EXHIBIT 3.2









                  LIMITED LIABILITY COMPANY OPERATING AGREEMENT

                                       OF

                               CE GENERATION, LLC



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                                TABLE OF CONTENTS
                                                                            Page

ARTICLE I......................................................................1

DEFINITIONS AND CHARACTERIZATION...............................................1
  1.1.  Definitions............................................................1
  1.2.  Tax Characterization...................................................4

ARTICLE II.....................................................................4

FORMATION......................................................................4
  2.1.  Organization...........................................................4
  2.2.  Name...................................................................4
  2.3.  Term...................................................................4
  2.4.  Registered Agent and Office............................................4
  2.5.  Principal Office.......................................................4
  2.6.  Qualified in Other Jurisdictions.......................................5

ARTICLE III....................................................................5

PURPOSE; NATURE OF BUSINESS....................................................5
  3.1.  Purpose................................................................5

ARTICLE IV.....................................................................5

ACCOUNTING AND RECORDS.........................................................5
  4.1.  Records to be Maintained...............................................5
  4.2.  Tax Returns and Reports; Accounting....................................6
  4.3.  Information............................................................6
  4.4.  Confidentiality........................................................6

ARTICLE V......................................................................7

MEMBERS........................................................................7
  5.1.  Membership Classes.....................................................7
  5.2.  Names and Addresses....................................................7
  5.3.  Admission of New Members...............................................7

ARTICLE VI.....................................................................7

MANAGEMENT; RIGHTS AND DUTIES OF MEMBERS.......................................7
  6.1.  Management.............................................................7

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  6.2.  Operations............................................................10
  6.3.  Other Opportunities...................................................12
  6.4.  Liability ............................................................12
  6.5.  Exculpation and Indemnification.......................................13

ARTICLE VII...................................................................13

CONTRIBUTIONS AND CAPITAL ACCOUNTS............................................13
  7.1.  Contributions.........................................................14
  7.2.  No Obligation to Restore Deficit Balance..............................14
  7.3.  Withdrawal; Successors................................................14
  7.4.  Interest  ............................................................14
  7.5.  No Personal Liability.................................................14

ARTICLE VIII..................................................................14

DISTRIBUTIONS.................................................................14

ARTICLE IX....................................................................14

TRANSFER OF INTERESTS.........................................................14
  9.1.  Transfer of Interests.................................................14
  9.2.  Conditions to Transfer................................................15
  9.3.  Electric Utility......................................................15
  9.4.  QF True Up............................................................15

ARTICLE X.....................................................................16

DISSOLUTION AND WINDING UP....................................................16
  10.1.  Dissolution..........................................................16
  10.2.  Effect of Dissolution................................................16
  10.3.  Distribution of Assets on Dissolution................................16
  10.4.  Winding Up and Filing Articles of
           Cancellation.......................................................17

ARTICLE XI....................................................................18

MISCELLANEOUS.................................................................18
  11.1.  Notices  ............................................................18
  11.2.  Amendment; Waiver; Decisions.........................................18
  11.3.  Resolution of Disputes...............................................18
  11.4.  Headings ............................................................18
  11.5.  Binding Agreement....................................................18
  11.6.  Enforcement..........................................................19
  11.7.  Saving Clause........................................................19
  11.8.  Counterparts.........................................................19
  11.9.  Governing Law........................................................19

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  11.10. No Rights of Creditors and Third
           Parties under Agreement............................................19
  11.11. General Interpretive Principles......................................19
  11.12. Entire Agreement.....................................................20

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                  LIMITED LIABILITY COMPANY OPERATING AGREEMENT

                                       OF

                               CE GENERATION, LLC

         This Limited Liability  Company  Operating  Agreement of CE Generation,
LLC,  a Delaware  limited  liability  company  (the  "COMPANY"),  is made by and
between  the  Company  and  CalEnergy  Company,  Inc.,  a  Delaware  corporation
("CALENERGY"), as of February 9, 1999.

         WHEREAS,  CalEnergy has formed a limited  liability company pursuant to
the Delaware  Limited  Liability  Company Act, 6 Del C.  ss.18-101,  et seq., as
amended from time to time (the "ACT"),  by filing a Certificate  of Formation of
the Company  with the office of the  Secretary of State of the State of Delaware
and entering into this Agreement; and

         NOW, THEREFORE,  in consideration of the agreements and obligations set
forth  herein and for other good and  valuable  consideration,  the  receipt and
sufficiency of which are hereby  acknowledged and intending to be legally bound,
the  Company  and  CalEnergy,  the  sole  Member,  hereby  adopt  the  following
provisions:

                                   ARTICLE I.

                        DEFINITIONS AND CHARACTERIZATION

    1.1.  DEFINITIONS.  In addition to the other terms defined elsewhere in this
Agreement (as defined  below),  the following  terms shall have the meanings set
forth below:

         ACT. Delaware Limited Liability Company Act, as amended.

         AFFILIATE. Any Person, directly or indirectly,  controlling, controlled
by or under common control with such Person and any director, officer, employee,
consultant or agent of such Person.

         AGREEMENT. This Limited Liability Company Operating Agreement including
all amendments adopted in accordance with this Agreement and the Act.

         BOARD. The Board of Directors of the Company.

         BUSINESS DAY. Any day other than Saturday,  Sunday or such other day on
which banking institutions in New York, New York, are authorized or obligated to
close.

         CAPITAL  ACCOUNT.  The account  maintained  for a Member  determined in
accordance with Article VII.

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         CAPITAL CONTRIBUTION. Any contribution of Property to the Company made
by or on behalf of a Member.

         CERTIFICATE.  The  Certificate of Formation of the Company,  as amended
from time to time and filed in the Office of the Secretary of State of the State
of Delaware.

         CLASS A INTERESTS. The Class A Interests representing 50% of the Common
Equity of the Company and entitling the holder to the rights described herein.

         CLASS B INTERESTS. The Class B Interests representing 50% of the Common
Equity of the Company and entitling the holder to the rights described herein.

         CODE. The Internal Revenue Code of 1986, as amended.

         COMPANY.  CE Generation,  LLC, a limited liability company formed under
the laws of the State of Delaware, and any successor limited liability company.

         DEVELOPMENT AGREEMENT.  The certain agreement by and among the Company,
CalEnergy  and El Paso Power  Holding  Company to be  executed as of the Closing
Date as defined in the Purchase Agreement.

         DIRECTOR.  A person  duly  appointed  to the  Board of the  Company  in
accordance with Section 6.1.

         DISSOLUTION EVENT. An event, the occurrence of which will result in the
dissolution of the Company under Article X.

         ELECTRIC  UTILITY.  An "electric  utility,"  "electric  utility holding
company" or a combination thereof, as such terms are used in 18 C.F.R.ss.292.206
or any successor provision, any Subsidiary of any of the foregoing, or any other
Person in which any of the  foregoing  holds an interest  which,  if such Person
owned a Class A Interest, would be deemed to result in any portion of such Class
A Interest being held by any of the foregoing.  Any  determination  of who is an
Electric Utility shall be made by the Board.

         FERC.  The  Federal  Energy  Regulatory  Commission,  or any  successor
agency.

         FISCAL YEAR. The calendar year.

         IMPERIAL VALLEY PROJECTS. The meaning set forth in the Purchase
Agreement.

         INTERESTS.  The Class A Interests and Class B Interests  taken together
or individually as the context may require.

         INVESTOR.  The Person acquiring the Class A Interest from CalEnergy and
such Persons successors and permitted assigns.



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         IPPCO DEBT. shall mean the $400 million indebtedness of the Company
issued prior to the Closing as defined in the Purchase Agreement.

         MEMBER. The Persons,  other than the Company,  executing this Agreement
as Members and any new Members added in accordance with this Agreement.

         MEMBERSHIP  ADMISSION.  The  sale or  issuance  by the  Company  of any
Interest to any Person,  whether or not such  Person,  immediately  prior to the
time of such sale or issuance, was a Member.

         OFFICER. The Persons appointed pursuant to Section 6.1(f).

         PERSON. An individual, trust, estate, corporation,  partnership,  joint
venture, limited liability company, business trust,  unincorporated association,
or a government or agency or political subdivision thereof.

         POWER PURCHASE  AGREEMENTS.  The Power sale contracts pursuant to which
each Project sells electricity.

         PROJECTS.  The Company's  interests in certain  generating  facilities,
commonly  known as Salton Sea Units I, II, III,  IV and V, CE Turbo,  Del Ranch,
Elmore, Vulcan, Leathers, PRI, Yuma, NorCon and Saranac.

         PROPERTY.  Any  property,  real or  personal,  tangible or  intangible,
including  money and  securities,  and any legal or  equitable  interest in such
property, but excluding services and promises to perform services in the future.

         PURCHASE  AGREEMENT.  The Equity Purchase  Agreement dated February 21,
1999 between CalEnergy,  as Seller, and Investor,  as Buyer, for the purchase of
the Class A Interests.

         PURPA. The Public Utility Regulatory Policies Act of 1978, as amended.

         QF. A power  plant which has  qualified  as a "small  power  production
facility" or a "cogeneration facility" as such terms are defined in PURPA.

         QF PROJECT.  Any Project  which has  obtained  the status of a QF until
such time as the Board determines to terminate the QF status, or such Project is
otherwise determined not to be a QF by FERC.

         SECURITIES ACT. The Securities Act of 1933, as amended.

         SUBSIDIARY. Any corporation or other entity (including partnerships and
other business associations and joint ventures) in which the Company directly or
indirectly owns 10% or more of the equity securities.

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         TAX REGULATIONS.  The federal income tax regulations promulgated by the
United States Treasury  Department under the Code as such Tax Regulations may be
amended from time to time.  All references  herein to a specific  section of the
Tax Regulations shall be deemed also to refer to any corresponding  provision of
succeeding Tax Regulations.

         TRANSFER. Any sale assignment,  pledge,  hypothecation,  abandonment or
other disposition or encumbrance whether or not for consideration.

         ZINC RECOVERY PROJECT. That certain zinc extraction facility located in
Imperial  Valley,  California,  owned by  CalEnergy  Minerals LLC and all future
expansions thereof and future minerals  extraction  facilities  developed in the
vicinity of the Projects located in Imperial Valley, California.

    1.2. TAX CHARACTERIZATION.  It is intended that the Company be characterized
and treated for federal,  state and local  income tax purposes as the  Directors
shall determine from time to time.


                                   ARTICLE II.

                                    FORMATION

    2.1.  ORGANIZATION.  The Members  hereby  organize the Company as a Delaware
limited liability company pursuant to the provisions of the Act.

    2.2. NAME.  The name of the Company is CE Generation,  LLC, and all business
of the Company  shall be conducted  under that name,  or one or more  fictitious
names as the Board may determine from time to time.

    2.3.  TERM.  The  existence of the Company  shall be  perpetual,  unless the
Company shall be sooner  dissolved  and its affairs wound up in accordance  with
the Act or this Agreement.

    2.4.  REGISTERED  AGENT AND OFFICE.  The registered agent for the service of
process  and the  registered  office of the  Company  shall be that  Person  and
location set forth in the  Certificate.  The Members or the Board may, from time
to time, change the registered agent or office through  appropriate filings with
the Office of the Secretary of State of the State of Delaware.  In the event the
registered  agent ceases to act as such for any reason or the registered  office
shall  change,  the Members or Board  shall  promptly  designate  a  replacement
registered agent or file a notice of change of address, as the case may be.

    2.5.  PRINCIPAL OFFICE. The Principal Office of the Company shall be located
at: c/o  CalEnergy  Company,  Inc.,  302 South 36th  Street,  Suite 400,  Omaha,
Nebraska 68131, Attn:  General Counsel,  or at such other address as the Company
may have furnished in writing.




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    2.6. QUALIFIED IN OTHER  JURISDICTIONS.  The Members shall cause the Company
to be qualified,  formed or registered under assumed or fictitious name statutes
or similar laws in any jurisdiction in which the Company transacts business. Any
member of the Board,  any  Officer or any  person  appointed  by the Board as an
authorized person within the meaning of the Delaware Act, shall execute, deliver
and file any  certificates  (and any  amendments  and/or  restatements  thereof)
necessary for the Company to qualify to do business in a  jurisdiction  in which
the Company may wish to conduct business.


                                  ARTICLE III.

                           PURPOSE; NATURE OF BUSINESS

    3.1. PURPOSE.  The Company's business and purpose is to (i) to engage in the
ownership and operation of the Projects,  (ii) to issue the IPPCo Debt, (iii) if
approved by the Board, to construct new projects, (iv) if approved by the Board,
to pursue new generation  facilities,  to engage in activities incidental to the
foregoing  (including  financing  activities),  and any and all lawful  business
activities  which  may be  approved  by the  Board  from  time to time for which
limited liability companies may be organized under the Act.


                                   ARTICLE IV.

                             ACCOUNTING AND RECORDS

    4.1.  RECORDS TO BE  MAINTAINED.  The Company  shall  maintain the following
records at the Principal Office:

         (a) a current list of the full name set forth in alphabetical order and
last known mailing address of each Member, together with information relating to
each Member's Capital Contributions and Membership Interest;

         (b) a copy of the Certificate and all amendments thereto, together with
executed  copies of any powers of attorney  pursuant to which the Certificate or
any such amendment has been executed;

         (c) a copy  of  the  Company's  federal,  state  and  local  income  or
information tax returns and reports for the three most recent Fiscal Years; and

         (d) the Company's books and records,  including  financial  statements,
permits and  insurance of the Company,  which shall be open to inspection by the
Members or their agents at reasonable times.

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    4.2. TAX RETURNS AND REPORTS;  ACCOUNTING.  The Company, at its own expense,
shall cause its accountants to prepare and timely file income tax returns of the
Company in all  jurisdictions  where such filings are required,  and the Company
shall cause its accountants to prepare and deliver to each Member, within ninety
(90) days after the  expiration  of each Fiscal  Year or as soon as  practicable
thereafter,  at the  Company's  expense,  all  information  with  respect to the
Company  required by the Code and the Tax Regulations for the preparation of the
Members' federal income tax returns. The Company shall use the accrual method of
accounting in the preparation of its financial  reports and for tax purposes and
shall keep its books and records accordingly.

    4.3. INFORMATION.

         (a) Requested  Information.  With  reasonable  promptness,  the Company
shall  furnish each Member or Director with such other data and  information  as
from time to time may be reasonably requested. The Company acknowledges that its
obligations  under this Section 4.3(a) shall not limit the rights of its Members
or Directors under applicable law to obtain information and other materials from
the Company.

         (b) Management Reporting. The officers of the Company shall cause to be
prepared and delivered to the Board of Directors or a designated officer of each
Member,  within  thirty (30) days after the end of each  quarter (and monthly to
the extent such reports are available),  reports which are  conventional for the
power  generation  industry  presenting  timely and relevant  information on the
financial and operational performance of the Company and its assets. In addition
to the  foregoing,  the officers of the Company shall prepare and deliver to the
Board of Directors (i) within sixty (60) days after the end of each Fiscal Year,
a balance sheet of the Company and its  Subsidiaries  as at the end of such year
and statements of income and cash flows of the Company and its  Subsidiaries for
such year, setting forth in comparative form the figures for the previous Fiscal
Year, audited and certified by a nationally recognized accounting firm acting as
the independent public accountants of the Company;  (ii) within thirty (30) days
after the end of each fiscal quarter (other than year-end), an unaudited balance
sheet of the  Company  and its  Subsidiaries  as at the end of such  quarter and
statements  of income and cash flows for the  Company and its  Subsidiaries  for
such quarter,  setting forth in comparative form the figures for the same fiscal
quarter for the previous  year;  (iii) with  reasonable  promptness,  such other
financial  information  and reports as from time to time may be requested by the
Board  of  Directors,   including,   without  limitation,   production  reports,
management reports and efficiency data.

         (c)  Inspection.  From and  after the date  hereof,  the  Company  will
permit,  upon reasonable prior notice and at such members sole cost and expense,
each holder of more than 5% of the outstanding Interests, its nominee,  assignee
or its  representative to visit and inspect any of the properties of the Company
and its Subsidiaries,  to examine all their books of account,  records,  reports
(including  tax records  and  returns)  and other  papers and to make copies and
extracts  therefrom,  during  normal  business  hours,  subject  to  appropriate
confidentiality requirements.

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    4.4.  CONFIDENTIALITY.  As  much  of  the  information  and  other  material
furnished under or in connection with this Agreement  (whether furnished before,
on or after the date  hereof)  constitutes  or contains  confidential  business,
financial or other information of the Company, its Subsidiaries or the Projects,
each Member  covenants  for itself and its  directors,  officers,  partners  and
stockholders  that it will not disclose such  confidential  information and will
cause its respective officers,  directors,  employees,  counsel, accountants and
other  representatives to abide by such confidentiality  obligations;  provided,
however,  that such  Member may  disclose or deliver  any  information  or other
material  disclosed  to or received  by the Member  should  such  disclosure  or
delivery be required by law or regulation provided that it provides prior notice
to the Company so that the Company may seek an appropriate  protective order, if
applicable.

                                   ARTICLE V.

                                     MEMBERS

    5.1.  MEMBERSHIP  CLASSES.  The  Company  shall  have two  classes of Member
Interests,  Class A Interests  and Class B Interests.  The Class A Interests and
Class B Interests  shall each  represent 50% of the common equity of the Company
and  shall  each  be  entitled  to 50%  of  the  voting  rights  and  50% of any
distributions, and otherwise have the rights as set forth in this Agreement.

    5.2. NAMES AND ADDRESSES.  The names and addresses of the Initial Members of
each class are as stated on Schedule 1.

    5.3.  ADMISSION  OF NEW  MEMBERS.  The  Members  may  effect,  at their sole
discretion,  a Membership Admission by the prior written consent of both (i) the
holders  of a  majority  of the  Class A  Interests  and (ii) the  holders  of a
majority of the Class B Interests;  provided, however, that at no time while any
Project remains a QF may such Membership  Admission be effected if it will cause
an Electric Utility, or more than one Electric Utility in the aggregate,  to own
more than 50% of the equity of the  Company or cause any  Project to lose its QF
status.


                                   ARTICLE VI.

                    MANAGEMENT; RIGHTS AND DUTIES OF MEMBERS

    6.1.  MANAGEMENT.  (a) Board of  Directors.  The  Company  shall be  managed
exclusively  by or under the  direction of a Board of Directors  (the  "BOARD"),
consisting of four  Directors,  two of whom shall be appointed by the holders of
the Class A Interests  and two of whom shall be  appointed by the holders of the
Class B Interests;  provided,  that,  no person  appointed by the holders of the
Class A Interests shall be an Electric Utility. Each Director and Officer of the
Company is not a  "manager"  (within  the  meaning  of the Act) of the  Company.
Following  their  appointment,  Directors  shall serve until (i)  removal,  (ii)
resignation  or (iii)  election of a successor by the holders of the  applicable
class of  Interests,  whichever  occurs  first.  Directors may be removed at any
time, with or without cause, by the holders of the class of Interests appointing
such Director.

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         (b) Authority of the Board. Except as provided in Section 6.2,

    (i) The Board, acting as a group or through the officers, has sole authority
to manage the Company and is  authorized to make any  contracts,  enter into any
transactions,  make and obtain any  commitments  and take any and all actions on
behalf of the Company to conduct or further the Company's  business.  Any action
taken by the Directors or Officers on behalf of the Company in  accordance  with
the foregoing provisions shall constitute the act of and shall serve to bind the
Company;

    (ii) Each Director has one vote in Board decisions;

    (iii) Action by the Board requires either

         (A) a resolution  approved by the affirmative vote of at least three of
    the  Directors  present at a meeting of the Board,  (1) scheduled by a prior
    act of the  Directors  or called upon at least two  business  days'  written
    notice signed by at least two  Directors or the Chairman or  President,  and
    (2) with a quorum present of at least three of the Directors, or

         (B) a written action, signed by at least three of the Directors.

         (c) Meetings of the Board of  Directors.  The Board of Directors  shall
hold annual  meetings at such time and at such place as shall be  designated  by
the  President  and  stated in the notice of the  meeting.  Notice of the annual
meeting  stating the place,  date and hour of the meeting shall be given to each
Director  not less than ten (10) days  before the date of such  annual  meeting,
either personally,  by telephone,  by mail, by telegram or by any other means of
communication.  Special  meetings of the Board of Directors may be called by the
Chairman,  if any, or the President on three (3) days' notice to each  Director,
either personally,  by telephone,  by mail, by telegram or by any other means of
communication;  special meetings shall be called by the Chairman, if any, or the
President or Secretary in like manner and on like notice on the written  request
of one or more of the Directors.

         (d) Quorum and Acts of the Board of  Directors.  At all meetings of the
Board of Directors a majority of the Directors shall constitute a quorum for the
transaction  of business and the act of a majority of the  Directors  present at
any  meeting  at  which  there  is a  quorum  shall  be the act of the  Board of
Directors,  except as may be otherwise  specifically provided by this Agreement.
If a quorum shall not be present at any meeting of the Board of  Directors,  the
Directors  present  thereat may adjourn the meeting  from time to time,  without
notice other than announcement at the meeting,  until a quorum shall be present.
Any  action  required  or  permitted  to be taken at any  meting of the Board of
Directors  may be taken  without  a  meeting,  if all  members  of the  Board of
Directors consent thereto in writing, and the writing or writings are filed with
the minutes of the proceedings of the Board of Directors.

         (e) Electronic  Communications.  Directors may participate in a meeting
of  the  Board  of  Directors  by  means  of  conference  telephone  or  similar
communications  equipment  by means of which all  persons  participating  in the
meeting  can  hear  each  other,  and  such  participation  in a  meeting  shall
constitute presence in person at the meeting.



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         (f)  Officers.  The Board of Directors  shall  appoint  officers of the
Company  (the  "Officers")  and assign in  writing  titles  (including,  without
limitation,  President,  Vice  President,  Secretary,  and  Treasurer)  to  such
persons.  Any number of  offices  may be held by the same  person.  The Board of
Directors at its annual  meetings  may appoint  such other  Officers as it shall
deem  necessary who shall hold their  offices for such terms and shall  exercise
such powers and perform such duties as shall be determined  from time to time by
the Board of Directors.  The salaries, if any, of all Officers shall be fixed by
or in the manner prescribed by the Board of Directors.

              (1) The  President.  The  President  shall be the chief  executive
officer of the Company, shall preside at all meetings of the Board of Directors,
shall have  general  and active  management  of the  business of the Company and
shall see that all orders and  resolutions of the Board of Directors are carried
into effect.  The President shall execute bonds,  mortgages and other contracts,
except where  required or  permitted by law to be otherwise  signed and executed
and except where signing and execution  thereof shall be expressly  delegated by
the Board of Directors or by this Agreement to some other Officer.

              (2) The Vice President and Commercial  Officer.  In the absence of
the  President  or in the event of the  President's  inability  to act, the Vice
President shall perform the duties of the President,  and when so acting,  shall
have  all  the  powers  of and be  subject  to all  the  restrictions  upon  the
President.  Subject to the  direction of the  President  or the Board,  the Vice
President shall be responsible for overseeing  activities  related to optimizing
the commercial  contracts and optimization of project economic value,  including
power  sales  and  fuel  management.  The  President  shall  work  with the Vice
President in developing and  implementing  the Annual  Budget.  Subject to Board
ratification,  the  holders of the Class A Interests  shall  appoint the initial
Vice President and Commercial Officer.

              (3) The  Treasurer.  The  Treasurer  shall have the custody of the
Company  funds and  securities  and shall  keep full and  accurate  accounts  or
receipts and  disbursements  in books belonging to the Company and shall deposit
all  moneys  and other  valuable  effects  in the name and to the  credit of the
Company in such depositories as may be designated by the Board of Directors. The
Treasurer shall disburse the funds of the Company as may be ordered by the Board
of Directors, taking proper vouchers for such disbursements, and shall render to
the President and the Board of Directors,  at its annual  meetings,  or when the
Board  of  Directors  so  requires,   an  account  of  all  of  the  Treasurer's
transactions and of the financial condition of the Company.

              (4) The Secretary.  The Secretary shall attend all meetings of the
Board of Directors  and record all  proceedings  of the meetings of the Board of
Directors in books to be kept for that  purpose.  The  Secretary  shall give, or
cause to be given,  notice of all meetings of the Board of Directors,  and shall
perform such other duties as may be  prescribed by the Board of Directors or the
President, under whose supervision the Secretary shall be.

         (g) Binding.  Unless otherwise  determined by the Board of Directors or
as otherwise set forth in this Agreement, each Officer has the authority to bind
the Company.

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         (h)  Nonliability  of  Directors  and Officers for Acts or Omissions in
Their Official Capacity.  To the full extent permitted by the Act, all Directors
and Officers appointed thereby are released from liability for damages and other
monetary relief on account of any act, omission, or conduct in the Director's or
such  Officer's  Managerial  capacity.  No  amendment  or repeal of this section
affects any  liability  or alleged  liability of any Director or Officer for any
acts, omission, or conduct that occurred prior to the amendment or repeal.

    6.2. OPERATIONS. (a) Restrictions. Without the approval of a majority of the
Board  (including at least one Director  appointed by the holders of the Class A
Interests  and at least one  Director  appointed  by the  holders of the Class B
Interests)  or the approval of the holders of a majority of the  Interests,  the
Company  shall not take (and,  subject to paragraph  (b) below,  shall cause its
Subsidiaries and controlled Affiliates not to take) the following actions:

         (i) provide guarantees,  indemnities, loans or other forms of financial
    or credit support in favor of any Member or any of their  Affiliates,  other
    than pursuant to arrangements existing as of the date hereof;

         (ii) enter into any other  transaction,  agreement or arrangement  with
    any Member or any of their Affiliates other than the Administrative Services
    Agreement,  the Fuel Management  Services  Agreement and the Power Marketing
    Services Agreement;

         (iii) adopt the annual operating,  capital and maintenance  budget (the
    "ANNUAL BUDGET") for any Project other than changes reasonably  necessary in
    the case of emergencies  including the Company's 1999 operating budget which
    shall be  presented  to the Board of  Directors on or before May 1, 1999 and
    approved by May 31,  1999.  This budget shall  include all existing  project
    capital  expenditure  requirements,  all direct project revenues,  costs and
    expenses as well as the direct costs of Services as addressed in  agreements
    with  Affiliates of a Member which are included in the existing 1999 Project
    Annual Budgets.  Any other costs shall only be included in the Annual Budget
    with the approval of the Board of Directors;

         (iv) make any  capital  expenditures,  acquire  any assets or expand or
    modify any Project at a cost of more than  $100,000  for any single  capital
    expenditure,  acquisition,  expansion  or  modification,  or $500,000 in the
    aggregate per Project for any series of capital expenditures,  acquisitions,
    expansions or modifications (or such other amounts as may be fixed from time
    to time by the  Board),  in each  case,  other than  pursuant  to the Annual
    Budget for such  Project or  relating to the  replacement  or repair of such
    Project  in the  ordinary  course  of  business  or such  as are  reasonably
    necessary in the case of emergencies;

         (v) liquidate, file for bankruptcy, reorganize, dissolve or wind up;

         (vi) merge or consolidate with or into any other Person;

         (vii) transfer,  sell,  lease or otherwise  dispose of its assets other
    than in the  ordinary  course  of  business)  having  a value in  excess  of
    $250,000  to or in favor of a third  party  unless  included  in an approved
    budget;

                                       10
<PAGE>

         (viii)  issue,  repurchase or redeem any Interest in the Company or any
    securities convertible or exchangeable for any such Interest;

         (ix) incur  indebtedness  for borrowed money (or enter into any related
    guarantee,  pledge or security arrangement) in excess of $1 million,  except
    for refinancings of existing debt outstanding principle and accrued interest
    plus transaction and closing costs on commercially reasonable terms;

         (x) enter into any  contractual or other  agreement or commitment  that
    would  exceed  $100,000  in any  year  (or  $500,000  over  the  life of the
    contract)  (or such  other  amount as may be fixed  from time to time by the
    Board),  other than in the  ordinary  course of  business or pursuant to the
    Annual Budget;

         (xi)  adopt,  or  modify  in  any  material   respect,   the  Company's
    distribution  policy,  as  described  in  Article  VIII  hereof,  other than
    pursuant to the Company's financing documents,  its organizational documents
    or rating agency requirements;

         (xii) enter into any material amendment to the Company's organizational
    documents;

         (xiii) make any  material  modification  to or enter into any  material
    amendment  of any Power  Purchase  Agreement or any other  material  Project
    agreement;

         (xiv)  initiate  or  settle  any  litigation  or  other   adversary  or
    regulatory  proceeding  involving  claims  in excess  of  $100,000  and will
    provide at least three  Business Days prior notice to the  Directors  before
    initiating any litigation,  adversarial or regulatory  proceeding,  and will
    provide as much notice as reasonably  practicable prior to settling any such
    proceeding.

         (xv) take any action  with  respect to a change in the QF status of any
    Project;

         (xvi) make any material tax election settle any material tax litigation
    or  controversy,  select any agents or  employees to manage any material tax
    litigation  or  controversy,  file any material tax returns  (including  any
    amendments thereto), or make any material tax payments;

         (xvii)   establish  or  modify   material   accounting   practices  and
    procedures;

         (xviii) select independent accountants;

         (xix)  make  any  determination  as to the  amount  and  timing  of any
    additional Capital Contributions to the Company;

         (xx)  enter  into any  joint  venture  or any new  project  other  than
    pursuant to the Purchase Agreement and Development  Agreement (as defined in
    the Purchase Agreement); and

                                       11
<PAGE>

         (xxi) waive any material rights the Company or any of its  Subsidiaries
    may have in respect of any Member

         (xxi) make any other  material  decision not in the ordinary  course of
    business.

              (b)  Subsidiaries.  The above clauses (other than clauses  (viii),
(xi), (xii) and (xix)) shall apply to all Subsidiaries and controlled Affiliates
of the Company as well as to the Company itself.

              (c) Annual  Budget.  The officers of the Company shall prepare and
deliver to the Board of  Directors,  no later than  September  30 of each year a
proposed  budget for the next  Fiscal  Year of the  Company and a meeting of the
Board of  Directors  shall be held prior to October 31 or such early date as may
be  required by project  documents  to take action to approve the budget for the
forthcoming year (each, an "Annual Budget"). In the event the Board cannot reach
agreement as to the Annual  Budget with respect to any Project  prior to the end
of any Fiscal Year, such Project shall continue to be run in accordance with the
Annual Budget for the previous year until a new Budget is agreed upon or reached
pursuant to the dispute  resolution  mechanisms set forth in Section 11.3 below;
provided  that all the items in the last Annual  Budget shall be  increased  for
inflation  based on the change in the Consumer Price Index - All Urban Consumer,
as reported by the U.S.  Department of Labor for the most recent 12-month period
for which figures are available.

              (d)  Additional  Actions.  Each  Member  agrees  to take all steps
reasonably  necessary to cause the Company to comply with the provisions of this
Section 6.2.

    6.3. OTHER OPPORTUNITIES. Except as expressly provided under the Development
Agreement,  the Company shall have the right to pursue all ventures,  activities
and opportunities relating to the expansion of its existing Projects at existing
sites and all new projects  developed on leasehold or fee interests owned by the
Company or any of the Subsidiaries, other than with respect to the Zinc Recovery
Project and the other mineral recovery and processing  rights or projects at the
Imperial Valley Projects or at other  locations.  Except for the rights provided
to the Company in the preceding  sentence,  no Member shall be  restricted  from
independently   pursuing  any  competing  or  other   ventures,   activities  or
opportunities  in  the  independent  power  production  business  or  any  other
business.  The Board shall  evaluate  from time to time the  feasibility  of the
Project  Subsidiaries  that own  various  Projects  becoming  "exempt  wholesale
generators"  ("EWG") as defined in PUHCA. In the event that the Board determines
that such an event is  beneficial  and in the best  interest of the Company with
respect  to any or all of the  Projects,  without  violating  the  terms  of any
material  contracts  of the  Company  or any of the  Project  Subsidiaries,  the
Company  shall  apply  to  FERC  for  EWG  status  for  the  applicable  Project
Subsidiaries.

    6.4. LIABILITY.  No Member,  Director or Officer shall be liable as such for
any debts, obligations or liabilities of the Company.

                                       12
<PAGE>

    6.5.  EXCULPATION AND  INDEMNIFICATION.  (a) No Member,  Director or Officer
appointed thereby shall be liable, directly or indirectly,  to the Company or to
any other Member for any loss,  claim,  damage or liability arising from any act
or omission  performed or omitted by it in connection  with this Agreement or in
its  capacity  as a Member,  Director or Officer of the  Company,  except to the
extent  any  such  losses,   claims,   damages  or  liabilities   are  primarily
attributable to such Member's,  Director's or Officer's gross negligence,  fraud
or willful misconduct.

         (b) The Company shall,  to the fullest  extent  permitted by applicable
law,  indemnify and hold harmless each Member,  Director and Officer against all
losses,  claims,  damages or  liabilities  to which  such  Member,  Director  or
Officer,  as such, may become subject in connection  with any matter arising out
of or related to the Company's business or affairs, except (i) to the extent any
such loss,  claim,  damage or liability is finally  judicially  determined to be
primarily   attributable  to  such  Member's,   Director's  or  Officer's  gross
negligence,  fraud  or  willful  misconduct  or (ii) for  economic  loss to such
Member's membership interest. If a Member,  Director or Officer becomes involved
in any capacity in any action,  proceeding or  investigation  in connection with
any matter arising out of or related to the Company's  business or affairs,  the
Company will  periodically  reimburse  such Member,  Director or Officer for its
legal and other expenses  incurred in connection  therewith,  provided that such
Member,  Director or Officer shall  promptly  repay to the Company the amount of
any  such  reimbursed  expenses  paid to it if it shall  be  finally  judicially
determined  that  such  Member,  Director  or  Officer  is  not  entitled  to be
indemnified  by the  Company  in  connection  with  such  action  proceeding  or
investigation.  If for any reason  (other  than the gross  negligence,  fraud or
willful   misconduct  of  such  Member,   Director  or  Officer)  the  foregoing
indemnification  is  unavailable  to  such  Member,   Director  or  Officer,  or
insufficient  to hold it  harmless,  then the Company  shall  contribute  to the
amount paid or payable by such  Member,  Director or Officer as a result of such
loss, claim, damage or liability in such proportion as is appropriate to reflect
the relative  benefits  received by the Company on the one hand and such Member,
Director or Officer on the other hand or, if such allocation is not permitted by
applicable  law, to reflect not only the  relative  benefits  (if  permitted  by
applicable  law to be  taken  into  account  in  respect  of such  contribution)
referred to above but also any other relevant equitable consideration.

         (c) The  reimbursement,  indemnity and contribution  provisions of this
Section 6.5 shall (i) extend upon the same terms and conditions (but only to the
extent any loss,  claim,  damage or liability relates to the business or affairs
of the Company) to the directors,  officers, employees and Affiliates and agents
of the applicable  Member and (ii) be reduced (and, if applicable,  refunded) by
the amount of any  insurance or other  payments from third parties in respect of
an indemnifiable claim hereunder.


                                  ARTICLE VII.

                       CONTRIBUTIONS AND CAPITAL ACCOUNTS

                                       13
<PAGE>

    7.1.  CONTRIBUTIONS.  Each  Member  has made a Capital  Contribution  to the
Company as  described on Schedule A hereto as of the date hereof in exchange for
the issuance of its Class A Interests or Class B Interests, as applicable.

    7.2. NO OBLIGATION TO RESTORE DEFICIT BALANCE. Except as required by law, no
Member shall be required to restore any deficit balance in its Capital Account.

    7.3. WITHDRAWAL;  SUCCESSORS. A Member shall not be entitled to withdraw any
part of its Capital  Account or to receive any  distribution  from the  Company,
except as  specifically  provided in this  Agreement.  No Member holding Class A
Interests may withdraw from membership without the consent of the Board.

    7.4. INTEREST. No Member shall be entitled to earn interest on such Member's
Capital Contribution or on any profits retained by the Company.

    7.5. NO PERSONAL LIABILITY.  No Member shall have any personal liability for
the repayment of any Capital Contributions of any other Member.


                                  ARTICLE VIII.

                                  DISTRIBUTIONS

    Except  as  modified  in  accordance  with  Section  6.2(a)(xi)  above,  the
Company's distribution policy shall be to pay quarterly distributions (except as
otherwise  required  by  financing  documents)  on the  Interests  equal  to the
Company's net after-tax cash flow after  operating  expenses and all payments of
principal,  interest and premiums on the Company's indebtedness and related debt
service  obligations,  in each case,  less such amounts the Board  determines is
required for working capital or applicable reserves. Distributions shall be made
equally as between the Class A Interests and the Class B Interests.


                                   ARTICLE IX.

                              TRANSFER OF INTERESTS

    9.1.  TRANSFER OF  INTERESTS.  No holder of  Interests  shall  Transfer  any
Interests, or any beneficial interest therein, without the consent of the holder
or holders of a majority of the Interests of the class other than those proposed
to be so  Transferred;  provided,  that (i) such consent may not be unreasonably
withheld in  connection  with the  Transfer of all or  substantially  all of the
Interests  owned by such holder,  (ii) the foregoing  shall not prohibit (a) any
Transfer to an Affiliate of such transferor  unless,  with respect to a Transfer
of Class A Interests, such Affiliate is an Electric Utility, or such Transfer of
Class A  Interests  would  violate  a  Project's  QF  status,  (b) any  Transfer
resulting from any merger or  consolidation of CalEnergy (or any successor) with
or  into  any  other  Person,  the  sale  of  all  or  substantially  all of its
independent

                                       14
<PAGE>


power production assets or other change in beneficial ownership of CalEnergy (or
any  successor)  and (c) any pledge of Interests by CalEnergy (or any successor)
in connection with a financing;  and (iii) the withholding of such consent shall
be deemed  reasonable  with  respect  to the  proposed  Transfer  of any Class A
Interests to an Electric  Utility or an Affiliate of an Electric  Utility or any
other  Transfer of Class A Interests  that would  violate a Project's QF status.
Any Transfer or purported Transfer made in violation of this Article IX shall be
null and void and of no effect.

    9.2.  CONDITIONS  TO TRANSFER.  No Member shall  Transfer any portion of its
Interest  unless (i) the transferee (if other than another  Member) agrees to be
bound by this  Agreement  and  executes a  counterpart  hereof and such  further
documents as may be necessary, in the opinion of the Company and its counsel, to
make it a party  hereto (and any such  transferee  shall then be deemed a Member
for all  purposes of this  Agreement  but no such  agreement  shall  relieve the
transferor from liability herein);  (ii) the permitted transferee  (including an
Affiliate  of the  transferor)  has  executed  a Joinder  Agreement  in the form
attached hereto as Exhibit A; and (iii) such transfer is made pursuant to either
an effective  registration statement under the Securities Act and any applicable
state   securities  laws  or  an  available   exemption  from  the  registration
requirements of the Securities Act and such laws.

    9.3. ELECTRIC UTILITY.  Any holder of the Class A Interests shall not become
an Electric Utility or take any other action that would violate any Project's QF
status for as long as the Company  owns any direct or  indirect  interest in any
QF. Any such holder of Class A Interests who breaches the foregoing  restriction
shall indemnify and hold harmless the Company and the other holders of Interests
from any losses, costs, damages (including consequential damages),  expenses and
liabilities  resulting  from such breach,  including,  without  limitation,  any
liability to holders of Class B Interests  resulting from the application of the
provisions of Section 9.4 hereof as a result of such breach.

    9.4. QF TRUE UP.

         (a) If, during the period during which any of the QF Projects remains a
QF,  there is a sale of the  Class B  Interests,  a QF  Project  is sold or a QF
Project  owner or the  Company is  dissolved,  the Board  shall have an analysis
performed in accordance  with the procedures  and practices  mandated by FERC to
determine if such event will result in the loss of QF status for any QF Project.
In addition, the Board will have such an analysis performed if at any time facts
come to its  attention  that indicate that  entitlement  to QF Project  benefits
through the Company has caused or will cause the aggregate  interest of Electric
Utilities  in any QF  Project  to  exceed  fifty  percent  (50%)  of the  equity
interests in such Project  (calculated  in  accordance  with FERC  regulations),
thereby jeopardizing such Project's QF status.

         (b) If, based on such analysis,  the Company is advised by counsel that
the QF status of a QF Project is likely to be lost, and the Board concludes that
loss of QF status will cause an economic loss to the Company, the parties hereto
and the Company shall take the following steps:



                                       15


<PAGE>


          (i) The  holders of the Class B Interests  will pay any  distributions
received  from each  affected QF Project to the holders of the Class A Interests
to the extent  required to maintain  the QF status for the affected QF Projects.
If excess  distributions  have already been paid by the Company,  the holders of
the Class B Interests will pay an amount  sufficient to eliminate such excess to
the  holders of the Class A  Interests  (together  with  interest  thereon at an
annual rate of 7%). In the event  distributions  derived from a QF Project which
would  otherwise be paid to and retained by the holders of the Class B Interests
are  payable to the  holders of the Class A  Interests  in  accordance  with the
foregoing,  distributions  payable from other business activities of the Company
which,  upon  advice of counsel or an order from  FERC,  are  determined  not to
constitute benefits of any affected QF Project,  shall be payable by the holders
of the Class A  Interests  to the  holders of the Class B  Interests  to offset,
insofar as possible, the loss of distributions  otherwise payable on the Class B
Interests from the QF Projects.

         (ii) If the foregoing  procedure is inadequate to protect the QF status
of an  affected  QF  Project,  the Board may  direct  the  holder of the Class B
Interest  to sell  Class B  Interests  to an  entity  which  is not an  Electric
Utility.


                                   ARTICLE X.

                           DISSOLUTION AND WINDING UP

    10.1. DISSOLUTION.  The Company shall be dissolved and its affairs wound up,
upon the  first to occur of any of the  following  events  (each of which  shall
constitute a Dissolution Event):

         (a) the  disposition  for  cash  and/or  liquid  Securities  of all the
securities  and  substantially  all of the other  Property  held by the Company,
unless the Company is continued with the consent of the Members;

         (b) the written consent of the Members; and

         (c) the dissolution,  expulsion,  or withdrawal,  if permitted,  of any
Member unless,  within 90 days after such event, the Company is continued by the
written consent of the remaining Members.

    10.2.  EFFECT OF  DISSOLUTION.  Upon  dissolution,  the Company shall not be
terminated and shall continue until the winding up of the affairs of the Company
is completed and a certificate of cancellation  has been issued by the Secretary
of State of Delaware.

    10.3.  DISTRIBUTION  OF ASSETS ON  DISSOLUTION.  Upon the  winding up of the
Company,  the  remaining  Members  shall  take full  account  of the  assets and
liabilities  of the  Company  and shall  liquidate  the assets of the Company as
promptly as is consistent with obtaining the fair value thereof. The proceeds of
any liquidation shall be applied and distributed in the following order:



                                       16


<PAGE>

         (a) first,  to the payment of the debts and  liabilities of the Company
to creditors,  including  Members who are creditors,  to the extent permitted by
law,  in  satisfaction  of such  debts and  liabilities  and to the  payment  of
necessary expenses of liquidation;

         (b) second,  to the setting up of any  reserves  which such Members may
deem necessary or appropriate for any anticipated  obligations or  contingencies
of the Company arising out of or in connection with the operation or business of
the Company.  Such  reserves may be paid over by such Members to an escrow agent
or trustee  selected by such  Members to be  disbursed  by such escrow  agent or
trustee in payment of any of the  aforementioned  obligations  or  contingencies
and, if any balance  remains at the  expiration  of such period as such  Members
shall deem  advisable,  shall be  distributed by such escrow agent or trustee in
the manner hereinafter provided;

         (c) then,  to the Members  equally as between the Class A Interests and
the Class B Interests.

    10.4. WINDING UP AND FILING ARTICLES OF CANCELLATION.  Upon the commencement
of the winding up of the Company, articles of cancellation shall be delivered by
the Company to the  Secretary of State of Delaware  for filing.  The articles of
cancellation shall set forth the information required by the Act. The winding up
of the Company shall be completed when all debts,  liabilities,  and obligations
of the Company have been paid and  discharged or reasonably  adequate  provision
therefor  has been made and all the  remaining  Property of the Company has been
distributed to the Members.

                                       17
<PAGE>

                                   ARTICLE XI.

                                  MISCELLANEOUS

    11.1. NOTICES.  Notices to the Company shall be sent to the Principal Office
of the Company.  Notices to the Members shall be sent to their  addresses as set
forth on the signature page hereof. Any Member may require notices to be sent to
a different  address by giving  notice to the  Company and the other  Members in
accordance with this Section 11.1. Any notice or other communication required or
permitted hereunder shall be in writing,  and shall be deemed to have been given
with  receipt  confirmed  if and when  delivered  personally,  given by  prepaid
telegram or mailed first class,  postage prepaid,  delivered by courier, or sent
by facsimile, to such Members at such addresses.

    11.2. AMENDMENT; WAIVER; DECISIONS. Amendments to this Agreement may be made
from time to time, provided,  however, that, except as otherwise provided in the
last sentence of this Section 11.2 or elsewhere in this Agreement, no amendment,
modification or waiver of this Agreement or any provision  hereof shall be valid
or  effective  unless in  writing  and  signed by (i) the holder or holders of a
majority of the Class A  Interests  and (ii) the holder or holders of a majority
of the Class B Interests. No waiver of any breach or condition of this Agreement
shall be  deemed to be a waiver of any  other  subsequent  breach or  condition,
whether of like or different nature. The Members may amend this Agreement in any
way  necessary,  in  their  reasonable  judgment,  to  effectuate  a  Membership
Admission.  Notwithstanding  anything in this  Agreement  to the  contrary,  any
decision to be made or action to be taken by the Members hereunder shall be made
or taken by (i) the holder or holders of a majority of the Class A Interests and
(ii) the holder or holders of a majority of the Class B Interests.

    11.3.  RESOLUTION  OF DISPUTES.  In the event of any failure of the Board or
the Members to reach  agreement on any  material  decision  (including,  without
limitation, those described in Section 9.2 hereof), the chief executive officers
and/or chief operating  officers of each of the Members shall meet to attempt to
resolve any such dispute in good faith.  If agreement  cannot be reached between
the parties  within 45 days, the parties shall submit the dispute to non-binding
arbitration under the rules of the American Arbitration Association. If, 60 days
after such 45-day period, such dispute is still not resolved,  the parties shall
be free to pursue any other remedy they may have.

    11.4.  HEADINGS.  All Article and Section headings in this Agreement are for
convenience of reference only and are not intended to qualify the meaning of any
Article or Section.

    11.5. BINDING AGREEMENT.  This Agreement shall be binding upon, and inure to
the benefit of, the parties hereto,  their  successors,  and permitted  assigns,
except as otherwise provided herein.

                                       18
<PAGE>

    11.6. ENFORCEMENT.  The parties agree that irreparable damage would occur in
the event that any of the  provisions  of this  Agreement  were not performed in
accordance  with  their  specific  terms  or  were  otherwise  breached.  It  is
accordingly  agreed that the  parties  shall be  entitled  to an  injunction  or
injunctions to prevent  breaches of this  Agreement and to enforce  specifically
the terms and  provisions  of this  Agreement in any court of the United  States
located  in the  State of New York or in New York  state  court,  this  being in
addition to any other remedy to which they are entitled at law or in equity. The
Company and the Members  shall have the right to  specific  performance  of such
obligations, and if any party hereto shall institute any action or proceeding to
enforce the provisions hereof, each of the Company and the Members hereby waives
the claim or defense that the party instituting such action or proceeding has an
adequate remedy at law. In addition,  each of the parties hereto (a) consents to
submit itself to the personal  jurisdiction  of any federal court located in the
State of New York or any New York state  court in the event any  dispute  arises
out of this Agreement or any of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny such personal jurisdiction by motion
or other  request  for leave from any such court and (c) agrees that it will not
bring  any  action  relating  to  this  Agreement  or any  of  the  transactions
contemplated  by this Agreement in any court other than a federal or state court
sitting in the State of New York.

    11.7.  SAVING  CLAUSE.  If any  provision  of this  Agreement  shall be held
invalid,  illegal or unenforceable in any jurisdiction in any respect,  then the
validity,  legality and  enforceability  of the remaining  provisions  contained
herein shall not in any way be affected or impaired,  and the parties  shall use
their best efforts to amend or substitute such invalid, illegal or unenforceable
provision with enforceable and valid provisions which would produce as nearly as
possible the rights and obligations  previously  intended by the parties without
renegotiation of any material terms and conditions stated herein.

    11.8.  COUNTERPARTS.   This  Agreement  may  be  executed  in  one  or  more
counterparts,  each of  which  shall  be  deemed  an  original  and all of which
together shall be considered one and the same agreement.

    11.9.  GOVERNING LAW. This  Agreement  shall be governed by and construed in
accordance  with the laws of the State of Delaware  without giving effect to the
conflicts of laws or provisions thereof.

    11.10.  NO RIGHTS OF  CREDITORS  AND THIRD  PARTIES  UNDER  AGREEMENT.  This
Agreement  is entered  into among the Company and the Members for the  exclusive
benefit  of the  Company,  its  Members,  and  their  successors  and  permitted
assignees.  This  Agreement  is  expressly  not  intended for the benefit of any
creditor  of the  Company  or any other  Person.  Except  and only to the extent
provided by applicable  statute,  no such creditor or any third party shall have
any rights  under this  Agreement or any  agreement  between the Company and any
Member with respect to any Capital Contribution or otherwise.

    11.11.  GENERAL  INTERPRETIVE  PRINCIPLES.  For purposes of this  Agreement,
except as otherwise expressly provided or unless the context otherwise requires:

                                       19
<PAGE>

         (a) the terms defined in this  Agreement  include the plural as well as
the  singular,  and the use of any gender  herein shall be deemed to include the
other gender;

         (b)  accounting  terms not otherwise  defined  herein have the meanings
given  to them in the  United  States  in  accordance  with  generally  accepted
accounting principles;

         (c) references herein to "Articles",  "Sections" and other subdivisions
without reference to a document are to designated  Articles,  Sections and other
subdivisions of this Agreement;

         (d) a reference to a paragraph  without further  reference to a Section
is a reference  to such  paragraph as contained in the same Section in which the
reference appears, and this rule shall also apply to other subdivisions;

         (e) the  words  "herein",  "hereof",  "hereunder"  and  other  words of
similar  import  refer to this  Agreement  as a whole and not to any  particular
provision;

         (f) where any provision in this Agreement  refers to action to be taken
by any Person,  or which such Person is prohibited  from taking,  such provision
shall be applicable  whether such action is taken directly or indirectly by such
Person; and

         (g) the term "include" or "including" shall mean without  limitation by
reason of enumeration.

    11.12. ENTIRE AGREEMENT. This Agreement constitutes the entire understanding
between  the  parties  hereto  with  respect to the  subject  matter  hereof and
supersedes any prior agreements, written or oral, with respect thereto.




                                       20

<PAGE>

         IN WITNESS WHEREOF, the parties hereto have hereunto set their hands as
of the date hereof.

CE GENERATION, LLC                               CALENERGY COMPANY, INC.

By: /s/ Douglas L. Anderson                      By: /s/ Douglas L. Anderson
   --------------------------                       --------------------------
Name:  Douglas L. Anderson                       Name:   Douglas L. Anderson
Title: Assistant Secretary                       Title:  Assistant Secretary

                                       21
<PAGE>

                                   SCHEDULE 1



                             CalEnergy Company, Inc.
                              302 South 36th Street
                                    Suite 400
                              Omaha, Nebraska 68131

<PAGE>

                                                                       EXHIBIT A

                                JOINDER AGREEMENT


         Joinder Agreement, dated as of this 3rd day of March 1999, by and among
CE Generation,  LLC., a Delaware limited liability company (the "Company"),  and
the undersigned (the "New Investor").

         Reference is made to that certain Limited  Liability  Company Operating
Agreement  (the  "Operating  Agreement"),  dated as of February 9, 1999,  by and
between  the Company  and,  CalEnergy  Company,  Inc.  and the other  holders of
interests in the Company from time to time party  thereto,  as the same may from
time to time be amended.

         By executing this Joinder Agreement,  the New Investor hereby agrees to
be  bound by the  terms of the  Operating  Agreement  as if it were an  original
signatory  to such  Agreement  and shall be  entitled  to all of the  rights and
benefits  afforded  to,  and  shall  be  subject  to all  the  restrictions  and
obligations of the Members thereunder.

         The New  Investor  hereby  represents  and  warrants  that  (i) it is a
corporation duly organized, validly existing and in good standing under the laws
of  Delaware  and has the  power and  authority  to  execute  and  deliver  this
Agreement and perform its obligations  hereunder,  (ii) the execution,  delivery
and  performance of this Agreement has been authorized by the board of directors
of the New  Investor and no other  approval or  authorization  is necessary  and
(iii)  the  execution,  delivery  and  performance  of this  Agreement  does not
conflict  with or  violate  the terms of its  Certificate  of  Incorporation  or
By-laws or any agreement to which it is a party or may be bound.

         IN WITNESS  WHEREOF,  the parties  hereto have  executed  this  Joinder
Agreement as of the date first above written.

                                            El Paso Power Holding Company

                                            By:
                                               ---------------------------------
                                            Name:
                                            Title:
Agreed to and Accepted by:

CE Generation, LLC


---------------------------------
Name:
Title:



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