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, 1999

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

     The members  equity  accounts are held 50% by MidAmerican  Energy  Holdings
Company and 50% by El Paso CE Generation Holding Company as of March 30, 2000.

         * This Annual Report on Form 10-K is being filed pursuant to Rule 15d-2
under the  Securities  Exchange  Act of 1934 and  contains  certified  financial
statements as required by Rule 15d-2.


<PAGE>


                                TABLE OF CONTENTS

Part I.........................................................................1
   Item 1.  Business...........................................................1
   General.....................................................................1

The Projects...................................................................2
Geothermal Facilities..........................................................2
Gas Facilities.................................................................4
Projects in Construction.......................................................5

   Description of the Securities...............................................6
   General.....................................................................6
   Collateral for the Securities...............................................6
   Payment of Interest and Principal...........................................6
   Interest....................................................................6
   Principal...................................................................7
   Priority of Payments........................................................8
   Debt Service Reserve Account................................................8
   Optional Redemption.........................................................9
   Mandatory Redemption--At Par................................................9
   Mandatory Redemption--With Yield Maintenance Premium........................9
   Distributions...............................................................9
   Nature of Recourse on the Securities........................................9
   Covenants...................................................................9
   Employees..................................................................10

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

Part II.......................................................................11
Item 5.  Market for Registrant's Common Equity and Related Stockholder's
   Matters....................................................................11
Item 6. Selected Financial Data...............................................12
Item 7. Management's Discussion and Analysis of Financial Condition and
   Results of Operations .....................................................13
Item 7A. Qualitative and Quantitative 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.......................................................85

Part III......................................................................86
Item 10.  Directors and Executive Officers....................................86
Item 11.  Executive Compensation..............................................88
Item 12. Security Ownership of Certain Beneficial Owners and Management ......88
Item 13.  Certain Relationships and Related Transactions......................88

Part IV.......................................................................89
Item 14.  Exhibits, Financial Statements Schedule and Reports on Form 8-K.....89

SIGNATURES....................................................................90


<PAGE>

                                     PART I

Item 1.  Business

General

         CE  Generation,  LLC ("CE  Generation" or the "Company"),  is a special
purpose  Delaware  limited  liability  company  created  by  MidAmerican  Energy
Holdings  Company  ("MEHC" or  "MidAmerican")  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  interests in CE
Generation  to El Paso CE  Generation  Holding  Company  ("El  Paso  Power"),  a
subsidiary of El Paso Energy  Corporation  ("El Paso" or "El Paso Energy").  The
principal executive office of CE Generation is located at 302 South 36th Street,
Omaha, Nebraska 68131 and its telephone number is (402) 341-4500.

          Due to the then pending merger of MEHC with an electric utility,  MEHC
was required to divest a portion of its  ownership  interests  in the  Company's
power  projects in order to permit  those  projects to maintain  their status as
qualifying  facilities (QFs) under the Public Utilities  Regulatory Policies Act
of 1978. This law requires that a non-electric utility own at least 50% of a QF.
The sale to El Paso Power, which does not own an electric utility,  was intended
to permit the Company's power projects to satisfy this ownership requirement. By
maintaining QF status, the Company's power projects are entitled to an exemption
from federal and state utility regulation under the Public Utilities  Regulatory
Policies Act and are able to maintain  compliance  with the  provisions of their
current power purchase agreements which require that they be QFs during the term
of those agreements.

          The Company's limited liability company operating  agreement  provides
that  MidAmerican  and El Paso Power  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"),  Falcon  Seaboard  Resources,  Inc.  ("FSRI") and California
Energy  Development  Corporation  ("CEDC") 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.
CE Generation  has an aggregate  net ownership  interest of 756 MW of electrical
generating  capacity in power plants in operation or under  construction  in the
United States, which have an aggregate net capacity of 816 MW.


<PAGE>


The Projects

          The  following  table sets out  information  concerning  CE Generation
projects:

PROJECT                 FUEL       COMMERCIAL        CAPACITY          LOCATION
                                   OPERATION

Vulcan               Geothermal       1986             34 MW          California
Del Ranch            Geothermal       1989             38 MW          California
Elmore               Geothermal       1989             38 MW          California
Leathers             Geothermal       1990             38 MW          California
CE Turbo             Geothermal       2000             10 MW          California
Salton Sea I         Geothermal       1987             10 MW          California
Salton Sea II        Geothermal       1990             20 MW          California
Salton Sea III       Geothermal       1989             49.8 MW        California
Salton Sea IV        Geothermal       1996             39.6 MW        California
Salton Sea V         Geothermal       2000             49 MW          California
Power Resources      Gas              1988             200 MW         Texas
Yuma                 Gas              1994             50 MW          Arizona
Saranac              Gas              1994             240 MW         New York

         On December 2, 1999,  the NorCon  project  was  transferred  to General
Electric  Capital  Corporation and,  therefore,  CE Generation no longer has any
interest in the NorCon project.

         Geothermal Facilities

         CE Generation  affiliates  currently operate eight geothermal plants in
the Imperial Valley in California (the "Imperial Valley Project"). Four of these
Imperial  Valley Project plants (the  "Partnership  Projects") were developed by
Magma which  originally  owned a 50%  interest.  On April 17, 1996,  the Company
completed the  Partnership  Interest  Acquisition  pursuant to which the Company
acquired the remaining 50% interests in each of the Partnership Projects for $70
million.  The  Partnership  Projects  consist of the Vulcan,  Hoch (Del  Ranch),
Elmore and  Leathers  projects  (the  "Vulcan  Project,"  the "Hoch (Del  Ranch)
Project," the "Elmore Project" and the "Leathers Project," respectively).

         The  remaining  four  operating  Imperial  Valley  Project  plants (the
"Salton Sea Projects") are wholly owned by subsidiaries of Magma. Three of these
plants  were  purchased  by Magma on March 31,  1993 from  Union Oil  Company of
California.  These  geothermal  power plants consist of the Salton Sea I project
(the  "Salton Sea I  Project"),  the Salton Sea II project  (the  "Salton Sea II
Project")  and the Salton Sea III project  (the "Salton Sea III  Project").  The
fourth plant, the Salton Sea IV project (the "Salton Sea IV Project"), commenced
commercial operations in 1996.

         Vulcan.  The Vulcan Project sells  electricity  to Southern  California
Edison  ("Edison")  under  a  30-year  Standard  Offer  No.  4  Agreement  ("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.
Under  the SO4  Agreement,  Edison  is  obligated  to pay the  Vulcan  Project a
capacity payment, a capacity bonus payment and an energy payment.  The price for
contract  capacity  payments  is fixed for the life of such SO4  Agreement.  The
as-available  capacity  price is based on a payment  schedule as approved by the
CPUC from time to time. The contract energy payment  increased each year for the
first ten years,  which  period  expired on  February 9, 1996.  Thereafter,  the
energy payments are based on Edison's Avoided Cost of Energy.

          Hoch (Del Ranch).  The Hoch (Del Ranch)  Project sells  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.  The
provisions of such SO4 Agreement are substantially the same as the SO4 Agreement
with respect to the Vulcan Project.  The price for contract capacity payments is
fixed for the life of the SO4  Agreement.  The fixed  price  period  for  energy
payments per kWh expired on January 1, 1999. Thereafter, the energy payments are
based on Edison's Avoided Cost of Energy.
<PAGE>

          Elmore. The Elmore Project sells 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. The provisions of such SO4
Agreement are  substantially  the same as the SO4 Agreement  with respect to the
Vulcan Project.  The price for contract  capacity payments is fixed for the life
of SO4 Agreement.  The fixed price period for energy payments per kWh expired on
December 31, 1998. Thereafter, the energy payments are based on Edison's Avoided
Cost of Energy.

         Leathers.  The Leathers Project sells 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. The provisions of such
SO4 Agreement are  substantially  the same as the SO4 Agreement  with respect to
the Vulcan Project.  The price for contract  capacity  payments is fixed for the
life of the SO4 Agreement  which expired on December 31, 1999.  Thereafter,  the
energy payments will be based on Edison's Avoided Cost of Energy.

         Salton Sea I Project.  The Salton Sea I Project  sells  electricity  to
Edison pursuant to a 30-year  negotiated  power purchase  agreement,  as amended
(the  "Salton Sea I PPA"),  which  provides  capacity and energy  payments.  The
contract capacity and contract nameplate are each 10 MW. The capacity payment is
based on the firm  capacity  price which is currently  $132.58 per kW-year.  The
contract  capacity payment adjusts quarterly based on a basket of energy indices
for the term of the Salton Sea I PPA. The energy  payment is calculated  using a
Base Price  (defined as the initial value of the energy payment (4.701 cents per
kWh for the second quarter of 1992)), which is subject to quarterly  adjustments
based on a basket of indices.  The time period  weighted  average energy payment
for Salton Sea I was 5.3 cents per kWh during  1999.  As the Salton Sea I PPA is
not an SO4 Agreement, the energy payments do not revert to Edison's Avoided Cost
of Energy.

         Salton Sea II Project.  The Salton Sea II Project sells  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
on-peak periods) and 20 MW,  respectively.  The contract requires Edison to make
capacity  payments,  capacity bonus payments and energy payments.  The price for
contract  capacity and contract capacity bonus payments is fixed for the life of
the modified SO4 Agreement.  The energy payments for the first ten-year  period,
which period expires on April 4, 2000,  are levelized at a time period  weighted
average of 10.6 cents per kWh.  Thereafter,  the monthly energy payments will be
based on Edison's Avoided Cost of Energy.  Edison is entitled to receive,  at no
cost, 5% of all energy  delivered in excess of 80% of contract  capacity through
September 30, 2004.

          Salton Sea III Project.  The Salton Sea III Project sells  electricity
to Edison  pursuant  to a 30-year  modified  SO4  Agreement  that  commenced  on
February 13, 1989. The contract  capacity is 47.5 MW and the contract  nameplate
is 49.8  MW.  The SO4  Agreement  requires  Edison  to make  capacity  payments,
capacity bonus  payments and energy  payments for the life of the SO4 Agreement.
The price for contract capacity payments and capacity bonus payments is fixed at
$175/kW per year.  The energy  payments  for the first  ten-year  period,  which
period expired on February 12, 1999,  were  levelized at a time period  weighted
average of 9.8 cents per kWh. Thereafter,  the monthly energy payments are based
on Edison's Avoided Cost of Energy.

         Salton Sea IV Project.  The Salton Sea IV Project sells  electricity to
Edison pursuant to a modified SO4 Agreement which provides for contract capacity
payments  on 34 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  ("Fish Lake PPA") (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 energy payment (for  deliveries up to a rate of 39.6
MW) is at a fixed price for 55.6% of the total energy delivered by Salton Sea IV
and is based on an  energy  payment  schedule  for  44.4%  of the  total  energy
delivered  by Salton Sea IV. 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.
<PAGE>

         Gas Facilities

         Yuma  Project.  The  Yuma  Project  is a 50  net MW  natural  gas-fired
cogeneration  project in Yuma,  Arizona  providing 50 MW of  electricity  to San
Diego Gas & Electric Company  ("SDG&E") under an existing 30-year power purchase
contract ("Yuma PPA").  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. The
power is wheeled  to SDG&E  over  transmission  lines  constructed  and owned by
Arizona Public Service Company ("APS").  The Yuma Project  commenced  commercial
operation in May 1994. The project entity, Yuma Cogeneration Associates ("YCA"),
has executed steam sales contracts with an adjacent  industrial entity 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.

         Saranac Project.  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 New York  State  Electric & Gas
("NYSEG").  The  Saranac  Project is a QF and has  entered  into  15-year  steam
purchase   agreements   (the   "Saranac   Steam   Purchase   Agreements")   with
Georgia-Pacific  Corporation and Tenneco Packaging, Inc. The Saranac Project has
a 15-year natural gas supply contract (the "Saranac Gas Supply  Agreement") with
Shell Canada Limited  ("Shell  Canada") to supply 100% of the Saranac  Project's
fuel  requirements.  Shell Canada 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 NYSEG and  Georgia-Pacific.  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
1999  Saranac PPA rates  escalate at a higher  percentage  than fuel rates.  The
Saranac Partnership is indirectly owned by subsidiaries of CE Generation,  Tomen
Corporation ("Tomen") and General Electric Capital Corporation ("GECC").

         On  February  14,  1995,  NYSEG  filed with the FERC a  Petition  for a
Declaratory  Order,  Complaint,  and Request for  Modification of Rates in Power
Purchase  Agreements Imposed Pursuant to the Public Utility Regulatory  Policies
Act of 1978  ("Petition")  seeking FERC (i) to declare that the rates NYSEG pays
under  the  Saranac  PPA,  which was  approved  by the New York  Public  Service
Commission  (the "PSC"),  were in excess of the level  permitted under PURPA and
(ii) to  authorize  the PSC to reform the Saranac  PPA. On March 14,  1995,  the
Saranac Partnership  intervened in opposition to the Petition  asserting,  inter
alia,  that the Saranac PPA fully  complied with PURPA,  that NYSEG's action was
untimely and that the FERC lacked  authority to modify the Saranac PPA. On April
12, 1995,  the FERC by a unanimous  (5-0)  decision  issued an order denying the
various forms of relief  requested by NYSEG and finding that the rates  required
under the Saranac PPA were consistent with PURPA and the FERC's regulations.  On
May 11, 1995,  NYSEG requested  rehearing of the order and, by order issued July
19, 1995, the FERC unanimously  (5-0) denied NYSEG's request.  On June 14, 1995,
NYSEG petitioned the United States Court of Appeals for the District of Columbia
Circuit (the "Court of Appeals") for review of FERC's April 12, 1995 order. FERC
moved to dismiss NYSEG's petition for review on July 28, 1995. On July 11, 1997,
the Court of Appeals dismissed NYSEG's appeal from FERC's denial of the petition
on jurisdictional grounds.
<PAGE>

         On August 7, 1997,  NYSEG filed a complaint in the U.S.  District Court
for the  Northern  District  of New  York  against  the  FERC,  the PSC (and the
Chairman,  Deputy  Chairman and the  Commissioners  of the PSC as individuals in
their  official   capacity),   the  Saranac   Partnership  and  Lockport  Energy
Associates,  L.P.  ("Lockport")  concerning the power purchase  agreements  that
NYSEG entered into with Saranac Partners and Lockport. NYSEG's suit asserts that
the PSC and the FERC  improperly  implemented  PURPA in authorizing  the pricing
terms that  NYSEG,  the  Saranac  Partnership  and  Lockport  agreed to in those
contracts.  The action raises  similar legal  arguments to those rejected by the
FERC in its April and July 1995 orders.  NYSEG in addition asks for  retroactive
reformation of the contracts as of the date of commercial  operation and seeks a
refund of $281 million from the Saranac Partnership. The Saranac Partnership and
other parties have filed motions to dismiss and oral  arguments on those motions
were heard on March 2, 1998 and again on March 3, 1999. The Saranac  Partnership
believes that NYSEG's claims are without merit for the same reasons described in
the FERC's orders.

         Power Resources  Project.  The Power Resources  Project is a 200 net MW
natural gas-fired cogeneration project located near Big Spring, Texas, which has
a 15-year  power  purchase  agreement  (the  "Power  Resources  PPA") with Texas
Utilities  Electric  Company.  The  Power  Resources  Project  began  commercial
operation  in June 1988.  The Power  Resources  Project is a QF and the  project
entity,  Power Resources Ltd.  ("Power  Resources"),  has entered into a 15-year
steam purchase  agreement (the "Power Resources Steam Purchase  Agreement") with
Fina Oil and  Chemical  Company  ("Fina"),  a subsidiary  of  Petrofina  S.A. of
Belgium. Power Resources has entered into an agreement (the "CE Texas Gas Supply
Agreement")  with CE Texas Gas L.P. ("CE Texas Gas") for Power  Resources'  fuel
requirements through December 2003. In June 1995, CE Texas Gas and Louis Dreyfus
Natural  Gas  Corp.  ("Dreyfus")  executed  an  eight-year  natural  gas  supply
agreement (the "CE Texas Gas-Dreyfus Gas Supply Agreement"), with which CE Texas
Gas will  fulfill its supply  commitment  to the Power  Resources  Project  from
October  1995 to the end of the term of the  Power  Resources  PPA.  Each of the
Power  Resources PPA, the Power  Resources  Steam Purchase  Agreement and the CE
Texas Gas Supply  Agreement  contains  rates  that are fixed for the  respective
contract terms.  Revenues  escalate at a higher rate than fuel costs.  The Power
Resources Project is wholly owned by subsidiaries of the Company.

         NorCon Project.  CE Generation  formerly owned an indirect  interest in
the NorCon Project, an 80 net MW natural gas-fired cogeneration facility located
in North East,  Pennsylvania which began commercial  operation in December 1992.
On December 2, 1999 the project entity, NorCon Power Partners,  L.P. ("NorCon"),
reached agreement with Niagara Mohawk Power Corporation  ("NIMO") to dismiss the
outstanding  litigation  between  NorCon and Niagara.  At the same time,  NorCon
transferred  the NorCon project to GECC and entered into  agreements  with third
parties to terminate  some of NorCon's  contracts  and to assign the rest of its
contracts to a subsidiary of GECC.  GECC also agreed to be responsible for other
third party  claims made against  NorCon  related to the NorCon  Project.  Thus,
after  December  2,  1999,  neither  NorCon  nor  any  of  the  Company's  other
subsidiaries  owns an  interest  in the NorCon  Project  and the NorCon  Project
contracts are no longer in effect or have been assigned to third parties.

         Projects in Construction

         Salton Sea V. Salton Sea Power LLC, an indirect wholly owned subsidiary
of CE Generation,  is  constructing  the Salton Sea V Project.  The Salton Sea V
Project is a 49 net MW  geothermal  power  plant  which will sell  approximately
one-third  of its net output to the Zinc  Recovery  Project.  The Zinc  Recovery
Project  is a  project  under  construction  owned by  CalEnergy  Minerals,  LLC
("Minerals LLC"), an indirect  wholly-owned  subsidiary of MidAmerican,  for the
extraction of zinc from solution in the geothermal  brine and fluids utilized by
CE  Generation's  Imperial Valley  Projects (the "Zinc Recovery  Project").  The
remainder  of the Salton Sea V power will be sold through the  California  Power
Exchange ("PX") or other market transactions.  The Salton Sea V Project is being
constructed  pursuant  to a date  certain,  fixed  price,  turnkey  engineering,
procurement and construction contract (the "Salton Sea V EPC Contract") by Stone
&  Webster  Engineering  Corporation  ("SWEC").  The  Salton  Sea V  Project  is
scheduled to commence commercial operation in mid-2000.
<PAGE>

         CE Turbo.  CE Turbo LLC,  an  indirect  wholly-owned  subsidiary  of CE
Generation, is constructing the CE Turbo Project. The CE Turbo Project will have
a capacity of 10 net MW. The net output of the CE Turbo  Project will be sold to
the Zinc Recovery  Project or sold through the PX or other market  transactions.
In addition to the CE Turbo Project,  the Partnership  Projects are constructing
an upgrade to the geothermal brine  processing  facilities at the Vulcan and Del
Ranch Projects to incorporate  the pH  Modification  Process,  which has reduced
operating  costs at the Imperial  Valley  Project.  The CE Turbo Project and the
brine facilities  construction are being  constructed by SWEC pursuant to a date
certain, fixed price, turnkey engineering, procurement and construction contract
(the  "Region 2 Upgrade EPC  Contract").  The CE Turbo  Project is  scheduled to
commence  initial  operations  in early to mid  2000  and the  brine  facilities
construction is scheduled to be completed in early 2000.

                          DESCRIPTION OF THE SECURITIES

         The  following  is  a  description  of  important   provisions  of  the
securities.  The  following  information  does  not  purport  to  be a  complete
description  of the  securities and is subject to, and qualified in its entirety
by, reference to the securities and the indenture.  Unless otherwise  specified,
the following description applies to all of the securities.

General

         The securities are direct senior  obligations of CE Generation,  issued
under the indenture for the  securities and secured by the  collateral.  The old
securities were issued in fully registered form and in denominations of $100,000
and any integral multiple of $1,000 in excess of $100,000.

         On March 2, 1999, CE Generation issued securities in a single series in
the aggregate principal amount of $400 million, bearing interest from their date
of issuance at 7.416% per annum and finally maturing on December 15, 2018. These
securities  were  issued  in  reliance  on  exemptions  from  the   registration
requirements  of the Securities  Act. On March 6, 2000, CE Generation  exchanged
$400,000,000  principal amount of these  securities for  $400,000,000  principal
amount of securities  which have been  registered  under the Securities Act. The
form and terms of these new securities are identical in all material respects to
the securities for which they were exchanged  except that transfer  restrictions
and registration rights applicable to the old securities do not apply to the new
securities.

         The  indenture  provides for the issuance of the  securities  and other
series of senior notes or  securities  as from time to time may be authorized by
us, subject to the limitations set forth in the indenture.

Collateral for the Securities

         The  securities  are  secured  by the  following  collateral:  (a)  all
available cash flow of the assigning  subsidiaries deposited with the depository
bank;  (b) a pledge of 99% of the equity  interests in Salton Sea Power  Company
and all of the equity interests in CE Texas Gas LLC, the assigning  subsidiaries
(other than Magma Power Company),  and California Energy Yuma  Corporation;  (c)
upon the redemption of, or earlier release of security interests under,  Magma's
9 7/8%  promissory  notes, a pledge of all of the capital stock of Magma;  (d) a
pledge of all of the capital stock of SECI Holdings  Inc.; (e) a grant of a lien
on and security  interest in the depository  accounts;  and a grant of a lien on
and security  interest in all of CE  Generation's  other tangible and intangible
property, to the extent it is possible to grant a lien on the property.

Payment of Interest and Principal

Interest
<PAGE>

         Interest on the securities is payable  semiannually  in arrears on each
June 15 and  December 15 to the  registered  holders at the close of business on
the  preceding  June 1 or December 1.  Interest is  calculated on the basis of a
360-day year, consisting of twelve 30-day months.

Principal

         The  principal  of  the  securities   will  be  payable  in  semiannual
installments, commencing June 15, 2000, as follows:


PAYMENT DATE               PERCENTAGE OF

June 15, 2000              1.300%

December 15, 2000          1.300%

June 15, 2001              1.575%

December 15, 2001          1.575%

June 15, 2002              2.575%

December 15, 2002          2.575%

June 15, 2003              2.250%

December 15, 2003          2.250%

June 15, 2004              1.825%

December 15, 2004          1.825%

June 15, 2005              1.850%

December 15, 2005          1.850%

June 15, 2006              2.400%

December 15, 2006          2.400%

June 15, 2007              2.250%

December 15, 2007          2.250%

June 15, 2008              3.525%

December 15, 2008          3.525%

June 15, 2009              3.075%

December 15, 2009          3.075%

June 15, 2010              1.775%

December 15, 2010          1.775%

June 15, 2011              1.900%

December 15, 2011          1.900%

June 15, 2012              2.560%

December 15, 2012          2.560%
<PAGE>

June 15, 2013              2.550%

December 15, 2013          2.550%

June 15, 2014              3.225%

December 15, 2014          3.225%

June 15, 2015              3.380%

December 15, 2015          3.380%

June 15, 2016              3.660%

December 15, 2016          3.660%

June 15, 2017              3.780%

December 15, 2017          3.780%

June 15, 2018              4.545%

December 15, 2018          4.545%

Priority of Payments

         All available cash flows  received by CE Generation  shall be paid into
the Revenue  Account  maintained by a Depository.  Amounts paid into the Revenue
Account shall be  distributed in the following  order:  (a) to pay operating and
administrative  costs of CE Generation and it's  subsidiaries,  excluding  those
costs payable to affiliated parties; (b) to pay certain  administrative costs of
the agents for the secured  parties  under the Financing  Documents;  (c) to pay
principal  of,  premium  (if any) and  interest on the  Securities  and the Debt
Service Reserve Bonds, if any, and interest and certain fees payable to the Debt
Service  Reserve LOC provider;  (d) to pay principal of Debt Service Reserve LOC
Loans and certain  related fees and charges;  (e) to replenish  any shortfall in
the Debt Payment  Account;  (f) to replenish  any  shortfall in the Debt Service
Reserve Account;  (g) to pay any remaining amounts to the Distribution  Suspense
Account.

Debt Service Reserve Account

         A Debt Service  Reserve  Fund for the benefit of the  Security  Holders
issued by Credit Suisse First Boston and Lehman Commercial Paper Inc., which has
been  funded  by a Debt  Service  Reserve  Letter of  Credit  Provider  has been
established under the Depository Agreement. If the amounts available to be drawn
under the Debt Service  Reserve  Letter of Credit and all other  amounts held in
the Debt Service Reserve Account from time to time do not equal the then current
debt service reserve  required  balance,  the Debt Service Reserve Fund shall be
funded from the  Revenue  Account  subject to the funding of requests  described
above.  The debt service reserve required balance on any date equals the maximum
semiannual  principal  and  interest  payment  due on  the  securities  for  the
remaining  term.  Any Debt Service  Reserve Letter of Credit must be issued by a
financial institution rated at least "A" by S&P and "A2" by Moody's.
<PAGE>

Optional Redemption

         The securities are subject to optional redemption, in whole or in part,
at any time on any business day, at a price equal to the redemption price plus a
premium  calculated to "make whole" to comparable U.S. Treasury  Securities plus
50 basis points.

Mandatory Redemption--At Par

         The securities are subject to mandatory redemption, at par plus accrued
interest to the  Redemption  Date,  (a) upon the occurrence of certain events of
loss,   expropriation   or  title  defects  related  to  CE  Generation  or  its
subsidiaries;  or (b) if a permitted  power  contract  buy-out occurs unless the
Rating Agencies confirm the then current rating of the securities.

Mandatory Redemption--With Yield Maintenance Premium

         The securities are subject to mandatory redemption, at par plus accrued
interest and a yield  maintenance  premium to the  Redemption  Date upon certain
project  refinancing or project debt refinancing or upon certain asset or equity
interests sales.

Distributions

         Distributions  may be made  only  from and to the  extent  of monies on
deposit in the Distribution  Suspense Account,  on any funding date on which the
following conditions are satisfied:

(a)       the debt  payment  account and the debt  service  reserve  account are
          funded to the then current required levels and the payments  described
          in the  first,  second,  sixth  and  seventh  priorities  of  payments
          described above are satisfied in full;

(b)       no default or event of default under the indenture shall have occurred
          and be continuing;

(c)       the debt service coverage ratio for the preceding four fiscal quarters
          ending on or prior to the funding  date,  measured  as one period,  is
          greater or equal to 1.5 to 1.0;

(d)       the projected  debt service  coverage  ratio for the  succeeding  four
          fiscal quarters, including the quarter in which the distribution is to
          be made,  measured as one period,  is greater  than or equal to 1.5 to
          1.0; and

(e)       no material default or event of default has occurred and is continuing
          under any project  financing  document  for the Saranac  Project,  the
          Power  Resources  Project,  the Yuma  Project or the  Imperial  Valley
          Projects.

Nature of Recourse on the Securities

         The  obligation to pay  principal of,  premium (if any) and interest on
the  Securities  are  obligations  solely  of  CE  Generation,  secured  by  the
collateral.   Neither  MidAmerican  nor  El  Paso  Energy,  nor  any  affiliate,
shareholder,  member,  officer,  director  or employee  of CE  Generation  or of
MidAmerican  or El Paso Energy will  guarantee the payment of the  securities or
has any obligation with respect to the securities  (other than the assignment by
the  assigning  subsidiaries  of  their  available  cash  flows  to  secure  the
obligation to make payments on the securities).

Covenants

Principal  covenants  under the  indenture  require CE  Generation,  among other
things,  (a) to maintain  its  existence,  (b) comply with  applicable  laws and
governmental  approach,  (c) perform  required  obligations  under the financing
documents,  (d) maintain the liens on the  collateral in favor of the collateral
agent,  (f) not to incur any debt except permitted debt and lien upon any of its
properties  except  permitted  liens,  and (g) not form any  subsidiaries,  make
investments,  loans or  advances  or  acquisitions,  in each case  other than as
permitted under the indenture.


<PAGE>


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, 1999, CEOC and FPOC, employed 166 and
75 people full-time, respectively.  MidAmerican employees provide administrative
services,  including accounting,  legal,  personnel and cash management under an
administrative  services  agreement.  El Paso  employees are expected to provide
power marketing and fuel management services under agreements for power services
and fuel management.

         MidAmerican  agreed  to  provide  administrative  services,   including
accounting,  legal, human resources and cash management services, to the Company
under an administrative  services  agreement.  MidAmerican is reimbursed for its
actual costs and expenses of providing the services. Other affiliates of El Paso
agreed to provide power marketing and fuel management services to the Company in
return for  reimbursement  of its actual  costs and  expenses of  providing  the
services.  These  agreements  each  have an  initial  term of one  year and then
continue from year to year until  terminated  by either party.  The Company also
entered into an agreement with  MidAmerican and El Paso Power to provide El Paso
Power  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  MidAmerican  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 MidAmerican.
If the Company elects not to participate,  the agreement  gives  MidAmerican 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 2. Properties

         The Company's most  significant  physical  properties,  are its current
interest in  operating  power  facilities,  its plants  under  construction  and
related real  property  interests.  The Company  also  maintains an inventory of
approximately  75,000  acres  of  geothermal  property  leases.  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. 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 Project.

         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 five years if drilling is commenced  within
the primary term and is diligently pursued for two successive  five-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

         In addition to the proceedings  described in Part 1, "The Projects,  CE
Generation Gas  Facilities,  Saranac  Project"  above,  some of the projects are
currently  parties to  various  minor  items of  litigation,  none of which,  if
determined adversely, would have a material adverse effect on those projects.

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

Not applicable.


<PAGE>


                                     Part II

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

Not applicable.


<PAGE>


Item 6.  Selected Financial Data

                      SELECTED CONSOLIDATED FINANCIAL DATA

                                 (in thousands)

         The selected  data  presented  below as of December 31, 1999,  1998 and
1997 and for the years ended December 31, 1999,  1998, 1997 and 1996 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  MidAmerican),
Falcon  Seaboard   Resources  Inc.  and  subsidiaries   and  Yuma   Cogeneration
Associates,  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. The selected data presented below as of December 31, 1996
and 1995 and for the year ended  December  31, 1995 are derived  from  unaudited
consolidated  financial statements and reflect all adjustments  necessary in the
opinion of our management for a fair presentation of the data.
<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,

                                                 1999 (4)       1998            1997         1996 (2)        1995 (1)
Statement of Operations Data:
<S>                                       <C>             <C>            <C>            <C>             <C>
Sales of electricity and thermal energy   $     295,787   $     395,560  $     381,458  $     281,307   $    179,393
Total revenue                                   340,683         436,175        407,138        304,843        217,182
Income before minority interest and
  extraordinary item                             61,970          93,778         69,996         46,211         29,131
Extraordinary item (3)                          (17,478)            ---            ---            ---            ---
Net income                                       44,492          93,778         69,996         46,211         25,040
</TABLE>
<TABLE>
<CAPTION>

                                                                         AS OF DECEMBER 31,
                                                 1999           1998            1997         1996 (2)       1995 (1)
Balance Sheet Data:
<S>                                       <C>             <C>            <C>            <C>            <C>
Total assets                              $   1,725,411   $   1,782,385  $   1,560,874  $   1,611,087  $   1,149,858
Project loans, including current portion         76,261          90,529        103,334        114,571         54,707
Salton Sea notes and bonds, including
  current portion                               568,980         626,816        448,754        538,982        452,088
Senior Secured Bonds                            400,000             ---            ---            ---            ---
Total liabilities                             1,333,131       1,245,438      1,096,734      1,156,184        916,433
Net investments and advances
   (members' equity at
   December 31, 1999)                           392,280         536,947        464,140        454,903        233,425
</TABLE>

(1) Reflects the  acquisition  of  approximately  51% of Magma Power  Company on
January 10, 1995,  and the  remaining  49% on February  24,  1995.  Includes the
results of  operations  of Magma Power  Company  from  January 10, 1995  through
December 31, 1995 adjusted for CE Generation's  percentage ownership during that
time period.  (2) Reflects the  acquisition  of the remaining 50% of the Elmore,
Vulcan, Del Ranch and Leathers projects on April 17, 1996 and the acquisition of
Falcon  Seaboard  Resources  on  August  7,  1996.  (3) The  extraordinary  item
recognized in the year ended December 31, 1999 reflects the early  redemption of
substantially  all of the  outstanding 9 7/8% Limited  Recourse  Senior  Secured
Notes Due 2003.  (4) The  decrease  in revenue and net income in 1999 was due to
the  expiration of the fixed price periods for the Elmore,  Del Ranch and Salton
Sea III Projects.


<PAGE>


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

The following is  management's  discussion and analysis of  significant  factors
which  have  affected  CE  Generation's   financial  condition  and  results  of
operations  during  the  periods  included  in the  accompanying  statements  of
operations.   The   Company's   actual   results  in  the  future  could  differ
significantly from the historical results.

Business

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

         The  consolidated   financial   statements   reflect  the  consolidated
financial   statements  of  Magma  and  subsidiaries   (excluding   wholly-owned
subsidiaries  retained by  MidAmerican),  FSRI and  subsidiaries and YCA, each a
wholly-owned  subsidiary.  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.  The basis in
assets and  liabilities  have been carried over from  MidAmerican.  All material
intercompany transactions and balances have been eliminated in consolidation.

         The  following  table sets out  information  concerning  CE  Generation
projects:

PROJECT              FUEL             COMMERCIAL       CAPACITY       LOCATION

Vulcan               Geothermal       1986             34 MW          California

Del Ranch            Geothermal       1989             38 MW          California

Elmore               Geothermal       1989             38 MW          California

Leathers             Geothermal       1990             38 MW          California

CE Turbo             Geothermal       2000(1)          10 MW          California

Salton Sea I         Geothermal       1987             10 MW          California

Salton Sea II        Geothermal       1990             20 MW          California

Salton Sea III       Geothermal       1989             49.8 MW        California

Salton Sea IV        Geothermal       1996             39.6 MW        California

Salton Sea V         Geothermal       2000(1)          49 MW          California

Power Resources      Gas              1988             200 MW         Texas

Yuma                 Gas              1994             50 MW          Arizona

Saranac              Gas              1994             240 MW         New York

(1)      The CE Turbo and Salton Sea V Project  are under  construction  and are
         expected to commence commercial operation by the summer of 2000.

         On December 2, 1999,  the NorCon  Project was  transferred  to GECC and
therefore CE Generation no longer has any interest in the NorCon Project.

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

Factors Affecting Results of Operations

         The capacity factor for a particular  project is determined by dividing
total quantity of electricity sold by the product of the project's  capacity and
the total hours in the year. The capacity factors for Vulcan Project,  Hoch (Del
Ranch) Project, Elmore Project and Leathers Project plants are based on capacity
amounts of 34, 38, 38 and 38 net megawatts,  respectively.  The capacity factors
for Salton Sea Unit I Project,  Salton Sea Unit II Project,  Salton Sea Unit III
Project and Salton Sea Unit IV Project  plants are based on capacity  amounts of
10, 20, 49.8 and 39.6 net megawatts,  respectively. The capacity factors for the
Saranac Project, Power Resources Project, NorCon Project and Yuma Project plants
are  based  on  capacity   amounts  of  240,  200,  80  and  50  net  megawatts,
respectively.  Each plant,  except the NorCon  Project,  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.

Power Purchase Agreements

         Imperial Valley  Projects.  The current  Partnership  Projects sell all
electricity  generated  by  the  respective  plants  under  four  long-term  SO4
Agreements  between the  Partnership  Projects and Edison.  These SO4 Agreements
provide for capacity  payments,  capacity  bonus  payments and energy  payments.
Edison  makes  fixed  annual   capacity  and  capacity  bonus  payments  to  the
Partnership  Projects to the extent that capacity factors exceed  benchmarks set
forth in the  agreements.  The price for capacity and capacity bonus payments is
fixed for the life of the SO4 Agreements. Energy is sold at increasing scheduled
rates for the first ten years after firm operation and thereafter at rates based
on the cost that Edison  avoids by  purchasing  energy from the Imperial  Valley
Partnership Projects instead of obtaining the energy from other sources.

         The  scheduled  energy  price  periods  of  the  Partnership  Projects'
long-term  agreements extended until February 1996, December 1998, December 1998
and December  1999 for each of the Vulcan  Project,  Del Ranch  Project,  Elmore
Project and Leathers Project, respectively. The weighted average energy rate for
all of the Partnership  Projects'  agreements was 6.5 cents per kilowatt-hour in
1999.

         Salton Sea Unit I Project sells  electricity  to Edison under a 30-year
negotiated  power  purchase  agreement,  which  provides for capacity and energy
payments.  The energy payment is calculated  using a base price which is subject
to quarterly  adjustments based on a basket of indices. The time period weighted
average  energy  payment  for Salton Sea Unit I was 5.3 cents per  kilowatt-hour
during  1999.  As the Salton Sea Unit I PPA is not a SO4  Agreement,  the energy
payments  do not  revert to  payments  based on the cost that  Edison  avoids by
purchasing  energy from Salton Sea Unit I instead of  obtaining  the energy from
other sources. The capacity payment is approximately $1.1 million per annum.

         Salton  Sea Unit II  Project  and  Salton  Sea Unit  III  Project  sell
electricity  to Edison under 30-year  modified SO4  Agreements  that provide for
capacity  payments,  capacity bonus payments and energy payments.  The price for
contract  capacity and contract capacity bonus payments is fixed for the life of
the modified  standard offer no. 4 agreements.  The energy  payments for each of
the first ten year periods, which periods expire in April 2000 for Salton Sea II
and expired in February  1999 for Salton Sea III, are levelized at a time period
weighted average of 10.6 cents per kilowatt-hour and 9.8 cents per kilowatt-hour
for Salton Sea Unit II and Salton Sea Unit III,  respectively.  Thereafter,  the
monthly  energy  payments  will be based  on the  cost  that  Edison  avoids  by
purchasing energy from Salton Sea Unit II or III instead of obtaining the energy
from other sources.  For Salton Sea Unit II only, 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 annual  capacity and bonus payments for Salton
Sea Unit II and  Salton Sea Unit III are  approximately  $3.3  million  and $9.7
million, respectively.
<PAGE>

         Salton Sea Unit IV Project sells electricity to Edison under a modified
SO4 Agreement which provides for contract  capacity  payments on 34 megawatts of
capacity at two  different  rates based on the  respective  contract  capacities
deemed  attributable to the original Salton Sea Unit I PPA option (20 megawatts)
and to the original Fish Lake PPA (14 megawatts). The capacity payment price for
the 20 megawatts  portion adjusts quarterly based upon specified indices and the
capacity  payment price for the 14 megawatts  portion is a fixed levelized rate.
The energy payment (for deliveries up to a rate of 39.6 megawatts) is at a fixed
rate for 55.6% of the total energy  delivered by Salton Sea Unit IV and is based
on an energy payment  schedule for 44.4% of the total energy delivered by Salton
Sea Unit IV.  The  contract  has a 30-year  term but Edison is not  required  to
purchase the 20 megawatts of capacity and energy originally  attributable to the
Salton Sea Unit I PPA option after September 30, 2017, the original  termination
date of the Salton Sea Unit I PPA.

         For the years ended December 31, 1999 and 1998,  Edison's average price
paid for  energy  was 3.1 cents and 3.0 cents per  kilowatt-hour,  respectively,
which is  substantially  below the contract  energy  prices  earned for the year
ended  December 31, 1999.  The Company cannot predict the likely level of energy
prices  under  the  SO4  Agreements  and  the  modified  SO4  Agreements  at the
expiration of the scheduled payment periods.  The revenues  generated by each of
the projects  operating under SO4 Agreements  will likely decline  significantly
after the expiration of the respective  scheduled payment periods.  Revenues for
the Del Ranch Project  decreased  from $57.9 million in the year ended  December
31, 1998 to $19.1  million in the year ended  December 31, 1999 after the end of
the  contract  energy  price  period in December  1998.  Revenues for the Elmore
Project  decreased  from $54.6  million in the year ended  December  31, 1998 to
$18.7 million in the year ended  December 31, 1999 after the end of the contract
energy price period in December 1998. If the Leathers  Project  received avoided
cost energy rates in 1999 rather than the contract energy prices, revenues would
have  decreased  from $62.3 million to $18.4 million in the year ended  December
31, 1999.

         Gas Projects.  The Saranac Project sells electricity to NYSEG under the
Saranac PPA, which provides for capacity and energy payments. Capacity payments,
which in 1999 totaled 2.4 cents per kilowatt-hour,  are received for electricity
produced  during  "peak  hours" as defined in the  Saranac  PPA and  escalate at
approximately  4.1%  annually for the  remaining  term of the  contract.  Energy
payments,  which  averaged  7.0 cents per  kilowatt-hour  in 1999,  escalate  at
approximately  4.4%  annually  for the  remaining  term of the Saranac  PPA. The
Saranac PPA expires in June of 2009.

         The  Power  Resources  Project  sells  electricity  to Texas  Utilities
Electric  Company under the Power Resources PPA, which provides for capacity and
energy payments.  Capacity payments and energy payments,  which in 1999 are $3.2
million  per month and 3.7 cents per  kilowatt-hour,  respectively,  escalate at
3.5%  annually  for the  remaining  term of the Power  Resources  PPA. The Power
Resources PPA expires in September 2003.

         The Yuma Project sells  electricity to SDG&E under Yuma PPA. The energy
is sold at a price based on the cost that SDG&E avoids by purchasing energy from
the Yuma  Project  instead of  obtaining  the energy from other  sources and the
capacity  is sold to SDG&E at a fixed  price for the life of the Yuma  PPA.  The
power is delivered to SDG&E over  transmission  lines  constructed  and owned by
APS.

Results of Operations for the Years Ended December 1999, 1998 and 1997

         Sales of electricity  and steam decreased to $295.8 million in the year
ended December 31, 1999 from $395.6 million in the year ended December 31, 1998,
a 25% decrease.  This  decrease was primarily a result of the  expiration of the
fixed price periods for the Elmore and Del Ranch Projects and for the Salton Sea
Unit III  Project.  These  periods  ended in December  1998,  December  1998 and
February 1999, respectively.
<PAGE>

         Sales of electricity  and steam increased to $395.6 million in the year
ended December 31, 1998 from $381.5 million in the year ended December 31, 1997,
a 3.7%  increase.  This increase was primarily due to an increase in electricity
production and the scheduled rate increases at the Imperial Valley Projects.

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

                                      1999          1998           1997

Overall capacity factor               98.2%         98.2%           99.2%
Megawatt-hours produced            2,300,700      2,299,400      2,323,800
Capacity (net megawatts)(average)    267.4         267.4           267.4

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

                                               1999         1998         1997

Overall capacity factor                        83.5%        81.6%        84.3%
Megawatt-hours produced                     4,258,606     4,072,620    4,211,030
Capacity (net megawatts)(weighted average)     557           570          570

         The overall capacity factor of the Gas Projects  reflects the effect of
contractual  curtailments.  The capacity factors adjusted for these  contractual
curtailments are 92.5%,  92.2% and 95.7% for 1999, 1998 and 1997,  respectively.
The  changes  in the  overall  capacity  factor in 1999,  1998 and 1997 were due
primarily to major maintenance downtime and lower electricity  production at the
Saranac Project due to 1998 winter snow and ice storms which caused transmission
curtailment.

         The  increase  in  equity  earnings  of  subsidiaries  in 1999 to $22.9
million  from  $10.7  million  in 1998 was  primarily  due to lower  electricity
production  at the  Saranac  Project in 1998 due to severe  winter  snow and ice
storms which caused transmission  curtailments.  The decrease in equity earnings
of  subsidiaries  in 1998 to $10.7 million from $14.5 million in 1997 represents
the negative impact of the January 1998 ice storm at the Saranac Project.

         Interest and other income  decreased to $22.0 million in the year ended
December 31, 1999 from $29.9 million in the year ended  December 31, 1998.  This
decrease was  primarily  due to reduced  royalty  income at the Imperial  Valley
Projects. Interest and other income increased to $29.9 million in the year ended
December 31, 1998 from $11.1 million in the year ended December 31, 1997, a 168%
increase.  This  increase was  primarily  due to interest  earned on higher cash
balances as a result of the issuance of Salton Sea Funding  Corporation bonds in
October 1998 and the amortization of deferred income of $6.9 million, related to
a settlement  with respect to our rights to receive  payments in connection with
our  assignment  to  East  Mesa  of  power  purchase  contracts,  power  project
facilities  and  geothermal  resource  rights,  which was  received  in 1998 and
recognized as income through the remainder of East Mesa's  contract energy price
period in June 1999.

         Plant  operating  expenses  decreased  in 1999 to $112.8  million  from
$114.1 million in 1998. These costs include  operating,  maintenance,  resource,
fuel and other plant  operating  expenses and the  stability of these costs from
period to period reflect the maturity of plant  operations.  Operating  expenses
decreased  in 1998 to  $114.1  million  from  $120.0  million  in  1997,  a 4.9%
decrease.  The decrease was primarily due to operating efficiencies.

         General and  administrative  expenses  decreased to $4.6 million in the
year ended  December 31, 1999 from $5.0  million in the year ended  December 31,

<PAGE>

1998. General and administrative  expenses increased to $5.0 million in the year
ended  December 31, 1998 from $4.4 million in the year ended  December 31, 1997.
These costs include administrative services provided to CE Generation, including
executive,  financial, legal, tax and other corporate functions. The increase in
1998 reflects increased bank service charges relating to increased indebtedness.

         Depreciation and  amortization  decreased to $57.9 million in 1999 from
$96.8  million in 1998.  The  decrease  was  primarily  due to  reduced  step up
depreciation after the end of the fixed price periods for the Del Ranch,  Elmore
and Salton Sea Unit III Projects as a result of greater value being  assigned to
the scheduled price periods for the contracts  relating to these projects at the
time of acquisition. Depreciation and amortization increased to $96.8 million in
1998 from $88.5 million in 1997, a 9.4% increase. The increase was due primarily
to a  modification  of the  amortization  method used to amortize the fair value
adjustments  associated  with the  scheduled  price  periods of the  Partnership
Projects.  The amortization method was modified from the weighted average of the
scheduled  price  periods of the four plants to the  scheduled  price periods of
each  individual  plant.  The  impact  of  this  modification  was  to  increase
amortization  expense by $7.5 million in 1998  compared  with 1997.  This change
will not have  significant  impact on future  periods as the fixed price periods
terminated in 1999.

         Interest expense, less amounts capitalized,  decreased in 1999 to $72.5
million from $74.3 million in 1998, a decrease of 2.4%.  Interest expense,  less
amounts  capitalized,  decreased in 1998 to $74.3  million from $80.9 million in
1997, a 8.2% decrease.  Lower interest  expense resulted from the paydown of the
Salton Sea Funding Corporation and Power Resources Project debt offset by Salton
Sea Funding  Corporation's Series F issuance in October 1998 and CE Generation's
issuance of Securities in 1999.

         The provision for income taxes  decreased to $30.9 million in 1999 from
$52.2  million in 1998 and $43.4  million in 1997.  The  effective  tax rate was
33.3%,  35.8%and 38.3% in 1999,  1998 and 1997,  respectively.  The changes from
year to year in the  effective  rate are due  primarily  to the  generation  and
utilization of energy tax credits and depletion deductions.

         The  extraordinary  item of $17.5  million in 1999 reflects the premium
paid and deferred  finance  costs  associated  with the  repayment of its 9 7/8%
Limited Recourse Senior Secured Notes.

Liquidity and Capital Resources

         Cash and cash  equivalents  were $29.1  million at December 31, 1999 as
compared to $25.8 million at December 31, 1998. In addition, restricted cash was
$32.6  million and $128.6  million at December  31, 1999 and  December 31, 1998,
respectively.  The decrease in  restricted  cash was primarily due to the use of
the  proceeds  from  issuance  of Salton Sea Funding  Corporation  bonds for the
construction  of Salton  Sea Unit V  Project  and the CE Turbo  Project  and the
construction of upgrades to the brine  facilities at some of the Imperial Valley
Projects.

         Existing cash and cash  generated by operating  activities are expected
to be sufficient to finance capital expenditures and make scheduled repayment of
debt for the foreseeable future.

         On  March 2,  1999,  CE  Generation  closed  the  sale of $400  million
aggregate  principal  amount of 7.416%  Senior notes due December 15, 2018.  The
proceeds were used to repay Magma's 9 7/8% note payable to  MidAmerican  of $200
million and Yuma's note payable to MidAmerican  of $47.7 million.  The remaining
amount  represented a distribution  to  MidAmerican in return for  MidAmerican's
contribution of common stock and partnership interests in geothermal and natural
gas-fired   combined   cycle   cogeneration   facilities  to  CE  Generation  in
MidAmerican's  strategic  restructuring  which was completed in February,  1999.
These payments to MidAmerican were accounted as repayments of notes payable to a
related party and as an equity distribution to MidAmerican.
<PAGE>

         The  securities  are senior secured debt which rank equally in right of
payment with the other senior secured debt permitted under the indenture for the
securities,  share equally in the collateral  with the other senior secured debt
permitted under the indenture for the securities,  and rank senior to any of the
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 securities are secured by the following collateral:

         * all  available  cash  flow of CE  Generation  subsidiaries  that have
assigned their available cash flows to secure the obligation to make payments on
the securities;

         * a pledge of 99% of the equity  interests in Salton Sea Power  Company
and all of the equity interests in CE Texas Gas LLC, the assigning  subsidiaries
(other than Magma Power Company) and California Energy Yuma Corporation;

         * upon the  redemption  of, or earlier  release of  security  interests
under,  Magma's 9 7/8% promissory notes, a pledge of all of the capital stock of
Magma;

         * a pledge of all of the capital stock of SECI Holdings Inc.;

         * a  grant  of a  lien  on and  security  interest  in  the  depositary
accounts; and

         * a  grant  of a lien  on and  security  interest  in all of our  other
tangible and intangible property.

         Scheduled  principal  payments on the  securities  commence on June 15,
2000,  and  are  payable  thereafter  through  December  15,  2018,  in  varying
semi-annual  payments ranging from approximately $5 million to $18 million.  The
maximum annual principal  payment  obligation during the period is approximately
$36 million in 2018.

         Salton Sea Power L.L.C., one of CE Generation's  indirect  wholly-owned
subsidiaries,  is constructing Salton Sea Unit V Project.  The Salton Sea Unit V
Project  is  a  49  net  megawatt   geothermal   power  plant  which  will  sell
approximately  one-third  of its net  output  to the zinc  facility,  which  was
retained by MidAmerican. The remainder will be sold through the California power
exchange or in other market transactions.

         The  Salton  Sea  Unit  V  Project  is  being   constructed   under  an
engineering,   procurement  and   construction   contract  by  Stone  &  Webster
Engineering  Corporation.  Salton Sea Unit V Project is  scheduled  to  commence
commercial  operation in mid-2000.  Total project costs of the Salton Sea Unit V
Project are expected to be approximately $119.1 million which is being funded by
$76.3 million of debt from Salton Sea Funding Corporation and $42.8 million from
equity contributions.  Salton Sea Power has incurred approximately $85.6 million
of these costs through December 31, 1999.

         CE  Turbo   LLC,   one  of  CE   Generation's   indirect   wholly-owned
subsidiaries,  is constructing  the CE Turbo Project.  The CE Turbo Project will
have a capacity of 10 net megawatts. The net output of the CE Turbo Project will
be sold to the zinc facility or sold through the California power exchange or in
other market transactions.

         The Partnership  Projects are upgrading the geothermal brine processing
facilities  at the  Vulcan  and Del Ranch  projects  with the  brine  facilities
construction.

         The CE Turbo Project and the brine  facilities  construction  are being
constructed  by  Stone  &  Webster  under  an   engineering,   procurement   and
construction  contract.  The  obligations  of Stone & Webster are  guaranteed by
Stone & Webster,  Incorporated.  The CE Turbo  Project is  scheduled to commence
initial operations in early to mid 2000 and the brine facilities construction is
scheduled to be completed in  early-2000.  Total  project  costs for both the CE
Turbo  Project  and  the  brine  facilities  construction  are  expected  to  be
approximately  $63.7  million which will be funded by $55.6 million of debt from
Salton Sea Funding Corporation and $8.1 million from equity  contributions.  The
Company has incurred approximately $40.8 million of these costs through December
31, 1999.
<PAGE>

         The  net  revenues,   equity   distributions  and  royalties  from  the
Partnership  Projects  are  used  to pay  principal  and  interest  payments  on
outstanding  senior secured bonds issued by the Salton Sea Funding  Corporation,
the final series of which is scheduled  to mature in November  2018.  The Salton
Sea Funding  Corporation debt is guaranteed by subsidiaries of Magma and secured
by the capital stock of the Salton Sea Funding Corporation.  The proceeds of the
Salton Sea  Funding  Corporation  debt were  loaned by the  Salton  Sea  Funding
Corporation  under loan  agreements and notes to  subsidiaries of Magma and used
for  construction  of  Salton  Sea  Unit V  Project  and the CE  Turbo  Project,
refinancing of  indebtedness  and other  purposes.  Debt service on the Imperial
Valley loans is used to repay debt service on the Salton Sea Funding Corporation
debt.  The Imperial  Valley loans and the  guarantees  of the Salton Sea 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.

         The proceeds of Series F of the Salton Sea Funding Corporation debt are
being used in part to construct the zinc  facility,  and the direct and indirect
owners of the zinc  facility are among the  guarantors of the Salton Sea Funding
Corporation debt.  MidAmerican has guaranteed the payment by the zinc guarantors
of a specified  portion of the  scheduled  debt service on the  Imperial  Valley
loans  described in the preceding  paragraph,  including  the current  principal
amount of $140.5 million and associated interest.

         On December 2, 1999,  MidAmerican's  indirect subsidiary,  NorCon Power
Partners,   L.P.,  reached  agreement  with  NIMO  to  dismiss  the  outstanding
litigation  between NorCon and NIMO. At the same time,  NorCon  transferred  the
NorCon  Project  to GECC and  entered  into  agreements  with  third  parties to
terminate some of NorCon's  contracts and to assign the rest of its contracts to
a subsidiary of GECC.  GECC also agreed to be responsible  for other third party
claims made against NorCon related to the NorCon Project.  Thus,  after December
2, 1999,  neither NorCon nor any of  MidAmerican's  other  subsidiaries  owns an
interest in the NorCon  Project and the NorCon  Project  contracts are either no
longer in effect or have been assigned to third parties.

         As CE Generation's  share of NorCon's earnings comprise less than 5% of
the equity  earnings in  subsidiaries  for the twelve months ended  December 31,
1999  and our  share  of  NorCon's  net  assets  is less  than 1% of the  equity
investments  at December 31, 1999, the transfer of the NorCon Project to GECC is
not  expected  to have any  significant  impact on our  results  of  operations,
financial condition or liquidity.

Inflation

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

Recent Accounting Pronouncements

         In June 1998, the Financial  Accounting Standards Board ("FASB") issued
Statement of Financial  Accounting  Standard  ("SFAS") No. 133,  Accounting  for
Derivative Instruments and Hedging Activities,  which established accounting and
reporting standards for derivative  instruments and for hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities in the statement of financial position and measure those instruments
at fair value.  This statement is effective for the Company beginning January 1,
2001.  The  Company  has not  yet  determined  the  impact  of  this  accounting
pronouncement.


<PAGE>


Pending Accounting Policy Change

         The Accounting  Standards  Executive  Committee (AcSEC) of the American
Institute of Certified Public  Accountants is considering a project that in part
will address the accounting for major maintenance  activities.  The project will
address the use of the accrual,  deferral and expense  methods of accounting for
major  maintenance  activities.  Pending  any  change in  current  authoritative
guidance,  the  Company may change its current  method of  accounting  for major
maintenance, overhaul and well workover costs.

Item 7A.  Qualitative and Quantitative Disclosures About Market Risk

         Certain  information  included in this report contains  forward-looking
statements made pursuant to the Private Securities Litigation Reform Act of 1995
("Reform Act"). Such statements are based on current  expectations and involve a
number of known and unknown risks and uncertainties  that could cause the actual
results and  performance of the Company to differ  materially  from any expected
future  results or  performance,  expressed or implied,  by the  forward-looking
statements. In connection with the safe harbor provisions of the Reform Act, the
Company has  identified  important  factors that could cause  actual  results to
differ materially from such expectations, including development and construction
uncertainty,  operating  uncertainty,  uncertainties  relating to doing business
outside of the United States,  uncertainties  relating to economic and political
conditions and  uncertainties  regarding the impact of  regulations,  changes in
government policy, industry deregulation and competition. The Company assumes no
responsibility to update forward-looking information contained herein.

Interest Rate Risk

         At December  31, 1999,  the Company had  fixed-rate  long-term  debt of
$969.0  million  with a fair  value of $907.5  million.  These  instruments  are
fixed-rate  and  therefore do not expose us to the risk of earnings  loss due to
changes in market interest rates.  However,  the fair value of these instruments
would decrease by approximately $60.0 million if interest rates were to increase
by 10% from their levels at December 31,  1999.  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, 1999,  the Company had  floating-rate  obligations  of
$76.3  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, 1999, these interest rate swaps had an aggregate notional amount
of $76.3 million,  which the Company could terminate at a cost of  approximately
$4.1 million. A decrease of 10% in the December 31, 1999 level of interest rates
would increase the cost of terminating the swaps by approximately  $0.8 million.
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.


<PAGE>


Item 8.  Financial Statements and Supplementary Data

                          INDEX TO FINANCIAL STATEMENTS

                                                                            PAGE

Consolidated Financial Statements of CE Generation, LLC:

Independent Auditors' Report                                                  23
Consolidated Balance Sheets as of December 31, 1999 and 1998                  24
Consolidated Statements of Operations for the Three Years Ended
  December 31, 1999, 1998 and 1997                                            25
Consolidated Statement of Members' Equity for the Three Years Ended
  December 31, 1999, 1998 and 1997                                            26
Consolidated Statements of Cash Flows for the Three Years Ended
  December 31, 1999, 1998 and 1997                                            27
Notes to Consolidated Financial Statements                                    28

Consolidated Financial Statements of Magma Power Company  (included in
  accordance with Rule 310):

Independent Auditors' Report                                                  46
Consolidated Balance Sheets as of December 31, 1999 and 1998                  47
Consolidated Statements of Operations for the Three Years Ended               48
Consolidated Statements of Stockholder's Equity for the Three Years Ended     49
Consolidated Statements of Cash Flows for the Three Years Ended               50
Notes to Consolidated Financial Statements                                    51

Consolidated Financial Statements of Falcon Seaboard Resources, Inc.
  (included in accordance with Rule 310):

Independent Auditors' Report                                                  62
Consolidated Balance Sheets as of December 31, 1999 and 1998                  63
Consolidated Statements of Operations for the Three Years Ended
  December 31, 1999, 1998 and 1997                                            64
Consolidated Statements of Changes in Stockholder's Equity for the
  Three Years Ended December 31, 1999, 1998 and 1997                          65
Consolidated Statements of Cash Flows for the Three Years Ended
  December 31, 1999, 1998 and 1997                                            66
Notes to Consolidated Financial Statements                                    67
<PAGE>

Consolidated Financial Statements of Saranac Power Partners L. P and
  Subsidiary (included in accordance with Rule 309):

Independent Auditors' Report                                                  75
Consolidated Balance Sheets as of December 31, 1999 and 1998                  76
Consolidated Statements of Operations for the Three Years Ended
  December 31, 1999, 1998 and 1997                                            77
Consolidated Statements of Partners' Capital for the Three Years Ended
  December 31, 1999, 1998 and 1997                                            78
Consolidated Statements of Cash Flows for the Three Years Ended
  December 31, 1999, 1998 and 1997                                            79
Notes to Consolidated Financial Statements                                    80


<PAGE>




                          INDEPENDENT AUDITORS' REPORT

Board of Directors
CE Generation, LLC

         We have  audited the  accompanying  consolidated  balance  sheets of CE
Generation,  LLC as of December 31, 1999 and 1998, and the related  consolidated
statements of operations,  members equity,  and cash flows for each of the three
years in the period ended December 31, 1999. These financial  statements are the
responsibility  of CE Generation,  LLC's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  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 as of
December 31, 1999 and 1998 and the results of its  operations and its cash flows
for each of the three years in the period ended  December 31, 1999 in conformity
with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Omaha, Nebraska
January 25, 2000


<PAGE>
                       CE GENERATION, LLC AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998
                             (Amounts in Thousands)

                                                         1999             1998
 ASSETS

 Cash and cash equivalents                     $         29,120  $        25,774
 Restricted cash                                          6,776           26,877
 Accounts receivable                                     40,688           67,629
 Prepaid expenses                                        10,461           11,677
 Inventory                                               19,734           15,442
 Due from affiliates                                      3,794              ---
 Deferred income taxes                                    9,256           31,753
 Other assets                                               ---            4,629
 Total current assets                                   119,829          183,781

 Restricted cash                                         25,836          101,676
 Properties, plants, contracts and equipment, net     1,017,342          893,492
 Equity investments                                     118,637          125,036
 Excess of cost over fair value of net assets acquired,
   net                                                  285,888          310,700
 Note receivable from related party (Note 6)            140,520          140,520
 Deferred financing charges and other assets             17,359           27,180
 Total assets                                  $      1,725,411  $     1,782,385

 LIABILITIES AND EQUITY
 Liabilities:

 Accounts payable and other accrued liabilities $        41,314  $        37,940
 Current portion of long term debt                       51,520           72,104
 Total current liabilities                               92,834          110,044

 Project loan                                            60,173           76,261
 Salton Sea notes and bonds                             543,948          568,980
 Senior secured bonds                                   389,600              ---
 Notes payable to related party                             ---          247,681
 Deferred income taxes                                  246,576          240,602
 Other long term liabilities                                ---            1,870
 Total liabilities                                    1,333,131        1,245,438
 Commitments and contingencies (Note 9)

 Members equity                                         392,280          536,947

 Total liabilities and equity                  $      1,725,411  $     1,782,385

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


<PAGE>


                       CE GENERATION, LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
                             (Amounts in Thousands)

                                            1999         1998             1997

 Revenue:

 Sales of electricity and steam     $     295,787 $     395,560    $     381,458

 Equity earnings in subsidiaries           22,861        10,732           14,542

 Interest and other income                 22,035        29,883           11,138

 Total revenues                           340,683       436,175          407,138



 Cost and Expenses:

 Plant operations                         112,801       114,092          119,973

 General and administrative                 4,594         4,963            4,380

 Depreciation and amortization             57,869        96,818           88,504

 Interest expense                          77,515        74,653           80,907

 Less interest capitalized                 (4,978          (347)             ---

 Total expenses                           247,801       290,179          293,764



 Income before provision for income taxes

    and extraordinary item                 92,882       145,996          113,374

 Provision for income taxes                30,912        52,218           43,378

 Income before extraordinary item          61,970        93,778           69,996

 Extraordinary item, net of tax (Note 8)  (17,478           ---              ---

 Net income                         $      44,492 $      93,778    $      69,996



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


<PAGE>


                       CE GENERATION, LLC AND SUBSIDIARIES
                    CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
                             (Amounts in Thousands)

 BALANCE, January 1, 1997                               $       454,903

 Distribution, net of advances                                  (60,759)

 Net income                                                      69,996

 BALANCE, December 31, 1997                                     464,140

 Distribution, net of advances                                  (20,971)

 Net income                                                      93,778

 BALANCE, December 31, 1998                                     536,947

 Distribution, net of advances                                 (122,080)

 Distribution of non-cash assets to MEHC                        (67,079)

 Net income                                                      44,492

 BALANCE, December 31, 1999                             $       392,280



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


<PAGE>


                       CE GENERATION, LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
                             (Amounts in Thousands)
<TABLE>
<CAPTION>

                                                                   1999             1998             1997
 Cash flows from operating activities:
<S>                                                         <C>              <C>               <C>
 Net income                                                 $      44,492    $      93,778     $      69,996
 Adjustments to reconcile to cash flows from
     operating activities:
 Extraordinary item, net of tax                                    17,478              ---               ---
 Depreciation and amortization                                     57,869           96,818            88,504
 Provision for deferred income taxes                                 (832)          (6,144)            4,280
 Distribution from equity investments in excess of
     equity earnings                                                6,399            6,171             9,418
 Changes in other items:
 Accounts receivable                                               26,941          (14,557)           (2,005)
 Inventory                                                         (4,292)          (3,191)            2,893
 Due from affiliates                                               (3,794)             ---               ---
 Accounts payable and other accrued liabilities                     1,504           (9,133)            4,837
 Other assets                                                       8,632            7,524             4,769

 Net cash flows from operating activities                         154,397          171,266           182,692

 Cash flows from investing activities:
 Capital expenditures                                            (183,508)         (46,222)          (21,676)
 Decrease (increase) in restricted cash                            75,840         (101,366)           15,120

 Net cash flows from investing activities                        (107,668)        (147,588)           (6,556)

 Cash flows from financing activities:
 Repayment of Salton Sea notes and bonds                          (57,836)        (106,938)          (90,228)
 Proceeds from Salton Sea notes and bonds                             ---          285,000               ---
 Proceeds from Senior Secured bonds                               400,000              ---               ---
 Note receivable from related party                                   ---         (140,520)              ---
 Repayment of note payable to related party                      (269,300)            (131)              ---
 Repayment of project loans                                       (14,268)         (12,805)          (11,237)
 Deferred charge relating to debt financing                           ---           (4,943)          (11,623)
 Distributions to MEHC, net of advances                          (122,080)         (20,971)          (60,759)
 Decrease (increase) in restricted cash                            20,101          (20,280)              (97)

 Net cash flows from financing activities                         (43,383)         (21,588)         (173,944)

 Net increase in cash and cash equivalents                          3,346            2,090             2,192
 Cash and cash equivalents at beginning of year                    25,774           23,684            21,492

 Cash and cash equivalents at end of year                   $      29,120    $      25,774     $      23,684
 Supplemental disclosure:
 Interest paid                                              $      78,944    $      73,283     $      72,846
 Income taxes paid                                          $      31,744    $      58,362     $      39,098
</TABLE>

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


<PAGE>



                       CE GENERATION, LLC AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999

1. Business

         MidAmerican  Energy  Holdings  Company  ("MEHC"  and the  successor  in
interest to CalEnergy  Company,  Inc.)  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,  Falcon  Seaboard  Resources,  Inc. 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. 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 is
an affiliate of El Paso Energy Corporation.

         Basis of  Presentation--These  consolidated  financial statements of CE
Generation,  LLC reflect the  consolidated  financial  statements of Magma Power
Company and subsidiaries (excluding wholly-owned subsidiaries retained by MEHC),
Falcon  Seaboard   Resources,   Inc.  and  subsidiaries  and  Yuma  Cogeneration
Associates,   each  a  wholly-owned   subsidiary.   The  consolidated  financial
statements present the financial position,  results of operations and cash flows
of CE Generation as if CE Generation was a separate legal entity for all periods
presented.  CE Generation  has accounted for MEHC's  contribution  of assets and
liabilities  to CE Generation in accordance  with  Interpretation  No. 39 of APB
Opinion No. 16, Transfers and Exchanges  Between Companies Under Common Control.
Accordingly, MEHC's basis in these assets and liabilities, has been carried over
and reflected in CE Generation's financial statements. All material intercompany
transactions and balances have been eliminated in consolidation.

         General--CE  Generation is engaged in the  independent  power business.
The following table sets out information concerning CE Generation's projects:

  PROJECT            FUEL    COMMERCIAL    CAPACITY              LOCATION

Vulcan            Geothermal    1986        34 MW               California
Del Ranch         Geothermal    1989        38 MW               California
Elmore            Geothermal    1989        38 MW               California
Leathers          Geothermal    1990        38 MW               California
Salton Sea I      Geothermal    1987        10 MW               California
Salton Sea II     Geothermal    1990        20 MW               California
Salton Sea III    Geothermal    1989        49.8 MW             California
Salton Sea IV     Geothermal    1996        39.6 MW             California
Salton Sea V      Geothermal    2000        49 MW               California
CE Turbo          Geothermal    2000        10 MW               California
Power Resources   Gas           1988        200 MW              Texas
Yuma              Gas           1994        50 MW               Arizona
Saranac           Gas           1994        240 MW              New York
<PAGE>

         On December 2, 1999,  the NorCon  Project was  transferred  to GECC and
therefore CE Generation no longer has any interest in the NorCon Project.

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

2. Summary of Significant Accounting Policies

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

         The  capital   expenditure   funds  are   restricted  for  use  in  the
construction  of  the  Salton  Sea V  Project,  the CE  Turbo  Project  and  the
construction  of new brine  facilities at the Imperial  Valley  Projects,  which
resulted from the sale on October 13, 1998 by Salton Sea Funding  Corporation of
$285  million  aggregate  amount of  7.475%  Senior  Secured  Series F Bonds due
November 30, 2018 (see Note 6).

         Well  Costs--The  cost of drilling and equipping  production  wells and
other direct costs, are capitalized and amortized on a straight-line  basis over
their estimated  useful lives when production  commences.  The estimated  useful
lives of production wells are twenty years.

         Deferred  Well and  Rework  Costs--Geothermal  well  rework  costs  are
deferred and amortized over the estimated period between reworks ranging from 18
months to 24 months. These deferred costs, net of accumulated amortization,  are
$5.9 million and $6.7 million at December 31, 1999 and 1998,  respectively,  and
are included in other assets.

         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.

         Properties,  Plants, Contracts, Equipment and Depreciation--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.

         Depreciation of the operating  power plant costs,  net of salvage value
if applicable, is computed on the straight line method over the estimated useful
life of 30 years. Depreciation of furniture,  fixtures and equipment is computed
on the  straight  line method  over the  estimated  useful  lives of the related
assets, which range from 3 to 10 years.

         The  acquisitions of Magma Power Company,  Falcon  Seaboard  Resources,
Inc. and Edison Mission  Energy's  partnership  interests by CE Generation  have
been accounted for as purchase business  combinations.  All identifiable  assets
acquired  and  liabilities  assumed  were  assigned  a  portion  of the  cost of
acquiring  the  respective  companies  equal to their  values at the date of the
acquisition and includes power sales agreements  which are amortized  separately
on a straight-line basis over (1) for the Edison Partnership interests and Magma
acquisitions,  the remaining portion of the scheduled price periods of the power
sales agreements which ranged from 1 to 5 years, (2) for the Edison  Partnership
interests and Magma acquisitions,  the 20 year avoided cost periods of the power
sales agreements and (3) over the remaining contract periods which ranged from 7
to 30 years.
<PAGE>

         Equity Investments--CE  Generation's  investments in Saranac and Norcon
are accounted for using the equity method of accounting  since CE Generation has
the ability to exercise significant  influence over the investees' operating and
financial  policies  through its  managing  general  partnership  interests.  At
December 31, 1999 and 1998, the carrying amount of CE Generation's investment in
Saranac  differs  from its  underlying  equity in net assets of Saranac by $98.5
million (net of  accumulated  amortization  of $35.1 million) and $108.8 million
(net  of  accumulated  amortization  of  $24.8  million),   respectively.   This
difference,  which  represents  the  adjustment  to record the fair value of the
investment at the date of  acquisition,  is being  amortized on a  straight-line
basis over  approximately  13 years,  the  remaining  portion of the power sales
agreement at the date of acquisition.

         Excess of Cost Over Fair  Value--Total  acquisition  costs in excess of
the fair values assigned to the net assets acquired are amortized over a 40 year
period for the Magma  acquisition  and a 25 year period for the Falcon  Seaboard
acquisition,  both using the straight line method.  Accumulated amortization was
$42.6 million and $32.9 million at December 31, 1999 and 1998, respectively.

         Maintenance and Repair Reserves--Major  maintenance and repair reserves
are  recorded  monthly  based  on  CE  Generation's  long-term  scheduled  major
maintenance  plans for the Gas  Projects  and  included in accrued  liabilities.
Other maintenance and repairs are charged to expense as incurred.

         Capitalization of Interest and Deferred  Financing  Costs--Prior to the
commencement  of operations,  interest is capitalized on the costs of the plants
and geothermal resource development to the extent incurred. Capitalized interest
and other deferred charges are amortized over the lives of the related assets.

         Deferred  financing  costs are  amortized  over the term of the related
financing using the effective interest method.

         Revenue  Recognition--Revenues  are recorded based upon electricity and
steam  delivered to the end of the month.  See Note 4 for  contractual  terms of
power sales agreements.  Royalties earned from providing geothermal resources to
power plants  operated by other  geothermal  power  producers  are recorded when
delivered.

         Income  Taxes--CE  Generation  had  historically  been  included in the
consolidated  income tax returns of MEHC. CE  Generation's  provision for income
taxes was  computed on a separate  return  basis.  Beginning  March 3, 1999,  CE
Generation became a separate  consolidated  taxpayer.  CE Generation  recognizes
deferred  tax  assets  and  liabilities  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--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.

         Impairment  of  Long-Lived  Assets--CE  Generation  reviews  long-lived
assets and certain  identifiable  intangibles for impairment  whenever events or
changes in  circumstances  indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized, based on discounted cash
flows or various models, whenever evidence exists that the carrying value is not
recoverable.
<PAGE>

         Change in Accounting Estimate--During the year ended December 31, 1998,
CE  Generation  modified  the  amortization  method to  amortize  the fair value
adjustments  associated  with the  scheduled  price  periods of the four  plants
acquired in the Imperial Valley. CE Generation  modified its amortization method
from the weighted  average of the scheduled price periods to amortization of the
fair value adjustments over the scheduled price periods of the individual plant.
The  change  in  accounting   estimate   included   increasing  the  accumulated
amortization  of  the  aggregate  fair  value  adjustment  associated  with  the
scheduled price periods of the four plants acquired in the Imperial Valley.  The
impact of the  change was to  decrease  1998 net  income by $4.7  million.  This
change will not have a  significant  impact on future  periods as the  scheduled
price periods terminated in 1999.

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

         Accounting  Pronouncements--In June 1998, the FASB issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities,  which established
accounting and reporting  standards for derivative  instruments  and for hedging
activities.  It requires  that an entity  recognize  all  derivatives  as either
assets or liabilities  in the statement of financial  position and measure those
instruments at fair value. This statement is effective for the Company beginning
January  1,  2001.  CE  Generation  has not yet  determined  the  impact of this
accounting pronouncement.

         Pending Accounting Policy Change--The  Accounting  Standards  Executive
Committee (AcSEC) of the American  Institute of Certified Public  Accountants is
considering  a  project  that in part  will  address  the  accounting  for major
maintenance  activities.  The  project  will  address  the  use of the  accrual,
deferral and expense  methods of accounting  for major  maintenance  activities.
Pending any change in current authoritative guidance, the Company may change its
current method of accounting for major  maintenance,  overhaul and well workover
costs.

3.       Equity Investments

         CE  Generation  indirectly  holds  noncontrolling  general  and limited
partnership interests in Saranac Power Partners, L.P. (Saranac) which was formed
to  build,  own and  operate  natural  gas  fired  combined  cycle  cogeneration
facilities.  The lenders to the  partnership  have  recourse  only against these
facilities and the income and revenues therefrom.  In 1999, CE Generation had an
approximate  49% economic  interest in Saranac.  Effective in January  2000,  CE
Generation has an approximate  61% economic  interest in the  partnership as TPC
Saranac  achieved  an after  tax  return of 8.35%.  CE  Generation  will have an
approximate  80% economic  interest in the  partnership  after General  Electric
Capital  Company  achieves  an after tax return,  as defined in the  Partnership
Agreement, of approximately 7.252%.

         The  following is a summary of  aggregated  financial  information  for
Saranac as of and for the year ended December 31, 1999 and 1998 (in thousands):

                                         1999             1998

 Assets                         $       289,152    $     300,425

 Liabilities                            192,524          197,680

 Revenues                               164,965          138,574

 Net income                              55,163           38,041
<PAGE>


         Saranac has project  financing through a 14 year note payable agreement
with a lender with a principal amount  outstanding of $181.1 million at December
31, 1999. The note agreement is  collateralized by all of the assets of Saranac.
Saranac  is  restricted  by the  terms  of the  payable  agreement  from  making
distributions  or  withdrawing  any capital  amounts  without the consent of the
lender. Under terms of the note payable agreement,  distributions may be made to
the partners in accordance with the terms of the Saranac partnership  agreement.
Distributions  are made monthly and quarterly to the extent of the partnership's
excess cash balances.

         Each of the Saranac  partners has an interest in cash  distributions by
Saranac which changes when certain  after-tax rates of return are achieved by GE
Capital and the TPC Saranac partners on their contributions to Saranac. The cash
distributions  of Saranac are divided into three levels:  (1)  distributions  in
fixed  amounts  payable  during the first 15 years of  operation  of the Saranac
project, which are applied first to pay debt service and other amounts due under
the Saranac  project  financing  documents and any refinancing  loans,  with the
remainder  paid to GE  Capital  to enable it to  achieve a certain  base rate of
return;  (2) distributions of the Saranac available cash remaining after payment
of the  level 1  distributions  during  the first 15 years of  operation  of the
Saranac project:  (3) distributions after the first 15 years of operation of the
Saranac project.  During the first 15 years of operation of the Saranac project,
Saranac  Energy  will  receive  63.51%  of the level 2  distributions  until TPC
Saranac  partners  achieve an 8.35%  rate of return  and,  after such  return is
achieved  (which  occurred in 2000),  Saranac  Energy will receive 81.18% of the
level 2  distributions.  After the first 15 years of  operation  of the  Saranac
project,  Saranac Energy will receive 68% of the level 3 distributions  until GE
Capital achieves a certain supplemental rate of return and, thereafter,  Saranac
Energy will receive 76% of the level 3 distributions.

         On December 2, 1999 the  Company's  indirect  subsidiary,  NorCon Power
Partners,  L.P.  reached  agreement  with Niagara  Mohawk Power  Corporation  to
dismiss the outstanding litigation between NorCon and Niagara. At the same time,
NorCon  transferred the NorCon project to General Electric  Capital  Corporation
and entered into  agreements  with third  parties to terminate  some of NorCon's
contracts  and to assign the rest of its  contracts to a  subsidiary  of General
Electric  Capital.  General  Electric  Capital also agreed to be responsible for
other third party  claims made  against  NorCon  related to the NorCon  project.
Thus,  after  December 2, 1999,  neither  NorCon nor any of the company's  other
subsidiaries  owns an  interest  in the NorCon  project  and the NorCon  project
contracts are no longer in effect or have been assigned to third parties.

         There were no undistributed  earnings in equity investments at December
31, 1999.


<PAGE>


4.       Properties, Plants, Contracts and Equipment

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

                                                         1999            1998
 Operating facilities:

 Power plants                                    $      716,809     $   678,710
 Wells and resource development                         151,996         137,399
 Power sales agreements                                 287,653         287,653
 Licenses and equipment                                  47,905          41,671

 Total operating facilities                           1,204,363       1,145,433
 Less accumulated depreciation and amortization        (326,042)       (270,244)
 Net operating facilities                               878,321         875,189

 Construction in progress:

 Salton Sea Unit V                                       89,072           9,227
 Turbo and Region 2 Brine Facilities Construction        42,612           2,253
 Other development                                        7,337           6,823

 Total                                           $    1,017,342     $   893,492

         Significant  Customers and  Contracts--All  of CE Generation's  current
sales  of  electricity  from  the  Imperial  Valley  Projects,   which  comprise
approximately 66% and 74%  respectively,  of 1999 and 1998 electricity and steam
revenues,  are to Southern  California  Edison  Company  (Edison)  and are under
long-term power purchase  contracts.  Accounts  receivable,  which are primarily
from Edison,  are primarily  uncollateralized  receivables  from long-term power
purchase contracts  described below. If the customers were unable to perform, CE
Generation  could  incur  an  accounting  loss  equal to the  entire  receivable
balance,  or $40.7  million  and $67.6  million at  December  31, 1999 and 1998,
respectively.

         Imperial Valley  Projects--The  current  Partnership  Projects sell all
electricity  generated  by the  respective  plants  pursuant  to four  long-term
standard  offer no. 4, or SO4,  agreements  between the Projects and Edison that
are based on this  standard  form.  These SO4  agreements  provide for  capacity
payments, capacity bonus payments and energy payments. Edison makes fixed annual
capacity and capacity bonus payments to the Projects to the extent that capacity
factors  exceed  certain  benchmarks.  The price for capacity and capacity bonus
payments  is  fixed  for  the  life  of the SO4  Agreements.  Energy  is sold at
increasing  scheduled  rates for the first ten years  after firm  operation  and
thereafter at a rate which is based on the cost that Southern  California Edison
avoids by  purchasing  energy from the project  instead of obtaining  the energy
from other  sources.  Southern  California  Edison's  avoided  cost is currently
determined by an approved  interim  formula which adjusts  historic  costs by an
inflation/deflation  factor representing  monthly changes in the cost of natural
gas at the California  border and  adjustment  factors based on the time of day,
week and  year in which  the  energy  is  delivered.  Consequently,  under  this
methodology,  energy  payments under the SO4 agreements  will fluctuate based on
the  time of  generation  and  monthly  changes  in  average  fuel  costs in the
California energy market. Legislation recently adopted in California establishes
that the  price  qualifying  facilities  receive  as  energy  payments  would be
modified  from the current  short-run  avoided cost basis to the clearing  price
established by the PX once specified  conditions are met. As the main condition,
the legislation  requires that the California  Public Utilities  Commission must
first issue an order  determining  that the PX is  functioning  properly for the
purposes of determining the short-run avoided cost energy payments to be made to
non-utility  power  generators.   Additionally,  a  project  company  may,  upon
appropriate notice to Southern California Edison,  exercise a one-time option to
elect to thereafter  receive energy  payments based upon the clearing price from
the PX.
<PAGE>

         The  PX  is  a  nonprofit  public  benefit   corporation  formed  under
California law to provide a competitive  marketplace where buyers and sellers of
power, including utilities,  end-use customers,  independent power producers and
power marketers, complete wholesale trades through an electronic auction. The PX
currently  operates  two  markets:  (1) a day ahead market which is comprised of
twenty-four  separate concurrent auctions for each hour of the following day and
(2) an hour  ahead  market  for each hour of each day for which bids are due two
hours  before each hour.  In each market,  the PX receives  bids from buyers and
sellers and, based on the bids,  establishes  the market clearing price for each
hour and schedules  deliveries from sellers whose bids did not exceed the market
clearing  price to buyers  whose  bids were not less  than the  market  clearing
price. All trades are executed at the market clearing price.

         The  scheduled  energy price  periods of the  Partnership  Projects SO4
agreements  extended  until  February  1996,  December  1998,  December 1998 and
December  1999  for  each  of  the  Vulcan,  Del  Ranch,   Elmore  and  Leathers
Partnerships,  respectively.  The  weighted  average  energy rate for all of the
Partnership Projects' SO4 Agreements was 6.49 cents per kWh in 1999.

         Salton  Sea  I  sells  electricity  to  Edison  pursuant  to a  30-year
negotiated  power purchase  agreement,  as amended (the Salton Sea I PPA), which
provides for  capacity and energy  payments.  The energy  payment is  calculated
using a Base Price which is subject to quarterly  adjustments  based on a basket
of indices. The time period weighted average energy payment for Salton Sea I was
5.3 cents per kWh during 1999. As the Salton Sea I PPA is not an SO4  Agreement,
the  energy  payments  do not revert to  Edison's  Avoided  Cost of Energy.  The
capacity payment is approximately $1.1 million per annum.

         Salton Sea II and Salton Sea III sell electricity to Edison pursuant to
30-year  modified SO4 agreements  that provide for capacity  payments,  capacity
bonus payments and energy payments. The price for contract capacity and contract
capacity  bonus  payments is fixed for the life of the modified SO4  agreements.
The energy payments for each of the first ten year periods, which periods expire
in April 2000 for Salton Sea II and expired in February 1999 for Salton Sea III,
respectively,  are levelized at a time period weighted average of 10.6 cents per
kWh and 9.8 cents per kWh for Salton  Sea II and  Salton Sea III,  respectively.
Thereafter, the monthly energy payments will be Edison's Avoided Cost of Energy.
For Salton Sea II only,  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 annual  capacity and bonus  payments for Salton Sea II and Salton Sea
III are approximately $3.3 million and $9.7 million, respectively.

         Salton Sea IV sells  electricity  to Edison  pursuant to a modified SO4
agreement which provides for contract  capacity payments on 34 MW of capacity at
two  different  rates  based  on  the  respective   contract  capacities  deemed
attributable  to the original  Salton Sea PPA option (20 MW) and to the original
Fish Lake PPA (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 energy payment (for deliveries up to a
rate of 39.6 MW) is at a fixed rate for 55.6% of the total  energy  delivered by
Salton Sea IV and is based on an energy payment  schedule for 44.4% of the total
energy delivered by Salton Sea IV. 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.

         For the  years  ended  December  31,  1999 and 1998,  Edison's  average
Avoided Cost of Energy was 3.1 cents and 3.0 cents per kWh, respectively,  which
is  substantially  below the contract  energy  prices  earned for the year ended
December 31, 1999.  CE  Generation  cannot  predict the level of Avoided Cost of
Energy or PX prices under the SO4  agreements and the modified SO4 agreements at
the expiration of the scheduled payment periods.  The revenues generated by each
of the projects operating under SO4 agreements will likely decline significantly
after the expiration of the respective scheduled payment periods.

         The  Imperial  Valley  Projects  other  than  Salton Sea Unit I receive
transmission   service  from  the  Imperial   Irrigation   District  to  deliver
electricity  to  Southern  California  Edison  near  Mirage,  California.  These
projects pay a rate based on the Imperial Irrigation  District's cost of service
which  was $1.46 per month per  kilowatt  of  service  provided  for 1999 and is
recalculated annually.  The transmission service and interconnection  agreements
expire in 2015 for the Partnership Projects,  2019 for Salton Sea Unit III, 2020
for Salton  Sea Unit II and 2026 for  Salton Sea Unit IV.  Salton Sea Unit V and
the CE Turbo  projects have entered into 30-year  agreements  with similar terms
with the  Imperial  Irrigation  District.  Salton Sea Unit I delivers  energy to
Southern  California Edison at the project site and has no transmission  service
agreement with the Imperial Irrigation District.
<PAGE>

         The Imperial Valley projects  obtain their  geothermal  resource rights
from Magma Power Company and Magma Land Company I, wholly-owned  subsidiaries of
the Company.

         The  Partnership  Project pays royalties  based on both energy revenues
and total  electricity  revenues.  Del Ranch and Leathers pay royalties of 5% of
energy revenues and 1% of total electricity revenue. Elmore pays royalties of 5%
of energy revenues. Vulcan pays royalties of 4.167% of energy revenues.

         The Salton Sea  Project's  weighted  average  royalty  expense in 1999,
1998,  and  1997  was  approximately  6.2%,  4.8% and  6.1%,  respectively.  The
royalties  are paid to  numerous  recipients  based on  varying  percentages  of
electrical revenue or steam production multiplied by published indices.

         During 1998, CE Generation changed the estimated useful life related to
the step up in basis for two of the plants  received in the  acquisition  of the
Imperial Valley projects.  This change conformed these plants'  estimated useful
life with the others  acquired in the  purchase  and  resulted in an increase in
depreciation and amortization of approximately $7.5 million in 1998. This change
will not have a  significant  impact on future  periods as the  scheduled  price
periods terminated in 1999.

         Gas  Projects--The  Saranac Project sells electricity to New York State
Electric & Gas pursuant to a 15 year  negotiated  power purchase  agreement (the
Saranac  PPA),  which  provides  for  capacity  and  energy  payments.  Capacity
payments,  which in 1999 total 2.4 cents per kWh, are  received for  electricity
produced  during  "peak  hours" as defined in the  Saranac  PPA and  escalate at
approximately  4.1%  annually for the  remaining  term of the  contract.  Energy
payments,  which averaged 7.0 cents per kWh in 1999,  escalate at  approximately
4.4% annually for the remaining term of the Saranac PPA. The Saranac PPA expires
in June of 2009.  Saranac sells steam to  Georgia-Pacific  and Tenneco Packaging
under  long-term  steam sales  agreements.  CE  Generation  believes  that these
agreements  will  enable  Saranac to sell the minimum  annual  quantity of steam
necessary for the Saranac  Project to maintain its  qualifying  facility  status
under PURPA for the term of the Saranac PPA.

         The  Power  Resources  Project  sells  electricity  to Texas  Utilities
Electric  Company  (TUEC)  pursuant  to  a 15  year  negotiated  power  purchase
agreement  (the Power  Resources  PPA),  which  provides for capacity and energy
payments.  Capacity payments and energy payments, which in 1999 are $3.2 million
per month and 3.7 cents per kWh, respectively, escalate at 3.5% annually for the
remaining term of the Power  Resources  PPA. The Power  Resources PPA expires in
September  2003.  Power  Resources  sells steam to Fina Oil and Chemical under a
15-year agreement.  Power Resources has agreed to supply Fina with up to 150,000
pounds  per  hour  of  steam.  As long  as  Power  Resources  meets  its  supply
obligations,  Fina is required to purchase at least the minimum  amount of steam
per year  required  to  allow  the  Power  Resources  Project  to  maintain  its
qualifying facility status under PURPA.

         Yuma  sells  electricity  to San Diego Gas & Electric  Company  (SDG&E)
under an existing 30-year power purchase contract. 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 power  purchase  contract.  The power is  wheeled  to SDG&E over
transmission  lines  constructed  and owned by Arizona  Public  Service  Company
(APS).  Yuma sells steam to Queen  Carpet,  Inc.  pursuant to an agreement  that
expires on May 1, 2024.  Queen  Carpet is  required to take a minimum of 126,900
MMBtus of steam per year,  which is  sufficient  to permit  the Yuma  Project to
maintain its  qualifying  facility  status under the Public  Utility  Regulatory
Policies Act.

         Saranac,  Power  Resources,  and  Yuma  each  delivers  energy  to  its
respective  power  purchaser  at or near  the site of its  project  and does not
utilize  transmission  service  provided by any other party.  The  facilities to
interconnect  each of these  projects to the system of the power  purchaser were
constructed under the terms of its power purchase agreement.
<PAGE>

         Saranac  purchases  natural gas from Coral  Energy  under a 15-year gas
supply agreement that expires in 2009. The price was $2.89 per MMBtu at December
1999 and  escalates  at the rate of 4% per year.  Coral  delivers the gas to the
pipeline  owned by  Saranac's  subsidiary,  North  Country  Gas  Pipeline  which
transports the gas to the Saranac project.

         Fina Oil and Chemical  supplies 3,600 MMBtu of refinery fuel gas to the
Power  Resources  project under an agreement  that expires in 2003. The delivery
point is at the Power Resources  project.  The price was $2.85 per MMBtu in 1999
and  escalates  at 2% per year.  Louis  Dreyfus  Natural  Gas  Corporation  also
supplies  natural  gas for  the  Power  Resources  project  under  a gas  supply
agreement  that  expires in 2003.  The price for the first  31,200 MMBtu per day
under the agreement was $2.24 per MMBtu in 1999 and escalates  incrementally  to
$2.57 per MMBtu in 2003.  The price for the second 3,000 MMBtu per day under the
agreement  is set at the West Texas  spot price plus $.05 per MMBtu.  Additional
gas may be  purchased  under the  agreement at prices that are  negotiated  with
Louis  Dreyfus.  Louis Dreyfus  delivers the gas to Westar  Transmission  System
which transports the gas for Power Resources to the project at a rate of $.06 to
$.12 per MMBtu  depending  upon the point of entry into the Westar  Transmission
system.

         Yuma  purchases  natural gas from  Southwest Gas  Corporation.  Yuma is
entitled to direct  Southwest Gas to purchase gas from any of several gas supply
basins  and  transport  it to the  project.  Yuma  pays  a  price  based  on the
applicable  index for the relevant  basin.  The  agreement  may be terminated by
either party  commencing in 2002, in which case  Southwest Gas would be required
to provide gas transportation service under its transportation tariff to Yuma.

         Royalties--Royalty  expense for the years ended December 31, 1999, 1998
and 1997, which is included in plant  operations in the consolidated  statements
of operations, comprise the following (in thousands):

                               1999            1998              1997

Vulcan                $         423    $         363     $         326
Leathers                      3,361            2,811             2,694
Elmore                          520            2,192             2,213
Del Ranch                       856            2,870             2,650
Salton Sea I & II               827              810             1,206
Salton Sea III                1,673            1,637             2,439
Salton Sea IV                 2,569            2,645             2,815

Total                 $      10,229    $      13,328     $      14,343

         The  Partnership  Project pays royalties  based on both energy revenues
and total  electricity  revenues.  Del  Ranch  and  Leathers  pay  royalties  of
approximately 5% of energy revenues and 1% of total electricity revenue.  Elmore
pays royalties of approximately 5% of energy revenues.  Vulcan pays royalties of
approximately 4.167% of energy revenues.

         The Salton Sea Project's weighted average royalty expense in 1999, 1998
and 1997 was approximately 6.2%, 4.8% and 6.1%, respectively.  The royalties are
paid to numerous  recipients based on varying percentages of electrical or steam
production multiplied by published indices.

5. Project Loan

         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  Yuma) 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 Power
Company and Salton Sea Power  Company),  or (2) owning  direct  interests in the
subsidiaries that own interests in the foregoing  projects,  the Saranac project
and the Power Resources project.
<PAGE>

         Power  Resources has 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 loan is  collateralized by an
assignment of all revenues received by Power Resources,  a lien on substantially
all of its real and personal property and a pledge of its capital stock.

         Effective June 5, 1989,  Power Resources  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,   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 are settled in cash based on the difference  between a fixed and
floating  (index based) price for the underlying  debt.  The notional  values of
these financial instruments were $76.3 million and $90.5 million at December 31,
1999 and 1998, respectively.  Power Resources would be exposed to credit loss in
the  event  of  nonperformance  by the  lender  under  the  interest  rate  swap
agreement.  However,  Power Resources does not anticipate  nonperformance by the
lender. The estimated cost to terminate the interest rate swap agreement,  based
on  termination  values  obtained  from the  lender,  was $4.1  million and $9.9
million at December 31, 1999 and 1998, respectively.

         The interest  rate can be increased  by payments  under a  Compensation
Agreement  included in Power Resources' term loan. The  Compensation  Agreement,
which entitles two of the term lenders to receive quarterly payments  equivalent
to a percentage of Power Resources'  discretionary cash flow (DCF) as separately
defined in the agreement, become effective initially for a 13-year period ending
December  31, 2003.  Under  certain  conditions  relating to the amount of Power
Resources' cash flow and the restrictions on cash distributions, Power Resources
has the option to replace the payment  obligation in a quarter with a payment to
be  calculated  in a future  quarter and added to the end of the initial term of
the  agreement.  The  Compensation  Agreement  entitles  the lenders to payments
totaling  10% of DCF for the first  ten  years,  7.5% of DCF for the next  three
years  and  10% of DCF  for  each  quarter  added  to the  initial  term  of the
agreement.  Power Resources  recorded  additional  interest expense of $617,000,
$1,176,000 and $1,091,000 for the years ended December 31, 1999,  1998 and 1997,
respectively, related to amounts owed under the Compensation Agreement.

         Scheduled  maturities  of project  financing  debt for the year  ending
December 31 are as follows (in thousands):

 2000                        $        16,088

 2001                                 18,119

 2002                                 20,312

 2003                                 21,742

 Total                       $        76,261
<PAGE>


         Under Power  Resources'  term loan  agreement,  certain  covenants  and
conditions  must  be met  before  cash  distributions  can  be  made,  the  most
significant of which is the  maintenance of a historical  quarterly debt service
coverage ratio of at least 1.20:1.00 in order to permit all available cash to be
distributed.  Power  Resources  was in  compliance  with these  requirements  at
December 31, 1999.

6. Salton Sea Notes and Bonds

         The Salton Sea  Funding  Corporation  (the  "Funding  Corporation"),  a
wholly-owned  indirect  subsidiary  of CE  Generation,  debt  securities  are as
follows (in thousands):

ISSUED DATE         SENIOR        FINAL         RATE            DECEMBER 31,
                    SECURED      MATURITY                     1999         1998
                    SERIES         DATE

 July 21, 1995     A Notes    May 30, 2000       6.69%  $     18,532  $   48,436

 July 21, 1995     B Bonds    May 30, 2005       7.37        101,776     106,980

 July 21, 1995     C Bonds    May 30, 2010       7.84        109,250     109,250

 June 20, 1996     D Notes    May 30, 2000       7.02          1,500      12,150

 June 20, 1996     E Bonds    May 30, 2011       8.30         52,922      65,000

 October 13, 1998  F Bonds    November 30, 2018  7.48        285,000     285,000

                                                        $    568,980  $  626,816


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

         On October  13,  1998,  the  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.  The proceeds of $144.5  million
from the  offering  are being used to  partially  fund  construction  of two new
geothermal  projects  at the Salton Sea and other  capital  improvements  at the
existing  Salton Sea projects.  The remaining  amount of $140.5 million is being
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  net  revenues,   equity   distributions  and  royalties  from  the
Partnership  Projects  are  used  to pay  principal  and  interest  payments  on
outstanding  senior secured bonds issued by the Funding  Corporation,  the final
series of which is scheduled to mature in November 2018. The Funding Corporation
Debt is guaranteed by certain  subsidiaries  of Magma and secured by the capital
stock of the Funding  Corporation.  The proceeds of the Funding Corporation Debt
were loaned by the Funding  Corporation  pursuant to loan  agreements  and notes
(the "Imperial Valley Project Loans") to certain  subsidiaries of Magma 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 the  Funding  Corporation  Debt.  The
Imperial Valley Project Loans and the guarantees of the 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.

         The proceeds of Series F of the Funding Corporation debt are being used
in part to construct the Zinc  Facility,  and the direct and indirect  owners of
the Zinc Facility (the "Zinc Guarantors", which will include Salton Sea Minerals
Corp. and Minerals  LLC),  are among the  guarantors of the Funding  Corporation
debt. In connection with the Divestiture, MEHC will guarantee the payment by the
Zinc  Guarantors  of a specified  portion of the  scheduled  debt service on the
Imperial Valley Project Loans,  including the current principal amount of $140.5
million and associated interest.
<PAGE>

         Pursuant to a depository agreement,  Funding Corporation  established a
debt  service  reserve  fund in the form of a letter of credit in the  amount of
$67.6 million from which scheduled interest and principal payments can be made.

         Annual  repayments  of the  Salton  Sea  Notes  and Bonds for the years
beginning January 1, 2000 and thereafter are as follows:

         2000                $           25,032
         2001                            23,658
         2002                            28,572
         2003                            28,086
         2004                            30,588
         Thereafter                     433,044
                             $          568,980


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

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

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

         * the  historical  debt  service  coverage  ratio of Salton Sea Funding
Corporation  for the prior four fiscal  quarters must be at least 1.4 to 1.0, if
the distribution occurs prior to 2000, or 1.5 to 1.0, if the distribution occurs
during or after 2000;

         * there must be sufficient  geothermal  resources to operate the Salton
Sea projects at their required levels; and

         * each Salton Sea project under  construction  cannot have failed to be
complete by its  guaranteed  substantial  completion  date,  unless a sufficient
portion  of the  Salton  Sea  Notes and Bonds  have been  redeemed  or a ratings
confirmation has been obtained.

7.  Senior Secured Bonds

         On March 2, 1999,  CE  Generation  issued $400 million of 7.416% Senior
Secured Bonds due 2018.  The net proceeds from this  financing were used for the
following purposes:

         * to repay  Magma's 9 7/8% Secured Note Due 2003 payable to MEHC in the
aggregate  principal amount of $200 million, at a repayment price (including its
premium) equal to approximately $220 million;

         * to make payments to MEHC  aggregating  approximately  $122 million in
return for MEHC's  transfer of certain  assets to CE  Generation.  MEHC will use
these funds to prefund  future  equity  contributions  for various  construction
projects;

         * to repay approximately $49 million outstanding principal and interest
on a promissory note to MEHC;

         * to make payments to MEHC  aggregating up to  approximately $4 million
in return for MEHC's transfers of certain assets to the Company which related to
MEHC's  development  costs for Salton Sea Unit V, the CE Turbo  project  and the
zinc facility; and

         * to pay transaction  costs and fees associated with the offer and sale
of the old securities.
<PAGE>

         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:

         *  all available cash flow (as defined);

         * a pledge of 99% of the equity  interests  in Salton Sea Power and all
of CE Generation's equity interests in its other consolidated subsidiaries, with
the exception of Magma Power Company (Magma) and subsidiaries;

         * upon the  redemption  of, or earlier  release of  security  interests
under,  Magma's 9 7/8% promissory notes, a pledge of all of the capital stock of
Magma;

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

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

         * 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  (other than the capital  stock of Magma,  which will be pledged upon
the redemption of, or earlier  release of security  interests  under,  Magma's 9
7/8% promissory notes).

         MEHC's  obligation to make payments on Magma's 9 7/8% promissory  notes
is secured by a pledge of the capital stock of Magma and a lien on dividends and
distributions in respect of such Magma stock. On March 3, 1999, MEHC repurchased
$195.8 million in aggregate  principal  amount of its 9 7/8% Notes in connection
with a tender  offer  for a  repurchase  price  (including  premium)  of  $215.4
million. In connection with the corresponding reduction of $195.8 million of the
principal  outstanding under Magma's 9 7/8% promissory notes,  $215.4 million of
the proceeds of the Senior Secured Bonds were paid to MEHC. As a result of the 9
7/8% note repurchase  offer,  the outstanding  principal  amount of Magma 9 7/8%
promissory  notes was reduced from $200 million to  approximately  $4.2 million.
MEHC intends to redeem the remaining outstanding Magma's 9 7/8% promissory notes
on June 30, 2000,  which is the first day upon which an optional  redemption  is
permitted  under the trust  indenture  for Magma's 9 7/8%  promissory  notes.  A
portion of the net proceeds of these securities,  in the amount of approximately
$4.2 million,  has been paid to MidAmerican and placed into a restricted account
held by the depository bank which is maintained solely for the purpose of paying
the remaining amounts due to the secured parties.  These proceeds are being used
to pay interest on, and effect the redemption (or the earlier repurchase) of the
remaining outstanding principal of, Magma's 9 7/8% promissory notes. At the time
of this  redemption,  the collateral agent is expected to obtain a pledge of all
of Magma's capital stock.

Annual repayments of the Senior Secured Bonds for the years beginning January 1,
2000 and thereafter are as follows (in thousands):

                  2000               $           10,400
                  2001                           12,600
                  2002                           20,600
                  2003                           18,000
                  2004                           14,600
                  Thereafter                    323,800
                                     $          400,000
<PAGE>

8. Notes Payable to Related Party

         On July 21,  1995,  MEHC issued $200  million 9 7/8%  Limited  Recourse
Senior  Secured  Notes Due 2003 (the  "Notes").  The  Notes  are  secured  by an
assignment and pledge of 100% of the outstanding  capital stock of Magma and are
recourse only to such Magma capital  stock.  The proceeds of the Notes  offering
were provided by MEHC to Magma and Magma issued an intercompany  note to MEHC in
the amount of $200 million.

         On  January  29,  1999,  MEHC  commenced  a  cash  offer  for  all  its
outstanding 9 7/8% Limited Recourse Senior Secured Notes Due 2003. MEHC received
tenders from holders of an aggregate of approximately  $195.8 million  principal
which were paid on March 3, 1999 at a redemption  price of 110.025% plus accrued
interest, resulting in an extraordinary loss of approximately $17.5 million, net
of tax of $11.1 million.  Proceeds from the issuance of CE  Generation's  Senior
Secured Bonds were used to repay the  outstanding  principal and interest on the
note.

         Yuma  Cogeneration  Associates  had  outstanding a note payable to MEHC
with a principal  balance at December  31,  1998 of $47.7  million,  and bearing
interest  at  a  fixed  rate  of  10.25%.  Proceeds  from  the  issuance  of  CE
Generation's  Senior Secured Bonds were used to repay the outstanding  principal
and interest on the note.

9. Commitments and Contingencies

         On  February  14,  1995,  NYSEG  filed with the FERC a  Petition  for a
Declaratory  Order,  Complaint,  and Request for  Modification of Rates in Power
Purchase  Agreements Imposed Pursuant to the Public Utility Regulatory  Policies
Act of 1978  ("Petition")  seeking FERC (i) to declare that the rates NYSEG pays
under  the  Saranac  PPA,  which was  approved  by the New York  Public  Service
Commission  (the "PSC"),  were in excess of the level  permitted under PURPA and
(ii) to  authorize  the PSC to reform the Saranac  PPA. On March 14,  1995,  the
Saranac Partnership  intervened in opposition to the Petition  asserting,  inter
alia,  that the Saranac PPA fully  complied with PURPA,  that NYSEG's action was
untimely and that the FERC lacked  authority to modify the Saranac PPA. On April
12, 1995,  the FERC by a unanimous  (5-0)  decision  issued an order denying the
various forms of relief  requested by NYSEG and finding that the rates  required
under the Saranac PPA were consistent with PURPA and the FERC's regulations.  On
May 11, 1995,  NYSEG requested  rehearing of the order and, by order issued July
19, 1995, the FERC unanimously  (5-0) denied NYSEG's request.  On June 14, 1995,
NYSEG petitioned the United States Court of Appeals for the District of Columbia
Circuit (the "Court of Appeals") for review of FERC's April 12, 1995 order. FERC
moved to dismiss  NYSEG's  petition for review on July 28, 1995.  On October 30,
1996,  all  parties  filed  final  briefs  and the Court of  Appeals  heard oral
arguments on December 2, 1996. On July 11, 1997, the Court of Appeals  dismissed
NYSEG's appeal from FERC's denial of the petition on jurisdictional grounds.

         On August 7, 1997,  NYSEG filed a complaint in the U.S.  District Court
for the  Northern  District  of New  York  against  the  FERC,  the PSC (and the
Chairman,  Deputy  Chairman and the  Commissioners  of the PSC as individuals in
their  official   capacity),   the  Saranac   Partnership  and  Lockport  Energy
Associates,  L.P.  ("Lockport")  concerning the power purchase  agreements  that
NYSEG entered into with Saranac Partners and Lockport. NYSEG's suit asserts that
the PSC and the FERC  improperly  implemented  PURPA in authorizing  the pricing
terms that  NYSEG,  the  Saranac  Partnership  and  Lockport  agreed to in those
contracts.  The action raises  similar legal  arguments to those rejected by the
FERC in its April and July 1995 orders.  NYSEG in addition asks for  retroactive
reformation of the contracts as of the date of commercial  operation and seeks a
refund of $281 million from the Saranac Partnership. The Saranac Partnership and
other parties have filed motions to dismiss and oral  arguments on those motions
were heard on March 2, 1998 and again on March 3, 1999. The Saranac  Partnership
believes that NYSEG's claims are without merit for the same reasons described in
the FERC's orders.
<PAGE>

         In February 1998, Del Ranch and Elmore  ("plaintiffs")  filed an action
for  breach of  contract,  fraud and  unlawful  discrimination  relating  to the
long-term  contracts  between  plaintiffs  and Edison for  purchase  and sale of
geothermal power.  Among other claims,  plaintiffs contend that Edison failed to
pay the correct  "forecast"  price for energy  purchased from plaintiffs  during
1998.  Plaintiffs seek  compensatory  damages of about $6 million and additional
punitive damages.  Edison's demurrer to the frauds claim was recently  overruled
by the Superior Court. In September 1999, the plaintiffs settled with Edison for
approximately $3.7 million including accrued interest.

         Power  Resources  has  contracted  to  purchase  natural  gas  for  its
cogeneration facility under two separate agreements,  an 8-year agreement for up
to 40,000 MMBTU per day which expires in December  2003 and a 15-year  agreement
for 3,600 MMBTU per day which  expires in June 2003.  These  agreements  include
annual price  adjustments,  and the 15-year agreement includes a provision which
allows the seller to terminate the agreement with a two-year written notice.  As
of December 31, 1999,  the seller had not elected to terminate  this  agreement;
therefore,  the minimum volumes under the 15-year and 8-year  agreements for the
years  ending  December 31, are included in the future  minimum  payments  under
these contracts as follows (in thousands):

                  2000              $     23,308
                  2001                    23,608
                  2002                    24,285
                  2003                    24,854
                  Total             $     96,055

         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 the Public  Utility  Regulatory
Policies Act. 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.

         Saranac 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
MMBTU's  per day.  The price for such  deliveries  is a stated  rate,  escalated
annually at a rate of 4%.

         The Saranac Project sells  electricity to New York State Electric & Gas
pursuant to a 15 year  negotiated  power  purchase  agreement (the Saranac PPA),
which provides for capacity and energy  payments.  Capacity  payments,  which in
1999 total 2.4 cents per kWh, are received for electricity produced during "peak
hours" as defined in the Saranac PPA and escalate at approximately 4.1% annually
for the remaining  term of the contract.  Energy  payments,  which  averaged 7.0
cents per kWh in 1999, escalate at approximately 4.4% annually for the remaining
term of the Saranac PPA. The Saranac PPA expires in June of 2009.  Saranac sells
steam to  Georgia-Pacific  and Tenneco  Packaging  under  long-term  steam sales
agreements.  The Company  believes that these  agreements will enable Saranac to
sell the minimum annual  quantity of steam  necessary for the Saranac Project to
maintain its qualifying  facility status under PURPA for the term of the Saranac
PPA.

         Salton Sea Unit V is obligated to supply the electricity demands of the
Zinc  Recovery  Project at the price  available to Salton Sea Unit V from the PX
less the wheeling costs to the PX.
<PAGE>

         Salton   Sea  Power,   L.L.C.,   one  of  our   indirect   wholly-owned
subsidiaries,  is constructing  Salton Sea Unit V. The Salton Sea Unit V Project
is a 49 net  megawatt  geothermal  power  plant  which  will sell  approximately
one-third  of its net  output  to the  zinc  facility,  which  was  retained  by
MidAmerican. The remainder will be sold through the California power exchange or
in other market transactions.

         Salton  Sea Unit V is being  constructed  pursuant  to a date  certain,
fixed price, turnkey engineering, procurement and construction contract by Stone
& Webster  Engineering  Corporation.  Salton Sea Unit V is scheduled to commence
commercial  operation in mid-2000.  Total project costs of Salton Sea Unit V are
expected  to be  approximately  $119.1  million  which  will be  funded by $76.3
million of debt from  Salton Sea  Funding  Corporation  and $42.8  million  from
equity contributions.

         CE  Turbo  LLC,  one  of our  indirect  wholly-owned  subsidiaries,  is
constructing the CE Turbo project.  The CE Turbo project will have a capacity of
10 net  megawatts.  The net output of the CE Turbo  project  will be sold to the
zinc facility or sold through the  California  power exchange or in other market
transactions.

         The partnership  projects are upgrading the geothermal brine processing
facilities  at the  Vulcan  and Del  Ranch  projects  with  the  Region  2 brine
facilities construction.

         The CE Turbo project and the Region 2 brine facilities construction are
being  constructed by Stone & Webster  pursuant to a date certain,  fixed price,
turnkey engineering,  procurement and construction  contract. The obligations of
Stone & Webster are  guaranteed by Stone & Webster,  Incorporated.  The CE Turbo
project is scheduled to commence initial operations in early to mid 2000 and the
Region  2  brine  facilities  construction  is  scheduled  to  be  completed  in
early-2000.  Total  project costs for both the CE Turbo project and the Region 2
brine facilities  construction  are expected to be  approximately  $63.7 million
which are  being  funded  by $55.6  million  of debt  from  Salton  Sea  Funding
Corporation and $8.1 million from equity contributions.

10. Income Taxes

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

                           1999            1998              1997

 Current:

 State             $       6,841    $      11,099     $       8,451
 Federal                  24,903           47,263            30,647

                          31,744           58,362            39,098
 Deferred:

 State                    (3,915)            (836)            1,057
 Federal                   3,083           (5,308)            3,223

                            (832)          (6,144)            4,280
 Total             $      30,912    $      52,218     $      43,378



<PAGE>


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

                                                    1999     1998         1997



 Federal statutory rate                            35.0%     35.0%       35.0%

 Percentage depletion in excess of cost depletion  (6.0)     (4.4)       (4.6)

 Investment and energy tax credits                 (1.4)     (2.5)       (0.9)

 Goodwill amortization                              3.7       3.1         3.6

 State taxes, net of federal benefit                2.0       4.6         5.2

 Effective tax rate                                33.3%     35.8%       38.3%


Deferred tax liabilities  (assets) are comprised of the following at December 31
(in thousands):

                                                         1999           1998
 Liabilities:

 Depreciation and amortization, net                 $   246,232    $   240,602


 Other                                                    2,224            ---
                                                        248,456        240,602

 Assets:

 Accruals not currently deductible for tax purposes      (9,356)        (3,218)

 General business tax credits                               ---         (8,891)

 Alternative minimum tax credits                            ---        (16,333)

 Other                                                   (1,780)        (3,311)

 Net deferred taxes                                     (11,136)       (31,753)
                                                        237,320        208,849

 Less current portion (deferred tax asset)               (9,256)       (31,753)

 Long-term deferred tax liability                   $   246,576    $   240,602


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

         The fair value of all debt issues  listed on  exchanges,  including the
note  payable  to  related  party  which is based on a debt  issue  listed on an
exchange,  has been estimated  based on the quoted market prices.  The remaining
note  payable to related  party,  which is not based on market  prices,  and the
project loan are estimated to have a fair value equal to the carrying value.
<PAGE>

         The   carrying   amounts  in  the  table  below  are  included  in  the
consolidated balance sheets under the indicated captions (in thousands):
<TABLE>
<CAPTION>
                                                1999                        1998
                                       CARRYING      ESTIMATED     CARRYING        ESTIMATED
                                        VALUE          FAIR          VALUE            FAIR
                                                       VALUE                         VALUE

 Financial Assets:
<S>                                 <C>          <C>           <C>            <C>
 Note receivable from related party $   140,520  $    128,815  $   140,520    $    140,942

 Financial Liabilities:

 Project loan                            76,261        76,261       90,529          90,529
 Salton Sea notes and bonds             560,880       540,659      626,816         646,397
 Notes payable to related party             ---           ---      247,681         265,581
 Interest rate swap                         ---         4,082          ---           9,904
 Senior secured bonds                   400,000       366,800          ---             ---
</TABLE>

12. Transactions with MEHC

         MEHC provides  certain  administrative  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 are estimated  based on the  individual  services and
expense items provided.  Management  reviewed all MEHC costs for the three years
ended  December  31,  1998 by  department,  which  included a review of all MEHC
personnel  positions  and duties.  Management  believes  that an average of such
costs  for  expense   allocation  is  reasonable.   Allocated  expenses  totaled
approximately  $2.7  million,  $3.0  million and $3.0  million for each of 1999,
1998, and 1997, and are included in General and Administrative expenses.


<PAGE>





                          INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholder
Magma Power Company
Omaha, Nebraska

         We have audited the accompanying  consolidated  balance sheets of Magma
Power  Company and  subsidiaries,  (a  wholly-owned  subsidiary of CE Generation
LLC), as of December 31, 1999 and 1998 and the related  consolidated  statements
of operations,  stockholder's  equity and cash flows for each of the three years
in the period ended  December  31,  1999.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  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 Magma Power  Company and
subsidiaries  at December 31, 1999 and 1998 and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 1999 in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Omaha, Nebraska
January 25, 2000


<PAGE>

                      MAGMA POWER COMPANY AND SUBSIDIARIES
                (A wholly-owned subsidiary of CE Generation LLC)
                           CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 1999 AND 1998
                 (Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>

                                                                                1999                1998

 ASSETS
<S>                                                                    <C>                <C>
 Cash and cash equivalents                                             $         3,372    $         54,661
 Restricted cash                                                                   ---              25,147
 Accounts receivable                                                            29,878              90,395
 Due from related parties                                                        3,726                 ---
 Prepaid expenses                                                                9,916              21,677
 Inventory and other assets                                                     15,593              18,801
 Deferred income taxes                                                           8,421                 ---

  Total current assets                                                          70,906             210,681

 Restricted cash                                                                24,512             215,696
 Properties, plants, contracts and equipment, net                              837,174           1,212,322
 Excess of cost over fair value of net assets acquired, net                    201,303             283,552
 Note receivable from related party                                            140,520                 ---
 Deferred charges and other assets                                              11,912              36,808

 Total assets                                                          $     1,286,327    $      1,959,059

 LIABILITIES AND STOCKHOLDER'S EQUITY
 Liabilities:

 Accounts payable and accrued liabilities                              $        29,373    $         45,418
 Current portion of long-term debt                                              25,032              80,396
 Due to related parties                                                            ---              43,673
 Deferred income taxes--current                                                    ---               1,221

 Total current liabilities                                                      54,405             170,708

 Malitbog loans                                                                    ---             131,246
 Salton Sea notes and bonds                                                    543,948             568,980
 Note payable to related party                                                     ---             200,000
 Deferred income taxes                                                         162,035             245,558
 Other long-term liabilities                                                       ---                 930

 Total liabilities                                                             760,388           1,317,422

 Deferred income                                                                   ---              32,147

 Commitments and contingencies (Note 9)

 Stockholder's Equity:

 Preferred stock--par value $0.10 per share, authorized 1,000
   shares                                                                          ---                 ---
 Common stock--par value $0.10 per share, authorized 30,000
   shares, outstanding 100 shares                                                  ---                 ---
 Additional paid in capital                                                    501,626             501,626
 Retained earnings                                                              24,313             107,864

 Total stockholder's equity                                                    525,939             609,490

 Total liabilities and stockholder's equity                            $     1,286,327    $      1,959,059
</TABLE>

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


<PAGE>

                      MAGMA POWER COMPANY AND SUBSIDIARIES
                (A wholly-owned subsidiary of CE Generation LLC)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
                             (Dollars In Thousands)
<TABLE>
<CAPTION>

                                                                    1999              1998              1997
Revenue:
<S>                                                         <C>              <C>               <C>
 Sales of electricity and steam                             $     201,454    $     370,470     $     328,248

 Royalty income                                                     2,240            2,284             3,489

 Interest and other income                                         13,556           28,072             3,978

 Total revenues                                                   217,250          400,826           335,715

 Cost and Expenses:

 Plant operations                                                  61,158           70,624            72,196

 General and administration                                         2,185            1,820             1,380

 Depreciation and amortization                                     43,590          105,876            89,134

 Interest expense                                                  44,807           76,850            72,386

 Less interest capitalized                                         (6,804)         (20,934)          (20,549)

 Total expenses                                                   144,936          234,236           214,547

 Income before provision for income taxes                          72,314          166,590           121,168

 Provision for income taxes                                        24,138           61,191            45,361

 Income before extraordinary items                                 48,176          105,399            75,807

 Extraordinary item, net of tax (Note 6)                          (17,478)             ---               ---

 Net income                                                 $      30,698    $     105,399     $      75,807
</TABLE>

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

<PAGE>


                      MAGMA POWER COMPANY AND SUBSIDIARIES
                (A wholly-owned subsidiary of CE Generation LLC)
                 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                               OUTSTANDING      COMMON        ADDITIONAL         RETAINED
                                                 COMMON          STOCK          PAID-IN          EARNINGS           TOTAL
                                                 SHARES                         CAPITAL

<S>                                                  <C>     <C>          <C>               <C>               <C>
 BALANCE, December 31, 1996                          100     $      ---   $       501,626   $       96,658    $     598,284
 Net income                                          ---            ---               ---           75,807           75,807

 BALANCE, December 31, 1997                          100            ---           501,626          172,465          674,091

 Distribution                                        ---            ---               ---         (170,000)        (170,000)
 Net income                                          ---            ---               ---          105,399          105,399

 BALANCE, December 31, 1998                          100            ---           501,626          107,864          609,490

 Distribution                                        ---            ---               ---          (72,915)         (72,915)
 Contribution                                        ---            ---               ---          298,818         298,818
 Distribution of equity interest in
   excluded subsidiaries to MidAmerican              ---            ---               ---         (340,152)        (340,152)
 Net income                                          ---            ---               ---           30,698           30,698

 BALANCE, December 31, 1999                          100      $     ---   $       501,626   $       24,313   $      525,939
</TABLE>

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


<PAGE>


                      MAGMA POWER COMPANY AND SUBSIDIARIES
                (A wholly-owned subsidiary of CE Generation LLC)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
                             (Dollars in Thousands)
<TABLE>
<CAPTION>

                                                                    1999           1998               1997

 Cash flows from operating activities:
<S>                                                         <C>              <C>               <C>
 Net income                                                 $      30,698    $     105,399     $      75,807
 Adjustments to reconcile to net cash flows
   from operating activities:

 Depreciation and amortization                                     43,590          105,876            89,134
 Provision for deferred income taxes                               (7,427)          18,533            17,277
 Extraordinary item, net of tax                                    17,478              ---               ---
 Changes in other items:

 Accounts receivable                                               26,026          (32,984)          (12,445)
 Inventory and other assets                                        13,177           (2,555)            4,709
 Accounts payable and other accrued liabilities                   (25,132)          33,326           (19,508)

 Net cash flows from operating activities                          98,410          227,595           154,974

 Cash flows from investing activities:

 Capital expenditures                                            (129,098)        (102,842)          (50,907)
 Cash distributed in spin-off                                        (677)             ---               ---
 Decrease (increase) in restricted cash                           104,674         (215,696)           14,044

 Net cash flows from investing activities                         (25,101)        (318,538)          (36,863)

 Cash flows from financing activities:

 Due from parent                                                  (71,046)         124,597           (12,230)
 Proceeds from debt offerings                                         ---          285,000               ---
 Repayment of Salton Sea notes and bonds                          (57,836)        (106,938)          (90,228)
 Repayment of note payable                                       (221,619)             ---               ---
 Repayment of project loans                                           ---          (22,851)              ---
 Proceeds from construction and other loans                           ---              ---            38,776
 Distribution to parent                                           (72,915)        (170,000)              ---
 Contribution from parent                                         298,818              ---               ---
 Deferred charge relating to debt financing                           ---           (4,943)          (11,623)
 Decrease (increase) in restricted cash                               ---           26,688           (42,184)

 Net cash flows from financing activities                        (124,598)         131,553          (117,489)

 Net increase (decrease) in cash and cash equivalents             (51,289)          40,610               622
 Cash and cash equivalents at beginning of year                    54,661           14,051            13,429

 Cash and cash equivalents at end of year                   $       3,372    $      54,661     $      14,051

 Supplemental disclosure:

 Interest paid (net of amounts capitalized)                 $      45,949    $      54,048     $      50,802

 Income taxes paid                                          $      31,565    $      42,658     $      28,084
</TABLE>

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


<PAGE>


                      MAGMA POWER COMPANY AND SUBSIDIARIES
                (A wholly-owned subsidiary of CE Generation LLC)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999

1.  Business

         Magma  Power  Company  (the  "Company"  or  "Magma"),   a  wholly-owned
subsidiary of CE Generation LLC is primarily  engaged in the exploration for and
development  of geothermal  resources  and  conversion  of such  resources  into
electrical power and steam for sale to electric  utilities,  and the development
of other environmentally responsible forms of power generation.

         The Company currently operates eight and is constructing two geothermal
power  plants in the  Imperial  Valley in  California.  On April 17,  1996,  the
Company  completed  the  acquisition  of  Edison  Mission  Energy's  partnership
interests (the "Partnership Interest  Acquisition") in four geothermal operating
facilities  in  California  for a  cash  purchase  price  of  $71,000  including
acquisition  costs. The four projects,  Vulcan,  Hoch (Del Ranch),  Leathers and
Elmore  are  located  in the  Imperial  Valley  of  California.  Prior  to  this
transaction, the Company was a 50% owner of these facilities. The remaining four
plants are the Salton Sea Project which are  wholly-owned by subsidiaries of the
Company.  These  geothermal power plants consist of the Salton Sea I, Salton Sea
II, Salton Sea III, and Salton Sea IV. In 1998,  the Company began  construction
of the Salton Sea Unit V and CE Turbo  projects  which are scheduled to commence
commercial operation in fiscal 2000.

         Prior to February 8, 1999, the Company was  wholly-owned by MidAmerican
Energy  Holdings  Company  ("MEHC").  On  February 8, 1999,  MEHC  created a new
subsidiary, CE Generation LLC ("CE Generation") and subsequently transferred its
interest in the Company and its power  generation  assets in the Imperial Valley
to CE Generation. On March 3, 1999, MEHC closed the sale of 50% of its ownership
interests in CE Generation to an affiliate of El Paso Energy Corporation.

2. Summary of Significant Accounting Policies

         The  consolidated  financial  statements  include  the  accounts of the
Company  and  its   wholly-owned   subsidiaries.   All   material   intercompany
transactions  and balances  have been  eliminated in  consolidation.  Management
believes the financial statements reflect all material costs associated with the
Company's operations.

         The consolidated  financial  statements reflect the acquisition by MEHC
and the  resulting  push down to the  Company  of the  accounting  as a purchase
business combination.

         Cash  Equivalents--The  Company  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 restricted cash balance is composed of restricted
accounts for debt  service and capital  expenditures.  The debt service  reserve
funds are legally  restricted  as to their use and require  the  maintenance  of
specific minimum balances equal to the net debt service payment.

         The  capital   expenditure   funds  are   restricted  for  use  in  the
construction  of Salton Sea V, the CE Turbo Project and the  construction of new
brine facilities at the Imperial Valley  Projects,  which resulted from the sale
on October 13, 1998 by Salton Sea Funding  Corporation of $285 million aggregate
amount of 7.475% Senior  Secured  Series F Bonds due November 30, 2018 (see Note
6).

         Well  Costs--The  cost of drilling and equipping  production  wells and
other direct costs, are capitalized and amortized on a straight-line  basis over
their estimated  useful lives when production  commences.  The estimated  useful
lives of production wells are twenty years.
<PAGE>

         Deferred  Well and Rework  Costs--Geothermal  rework costs are deferred
and amortized over the estimated  period between  reworks ranging from 18 months
to 24 months.  These deferred costs, net of accumulated  amortization,  are $5.9
million and $6.7  million at December 31, 1999 and 1998,  respectively,  and are
included in other assets.

         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.

         Properties,  Plants, Contracts, Equipment and Depreciation--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.

         Depreciation of the operating power plant costs,  net of salvage value,
is computed on the  straight  line method over the  estimated  useful life of 30
years.  Depreciation  of  furniture,  fixtures and  equipment is computed on the
straight  line method over the  estimated  useful  lives of the related  assets,
which range from three to ten years.

         The Magma and  Partnership  Interest  Acquisitions  by the Company have
been accounted for as purchase business  combinations.  All identifiable  assets
acquired  and  liabilities  assumed  were  assigned  a  portion  of the  cost of
acquiring the  respective  companies,  equal to their fair values at the date of
the  acquisition  and  includes  power  sales  agreements,  which are  amortized
separately over (1) the remaining  portion of the scheduled price periods of the
power sales  agreements  and (2) the 20 year  avoided  cost periods of the power
sales agreements using the straight line method.

         Excess of Cost over Fair  Value--Total  acquisition  costs in excess of
the fair values assigned to the net assets acquired are amortized over a 40 year
period  using the  straight  line  method.  Accumulated  amortization  was $27.9
million and $30.2 million at December 31, 1999 and 1998, respectively.

         Capitalization of Interest and Deferred  Financing  Costs--Prior to the
commencement  of operations,  interest is capitalized on the costs of the plants
and geothermal resource development to the extent incurred. Capitalized interest
and other deferred charges are amortized over the lives of the related assets.

         Deferred  financing  costs are  amortized  over the term of the related
financing using the effective interest method.

         Revenue  Recognition--Revenues  are recorded based upon electricity and
steam  delivered to the end of the month.  See Note 4 for  contractual  terms of
power sales agreements.  Royalties earned from providing geothermal resources to
power plants  operated by other  geothermal  power  producers  are recorded when
delivered.

         Income  Taxes--The  Company  had  historically  been  included  in  the
consolidated  income tax  returns of MEHC and as of March 3, 1999 is included in
the consolidated income tax return of CE Generation. The Company's provision for
income  taxes is computed on a separate  return  basis.  The Company  recognizes
deferred  tax  assets  and  liabilities  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.

         Fair Values of Financial  Instruments--Fair  values have been 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.

         Impairment of Long-Lived  Assets--The Company reviews long-lived assets
and certain  identifiable  intangibles for impairment whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable.  An impairment  loss would be recognized,  based on discounted cash
flow or various models,  whenever evidence exists that the carrying value is not
recoverable.
<PAGE>

         Change in Accounting Estimate--During the year ended December 31, 1998,
the  Company  modified  the  amortization  method  to  amortize  the fair  value
adjustments  associated  with the  scheduled  price  periods of the four  plants
acquired in the Imperial Valley.  The Company  modified its amortization  method
from the weighted  average of the scheduled price periods to amortization of the
fair value adjustments over the scheduled price periods of the individual plant.
The  change  in  accounting   estimate   included   increasing  the  accumulated
amortization  of  the  aggregate  fair  value  adjustment  associated  with  the
scheduled price periods of the four plants acquired in the Imperial Valley.  The
impact of the change was to decrease 1998 net income by $4.7 million.

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

         Accounting  Pronouncements--In June 1998, the FASB issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities,  which established
accounting and reporting  standards for derivative  instruments  and for hedging
activities.  It requires  that an entity  recognize  all  derivatives  as either
assets or liabilities  in the statement of financial  position and measure those
instruments at fair value. This statement is effective for the Company beginning
January  1,  2001.  The  Company  has  not yet  determined  the  impact  of this
accounting pronouncement.

         Pending Accounting Policy Change--The  Accounting  Standards  Executive
Committee (AcSEC) of the American  Institute of Certified Public  Accountants is
considering  a  project  that in part  will  address  the  accounting  for major
maintenance  activities.  The  project  will  address  the  use of the  accrual,
deferral and expense  methods of accounting  for major  maintenance  activities.
Pending any change in current authoritative guidance, the Company may change its
current method of accounting for overhaul and well workover costs.

3. Dispositions

         Subsequent to the contribution by MEHC to CE Generation of its interest
in the  Company,  the Company and CE  Generation  transferred  its  interests in
Visayas Geothermal Power Company and Minerals LLC (the "Excluded  Subsidiaries")
to  MEHC.  This  transfer  was  recorded  as  a  distribution  of  the  Excluded
Subsidiaries' net assets as follows (in thousands):

                             Visayas      Minerals        Other        Total

   Cash                  $       234   $       ---  $       443   $       677
   Restricted cash            11,303       100,355          ---       111,658
   Accounts receivable        22,352        10,253       12,139        44,744
   Prepaid expenses            6,844           ---        5,215        12,059
   Plant & equip. net        183,460       256,568       42,543       482,571
   Goodwill                      ---        72,244          ---        72,244
   Deferred financing         11,945         2,684          ---        14,629
   Liabilities                (3,780)          ---     (235,988)     (239,768)
   Due to related parties     (5,112)       (1,508)     142,286       135,666
   Project financing        (153,808)     (140,520)         ---      (294,328)
   Total                 $    73,438   $   300,076  $   (33,362)  $   340,152
<PAGE>

         During the year ended  December 31, 1999,  1998 and 1997,  the Excluded
Subsidiaries  revenues and net income included in Magma's income  statement were
$7.3 million, $80.9 million and $42.3 million,  respectively,  and $2.4 million,
$17.0 million and $14.4 million, respectively.

4. Properties, Plants, Contracts and Equipment

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

                                                         1999            1998
Operating facilities:

Power plants                                      $     518,082    $    768,155
Wells and resource development                          151,996         137,399
Power sales agreements                                  264,371         264,371
Licenses and equipment                                   46,290          46,290

Total operating facilities                              980,739       1,216,215
Less accumulated depreciation and amortization         (282,586)       (284,664)

Net operating facilities                                698,153         931,551

Mineral reserves                                            ---         240,114

Construction in progress:

Zinc Plant                                                  ---          22,351
Salton Sea Unit V                                        89,072           9,227
Turbo and Region 2 Brine Facilities                      42,612           2,256
Other development                                         7,337           6,823

Total                                             $     837,174    $  1,212,322

         Imperial Valley Project Operating  Facilities--The  Partnership Project
and the Salton Sea Project are  collectively  referred to as the Imperial Valley
Project.  The  following  table sets out  information  regarding  the  Company's
projects:

  PROJECT                   COMMERCIAL                        CAPACITY

Vulcan                         1986                             34 MW
Del Ranch                      1989                             38 MW
Elmore                         1989                             38 MW
Leathers                       1990                             38 MW
Salton Sea I                   1987                             10 MW
Salton Sea II                  1990                             20 MW
Salton Sea III                 1989                             49.8 MW
Salton Sea IV                  1996                             39.6 MW
Salton Sea V                   2000 (est.)                      49 MW
CE Turbo                       2000 (est.)                      10 MW

         Significant  Customers and  Contracts--All  of the  Company's  sales of
electricity from the Imperial Valley Project,  which comprise  approximately 97%
and 74% of 1999 and 1998  electricity and steam revenues,  respectively,  are to
Southern  California  Edison Company  ("Edison") and are under  long-term  power
purchase contracts.  Accounts  receivable,  which are primarily from Edison, are
primarily  uncollateralized  receivables from long-term power purchase contracts
described  below.  If the  customers  were unable to perform,  the Company could
incur an accounting loss equal to the entire receivable balance of $29.9 million
and $90.4 million at December 31, 1999 and 1998, respectively.
<PAGE>

         The current Partnership Projects sell all electricity  generated by the
respective  plants  pursuant  to four  long-term  standard  offer no. 4, or SO4,
Agreements between the projects and Edison that are based on this standard form.
These SO4 Agreements provide for capacity payments,  capacity bonus payments and
energy payments.  Edison makes fixed annual capacity and capacity bonus payments
to the Projects to the extent that capacity  factors exceed certain  benchmarks.
The price for capacity and capacity  bonus payments is fixed for the life of the
SO4 Agreements.  Energy is sold at increasing  scheduled rates for the first ten
years after firm  operation and  thereafter at a rate which is based on the cost
that Southern  California  Edison  avoids by purchasing  energy from the project
instead of obtaining the energy from other sources. Southern California Edison's
avoided  cost is  currently  determined  by an approved  interim  formula  which
adjusts historic costs by an  inflation/deflation  factor  representing  monthly
changes  in the cost of natural  gas at the  California  border  and  adjustment
factors  based  on the time the day,  week  and  year in  which  the  energy  is
delivered.  Consequently,  under this methodology, energy payments under the SO4
agreements will fluctuate based on the time of generation and monthly changes in
average fuel costs in the California energy market. Legislation recently adopted
in California  establishes  that price qualifying  facilities  receive as energy
payments would be modified from the current  short-run avoided cost basis to the
clearing price  established by the PX once specified  conditions are met. As the
main condition,  the legislation  requires that the California  Public Utilities
Commission  must first  issue an order  determining  that the PX is  functioning
properly  for the  purposes of  determining  the  short-run  avoided cost energy
payments to be made to non-utility  power  generators.  Additionally,  a project
company may, upon appropriate notice to Southern  California Edison,  exercise a
one-time  option to elect to thereafter  receive energy  payments based upon the
clearing price from the PX.

         The  PX  is  a  nonprofit  public  benefit   corporation  formed  under
California law to provide a competitive  marketplace where buyers and sellers of
power, including utilities,  end-use customers,  independent power producers and
power marketers, complete wholesale trades through an electronic auction. The PX
currently  operates  two  markets:  (1) a day ahead market which is comprised of
twenty-four  separate concurrent auctions for each hour of the following day and
(2) an hour  ahead  market  for each hour of each day for which bids are due two
hours  before each hour.  In each market,  the PX receives  bids from buyers and
sellers and, based on the bids,  establishes  the market clearing price for each
hour and schedules  deliveries from sellers whose bids did not exceed the market
clearing  price to buyers  whose  bids were not less  than the  market  clearing
price. All trades are executed at the market clearing price.

         The  scheduled  energy  price  periods of the  Partnership  Project SO4
agreements  extended  until  February  1996,  December  1998,  December 1998 and
December  1999  for  each  of  the  Vulcan,  Del  Ranch,   Elmore  and  Leathers
Partnerships,  respectively.  The  weighted  average  energy rate for all of the
Partnership Projects' SO4 agreements was 6.49 cents per kWh in 1999.

         Salton  Sea  I  sells  electricity  to  Edison  pursuant  to a  30-year
negotiated power purchase agreement,  as amended (the "Salton Sea I PPA"), which
provides for  capacity and energy  payments.  The energy  payment is  calculated
using a Base Price which is subject to quarterly  adjustments  based on a basket
of indices. The time period weighted average energy payment for Salton Sea I was
5.3 cents per kWh during 1999. As the Salton Sea I PPA is not an SO4  Agreement,
the  energy  payments  do not revert to  Edison's  Avoided  Cost of Energy.  The
capacity payment is approximately $1.1 million per annum.

         Salton Sea II and Salton Sea III sell electricity to Edison pursuant to
30-year  modified SO4 Agreements  that provide for capacity  payments,  capacity
bonus payments and energy payments. The price for contract capacity and contract
capacity  bonus  payments is fixed for the life of the modified SO4  Agreements.
The energy payments for the first ten year period, which periods expire in April
2000  for  Salton  Sea II and  expired  in  February  1999 for  Salton  Sea III,
respectively,  are levelized at a time period  weighted  average of 10.6 per kWh
and 9.8 per kWh for Salton Sea II and Salton Sea III, respectively.  Thereafter,
the monthly  energy  payments  will be at Edison's  Avoided Cost of Energy.  For
Salton Sea II only, 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
annual  capacity  and bonus  payments  for  Salton Sea II and Salton Sea III are
approximately $3.3 million and $9.7 million, respectively.
<PAGE>

         Salton Sea IV sells  electricity  to Edison  pursuant to a modified SO4
agreement which provides for contract  capacity payments on 34 MW of capacity at
two  different  rates  based  on  the  respective   contract  capacities  deemed
attributable  to the original  Salton Sea PPA option (20 MW) and to the original
Fish Lake PPA (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 energy payment (for deliveries up to a
rate of 39.6 MW) is at a fixed price for 55.6% of the total energy  delivered by
Salton Sea IV and is based on an energy payment  schedule for 44.4% of the total
energy delivered by Salton Sea IV. 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.

         For the  years  ended  December  31,  1999 and 1998,  Edison's  average
Avoided Cost of Energy was 3.1 cents and 3.0 cents per kWh, respectively,  which
is  substantially  below the contract  energy  prices  earned for the year ended
December 31,  1999.  Estimates  of Edison's  future  Avoided Cost of Energy vary
substantially  from year to year. The Company cannot predict the likely level of
Avoided  Cost of Energy or PX prices under the SO4  Agreements  and the modified
SO4 Agreements at the expiration of the scheduled payment periods.  The revenues
generated by each of the projects  operating  under SO4  Agreements  will likely
decline  significantly after the expiration of the respective  scheduled payment
periods.

         The  Imperial  Valley  Projects  other  than  Salton Sea Unit I receive
transmission   service  from  the  Imperial   Irrigation   District  to  deliver
electricity  to  Southern  California  Edison  near  Mirage,  California.  These
projects pay a rate based on the Imperial Irrigation  District's cost of service
which  was $1.46 per month per  kilowatt  of  service  provided  for 1999 and is
recalculated annually.  The transmission service and interconnection  agreements
expire in 2015 for the Partnership Projects,  2019 for Salton Sea Unit III, 2020
for Salton  Sea Unit II and 2026 for  Salton Sea Unit IV.  Salton Sea Unit V and
the CE Turbo  projects have entered into 30-year  agreements  with similar terms
with the  Imperial  Irrigation  District.  Salton Sea Unit I delivers  energy to
Southern  California Edison at the project site and has no transmission  service
agreement with the Imperial Irrigation District.

         The Imperial Valley projects  obtain their  geothermal  resource rights
from Magma Power Company and Magma Land Company I, a wholly-owned  subsidiary of
the Company.

         Royalties--Royalty  expense for the years ended December 31, 1999, 1998
and 1997, which is included in plant  operations in the consolidated  statements
of operations, comprise the following (in thousands):

                                 1999             1998              1997

Vulcan                  $         423    $         363     $         326
Leathers                        3,361            2,811             2,694
Elmore                            520            2,192             2,213
Del Ranch                         856            2,870             2,650
Salton Sea I & II                 827              810             1,206
Salton Sea III                  1,673            1,637             2,439
Salton Sea IV                   2,569            2,645             2,815

Total                   $      10,229    $      13,328     $      14,343

         The  Partnership  Project pays royalties  based on both energy revenues
and total electricity  revenues.  Hoch (Del Ranch) and Leathers pay royalties of
approximately 5% of energy revenues and 1% of total electricity revenue.  Elmore
pays royalties of approximately 5% of energy revenues.  Vulcan pays royalties of
4.167% of energy revenues.
<PAGE>

         The Salton Sea Project's weighted average royalty expense in 1999, 1998
and 1997 was approximately 6.2%, 4.8% and 6.1%, respectively.  The royalties are
paid to numerous  recipients based on varying  percentages of electrical revenue
or steam production multiplied by published indices.

5. Notes and Bonds

         Each of the Company's direct or indirect subsidiaries is organized as a
legal  entity  separate  and apart from the Company and its other  subsidiaries.
Pursuant to separate project financing agreements, the assets of each Subsidiary
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 the Company will be available to satisfy the  obligations  of the
Company  or  any  of  its  other  such  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  of such
parties,  be advanced,  loaned,  paid as dividends or otherwise  distributed  or
contributed to the Company or affiliates  thereof.  "Subsidiaries"  means all of
the  Company's  direct or indirect  subsidiaries  (1) owning  direct or indirect
interests in the Imperial  Valley projects (other than Salton Sea Power Company)
or (2) owning interests in the Malitbog Project.

         The Salton Sea Funding  Corporation,  a wholly owned  subsidiary of the
Company,  (the  "Funding  Corporation")  debt  securities  are  as  follows  (in
thousands):

                     SENIOR        FINAL           RATE          DECEMBER 31,
                     SECURED      MATURITY
                     SERIES        DATE                       1999       1998


July 21, 1995        A Notes    May 30, 2000        6.69% $  18,532   $  48,436
July 21, 1995        B Bonds    May 30, 2005        7.37    101,776     106,980
July 21, 1995        C Bonds    May 30, 2010        7.84    109,250     109,250
June 20, 1996        D Notes    May 30, 2000        7.02      1,500      12,150
June 20, 1996        E Bonds    May 30, 2011        8.30     52,922      65,000
October 13, 1998     F Bonds    November 30, 2018  7.475    285,000     285,000
                                                          $ 568,980   $ 626,816

         Principal and interest  payments are made in semi-annual  installments.
The Salton Sea Notes and Bonds are nonrecourse to the Company.

         The  net  revenues,   equity   distributions  and  royalties  from  the
Partnership  Projects  are  used  to pay  principal  and  interest  payments  on
outstanding  senior secured bonds issued by the Funding  Corporation,  the final
series of which is scheduled to mature in November 2018. The Funding Corporation
Debt is guaranteed by certain  subsidiaries  of Magma and secured by the capital
stock of the Funding  Corporation.  The proceeds of the Funding Corporation Debt
were loaned by the Funding  Corporation  pursuant to loan  agreements  and notes
(the "Imperial Valley Project Loans") to certain  subsidiaries of Magma 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 the  Funding  Corporation  Debt.  The
Imperial Valley Project Loans and the guarantees of the 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.

         The proceeds of Series F of the Funding Corporation debt are being used
in part to construct the Zinc  Facility,  and the direct and indirect  owners of
the Zinc Facility (the "Zinc Guarantors", which will include Salton Sea Minerals
Corp. and Minerals  LLC),  are among the  guarantors of the Funding  Corporation
debt. In connection with the Divestiture, MEHC has guaranteed the payment by the
Zinc  Guarantors  of a specified  portion of the  scheduled  debt service on the
Imperial Valley Project Loans,  including the current principal amount of $140.5
million and associated interest.
<PAGE>

         Pursuant to a depository agreement,  Funding Corporation  established a
debt  service  reserve  fund in the form of a letter of credit in the  amount of
$67.6 million from which scheduled interest and principal payments can be made.

         Annual  repayments  of the  Salton  Sea  Notes  and Bonds for the years
beginning January 1, 2000 and thereafter are as follows (in thousands):

    2000                         $          25,032
    2001                                    23,658
    2002                                    28,572
    2003                                    28,086
    2004                                    30,588
    Thereafter                             433,044
                                 $         568,980

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

         * the  depository  accounts for the Salton Sea Notes and Bonds
         must be fully funded;

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

         * the  historical  debt  service  coverage  ratio of Salton Sea Funding
         Corporation  for the prior four fiscal quarters must be at least 1.4 to
         1.0, if the  distribution  occurs prior to 2000,  or 1.5 to 1.0, if the
         distribution occurs during or after 2000;

         * there must be sufficient geothermal resources to operate the
         Salton Sea projects at their required levels; and

         * each Salton Sea project under  construction  cannot have failed to be
         complete  by its  guaranteed  substantial  completion  date,  unless  a
         sufficient portion of the Salton Sea Notes and Bonds have been redeemed
         or a ratings confirmation has been obtained.

6. Related Party Transactions

         On July 21, 1995,  MEHC issued $200 million of 9 7/8% Limited  Recourse
Senior  Secured  Notes Due 2003 (the  "Notes").  The  Notes  are  secured  by an
assignment and pledge of 100% of the outstanding  capital stock of Magma and are
recourse only to such Magma capital stock.

         On  January  29,  1999,  MEHC  commenced  a  cash  offer  for  all  its
outstanding 9 7/8% Limited Recourse Senior Secured Notes due 2003. MEHC received
tenders from holders of an aggregate of approximately  $195.8 million  principal
which were paid on March 3, 1999 at a redemption  price of 110.025% plus accrued
interest,  resulting in a extraordinary loss of approximately $17.5 million, net
of tax of $11.1 million.
<PAGE>

7. Income Taxes

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

                       1999            1998              1997
Current:

 State         $       4,492    $      13,443     $       7,488
 Federal              27,073           29,215            20,596
                      31,565           42,658            28,084
Deferred:

 State                 1,041              237             1,342
 Federal              (8,468)          15,748            15,207
 Foreign                 ---            2,548               728
                      (7,427)          18,533            17,277

 Total         $      24,138    $      61,191     $      45,361

         The deferred expense is primarily temporary differences associated with
depreciation and amortization of certain assets.

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

                                                   1999       1998        1997

 Federal statutory rate                            35.0%     35.0%       35.0%
 Percentage depletion in excess of cost depletion  (7.7)     (3.8)       (4.3)
 Investment and energy tax credits                 (1.8)     (1.3)       (0.8)
 State taxes, net of federal tax effect             5.0       4.8         4.7
 Goodwill amortization                              2.9       1.6         2.2
 Tax effect of foreign income                      ---        0.5         0.6

                                                   33.4%     36.7%       37.4%


Deferred tax liabilities  (assets) are comprised of the following at December 31
(in thousands):

                                                  1999                 1998


  Depreciation and amortization, net    $        163,937      $       251,859
  Unremitted foreign earnings                        ---               21,464
  Other                                              116                   91

                                                 164,053              273,414

 Accruals not currently deductible for
  tax purposes                                    (8,529)             (13,171)
 Tax credits                                         ---               (7,023)
 Other                                            (1,910)              (6,441)

                                                 (10,439)             (26,635)

 Net deferred taxes                     $        153,614      $       246,779

8. Fair Value of Financial Instruments
<PAGE>

         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
the Company could realize in a current transaction.

         The fair value of all debt issues  listed on  exchanges,  including the
note  payable  to  related  party  which is based on a debt  issue  listed on an
exchange,  has been estimated based on the quoted market prices.  The Company is
unable to  estimate  a fair value for the  Malitbog  loan as there are no quoted
market prices available.

         The   carrying   amounts  in  the  table  below  are  included  in  the
consolidated balance sheets under the indicated captions (in thousands).

                                      1999                      1998
                             CARRYING      ESTIMATED   CARRYING      ESTIMATED
                               VALUE         FAIR        VALUE          FAIR
                                             VALUE                      VALUE

Financial assets:
Note receivable from
     related party         $   140,520   $   128,815  $     -      $         -

Financial liabilities:
Salton Sea notes and bonds     568,980       540,659      626,816      646,397
Note payable to related party      ---           ---      200,000      217,900

9. Commitments and Contingencies

         Salton Sea Unit V is obligated to supply the electricity demands of the
Zinc  Recovery  Project at the price  available to Salton Sea Unit V from the PX
less the wheeling costs to the PX.

         Salton Sea Power,  L.L.C.,  an  indirect  wholly-owned  subsidiary,  is
constructing  Salton  Sea Unit V. The  Salton  Sea  Unit V  Project  is a 49 net
megawatt  geothermal power plant which will sell approximately  one-third of its
net output to the zinc facility,  which was retained by MEHC. The remainder will
be sold through the California power exchange.

         Salton  Sea Unit V is being  constructed  pursuant  to a date  certain,
fixed price, turnkey engineering, procurement and construction contract by Stone
& Webster  Engineering  Corporation.  Salton Sea Unit V is scheduled to commence
commercial  operation in mid-2000.  Total project costs of Salton Sea Unit V are
expected  to be  approximately  $119.1  million  which is being  funded by $76.3
million of debt from  Salton Sea  Funding  Corporation  and $42.8  million  from
equity contributions.

         CE Turbo LLC, an indirect wholly-owned subsidiary,  is constructing the
CE Turbo project. The CE Turbo project will have a capacity of 10 net megawatts.
The net output of the CE Turbo project will be sold to the zinc facility or sold
through the California power exchange.

         The partnership  projects are upgrading the geothermal brine processing
facilities  at the  Vulcan  and Del  Ranch  projects  with  the  Region  2 brine
facilities construction.

         The CE Turbo project and the Region 2 brine facilities construction are
being  constructed by Stone & Webster  pursuant to a date certain,  fixed price,
turnkey engineering,  procurement and construction  contract. The obligations of
Stone & Webster are  guaranteed by Stone & Webster,  Incorporated.  The CE Turbo
project is scheduled to commence initial operations in early to mid 2000 and the
Region  2  brine  facilities  construction  is  scheduled  to  be  completed  in
early-2000.  Total  project costs for both the CE Turbo project and the Region 2
brine facilities  construction  are expected to be  approximately  $63.7 million
which  is  being  funded  by $55.6  million  of debt  from  Salton  Sea  Funding
Corporation and $8.1 million from equity contributions.


<PAGE>



                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Falcon Seaboard Resources, Inc.

         We have audited the accompanying  consolidated balance sheets of Falcon
Seaboard Resources,  Inc. (a wholly owned subsidiary of CE Generation,  LLC) and
subsidiaries  as of  December  31, 1999 and 1998,  and the related  consolidated
statements of  operations,  changes in  stockholder's  equity and cash flows for
each of the three years in the period ended December 31, 1999.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  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 Falcon Seaboard  Resources,
Inc. and  subsidiaries  at December 31, 1999 and 1998,  and the results of their
operations  and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Omaha, Nebraska
January 25, 2000


<PAGE>


                FALCON SEABOARD RESOURCES, INC. AND SUBSIDIARIES
                (A Wholly-Owned Subsidiary of CE Generation LLC)
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998
                 (Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
                                                                  1999                        1998

ASSETS

<S>                                                     <C>                        <C>
Cash and cash equivalents                               $         11,525           $        11,844
Restricted cash                                                    6,776                     5,917
Accounts receivable                                                6,278                     7,100
Inventory and other assets                                         4,405                     3,932
Deferred income taxes                                              1,333                     2,188

Total current assets                                              30,317                    30,981

Properties, plant, and contracts:

Land                                                                 358                       358
Cogeneration facility                                            164,647                   163,389
Furniture, fixtures and equipment                                  1,614                     1,602
                                                                 166,619                   165,349
Accumulated depreciation and amortization                        (35,627)                  (25,046)

Properties, plants and contracts, net                            130,992                   140,303

Restricted cash                                                    1,324                     1,307
Excess of cost over fair value of net assets acquired, net        84,585                    88,429
Investments in partnerships                                      118,637                   125,036
Deferred charges and other assets                                  5,447                     2,573

Total assets                                            $        371,302           $       388,629

LIABILITIES AND STOCKHOLDER'S EQUITY

Liabilities:
Accounts payable                                        $             13           $           366
Accrued liabilities                                                8,588                     6,435
Current portion of long-term debt                                 16,088                    14,268
Amounts due to affiliates, net                                    39,318                    28,696

Total current liabilities                                         64,007                    49,765

Deferred income taxes                                             79,763                    79,183
Project financing debt                                            60,173                    76,261
Other long-term liabilities                                          ---                       940

Total liabilities                                                203,943                   206,149

Commitments and contingencies (Notes 4 and 5)

Stockholder's Equity:

Common stock, $.01 par value; 1,000,000 shares authorized,

 1,192 shares issued and outstanding                                 ---                       ---
Additional paid in capital                                       167,359                   182,480
Retained earnings                                                    ---                       ---

Total stockholder's equity                                       167,359                   182,480

Total liabilities and stockholder's equity              $        371,302           $       388,629
</TABLE>


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


<PAGE>


                FALCON SEABOARD RESOURCES, INC. AND SUBSIDIARIES
                (A Wholly-Owned Subsidiary of CE Generation LLC)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                    1999            1998               1997

Revenues:
<S>                                                         <C>              <C>               <C>
 Sales of electricity and steam                             $      78,367    $      80,375     $      77,405
 Equity earnings of partnerships                                   22,861           10,732            14,542
 Interest and other income                                          4,314            3,694             4,325

 Total revenues                                                   105,542           94,801            96,272

Costs and Expenses:

 Plant operations                                                  36,872           37,765            39,388
 Depreciation and amortization                                     15,158           17,033            15,841
 Interest expense                                                   9,729           11,854            12,995

 Total costs and expenses                                          61,759           66,652            68,224

 Income before income tax expense                                  43,783           28,149            28,048

 Income tax expense                                                17,257           12,273            11,698

 Net income                                                 $      26,526    $      15,876     $      16,350
</TABLE>


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


<PAGE>


                FALCON SEABOARD RESOURCES, INC. AND SUBSIDIARIES
                (A Wholly-Owned Subsidiary of CE Generation LLC)
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                             Common Stock           Additional       Retained
                                                                      Paid-in        Earnings        Total
                                         Shares         Amount        Capital

<S>                                       <C>      <C>          <C>             <C>            <C>
BALANCE, January 1, 1997                  1,192    $       ---  $     232,500   $       2,755  $      235,255

Net income                                  ---            ---            ---          16,350          16,350

BALANCE, December 31, 1997                1,192            ---        232,500          19,105         251,605

Distribution                                ---            ---        (50,020)        (34,981)        (85,001)


Net income                                  ---            ---            ---          15,876          15,876

BALANCE, December 31, 1998                1,192            ---        182,480             ---         182,480

Distribution                                ---            ---        (15,121)        (26,526)        (41,647)

Net income                                  ---            ---            ---          26,526          26,526

BALANCE, December 31, 1999                1,192    $       ---  $     167,359   $         ---  $      167,359
</TABLE>



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


<PAGE>


                FALCON SEABOARD RESOURCES, INC. AND SUBSIDIARIES
                (A Wholly-Owned Subsidiary of CE Generation LLC)
         CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE YEARS ENDED
                                DECEMBER 31, 1999
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                   1999             1998              1997

Cash flows from operating activities:
<S>                                                         <C>              <C>               <C>
Net income                                                  $      26,526    $      15,876     $      16,350
Adjustments to reconcile to cash flows from
  operating activities:
Depreciation                                                       11,314           13,211            13,149
Amortization of excess of cost over fair value
  of net assets acquired                                            3,844            3,822             2,692
Provision for deferred income taxes                                (3,683)         (14,246)           (3,157)
Distribution from equity investments in excess
  of equity earnings                                                6,399            6,171             9,418
Changes in other items:
Accounts receivable                                                   822              766            (1,339)
Deferred charges and other assets                                  (4,080)          (1,000)           (1,601)
Accounts payable and accrued liabilities                              860           (4,720)            3,135

Net cash flows from operating activities                           42,002           19,880            38,647

Cash flows from investing activities:
Capital expenditures                                               (1,270)            (212)             (409)
Decrease (increase) in restricted cash                                (17)            (997)            1,076

Net cash flows from investing activities                           (1,287)          (1,209)              667

Cash flows from financing activities:
Repayments of debt                                                (14,268)         (12,805)          (11,237)
Distribution to parent                                            (44,648)         (82,000)              ---
Amounts due to/from affiliates                                     18,741           77,358           (26,708)
Decrease (increase) in restricted cash                               (859)             680               (97)

Net cash flows from financing activities                          (41,034)         (16,767)          (38,042)

Net increase (decrease) in cash and cash equivalents                 (319)           1,904             1,272
Cash and cash equivalents, beginning of year                       11,844            9,940             8,668

Cash and cash equivalents, end of year                      $      11,525    $      11,844     $       9,940

Supplemental disclosure:

Interest paid                                               $       9,582    $      11,707     $      12,995

Income taxes paid                                           $       6,543    $       6,982     $       1,237
</TABLE>


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


<PAGE>


                FALCON SEABOARD RESOURCES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999

1. Business

         Falcon Seaboard Resources,  Inc. ("FSRI" or the "Company") is a holding
company that invests  primarily  through its wholly  owned  subsidiaries  Falcon
Seaboard Pipeline Corporation,  Falcon Seaboard Power Corporation ("FSPC"),  and
Falcon Seaboard Oil Company ("FSOC").  On February 8, 1999,  MidAmerican  Energy
Holdings  Company,  the parent of FSRI  ("MEHC")  created a new  subsidiary,  CE
Generation L.L.C. ("CE Generation") and subsequently transferred its interest in
FSRI and other power generation assets to CE Generation.  On March 3, 1999, MEHC
sold 50% of its  interest in CE  Generation  to an  affiliate  of El Paso Energy
Corporation.

         Falcon   Seaboard   Pipeline   Corporation,   through   its   operating
subsidiaries,  acquires,  develops, owns and operates natural gas properties for
the benefit of affiliated power projects.

         FSPC, through its subsidiaries,  was formed to develop, design, own and
operate cogeneration and independent power plants. FSPC is the parent company to
Falcon Power Operating  Company  ("FPOC"),  Northern  Consolidated  Power,  Inc.
("Norcon") and Saranac Energy Company,  Inc. ("SECI").  FPOC provides operations
and maintenance  services to the  independent  power plants owned by the Company
and  affiliated  partnerships.  Norcon  held  general  and  limited  partnership
interests in a 79.9 megawatt  cogeneration  facility  which began  operations in
December  1992.  On December 2, 1999,  Norcon  transferred  its  interest in the
Norcon Project to General Electric Capital  Corporation.  SECI holds general and
limited partnership  interests in a 240 megawatt  cogeneration  facility,  which
began  operations in June 1994, and a natural gas pipeline that supplies fuel to
the facility, which began operations in January 1994.

         FSOC acquires,  develops,  owns and operates natural gas properties and
is the parent company of Power  Resources,  Ltd.,  which owns and operates a 200
megawatt cogeneration facility.

2. Summary of Significant Accounting Policies

         Basis  of   Presentation--The   accompanying   consolidated   financial
statements  include the  operations  and  accounts of FSRI and its wholly  owned
subsidiaries.  All significant intercompany  transactions and balances have been
eliminated  in  consolidation.  Management  believes  the  financial  statements
reflect all material costs associated with the Company's operations.

         Revenue Recognition--Revenue from cogeneration activities is recognized
when electrical and steam output is delivered in accordance with contract terms.

         Cash Equivalents--Cash  equivalents represent short-term, highly liquid
investments with an original maturity of less than three months. Restricted cash
is not considered a cash equivalent.

         Restricted   Cash--Restricted   cash   represents   amounts  for  major
maintenance expenditures and a debt protection reserve account. The debt service
funds are legally restricted as to their use and require maintenance of specific
minimum balances equal to the next debt service payment.

         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.

         Property,  Plants,  Contracts  and  Depreciation--Property,  plants and
contracts  are  stated at the cost  pushed  down from MEHC  which  reflects  the
estimated  fair  value  at the  date of  acquisition.  Depreciation  expense  is
computed using the straight line or accelerated  methods of accounting  over the
following useful lives:
<PAGE>

 Furniture, fixtures and equipment                          5 to 30 years
 Cogeneration facility                                      6 to 30 years

         Impairment of Long-Lived  Assets--The Company reviews long-lived assets
and certain  identifiable  intangibles for impairment whenever events or changes
in  circumstances  indicate  that the  carrying  amount  of an asset  may not be
recoverable.  An impairment  loss would be recognized,  based on discounted cash
flows or various models, whenever evidence exists that the carrying value is not
recoverable.

         Excess of Cost Over Fair  Value--Total  acquisition  costs in excess of
the fair values  assigned to the net assets  acquired  are being  amortized on a
straight  line basis over 25 years.  At December 31, 1999 and 1998,  accumulated
amortization  of the excess of cost over fair value was $14.1  million and $10.2
million, respectively.

         Investments--The  Company's investments in Saranac and Norcon (see Note
3) are accounted for using the equity method of accounting since the Company has
the ability to exercise significant  influence over the investees' operating and
financial  policies  through its  managing  general  partnership  interests.  At
December 31, 1999 and 1998, the carrying  amount of the Company's  investment in
Saranac  differs  from its  underlying  equity in net assets of Saranac by $98.5
million (net of  accumulated  amortization  of $35.1 million) and $108.8 million
(net  of  accumulated  amortization  of  $24.8  million),   respectively.   This
difference,  which  represents  the  adjustment  to record the fair value of the
investment at the date of  acquisition,  is being  amortized on a  straight-line
basis over  approximately  13 years,  the  remaining  portion of the power sales
agreement at the date of acquisition.

         Maintenance  and Repair  Reserves--A  maintenance and repair reserve is
recorded based on the Company's  long-term scheduled major maintenance plans for
the  Power   Resources   cogeneration   facility  and  is  included  in  accrued
liabilities. Other maintenance and repairs are charged to expense as incurred.

         Income  Taxes--The  Company  had  historically  been  included  in  the
consolidated  income tax  returns of MEHC and as of March 3, 1999 is included in
the  consolidated  income tax return of CE Generation.  The provision for income
taxes is computed on a separate return basis.  The Company  recognizes  deferred
tax  assets  and  liabilities  based on the  difference  between  the  financial
statement and tax bases of the assets and liabilities  using estimated tax rates
in effect for the year in which the differences are expected to reverse.

         Deferred   Financing   Costs--Costs   associated  with  securing  Power
Resources term loan were  capitalized and are being amortized using the straight
line method over the period the term loan is outstanding.

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

         Financial  Instruments--The  Company utilizes swap agreements to manage
market risks and reduce its exposure  resulting  from  fluctuations  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.  The Company'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 negligible.

         Fair  values  of  financial   instruments  have  been  estimated  using
available market  information and other valuation  techniques.  Unless otherwise
noted,  the  estimated  fair  value  amounts do not  differ  significantly  from
recorded values.
<PAGE>

         New Accounting  Pronouncement--In  June 1998, the Financial  Accounting
Standards  Board  ("FASB")  issued  Statement of Financial  Accounting  Standard
("SFAS") No. 133, Accounting for Derivative  Instruments and Hedging Activities,
which established  accounting and reporting standards for derivative instruments
and for hedging activities. It requires that an entity recognize all derivatives
as either  assets or  liabilities  in the  statement of  financial  position and
measure those  instruments  at fair value.  This  statement is effective for the
Company  beginning  January 1, 2001. The Company is in the process of evaluating
the impact of this accounting pronouncement.

         Pending Accounting Policy Change--The  Accounting  Standards  Executive
Committee (AcSEC) of the American  Institute of Certified Public  Accountants is
considering  a  project  that in part  will  address  the  accounting  for major
maintenance  activities.  The  project  will  address  the  use of the  accrual,
deferral and expense  methods of accounting  for major  maintenance  activities.
Pending any change in current authoritative guidance, the Company may change its
current method of accounting for major maintenance costs.

3. Investment in Partnerships

         The  Company  indirectly  holds  noncontrolling   general  and  limited
partnership  interests in Saranac Power Partners,  L.P.  ("Saranac"),  which was
formed to build, own and operate a natural gas fired combined cycle cogeneration
facility.  The lenders to the  partnership  have  recourse  only  against  these
facilities  and the income and revenues  therefrom.  In 1999, the Company had an
approximate  49% economic  interest in Saranac.  Effective in January 2000,  the
Company has an  approximate  61%  economic  interest in the  partnership  as TPC
Saranac  achieved  an after  tax  return  of  8.35%.  The  Company  will have an
approximate  80% economic  interest in the  partnership  after General  Electric
Capital  Company  achieves  an after tax return,  as defined in the  Partnership
Agreement, of approximately 7.252%.

         The  following is a summary of  aggregated  financial  information  for
Saranac as of and for the year ended December 31, 1999 and 1998 (in thousands):

                                 1999                     1998
 Assets                $       289,152           $       300,425
 Liabilities                   192,524                   197,680
 Revenue                       164,965                   138,574
 Net income                     55,163                    38,041

         Saranac has project  financing through a 14 year note payable agreement
with a lender with a principal amount  outstanding of $181.1 million at December
31, 1999. The note agreement is  collateralized by all of the assets of Saranac.
Saranac  is  restricted  by the  terms  of the  payable  agreement  from  making
distributions  or  withdrawing  any capital  amounts  without the consent of the
lender. Under terms of the note payable agreement,  distributions may be made to
the partners in accordance with the terms of the Saranac partnership  agreement.
Distributions  are made monthly and quarterly to the extent of the partnership's
excess cash balances.

         Each of the Saranac  partners has an interest in cash  distributions by
Saranac which changes when certain  after-tax rates of return are achieved by GE
Capital and the TPC Saranac partners on their contributions to Saranac. The cash
distributions  of Saranac are divided into three levels:  (1)  distributions  in
fixed  amounts  payable  during the first 15 years of  operation  of the Saranac
project, which are applied first to pay debt service and other amounts due under
the Saranac  project  financing  documents and any refinancing  loans,  with the
remainder  paid to GE  Capital  to enable it to  achieve a certain  base rate of
return;  (2) distributions of the Saranac available cash remaining after payment
of the  level 1  distributions  during  the first 15 years of  operation  of the
Saranac project;  (3) distributions after the first 15 years of operation of the
Saranac project.  During the first 15 years of operation of the Saranac project,
Saranac  Energy  will  receive  63.51%  of the level 2  distributions  until TPC
Saranac  partners  achieve an 8.35%  rate of return  and,  after such  return is
achieved  (which  occurred in 2000),  Saranac  Energy will receive 81.18% of the
level 2  distributions.  After the first 15 years of  operation  of the  Saranac
project,  Saranac Energy will receive 68% of the level 3 distributions  until GE
Capital achieves a certain supplemental rate of return and, thereafter,  Saranac
Energy will receive 75% of the level 3 distributions.
<PAGE>

         On December 2, 1999, the Company's  indirect  subsidiary,  NorCon Power
Partners,  L.P.  reached  agreement  with Niagara  Mohawk Power  Corporation  to
dismiss the outstanding litigation between NorCon and Niagara. At the same time,
NorCon  transferred the NorCon project to GE Capital and entered into agreements
with third  parties to terminate  some of NorCon's  contracts  and to assign the
rest of its contracts to a subsidiary  of GE Capital.  GE Capital also agreed to
be  responsible  for other third party claims made against NorCon related to the
NorCon  project.  Thus,  after  December 2, 1999,  neither NorCon nor any of the
company's  other  subsidiaries  owns an interest  in the NorCon  project and the
NorCon project  contracts are no longer in effect or have been assigned to third
parties.

         There were no undistributed  earnings in equity investments at December
31, 1999.

4. Project Financing Debt

         Power  Resources has 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 loan is  collateralized by an
assignment of all revenues received by Power Resources,  a lien on substantially
all of its real and personal property and a pledge of its capital stock.

         Effective June 5, 1989,  Power Resources  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 million and $110 million,  declining in  correspondence
with the principal balances,  and effectively fixed the interest rates at 9.385%
and  9.625%,  respectively,   excluding  the  interest  rate  margin.  The  swap
agreements  are  settled  in cash  based on the  difference  between a fixed and
floating  (index based) price for the  underlying  debt.  The notional  value of
these financial instruments were $76.3 million and $90.5 million at December 31,
1999 and 1998, respectively.  Power Resources would be exposed to credit loss in
the  event  of  nonperformance  by the  lender  under  the  interest  rate  swap
agreement.  However,  Power Resources does not anticipate  nonperformance by the
lender. The estimated cost to terminate the interest rate swap agreement,  based
on  termination  values  obtained  from the  lender,  was $4.1  million and $9.9
million at December 31, 1999 and 1998, respectively.

         The interest  rate can be increased  by payments  under a  Compensation
Agreement  included in Power Resources' term loan. The  Compensation  Agreement,
which entitles two of the term lenders to receive quarterly payments  equivalent
to  a  percentage  of  Power  Resources'  discretionary  cash  flow  ("DCF")  as
separately  defined in the agreement,  became effective  initially for a 13-year
period ending December 31, 2003. Under certain conditions relating to the amount
of Power Resources' cash flow and the restrictions on cash distributions,  Power
Resources  has the option to replace the payment  obligation in a quarter with a
payment to be calculated in a future quarter and added to the end of the initial
term of the  agreement.  The  Compensation  Agreement  entitles  the  lenders to
payments  totaling 10% of DCF for the first ten years,  7.5% of DCF for the next
three years and 10% of DCF for each  quarter  added to the  initial  term of the
agreement.  Power Resources recorded additional interest expense of $617,000 and
$1,177,000 for the years ended December 31, 1999 and 1998, respectively, related
to amounts owed under the Compensation Agreement.


<PAGE>


         Scheduled  maturities  of project  financing  debt for the year  ending
December 31 are as follows (in thousands):

2000                    $           16,088
2001                                18,119
2002                                20,312
2003                                21,742

Total                   $           76,261

         Under Power Resources' term loan agreement,  certain covenants and debt
service  coverage  ratios must be met before cash  distributions  can be made to
FSOC.  Power  Resources was in compliance  with these  requirements  at December
31,1999.

5. Commitments and Contingencies

         On  February  14,  1995,  NYSEG  filed with the FERC a  Petition  for a
Declaratory  Order,  Complaint,  and Request for  Modification of Rates in Power
Purchase  Agreements Imposed Pursuant to the Public Utility Regulatory  Policies
Act of 1978  ("Petition")  seeking FERC (i) to declare that the rates NYSEG pays
under  the  Saranac  PPA,  which was  approved  by the New York  Public  Service
Commission  (the "PSC"),  were in excess of the level  permitted under PURPA and
(ii) to  authorize  the PSC to reform the Saranac  PPA. On March 14,  1995,  the
Saranac Partnership  intervened in opposition to the Petition  asserting,  inter
alia,  that the Saranac PPA fully  complied with PURPA,  that NYSEG's action was
untimely and that the FERC lacked  authority to modify the Saranac PPA. On April
12, 1995,  the FERC by a unanimous  (5-0)  decision  issued an order denying the
various forms of relief  requested by NYSEG and finding that the rates  required
under the Saranac PPA were consistent with PURPA and the FERC's regulations.  On
May 11, 1995,  NYSEG requested  rehearing of the order and, by order issued July
19, 1995, the FERC unanimously  (5-0) denied NYSEG's request.  On June 14, 1995,
NYSEG petitioned the United States Court of Appeals for the District of Columbia
Circuit (the "Court of Appeals") for review of FERC's April 12, 1995 order. FERC
moved to dismiss NYSEG's petition for review on July 28, 1995. On July 11, 1997,
the Court of Appeals dismissed NYSEG's appeal from FERC's denial of the petition
on jurisdictional grounds.

         On August 7, 1997,  NYSEG filed a complaint in the U.S.  District Court
for the  Northern  District  of New  York  against  the  FERC,  the PSC (and the
Chairman,  Deputy  Chairman and the  Commissioners  of the PSC as individuals in
their  official   capacity),   the  Saranac   Partnership  and  Lockport  Energy
Associates,  L.P.  ("Lockport")  concerning the power purchase  agreements  that
NYSEG entered into with Saranac Partners and Lockport. NYSEG's suit asserts that
the PSC and the FERC  improperly  implemented  PURPA in authorizing  the pricing
terms that  NYSEG,  the  Saranac  Partnership  and  Lockport  agreed to in those
contracts.  The action raises  similar legal  arguments to those rejected by the
FERC in its April and July 1995 orders.  NYSEG in addition asks for  retroactive
reformation of the contracts as of the date of commercial  operation and seeks a
refund of $281 million from the Saranac Partnership. The Saranac Partnership and
other parties have filed motions to dismiss and oral  arguments on those motions
were heard on March 2, 1998 and again on March 3, 1999. The Saranac  Partnership
believes that NYSEG's claims are without merit for the same reasons described in
the FERC's orders.

         Power  Resources  has  contracted  to  purchase  natural  gas  for  its
cogeneration facility under two separate agreements,  an 8-year agreement for up
to 40,000 MMBTU per day which expires in December  2003 and a 15-year  agreement
for 3,600 MMBTU per day which  expires in June 2003.  These  agreements  include
annual price  adjustments,  and the 15-year agreement includes a provision which
allows the seller to terminate the agreement with a two-year written notice.  As
of December 31, 1999,  the seller had not elected to terminate  this  agreement;
therefore,  the minimum volumes under the 15-year and 8-year  agreements for the
years  ending  December 31, are included in the future  minimum  payments  under
these contracts as follows (in thousands):


<PAGE>



  2000                        $           23,308
  2001                                    23,608
  2002                                    24,285
  2003                                    24,854

  Total                       $           96,055

         The  Company's  affiliates   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.

         All of Power  Resources' sales of electricity and steam are made to two
customers under long-term contracts which expire in 2003.

         The  Power  Resources  Project  sells  electricity  to Texas  Utilities
Electric  Company  (TUEC)  pursuant  to  a 15  year  negotiated  power  purchase
agreement  (the Power  Resources  PPA),  which  provides for capacity and energy
payments.  Capacity payments and energy payments, which in 1999 are $3.2 million
per month and 3.7 cents per kWh, respectively, escalate at 3.5% annually for the
remaining term of the Power  Resources  PPA. The Power  Resources PPA expires in
September 2003.  Power Resources sells steam to Fina Oil and Chemical under a 15
year  agreement.  Power  Resources  has agreed to supply Fina with up to 150,000
pounds  per  hour  of  steam.  As long  as  Power  Resources  meets  its  supply
obligations,  Fina is required to purchase at least the minimum  amount of steam
per year  required  to  allow  the  Power  Resources  Project  to  maintain  its
qualifying facility status under PURPA.

         Accounts  receivable,  which are  primarily  from TUEC,  are  primarily
uncollateralized  receivables from long-term power purchase contracts  described
above. If TUEC was unable to perform,  FSRI could incur an accounting loss equal
to $5.8 million and $7.0 million at December 31, 1999 and 1998, respectively.

         Saranac 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
MMBTU's  per day.  The price for such  deliveries  is a stated  rate,  escalated
annually at a rate of 4%.

         The Saranac Project sells  electricity to New York State Electric & Gas
pursuant to a 15 year  negotiated  power  purchase  agreement (the Saranac PPA),
which provides for capacity and energy  payments.  Capacity  payments,  which in
1999 total 2.4 cents per kWh, are received for electricity produced during "peak
hours" as defined in the Saranac PPA and escalate at approximately 4.1% annually
for the remaining  term of the contract.  Energy  payments,  which  averaged 7.0
cents per kWh in 1999, escalate at approximately 4.4% annually for the remaining
term of the Saranac PPA. The Saranac PPA expires in June of 2009.  Saranac sells
steam to  Georgia-Pacific  and Tenneco  Packaging  under  long-term  steam sales
agreements.  The Company  believes that these  agreements will enable Saranac to
sell the minimum annual  quantity of steam  necessary for the Saranac Project to
maintain its qualifying  facility status under PURPA for the term of the Saranac
PPA.


<PAGE>


6. Income Taxes

         The  components  of income  tax  expense  (benefit)  for the year ended
December 31, 1999, 1998 and 1997 are as follows (in thousands):

                                      1999           1998              1997

 Current                     $      20,940    $      26,519     $      14,855

 Deferred                           (3,683)         (14,246)           (3,157)

 Total income tax expense    $      17,257    $      12,273     $      11,698


         At December 31, 1999 and 1998,  temporary  differences result primarily
from accruals, alternative minimum tax credit carryforwards and depreciation. At
December 31, 1999, and 1998, the Company had deferred tax assets and liabilities
as shown below (in thousands):

                                             1999            1998

 Deferred tax asset                 $      (1,333)   $      (2,188)

 Deferred tax liability                    79,763           79,183

 Net deferred tax liability         $      78,430    $      76,995


7. Related Party Transactions

         Amounts due from  affiliates  at December 31, 1999 and 1998,  primarily
represent balances with CE Generation for cash management  purposes.  The due to
affiliates  balance  at  December  31,  1998  includes  $3.0  million  in unpaid
distributions to CE Generation.

         FPOC has contracted with Saranac to provide  operations and maintenance
("O&M")  services to the  cogeneration  facility and  pipeline.  The Saranac O&M
agreement for the  cogeneration  facility  expires  January 1, 2009, and July 1,
2010.  The O&M  agreement  for the  pipeline  expires  June  20,  2010.  The O&M
agreements  provide  for  monthly  and  quarterly  fees  which  are  subject  to
escalation  provisions  and  reimbursement  of certain costs as specified in the
applicable  agreements.  The amounts due under these  agreements are included in
the amounts due from affiliates in the accompanying balance sheets.

         The due from and due to affiliate  balances in the Company's  financial
statements are the result of CE Generation's  central cash management policy. CE
Generation's  policy is to have FSRI distribute all available cash to the parent
company and have the parent company remit payment for most expenses  incurred by
FSRI. As a result, the due from and due to parent balances are simply a function
of the timing of cash receipts and cash distributions  between CE Generation and
FSRI.

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
FSRI could realize in a current transaction.

         The  project  loan is  estimated  to  have a fair  value  equal  to the
carrying value.
<PAGE>

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

                                    1999                      1998
                              CARRYING    ESTIMATED      CARRYING     ESTIMATED
                                VALUE        FAIR          VALUE        FAIR
                                             VALUE                      VALUE
Financial Liabilities:

 Project loan              $    76,261  $    76,261  $    90,529    $    90,529

 Interest rate swap                ---        4,082          ---          9,904


<PAGE>



INDEPENDENT AUDITORS' REPORT

To the Board of Directors
Saranac Power Partners, L.P.

We have audited the  accompanying  consolidated  balance sheets of Saranac Power
Partners, L.P. and subsidiary, as of December 31, 1999 and 1998, and the related
consolidated statements of operations, partners' capital and cash flows for each
of the three  years in the period  ended  December  31,  1999.  These  financial
statements  are  the  responsibility  of  the  Partnership's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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 Saranac Power Partners,  L.P. and
subsidiary  at December 31, 1999 and 1998,  and the results of their  operations
and their cash flows for each of the three  years in the period  ended  December
31, 1999 in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Omaha, Nebraska
January 25, 2000


<PAGE>


                   SARANAC POWER PARTNERS, L.P. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998
                             (Amounts in Thousands)
<TABLE>
<CAPTION>
                                                                 1999                  1998
ASSETS
<S>                                                  <C>                             <C>
Cash and cash equivalents                            $            2,559              $  1,169
Restricted cash                                                   6,969                 7,037
Accounts receivable                                              15,099                15,759
Inventory                                                         5,319                 5,853
Prepaid expenses                                                  1,139                 1,139
Total current assets                                             31,085                30,957

Property and equipment:

Land                                                                858                   858
Cogeneration facility                                           300,226               300,133
Pipeline                                                         18,638                18,621
Furniture, fixtures and equipment                                 1,298                 1,101
Total                                                           321,020               320,713
Accumulated depreciation                                        (70,430)              (57,728)
Property and equipment, net                                     250,590               262,985
Restricted cash                                                   7,478                 6,483
Total assets                                         $          289,153    $          300,425

LIABILITIES AND PARTNERS' CAPITAL

Liabilities:

Accounts payable                                     $                8    $              156
Accrued liabilities                                               6,845                 7,817
Amounts due to affiliates, net                                    2,234                    40
Current portion of long term debt                                11,050                 8,185
Total current liabilities                                        20,137                16,198

Other long term liabilities                                       2,340                   385
Notes payable                                                   170,047               181,097
Total liabilities                                               192,524               197,680

Commitments and contingencies (Notes 3, 4, 5 and 6)

Partners' capital                                                96,629               102,745

Total liabilities and partners' capital               $         289,153    $          300,425
</TABLE>


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


<PAGE>


                   SARANAC POWER PARTNERS, L.P. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
                             (Amounts in Thousands)

                                      1999             1998             1997

Revenues:

Sales of electricity        $       160,825    $     135,046   $      143,600
Sales of steam                        2,853            2,433            2,166
Transportation revenue                  244              220              283
Interest income                       1,043              874              904
Total revenues                      164,965          138,573          146,953

Costs and expenses:

Fuel                                 63,254           54,970           57,053
Operations and maintenance           17,758           16,106           16,807
Depreciation                         12,702           12,923           12,887
Interest expense                     16,088           16,534           16,800
Total costs and expenses            109,802          100,533          103,547

Net income                  $        55,163    $      38,040   $       43,406

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


<PAGE>



                   SARANAC POWER PARTNERS, L.P. AND SUBSIDIARY
                         STATEMENTS OF PARTNERS' CAPITAL
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
                             (Amounts in Thousands)

                                                      TOTAL

Balance at January 1, 1997                  $         112,036

Distributions                                         (50,572)

Net Income                                             43,406

Balance at December 31, 1997                          104,870

Distributions                                         (40,165)

Net Income                                             38,040

Balance at December 31, 1998                          102,745

Distributions                                         (61,279)

Net income                                             55,163

Balance at December 31, 1999                $          96,629

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


<PAGE>


                   SARANAC POWER PARTNERS, L.P. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999
                             (Amounts in Thousands)
<TABLE>
<CAPTION>

                                                                  1999                   1998                 1997
Cash flows from operating activities:
<S>                                                <C>                  <C>                  <C>
Net income                                         $         55,163     $          38,040    $        43,406
Adjustments to reconcile to net cash flow
  from operating activities:

Depreciation                                                 12,702                12,923             12,887
Changes in other items:
Accounts receivable                                             660                (1,822)              (491)
Inventory                                                       534                 1,057             (2,690)
Prepaid expenses                                                  -                   (26)                33
Accounts payable and accrued liabilities                        835                (2,989)             2,318
Net cash flows from operating activities                     69,894                47,183             55,463

Cash flows from investing activities:

Capital expenditures                                           (307)                 (802)               (92)
Decrease (increase) in restricted cash                         (995)                  (70)               759
Net cash flows from investing activities                     (1,302)                 (872)               667

Cash flows from financing activities:

Repayment of note payable                                    (8,174)               (6,139)            (4,911)
Distributions to partners                                   (61,279)              (40,165)           (50,572)
Decrease (increase) in restricted cash                           68                  (814)              (300)
Amounts due to affiliates, net                                2,183                  (447)               238
Net cash flows from financing activities                    (67,202)              (47,565)           (55,545)
Net increase (decrease) in cash and
   cash equivalents                                           1,390                (1,254)               585

Cash and cash equivalents, beginning of year                  1,169                 2,423              1,837

Cash and cash equivalents, end of year             $          2,559     $           1,169    $         2,422

Supplemental disclosures:

Cash paid for interest                             $         16,156     $          16,179    $        16,635
</TABLE>

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


<PAGE>


                   SARANAC POWER PARTNERS, L.P. AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 1999

1.   BUSINESS

         Saranac Power Partners,  L.P. (the "Partnership") was formed on May 11,
1992 to construct,  own and operate a natural gas-fired cogeneration facility in
Plattsburgh,  New York (the "Facility") and to construct,  own and operate a gas
pipeline (the  "Pipeline")  to transport  fuel to the Facility  through a wholly
owned  subsidiary of the  Partnership,  North  Country Gas Pipeline  Corporation
("North Country"). The Partnership and North Country began commercial operations
on June 21, 1994 and January 1, 1994, respectively.

         The  Partnership  consists  of  one  general  partner,  Saranac  Energy
Company,  Inc. ("SECI"),  an indirect wholly owned subsidiary of Falcon Seaboard
Resources,  Inc. ("FSRI"),  and four limited partners:  General Electric Capital
Corporation  ("GECC"),  SECI,  TPC Saranac  Partner  One,  Inc.  ("TP1") and TPC
Saranac  Partner  Two,  Inc.  ("TP2");   both  TP1  and  TP2  are  wholly  owned
subsidiaries of Tomen Power Corporation ("Tomen").

         Net income and distributions  from the Partnership are allocated to the
various  partners based on allocation  percentages that vary throughout the life
of the Partnership,  as specified in the Partnership Agreement. These allocation
percentages  will differ from the stated  ownership  percentages  until  certain
returns, as defined in the Partnership Agreement, are achieved.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Basis  of  Presentation  -  The  accompanying   consolidated  financial
statements  include the  operations  and accounts of the  Partnership  and North
Country.  All  significant  intercompany  transactions  and  balances  have been
eliminated in consolidation.

         Revenue  Recognition - Revenues are recognized for output  delivered or
services provided at rates specified in the related contracts.

         Cash Equivalents - Cash equivalents represent short-term, highly liquid
investments with original maturities of less than three months.  Restricted cash
is not considered a cash equivalent.

         Restricted  Cash  -  Restricted  cash  represents   amounts  for  major
maintenance  expenditures,  the debt  protection  reserve  account and remaining
amounts which were to be used for the  completion of the Facility.  Excess funds
remaining  in the  completion  account  will  be  paid  to  FSRI  as  additional
development fees. The debt service funds are legally  restricted as to their use
and require  maintenance  of specific  minimum  balances  equal to the next debt
service payment.

         Inventory - Inventory,  consisting  primarily of replacement  parts, is
valued on an average cost basis and stated at the lower of cost or market value.

         Property,  Equipment  and  Depreciation  - Property and  equipment  are
stated at cost.  Depreciation expense is computed using the straight line method
of accounting over the following useful lives:

     Cogeneration facility                               25 years
     Pipeline                                            30 years
     Furniture, fixtures and equipment                    5 years

         The  Partnership  reviews  long-lived  assets for  impairment  whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be  recoverable.  An  impairment  loss  would  be  recognized  based  on
discounted  cash flows or various  models,  whenever  evidence  exists  that the
carrying value is not recoverable.
<PAGE>

     Income Taxes - There is no provision for income taxes since those taxes are
the responsibility of the partners.

         Allocation  of Income  to  Partners  - Income  before  depreciation  is
allocated  in  the  same  proportion  as  cash  distributions.  Depreciation  is
allocated in accordance  with stated  percentages in the  Partnership  Agreement
based on relative capital contributions.

         Maintenance  and Repair  Reserve - A maintenance  and repair reserve is
recorded based on the Facility's  long-term,  scheduled major  maintenance plans
for the  cogeneration  facility  and is included in accrued  liabilities.  Other
maintenance and repairs are charged to expense as incurred.

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

         Financial  Instruments - The  Partnership  utilizes swap  agreements to
manage market risks and reduce its exposure from fluctuations 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.  The
Partnership'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  negligible.  Fair  values  of  financial  instruments  have been
estimated using  available  market  information and other valuation  techniques.
Unless  otherwise  noted,  the  estimated  fair  value  amounts  do  not  differ
significantly from recorded values.

         New Accounting  Pronouncement - In June 1998, the Financial  Accounting
Standards  Board  ("FASB")  issued  Statement of Financial  Accounting  Standard
("SFAS")  No.  133,   "Accounting   for  Derivative   Instruments   and  Hedging
Activities," which established accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives  as either  assets or  liabilities  in the  statement  of  financial
position  and  measure  those  instruments  at fair  value.  This  statement  is
effective for the Partnership  beginning  January 1, 2001. The Partnership is in
the process of evaluating the impact of this accounting pronouncement.

         Pending Accounting Policy Change - The Accounting  Standards  Executive
Committee (AcSEC) of the American  Institute of Certified Public  Accountants is
considering  a  project  that in part  will  address  the  accounting  for major
maintenance  activities.  The  project  will  address  the  use of the  accrual,
deferral and expense  methods of accounting  for major  maintenance  activities.
Pending any change in current authoritative guidance, the Partnership may change
its current method of accounting for major maintenance costs.

3.   SIGNIFICANT CONTRACTS

         Sales of electricity  and steam are made under  long-term  contracts to
two customers.  The steam contract includes stipulated volumes and prices over a
15-year term expiring in October 2009.

         The  contract for the sale of  electricity  (the  "Contract")  covers a
15-year term from the date of commercial  operation and provides for the sale of
the Facility's estimated annual electric energy production of 1,971,000 megawatt
hours to a New York state utility (the  "Utility").  The Contract  specified two
pricing  periods during its term.  The first period,  which began on the date of
commencement  of commercial  operation and ended  December 31, 1995, had a fixed
price per  kilowatt-hour for electricity  delivered.  To the extent the Facility
delivered  proportionately  more  electricity  during non-peak periods than peak
periods,  that excess  electricity is priced at the Utility's  tariff  short-run
avoided cost. The second pricing period, which began January 1, 1996 and ends 15
years after the commencement of commercial  operation,  has a price based upon a
discount to the Utility's 1988 estimate of long-run avoided costs.
<PAGE>

         During 1994, the  Partnership  and the Utility  amended the Contract to
grant,  among  other  things,  the Utility the right to reduce the output of the
Facility  by up to  200,000  megawatt-hours  per year.  In return,  among  other
things,  the Utility is required to  compensate  the  Partnership  for its fixed
costs during those periods of reduced production. The Utility reduced the output
of the Facility by approximately 113,000,  122,000 and 157,000 Megawatt hours in
1999, 1998 and 1997, respectively.

         The Contract  requires  payment by the Partnership in certain events of
termination  by either party of the excess of amounts paid for  electricity  and
the  Utility's  1988  estimate of avoided  cost.  At December 31,  1999,  actual
payments received for electricity to date plus projected 2000 payments were less
than the Utility's 1988 estimate of avoided costs.

         The  Facility  is  a  qualifying  facility  under  the  Public  Utility
Regulatory  Policy  Act of 1978  ("PURPA")  and  its  contract  for the  sale of
electricity is subject to the 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 a 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.

         The  Partnership  has  contracted  to  purchase  natural  gas  for  its
cogeneration facility for delivery through North Country's pipeline for a period
of 15 years  for an  amount up to  51,000  MMBTU's  per day.  The price for such
deliveries  is a  stated  rate,  escalated  annually  at a rate  of 4%.  Minimum
expected payments under the contract are as follows (in thousands):

        2000                                   $        56,491
        2001                                            58,592
        2002                                            60,935
        2003                                            63,373
        2004                                            66,088
        Thereafter                                     344,090

        Total                                  $       649,569

         North Country has also contracted to transport gas through its pipeline
to the Utility and the steam purchaser discussed above for a period of 15 years.

4.   NOTE PAYABLE

         In  October  1994,  the  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,  1999,  1998 and 1997 was
6.5088%, 6.1875% and 6.5625%, respectively.

         Effective  October 7, 1994,  the  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 will increase to 8.31% in October 2001 and 8.56% in October 2005.
During 1999, 1998 and 1997, the Partnership paid $3.6 million,  $3.0 million and
$2.9  million,  respectively,  related to this  agreement  which was included in
interest  expense.  The  Partnership  is exposed to credit  loss in the event of
nonperformance  by the lender under the interest rate swap  agreement.  However,
the Partnership does not anticipate  nonperformance by the lender. The estimated
cost to terminate the interest rate swap agreements, based on termination values
obtained from the lender,  was $4.5 million,  $17.5 million and $12.3 million at
December 31, 1999, 1998 and 1997, respectively.
<PAGE>

     Maturities  of the note  payable at  December  31,  1999 are as follows (in
thousands):

       2000                                   $        11,050
       2001                                            13,096
       2002                                            15,552
       2003                                            18,826
       2004                                            22,100
       Thereafter                                     100,484
       Total                                  $       181,108

         The note  agreements  are  collateralized  by all of the  Partnership's
assets. The 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
Partnership Agreement.  The note payable agreement also requires the Partnership
to maintain  certain  covenants.  The  Partnership  was in compliance with these
requirements at December 31, 1999.

         The Partnership  has issued an irrevocable  letter of credit to its gas
supplier in the amount of $13 million.  The Partnership has  approximately  $7.5
million available in additional 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.   COMMITMENTS AND CONTINGENCIES

         On  February  14,  1995,  NYSEG  filed with the FERC a  Petition  for a
Declaratory  Order,  Complaint,  and Request for  Modification of Rates in Power
Purchase  Agreements Imposed Pursuant to the Public Utility Regulatory  Policies
Act of 1978  ("Petition")  seeking FERC (i) to declare that the rates NYSEG pays
under  the  Saranac  PPA,  which was  approved  by the New York  Public  Service
Commission  (the "PSC"),  were in excess of the level  permitted under PURPA and
(ii) to  authorize  the PSC to reform the Saranac  PPA. On March 14,  1995,  the
Saranac Partnership  intervened in opposition to the Petition  asserting,  inter
alia,  that the Saranac PPA fully  complied with PURPA,  that NYSEG's action was
untimely and that the FERC lacked  authority to modify the Saranac PPA. On April
12, 1995,  the FERC by a unanimous  (5-0)  decision  issued an order denying the
various forms of relief  requested by NYSEG and finding that the rates  required
under the Saranac PPA were consistent with PURPA and the FERC's regulations.  On
May 11, 1995,  NYSEG requested  rehearing of the order and, by order issued July
19, 1995, the FERC unanimously  (5-0) denied NYSEG's request.  On June 14, 1995,
NYSEG petitioned the United States Court of Appeals for the District of Columbia
Circuit (the "Court of Appeals") for review of FERC's April 12, 1995 order. FERC
moved to dismiss NYSEG's petition for review on July 28, 1995. On July 11, 1997,
the Court of Appeals dismissed NYSEG's appeal from FERC's denial of the petition
on jurisdictional grounds.

         On August 7, 1997,  NYSEG filed a complaint in the U.S.  District Court
for the  Northern  District  of New  York  against  the  FERC,  the PSC (and the
Chairman,  Deputy  Chairman and the  Commissioners  of the PSC as individuals in
their  official   capacity),   the  Saranac   Partnership  and  Lockport  Energy
Associates,  L.P.  ("Lockport")  concerning the power purchase  agreements  that
NYSEG entered into with Saranac Partners and Lockport. NYSEG's suit asserts that
the PSC and the FERC  improperly  implemented  PURPA in authorizing  the pricing
terms that  NYSEG,  the  Saranac  Partnership  and  Lockport  agreed to in those
contracts.  The action raises  similar legal  arguments to those rejected by the
FERC in its April and July 1995 orders.  NYSEG in addition asks for  retroactive
reformation of the contracts as of the date of commercial  operation and seeks a
refund of $281 million from the Saranac Partnership. The Saranac Partnership and
other parties have filed motions to dismiss and oral  arguments on those motions
were heard on March 2, 1998 and again on March 3, 1999. The Saranac  Partnership
believes that NYSEG's claims are without merit for the same reasons described in
the FERC's orders.
<PAGE>

6.   RELATED PARTIES

         The Partnership  has contracted  with an affiliated  company to provide
operating and  maintenance  services (the "O&M  Contract")  for a 16-year period
expiring  in June 2010.  This O&M  Contract  provides  for a  management  fee of
$137,500  per  month  which is  adjusted  annually,  based on a  published  U.S.
government  index.  The  affiliate  is  also  reimbursed  for any  direct  costs
incurred.  During 1999,  1998 and 1997, the  Partnership  incurred costs of $1.6
million, $1.7 million and $2.7 million, respectively, related to this agreement.

         Additionally, the O&M Contract provides for certain performance bonuses
or penalties.  During 1999,  1998 and 1997, the affiliate  earned  approximately
$851, $0 and $815, respectively as performance bonuses.

7.  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
the Partnership could realize in a current transaction.

     The note  payable is  estimated  to have a fair value equal to the carrying
value.

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

                                     1999                      1998
                                         Estimated                    Estimated
                             Carrying      Fair       Carrying           Fair
                               Value       Value        Value            Value

  Financial Liabilities:

   Note Payable               181,108     181,108      189,282         189,282
   Interest Rate Swap             ---       4,487          ---          17,506



<PAGE>




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

         Not applicable


<PAGE>


Part III

Item 10.  Directors and Executive Officers

EXECUTIVE OFFICER                             POSITION

Robert S. Silberman           Director, President and Chief Operating Officer

Brian K. Hankel               Vice President and Treasurer

Douglas L. Anderson           Director, Vice President and General Counsel

Richard P. Johnston           Vice President and Commercial Officer

Joseph M. Lillo               Vice President and Controller

Patrick J. Goodman            Director

Larry Kellerman               Director

John L. Harrison              Director

Steven M. Pike                Director


         ROBERT S. SILBERMAN,  43,  President and Chief Operating  Officer of CE
Generation and each assigning  subsidiary.  Mr. Silberman joined  MidAmerican in
1995. Prior to that, Mr. Silberman served as Executive Assistant to the Chairman
and Chief Executive Officer of International Paper Company from 1993 to 1995, as
Director of Project Finance and  Implementation  for the Ogden  Corporation from
1986 to 1989 and as a Project Manager in Business Development for Allied-Signal,
Inc.  from 1984 to 1985.  He has also served as the  Assistant  Secretary of the
Army for the United States Department of Defense.

         BRIAN K. HANKEL,  37, Vice President and Treasurer of  MidAmerican,  CE
Generation  and each  assigning  subsidiary.  Mr. Hankel joined  MidAmerican  in
February 1992 as Treasury  Analyst and served in that position to December 1995.
Mr. Hankel was appointed  Assistant  Treasurer in January 1996 and was appointed
Treasurer in January 1997. Prior to joining MidAmerican,  Mr. Hankel was a Money
Position Analyst at FirsTier Bank of Lincoln from 1988 to 1992 and Senior Credit
Analyst at FirsTier from 1987 to 1988.

         DOUGLAS  L.  ANDERSON,  42,  Vice  President  and  General  Counsel  of
CalEnergy Generation, CE Generation and each assigning subsidiary.  Mr. Anderson
joined  MidAmerican  in February  1993.  From 1990 to 1993,  Mr.  Anderson was a
business attorney with Fraser,  Stryker,  Vaughn,  Meusey, Olson, Boyer & Cloch,
P.C. in Omaha.  From 1987 through 1989, Mr. Anderson was a principal in the firm
Anderson & Anderson.  Prior to that,  from 1985 to 1987, he was an attorney with
Foster, Swift, Collins & Coey, P.C. in Lansing, Michigan.

         RICHARD P. JOHNSTON,  43, Vice  President and Commercial  Officer of CE
Generation  and Director of  Operations  for El Paso Energy  International.  Mr.
Johnston  joined El Paso Energy in 1997 and was  assigned  to the CE  Generation
management  team at its founding in March of 1999. In his 21 years of experience
in power generation engineering and management,  Mr. Johnston has held positions
directing  Plant  Operations  and  Maintenance,  Asset  Management  and  Project
Development  in both the Domestic and  International  Markets for ESI Energy,  a
Florida Power & Light subsidiary,  from 1993 to 1997, and previously for The AES
Corp.,  based in  Arlington,  VA, and  Westinghouse,  based in Orlando,  FL. Mr.
Johnston has extensive  experience in hands-on  management of the operations and
maintenance of oil and gas-fired combustion turbines, coal, biomass,  geothermal
and solar independent power,  including all aspects of construction  management,
mobilization and start-up.
<PAGE>

         JOSEPH M. LILLO, 30, Vice President and Controller of CE Generation and
each assigning  subsidiary.  Mr. Lillo joined  MidAmerican in November 1996, and
served as manager of Financial  Reporting and was promoted to  Controller/IPP in
March 1998.  Mr. Lillo was promoted to Vice  President  and  Controller  in July
1999.  Prior to  joining  MidAmerican,  Mr.  Lillo was a senior  associate  with
Coopers & Lybrand LLP.

         PATRICK J.  GOODMAN,  33,  Senior Vice  President  and Chief  Financial
Officer  of  MidAmerican  and a director  of CE  Generation  and each  assigning
subsidiary. Mr. Goodman joined MidAmerican in June 1995 and served as Manager of
Consolidation   Accounting   until  September  1996  when  he  was  promoted  to
Controller.  Mr. Goodman was promoted to Chief Financial  Officer in April 1999.
Prior to joining  MidAmerican,  Mr. Goodman was a financial manager for National
Indemnity Co. from 1993 to 1995 and a certified  public  accountant at Coopers &
Lybrand from 1989 to 1993.

         LARRY KELLERMAN,  44, President of El Paso Power Services Company and a
director of CE Generation. Mr. Kellerman joined El Paso Energy in February 1998.
Prior to joining El Paso Energy,  he was President of Citizens  Power,  where he
initiated  Citizens'  activities  in the  power  marketing  field in 1988,  when
Citizens was the initial power marketer  granted FERC  authorization.  From 1982
through 1988,  Mr.  Kellerman was General  Manager of Power  Marketing and Power
Supply for Portland General Electric.  From 1979 through 1982, Mr. Kellerman was
Financial Analyst and Power Contract Negotiator with Southern California Edison,
where he negotiated  some of the first Public  Utility  Regulatory  Policies Act
qualifying facility contracts in the nation.

         JOHN L.  HARRISON,  40, Senior  Managing  Director and Chief  Financial
Officer of El Paso Merchant Energy and a director of CE Generation. Mr. Harrison
joined  El Paso  Energy in June  1996.  Prior to  joining  El Paso  Energy,  Mr.
Harrison was a partner with Coopers & Lybrand LLP for five years.

         STEVEN M. PIKE, 38, Vice President  Structured  Transactions of El Paso
Power Services Company and a director of CE Generation.  Mr. Pike joined El Paso
Energy in April of 1998.  Prior to joining  El Paso  Energy,  Mr.  Pike was Vice
President  Risk  Management  for Enerz,  a  wholly-owned  trading  subsidiary of
Zeigler Coal  Holding  Company,  and Director of Strategic  Planning for Zeigler
Coal Holding  Company from 1995 to 1998, and Director of Energy  Development for
Kennecott  Corporation from 1995 to 1996. Mr. Pike began his career with Niagara
Mohawk  Power  Corporation  and  held a number  of  positions  in  power  system
transmission  operations and generation  dispatch  planning,  power contracting,
fuel supply,  fossil and hydro generation planning,  and strategic planning from
1983 to 1995.

         The directors and  executive  officers do not receive any  compensation
for serving in these positions.


<PAGE>


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

     Fifty percent of CE Generation's interests are owned by MidAmerican and the
other 50% are owned by El Paso Power.  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.  MidAmerican's common stock is not
publicly traded.  El Paso Power is owned  indirectly by El Paso Energy.  El Paso
Energy's common stock is publicly traded on the New York Stock Exchange.

Item 13.      Certain Relationships and Related Transactions

Relationship with MidAmerican and El Paso Energy Corporation

     CE Generation is 50% owned by  MidAmerican  and 50% owned by El Paso Power.
CE Generation's  activities are restricted by the terms of the indenture for the
securities  to (1) ownership of our  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  MidAmerican,  El Paso  Energy  and  their  other  affiliates,  and,
accordingly, our assets and the assets of the assigning subsidiaries will not be
generally available to satisfy the obligations of MidAmerican, El Paso Energy or
any of their other  affiliates.  However,  our and the  assigning  subsidiaries'
unrestricted  cash and other assets which are  available for  distribution  may,
subject to applicable  law and the terms of our and the assigning  subsidiaries'
financing  arrangements,  be  advanced,  loaned,  paid as dividends or otherwise
distributed or contributed to MidAmerican,  El Paso Energy or their  affiliates.
The securities are non-recourse to MidAmerican and El Paso Energy.

     In connection  with El Paso Power's  acquisition of 50% of CE  Generation's
interests, MidAmerican entered into an administrative services agreement with CE
Generation and El Paso Power entered into a power marketing  services  agreement
and a fuel management services agreement with CE Generation.  MidAmerican and El
Paso Power are reimbursed for the actual costs and expenses of performing  their
obligations under these  agreements.  These agreements each have an initial term
of one year and then  continue  from  year to year  until  terminated  by either
party.


<PAGE>


                                    PART IV

Item 14.      Exhibits, Financial Statements Schedule 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

              Financial  Statement  Schedules are not included  because they are
              not required or the information required is included in Part II of
              this Form 10-K.

     (b) Reports on Form 8-K

         Not applicable.

     (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


<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 6th day of April, 2000.

                                CE Generation LLC

                                /s/ Robert S. Silberman*
                                By: Robert S. Silberman
                                Director, President and Chief Operating Officer

                                         * By:  /s/  Douglas L. Anderson
                                         Douglas L. Anderson
                                         Attorney-in-Fact

         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/ Robert S. Silberman*                                 April 6, 2000
Director, President and
Chief Operating Officer
(Principal Executive Officer)

/s/ Douglas L. Anderson*                                 April 6, 2000
Director

/s/ Richard P. Johnston*                                 April 6, 2000
Vice President and
Commercial Officer

/s/ Joseph M. Lillo*                                     April 6, 2000
Vice President and Controller
(Principal Accounting Officer)

/s/ Patrick J. Goodman*                                  April 6, 2000
Director

/s/ Larry Kellerman*                                     April 6, 2000
Director

/s/ John L. Harrison*                                    April 6, 2000
Director

/s/ Steven M. Pike*                                      April 6, 2000
Director

*  By:  /s/ Douglas L. Anderson
         Attorney-in-Fact


<PAGE>


                                  EXHIBIT INDEX


         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      Limited Liability Company Operating  Agreement
                  of CE Generation,  LLC (incorporated by reference to Exhibit
                  3.2 to the Company's Registration Statement on Form S-4).

         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      Purchase  Agreement,  dated February 24, 1999, by and among CE
                  Generation,  LLC,  Credit Suisse First Boston  Corporation and
                  Lehman  Brothers,  Inc.  (incorporated by reference to Exhibit
                  4.3 to the Company's Registration Statement on Form S-4).

         4.4      Exchange and Registration Rights Agreement,  dated as of March
                  2, 1999, by and among CE Generation,  LLC, Credit Suisse First
                  Boston Corporation and Lehman Brothers,  Inc. (incorporated by
                  reference  to  Exhibit  4.4  to  the  Company's   Registration
                  Statement on Form S-4).

         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).
<PAGE>

         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).

         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  Stock and CEDC  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).

         24.0     Power of Attorney

         27.0     Financial Data Schedule