code
of Ethics
  In March
2004, the Managing Shareholder, for itself and for the Trust and its affiliates
adopted a Code of Ethics applicable to the principal executive officer,
principal financial officer, principal accounting officer or controller (or any
persons performing similar functions) of each such entity. A copy of the Code of
Ethics is filed as Exhibit 14 to this Annual Report on Form 10-K.
  ITEM 11.  EXECUTIVE
COMPENSATION
  The
executive officers of the Trust do not receive compensation directly from the
Trust or any of its subsidiaries. They provide managerial services to the Trust
in accordance with the terms of the Trust’s Declaration of Trust. The Managing
Shareholder, or affiliated management companies, determines and pays the
compensation of these officers. Each of the executive officers of the Trust also
serves as an executive officer of the Managing Shareholder and other trusts
managed by the Managing Shareholder and its affiliates.
 
 The Trust
does, however, pay the Managing Shareholder a management fee and the Managing
Shareholder may determine to use a portion of the proceeds from the management
fee to pay compensation to executive officers of the Trust. See Item 13.
“Certain Relationships and Related Transactions, and Director Independence” for
more information regarding Managing Shareholder compensation and payments to
affiliated entities.
  ITEM 12. SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  The
following table sets forth information with respect to the beneficial ownership
of the Trust’s Investor Shares as of December 31, 2007 (no person owns more than
5%) by:
 
 ·
              each
      executive officer of the Trust (there are no directors);
    and
 ·
              all
      of the executive officers of the Trust as a
  group.
 
 Beneficial
ownership is determined in accordance with SEC rules and includes voting or
investment power with respect to the securities. Except as indicated by
footnote, and subject to applicable community property laws, the persons named
in the table below have sole voting and investment power with respect to all
Investor Shares shown as beneficially owned by them. Percentage of beneficial
ownership is based on 391.8444 Investor Shares outstanding at December 31, 2007.
Other than as set forth below, no officer of the Trust owns any shares of the
Trust.
 
 Name of beneficial
      owner
              
              Number
                of shares
      (1)
              
              
              PercentRidgewood
      Renewable Power LLC (Managing Shareholder)
                Robert
      E. Swanson,  controlling member
              
              
              1
              
              
              
              *Executive
      officers as a group
              
              
              1
              
              
              
              *
 
 
 (1)
              Does
      not include a management share in the Trust representing the beneficial
      interests and management rights of the Managing Shareholder in its
      capacity as the Managing Shareholder. The management share owned by the
      Managing Shareholder is the only issued and outstanding management share
      of the Trust. The management rights of the Managing Shareholder are
      described in further detail in Item 1. “Business”. Its beneficial interest
      in cash distributions of the Trust and its allocable share of the Trust’s
      net profits and net losses and other items attributable to the management
      share are described in further detail below at Item 13. “Certain
      Relationships and Related Transactions, and Director
      Independence”.
 15
 Table of Contents
  ITEM 13.  CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
 
 Under the
terms of the Trust’s Management Agreement, the Managing Shareholder provides
certain management, administrative and advisory services, and office space to
the Trust. In return, the Trust is obligated to pay the Managing Shareholder an
annual management fee equal to 2.5% of the Trust’s prior year net asset value,
which equaled $273,000 for the year ended December 31, 2007, as compensation for
such services. The management fee is to be paid in monthly installments and, to
the extent that the Trust does not pay the management fee on a timely basis, the
Trust accrues interest at an annual rate of 10% on the unpaid
balance.
 
 For the
year ended December 31, 2007, the Trust made management fee payments to the
Managing Shareholder of $158,000.  During the fourth quarter of 2007,
the Managing Shareholder forgave $115,000 of unpaid accrued management fees. In
the fourth quarter of 2007, the Managing Shareholder waived its right to
reimbursement of $248,000 relating to professional service fees of the Trust.
Any waivers, or forgiveness, by the Managing Shareholder are recorded by the
Trust as a deemed capital contribution. The shareholders of the Trust other than
the Managing Shareholder were allocated 99% of each contribution and the
Managing Shareholder was allocated 1% so that the amount of the
contribution allocated offsets the allocation of the recorded
expense.
  Under the
Management Agreement with the Managing Shareholder, RPM provides management,
purchasing, engineering, planning and administrative services to the projects
operated by the Trust. RPM charges the projects 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 or in proportion to amounts invested
in projects managed by RPM.  For the year ended December 31, 2007, RPM
charged the projects approximately $223,000 for overhead items allocated in
proportion to the amount invested in projects managed.  In addition,
for the year ended December 31, 2007, RPM charged the projects approximately
$4,248,000 for direct expenses incurred during 2007.
 
 Under the
Declaration of Trust, the Managing Shareholder is entitled to receive,
concurrently with the shareholders of the Trust other than the Managing
Shareholder, 1% of all distributions from operations made by the Trust in a year
until the shareholders have received distributions in that year equal to 14% per
annum of their equity contribution. Thereafter, the Managing Shareholder is
entitled to receive 20% of the distributions for the remainder of the year. The
Managing Shareholder is entitled to receive 1% of the proceeds from dispositions
of Trust property until the shareholders other than the Managing Shareholder,
have received cumulative distributions equal to their original investment
(“Payout”). After Payout, the Managing Shareholder is entitled to receive 20% of
all remaining distributions of the Trust. Distributions to the Managing
Shareholder were $5,000 for the year ended December 31, 2007. The Trust has not
yet reached Payout.
 
 Income is
allocated to the Managing Shareholder until the profits so allocated equal
distributions to the Managing Shareholder. Thereafter, income is allocated among
the shareholders other than the Managing Shareholder in proportion to their
ownership of Investor Shares. If the Trust has net losses for a fiscal period,
the losses are allocated 99% to the shareholders other than the Managing
Shareholder and 1% to the Managing Shareholder, subject to certain limitations
as set forth in the Declaration of Trust. Amounts allocated to shareholders
other than the Managing Shareholder are apportioned among them in proportion to
their capital contributions.
 
 Under the
terms of the Declaration of Trust, if the Adjusted Capital Account (as defined
in the Declaration of Trust) of a shareholder other than the Managing
Shareholder would become negative using General Allocations (as defined in the
Declaration of Trust), losses and expenses will be allocated to the Managing
Shareholder. Should the Managing Shareholder’s Adjusted Capital Account become
negative and items of income or gain occur, then such items of income or gain
will be allocated entirely to the Managing Shareholder until such time as the
Managing Shareholder’s Adjusted Capital Account becomes positive. This mechanism
does not change the allocation of cash, as discussed above.
 
 On June
26, 2003, the Managing Shareholder, entered into a Revolving Credit and Security
Agreement with Wachovia Bank, National Association. The agreement, as amended,
allows the Managing Shareholder to obtain loans and letters of credit of up to
$6,000,000 for the benefit of the Trust and other trusts that it manages. As
part of the agreement, the Trust agreed to limitations on its ability to incur
indebtedness, liens and to provide guarantees.In 2007, the
Managing Shareholder and Wachovia Bank agreed to extend the Managing
Shareholder’s line of credit through May 31, 2008.
 
 ITEM14.  PRINCIPAL
ACCOUNTANT FEES AND SERVICES
  The
following table presents fees and services rendered by Grant Thornton LLP, the
Trust’s principal accountant, for the years ended December 31, 2007 and 2006 (in
thousands).
  2007
              
              
              2006Audit
      fees
              
              $
              320
              
              
              $
              138Tax
      fees1
              
              
              24
              
              
              
              29Total
              
              $
              344
              
              
              $
              167
 
 1
              Tax
      fees consisted principally of tax compliance, planning and advisory
      services as well as tax examination
services.
  16
 Table of Contents
  Audit
Committee Pre-Approval Policy
  The
Managing Shareholder pre-approves on an annual basis all audit and permitted
non-audit services that may be performed by the Trust’s independent registered
public accounting firm, including the audit engagement terms and fees, and also
pre-approves any detailed types of audit-related and permitted tax services to
be performed during the year. The Managing Shareholder pre-approves permitted
non-audit services on an engagement-by-engagement basis.
 
 PART
IV
 
 ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES
  (a)           
Financial
Statements
  See the
Index to Financial Statements on page F-1 of this report.
 
 (b)           
Exhibits
 
 Exhibits
required by Section 601 of Regulation S-K:
  Exhibit
      No.
              
              Description3
              (i)(A)
              
              Certificate
      of Trust of the Registrant (incorporated by reference to the Registrant’s
      Registration Statement filed with the SEC on February 15,
      1994).3
              (i)(B)
              
              Certificate
      of Amendment to the Certificate of Trust of the Registrant filed with
      Delaware Secretary of State on December 18, 2003 (incorporated by
      reference to the Registrant’s Annual Report on Form 10-K filed with the
      SEC on December 14, 2007).3
              (ii)(A)
              
              Declaration
      of Trust of the Registrant (incorporated by reference to the Registrant’s
      Registration Statement filed with the SEC on February 15,
      1994).3
              (ii)(B)
              
              Declaration
      of Trust of the Registrant (as amended and restated) (incorporated by
      reference to the Registrant’s Annual Report on Form 10-K filed with the
      SEC on December 14, 2007).3
              (ii)(C)
              
              Amendment
      No. 1 to Declaration of Trust of the Registrant (incorporated by reference
      to Exhibit A of the Registrant’s Proxy Statement filed with the SEC on
      November 5, 2001, SEC File No. 814-00134).3
              (ii)(D)
              
              Amendment
      to the Amended Declaration of Trust of the Registrant effective January 1,
      2005 (incorporated by reference to the Registrant’s Annual Report on Form
      10-K filed with the SEC on December 14, 2007).10.1
              
              #
              Management
      Agreement between the Trust and Managing Shareholder, dated January 3,
      1994 (incorporated by reference to the Registrant’s Registration Statement
      filed with the SEC on February 15, 1994).10.2
              
              
              Long-Term
      Energy and Capacity Power Purchase Agreement between Byron Power Partners
      and Pacific Gas and Electric Company dated April 1985 (as amended)
      (incorporated by reference to the Registrant’s Annual Report on Form 10-K
      filed with the SEC on December 14, 2007).10.3
              
              
              Long-Term
      Energy and Capacity Power Purchase Agreement between JRW Associates L.P.,
      as successor in interest, and Pacific Gas and Electric Company dated
      December 1985 (as amended) (incorporated by reference to the Registrant’s
      Annual Report on Form 10-K filed with the SEC on December 14,
      2007).10.4
              
              
              Power
      Purchase Agreement between New England Power Company and Ridgewood
      Providence Power Partners, as successor in interest, dated November 1987
      (as amended) (incorporated by reference to the Registrant’s Annual Report
      on Form 10-K filed with the SEC on December 14, 2007).14
              
              
              Code
      of Ethics, adopted on March 1, 2004 (incorporated by reference to the
      Annual Report on Form 10-K filed by The Ridgewood Power Growth Fund with
      the SEC on March 1, 2006).21
              
              
              Subsidiaries
      of the Registrant (incorporated by reference to the Registrant’s
      Annual Report on Form 10-K filed with the SEC on January 25,
      2008).31.1
              
              *
              Certification
      of Randall D. Holmes, Chief Executive Officer of the Registrant, pursuant
      to Securities Exchange Act Rule
13a-14(a).
   17
 Table of Contents
  Exhibit
      No.
              
              Description31.2
              
              *
              Certification
      of Jeffrey H. Strasberg, Chief Financial Officer of the Registrant,
      pursuant to Securities Exchange Act Rule 13a-14(a).32
              
              *
              Certifications
      pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
      The Sarbanes-Oxley Act of 2002, signed by Randall D. Holmes, Chief
      Executive Officer of the Registrant, and Jeffrey H. Strasberg, Chief
      Financial Officer of the
Registrant.
 _____________________
 *
              Filed
      herewith.
  #
              A
      management contract or compensatory plan or arrangement required to be
      filed as an exhibit pursuant to Item 15(a)(3) of Form
  10-K.
  (c)
              Financial Statement
      Schedules
  See
Financial Statements and accompanying notes included in this
report.
  18
 Table of Contents
  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.
  RIDGEWOOD
      ELECTRIC POWER TRUST IIIDate: 
      March 17, 2008
              By:
              /s/ Randall
      D. HolmesRandall
      D. HolmesChief
      Executive Officer(Principal
      Executive Officer)
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
  Signature
              
              Capacity
              
              Date/s/
      Randall D. Holmes
              
              Chief
      Executive Officer
              
              March 17,
      2008Randall
      D. Holmes
              
              (Principal
      Executive Officer)/s/
      Jeffrey H. Strasberg
              
              Executive
      Vice President and Chief Financial Officer
              
              March 17,
      2008Jeffrey
      H. Strasberg
              
              (Principal
      Financial and Accounting Officer)RIDGEWOOD
      RENEWABLE POWER LLC(Managing
      Shareholder)By:
      /s/ Randall D. Holmes
              
              Chief
      Executive Officer of Managing Shareholder
              
              March 17,
      2008Randall
      D. Holmes
  19
  
 RIDGEWOOD ELECTRIC POWER TRUST III
 
 INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
   
 PageReport of Independent Registered Public Accounting
      Firm
              F-2Consolidated Balance Sheets at December 31, 2007 and
      2006
              F-3Consolidated Statements of Operations for the years
      ended December 31, 2007 and 2006
              F-4Consolidated Statements of Changes in Shareholders’ Equity
      (Deficit) for the years ended December 31, 2007 and
      2006
              F-5Consolidated Statements of Cash Flows for the years ended
      December 31, 2007 and 2006
              F-6Notes to Consolidated Financial Statements
              F-7
 
  F-1
 Table of Contents
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 The
Managing Shareholder and Shareholders
 Ridgewood
Electric Power Trust III
 
 
 We have
audited the accompanying consolidated balance sheets of Ridgewood Electric Power
Trust III (a Delaware trust) and subsidiaries as of December 31, 2007 and 2006,
and the related consolidated statements of operations, changes in shareholders’
equity (deficit), and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The Trust
is not required to have, nor were we engaged to perform an audit of its internal
control over financial reporting. Our audit included 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 Trust’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 audits provide 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 Electric Power
Trust III as of December 31, 2007 and 2006, and the results of its operations
and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
  
 
 
 
 /s/ GRANT
THORNTON LLP
 Edison,
New Jersey
 March 17,
2008
   F-2
 Table of Contents
  RIDGEWOOD ELECTRIC POWER TRUST IIICONSOLIDATED
      BALANCE SHEETS(in
      thousands, except share data)December
      31,2007
                
                
                2006ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                1,863
                
                
                $
                1,365Accounts
      receivable
                
                
                294
                
                
                
                488Notes
      receivable
                
                
                -
                
                
                
                15Due
      from affiliates
                
                
                304
                
                
                
                414Other
      current assets
                
                
                141
                
                
                
                82Total
      current assets
                
                
                2,602
                
                
                
                2,364Investment
                
                
                3,961
                
                
                
                4,566Plant
      and equipment, net
                
                
                -
                
                
                
                3,233Intangibles,
      net
                
                
                -
                
                
                
                933Total
      assets
                
                $
                6,563
                
                
                $
                11,096LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                
                $
                166
                
                
                $
                131Due
      to affiliates
                
                
                40
                
                
                
                27Total
      current liabilities
                
                
                206
                
                
                
                158Commitments
      and contingenciesShareholders’
      equity (deficit):Shareholders’
      equity (391.8444 Investor Shares issued andoutstanding)
                
                
                6,625
                
                
                
                11,160Managing
      shareholder’s accumulated deficit(1
      management share issued and outstanding)
                
                
                (268
                )
                
                
                (222
                )Total
      shareholders’ equity
                
                
                6,357
                
                
                
                10,938Total
      liabilities and shareholders’ equity
                
                $
                6,563
                
                
                $
                11,096
   The
accompanying notes are an integral part of these consolidated financial
statements.
  F-3
 Table of Contents
  RIDGEWOOD ELECTRIC POWER TRUST IIICONSOLIDATED
      STATEMENTS OF OPERATIONS(in
      thousands, except per share data)Years
      Ended December 31,2007
                
                
                2006Revenues
                
                $
                3,558
                
                
                $
                3,768Cost
      of revenues
                
                
                4,301
                
                
                
                5,490Gross
      loss
                
                
                (743
                )
                
                
                (1,722
                )Operating
      expenses:General
      and administrative expenses
                
                
                600
                
                
                
                103Management
      fee to Managing Shareholder
                
                
                273
                
                
                
                341Impairment
      of plant, equipment and intangibles
                
                
                3,738
                
                
                
                -Total operating expenses
                
                
                4,611
                
                
                
                444Loss
      from operations
                
                
                (5,354
                )
                
                
                (2,166
                )Other
      income (expense):Equity
      in income from investment
                
                
                859
                
                
                
                1,005Interest
      income
                
                
                48
                
                
                
                30Interest
      expense
                
                
                -
                
                
                
                (5
                )Other
      income
                
                
                8
                
                
                
                9Total
      other income, net
                
                
                915
                
                
                
                1,039Net
      loss
                
                $
                (4,439
                )
                
                $
                (1,127
                )Managing
      Shareholder - Net loss
                
                $
                (44
                )
                
                $
                (11
                )Shareholders
      - Net loss
                
                
                (4,395
                )
                
                
                (1,116
                )Net
      loss per Investor Share
                
                
                (11,218
                )
                
                
                (2,849
                )
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-4
 Table of Contents
  RIDGEWOOD ELECTRIC POWER TRUST IIICONSOLIDATED
      STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)YEARS
      ENDED DECEMBER 31, 2007 AND 2006(in
      thousands)Managing
                
                
                TotalShareholders'
                
                
                Shareholder
                
                
                Shareholders'Equity
                
                
                (Deficit)
                
                
                EquityBalance
      at December 31, 2005
                
                $
                13,827
                
                
                $
                (195
                )
                
                $
                13,632Net
      loss
                
                
                (1,116
                )
                
                
                (11
                )
                
                
                (1,127
                )Cash
      distributions
                
                
                (1,651
                )
                
                
                (17
                )
                
                
                (1,668
                )Capital
      contribution
                
                
                100
                
                
                
                1
                
                
                
                101Balance
      at December 31, 2006
                
                
                11,160
                
                
                
                (222
                )
                
                
                10,938Net
      loss
                
                
                (4,395
                )
                
                
                (44
                )
                
                
                (4,439
                )Cash
      distributions
                
                
                (500
                )
                
                
                (5
                )
                
                
                (505
                )Capital
      contribution
                
                
                360
                
                
                
                3
                
                
                
                363Balance
      at December 31, 2007
                
                $
                6,625
                
                
                $
                (268
                )
                
                $
                6,357
     The
accompanying notes are an integral part of these consolidated financial
statements.
  F-5
 Table of Contents
  RIDGEWOOD ELECTRIC POWER TRUST IIICONSOLIDATED
      STATEMENTS OF CASH FLOWS(in
      thousands)Years
      Ended December 31,2007
                
                
                2006Cash
      flows from operating activities:Net
      loss
                
                $
                (4,439
                )
                
                $
                (1,127
                )Adjustments
      to reconcile net loss to net cashprovided
      by operating activities:Depreciation
      and amortization
                
                
                430
                
                
                
                433Impairment
      of plant, equipment and intangibles
                
                
                3,738
                
                
                
                -Equity
      in income from investment
                
                
                (859
                )
                
                
                (1,005
                )Distributions
      from investment
                
                
                1,464
                
                
                
                1,071Gas
      forward contract
                
                
                -
                
                
                
                2,482Forgiveness
      of professional and management fees and related interest
                
                
                363
                
                
                
                101Change
      in operating assets and liabilities:Accounts
      receivable
                
                
                194
                
                
                
                407Due
      to/from affiliates, net
                
                
                123
                
                
                
                279Other
      current assets
                
                
                (58
                )
                
                
                6Accounts
      payable and accrued expenses
                
                
                34
                
                
                
                28Total
      adjustments
                
                
                5,429
                
                
                
                3,802Net
      cash provided by operating activities
                
                
                990
                
                
                
                2,675Cash
      flows from investing activities:Proceeds
      from notes receivable
                
                
                15
                
                
                
                55Capital
      expenditures
                
                
                (2
                )
                
                
                -Net
      cash provided by investing activities
                
                
                13
                
                
                
                55Cash
      flows from financing activities:Cash
      distributions to shareholders
                
                
                (505
                )
                
                
                (1,668
                )Net
      increase in cash and cash equivalents
                
                
                498
                
                
                
                1,062Cash
      and cash equivalents, beginning of year
                
                
                1,365
                
                
                
                303Cash
      and cash equivalents, end of year
                
                $
                1,863
                
                
                $
                1,365Supplemental
      disclosure of cash flow information:Interest
      paid
                
                $
                -
                
                
                $
                5
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-6
 Table of Contents
 RIDGEWOOD ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 ( dollar amounts in thousands, except
per share data )
  1.    
DESCRIPTION OF BUSINESS
 
 Ridgewood
Electric Power Trust III (the “Trust”) is a Delaware trust formed on December 6,
1993. The Trust began offering shares in January 1994 and concluded its offering
in May 1995. The objective of the Trust is to provide benefits to its
shareholders through a combination of distributions of operating cash flow and
capital appreciation. The Managing Shareholder of the Trust is Ridgewood
Renewable Power LLC (“RRP” or the “Managing Shareholder”). The Trust has been
organized to invest primarily in power generation facilities located in the US.
The projects of the Trusts have characteristics that qualify the projects for
government incentives.
  The
Trust’s accompanying consolidated financial statements include the acounts of
the Trust and its wholly-owned subsidiaries. The Trust’s consolidated financial
statements also include the Trust’s 35.7% limited partnership interest in
Ridgewood Providence Power Partners, L.P. (“Ridgewood Providence”), which is
accounted for under the equity method of accounting, as the Trust has the
ability to exercise significant influence but does not control the investment’s
operating and financial policies.  Ridgewood Providence and the Trust,
along with Ridgewood Electric Power Trust IV ("Trust IV") and Ridgewood
Rhode Island Generation LLC (“RRIG”), are evaluating expanding the generation
facilities at the site. If such expansion were to occur, the Trust may make an
additional investment in Ridgewood Providence.
 
 TheTrust’s cogeneration
facilities suspended operations in the fourth quarter of 2007 and are expected
to remain closed at least until May 2008 (see Note 3).
 
 The
Managing Shareholder performs (or arranges for the performance of) the operation
and maintenance of the projects invested in by the Trust and the management and
administrative services required for Trust operations. Among other services, the
Managing Shareholder administers the accounts and handles relations with the
shareholders, including tax and other financial information. The Managing
Shareholder also provides the Trust with office space, equipment and facilities
and other services necessary for its operation.
 
 2.SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
 
 a)
Principles of Consolidation
 
 The
consolidated financial statements include the accounts of the Trust and its
wholly-owned subsidiaries. All material intercompany transactions have been
eliminated in consolidation.
 
 The Trust
uses the equity method of accounting for its investments in affiliates which are
50% or less owned as the Trust has the ability to exercise significant influence
over the operating and financial policies of the affiliates but does not control
the affiliate. The Trust’s share of the earnings or losses of the affiliates is
included in the consolidated financial statements.
 
 b)
Use of Estimates
  The
preparation of consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America requires the Trust
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 Trust evaluates its estimates,
including accounts receivable, investments, recoverable value of plant and
equipment, intangibles and recordable liabilities for litigation and other
contingencies. The Trust 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.
 
 c)
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 electric power sales
contract. Adjustments are made to reflect actual volumes delivered when the
actual volumetric 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.
 
 d)
Cash and Cash Equivalents
 
 The Trust
considers all highly liquid investments with maturities, when purchased, of
three months or less as cash and cash equivalents. Cash balances with banks
as of December 31, 2007 and 2006 exceeded insured limits by $1,763 and
$1,265, respectively.
  F-7
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 ( dollar amounts in thousands, except
per share data )
  e)
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.
 
 f)
Plant and Equipment
 
 Plant and
equipment, consisting principally of electrical generating machinery and
power generation facilities, are stated at cost less accumulated depreciation.
Renewals and betterments that increase the useful lives of the assets are
capitalized.  Repair and maintenance expenditures are expensed as
incurred.  Upon retirement or disposal of assets, the cost and related
accumulated depreciation are removed from the consolidated balance
sheets.  The difference, if any, between the net asset value and any
proceeds from such retirement or disposal is recorded as a gain or loss in the
consolidated statement of operations.
 
 The Trust
uses the straight-line method of depreciation over the estimated useful life of
the assets:
  Building
              20
      yearsMachinery
      and equipment
              5-7
      years
  g)
Impairment of Long-Lived Assets and Intangibles
 
 The Trust
evaluates intangible assets and long-lived assets, such as 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 impairment has
occurred is made by comparing the carrying value of an asset to the estimated
undiscounted cash flows attributable to that asset. If 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 analysis
requires estimates of the amount and timing of projected cash flows and,
where applicable, judgments associated with, among other factors, the
appropriate discount rate. Such estimates are critical in determining
whether any impairment charge should be recorded and the amount of such charge
if an impairment loss is deemed to be necessary.
  h)
Fair Value of Financial Instruments
  At
December 31, 2007 and 2006, the carrying value of the Trust’s cash and cash
equivalents, accounts receivable, notes receivable, accounts payable and accrued
expenses approximates their fair value.
 
 i) Gas Contracts
 
 In August
2001, subsidiaries of the Trust entered into agreements to purchase natural gas,
at fixed prices, over a five-year term in connection with entering into an
amendment fixing the sales price of electric power sales contracts for a similar
term. These contracts were entered into in order to minimize the impact of
fluctuating energy prices. The Trust determined that these contracts were
derivatives as defined under Statement of Financial Accounting Standard (“SFAS”)
No. 133, "Accounting for Derivative Instruments and Hedging Activities", as
amended. The Trust designated these derivatives as non-hedge instruments.
Accordingly, the value of these contracts based on the differences between
contract prices and market value prices was recognized as an asset or a
liability in the balance sheet. Changes in the carrying value of these contracts
were reflected as a component of cost of revenues in the consolidated statements
of operations. During the third quarter of 2006, these subsidiaries completed
their contractual agreements to resell the purchased gas back to their supplier
and therefore, there is no longer any value recorded on the consolidated balance
sheets associated with these contracts.
 
 During
the year ended December 31, 2006, the Trust recorded a loss, as a component of
cost of revenues, from changes in the value of its gas supply contracts of
$2,482. There was no gain or loss recorded during the year ended December 31,
2007, as the contracts had expired in the prior year.
 
 j)
Comprehensive Loss
  The
Trust's comprehensive loss consists only of net loss.
 F-8
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 ( dollar amounts in thousands, except
per share data )
 k)
Significant Customer and Supplier
 
 During
2007 and 2006, the Trust’s largest customer accounted for 100%
and 97.1% of total revenues, respectively. During 2007 and 2006, the
Trust purchased 100% of its gas from one supplier.
 
 l)
Income Taxes
 
 No
provision is made for income taxes in the Trust’s consolidated financial
statements as the income or losses of the Trust are passed through and included
in the income tax returns of the individual shareholders of the Trust. 
Effective January 1, 2007, the Trust adopted Financial Accounting Standards
Board (“FASB”) Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (“FIN 48”) with no impact on its consolidated financial
statements. FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with SFAS No.
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.
 
 m)
Recent Accounting Pronouncements
 
 SFAS
157
  In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS 157"), to define fair value, establish a framework for measuring fair
value in accordance with generally accepted accounting principles and expand
disclosures about fair value measurements. SFAS 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 157 will become effective for the Trust
beginning January 1, 2008. In February 2008, FASB issued Staff Position 157-2,
Effective Date of FASB
Statement No. 157, which delays the effective date of SFAS 157
for nonfinancial assets and nonfinancial liabilities for the Trust until January
1, 2009, except for items that are recognized or disclosed at fair value in the
financial statements on a recurring basis. The Trust is currently evaluating the
impact of adopting SFAS 157 on its consolidated financial
statements.
 
 SFAS
159
  In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”), which expands
opportunities to use fair value measurements in financial reporting and permits
entities to choose to measure many financial instruments and certain other items
at fair value. SFAS 159 will become effective for the Trust beginning
January 1, 2008. The Trust is currently evaluating the impact of adopting
SFAS 159 on its consolidated financial statements.
 
 SFAS
160
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements — an amendment of ARB No. 51
(“SFAS 160”).  SFAS 160 requires that ownership interests in
subsidiaries held by parties other than the parent, and the amount of
consolidated net income, be clearly identified, labeled, and presented in the
consolidated financial statements within
equity, but separate from the parent’s equity.It also requires once a
subsidiary is deconsolidated, any retained noncontrolling equity investment in
the former subsidiary be initially measured at fair value. Sufficient
disclosures are required to clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS 160
will become effective for the Trust beginning January 1, 2009. The Trust is
currently evaluating the impact of adopting SFAS 160 on its consolidated
financial statements.
 
 3.    PROJECTS
AND IMPAIRMENT OF LONG-LIVED ASSETS
 
 JRW
Associates, L.P.
 
 In
January 1995, the Trust acquired 100% of the existing partnership interests of
JRW Associates, L.P. (“San Joaquin”) which owns and operates an 8.5 megawatt
(“MW”) electric cogeneration facility, located in Atwater,
California.  The aggregate purchase price was $4,900, including
transaction costs.
 
 The
acquisition of San Joaquin was accounted for as a purchase and the results of
operations of San Joaquin have been included in the Trust's consolidated
financial statements since the acquisition date. The purchase price was
allocated to the net assets acquired, based on their respective fair
values.  Of the purchase price, $1,400 was allocated to the Electric
Power Sales Contract and was being amortized over the life of the contract (25
years).
  F-9
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 ( dollar amounts in thousands, except
per share data )
  Byron
Power Partners, L.P.
 
 In
January 1995, the Trust caused the formation of Byron Power Partners, L.P.
(“Byron”) in which the Trust owns 100% of the partnership
interests.  In January 1995, Byron acquired a 5.7MW electric
cogeneration facility, located in Byron, California. The aggregate purchase
price was $2,509, including transaction costs. The purchase price was allocated
to the net assets acquired, based on their respective fair values.  Of
the purchase price, $420 was allocated to the Electric Power Sales Contract and
was being amortized over the life of the contract (25 years).
 
 Impairment
of San Joaquin and Byron
 
 In
connection with the Trust's 2008 annual budget cycle, which is part of its 2007
year-end financial closing process, the Trust performed impairment assessments
of San Joaquin and Byron. These impairment assessments were determined using a
discounted cash flow valuation methodology, and the Trust noted that the
carrying value of the assets exceeded their estimated fair value. Therefore,
effective December 31, 2007, the remaining net book value of their plant,
equipment and intangible assets was fully impaired with a resulting impairment
expense of $3,738 recorded in the fourth quarter of 2007.
 Ridgewood
AES Power Partners, LLC
 
 In
September 1997, the Trust formed a joint partnership, Ridgewood/AES Power
Partners, L.P. with AES-NJ Cogen, Inc. to develop cogeneration projects. During
2003, the Trust sold its interest in the joint partnership for $100 cash, a $150
interest bearing promissory note ("Promissory Note"), and a $74 interest free
note ("Interest Free Note"). The Promissory Note receivable bore interest at a
rate of 10% per annum, and was fully paid monthly over a four year term. The
Interest Free Note was repaid over a six month term.
 
 On-site
Cogeneration Projects
 
 In 1995,
the Trust acquired a portfolio of 35 projects from affiliates of Eastern
Utilities Associates ("EUA"), which sell electricity and thermal energy to
industrial and commercial customers. The projects were held in eight limited
partnerships of which the Trust is the sole limited partner and is the sole
owner of each of the general partners.  In the aggregate, the projects
had 13.7MW of base load and 5.7MW of backup and standby capacity.  All the
projects were gas-fired cogeneration projects located in California,
Connecticut, Massachusetts, Rhode Island or New York. Their energy service
agreements had terms expiring between September 1996 and 2011. The acquisition
of the projects was accounted for as a purchase and the results of operations of
the projects have been included in the Trust's consolidated financial statements
since the acquisition date.
 
 The Trust
shut down all but two of the projects from 2001 through 2003.  The
remaining projects ceased operations in the fourth quarter of 2006.
 
 4.  
 INVESTMENT
 
 Ridgewood
Providence
 
 In 1996,
Ridgewood Providence was formed as a Delaware limited partnership which acquired
a 12.3MW electrical generating station, located at the Central Landfill in
Johnston, Rhode Island.  In 1997, the capacity was increased to
13.8MW. The Trust owns a 35.7% limited partnership interest in Ridgewood
Providence and its general partner.
 
 The
project is fueled by methane gas produced and collected from the landfill. The
electricity generated is sold pursuant to a long-term contract. The remaining
64.3% of Ridgewood Providence is owned by Trust IV, whose managing partner is
also RRP.
 F-10
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 ( dollar amounts in thousands, except
per share data )
  Summarized
balance sheet data for Ridgewood Providence at December 31, 2007 and 2006 is as
follows:
 
 2007
              
              
              2006Current
      assets
              
              $
              2,839
              
              
              $
              2,944Non-current
      assets
              
              
              9,360
              
              
              
              10,822Total
      assets
              
              $
              12,199
              
              
              $
              13,766Current
      liabilities
              
              $
              1,102
              
              
              $
              975Equity
              
              
              11,097
              
              
              
              12,791Total
      liabilities and equity
              
              $
              12,199
              
              
              $
              13,766Trust
      share of Ridgewood Providence equity
              
              $
              3,961
              
              
              $
              4,566
 
 Summarized
statements of operations data for Ridgewood Providence for the years ended
December 31, 2007 and 2006 is as follows:
 
 2007
              
              
              2006Revenues
              
              $
              13,485
              
              
              $
              11,999Cost
      of revenues
              
              
              10,161
              
              
              
              9,138Other
      expenses
              
              
              918
              
              
              
              47Total
      expenses
              
              
              11,079
              
              
              
              9,185Net
      income
              
              $
              2,406
              
              
              $
              2,814Trust
      share of income in Ridgewood Providence
              
              $
              859
              
              
              $
              1,005
 
 5.    PLANT
AND EQUIPMENT
 
 At
December 31, 2007 and 2006, plant and equipment at cost and accumulated
depreciation were:
 
 2007
              
              
              2006Building
              
              $
              -
              
              
              $
              319Machinery
      and equipment
              
              
              -
              
              
              
              6,838-
              
              
              
              7,157Less:
      accumulated depreciation
              
              
              -
              
              
              
              (3,924
              )$
              -
              
              
              $
              3,233
 
 In the
fourth quarter of 2007, the Trust recorded an asset impairment of its remaining
net book value of plant and equipment related to the San Joaquin and Byron
projects.
 
 For the
years ended December 31, 2007 and 2006, depreciation expense was $358 and $361,
respectively, which is included in cost of revenues.
 
 6.   INTANGIBLES
  At
December 31, 2007 and 2006, the gross and net carrying amounts of the electric
sales contracts were:
 
 2007
              
              
              2006Electricity sales
      contracts - gross
              
              $
              -
              
              
              $
              1,794Less:
      accumulated amortization
              
              
              -
              
              
              
              (861
              )Intangibles, net
              
              $
              -
              
              
              $
              933
 
 A portion
of the purchase price of the San Joaquin and Byron was assigned to electric
power sales contracts and was being amortized over the lives
of the contracts on a straight-line basis.In the fourth quarter of 2007,
the Trust recorded an asset impairment of its remaining net book value of
intangibles related to the San Joaquin and Byron
projects.
  F-11
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 ( dollar amounts in thousands, except
per share data )
  For each
of the years ended December 31, 2007 and 2006, amortization expense was $72,
which is included in cost of revenues.
 
 7.TRANSACTIONS WITH MANAGING
SHAREHOLDER AND AFFILIATES
 
 The Trust
operates pursuant to the terms of a management agreement (“Management
Agreement”). Under the terms of the Management Agreement, the Managing
Shareholder provides certain management, administrative and advisory services,
and office space to the Trust. In return, the Trust is obligated to pay the
Managing Shareholder an annual management fee equal to 2.5% of the Trust’s prior
year net asset value which equals $273 and $341 for the years ended December 31,
2007 and 2006, respectively, as compensation for such services. The
management fee is to be paid in monthly installments and, to the extent that the
Trust does not pay the management fee on a timely basis, the Trust accrues
interest at an annual rate of 10% on the unpaid balance.
  For the
years ended December 31, 2007 and 2006, the Trust made management fee
payments to the Managing Shareholder of $158 and $245,
respectively.  During the fourth quarter of 2007 and 2006, the
Managing Shareholder forgave $115 and $96 of unpaid accrued management fees,
respectively. In the fourth quarter of 2007, the Managing Shareholder waived its
right to reimbursement of $248, relating to professional service fees of the
Trust. Any waivers, or forgiveness, by the Managing Shareholder are recorded by
the Trust as a deemed capital contribution. The shareholders of the Trust other
than the Managing Shareholder were allocated 99% of each contribution and the
Managing Shareholder was allocated 1% so that the amount of the
contribution allocated offsets the allocation of the recorded
expense.
  The Trust
had no accrued interest expense relating to management fees in 2007. In 2006,
the Trust accrued interest expense of $5 on accrued but unpaid management fees.
The interest accrued has been waived by the Managing Shareholder and recorded as
a deemed capital contribution in the period waived.
 
 Under the
Management Agreement with the Managing Shareholder, Ridgewood Power Management
("RPM"), an affiliate of the Managing Shareholder, provides management,
purchasing, engineering, planning and administrative services to the projects
operated by the Trust. RPM charges the projects 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 or in proportion to amounts invested
in projects managed by RPM. During the years ended December 31, 2007 and
2006, RPM charged the projects $223 and $237, respectively, for overhead
items allocated in proportion to the amount invested in projects managed.
In addition, for the years ended December 31, 2007 and 2006, RPM
charged the projects $4,248, and $3,624, respectively, for direct expenses
incurred. These charges may not be indicative of costs incurred if the Trust
were not operated by RPM.
  Under the
Declaration of Trust, the Managing Shareholder is entitled to receive,
concurrently with the shareholders of the Trust other than the Managing
Shareholder, 1% of all distributions from operations made by the Trust in a year
until the shareholders have received distributions in that year equal to 14% per
annum of their equity contribution. Thereafter, the Managing Shareholder is
entitled to receive 20% of the distributions for the remainder of the year. The
Managing Shareholder is entitled to receive 1% of the proceeds from dispositions
of Trust property until the shareholders other than the Managing Shareholder,
have received cumulative distributions equal to their original investment
(“Payout”). After Payout, the Managing Shareholder is entitled to receive 20% of
all remaining distributions of the Trust. Distributions to the Managing
Shareholder were $5 and $17 for the years ended December 31, 2007 and 2006,
respectively. The Trust has not yet reached Payout.
 
 Income is
allocated to the Managing Shareholder until the profits so allocated equal
distributions to the Managing Shareholder. Thereafter, income is allocated among
the shareholders other than the Managing Shareholder in proportion to their
ownership of Investor Shares. If the Trust has net losses for a fiscal period,
the losses are allocated 99% to the shareholders other than the Managing
Shareholder and 1% to the Managing Shareholder, subject to certain limitations
as set forth in the Declaration of Trust. Amounts allocated to shareholders
other than the Managing Shareholder are apportioned among them in proportion to
their capital contributions.
 
 Under the
terms of the Declaration of Trust, if the Adjusted Capital Account (as defined
in the Declaration of Trust) of a shareholder other than the Managing
Shareholder would become negative using General Allocations (as defined in the
Declaration of Trust), losses and expenses will be allocated to the Managing
Shareholder. Should the Managing Shareholder’s Adjusted Capital Account become
negative and items of income or gain occur, then such items of income or gain
will be allocated entirely to the Managing Shareholder until such time as the
Managing Shareholder’s Adjusted Capital Account becomes positive. This mechanism
does not change the allocation of cash, as discussed above.
  F-12
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 ( dollar amounts in thousands, except
per share data )
  RRP owns
one Investor Share of the Trust. The Trust granted the Managing Shareholder a
single Management Share representing the Managing Shareholder’s management
rights and rights to distributions of cash flow.
 
 On June
26, 2003, the Managing Shareholder entered into a Revolving Credit and Security
Agreement with Wachovia Bank, National Association. The agreement, as amended,
allows the Managing Shareholder to obtain loans and letters of credit of up to
$6,000 for the benefit of the trusts and funds that it manages. As part of the
agreement, the Trust agreed to limitations on its ability to incur indebtedness
and liens, and to provide guarantees. In 2007, the Managing Shareholder and
Wachovia Bank agreed to extend the Managing Shareholder’s line of credit through
May 31, 2008.
 
 In
October 2003, the Trust obtained from its bank two standby letters of credit to
secure the gas purchases for the Byron and San Joaquin projects. The Trust used
its credit facility to collateralize the letters of credit. These two standby
letters of credit expired in August 2006 and at December 31, 2005, were a
combined total of $350.
 
 The Trust
records short-term payables to and receivables from other affiliates in the
ordinary course of business. The amounts payable to and receivable from the
other affiliates do not bear interest. At December 31, 2007 and 2006, the Trust
had outstanding receivables and payables as follows:
 
 Due
      from
                
                
                Due
      to2007
                
                
                2006
                
                
                2007
                
                
                2006RPM
                
                $
                296
                
                
                $
                396
                
                
                $
                -
                
                
                $
                -RRP
                
                
                7
                
                
                
                5
                
                
                
                -
                
                
                
                -Providence
                
                
                -
                
                
                
                -
                
                
                
                39
                
                
                
                27Other
      affiliates
                
                
                1
                
                
                
                13
                
                
                
                1
                
                
                
                -Total
                
                $
                304
                
                
                $
                414
                
                
                $
                40
                
                
                $
                27
  8.    COMMITMENTS
AND CONTINGENCIES
 
 The
Trust, through certain of its subsidiaries, has two long-term operating ground
leases with future minimum lease payments as of December 31, 2007 as
follows:
  Years Ended December
      31,2008
              
              
              1732009
              
              
              1732010
              
              
              1732011
              
              
              1732012
              
              
              173Thereafter
              
              
              1,444Total
              
              $
              2,309
 
 Rent
expense for the years ended December 31, 2007 and 2006 was $206 and $185,
respectively.
 
 On August
16, 2006, the Managing Shareholder of the Trust and affiliates of the Trust,
filed lawsuits against the former independent registered public accounting firm
for the Trust, Perelson Weiner, LLP (“Perelson Weiner”), in New Jersey Superior
Court. The suits alleged professional malpractice and breach of contract in
connection with audit and accounting services performed by Perelson Weiner. On
October 20, 2006, Perelson Weiner filed a counterclaim against the Trust, and
its affiliates alleging breach of contract due to unpaid invoices totaling
$1,188. Discovery is ongoing and no trial date has been set. The costs and
expenses of the litigation are being paid for by the Managing Shareholder and
affiliated management companies and not the underlying investment funds,
including the Trust.
  If San
Joaquin and Bryron were to remain closed on a permanent basis, and effectively
terminate their agreements with their customer, these subsidiaries, but not the
Trust, may be obligated to pay significant termination fees.
 
 The Trust
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 Trust may be required to record
additional litigation expense.  While it is not possible to predict
the outcome of the litigation discussed above with certainty and some lawsuits,
claims or proceedings may be
disposed of unfavorably to the Trust, based on its evaluation of matters which
are pending or asserted, the Trust’s management believes the disposition of such
matters will not have a material adverse effect on the Trust’s business
or consolidated financial statements.
  F-13
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 ( dollar amounts in thousands, except
per share data )
  9.   
 SUBSEQUENT EVENT
 
 On
February 19, 2008, the Trust received a distribution of $494 related to the
bankruptcy of Globe Manufacturing Corporation (“Globe”), which occurred in
January 2001. The Trust had filed a claim against Globe totaling $4,000 and is
unable to determine if any of the remaining claim will be satisfied. The Trust
will record this receipt, and additional receipts, if any, as other income at
the time of receipt.
           F-14


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