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, 2008


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
February 28, 2009 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
                8Item 4.
                Submission of Matters to a Vote of Security
      Holders
                8PART
      IIItem 5.
                Market
      for Registrant’s Common Equity, Related Security Holder Matters andIssuer
      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
                13Item 9B.
                Other Information
                13PART
      IIIItem 10.
                Directors, Executive Officers and Corporate
      Governance
                14Item 11.
                Executive Compensation
                15Item 12.
                Security Ownership of Certain Beneficial Owners and Management
      and Related Stockholder Matters
                16Item 13.
                Certain Relationships and Related Transactions, and Director
      Independence
                16Item 14.
                Principal Accounting Fees and Services
                17PART
      IVItem 15.
                Exhibits and Financial Statement Schedules
                18SIGNATURES
                20




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, as a result of new information, future events
or otherwise, 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.




Historically, the
Trust focused primarily on projects fueled by natural gas and renewable sources
of fuel. These projects allowed 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, 2008, 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 23 megawatts (“MW”) and in two electric cogeneration projects with
total capacity of 14.2MW.





The
Managing Shareholder announced that it intends to market the Trust’s landfill
project and cogeneration facilities for sale. The Managing Shareholder cannot
predict the timing of the sale process or whether any sales will
occur.





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.




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, including tax and other financial information, and
handles relations with the shareholders. 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.





Projects
and Properties




The
following table is a summary of the Trust’s investment portfolio as of December
31, 2008 detailing the nature of the business and the portion of the
investment owned by the Trust.





Company
                  Trust
                    Interest
                  Leased/
                    Owned1
                  Purpose
                  Structure2San
      Joaquin3
                  100%
                  Leased
                  Electricity
      generation
                  Steel
      building/
                    concrete
      slabByron3
                  100%
                  Leased
                  Electricity
      generation
                  Steel
      building/
                    concrete
      slabRhode
      Island LFG Genco4
                  19.56%
                  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
              Located
      in Rhode Island.





San Joaquinand Byron





In
January 1995, the Trust acquired 100% of the existing partnership interests of
JRW Associates, L.P. (“San Joaquin”), which owned and operated an 8.5MW electric
cogeneration facility located in Atwater, California. The aggregate purchase
price was $4.9 million, including transaction costs.




In
January 1995, the Trust formed Byron Power Partners, L.P. (“Byron”),
wholly-owned by the Trust, and acquired a 5.7MW electric cogeneration facility
located in Byron, California. The aggregate purchase price was $2.5
million, including transaction costs.





San
Joaquin and Byron (together 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.





The
Norcals have agreements with Shell Energy North America (US), L.P.
(“Shell”) to purchase natural gas fuel at market price. 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.





Other
than Byron resuming its operations briefly in January 2008, the Norcals remained
closed since the fourth quarter of 2007 until the resumption of their
operations in May 2008. Consistent with past operating practices, the Norcals
suspended their operations in the fourth quarter of 2008 and both Byron and
San Joaquin are evaluating resuming operations in May 2009. 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.





San
Joaquin failed to produce electricity at the required minimum capacity
thresholds in July 2008. If San Joaquin is not able to operate at a minimum
rated capacity of 80% from June to August 2009, the project would receive a
permanent lower capacity rating and the capacity payments it receives would
decline. If the project fails to meet the capacity requirement, San
Joaquin may be unable to run profitably.




2
 Table of Contents




The
Norcals are operated and maintained by RPM, on an at-cost basis.





Rhode
Island LFG Genco, LLC




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 a 13.8MW capacity electrical
generating station and associated gas treatment system, located at the Central
Landfill in Johnston, Rhode Island (the “Landfill”). The project included
nine reciprocating engine generator sets (“gensets”) fueled by methane gas
produced by and collected from the Landfill. The electricity produced by
Ridgewood Providence is sold to New England Power Service Company (“NEP”)
under a long-term electric power sales contract which expires in 2020, and can
be terminated by NEP under certain conditions in 2010. Prior to the
reorganization discussed below, the Trust owned 35.7% of Ridgewood
Providence.





In April
2002, the Managing Shareholder formed Ridgewood Rhode Island Generation LLC
(“RRIG”) through a joint venture between Ridgewood Electric Power Trust I
(“Trust I”) (15%) and the Ridgewood Power B Fund/Providence Expansion (“B Fund”)
(85%) 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 RRIG project is a 9.2MW facility on two compounds made up
of six gensets. RRIG sells its electrical output in the spot or day-ahead
wholesale electricity market.





The
assets owned by Ridgewood Providence and RRIG have a combined 23MW of electrical
generating capacity and are operated under contract by RPM on an at-cost
basis.




On
November 17, 2008, the Trust and Ridgewood Electric Power Trust IV (“Trust IV”)
entered directly or indirectly, through one or more subsidiaries, into a series
of agreements relating to Ridgewood Providence’s operations at the Landfill, the
operation of gas collection systems at the Landfill, and the ownership and
development rights related to the electric generation facilities located at the
Landfill.  The principal purpose of these agreements was to
consolidate the activities of the Trust, Trust I, Trust IV and B Fund, at the
Landfill under one entity, Rhode Island LFG Genco, LLC (“RILG”), for the
purposes of developing a new electric generating facility and consolidating all
gas rights under one entity. References to RILG herein refer to RILG or RILG and
its subsidiaries, as the context requires.





Pursuant
to terms and conditions of a contribution agreement, the Trust, Trust I, Trust
IV and B Fund each contributed certain membership, partnership and economic
interests that they held in Ridgewood Providence, RRIG, Rhode Island Gas
Management LLC (“RIGM”) and Ridgewood Providence Power Corporation (“RPPC”) to
RILG, in exchange for their allocable interests in RILG.  As a result
of the completion of the transaction, the Trust, Trust I, Trust IV and B Fund
own all of the equity interests in RILG. The Trust contributed its 35.7%
interest in Ridgewood Providence in exchange for a 19.56% interest in
RILG.





Under a
site lease and gas rights agreement entered into in connection with the
transaction, Rhode Island Resource Recovery Corporation (“RIRRC”), the owner and
operator of the Landfill, will transfer 100% of the current and future landfill
gas produced at the Landfill to RILG. Effective with the commercial
operation date of the new generating facility, RILG will pay a royalty of 15% of
gross revenue to RIRRC, net of certain credits, from all sources including
electricity, capacity, Renewable Portfolio Standards Attributes and other
environmental attributes (“RPS Attributes”).  The payment arrangements
under the previously existing arrangements will continue in place until the new
generating facility begins commercial operation.  RILG will also pay
monthly rent of $3,400 (escalated for inflation beginning in 2010) for the land
on which the treatment facility is intended to be built. Under
the prior existing RPS Attribute agreement between Ridgewood
Providence and RIRRC, Ridgewood Providence is required to pay 15% net revenue
royalties to each of RIRRC and Ridgewood Gas Services LLC, which are derived
from the sale of its RPS Attributes. Similarly, RRIG is required to pay 15%
net revenue royalties derived from the sale of its RPS Attributes to
RIRRC.  The site lease and gas rights agreement also requires that
Ridgewood Providence terminate operation of its existing facility, decommission
the facility and turn it over to RIRRC, if requested, but no earlier than
January 2010 (subject to acceleration with a payment by RIRRC). RILG may
also relocate all or a portion of RRIG’s plant and will split the cost of that
relocation with RIRRC (subject to a $250,000 cap on RIRRC’s share). The
electricity produced continues to be sold under the prior arrangements of
Ridgewood Providence and RRIG.





RILG is
also obligated, under the terms of the various agreements with RIRRC, to assume
primary responsibility for costs associated with the landfill gas collection
system at the Landfill as of the first to occur of the commencement of operation
of the redeveloped facility or June 1, 2013.  If RILG fails to comply
with these obligations, RILG could be subject to monetary damages and could also
forfeit its contracted gas rights and its sales agreements as discussed in Item
7. “Management’s Discussion and Analysis of Financial Condition and Result of
Operations” under the heading “Contractual Obligations and
Commitments”.





Massachusetts law
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 renewable generation units powered by one of several renewable
fuels, such as solar, biomass or landfill methane gas.  In 2009,
each such retail supplier must obtain at least approximately
four percent of its supply from qualified new renewable
generation units and approximately four percent from qualified older
renewable generation units. The regulations providing for certain of these
provisions are currently being reviewed by the Massachusetts Department of
Energy Resources (“DOER”) and could be modified as a result of that
review.




3
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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, subject to “vintage” provisions, which disqualifies the
amount of a facility’s generation of electric energy measured by its average
output during the period 1995 through 1997. 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 “vintage”
provisions. Thus, Ridgewood Providence can sell the 86,000 megawatt hours that
are ineligible under Massachusetts standards into the Connecticut market. During
2008 and 2007, Ridgewood Providence sold its “vintage” RPS Attributes pursuant
to agreements with various power marketers. Effective
January 1, 2009, Massachusetts adopted provisions that now allow Ridgewood
Providence to sell the previously ineligible
attributes.




The
output from RRIG qualifies for renewable energy incentives in Massachusetts,
Rhode Island and Connecticut. A portion of these incentives are eligible to be
sold to a power marketer under an agreement that continues through 2009. The
output of four gensets, representing 70.6% of the RRIG electrical generating
capacity, also qualifies for Section 45 federal tax credits. The federal tax
credits are expected to continue until the tenth anniversary of the
commissioning of the gensets, or October 2015.





Other
Investments





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
2008 and 2007, PG&E accounted for 100% of total revenues. During 2008
and 2007, the Trust purchased all of its gas from Shell.





Project
Feedstock/Raw Materials





The
Trust’s investments 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 electricity generating facilities consist of
gensets that use methane-containing landfill gas as fuel. Gas is collected from
the Landfill as it is produced through natural anaerobic digestion of the waste.
RILG does not own or operate the Landfill but has arrangements with RIRRC which
give the project certain rights, including the right to build the project,
occupy the compound 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 RIRRC as compensation for the granting of these
rights.




Competition





Power
generated from the Norcals is sold pursuant to long-term contracts and power
generated by RILG is sold partly pursuant to long-term contracts and partly at
prevailing market prices. As a result, these facilities do not face competition
in the sale of their finished product. RILG 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.





RILG
qualifies for incentives because of the use of renewable fuel.





All of
the Trust’s projects have operated under Qualifying Facility Certifications
issued by the Federal Energy Regulatory Commission. Even though these projects
have no employees, they are affected by general employment regulations in the
jurisdictions of their facilities through the RPM operations and maintenance
agreements. The Trust considers these regulations to be routine and does not
consider the cost of compliance to be material.




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.




4
 Table of Contents




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. RISKFACTORS




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





RILG
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 RILG is typically limited by the available amount and
quality of landfill methane gas used as fuel by the project. A number of factors
influence the amount and quality of landfill methane gas produced by a landfill
site including the quantity and makeup of the waste deposited into the site by
RIRRC, 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, RILG may not maintain profitable output
levels.





RILG
is subject to forfeiture of its gas rights if the facilities are not expanded as
contractually required.





In
November 2008, RILG restructured the contracts that were previously in place
with the Landfill that supplies methane gas. As part of the modifications, RILG
agreed to a site lease and gas rights agreement whereby, RIRRC will transfer
100% of the current and future landfill gas produced at the Landfill to RILG.
The term of the site lease and gas rights agreement will continue so long as
RILG or an affiliate has electricity generating facilities on the Landfill
capable of using the landfill gas on an economic basis or otherwise making
economic use of the Landfill gas products, including, without limitation, sales
to third parties.  RILG is also obligated, under the terms of the various
agreements with RIRRC, to assume primary responsibility for costs associated
with the landfill gas collection system at the Landfill as of the first to occur
of the commencement of operation of the redeveloped facility or June 1,
2013.  If RILG fails to comply with these obligations, RILG could be
subject to monetary damages and could also forfeit its contracted gas rights and
its sales agreements. Further, RILG has insufficient capital to expand its
operations fully. As a result, RILG will either have to be sold to entities that
can invest in the development of these projects or have to obtain third-party
financing to perform its duties under the relevant agreements. While the
Managing Shareholder believes a portion of such financing will be available,
there can be no assurance whether or when RILG can be sold or obtain sufficient
financing or obtain it on satisfactory terms.  The recent severe
crisis in the capital markets may make selling or obtaining financing for these
projects very difficult.




The
Norcals could be faced with breaching their contracts with
PG&E.





If San Joaquin is not able operate at a minimum rated capacity of 80%
from June to August 2009, the project would receive a permanent lower capacity
rating and the capacity payments it receives would decline. If the project fails
to meet the capacity requirement, San Joaquin may be unable to run
profitably. If it elected to instead shut down, it could be in breach of its
agreement with PG&E. While this is an obligation of San Joaquin and not the
Trust, the occurrence of either event would adversely affect the reported
results of the Trust.  Similarly, if Byron is not operational, it
could be in breach of its agreement with PG&E.





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.




Regulatory
changes, such as emission control changes could impact the operations of the
Trust’s projects. Such changes could increase their costs or prevent them from
operating.




5
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The
Trust’s projects sell at open market prices and could be adversely impacted by
unfavorable changes in market prices.




Ridgewood
Providence currently sells electricity at fixed prices under a long-term
contract however, beginning in 2010, it anticipates selling electricity at
market prices.  If market prices for electricity fall sufficiently,
RILG may not be able to operate profitably.  Effective January 1,
2009, all RPS Attributes generated by RILG’s operations will be sold at
market prices. These market prices are highly dependent on the available supply
of RPS Attributes. The supply of available RPS Attributes in the region is
anticipated to increase in the coming years and the price for RPS Attributes
declined during 2008. If this increase in supply results in a further decrease
in the market prices for RPS Attributes, such a decline would impact the
profitability of RILG, and, if severe enough, coupled with a decrease in
electric prices, could result in a suspension of operations





The
Norcals sell electricity at a price which depends 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 may experience competitive price pressure and
competition for project development opportunities.




Competition
for new project opportunities is based largely on price, service and
reliability. While it is difficult to displace existing projects of the Trust
from its customers, competition exists for new projects and this competition
may, in some circumstances, drive down the prices of the products and services
offered by the Trust’s projects.





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 projects is gensets. 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 significant 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.




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.




6
 Table of Contents




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 arising 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 fund 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.




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.




7
 Table of Contents




·
            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 when it was established, 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”.




ITEM
3.  LEGAL PROCEEDINGS




On August
16, 2006, the Trust and several affiliated entities, including the Managing
Shareholder, filed lawsuits 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 other plaintiffs by Perelson
Weiner. On October 20, 2006, Perelson Weiner filed a counterclaim against the
Trust and other plaintiffs, alleging breach of contract due to unpaid invoices
with a combined total of approximately $1.2 million. Discovery is ongoing and no
trial date has been set. The costs and expenses of this litigation,
including adverse judgments, if any, are being paid for by the Managing
Shareholder and affiliated management companies and not the underlying
investment funds.





ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




None.





8
 Table of Contents




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
February 28, 2009, there were 849 holders of Investor Shares.




Dividends




Trust
distributions for the years ended December 31, 2008 and 2007 were as
follows (in thousands, except per share data):




2008
                      
                      
                      2007Distributions
      to Investors
                      
                      $
                      51
                      
                      
                      $
                      500Distributions
      per Investor Share
                      
                      
                      130
                      
                      
                      
                      1,276Distributions
      to Managing Shareholder
                      
                      
                      1
                      
                      
                      
                      5





ITEM 6.  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.




Historically,
the Trust focused primarily on small scale projects fueled by natural gas and
renewable sources of fuel. These projects allowed 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, 2008, 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 23MW and in two electric cogeneration projects
with total capacity of 14.2MW.





Other
than Byron resuming its operations briefly in January 2008, the Norcals remained
closed since the fourth quarter of 2007 until the resumption of their
operations in May 2008. Consistent with the past operating
practices, the Norcals suspended their operations in the fourth
quarter of 2008 and both Byron and San Joaquin are evaluating resuming
operations in May 2009. 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 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 19.56% interest in RILG, effective November
17, 2008, 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.




Prior to
November 17, 2008, the Trust owned a 35.7% minority interest in Ridgewood
Providence. The remaining 64.3% of Ridgewood Providence was owned by Trust IV.
On November 17, 2008, the Trust and other affiliated entities agreed to
contribute their interest in Ridgewood Providence, RRIG, RIGM and RPPC to a new
entity, RILG. The Trust contributed its 35.7% interest in Ridgewood Providence
in exchange for a 19.56% interest in RILG. Ridgewood Providence was accounted
for using the equity method of accounting.




9
 Table of Contents




The
Managing Shareholder announced that it intends to market RILG and the Norcals
for sale. The Managing Shareholder cannot predict the timing of the sale
process or whether any sales will occur.





RILG’s revenue
is derived from the sale of electricity generated and sales of related RPS
Attributes. For the year ended December 31, 2008, RILG derived $4.5 million, or
26.3%, of its annual revenues from the sale 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, the profitability of RILG will
decline.





Based on
the Trust’s accounting for its investments, historical operating revenues and
cost of revenues of the Trust for the years ended December 31, 2008 and 2007
have been derived from the operations of the Norcals.





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 (“GAAP”). 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.





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.





Results
of Operations





Revenues
of $3.6 million in 2008 were comparable to the same period in 2007. Revenues
increased slightly due to higher electricity rates in 2008 as compared to 2007,
offset by a decrease in capacity payments resulting from lower output produced
due to repair and maintenance of the projects in 2008.





Cost of
revenues increased $0.3 million, or 6.8%, to $4.6 million in 2008 from $4.3
million in 2007. This increase in 2008 was primarily attributable to $0.3
million in higher fuel and consumable expenses and approximately $0.4
million in higher repair and maintenance expenses. This increase was partially
offset by $0.4 million in lower depreciation and amortization expense in 2008,
as plant, equipment and intangibles were fully impaired in the fourth quarter of
2007.





Gross
loss increased by $0.3 million, or 39.2%, from $0.7 million in 2007 to $1
million in 2008, due to increased cost of revenues.





The
management fee due to the Managing Shareholder was $0.2 million in 2008, as
compared to $0.3 million in 2007. The management fee was for certain management,
administrative and advisory services, office space and other facilities provided
to the Trust. This decrease was due to lower net asset values of the Trust at
December 31, 2007 compared to December 31, 2006.




In 2007,
the Trust recorded an impairment of $3.7 million related to its remaining
balance in plant, equipment and intangibles at the Norcals. The Trust did
not record any impairment in 2008.




10
 Table of Contents




As a
result of the Ridgewood Providence reorganization, effective November 17, 2008,
the Trust exchanged its interest in Ridgewood Providence for an interest in
RILG. In 2008, the Trust recorded equity loss of $0.6 million from its
investment in Ridgewood Providence and equity loss of $0.1 million from its
investment in RILG. In 2007, the Trust recorded equity income of $0.9 million
from its investment in Ridgewood Providence. The decrease in equity income of
$1.5 million from its investment in Ridgewood Providence in 2008 was primarily
attributable to a decrease in renewable attribute revenues in 2008 resulting
from produced, but unsold, renewable energy credits due to low market demand. In
addition, the decrease in equity income of Ridgewood Providence in 2008 was also
due to an increase in professional fees.




In 2008,
the Trust recorded other income of $0.7 million, which represents a property tax
reassessment refund of $0.2 million for San Joaquin and $0.5 million received
during the first quarter of 2008 as a result of the bankruptcy claim filed
against an on-site cogeneration facility owned by
Globe.





Liquidity
and Capital Resources





At
December 31, 2008, the Trust had cash and cash equivalents of $1.4 million, a
decrease of $0.5 million from $1.9 at December 31, 2007. The cash flows for the
year ended December 31, 2008 were $0.4 million used in operating activities
and $0.1 million used in financing activities.





In 2008,
the Trust’s operating activities used cash of $0.4 million as compared to
cash provided of $1 million in 2007. The increase in cash used by operating
activities of $1.4 million in 2008 was primarily due to an increase in cost of
revenues and decreased investment distributions, partially offset by a
distribution received by the Trust in the first quarter of 2008 relating to the
bankruptcy of Globe, which occurred in January 2001.





In 2008,
the Trust used cash of $0.1million in financing activities as compared to $0.5
million in 2007; 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




The
Trust, along with other trusts managed by the Managing Shareholder, are jointly
and severally liable for liquidated damages if RILG and affiliates fail to
produce RPS Attributes under an agreement with a power marketer, as more fully
described below.




Contractual
Obligations and Commitments





At
December 31, 2008, the Trust’s contractual obligations related to the Norcals
ground operating leases are as follows (inthousands):





Payments
      due by periodTotal
                  
                  
                  Less
      than
                    1
      year
                  
                  
                  1 -
      3
                    years
                  
                  
                  3 -
      5
                    years
                  
                  
                  More
      than
                    5
      yearsGround
      operating leases
                  
                  $
                  2,135
                  
                  
                  $
                  173
                  
                  
                  $
                  346
                  
                  
                  $
                  346
                  
                  
                  $
                  1,270





As part
of the Ridgewood Providence reorganization, RILG is obligated under the terms of
various agreements with RIRRC to assume primary responsibility for costs
associated with the landfill gas collection system at the Landfill as of the
first to occur of the commencement of operation of the redeveloped facility or
June 1, 2013. If RILG fails to comply with these obligations, RILG could be
subject to monetary damages and also forfeit its contracted gas rights and its
sales agreements. RILG is responsible for the development and construction of a
sulfur treatment facility on the Landfill and the construction of new pipes and
headers. The cost of building and operating the sulfur treatment facility
and the pipes and headers is estimated to be approximately $5 million. The
cost of the sulfur treatment facility will be split equally between RILG and
RIRRC and the entire cost associated with the construction of pipes and headers
will be paid by RILG.  In addition, the cost of new flares on the
Landfill will be borne by RIRRC, but in certain circumstances, the costs may be
shared with RILG. RILG may need to obtain third-party financing to perform its
duties under the various agreements. While the Managing Shareholder believes a
portion of such financing will be available, there can be no assurance whether
or when RILG can obtain sufficient financing or obtain it on satisfactory
terms.




11
 Table of Contents


RILG and
several of its affiliates have an agreement with a power marketer for which they
were 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 in
the agreement. If RILG and the affiliates failed to supply the required number
of RPS Attributes, liquidated damages could be assessed. In accordance with the
terms of the agreement, if the power marketer elects to exercise an annual
option and RILG and the affiliates produce insufficient RPS Attributes for
such option year, RILG and the affiliates face maximum liquidated
damages 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, RILG may be liable for up to 100% of the
liquidated damages in the event of a default by RILG and any of the affiliates.
In addition, the Trust (together with several other trusts and entities managed
by the Managing Shareholder) is a guarantor of the obligations of RILG and the
affiliates under the agreement and as such, could be liable for the maximum
liquidated damages under the agreement. In the agreement with the power
marketer, RILG and a wholly-owned subsidiary of Trust IV agreed with the power
marketer that if the amount on deposit with the power marketer is less than 1.5
times the liquidated damages or a default or potential default under the
agreement has occurred, they would not make distributions to their members other
than to pay federal and state income taxes and to undertake other permitted
transactions under that agreement. RILG and the affiliates have deposits with
the power marketer as partial collateral of their obligations. As the power
marketer did not exercise its option to purchase 2009 RPS Attributes, the
deposit is expected to be returned in 2009.


Recent
Accounting Pronouncements





SFAS
157




In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 157, Fair Value Measurements
(“SFAS 157”), to define fair value, establish a framework for measuring fair
value in accordance with GAAP 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. In
February 2008, the FASB issued Staff Position 157-2, Effective Date of FASB Statement
No. 157, which delays the effective date of SFAS 157 for
non-financial assets and non-financial 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.  In October 2008, the FASB
issued Staff Position 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active,which clarifies the
application of SFAS 157 in a market that is not active and to determine the fair
value of a financial asset when the market for that financial asset is not
active. The Trust adopted SFAS 157 for financial assets and financial
liabilities effective January 1, 2008, with no material impact on its
consolidated financial statements.  Staff Position 157-3 does not have
a material impact on its consolidated financial statements. The Trust is
currently evaluating the impact of adopting SFAS 157 for non-financial
assets and non-financial liabilities 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 – Including an amendment of FASB
Statement No. 115 (“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. The Trust adopted SFAS 159 effective January 1, 2008, with no material
impact on its consolidated financial statements.





SFAS
162





In
May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”).  SFAS 162 identifies the sources
of accounting principles and the framework for selecting principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP.  This statement shall be effective 60
days following the SEC’s approval of the Public Company Accounting Oversight
Board’s amendments to AU section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. The Trust is
currently evaluating the impact of adopting SFAS 162 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.





12
 Table of Contents




ITEM
9A.  CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures




In
accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), the Trust’s Chief Executive Officer and Chief
Financial Officer have evaluated the effectiveness of the Trust’s disclosure
controls and procedures, as defined in Exchange Act Rule 13a-15(e). Based on
this evaluation, the Trust’s Chief Executive Officer and Chief Financial Officer
concluded that the Trust’s disclosure controls and procedures were effective as
of the end of the period covered by this report to ensure that information
required to be disclosed by a registrant in reports filed pursuant to Exchange
Act are recorded, processed, summarized and reported within the time periods
specified in the SEC rules and forms and that information required to be
disclosed by a registrant is accumulated and communicated to senior management
so as to allow timely decisions regarding required disclosure.




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 GAAP.





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, 2008.  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.  Based on this evaluation,
the Trust’s management concluded that as of December 31, 2008, the Trust’s
internal controls over financial reporting were effective.





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) that occurred
during the fiscal quarter ended December 31, 2008 that has materially affected,
or is reasonably likely to materially affect, the Trust’s internal control over
financial reporting.





ITEM 9B.  OTHER INFORMATION




None.




13
 Table of Contents




PART
III





ITEM 10.  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, 61President
      and Chief Executive Officer
                            2004Robert
      E. Swanson, 61Chairman
                            1997Jeffrey
      H. Strasberg, 51Executive
      Vice President and Chief Financial Officer
                            2007Daniel
      V. Gulino, 48Senior
      Vice President, General Counsel and Secretary
                            2000





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 Ridgewood Power trusts and limited liability companies since
January 2006 and served as Chief Operating Officer of the Trust, the Managing
Shareholder and affiliated Ridgewood Power trusts and limited liability
companies 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 Ridgewood
Power trusts and limited liability companies 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 Ridgewood Power trusts and limited liability companies
since May 2007. Mr. Strasberg also serves as Senior Vice President and
Chief Financial Officer of Ridgewood Capital and affiliated limited liability
companies 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 Ridgewood Power trusts and limited liability companies 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 Ridgewood Power trusts and limited liability companies
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.




14
 Table of Contents




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”.




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. During the past fiscal year, all filings required to be made by
members of the management or others pursuant to Section 16(a) of the Exchange
Act have been duly filed within the SEC.





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 of 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.





As part of the sale of variousassets of the Trust,
affiliated trusts and assets of the Managing Shareholder, the Managing Shareholder has adopted the
Senior Executive Bonus Plan(“Plan”), which provides for incentive payments
to the participants in the Plan. Any payments made pursuant to this Plan will be
borne entirely by the Managing Shareholder and not by any of thetrustsmanaged by the Managing
Shareholder. Pursuant to
the Plan:


·
                Once
      a relevant trust reaches payout, three officers of the Managing
      Shareholder, including Randall D. Holmes, President and Chief Executive
      Officer of the Trust and the Managing Shareholder will receive, in the
      aggregate, depending on the trust, 25% to 30% (25% in regards to the
      Trust) of any payments received by the Managing Shareholder from the
      various trusts it manages resulting from the sale of assets by the
      trusts.
 
 ·
                Participants
      in the Plan will receive bonus payments in the aggregate at the rate of
      30% of any payment received by the Managing Shareholder for sales of
      assets owned by it and not a
trust.


15
 Table of Contents
 ·
                The
      Managing Shareholder will generally fund the Plan as it receives any
      payments from a trust from the sale of its assets once that trust reaches
      payout.


To be
included under the Plan, a sale must be consummated pursuant to a contract
executed and delivered on or prior to June 30, 2009. As of the date of this
filing, no payment has been made pursuant to this Plan.





Under the
Plan, the three officers have also agreed to be employed by any purchasers of
assets from the trusts as requested by the Managing Shareholder, for up to one
year. To the extent that the compensation received by any of them from any such
purchase is less than the base salary that officer currently receives from the
Managing Shareholder, the Managing Shareholder has agreed to pay to that officer
75% of the difference, if any, for one year, even if such officer leaves the
employ of the purchaser prior to the end of such one year period, except in the
event of death or disability.





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 February 28, 2009 (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 February 28, 2009.
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
                
                
                *


__________________________________


*    
Represents less than one percent.





(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 in Item 13. “Certain
      Relationships and Related Transactions, and Director
      Independence”.




ITEM
13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE





Under the
terms of the Trust’s Management Agreement, 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 was approximately $159,000 and $273,000 for the
years ended December 31, 2008 and 2007, respectively, as compensation for
the services the Managing Shareholder provides to the Trust. 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, 2008 and 2007, the Trust made management fee
payments to the Managing Shareholder of approximately $159,000 and $158,000,
respectively.  During the fourth quarter of 2007, the Managing
Shareholder forgave approximately $115,000 of unpaid accrued management fees. In
the fourth quarter of 2007, the Managing Shareholder waived its right to
reimbursement of approximately $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
Operating Agreement with the Trust, 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 years ended December 31, 2008 and
2007, RPM charged the projects approximately $217,000 and $223,000,
respectively, for overhead items allocated in proportion to the amount invested
in projects managed.  In addition, for the years ended December 31,
2008 and 2007, RPM charged the projects approximately $4,958,000 and $4,248,000,
respectively, for direct expenses incurred. These charges may not be indicative
of costs incurred if the Trust were not operated by RPM.


16
 Table of Contents


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 approximately $1,000 and $5,000 for the years ended December
31, 2008 and 2007, 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.





In
accordance with the  Declaration of Trust, upon or prior to the first
distribution by the Trust in liquidation, the Managing Shareholder is required
to contribute to the capital of the Trust an amount equal to any deficit in the
tax basis capital account of the Managing Shareholder calculated just prior to
the date of such distribution. As of December 31, 2008, the last date such
calculation was made, the Managing Shareholder would have been required to
contribute approximately $146,000 to the Trust prior to the Trust making
any liquidating distributions.





ITEM 14.  PRINCIPAL ACCOUNTING 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, 2008 and 2007 (in
thousands).




2008
                  
                  
                  2007Audit
      fees
                  
                  $
                  160
                  
                  
                  $
                  320Tax
      fees1
                  
                  
                  21
                  
                  
                  
                  24Total
                  
                  $
                  181
                  
                  
                  $
                  344




1Tax fees consisted principally of tax compliance, planning and advisory
services as well as tax examination services.


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.




17
 Table of Contents




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)
                First
      Amendment to the 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
                
                Contribution
      Agreement dated as of November 17, 2008 by and among Ridgewood Olinda,
      LLC, Ridgewood Electric Power Trust III, Ridgewood Electric Power Trust
      IV, Ridgewood Power B Fund/Providence Expansion, Ridgewood Providence
      Power Corporation, Rhode Island Gas Management, LLC, Ridgewood Management
      Corporation, Rhode Island LFG Genco, LLC and Ridgewood Renewable Power LLC
      (incorporated by reference to Exhibit 10.1 to the Current Report on Form
      8-K filed by the Registrant with the SEC on November 20,
    2008)10.3
                
                Amended
      and Restated Limited Liability Company Agreement of Rhode Island LFG
      Genco, LLC dated as of November 17, 2008 by Rhode Island LFG Genco, LLC,
      Ridgewood Olinda, LLC, Ridgewood Electric Power Trust III, Ridgewood
      Electric Power Trust IV, Ridgewood Power B Fund/Providence Expansion and
      Ridgewood Renewable Power LLC (incorporated by reference to Exhibit 10.2
      to the Current Report on Form 8-K filed by the Registrant with the SEC on
      November 20, 2008)10.4
                
                Amended
      and Restated Site Lease and Landfill Gas Delivery Agreement dated as of
      November 17, 2008 between Rhode Island LFG Genco, LLC and Rhode Island
      Resource Recovery Corporation (incorporated by reference to Exhibit 10.3
      to the Current Report on Form 8-K filed by the Registrant with the SEC on
      November 20, 2008)10.5
                
                Amended
      and Restated Landfill Gas Services Agreement dated as of November 17, 2008
      among Ridgewood Gas Services LLC, Rhode Island Resource Recovery
      Corporation and, solely as to Sections 3.2 and 3.3, Rhode Island LFG
      Genco, LLC (incorporated by reference to Exhibit 10.4 to the Current
      Report on Form 8-K filed by the Registrant with the SEC on November 20,
      2008)10.6
                
                Purchase
      and Sale Agreement dated as of November 17, 2008 between Ridgewood Gas
      Services LLC and Rhode Island Resource Recovery Corporation (incorporated
      by reference to Exhibit 10.5 to the Current Report on Form 8-K filed by
      the Registrant with the SEC on November 20, 2008)10.7
                
                Backup
      Certificate Agreement, dated as of August 19, 2008, by and among
      Indeck Maine Energy, LLC, Ridgewood Providence Power Partners, L.P.,
      Ridgewood Rhode Island Generation, LLC, Linwood 0708 LLC, Rhode Island LFG
      Genco, LLC, and for certain limited purposes, Ridgewood Power Management
      LLC, and Covanta Energy Corporation (incorporated by reference to Exhibit
      10.1 to the Current Report on Form 8-K filed by Ridgewood Electric Power
      Trust IV with the SEC on August 25,
2008)




18
 Table of Contents




Exhibit No.
                
                Description10.8
                
                First
      Amendment to the Backup Certificate Agreement, dated as of November 11,
      2008, by and among Indeck Maine Energy, LLC, Ridgewood Providence Power
      Partners, L.P., Ridgewood Rhode Island Generation, LLC, Linwood 0708 LLC,
      Rhode Island LFG Genco, LLC, and for certain limited purposes, Ridgewood
      Power Management LLC and Covanta Energy Corporation (incorporated by
      reference to Exhibit 10.1 to the Current Report on Form 8-K filed by
      Ridgewood Electric Power Trust IV with the SEC on November 14,
      2008)10.9
                
                Certificate
      Sale Support Agreement, dated as of July 31, 2008, by and among
      Linwood 0708 LLC, Ridgewood Rhode Island Generation, LLC, Ridgewood
      Providence Power Partners, L.P., Rhode Island LFG Genco, LLC, Indeck
      Energy Services, Inc., Ridgewood Electric Power Trust I, Ridgewood
      Electric Power Trust III, Ridgewood Electric Power Trust IV,
      Ridgewood Electric Power Trust V, Ridgewood Power B Fund/Providence
      Expansion, and Ridgewood Renewable Power, LLC (incorporated by
      reference to Exhibit 10.4 to the Current Report on Form 8-K filed by
      Ridgewood Electric Power Trust IV with the SEC on August 25,
      2008)10.10
                
                First
      Amendment to the Certificate Sale Support Agreement, dated as of
      November 11, 2008, by and among Linwood 0708 LLC, Ridgewood Rhode
      Island Generation, LLC, Ridgewood Providence Power Partners, L.P., Rhode
      Island LFG Genco, LLC, Indeck Energy Services, Inc., Ridgewood Electric
      Power Trust I, Ridgewood Electric Power Trust III, Ridgewood Electric
      Power Trust IV, Ridgewood Electric Power Trust V, Ridgewood Power B
      Fund/Providence Expansion and Ridgewood Renewable Power, LLC (incorporated
      by reference to Exhibit 10.4 to the Current Report on Form 8-K filed by
      Ridgewood Electric Power Trust IV with the SEC on November 14,
      2008)10.11
                
                Agency
      Agreement, dated as of August 19, 2008, among Ridgewood Providence Power
      Partners, L.P., Ridgewood Rhode Island Generation, LLC, Linwood 0708 LLC,
      Ridgewood Power Management, LLC and Indeck Maine Energy, LLC. This Agency
      Agreement is also acknowledged by Ridgewood Electric Power Trust III,
      Ridgewood Electric Power Trust IV, Ridgewood Electric Power
      Trust V and Ridgewood Power B Fund/Providence Expansion (incorporated
      by reference to Exhibit 10.5 to the Current Report on Form 8-K filed by
      Ridgewood Electric Power Trust IV with the SEC on August 25,
      2008)10.12
                
                First
      Amendment to the Agency Agreement, dated as of November 11, 2008,
      among Ridgewood Providence Power Partners, L.P., Ridgewood Rhode Island
      Generation, LLC, Linwood 0708 LLC, Ridgewood Power Management, LLC and
      Indeck Maine Energy, LLC. This First Amendment to Agency Agreement is also
      acknowledged by Ridgewood Electric Power Trust III, Ridgewood
      Electric Power Trust IV, Ridgewood Electric Power Trust V and
      Ridgewood Power B Fund/Providence Expansion (incorporated by reference to
      Exhibit 10.5 to the Current Report on Form 8-K filed by Ridgewood Electric
      Power Trust IV with the SEC on November 14, 2008)10.13
                #
                Senior
      Executive Bonus Plan (incorporated by reference to Exhibit 10.3 to the
      Current Report on Form 10-Q filed by the Registrant with the SEC on
      November 7, 2008)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 Registrant31.1
                *
                Certification
      of Randall D. Holmes, Chief Executive Officer of the Registrant, pursuant
      to Securities Exchange Act Rule 13a-14(a)31.2
                *
                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.





19
 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 20, 2009
            By:
            /s/ Randall
      D. HolmesRandall
      D. HolmesPresident
      and Chief 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
              
              President
      and Chief Executive Officer
              
              March 20,
      2009Randall
      D. Holmes
              
              (Principal
      Executive Officer)/s/
      Jeffrey H. Strasberg
              
              Executive
      Vice President and Chief Financial Officer
              
              March 20,
      2009Jeffrey
      H. Strasberg
              
              (Principal
      Financial and Accounting Officer)RIDGEWOOD
      RENEWABLE POWER LLC(Managing
      Shareholder)By:
      /s/ Randall D. Holmes
              
              President
      and Chief Executive Officer of Managing Shareholder
              
              March 20,
      2009Randall
      D. Holmes








20
 Index to Consolidated Financial
Statements




RIDGEWOOD
ELECTRIC POWER TRUST III





INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS






PageReport of Independent Registered Public Accounting
      Firm
              F-2Consolidated Balance Sheets at December 31, 2008 and
      2007
              F-3Consolidated Statements of Operations for the years
      ended December 31, 2008 and 2007
              F-4Consolidated Statements of Changes in Shareholders’ Equity
      (Deficit) for the years ended December 31, 2008 and
      2007
              F-5Consolidated Statements of Cash Flows for the years ended
      December 31, 2008 and 2007
              F-6Notes to Consolidated Financial
    Statements
              F-7









F-1
 Index to Consolidated Financial
Statements




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, 2008 and 2007,
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, 2008 and 2007, 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 20,
2009







F-2
 Index to Consolidated Financial
Statements




RIDGEWOOD
      ELECTRIC POWER TRUST IIICONSOLIDATED BALANCE SHEETS(in
      thousands, except share data)December
      31,2008
                                                                      
                                                                      
                                                                      2007ASSETSCurrent
      assets:Cash
      and cash equivalents
                                                                      
                                                                      $
                                                                      1,378
                                                                      
                                                                      
                                                                      $
                                                                      1,863Accounts
      receivable
                                                                      
                                                                      
                                                                      -
                                                                      
                                                                      
                                                                      
                                                                      294Due
      from affiliates
                                                                      
                                                                      
                                                                      259
                                                                      
                                                                      
                                                                      
                                                                      304Other
      current assets
                                                                      
                                                                      
                                                                      137
                                                                      
                                                                      
                                                                      
                                                                      141Total
      current assets
                                                                      
                                                                      
                                                                      1,774
                                                                      
                                                                      
                                                                      
                                                                      2,602Investment
                                                                      
                                                                      
                                                                      2,714
                                                                      
                                                                      
                                                                      
                                                                      3,961Other
      assets
                                                                      
                                                                      
                                                                      56
                                                                      
                                                                      
                                                                      
                                                                      -Total
      assets
                                                                      
                                                                      $
                                                                      4,544
                                                                      
                                                                      
                                                                      $
                                                                      6,563LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                                                                      
                                                                      $
                                                                      51
                                                                      
                                                                      
                                                                      $
                                                                      166Due
      to affiliates
                                                                      
                                                                      
                                                                      12
                                                                      
                                                                      
                                                                      
                                                                      40Total
      liabilities
                                                                      
                                                                      
                                                                      63
                                                                      
                                                                      
                                                                      
                                                                      206Commitments
      and contingenciesShareholders’
      equity (deficit):Shareholders’
      equity (391.8444 Investor Shares issued andoutstanding)
                                                                      
                                                                      
                                                                      4,768
                                                                      
                                                                      
                                                                      
                                                                      6,625Managing
      shareholder’s accumulated deficit(1
      management share issued and outstanding)
                                                                      
                                                                      
                                                                      (287
                                                                      )
                                                                      
                                                                      
                                                                      (268
                                                                      )Total
      shareholders’ equity
                                                                      
                                                                      
                                                                      4,481
                                                                      
                                                                      
                                                                      
                                                                      6,357Total
      liabilities and shareholders’ equity
                                                                      
                                                                      $
                                                                      4,544
                                                                      
                                                                      
                                                                      $
                                                                      6,563









The
accompanying notes are an integral part of these consolidated financial
statements.





F-3
 Index to Consolidated Financial
Statements





RIDGEWOOD
      ELECTRIC POWER TRUST IIICONSOLIDATED
      STATEMENTS OF OPERATIONS(in
      thousands, except per share data)Years
      Ended December 31,2008
                                                                    
                                                                    
                                                                    2007Revenues
                                                                    
                                                                    $
                                                                    3,559
                                                                    
                                                                    
                                                                    $
                                                                    3,558Cost
      of revenues
                                                                    
                                                                    
                                                                    4,593
                                                                    
                                                                    
                                                                    
                                                                    4,301Gross
      loss
                                                                    
                                                                    
                                                                    (1,034
                                                                    )
                                                                    
                                                                    
                                                                    (743
                                                                    )Operating
      expenses:General
      and administrative expenses
                                                                    
                                                                    
                                                                    582
                                                                    
                                                                    
                                                                    
                                                                    600Management
      fee to Managing Shareholder
                                                                    
                                                                    
                                                                    159
                                                                    
                                                                    
                                                                    
                                                                    273Impairment
      of plant, equipment and intangibles
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    3,738Total
      operating expenses
                                                                    
                                                                    
                                                                    741
                                                                    
                                                                    
                                                                    
                                                                    4,611Loss
      from operations
                                                                    
                                                                    
                                                                    (1,775
                                                                    )
                                                                    
                                                                    
                                                                    (5,354
                                                                    )Other
      (expense) income:Equity
      in (loss) income of Ridgewood Providence
                                                                    
                                                                    
                                                                    (603
                                                                    )
                                                                    
                                                                    
                                                                    859Equity
      in loss of RILG
                                                                    
                                                                    
                                                                    (145
                                                                    )
                                                                    
                                                                    
                                                                    -Interest
      income
                                                                    
                                                                    
                                                                    18
                                                                    
                                                                    
                                                                    
                                                                    48Other
      income
                                                                    
                                                                    
                                                                    681
                                                                    
                                                                    
                                                                    
                                                                    8Total
      other (expense) income, net
                                                                    
                                                                    
                                                                    (49
                                                                    )
                                                                    
                                                                    
                                                                    915Net
      loss
                                                                    
                                                                    $
                                                                    (1,824
                                                                    )
                                                                    
                                                                    $
                                                                    (4,439
                                                                    )Managing
      Shareholder - Net loss
                                                                    
                                                                    $
                                                                    (18
                                                                    )
                                                                    
                                                                    $
                                                                    (44
                                                                    )Shareholders
      - Net loss
                                                                    
                                                                    
                                                                    (1,806
                                                                    )
                                                                    
                                                                    
                                                                    (4,395
                                                                    )Net
      loss per Investor Share
                                                                    
                                                                    
                                                                    (4,610
                                                                    )
                                                                    
                                                                    
                                                                    (11,218
                                                                    )







The
accompanying notes are an integral part of these consolidated financial
statements.





F-4
 Index to Consolidated Financial
Statements





RIDGEWOOD
      ELECTRIC POWER TRUST IIICONSOLIDATED
      STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
      (DEFICIT)YEARS
      ENDED DECEMBER 31, 2008 AND 2007(in
      thousands)Shareholders'
                                                            Equity
                                                          
                                                          Managing
                                                            Shareholder
                                                            (Deficit)
                                                          
                                                          Total
                                                            Shareholders'
                                                            EquityBalance
      at December 31, 2006
                                                          
                                                          $
                                                          11,160
                                                          
                                                          
                                                          $
                                                          (222
                                                          )
                                                          
                                                          $
                                                          10,938Net
      loss
                                                          
                                                          
                                                          (4,395
                                                          )
                                                          
                                                          
                                                          (44
                                                          )
                                                          
                                                          
                                                          (4,439
                                                          )Cash
      distributions
                                                          
                                                          
                                                          (500
                                                          )
                                                          
                                                          
                                                          (5
                                                          )
                                                          
                                                          
                                                          (505
                                                          )Capital
      contributions
                                                          
                                                          
                                                          360
                                                          
                                                          
                                                          
                                                          3
                                                          
                                                          
                                                          
                                                          363Balance
      at December 31, 2007
                                                          
                                                          
                                                          6,625
                                                          
                                                          
                                                          
                                                          (268
                                                          )
                                                          
                                                          
                                                          6,357Net
      loss
                                                          
                                                          
                                                          (1,806
                                                          )
                                                          
                                                          
                                                          (18
                                                          )
                                                          
                                                          
                                                          (1,824
                                                          )Cash
      distributions
                                                          
                                                          
                                                          (51
                                                          )
                                                          
                                                          
                                                          (1
                                                          )
                                                          
                                                          
                                                          (52
                                                          )Balance
      at December 31, 2008
                                                          
                                                          $
                                                          4,768
                                                          
                                                          
                                                          $
                                                          (287
                                                          )
                                                          
                                                          $
                                                          4,481








The
accompanying notes are an integral part of these consolidated financial
statements.




F-5
 Index to Consolidated Financial
Statements




RIDGEWOOD
      ELECTRIC POWER TRUST IIICONSOLIDATED
      STATEMENTS OF CASH FLOWS(in
      thousands)Years
      Ended December 31,2008
                                                            
                                                            
                                                            2007Cash
      flows from operating activities:Net
      loss
                                                            
                                                            $
                                                            (1,824
                                                            )
                                                            
                                                            $
                                                            (4,439
                                                            )Adjustments
      to reconcile net loss to net cash (used in) providedby
      operating activities:Depreciation
      and amortization
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            430Impairment
      of plant, equipment and intangibles
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            3,738Equity
      in loss (income) of Ridgewood Providence
                                                            
                                                            
                                                            603
                                                            
                                                            
                                                            
                                                            (859
                                                            )Equity
      in loss of RILG
                                                            
                                                            
                                                            145
                                                            
                                                            
                                                            
                                                            -Distributions
      from investment
                                                            
                                                            
                                                            499
                                                            
                                                            
                                                            
                                                            1,464Forgiveness
      of professional and management fees and related interest
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            363Change
      in operating assets and liabilities:Accounts
      receivable
                                                            
                                                            
                                                            294
                                                            
                                                            
                                                            
                                                            194Due
      to/from affiliates, net
                                                            
                                                            
                                                            17
                                                            
                                                            
                                                            
                                                            123Other
      current assets
                                                            
                                                            
                                                            4
                                                            
                                                            
                                                            
                                                            (58
                                                            )Other
      assets
                                                            
                                                            
                                                            (56
                                                            )
                                                            
                                                            
                                                            -Accounts
      payable and accrued expenses
                                                            
                                                            
                                                            (115
                                                            )
                                                            
                                                            
                                                            34Total
      adjustments
                                                            
                                                            
                                                            1,391
                                                            
                                                            
                                                            
                                                            5,429Net
      cash (used in) provided by operating activities
                                                            
                                                            
                                                            (433
                                                            )
                                                            
                                                            
                                                            990Cash
      flows from investing activities:Proceeds
      from notes receivable
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            15Capital
      expenditures
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            (2
                                                            )Net
      cash provided by investing activities
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            13Cash
      flows from financing activities:Cash
      distributions to shareholders
                                                            
                                                            
                                                            (52
                                                            )
                                                            
                                                            
                                                            (505
                                                            )Net
      (decrease) increase in cash and cash equivalents
                                                            
                                                            
                                                            (485
                                                            )
                                                            
                                                            
                                                            498Cash
      and cash equivalents, beginning of year
                                                            
                                                            
                                                            1,863
                                                            
                                                            
                                                            
                                                            1,365Cash
      and cash equivalents, end of year
                                                            
                                                            $
                                                            1,378
                                                            
                                                            
                                                            $
                                                            1,863Supplemental
      disclosures of noncash financing activities:Noncash
      exchange of Ridgewood Providence interests for RILG
    interests
                                                            
                                                            $
                                                            2,858
                                                            
                                                            
                                                            $
                                                            -









The
accompanying notes are an integral part of these consolidated financial
statements.





F-6
 Index to Consolidated Financial
Statements




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 Trust have characteristics that qualify the projects for
government incentives.




The
Trust’s accompanying consolidated financial statements include the accounts of
the Trust and its wholly-owned subsidiaries, Byron Power Partners, L.P.
(“Byron”) and JRW Associates, L.P. (“San Joaquin”, collectively with Byron, the
“Norcals”). Effective November 17, 2008, the Trust’s consolidated financial
statements also include the Trust’s 19.56% interest in Rhode Island LFG Genco,
LLC (“RILG”), 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.





Prior to
November 17, 2008, the Trust owned a 35.7% minority interest in Ridgewood
Providence Power Partners, L.P. (“Ridgewood Providence”) and the remaining
64.3% interest was owned by Ridgewood Electric Power Trust IV (“Trust IV”). On
November 17, 2008, the Trust and Trust IV entered directly or indirectly,
through one or more subsidiaries, into a series of agreements relating to the
Ridgewood Providence’s operations. The principal purpose of these agreements was
to consolidate the activities of the Trust, Ridgewood Electric Power Trust I
(“Trust I”), Trust IV and Ridgewood Power B Fund/Providence Expansion (“B
Fund”), under one entity, RILG.  As a result of the completion of the
transaction, the Trust, Trust I, Trust IV and B Fund own all of the equity
interests in RILG. The Trust contributed its 35.7% interest in Ridgewood
Providence in exchange for a 19.56% interest in RILG. Ridgewood Providence was
accounted for using the equity method of accounting.





Other
than Byron resuming its operations briefly in January 2008, the Norcals remained
closed since the fourth quarter of 2007 until the resumption of their
operations in May 2008. Consistent with past operating practices, the
Norcals suspended their operations in the fourth quarter of 2008 and
both Byron and San Joaquin are evaluating resuming operations in May 2009. If
the Norcals were to remain closed on a permanent basis, and effectively
terminate their agreements with Pacific Gas & Electric Company (“PG&E”),
the Norcals, but not the Trust, may be obligated to pay significant termination
fees.





The
Managing Shareholder announced that it intends to market RILG and the Norcals
for sale. The Managing Shareholder cannot predict the timing of the sale
process or whether any sales will occur.





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, including tax and other financial
information, and handles relations with the shareholders. 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 (“GAAP”) 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.


F-7
 Index to Consolidated Financial
Statements
  RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (dollar amounts in thousands, except
per share data)


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. At December 31, 2008,
cash and cash equivalents did not exceed insured limits. At December 31, 2007,
cash balances with banks exceeded insured limits by $1,763.




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 and Intangibles





Plant,
equipment and intangibles were fully impaired in 2007, as discussed in Note
4.





Renewals
and betterments that increase the useful lives of plant and equipment are
capitalized.  Repair and maintenance expenditures are expensed as
incurred.  The Trust used the straight-line method of depreciation
over the estimated useful life of the assets prior to their
impairment:





Building
                20
      yearsMachinery
      and equipment
                5-7
      years





Prior to
impairment of intangibles, a portion of the purchase price of the Norcals was
assigned to electric power sales contracts, which were being amortized over the
lives of the contracts on a straight-line basis.





g)
Impairment of Intangibles and Long-Lived Assets





The Trust
evaluates intangibles 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.  For the year ended
December 31, 2007, the remaining net book value of the plant, equipment and
intangible assets was fully impaired (See Note 4).





h)
Fair Value of Financial Instruments




At
December 31, 2008 and 2007, the carrying value of the Trust’s cash and cash
equivalents, accounts receivable, other current assets, accounts payable and
accrued expenses approximates their fair value.





i)
Comprehensive Loss




The
Trust's comprehensive loss consists only of net loss.





j)
Significant Customer and Supplier





During
2008 and 2007, PG&E accounted for 100% of total revenues. During 2008 and
2007, the Trust purchased 100% of its gas from Shell Energy North America
(US), L.P.





k)
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.


F-8
 Index to Consolidated Financial
Statements
  RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (dollar amounts in thousands, except
per share data)


l)
Recent Accounting Pronouncements





SFAS
157




In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standard (“SFAS”) No. 157, Fair Value Measurements
(“SFAS 157”), to define fair value, establish a framework for measuring fair
value in accordance with GAAP 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. In
February 2008, the FASB issued Staff Position 157-2, Effective Date of FASB Statement
No. 157, which delays the effective date of SFAS 157 for
non-financial assets and non-financial 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.  In October 2008, the FASB
issued Staff Position 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active,which clarifies the
application of SFAS 157 in a market that is not active and to determine the fair
value of a financial asset when the market for that financial asset is not
active. The Trust adopted SFAS 157 for financial assets and financial
liabilities effective January 1, 2008, with no material impact on its
consolidated financial statements.  Staff Position 157-3 does not have
a material impact on its consolidated financial statements. The Trust is
currently evaluating the impact of adopting SFAS 157 for non-financial
assets and non-financial liabilities 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 – Including an amendment of FASB
Statement No. 115 (“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. The Trust adopted SFAS 159 effective January 1, 2008, with no material
impact on its consolidated financial statements.





SFAS
162





In May
2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles (“SFAS 162”).  SFAS 162 identifies the sources
of accounting principles and the framework for selecting principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with GAAP.  This statement shall be effective 60
days following the SEC’s approval of the Public Company Accounting Oversight
Board’s amendments to AU section 411, The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles. The Trust is
currently evaluating the impact of adopting SFAS 162 on its consolidated
financial statements.





3.      INVESTMENT





RILG





In
October 2007, RILG was formed as a Delaware limited liability
company.  RILG has 23 megawatts capacity electrical generating
stations and associated gas treatment systems, located at the Central Landfill
in Johnston, Rhode Island (the “Landfill”). The project includes reciprocating
engine generator sets which are fueled by methane gas produced by and collected
from the Landfill. RILG is operated under contract by Ridgewood Power Management
LLC (“RPM”), an affiliate of the Managing Shareholder.





On
November 17, 2008, the Trust, Trust I, Trust IV and B Fund agreed to contribute
their interest in Ridgewood Providence, Ridgewood Rhode Island Generation LLC
and other affiliates to RILG.  The Trust contributed its interest in
Ridgewood Providence in exchange for a 19.56% interest in RILG, as more
fully described in Note 1. The electricity produced is partly sold to
New England Power Service Company under a long-term electric power sales
contract and partly sold in the spot or day-ahead wholesale electricity
market.




F-9
 Index to Consolidated Financial
Statements
  RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (dollar amounts in thousands, except
per share data)




Summarized
balance sheet data for RILG at December 31, 2008 and Ridgewood Providence
at December 31, 2007 is as follows:





December
      31,2008
                        
                        
                        2007Current
      Assets
                        
                        $
                        4,120
                        
                        
                        $
                        2,839Non-current
      assets
                        
                        
                        15,004
                        
                        
                        
                        9,360Total
      assets
                        
                        $
                        19,124
                        
                        
                        $
                        12,199Current
      liabilities
                        
                        $
                        2,782
                        
                        
                        $
                        1,102Equity
                        
                        
                        16,342
                        
                        
                        
                        11,097Total
      liabilities and equity
                        
                        $
                        19,124
                        
                        
                        $
                        12,199Trust
      share of RILG and Ridgewood Providence  equity,
      respectively
                        
                        $
                        2,714
                        
                        
                        $
                        3,961




Summarized
statements of operations data for RILG from November 17, 2008 to
December 31, 2008 and for Ridgewood Providence for the period from January
1, 2008 to November 16, 2008 and the year ended December 31, 2007 is as
follows:




November
      17 to
                          December
      31,
                          2008
                        
                        
                        January
      1 to
                          November
      16,
                          2008
                        
                        
                        Year
      ended
                          December
      31,
                          2007Revenues
                        
                        $
                        2,200
                        
                        
                        $
                        8,352
                        
                        
                        $
                        13,485Cost
      of revenues
                        
                        
                        2,050
                        
                        
                        
                        7,275
                        
                        
                        
                        10,161Other
      expenses
                        
                        
                        890
                        
                        
                        
                        2,766
                        
                        
                        
                        918Total
      expenses
                        
                        
                        2,940
                        
                        
                        
                        10,041
                        
                        
                        
                        11,079Net
      (loss) income
                        
                        $
                        (740
                        )
                        
                        $
                        1,689
                        
                        
                        $
                        2,406Trust
      share of equity (loss) income
                        
                        $
                        (145
                        )
                        
                        
                        (603
                        )
                        
                        $
                        859




The Trust
share of income in RILG is calculated effective November 17, 2008, the date when
the Trust’s interest in RILG is accounted for using the equity method of
accounting. The Trust’s share of RILG equity at December 31, 2008, is not based
on its 19.56% interest in RILG. Instead, it represents the carrying value of its
net investment in Ridgewood Providence at the time of the reorganization,
increased/decreased for its 19.56% share of earnings, losses and distributions
of RILG that occur subsequent to the reorganization.





4.      IMPAIRMENT
OF INTANGIBLES AND LONG-LIVED ASSETS





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, on December 31, 2007, the remaining net book value of the plant,
equipment and intangible assets was fully impaired with a resulting impairment
expense of $3,738 recorded in the fourth quarter of 2007.





5.      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, 2008 as
follows:




Years Ended December 31,2009
                        
                        $
                        1732010
                        
                        
                        1732011
                        
                        
                        1732012
                        
                        
                        1732013
                        
                        
                        173Thereafter
                        
                        
                        1,270Total
                        
                        $
                        2,135




Rent
expense for the years ended December 31, 2008 and 2007 was $229 and $206,
respectively.


F-10
 Index to Consolidated Financial
Statements
  RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (dollar amounts in thousands, except
per share data)


As part
of the Ridgewood Providence reorganization, RILG is obligated under the terms of
various agreements with Rhode Island Resource Recovery Corporation (“RIRRC”),
the owner and operator of the Landfill, to assume primary responsibility for
costs associated with the landfill gas collection system at the Landfill as of
the first to occur of the commencement of operation of the redeveloped facility
or June 1, 2013. If RILG fails to comply with these obligations, RILG could be
subject to monetary damages and also forfeit its contracted gas rights and its
sales agreements. RILG is responsible for the development and construction of a
sulfur treatment facility on the Landfill and the construction of new pipes and
headers. The cost of building and operating the sulfur treatment facility
and the pipes and headers is estimated to be approximately $5,000. The cost
of the sulfur treatment facility will be split equally between RILG and RIRRC
and the entire cost associated with the construction of pipes and headers will
be paid by RILG.  In addition, the cost of new flares on the Landfill
will be borne by RIRRC, but in certain circumstances, the costs may be shared
with RILG. RILG may need to obtain third-party financing to perform its duties
under the various agreements. While the Managing Shareholder believes a portion
of such financing will be available, there can be no assurance whether or when
RILG can obtain sufficient financing or obtain it on satisfactory
terms.





RILG and
several of its affiliates have an agreement with a power marketer for which they
were 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 in
the agreement. If RILG and the affiliates failed to supply the required number
of RPS Attributes, liquidated damages could be assessed. In accordance with the
terms of the agreement, if the power marketer elects to exercise an annual
option and RILG and the affiliates produce insufficient RPS Attributes for
such option year, RILG and the affiliates face maximum liquidated damagesof up to
approximately $3,800, 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, RILG
may be liable for up to 100% of the liquidated damages in the event of
a default by RILG and any of the affiliates. In addition, the Trust (together
with several other trusts and entities managed by the Managing Shareholder) is a
guarantor of the obligations of RILG and the affiliates under the agreement and
as such, could be liable for the maximum liquidated damages under the agreement.
RILG and the affiliates have deposits with the power marketer as partial
collateral of their obligations. In August 2008, the agreement with the power
marketer was amended and the security deposit with the power marketer was
increased by $6,121 (none of which was directly provided by the Trust) in
exchange for the release of, among other things, certain underlying assets that
have been sold, or were being marketed for sale, as collateral for the
obligations of the RILG and the affiliates under the agreement. In the agreement
with the power marketer, RILG and a wholly-owned subsidiary of Trust IV agreed
with the power marketer that if the amount on deposit with the power marketer is
less than 1.5 times the liquidated damages or a default or potential default
under the agreement has occurred, they would not make distributions to their
members other than to pay federal and state income taxes and to undertake other
permitted transactions under that agreement. As the power marketer did not
exercise its option to purchase 2009 RPS Attributes, the deposit is expected to
be returned in 2009.





On August
16, 2006, the Trust and several affiliated entities, including the Managing
Shareholder, filed lawsuits 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 other plaintiffs by Perelson
Weiner. On October 20, 2006, Perelson Weiner filed a counterclaim against the
Trust and other plaintiffs, alleging breach of contract due to unpaid invoices
with a combined total of approximately $1,200. Discovery is ongoing and no trial
date has been set. The costs and expenses of this litigation, including
adverse judgments, if any, are being paid for by the Managing Shareholder and
affiliated management companies and not the underlying investment
funds.




If San
Joaquin and Byron 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.




6.      TRANSACTIONS
WITH MANAGING SHAREHOLDER AND AFFILIATES





The Trust
operates pursuant to the terms of a management agreement (“Management
Agreement”).  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 was $159 and $273 for the years ended December 31, 2008 and
2007, respectively, as compensation for services to the Trust. 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.


F-11
 Index to Consolidated Financial
Statements
  RIDGEWOOD
ELECTRIC POWER TRUST III
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 (dollar amounts in thousands, except
per share data)




For the
years ended December 31, 2008 and 2007, the Trust made management fee
payments to the Managing Shareholder of $159 and $158,
respectively.  During the fourth quarter of 2007, the Managing
Shareholder forgave $115 of unpaid accrued management fees. 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.




Under the
Operating Agreement with the Trust, 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. During the years ended December 31, 2008 and 2007,
RPM charged the projects $217 and $223, respectively, for overhead items
allocated in proportion to the amount invested in projects managed.
In addition, for the years ended December 31, 2008 and 2007, RPM
charged the projects $4,958 and $4,248, 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 $1 and $5 for the years ended December 31, 2008 and 2007,
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.





In
accordance with the  Declaration of Trust, upon or prior to the first
distribution by the Trust in liquidation, the Managing Shareholder is required
to contribute to the capital of the Trust an amount equal to any deficit in the
tax basis capital account of the Managing Shareholder calculated just prior to
the date of such distribution. As of December 31, 2008, the last date such
calculation was made, the Managing Shareholder would have been required to
contribute $146 to the Trust prior to the Trust making any liquidating
distributions.





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.





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, 2008 and 2007, the Trust
had outstanding receivables and payables as follows:





Due
      from
                  
                  
                  Due
      to2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007RPM
                  
                  $
                  252
                  
                  
                  $
                  296
                  
                  
                  $
                  -
                  
                  
                  $
                  -RRP
                  
                  
                  -
                  
                  
                  
                  7
                  
                  
                  
                  -
                  
                  
                  
                  -RILG
                  
                  
                  6
                  
                  
                  
                  -
                  
                  
                  
                  12
                  
                  
                  
                  39Other
      affiliates
                  
                  
                  1
                  
                  
                  
                  1
                  
                  
                  
                  -
                  
                  
                  
                  1Total
                  
                  $
                  259
                  
                  
                  $
                  304
                  
                  
                  $
                  12
                  
                  
                  $
                  40








F-12