**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-K**





**[X]
      Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act
      of
      1934**





For
      the
      fiscal year ended December 31, 2005





or





**[
      ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934.**





For
      the
      transition period from **** **** **** to





Commission
      File No. 001-12995





**CE
      CASECNAN WATER AND ENERGY COMPANY, INC.**


(Exact
      name of registrant as specified in its charter)





Philippines
            
            Not
                Applicable(State
                or other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                No.)24thFloor, 6750 Building, Ayala AvenueMakati,
                Metro Manila, Philippines
            
            Not
                Applicable(Address
                of principal executive offices)
            
            (Zip
                Code)011
                63 2 892-0276(Registrant’s
                telephone number, including area
                code)





Securities
      registered pursuant to Section 12(b) of the Act: N/A


Securities
      registered pursuant to Section 12(g) of the Act: N/A





Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes  ̈ No T





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 of 15(d) of the Act.


Yes T No  ̈





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  ̈ No T





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. T





Indicate
      by check mark whether the registrant is a large accelerated filer, or a
      non-accelerated filer. See definition of “accelerated filer and large
      accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):





Large
                accelerated filer ̈
            Accelerated
                filer ̈
            Non-accelerated
                filerT





Indicate
      by check mark if the registrant is a shell company (as defined in Rule 12b-2
      of
      the Act). Yes  ̈ No T





All
      of
      the shares of common equity of CE Casecnan Water and Energy Company, Inc. are
      privately held by a limited group of investors. As of January 31, 2006, the
      number of outstanding shares of $0.038 par value common stock was
      767,162.





**TABLE
      OF CONTENTS**








**PART
                I**Item
                1.
            Business
            4Item
                1A.
            Risk
                Factors
            9Item
                1B.
            Unresolved
                Staff Comments
            10Item
                2.
            Properties
            10Item
                3.
            Legal
                Proceedings
            10Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            10**PART
                II**Item
                5.
            Market
                for Registrant’s Common Equity and Related Stockholder
                Matters
            11Item
                6.
            Selected
                Financial Data
            11Item
                7.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            11Item
                7A.
            Quantitative
                and Qualitative Disclosures About Market Risk
            17Item
                8.
            Financial
                Statements and Supplementary Data
            18Item
                9.
            Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure
            34Item
                9A.
            Controls
                and Procedures
            34Item
                9B.
            Other
                Information
            34**PART
                III**Item
                10.
            Directors
                and Executive Officers of the Registrant
            35Item
                11.
            Executive
                Compensation
            36Item
                12.
            Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters
            37Item
                13.
            Certain
                Relationships and Related Transactions
            38Item
                14.
            Principal
                Accounting Fees and Services
            38**PART
                IV**Item
                15.
            Exhibits
                and Financial Statement Schedules
            39Signatures
            
            40Exhibit
                Index
            
            41








2


**Disclosure
      Regarding Forward-Looking Statements**





This
      report contains statements that do not directly or exclusively relate to
      historical facts. These statements are "forward-looking statements" within
      the
      meaning of the Private Securities Litigation Reform Act of 1995. You can
      typically identify forward-looking statements by the use of forward-looking
      words, such as "may," "will," "could," "project," "believe," "anticipate,"
      "expect," "estimate," "continue," "potential," "plan," "forecast" and similar
      terms. These statements represent the Company’s intentions, plans, expectations
      and beliefs and are subject to risks, uncertainties and other factors. Many
      of
      these factors are outside the Company’s control and could cause actual results
      to differ materially from such forward-looking statements. These factors
      include, among others:





·
            general
                economic, political and business conditions in the Philippines;





·
            governmental,
                statutory, regulatory or administrative initiatives affecting the
                Company
                or the power generation industry;





·
            weather
                effects on sales and revenues;





·
            general
                industry trends;





·
            increased
                competition in the power generation industry;





·
            availability
                of qualified personnel;





·
            financial
                or regulatory accounting principles or policies imposed by the Public
                Company Accounting Oversight Board, the Financial Accounting Standards
                Board, the United States Securities and Exchange Commission (“SEC”) and
                similar entities with regulatory oversight; and





·
            other
                business or investment considerations that may be disclosed from
                time to
                time in the Company’s SEC filings or in other publicly disseminated
                written documents.





T he
      Company undertakes no obligation to publicly update or revise any
      forward-looking statements, whether as a result of new information, future
      events or otherwise. The foregoing review of factors should not be construed
      as
      exclusive.


3


**PART
      I**





**Item
      1.** **Business** **.**





**General**





CE
      Casecnan Water and Energy Company, Inc. (the “Company” or “CE Casecnan”) is a
      privately held Philippine corporation formed indirectly by MidAmerican Energy
      Holdings Company (“MidAmerican”) in September of 1994 solely to develop,
      construct, own and operate a multi-purpose irrigation and hydroelectric power
      facility with a rated capacity of approximately 150 megawatts located on
      the island of Luzon in the Republic of the Philippines (the “ROP”) (the
“Casecnan Project”).


The
      Securities (described herein) are recourse only to the Company. MidAmerican
      has
      not guaranteed directly or indirectly the payment or performance of any Company
      obligations.





The
      Company’s principal executive office is located at 24th Floor, 6750 Building,
      Ayala Avenue, Makati City, Metro Manila, Philippines, and its telephone number
      is 63 2 892-0276. The Company’s principal operations office is located at
      Pantabangan in the Province of Nueva Ecija, Philippines.





In
      this
      Annual Report, references to "U.S. dollars," "dollars," or "$" are to the
      currency of the United States and references to "pesos" are to the currency
      of
      the Philippines. References to kW means kilowatts, MW means megawatts, GW means
      gigawatts, kWh means kilowatt hours, MWh means megawatt hours, and GWh means
      gigawatt hours.





**The
      Casecnan Project**





The
      Casecnan Project is located in the central part of the island of Luzon. It
      consists generally of diversion structures in the Casecnan and Taan rivers
      that
      capture and divert excess water in the Casecnan watershed by means of concrete,
      in-stream diversion weirs, and transfer that water through a transbasin tunnel
      of approximately 23 kilometers. During the water transfer, the elevation
      differences between the two watersheds allows electrical energy to be generated
      by an approximately 150 MW rated capacity power plant, which is located in
      an
      underground powerhouse cavern at the end of the water tunnel. A tailrace
      discharge tunnel then delivers water to the existing water storage reservoir
      at
      Pantabangan, providing additional water for irrigation and increasing the
      potential electrical generation at two downstream hydroelectric facilities
      of
      the Philippine National Power Corporation (“NPC”), the government-owned and
      controlled corporation that is the primary supplier of electricity in the
      Philippines. Once in the reservoir at Pantabangan, the water is under the
      control of the Philippine National Irrigation Administration
      (“NIA”).





The
      Company has a contract with the ROP, through the Philippine National Irrigation
      Administration (“NIA”) (a ROP-owned and controlled corporation), for the
      development and construction of a hydroelectric power plant and related
      facilities under a build-own-operate-transfer agreement (“Project Agreement”),
      as amended by the Supplemental Agreement dated September 29, 2003 (the
“Supplemental Agreement”), covering a 20-year cooperation period (“Cooperation
      Period”) with “take-or-pay” obligations for water and electricity. At the end of
      the Cooperation Period, the combined irrigation and 150 MW hydroelectric power
      generation project (the “Casecnan Project”) will be transferred to the ROP at no
      cost on an “as is” basis. The ROP also signed a Performance Undertaking, which,
      among others, affirms and guarantees the obligations of NIA under the contract.
      Construction of the Casecnan Project commenced in 1995. The Casecnan Project
      Cooperation Period began upon commencement of commercial operations on
      December 11, 2001.





Upon
      the
      occurrence and during the continuance of certain force majeure events, including
      those associated with Philippine political action, NIA may be obligated to
      buy
      the Casecnan Project from CE Casecnan at a buyout price expected to be in excess
      of the aggregate principal amount of the outstanding CE Casecnan debt
      securities, together with accrued but unpaid interest.





The
      ROP
      has provided a Performance Undertaking under which NIA’s obligations under the
      Project Agreement are guaranteed by the full faith and credit of the ROP. The
      Project Agreement and the Performance Undertaking provide for the resolution
      of
      disputes by binding arbitration in Singapore under international arbitration
      rules.





CE
      Casecnan financed a portion of the costs of the Casecnan Project through the
      issuance of $125.0 million of its 11.45% Senior Secured Series A Notes due
      2005
      (the “Series A Notes”), $171.5 million of its 11.95% Senior Secured Series B
      Bonds due 2010 (the “Series B Bonds”) and $75.0 million of its Senior Secured
      Floating Rate Notes due 2002 (“FRNs”), pursuant to an indenture dated
      November 27, 1995 (as amended to date, the “Trust Indenture”). During 2002
      and 2005, the Company repaid all amounts due under the FRNs and Series A Notes,
      respectively.


4





**Concentration
      of Risk**





NIA’s
      payments of obligations under the Project Agreement are substantially
      denominated in U.S. Dollars and are the Company’s sole source of operating
      revenues .
      Because
      of the Company’s dependence on NIA, any material failure of NIA to fulfill its
      obligations under the Project Agreement and any material failure of the ROP
      to
      fulfill its obligations under the Performance Undertaking would significantly
      impair the ability of the Company to meet its existing and future obligations.
      No stockholders, partners or affiliates of the Company, including MidAmerican,
      and no directors, officers or employees of the Company will guarantee or be
      in
      any way liable for payment of the Company’s obligations. As a result, payment of
      the Company’s obligations depends upon the availability of sufficient revenues
      from the Company’s business after the payment of operating
      expenses.





**Terms
      of the Securities**





General





In
      November 1995, the Company issued and sold (i) the Series A Notes, (ii) the
      Series B Bonds, and (iii) the FRNs (collectively, the “Securities”). In 2002,
      the Company repaid all amounts due under the FRNs. In 2005, the Company repaid
      all amounts due under the Series A Notes.





Interest
      on the Series B Bonds is payable semiannually every May 15 and
      November 15 (the “Securities Interest Payment Date”), which commenced on
      May 15, 1996, to the registered Holders thereof at the close of business on
      May 1 and November 1, as the case may be, preceding each Securities
      Interest Payment Date.





Priority
      of Payments





Except
      as
      otherwise provided for with respect to mandatory redemptions and loss proceeds,
      all revenues received by the Company from the Casecnan Project have been and
      will continue to be paid to the Revenue Fund maintained by the Depositary (other
      than payments required to be used for VAT payments to the ROP). Amounts paid
      to
      the Revenue Fund have been and will continue to be distributed in the following
      order of priority: (a) to pay operating and maintenance costs; (b) to pay
      certain administrative costs of the agents for the Secured Parties under the
      Financing Documents; (c) to pay principal of, premium (if any) and interest
      on
      the Securities (including any increased costs necessary to gross up such
      payments for certain withholding taxes and other assessments and charges),
      and
      principal and interest on other senior debt, if any; (d) to cause the Debt
      Service Reserve Fund to equal the Debt Service Reserve Fund Required Balance,
      as
      defined below; (e) to pay indemnification expenses and other expenses to the
      Secured Parties and certain other costs, and (f) to the Distribution Fund or
      Distribution Suspense Fund, as applicable.





Debt
      Service Reserve Fund





The
      Company established a Debt Service Reserve Fund for the benefit of the Holders
      of the Securities, which is funded by cash from operating revenues, subject
      to
      cash being available, as described under “Priority of Payments” above. Such
      amounts are deposited to the Debt Service Reserve Fund from time to time to
      the
      extent required to cause it to equal the Debt Service Reserve Fund Required
      Balance, which is intended to approximate the highest amount of the payments
      of
      principal and interest to be made on the Securities during any semiannual period
      over the next three years from the last debt service payment.





Optional
      Redemption





The
      Series B Bonds are subject to optional redemption by the Company, at any time,
      in whole or in part, pro rata, at par plus accrued interest to the redemption
      date plus a premium, calculated to “make whole” to comparable United States
      treasury securities plus 150 basis points.





The
      Company also has the option to redeem the Securities, in whole or in part,
      at
      par plus accrued interest at any time if, as a result of any change in
      Philippine tax law or in the application or interpretation of Philippine tax
      law
      occurring after the date of issuance of the Securities, the Company is required
      to pay certain additional amounts described in the Trust Indenture.





5


Mandatory
      Redemption





The
      Securities are subject to mandatory redemption, pro rata, at par plus accrued
      interest to the redemption date upon (a) the receipt by the Company of loss
      proceeds that exceed $15.0 million in respect of certain events of property
      or
      casualty loss or similar events, unless the funds are to be utilized by the
      Company for an Approved Restoration Plan or (b) the receipt by the Company
      of
      proceeds realized in connection with a Project Agreement Buyout.





Change
      in Control Put





When
      a
      Change in Control occurs, each Holder will have the right to require the Company
      to repurchase all or any part of such Holder’s Securities at a cash purchase
      price equal to 101% of the principal amount thereof, plus accrued interest
      to
      the date of repurchase in accordance with the procedures set forth in the Trust
      Indenture. There is no assurance that upon a Change in Control the Company
      will
      have sufficient funds to repurchase the Securities.





Profit
      Distributions





Profit
      distributions may be made only from and to the extent of amounts on deposit
      in
      the Distribution Fund or Distribution Suspense Fund .
      Distributions are subject to the prior satisfaction of the following
      conditions:





(a) The
      amounts contained in the Principal Fund and the Interest Fund are equal to
      or
      greater than the aggregate scheduled principal and interest payments next due
      on
      the Securities;





(b) No
      Default or Event of Default under the Trust Indenture shall have occurred and
      be
      continuing;





(c) The
      Debt
      Service Coverage Ratio for the preceding 12-month period is equal to or greater
      than 1.35 to 1 as certified by an officer of the Company;





(d) The
      projected Debt Service Coverage Ratio of the Securities for the succeeding
      12-month period is equal to or greater than 1.35 to 1, as certified by an
      officer of the Company; and





(e) The
      Debt
      Service Reserve Fund has a balance equal to or greater than the Debt Service
      Reserve Fund Required Balance.





During
      2005 and 2004, the Company made profit distributions totaling $11.0 million
      and
      $106.0 million, respectively. Due to the dispute between an initial shareholder
      as described in Item 7 - Management’s Discussion and Analysis of Financial
      Condition and Results of Operations - Stockholder Litigation, 15%, or $17.6
      million of the distributions as of December 31, 2005 and the corresponding
      interest earned thereon, is being held in an account of the Company over which
      the holders of the Securities do not have a security interest.





Ranking
      and Security for the Securities





The
      Securities are senior debt of the Company and are secured by (a) an assignment
      of all revenues received by the Company from the Casecnan Project; (b) a
      collateral assignment of all material contracts; (c) a lien on any accounts
      and
      funds on deposit under the Depositary Agreement; (d) a pledge of approximately
      100% of the capital stock of the Company, subject to release in certain
      circumstances relating to accessing political risk insurance for the benefit
      of
      the stockholders; and (e) a lien on all other material assets and property
      interests of the Company. The Securities will rank pari passu with and will
      share the Collateral on a pro rata basis with certain other senior secured
      debt,
      if any (provided that the Debt Service Reserve Fund shall be held as collateral
      solely for the obligations under the Securities). The proceeds of any political
      risk insurance covering the capital investment will not be part of the
      collateral for the Securities. While under the Trust Indenture the Company
      may
      incur certain permitted debt senior to the Securities, it has no present
      intention to do so.





Ratings





At
      December 31, 2005, the CE Casecnan Series B Bonds ratings by Standard and
      Poors and Moody’s were B+ with positive outlook and B2 with positive outlook,
      respectively .
      On
      January 12, 2006, Moody’s issued a report changing the outlook from positive to
      stable.


6


Nature
      of Recourse on the Securities





The
      Company’s obligations to make payments of principal, premium, if any, and
      interest on the Securities are obligations solely of the Company secured solely
      by the collateral. Neither the stockholders of the Company nor any affiliates
      (including MidAmerican), incorporators, officers, directors or employees thereof
      or of the Company guaranteed the payment of, or have any obligation with respect
      to payment of, the Securities, except to the extent that stockholders of the
      Company have pledged their stockholdings in the Company as security for the
      notes and bonds issued by the Company. As a result, payment of the Company’s
      obligations depends upon the availability of sufficient revenues from the
      Company’s business after the payment of operating expenses.





Incurrence
      of Additional Debt





The
      Company shall not incur any debt other than “Permitted Debt.” “Permitted Debt”
means:




(a)
              The
                  Securities;(b)
              Debt
                  incurred to finance the construction of capital improvements to
                  the
                  Casecnan Project, which are required to ensure compliance with
                  applicable
                  law or anticipated changes therein; provided that no such debt
                  may be
                  incurred unless at the time of incurrence of such debt, an independent
                  engineer confirms the reasonableness of (i) a certification by
                  the Company
                  (containing customary assumptions and qualifications) that the
                  proposed
                  capital improvements are reasonably expected to enable the Casecnan
                  Project to comply with applicable or anticipated legal requirements
                  and
                  (ii) the calculations of the Company that demonstrate, after giving
                  effect
                  to the incurrence of such debt, that the minimum project Debt Service
                  Coverage Ratio (x) for the next four consecutive fiscal quarters,
                  commencing with the quarter in which such debt is incurred, taken
                  as one
                  annual period, and (y) for each subsequent fiscal year through
                  the final
                  maturity date, will not be less than 1.3 to 1;(c)
              Debt
                  incurred to finance the construction of capital improvements to
                  the
                  Casecnan Project not required by applicable law, so long as after
                  giving
                  effect to the incurrence of such debt (i) no default or event of
                  default
                  has occurred and is continuing, and (ii)(A) the independent engineer
                  confirms the reasonableness of (I) a certification by the Company
                  (containing customary assumptions and qualifications) that the
                  proposed
                  capital improvements are technically feasible and prudent and (II)
                  the
                  calculations of the Company that demonstrate, after giving effect
                  to the
                  incurrence of such debt, (x) the minimum project Debt Service Coverage
                  Ratio for the next four consecutive fiscal quarters, commencing
                  with the
                  quarter in which such debt is incurred, taken as one annual period,
                  and in
                  every fiscal year thereafter, will not be less than 1.4 to 1 and
                  (y) the
                  average projected Debt Service Coverage Ratio for all succeeding
                  fiscal
                  years until the final maturity date will not be less than 1.7 to
                  1, or (B)
                  the rating agencies confirm that the incurrence of such debt will
                  not
                  result in a rating downgrade;(d)
              Working
                  capital debt in an aggregate amount outstanding at any time not
                  to exceed
                  $5.0 million;(e)
              Debt
                  incurred in connection with certain permitted interest rate and
                  currency
                  hedging arrangements;(f)
              Subordinated
                  debt from affiliates in an aggregate amount not to exceed $100.0
                  million
                  which shall be used to finance capital, operating or other costs
                  with
                  respect to the Casecnan Project;(g)
              Debt
                  incurred for purposes for which permitted liens may be
                  incurred;(h)
              Debt
                  contemplated to be incurred pursuant to the Casecnan Project documents,
                  including obligations in connection with any letter of credit in
                  an
                  aggregate amount outstanding at any time not to exceed $15.0
                  million;(i)
              Purchase
                  money debt and other debts in the ordinary course of business to
                  support
                  the operation and maintenance of the Casecnan Project, in an aggregate
                  amount not to exceed $35.0 million at any time; and(j)
              Permitted
                  refinancing debt, if, as certified by an authorized officer of
                  the Company
                  at the time of incurrence, (A)(i) after giving effect to the incurrence
                  of
                  such debt, (x) the minimum projected Debt Service Coverage Ratio
                  for the
                  next four consecutive fiscal quarters in which such debt is incurred,
                  taken as one annual period, and in every fiscal year thereafter,
                  will not
                  be less than 1.5 to 1, and (y) for each subsequent fiscal year
                  through the
                  final maturity date, the average project Debt Service Coverage
                  Ratio will
                  not be less than 2.0 to 1, and (ii) the final maturity and average
                  life of
                  the debt incurred each exceed those of the debt remaining, (B)
                  each
                  principal payment equals that of each corresponding principal payment
                  of
                  the debt being replaced or (C) the rating agencies confirm that
                  the
                  incurrence of such debt will not result in a rating
                  downgrade.


7


Principal
      Covenants





Principal
      covenants under the Trust Indenture require the Company, subject to certain
      exceptions and qualifications, (a) not to incur (i) any debt except Permitted
      Debt or (ii) any lien upon any of its assets except permitted liens; (b) not
      to
      enter into any transaction of merger or consolidation, change its form of
      organization, liquidate, wind-up or dissolve itself; (c) not to enter into
      non-arm’s length transactions or agreements with affiliates; (d) not to engage
      in any business other than as contemplated by the Trust Indenture; (e) not
      to
      amend, terminate or otherwise modify any material Project Document to which
      it
      is a party, except as permitted under the Trust Indenture; (f) not to sell,
      lease or transfer any property or assets material to the Casecnan Project except
      in the ordinary course of business; (g) to operate and maintain the Casecnan
      Project in accordance with the Approved Operation and Maintenance Budget; and
      (h) to maintain insurance as required under the Trust Indenture.





**Insurance**





The
      Company maintains insurance with respect to the Casecnan Project of a type
      and
      in such amounts as are generally carried by companies engaged in similar
      businesses and owning similar projects that are financed in a similar manner.
      This coverage includes casualty insurance, including flood and earthquake
      coverage, business interruption insurance, primary and excess liability
      insurance, automobile insurance and workers compensation insurance. The proceeds
      of such insurance may not be adequate to cover reduced revenues, increased
      expenses or other liabilities arising from the occurrence of catastrophic
      events. There can be no assurance that such insurance coverage will be available
      in the future at commercially reasonable rates or that the amounts for which
      the
      Company is insured will cover all losses. Nevertheless, the Company will not
      reduce or cancel the coverage if the Insurance Consultant determines it is
      not
      reasonable to do so and insurance is available on commercially reasonable
      terms.





**Regulatory
      Matters**





The
      Philippine Congress has passed the Electric
      Power Industry Reform Act of 2001 (“ EPIRA”),
      which is aimed at restructuring the Philippine power industry, privatizing
      the
      NPC and introducing a competitive electricity market, among other initiatives.
      The implementation of EPIRA may have an impact on the Company’s future
      operations in the Philippines and the Philippine power industry as a whole,
      the
      effect of which is not yet determinable or estimable.





On
      December 6, 2004, the Municipality of Alfonso Castaneda (the
“Municipality”), Province of Nueva Vizcaya (the “Province”) passed an ordinance
      which required the submission of a tax clearance from each of the provincial
      treasurer and municipal treasurer as a condition to issuing to CE Casecnan
      the
      annual renewal of its license to operate and business permit. CE Casecnan
      cannot obtain a tax clearance certificate from the Province until real property
      taxes due to the Province are paid. Pursuant to the Supplemental Agreement,
      before paying such real property taxes CE Casecnan must either receive
      direction from NIA and the Philippine Department of Finance (“DOF”) or be
      subject to risk of imminent assessment of penalties for non payment.
      CE Casecnan filed an action in the Regional Trial Court on
      January 21, 2005, against the Municipality and was granted a temporary
      restraining order barring the Municipality from closing the Casecnan Project.
      On
      February 7, 2005, the temporary restraining order was extended until
      the court resolves the petition for an injunction. On May 25, 2005, the
      Province served the Company a notice of delinquency stating that the assets
      of
      the Casecnan Project located in the Province were scheduled to be sold in a
      public auction on July 26, 2005. CE Casecnan filed a complaint for
      injunction with an application for a temporary restraining order on
      July 11, 2005 against the Province, impleading the DOF and NIA as necessary
      parties, seeking an order enjoining the Province from proceeding with any public
      auction or sale of any Casecnan Project assets. On July 21, 2005, the
      Regional Trial Court denied CE Casecnan’s request for a temporary restraining
      order. On July 25, 2005, CE Casecnan paid the real property taxes, plus
      interest and penalties, due to the Province of approximately $4.5 million
      and submitted an invoice for reimbursement of such amount to NIA in accordance
      with the Supplemental Agreement. On August 1, 2005, CE Casecnan received
      the business license and mayor’s permit from the Municipality. On August 2,
      2005, NIA rejected CE Casecnan’s invoice for reimbursement of the real property
      tax payment to Nueva Vizcaya. On August 12, 2005, CE Casecnan disputed NIA’s
      rejection of the reimbursement as without basis and constituting anticipatory
      breach under the Supplemental Agreement. CE Casecnan invoked Section 20.1 on
      dispute resolution of the Agreement and requested a meeting to resolve the
      dispute. On September 1, 2005, the Company met with NIA and the DOF to discuss
      the tax reimbursement issue. On January 9, 2006, CE Casecnan received a letter,
      jointly signed by NIA and the DOF, acknowledging their obligation to reimburse
      CE Casecnan for property taxes paid pursuant to the Supplemental Agreement.
      The
      letter further expressed willingness to discuss a possible compromise settlement
      of the real property tax payment to Nueva Vizcaya. CE Casecnan responded in
      writing urging NIA and the DOF to come to a settlement of the taxes prior to
      the
      payment due date on January 23, 2006, to avoid payment of interest under the
      Casecnan Amended and Restated Agreement. On January 24, 2006, NIA, the DOF
      and
      CE Casecnan agreed that NIA will reimburse CE Casecnan in five approximately
      equal installments beginning in February 2006 and ending in December 2006.
      A
      receivable of $4.5 million has been recorded for
      the
      expected full reimbursement to CE Casecnan in respect of the Nueva Vizcaya
      assessment.


8


On
      August 3, 2005, CE Casecnan received a tax assessment of approximately
      $4.5 million in respect of Casecnan Project property located in the
      Province of Nueva Ecija. CE Casecnan forwarded the tax assessment to NIA and
      the
      DOF and sought authorization to pay such taxes. On August 8, 2005, NIA
      instructed CE Casecnan in writing to file an appeal before the Local Board
      of
      Assessment Appeals to dispute the assessment within 60 days from receipt of
      the
      tax assessment. CE Casecnan filed the appeal on September 30, 2005. On
      December 28, 2005, under threat of imminent assessment of penalties, CE Casecnan
      paid real property taxes of approximately $4.7 million to the Province of Nueva
      Ecija. On December 29, 2005 and January 6, 2006, the Company received letters
      from NIA and the DOF, respectively, authorizing the payment. A receivable of
      $4.7 million has been recorded for the expected full reimbursement to CE
      Casecnan in respect of the Nueva Ecija tax assessment.





On
      May 24, 2005, President Arroyo signed an amended tax law to raise the
      corporate income tax rate from 32% to 35% through 2008 (reducing to 30%
      thereafter) and impose value-added tax of 10% on certain goods and services.
      The
      law and the Project Agreement permit CE Casecnan to invoice NIA for value-added
      tax on water delivery fees and, if electricity generated from hydro-electric
      power were to become subject to value-added tax, on energy delivery fees as
      well. Implementation of the tax law was deferred until legal challenges were
      resolved. On October 18, 2005, the Philippine Supreme Court upheld the
      constitutionality of the tax law and implementation became effective November
      1,
      2005. The tax law is not expected to have a material adverse impact on the
      Casecnan Project.





**Employees**





At
      December 31, 2005, the Company had 42 full-time employees.





**Item
                1A.**
            **Risk
                Factors.**





The
      Company is subject to numerous political and economic risks,
      including:





Ÿ
            dependence
                upon a single customer;





Ÿ
            performance
                of equipment;





Ÿ
            catastrophic
                or incremental geologic, environmental or climactic
                events;





Ÿ
            expropriation
                or nationalization of property;





Ÿ
            inconvertibility
                of the peso to the US dollar, currency availability and exchange
                restrictions;





Ÿ
            risk
                of loss due to civil strife, acts of war, guerrilla activities,
                insurrection and terrorism;





Ÿ
            tax
                increases or claims by governmental entities, including retroactive
                claims;





Ÿ
            other
                risks arising out of foreign sovereignty over areas in which the
                Company
                conducts operations.





Consequently,
      the Company’s operations may be significantly affected by factors beyond the
      Company’s control, any of which could materially affect the Company’s financial
      position or results from operations.





NIA’s
      payment obligations under the Project Agreement are the Company’s sole source of
      operating revenue. Any material failure of NIA to fulfill its obligations under
      the Project Agreement and any material failure of the ROP to fulfill its
      obligations under the Performance Undertaking would materially adversely affect
      the Company’s financial condition and results of operations.





The
      Casecnan Project is a complex infrastructure project and power plant. Operation
      of the Casecnan Project may be adversely affected by a variety of operating
      factors and is subject to uncertainties, including the breakdown or failure
      of
      equipment or processes or the performance of equipment at levels below those
      originally demonstrated, whether due to ordinary wear and tear, unexpected
      degradation or other events. Any of the foregoing could increase the cost of
      operating the Project or require substantial capital expenditures, thereby
      adversely affecting the Company’s financial condition and results of operations.





9


A
      significant portion of the Casecnan Project’s revenues are required to be paid
      by NIA without regard to actual water flows. However, since commencing
      commercial operations, approximately 20% of the Project’s revenues are variable
      energy fees that are dependent upon water flow volumes. No assurance can be
      given that future rainfall levels and water flows will approximate historical
      results.





Fires,
      earthquakes, floods, volcanic eruptions or other similar catastrophic events
      could cause personal injury, loss of life, damage or destruction to the Casecnan
      Project, or suspension of operations. Although the Company maintains insurance
      coverage (including business interruption insurance) to protect against certain
      of these risks, the proceeds of such insurance may not be adequate to cover
      reduced revenues, increased expenses or other liabilities arising from the
      occurrence of any of the events described above. Moreover, there can be no
      assurance that such insurance coverage will be available in the future at
      commercially reasonable rates or that the amounts for which the Company is
      insured will cover all losses.





The
      Casecnan Project is located in the Philippines and is therefore subject to
      political, economic and other uncertainties, including the risks of war,
      expropriation, nationalization, renegotiation or nullification of existing
      contracts, changes in taxation policies, currency availability and exchange
      restrictions, changing political conditions and international monetary
      fluctuations. The government of the Philippines has exercised and continues
      to
      exercise a significant influence over the Philippine economy. There can be
      no
      assurance that future developments in the Philippines will not impair the
      Casecnan Projects’ operations or the Company’s revenues.





The
      Company is subject to a number of statutory and regulatory standards and
      required approvals, including those related to energy and environmental laws.
      Many permits and regulatory approvals are required for the operation of the
      Casecnan Project. Delay in receipt or failure to obtain these permits or
      approvals or to satisfy any of these conditions could restrict operation of
      the
      Casecnan Project or result in additional costs or taxes. The adoption of new
      laws, policies and regulations, or changes in the interpretation or application
      of existing laws, policies and regulations that modify the present regulatory
      environment could have a material adverse affect on the Company’s ability to
      operate the Casecnan Project.




**Item
                1B.**
            **Unresolved
                Staff Comments.**





Not
      applicable.





**Item
                2.**
            **Properties.**





CE
      Casecnan’s principal property is the approximately 150 MW hydroelectric power
      facility, located in the central part of the island of Luzon in the Republic
      of
      the Philippines.





**Item
                3.**
            **Legal
                Proceedings.**





None.





**Item
                4.**
            **Submission
                of Matters to a Vote of Security
                Holders.**





Not
      applicable.


10


**PART
      II**





**Item
                5.**
            **Market
                for Registrant’s Common Equity and Related Stockholder
                Matters.**





Not
      applicable.





**Item
                6.**
            **Selected
                Financial Data.**





The
      following table sets forth selected financial data, which should be read in
      conjunction with the Company’s financial statements and the related notes to
      those statements included in “Item 8. Financial Statements and Supplementary
      Data” and with "Item 7. Management's Discussion and Analysis of Financial
      Condition and Results of Operations" appearing elsewhere in this Form 10-K.
      The
      selected financial data has been derived from the Company’s audited financial
      statements.





**Selected
      Financial Data**


(In
      thousands, except per share amounts)





**Year
                ended December 31,****2005**
            
            **2004****(1)**
            
            **2003****(1)**
            
            **2002**
            
            **2001****(2)**Revenue
            
            $
            107,000
            
            $
            106,847
            
            $
            129,921
            
            $
            138,264
            
            $
            8,174Operating
                income
            
            
            75,674
            
            
            73,431
            
            
            91,539
            
            
            93,415
            
            
            4,252Net
                income
            
            $
            52,009
            
            $
            45,302
            
            $
            59,765
            
            $
            44,956
            
            $
            2,867**As
                of December 31,****2005**
            
            
            **2004**
            
            
            **2003**
            
            
            **2002**
            
            
            **2001**Total
                assets
            
            $
            470,017
            
            $
            477,996
            
            $
            565,313
            
            $
            541,507
            
            $
            515,192Notes
                payable
            
            
            51,263
            
            
            51,263
            
            
            51,263
            
            
            51,263
            
            
            40,763Long-term
                debt, including current portion
            
            
            142,345
            
            
            197,098
            
            
            246,458
            
            
            287,925
            
            
            323,125Stockholders’
                equity
            
            $
            191,997
            
            $
            150,988
            
            $
            211,686
            
            $
            151,921
            
            $
            106,965





(1)
            Revenue
                decreased due to the NIA Arbitration Settlement in October
                2003.


(2)
            Commercial
                operations commenced on December 11,
                2001.





**Item
                7.**
            **Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations.**





The
      following is management's discussion and analysis of certain significant factors
      which have affected the financial condition and results of operations of the
      Company during the periods included in the accompanying statements of
      operations. This discussion should be read in conjunction with "Selected
      Financial Data" in Item 6 and the Company's historical financial statements
      and
      the notes to those statements included elsewhere in this report.





**Factors
      Affecting the Results of Operations**





**Seasonality**





The
      Casecnan Project is dependent upon sufficient rainfall to generate electricity
      and deliver water. Rainfall varies within the year and from year to year which
      is outside the control of the Company and may have a material impact on the
      amounts of electricity generated and water delivered by the Casecnan Project.
      Rainfall has historically been highest from June through December and lowest
      from January through May. The contractual terms for water delivery fees and
      variable energy fees (described below) can produce significant variability
      in
      revenue between reporting periods.





11


Under
      the
      Supplemental Agreement, the water delivery fee is payable in a fixed monthly
      payment based upon an average annual water delivery of 801.9 million cubic
      meters, pro-rated to approximately 66.8 million cubic meters per month,
      multiplied by the applicable per cubic meter rate through December 25,
      2008. For each contract year starting from December 25, 2003 and ending on
      December 25, 2008, a water delivery fee credit (deferred revenue) is
      computed equal to 801.9 million cubic meters minus the greater of actual water
      deliveries or 700.0 million cubic meters - the minimum threshold. The water
      delivery fee credit at the end of the contract year is available to be earned
      in
      the succeeding contract years ending December 25, 2008. The cumulative
      water delivery fee credit at December 25, 2008, if any, shall be amortized
      from December 25, 2008 through December 25, 2013. Accordingly, in
      recognizing revenue the water delivery fees are recorded each month pro-rated
      to
      approximately 58.3 million cubic meters per month until the minimum threshold
      has been reached for the contract year. Subsequent water delivery fees within
      the contract year are based on actual water delivered.





The
      Company earns guaranteed energy fees based upon an assumed delivery of 19.0
      GWh
      per month, at a rate of $0.1596 per kWh. The Company earns variable energy
      fees
      based upon actual energy delivered in each month in excess of 19.0 GWh, payable
      at a rate of $0.1509 per kWh. Starting in 2009, the kWh rate for energy
      deliveries in excess of 19.0 GWh per month is reduced to $0.1132, escalating
      at
      1% per annum thereafter. Any deliveries of energy in excess of 490.0 GWh, but
      less than 550.0 GWh per year are paid at a rate of 1.3 pesos per kWh. Deliveries
      in excess of 550.0 GWh per year are at no cost to NIA. Within each contract
      year, no variable energy fees are payable until energy in excess of the
      cumulative 19.0 GWh per month for the contract year to date has been
      delivered.





**Results
      of Operations for the Years Ended December 31, 2005 and
      2004**





The
      following table provides certain operating data of the Casecnan Project for
      the
      years ended December 31, 2005 and 2004:





**2005**
            
            **2004**Electricity
                produced (GWh)
            406.5
            
            404.5Water
                delivered (million cubic meters)
            723.0
            
            719.2





For
      accounting purposes, the Project Agreement with NIA contains both an operating
      lease and a service contract, which the Company accounted for pursuant to
      provisions of Statement of Financial Accounting Standards, No. 13, "Accounting
      for Leases." The Company earned water and energy fees as follows (in
      millions):




**2005**
            
            **2004**Water
                delivery fees
            
            $
            53.3
            
            $
            49.6Guaranteed
                energy fees
            
            
            36.4
            
            
            36.4Variable
                energy fees
            
            
            24.9
            
            
            26.9Deferred
                water delivery fees
            
            
            (7.6
            )
            
            (6.1
            )Total
                lease rentals and service contracts revenue
            
            $
            107.0
            
            $
            106.8





Revenue
      increased by $0.2 million to $107.0 million for the year ended December 31,
      2005 from $106.8 million for the year ended December 31, 2004. The increase
      in water delivery fees and deferred water delivery fees was primarily due to
      the
      contractual 7.5% annual escalation factor. Differences between calendar year
      operations and contract year invoicing resulted in lower variable energy fees
      in
      2005 compared to 2004 despite marginally higher total energy production during
      the calendar year. The monthly billing cycle runs from the 25 th day of a
      given calendar month to the 25 th day of
      the following month. Within each billing cycle, the Casecnan Project must
      produce 19.0 GWh of electricity before it can earn variable energy fees. The
      electricity generated by heavy water flows in the last six days of the December
      2005 (the start of the new billing cycle) did not generate any variable energy
      fees in calendar year 2005.





Operating
      expenses decreased by $2.1 million to $31.3 million for the year ended
      December 31, 2005 from $33.4 million for the year ended December 31,
      2004. Road maintenance was $0.7 million lower in 2005 due to damage caused
      by
      typhoons in 2004. Engineering and consulting expenses were $0.7 million lower
      in
      2005 due to plant optimization activities in 2004 and the construction contract
      arbitration settlement in April 2004. Depreciation expense decreased by $0.4
      million in 2005 due to the lower depreciable base resulting from the
      construction contract arbitration settlement in April 2004.




Interest
        expense decreased to $24.8 million for the year ended December 31, 2005
        from $29.5 million for the year ended December 31, 2004 due primarily to
        lower outstanding debt resulting from the scheduled repayment of
        debt.
 12
  Tax
        expense increased to $1.1 million for the year ended December 31, 2005 from
        $0.1 million for the year ended December 31, 2004. In 2005, the Company
        recorded income tax expense $0.7 million on interest income earned outside
        the
        Philippines.





**Results
      of Operations for the Years Ended December 31, 2004 and
      2003**





The
      following table provides certain operating data of the Casecnan Project for
      the
      years ended December 31, 2004 and 2003:





**2004**
            
            **2003**Electricity
                produced (GWh)
            404.5
            
            382.2Water
                delivered (million cubic meters)
            719.2
            
            620.6





For
      accounting purposes, the Project Agreement with NIA contains both an operating
      lease and a service contract, which the Company accounted for pursuant to
      provisions of Statement of Financial Accounting Standards, No. 13, "Accounting
      for Leases." The Company earned water and energy fees as follows (in
      millions):





**2004**
            
            **2003**Water
                delivery fees
            
            $
            49.6
            
            $
            71.5Guaranteed
                energy fees
            
            
            36.4
            
            
            36.4Variable
                energy fees
            
            
            26.9
            
            
            22.0Deferred
                water delivery fees
            
            
            (6.1
            )
            
            -Total
                lease rentals and service contracts revenue
            
            $
            106.8
            
            $
            129.9





Revenue
      decreased by $23.1 million to $106.8 million for the year ended
      December 31, 2004 from $129.9 million for the year ended December 31,
      2003. The decrease in water delivery fees was primarily due to the impact of
      the
      elimination of the tax compensation portion of the water delivery fee pursuant
      to the Supplemental Agreement, partially offset by a 7.5% increase in the water
      delivery rate based on a contractual annual escalation factor. The increase
      in
      variable energy fees was due primarily to increased generation resulting from
      higher water flows in 2004 compared to 2003. The deferred water delivery fees
      represent the difference between the actual water delivery fees earned and
      water
      delivery fees invoiced pursuant to the Supplemental Agreement.





Operating
      expenses decreased by $5.0 million to $33.4 million for the year ended
      December 31, 2004 from $38.4 million for the year ended December 31,
      2003. Depreciation expense decreased by $1.2 million in 2004 due primarily
      to
      the lower depreciable base resulting from settlement of the construction
      contract arbitration in April 2004. Reductions in legal costs and doubtful
      accounts expense in 2004 of $1.1 million and $2.0 million, respectively, were
      due to the NIA Arbitration Settlement in October 2003. Finally, the Company
      had
      lower property insurance costs of $0.9 million in 2004 compared to 2003.





Interest
      expense decreased to $29.5 million for the year ended December 31, 2004
      from $39.8 million for the year ended December 31, 2003 due primarily to
      lower outstanding debt resulting from the scheduled repayment of debt and
      interest expense incurred in 2003 associated with BIR settlements.





Tax
      expense decreased to $0.1 million for the year ended December 31, 2004 from
      $25.7 million for the year ended December 31, 2003. In 2003, the Company
      paid income taxes of $24.4 million in connection with the NIA Arbitration
      Settlement and made tax payments associated with BIR settlements.





**Liquidity
      and Capital Resources**





CE
      Casecnan constructed and operates the Casecnan Project, which was developed
      as
      an unsolicited proposal under the Philippine build-own-operate-transfer law,
      pursuant to the terms of the Project Agreement. CE Casecnan is
      registered with the Philippine Board of Investments as a new operator of
      hydroelectric power plant with pioneer status under the Omnibus Investments
      Code
      of 1987 (Executive Order No. 226). Under the terms of its registration, CE
      Casecnan is entitled to certain incentives which include an income tax holiday
      for a minimum of six years from the start of commercial operations, tax and
      duty-free importation of capital equipment, tax credits on domestic capital
      equipment, and exemption from customs duties and national internal revenue
      taxes
      for the importation and unrestricted use of the consigned equipment for the
      development, construction, start-up, testing and operation of the power plant. CE
      Casecnan developed, financed and constructed the Casecnan Project over the
      construction period, and owns and operates the Casecnan Project for the term
      of
      the Cooperation Period, which commenced on December 11, 2001. During the
      Cooperation Period, NIA is obligated to accept all deliveries of water and
      energy, and so long as the Casecnan Project is physically capable of operating
      and delivering in accordance with agreed levels set forth in the Project
      Agreement, NIA is obligated to pay CE Casecnan a fixed fee for the delivery
      of a
      threshold volume of water and a fixed fee for the delivery of a threshold amount
      of electricity. In addition, NIA is obligated to pay a fee for all electricity
      delivered in excess of the threshold amount up to a specified amount and will
      be
      obligated to pay a fee for all water delivered in excess of the threshold amount
      up to a specified amount beginning after December 25,
      2008.


13


The
      ROP
      has provided a Performance Undertaking under which NIA’s obligations under the
      Project Agreement are guaranteed by the full faith and credit of the ROP. The
      Project Agreement and the Performance Undertaking provide for the resolution
      of
      disputes by binding arbitration in Singapore under international arbitration
      rules.





NIA’s
      obligations under the Project Agreement are substantially denominated in U.S.
      Dollars and are the Company’s sole source of operating revenues. Because of the
      Company’s dependence on NIA, any material failure of NIA to fulfill its
      obligations under the Project Agreement and any material failure of the ROP
      to
      fulfill its obligations under the Performance Undertaking would significantly
      impair the ability of the Company to meet its existing and future obligations,
      including obligations pertaining to its outstanding debt. No stockholders,
      partners or affiliates of the Company, including MidAmerican, and no
      directors, officers or employees of the Company
      will guarantee or be in any way liable for payment of the
      Company’s obligations. As a result, payment of the Company’s obligations
      depends upon the availability of sufficient revenues from the Company’s business
      after the payment of operating expenses.





The
      Company's cash and cash equivalents were $42.3 million and $16.7 million at
      December 31, 2005 and 2004, respectively.





The
      Company generated cash flows from operations of $79.4 million and $76.8 million
      for the years ended December 31, 2005 and 2004, respectively. The increase
      in 2005 was primarily due to higher net income of $6.7 million, lower interest
      paid in 2005 of $ 6.5 million and the payment of property taxes of $9.2 million
      in 2005.





The
      Company received $10.1 million and used $74.5 million for investing activities
      for the years ended December 31, 2005 and 2004, respectively. On January
      14, 2004, the Company collected the $97.0 million ROP Note receivable obtained
      in connection with the NIA Arbitration Settlement. On April 14, 2004, the
      Company received $18.9 million pursuant to an arbitration settlement with the
      construction contractor. Capital expenditures were $0.5 million and $4.1 million
      for the years ended December 31, 2005 and 2004, respectively. Restricted
      cash and investments for debt service obligations decreased by $10.6 million
      in
      2005 due to lower principal payments due in 2006. In 2004, restricted cash
      and
      investments for debt service obligations increased by $37.4 million to fully
      fund the Debt Service Reserve Fund.





The
      Company used $63.9 million and $139.1 million for financing activities for
      the
      years ended December 31, 2005 and 2004, respectively. The Company declared
      dividends totaling $11.0 million in 2005 and $106.0 million in 2004 (of which
      $1.7 million and $15.9 million, respectively were set aside in a separate bank
      account in the name of the Company and shown as restricted cash and investments
      and dividends payable in the balance sheet). The Company repaid $54.8 million
      and $49.4 million on the balance of the Series A Notes and Series B Bonds in
      2005 and 2004, respectively.





**NIA
      Arbitration Settlement**





On
      October 15, 2003, the Company closed a transaction settling an arbitral
      proceeding which arose from a statement of claim made on August 19, 2002,
      by CE Casecnan against NIA. In connection with the NIA Arbitration Settlement,
      NIA delivered to CE Casecnan the ROP Note, which contained a put provision
      granting CE Casecnan the right to put the ROP Note to the ROP for a price of
      par
      plus accrued interest for a 30-day period commencing on January 14, 2004.
      On January 14, 2004, CE Casecnan exercised its right to put the ROP Note to
      the ROP and, in accordance with the terms of the put, CE Casecnan received
      $99.2
      million (representing $97.0 million par value plus accrued interest) from the
      ROP on January 21, 2004. In addition to providing for the dismissal with
      prejudice of all claims by CE Casecnan and counterclaims by NIA in the arbitral
      proceeding, the Supplemental Agreement supplements and amends the Project
      Agreement in certain respects as summarized below:





Modifications
      to Water Delivery Fee





Under
      the
      Project Agreement, the Water Delivery Rate increased by $0.00043 per cubic
      meter
      for each $1.0 million of certain taxes paid by CE Casecnan. The Supplemental
      Agreement amends the per cubic meter Water Delivery Fee calculation by
      eliminating the increase for taxes paid. Instead, the Water Delivery Rate
      remains at $0.029 per cubic meter, escalated at 7.5% annually from
      January 1, 1994 through the first five years of the Cooperation Period,
      extending through December 25, 2006. The Company expects to be reimbursed
      quarterly for certain taxes it pays during the remainder of the Cooperation
      Period.





14


Under
      the
      Project Agreement, the Water Delivery Fee payable monthly was a fixed monthly
      payment based on an average water delivery of 801.9 million cubic meters per
      year, pro-rated to approximately 66.8 million cubic meters per month, multiplied
      by the per cubic meter rate as described above. Under the Supplemental Agreement
      the Water Delivery Fee is equal to the Guaranteed Water Delivery Fee plus the
      Variable Delivered Water Delivery Fee minus the Water Delivery Fee Credit.





*Guaranteed
      Water Delivery Fee.* For the
      sixty-month period from December 25, 2003 through December 25, 2008,
      the Guaranteed Water Delivery Fee shall equal the Water Delivery Rate, as
      described above, multiplied by approximately 66.8 million cubic meters
      (corresponding to the 801.9 million cubic meters per year). For each month
      beginning after December 25, 2008 through the remainder of the Cooperation
      Period, the Guaranteed Water Delivery Fee shall equal the Water Delivery Rate
      multiplied by approximately 58.3 million cubic meters (corresponding to 700.0
      million cubic meters per year).





*Variable
      Delivered Water Delivery Fee.* Variable
      Delivered Water Delivery Fees will be earned for months beginning after
      December 25, 2008. For each month beginning after December 25, 2008
      through the end of the Cooperation Period, the Variable Delivered Water Delivery
      Fee shall be payable only from the date when the cumulative Total Available
      Water (total delivered water plus the water volume not delivered to NIA as
      a
      result of NIA’s failure to accept energy deliveries at a capacity up to 150 MW)
      for each contract year exceeds 700.0 million cubic meters. Variable Delivered
      Water Delivery Fees will be earned up to an aggregate maximum of 1,324.7 million
      cubic meters for the period from December 25, 2008 through the end of the
      Cooperation Period. No additional variable water delivery fees will be earned
      over the 1,324.7 million cubic meter threshold.





*Water
      Delivery Fee Credit.* The
      Water Delivery Fee Credit shall be applicable only for each of the sixty-months
      from December 25, 2008 through December 25, 2013 and shall equal the
      Water Delivery Rate as of December 25, 2008 multiplied by the sum of each
      Annual Water Credit divided by sixty. The Annual Water Credit for each contract
      year starting from December 25, 2003 and ending on December 25, 2008
      shall equal 801.9 million cubic meters minus the Total Available Water for
      each
      contract year. The Total Available Water in any such year will equal actual
      deliveries with a minimum threshold of 700.0 million cubic meters.





*Deferred
      Revenue.* The
      Company records deferred revenue on the difference between the actual water
      delivery fees earned and water delivery fees invoiced pursuant to the
      Supplemental Agreement. Cumulative deferred water delivery revenue, amounting
      to
      $13.8 million as of December 31, 2005, is available to be earned in the
      succeeding contract years ending December 25, 2008.





Modifications
      to Variable Energy Delivery Fee





Under
      the
      Project Agreement, the Variable Energy Delivery Fee was a variable amount based
      on actual electrical energy delivered in each month in excess of 19.0 GWh,
      payable at a rate of $0.1509 per kWh. Under the Supplemental Agreement, the
      kWh
      rate for energy deliveries in excess of 19.0 GWh per month has been reduced,
      commencing in 2009, to $0.1132 (escalating at 1% per annum thereafter). Any
      deliveries of energy in excess of 490.0 GWh but less than 550.0 GWh per year
      are
      paid for at a rate of 1.3 pesos per kWh. Deliveries in excess of 550.0 GWh
      per
      year are at no cost to NIA.





For
      periods after September 28, 2003, the Supplemental Agreement provides that
      if the Casecnan Project is not dispatched up to 150 MW whenever water is
      available, NIA will pay for excess energy that could have been generated but
      was
      not as a result of such dispatch constraint.





Other
      Provisions of the Supplemental Agreement





The
      Company received an opinion from the Philippine Office of Government Corporate
      Counsel that the Supplemental Agreement has due authorization and is
      enforceable. The Company also received written confirmation from the Private
      Sector Assets and Liabilities Management Corporation that the issues with
      respect to the Casecnan Project that had been raised by the interagency review
      of independent power producers in the Philippines or that may have existed
      with
      respect to the Casecnan Project
      under certain provisions of the EPIRA calling for the renegotiation of contracts
      such as the Project Agreement have been satisfactorily addressed by the
      Supplemental Agreement.





The
      Guaranteed Energy Delivery Fee, Force Majeure, Buyout and Dispute Resolution
      provisions of the Project Agreement, as well as the Performance Undertaking
      provided by the ROP, remain in full force and effect under the Supplemental
      Agreement.





15


**Casecnan
      Stockholder Litigation**





Pursuant
      to the share ownership adjustment mechanism in the CE Casecnan stockholder
      agreement, which is based upon proforma financial projections of the Casecnan
      Project prepared following commencement of commercial operations, in February
      2002, MidAmerican’s indirect wholly owned subsidiary,
      CE Casecnan Ltd., advised the minority stockholder of the Company,
      LaPrairie Group Contractors (International) Ltd. (“LPG”), that MidAmerican’s
      indirect ownership interest in CE Casecnan had increased to 100% effective
      from commencement of commercial operations. On July 8, 2002, LPG filed
      a complaint in the Superior Court of the State of California, City and County
      of
      San Francisco against CE Casecnan Ltd., KEIL Casecnan Ltd. (“KE”), a former
      stockholder, and MidAmerican. LPG’s complaint, as amended, seeks
      compensatory and punitive damages arising out of CE Casecnan Ltd.’s and
      MidAmerican’s alleged improper calculation of the proforma financial projections
      and alleged improper settlement of the NIA arbitration. The Company is not
      a
      defendant in the action. On January 21, 2004, CE Casecnan Ltd., LPG and the
      Company entered into a status quo agreement pursuant to which the parties agreed
      to set aside certain distributions related to the shares subject to the LPG
      dispute and CE Casecnan agreed not to take any further actions with respect
      to
      such distributions without at least 15 days’ prior notice to LPG. Accordingly,
      15% of the dividend declarations in 2004 and 2005, totaling $17.6 million,
      was set aside in a separate bank account in the name of the Company and is
      shown
      as restricted cash and investments and dividends payable in the accompanying
      balance sheets. On August 4, 2005, the court issued a decision, ruling in
      favor of LPG on five of the eight disputed issues in the first phase of the
      litigation. On September 12, 2005, LPG filed a motion seeking the release of
      the
      funds which have been set aside pursuant to the status quo agreement referred
      to
      above. MidAmerican and CE Casecnan Ltd. filed an opposition to the motion on
      October 3, 2005, and at the hearing on October 26, 2005, the court denied
      LPG’s motion. On January 3, 2006, the court entered a judgment in favor of LPG
      against CE Casecnan Ltd. and KE. According to the judgment LPG would retain
      its
      ownership of 15% of the shares of the Company and distributions of the amounts
      deposited into escrow plus interest at 9% per annum. CE Casecnan Ltd. and KE
      intend to appeal this judgment and the August 4, 2005 decision. The appeal
      will
      be filed by March 3, 2006 and is expected to be resolved sometime after the
      end
      of 2006.





In
      February 2003, San Lorenzo Ruiz Builders and Developers Group, Inc. (“San
      Lorenzo”), an original shareholder substantially all of whose shares in the
      Company were purchased by MidAmerican in 1998, threatened to initiate legal
      action against the Company in the Philippines in connection with certain aspects
      of its option to repurchase such shares. The Company believes that San Lorenzo
      has no valid basis for any claim and, if named as a defendant in any action
      that
      may be commenced by San Lorenzo, the Company will vigorously defend such action.
      On July 1, 2005, MidAmerican and CE Casecnan Ltd. commenced an action
      against San Lorenzo in the District Court of Douglas County, Nebraska, seeking
      a
      declaratory judgment as to MidAmerican’s and CE Casecnan Ltd.'s rights vis-à-vis
      San Lorenzo in respect of such shares. San Lorenzo filed a motion to dismiss
      on
      September 19, 2005. The motion was heard on October 21, 2005, and the court
      took
      the matter under advisement Subsequently, San Lorenzo purported to exercise
      its
      option to repurchase such shares. The impact, if any, on the Company of San
      Lorenzo’s purported exercise of its option and the Nebraska litigation cannot be
      determined at this time.





**Obligations
      and Commitments**





The
      Company has contractual obligations and commercial commitments that may affect
      its financial condition. Contractual obligations to make future payments arise
      from long-term debt and notes payable .
      Material obligations as of December 31, 2005 are as follows (in
      thousands):





**Payments
                Due by Period****<
                1**
            
            **2-3**
            
            **4-5**
            
            **>5****Total**
            
            **Year**
            
            **Years**
            
            **Years**
            
            **Years**Contractual
                cash obligations:Long-term
                debt
            
            $
            142,345
            
            $
            36,015
            
            $
            75,460
            
            $
            30,870
            
            $
            -Note
                payable
            
            
            51,263
            
            
            -
            
            
            -
            
            
            -
            
            
            51,263Interest
            
            
            99,196
            
            
            15,934
            
            
            18,650
            
            
            4,816
            
            
            62,021Total
                contractual cash obligations
            
            $
            292,804
            
            $
            51,949
            
            $
            94,110
            
            $
            35,686
            
            $
            113,284





16


**Critical
      Accounting Policies**





The
      preparation of financial statements and related disclosures in conformity with
      accounting principles generally accepted in the United States of America
      requires management to make judgments, assumptions and estimates that affect
      the
      amounts reported in the financial statements and accompanying notes. Note 2
      to
      the financial statements describes the significant accounting policies and
      methods used in the preparation of the financial statements. Estimates are
      used
      for, but not limited to, the accounting for the impairment of long-lived assets
      and the allowance for doubtful accounts. Actual results could differ from these
      estimates. The following critical accounting policies are impacted significantly
      by judgments, assumptions and estimates used in the preparation of the financial
      statements.





Impairment
      of Long-Lived Assets





Long-lived
      assets are reviewed for impairment whenever events or changes in circumstances
      indicate that the carrying amount of an asset may not be recoverable. An
      impairment loss would be recognized whenever evidence exists that the carrying
      value is not recoverable.





Allowance
      for Doubtful Accounts





The
      allowance for doubtful accounts is based on the Company’s assessment of the
      collectibility of payments from NIA. This assessment requires judgment regarding
      the outcome of disputes and the ability of the customer to pay the amounts
      owed
      to the Company. Any change in the Company’s assessment of the collectibility of
      accounts receivable that was not previously provided for could significantly
      impact the calculation of such allowance and the results of
      operations.





**Item
                7A.**
            **Quantitative
                and Qualitative Disclosures About Market Risk****.**





The
      following discussion of the Company’s exposure to various market risks contains
“forward-looking statements” that involve risks and uncertainties. These
      projected results have been prepared utilizing certain assumptions considered
      reasonable in the circumstances and in light of information currently available
      to the Company. Actual results could differ materially from those projected
      in
      the forward-looking information.





Interest
      Rate Risk





At
      December 31, 2005, the Company had fixed-rate long-term debt of $142.3
      million in principal amount and having a fair value of $153.4 million. These
      instruments are fixed-rate and therefore do not expose the Company to the risk
      of earnings loss due to changes in market interest rates. However, the fair
      value of these instruments would decrease by approximately $5.5 million if
      interest rates were to increase by 10% from their levels at December 31,
      2005. In general, such a decrease in fair value would impact earnings and cash
      flows only if the Company were to reacquire all or a portion of these
      instruments prior to their maturity.





Currency
      Risk





NIA’s
      payments of obligations under the Project Agreement are substantially
      denominated in U.S. Dollars and are the Company’s sole source of operating
      revenues. NIA must obtain U.S. Dollars to fund its payment obligations. Because
      of the Company’s dependence on NIA, any material failure of NIA to obtain U.S.
      Dollars and fulfill its obligations under the Project Agreement and any material
      failure of the ROP to fulfill its obligations under the Performance Undertaking
      would significantly impair the ability of the Company to meet its existing
      and
      future obligations. No stockholders, partners or affiliates of the Company,
      including MidAmerican, and no directors, officers or employees of the Company
      will guarantee or be in any way liable for payment of the Company’s obligations.
      As a result, payment of the Company’s obligations depends upon the availability
      of sufficient revenues from the Company’s business after the payment of
      operating expenses.





17


**Item
                8.**
            **Financial
                Statements and Supplementary
                Data.**





Report
                of Independent Registered Public Accounting Firm
            19Balance
                Sheets as of December 31, 2005 and 2004
            20Statements
                of Operations for the Years Ended December 31, 2005, 2004 and
                2003
            21Statements
                of Changes in Stockholders’ Equity for the Years Ended December 31,
                2005, 2004 and 2003
            22Statements
                of Cash Flows for the Years Ended December 31, 2005, 2004 and
                2003
            23Notes
                to Financial Statements
            24





18


**REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**





To
      the
      Board of Directors and Stockholders of


CE
      Casecnan Water and Energy Company, Inc.








We
      have
      audited the accompanying balance sheets of CE Casecnan Water and Energy Company,
      Inc. as of December 31, 2005 and 2004, and the related statements of
      operations, of changes in stockholders’ equity and of cash flows for each of the
      three years in the period ended December 31, 2005 .
      These
      financial statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these financial statements based
      on
      our audits.





We
      conducted our audits 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 financial
      statements are free of material misstatement. An audit includes examining,
      on a
      test basis, evidence supporting the amounts and disclosures in the financial
      statements. An audit also includes 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 financial statements referred to above present fairly, in all
      material respects, the financial position of


CE
      Casecnan Water and Energy Company, Inc. as of December 31, 2005 and 2004,
      and the results of its operations and its cash flows for each of the three
      years
      in the period ended December 31, 2005, in conformity with accounting
      principles generally accepted in the United States of America.





/s/
      Isla
      Lipana & Co.





ISLA
      LIPANA & CO.


A
      PricewaterhouseCoopers member firm


Makati
      City, Philippines


February
      8, 2006








19





**CE
      CASECNAN WATER AND ENERGY COMPANY, INC.**


**BALANCE
      SHEETS**


(Amounts
      in thousands of U.S. Dollars, except share data)





**As
                of December 31,****2005**
            
            **2004****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            42,317
            
            $
            16,732Restricted
                cash and investments
            
            
            44,956
            
            
            55,507Trade
                receivable, net
            
            
            26,638
            
            
            25,242Prepaid
                insurance and other current assets
            
            
            5,215
            
            
            7,334Total
                current assets
            
            
            119,126
            
            
            104,815Bond
                issue costs, net
            
            
            1,745
            
            
            2,678Property,
                plant and equipment, net
            
            
            344,051
            
            
            365,132Deferred
                income tax
            
            
            5,095
            
            
            5,371**Total
                assets**
            
            $
            470,017
            
            $
            477,996**LIABILITIES
                AND STOCKHOLDERS’ EQUITY**Current
                liabilities:Accounts
                payable and other accrued liabilities
            
            $
            7,156
            
            $
            12,997Dividends
                payable
            
            
            17,550
            
            
            15,900Accrued
                interest
            
            
            10,592
            
            
            8,482Payable
                to affiliates
            
            
            35,358
            
            
            35,148Current
                portion of long-term debt
            
            
            36,015
            
            
            54,753Total
                current liabilities
            
            
            106,671
            
            
            127,280Notes
                payable
            
            
            51,263
            
            
            51,263Deferred
                revenue
            
            
            13,756
            
            
            6,120Long-term
                debt, net of current portion
            
            
            106,330
            
            
            142,345Total
                liabilities
            
            
            278,020
            
            
            327,008Commitments
                and contingencies (Note 10)Stockholders’
                equity:Capital
                stock - 2,148,000 shares authorized, one Philippine peso ($0.038)
                par
                value; 767,162 shares issued and outstanding
            
            
            29
            
            
            29Additional
                paid-in capital
            
            
            123,807
            
            
            123,807Retained
                earnings
            
            
            68,161
            
            
            27,152Total
                stockholders’ equity
            
            
            191,997
            
            
            150,988**Total
                liabilities and stockholders’ equity**
            
            $
            470,017
            
            $
            477,996





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


20





**CE
      CASECNAN WATER AND ENERGY COMPANY, INC.**


**STATEMENTS
      OF OPERATIONS**


(Amounts
      in thousands of U.S. Dollars)





**Year
                Ended December 31,****2005**
            
            **2004**
            
            **2003****Revenue:**Lease
                rentals and service contracts
            
            $
            107,000
            
            $
            106,847
            
            $
            129,921**Operating
                expenses:**Depreciation
            
            
            21,543
            
            
            21,972
            
            
            23,158Plant
                operations and other operating expenses
            
            
            9,783
            
            
            11,444
            
            
            13,180Doubtful
                accounts expense
            
            
            -
            
            
            -
            
            
            2,044Total
                operating expenses
            
            
            31,326
            
            
            33,416
            
            
            38,382**Operating
                income**
            
            
            75,674
            
            
            73,431
            
            
            91,539**Other
                income (expense):**Settlement
                revenue (Note 4)
            
            
            -
            
            
            -
            
            
            31,887Interest
                expense
            
            
            (24,812
            )
            
            (29,468
            )
            
            (39,835
            )Interest
                income
            
            
            1,938
            
            
            1,539
            
            
            1,949Other,
                net
            
            
            303
            
            
            (98
            )
            
            (38
            )Total
                other expense, net
            
            
            (22,571
            )
            
            (28,027
            )
            
            (6,037
            )**Income
                before provision for income tax**
            
            
            53,103
            
            
            45,404
            
            
            85,502Provision
                for income tax
            
            
            1,094
            
            
            102
            
            
            25,737**Net
                income**
            
            $
            52,009
            
            $
            45,302
            
            $
            59,765





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





21





**CE
      CASECNAN WATER AND ENERGY COMPANY, INC.**


**STATEMENTS
      OF CHANGES IN STOCKHOLDERS’ EQUITY**


(Amounts
      in thousands of U.S. Dollars)





**Outstanding**
            
            
            
            **Additional****Common**
            
            **Common**
            
            **Paid-in**
            
            **Retained****Shares**
            
            **Stock**
            
            **Capital**
            
            **Earnings**
            
            **Total****Balance,
                January 1, 2003**
            
            
            767,162
            
            $
            29
            
            $
            123,807
            
            $
            28,085
            
            $
            151,921Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            59,765
            
            
            59,765**Balance,
                December 31, 2003**
            
            
            767,162
            
            
            29
            
            
            123,807
            
            
            87,850
            
            
            211,686Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            45,302
            
            
            45,302Dividends
                declared
            
            
            -
            
            
            -
            
            
            -
            
            
            (106,000
            )
            
            (106,000
            )**Balance,
                December 31, 2004**
            
            
            767,162
            
            
            29
            
            
            123,807
            
            
            27,152
            
            
            150,988Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            52,009
            
            
            52,009Dividends
                declared
            
            
            -
            
            
            -
            
            
            -
            
            
            (11,000
            )
            
            (11,000
            )**Balance,
                December 31, 2005**
            
            
            767,162
            
            $
            29
            
            $
            123,807
            
            $
            68,161
            
            $
            191,997





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











22


**CE
      CASECNAN WATER AND ENERGY COMPANY, INC.**


**STATEMENTS
      OF CASH FLOWS**


(Amounts
      in thousands of U.S. Dollars)





**Year
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Cash
                flows from operating activities:Net
                income
            
            $
            52,009
            
            $
            45,302
            
            $
            59,765Adjustments
                to reconcile net income to net cash flows from operating
                activities:Depreciation
            
            
            21,543
            
            
            21,972
            
            
            23,158Amortization
                of bond issue costs
            
            
            933
            
            
            1,183
            
            
            1,356Provision
                for deferred income tax
            
            
            276Gain
                on settlement of arbitration, net of tax
            
            
            -
            
            
            -
            
            
            (7,500
            )Changes
                in other items:Trade
                receivable, net
            
            
            (1,396
            )
            
            (8,791
            )
            
            (20,132
            )Prepaid
                insurance and other current assets
            
            
            2,119
            
            
            5,686
            
            
            4,263Accounts
                payable and other accrued liabilities
            
            
            (5,841
            )
            
            8,921
            
            
            3,932Accrued
                interest
            
            
            2,110
            
            
            1,114
            
            
            1,097Accrued
                liquidated damages
            
            
            -
            
            
            (3,800
            )
            
            (1,620
            )Deferred
                revenue
            
            
            7,636
            
            
            5,218
            
            
            902Net
                cash flows from operating activities
            
            
            79,389
            
            
            76,805
            
            
            65,221Cash
                flows from investing activities:Additions
                to property, plant and equipment
            
            
            (462
            )
            
            (4,049
            )
            
            (4,335
            )Arbitration
                settlement
            
            
            -
            
            
            -
            
            
            (5,965
            )Liquidated
                damages received, net of amounts accrued
            
            
            -
            
            
            18,900
            
            
            -Collection
                of ROP Note
            
            
            -
            
            
            97,000
            
            
            -Decrease
                (increase) in restricted cash and investments for debt service obligations
                and dividends payable
            
            
            10,551
            
            
            (37,386
            )
            
            (11,043
            )Net
                cash flows from (used in) investing activities
            
            
            10,089
            
            
            74,465
            
            
            (21,343
            )Cash
                flows from financing activities:Increase
                in payable to affiliates
            
            
            210
            
            
            409
            
            
            1,397Payment
                of long-term debt
            
            
            (54,753
            )
            
            (49,360
            )
            
            (41,467
            )Cash
                dividends paid
            
            
            (9,350
            )
            
            (90,100
            )
            
            -Net
                cash flows from financing activities
            
            
            (63,893
            )
            
            (139,051
            )
            
            (40,070
            )**Net
                change in cash and cash equivalents**
            
            
            25,585
            
            
            12,219
            
            
            3,808**Cash
                and cash equivalents at beginning of period**
            
            
            16,732
            
            
            4,513
            
            
            705**Cash
                and cash equivalents at end of period**
            
            $
            42,317
            
            $
            16,732
            
            $
            4,513**Supplemental
                Disclosure:**Interest
                paid
            
            $
            24,150
            
            $
            30,638
            
            $
            36,205Income
                taxes paid
            
            $
            89
            
            $
            102
            
            $
            24,387Non-cash
                transaction - ROP note received under NIA Arbitration
                Settlement
            
            $
            -
            
            $
            -
            
            $
            97,000





In
      2004,
      the investment in property, plant and equipment was reduced by $23.9 million
      involving receipt of cash of $18.9 million and reversal of liabilities of $5.0
      million pursuant to settlement of a construction contract arbitration (Note
      6).





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


23


**CE
      CASECNAN WATER AND ENERGY COMPANY, INC.**


**NOTES
      TO FINANCIAL STATEMENTS**


(In
      U.S.
      Dollars, unless indicated otherwise)





**1.**
            **Organization
                and Operations**





CE
      Casecnan Water and Energy Company, Inc. (the “Company” or “CE Casecnan”) is a
      privately held Philippine corporation formed indirectly by MidAmerican Energy
      Holdings Company (“MidAmerican”) and was registered with the Philippine
      Securities and Exchange Commission on September 21, 1994 .
      The
      purpose of the Company is to develop, construct, operate and own a hydroelectric
      power plant and the related facilities for conversion into electricity of water
      provided by and under contract with the Republic of the Philippines (“ROP”) or
      any ROP-owned or controlled corporation.





The
      Company has a contract with the ROP, through the Philippine National Irrigation
      Administration (“NIA”) (a ROP-owned and controlled corporation), for the
      development and construction of a hydroelectric power plant and related
      facilities under a build-own-operate-transfer agreement (“Project Agreement”),
      as amended by the Supplemental Agreement dated September 29, 2003 (the
“Supplemental Agreement”), covering a 20-year cooperation period (“Cooperation
      Period”) with “take-or-pay” obligations for water and electricity. At the end of
      the Cooperation Period, the combined irrigation and 150 MW hydroelectric power
      generation project (the “Casecnan Project”) will be transferred to the ROP at no
      cost on an “as is” basis. The ROP also signed a Performance Undertaking, which,
      among others, affirms and guarantees the obligations of NIA under the contract.
      Construction of the Casecnan Project commenced in 1995. The Casecnan Project
      Cooperation Period began upon commencement of commercial operations on
      December 11, 2001.





The
      Company is registered with the Philippine Board of Investments as a new operator
      of hydroelectric power plant with pioneer status under the Omnibus Investments
      Code of 1987 (Executive Order No. 226) .
      Under
      the terms of its registration, the Company is entitled to certain incentives
      which include an income tax holiday for a minimum of six years from the start
      of
      commercial operations, tax and duty-free importation of capital equipment,
      tax
      credits on domestic capital equipment, and exemption from customs duties and
      national internal revenue taxes for the importation and unrestricted use of
      the
      consigned equipment for the development, construction, start-up, testing and
      operation of the power plant .
      The
      registration also requires, among others, the maintenance of a debt-to-equity
      ratio not exceeding 75:25 during commercial operations.





In
      April
      2003, CE Casecnan Ltd. assigned a 70% stockholding in the Company to CE Casecnan
      II, Inc., a Philippine company, in exchange for the latter’s shares of stock.
      Consequently, the Company became 70% owned by CE Casecnan II, Inc.





References
      to "U.S. dollars," "dollars," or "$" are to the currency of the United States
      and references to "pesos" are to the currency of the Philippines. References
      to
      kW means kilowatts, MW means megawatts, GW means gigawatts, kWh means kilowatt
      hours, MWh means megawatt hours, and GWh means gigawatt hours.





**2.**
            **Summary
                of Significant Accounting
                Policies**





The
      financial statements are prepared in accordance with accounting principles
      generally accepted in the United States of America. The more significant
      accounting policies and practices of the Company are set forth
      below:





Basis
      of Presentation





The
      functional and reporting currency of the Company is the U.S. dollar.
      Transactions in foreign currencies (Philippines pesos) are recorded based on
      the
      prevailing rates of exchange at transaction dates. Foreign currency denominated
      monetary assets and liabilities are translated at the exchange rate prevailing
      at the balance sheet date. The resulting exchange differences from settlements
      of foreign currency transactions and translations of monetary assets and
      liabilities are credited or charged to operations.





The
      Company’s operations are in one reportable segment, the water and electricity
      generation industry.





Reclassifications





Certain
      amounts in the 2004 and 2003 financial statements and supporting note
      disclosures have been reclassified to conform to the current period
      presentation, including the reclassification of restricted cash and investments
      to current assets and the reclassification of changes in restricted cash from
      financing activities to investing activities. Such reclassification did not
      impact previously reported net income or retained earnings.


24


Use
      of
      Estimates





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenue and expenses during
      the reporting period. Actual results could differ from those estimates.





Cash
      Equivalents





Cash
      equivalents are short-term, highly liquid investments that are readily
      convertible to known amounts of cash with original maturities of three months
      or
      less and that are subject to an insignificant risk of change in
      value.





Restricted
      Cash and Investments





Restricted
      cash and investments are composed
      of debt service funds and undistributed dividends that are contractually
      restricted as to their use and require the maintenance of specific minimum
      balances. Since
      the Company has the positive intent and ability to hold all of its investments
      to maturity, these are classified as held to maturity and recorded at amortized
      cost. The carrying amount of investments as of December 31, 2005
      approximates their fair value, which is based on quoted market prices as
      provided by the financial institution holding the investments.





Bond
      Issue Costs





Bond
      issue costs consist of costs incurred in the issuance of senior secured notes
      and bonds and are deferred and amortized over the term of the notes and bonds
      using the effective interest rate method. Amortization of bond issue costs
      was
      capitalized during the construction period and charged to operations, as an
      interest expense, upon commercial operations of the Casecnan
      Project.





Property,
      Plant and Equipment, Net





Property,
      plant and equipment are stated at historical cost (including capitalized
      interest costs) less accumulated depreciation. Depreciation is computed on
      the
      straight-line method based on the 20-year Cooperation Period for the
      hydroelectric power plant and office and building structure, and on the
      estimated useful life of five years for other equipment. Minor expenditures
      for
      repairs and maintenance are charged to operations as incurred, while significant
      improvements are capitalized. Liquidated damages received relative to the
      Casecnan Project construction are recorded as reduction to the cost of the
      Project. When an asset is sold or otherwise disposed of, its cost and related
      accumulated depreciation are removed from the accounts and the resulting gain
      or
      loss is credited or charged to operations.





Deferred
      Income Taxes





Deferred
      income tax assets and liabilities are recognized for the future tax consequences
      attributable to differences between the financial reporting bases of assets
      and
      liabilities and their related tax bases. Deferred income tax assets and
      liabilities are measured using the tax rate expected to apply to taxable income
      in the years in which those temporary differences are expected to be recovered
      or settled. A valuation allowance is provided for deferred income tax assets
      if
      it is more likely than not that a tax benefit will not be realized.





Allowance
      for Doubtful Accounts





Allowance
      for doubtful accounts is based on the Company’s assessment of the collectibility
      of payments from NIA. This assessment requires judgment regarding the outcome
      of
      pending disputes and the ability of the customer to pay the amounts owed to
      the
      Company. Any change in the Company’s assessment of the collectibility of
      accounts receivable that was not previously provided for could significantly
      impact the calculation of such allowance and the results of
      operations.





25


Impairment
      of Long-Lived Assets





Long-lived
      assets are reviewed for impairment whenever events or changes in circumstances
      indicate that the carrying amount of an asset may not be recoverable. An
      impairment loss would be recognized whenever evidence exists that the carrying
      value is not recoverable.





Revenue





Pursuant
      to the Project Agreement, the Company bills on a monthly basis for the delivery
      of water and electricity. The Project Agreement is treated for accounting
      purposes as an arrangement that contains both an operating lease and a service
      contract to operate the plant. The Project Agreement was classified as an
      operating lease due to the significant uncertainties that existed at the
      inception of the lease regarding both the collection of future amounts and
      the
      amount of unreimbursable costs yet to be incurred, mainly due to the existence
      of political, economic and other uncertainties associated with the
      Philippines.





The
      annual water delivery revenue is recorded on the basis of the contractual
      minimum guaranteed water delivery threshold for the respective contract year.
      If
      and when actual cumulative deliveries within a contract year exceed the minimum
      threshold, additional revenue is recognized and calculated as the product of
      the
      water deliveries in excess of the minimum threshold and the applicable unit
      price up to the maximum contractually allowed water delivery volume. The Company
      defers revenue on the difference between the actual water delivery fees earned
      and water delivery fees invoiced pursuant to the Supplemental Agreement.
      Cumulative deferred water delivery revenue, amounting to $13.8 million as of
      December 31, 2005, is available to be earned in the succeeding contract years
      ending December 25, 2008.





Revenue
      from electricity consists of guaranteed energy fees with fixed monthly amounts
      and is recognized based on the contractually guaranteed energy deliveries.
      Actual deliveries of energy less than the fixed, monthly contractual amounts
      will not result in any reduction of the guaranteed energy fee. The variable
      energy fee is recognized when deliveries of energy exceed the guaranteed energy
      in any contract year. The variable energy fee will not be recognized until
      all
      cumulative electrical energy shortfalls in previous months have been made up.
      At
      December 31, 2005, there was no cumulative electrical energy shortfall.





**3.**
            **Restricted
                Cash and Investments**





Restricted
      cash and investments consist of the following (in thousands):





**December 31,****2005**
            
            **2004**Debt
                service reserve fund
            
            $
            26,718
            
            $
            39,444Dividend
                set aside account
            
            
            18,238
            
            
            16,063$
            44,956
            
            $
            55,507





**4.**
            **NIA
                Settlement Agreement**





On
      October 15, 2003, the Company closed a transaction settling an arbitral
      proceeding which arose from a statement of claim made on August 19, 2002,
      by CE Casecnan against NIA. In connection with the NIA Arbitration Settlement,
      NIA delivered to CE Casecnan the ROP Note, which contained a put provision
      granting CE Casecnan the right to put the ROP Note to the ROP for a price of
      par
      plus accrued interest for a 30-day period commencing on January 14, 2004.
      On January 14, 2004, CE Casecnan exercised its right to put the ROP Note to
      the ROP and, in accordance with the terms of the put, CE Casecnan received
      $99.2
      million (representing $97.0 million par value plus accrued interest) from the
      ROP on January 21, 2004. In addition to providing for the dismissal with
      prejudice of all claims by CE Casecnan and counterclaims by NIA in the arbitral
      proceeding, the Supplemental Agreement supplements and amends the Project
      Agreement in certain respects as summarized below:





Modifications
      to Water Delivery Fee





Under
      the
      Project Agreement, the Water Delivery Rate increased by $0.00043 per cubic
      meter
      for each $1.0 million of certain taxes paid by CE Casecnan. The Supplemental
      Agreement amends the per cubic meter Water Delivery Fee calculation by
      eliminating the increase for taxes paid. Instead, the Water Delivery Rate
      remains at $0.029 per cubic meter, escalated at 7.5% annually from
      January 1, 1994 through the first five years of the Cooperation Period,
      extending through December 11, 2006. The Company will be reimbursed for
      certain taxes it pays during the remainder of the Cooperation
      Period.


26


Under
      the
      Project Agreement, the Water Delivery Fee payable monthly was a fixed monthly
      payment based on an average water delivery of 801.9 million cubic meters per
      year, pro-rated to approximately 66.8 million cubic meters per month, multiplied
      by the per cubic meter rate as described above. Under the Supplemental Agreement
      the Water Delivery Fee is equal to the Guaranteed Water Delivery Fee plus the
      Variable Delivered Water Delivery Fee minus the Water Delivery Fee
      Credit.





*Guaranteed
      Water Delivery Fee.* For the
      sixty-month period from December 25, 2003 through December 25, 2008,
      the Guaranteed Water Delivery Fee shall equal the Water Delivery Rate, as
      described above, multiplied by approximately 66.8 million cubic meters
      (corresponding to the 801.9 million cubic meters per year). For each month
      beginning after December 25, 2008 through the remainder of the Cooperation
      Period, the Guaranteed Water Delivery Fee shall equal the Water Delivery Rate
      multiplied by approximately 58.3 million cubic meters (corresponding to 700.0
      million cubic meters per year).





*Variable
      Delivered Water Delivery Fee.* Variable
      Delivered Water Delivery Fees will be earned for months beginning after
      December 25, 2008. For each month beginning after December 25, 2008
      through the end of the Cooperation Period, the Variable Delivered Water Delivery
      Fee shall be payable only from the date when the cumulative Total Available
      Water (total delivered water plus the water volume not delivered to NIA as
      a
      result of NIA’s failure to accept energy deliveries at a capacity up to 150 MW)
      for each contract year exceeds 700.0 million cubic meters. Variable Delivered
      Water Delivery Fees will be earned up to an aggregate maximum of 1,324.7 million
      cubic meters for the period from December 25, 2008 through the end of the
      Cooperation Period. No additional variable water delivery fees will be earned
      over the 1,324.7 million cubic meter threshold.





*Water
      Delivery Fee Credit.* The
      Water Delivery Fee Credit shall be applicable only for each of the sixty-months
      from December 25, 2008 through December 25, 2013 and shall equal the
      Water Delivery Rate as of December 25, 2008 multiplied by the sum of each
      Annual Water Credit divided by sixty. The Annual Water Credit for each contract
      year starting from December 25, 2003 and ending on December 25, 2008 shall
      equal 801.9 million cubic meters minus the Total Available Water for each
      contract year. The Total Available Water in any such year will equal actual
      deliveries with a minimum threshold of 700.0 million cubic meters.





Modifications
      to Variable Energy Delivery Fee





Under
      the
      Project Agreement, the Variable Energy Delivery Fee was a variable amount based
      on actual electrical energy delivered in each month in excess of 19.0 GWh,
      payable at a rate of $0.1509 per kWh. Under the Supplemental Agreement, the
      kWh
      rate for energy deliveries in excess of 19 GWh per month has been reduced,
      commencing in 2009, to $0.1132 (escalating at 1% per annum thereafter). Any
      deliveries of energy in excess of 490.0 GWh but less than 550.0 GWh per year
      are
      paid for at a rate of 1.3 pesos per kWh. Deliveries in excess of 550.0 GWh
      per
      year are at no cost to NIA.





For
      periods after September 28, 2003, the Supplemental Agreement provides that
      if the Casecnan Project is not dispatched up to 150 MW whenever water is
      available, NIA will pay for excess energy that could have been generated but
      was
      not as a result of such dispatch constraint.





Other
      Provisions of the Supplemental Agreement





The
      Company received an opinion from the Philippine Office of Government Corporate
      Counsel that the Supplemental Agreement has due authorization and is
      enforceable. The Company also received written confirmation from the Private
      Sector Assets and Liabilities Management Corporation that the issues with
      respect to the Casecnan Project that had been raised by the interagency review
      of independent power producers in the Philippines or that may have existed
      with
      respect to the Casecnan Project under certain provisions of the Electric Power
      Industry Reform Act of 2001 (“EPIRA”) calling for the renegotiation of contracts
      such as the Project Agreement have been satisfactorily addressed by the
      Supplemental Agreement.





The
      Guaranteed Energy Delivery Fee, Force Majeure, Buyout and Dispute Resolution
      provisions of the Project Agreement, as well as the Performance Undertaking
      provided by the ROP, remain in full force and effect under the Supplemental
      Agreement.





27


**5****.**
            **Trade
                Receivable, Net**





Trade
      receivable pertains to the receivable due for lease rentals, service income
      and
      recoverable taxes billed pursuant to the provisions of the Project Agreement
      with NIA, as follows (in thousands):





**December 31,****2005**
            
            **2004**Water
                delivery fee
            
            $
            17,299
            
            $
            14,406Guaranteed
                energy delivery fee
            
            
            3,676
            
            
            3,676Variable
                energy delivery fee
            
            
            6,317
            
            
            7,979Total
                trade receivable
            
            
            27,292
            
            
            26,061Allowance
                for doubtful accounts
            
            
            (654
            )
            
            (819
            )Trade
                receivable, net
            
            $
            26,638
            
            $
            25,242





The
      water
      delivery fee includes claims for tax reimbursement from NIA pursuant to the
      Supplemental Agreement amounting to $11.5 million and $8.7 million as of
      December 31, 2005 and 2004, respectively. The allowance for doubtful
      accounts as of December 31, 2005 and 2004 represents the Company’s estimate
      of the uncollectible portion of the receivable balance. The activity for the
      Company’s allowance for doubtful accounts was as follows (in
      thousands):





**Year
                Ended December 31,****2005**
            
            **2004**
            
            **2003**Balance,
                January 1
            
            $
            (819
            )
            $
            (2,044
            )
            $
            (12,066
            )Charges
            
            
            -
            
            
            -
            
            
            (12,890
            )Write-off
            
            
            -
            
            
            -
            
            
            174Recoveries
            
            
            165
            
            
            1,225
            
            
            22,738Balance,
                December 31
            
            $
            (654
            )
            $
            (819
            )
            $
            (2,044
            )





**6****.**
            **Property,
                Plant and Equipment, Net**





Property,
      plant and equipment, net at December 31 consists of the following (in
      thousands):





**December 31,****2005**
            
            **2004**Hydroelectric
                power facility
            
            $
            429,869
            
            $
            429,805Office
                and building structures
            
            
            1,149
            
            
            1,149Transportation
                and other equipment
            
            
            1,388
            
            
            990Total
                operating assets
            
            
            432,406
            
            
            431,944Accumulated
                depreciation
            
            
            (88,355
            )
            
            (66,812
            )Property,
                plant and equipment, net
            
            $
            344,051
            
            $
            365,132





Construction
      of the Casecnan Project was completed under a fixed-price, date certain, turnkey
      engineering, procurement and construction contract (the "Replacement Contract")
      dated May 7, 1997 and amended on November 20, 1999 .
      The
      work under the Replacement Contract was conducted by a consortium consisting
      of
      Cooperativa Muratori Cementisti CMC di Ravenna and Impresa Pizzarotti & C.
      Spa. (collectively, the "Contractor"), working together with Siemens A.G.,
      Sulzer Hydro Ltd., Black & Veatch and Colenco Power Engineering Ltd. On
      February 12, 2001, the Contractor filed a Request for Arbitration with the
      International Chamber of Commerce ("ICC") seeking schedule relief from various
      alleged force majeure events. On April 7, 2004, the Company entered into an
      agreement with the Contractor settling the ICC arbitration. Pursuant to the
      settlement agreement, as amended, the Contractor paid $18.9 million to CE
      Casecnan on April 14, 2004, and the Contractor and CE Casecnan executed
      mutual releases and agreed to dismiss the arbitration. A total of $23.9 million
      (the $18.9 million receipt along with $3.8 million originally recorded for
      liquidated damages and $1.2 million accrual for the unpaid portion of the
      Replacement Contract) was recorded as a reduction to property, plant and
      equipment in 2004.





28


**7****.**
            **Long-Term
                Debt**





On
      November 27, 1995, the Company issued $371.5 million of notes and bonds
      (the “Securities”) to finance the construction of the Casecnan
      Project .
      These
      debts consisted of $75.0 million Senior Secured Floating Rate Notes (“FRNs”)
      bearing interest at LIBOR plus 3.00%, which were paid in installments through
      November 15, 2002; $125.0 million Senior Secured Series A Notes (“Series A
      Notes”) with interest at 11.45% payable, which were paid in semiannual
      installments through November 15, 2005; and $171.5 million Senior Secured Series
      B Bonds (“Series B Bonds”) with interest at 11.95% payable in semiannual
      installments up to 2010. For the year ended December 31, 2005, the Series B
      Bonds had an effective interest rate of 13.82%, inclusive of bond issue cost
      amortization.





The
      repayment schedule of the Series B Bonds is as follows (in
      thousands):




2006
                
                $
                36,0152007
                
                
                37,7302008
                
                
                37,7302009
                
                
                13,7202010
                
                
                17,150$
                142,345





The
      Securities are senior debt of the Company and are secured by an assignment
      of
      all revenues that will be received from the Casecnan Project, a collateral
      assignment of all material contracts, a lien on any accounts and funds on
      deposit under a Deposit and Disbursement Agreement, a pledge of 100% of the
      capital stock of the Company and a lien on all other material assets and
      prop erty
      interests of the Company. The Securities rank pari passu with and will share
      the
      collateral on a pro rata basis with other senior secured debt, if any.





The
      Series B Bonds are subject to optional redemption by the Company, at any time,
      in whole or in part, pro rata, at par plus accrued interest to the redemption
      date plus a premium, calculated to “make whole” to comparable U.S. Treasury
      Securities plus 150 basis points .
      The
      Company also had the option to redeem the securities, in whole or in part,
      at
      par plus accrued interest at any time if, as a result of any change in
      Philippine tax law or in the application or interpretation of Philippine tax
      law
      occurring after the date of issuance of the Securities, the Company is required
      to pay certain additional amounts described in the Trust Indenture. The
      Securities are subject to mandatory redemption, pro rata, at par plus accrued
      interest to the redemption date; (a) upon the receipt by the Company of loss
      proceeds that exceed $15.0 million in respect of certain events of property
      or
      casualty loss or similar events, unless the funds are to be utilized by the
      Company for an Approved Restoration Plan; or (b) upon the receipt by the Company
      of proceeds realized in connection with a Project Agreement Buyout.





When
      a
      Change in Control occurs, each holder of the Securities (“Holder”) will have the
      right to require the Company to repurchase all or any part of such Holder’s
      Securities at a cash purchase price equal to 101% of the principal amount
      thereof, plus accrued interest to the date of repurchase in accordance with
      the
      procedures set forth in the Trust Indenture. There is no assurance that upon
      a
      Change in Control the Company will have sufficient funds to repurchase the
      Securities.





The
      debt
      covenants contain certain restrictions as to incurrence of additional
      indebtedness; merger, consolidation, dissolution, or any significant change
      in
      corporate structure; non-arm’s length transactions or agreements with
      affiliates; sale, lease, or transfer of properties material to the Casecnan
      Project, among others. In connection with the foregoing secured indebtedness,
      the Company, on November 27, 1995, entered into a Deposit and Disbursement
      Agreement whereby JPMorgan Chase Bank, N.A. (formerly known as Chemical Trust
      Company of California) acts as a depositary and a collateral agent. As a
      depositary agent, it will hold monies, instruments and Securities pledged by
      the
      Company to the collateral agent. The terms of this agreement require the
      establishment of several funds, which include a Capital Contribution Fund.
      Pursuant to this requirement, the Company’s stockholders deposited an aggregate
      capital contribution of approximately $123.3 million to the fund, which was
      strictly used to fund the construction of the Casecnan Project when the proceeds
      from the Series A Notes and Series B Bonds were fully utilized. The
      contributions are included in the “Additional paid-in capital” account in the
      accompanying balance sheets.





29


**8.**
            **Income
                Taxes**





Since
      commencing commercial operations in December 2001, the Company has incurred
      no
      income tax expense on its results from operations due to a six year income
      tax
      holiday received from the Philippine Board of Investments. In 2005, CE Casecnan accrued
      $0.7 million of income taxes on interest earned outside the Philippines. The
      Company’s deferred income tax asset of $5.1 million and $5.4 million as of
      December 31, 2005 and 2004, respectively, consists mainly of the difference
      between the financial reporting basis and the tax reporting basis for
      development and construction costs.





**9.**
            **Related
                Party Transactions**





In
      the
      normal course of business, the Company transacts with its affiliates in the
      form
      of advances for construction related and operating expenses. The payable to
      affiliates was $35.4 million and $35.1 million at December 31, 2005 and
      2004, respectively. Costs incurred by the Company in transactions with related
      parties amounted to $1.4 million, $1.5 million and $2.3 million for the years
      ended December 31, 2005, 2004 and 2003, respectively, and consist primarily
      of
      reimbursement for costs paid by affiliates on behalf of the
      Company.





As
      of
      December 31, 2005 and 2004, the Company had outstanding $51.3 million of
      unsecured subordinated notes payable to CE Casecnan Ltd., a stockholder. On
      November 1, 2005, the Company extended the due date of the notes from November
      15, 2005 to November 1, 2006 and amended the interest rate to 10% per annum,
      effective November 1, 2005. On December 6, 2005, the notes’ original maturity
      date was changed to November 1, 2015 and the interest rate from LIBOR plus
      two
      (2%) percent to LIBOR plus 5.25%; provided, however, that CE Casecnan Ltd.
      can
      demand payment of the outstanding principal amount at any time prior to the
      maturity date. The interest is payable every May 15 and November 15.
      Interest expense on the notes was $2.9 million, $1.8 million and $1.7
      million for the years ended December 31, 2005, 2004 and 2003, respectively.
      Any overdue payment of principal or interest payable on the notes shall increase
      the annual interest by two (2%) percent. At December 31, 2005, the
      effective interest rate on the notes was 9.8%. The notes may be prepaid at
      any
      time without premium or penalty but with accrued interest, if any. The unsecured
      subordinated notes and any and all payments, whether of principal, interest
      or
      otherwise are subject in all respects to the terms of the Subordination
      Agreement dated November 15, 2001 and as amended on November 1, 2005
      between CE Casecnan Ltd. and the Company in favor of the Trustee, the Collateral
      Agent, the co-collateral agent, the Depositary, any party that becomes a
      Permitted Counterparty under an Interest Rate/Currency Protection Agreement,
      and
      any party that becomes a working capital facility agent and any other Person
      that becomes a secured party under the Intercreditor Agreement. The Company
      intends to repay the notes or convert them to some form of capital prior to
      maturity.





**10.**
            **Commitments
                and Contingencies**





Stockholder
      Litigation





Pursuant
      to the share ownership adjustment mechanism in the CE Casecnan stockholder
      agreement, which is based upon proforma financial projections of the Casecnan
      Project prepared following commencement of commercial operations, in February
      2002, MidAmerican’s indirect wholly owned subsidiary,
      CE Casecnan Ltd., advised the minority stockholder of the Company,
      LaPrairie Group Contractors (International) Ltd. (“LPG”), that MidAmerican’s
      indirect ownership interest in CE Casecnan had increased to 100% effective
      from commencement of commercial operations. On July 8, 2002, LPG filed
      a complaint in the Superior Court of the State of California, City and County
      of
      San Francisco against CE Casecnan Ltd., KEIL Casecnan Ltd. (“KE”), a former
      stockholder, and MidAmerican. LPG’s complaint, as amended, seeks
      compensatory and punitive damages arising out of CE Casecnan Ltd.’s and
      MidAmerican’s alleged improper calculation of the proforma financial projections
      and alleged improper settlement of the NIA arbitration (see note 4). The Company
      is not a defendant in the action. On January 21, 2004, CE Casecnan Ltd.,
      LPG and the Company entered into a status quo agreement pursuant to which the
      parties agreed to set aside certain distributions related to the shares subject
      to the LPG dispute and CE Casecnan agreed not to take any further actions with
      respect to such distributions without at least 15 days’ prior notice to LPG.
      Accordingly, 15% of the dividend declarations in 2004 and 2005, totaling
      $17.6 million, was set aside in a separate bank account in the name of the
      Company and is shown as restricted cash and investments and dividends payable
      in
      the accompanying balance sheets. On August 4, 2005, the court issued a
      decision, ruling in favor of LPG on five of the eight disputed issues in the
      first phase of the litigation. On September 12, 2005, LPG filed a motion seeking
      the release of the funds which have been set aside pursuant to the status quo
      agreement referred to above. MidAmerican and CE Casecnan Ltd. filed an
      opposition to the motion on October 3, 2005, and at the hearing on
      October 26, 2005, the court denied LPG’s motion. On January 3, 2006, the
      court entered a judgment in favor of LPG against CE Casecnan Ltd. and KE.
      According to the judgment LPG would retain its ownership of 15% of the shares
      of
      the Company and distributions of the amounts deposited into escrow plus interest
      at 9% per annum. CE Casecnan Ltd. and KE intend to appeal this judgment and
      the
      August 4, 2005 decision. The appeal will be filed by March 3, 2006 and is
      expected to be resolved sometime after the end of 2006.


30


In
      February 2003, San Lorenzo Ruiz Builders and Developers Group, Inc. (“San
      Lorenzo”), an original shareholder substantially all of whose shares in the
      Company were purchased by MidAmerican in 1998, threatened to initiate legal
      action against the Company in the Philippines in connection with certain aspects
      of its option to repurchase such shares. The Company believes that San Lorenzo
      has no valid basis for any claim and, if named as a defendant in any action
      that
      may be commenced by San Lorenzo, the Company will vigorously defend such action.
      On July 1, 2005, MidAmerican and CE Casecnan Ltd. commenced an action
      against San Lorenzo in the District Court of Douglas County, Nebraska, seeking
      a
      declaratory judgment as to MidAmerican’s and CE Casecnan Ltd.'s rights vis-à-vis
      San Lorenzo in respect of such shares. San Lorenzo filed a motion to dismiss
      on
      September 19, 2005. The motion was heard on October 21, 2005, and the court
      took
      the matter under advisement Subsequently, San Lorenzo purported to exercise
      its
      option to repurchase such shares. The impact, if any, on the Company of San
      Lorenzo’s purported exercise of its option and the Nebraska litigation cannot be
      determined at this time.





Concentration
      of Risk





NIA’s
      payments of obligations under the Project Agreement are substantially
      denominated in U.S. Dollars and are the Company’s sole source of operating
      revenues. Because of the Company’s dependence on NIA, any material failure of
      NIA to fulfill its obligations under the Project Agreement and any material
      failure of the ROP to fulfill its obligations under the Performance Undertaking
      would significantly impair the ability of the Company to meet its existing
      and
      future obligations. No stockholders, partners or affiliates of the Company,
      including MidAmerican, and no directors, officers or employees of the Company
      will guarantee or be in any way liable for payment of the Company’s obligations.
      As a result, payment of the Company’s obligations depends upon the availability
      of sufficient revenues from the Company’s business after the payment of
      operating expenses.





Regulatory
      environment





The
      Philippine Congress has passed the Electric
      Power Industry Reform Act of 2001 (“ EPIRA”),
      which is aimed at restructuring the Philippine power industry, privatizing
      the
      Philippine National Power Corporation and introducing a competitive electricity
      market, among other initiatives. The implementation of EPIRA may have an impact
      on the Company’s future operations in the Philippines and the Philippine power
      industry as a whole, the effect of which is not yet determinable or estimable.





On
      December 6, 2004, the Municipality of Alfonso Castaneda (the
“Municipality”), Province of Nueva Vizcaya (the “Province”) passed an ordinance
      which required the submission of a tax clearance from each of the provincial
      treasurer and municipal treasurer as a condition to issuing to CE Casecnan
      the
      annual renewal of its license to operate and business permit. CE Casecnan
      cannot obtain a tax clearance certificate from the Province until real property
      taxes due to the Province are paid. Pursuant to the Supplemental Agreement,
      before paying such real property taxes CE Casecnan must either receive
      direction from NIA and the Philippine Department of Finance (“DOF”) or be
      subject to risk of imminent assessment of penalties for non payment.
      CE Casecnan filed an action in the Regional Trial Court on
      January 21, 2005, against the Municipality and was granted a temporary
      restraining order barring the Municipality from closing the Casecnan Project.
      On
      February 7, 2005, the temporary restraining order was extended until
      the court resolves the petition for an injunction. On May 25, 2005, the
      Province served CE Casecnan a notice of delinquency stating that the assets
      of
      the Casecnan Project located in the Province were scheduled to be sold in a
      public auction on July 26, 2005. CE Casecnan filed a complaint for
      injunction with an application for a temporary restraining order on
      July 11, 2005 against the Province, impleading the DOF and NIA as necessary
      parties, seeking an order enjoining the Province from proceeding with any public
      auction or sale of any Casecnan Project assets. On July 21, 2005, the
      Regional Trial Court denied CE Casecnan’s request for a temporary restraining
      order. On July 25, 2005, CE Casecnan paid the real property taxes, plus
      interest and penalties, due to the Province of approximately $4.5 million
      and submitted an invoice for reimbursement of such amount to NIA in accordance
      with the Supplemental Agreement. On August 1, 2005, CE Casecnan received
      the business license and mayor’s permit from the Municipality. On August 2,
      2005, NIA rejected CE Casecnan’s invoice for reimbursement of the real property
      tax payment to Nueva Vizcaya. On August 12, 2005, CE Casecnan disputed NIA’s
      rejection of the reimbursement as without basis and constituting anticipatory
      breach under the Supplemental Agreement. CE Casecnan invoked Section 20.1 on
      dispute resolution of the Agreement and requested a meeting to resolve the
      dispute. On September 1, 2005, CE Casecnan met with NIA and the DOF to discuss
      the tax reimbursement issue. On January 9, 2006, CE Casecnan received a letter,
      jointly signed by NIA and the DOF, acknowledging their obligation to reimburse
      CE Casecnan for property taxes paid pursuant to the Supplemental Agreement.
      The
      letter further expressed willingness to discuss a possible compromise settlement
      of the real property tax payment to Nueva Vizcaya. CE Casecnan responded in
      writing urging NIA and the DOF to come to a settlement of the taxes prior to
      the
      payment due date on January 23, 2006, to avoid payment of interest under the
      Casecnan Amended and Restated Agreement. On January 24, 2006, NIA, the DOF
      and
      CE Casecnan agreed that NIA will reimburse CE Casecnan in five approximately
      equal installments beginning in February 2006 and ending in December 2006.
      A
      receivable of $4.5 million has been recorded for
      the
      expected full reimbursement to CE Casecnan in respect of the Nueva Vizcaya
      assessment.


31


On
      August 3, 2005, CE Casecnan received a tax assessment of approximately
      $4.5 million in respect of Project property located in the Province of
      Nueva Ecija. CE Casecnan forwarded the tax assessment to NIA and the DOF and
      sought authorization to pay such taxes. On August 8, 2005, NIA instructed CE
      Casecnan in writing to file an appeal before the Local Board of Assessment
      Appeals to dispute the assessment within 60 days from receipt of the tax
      assessment. CE Casecnan filed the appeal on September 30, 2005. On
      December 28, 2005, under threat of imminent assessment of penalties, CE Casecnan
      paid real property taxes of approximately $4.7 million to the Province of Nueva
      Ecija. On December 29, 2005 and January 6, 2006, CE Casecnan received letters
      from NIA and the DOF, respectively, authorizing the payment. A receivable of
      $4.7 million has been recorded for the expected full reimbursement to CE
      Casecnan in respect of the Nueva Ecija tax assessment.





On
      May 24, 2005, President Arroyo signed an amended tax law to raise the
      corporate income tax rate from 32% to 35% through 2008 (reducing to 30%
      thereafter) and impose value-added tax of 10% on certain goods and services.
      The
      law and the Project Agreement permit CE Casecnan to invoice NIA for value-added
      tax on water delivery fees and, if electricity generated from hydro-electric
      power were to become subject to value-added tax, on energy delivery fees as
      well. Implementation of the tax law was deferred until legal challenges were
      resolved. On October 18, 2005, the Philippine Supreme Court upheld the
      constitutionality of the tax law and implementation became effective November
      1,
      2005. The tax law is not expected to have an adverse impact on the Casecnan
      Project.





**11.**
            **Fair
                Value of Financial
                Instruments**





Statement
      of Financial Accounting Standards No. 107, "Disclosures About Fair Value of
      Financial Instruments,” defines the fair value of financial instruments as the
      amount at which the instruments could be exchanged in a current transaction
      between willing parties. Although management uses its best judgment in
      estimating the fair value of these financial instruments, there are inherent
      limitations in any estimation technique. Therefore, the fair value estimates
      presented herein are not necessarily indicative of the amounts that the Company
      could realize in a current transaction.





The
      methods and assumptions used to estimate fair value are as follows:





Cash,
      trade receivable, accounts payable and accrued expenses





The
      carrying amounts reported in the balance sheets approximate fair value due
      to
      the liquidity, the short maturity and nature of such items.





Notes
      payable





The
      Company has outstanding $51.3 million of unsecured subordinated notes payable
      to
      CE Casecnan Ltd., a stockholder, originally due November 15, 2005. On
      November 1, 2005, the Company extended the due date of the notes to November
      1,
      2006 and amended the interest rate to 10% per annum, effective November 1,
      2005.
      On December 6, 2005, the notes’ original maturity date was changed to November
      1, 2015 and the interest rate from LIBOR plus two (2%) percent to LIBOR plus
      5.25%; provided, however, that CE Casecnan Ltd. can demand payment of the
      outstanding principal amount at any time prior to the maturity date. The
      interest is payable every May 15 and November 15. Interest expense on the
      unsecured notes was $2.9 million, $1.8 million and $1.7 million for the years
      ended December 31, 2005, 2004 and 2003, respectively. At December 31,
      2005, the effective interest rate on the notes was 9.72% .
      It is
      not practicable to estimate the fair value of the notes payable for a variety
      of
      reasons, including the absence of quoted market prices for the notes and their
      subordination provisions to the existing senior debt of the
      Company.





Long-term
      debt





The
      fair
      value of the Company’s long-term debt is estimated based on quoted market prices
      of similar types of arrangements .
      At
      December 31, 2005, the Company had fixed-rate long-term debt of $142.3
      million in principal amount and having a fair value of $153.4 million. At
      December 31, 2004, the Company had fixed-rate long-term debt of $197.1
      million in principal amount and having a fair value of $220.0 million. These
      instruments are fixed-rate and, therefore, do not expose the Company to the
      risk
      of earnings loss due to changes in market interest rates. However, the fair
      value of these instruments would decrease by approximately $5.5 million if
      interest rates were to increase by 10% from their levels at December 31,
      2005. In general, such a decrease in fair value would impact earnings and cash
      flows only if the Company were to reacquire all or a portion of these
      instruments prior to their maturity.





32


**12.**
            **Operating
                Lease Rentals and Service
                Income**





The
      following is the minimum lease rentals and service income in the next five
      years
      on the noncancelable operating lease as of December 31, 2005 (in
      thousands):





**Year
                Ended**
              **December 31,**
            
            **Amount**2006
            
            $
            86,1362007
            
            
            88,0532008
            
            
            88,0532009
            
            
            88,0532010
            
            
            88,053





Variable
      lease rentals and service income amounted to $24.9 million in 2005, $26.9
      million in 2004 and $22.0 million in 2003.





33


**Item
                9.**
            **Changes
                in and Disagreements with Accountants on Accounting****and
                Financial Disclosure.**





None.





**Item
                9A.**
            **Controls
                and Procedures.**





An
      evaluation was performed under the supervision and with the participation of
      the
      Company’s management, including the respective persons acting as chief executive
      officer and chief financial officer, regarding the effectiveness of the design
      and operation of the Company’s disclosure controls and procedures (as defined in
      Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as
      amended) as of December 31, 2005. Based on that evaluation, the Company’s
      management, including the respective persons acting as chief executive officer
      and chief financial officer, concluded that the Company’s disclosure controls
      and procedures were effective. There have been no changes during the fourth
      quarter of 2005 in the Company’s internal control over financial reporting that
      have materially affected, or are likely to materially affect, the Company’s
      internal control over financial reporting.





**Item
                9B.**
            **Other
                Information.**





None.





34


**PART
      III**





**Item
                10.**
            **Directors
                and Executive Officers of the
                Registrant.**





The
      following table sets forth the names, ages, and positions of the directors
      and
      executive officers of the Company:





David
                L. Sokol
            
            49
            
            Director
                and ChairmanGregory
                E. Abel
            
            43
            
            Vice
                ChairmanJoseph
                L. Sullivan
            
            51
            
            Director,
                President and General ManagerPatrick
                J. Goodman
            
            39
            
            Director,
                Senior Vice President and Chief Financial OfficerDouglas
                L. Anderson
            
            47
            
            Director,
                Senior Vice President, General Counsel and Assistant
                SecretaryBrian
                K. Hankel
            
            43
            
            Vice
                President and TreasurerScott
                La Prairie
            
            48
            
            DirectorMitchell
                L. Pirnie
            
            47
            
            Vice
                PresidentLinda
                B. Castillo
            
            46
            
            DirectorTrinity
                S. Gatuz
            
            39
            
            DirectorBelinda
                E. Dugan
            
            37
            
            DirectorSuzy
                Lyn A. Bayona
            
            30
            
            Director





Directors
      of the Company are elected annually and hold office until a successor is
      elected. Executive officers are chosen from time to time by vote of the Board
      of
      Directors. Pursuant to the terms of the Stockholders Agreement, CE Casecnan
      Ltd.
      is entitled to elect seven of the directors, and each minority investor is
      entitled to elect one director.





**David
      L. Sokol.** In
      addition to serving as Director and Chairman of the Company, Mr. Sokol has
      been
      Chief Executive Officer of MidAmerican since April 19, 1993 and served as
      President of MidAmerican from April 19, 1993 until January 21, 1995.
      Mr. Sokol has been Chairman of the Board of Directors since May 1994 and a
      director of MidAmerican since March 1991. Formerly, among other positions held
      in the independent power industry, Mr. Sokol served as the President and Chief
      Executive Officer of Kiewit Energy Company, which at that time was a wholly
      owned subsidiary of Peter Kiewit Sons’, Inc. and Ogden Projects,
      Inc.





**Gregory
      E. Abel.** In
      addition to serving as Vice Chairman of the Company, Mr. Abel is President
      and
      Chief Operating Officer of MidAmerican. Mr. Abel joined MidAmerican in 1992.
      Mr.
      Abel is a Chartered Accountant and from 1984 to 1992 was employed by Price
      Waterhouse. As a Manager in the San Francisco office of Price Waterhouse, he
      was
      responsible for clients in the energy industry.





**Joseph
      L. Sullivan.** In
      addition to serving as Director, President and General Manager for the Company,
      Mr. Sullivan is President and General Manager, Philippines for affiliates of
      the
      Company. From 2002 to 2004, Mr. Sullivan served as Executive Vice President
      for
      Operations of Mirant Philippines. From 2001 to 2002, Mr. Sullivan served as
      Station Manager of Mirant Sual Power Corporation. Prior to 2001, he held a
      series of management and engineering positions at Cajun Electric Power
      Cooperative, Inc. and Alabama Power Company.





**Patrick
      J. Goodman.** In
      addition to serving as Director, Senior Vice President and Chief Financial
      Officer for the Company, Mr. Goodman is Senior Vice President and Chief
      Financial Officer for MidAmerican. Mr. Goodman joined MidAmerican in June 1995,
      and served in various accounting positions, including Senior Vice President
      and
      Chief Accounting Officer. Prior to joining MidAmerican, Mr. Goodman was a
      financial manager for National Indemnity Company and a senior associate at
      Coopers & Lybrand LLP.





**Douglas
      L. Anderson.** In
      addition to serving as Director, Senior Vice President, General Counsel and
      Assistant Secretary for the Company, Mr. Anderson is Senior Vice President,
      General Counsel and Corporate Secretary of MidAmerican. Mr. Anderson joined
      MidAmerican in February 1993. Prior to that, Mr. Anderson was in private
      practice.





**Brian
      K. Hankel.** In
      addition to serving as Vice President and Treasurer for the Company, Mr. Hankel
      is Vice President and Treasurer for MidAmerican. Mr. Hankel joined MidAmerican
      in February 1992 as a Treasury Analyst and served in that position to December
      1995. Mr. Hankel was appointed Assistant Treasurer in January 1996 and was
      appointed Treasurer in January
      1997. Prior to joining the Company, Mr. Hankel was a Money Position Analyst
      at
      FirsTier Bank of Lincoln from 1988 to 1992.


35


**Scott
      LaPrairie.** In
      addition to serving as a Director of the Company, Mr. LaPrairie is President
      and
      Chief Executive Officer of the LaPrairie Group of Companies.





**Mitchell
      L. Pirnie** .
      In
      addition to serving as Vice President for the Company, Mr. Pirnie also serves
      as
      Vice President, General Counsel and Director of CE Generation, LLC, an affiliate
      of the Company. Mr. Pirnie joined MidAmerican in November 1997. Prior to joining
      MidAmerican, Mr. Pirnie was an attorney in private practice.





**Linda
      B. Castillo.** In
      addition to serving as a Director of the Company, Ms. Castillo is Corporate
      Counsel for the Company and certain of its affiliates.





**Trinity
      S. Gatuz.** In
      addition to serving as a Director of the Company, Ms. Gatuz is Vice-President
      for Finance and Accounting for the Company and its affiliates.





**Belinda
      E. Dugan** .
      In
      addition to serving as a Director of the Company, Ms. Dugan is Legal Counsel
      for
      the Company and certain of its affiliates.





**Suzy
      Lyn A. Bayona.** In
      addition to serving as a Director of the Company, Ms. Bayona is Senior
      Accountant for the Company and certain of its affiliates.





**Audit
      Committee Matters**





During
      the fiscal year ended December 31, 2005 and as of the date of this Report,
      the Board of Directors had no committees, including any audit committee. The
      Company is not an issuer as defined in the Sarbanes-Oxley Act of 2002, it does
      not have a class of securities listed on any securities exchange, and it is
      not
      required to have an audit committee.





**Code
      of Ethics**





The
      Company has adopted a code of ethics that applies to its principal executive
      officer, its principal financial officer and to certain other covered officers.
      The code of ethics is filed as an exhibit to this Annual Report on Form 10-K.





**Item
                11.**
            **Executive
                Compensation.**





None
      of
      the executive officers or directors of the Company receives compensation from
      the Company for services as officers or directors of the Company. All directors
      are reimbursed for their expenses in attending board and committee
      meetings.





36


**Item
                12.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters.**





**Description
      of Capital Stock**





As
      of
      December 31, 2005, the authorized capital stock of the Company consisted of
      2,148,000 shares of common stock, par value 1.00 Philippine peso ($0.038) per
      share (the “Common Stock”), of which 767,162 shares were outstanding. There is
      no public trading market for the Common Stock. As of December 31, 2005
      there were 11 holders of record of the Common Stock. Holders of Common Stock
      are
      entitled to one vote per share on any matter coming before the stockholders
      for
      a vote.





The
      Trust
      Indenture contains certain restrictions on the payment of dividends with respect
      to the Common Stock.





**Principal
      Stockholders**





The
      following table sets forth information with respect to all persons who own
      beneficially more than 5% of the common stock and by all directors and officers
      of the Company as a group.





**Number
                of****Name
                and Address of Owner**
            
            **Shares
                Owned***
            
            **%
                of Common**1.CE
                Casecnan II, Inc.(1)
            
            537,005
            
            70%(1)2.CE
                Casecnan Ltd.
            
            230,148
            
            30%(2)
                (3)





*
            In
                addition, each director of the Company owns one share in the Company
                as
                required by Philippine law.





(1)
            In
                April 2003, CE Casecnan Ltd., a Bermuda registered corporation assigned
                shares in CE Casecnan to CE Casecnan II, Inc., a Philippine corporation.
                CE Casecnan Ltd and CE Casecnan II, Inc are indirectly owned by
                MidAmerican.




(2)
                Pursuant
                    to the share ownership adjustment mechanism in the CE Casecnan
                    stockholder
                    agreement, which is based upon pro forma financial projections
                    of the
                    Casecnan Project prepared following commencement of commercial
                    operations,
                    in February 2002, MidAmerican’s indirect wholly owned subsidiary CE
                    Casecnan Ltd., advised the minority stockholder of the Company,
                    LPG, that
                    MidAmerican’s indirect ownership interest in CE Casecnan had increased to
                    100% effective from commencement of commercial operations. On
                    July 8,
                    2002, LPG filed a complaint in the Superior Court of the State
                    of
                    California, City and County of San Francisco against CE Casecnan
                    Ltd.,
                    KEIL Casecnan Ltd. (“KE”), a former stockholder, and MidAmerican. The
                    Company is not a defendant in the action. On January 21, 2004, CE
                    Casecnan Ltd., LPG and the Company entered into a status quo
                    agreement
                    pursuant to which the parties agreed to set aside certain distributions
                    related to the shares subject to the LPG dispute and CE Casecnan
                    agreed
                    not to take any further actions with respect to such distributions
                    without
                    at least 15 days’ prior notice to LPG. Accordingly, 15% of the dividend
                    declarations in 2004 and 2005, totaling $17.6 million, was set
                    aside in a
                    separate bank account in the name of the Company and is shown
                    as
                    restricted cash and investments and dividends payable in the
                    accompanying
                    balance sheet at December 31, 2005.On
                    August 4, 2005, the court issued a decision, ruling in favor of LPG
                    on five of the eight disputed issues in the first phase of the
                    litigation.
                    On September 12, 2005, LPG filed a motion seeking the release
                    of the funds
                    which have been set aside pursuant to the status quo agreement
                    referred to
                    above. MidAmerican and CE Casecnan Ltd. filed an opposition to
                    the motion
                    on October 3, 2005, and at the hearing on October 26, 2005, the court
                    denied LPG’s motion. On January 3, 2006, the court entered a judgment in
                    favor of LPG against CE Casecnan Ltd. and KE. According to the
                    judgment LPG would retain its ownership of 15% of the shares
                    of the
                    Company and distributions of the amounts deposited into escrow
                    plus
                    interest at 9% per annum. CE Casecnan Ltd. and KE intend to appeal
                    this
                    judgment and the August 4, 2005 decision. The appeal will be
                    filed by
                    March 3, 2006 and is expected to be resolved sometime after the
                    end of
                    2006.


(3)
              Includes
                  rights to 115,000 shares, which rights were purchased from San
                  Lorenzo
                  Ruiz Builders and Developers Group, Inc.(“San
                  Lorenzo”)in
                  1998. The 115,000 shares are subject to the ownership adjustment
                  mechanism
                  in the Stockholders Agreement discussed in Note 10. San Lorenzo
                  retained
                  an option to repurchase the 115,000 shares, if any, remaining after
                  such
                  ownership adjustment.





37


In
      February 2003, San Lorenzo, an original shareholder substantially all of whose
      shares in the Company were purchased by MidAmerican in 1998, threatened to
      initiate legal action against the Company in the Philippines in connection
      with
      certain aspects of its option to repurchase such shares. The Company believes
      that San Lorenzo has no valid basis for any claim and, if named as a defendant
      in any action that may be commenced by San Lorenzo, the Company will vigorously
      defend such action. On July 1, 2005, MidAmerican and CE Casecnan Ltd.
      commenced an action against San Lorenzo in the District Court of Douglas County,
      Nebraska, seeking a declaratory judgment as to MidAmerican’s and CE Casecnan
      Ltd.'s rights vis-à-vis San Lorenzo in respect of such shares. San Lorenzo filed
      a motion to dismiss on September 19, 2005. The motion was heard on October
      21,
      2005, and the court took the matter under advisement. Subsequently, San Lorenzo
      purported to exercise its option to repurchase such shares. The impact, if
      any,
      on the Company of San Lorenzo’s purported exercise of its option and the
      Nebraska litigation cannot be determined at this time.





**Item
                13.**
            **Certain
                Relationships and Related
                Transactions.**





Not
      applicable.





**Item
                14.**
            **Principal
                Accounting Fees and
                Services.**





Aggregate
      fees billed to CE Casecnan during the fiscal years ending December 31, 2005
      and 2004 by its principal accounting firm, Isla Lipana & Co. formerly
      Joaquin Cunanan & Co. (A PricewaterhouseCoopers Member Firm) are set forth
      below (in thousands). The audit committee of MidAmerican Energy Holdings has
      considered whether the provision of the non-audit services described below
      is
      compatible with maintaining the principal accountant's
      independence.








**Year
                Ended December 31,****2005**
            
            **2004**Audit
                Fees(1)
            
            $
            122
            
            $
            32Audit-Related
                Fees(2)
            
            
            -
            
            
            3Tax
                Fees(3)
            
            
            20
            
            
            31All
                Other Fees(4)
            
            
            -
            
            
            -Total
                aggregate fees billed
            
            $
            142
            
            $
            66





(1) Includes
      the aggregate fees billed for each of the last two fiscal years for professional
      services rendered for the audit of the Company’s financial statements, review of
      financial statements included in the Company’s Form 10-K and 10-Q and for
      services that are normally provided in connection with statutory and regulatory
      filings or engagements for those fiscal years.





(2) Includes
      the aggregate fees billed in each of the last two fiscal years for assurance
      and
      related services that are reasonably related to the performance of the audit
      or
      review of the registrant's financial statements. Services included in this
      category include audits of benefit plans, due diligence for possible
      acquisitions and consultation pertaining to new and proposed accounting and
      regulatory rules.





(3) Includes
      the aggregate fees billed in each of the last two fiscal years for professional
      services rendered for tax compliance, tax advice, and tax planning.





(4) Includes
      the aggregate fees billed in each of the last two fiscal years for products
      and
      services other than the services reported as “Audit Fees,” “Audit-Related Fees”
or “Tax Fees.”








38





**PART
      IV**





**Item
                15.**
            **Exhibits
                and Financial Statement
                Schedules.**





(a)
            Financial
                Statements and Schedules(i)
            Financial
                StatementsFinancial
                Statements are included in Item 8 of this Form 10-K.(ii)
            Financial
                Statement SchedulesSchedules
                not listed above have been omitted because they are either not applicable,
                not required or the information required to be set forth therein
                is
                included in the financial statements or notes thereto.(b)
            ExhibitsThe
                exhibits listed on the accompanying Exhibit Index are filed as part
                of
                this Annual Report.(c)
            Financial
                statements required by Regulation S-X, which are excluded from the
                Annual
                Report by Rule 14a-3(b).Not
                applicable.





39


**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) 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, in the City of Omaha, State of
      Nebraska, on February 8, 2006.








**CE
                CASECNAN WATER AND ENERGY COMPANY, INC.**By:
            /s/
                * Joseph L. SullivanJoseph
                L. SullivanPresident(chief
                executive officer)








Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed by the following persons on behalf of the Registrant and in the
      capacities and on the dates indicated:





Signature
            
            Title
            
            Date/s/
                Joseph L. Sullivan*
            
            Director,President and General Manager
            
            February
                8, 2006Joseph
                L. Sullivan
            
            (Principal
                Executive Officer)/s/
                Patrick J. Goodman*
            
            Director,
                Senior Vice President and Chief Financial Officer
            
            February
                8, 2006Patrick
                J. Goodman
            
            (PrincipalFinancial Officer)/s/
                David L. Sokol
            
            Director
                and Chairman
            
            February
                8, 2006David
                L. Sokol/s/
                Douglas L. Anderson
            
            Director,
                Senior Vice President, General Counsel
            
            February
                8, 2006Douglas
                L. Anderson
            
            andAssistant Secretary/s/
                Linda B. Castillo*
            
            Director
            
            February
                8, 2006Linda
                B. Castillo/s/
                Trinity S. Gatuz
            
            Director
            
            February
                8, 2006Trinity
                S. Gatuz/s/
                Belinda E. Dugan
            
            Director
            
            February
                8, 2006Belinda
                E. Dugan/s/
                Suzy Lyn A. Bayona
            
            Director
            
            February
                8, 2006Suzy
                Lyn A. BayonaScott
                LaPrairie
            
            Director
            
            February
                8, 2006*By:/s/
                Douglas L. AndersonDouglas
                L. AndersonAttorney-in-Fact





40





**EXHIBIT
      INDEX**





Exhibit
                No.3.1
            Articles
                of Incorporation of the Company (incorporated by reference to Exhibit
                3.1
                the Company’s Registration Statement on Form S-4, as amended, dated
                January 25, 1996 (“Form S-4”)).3.2
            By-laws
                of the Company (incorporated by reference to Exhibit 3.2 the Company’s
                Form S-4).4.1(a)
            Trust
                Indenture, dated as of November 27, 1995, between Chemical Trust
                Company of California and the Company (incorporated by reference
                to
                Exhibit 4.1(a) the Company’s Form S-4).4.1(b)
            First
                Supplemental Indenture, dated as of April 10, 1996, between Chemical
                Trust Company of California and the Company (incorporated by reference
                to
                Exhibit 4.1(b) to the Company’s Form S-4).4.2
            Exchange
                and Registration Rights Agreement, dated as of November 27, 1995, by
                and among CS First Boston Corporation, Bear Stearns & Co. Inc., Lehman
                Brothers Inc. and the Company (incorporated by reference to Exhibit
                4.2
                the Company’s Form S-4).4.3
            Collateral
                Agency and Intercreditor Agreement, dated as of November 27, 1995, by
                and among Chemical Trust Company of California, Far East Bank & Trust
                Company and the Company (incorporated by reference to Exhibit 4.3
                the
                Company’s Form S-4).4.4
            Mortgage
                and Security Agreement, dated as of November 10, 1995, by and among
                CE
                Casecnan Ltd., Kiewit Energy International (Bermuda) Ltd., La Prairie
                Group Contractors (International) Ltd., San Lorenzo Ruiz Builders
                and
                Developers Group, Inc., Chemical Trust Company of California, Far
                East
                Bank & Trust Company and the Company (incorporated by reference to
                Exhibit 4.4 the Company’s Form S-4).4.6
            Deposit
                and Disbursement Agreement, dated as of November 27, 1995, by and
                among the Company, Chemical Trust Company of California, Kiewit Energy
                Company and the Company (incorporated by reference to the Company’s Form
                S-4).4.7
            Consent
                of NIA, dated as of November 10, 1995, to the assignment of the
                Amended and Restated Casecnan Project Agreement (incorporated by
                reference
                to Exhibit 4.7 to the Company’s Form S-4).4.8
            Consent
                of the Republic of the Philippines, dated November 10, 1995, to the
                assignment of the Performance Undertaking and the Amended and Restated
                Casecnan Project Agreement (incorporated by reference to Exhibit
                4.8 to
                the Company’s Form S-4).10.1
            Amended
                and Restated Casecnan Project Agreement, dated as of June 26, 1995,
                between the National Irrigation Administration and the Company
                (incorporated by reference to Exhibit 10.1 the Company’s Form
                S-4).10.2
            Performance
                Undertaking, dated as of July 20, 1995, executed by the Secretary of
                Finance on behalf of the Republic of the Philippines (incorporated
                by
                reference to Exhibit 10.2 to the Company’s Form S-4).10.8
            Supplemental
                Agreement between CE Casecnan Water and Energy Company, Inc. and
                the
                Philippines National Irrigation Administration dated as of
                September 29, 2003 (incorporated by reference to Exhibit 99.1 to the
                Company’s Form 8-K dated October 15, 2003).14.1
            CE
                Casecnan Water and Energy Company, Inc. Code of Ethics for Chief
                Executive
                Officer, Chief Financial Officer and Chief Accounting Officer
                (incorporated by reference to Exhibit 14.1 to the Company’s Form 10-K
                dated December 31, 2003).24
            Power
                of Attorney





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31.1
            Chief
                Executive Officer’s Certificate Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            Chief
                Financial Officer’s Certificate Pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            Chief
                Executive Officer’s Certificate Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.32.2
            Chief
                Financial Officer’s Certificate Pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.





42