Table of
Contents
 
 UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
DC 20549
 
 FORM
10-K
 (Mark
One)
 x           ANNUAL REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 For the
fiscal year ended December 31, 2007
 
 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:  0-21304
 
 RIDGEWOOD
ELECTRIC POWER TRUST II
 (Exact Name of
Registrant as Specified in Its Charter)
 Delaware
              
              22-3206429(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 
o       No 
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 
o       No 
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.  o
 
 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
definitions of “large accelerated filer”, “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
  Large
accelerated filer   oAccelerated
filer   oNon-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 Sharesoutstanding at January 31, 2008
was235.3775.
  
 Table of Contents
  FORM
10-K
  TABLE OF CONTENTS
 
 PART
I
 
 PageItem 1.
              Business
              1Item 1A.
              Risk Factors
              4Item 1B.
              Unresolved Staff Comments
              6Item 2.
              Properties
              6Item 3.
              Legal Proceedings
              6Item 4.
              Submission of Matters to a Vote of Security
      Holders
              7PART
      IIItem 5.
              Market for Registrant’s Common Equity, Related Security
      Holder Matters and
                Issuer Purchases of Equity Securities
              7Item 6.
              Selected Financial Data
              7Item 7.
              Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
              7Item 7A.
              Quantitative and Qualitative Disclosures About Market
      Risk
              11Item 8.
              Financial Statements and Supplementary
    Data
              11Item 9.
              Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure
              11Item 9A.
              Controls and Procedures
              11Item 9B.
              Other Information
              12PART
      IIIItem 10.
              Directors, Executive Officers and Corporate
      Governance
              12Item 11.
              Executive Compensation
              13Item 12.
              Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder Matters
              13Item 13.
              Certain Relationships and Related Transactions, and Director
      Independence
              14Item 14.
              Principal Accountant Fees and Services
              15PART
      IVItem 15.
              Exhibits and Financial Statement
    Schedules
              15SIGNATURES
              17
  Table of Contents
  Forward-Looking
Statements
  Certain
statements discussed in Item 1. “Business”, Item 3. “Legal
Proceedings” and Item 7. “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and elsewhere in this Annual Report on
Form 10-K constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995.
 
 These
forward-looking statements generally relate to the Trust’s plans, objectives and
expectations for future events and include statements about the Trust’s
expectations, beliefs, plans, objectives, intentions, assumptions and other
statements that are not historical facts. These statements are based upon
management’s opinions and estimates as of the date they are made. Although
management believes that the expectations reflected in these forward-looking
statements are reasonable, such forward-looking statements are subject to known
and unknown risks and uncertainties that may be beyond the Trust’s control,
which could cause actual results, performance and achievements to differ
materially from results, performance and achievements projected, expected,
expressed or implied by the forward-looking statements. Examples of events that
could cause actual results to differ materially from historical results or those
anticipated include changes in political and economic conditions, federal or
state regulatory structures, government mandates, the ability of customers to
pay for energy received, supplies and prices of fuels, operational status of
generating plants, mechanical breakdowns, volatility in the price for electric
energy, natural gas, or renewable energy. Additional information concerning the
factors that could cause actual results to differ materially from those in the
forward-looking statements is contained in Item 1A. “Risk Factors” and
Item 7. “Management’s Discussion and Analysis of Financial Condition and
Results of Operations”, and elsewhere in this Annual Report on Form 10-K.
The Trust undertakes no obligation to publicly revise any forward-looking
statements or cautionary factors, except as required by law.
 
 PART
I
 
 ITEM 1.  BUSINESS
 
 Overview
 
 Ridgewood
Electric Power Trust II (the “Trust”) is a Delaware trust formed on November 20,
1992 primarily to make investments in projects and businesses in the energy and
infrastructure sectors. Ridgewood Renewable Power LLC (“RRP” or the “Managing
Shareholder”), a New Jersey limited liability company, is the Managing
Shareholder. As the Managing Shareholder, RRP has direct and exclusive control
over the management and operations of the Trust.
  The Trust
has focused primarily on small-scale electricity generation projects. These
projects allow the Trust to develop secure long-term positions in attractive
specialty markets for products and services provided by its projects and
companies. As of December 31, 2007, the Trust had one non-operating investment,
located in California and 100% owned by the Trust.  This investment is
a 5.5 megawatt (“MW”) cogeneration project which suspended operations in January
2006 due to a contract dispute with its only customer and remains closed as of
the date of this filing. See Item 3. “Legal Proceedings” for further discussion.
Additionally, the Trust had long-term notes receivable, which were paid in
full, in advance of their due dates, on October 31, 2007. The proceeds are
currently held as cash and cash equivalents.
  The Trust
initiated its private placement offering in November 1992, 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
January 1994 and after payment of offering fees, commissions and investment
fees, the Trust had $19.4 million available for investments and operating
expenses. As of January 31, 2008, the Trust had 235.3775 Investor Shares
outstanding, held by 534 shareholders.
 
 Managing
Shareholder
  RRP, via
a predecessor corporation, was founded in 1991 by Robert E. Swanson. As the
Managing Shareholder, RRP has direct and exclusive control over the management
of the Trust’s operations. With respect to project investment, RRP locates
potential projects, conducts appropriate due diligence and negotiates and
completes the transactions in which the investments are made by the
Trust.
 
 In
addition, RRP performs (or arranges for the performance of) the operation and
maintenance of the projects invested in by the Trust and the management and
administrative services required for Trust operations. Among other services, RRP
administers the accounts and handles relations with the shareholders, including
tax and other financial information. RRP also provides the Trust with office
space, equipment and facilities and other services necessary for its
operation.
 
 As
compensation for its management services, the Managing Shareholder is entitled
to (i) an annual management fee, payable monthly, equal to 1.5% of the prior
year net asset value of the Trust, and (ii) a 20% interest in the cash
distributions made by the Trust in excess of certain threshold amounts expressed
in terms of shareholder returns. The Managing Shareholder is also entitled to
receive reimbursement from the Trust for operating expenses incurred by the
Trust, or on behalf of the Trust and paid by RRP, as the Managing Shareholder.
RRP has arranged for administrative functions required to be performed for the
Trust to be performed by an affiliate, Ridgewood Power Management LLC (“RPM”),
and at RPM’s costs, such costs are reimbursed to RPM by the Trust. RRP also
serves as the managing shareholder (or managing member as appropriate) of a
number of affiliated trusts and investment vehicles similar to the Trust and,
through RPM, provides services to those entities similar to those provided to
the Trust.
  1
 Table of Contents
  Affiliates
of RRP act on behalf of a number of investment vehicles in the oil and gas and
venture capital sectors in a manner similar to that for which RRP serves on
behalf of the Trust.
  Business
Strategy
  The
Trust’s primary investment objective is to generate cash flow for distribution
to shareholders and capital appreciation from one or more of the acquisition,
development, ownership and operation of interests in electricity generation and
other infrastructure projects and companies. The Trust generally seeks to invest
in projects and companies that provide products or services through a number of
small facilities and that offer opportunities for expansion either through
increasing production at existing sites or through the establishment of
additional sites. These projects often involve development, construction and
operating risk but, once established, may be able to effectively “lock-in” the
customer (or customers) served by the project, which would prevent competitors
from dislodging the Trust’s project. The Trust focuses on markets in which
projects can be developed and built quickly and can be standardized as to their
design, equipment and construction. By following this strategy, the Trust seeks
to take advantage of attractive market opportunities while streamlining the
development process and diversifying across a number of projects in order to
contain the exposure of the Trust to the risks inherent in such projects. As of
December 31, 2007, all of the Trust’s projects are 100% owned through investment
vehicles managed by the Managing Shareholder.
  Projects
and Properties
  Monterey
  In
January 1995, the Trust purchased 100% of the equity interests in Sunnyside
Cogeneration Partners, L.P., which owns a 5.5MW cogeneration project located in
Salinas, Monterey County, California (“Monterey”). Monterey began operations in
1991 using natural gas fired reciprocating engines to generate electricity for
sale to Pacific Gas and Electric Company ("PG&E") under a long term contract
expiring in 2020 (the "Power Contract"). PG&E is also obligated to pay
Monterey capacity payments based on its net electrical output or its available
capacity. Thermal energy from Monterey’s operations provides warm water to an
adjacent greenhouse under a long-term contract that also terminates in 2020.
Monterey is operated on behalf of the Trust by RPM on an at-cost
basis.
 
 Monterey’s
contract prices with PG&E were determined pursuant to a contract formula
approved by the California Public Utilities Commission with the energy payment
originally based upon a benchmark energy price adjusted for changes over time in
a natural gas price index; referred to as the Short Run Avoided Cost
Methodology. In 2001, Monterey entered into an amendment to the Power
Contract with PG&E, which provided, among other things, that Monterey would
receive a fixed energy payment (as well as the required capacity payment) for a
term of five years, until approximately August 2006. Upon expiration of the
amendment, through the remainder of the term of the contract, the formula
contained in the original contract is being used to determine the energy price
paid by PG&E.
 
 In August
2001, Monterey entered into an agreement with Coral Energy Services, Inc.
(“Coral”), a subsidiary of Shell Oil, to procure its natural gas fuel at a fixed
price through August 2006. Coral and Monterey also had a master re-sale
agreement, which also expired in August 2006. Such agreement enabled
Monterey to not take delivery of, and sell back to Coral, certain amounts of
natural gas once predetermined prices have been established. During the
contract, Monterey re-sold gas back to Coral.
 
 Monterey
has a non-cancelable operating lease covering its site, which expires in May
2021 with minimum annual lease payments, including the delivery of cogeneration
steam.
 
 Monterey
received notice on December 1, 2005 from PG&E, its sole customer, directing
Monterey to increase its operations from 13 hours, 5 days a week to 24 hours, 7
days a week. However, PG&E had been operating or "dispatching" Monterey on a
13 by 5 basis for over 15 years. Monterey determined that it could not
operate profitably on such a 24 by 7 schedule and was concerned that if it only
operated on a 13 by 5 basis, PG&E might refuse to pay for delivered
electricity. Monterey requested from PG&E to limit its operations to the 13
by 5 basis, but this request was denied. As a result, effective January 9, 2006,
Monterey ceased its operations. Monterey and PG&E have filed lawsuits
against the other for breach of contract. Additionally, as a result of the
Monterey shutdown, the project has not delivered cogeneration steam since it was
shutdown in January 2006. As a result, it may be subject to penalties from the
lessor, though no claims have been asserted by the lessor as of the date of this
filing.
  2
 Table of Contents
  PILP/B-3
 
 In
January 1994, the Trust made an equity investment of $2.3 million in Pittsfield
Investors Limited Partnership (“PILP”), which was formed to acquire a
waste-to-energy project designed and built to burn municipal solid waste
supplied by the City of Pittsfield, Massachusetts, surrounding communities and
other waste providers as well as to supply steam to a nearby paper
mill. The PILP project originally began operating in 1981 and was operated
and co-owned with the Trust by subsidiaries of Energy Answers Corporation
(“EAC”). The Trust made an additional investment with affiliates of EAC in
August 1994 when it purchased an interest in the B-3 Limited Partnership (“B-3”)
for $4 million. The business of B-3 was the construction and operation of a
municipal waste transfer station in Columbia County, New York.  In
September 2002, the Trust sold its interests in PILP and B-3 to EAC for $1.2
million in cash and $5 million of promissory notes. The notes bore interest at a
rate of 10% per annum, and were to be repaid over a 17-year term. The notes were
collateralized solely by the assets of the projects and were without recourse to
EAC. On October 31, 2007, the Trust’s notes receivable were fully repaid in
advance of their due dates. The amount received, including prepayment penalties,
totaled $5 million.
 
 Significant
Customers and Supplier
 
 During
2007, the Trust did not record any operating revenues and did not purchase any
natural gas. During 2006, the Trust’s only customer, PG&E, accounted for
100% of total revenues, and in 2006 the Trust purchased 100% of its natural gas
from Coral.
 
 Competition
 
 Monterey
is currently bound under a long-term sale contract. Based on this, the Trust
does not generally face direct competition in the sale of the electricity it
generates.
 
 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. Monterey also operates under a
Qualifying Facility Certification issued by the Federal Energy Regulatory
Commission. The Trust considers these regulations to be routine and does not
consider the cost of compliance to be material.
 
 Insurance
  The Trust
has in place, either directly or through investee companies, insurance typical
for activities such as those conducted by the Trust. These policies include
property and casualty, business interruption and workman’s compensation
insurance, which the Trust believes to be appropriate.
 
 Employees
  The Trust
does not have employees. The activities of the Trust are performed either by
employees of the Managing Shareholder, its affiliates or those of the specific
investments of the Trust.
  Offices
  The
principal office of the Trust is located at 1314 King Street, Wilmington,
Delaware, 19801 and its phone number is 302-888-7444. The Managing Shareholder’s
principal office is located at 947 Linwood Avenue, Ridgewood, New Jersey, 07450
and its phone number is 201-447-9000.
  3
 Table of Contents
 ITEM 1A. RISK
FACTORS
 
 In
addition to the other information set forth elsewhere in this report, you should
carefully consider the following factors when evaluating the
Trust:
  RISKS
INHERENT IN THE BUSINESSES OF THE TRUST
  The
Trust’s remaining operating asset, Monterey, has not operated since January
2006.
  If
Monterey is unable to satisfactorily resolve its dispute with PG&E, its only
customer, it is likely that the plant will remain closed. The Monterey project
is the only remaining operating asset of the Trust. Continued closure of the
Monterey project significantly reduces revenue and cash flows to the Trust. See
Item 3. “Legal Proceedings” for a description of the dispute with
PG&E.
 
 The
project of the Trust depends on the near-continuous operation of its equipment.
Should the productivity of some or all of this equipment be compromised or
should the equipment fail altogether, the Trust would be adversely affected. The
Trust may also experience difficulty in hiring qualified operating
personnel.
  The
primary equipment of the Trust 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 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
project of the Trust is subject to regulatory changes (including changes in
environmental regulations) that could significantly reduce revenues or increase
expenses of the Trust.
  This area of risk is inherently
difficult to predict but could include matters such as emission control changes.
Such changes could increase costs at the affected project or prevent the project
from operating.
  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. 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.
  While the
Trust no longer has any assets currently operating, the Trust may need to
remain in existence until such time as its litigation, as well as its
contractual obligations, are resolved.
  RISKS
RELATED TO THE NATURE OF THE TRUST’S SHARES
  The
Trust’s shares have severe restrictions on transferability and liquidity and
shareholders are required to hold the shares indefinitely.
  The
Trust’s shares are illiquid investments. There is currently no market for these
shares and one is not likely to develop. Because there may be only a limited
number of persons who purchase shares and because there are significant
restrictions on the transferability of such shares under the Trust’s Declaration
of Trust and under applicable federal and state securities laws, it is expected
that no public market will develop. Moreover, neither the Trust nor the Managing
Shareholder will provide any market for the shares. Shareholders are generally
prohibited from selling or transferring their shares except in the circumstances
permitted under the Declaration of Trust and applicable law, and all such sales
or transfers require the Trust’s consent, which it may withhold at its sole
discretion. Accordingly, shareholders have no assurance that an investment can
be transferred and must be prepared to bear the economic risk of the investment
indefinitely.
 
 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.
  4
 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 rising out of the Trust’s management,
except for claims arising out of bad faith, gross negligence or willful
misconduct or a breach of the Declaration of Trust. Therefore, the Trust may
have difficulty sustaining an action against the Managing Shareholder, or its
affiliates and their officers based on breach of fiduciary responsibility or
other obligations to the shareholders.
  The
Managing Shareholder is entitled to receive a management fee regardless of the
Trust’s profitability and also receives cash distributions.
  The
Managing Shareholder is entitled to receive an annual management fee from the
Trust regardless of whether the Trust is profitable in that year. The annual
fee, payable monthly, is equal to 1.5% of the Trust's net asset value. In
addition to its annual management fee, the Managing Shareholder, as compensation
for its management services, will receive 20% of the Trust’s cash distributions
to shareholders upon the shareholders having received a certain minimum level of
distributions as set out in the Declaration of Trust, even though the Managing
Shareholder has not contributed any cash to the Trust. Accordingly,
shareholders contribute all of the cash utilized for the Trust’s
investments and activities. If the Trust’s projects are unsuccessful, the
shareholders may lose 100% of their investment while the Managing
Shareholder will not suffer any investment losses because it did not contribute
any capital. None of the compensation to be received by the Managing Shareholder
has been derived as a result of arm’s length negotiations.
  Cash
distributions are not guaranteed and may be less than anticipated or
estimated.
  Distributions
depend primarily on available cash from project operations. At times,
distributions have been delayed to repay the principal and interest on project
or Trust borrowings, if any, or to the Trust’s other costs. The Trust’s taxable
income will be taxable to the shareholders in the year earned, even if cash is
not distributed.
  Because
the Managing Shareholder manages other electricity generation and infrastructure
trusts, it may have conflicts of interest in its management of the Trust’s
operations.
  Shareholders
will not be involved in the management of the Trust’s operations. Accordingly,
they must rely on the Managing Shareholder’s judgment in such matters. Inherent
with the exercise of its judgment, the Managing Shareholder will be faced with
conflicts of interest. While neither the Trust nor the Managing Shareholder have
specific procedures in place in the event of any such conflicting
responsibilities, the Managing Shareholder recognizes that it has fiduciary
duties to the Trust in connection with its position and responsibilities as
Managing Shareholder and it intends to abide by such fiduciary responsibilities
in performing its duties. Therefore, the Managing Shareholder and its affiliates
will attempt, in good faith, to resolve all conflicts of interest in a fair and
equitable manner with respect to all parties affected by any such conflicts of
interest. However, the Managing Shareholder is not liable to the Trust for how
conflicts of interest are resolved unless it has acted in bad faith, or engaged
in gross negligence or willful misconduct.
  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.
 
 5
 Table of Contents
 ·
              All
      or a substantial portion of the Trust’s income could be deemed to
      constitute unrelated business taxable income, such that tax-exempt
      shareholders could be subject to tax on their respective portions of such
      income.
 
 ·
              If
      any Trust income is deemed to be unrelated business taxable income, a
      shareholder that is a charitable remainder trust could have all of its
      income from any source deemed to be
taxable.
 
 ·
              All
      or a portion of the losses, if any, allocated to the shareholders will be
      passive losses and thus deductible by the shareholder only to the extent
      of passive income.
 
 ·
              The
      shareholders could have capital losses in excess of the amount that is
      allowable as a deduction in a particular
year.
  Although
the Trust has obtained an opinion of counsel regarding the matters described in
the preceding paragraph, it will not obtain a ruling from the IRS as to any
aspect of the Trust’s tax status. The tax consequences of investing in the Trust
could be altered at any time by legislative, judicial, or administrative
action.
 
 If
the IRS audits the Trust, it could require investors to amend or adjust their
tax returns or result in an audit of their tax returns.
  The IRS
may audit the Trust’s tax returns. Any audit issues will be resolved at the
Trust level by the Managing Shareholder. If adjustments are made by the
IRS, corresponding adjustments will be required to be made to the federal income
tax returns of the shareholders, which may require payment of additional taxes,
interest, and penalties. An audit of the Trust’s tax return may result in the
examination and audit of a shareholder’s return that otherwise might not have
occurred, and such audit may result in adjustments to items in the shareholder’s
return that are unrelated to the Trust’s operations. Each shareholder bears the
expenses associated with an audit of that shareholder’s return.
  In the
event that an audit of the Trust by the IRS results in adjustments to the tax
liability of a shareholder, such shareholder will be subject to interest on the
underpayment and may be subject to substantial penalties.
  The tax
treatment of the Trust cannot be guaranteed for the life of the Trust. Changes
in laws or regulations may adversely affect any such tax treatment.
  Deductions,
credits or other tax consequences may not be available to shareholders.
Legislative or administrative changes or court decisions could be forthcoming
which would significantly change the statements herein. In some instances, these
changes could have substantial effect on the tax aspects of the Trust. Any
future legislative changes may or may not be retroactive with respect to
transactions prior to the effective date of such changes. Bills have been
introduced in Congress in the past and may be introduced in the future which, if
enacted, would adversely affect some of the tax consequences of the
Trust.
 
 ITEM
1B.  UNRESOLVED STAFF COMMENTS
  Not
applicable.
  ITEM2.  PROPERTIES
  Information
regarding the Trust’s properties is contained in Item 1. “Business”, under the
heading “Projects and Properties”.
  ITEM 3.  LEGAL
PROCEEDINGS
  As
discussed in Item 1. “Business” under the heading “Monterey” for the first 15
years of operation, PG&E “dispatched” the Monterey facility to produce and
deliver electricity up to its contract capacity on a 13 hour per day, five day
per week basis.  However, on December 1, 2005, PG&E dispatched Monterey
on a 24 hour per day, seven day per week basis for an indefinite period,
effective January 1, 2006.  Monterey advised PG&E that its 24 by 7
dispatch order was a breach of the parties’ power purchase agreement. 
Management of Monterey was also concerned that if Monterey continued to produce
and supply power consistent with the parties’ prior course of performance,
PG&E would refuse to pay.  Accordingly, Monterey demanded that PG&E
provide adequate assurances that it would continue to pay Monterey for its
capacity and its electricity produced and delivered in accordance with the
parties’ longstanding 13 by 5 operations.  PG&E did not provide such
assurances.  In the absence of such assurances, Monterey suspended
operations on January 9, 2006.  Monterey filed a Complaint against PG&E
in the San Francisco Superior Court on May 16, 2006 (the “Monterey
Complaint”).  The Monterey Complaint seeks damages for breach of contract,
damages for PG&E’s breach of the implied covenant of good faith and fair
dealing, and a claim for declaratory relief against PG&E, seeking a judicial
determination that PG&E’s conduct materially breached the parties’ agreement
and justified Monterey’s suspension of performance.  Monterey is
seeking damages against PG&E estimated at approximately $5
million.
  6
 Table of Contents
  On May
14, 2007, PG&E filed a Complaint in San Francisco Superior Court against
Monterey (the “PG&E Complaint”).  The PG&E Complaint arises out of
the same transactions and occurrences that gave rise to the Monterey Complaint
against PG&E.  PG&E asserted claims for compensatory damages for
breach of contract and breach of the implied covenant of good faith and fair
dealing, as well as “restitution” of capacity payments made to Monterey on a
theory of unjust enrichment, and declaratory relief for repayment of capacity
payments made to Monterey.  PG&E is seeking restitution damages against
Monterey estimated at approximately $4.8 million.
 
 The
claims made by PG&E have been made solely against Monterey and do not
involve any claims against the Trust. A trial date for both of the above
litigation matters has been set for September 15, 2008.
 
 On August
16, 2006, the Trust and several affiliated entities, including the Managing
Shareholder, filed a lawsuit against the former independent registered public
accounting firm for the Trust and several affiliated entities, Perelson Weiner
LLP (“Perelson Weiner”), in New Jersey Superior Court. The suit alleged
professional malpractice and breach of contract in connection with audit and
accounting services performed for the Trust and the other plaintiffs by Perelson
Weiner. On October 20, 2006, Perelson Weiner filed a counterclaim against the
Trust and the other plaintiffs, alleging breach of contract due to unpaid
invoices in the total amount of approximately $1,188,000. Discovery is ongoing
and no trial date has been set. The costs and expenses of the litigation are
being paid for by the Managing Shareholder and affiliated management companies
and not the underlying investment funds, including the Trust.
  ITEM4.  SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
 None.
 
 PART
II
 
 ITEM5.  MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED SECURITY HOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
  Market
Information
 
 There has
never been an established public trading market for the Trust’s Investor
Shares.
 
 Holders
 
 As of
January 31, 2008, there were 534 holders of Investor Shares.
 
 Dividends
 
 There
were no dividends or other distributions made by the Trust for the years ended
December 31, 2007 and 2006.
 
 ITEM6.  SELECTED
FINANCIAL DATA
 
 Not
required.
 
 ITEM7.  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 November 20, 1992 primarily to make investments in
projects and businesses in the energy and infrastructure sectors. RRP, a New
Jersey limited liability company, is the Managing Shareholder. As the Managing
Shareholder, RRP has direct and exclusive control over the management and
operations of the Trust.
  The Trust
has focused primarily on small-scale electricity generation projects. These
projects allow the Trust to develop secure long-term positions in attractive
specialty markets for products and services provided by its projects and
companies. As of December 31, 2007, the Trust had one non-operating investment,
located in California and 100% owned by the Trust.  This investment is
a 5.5 megawatt cogeneration project which suspended operations in January 2006
due to a contract dispute with its only customer. See Item. 3 “Legal
Proceedings” for further discussion.  Additionally, the Trust
had long-term notes receivable, which were paid in full, in advance of
their due dates, on October 31, 2007.  The proceeds are currently held
as cash and cash equivalents.
  7
 Table of Contents
  Since the
closing of the Monterey facility in January 2006, the Trust has not had any
operating revenues, though it continued to have contractual obligations through
August 2006 related to the gas purchase agreement with Coral and ongoing lease
and maintenance expenses. Upon the repayment of the Trust’s long term receivable
in October 2007, the Trust no longer had any income producing assets and may not
in the future, subject to the resolution of litigation relating to the Monterey
facility. Monterey remains closed as of the date of this filing.
 
 Critical
Accounting Policies and Estimates
 
 The
discussion and analysis of the Trust’s financial condition and results of
operations are based upon the Trust’s consolidated financial statements, which
have been prepared in conformity with accounting principles generally accepted
in the United States of America. In preparing these financial statements, the
Trust is required to make certain estimates, judgments and assumptions. These
estimates, judgments and assumptions affect the reported amounts of the Trust’s
assets and liabilities, including the disclosure of contingent assets and
liabilities, at the date of the financial statements and the reported amounts of
the Trust’s revenues and expenses during the periods presented. The Trust
evaluates these estimates and assumptions on an ongoing basis. The Trust bases
its estimates and assumptions on historical experience and on various other
factors that the Trust believes to be reasonable at the time the estimates and
assumptions are made. However, future events and their effects cannot be
predicted with absolute certainty. Therefore, the determination of estimates
requires the exercise of judgment. Actual results may differ from these
estimates and assumptions under different circumstances or conditions, and such
differences may be material to the financial statements. The Trust believes the
following critical accounting policies affect the more significant estimates and
judgments in the preparation of the Trust’s consolidated financial
statements.
 
 Revenue
Recognition
 
 Power
generation revenue is recorded in the month of delivery, based on the estimated
volumes sold to customers at rates stipulated in the electric power sales
contract. Adjustments are made to reflect actual volumes delivered when the
actual volumetric information subsequently becomes available. Billings to
customers for power generation generally occurs during the month following
delivery. Final billings do not vary significantly from estimates.
 
 Accounts
Receivable
 
 Accounts
receivable are recorded at invoice price in the period the related revenues are
earned, and do not bear interest. No allowance for bad debt expense was provided
based upon historical write-off experience, evaluation of customer credit
condition and the general economic status of the customers.
 
 Plant
and Equipment
 
 Plant and
equipment, consisting principally of a power generating facility has been fully
impaired. Renewals and betterments that increase the useful lives of the assets
are capitalized. Repair and maintenance expenditures are expensed as incurred.
Upon retirement or disposal of assets, the cost and related accumulated
depreciation are removed from the consolidated balance sheets. The difference,
if any, between the net asset value and any proceeds from such retirement or
disposal is recorded as a gain or loss in the consolidated statement of
operations.
 
 Impairment
of Intangibles and Long-Lived Assets
  The Trust
evaluates intangible assets and long-lived assets, such as plant and equipment,
when events or changes in circumstances indicate that the carrying value of such
assets may not be recoverable. The determination of whether impairment has
occurred is made by comparing the carrying value of an asset to the estimated
undiscounted cash flows attributable to that asset. If impairment has occurred,
the impairment loss recognized is the amount by which the carrying value exceeds
the estimated fair value of the asset, which is based on the estimated future
cash flows discounted at the estimated cost of capital. The analysis requires
estimates of the amount and timing of projected cash flows and, where
applicable, judgments associated with, among other factors, the appropriate
discount rate. Such estimates are critical in determining whether any impairment
charge should be recorded and the amount of such charge if an impairment loss is
deemed to be necessary.
 
 Management
Fee
 
 The Trust
is charged management fees from its Managing Shareholder. Unpaid management fees
accrue interest at 10% per annum. The Managing Shareholder has periodically
waived its right to receive a portion of the fees and related interest, as well
as various professional service fee reimbursements. Any waived management fees,
interest or reimbursements are deemed capital contributions at the time of
waiver. The shareholders of the Trust other than the Managing Shareholder
are allocated 99% of each contribution and the Managing Shareholder is
allocated 1% so that the amount of the contribution allocated offsets the
allocation of the recorded expense.
  8
 Table of Contents
  Gas Contract
 
 In August
2001, Monterey entered into an agreement to purchase natural gas, at fixed
prices, over a five-year term in connection with entering into an amendment
fixing the sales price of electric power sales contracts for a similar term. The
contract was entered into in order to minimize the impact of fluctuating energy
prices. The Trust determined that the contract was a derivative as defined under
Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for
Derivative Instruments and Hedging Activities”, as amended. The Trust designated
the derivative as a non-hedge instrument. Accordingly, the value of the contract
based on the differences between contract prices and market value prices was
recognized as an asset or a liability in the consolidated balance sheet. Changes
in the carrying value of the contract were reflected as a component of cost of
revenues in the consolidated statement of operations. During the third quarter
of 2006, the Trust completed its contractual agreement to resell the purchased
gas back to Monterey’s gas supplier and therefore, there is no longer any value
recorded on the consolidated balance sheets associated with this
contract.
 
 Notes
Receivable
 
 Recovery
of interest and principal under the promissory notes issued in connection with
the sale of the Trust’s interest in PILP and B-3 were dependent upon the
operations of the partnership investment transferred. Consequently, the Trust
deferred its gain on the sale of its ownership interest until the carrying value
of the investments was fully recovered. The cash proceeds received for the
interest and principal were recorded as a reduction of the Trust’s investment in
the partnership transferred under contractual agreement through June 30,
2005.  Subsequent payments were recorded as a component of other
income. The note payments remained current until they were paid in full, in
advance of their due dates, on October 31, 2007.
 
 Income
Taxes
 
 No
provision is made for income taxes in the Trust’s consolidated financial
statements as the income or losses of the Trust are passed through and included
in the income tax returns of the individual shareholders of the Trust. Effective
January 1, 2007, the Trust adopted Financial Accounting Standards Board (“FASB”)
Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (“FIN 48”) with no impact on its consolidated financial statements.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with SFAS No. 109 and prescribes
a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition.
 
 Results
of Operations
 
 There
were no revenues for the year ended December 31, 2007 compared to $0.1 million
for the same period in 2006 due to the shutdown of Monterey’s operations, which
occurred in January 2006. The 2006 revenues were derived from the Monterey
facility prior to its closure.
 
 Cost of
revenues decreased $0.7 million, or 67.5%, from $1 million in 2006 to $0.3
million in 2007. The cost of revenues in 2006 was primarily due to
decreased natural gas prices and their impact on Monterey’s gas contract, which
expired in August 2006. Cost of revenues in 2007 primarily included certain
fixed expenses and maintenance of the Monterey operations.
 
 Gross
loss decreased approximately $0.7 million to a gross loss of $0.3 million for
the year ended December 31, 2007, as compared to $1 million for the same period
in 2006. This decrease was primarily due to the 2007 period not having the gas
contract, which expired in August 2006.
 
 General
and administrative expenses increased $0.6 million to $0.8 million for the year
ended December 31, 2007, as compared to $0.2 million for the same period in
2006. This was primarily due to increased professional fees related to the
Monterey litigation.
 
 During
the first quarter of 2006, the Trust recorded a $2.8 million impairment of its
plant, equipment and intangible assets, due to the shutdown of Monterey’s
operations.
 
 Gain on
sale of investment increased $4.9 million, to $5.6 million for the year ended
December 31, 2007, as compared to $0.7 million for the same period in 2006. This
increase was due to the collection of the Trust’s notes receivable, which were
paid in full in October 2007.
 
 Liquidity
and Capital Resources
 
 At
December 31, 2007, the Trust had cash and cash equivalents of $5.3 million, an
increase of $4.9 million from December 31, 2006. The cash flows for 2007
consisted of $4.9 million provided by operating activities. There were no cash
flows from either investing or financing activities in 2007 and
2006.
 
 9
 Table of Contents
  In 2007,
the Trust’s operating activities generated cash of $4.9 million as compared to
$0.2 million in 2006. The increase of $4.7 million was primarily due to
collections of the Trust’s notes receivable.
 
 Future
Liquidity and Capital Resource Requirements
 
 The Trust
believes sufficient cash and cash equivalents are available to provide working
capital and fund capital expenditures for the next 12 months.
 
 Off-Balance
Sheet Arrangements
 
 None.
 
 Contractual
Obligations and Commitments
 
 At
December 31, 2007, the Trust’s contractual obligations are as follows (in
thousands):
 
 Payments
      due by periodContractual
      obligations
              
              Total
              
              
              Less
      than 1
                year
              
              
              1 -
      3 years
              
              
              3 -
      5 years
              
              
              More
      than 5
                yearsGround
      lease *
              
              $
              164
              
              
              $
              12
              
              
              $
              24
              
              
              $
              24
              
              
              $
              104
 *         Excludes
payments in lieu of delivered steam.
 
 In
connection with the ground lease, Monterey has not delivered by-product steam
since it was shut down in January 2006. As a result, it may be subject to
penalties from the lessor. As of the date of this filing, no claims have been
asserted by the lessor.
 
 Recent
Accounting Pronouncements
 
 SFAS
157
 
 In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS 157"), to define fair value, establish a framework for measuring fair
value in accordance with generally accepted accounting principles and expand
disclosures about fair value measurements. SFAS 157 requires quantitative
disclosures using a tabular format in all periods (interim and annual) and
qualitative disclosures about the valuation techniques used to measure fair
value in all annual periods. SFAS 157 will become effective for the Trust
beginning January 1, 2008. In February 2008, FASB issued Staff Position 157-2,
Effective Date of FASB
Statement No. 157, which delays the effective date of SFAS 157
for nonfinancial assets and nonfinancial liabilities for the Trust until January
1, 2009, except for items that are recognized or disclosed at fair value in the
financial statements on a recurring basis. The Trust is currently
evaluating the impact of adopting SFAS 157 on its consolidated financial
statements.
 
 SFAS
159
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”), which expands
opportunities to use fair value measurements in financial reporting and permits
entities to choose to measure many financial instruments and certain other items
at fair value. SFAS 159 will become effective for the Trust beginning January 1,
2008. The Trust is currently evaluating the impact of adopting SFAS 159 on its
consolidated financial statements.
 
 SFAS
160
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements — an amendment of ARB No. 51
(“SFAS 160”).  SFAS 160 requires that ownership interests in
subsidiaries held by parties other than the parent, and the amount of
consolidated net income, be clearly identified, labeled, and presented in the
consolidated financial statements within
equity, but separate from the parent’s equity.It also requires once a
subsidiary is deconsolidated, any retained noncontrolling equity investment in
the former subsidiary be initially measured at fair value. Sufficient
disclosures are required to clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS 160
will become effective for the Trust beginning January 1, 2009. The Trust is
currently evaluating the impact of adopting SFAS 160 on its consolidated
financial statements.
  10
 Table of Contents
  ITEM7A. QUANTITATIVE AND
QUALITATIVE
DISCLOSURESABOUT MARKET RISK
  Not
required.
  ITEM8.  FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
  The
consolidated financial statements of the Trust, including the notes thereto and
the report thereon, are presented beginning at page F-1 of this Form
10-K.
 
 ITEM 9.  CHANGES IN
AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  None.
 
 ITEM 9A.  CONTROLS
AND
PROCEDURES
  Evaluation
of Disclosure Controls and Procedures
  Under the
supervision, and with the participation of the Trust’s management, including its
Chief Executive Officer and Chief Financial Officer, the Trust evaluated the
effectiveness of the design and operation of disclosure controls and procedures
(as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the
period covered by this Annual Report on Form 10-K.
  The Trust
previously reported the following material weaknesses:
   (i)
                a lack of sufficient
      personnel with relevant experience to develop, administer and monitor
      disclosure controls and procedures to enable the Trust to comply
      efficiently, or on a timely basis, with its financial reporting
      obligations,(ii)
                inadequate
      disclosure controls and procedures, including inadequate record retention
      and review policies that would enable the Trust to meet its financial
      reporting and disclosure obligations in an efficient and timely
      manner.
   During
the fourth quarter of 2007, the Trust expanded its disclosure controls and
procedures. The Trust documented many of its existing informal procedures,
established a compliance-focused disclosure committee, formalized monthly
closing procedures and implemented a corporate whistleblower policy. Management
of the Trust believes that it has corrected the weakness regarding inadequate
record retention and believes that these improvements in disclosure controls and
procedures, coupled with those implemented earlier in 2007, when fully
operational, will correct the remainder of the previously reported weaknesses in
its disclosure controls and procedures.
  As of
December 31, 2007, the Trust was still delinquent in its filings with the SEC.
As a result, the Trust’s Chief Executive Officer and Chief Financial Officer
concluded that, as of the end of the period covered by this report, the Trust’s
disclosure controls and procedures were not effective.
  Management’s
Report on Internal Control over Financial Reporting
 
 The
Trust’s management is responsible for establishing and maintaining adequate
internal control over financial reporting.  The Trust’s internal control
over financial reporting is designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted
accounting principles.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
 
 Management
of the Trust, including its Chief Executive Officer and Chief Financial Officer,
assessed the effectiveness of the Trust’s internal control over financial
reporting as of December 31, 2007.  In making this assessment,
management of the Trust used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal
Control — Integrated Framework.
 
 While no
material weaknesses were noted during their assessment using those criteria, it
was noted that many of the Trust’s current disclosure procedures and controls
were only recently put into place and were not operational during the entire
year. Based on this, the Trust has not sufficiently demonstrated compliance with
its procedures related to internal control over financial reporting.
Accordingly, management of the Trust concluded that as of December 31,
2007, the Trust’s internal control over financial reporting was not effective.
To mitigate the impact of this lack of effective internal control over financial
reporting, the Trust’s Chief Executive Officer and Chief Financial Officer
expanded their review of the disclosures contained in this Form 10-K by
reviewing additional supporting materials and conducting interviews of
management.
  This
Annual Report on Form 10-K does not include an attestation report of the Trust’s
registered public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Trust’s registered public accounting firm pursuant to temporary rules of the SEC
that permit the Trust to provide only management’s report in this Annual
Report.
  Changes
in Internal Control over Financial Reporting
 
 The
Trust’s Chief Executive Officer and Chief Financial Officer have concluded that
there was no change in the Trust's internal control over financial reporting (as
such term is defined in Rule 13a-15(f) under the Exchange Act, as amended) that
occurred during the quarter ended December 31, 2007 that has materially
affected, or is reasonably likely to materially affect, the Trust’s internal
control over financial reporting.
  11
 Table of Contents
  ITEM 9B.  OTHER
INFORMATION
  None.
 
 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, 60President
      and Chief Executive Officer
              2004Robert
      E. Swanson, 60Chairman
              1997Jeffrey
      H. Strasberg, 50Executive
      Vice President and Chief Financial Officer
              2007Daniel
      V. Gulino, 47Senior
      Vice President, General Counsel and Secretary
              2000
 
 Set forth
below is the name of and certain biographical information regarding the
executive officers of the Trust:
  Randall D. Holmes has served
as President and Chief Executive Officer of the Trust, the Managing Shareholder
and affiliated Power Trusts and LLCs since January 2006 and served as Chief
Operating Officer of the Trust, the Managing Shareholder and affiliated Power
Trusts and LLCs from January 2004 until January 2006. Prior to such time, Mr.
Holmes served as the primary outside counsel to and has represented the Managing
Shareholder and its affiliates since 1991. Immediately prior to being
appointed Chief Operating Officer, Mr. Holmes was counsel to Downs Rachlin
Martin PLLC (“DRM”). DRM is one of the primary outside counsel to the Trust, the
Managing Shareholder and its affiliates. He has maintained a minor consulting
relationship with DRM in which he may act as a paid advisor to DRM on certain
matters that are unrelated to the Trust. Such relationship will not require a
significant amount of Mr. Holmes’ time and it is expected that such relationship
will not adversely affect his duties as President and Chief Executive Officer.
Mr. Holmes is a graduate of Texas Tech University and the University
of Michigan Law School. He is a member of the New
York State Bar.
  Robert E. Swanson has served
as Chairman of the Trust, the Managing Shareholder and affiliated Power Trusts
and LLCs since their inception. From their inception until January 2006, Mr.
Swanson also served as their Chief Executive Officer. Mr. Swanson is the
controlling member of the Managing Shareholder, as well as Ridgewood Energy and
Ridgewood Capital, affiliates of the Trust. Mr. Swanson has been President and
registered principal of Ridgewood Securities since its formation in 1982, has
served as the Chairman of the Board of Ridgewood Capital since its organization
in 1998 and has served as President and Chief Executive Officer of Ridgewood
Energy since its inception in 1982. Mr. Swanson is a member of the New
York State and New Jersey State Bars, the Association of the Bar of the
City of New York and the New York State Bar Association. He is a graduate of
Amherst College and
Fordham University Law School.
  Jeffrey H. Strasberg has
served as Executive Vice President and Chief Financial Officer of the Trust, the
Managing Shareholder and affiliated Power Trusts and LLCs since May 2007. Mr.
Strasberg also serves as Senior Vice President and Chief Financial Officer of
Ridgewood Capital and affiliated LLCs and Ridgewood Securities and has done so
since April 2005. Mr. Strasberg joined Ridgewood Capital in 1998 where his
initial responsibilities were to serve as interim Chief Financial Officer of
various portfolio companies in which Ridgewood Capital Trusts had interests. Mr.
Strasberg is a Certified Public Accountant and a graduate of the University of
Florida.
  Daniel V. Gulino has served as
Senior Vice President and General Counsel of the Trust, the Managing
Shareholder and affiliated Power Trusts and LLCs since 2000 and was appointed
Secretary in February 2007. Mr. Gulino also serves as Senior Vice President and
General Counsel of Ridgewood Energy, Ridgewood Capital, Ridgewood Securities and
affiliated Trusts and LLCs and has done so since 2000. Mr. Gulino is a member of
the New Jersey State and Pennsylvania State Bars. He is a graduate of
Fairleigh Dickinson University and Rutgers University School of
Law.
 
 Board
of Directors and Board Committees
  The Trust
does not have its own board of directors or any board committees. The Trust
relies upon the Managing Shareholder to perform the function that a board of
directors or its committees would otherwise perform. Officers of the Trust are
not directly compensated by the Trust, and all compensation matters are
addressed by the Managing Shareholder, as described in Item 11. “Executive
Compensation”. Because the Trust does not maintain a board of directors and
because officers of the Trust are compensated by the Managing Shareholder, the
Managing Shareholder believes that it is appropriate for the Trust not to have a
nominating or compensation committee.
  12
 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.
Based on a review of the copies of reports furnished or otherwise available to
the Trust, the Trust believes that the filing requirements were not met by
Robert E. Swanson during the year ended December 31, 2007, as he failed to
timely file a Form 4. This report has since been filed with 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 to this Annual Report on Form 10-K.
  ITEM11.  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.
 
 ITEM12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  The
following table sets forth information with respect to the beneficial ownership
of the Trust’s Investor Shares as of December 31, 2007 (no person owns more than
5%) by:
  ·
              each
      executive officer  of the Trust (there are no directors);
      and
 ·
              all
      of the executive officers of the Trust as a
  group.
 
 13
 Table of Contents
  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 235.3775 Investor Shares outstanding at December 31, 2007.
Other than as set forth below, no officer of the Trust owns any shares of the
Trust.
 
 Name
      of beneficial owner
              Number
                of
      shares (1)
              PercentRidgewood
      Renewable Power LLC (Managing Shareholder)
                Robert
      E. Swanson,  controlling member
              1.45
              *Executive
      officers as a group
              1.45
              *
 
 *            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
      at 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 Managing Shareholder provides certain management,
administrative and advisory services, and office space to the Trust. In return,
the Trust is obligated to pay the Managing Shareholder an annual management fee
equal to1.5% of the Trust’s prior year net asset value, which
equaledapproximately$8,000 for the year ended December 31,
2007, as compensation for such services. The management fee is to be paid in
monthly installments and, to the extent that the Trust does not pay the
management fee on a timely basis, the Trust accrues interest at an annual rate
of 10% on the unpaid balance.
 
 For the year ended December 31,
2007,the Trustdid not make anymanagement fee payments to the Managing
Shareholder. During 2007, the Managing Shareholder forgaveapproximately$8,000 of unpaid accrued management fees.
In the fourth quarter of 2007, the Managing Shareholder waived its right to
reimbursement of $75,000 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 offsetsthe allocationof therecordedexpense.
 
 Under the Management Agreement with the
Managing Shareholder, RPM provides management, purchasing, engineering, planning
and administrative services to the projects operated by the Trust. RPM charges
the projects at its cost for these services and for the allocable amount of
certain overhead items. Allocations of costs are on the basis of identifiable
direct costs or in proportion to amounts invested in projects managed by
RPM. For the year ended December 31, 2007, RPM charged the projectsapproximately $139,000
foroverhead items
allocated in proportion to the amount invested in projects managed. In
addition, for the year ended December 31, 2007, RPM charged the projectsapproximately
$1,010,000 fordirect expenses incurred during
2007.
 
 Under the Declaration of Trust, the
Managing Shareholder is entitled to receive, concurrently with the shareholders
of the Trust other than the Managing Shareholder, 1% of all distributions from
operations made by the Trust in a year until the shareholders have received
distributions in that year equal to 14% per annum of their equity contribution.
Thereafter, the Managing Shareholder is entitled to receive 20% of the
distributions for the remainder of the year. The Managing Shareholder is
entitled to receive 1% of the proceeds from dispositions of Trust property until
the shareholders other than the Managing Shareholder, have received cumulative
distributions equal to their original investment ("Payout"). After Payout, the
Managing Shareholder is entitled to receive 20% of all remaining distributions
of the Trust.There were
no distributionsmadeto the Managing Shareholder for the
year ended December 31, 2007. The Trust has not yet reached
Payout.
 
 Income is allocated to the Managing
Shareholder until the profits so allocated equal distributions to the Managing
Shareholder. Thereafter, income is allocated among the shareholders other than
the Managing Shareholder in proportion to their ownership of Investor Shares. If
the Trust has net losses for a fiscal period, the losses are allocated 99% to
the shareholders other than the Managing Shareholder and 1% to the Managing
Shareholder, subject to certain limitations as set forth in the Declaration of
Trust. Amounts allocated to shareholders other than the Managing Shareholder are
apportioned among them in proportion to their capital
contributions.
  14
 Table of Contents
  Under the terms of the Declaration of
Trust, if the Adjusted Capital Account (as defined in the Declaration of Trust)
of a shareholder other than the Managing Shareholder would become negative using
General Allocations (as defined in the Declaration of Trust), losses and
expenses will be allocated to the Managing Shareholder. Should the Managing
Shareholder's Adjusted Capital Account become negative and items of income or
gain occur, then such items of income or gain will be allocated entirely to the
Managing Shareholder until such time as the Managing Shareholder's Adjusted
Capital Account becomes positive. This mechanism does not change the allocation
of cash, as discussed above.
 
 On June
26, 2003, the Managing Shareholder, entered into a Revolving Credit and Security
Agreement with Wachovia Bank, National Association. The agreement, as amended,
allows the Managing Shareholder to obtain loans and letters of credit of up to
$6,000,000 for the benefit of the Trust and other trusts that it manages. As
part of the agreement, the Trust agreed to limitations on its ability to incur
indebtedness, liens and to provide guarantees.In 2007, the
Managing Shareholder and Wachovia Bank agreed to extend the Managing
Shareholder’s line of credit through May 31, 2008.
 
 ITEM 14.  PRINCIPAL
ACCOUNTANT FEES AND SERVICES
  The
following table presents fees and services rendered by Grant Thornton LLP, the
Trust’s principal accountant, for the years ended December 31, 2007 and 2006 (in
thousands).
  2007
              
              2006Audit
      fees
              $
              244
              
              $
              157Tax
      fees1
              
              14
              
              
              18Total
              $
              258
              
              $
              175
 
 1
              Tax
      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.
  PART
IV
  ITEM15.  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 on Form 10 filed with the SEC on February 27,
      1993).3
              (i)(B)
              
              Certificate
      of Amendment to the Certificate of Trust of the Registrant filed with the
      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)
              
              Amended
      and Restated Declaration of Trust of the Registrant (incorporated by
      reference to Exhibit 4 to the Registrant’s Quarterly Report on Form 10-Q/A
      filed with the SEC on November 17, 1993, SEC File No.
      000-21034).3
              (ii)(B)
              
              January
      2000 Amendment to Declaration of Trust by Consent of the Registrant
      (incorporated by reference to the Registrant’s Annual Report on Form 10-K
      filed with the SEC on December 14, 2007).3
              (ii)(C)
              
              Amendment
      No. 1 to the Declaration of Trust of the Registrant (incorporated by
      reference to Exhibit A to the Registrant’s Proxy Statement filed with the
      SEC on November 5, 2001, SEC File No.
  000-21304).
  15
 Table of Contents
 Exhibit
No.
              
              Description10.1
              #
              
              Management
      Agreement between the Trust and Managing Shareholder (incorporated by
      reference to the Registrant’s Registration Statement on Form 10 filed with
      the SEC on February 27, 1993).10.2
              
              
              Long-Term
      Energy and Capacity Power Purchase Agreement between Sunnyside
      Cogeneration Partners L.P. and Pacific Gas and Electric Company dated May
      1984 (as amended) (incorporated by reference to the Registrant’s Annual
      Report on Form 10-K filed with the SEC on December 14,
    2007).10.3
              
              
              Limited
      Recourse Term Note issued by EAC Operations, Inc. to the Registrant dated
      September 20, 2002
                for
      $3,000,000 as payment for the B-3 Limited Partnership interests
      (incorporated by reference to the Registrant’s Annual Report on Form 10-K
      filed with the SEC on December 14, 2007).10.4
              
              
              Limited
      Recourse Term Note issued by EAC Operations, Inc. to the Registrant dated
      September 20, 2002 for $2,000,000 as payment for the Pittsfield Investors
      Limited Partnership interests (incorporated by reference to the
      Registrant’s Annual Report on Form 10-K filed with the SEC on December 14,
      2007).14
              
              
              Code
      of Ethics, adopted on March 1, 2004 (incorporated by reference to the
      Annual Report on Form 10-K filed by The Ridgewood Power Growth Fund with
      the SEC on March 1, 2006).21
              
              
              Subsidiaries
      of the Registrant (incorporated by reference to the Registrant’s Annual
      Report on Form 10-K filed with the SEC on January 25,
    2008).31.1
              *
              
              Certification
      of Randall D. Holmes, Chief Executive Officer of the Registrant, pursuant
      to Securities Exchange Act Rule 13a-14(a).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 Item15(a)(3)
      of Form 10-K.(c)
                Financial Statement
      SchedulesSee Financial
      Statements and accompanying notes included in this
  report.
 16
 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 IIDate:
      March 14, 2008
              By:
              /s/ Randall
      D. HolmesRandall
      D. HolmesChief
      Executive Officer(Principal
      Executive Officer)
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
  Signature
              
              Capacity
              
              Date/s/
      Randall D. Holmes
              
              Chief
      Executive Officer
              
              March
      14, 2008Randall
      D. Holmes
              
              (Principal
      Executive Officer)/s/
      Jeffrey H. Strasberg
              
              Executive
      Vice President and Chief Financial Officer
              
              March
      14, 2008Jeffrey
      H. Strasberg
              
              (Principal
      Financial and Accounting Officer)RIDGEWOOD
      RENEWABLE POWER LLC(Managing
      Shareholder)By:
      /s/ Randall D. Holmes
              
              Chief
      Executive Officer of Managing Shareholder
              
              March
      14, 2008Randall
      D. Holmes
   17
 Table of Contents
  
 RIDGEWOOD
      ELECTRIC POWER TRUST IIINDEX
      TO CONSOLIDATED FINANCIAL STATEMENTSPageReport of Independent Registered Public Accounting
      Firm
              F-2Consolidated Balance Sheets at December 31, 2007 and
      2006
              F-3Consolidated Statements of Operations for the years ended
      December 31, 2007 and 2006
              F-4Consolidated Statements of Changes in Shareholders’ Equity
      (Deficit) for the years ended December 31, 2007 and
      2006
              F-5Consolidated Statements of Cash Flows for the years ended
      December 31, 2007 and 2006
              F-6Notes to Consolidated Financial Statements
              F-7
 
   
 F-1
 Table of Contents
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 The
Managing Shareholder and Shareholders
 Ridgewood
Electric Power Trust II
 
 
 We have
audited the accompanying consolidated balance sheets of Ridgewood Electric Power
Trust II (a Delaware trust) and subsidiaries as of December 31, 2007 and 2006,
and the related consolidated statements of operations, changes in shareholders’
equity (deficit), and cash flows for the years then ended.  These
consolidated financial statements are the responsibility of the Trust’s
management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement.  The Trust is not required to have, nor were we engaged
to perform an audit of its internal control over financial reporting. Our audits
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 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 II as of December 31, 2007 and 2006, and the results of its operations and
its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.
 
 As
discussed in Note 3 to the consolidated financial statements, as of January 9,
2006, the Trust no longer has any income producing assets in operation, and may
not in the future.
 
 /s/GRANT THORNTON
LLP
 Edison,
New Jersey
 March 14,
2008
 
  F-2
 Table of Contents
  RIDGEWOOD ELECTRIC POWER TRUST IICONSOLIDATED
      BALANCE SHEETS(in
      thousands, except share data)December
      31,2007
                
                
                2006ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                5,250
                
                
                $
                395Accounts
      receivable
                
                
                -
                
                
                
                118Due
      from affiliates
                
                
                5
                
                
                
                21Other
      current assets
                
                
                31
                
                
                
                29Total
      current assets
                
                
                5,286
                
                
                
                563Total
      assets
                
                $
                5,286
                
                
                $
                563LIABILITIES
      AND SHAREHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                
                $
                169
                
                
                $
                8Commitments
      and contingenciesShareholders’
      equity (deficit):Shareholders’
      equity (235.3775 Investor Shares issued andoutstanding)
                
                
                5,267
                
                
                
                751Managing
      shareholder’s accumulated deficit(1
      management share issued and outstanding)
                
                
                (150
                )
                
                
                (196
                )Total
      shareholders’ equity
                
                
                5,117
                
                
                
                555Total
      liabilities and shareholders’ equity
                
                $
                5,286
                
                
                $
                563
 
  
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-3
 Table of Contents
  RIDGEWOOD ELECTRIC POWER TRUST IICONSOLIDATED
      STATEMENTS OF OPERATIONS(in
      thousands, except per share data)Years
      Ended December 31,2007
                  
                  
                  2006Revenues
                  
                  $
                  -
                  
                  
                  $
                  91Cost
      of revenues
                  
                  
                  341
                  
                  
                  
                  1,049Gross
      loss
                  
                  
                  (341
                  )
                  
                  
                  (958
                  )Operating
      expenses:General
      and administrative expenses
                  
                  
                  808
                  
                  
                  
                  184Impairment
      of plant, equipment and intangibles
                  
                  
                  -
                  
                  
                  
                  2,830Management
      fee to Managing Shareholder
                  
                  
                  8
                  
                  
                  
                  58Total
      operating expenses
                  
                  
                  816
                  
                  
                  
                  3,072Loss
      from operations
                  
                  
                  (1,157
                  )
                  
                  
                  (4,030
                  )Other
      income (expense):Interest
      income
                  
                  
                  37
                  
                  
                  
                  -Interest
      expense
                  
                  
                  -
                  
                  
                  
                  (2
                  )Gain
      on sale of investment
                  
                  
                  5,598
                  
                  
                  
                  668Total
      other income, net
                  
                  
                  5,635
                  
                  
                  
                  666Net
      income (loss)
                  
                  $
                  4,478
                  
                  
                  $
                  (3,364
                  )Managing
      Shareholder - Net income (loss)
                  
                  $
                  45
                  
                  
                  $
                  (34
                  )Shareholders
      - Net income (loss)
                  
                  
                  4,433
                  
                  
                  
                  (3,330
                  )Net
      income (loss) per Investor Share
                  
                  
                  18,833
                  
                  
                  
                  (14,149
                  )
 
  
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F-4
 Table of Contents
  RIDGEWOOD ELECTRIC POWER TRUST IICONSOLIDATED
      STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)YEARS
      ENDED DECEMBER 31, 2007 AND 2006(in
      thousands)Shareholders'
                  Equity
                
                
                Managing
      Shareholder
                  (Deficit)
                
                
                Total
                  Shareholders'
                  EquityBalance
      at December 31, 2005
                
                $
                4,040
                
                
                $
                (162
                )
                
                $
                3,878Net
      loss
                
                
                (3,330
                )
                
                
                (34
                )
                
                
                (3,364
                )Capital
      contribution
                
                
                41
                
                
                
                -
                
                
                
                41Balance
      at December 31, 2006
                
                
                751
                
                
                
                (196
                )
                
                
                555Net
      income
                
                
                4,433
                
                
                
                45
                
                
                
                4,478Capital
      contribution
                
                
                83
                
                
                
                1
                
                
                
                84Balance
      at December 31, 2007
                
                $
                5,267
                
                
                $
                (150
                )
                
                $
                5,117
    The
accompanying notes are an integral part of these consolidated financial
statements.
  F-5
 Table of Contents
  RIDGEWOOD ELECTRIC POWER TRUST IICONSOLIDATED
      STATEMENTS OF CASH FLOWS(in
      thousands)Years
      Ended December 31,2007
                
                
                2006Cash
      flows from operating activities:Net
      income (loss)
                
                $
                4,478
                
                
                $
                (3,364
                )Adjustments
      to reconcile net income (loss) to net cashprovided
      by operating activities:Impairment
      of investment
                
                
                -
                
                
                
                2,830Gas
      forward contract
                
                
                -
                
                
                
                898Forgiveness
      of professional and management fees and related interest
                
                
                84
                
                
                
                41Change
      in operating assets and liabilities:Accounts
      receivable
                
                
                118
                
                
                
                301Other
      current assets
                
                
                (2
                )
                
                
                10Accounts
      payable and accrued expenses
                
                
                161
                
                
                
                (143
                )Due
      to/from affiliates, net
                
                
                16
                
                
                
                (374
                )Total
      adjustments
                
                
                377
                
                
                
                3,563Net
      cash provided by operating activities
                
                
                4,855
                
                
                
                199Cash
      and cash equivalents, beginning of year
                
                
                395
                
                
                
                196Cash
      and cash equivalents, end of year
                
                $
                5,250
                
                
                $
                395
    The
accompanying notes are an integral part of these consolidated financial
statements.
  F-6
 Table of Contents
 RIDGEWOOD ELECTRIC POWER TRUST II
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (dollar
amounts in thousands, except per share data)
  1.     DESCRIPTION
OF BUSINESS
 
 Ridgewood
Electric Power Trust II (the “Trust”) is a Delaware trust formed on November 20,
1992. The Trust began offering shares in 1993 and concluded its offering in
1994. 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 independent power generation facilities located in the US.
The projects owned by the Trust have characteristics that qualify the projects
for government incentives.
 
 As of
December 31, 2007 and 2006, the Trust had one non-operating investment, located
in California and 100% owned by the Trust (“Monterey”). The investment is a 5.5
megawatt (“MW”) cogeneration project which suspended operations in January 2006
due to a contract dispute with its customer (see Note 6). Since the closing of
the Monterey facility in January 2006, the Trust has not had any operating
revenues, though it continued to have contractual obligations through August
2006 related to its gas purchase agreement with Coral Energy Services, Inc.
(“Coral”), and on-going ground lease and maintenance expenses. During the first
quarter of 2006, the Trust recorded an asset impairment of Monterey’s net book
value of its plant, equipment and intangibles (see Note 3). The Monterey project
remains closed as of the date of this filing.
 
 The Trust
had long-term notes receivable, which were paid in full, in advance of
their due dates, on October 31, 2007. Upon the repayment of the Trust’s
long-term receivables in October 2007, the Trust no longer had any income
producing assets and may not in the future, subject to the resolution of
litigation relating to the Monterey facility.
 
 The
Managing Shareholder performs (or arranges for the performance of) the operation
and maintenance of the projects invested in by the Trust and the management and
administrative services required for Trust operations. Among other services, the
Managing Shareholder administers the accounts and handles relations with the
shareholders, including tax and other financial information. The Managing
Shareholder also provides the Trust with office space, equipment and facilities
and other services necessary for its operation.
 
 2.     SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
 
 a)
Principles of Consolidation
 
 The
consolidated financial statements include the accounts of the Trust and its
wholly-owned subsidiaries. All material intercompany transactions have been
eliminated in consolidation.
 
 b) Use of Estimates
 
 The
preparation of consolidated financial statements in accordance with accounting
principles generally accepted in the United States of America requires the Trust
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, the Trust evaluates its estimates,
including accounts receivable, investments, recoverable value of plant and
equipment, intangibles and recordable liabilities for litigation and other
contingencies. The Trust basis its estimates on historical experience, current
and expected conditions and various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
 
 c)
Revenue Recognition
 
 Power
generation revenue is recorded in the month of delivery, based on the estimated
volumes sold to customers at rates stipulated in the power sales contract.
Adjustments are made to reflect actual volumes delivered when the actual
volumetric information subsequently becomes available. Billings to customers for
power generation generally occurs during the month following delivery. Final
billings do not vary significantly from estimates.
 
 d)
Cash and Cash Equivalents
 
 The Trust
considers all highly liquid investments with maturities, when purchased, of
three months or less as cash and cash equivalents. Cash balances with banks
as of December 31, 2007 and 2006 exceed insured limits by $5,150 and $295,
respectively.
  F-7
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST II
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (dollar
amounts in thousands, except per share data)
  e)
Accounts Receivable
 
 Accounts
receivable are recorded at invoice price in the period in which the related
revenues are earned, and do not bear interest. No allowance for bad debt expense
was provided based upon historical write-off experience, evaluation of customer
credit condition and the general economic status of the customers.
 
 f)
Plant and Equipment
 
 Plant and
equipment, which consists of equipment, leasehold improvements, and
building, have been fully impaired. Renewals and betterments that increase the
useful lives of the assets are capitalized. Repair and maintenance
expenditures are expensed as incurred. Upon retirement or disposal of
assets, the cost and related accumulated depreciation are removed from the
consolidated balance sheets. The difference, if any, between the net asset
value and any proceeds from such retirement or disposal is recorded as a gain or
loss in the consolidated statement of operations.
  g)
Impairment of Long-Lived Assets and Intangibles
  The Trust
evaluates intangible assets and long-lived assets, such as plant and equipment,
when events or changes in circumstances indicate that the carrying value of such
assets may not be recoverable. The determination of whether impairment has
occurred is made by comparing the carrying value of an asset to the estimated
undiscounted cash flows attributable to that asset. If impairment has occurred,
the impairment loss recognized is the amount by which the carrying value exceeds
the estimated fair value of the asset, which is based on the estimated future
cash flows discounted at the estimated cost of capital. The analysis
requires estimates of the amount and timing of projected cash flows and, where
applicable, judgments associated with, among other factors, the appropriate
discount rate. Such estimates are critical in determining whether any
impairment charge should be recorded and the amount of such charge if an
impairment loss is deemed to be necessary.
 
 h)
Fair Value of Financial Instruments
 
 At
December 31, 2007 and 2006, the carrying value of the Trust’s cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses
approximates their fair value.
 
 i)
Gas Contract
 
 In August
2001, Monterey entered into an agreement to purchase natural gas, at fixed
prices, over a five-year term in connection with entering into an amendment
fixing the sales price of electric power sales contracts for a similar term.
This contract was entered into in order to minimize the impact of fluctuating
energy prices. The Trust determined that this contract was a derivative as
defined under Statement of Financial Accounting Standards (“SFAS”) No. 133,
“Accounting for Derivative Instruments and Hedging Activities”, as amended. The
Trust designated the derivative as a non-hedge instrument. Accordingly, the
value of the contract based on the differences between contract prices and
market value prices was recognized as an asset or a liability in the
consolidated balance sheet. Changes in the carrying value of the contract were
reflected as a component of cost of revenues in the consolidated statements of
operations. During the third quarter of 2006, the Trust completed its
contractual agreement to resell the purchased gas back to Monterey’s gas
supplier and therefore, there is no longer any value recorded on the
consolidated balance sheets associated with this contract.
  During
the year ended December 31, 2006, the Trust recorded a loss, as a component of
cost of revenues, from changes in the value of its gas supply contract of $554.
There was no gain or loss recorded during the year ended December 31, 2007, as
the contract had expired in the prior year.
  j)
Notes Receivable
 
 Recovery
of interest and principal under the promissory notes issued in connection with
the sale of the Trust’s interest in Pittsfield Investors Limited Partnership
(“PILP”) and B-3 Limited Partnership (“B-3”) were dependent upon the operations
of the partnership investment transferred. Consequently, the Trust deferred its
gain on the sale of its ownership interest until the carrying value of the
investments was fully recovered. The cash proceeds received for the interest and
principal were recorded as a reduction of the Trust’s investment in the
partnership transferred under contractual agreement through June 30,
2005.  Subsequent payments were recorded as a component of other
income. The note payments remained current until the notes were paid in full, in
advance of their due dates, on October 31, 2007.
 
 k)
Comprehensive Income (Loss)
 
 The
Trust’s comprehensive income (loss) consists only of net income
(loss).
  F-8
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST II
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (dollar
amounts in thousands, except per share data)
  l)
Significant Customer and Supplier
 
 During
2007, the Trust did not record any operating revenues and did not purchase any
natural gas. During 2006, the Trust’s only customer accounted for 100% of total
revenues, and in 2006 the Trust purchased 100% of its gas from one
supplier.
 
 m)
Income Taxes
 
 No
provision is made for income taxes in the Trust’s consolidated financial
statements as the income or losses of the Trust are passed through and included
in the income tax returns of the individual shareholders of the Trust. Effective
January 1, 2007, the Trust adopted Financial Accounting Standards Board (“FASB”)
Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (“FIN 48”) with no impact on its consolidated financial statements.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprise’s financial statements in accordance with SFAS No. 109 and prescribes
a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and
transition.
 
 n)
Recent Accounting Pronouncements
 
 SFAS
157
  In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements
("SFAS 157"), to define fair value, establish a framework for measuring fair
value in accordance with generally accepted accounting principles and expand
disclosures about fair value measurements. SFAS 157 requires quantitative
disclosures using a tabular format in all periods (interim and annual) and
qualitative disclosures about the valuation techniques used to measure fair
value in all annual periods. SFAS 157 will become effective for the Trust
beginning January 1, 2008. In February 2008, FASB issued Staff Position 157-2,
Effective Date of FASB
Statement No. 157, which delays the effective date of SFAS 157
for nonfinancial assets and nonfinancial liabilities for the Trust until January
1, 2009, except for items that are recognized or disclosed at fair value in the
financial statements on a recurring basis. The Trust is currently
evaluating the impact of adopting SFAS 157 on its consolidated financial
statements.
 
 SFAS
159
 
 In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities (“SFAS 159”), which expands
opportunities to use fair value measurements in financial reporting and permits
entities to choose to measure many financial instruments and certain other items
at fair value. SFAS 159 will become effective for the Trust beginning January 1,
2008. The Trust is currently evaluating the impact of adopting SFAS 159 on its
consolidated financial statements.
 
 SFAS
160
 
 In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements — an amendment of ARB No. 51
(“SFAS 160”).  SFAS 160 requires that ownership interests in
subsidiaries held by parties other than the parent, and the amount of
consolidated net income, be clearly identified, labeled, and presented in the
consolidated financial statements within
equity, but separate from the parent’s equity.It also requires once a
subsidiary is deconsolidated, any retained noncontrolling equity investment in
the former subsidiary be initially measured at fair value. Sufficient
disclosures are required to clearly identify and distinguish between the
interests of the parent and the interests of the noncontrolling owners. SFAS 160
will become effective for the Trust beginning January 1, 2009. The Trust is
currently evaluating the impact of adopting SFAS 160 on its consolidated
financial statements.
 
 3.    
PROJECTS AND IMPAIRMENT OF LONG-LIVED ASSETS
 
 Sunnyside
Cogeneration Partners, L.P.
 
 In
January 1995, the Trust acquired 100% of the existing partnership interests of
Sunnyside Cogeneration Partners, L.P., which owns and operates Monterey, a 5.5MW
electric cogeneration facility, located in Monterey County, California. The
aggregate purchase price was $5,198, including transaction costs. Electricity is
sold to PG&E under a long term contract expiring in 2020.
 
 The
acquisition of Monterey was accounted for as a purchase and the results of
operations of Monterey have been included in the Trust’s consolidated financial
statements since the acquisition date. The purchase price was allocated to
the net assets acquired, based on their respective fair values. Of the
purchase price, $3,032 was allocated to the electric power sales contract and
was being amortized over the life of the contract of 25
years.
  F-9
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST II
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (dollar
amounts in thousands, except per share data)
  Monterey
received notice on December 1, 2005 from PG&E directing Monterey to increase
its operations from 13 hours, 5 days a week to 24 hours, 7 days a week. However,
PG&E had been operating or "dispatching" Monterey on a 13 by 5 basis for
over 15 years.  Monterey determined that it could not operate
profitably on such a 24 by 7 schedule and was concerned that if it only operated
on a 13 by 5 basis, PG&E might refuse to pay for delivered electricity.
Monterey requested from PG&E to limit its operations to the 13 by 5 basis,
but this request was denied. As a result, effective January 9, 2006, Monterey
ceased its operations. Monterey and PG&E have filed lawsuits against the
other for breach of contract. The Monterey project remains closed as of the date
of this filing.  Additionally, as a result of the shutdown, the
project has not delivered by-product steam since it was shutdown. As a result,
it may be subject to penalties from the lessor. Since the closing of the
Monterey facility, the Trust has not had any operating revenues, though it
continued to have contractual obligations through August 2006 related to its gas
purchase agreement with Coral and on-going ground lease and maintenance
expenses. During the first quarter of 2006, the Trust recorded an asset
impairment of Monterey’s net book value of its plant, equipment and intangibles
of $1,132 and $1,698, respectively.
 
 B-3
Limited Partnership and Pittsfield Investor Limited Partnership
 
 In
January 1994, the Trust made an equity investment of $2,300 in PILP, which was
formed to acquire a waste-to-energy project designed and built to burn municipal
solid waste supplied by the City of Pittsfield, Massachusetts, surrounding
communities and other waste providers as well as to supply steam to a nearby
paper mill. The PILP project originally began operating in 1981 and was
operated and co-owned with the Trust by subsidiaries of Energy Answers
Corporation (“EAC”). The Trust made an additional investment with affiliates of
EAC in August 1994 when it purchased an interest in B-3 for
$3,975.  The business of B-3 was the construction and operation of a
municipal waste transfer station in Columbia County, New York.  In
September 2002, the Trust sold its interests in PILP and B-3 to EAC for $1,200
in cash and $5,000 of promissory notes. The notes bore interest at a rate of 10%
per annum, and were to be paid over a 17-year term. The notes were
collateralized solely by the assets of the projects and were without recourse to
EAC.
 
 Recovery
of interest and principal under the promissory notes were dependent upon the
operations of the partnership investment transferred. Consequently, the Trust
deferred its gain on the sale of its ownership interest until the carrying value
of the investments was fully recovered. The cash proceeds received for the
interest and principal were recorded as a reduction of its investment in
partnership transferred under contractual agreement through June 30, 2005, the
date at which the recorded balance reached zero. On October 31, 2007, the
Trust’s notes receivable were fully repaid in advance of their due dates. The
amount received, including prepayment penalties, totaled $5,042. As these notes
had no recorded accounting value, the amount received was recorded as other
income during the fourth quarter of 2007.
 
 4.    
PLANT AND EQUIPMENT
 
 As a
result of Monterey operations being suspended in January 2006, the Trust
recorded an asset impairment for its remaining net book value of plant and
equipment of $1,132. For the years ended December 31, 2007 and 2006, no
depreciation expense was recorded.
 
 5.    
INTANGIBLES
 
 A portion
of the purchase price of Monterey was assigned to an electric power sales
contract and was being amortized over the life of the contract on a
straight-line basis As a result of Monterey operations being suspended in
January 2006, the Trust recorded an asset impairment for the remaining net book
value of its intangibles of $1,698. At December 31, 2007 and 2006, the Trust had
no intangible assets. During 2007 and 2006, there was no amortization expense
recorded.
 
 6. COMMITMENTS AND
CONTINGENCIES
 
 Monterey
has a non-cancelable operating lease which expires in May 2021. Future minimum
lease payments as of December 31, 2007 are approximately $12 per annum along
with the delivery of by-product steam.  In connection with this lease,
Monterey has not delivered by-product steam since it was shut down in January
2006. As a result, Monterey may be subject to penalties by the
lessor.  No claims have been asserted by the lessor as of March 14,
2008. Rent expense for the years ended December 31, 2007 and 2006 was $12 for
both periods, which is included in cost of revenues.
  Monterey
received notice on December 1, 2005 from PG&E directing Monterey to increase
its operations from 13 hours, 5 days a week to 24 hours, 7 days a week. However,
PG&E had been operating or "dispatching" Monterey on a 13 by 5 basis for
over 15 years.  Monterey determined that it could not operate
profitably on such a 24 by 7 schedule and was concerned that if it only operated
on a 13 by 5 basis, PG&E might refuse to pay for delivered electricity.
Monterey requested from PG&E to limit its operations to the 13 by 5 basis,
but this request was denied. As a result, effective January 9, 2006, Monterey
ceased its operations. Monterey and PG&E have filed lawsuits against the
other for breach of contract. The Monterey project remains closed as of the date
of this filing.  Additionally, as a result of the shutdown, the
project has not delivered by-product steam since it was shutdown in January
2006. As a result, it may be subject to penalties from the lessor. Since the
closing of the Monterey facility, the Trust has not had any operating revenues,
though it continued to have contractual obligations through August 2006 related
to its gas purchase agreement with Coral and on-going ground lease expenses.
Monterey filed a Complaint against PG&E in the San Francisco Superior Court
on May 16, 2006 (the “Monterey Complaint”).  The Monterey Complaint seeks
damages for breach of contract, damages for PG&E’s breach of the implied
covenant of good faith and fair dealing, and a claim for declaratory relief
against PG&E, seeking a judicial determination that PG&E’s conduct
materially breached the parties’ agreement and justified Monterey’s suspension
of performance. Monterey is seeking damages against PG&E estimated at
approximately $5,000.   F-10
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST II
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (dollar
amounts in thousands, except per share data)
  On May
14, 2007, PG&E filed a Complaint in San Francisco Superior Court against
Monterey (the “PG&E Complaint”).  The PG&E Complaint arises out of
the same transactions and occurrences that gave rise to the Monterey Complaint
against PG&E.  PG&E asserted claims for compensatory damages for
breach of contract and breach of the implied covenant of good faith and fair
dealing as well as “restitution” of capacity payments made to Monterey on a
theory of unjust enrichment, and declaratory relief for repayment of capacity
payments made to the Monterey. PG&E is seeking restitution damages
against Monterey estimated at approximately $4,800.
 
 The
claims made by PG&E have been made solely against Monterey and do not
involve any claims against the Trust. A trial date for both of the above
litigation matters has been set for September 15, 2008.
 
 The
following table provides the contractual obligations and commitments of the
Trust for the future minimum payments of its ground lease as of December 31,
2007, excluding payments in lieu of delivered steam.
  Years Ended December
      31,2008
              
              $
              122009
              
              
              122010
              
              
              122011
              
              
              122012
              
              
              12Thereafter
              
              
              104Total
              
              $
              164
 
 On August
16, 2006, the Managing Shareholder of the Trust and affiliates of the Trust,
filed lawsuits against the former independent registered public accounting firm
for the Trust, Perelson Weiner, LLP (“Perelson Weiner”), in New Jersey Superior
Court.  The suits alleged professional malpractice and breach of contract
in connection with audit and accounting services performed by Perelson Weiner.
On October 20, 2006, Perelson Weiner filed a counterclaim against the Trust, and
its affiliates alleging breach of contract due to unpaid invoices totaling
$1,188. Discovery is ongoing and no trial date has been set. The costs and
expenses of the litigation are being paid for by the Managing Shareholder and
affiliated management companies and not the underlying investment funds,
including the Trust.
 
 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.
 
 7. TRANSACTIONS WITH MANAGING SHAREHOLDER
AND AFFILIATES
 
 The Trust
operates pursuant to the terms of a management agreement ("Management
Agreement"). Under the terms of the Management Agreement, the Managing
Shareholder provides certain management, administrative and advisory services,
and office space to the Trust. In return, the Trust is obligated to pay the
Managing Shareholder an annual management fee equal to 1.5% of the Trust’s prior
year net asset value which equals $8 and $58 for the years ended December 31,
2007 and 2006, respectively, as compensation for such services. The
management fee is to be paid in monthly installments and, to the extent that the
Trust does not pay the management fee on a timely basis, the Trust accrues
interest at an annual rate of 10% on the unpaid balance.
  The Trust
made no management fee payments to the Managing Shareholder in 2007. In 2006,
the Trust made management fee payments to the Managing Shareholder of
$19.  During 2007 and 2006, the Managing Shareholder forgave $8 and
$39 of unpaid accrued management fees, respectively. In the fourth quarter of
2007, the Managing Shareholder waived its right to reimbursement of $75,
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.
 F-11
 Table of Contents
 RIDGEWOOD
ELECTRIC POWER TRUST II
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (dollar
amounts in thousands, except per share data)
  The Trust
had no accrued interest expense relating to management fees in 2007. In 2006,
the Trust accrued interest expense of $2 on accrued but unpaid management fees.
The interest accrued has been waived by the Managing Shareholder and recorded as
deemed a capital contribution in the period waived.
  Under the
Management Agreement with the Managing Shareholder, Ridgewood Power Management
(“RPM”), an affiliate of the Managing Shareholder, provides management,
purchasing, engineering, planning and administrative services to the projects
operated by the Trust. RPM charges the projects at its cost for these services
and for the allocable amount of certain overhead items. Allocations of costs are
on the basis of identifiable direct costs or in proportion to amounts invested
in projects managed by RPM. During the years ended December 31, 2007 and
2006, RPM charged the projects $139 and $128, respectively, for overhead
items allocated in proportion to the amount invested in projects managed. In
addition, for the years ended December 31, 2007 and 2006, RPM
charged the projects $1,010, and $1,104, 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. There were no distributions to the
Managing Shareholder during 2007 and 2006. 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.
 
 The
Managing Shareholder owns 1.45 investor shares. The Trust granted the Managing
Shareholder a single Management Share representing the Managing Shareholder's
management rights and rights to distributions of cash flow.
  On June
26, 2003, the Managing Shareholder entered into a Revolving Credit and Security
Agreement with Wachovia Bank, National Association.  The agreement, as
amended, allows the Managing Shareholder to obtain loans and letters of credit
of up to $6,000 for the benefit of the trusts and funds that it manages. 
As part of the agreement, the Trust agreed to limitations on its ability to
incur indebtedness and liens, and to provide guarantees.  In 2007, the
Managing Shareholder and Wachovia Bank agreed to extend the Managing
Shareholder’s line of credit through May 31, 2008.
 
 In August
2003, the Trust obtained from its bank a standby letter of credit, in the amount
of $504 to secure the gas purchases for Monterey.  In August of 2004,
the supplier of natural gas to Monterey agreed to reduce the standby letter of
credit to $230.  The standby letter of credit remained at $230 until
it expired and was reduced to zero at August 31, 2006.
 
 The Trust
records short-term receivables from other affiliates in the ordinary course of
business. The amounts receivable from the other affiliates do not bear
interest.
  
 F-12