UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2003

                          Commission File No. 333-89521

                               CE GENERATION, LLC
                               ------------------
             (Exact name of registrant as specified in its charter)

               Delaware                                     47-0818523
    -------------------------------                    -------------------
    (State or other jurisdiction of                     (I.R.S. Employer
    Incorporation or organization)                     Identification No.)

    302 South 36th Street, Suite 400, Omaha, NE               68131
    -------------------------------------------             ---------
     (Address of principal executive offices)               (Zip Code)

       Registrant's telephone number, including area code: (402) 341-4500
                                                           --------------

         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  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 [X]      No [ ]

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 each of the  registrants'  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined by Rule 12b-2 of the Act).
Yes [ ]    No [X]

The members' equity accounts are held 50% by MidAmerican Energy Holdings Company
and 50% by TransAlta USA Inc. as of February 27, 2004.

<PAGE>


3

                                TABLE OF CONTENTS

                                     PART I

Item 1.  Business.............................................................4
Item 2.  Properties..........................................................10
Item 3.  Legal Proceedings...................................................10
Item 4.  Submission of Matters to a Vote of Security Holders.................10

                                  PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder's
           Matters and Issuer Purchases of Equity Securities.................11
Item 6.  Selected Financial Data.............................................11
Item 7.  Management's Discussion and Analysis of Financial Condition and
           Results of Operations.............................................12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..........20
Item 8.  Financial Statements and Supplementary Data.........................21
Item 9.  Changes in and Disagreements with Accountants on Accounting and
           Financial Disclosure..............................................43
Item 9A. Controls and Procedures.............................................43

                                 PART III

Item 10. Directors and Executive Officers of the Registrant..................44
Item 11. Executive Compensation..............................................45
Item 12. Security Ownership of Certain Beneficial Owners and Management and
           Related Stockholder Matters.......................................45
Item 13. Certain Relationships and Related Transactions......................45
Item 14. Principal Accountant Fees and Services..............................46

                                  PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....47
SIGNATURES...................................................................49
EXHIBIT INDEX................................................................50

                                      -2-

<PAGE>

                 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 CE  Generation,  LLC's  intentions,  plans,
expectations  and  beliefs  and are  subject to risks,  uncertainties  and other
factors.  Many of these  factors are outside CE  Generation,  LLC's  control and
could  cause  actual  results  to differ  materially  from such  forward-looking
statements. These factors include, among others:

     o    general economic and business conditions in the jurisdictions in which
          CE Generation, LLC's facilities are located;

     o    the  financial  condition  and  creditworthiness  of  our  significant
          customers and suppliers;

     o    governmental,  statutory,  regulatory or administrative initiatives or
          ratemaking   actions  affecting  CE  Generation,   LLC  or  the  power
          generation industries;

     o    weather effects on sales and revenue;

     o    general industry trends;

     o    increased competition in the power generation industry;

     o    fuel and power costs and availability;

     o    changes in business strategy,  development plans or customer or vendor
          relationships;

     o    availability of qualified personnel;

     o    unscheduled outages or repairs;

     o    financial or regulatory  accounting  principles or policies imposed by
          the  Public  Company   Accounting   Oversight   Board,  the  Financial
          Accounting  Standards  Board  ("FASB"),  the  Securities  and Exchange
          Commission ("SEC") and similar entities with regulatory oversight;

     o    other  risks or  unforeseen  events,  including  wars,  the effects of
          terrorism, embargos and other catastrophic events; and

     o    other business or investment considerations that may be disclosed from
          time to time in SEC filings or in other publicly  disseminated written
          documents.

CE  Generation,  LLC  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.

In this Annual Report references to kW means kilowatts, MW means megawatts,  kWh
means kilowatt hours, MWh means megawatt hours, and MMBtus means million British
thermal units.

                                      -3-
<PAGE>

                                     PART I

ITEM 1. BUSINESS.

GENERAL

CE Generation,  LLC ("CE  Generation" or the "Company"),  is a Delaware  limited
liability  company created by MidAmerican  Energy Holdings  Company  ("MEHC") on
February 8, 1999,  for the sole  purpose of issuing  securities  and holding the
equity investments in certain  subsidiaries.  On March 3, 1999, MEHC sold 50% of
its ownership interest in CE Generation to El Paso CE Generation Holding Company
("El Paso").

On January 29, 2003, El Paso sold all its interest in CE Generation to TransAlta
USA Inc. ("TransAlta"), an affiliate of TransAlta Corporation.

The Company's limited liability company operating  agreement  provides that MEHC
and TransAlta each are entitled to appoint 50% of the directors and are entitled
to 50% of the distributions made by the Company.

CE  Generation  owns all of the common stock  interests  in Magma Power  Company
("Magma"),  FSRI  Holdings,  Inc.  ("FSRI") and  California  Energy  Development
Corporation and their subsidiaries.  Through its subsidiaries,  CE Generation is
primarily engaged in the development, ownership and operation of environmentally
responsible  independent  power  production  facilities  in  the  United  States
utilizing geothermal and natural gas resources.

The  principal  executive  office of CE  Generation is located at 302 South 36th
Street,  Suite 400,  Omaha,  Nebraska  68131 and its  telephone  number is (402)
341-4500.

                                      -4-

<PAGE>

THE PROJECTS

CE Generation  has an aggregate  net ownership  interest of 769 MW of electrical
generating  capacity in power plants in operation  in the United  States,  which
have an aggregate net capacity of 829 MW. Set forth below is a table  describing
certain characteristics of CE Generation's projects as of December 31, 2003:
<TABLE>
<CAPTION>

                                 FACILITY NET                           POWER PURCHASE
                                   CAPACITY     NET MW                     AGREEMENT           POWER
OPERATING PROJECT                  (MW) (1)    OWNED (1)     LOCATION     EXPIRATION        PURCHASER (2)
-----------------                  --------    ---------     --------     ----------    ---------------------
<S>                                   <C>        <C>        <C>             <C>         <C>
GEOTHERMAL FACILITIES:
Salton Sea Projects
Salton Sea I......................     10         10        California       2017              Edison
Salton Sea II.....................     20         20        California       2020              Edison
Salton Sea III....................     50         50        California       2019              Edison
Salton Sea IV.....................     40         40        California       2026              Edison
Salton Sea V......................     49         49        California      Varies            TransAlta
                                      ---        ---
                                                                                        Riverside/Minerals(3)
  Total Salton Sea Projects......     169        169
                                      ---        ---
Partnership Projects
Vulcan............................     34         34        California       2016              Edison
Elmore............................     38         38        California       2018              Edison
Leathers..........................     38         38        California       2019              Edison
Del Ranch.........................     38         38        California       2019              Edison
CE Turbo..........................     10         10        California      Varies      TransAlta/Minerals(3)
                                      ---        ---
Total Partnership Projects........    158        158
                                      ---        ---
Total geothermal facilities.......    327        327
                                      ---        ---

GAS FACILITIES:
Saranac...........................    240        180         New York        2009              NYSE&G
Power Resources (4)...............    212        212           Texas         2005               ONEOK
Yuma..............................     50         50          Arizona        2024               SDG&E
                                      ---        ---
  Total gas facilities...........     502        442
                                      ---        ---
TOTAL OPERATING PROJECTS..........    829        769
                                      ===        ===
</TABLE>

     (1)  Represents  nominal net generating  capability  (contract capacity for
          most). Actual MW may vary depending on operating  conditions and plant
          design. Net MW owned indicates current legal ownership.

     (2)  Southern  California Edison Company ("Edison");  TransAlta;  CalEnergy
          Minerals  LLC   ("Minerals");   the  City  of  Riverside,   California
          ("Riverside");  New York State Electric & Gas Corporation  ("NYSE&G");
          ONEOK Energy,  Marketing and Trading Company, L.P. ("ONEOK");  and San
          Diego Gas & Electric Company ("SDG&E").

     (3)  Each  contract  governing  power  purchases by Minerals will expire 33
          years from the date of the initial power delivery under such contract.
          Pursuant to a Transaction Agreement dated January 29, 2003, Salton Sea
          Power LLC ("Salton  Sea Power")  which owns Salton Sea V, and CE Turbo
          LLC  ("CE  Turbo")  began  selling  available  power to  TransAlta  on
          February 12, 2003 based on  percentages  of the Dow Jones SP-15 Index.
          The Transaction  Agreement shall continue until the earlier of: (a) 30
          days  following  a  written  notice of  termination;  or (b) any other
          termination date mutually agreed to by the parties.  No such notice of
          termination  has been given by either party.  Effective  July 1, 2004,
          Salton Sea Power and CE Turbo will also be selling  the  environmental
          attributes  associated  with up to 931,800 MWh to TransAlta  Marketing
          (US) Inc ("TransAlta Marketing") through December 31, 2008. Salton

                                      -5-
<PAGE>

          Sea Power also entered into a 10-year power sales  agreement for up to
          20 MW with Riverside in May 2003.

     (4)  Power Resources net capacity was 200 MW during operation as a QF under
          the TXU Power Generation Company, LP ("TXU") Power Purchase Agreement,
          which expired September 30, 2003. The net capacity increased to 212 MW
          during operations as an exempt wholesale generator ("EWG"), as defined
          by the Energy Policy Act of 1992,  under the ONEOK  tolling  agreement
          due to the absence of the need to deliver steam to a third party.

GEOTHERMAL FACILITIES

CE Generation  affiliates currently operate ten geothermal plants (the "Imperial
Valley  Projects")  in the  Imperial  Valley  in  California.  The  "Salton  Sea
Projects" consist of the Salton Sea I, Salton Sea II, Salton Sea III, Salton Sea
IV and Salton Sea V Projects  (the  "Salton Sea I  Project",  the "Salton Sea II
Project",  the "Salton Sea III  Project",  the "Salton Sea IV Project",  and the
"Salton Sea V Project" respectively).  The "Partnership Projects" consist of the
Vulcan, Elmore, Leathers, Del Ranch and CE Turbo projects (the "Vulcan Project",
the "Elmore Project",  the "Leathers Project",  the "Del Ranch Project", and the
"CE Turbo Project", respectively).

Each of the Imperial  Valley  Projects,  excluding the Salton Sea V and CE Turbo
Projects,  sells electricity to Edison pursuant to a separate Standard Offer No.
4 Agreement ("SO4  Agreement") or a negotiated  power purchase  agreement.  Each
power  purchase  agreement is  independent  of the others,  and the  performance
requirements specified within one such agreement apply only to the project which
is subject to the agreement.  The power purchase agreements provide for capacity
payments,  capacity  bonus  payments,  and energy  payments.  Edison makes fixed
annual capacity payments and capacity bonus payments to the applicable  projects
to the extent that capacity  factors  exceed certain  benchmarks.  The price for
capacity  was  fixed  for the life of the SO4  Agreements  and is  significantly
higher in the months of June through September.

Energy payments under the Imperial Valley Projects SO4 Agreements, excluding the
Salton Sea IV Project,  were at  increasing  fixed rates for the first ten years
after firm  operation  and  thereafter  at a rate based on the cost that  Edison
avoids by  purchasing  energy from the project  instead of obtaining  the energy
from other  sources  ("Edison's  Avoided Cost of Energy").  In June and November
2001,  the Imperial  Valley  Projects  which  receive  Edison's  Avoided Cost of
Energy,  entered into  agreements that provide for amended energy payments under
the SO4 Agreements.  The amendments provide for fixed energy payments per kWh in
lieu of Edison's Avoided Cost of Energy. The fixed energy payment was 3.25 cents
per kWh from  December 1, 2001 through  April 30, 2002 and is 5.37 cents per kWh
commencing May 1, 2002 for a five-year  period.  Following the five-year period,
the energy payments revert back to Edison's Avoided Cost of Energy.

For the years ended  December 31, 2003,  2002 and 2001,  respectively,  Edison's
Average  Avoided Cost of Energy was 5.4 cents per kWh, 3.5 cents per kWh and 7.4
cents per kWh, respectively. Estimates of Edison's future Avoided Cost of Energy
vary substantially from year-to-year based primarily on the future cost of gas.

The Salton Sea I Project  contracts to sell  electricity to Edison pursuant to a
30-year  negotiated  power purchase  agreement,  which commenced on July 1, 1987
(the "Salton Sea I PPA"). The contract capacity and contract  nameplate are each
10 MW. The capacity  payment is based on the firm capacity price,  which adjusts
quarterly  based on a basket of energy  indices for the term of the Salton Sea I
PPA and is currently $158.71 per kW-year. The capacity payment was approximately
$1.5  million in 2003.  The  energy  payment  is  calculated  using a Base Price
(defined as the initial  value of the energy  payment (4.7 cents per kWh for the
second quarter of 1992)),  which is subject to quarterly  adjustments based on a
basket of energy indices.  The time period  weighted  average energy payment for
Salton Sea I was 6.1 cents per kWh during 2003.

The Salton Sea II Project  contracts to sell electricity to Edison pursuant to a
30-year  modified SO4 Agreement  that  commenced on April 5, 1990.  The contract
capacity and contract  nameplate are 15 MW (16.5 MW during

                                      -6-
<PAGE>

on-peak periods) and 20 MW,  respectively.  The price for contract  capacity and
contract  capacity  bonus  payments  is fixed for the life of the  modified  SO4
Agreement. Pursuant to the SO4 Agreements, the maximum annual capacity and bonus
payments are approximately  $3.3 million.  Edison is entitled to receive,  at no
cost, 5% of all energy  delivered in excess of 80% of contract  capacity through
September 30, 2004.

The Salton Sea III Project contracts to sell electricity to Edison pursuant to a
30-year modified SO4 Agreement that commenced on February 13, 1989. The contract
capacity and contract nameplate are 47.5 MW and 49.8 MW, respectively. The price
for contract  capacity payments and capacity bonus payments is fixed at $175 per
kW per year.  Pursuant to the SO4  Agreements,  the maximum annual  capacity and
bonus payments are approximately $9.7 million.

The Salton Sea IV Project  contracts to sell electricity to Edison pursuant to a
modified SO4 Agreement which provides for contract capacity payments on 40 MW of
capacity at two  different  rates based on the  respective  contract  capacities
deemed  attributable  to the original Salton Sea I PPA option (20 MW) and to the
original Salton Sea IV SO4 Agreement (14 MW). The capacity payment price for the
20 MW portion adjusts  quarterly  based upon specified  indices and the capacity
payment price for the 14 MW portion is a fixed  levelized rate. The capacity and
bonus  payments in 2003,  2002 and 2001 were  approximately  $3.9 million,  $5.5
million and $5.7 million, respectively. The energy payment (for deliveries up to
a rate of 39.6 MW) is at a base price,  adjusted  quarterly  based on  specified
indices,  for 55.6% of the total  energy  delivered by the Salton Sea IV Project
and is based on an  energy  payment  schedule  for  44.4%  of the  total  energy
delivered  by the Salton Sea IV Project.  The  contract  has a 30-year  term but
Edison is not required to purchase  the 20 MW of capacity and energy  originally
attributable  to the Salton Sea I PPA  option  after  September  30,  2017,  the
original termination date of the Salton Sea I PPA.

On May 20, 2003, Salton Sea Power, LLC ("Salton Sea Power") entered into a Power
Sales  Agreement with  Riverside.  Under the terms of the agreement,  Salton Sea
Power  sells up to 20 MW of energy  generated  from the  Salton Sea V Project to
Riverside  at 6.1 cents per kWh.  Pursuant to a 33-year  power sales  agreement,
sales under the  agreement  commenced  June 1, 2003 and will  terminate  May 31,
2013. The Salton Sea V Project sells a portion of its net output to Minerals for
its full electrical energy  requirements,  currently  estimated to be 19 MW. The
agreement  provides for energy  payments based on the market rates  available to
the Salton Sea V Project,  adjusted for wheeling costs. The Salton Sea V Project
sells  its  remaining  output  under  the  TransAlta  Transaction  Agreement  as
described below.

Commencing January 17, 2001, Salton Sea Power and CE Turbo entered into a series
of transaction  agreements to sell available  power from the Salton Sea V and CE
Turbo Projects to El Paso based on day ahead price quotes  received from El Paso
under the original  agreement  and based on  percentages  of the Dow Jones SP-15
Index thereafter.  Pursuant to a Transaction Agreement  ("TransAlta  Transaction
Agreement")  dated January 29, 2003, Salton Sea Power and CE Turbo began selling
available  power to TransAlta on February 12, 2003 based on  percentages  of the
Dow Jones SP-15  Index.  The  Transaction  Agreement  shall  continue  until the
earlier of: (a) 30 days  following a written notice of  termination;  or (b) any
other  termination  date  mutually  agreed to by the parties.  No such notice of
termination has been given by either party.

The Vulcan Project  contracts to sell  electricity to Edison under a 30-year SO4
Agreement that commenced on February 10, 1986. The Vulcan Project has a contract
capacity and contract nameplate of 29.5 MW and 34 MW, respectively.  Pursuant to
the  SO4  Agreements,  the  maximum  annual  capacity  and  bonus  payments  are
approximately $5.5 million.

The Elmore Project  contracts to sell  electricity to Edison under a 30-year SO4
Agreement that commenced on January 1, 1989. The contract  capacity and contract
nameplate are 34 MW and 38 MW, respectively. Pursuant to the SO4 Agreements, the
maximum annual capacity and bonus payments are approximately $7.9 million.

The Leathers  Project  contracts  to sell  electricity  to Edison  pursuant to a
30-year SO4 Agreement that  commenced on January 1, 1990. The contract  capacity
and contract  nameplate are 34 MW and 38 MW,  respectively.  Pursuant to the SO4
Agreements,  the maximum annual  capacity and bonus  payments are  approximately
$7.5 million.
                                      -7-
<PAGE>

The Del Ranch Project  contracts to sell  electricity  to Edison under a 30-year
SO4  Agreement  that  commenced on January 2, 1989.  The  contract  capacity and
contract  nameplate  are  34 MW and 38 MW,  respectively.  Pursuant  to the  SO4
Agreements,  the maximum annual  capacity and bonus  payments are  approximately
$7.9 million.

The CE Turbo Project sells its available  power under the TransAlta  Transaction
Agreement.  The CE Turbo Project may sell its output to Minerals,  pursuant to a
33-year power purchase  agreement.  The agreement  provides for energy  payments
based on the  market  rates  available  to the CE Turbo  Project,  adjusted  for
wheeling costs.

The  Imperial  Valley  Projects,  other than the  Salton Sea I Project,  receive
transmission   service  from  the  Imperial   Irrigation   District  to  deliver
electricity to Edison near Mirage,  California.  These projects pay a rate based
on the Imperial Irrigation District's cost of service, which was $1.78 per month
per  kW  of  service  provided  for  2003  and  is  recalculated  annually.  The
transmission  service  and  interconnection  agreements  expire  in 2015 for the
Partnership  Projects,  2019 for the Salton Sea III Project, 2020 for the Salton
Sea II Project and 2026 for the Salton Sea IV  Project.  The Salton Sea V and CE
Turbo Projects have entered into 30-year  agreements with similar terms with the
Imperial Irrigation District. The Salton Sea I Project delivers energy to Edison
at the project site and has no transmission  service agreement with the Imperial
Irrigation District.

GAS FACILITIES

CE Generation  affiliates currently operate three gas fired facilities (the "Gas
Projects")  located in New York,  Arizona and Texas. The Gas Projects consist of
the "Saranac Project",  the "Power Resources  Project",  and the "Yuma Project",
respectively.

The  Saranac  Project is a 240 net MW natural  gas-fired  cogeneration  facility
located in Plattsburgh, New York, which began commercial operation in June 1994.
The Saranac  Project has entered into a 15-year power  purchase  agreement  (the
"Saranac PPA") with NYSE&G.  The Saranac  Project has entered into 15-year steam
purchase   agreements   (the   "Saranac   Steam   Purchase   Agreements")   with
Georgia-Pacific  Corporation and Pactiv  Corporation.  The Saranac Project has a
15-year  natural gas supply contract (the "Saranac Gas Supply  Agreement")  with
Coral Energy to supply 100% of the Saranac  Project's fuel  requirements.  Coral
Energy  is  responsible  for  production  and  delivery  of  natural  gas to the
U.S.-Canadian  border;  the gas is then  transported  by the North  Country  Gas
Pipeline  Corporation  ("NCGP") the  remaining 22 miles to the plant.  NCGP is a
wholly-owned   subsidiary  of  Saranac  Power   Partners,   L.P.  (the  "Saranac
Partnership")  and the Saranac  Partnership also owns the Saranac Project.  NCGP
also  transports  gas for NYSE&G and  Georgia-Pacific  Corporation.  Each of the
Saranac PPA, the Saranac Steam  Purchase  Agreements  and the Saranac Gas Supply
Agreement  contains rates that are fixed for the respective  contract terms. The
2003  Saranac  PPA rates  escalate at a higher  percentage  than the Saranac Gas
Supply  Agreement  rates.  The  Saranac   Partnership  is  indirectly  owned  by
subsidiaries of CE Generation,  ArcLight  Capital  Holdings and General Electric
Capital Corporation.

The Power Resources Project, a 212 net MW natural gas-fired cogeneration project
owned by Power Resources,  Ltd. ("Power  Resources"),  an indirect  wholly-owned
subsidiary of CE  Generation,  sold  electricity  to TXU as a QF,  pursuant to a
15-year  negotiated power purchase  agreement (the "Power Resources PPA"), which
provided for capacity and energy payments.  The contractual capacity payments in
2003,  2002,  and 2001 were $3.7  million,  $3.6  million,  and $3.5 million per
month,  respectively.  The average energy payments in 2003,  2002, and 2001 were
3.6, 3.5, and 3.4 cents per kWh,  respectively.  The Power Resources PPA expired
September  30,  2003.  The Power  Resources  Project  sold steam to ALON USA, LP
("ALON") under a 15-year agreement that also expired September 30, 2003.

On August 5, 2003, Power Resources  entered into a Tolling Agreement with ONEOK.
The agreement commenced October 1, 2003 and expires December 31, 2005. Under the
terms of the agreement,  Power  Resources  sells its electricity and capacity to
ONEOK,  as an  EWG  for  $1.75  per  kW-month  plus  a  variable  operating  and
maintenance fee of $.50 per MWh. In addition, ONEOK pays annual turbine start-up
costs in an amount equal to the greater of (i) $3,643 per turbine start-up, (ii)
$939,986 or (iii) $140 per hour of operation during the contract year.

                                      -8-
<PAGE>

The Yuma Project is a 50 net MW natural gas-fired  cogeneration project in Yuma,
Arizona  providing 50 MW of electricity to SDG&E under an existing 30-year power
purchase  contract  ("Yuma PPA")  commencing in May 1994.  The energy is sold at
SDG&E's  Avoided  Cost of Energy  and the  capacity  is sold to SDG&E at a fixed
price for the life of the Yuma PPA. For the years ended December 31, 2003,  2002
and 2001,  SDG&E's  Average  Avoided  Cost of Energy was 6.0 cents per kWh,  4.1
cents per kWh and 7.8 cents per kWh,  respectively.  The maximum annual capacity
payments  are  approximately  $8.4  million.  The power is wheeled to SDG&E over
transmission lines constructed and owned by Arizona Public Service Company.  The
project entity, Yuma Cogeneration  Associates ("YCA"),  has executed steam sales
contracts  with  Queen  Carpet,  Inc.  to act as its  thermal  host.  Since  the
industrial  entity has the right under its  agreement to terminate the agreement
upon one year's  notice if a change in its  technology  eliminates  its need for
steam,  and in any case to terminate  the agreement at any time upon three years
notice, there can be no assurance that the Yuma Project will maintain its status
as a QF.  However,  if the  industrial  entity  terminates  the  agreement,  YCA
anticipates that it will be able to locate an alternative  thermal host in order
to  maintain  its  status  as a QF. A  natural  gas  supply  and  transportation
agreement has been executed with  Southwest Gas  Corporation,  terminable  under
certain circumstances by YCA and Southwest Gas Corporation.

INSURANCE

The Company currently possess property, business interruption,  catastrophic and
general liability  insurance.  There can be no assurance that such comprehensive
insurance  coverage will be available in the future at  commercially  reasonable
costs or terms or that the  amounts for which the Company has or will be insured
will cover all potential losses.

Because  geothermally active areas such as the area in which the Imperial Valley
Projects are located are subject to frequent low-level seismic disturbances, and
serious seismic disturbances are possible, the power generating plants and other
facilities  at these  projects are  designed  and built to withstand  relatively
significant levels of seismic disturbance.  However,  there is no assurance that
seismic disturbances of a nature and magnitude so as to cause material damage to
the  projects  or  gathering  systems or a material  change in the nature of the
geothermal  resource  will not occur,  that  insurance  with  respect to seismic
disturbances  will be maintained  by or on behalf of all of the  projects,  that
insurance proceeds will be adequate to cover all potential losses sustained,  or
that insurance  will continue to be available in the future in amounts  adequate
to insure against such seismic disturbances.

REGULATORY AND ENVIRONMENTAL MATTERS

The  Company  is  subject  to a number  of  environmental  laws and  regulations
affecting  many aspects of their  present and future  operations,  including the
disposal of various  forms of  materials  resulting  from  geothermal  reservoir
production  and  the  drilling  and  operation  of  new  wells.  Such  laws  and
regulations  generally  require  the  Company to obtain  and comply  with a wide
variety of  licenses,  permits  and other  approvals.  In  addition,  regulatory
compliance for the construction of new facilities is a costly and time-consuming
process,  and  intricate  and rapidly  changing  environmental  regulations  may
require  major  expenditures  for  permitting  and create the risk of  expensive
delays or material  impairment of project value if projects  cannot  function as
planned due to changing regulatory requirements or local opposition. The Company
also remains  subject to a varied and complex body of  environmental  and energy
regulations  that both  public  officials  and private  individuals  may seek to
enforce. There can be no assurance that existing regulations will not be revised
or that new regulations will not be adopted or become  applicable to the Company
which  could  have an  adverse  impact on its  operations.  In  particular,  the
independent  power  market in the United  States is  dependent  on the  existing
energy regulatory  structure,  including the Public Utility Regulatory  Policies
Act of 1978 and its implementation by utility commissions in the various states.
The structure of such federal and state energy  regulations has in the past, and
may in the  future,  be the  subject of  various  challenges  and  restructuring
proposals by utilities and other industry  participants.  The  implementation of
regulatory changes in response to such challenges or restructuring proposals, or
otherwise imposing more comprehensive or stringent  requirements on the Company,
which would result in increased  compliance  costs could have a material adverse
effect on the Company's results of operations.

EMPLOYEES

Employees necessary for the operation of the CE Generation projects are provided
by CalEnergy Operating  Corporation  ("CEOC") and Falcon Power Operating Company
("FPOC"),   indirect   subsidiaries  of  CE  Generation,   under  operation  and
maintenance agreements.  As of December 31, 2003, CEOC and FPOC employed 235 and
57 people full-time, respectively.
                                      -9-
<PAGE>

ITEM 2. PROPERTIES.

The Company's most significant  physical  properties are its current interest in
operating  power  facilities  and its related real property  interests.  The gas
fired  generating  facilities  are  located  on  land  leased  or  owned  by the
respective   project   companies.   The  Company   maintains   an  inventory  of
approximately  26,000 acres of geothermal property leases in the Salton Sea area
to support the Imperial Valley Projects.  The Company,  as lessee,  pays certain
royalties  and other  fees to the  property  owners and other  royalty  interest
holders from the revenue generated by the Imperial Valley Projects.  The Company
also has interests in other  geothermal  property  leases which are unrelated to
its current operating power  facilities.  Certain of the producing acreage owned
by Magma is  leased to  Mammoth-Pacific  as owner and  operator  of the  Mammoth
Plants,  and Magma,  as lessor,  receives  royalties from the revenues earned by
such power plants.

Lessors  and  royalty  holders  are  generally  paid a monthly or annual  rental
payment during the term of the lease or mineral  interest,  unless and until the
acreage goes into  production,  in which case the rental typically stops and the
(generally  higher)  royalty  payments  begin.  Leases of federal  property  are
transacted with the Department of Interior, Bureau of Land Management,  pursuant
to standard geothermal leases under the Geothermal Steam Act and the regulations
promulgated  thereunder  (the  "Regulations"),  and are for a primary term of 10
years,  extendible for an additional 5 years if drilling is commenced within the
primary term and is  diligently  pursued for two  successive 5 year periods upon
certain  conditions  set forth in the  Regulations.  A  secondary  term of up to
40-years is  available  so long as  geothermal  resources  from the property are
being produced or used in commercial quantities.  Leases of state lands may vary
in form.  Leases of  private  lands vary  considerably,  since  their  terms and
provisions are the product of negotiations with the landowners.

ITEM 3. LEGAL PROCEEDINGS.

Edison and the California Power Exchange
----------------------------------------

Due to reduced  liquidity,  Southern  California  Edison Company  ("Edison") had
failed  to  pay  approximately  $119  million  owed  under  the  power  purchase
agreements with the Imperial Valley Projects  (excluding the Salton Sea V and CE
Turbo  Projects)  for power  delivered in the fourth  quarter 2000 and the first
quarter  2001.  Due to  Edison's  failure to pay  contractual  obligations,  the
Imperial Valley Projects  (excluding the Salton Sea V and CE Turbo Projects) had
established an allowance for doubtful  accounts of approximately  $21 million as
of December 31, 2001.

Pursuant to a  settlement  agreement,  the final  payment by Edison for past due
balances was received March 1, 2002.  Following the receipt of Edison's  payment
of past due  balances,  the Imperial  Valley  Projects  released  the  remaining
allowance for doubtful accounts.

Edison has disputed a portion of the settlement  agreement and has failed to pay
approximately  $3.9  million of  capacity  bonus  payments  for the months  from
October  2001  through May 2002.  On December  10,  2001,  the  Imperial  Valley
Projects  (excluding the Salton Sea I, Salton Sea V and CE Turbo Projects) filed
a lawsuit against Edison in California's  Imperial County Superior Court seeking
a court order  requiring  Edison to make the required  capacity  bonus  payments
under  the Power  Purchase  Agreements.  Due to  Edison's  failure  to pay these
contractual  obligations,  the Imperial Valley Projects established an allowance
for doubtful accounts of approximately  $2.7 million as of December 31, 2002. In
connection with the June 11, 2003 settlement  discussed  below,  the receivables
associated with this allowance were written off during 2003.

On March 25,  2002,  Salton Sea II's 10 MW turbine went out of service due to an
uncontrollable  force event. Such  uncontrollable  force event ended, and Salton
Sea II returned to service, on December 17, 2002. Edison failed to recognize the
uncontrollable  force  event and as such did not pay amounts  otherwise  due and
owing and  improperly  derated  Salton  Sea II from 15 MW to 12.5 MW,  under the
Salton Sea II Power Purchase  Agreement.  On January 29, 2003,  Salton Sea Power
Generation,  L.P., owner of Salton Sea II, served a complaint on Edison for such
unpaid amounts and to rescind such deration.

On June 11, 2003,  the Imperial  Valley  Projects  (excluding  the Salton Sea I,
Salton Sea V and CE Turbo  Projects)  entered into a settlement  agreement  with
Edison.  The settlement,  which relates to the capacity bonus payment and Salton
Sea II uncontrollable force event disputes,  provides for an $800,000 settlement
payment  from  Edison,  payment of amounts  previously  withheld for the Unit II
deration and the recission of such deration. The amounts previously withheld for
the Unit II deration were received in the second  quarter of 2003.  The $800,000
settlement  payment  is  contingent  upon  approval  by  the  California  Public
Utilities Commission.

On July 10,  2003,  Salton Sea IV's 40 MW turbine  went out of service due to an
uncontrollable  force event. Such  uncontrollable  force event ended, and Salton
Sea IV returned to service on September 17, 2003. Edison failed to recognize the
uncontrollable  force event and as such has not paid amounts  otherwise  due and
owing under the Salton Sea IV Power  Purchase  Agreement  totaling $2.3 million.
Salton Sea Power Generation, L.P., with Fish Lake Power Company, owner of Salton
Sea IV, served notices of error on Edison for such unpaid amounts.  As a result,
the Company  established  reserves of $1.7 million for  capacity  payments as of
December 31, 2003.

On October 9, 2003, Salton Sea III's 50 MW turbine went out of service due to an
uncontrollable force event. Such uncontrollable force event ended and Salton Sea
III  returned to service on December 12, 2003.  Edison  failed to recognize  the
uncontrollable  force event and as such has not paid amounts  otherwise  due and
owing under the Salton Sea III Power Purchase  Agreement  totaling $0.7 million.
Salton Sea Power  Generation,  L.P.,  owner of Salton Sea III,  served notice of
error on Edison  for such  unpaid  amounts.  As a result the  Company  has fully
reserved for this balance as of December 31, 2003.

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

Not Applicable.
                                      -10-
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER'S MATTERS AND
        ISSUER PURCHASES OF EQUITY SECURITIES.

Not applicable.

ITEM 6. SELECTED FINANCIAL DATA.

                      SELECTED CONSOLIDATED FINANCIAL DATA
                             (Amounts in thousands)

The  selected  data  presented  below are derived from CE  Generation's  audited
consolidated financial statements. The consolidated financial statements reflect
the  consolidated  financial  statements  of Magma and  subsidiaries  (excluding
wholly-owned  subsidiaries  retained  by  MEHC in 1999  when CE  Generation  was
formed),  FSRI and  subsidiaries  and YCA, each a wholly-owned  subsidiary of CE
Generation.  The  consolidated  financial  statements  present  CE  Generation's
financial  position,  results of  operations  and cash flows as if CE Generation
were a separate legal entity for all periods presented.
<TABLE>
<CAPTION>

                                                                     YEAR ENDED DECEMBER 31,
                                             -----------------------------------------------------------------------
                                                 2003           2002           2001         2000 (1)         1999
                                             -----------     ----------    -----------     ----------    -----------
<S>                                          <C>             <C>           <C>             <C>           <C>
STATEMENT OF OPERATIONS DATA:
Total revenue ...........................    $   487,422     $  510,082    $   565,838     $  510,796    $  340,683
Income before minority interest and
  cumulative effect of change in
  accounting principle ..................         58,188         79,071         89,812         73,535        44,492
Cumulative effect of change in
  accounting principle, net of tax (2) ..         (2,467)             -        (15,386)             -             -
Net income ..............................         34,874         58,314         58,808         73,535        44,492

BALANCE SHEET DATA:
Total assets ............................    $ 1,708,742     $1,865,036    $ 1,932,119     $1,984,445    $1,725,411
Project loans, including current portion         122,573        163,142        199,006        230,221        76,261
Salton Sea notes and bonds, including
  current portion .......................        463,592        491,678        520,250        543,908       568,980
Senior Secured Bonds, including current
  portion ...............................        338,400        356,400        377,000        389,600       400,000
Members' equity .........................        418,885        489,895        467,377        438,915       392,280
</TABLE>

     (1)  Reflects  full  consolidation  of  the  Saranac  Project,   which  was
          previously  accounted  for as an equity  investment.  The 2000 results
          also  reflect  the  addition  of the  Salton  Sea  Unit V and CE Turbo
          Projects, which commenced operations in 2000.

     (2)  The  cumulative  effect  of  change in  accounting  principle  in 2003
          reflects  a  January  1,  2003  adoption  of  Statement  of  Financial
          Accounting   Standards   ("SFAS")  No.  143,   "Accounting  for  Asset
          Retirement  Obligations" ("SFAS 143"). The cumulative effect of change
          in accounting  principle in 2001 reflects a January 1, 2001  write-off
          of prepaid and accrued  balances  associated with the change in policy
          for accounting for major maintenance, overhauls and well workovers.
          See Note 2 to the Consolidated Financial Statements.

                                      -11-
<PAGE>

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

The following  discussion and analysis  should be read in  conjunction  with the
selected consolidated  financial data and the consolidated  financial statements
included in Items 6 and 8 herein.

EXECUTIVE SUMMARY

Significant items impacting the 2003 financial results of CE Generation were the
expiration of the TXU contract with Power Resources and decreased  production at
the Salton Sea III and IV Project plants due to  uncontrollable  force events in
2003. Significant items impacting the 2002 financial results were the collection
of the  majority  of the  amounts  in  dispute  with  Edison  and the  favorable
resolution of income tax matters. The 2001 results reflect higher revenue due to
higher prices at the Imperial Valley and Yuma Projects,  partially  offset by an
asset  impairment in 2001  reflecting the write-off of the book value of a steam
turbine held in storage,  and the cumulative  effect of the change in accounting
principle in 2001 reflecting the Company's  change in its accounting  policy for
major maintenance, overhaul and well workover costs.

The capacity factor for a particular project is determined by dividing the total
quantity of  electricity  sold by the product of the project's  capacity and the
total hours in the year.  At December  31, 2003,  the  capacity  factors for the
Salton Sea I Project,  Salton Sea II Project, Salton Sea III Project, Salton Sea
IV Project,  and Salton Sea V Project  plants are based on  capacity  amounts of
approximately 10, 20, 50, 40, and 49 net MW, respectively. At December 31, 2003,
the capacity factors for the Vulcan Project,  Elmore Project,  Leathers Project,
Del Ranch Project,  and CE Turbo Project plants are based on capacity amounts of
approximately 34, 38, 38, 38 and 10 net MW, respectively.  At December 31, 2003,
the capacity factors for the Saranac Project,  Power Resources  Project and Yuma
Project plants are based on capacity  amounts of  approximately  240, 212 and 50
MW,  respectively.  Each plant possesses an operating  margin,  which allows for
production in excess of the amount listed above.  Utilization  of this operating
margin is based upon a variety of factors and can be expected to vary throughout
the year under normal operating  conditions.  The amount of revenues received by
these  projects  is affected by the extent to which they are able to operate and
generate  electricity.  Accordingly,  the capacity and capacity  factor  figures
provide  information  on  operating  performance  that has affected the revenues
received by these projects.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 2003 AND 2002

Operating revenue decreased $17.3 million or 3.5% to $483.4 million for the year
ended  December  31, 2003 from $500.7  million for the same period in 2002.  The
decrease  reflects  $44.9  million  in  lower  revenue  in 2003  from  decreased
production  at both the  Imperial  Valley  Projects and the Gas  Projects,  as a
result of contract  curtailments,  scheduled  maintenance,  uncontrollable force
events and the  expiration of the TXU contract at Power  Resources and the $21.0
million  favorable  adjustment  to the Edison  provision at the Imperial  Valley
Projects in the first  quarter of 2002  partially  offset by  increases of $30.1
million due to higher  energy  rates at the Imperial  Valley  Projects and $18.4
million due to increased energy rates at the Gas Projects in 2003.

The following  operating data represents the aggregate  capacity and electricity
production of the Imperial Valley Projects:

                                                   2003             2002
                                                ---------        ---------

    Overall capacity factor .............           84.56%           89.60%
    MWh produced ........................       2,417,700        2,561,800
    Capacity (net MW)(weighted average)..           326.4            326.4

                                      -12-
<PAGE>

The decrease in capacity and  production in 2003 are primarily the result of the
uncontrollable force events at the Salton Sea III and Salton Sea IV Projects. On
July 10, 2003, the Salton Sea IV Project's 40 MW turbine went out of service due
to an uncontrollable force event. Such uncontrollable force event ended, and the
Salton Sea IV Project  plant  returned  to service on  September  17,  2003.  On
October 9, 2003,  the Salton Sea III Project's 50 MW turbine went out of service
due to an uncontrollable  force event. Such uncontrollable force event ended and
the Salton Sea III Project's plant returned to service on December 12, 2003.

The following  operating data represents the aggregate  capacity and electricity
production of the Gas Projects:

                                                   2003             2002
                                                ---------        ---------

    Overall capacity factor .............           77.91%           92.35%
    MWh produced ........................       3,364,479        3,963,818
    Capacity (net MW)(weighted average)..           493.0            490.0

The decrease in production and capacity factors in 2003 are primarily the result
of the expiration of Power Resources' contract with TXU in September 2003.

Interest  and other income  decreased  $5.4 million to $4.0 million for the year
ended  December 31, 2003 from $9.4 million for the same period in 2002 primarily
due to the interest  earned in 2002 on past due Edison amounts and Salton Sea II
Project business interruption revenue.

Fuel  expenses  decreased  $3.4  million  to $118.3  million  for the year ended
December 31, 2003 from $121.7  million for the same period in 2002. The decrease
reflects $11.4 million in lower fuel costs in 2003 from decreased  production at
the Gas Projects,  as a result of contract  curtailments,  scheduled maintenance
and the expiration of the TXU contract at Power Resources partially offset by an
$8.0 million increase due to higher fuel prices at the Gas Projects in 2003.

Plant operating  expenses,  which include operating,  maintenance,  resource and
other plant operating expenses, decreased $4.3 million to $129.8 million for the
year ended  December  31, 2003 from $134.1  million for the same period in 2002.
The decrease was  primarily  due to the $7.6  million  settlement  of a warranty
claim  with Stone &  Webster,  Inc.  ("Stone &  Webster"),  partially  offset by
increased major maintenance outages at the Gas Projects in 2003.

General and  administrative  expenses decreased $2.5 million to $4.4 million for
the year ended  December 31, 2003 from $6.9 million for the same period in 2002.
These costs include  administrative  services  including  executive,  financial,
legal,  tax and other  corporate  functions.  The  decrease in 2003 was due to a
reduction in legal costs related to disputes with Edison.

Depreciation  and  amortization  increased $5.6 million to $87.7 million for the
year ended December 31, 2003 from $82.1 million for the same period in 2002. The
increase was primarily due to a change in salvage  values used at the Salton Sea
Projects.

Interest  expense  decreased  $7.3  million to $69.4  million for the year ended
December 31, 2003 from $76.7  million for the same period in 2002.  The decrease
is due to lower outstanding debt balances.

The  $3.9  million  asset   impairment   in  2003   represents  a  write-off  of
miscellaneous equipment at the Imperial Valley Projects.

The provision for income taxes  increased  $6.1 million to $15.7 million for the
year ended  December 31, 2003 from $9.6 million for the same period in 2002. The
effective  tax rate was 21.3% and 10.8% in 2003 and 2002,  respectively.  During
2002, the Company made considerable  progress on several  significant income tax
examination

                                      -13-
<PAGE>

matters for prior tax years,  including percentage of depletion,  which resulted
in a decrease in income tax expense of $15.1 million in 2002.

The cumulative  effect of a change in accounting  principle in 2003 reflects the
Company's  adoption of SFAS 143 as of January 1, 2003. The cumulative  effect of
initially  applying this  statement was  recognized as a cumulative  effect of a
change in accounting  principle of $2.5 million,  net of tax of $1.6 million, as
of January 1, 2003.  If CE  Generation  had  adopted the policy as of January 1,
2002, income before  cumulative  effect of change in accounting  principle would
have been $0.5 million lower for the year ended  December 31, 2002 on a proforma
basis.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 2002 AND 2001

Operating revenue decreased $51.6 million or 9.3% to $500.7 million for the year
ended  December  31, 2002 from $552.3  million for the same period in 2001.  The
decrease  reflects higher prices at the Imperial Valley and Yuma Projects in the
first quarter of 2001.

The following  operating data represents the aggregate  capacity and electricity
production of the Imperial Valley Projects:

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

    Overall capacity factor .............           89.60%           89.70%
    MWh produced ........................       2,561,800        2,565,600
    Capacity (net MW)(weighted average)..           326.4            326.4

The following  operating data represents the aggregate  capacity and electricity
production of the Gas Projects:

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

    Overall capacity factor .............           92.35%           88.60%
    MWh produced ........................       3,963,818        3,804,800
    Capacity (net MW)(weighted average)..           490.0            490.0

The changes in the overall  capacity  factor in 2002 and 2001 were due primarily
to major maintenance scheduling.

Interest  and other income  decreased  $4.2 million or 30.7% to $9.4 million for
the year ended  December 31, 2002 from $13.5 million for the same period in 2001
due to the interest earned in 2001 on past due Edison amounts.

Fuel  expenses  increased  $0.7  million or 0.6% to $121.7  million for the year
ended  December  31, 2002 from $121.0  million for the same period in 2001.  The
increase was primarily due to increased production.

Plant operating  expenses,  which include operating,  maintenance,  resource and
other plant operating expenses, decreased $0.3 million or 0.2% to $134.1 million
for the year ended  December 31, 2002 from $134.4 million for the same period in
2001. The decrease was primarily due to timing of major maintenance activities.

General and  administrative  expenses  decreased  $3.3  million or 32.4% to $6.9
million for the year ended  December  31,  2002 from $10.2  million for the same
period in 2001.  These  costs  include  administrative  services  provided to CE
Generation,  including  executive,  financial,  legal,  tax and other  corporate
functions.  The decrease in 2002 was  primarily  due to high legal costs in 2001
related to the disputes with Edison.

Depreciation  and  amortization  decreased $0.8 million or 0.1% to $82.1 million
for the year ended  December 31, 2002 from $82.9  million for the same period in
2001.  This decrease was due to the  discontinuation  of goodwill

                                      -14-
<PAGE>

amortization,  resulting  from the  adoption  of SFAS  No.  142,  "Goodwill  and
Intangible  Assets,"  which  totaled  $9.6  million in 2001.  This  decrease was
partially offset by increased depreciation from capital additions.

Interest  expense,  decreased $5.2 million or 6.3% to $76.7 million for the year
ended  December  31, 2002 from $81.9  million  for the same period in 2001.  The
decrease reflects lower debt balances.

The asset  impairment  in 2001  principally  reflects the  write-off of the book
value of a steam  turbine.  In 2001, the Company made the decision to dispose of
the turbine.  The Company  determined  that the turbine,  which had been held in
storage  for  possible  use in new  development  projects,  no  longer  had  any
significant value.

The provision for income taxes  decreased $19.0 million or 66.5% to $9.6 million
for the year ended  December 31, 2002 from $28.5  million for the same period in
2001. The effective tax rate was 10.8% and 24.1% in 2002 and 2001, respectively.
During  2002,  the Company  made  considerable  progress on several  significant
income tax  examination  matters for prior tax years,  including  percentage  of
depletion,  which  resulted in a decrease in income tax expense of $15.1 million
in 2002.

The cumulative effect of the change in accounting principle in 2001 reflects the
Company's change in its accounting  policy for major  maintenance,  overhaul and
well workover  costs.  These costs,  which had  historically  been accounted for
using the  deferral  and accrual  methods,  are now  expensed as  incurred.  The
cumulative  effect of the change in  accounting  policy  represents a January 1,
2001  write-off  of prepaid  and accrued  major  maintenance  and well  workover
balances of approximately $15.4 million, net of tax of $9.9 million.

RELATED PARTY TRANSACTIONS

Pursuant  to  the  Administrative  Services  Agreement,  MEHC  provides  certain
administrative and management  services to CE Generation,  and MEHC's executive,
financial,  legal,  tax and other  corporate staff  departments  perform certain
services  for CE  Generation.  Expenses  incurred  by MEHC and  allocated  to CE
Generation  were estimated  based on the  individual  services and expense items
provided.  The allocated expenses in 2003, 2002 and 2001 were $0.2 million, $0.2
million  and  $3.4  million,  respectively,  and are  included  in  general  and
administrative expense. On August 1, 2002, the Administrative Services Agreement
between MEHC and CE Generation was amended to provide for a fixed monthly fee in
lieu of certain expenses,  which were being allocated.  The fixed fee, which was
retroactive to January 1, 2002 and ends December 2004, is $3.1 million  annually
and is included in general and administrative expense.

The Company participates in multi-employer  pension plans sponsored by MEHC. The
Company's  contributions  to the various plans was  approximately  $2.3 million,
$1.8 million and $1.6 million in 2003, 2002 and 2001, respectively.

On September  29, 2000,  Salton Sea Power and CE Turbo entered into an agreement
to sell all  available  power from the Salton Sea V Project and CE Turbo Project
to El  Paso.  Under  the  terms of the  agreement,  El Paso  purchased  and sold
available power on behalf of Salton Sea Power and CE Turbo,  into the California
Independent System Operator markets.  The purchase price for the available power
was  equivalent to the value  actually  received by El Paso for the sale of such
power, including renewable premiums.

On January 17, 2001,  Salton Sea Power and CE Turbo  entered into a  Transaction
Agreement  to sell  available  power from the Salton Sea V Project  and CE Turbo
Project to El Paso.  Under the terms of the  agreement,  at the option of Salton
Sea Power and CE Turbo,  El Paso  purchased all available  power from the Salton
Sea V Project and CE Turbo Project based on day-ahead price quotes received from
El Paso.

On March 27, 2001 and May 1, 2001,  the owners of the Imperial  Valley  Projects
entered into Transaction  Agreements to sell available power to El Paso based on
percentages  of the Dow Jones SP-15 Index.  On June 22, 2001,  the owners of the
Imperial  Valley  Projects  (excluding  Salton  Sea Power  and CE Turbo)  ceased
selling

                                      -15-
<PAGE>

available  power to El Paso and resumed power sales to Edison under both the SO4
Agreements and negotiated  Power Purchase  Agreements.  Effective  September 16,
2002 Salton Sea Power and CE Turbo entered into  Transaction  Agreements to sell
available  power to El Paso at  increased  percentages  of the Dow  Jones  SP-15
Index.

Pursuant to these  agreements,  sales to El Paso from the Company  totaled  $1.2
million,  $8.9 million and $102.8 million in 2003, 2002 and 2001,  respectively.
As of December 31, 2003 and 2002,  accounts receivable from El Paso were $ - and
$1.4 million, respectively.

Pursuant to a Transaction Agreement dated January 29, 2003, Salton Sea Power and
CE Turbo began selling  available  power to TransAlta on February 12, 2003 based
on percentages of the Dow Jones SP-15 Index.  The  Transaction  Agreement  shall
continue  until the  earlier  of:  (a) 30 days  following  a  written  notice of
termination;  or (b)  any  other  termination  date  mutually  agreed  to by the
parties. No such notice of termination has been given by either party.  Pursuant
to this  agreement,  sales to  TransAlta  totaled  $9.9  million in 2003.  As of
December 31, 2003, accounts receivable from TransAlta were $1.6 million.

On January 21, 2004,  Salton Sea Power and CE Turbo  entered into a Green Energy
Tag Purchase and Sale Agreement to sell the non-power  attributes (the non-power
attributes made available by 1 MWh of generation, a "Green Tag") associated with
up to 931,800  MWh of  available  generation  of the Salton Sea V Project and CE
Turbo  Project  through  December 31, 2008 to TransAlta  Marketing at a price of
$10.00 per Green Tag.  Salton Sea Power and CE Turbo  expect to  commence  sales
under their agreement in July 2004.

Pursuant to the November 1, 1998 Amended and  Restated  Power Sales  Agreements,
Salton Sea Power and CE Turbo are to provide  Minerals with its full  electrical
energy  requirements at the market rates available to them, less wheeling costs.
Pursuant to these  agreements,  sales to Minerals  from Salton Sea Power totaled
$0.9  million,  $0.4 million and $0.9  million for the years ended  December 31,
2003, 2002 and 2001,  respectively,  and there were no sales to Minerals from CE
Turbo for the  years  ended  December  31,  2003,  2002 or 2001.  There  were no
material accounts receivable balances at December 31, 2003 or 2002.

LIQUIDITY AND CAPITAL RESOURCES

Each of CE Generation's direct or indirect  subsidiaries is organized as a legal
entity  separate and apart from CE  Generation  and its other  subsidiaries  and
MEHC.  Pursuant to separate  project  financing  agreements,  the assets of each
subsidiary  (excluding the Power Resources Project and Yuma Project) are pledged
or encumbered to support or otherwise provide the security for their own project
or subsidiary debt. It should not be assumed that any asset of any subsidiary of
CE Generation  will be available to satisfy the  obligations of CE Generation or
any of its other  subsidiaries;  provided,  however,  that  unrestricted cash or
other assets which are available for distribution may, subject to applicable law
and the terms of financing  arrangements for such parties, be advanced,  loaned,
paid as dividends or otherwise  distributed  or  contributed to CE Generation or
affiliates thereof. "Subsidiary" means all of CE Generation's direct or indirect
subsidiaries:  (1) owning  direct or indirect  interests in the Imperial  Valley
Projects  (including the Salton Sea Projects and the Partnership  Projects other
than Magma and Salton Sea Power Company);  or (2) owning direct interests in the
subsidiaries  that own  interests  in the  foregoing  projects  and the  Saranac
Project.

CE Generation  generated  cash flows from  operations of $146.6  million for the
year ended December 31, 2003 compared with $197.5 million for the same period in
2002.  The  decrease  was  mainly  due to  reduced  net income and the timing of
receipts of past due balances from Edison in 2002,  partially  offset by changes
in working capital.

The Imperial  Valley  Projects' only source of  electricity  revenue is payments
received  pursuant to long-term power sales  agreements with Edison,  other than
Salton  Sea V and CE Turbo  Project  revenues.  Because of the  Imperial  Valley
Projects'  dependence on Edison,  if Edison fails to fulfill its  obligations to
the projects,  it could significantly impair the ability, of the Imperial Valley
Projects, to fund operating and maintenance  expenses,

                                      -16-
<PAGE>

payments  of  interest  and  principal  on  the  Securities,  projected  capital
expenditures and debt service reserve fund requirements.

The Power  Resources  Project  sold  electricity  to TXU as a QF,  pursuant to a
15-year  negotiated power purchase  agreement ("the Power Resources PPA"), which
provided for capacity and energy payments. Capacity and energy payments, in 2003
were $3.7  million  per month  and 3.6  cents per kWh,  respectively.  The Power
Resources PPA expired September 30, 2003. The Power Resources Project sold steam
to ALON under a 15-year agreement that also expired September 30, 2003.

On August 5, 2003, Power Resources  entered into a Tolling Agreement with ONEOK.
The agreement commenced October 1, 2003 and expires December 31, 2005. Under the
terms of the agreement,  Power  Resources  sells its electricity and capacity to
ONEOK,  as an  EWG,  for  $1.75  per  kW-month  plus a  variable  operating  and
maintenance fee of $.50 per MWh. In addition, ONEOK pays annual turbine start-up
costs in an amount equal to the greater of (i) $3,643 per turbine start-up, (ii)
$939,986 or (iii) $140 per hour of operation during the year.

On May 20,  2003,  Salton Sea Power  entered into a Power Sales  Agreement  with
Riverside. Under the terms of the agreement,  Salton Sea Power sells up to 20 MW
of energy  generated  from Salton Sea V to Riverside at 6.1 cents per kWh. Sales
under the agreement commenced June 1, 2003 and will terminate May 31, 2013.

Cash flow used in  investing  activities  was $14.7  million  for the year ended
December 31, 2003  compared  with cash used of $28.9 million for the same period
in 2002.  Capital  expenditures  and major  maintenance  cash  reserves  are the
primary component of investing activities. The decrease was primarily due to the
use of $5.7 million of restricted cash for the Saranac Project major maintenance
outage  in 2003  and the  impact  of the  Stone &  Webster  settlement.  Capital
expenditures for 2004 are expected to be approximately $33.3 million.

The Salton Sea V Project  was  constructed  by Stone & Webster,  pursuant to the
Salton Sea V Project EPC Contract. On March 7, 2002, Salton Sea Power, the owner
of the Salton Sea V Project,  filed a Demand  for  Arbitration  against  Stone &
Webster for breach of contract and breach of warranty arising from  deficiencies
in Stone &  Webster's  design,  engineering,  construction  and  procurement  of
equipment for the Salton Sea V Project  pursuant to the Salton Sea V Project EPC
Contract.  The demand for arbitration did not include a stated claim amount.  On
April 25, 2003, Salton Sea Power entered into a settlement  agreement with Stone
& Webster. The settlement agreement resulted in a total payment of $12.1 million
from  Stone & Webster  in the second  quarter  of 2003 and the  arbitration  was
dismissed.   The  settlement  was  recorded  as  a  $4.5  million  reduction  of
incremental  capital  expenditures  and a $7.6 million  reduction of incremental
operating expenses related to legal, other expenses and equipment write-offs.

Cash flow used in  financing  activities  was $141.8  million for the year ended
December 31, 2003 compared with $159.8  million for the same period in 2002. The
changes in cash flows from  financing  activities  reflect  the  scheduled  debt
repayments;  a $109.5 million distribution in 2003 and a $52.9 million reduction
to the debt service reserve account of Salton Sea Funding Corporation  ("Funding
Corporation")  in  2003.  In  May  2003,  the  previous  $65.4  million  Funding
Corporation  debt  service  reserve  letter of credit  was  replaced  by a $32.7
million  TransAlta  letter of credit which expires on May 30, 2004,  and a $32.7
million MEHC letter of credit which expires on June 6, 2006.

On January 30, 2004,  Funding  Corporation  announced  its election to redeem an
aggregate principal amount of approximately  $136.4 million of its 7.475% Senior
Secured Series F Bonds due November 30, 2018, pro rata, at a redemption price of
100% of such aggregate  outstanding  principal amount,  plus accrued interest to
the date of redemption. The trustee delivered a redemption notice to the holders
of the bonds on January 29, 2004. The record date for the redemption is February
15,  2004 and the  redemption  is  expected  to be  completed  on March 1, 2004.
Funding  Corporation has made a demand on MEHC for the full amount  remaining on
MEHC's guarantee of the Series F Bonds in order to fund the redemption. Upon the
expected payment under MEHC's guarantee,  MEHC will no longer have any liability
with respect to its guarantee.

                                      -17-
<PAGE>

ENVIRONMENTAL LIABILITIES

The  Company is subject to numerous  legislative  and  regulatory  environmental
protection  requirements  involving air and water pollution,  waste  management,
hazardous chemical use, noise abatement, and land use aesthetics.

State and federal  environmental laws and regulations currently have, and future
modifications  may have,  the effect of:  (i)  increasing  the lead time for the
construction of new facilities;  (ii) significantly increasing the total cost of
new  facilities;   (iii)  requiring   modification  of  the  Company's  existing
facilities;  (iv)  increasing the risk of delay on  construction  projects;  (v)
increasing  the  Company's  cost  of  waste  disposal;  and  (vi)  reducing  the
reliability  of  service  provided  by the  Company  and the  amount  of  energy
available  from  the  Company's  facilities.  Any of  such  items  could  have a
substantial  impact on amounts  required  to be  expended  by the Company in the
future.  Expenditures for ongoing compliance with environmental regulations that
relate to  current  operations  are  expensed  or  capitalized  as  appropriate.
Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue  generation,  are expensed.
Liabilities   are  recorded  when   environmental   assessments   indicate  that
remediation  efforts are  probable  and the costs can be  reasonably  estimated.
Estimates of the liability are based upon currently  available  facts,  existing
technology and presently enacted laws and regulations  taking into consideration
the likely  effects of  inflation  and other social and  economic  factors,  and
include  estimates of associated legal costs.  These amounts also consider prior
experience in remediating sites, other companies'  clean-up  experience and data
released by the Environmental  Protection Agency or other  organizations.  These
estimated  liabilities are subject to revision in future periods based on actual
costs or new circumstances,  and are included in the accompanying balance sheets
at  their  undiscounted   amounts.  As  of  December  31,  2003  and  2002,  the
environmental  liabilities  recorded on the balance  sheet were $4.6 million and
$5.3 million, respectively.

INFLATION

Inflation has not had a significant impact on CE Generation's cost structure.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The Company has  contractual  obligations  and commercial  commitments  that may
affect its financial condition.  Contractual obligations to make future payments
primarily arise from long-term debt and fuel purchase  agreements.  In addition,
possible  future  payments  arise from lines of credit  and  standby  letters of
credit.

The  following  tables  identify  material  obligations  and  commitments  as of
December 31, 2003 (in thousands):
<TABLE>
<CAPTION>

                                                             PAYMENTS DUE BY PERIOD
                                            ----------------------------------------------------------
                                                             <           2-3         4-5         > 5
                                               TOTAL       1 YEAR       YEARS       YEARS       YEARS
                                            ----------    --------    --------    --------    --------
<S>                                         <C>           <C>         <C>         <C>         <C>
Contractual cash obligations:
  Long-term debt(1).....................    $  924,565    $201,915    $145,833    $142,533    $434,284
  Other long-term obligations (2) ......       394,904      66,088     139,830     151,450      37,536
                                            ----------    --------    --------    --------    --------
    Total contractual cash obligations..    $1,319,469    $268,003    $285,663    $293,983    $471,820
                                            ==========    ========    ========    ========    ========
</TABLE>

(1)  Total less than one year includes $136.4 million expected to be redeemed
     on March 1, 2004.

(2)  Other long-term  obligations  represent natural gas purchase agreements for
     the Saranac Project as of December 31, 2003.

The  Saranac  Project  has  issued  an  irrevocable  letter of credit to its gas
supplier in the amount of $15.4  million.  The Saranac  Project has $5.1 million
available in additional  unused letters of credit.  Annual fees related to these
letters of credit are  calculated as 1.75% of the issued balance and .05% of the
unissued  balance.  CE Generation  has issued a debt service  reserve  letter of
credit of approximately $24.2 million.

                                      -18-
<PAGE>

OFF BALANCE SHEET ARRANGEMENTS

The  Company  does not have any  obligations  which  meet the  definition  of an
off-balance  sheet arrangement and which have or are reasonably likely to have a
material effect on the financial statements.

NEW ACCOUNTING PRONOUNCEMENTS

Effective  January 1, 2003, the Company  adopted SFAS No. 143,  "Accounting  for
Asset Retirement Obligations". This statement provides accounting and disclosure
requirements for retirement  obligations  associated with long-lived assets. The
cumulative  effect of initially  applying  this  statement  was  recognized as a
cumulative  effect of a change in accounting  principle of $2.5 million,  net of
tax of $1.6 million, as of January 1, 2003.

In December 2003, the FASB issued FASB Interpretation No. 46R, "Consolidation of
Variable Interest Entities" ("FIN 46R"), which served to clarify guidance in FIN
46,  "Consolidation  of  Variable  Interest  Entities"  ("FIN 46") and  provided
additional  guidance  surrounding the application of FIN 46. The adoption of FIN
46R as it relates to special purpose  entities did not have a material effect on
the Company's  financial  position,  results of  operations  or cash flows.  The
Company will evaluate the provisions of FIN 46R related to  non-special  purpose
entities in the first quarter of 2004.

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  consolidated  financial  statements  and  accompanying
notes.  Note 2 to the  consolidated  financial  statements in this annual report
describes  the  significant   accounting   policies  and  methods  used  in  the
preparation of the consolidated  financial  statements.  Estimates are used for,
but not limited to, the  accounting  for the  allowance  for doubtful  accounts,
impairment of long-lived assets, contingent liabilities and income taxes. Actual
results could differ from these  estimates.  The following  critical  accounting
policies are impacted significantly by judgments, assumptions and estimates used
by management in the preparation of the Consolidated Financial Statements.

Allowance for Doubtful Accounts
-------------------------------

The allowance for doubtful accounts is based on the Company's  assessment of the
collectibility  of  specific  customer  accounts  and the aging of the  accounts
receivable.  If there is a deterioration of a major customer's credit worthiness
or  actual  defaults  are  higher  than  the  Company's  historical  experience,
estimates of the recoverability of amounts due could be adversely affected.

Impairment of Long-Lived Assets
-------------------------------

The Company's  long-lived  assets consist  primarily of  properties,  plants and
equipment.  Depreciation  is computed  using the  straight-line  method based on
economic  lives.   The  Company  believes  the  useful  lives  assigned  to  the
depreciable assets, which generally range from 3 to 30 years, are reasonable.

The Company  periodically  evaluates  long-lived assets,  including  properties,
plants and equipment,  when events or changes in circumstances indicate that the
carrying value of these assets may not be recoverable.  Upon the occurrence of a
triggering  event,  the  carrying  amount of a  long-lived  asset is reviewed to
assess whether the  recoverable  amount has declined below its carrying  amount.
The  recoverable  amount is the estimated net future cash flows that the Company
expects to recover  from the future use of the asset,  undiscounted  and without
interest,  plus the asset's  residual value on disposal.  Where the  recoverable
amount of the long-lived  asset is less than the carrying  value,  an impairment
loss would be recognized to write down the asset to its fair value that is based
on discounted estimated cash flows from the future use of the asset.

On January 1, 2002,  the  Company  adopted  SFAS No.  142,  "Goodwill  and Other
Intangible  Assets" ("SFAS 142"),  which establishes the accounting for acquired
goodwill  and  other   intangible   assets,   and  provides  that  goodwill  and
indefinite-lived intangible assets will not be amortized, but will be tested for
impairment  on an annual  basis.  The Company's  related  amortization  consists
solely of  goodwill  amortization.  In  accordance  with SFAS 142,  the  Company
completed its annual goodwill impairment test during the fourth quarter of 2003,
primarily using a discounted cash flow methodology.  No impairment was indicated
as a result of the impairment tests.

Contingent Liabilities
----------------------

The Company  establishes  reserves for  estimated  loss  contingencies,  such as
environmental, legal and income taxes, when it is management's assessment that a
loss is  probable  and the  amount  of the  loss  can be  reasonably

                                      -19-
<PAGE>

estimated.  Revisions to contingent  liabilities  are reflected in operations in
the period in which different facts or information become known or circumstances
change that affect the previous  assumptions  with respect to the  likelihood or
amount of loss. Reserves for contingent  liabilities are based upon management's
assumptions  and  estimates,  and advice of legal counsel or other third parties
regarding the probable outcomes of any matters.  Should the outcomes differ from
the  assumptions  and  estimates,   revisions  to  the  estimated  reserves  for
contingent liabilities would be required.

Income Taxes
------------

CE  Generation  and its  subsidiaries  file a  consolidated  federal tax return.
Deferred  tax assets and  liabilities  are  recognized  based on the  difference
between the financial  statement and tax bases of assets and  liabilities  using
estimated tax rates in effect for the year in which the differences are expected
to reverse.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

INTEREST RATE RISK

At December 31, 2003 and 2002 respectively, the Company had fixed-rate long-term
debt of $802.0  million and $848.1  million with a fair value of $826.8  million
and $778.2 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 $44.7 million and $49.2 million if interest rates were to increase
by 10% from  their  levels  at  December  31,  2003 and 2002,  respectively.  In
general,  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.

At December  31,  2003 and 2002,  respectively,  the  Company had  floating-rate
obligations of $122.6 million and $163.1  million,  which exposes the Company to
the risk of increased  interest  expense in the event of increases in short-term
interest  rates.  The Company has entered into interest rate swap agreements for
the purpose of  completely  offsetting  these  interest rate  fluctuations.  The
interest rate  differential  is reflected as an  adjustment to interest  expense
over the life of the instruments.  At December 31, 2003 and 2002,  respectively,
these interest rate swaps had an aggregate notional amount of $122.6 million and
$163.1  million,  which the Company could  terminate at a cost of  approximately
$13.9 million and $21.0 million.  A decrease of 10% in the December 31, 2003 and
2002 level of interest rates would increase the cost of terminating the swaps by
approximately  $3.2 million and $4.3 million,  respectively.  These  termination
costs  would  impact  the  Company's  earnings  and cash  flows only if all or a
portion of the swap instruments were terminated prior to their expiration.

                                      -20-
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


Independent Auditors' Report.................................................22


Consolidated Balance Sheets..................................................23


Consolidated Statements of Operations........................................24


Consolidated Statements of Members' Equity...................................25


Consolidated Statements of Cash Flows........................................26


Notes to Consolidated Financial Statements...................................27


                                      -21-

<PAGE>


                          INDEPENDENT AUDITORS' REPORT


Board of Directors and Members'
CE Generation, LLC
Omaha, Nebraska

We have audited the accompanying  consolidated  balance sheets of CE Generation,
LLC and subsidiaries  (collectively,  the "Company") as of December 31, 2003 and
2002,  and  the  related   consolidated   statements  of  operations  and  other
comprehensive  income,  members'  equity,  and cash  flows for each of the three
years in the period  ended  December  31,  2003.  Our audits also  included  the
consolidated  financial  statement  schedule  listed in Item 15. These financial
statements  and  financial  statement  schedule  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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,  such consolidated  financial  statements present fairly, in all
material respects, the financial position of CE Generation, LLC and subsidiaries
as of December 31, 2003 and 2002 and the results of their  operations  and their
cash flows for each of the three years in the period ended  December 31, 2003 in
conformity with accounting principles generally accepted in the United States of
America.  Also in our opinion,  such consolidated  financial statement schedule,
when considered in relation to the basic consolidated financial statements taken
as a whole,  presents fairly in all material  respects the information set forth
therein.

As  discussed in Note 2 to the  consolidated  financial  statements  the Company
changed its accounting  policy for asset  retirement  obligations,  in 2003, the
Company changed its accounting  policy for goodwill and other intangible  assets
in 2002 and the Company  changed its  accounting  policy for major  maintenance,
overhaul and well workover costs in 2001.

/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 20, 2004

                                      -22-

<PAGE>

                       CE GENERATION, LLC AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                          AS OF DECEMBER 31,
                                                                     ----------------------------
                                                                         2003            2002
                                                                     -------------   ------------

                                     ASSETS
<S>                                                                  <C>             <C>
Current assets:
  Cash and cash equivalents ........................................ $      33,853   $     43,706
  Restricted cash ..................................................         7,297         60,238
  Trade accounts receivable, net of allowance of $6,268 and $6,496..        49,434         62,138
  Trade accounts receivable from affiliate .........................         1,564          1,416
  Prepaid expenses and other current assets ........................         6,104          5,600
  Income tax receivable ............................................             -          4,343
  Inventories ......................................................        25,265         25,049
  Note receivable from related party and other due from affiliates..       137,034              -
                                                                       -----------    -----------
    Total current assets ...........................................       260,551        202,490
                                                                       -----------    -----------
Restricted cash ....................................................         6,419         14,299
Properties, plants, contracts and equipment, net ...................     1,167,359      1,234,408
Goodwill ...........................................................       265,897        265,897
Note receivable from related party .................................             -        137,789
Deferred financing charges and other assets ........................         8,516         10,153
                                                                       -----------    -----------
TOTAL ASSETS .......................................................   $ 1,708,742    $ 1,865,036
                                                                       ===========    ===========

                         LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
  Accounts payable .................................................   $     1,262    $       667
  Accrued interest .................................................         3,156          3,382
  Interest rate swap liability .....................................        13,873         21,023
  Other accrued liabilities ........................................        31,893         36,551
  Income tax payable ...............................................         1,138              -
  Due to affiliates ................................................             -            406
  Current portion of long-term debt ................................       201,915         86,656
                                                                       -----------    -----------
    Total current liabilities ......................................       253,237        148,685
                                                                       -----------    -----------
Project loans ......................................................       100,473        122,573
Salton Sea notes and bonds .........................................       298,377        463,591
Senior secured bonds ...............................................       323,800        338,400
Deferred income taxes ..............................................       257,045        248,033
Other long-term liabilities ........................................         8,039          1,480
                                                                       -----------    -----------
  Total liabilities ................................................     1,240,971      1,322,762
                                                                       -----------    -----------

Minority interest ..................................................        48,886         52,379

Commitments and contingencies (Note 9)

Members' equity ....................................................       425,122        499,748
Accumulated other comprehensive loss ...............................        (6,237)        (9,853)
                                                                       -----------    -----------
  Total members' equity ............................................       418,885        489,895
                                                                       -----------    -----------
TOTAL LIABILITIES AND MEMBERS' EQUITY ..............................   $ 1,708,742    $ 1,865,036
                                                                       ===========    ===========
</TABLE>

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

                                      -23-
<PAGE>

                       CE GENERATION, LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         AND OTHER COMPREHENSIVE INCOME
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                              YEAR ENDED DECEMBER 31,
                                                                       -------------------------------------
                                                                         2003           2002          2001
                                                                       ---------     ----------    ---------

<S>                                                                    <C>           <C>           <C>
REVENUE:
  Operating revenue ...............................................    $ 483,397     $ 500,729     $ 552,335
  Interest and other income .......................................        4,025         9,353        13,503
                                                                       ---------     ---------     ---------
    Total revenue .................................................      487,422       510,082       565,838
                                                                       ---------     ---------     ---------
COSTS AND EXPENSES:
  Fuel ............................................................      118,334       121,736       121,022
  Plant operations ................................................      129,815       134,065       134,357
  General and administrative ......................................        4,416         6,899        10,205
  Depreciation and amortization ...................................       87,665        82,055        82,911
  Interest expense ................................................       69,421        76,697        81,869
  Asset impairment (Note 3) .......................................        3,862             -        17,124
                                                                       ---------     ---------     ---------
    Total costs and expenses ......................................      413,513       421,452       447,488
                                                                       ---------     ---------     ---------
INCOME BEFORE PROVISION FOR INCOME TAXES ..........................       73,909        88,630       118,350
  Provision for income taxes ......................................       15,721         9,559        28,538
                                                                       ---------     ---------     ---------
INCOME BEFORE MINORITY INTEREST ...................................       58,188        79,071        89,812
  Minority interest ...............................................       20,847        20,757        15,618
                                                                       ---------     ---------     ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE..       37,341        58,314        74,194
  Cumulative effect of change in accounting
    principle, net of tax (Note 2) ................................       (2,467)            -       (15,386)
                                                                       ---------     ---------     ---------
NET INCOME ........................................................    $  34,874     $  58,314     $  58,808
                                                                       =========     =========     =========

OTHER COMPREHENSIVE INCOME:
  Cumulative effect of change in accounting
    principle, net of tax (Note 2) ................................            -             -        (5,954)
  Unrealized gain (loss) on cash flow hedges, net of tax
    of $(1,999), $1,438 and $1,161 ................................        3,616        (2,157)       (1,742)
                                                                       ---------     ---------     ---------
COMPREHENSIVE INCOME ..............................................    $  38,490     $  56,157     $  51,112
                                                                       =========     =========     =========
</TABLE>

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

                                      -24-
<PAGE>

                       CE GENERATION, LLC AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                           ACCUMULATED
                                                                                              OTHER
                                                                               MEMBERS'   COMPREHENSIVE
                                                                               EQUITY      INCOME(LOSS)     TOTAL
                                                                              ---------   -------------   ---------

<S>                                                                           <C>            <C>          <C>
BALANCE, JANUARY 1, 2001 ................................................     $ 438,915      $     -      $ 438,915
  Distributions .........................................................       (22,650)           -        (22,650)
  Net income ............................................................        58,808            -         58,808
  Other comprehensive income:
    Initial implementation of SFAS 133 designated cash flow hedges, net
      of tax of $(3,969) ................................................             -       (5,954)        (5,954)
    Fair value adjustment on cash flow hedges, net of tax of $(1,161) ...             -       (1,742)        (1,742)
-------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001 ..............................................       475,073       (7,696)       467,377
  Distributions .........................................................       (33,639)           -        (33,639)
  Net income ............................................................        58,314            -         58,314
  Other comprehensive income:
    Fair value adjustment on cash flow hedges, net of tax of $(1,438) ...             -       (2,157)        (2,157)
-------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002 ..............................................       499,748       (9,853)       489,895
  Distributions .........................................................      (109,500)           -       (109,500)
  Net income ............................................................        34,874            -         34,874
  Other comprehensive income:
    Fair value adjustment on cash flow hedges, net of tax of $1,999 .....             -        3,616          3,616
-------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003 ..............................................     $ 425,122      $(6,237)     $ 418,885
===================================================================================================================
</TABLE>

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

                                      -25-
<PAGE>

                       CE GENERATION, LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                          YEARS ENDED DECEMBER 31,
                                                                                   -----------------------------------
                                                                                      2003         2002         2001
                                                                                   ---------    ---------    ---------
<S>                                                                                <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income ...................................................................   $  34,874    $  58,314    $  58,808
  Adjustments to reconcile net income to cash flows from operating activities:
    Depreciation and amortization ..............................................      87,665       82,055       82,911
    Provision for deferred income taxes ........................................       8,657       10,490        3,377
    Distributions to minority interest in excess of related income .............      (5,029)      (5,222)      (5,163)
    Cumulative effect of change in accounting principle, net of tax ............       2,467            -       15,386
    Asset impairment/abandonment ...............................................       3,862            -       17,124
    Amortization of deferred financing costs ...................................       1,488        1,824        1,836

  Changes in other items:
    Accounts receivable, net ...................................................      12,556       65,171      (39,149)
    Inventories ................................................................        (216)      (1,344)       3,719
    Due to/from affiliates .....................................................      (1,057)         538       (2,260)
    Accounts payable and other accrued liabilities .............................      (2,584)     (12,397)      (4,722)
    Other assets ...............................................................       3,926       (1,882)      (4,381)
                                                                                   ---------    ---------    ---------
      Net cash flows from operating activities .................................     146,609      197,547      127,486
                                                                                   ---------    ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures, net of warranty settlement .............................     (22,534)     (28,640)     (33,219)
  Decrease (increase) in restricted cash .......................................       7,880         (290)      (4,391)
                                                                                   ---------    ---------    ---------
    Net cash flows from investing activities ...................................     (14,654)     (28,930)     (37,610)
                                                                                   ---------    ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of project loans ...................................................     (40,568)     (35,864)     (31,201)
  Repayment of Salton Sea notes and bonds ......................................     (28,087)     (28,572)     (23,658)
  Repayment of Senior Secured bonds ............................................     (18,000)     (20,600)     (12,600)
  Proceeds from related party note .............................................       1,406        2,107          632
  Distributions ................................................................    (109,500)     (33,639)     (22,100)
  Decrease (increase) in restricted cash .......................................      52,941      (43,213)      (2,231)
                                                                                   ---------    ---------    ---------
    Net cash flows from financing activities ...................................    (141,808)    (159,781)     (91,158)
                                                                                   ---------    ---------    ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS ........................................      (9,853)       8,836       (1,282)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .................................      43,706       34,870       36,152
                                                                                   ---------    ---------    ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR .......................................   $  33,853    $  43,706    $  34,870
                                                                                   =========    =========    =========

SUPPLEMENTAL DISCLOSURE:
  Interest paid ................................................................   $  66,653    $  74,067    $  79,211
                                                                                   =========    =========    =========
  Income taxes paid ............................................................   $   1,614    $   1,199    $  21,928
                                                                                   =========    =========    =========
</TABLE>

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

                                      -26-

<PAGE>

                       CE GENERATION, LLC AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND OPERATIONS

MidAmerican Energy Holdings Company ("MEHC") completed a strategic restructuring
in conjunction  with its acquisition of MHC Inc.  (formerly  MidAmerican  Energy
Holdings Company) in which MEHC's common stock interests in Magma Power Company,
FSRI Holdings, Inc. ("FSRI") and California Energy Development Corporation,  and
their  subsidiaries  (which own the  geothermal and natural  gas-fired  combined
cycle cogeneration  facilities described below), were contributed by MEHC to the
newly  created CE  Generation,  LLC ("CE  Generation"  or the  "Company").  This
restructuring was completed in February 1999.

On March 3, 1999,  MEHC closed the sale of 50% of its ownership  interests in CE
Generation to El Paso CE Generation Holding Company ("El Paso").

On January 29, 2003, TransAlta USA Inc. ("TransAlta"), a wholly owned subsidiary
of TransAlta Corporation, purchased El Paso's 50% interest in CE Generation.

                                      -27-

<PAGE>


General
-------

CE Generation is engaged in the independent power business.  The following table
sets out information concerning CE Generation's projects:
<TABLE>
<CAPTION>

                                                                                       PURCHASE
                                            FACILITY NET                                POWER
                                              CAPACITY      NET MW                    AGREEMENT
             OPERATING PROJECT                  (MW)        OWNED        LOCATION     EXPIRATION
------------------------------------------  ------------    ------      ----------    -----------
<S>                                             <C>          <C>        <C>              <C>
GEOTHERMAL FACILITIES:
Salton Sea Projects
Salton Sea I..............................       10           10        California        2017
Salton Sea II.............................       20           20        California        2020
Salton Sea III............................       50           50        California        2019
Salton Sea IV.............................       40           40        California        2026
Salton Sea V..............................       49           49        California       Varies
                                                ---          ---
Total Salton Sea Projects.................      169          169
                                                ---          ---
Partnership Projects
Vulcan....................................       34           34        California        2016
Elmore....................................       38           38        California        2018
Leathers..................................       38           38        California        2019
Del Ranch.................................       38           38        California        2019
CE Turbo..................................       10           10        California       Varies
                                                ---          ---
Total Partnership Projects................      158          158
                                                ---          ---
Total geothermal facilities...............      327          327
                                                ---          ---
GAS FACILITIES:
Saranac...................................      240          180         New York         2009
Power Resources...........................      212          212           Texas          2005
Yuma......................................       50           50          Arizona         2024
                                                ---          ---
Total gas facilities......................      502          442
                                                ---          ---
TOTAL OPERATING PROJECTS..................      829          769
                                                ===          ===
</TABLE>

Salton Sea I, II, III, IV and V are referred as the Salton Sea Projects. Vulcan,
Elmore,  Leathers,  Del Ranch,  and CE Turbo are referred to as the  Partnership
Projects.  The Salton Sea Projects and the Partnership Projects are collectively
referred to as the Imperial Valley Projects.  Saranac,  Power Resources and Yuma
are collectively referred to as the Gas Projects.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------

These   consolidated   financial   statements  of  CE  Generation   reflect  the
consolidated financial statements of Magma Power Company and subsidiaries,  FSRI
and  subsidiaries  and  Yuma  Cogeneration   Associates,   each  a  wholly-owned
subsidiary.  All intercompany  transactions and balances have been eliminated in
consolidation.

Based on the  nature of the  Company's  products,  production  and  distribution
processes,  types of customers and the regulatory  environment  and the economic
characteristics  of its operations,  the Company has determined that it operates
in one reportable segment.

                                      -28-
<PAGE>

Reclassifications
-----------------

Certain amounts in the fiscal 2002 and 2001  consolidated  financial  statements
and supporting note disclosures have been  reclassified to conform to the fiscal
2003 presentation.  Such reclassification did not impact previously reported net
income or retained earnings.

Use of Estimates
----------------

The  preparation  of  consolidated   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  consolidated  financial  statements  and  the
reported  amounts of revenues and expenses during the reporting  period.  Actual
results could differ from those estimates.

Cash and Cash Equivalents
-------------------------

CE Generation  considers all investment  instruments  purchased with an original
maturity of three months or less to be cash equivalents.  Restricted cash is not
considered a cash equivalent.

Restricted Cash
---------------

The current  restricted  cash balance is composed of debt service funds that are
legally  restricted  as to their use and  require  the  maintenance  of specific
minimum  balances  equal to the  next  debt  service  payment.  The  non-current
restricted  cash  balance  is  composed  of  restricted   accounts  for  capital
expenditures and major maintenance expenditures.

Allowance for Doubtful Accounts
-------------------------------

The allowance for doubtful accounts is based on the Company's  assessment of the
collectibility  of  specific  customer  accounts  and the aging of the  accounts
receivable. If there is deterioration of a major customer's credit worthiness or
actual defaults are higher than the Company's historical  experience,  estimates
of the recoverability of amounts due it could be adversely affected.

Inventories
-----------

Inventories  consist of spare parts and  supplies and are valued at the lower of
cost or  market.  Cost for  large  replacement  parts is  determined  using  the
specific  identification method. For the remaining supplies,  cost is determined
using the weighted average cost method.

Major Maintenance, Overhaul and Well Rework Costs
-------------------------------------------------

CE Generation has changed its accounting policy for major maintenance,  overhaul
and well rework costs.  These costs,  which had historically  been accounted for
using deferral and accrual methods, are now expensed as incurred. The new policy
went into effect January 1, 2001 and the Company recorded a cumulative effect of
this change of approximately  $15.4 million,  net of tax of  approximately  $9.9
million.

Properties, Plants, Contracts and Equipment, Net
------------------------------------------------

Properties,  plants and equipment are recorded at historical  cost.  The cost of
major   additions  and   betterments  are   capitalized,   while   replacements,
maintenance,  and  repairs  that do not  improve  or  extend  the  lives  of the
respective assets are expensed.

                                      -29-
<PAGE>

Impairment of Long-Lived Assets
-------------------------------

The  Company's  long-lived  assets  consist  primarily  of  properties,  plants,
contracts and equipment. Depreciation of the operating power plant costs, net of
salvage value if applicable, is computed using the straight-line method based on
economic  lives.   The  Company  believes  the  useful  lives  assigned  to  the
depreciable  assets,  which generally range from 3 to 30 years,  are reasonable.
Acquired  power sales  agreements  are amortized  separately on a  straight-line
method over the remaining contract periods which have ranged from 7 to 30 years.

The Company  periodically  evaluates  long-lived assets,  including  properties,
plants,  contracts  and  equipment,  when  events or  changes  in  circumstances
indicate that the carrying  value of these assets may not be  recoverable.  Upon
the occurrence of a triggering  event, the carrying amount of a long-lived asset
is reviewed to assess  whether the  recoverable  amount has  declined  below its
carrying amount.  The recoverable  amount is the estimated net future cash flows
that  the  Company  expects  to  recover  from  the  future  use of  the  asset,
undiscounted and without interest,  plus the asset's residual value on disposal.
Where the recoverable  amount of the long-lived  asset is less than the carrying
value,  an  impairment  loss would be  recognized to write down the asset to its
fair value that is based on discounted  estimated cash flows from the future use
of the asset.

As a result of these  impairment  tests,  the company wrote down $3.8 million of
equipment in 2003 and $17.1 million in 2001, $15 million of which relates to a
steam turbine and $2.1 million in other equipment.

Goodwill
--------

On January 1, 2002,  CE  Generation  adopted  Statement of Financial  Accounting
Standards No. 142,  "Goodwill and Other Intangible  Assets" ("SFAS 142"),  which
establishes the accounting for acquired  goodwill and other  intangible  assets,
and provides that goodwill and  indefinite-lived  intangible  assets will not be
amortized, but will be tested for impairment on an annual basis. CE Generation's
related  amortization  consisted solely of goodwill  amortization,  which has no
income tax effect.  Following is a  reconciliation  of net income as  originally
reported for the years ended  December 31, 2003,  2002 and 2001, to adjusted net
income as if SFAS 142 was effective for all years (in thousands):

                                          2003       2002       2001
                                        -------    -------    -------

           Reported net income .....    $34,874    $58,314    $58,808
           Goodwill amortization ...          -          -      9,589
                                        -------    -------    -------
           Adjusted net income .....    $34,874    $58,314    $68,397
                                        =======    =======    =======

The Company  conducts its annual  review  pursuant to SFAS 142 during the fourth
quarter of 2003 using a discounted  cash flow  methodology.  No  impairment  was
indicated as a result of the assessment.

Revenue Recognition
-------------------

CE Generation  recognizes revenue and related accounts  receivable from sales of
electricity on an accrual  basis.  All of CE  Generation's  sales of electricity
(except for the Salton Sea V and CE Turbo  Projects) are under  long-term  power
purchase contracts.

CE  Generation's  sales  of  electricity  from  the  Imperial  Valley  Projects,
comprised approximately 39%, 37%, and 43%, respectively, of 2003, 2002, and 2001
electricity and steam revenues.  Of these sales,  approximately 90%, 95% and 59%
were  to  Southern   California  Edison  ("Edison")  in  2003,  2002  and  2001,
respectively.   Sales  of  electricity   from  the  Saranac  Project   comprised
approximately  39%,  37% and  31%,  respectively,  of the  2003,  2002  and 2001
electricity and steam revenues.  Of these sales,  approximately  98% were to New
York State  Electric and Gas  ("NYSE&G").  Sales of  electricity  from the Power
Resources Project comprised approximately 16%, 19% and 16%, respectively, of the
2003, 2002 and 2001 electricity and steam revenues. Of these sales approximately
97% were to TXU Generation Company LP ("TXU").  The Power Resources PPA with TXU
expired September 30, 2003. Accounts receivable,  approximately $23.8 million of
which are from Edison and approximately  $16.9 million from NYSE&G are primarily
uncollateralized receivables from long-term power purchase contracts.

                                      -30-
<PAGE>

Deferred Income Taxes
---------------------

CE  Generation  and its  subsidiaries  file a  consolidated  federal tax return.
Deferred  tax assets and  liabilities  are  recognized  based on the  difference
between the financial  statement and tax bases of assets and  liabilities  using
estimated tax rates in effect for the year in which the differences are expected
to reverse.

Financial Instruments
---------------------

Effective  January 1, 2001, the Company  adopted SFAS 133/138,  "Accounting  for
Derivative  Instruments  and Hedging  Activities",  which  requires an entity to
recognize  all of  its  derivatives  as  either  assets  or  liabilities  in its
statement of financial  position and measure those instruments at fair value. As
a result of the adoption of SFAS 133/138,  CE Generation recorded the fair value
of the interest rate swap agreements at January 1, 2001, which was approximately
$6.0 million, net of tax of approximately $4.0 million. These interest rate swap
agreements are considered  cash flow hedges and therefore the offset is recorded
in accumulated other comprehensive income.

CE  Generation  utilizes  swap  agreements to manage market risks and reduce its
exposure  resulting from  fluctuation in interest rates.  For interest rate swap
agreements,  the net cash amounts paid or received on the agreements are accrued
and recognized as an adjustment to interest expense. CE Generation's practice is
not  to  hold  or  issue  financial  instruments  for  trading  purposes.  These
instruments  are either exchange  traded or with  counterparties  of high credit
quality;  therefore,  the  risk  of  nonperformance  by  the  counterparties  is
considered to be negligible.  Fair values of financial instruments are estimated
based on quoted  market  prices  for debt  issues  actively  traded or on market
prices  of  similar   instruments  and/or  valuation   techniques  using  market
assumptions.

NEW ACCOUNTING PRONOUNCEMENTS

On January 1, 2003,  the Company  adopted  SFAS No. 143,  "Accounting  for Asset
Retirement  Obligations"  ("SFAS 143"). This statement  provides  accounting and
disclosure  requirements for retirement  obligations  associated with long-lived
assets.   The effect  of  initially  applying  this  statement  was
recognized as a cumulative  effect of a change in  accounting  principle of $2.5
million, net of tax of $1.6 million, as of January 1, 2003.

The Company's review  identified  legal retirement  obligations for landfill and
plant  abandonment  costs.  The Company used an expected  cash flow  approach to
measure the obligations.  The following table reflects  liability  amounts as if
this statement had been applied during all periods (in thousands):


                                            2003         2002
                                           ------     ----------
                                                      (Proforma)
            Plant abandonment ......       $4,026       $3,798
            Landfill abandonment ...       $4,013       $3,663

                                      -31-

<PAGE>

Following is a reconciliation of net income as originally reported for the years
ended  December  31,  2003,  2002 and 2001,  to  adjusted  net income as if this
statement had been applied to all periods (in thousands):
<TABLE>
<CAPTION>

                                                              YEAR ENDED DECEMBER 31,
                                                         --------------------------------
                                                           2003       2002         2001
                                                         -------    --------     --------

<S>                                                      <C>        <C>          <C>
Reported net income .................................    $34,874    $ 58,314     $ 58,808
Accretion and amortization expense ..................          -        (497)        (469)
Cumulative effect of change in accounting principle..      2,467           -            -
                                                         -------    --------     --------
Adjusted net income .................................    $37,341    $ 57,817     $ 58,339
                                                         =======    ========     ========
</TABLE>

The  plant  abandonment  had no  previously  recorded  liability.  The  landfill
abandonment had a previously recorded liability of $1.5 million.

In December 2003, the FASB issued FASB Interpretation No. 46R, "Consolidation of
Variable Interest Entities" ("FIN 46R"), which served to clarify guidance in FIN
46,  "Consolidation  of  Variable  Interest  Entities"  ("FIN 46") and  provided
additional  guidance  surrounding the application of FIN 46. The adoption of FIN
46R as it relates to special purpose  entities did not have a material effect on
the Company's  financial  position,  results of  operations  or cash flows.  The
Company will evaluate the provisions of FIN 46R related to  non-special  purpose
entities in the first quarter of 2004.

3.   PROPERTIES, PLANTS, CONTRACTS AND EQUIPMENT, NET AND INTANGIBLE ASSETS

Properties,  plants,  contracts and equipment comprise the following at December
31 (in thousands):


                                                        2003           2002
                                                     -----------    ------------

Properties, plants, contracts and equipment, net:
Power plants .....................................   $ 1,297,186    $ 1,288,281
Wells and resource development ...................       190,079        180,151
Power sales agreements ...........................       338,716        338,716
Licenses and equipment ...........................        50,500         50,501
                                                     -----------    -----------
Total operating assets ...........................     1,876,481      1,857,649
Accumulated depreciation and amortization ........      (709,122)      (623,241)
                                                     -----------    -----------
Properties, plants, contracts and equipment, net .   $ 1,167,359    $ 1,234,408
                                                     ===========    ===========

The Salton Sea V Project  was  constructed  by Stone & Webster,  Inc.  (formerly
Stone & Webster Engineering Corporation),  a wholly-owned subsidiary of the Shaw
Group  ("Stone & Webster"),  pursuant to a date  certain,  fixed-price,  turnkey
engineering,  procure,  construct and manage contract (the "Salton Sea V Project
EPC Contract").  On March 7, 2002, Salton Sea Power, the owner of the Salton Sea
V Project,  filed a Demand for Arbitration against Stone & Webster for breach of
contract and breach of warranty  arising from  deficiencies in Stone & Webster's
design,  engineering,  construction  and procurement of equipment for the Salton
Sea V Project pursuant to the Salton Sea V Project EPC Contract.  The demand for
arbitration did not include a stated claim amount. On April 25, 2003, Salton Sea
Power entered into a settlement  agreement with Stone & Webster.  The Settlement
Agreement  resulted in a total  payment of $12.1 million from Stone & Webster in
the second quarter 2003 and the  arbitration  was dismissed.  The settlement was
recorded as a $4.5 million reduction of incremental  capital  expenditures and a
$7.6 million reduction of incremental operating expenses related to legal, other
expenses and equipment write-offs.

On November 25, 2002,  Vulcan/BN  Geothermal Power Company, Del Ranch, L.P., and
CE Turbo,  LLC entered into a settlement  agreement with Stone & Webster related
to a Demand for  Arbitration  against Stone & Webster for breach of contract and
breach of  warranty  arising  from  deficiencies  in Stone &  Webster's  design,
engineering, construction and procurement of equipment for the CE Turbo Project.
The settlement agreement resulted in a $3.5 million payment from Stone & Webster
which was recorded as a reduction of incremental capital expenditures.

                                      -32-
<PAGE>

Intangible Assets
-----------------

The following tables summarize the acquired  intangible assets as of December 31
(in thousands):

                                                        2003
                                         ---------------------------------
                                         GROSS CARRYING        ACCUMULATED
                                             AMOUNT           AMORTIZATION
                                         --------------       ------------

     Amortized Intangible Assets:
     Power Purchase Contracts .......       $338,716            $220,420
     Patented Technology ............         46,290              17,314
                                            --------            --------
     Total ..........................       $385,006            $237,734
                                            ========            ========


                                                        2002
                                         ---------------------------------
                                         GROSS CARRYING        ACCUMULATED
                                             AMOUNT           AMORTIZATION
                                         --------------       ------------

     Amortized Intangible Assets:
     Power Purchase Contracts .......       $338,716            $203,685
     Patented Technology ............         46,290              15,385
                                            --------            --------
     Total ..........................       $385,006            $219,070
                                            ========            ========

Amortization  expense on acquired  intangible  assets was $18.7  million,  $18.3
million and $18.1 million for the years ended December 31, 2003,  2002 and 2001,
respectively.  CE Generation expects amortization expense on acquired intangible
assets to be $15.8 million for each of the five succeeding fiscal years.

4.   PROJECT LOANS

Each of CE Generation's direct or indirect  subsidiaries is organized as a legal
entity  separate and apart from CE  Generation  and its other  subsidiaries  and
MEHC.  Pursuant to separate  project  financing  agreements,  the assets of each
subsidiary  (excluding  the Power  Resources  Project and the Yuma  Project) are
pledged or encumbered to support or otherwise provide the security for their own
project or  subsidiary  debt.  It should  not be  assumed  that any asset of any
subsidiary of CE Generation,  will be available to satisfy the obligations of CE
Generation  or  any  of  its  other  subsidiaries;   provided,   however,   that
unrestricted  cash or other assets which are  available  for  distribution  may,
subject  to  applicable  law and the terms of  financing  arrangements  for such
parties,  be advanced,  loaned,  paid as dividends or otherwise  distributed  or
contributed to CE Generation or affiliates thereof.  "Subsidiary",  for purposes
of the immediately preceding two sentences,  means all of CE Generation's direct
or indirect subsidiaries (1) owning direct or indirect interests in the Imperial
Valley Projects (including the Salton Sea Projects and the Partnership Projects,
other than Magma  Power  Company  and  Salton Sea Power  Company,  or (2) owning
direct  interests  in the  subsidiaries  that  own  interests  in the  foregoing
projects and the Saranac Project.

The Power  Resources  Project had project  financing  debt with a consortium  of
banks with interest and principal due quarterly over a 15-year period, beginning
March 31, 1989. The original principal carried a variable interest rate based on
the London  Interbank  Offer Rate ("LIBOR") with a .85% interest  margin through
the  5th  anniversary  of the  loan,  a  1.00%  interest  margin  from  the  5th
anniversary through the 12th anniversary of the loan and a 1.25% interest margin
from the 12th  anniversary  through the end of the loan. The  outstanding  $21.7
million of project financing debt, at December 31, 2002, was repaid during 2003.

Effective June 5, 1989, in connection with the project financing debt, the Power
Resources  Project  entered into an interest rate swap agreement with the lender
as a means of hedging  floating  interest rate  exposure  related to its 15-year
term loan. The swap agreement was for initial  notional amounts of $55.0 million
and $110.0 million,

                                      -33-
<PAGE>

declining in correspondence with the principal  balances,  and effectively fixed
the interest  rates at 9.385% and 9.625%,  respectively,  excluding the interest
margin. The swap agreements were settled in cash based on the difference between
a fixed and floating  (index based) price for the underlying  debt. The interest
rate swap  agreement  was  terminated  in  connection  with the repayment of the
project  financing  debt on  September  30, 2003.  The notional  values of these
financial instruments were $21.7 million at December 31, 2002. The fair value of
the swap as of December  31, 2002 was $1.1  million and was included in interest
rate swap liability in the balance sheet.

The interest rate on the project  financing debt was increased by payments under
a Compensation  Agreement included in the Power Resources Project term loan. The
Compensation  Agreement,  which  entitled  two of the term  lenders  to  receive
quarterly payments  equivalent to a percentage of the Power Resources  Project's
discretionary cash flow as separately defined in the agreement, became effective
for a 13-year  period that was scheduled to end on September 30, 2003. The Power
Resources  Project recorded  additional  interest expense of $1.2 million,  $1.3
million and $1.1 million for the years ended  December 31, 2003,  2002 and 2001,
respectively,  related to amounts  owed under the  Compensation  Agreement.  The
Compensation  Agreement  was  terminated  with  the  repayment  of  the  project
financing debt.

In October 1994,  Saranac Power Partners L.P. ("Saranac  Partnership")  signed a
14-year note payable  agreement with a lender for an initial principal amount of
$204.6  million.  Under the terms of the note payable  agreement,  interest rate
alternatives  include an option to use a Eurodollar  rate or the  lender's  base
rate. Each option includes an interest margin in addition to the applicable rate
selected.  The selected interest rate plus interest margin at December 31, 2003,
2002, and 2001 was 2.27%, 2.92% and 3.72%, respectively.

Effective October 7, 1994, the Saranac Partnership entered into an interest rate
swap  agreement  with the lender as a means of hedging  floating  interest  rate
exposure related to its 14-year note payable.  The swap agreement was an initial
notional  amount of $204.6  million and  effectively  fixes the interest rate at
8.185%,  which  increased to 8.31% in October 2001 and will increase to 8.56% in
October 2005. The Saranac  Partnership is exposed to credit loss in the event of
nonperformance  by the lender under the interest rate swap  agreement.  However,
the Saranac  Partnership does not anticipate  nonperformance by the lender.  The
fair value of the swap as of December  31,  2003 and 2002 was $13.9  million and
$19.9 million,  respectively, and is included in interest rate swap liability in
the balance sheet.

Annual  repayments  of the note payable for the years ending  December 31 are as
follows (in thousands):

                                              AMOUNT
                                             --------

                          2004 ..........    $ 22,100
                          2005 ..........      26,192
                          2006 ..........      31,104
                          2007 ..........      34,378
                          2008 ..........       8,799
                                             --------
                          Total .........    $122,573
                                             ========

The note  agreements  are  collateralized  by all of the  Saranac  Partnership's
assets.  The Saranac  Partnership is restricted by the terms of the note payable
agreement from making  distributions or withdrawing any capital accounts without
the  consent  of the  lender.  Under  the terms of the note  payable  agreement,
distributions  may be made to the partners in  accordance  with the terms of the
Saranac  Partnership  Agreement.  The note payable  agreement  also requires the
Saranac  Partnership to maintain certain covenants.  The Saranac Partnership was
in compliance with these requirements at December 31, 2003.

The Saranac  Partnership  has issued an irrevocable  letter of credit to its gas
supplier in the amount of approximately  $15.4 million.  The Saranac Partnership
has  approximately  $5.1 million  available in  additional

                                      -34-
<PAGE>

unissued  letters of credit.  Annual fees related to these letters of credit are
calculated as 1.75% of the issued balance and 0.5% of the unissued balance.

5.   SALTON SEA NOTES AND BONDS

The Salton Sea Funding Corporation (the "Funding  Corporation"),  a wholly-owned
indirect subsidiary of CE Generation,  has issued debt securities as follows (in
thousands):
<TABLE>
<CAPTION>

                         SENIOR                                           DECEMBER 31,
                         SECURED                                     -----------------------
ISSUED DATE              SERIES     FINAL MATURITY DATE     RATE       2003          2002
-----------             --------    -------------------     ----     --------   ------------
<S>                     <C>         <C>                     <C>      <C>          <C>
July 21, 1995.......    B Bonds     May 30, 2005            7.37%    $ 41,662     $ 56,662
July 21, 1995.......    C Bonds     May 30, 2010            7.84%     102,014      109,250
June 20, 1996.......    E Bonds     May 30, 2011            8.30%      43,322       46,322
October 13, 1998....    F Bonds     November 30, 2018       7.48%     276,594      279,444
                                                                     ---------    ---------
                                                                     $463,592     $491,678
                                                                     ========     ========
</TABLE>

Principal and interest payments are made in semi-annual installments. The Salton
Sea Notes and Bonds are non-recourse to CE Generation.

The net  revenues,  equity  distributions  and  royalties  from the  Salton  Sea
Projects and the  Partnership  Projects are used to pay  principal  and interest
payments on outstanding senior secured bonds issued by Funding Corporation,  the
final  series  of which  is  scheduled  to  mature  in  November  2018.  Funding
Corporation  debt is guaranteed by certain  subsidiaries  of Magma Power Company
and secured by the capital stock of certain  subsidiaries of CE Generation.  The
proceeds of Funding Corporation debt were loaned by Funding Corporation pursuant
to loan  agreements and notes (the "Imperial  Valley Project  Loans") to certain
subsidiaries  of  Magma  Power  Company  and used for  construction  of  certain
Imperial  Valley  Projects,   refinancing  of  certain  indebtedness  and  other
purposes.  Debt service on the Imperial  Valley  Project  Loans is used to repay
debt service on Funding  Corporation debt. The Imperial Valley Project Loans and
the guarantees of Funding  Corporation debt are secured by substantially  all of
the assets of the guarantors, including the Imperial Valley Projects, and by the
equity interests in the guarantors.

On October 13,  1998,  Funding  Corporation  completed  a sale to  institutional
investors of $285 million  aggregate  amount of 7.475% Senior  Secured  Series F
Bonds due November 30, 2018. A portion of the proceeds was used to fund the cost
of  construction  of, and was advanced to, the Zinc Recovery  Project,  which is
indirectly  100% owned by Salton Sea Minerals  Corp., a MEHC affiliate not owned
by CE Generation. The direct and indirect owners of the Zinc Facility (the "Zinc
Guarantors",  which include Salton Sea Minerals Corp. and Calenergy Minerals LLC
("Minerals"))  are among the  guarantors  of the Funding  Corporation  debt.  In
connection  with the  divestiture of 50% of CE Generation,  MEHC  guaranteed the
payment by the Zinc  Guarantors  of a specified  portion of the  scheduled  debt
service  on and  certain  prepayments  of the  Imperial  Valley  Project  Loans,
including the current principal amount of approximately $136.4 million, which is
included in note  receivable  to related party in the  accompanied  consolidated
balance sheet and associated interest.

On January 30, 2004,  Funding  Corporation  announced  its election to redeem an
aggregate principal amount of approximately  $136.4 million of its 7.475% Senior
Secured Series F Bonds due November 30, 2018, pro rata, at a redemption price of
100% of such aggregate  outstanding  principal amount,  plus accrued interest to
the date of redemption. The trustee delivered a redemption notice to the holders
of the bonds on January 29, 2004. The record date for the redemption is February
15,  2004 and the  redemption  is  expected  to be  completed  on March 1, 2004.
Funding  Corporation has made a demand on MEHC for the full amount  remaining on
MEHC's guarantee of the Series F Bonds in order to fund the redemption. Upon the
expected payment under MEHC's guarantee,  MEHC will no longer have any liability
with respect to its guarantee.

                                      -35-
<PAGE>

In May 2003, the previous $65.4 million Funding Corporation debt service reserve
letter of credit was  replaced  by a $32.7  million  TransAlta  letter of credit
which  expires on May 30, 2004,  and a $32.7 million MEHC letter of credit which
expires on June 6, 2006.

These new Funding  Corporation  debt service reserve letters of credit permitted
the cash, which was previously  restricted,  to be included in funds distributed
to CE Generation on May 29, 2003. During 2003, CE Generation distributed a total
of $109.5 million to MEHC and TransAlta.

Annual  repayments  of the  Salton  Sea Notes  and  Bonds  for the years  ending
December 31 are as follows (in thousands):

                                              AMOUNT
                                             --------
                          2004 ..........    $165,215
                          2005 ..........      28,620
                          2006 ..........      25,917
                          2007 ..........      25,091
                          2008 ..........      28,065
                          Thereafter ....     190,684
                                             --------
                          Total .........    $463,592
                                             ========

CE  Generation's  ability to obtain  distributions  from its  investment  in the
Salton Sea  Projects  and  Partnership  Projects  is  subject  to the  following
conditions:

     o    the  depositary  accounts  for the  Salton Sea Notes and Bonds must be
          fully funded;

     o    there cannot have occurred and be  continuing  any default or event of
          default under the Salton Sea Notes and Bonds;

     o    the historical debt service coverage ratio of Funding  Corporation for
          the prior four fiscal quarters must be at least 1.5 to 1.0; and

     o    there must be  sufficient  geothermal  resources to operate the Salton
          Sea Projects at their required levels.

6.   SENIOR SECURED BONDS

On March 2, 1999,  CE Generation  issued $400 million of 7.416%  Senior  Secured
Bonds due 2018.  These  securities are senior secured debt which rank equally in
right of payment with CE Generation's  other senior secured debt permitted under
the  indenture  for the  Securities,  share  equally in the  collateral  with CE
Generation's  other senior  secured debt  permitted  under the indenture for the
Securities,  and  rank  senior  to  any  of CE  Generation's  subordinated  debt
permitted  under  the  indenture  for  the  Securities.   These  securities  are
effectively  subordinated to the existing  project  financing debt and all other
debt of CE Generation's consolidated subsidiaries.

The Senior Secured Bonds are primarily secured by the following collateral:

     o    all available cash flow (as defined);

     o    a pledge of 99% of the  equity  interests  in Salton  Sea  Power,  LLC
          ("Salton Sea Power") and all of CE  Generation's  equity  interests in
          its other consolidated subsidiaries;

     o    a pledge of all of the capital stock of SECI Holding Inc.;

                                      -36-
<PAGE>

     o    a grant of a lien on and security interest in the depository accounts;
          and

     o    to the extent possible,  a grant of a lien on and security interest in
          all of CE Generation's other tangible and intangible property,  to the
          extent assignable.

CE Generation  has issued a debt service  reserve letter of credit in the amount
of $24.3 million.

Annual  repayments of the Senior Secured Bonds for the years ending  December 31
are as follows (in thousands):

                                              AMOUNT
                                             --------
                          2004 ..........    $ 14,600
                          2005 ..........      14,800
                          2006 ..........      19,200
                          2007 ..........      18,000
                          2008 ..........      28,200
                          Thereafter ....     243,600
                                             --------
                          Total .........    $338,400
                                             ========

7.   INCOME TAXES

Provision  for income tax is  comprised  of the  following  at  December  31 (in
thousands):

                                  2003         2002         2001
                                --------     --------     --------

             Current:
             Federal .......    $  5,161     $   (873)    $ 20,412
             State .........       1,903          (58)       4,749
                                --------     --------     --------
                                   7,064         (931)      25,161
                                --------     --------     --------

             Deferred:
             Federal .......       6,410        8,991        3,762
             State .........       2,247        1,499         (385)
                                --------     --------     --------
                                   8,657       10,490        3,377
                                --------     --------     --------
             Total provision    $ 15,721     $  9,559     $ 28,538
                                ========     ========     ========

A  reconciliation  of the federal  statutory  tax rate to the effective tax rate
applicable to income before provision for income taxes follows:

                                                    2003       2002       2001
                                                   -----      -----      -----

Federal statutory rate ........................     35.0%      35.0%      35.0%
Increases (reductions) in taxes resulting from:
Percentage depletion ..........................     (3.7)     (18.1)      (5.9)
Investment and energy tax credits .............     (1.3)      (2.3)      (1.7)
Goodwill amortization .........................        -          -        2.8
State taxes, net of federal benefit ...........      3.6        3.3        2.4
Minority interest .............................     (9.9)      (8.2)      (4.6)
Other items, net ..............................     (2.4)       1.1       (3.9)
                                                   -----      -----      -----
Effective tax rate ............................     21.3%      10.8%      24.1%
                                                   =====      =====      =====

                                      -37-
<PAGE>

During  2002,  the Company  made  considerable  progress on several  significant
income tax  examination  matters for prior tax years,  including  percentage  of
depletion,  which  resulted in a decrease in income tax expense of $15.1 million
in 2002.

Income tax expense is only  provided  for the taxable  earnings of the  Company,
including its partnership  interests.  No provision for income taxes is provided
in the accompanying consolidated financial statements for the minority interests
share of the partnership earnings.

Deferred tax  liabilities  (assets)  comprise  the  following at December 31 (in
thousands):

                                                           2003          2002
                                                         ---------    ----------

Deferred tax liabilities:
  Properties, plant, contracts and equipment .........   $ 274,436    $ 262,921
  Other ..............................................       1,661        1,498
                                                         ---------    ---------
    Total deferred tax liabilities ...................     276,097      264,419
                                                         ---------    ---------
Deferred tax assets:
  Accruals not currently deductible for tax purposes..      (6,375)      (4,919)
  General business tax credits .......................     (12,677)     (11,467)
                                                         ---------    ---------
    Total deferred tax assets ........................     (19,052)     (16,386)
                                                         ---------    ---------
Net deferred tax liabilities .........................   $ 257,045    $ 248,033
                                                         =========    =========

8.   FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair value of a financial  instrument is the amount at which the  instrument
could be exchanged in a current transaction between willing parties,  other than
in a forced sale or liquidation.  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,  which  CE
Generation could realize in a current transaction.

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

Note receivable  from related  party--The fair value of the note receivable from
related party is estimated based on the quoted market price of the corresponding
debt issue.

Debt  instruments - The fair value of all debt  instruments  has been  estimated
based upon quoted market prices as supplied by third-party broker dealers, where
available,  or at the  present  value of future cash flows  discounted  at rates
consistent with comparable  maturities with similar credit risks. The Company is
unable to  estimate  a fair value for the  project  loans as there are no quoted
market prices available.

Other  financial  instruments - All other  financial  instruments  of a material
nature are short-term and the fair value approximates the carrying amount.

                                      -38-

<PAGE>

The carrying amounts in the table below are included in the consolidated balance
sheets under the indicated captions (in thousands):
<TABLE>
<CAPTION>

                                                   2003                       2002
                                          ------------------------   ------------------------
                                           CARRYING     ESTIMATED     CARRYING     ESTIMATED
                                             VALUE      FAIR VALUE      VALUE      FAIR VALUE
                                          ---------     ----------   ---------     ----------

<S>                                        <C>           <C>          <C>           <C>
Financial Assets:
  Note receivable from related party...    $136,383      $141,821     $137,789      $126,765

Financial Liabilities:
  Interest rate swaps..................      13,873        13,873       21,023        21,023
  Project loans........................     122,573       122,572      163,142       163,142
  Salton Sea notes and bonds...........     463,591       483,312      491,678       464,552
  Senior secured bonds.................     338,400       343,476      356,400       313,632
</TABLE>

9.    COMMITMENTS AND CONTINGENCIES

Edison and the California Power Exchange
----------------------------------------

Due to reduced  liquidity,  Southern  California  Edison Company  ("Edison") had
failed  to  pay  approximately  $119  million  owed  under  the  power  purchase
agreements with the Imperial Valley Projects  (excluding the Salton Sea V and CE
Turbo  Projects)  for power  delivered in the fourth  quarter 2000 and the first
quarter  2001.  Due to  Edison's  failure to pay  contractual  obligations,  the
Imperial Valley Projects  (excluding the Salton Sea V and CE Turbo Projects) had
established an allowance for doubtful  accounts of approximately  $21 million as
of December 31, 2001.

Pursuant to a  settlement  agreement,  the final  payment by Edison for past due
balances was received March 1, 2002.  Following the receipt of Edison's  payment
of past due  balances,  the Imperial  Valley  Projects  released  the  remaining
allowance for doubtful accounts.

Edison has disputed a portion of the settlement  agreement and has failed to pay
approximately  $3.9  million of  capacity  bonus  payments  for the months  from
October  2001  through May 2002.  On December  10,  2001,  the  Imperial  Valley
Projects  (excluding the Salton Sea I, Salton Sea V and CE Turbo Projects) filed
a lawsuit against Edison in California's  Imperial County Superior Court seeking
a court order  requiring  Edison to make the required  capacity  bonus  payments
under  the Power  Purchase  Agreements.  Due to  Edison's  failure  to pay these
contractual  obligations,  the Imperial Valley Projects established an allowance
for doubtful accounts of approximately  $2.7 million as of December 31, 2002. In
connection with the June 11, 2003 settlement  discussed  below,  the receivables
associated with this allowance were written off during 2003.

On March 25,  2002,  Salton Sea II's 10 MW turbine went out of service due to an
uncontrollable  force event. Such  uncontrollable  force event ended, and Salton
Sea II returned to service, on December 17, 2002. Edison failed to recognize the
uncontrollable  force  event and as such did not pay amounts  otherwise  due and
owing and  improperly  derated  Salton  Sea II from 15 MW to 12.5 MW,  under the
Salton Sea II Power Purchase  Agreement.  On January 29, 2003,  Salton Sea Power
Generation,  L.P., owner of Salton Sea II, served a complaint on Edison for such
unpaid amounts and to rescind such deration.

On June 11, 2003,  the Imperial  Valley  Projects  (excluding  the Salton Sea I,
Salton Sea V and CE Turbo  Projects)  entered into a settlement  agreement  with
Edison.  The settlement,  which relates to the capacity bonus payment and Salton
Sea II uncontrollable force event disputes,  provides for an $800,000 settlement
payment  from  Edison,  payment of amounts  previously  withheld for the Unit II
deration and the recission of such deration. The amounts previously withheld for
the Unit II deration were received in the second  quarter of 2003.  The $800,000
settlement  payment  is  contingent  upon  approval  by  the  California  Public
Utilities Commission.

                                      -39-
<PAGE>

On July 10,  2003,  Salton Sea IV's 40 MW turbine  went out of service due to an
uncontrollable  force event. Such  uncontrollable  force event ended, and Salton
Sea IV returned to service on September 17, 2003. Edison failed to recognize the
uncontrollable  force event and as such has not paid amounts  otherwise  due and
owing under the Salton Sea IV Power  Purchase  Agreement  totaling $2.3 million.
Salton Sea Power Generation, L.P., with Fish Lake Power Company, owner of Salton
Sea IV, served notices of error on Edison for such unpaid amounts.  As a result,
the Company  established  reserves of $1.7 million for  capacity  payments as of
December 31, 2003.

On October 9, 2003, Salton Sea III's 50 MW turbine went out of service due to an
uncontrollable force event. Such uncontrollable force event ended and Salton Sea
III  returned to service on December 12, 2003.  Edison  failed to recognize  the
uncontrollable  force event and as such has not paid amounts  otherwise  due and
owing under the Salton Sea III Power Purchase  Agreement  totaling $0.7 million.
Salton Sea Power  Generation,  L.P.,  owner of Salton Sea III,  served notice of
error on Edison  for such  unpaid  amounts.  As a result the  Company  has fully
reserved for this balance as of December 31, 2003.

Environmental
-------------

The  Company is subject to numerous  legislative  and  regulatory  environmental
protection  requirements  involving air and water pollution,  waste  management,
hazardous chemical use, noise abatement, and land use aesthetics.

State and federal  environmental laws and regulations currently have, and future
modifications  may  have,  the  effect of (i)  increasing  the lead time for the
construction of new facilities,  (ii) significantly increasing the total cost of
new  facilities,   (iii)  requiring   modification  of  the  Company's  existing
facilities,  (iv)  increasing the risk of delay on  construction  projects,  (v)
increasing   the  Company's  cost  of  waste  disposal  and  (vi)  reducing  the
reliability  of  service  provided  by the  Company  and the  amount  of  energy
available  from  the  Company's  facilities.  Any of  such  items  could  have a
substantial  impact on amounts  required  to be  expended  by the Company in the
future.  Expenditures for ongoing compliance with environmental regulations that
relate to  current  operations  are  expensed  or  capitalized  as  appropriate.
Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue  generation,  are expensed.
Liabilities   are  recorded  when   environmental   assessments   indicate  that
remediation  efforts are  probable  and the costs can be  reasonably  estimated.
Estimates of the liability are based upon currently  available  facts,  existing
technology and presently enacted laws and regulations  taking into consideration
the likely  effects of  inflation  and other social and  economic  factors,  and
include  estimates of associated legal costs.  These amounts also consider prior
experience in remediating sites, other companies'  clean-up  experience and data
released by the Environmental  Protection Agency or other  organizations.  These
estimated  liabilities are subject to revision in future periods based on actual
costs or new circumstances,  and are included in the accompanying balance sheets
at  their  undiscounted   amounts.  As  of  December  31,  2003  and  2002,  the
environmental  liabilities  recorded on the balance  sheet were $4.6 million and
$5.3 million, respectively.

Other Commitments
-----------------

Certain of CE Generation's geothermal and cogeneration facilities are qualifying
facilities  under the Public Utility  Regulatory  Policies Act of 1978 ("PURPA")
and their contracts for the sale of electricity are subject to regulations under
PURPA.  In order to promote open  competition in the industry,  legislation  has
been proposed in the U.S.  Congress that calls for either a repeal of PURPA on a
prospective basis or the significant  restructuring of the regulations governing
the electric industry,  including sections of PURPA. Current federal legislative
proposals would not abrogate,  amend, or modify existing contracts with electric
utilities.  The ultimate outcome of any proposed  legislation is unknown at this
time.

                                      -40-

<PAGE>

The Saranac  Partnership  has a contract  to  purchase  natural gas from a third
party, for its  cogeneration  facility for a period of 15 years for an amount up
to 51,000 MMBtus per day which expires in 2009. The price for such deliveries is
a stated rate, escalated annually at a rate of 4%. The minimum volumes under the
agreement  for the years ending  December 31 are included in the future  minimum
payments under the contract as follows (in thousands):

                                                 AMOUNT
                                                ---------
                     2004.................      $  66,088
                     2005.................         68,544
                     2006.................         71,286
                     2007.................         74,137
                     2008.................         77,313
                     Thereafter...........         37,536
                                               ----------
                     Total................       $394,904
                                                 ========

The Salton Sea V Project is obligated to supply the  electricity  demands of the
Zinc Recovery  Project,  which  commenced  operations  in December  2002, at the
market  rates  available to the Salton Sea V Project,  less the wheeling  costs.
Upon the Zinc Recovery Project reaching full production the Salton Sea V Project
expects  to sell up to 19 MW of its output to  Minerals.  The  remainder  of the
Salton Sea V Project  output is sold pursuant a power sales  agreement  with the
City of Riverside, California and a transaction agreement with TransAlta.

10.  RELATED PARTY TRANSACTIONS

Pursuant  to  the  Administrative  Services  Agreement,  MEHC  provides  certain
administrative and management  services to CE Generation,  and MEHC's executive,
financial,  legal,  tax and other  corporate staff  departments  perform certain
services  for CE  Generation.  Expenses  incurred  by MEHC and  allocated  to CE
Generation  were estimated  based on the  individual  services and expense items
provided.  The allocated expenses in 2003, 2002 and 2001 were $0.2 million, $0.2
million  and  $3.4  million,  respectively,  and are  included  in  general  and
administrative expense. On August 1, 2002, the Administrative Services Agreement
between MEHC and CE Generation was amended to provide for a fixed monthly fee in
lieu of certain expenses,  which were being allocated.  The fixed fee, which was
retroactive to January 1, 2002 and ends December 2004, is $3.1 million  annually
and is included in general and administrative expense.

The Company participates in multi-employer  pension plans sponsored by MEHC. The
Company's  contributions  to the various plans was  approximately  $2.3 million,
$1.8 million and $1.6 million in 2003, 2002 and 2001, respectively.

On September  29, 2000,  Salton Sea Power and CE Turbo entered into an agreement
to sell all  available  power from the Salton Sea V Project and CE Turbo Project
to El  Paso.  Under  the  terms of the  agreement,  El Paso  purchased  and sold
available power on behalf of Salton Sea Power and CE Turbo,  into the California
Independent System Operator markets.  The purchase price for the available power
was  equivalent to the value  actually  received by El Paso for the sale of such
power, including renewable premiums.

On January 17, 2001,  Salton Sea Power and CE Turbo  entered into a  Transaction
Agreement  to sell  available  power from the Salton Sea V Project  and CE Turbo
Project to El Paso.  Under the terms of the  agreement,  at the option of Salton
Sea Power and CE Turbo,  El Paso  purchased all available  power from the Salton
Sea V Project and CE Turbo Project based on day-ahead price quotes received from
El Paso.

On March 27, 2001 and May 1, 2001,  the owners of the Imperial  Valley  Projects
entered into Transaction  Agreements to sell available power to El Paso based on
percentages  of the Dow Jones SP-15 Index.  On June 22, 2001,  the owners of the
Imperial  Valley  Projects  (excluding  Salton  Sea Power  and CE Turbo)  ceased
selling  available power to El Paso and resumed power sales to Edison under both
the SO4 Agreements and negotiated

                                      -41-
<PAGE>

Power Purchase Agreements.  Effective September 16, 2002 Salton Sea Power and CE
Turbo entered into Transaction  Agreements to sell available power to El Paso at
increased percentages of the Dow Jones SP-15 Index.

Pursuant to these  agreements,  sales to El Paso from the Company  totaled  $1.2
million,  $8.9 million and $102.8 million in 2003, 2002 and 2001,  respectively.
As of December 31, 2003 and 2002,  accounts receivable from El Paso were $ - and
$1.4 million, respectively.

Pursuant to a Transaction Agreement dated January 29, 2003, Salton Sea Power and
CE Turbo and began  selling  available  power to  TransAlta on February 12, 2003
based on percentages  of the Dow Jones SP-15 Index.  The  Transaction  Agreement
shall  continue  until the earlier of: (a) 30 days following a written notice of
termination;  or (b)  any  other  termination  date  mutually  agreed  to by the
parties. No such notice of termination has been given by either party.  Pursuant
to this  agreement,  sales to  TransAlta  totaled  $9.9  million in 2003.  As of
December 31, 2003, accounts receivable from TransAlta were $1.6 million.

On January 21, 2004,  Salton Sea Power and CE Turbo  entered into a Green Energy
Tag Purchase and Sale Agreement to sell the non-power  attributes (the non-power
attributes made available by 1 MW of generation,  a "Green Tag") associated with
up to  931,800 MW of  available  generation  of the Salton Sea V Project  and CE
Turbo Project through  December 31, 2008 to TransAlta Energy Marketing (US) Inc.
at a price of $10.00  per Green  Tag.  Salton  Sea Power and CE Turbo  expect to
commence sales under their agreement in July 2004.

Pursuant to the November 1, 1998 Amended and  Restated  Power Sales  Agreements,
Salton Sea Power and CE Turbo are to provide  Minerals with its full  electrical
energy  requirements at the market rates available to them, less wheeling costs.
Pursuant to these  agreements,  sales to Minerals  from Salton Sea Power totaled
$0.9  million,  $0.4 million and $0.9  million for the years ended  December 31,
2003, 2002 and 2001,  respectively,  and there were no sales to Minerals from CE
Turbo for the  years  ended  December  31,  2003,  2002 or 2001.  There  were no
material accounts receivable balances at December 31, 2003 or 2002.

                                      -42-
<PAGE>


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,  2003.  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 significant  changes
in the Company's internal controls or in other factors that could  significantly
affect internal controls.

                                      -43-
<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

EXECUTIVE OFFICER                   POSITION
-----------------                   --------

Stefan A. Bird                      President
Douglas L. Anderson                 Senior Vice President
Wayne F. Irmiter                    Vice President and Controller
Ian A. Bourne                       Director
J. Thomas Coyle                     Director
Patrick J. Goodman                  Director
Mitchell L. Pirnie                  Vice President, General Counsel and Director

STEFAN A. BIRD, 37,  President of CE Generation,  is responsible for independent
power plant  operations and  construction in the United States.  Mr. Bird joined
MEHC in January  1998 as Project  Development  Manager and was  promoted to Vice
President,  Project  Development in August 1999. Prior to joining MEHC, Mr. Bird
held various  positions at Koch Industries from 1989 to 1997 including  Director
of Finance,  Latin  America for Koch  Industries  International  in Mexico City;
Director  of  Marketing  and Risk  Manager  for Koch Power  Services in Houston,
Texas;  Senior Financial Analyst for Koch  International  Financial  Services in
Fribourg,   Switzerland;   Project  Manager,   Corporate  Development  for  Koch
Industries in Wichita,  Kansas; and Project Engineer and Maintenance Planner for
Koch Refining Company in St. Paul, Minnesota.

DOUGLAS L. ANDERSON, 46, Senior Vice President and General Counsel of MEHC and a
Senior Vice President of CE  Generation.  Mr.  Anderson  joined MEHC in February
1993. Prior to that, Mr. Anderson was an attorney in private practice.

WAYNE F. IRMITER,  38, Vice  President  and  Controller  of CE  Generation.  Mr.
Irmiter joined MEHC as Vice President and Chief  Accounting  Officer in November
2002.  Mr.  Irmiter is a Certified  Public  Accountant  and from 1988 to 1993 he
worked in public accounting.  Most recently,  Mr. Irmiter was with Gateway, Inc.
in various management  positions  including  Director-Strategic  Initiatives and
Director-Finance.

IAN A. BOURNE,  56,  Executive  Vice  President and Chief  Financial  Officer of
TransAlta  and a director of CE  Generation.  Mr.  Bourne  joined  TransAlta  in
January  1998 as senior  vice  president  and chief  financial  officer  and was
appointed to his current  position  June 1, 1998.  Immediately  prior to joining
TransAlta, Mr. Bourne had been senior vice president and chief financial officer
of Canada Post  Corporation from 1992. Prior to 1992 Mr. Bourne gained extensive
financial  experience  with General  Electric,  including  positions as European
treasurer,  based in London;  chief financial  officer for GE Canada,  and chief
financial officer for GE Medical Systems Europe, based in Paris.

J. THOMAS COYLE,  56,  President of TransAlta Energy Marketing (U.S.) Inc. and a
director of CE Generation.  Mr. Coyle joined TransAlta in 1998 as Director, Risk
Portfolio Management,  Energy Marketing.  Prior to joining TransAlta,  Mr. Coyle
held various  positions at  Petro-Canada  from 1986 to 1997 including  Portfolio
Manager - Natural  Gas  Marketing,  Manager  Market  Development  - Natural  Gas
Marketing and Risk Manager.

PATRICK J. GOODMAN,  37, Senior Vice  President and Chief  Financial  Officer of
MEHC and a director of CE Generation. Mr. Goodman joined MEHC in 1995 and served
in various  accounting  positions  including  Senior  Vice  President  and Chief
Accounting  Officer.  Prior to joining MEHC, Mr. Goodman was a financial manager
for National Indemnity Company and a senior associate at Coopers & Lybrand.

                                      -44-
<PAGE>

MITCHELL L.  PIRNIE,  45, Vice  President,  General  Counsel and  Director of CE
Generation.  Mr. Pirnie joined MEHC in November 1997. Prior to joining MEHC, Mr.
Pirnie was engaged in the private practice of law in Omaha, Nebraska.

AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT

The Company does not have a separately designated audit committee.  No member of
the Board of  Directors  has the  qualifications  required to be  considered  an
independent  audit committee  financial expert for purposes of the SEC rules and
regulations.  Currently,  the Company is not required to have an audit committee
or an audit committee  financial expert under the  Sarbanes-Oxley Act of 2002 or
any other applicable regulation.

CODE OF ETHICS

The Company has adopted a code of ethics that applies to its principal executive
officer,  principal financial officer and to its controller.  The code of ethics
is filed as an exhibit to this annual report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION.

CE Generation's  directors and executive  officers  receive no remuneration  for
serving in such capacities.

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS.

Fifty percent of CE  Generation's  interests are owned by MEHC and the other 50%
are owned by TransAlta.  There is no public trading  market for CE  Generation's
membership  interests.  None of the directors or executive officers beneficially
own any of the equity  interests.  MEHC's  common stock is not publicly  traded.
TransAlta  is owned by TransAlta  Corporation.  TransAlta  Corporation's  common
stock is publicly traded on the New York Stock Exchange.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

CE Generation is 50% owned by MEHC and 50% owned by TransAlta.  CE  Generation's
activities  are  restricted by the terms of the indenture for the Securities to:
(1) ownership of the Company's  subsidiaries and related activities;  (2) acting
as issuer of securities and other  indebtedness as permitted under the indenture
and related  activities;  and (3) other activities which could not reasonably be
expected to result in a material  adverse effect so long as the rating  agencies
confirm that these activities will not result in a downgrade of their ratings of
the Securities.  CE Generation and each of the assigning  subsidiaries have been
organized  and are  operated  as legal  entities  separate  and apart from MEHC,
TransAlta and their other affiliates, and, accordingly, the Company's assets and
the assets of the  assigning  subsidiaries  will not be  generally  available to
satisfy the  obligations  of MEHC,  TransAlta or any of their other  affiliates.
However,  the Company's and the assigning  subsidiaries'  unrestricted  cash and
other assets which are available for distribution may, subject to applicable law
and the  terms of CE  Generation's  and the  assigning  subsidiaries'  financing
arrangements, be advanced, loaned, paid as dividends or otherwise distributed or
contributed  to  MEHC,  TransAlta  or  their  affiliates.   The  securities  are
non-recourse to MEHC and TransAlta.

MEHC entered into an administrative services agreement with CE Generation, which
provides CE Generation administrative services from MEHC in exchange for a fixed
fee through December 31, 2004. TransAlta has entered into Transaction Agreements
with  Salton  Sea Power and CE Turbo.  Pursuant  to the  Transaction  Agreements
Salton  Sea  Power  and CE Turbo  sell  available  power to  TransAlta  based on
percentages  of the  Dow  Jones  SP-15  Index.  The  agreement  continues  until
termination  notice by either  party.  No such  notice of  termination  has been
given.  TransAlta Energy Marketing (US) Inc. has entered into a Green Energy Tag
Purchase  and  Sale  Agreement  with  Salton  Sea  Power  and CE Turbo to sell a
specified  volume  of  non-power   attributes  (the  non-power  attributes  made

                                      -45-
<PAGE>

available 1 MWh of generation,  a "Green Tag) made available by generation  from
the Salton Sea V Project and the CE Turbo Project through December 31, 2008 at a
price of $10.00 per Green Tag.

CE Generation also has an agreement with MEHC and TransAlta to provide TransAlta
with a right of first refusal for the Company to participate in the  development
of any future geothermal power projects or combined geothermal power and mineral
recovery projects proposed by MEHC in the area of the geothermal  reservoir that
currently  supplies  geothermal  resources  to the Imperial  Valley  projects in
return  for the  payment  of a  royalty  to MEHC.  If  TransAlta  elects  not to
participate,  the agreement gives MEHC the right to develop the new project upon
a  showing  that  there are  sufficient  geothermal  resources  for both the new
project and the Company's existing projects.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

As discussed in "Item 13. Certain  Relationships and Related  Transactions" MEHC
entered  into an  administrative  services  agreement  with CE  Generation.  The
agreement  includes principal  accountant fees and services.  CE Generation does
not have preapproval policies and procedures and does not specifically  identify
principal  accountant  fees and services as they are part of the  administrative
fees paid to MEHC. The fees and services of CE Generation's principal accountant
are preapproved by the audit committee of MEHC.

                                      -46-
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

          (a)  Financial Statements and Schedules

               (i)  Financial Statements

                    Financial  Statements  are  included in Part II of this Form
                    10-K

               (ii) Financial Statement Schedules

                    See Schedule II on page 48. Schedules 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  consolidated  financial  statements  or
                    notes thereto.

          (b)  Reports on Form 8-K

               None.

          (c)  Exhibits

               The exhibits listed on the  accompanying  Exhibit Index are filed
               as part of this Annual Report.

          (d)  Financial  statements  required  by  Regulations  S-X,  which are
               excluded from the Annual Report by Rule 14a-3(b).

               Not Applicable

                                      -47-

<PAGE>

SCHEDULE II


                               CE GENERATION, LLC
                 CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2003
                             (Amounts in thousands)
<TABLE>
<CAPTION>


COLUMN A                                  COLUMN B    COLUMN C    COLUMN D    COLUMN E
                                         BALANCE AT   ADDITIONS               BALANCE
                                         BEGINNING     CHARGED                 AT END
DESCRIPTION                               OF YEAR     TO INCOME   DEDUCTIONS   OF YEAR
-----------                              ----------   ---------   ----------  --------
<S>                                        <C>        <C>         <C>         <C>
Allowance for doubtful accounts

Year ended 2003 ........................   $ 6,496    $ 2,433     $ (2,661)    $ 6,268

Year ended 2002 ........................   $24,754    $ 2,661     $(20,919)    $ 6,496

Year ended 2001 ........................   $     -    $24,754     $      -     $24,754

Reserves Not Deducted from Assets (1):

Year ended 2003 ........................   $ 6,300    $ 2,104     $ (2,780)    $ 5,624

Year ended 2002 ........................   $ 6,132    $ 3,509     $ (3,341)    $ 6,300

Year ended 2001 ........................   $ 9,102    $ 2,000     $ (4,970)    $ 6,132
</TABLE>

          1)   Reserves not deducted from assets include  estimated  liabilities
               for  litigation  and  environmental  compliance  at the  Imperial
               Valley Projects.

                                      -48-
<PAGE>

                                   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 this 27th day of February, 2004.

                               CE Generation, LLC

                               /s/ Stefan A. Bird
                               ------------------
                               By: Stefan A. Bird
                                    President

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

Signature                                                     Date

/s/ Stefan A. Bird                                      February 27, 2004
----------------------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/ Wayne F. Irmiter                                    February 27, 2004
----------------------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Ian A. Bourne                                       February 27, 2004
----------------------------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                     February 27, 2004
----------------------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                  February 27, 2004
----------------------------------
Patrick J. Goodman
Director

/s/ Mitchell L. Pirnie                                  February 27, 2004
----------------------
Mitchell L. Pirnie
Vice President, General Counsel and Director


<PAGE>

EXHIBIT INDEX

Exhibit No.
-----------

3.1  Certificate of Formation of CE Generation,  LLC  (incorporated by reference
     to Exhibit 3.1 to the Company's Registration Statement on Form S-4).

3.2  Amended and Restated Limited Liability  Company  Operating  Agreement of CE
     Generation, LLC.

3.3  First Amendment to Amended and Restated Limited Liability Company Operating
     Agreement of CE Generation, LLC, dated as of October 28, 2002.

4.1  Indenture, dated as of March 2, 1999, by and between CE Generation, LLC and
     Chase Manhattan Bank and Trust Company,  National Association (incorporated
     by reference to Exhibit 4.1 to the Company's Registration Statement on Form
     S-4).

4.2  Form of First  Supplemental  Indenture to be entered into by and between CE
     Generation,  LLC and  Chase  Manhattan  Bank and  Trust  Company,  National
     Association,  Trustee  (incorporated  by  reference  to Exhibit  4.2 to the
     Company's Registration Statement on Form S-4).

4.3  Intentionally left blank.

4.4  Intentionally left blank.

4.5  Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as
     of March 2, 1999, by and among CE Generation,  LLC, the banks named therein
     and Credit  Suisse First  Boston,  as Agent  (incorporated  by reference to
     Exhibit 4.5 to the Company's Registration Statement on Form S-4).

4.6  Deposit and Disbursement Agreement, dated as of March 2, 1999, by and among
     CE Generation,  LLC, Magma Power Company,  Salton Sea Power Company, Falcon
     Seaboard  Resources,  Inc.,  Falcon  Seaboard  Power  Corporation,   Falcon
     Seaboard Oil Company,  California Energy Development Corporation,  CE Texas
     Energy  LLC  and  Chase   Manhattan  Bank  and  Trust   Company,   National
     Association,  as Collateral  Agent and  Depositary  Bank  (incorporated  by
     reference to Exhibit 4.6 to the  Company's  Registration  Statement on Form
     S-4).

4.7  Intercreditor  Agreement,  dated  as of  March  2,  1999,  by and  among CE
     Generation,  LLC,  Magma Power Company,  Salton Sea Power  Company,  Falcon
     Seaboard  Resources,  Inc.,  Falcon  Seaboard  Power  Corporation,   Falcon
     Seaboard Oil Company,  California Energy Development Corporation,  CE Texas
     Energy LLC,  Credit Suisse First Boston and Chase  Manhattan Bank and Trust
     Company, National Association,  as Trustee, Collateral Agent and Depositary
     Bank   (incorporated   by  reference  to  Exhibit  4.7  to  the   Company's
     Registration Statement on Form S-4).

4.8  Assignment and Security Agreement,  dated as of March 2, 1999, by and among
     Magma Power Company,  Salton Sea Power Company,  Falcon Seaboard Resources,
     Inc.,  Falcon  Seaboard  Power  Corporation,  Falcon  Seaboard Oil Company,
     California  Energy  Development  Corporation,  CE Texas Energy LLC,  Credit
     Suisse First Boston and Chase  Manhattan Bank and Trust  Company,  National
     Association,  as Collateral Agent (incorporated by reference to Exhibit 4.8
     to the Company's Registration Statement on Form S-4).

4.9  Assignment  and  Security  Agreement,  dated as of March  2,  1999,  by and
     between CE  Generation,  LLC and Chase  Manhattan  Bank and Trust  Company,
     National  Association,  as Collateral  Agent  (incorporated by reference to
     Exhibit 4.9 to the Company's Registration Statement on Form S-4).

                                      -50-
<PAGE>

4.10 Pledge  Agreement  (SSPC Stock),  dated as of March 2, 1999, by Magma Power
     Company  in favor of Chase  Manhattan  Bank  and  Trust  Company,  National
     Association, as Collateral Agent (incorporated by reference to Exhibit 4.10
     to the Company's Registration Statement on Form S-4).

4.11 Pledge  Agreement  (FSRI  Holdings,   Inc.  Stock  and  California   Energy
     Development Corporation Stock), dated as of March 2, 1999 by CE Generation,
     LLC  in  favor  of  Chase  Manhattan  Bank  and  Trust  Company,   National
     Association, as Collateral Agent (incorporated by reference to Exhibit 4.11
     to the Company's Registration Statement on Form S-4).

4.12 Securities  Account  Control  Agreement,  dated as of March 2, 1999, by and
     among CE Generation,  LLC,  Magma Power Company,  Salton Sea Power Company,
     Falcon Seaboard Resources, Inc., Falcon Seaboard Power Corporation,  Falcon
     Seaboard Oil Company,  California Energy Development Corporation,  CE Texas
     Energy LLC,  Credit Suisse First Boston and Chase  Manhattan Bank and Trust
     Company,  National  Association,  as Collateral  Agent and Depositary  Bank
     (incorporated  by reference to Exhibit 4.12 to the  Company's  Registration
     Statement on Form S-4).

14.1 CE  Generation,  LLC - Code of Ethics for Chief  Executive  Officer,  Chief
     Financial Officer and Chief Accounting Officer.

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.

                                      -51-