Exhibit 13

Financial Summary

Over  the  last  three years ended December 31,  1997,  CalEnergy
Company,  Inc.  ("CalEnergy"  or the "Company")  has  experienced
significant  growth.  Revenues have risen at  a  compound  annual
rate  of  130%  from  approximately  $186  million  in  1994   to
approximately $2,271 million in 1997 and net income available  to
common  stockholders  excluding non-recurring  and  extraordinary
items   has  risen  at  a  compound  annual  rate  of  60%   from
approximately  $33.8  million  in 1994  to  approximately  $138.8
million  in  1997.   This significant growth  has  been  achieved
through:   (i)  acquisitions that complement  and  diversify  the
Company's existing business, broaden the geographic locations  of
its   assets  and  enhance  its  competitive  capabilities;  (ii)
enhancement  of  the  financial  and  technical  performance   of
existing  and  acquired  projects;  and  (iii)  development   and
construction of new plants.

On  September 11, 1997, the Company signed a definitive agreement
with  Kiewit Diversified Group ("KDG"), a wholly owned subsidiary
of  Peter Kiewit Sons', Inc. ("PKS"), for the Company to purchase
KDG's  ownership  interest  in various project  partnerships  and
CalEnergy  common  shares (the "KDG Acquisition").   Accordingly,
common  stock  and  options  subject  to  redemption  have   been
reclassified in the consolidated balance sheet.

KDG's ownership interest in CalEnergy comprised 20,231,065 shares
of  common stock (assuming exercise by KDG of one million options
to  purchase  CalEnergy  shares), the 30%  interest  in  Northern
Electric  plc  ("Northern"), as well as  the  following  minority
project  interests:   Mahanagdong (45%),  Casecnan  (35%),  Dieng
(47%),  Patuha  (44%)  and  Bali (30%)  and  other  interests  in
international development stage projects.

CalEnergy   paid  approximately  $1,159  million  for   the   KDG
Acquisition  and  final  closing of the transaction  occurred  in
January  1998.  CalEnergy funded this acquisition with  available
cash and the net proceeds of the equity and senior note offerings
completed in October 1997.

On  December 24, 1996, CE Electric plc ("CE Electric"), which  in
1997  was  70%  owned  indirectly by the Company  and  30%  owned
indirectly by PKS, acquired majority ownership of the outstanding
ordinary  share  capital of Northern pursuant to a  tender  offer
(the "Northern Tender Offer") commenced in the United Kingdom  on
November  5, 1996.  As of March 18, 1997, CE Electric effectively
owned 100% of Northern's ordinary shares.

In  the last three years, the Company has consummated three other
significant  acquisitions,  in addition  to  the  acquisition  of
Northern.   In  January  1995, the Company acquired  Magma  Power
Company  ("Magma"),  a publicly-traded United States  independent
power  producer  with  228  megawatts  ("MW")  of  aggregate  net
operating   capacity  and  154  MW  of  aggregate  net  ownership
capacity,  for  approximately $958 million.  In April  1996,  the
Company  completed the buy-out for approximately $70  million  of
its partner's interests ("Partnership Interest") in four electric
generating  plants  in  Southern California,  resulting  in  sole
ownership  of the Imperial Valley Project.  In August  1996,  the
Company   acquired  Falcon  Seaboard  Resources,  Inc.   ("Falcon
Seaboard")  for  approximately $226  million,  thereby  acquiring
significant  ownership  in 520 MW of natural  gas-fired  electric
production facilities located in New York, Texas and Pennsylvania
and a related gas transmission pipeline.

The  Company has substantially completed constructing  the  Dieng
Unit  I, 55 net MW geothermal project in Indonesia, which is  the
first  unit  of  400 MW under contract at Dieng.   In  1997,  the
Company   financed  and  commenced  construction  of  two   other
projects;  the Dieng Unit II 80 MW project as well as the  Patuha
Unit  I  80 MW project, which is the first unit of 400  MW  under
contract  at  Patuha.   Additionally, the Company  has  conducted
infrastructure construction and drilling activities for  the  400
MW  Bali  project. Although the Company intends  to  enforce  its
contractual rights, the ultimate outcome of the current uncertain
situation in Indonesia with respect to the possible abrogation by
the Indonesian government of the Dieng, Patuha and Bali contracts
adds  significant  risk to the completion of those  projects  and
resulted  in the Company recording an asset impairment charge  in
the fourth quarter of 1997.  This $87 million charge includes all
reasonably estimated asset valuation impairments associated  with
the  Company's  assets  in  Indonesia and  gives  effect  to  the
political risk insurance on such investment.

SELECTED Financial Data
Dollars in Thousands, Except Per Share Amounts

                               Year Ended December 31,
                             1997       1996(1)   1995(2)     1994      1993
Income Statement Data:
Operating revenue        $2,166,338    $518,934   $335,630   $154,562  $132,059
Total revenue             2,270,911     576,195    398,723    185,854   149,253
Expenses                  2,074,051     435,791    301,672    130,018    87,995
Income before provision
  for income taxes          196,860(3)  140,404     97,051     55,836    61,258
Minority interest            45,993       6,122      3,005        ---       ---
Income before change in accounting
  principle and
  extraordinary item         51,823(3)   92,461     63,415     38,834    43,074
Cumulative effect of change in
  accounting principle          ---         ---        ---        ---     4,100
Extraordinary item         (135,850)        ---        ---     (2,007)      ---
Net income (loss)           (84,027)(3)  92,461     63,415     36,827    47,174
Preferred dividends             ---         ---      1,080      5,010     4,630
Net income (loss) available to
      common stockholders   (84,027)(3)  92,461     62,335     31,817    42,544
Income per share before change in accounting
  principle and
  extraordinary item           0.77(3)     1.69       1.32       1.02      1.08
Cumulative effect of change in accounting
  principle per share           ---         ---        ---        ---      0.12
Extraordinary item per share  (2.02)        ---        ---      (0.06)      ---
Net income (loss) per share   (1.25)(3)    1.69       1.32       0.96      1.20
Balance Sheet Data:
Total assets              7,487,626   5,630,156  2,654,038  1,131,145   715,984
Total liabilities         5,282,162   4,181,052  2,084,474    867,703   425,393
Company-obligated mandatorily
  redeemable convertible
  preferred securities of
  subsidiary trusts         553,930     103,930        ---        ---       ---
Preferred securities of
  subsidiary                 56,181     136,065        ---        ---       ---
Minority interest           134,454     299,252        ---        ---       ---
Redeemable preferred stock      ---         ---        ---     63,600    58,800
Stockholders' equity        765,326     880,790    543,532    179,991   211,503


1 Reflects the acquisitions of Northern, Falcon Seaboard and the
Partnership Interest owned for a portion of the
   year. See Note 4 to the financial statements.
2 Reflects the acquisition of Magma owned for a portion of the
year.
3 Includes the $87,000, $1.29 per share, non-recurring asset
impairment charge.

MANAGEMENT'S Discussion and Analysis of Financial Condition
and Results of Operations
Dollars, Pounds and Shares in Thousands, Except Per Share Amounts

The  following is management's discussion and analysis of certain
significant  factors which have affected the Company'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
Company's historical results.

Acquisitions

On  December 24, 1996, CE Electric plc ("CE Electric"), which  in
1997  was  70%  owned  indirectly by the Company  and  30%  owned
indirectly by Peter Kiewit Sons', Inc. ("PKS"), acquired majority
ownership  of the outstanding ordinary share capital of  Northern
Electric  plc  ("Northern")  pursuant  to  a  tender  offer  (the
"Northern  Tender  Offer") commenced in  the  United  Kingdom  on
November  5, 1996.  As of March 18, 1997, CE Electric effectively
owned 100% of Northern's ordinary shares.

In  the last three years, the Company has consummated three other
significant  acquisitions,  in addition  to  the  acquisition  of
Northern.   In  January  1995, the Company acquired  Magma  Power
Company  ("Magma"),  a publicly-traded United States  independent
power  producer  with  228  megawatts  ("MW")  of  aggregate  net
operating   capacity  and  154  MW  of  aggregate  net  ownership
capacity, for approximately $958,000.  In April 1996, the Company
completed  the buy-out for approximately $70,000 of its partner's
interests  ("Partnership Interest") in four  electric  generating
plants in Southern California, resulting in sole ownership of the
Imperial  Valley  Project.  In August 1996, the Company  acquired
Falcon   Seaboard   Resources,  Inc.  ("Falcon   Seaboard")   for
approximately  $226,000, thereby acquiring significant  ownership
in  520  MW  of natural gas-fired electric production  facilities
located  in  New York, Texas and Pennsylvania and a  related  gas
transmission pipeline.

Power Generation Projects

For  purposes  of  consistency in financial  presentation,  plant
capacity   factors  for  Navy  I,  Navy  II,   and   BLM   plants
(collectively  the  "Coso Project"), are  based  upon  a  nominal
capacity  amount  of  80  net MW for each plant.  Plant  capacity
factors  for  Vulcan, Hoch (Del Ranch), Elmore,  Leathers  plants
(collectively  the "Partnership Project"), are based  on  nominal
capacity amounts of 34, 38, 38, and 38 net MW, respectively,  and
for Salton Sea I, Salton Sea II, Salton Sea III and Salton Sea IV
plants  (collectively  the "Salton Sea Project"),  are  based  on
nominal  capacity  amounts  of 10, 20,  49.8  and  39.6  net  MW,
respectively (the Partnership Project and the Salton Sea  Project
are  collectively referred to as the "Imperial Valley  Project").
Plant  capacity factors for Saranac, Power Resources, NorCon  and
Yuma plants (collectively the "Gas Plants") are based on capacity
amounts of 240, 200, 80 and 50 net MW, respectively.  Each  plant
possesses  an  operating margin which allows  for  production  in
excess  of the amount listed above. Utilization of this operating
margin is based upon a variety of factors and can be expected  to
vary throughout the year under normal operating conditions.

See  Note 5 to the financial statements for a discussion  of  the
Company's significant operating contracts.

Results  of Operations Three Years Ended December 31, 1997,  1996
and 1995

Operating  revenues increased to $2,166,338  in  the  year  ended
December  31, 1997, from $518,934 in the year ended December  31,
1996,  a  317.5% increase. This growth was primarily due  to  the
acquisitions  of  Northern, Falcon Seaboard, and the  Partnership
Interest  as well as the commencement of earnings at  Salton  Sea
IV, Upper Mahiao and Malitbog.

The  increase  in  operating revenues in 1996  to  $518,934  from
$335,630  in  1995 was primarily due to the acquisitions  of  the
Partnership  Interest, Falcon Seaboard and Northern,  the  deemed
completion  and  commencement of receipt of  revenue  from  Upper
Mahiao and Unit I of the Malitbog Project in the Philippines, the
completion and commencement of commercial operation of Salton Sea
IV and an increase in the Coso Project's electricity revenues.

The   following  data  represents  the  supply  and  distribution
operations at Northern:

                                          1997       1996        1995


Supply (GWh)                             14,389     14,185      14,253
Distribution (GWh)                       15,714     15,656      15,260
Gas Therms Supply (in thousands)           74.5       50.0        35.3


The  increase in units supplied and distributed in 1997 from 1996
reflects increased activity in the local economy. The increase in
therms  supplied in 1997 from 1996 reflects the increased  volume
as  the gas business in the U.K. begins to open up to competition
as a result of regulatory changes.

The  following  operating data represents the aggregate  capacity
and electricity production of the domestic geothermal projects:

                                        1997       1996        1995


Overall capacity factor                 101.4%     104.4%      104.8%
kWh produced (in thousands)         4,507,500  4,502,200   4,296,010
Capacity NMW (average)                  507.4      491.0*      467.8

* Weighted average for the commencement of operations at the
Salton Sea IV in 1996.

The  capacity  factor was 100.4% in the fourth  quarter  of  1997
compared  to 102.6%, 99.6% and 103.1% for the third,  second  and
first  quarters  of  1997,  respectively.   The  capacity  factor
decreased   in  1997  from  1996  due  to  marginally  decreasing
production  at the Coso Project and a scheduled turbine  overhaul
at BLM in April 1997.

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


                                            1997       1996        1995

Overall capacity factor                     84.3%      84.2%       88.8%
kWh  produced (in thousands)           4,211,030  4,216,800   4,433,900
Installed capacity NMW                       570        570         570

The  capacity  factor of the Gas Plants reflects  the  effect  of
certain  contractual curtailments.  The capacity factors adjusted
for these contractual curtailments are 95.7%, 93.2% and 96.8% for
1997, 1996 and 1995, respectively.

Electric  sale  price  per kWh for the Coso Project,  Partnership
Project  and  Salton Sea Project varies seasonally in  accordance
with the rate schedule referenced in the SO4 agreements and power
purchase  agreements.  The Coso Project's, Partnership  Project's
and  Salton  Sea  Project's average electricity  prices  per  kWh
received in 1997, 1996 and 1995 were comprised of (in cents):
Coso Project            Energy Capacity & Bonus     Total

Average fiscal 1997      12.56         1.91         14.47
Average fiscal 1996      12.61         1.82         14.43
Average fiscal 1995      11.81         1.82         13.63


Partnership Project     Energy Capacity & Bonus     Total


Average fiscal 1997      10.96         2.18         13.14
Average fiscal 1996      10.02         2.12         12.14
Average fiscal 1995      11.14         2.10         13.24

Salton Sea Project      Energy Capacity & Bonus     Total


Average fiscal 1997       8.66         1.97         10.63
Average fiscal 1996       8.84         2.29         11.13
Average fiscal 1995       9.50         2.33         11.83


Interest  and  other income increased in 1997  to  $104,573  from
$57,261  in  1996,  an  82.6% increase.  This  increase  was  due
primarily  to  interest earned by Northern, equity earnings  from
Saranac  and  Mahanagdong, and increased interest income  on  the
proceeds of the equity and senior note offerings in October 1997.
Interest  and  other  income decreased in 1996  to  $57,261  from
$63,093 in 1995.

Overall, the Company's expenses increased in 1997 due to the full
year  of  operations  of  Northern, Falcon Seaboard,  Partnership
Interest, Salton Sea IV Project, Upper Mahiao Project and Unit  I
of the Malitbog Project and the deemed completion of Units II and
III of the Malitbog Project in July 1997.

Cost  of  sales increased to $1,055,195 in 1997 from  $31,840  in
1996.   This  increase is a result of reflecting a full  year  of
Northern's operations. Cost of sales represents Northern's  costs
of  electricity and appliances during the period of the Company's
controlling interest since December 24, 1996.

Operating expense increased to $345,833 in 1997 from $132,655  in
1996,  an increase of 160.7%.  This increase is a result  of  the
acquisitions  of  Northern, Falcon Seaboard and  the  Partnership
Interest  as  well as the commencement of receipt of  revenue  at
Salton  Sea  IV,  Upper  Mahiao and Malitbog.  Operating  expense
increased to $132,655 in 1996 from $103,602 in 1995, an  increase
of 28.0%. The increase is a result of the Falcon Seaboard and the
Partnership  Interest  acquisitions,  and  the  commencement   of
operations of the Salton Sea IV Project.

General  and  administration costs increased to $52,705  in  1997
from  $21,451 in 1996, an increase of 145.7%.  This  increase  is
primarily  a  result  of the addition of Northern.   General  and
administration  costs decreased to $21,451 in 1996  from  $23,376
in  1995,  a decrease of 8.2%. This decrease is a result  of  the
Company's  continued  efforts to reduce costs  and  reflects  the
elimination  of redundant functions subsequent to the acquisition
of Magma.

Depreciation and amortization increased to $276,041 in 1997  from
$118,586  in  1996, an increase of 132.8%.  This  increase  is  a
result  of the acquisitions of Northern, Falcon Seaboard and  the
Partnership  Interest as well as the commencement of the  receipt
of   revenue  at  Salton  Sea  IV,  Upper  Mahiao  and  Malitbog.
Depreciation and amortization increased in 1996 to $118,586  from
$72,249 in 1995, a 64.1% increase. This increase is primarily due
to   the   Magma,   Partnership  Interest  and  Falcon   Seaboard
acquisitions, and the commencement of the receipt of  revenue  at
Salton Sea IV, Upper Mahiao and Malitbog.

Loss  on  equity investment in the Casecnan Project reflects  the
Company's  share  of  interest expense in excess  of  capitalized
interest  and interest income at the Casecnan  Project, which  is
currently in construction.

Interest expense, less amounts capitalized, increased in 1997  to
$251,305  from $126,038 in 1996, a 99.4% increase, and  increased
to  $126,038  in  1996 from $102,083 in 1995, a  23.5%  increase.
Higher interest expense is primarily due to a larger portfolio of
facilities  and  their associated debt partially  offset  by  the
increase  in  capitalized interest on the Company's international
and domestic projects.

The non-recurring charge of $87,000 represents an asset valuation
impairment   under   Financial  Accounting  Standard   No.   121,
"Accounting for the Impairment of Long-Lived Assets", relating to
CalEnergy's  assets  in  Indonesia.   The  charge  includes   all
reasonably  estimated cash flows associated  with  the  Company's
assets  in  Indonesia  and gives effect  to  the  political  risk
insurance  on such investments.  The estimate assumes there  will
be   no   tax   benefits  associated  with  the  asset  valuation
impairment.

The  provision for income taxes increased to $99,044 in 1997 from
$41,821 in 1996 and $30,631 in 1995. After adjusting for the non-
recurring charge for asset valuation impairment and the dividends
on  convertible preferred securities, the effective tax rate  was
38.0%,  30.8%,  and 31.6% in 1997, 1996, and 1995,  respectively.
The  increase from 1996 to 1997 is due primarily to larger energy
tax credits and depletion deductions in 1996.

Minority  interest increased to $45,993 in 1997  from  $6,122  in
1996,  an  increase  of  651.3%.  Minority interest  consists  of
dividends  on  convertible  preferred  securities  of  subsidiary
trusts  and  the  Company's partial ownership in Northern.   This
increase  is  a result of issuance of the $180,000  of  Trust  II
Securities  in February 1997 and $270,000 of Trust III Securities
in  August  1997  and  a full year of operations  from  Northern.
Minority   interest  in  1995  reflects  the  Company's   partial
ownership  in  Magma  for the period from  January  10,  1995  to
February 24, 1995.

Income  before extraordinary item was $51,823 or $0.77 per common
share  in  1997 compared to $92,461 or $1.69 per common share  in
1996  and  $62,335 or $1.32 per common share in 1995.   Excluding
the $87,000, $1.29 per share, non-recurring charge, income before
extraordinary item would have been $138,823 in 1997.

On  July  31,  1997,  the Finance Act in the United  Kingdom  was
passed by Parliament and included the introduction of a one  time
so-called  "windfall tax" equal to 23% of the difference  between
the  price  paid for Northern upon privatization and  the  Labour
government's  assessed  "value"  of  Northern  as  calculated  by
reference  to  a  formula  set forth in  the  July  budget.  This
amounted  to  $135,850,  net  of  minority  interest,  which  was
recorded  as  an  extraordinary item.  The first installment  was
paid on December 1, 1997 and the second installment is payable on
December 1, 1998.

Liquidity and Capital Resources

Cash  and short-term investments were $1,446,620 at December  31,
1997  as  compared to $429,421 at December 31, 1996. In addition,
the  Company's  share  of  joint  venture  cash  and  investments
retained  in project control accounts was $6,072 and  $47,764  at
December  31, 1997 and 1996, respectively. Distributions  out  of
the  project control accounts are made monthly to the Company for
operation  and maintenance and capital costs and semiannually  to
each  Coso  Project partner for profit sharing under a prescribed
calculation  subject  to mutual agreement  by  the  partners.  In
addition,  the  Company recorded separately  restricted  cash  of
$223,636   and   $106,968  at  December  31,   1997   and   1996,
respectively.   The  restricted  cash  balances   are   comprised
primarily of amounts deposited in restricted accounts from  which
the  Company will fund construction of Dieng Unit II  and  Patuha
Unit I; the Power Resources Project, the Upper Mahiao Project and
the  Malitbog Project cash reserves for the debt service  reserve
funds; and the Coso Project royalty payment.

The  Company repurchased 1,622 common shares during 1997 for  the
aggregate  amount of $55,505. The Company repurchased 472  shares
of  common stock in 1996 at an aggregate amount of $12,008. As of
December 31, 1997 the Company held 1,658 shares of treasury stock
at  a  cost  of $56,525 to provide shares for issuance under  the
Company's employee stock option and share purchase plan and other
outstanding convertible securities. The repurchase plan minimizes
the  dilutive effect of the additional shares issued under  these
plans.

On  September 11, 1997, the Company signed a definitive agreement
with  Kiewit Diversified Group ("KDG"), a wholly owned subsidiary
of  PKS, for the Company to purchase KDG's ownership interest  in
various  project  partnerships and CalEnergy common  shares  (the
"KDG Acquisition").

KDG's  ownership  interest in CalEnergy  comprised  approximately
20,231  shares of common stock (assuming exercise by KDG  of  one
million  options to purchase CalEnergy shares), the 30%  interest
in  Northern Electric, as well as the following minority  project
interests:   Mahanagdong  (45%),  Casecnan  (35%),  Dieng  (47%),
Patuha  (44%) and Bali (30%) and other interests in international
development projects.

CalEnergy  paid  $1,159,215  for the KDG  Acquisition  and  final
closing  of the transaction occurred in January 1998.   CalEnergy
funded  this acquisition with available cash and the proceeds  of
the equity and senior note offerings completed in October 1997.

On December 15, 1997, CE Electric UK Funding Company, an indirect
subsidiary  of  the  Company  (the  "Funding  Company"),   issued
$125,000 of 6.853% senior notes due 2004, and $237,000 of  6.995%
senior  notes due 2007 (collectively, the "CE Electric UK Funding
Company Senior Notes"), and pound 200,000 of 7.25% Sterling Bonds  due
2022.

On  November  26,  1997, the Company amended  and  increased  its
$100,000 revolving credit facility to $400,000.  The facility  is
unsecured  and is available to fund working capital  requirements
and finance future business expansion opportunities.

On October 17, 1997, the Company completed the public offering of
17.1  million shares of its common stock ("Common Stock") at  $37
7/8  per  share (the "Public Offering").  In addition, 2  million
shares  of Common Stock were purchased from CalEnergy in a direct
sale  by  a trust affiliated with Walter Scott, Jr., the Chairman
and   Chief  Executive  Officer  of  PKS  (the  "Direct   Sale"),
contemporaneously with the closing of the Public Offering.

On  October 28, 1997, the Company completed the sale of  $350,000
aggregate  principal amount of its 7.63% Senior  Notes  due  2007
(the "Senior Note Offering").

On  August  12,  1997,  a subsidiary of the Company  completed  a
private  placement  (with certain shelf registration  rights)  of
$225,000  aggregate amount of 6 1/2% Trust Convertible  Preferred
Securities  (the  "6 1/2% Trust Securities").   In  addition,  an
option  to  purchase  an  additional 900  of  the  6  1/2%  Trust
Securities,  or  $45,000 aggregate amount, was exercised  by  the
initial purchasers to cover overallotments in connection with the
placement.   Each  6  1/2%  Trust  Security  has  a   liquidation
preference of fifty dollars and is convertible at any time at the
option  of  the holder into 1.047 shares of Company Common  Stock
(equivalent  to  a conversion price of $47.75 per  common  share)
subject to adjustments in certain circumstances.

On  August  5,  1997, the Company and certain affiliated  capital
funding  trusts filed with the Securities and Exchange Commission
a  shelf  registration statement covering  up  to  $1,500,000  of
common  stock, preferred stock and debt securities which  may  be
sold  from  time  to  time  for various  purposes.   The  Company
completed the Public Offering and the Senior Note Offering  under
the shelf registration statement.

On  February  26, 1997, a subsidiary of the Company  completed  a
private  placement  (with certain shelf registration  rights)  of
$150,000  aggregate amount of 6 1/4% Trust Convertible  Preferred
Securities  ("Trust  Securities").  In  addition,  an  option  to
purchase an additional 600 Trust Securities, or $30,000 aggregate
amount,  was  exercised by the initial purchasers to cover  over-
allotments in connection with the placement.  Each Trust Security
has  a liquidation preference of fifty dollars and is convertible
at  any  time at the option of the holder into 1.1655  shares  of
Company Common Stock (equivalent to a conversion price of  $42.90
per   common   share)   subject   to   adjustments   in   certain
circumstances.

In  November 1995, the Company closed the financing and commenced
construction  of the Casecnan Project, a combined irrigation  and
150  net MW hydroelectric power generation project (the "Casecnan
Project") located in the central part of the island of  Luzon  in
the Republic of the Philippines.

CE   Casecnan  Water  and  Energy  Company,  Inc.,  a  Philippine
Corporation ("CE Casecnan") which is approximately 70% indirectly
owned  by  the Company (after the KDG Acquisition), is developing
the Casecnan Project. CE Casecnan financed a portion of the costs
of  the Casecnan Project through the issuance of $125,000 of  its
11.45% Senior Secured Series A Notes due 2005 and $171,500 of its
11.95% Senior Secured Series B Bonds due 2010 and $75,000 of  its
Secured  Floating Rate Notes due 2002, pursuant to  an  indenture
dated as of November 27, 1995, as amended to date.

The  Casecnan Project was being constructed pursuant to a  fixed-
price,  date-certain, turnkey construction contract  (the  "Hanbo
Contract")  on  a  joint and several basis by  Hanbo  Corporation
("Hanbo")  and  Hanbo  Engineering  and  Construction  Co.,  Ltd.
("HECC"), both of which are South Korean corporations.  As of May
7,  1997,  CE  Casecnan  terminated the  Hanbo  Contract  due  to
defaults by Hanbo and HECC including the insolvency of each  such
company.  On May 7, 1997, CE Casecnan entered into a new  turnkey
engineering,  procurement and construction contract  to  complete
the  construction  of  the  Casecnan  Project  (the  "Replacement
Contract").   The  work under the Replacement Contract  is  being
conducted  by  a  consortium consisting of  Cooperativa  Muratori
Cementisti  CMC  di Ravenna and Impressa Pizzarottie  &  C.  Spa,
working  together with Siemens A.G., Sulzer Hydro Ltd.,  Black  &
Veatch  and  Colenco  Power Engineering Ltd.  (collectively,  the
"Replacement Contractor").

In  connection with the Hanbo Contract termination,  CE  Casecnan
tendered a certificate of drawing to Korea First Bank ("KFB")  on
May  7,  1997,  under the irrevocable standby  letter  of  credit
issued  by  KFB as security under the Hanbo Contract to  pay  for
certain   transition  costs  and  other  presently  ascertainable
damages  under the Hanbo Contract.  As a result of KFB's wrongful
dishonor of the draw request, CE Casecnan filed an action in  New
York State Court. That Court granted CE Casecnan's request for  a
temporary restraining order requiring KFB to deposit $79,329, the
amount of the requested draw, in an interest bearing account with
an  independent financial institution in the United States.   KFB
appealed this order, but the appellate court denied KFB's  appeal
and  on  May  19, 1997, KFB transferred funds in  the  amount  of
$79,329  to  a segregated New York bank account pursuant  to  the
Court order.

On  August  6, 1997, CE Casecnan announced that it had  issued  a
notice  to proceed to the Replacement Contractor. The Replacement
Contractor   has  fully  mobilized  and  commenced   engineering,
procurement and construction work on the Casecnan Project.

On August 27, 1997, CE Casecnan announced that it had received  a
favorable summary judgment ruling in New York State Court against
KFB.  The judgment, which has been appealed by the bank, requires
KFB  to  honor the $79,329 drawing by CE Casecnan on  a  $117,850
irrevocable standby letter of credit.

On  September 29, 1997, CE Casecnan tendered a second certificate
of  drawing  for  $10,828  to KFB and on  December  30,  1997  CE
Casecnan  tendered a third certificate of drawing for  $2,920  to
KFB.  KFB also wrongfully dishonored these draws, but pursuant to
a  stipulation agreed to deposit the draw amounts in an  interest
bearing  account with the same independent financial  institution
in  the  United States pending resolution of the appeal regarding
the first draw and agreed to expedite the appeal.

The  receipt  of  the  letter of credit funds  from  KFB  remains
essential and CE Casecnan will continue to press KFB to honor its
clear  obligations under the letter of credit and to pursue Hanbo
and  KFB  for any additional damages arising out of their actions
to  date.  If KFB were to fail to honor its obligations under the
Casecnan  letter  of credit, such action could  have  a  material
adverse effect on the Casecnan Project and CE Casecnan.

On  September  2,  1997,  Hanbo and  HECC  filed  a  Request  for
Arbitration before the International Chamber of Commerce ("ICC").
The  Request for Arbitration asserts various claims by Hanbo  and
HECC  against  CE  Casecnan  relating  to  the  terminated  Hanbo
Contract  and seeking damages.  On October 10, 1997, CE  Casecnan
served  its  answer and defenses in response to the  Request  for
Arbitration as well as counterclaims against Hanbo and  HECC  for
breaches  of  the  Hanbo  Contract.  The arbitration  proceedings
before  the  ICC  are ongoing and CE Casecnan intends  to  pursue
vigorously  its  claims  against  Hanbo,  HECC  and  KFB  in  the
proceedings described above.

In  June 1997, the Company's indirect special-purpose subsidiary,
CE  Indonesia  Funding Corp., entered into a  $400,000  revolving
credit  facility (which is nonrecourse to the Company) to finance
the  development  and  construction of the  Company's  geothermal
power facilities in Indonesia.

On  September 20, 1997, a Presidential Decree (the "Decree")  was
issued  in  Indonesia,  providing for government  action  to  the
effect  that, in order to address certain recent fluctuations  in
the  value of the Indonesian currency, the start-up dates  for  a
number  of  private  power  projects  would  be:   (i)  continued
according  to  their initial schedule (because  construction  was
underway);  (ii)  postponed as to their start-up  dates  (because
they  are not yet in construction) until economic conditions have
recovered;  or  (iii)  reviewed with a view to  being  continued,
postponed  or  rescheduled, depending  on  the  status  of  those
projects.  In the Decree, Dieng Units 1, 2 and 3 are approved  to
continue according to their initial schedule; Patuha Unit  1  and
Bali  Units  1  and 2 are to receive further review to  determine
whether or not they should be continued in accordance with  their
initial schedule; and Bali Units 3 and 4, Patuha Units 2, 3 and 4
and  Dieng Unit 4 are to be postponed for an unspecified  period.
In  this  regard,  the  Company  notes  that  its  contracts  and
government  undertakings for the Dieng, Patuha and Bali  projects
do not by their terms permit such categorization or delays by the
government  and  that  the  Company has obtained  political  risk
insurance  coverage for its Dieng and Patuha projects.  Moreover,
the  Company  intends to continue to take actions to  attempt  to
require  the  Government of Indonesia to  honor  its  contractual
obligations;  however, subsequent actions by  the  Government  of
Indonesia  and  continued  economic problems  in  Indonesia  have
created further uncertainty as to whether the contracts for  such
projects  will  be  abrogated by the  Indonesian  government  and
accordingly  have created significant risks to the completion  of
these  projects.  As a result, the Company recorded  a  SFAS  121
asset  valuation  impairment charge  of  $87,000  in  the  fourth
quarter  of 1997.  This charge includes all reasonably  estimated
asset  valuation impairments associated with the Company's assets
in  Indonesia and gives effect to the political risk insurance on
such investments.

On  December  2,  1994,  a subsidiary of  the  Company,  Himpurna
California  Energy  Ltd.  ("HCE")  executed  a  joint   operation
contract  (the "Dieng JOC") for the development of the geothermal
steam   field  and  geothermal  power  facilities  at  the  Dieng
geothermal  field, located in Central Java (the "Dieng  Project")
with   Perusahaan  Pertambangan  Minyak  Dan  Gas   Bumi   Negara
("Pertamina"), the Indonesian national oil company, and  executed
a "take-or-pay" energy sales contract (the "Dieng ESC") with both
Pertamina and P.T. PLN (Persero) ("PLN"), the Indonesian national
electric utility.  HCE was formed pursuant to a joint development
agreement  with P.T. Himpurna Enersindo Abadi ("P.T.  HEA"),  its
Indonesian  partner, which is a subsidiary of  Himpurna,  whereby
the  Company  and  P.T. HEA have agreed to work  together  on  an
exclusive  basis to develop the Dieng Project (the  "Dieng  Joint
Venture").   Subsequent to the January 1998 KDG acquisition,  the
Dieng  Joint  Venture  is  structured with  subsidiaries  of  the
Company  holding  an approximate 94% interest (including  certain
assignments of dividend rights representing an economic  interest
of  4%), and P.T. HEA holding a 6% interest in the Dieng Project.
Financial  closing  and first disbursement of  construction  loan
funds occurred on October 3, 1996.  Construction of Dieng Unit  I
is expected to be completed in March 1998.

Pursuant to the Dieng JOC and ESC, Pertamina has granted  to  HCE
the geothermal field and the wells and other facilities presently
located  thereon  and  HCE  may  build,  own  and  operate  power
production units with an aggregate capacity of up to 400 MW.  HCE
will accept the field operation responsibility for developing and
supplying the geothermal steam and fluids required to operate the
plant.   The  Dieng  JOC is structured as  a  build  own  operate
transfer  agreement  and  will expire (subject  to  extension  by
mutual agreement) on the date which is the later of (i) 42  years
following  effectiveness  of the Dieng  JOC  and  (ii)  30  years
following  the  date of commencement of commercial generation  of
the  final unit.  Upon the expiration of the proposed Dieng  JOC,
all facilities will be transferred to Pertamina at no cost.

HCE began well testing in the fourth quarter of 1995 and issued a
notice  to proceed for the construction and supply of an  initial
55 net MW unit ("Dieng Unit I") in the first quarter of 1996.  PT
Kiewit/Holt Indonesia, a consortium including Kiewit Construction
Group,  Inc., a subsidiary of PKS ("KCG"), is constructing  Dieng
Unit   I  pursuant  to  a  fixed  price,  date  certain,  turnkey
construction  contract ("Construction Contract").  Affiliates  of
KCG  are  providing the engineered supply with respect  to  Dieng
Unit  I  pursuant to a fixed price, date certain, turnkey  supply
contract  ("Supply  Contract").  The  Construction  Contract  and
Supply  Contract are sometimes referred to herein as  the  "Dieng
EPC"  and  KCG  and  their affiliates party to  the  Construction
Contract  and Supply Contract are sometimes referred  to  herein,
collectively, as the "Construction Consortium."  The  obligations
of  the Construction Consortium under the Construction and Supply
Contracts  are supported by a guaranty of KCG. KCG  is  the  lead
member of the Construction Consortium, with a 60% interest.   HCE
will be responsible for operating and managing the Dieng Project.

In the fourth quarter of 1997, HCE issued a notice to proceed and
closed  the project financing for the construction and supply  of
the  Dieng  Unit  II  80 net MW project.  The  same  construction
consortium as described above for Dieng Unit I has contracted  to
construct  Dieng  Unit II under similar terms.  The  Company  has
contributed the necessary equity for the completion of Dieng Unit
II  and the construction loan of $109,000 was arranged under  the
June  1997 CE Indonesia Funding Corp. facility.  However, pending
resolution   of   the  current  uncertainties   associated   with
Indonesia,  construction activities on  this  project  have  been
significantly reduced.

Patuha  Power, Ltd. ("Patuha Power") is developing  a  geothermal
power  plant  in  the Patuha geothermal field in Java,  Indonesia
(the  "Patuha  Project").   On December  2,  1994,  Patuha  Power
executed  both  a  joint operation contract and an  energy  sales
contract,  each of which contains terms substantially similar  to
those  described above for the Dieng Project.  Patuha Power began
well testing and exploration in the fourth quarter of 1995 and in
the  third  quarter of 1997, issued a notice to proceed  for  the
construction and supply of the Patuha Unit I 80 net  MW  project.
The  same  construction consortium as described above  for  Dieng
Unit  I  has contracted to construct Patuha Unit I under  similar
terms.  The Company has contributed the necessary equity for  the
completion of Patuha Unit I and the construction loan of $150,000
was  arranged  under  the  June 1997 CE Indonesia  Funding  Corp.
facility.   However,   pending   resolution   of   the    current
uncertainties associated with Indonesia, construction  activities
on this project have been significantly reduced.

The  Company  and PT Panutan Group, an Indonesian  consortium  of
energy,  oil,  gas  and mining companies,  have  formed  a  joint
venture to pursue the development of geothermal resources in Bali
(the  "Bali  Project").   The PT Panutan  Group  is  entitled  to
contribute up to 40% of the total equity and obtain up to 40%  of
the  net  profit  of  the  Bali  Project.   The  project  company
developing  the  Bali Project, Bali Energy Ltd. ("Bali  Energy"),
has  executed both a joint operation contract and an energy sales
contract  with  terms  similar to  those  at  Dieng  and  Patuha.
However,   pending   resolution  of  the  current   uncertainties
associated   with  Indonesia,  infrastructure  construction   and
drilling  activities  on  this project  have  been  significantly
reduced.

The  Company  developed  and owns the  rights  to  a  proprietary
process  for the extraction of minerals from elements in solution
in  the  geothermal  brine and fluids utilized  at  its  Imperial
Valley  plants (the "Salton Sea Extraction Project") as  well  as
the  production  of  power to be used in the extraction  process.
The initial phase of the project would require delivery of 49 net
MW  of power.  A pilot plant has successfully produced commercial
quality  zinc at the Company's Imperial Valley Project.  Zinc  is
primarily  used  in galvanizing steel for use in  the  automobile
industry.  The Company intends to sequentially develop manganese,
silver,  gold,  lead,  boron, lithium and other  products  as  it
further  develops the extraction technology. The Company is  also
investigating  producing silica from the solids precipitated  out
of  the geothermal power process.  Silica is used as a filler for
such products as paint, plastics and high temperature cement.  If
successfully  developed,  the  mineral  extraction  process  will
provide  an  environmentally responsible and  low  cost  minerals
recovery methodology.

Subsidiaries  of Magma, a subsidiary of the Company,  sought  new
long-term  final SO4 power purchase agreements in the Salton  Sea
area through the bidding process adopted by the California Public
Utilities  Commission ("CPUC") under its 1992  Biennial  Resource
Plan Update ("BRPU"). In its BRPU, the CPUC cited the need for an
additional  9,600  MW  of  power production  through  1999  among
California's three investor-owned utilities, Southern  California
Edison  Company ("Edison"), San Diego Gas and Electric  ("SDG&E")
and  Pacific Gas and Electric Company. Of this amount, 275 MW was
set  aside  for bidding by independent power producers  (such  as
Magma) utilizing renewable resources. Pursuant to an order of the
CPUC  dated June 22, 1994 (confirmed on December 21, 1994), Magma
was  awarded  163 net MW for sale to Edison and SDG&E,  with  in-
service dates in 1997 and 1998.  On February 23, 1995 the Federal
Energy  Regulatory Commission ("FERC") issued  an  order  finding
that  the  CPUC's  BRPU  program violated  the  Public  Utilities
Regulatory   Policies  Act  ("PURPA")  and  FERC's   implementing
regulations and recommended negotiated settlements.  In response,
the  CPUC  issued  an  Assigned Commissioners Ruling  encouraging
settlements between the final winning bidders and the  utilities.
The utilities are expected to continue to challenge the BRPU and,
in light of the regulatory uncertainty, there can be no assurance
that  power  sales contracts will be executed or  that  any  such
projects will be completed.  In light of these developments,  the
Company  agreed to execute an agreement with Edison on March  16,
1995,  providing that in certain circumstances it would  withdraw
its  Edison BRPU bid in consideration for the payment of  certain
sums.   In December 1996, the Company entered into a confidential
cash  buyout agreement with SDG&E.  These agreements are  subject
to CPUC approval.

Within  the  United  Kingdom there was  continued  investment  to
extend   and   improve  the  electricity  distribution   network.
Expenditures  in  the year were approximately  $102,000  although
customers  directly  contributed  approximately  $33,000  to  the
additional  costs incurred in expanding the system to meet  their
specific requirements.

The  Company is actively seeking to develop, construct,  own  and
operate    new    energy   projects,   both   domestically    and
internationally,  the completion of any of which  is  subject  to
substantial risk.  Development can require the Company to  expend
significant  sums  for preliminary engineering, permitting,  fuel
supply,  resource  exploration,  legal  and  other  expenses   in
preparation for competitive bids which the Company may not win or
before  it  can  be  determined whether a  project  is  feasible,
economically attractive or capable of being financed.  Successful
development  and  construction is contingent  upon,  among  other
things,  negotiation  on terms satisfactory  to  the  Company  of
engineering, construction, fuel supply and power sales  contracts
with other project participants, receipt of required governmental
permits  and  consents and timely implementation of construction.
There  can  be  no  assurance  that development  efforts  on  any
particular   project,   or  the  Company's  development   efforts
generally, will be successful.

The  Company  believes that the international  independent  power
market  holds  the majority of new opportunities for  financially
attractive  private  power generation  development  in  the  next
several  years.  The financing, construction and  development  of
projects  outside the United States entail significant  political
and financial risks (including, without limitation, uncertainties
associated with first time privatization efforts in the countries
involved,   currency   exchange   rate   fluctuations,   currency
repatriation  restrictions, political instability,  civil  unrest
and  expropriation) and other structuring issues  that  have  the
potential  to cause substantial delays or material impairment  of
value  to the project being developed, which the Company may  not
be  fully  capable  of insuring against. The uncertainty  of  the
legal  environment  in  certain foreign countries  in  which  the
Company  may  develop  or acquire projects  could  make  it  more
difficult  for the Company to enforce its rights under agreements
relating  to such projects. In addition, the laws and regulations
of certain countries may limit the ability of the Company to hold
a  majority interest in some of the projects that it may  develop
or  acquire. The Company's international projects may, in certain
cases,  be  terminated by a government.  Projects  in  operation,
construction  and  development  are  subject  to  a   number   of
uncertainties, more specifically described in the Company's  Form
8-K  dated March 6, 1998, filed with the Securities and  Exchange
Commission and incorporated herein by reference.

Inflation  has  not  had a substantial impact  on  the  Company's
operating revenues and costs; energy payments for electricity for
the  Coso Project, Partnership Project, Salton Sea II Project and
Salton  Sea III Project will continue to be based upon  scheduled
rates and are not adjusted for inflation through the initial  ten
year  period after the dates of firm operation under  each  power
purchase agreement.

The Company has commenced, for all of its information systems,  a
year  2000 date conversion project to address all necessary  code
changes,  testing  and implementation.  The "Year  2000  Computer
Problem" creates risk for the Company from unforeseen problems in
its  own  computer systems and from third parties with  whom  the
Company deals on financial transactions worldwide.  Such failures
of  the  Company's and/or third parties' computer  systems  could
have  a  material impact on the Company's ability to conduct  its
business, and especially to process and account for the  transfer
of  funds electronically.  Management believes that the year 2000
implementation costs and related potential effect should not have
a material financial impact on the Company.

CONSOLIDATED BALANCE SHEETS
As of December 31, 1997 and 1996
Dollars and Shares in Thousands, Except Per Share Amounts

ASSETS                                          1997            1996


Cash and cash equivalents (Note 3)         $  1,445,338     $  424,500
Joint venture cash and investments                6,072         47,764
Restricted cash                                 223,636        106,968
Short-term investments                            1,282          4,921
Accounts receivable                             376,745        342,307
Properties, plants, contracts and
  equipment, net                              3,528,910      3,225,496
Excess of cost over fair value of net
  assets acquired, net                        1,312,788        790,920
Equity investments                              238,025        238,856
Deferred charges and other assets               354,830        448,424


Total assets                               $  7,487,626  $   5,630,156


LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable                           $     173,610   $   218,164
Other accrued liabilities                      1,106,641       668,612
Parent company debt                            1,303,845     1,146,685
Subsidiary and project debt                    2,189,007     1,678,392
Deferred income taxes                            509,059       469,199


Total liabilities                              5,282,162     4,181,052


Deferred income                                   40,837        29,067


Commitments and contingencies (Notes 3, 18, 19 and 20)
Company - obligated mandatorily redeemable
 convertible preferred securities
 of subsidiary trusts                            553,930       103,930
Preferred securities of subsidiary                56,181       136,065
Minority interest                                134,454       299,252
Common stock and options subject to redemption   654,736           ---


Stockholders' equity:
Preferred stock - authorized 2,000 shares,
  no par value                                       ---           ---
Common stock - par value $.0675 per share,
 authorized 180,000 shares, issued 82,980
   and 63,747 shares, outstanding 81,322 and
   63,448 shares, respectively                     5,602         4,303
Additional paid in capital                     1,261,081       563,567
Retained earnings                                213,493       297,520
Cumulative effect of foreign currency
  translation adjustment                          (3,589)       29,658
Common stock and options subject to redemption  (654,736)          ---
Treasury stock - 1,658 and 299 common
  shares at cost                                 (56,525)       (8,787)
Unearned compensation - restricted stock             ---        (5,471)


Total stockholders' equity                       765,326       880,790


Total liabilities and stockholders' equity $   7,487,626   $ 5,630,156

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

CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Years Ended December 31, 1997
Dollars and Shares in Thousands, Except Per Share Amounts

                                          1997         1996         1995

Revenue:
Operating revenue                      $2,166,338  $   518,934   $  335,630
Interest and other income                 104,573       57,261       63,093


Total revenues                          2,270,911      576,195      398,723


Costs and expenses:
Cost of sales                           1,055,195       31,840          ---
Operating expense                         345,833      132,655      103,602
General and administration                 52,705       21,451       23,376
Depreciation and amortization             276,041      118,586       72,249
Loss on equity investment in Casecnan       5,972        5,221          362
Interest expense                          296,364      165,900      134,637
Less interest capitalized                 (45,059)     (39,862)     (32,554)
Non-recurring charge - asset valuation
  impairment                               87,000          ---          ---


Total costs and expenses                2,074,051      435,791      301,672


Income before provision for income taxes  196,860      140,404       97,051
Provision for income taxes                 99,044       41,821       30,631


Income before minority interest            97,816       98,583       66,420
Minority interest                          45,993        6,122        3,005



Income before extraordinary item           51,823       92,461       63,415
Extraordinary item, net of
  minority interest of $58,222           (135,850)         ---          ---

Net income (loss)                         (84,027)      92,461       63,415
Preferred dividends                           ---          ---        1,080

Net income (loss) available to
  common stockholders                 $   (84,027)    $ 92,461    $  62,335


Income per share before extraordinary
  item                                 $     0.77     $   1.69    $    1.32


Extraordinary item                     $    (2.02)    $    ---    $     ---

Net income (loss) per share            $    (1.25)    $   1.69    $    1.32


Income per share before extraordinary
  item - diluted                       $     0.75     $   1.54    $    1.22

Extraordinary item - diluted           $    (1.97)    $    ---    $     ---

Net income (loss) per share - diluted  $    (1.22)    $   1.54    $    1.22


The accompanying notes are an integral part of these financial
statements.
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Three Years Ended December 31, 1997
Dollars and Shares in Thousands
<CAPTION>
                                                         Common Stock
                Outstanding    Additional          Foreign & Options
                  Common  Common Paid-In Retained Currency Subject to Treasury Unearned
                  Shares   Stock Capital Earnings  Adjust. Redemption  Stock Compensation Total
<S>                <C>    <C>    <C>      <C>      <C>     <C>       <C>       <C>     <C>
Balance
 December 31, 1994 31,849 $2,407 $100,421 $142,937 $   --- $     --- $(65,774) $   --- $179,991
Equity offering    18,170  1,004  240,825      ---     ---       ---   56,801      ---  298,630
Restricted stock      500    ---      848      ---     ---       ---    8,652   (9,500)     ---
Exercise of stock options
 and other equity
 transactions         176     10      446      ---     ---       ---      563    2,494    3,513
Purchase of treasury
 stock               (102)   ---      ---      ---     ---       ---   (1,590)     ---   (1,590)
Preferred stock dividends, Series C,
 including cash distribution
 of $43               ---    ---      ---   (1,293)    ---       ---      ---      ---   (1,293)
Tax benefit from
 stock plan           ---    ---      866      ---     ---       ---      ---      ---      866
Net income before
 preferred dividends  ---    ---      ---   63,415     ---       ---      ---      ---   63,415


Balance December 31,
 1995              50,593  3,421  343,406  205,059     ---       ---    (1,348) (7,006) 543,532
Exercise of stock options
 and other equity
 transactions       5,263    337   53,030      ---     ---       ---     4,569   1,535   59,471
Purchase of treasury
 stock               (472)   ---      ---      ---     ---       ---   (12,008)    ---  (12,008)
Conversion of debt  8,064    545  164,912      ---     ---       ---       ---     ---  165,457
Tax benefit from
 stock plan           ---    ---    2,219      ---     ---       ---       ---     ---    2,219
Foreign currency translation
 adjustment           ---    ---      ---      ---  29,658       ---       ---     ---   29,658
Net income            ---    ---      ---   92,461     ---       ---       ---     ---   92,461


Balance December 31,
  1996             63,448  4,303  563,567  297,520  29,658       ---    (8,787) (5,471) 880,790
Equity offering    19,100  1,289  697,315      ---     ---       ---       ---     ---  698,604
Exercise of stock options
 and other equity
 transactions         396     10   (2,757)     ---     ---       ---     7,767   5,471   10,491
Purchase of treasury
 stock             (1,622)   ---      ---      ---     ---       ---   (55,505)    ---  (55,505)
Common stock and options
 subject to
 redemption           ---    ---      ---      ---     ---  (654,736)      ---     --- (654,736)
Tax benefit from
 stock plan           ---    ---    2,956      ---     ---       ---       ---     ---    2,956
Foreign currency
 translation
 adjustment           ---    ---      ---      --- (33,247)      ---       ---     ---  (33,247)
Net loss              ---    ---      ---  (84,027)    ---       ---       ---     ---  (84,027)
Balance December 31,
  1997            81,322 $5,602 $1,261,081 $213,493$(3,589)$(654,736) $(56,525)$   ---$ 765,326
</TABLE>

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

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Years Ended December 31, 1997
Dollars in Thousands

                                                1997         1996         1995
Cash flows from operating activities:
Net income (loss)                      $      (84,027)   $  92,461  $    63,415
Adjustments to reconcile net cash flow from operating activities:
  Non-recurring charge-asset valuation
   impairment                                  87,000          ---          ---
  Depreciation and amortization               239,234      109,447       65,244
  Amortization of excess of cost over
   fair value of net assets acquired           36,807        9,139        7,005
  Amortization of original issue discount       2,160       50,194       45,409
  Amortization of deferred financing costs     26,161        9,677        8,979
  Amortization of unearned compensation         5,471        1,535        2,494
  Provision for deferred income taxes          55,584       12,252       13,983
  Loss (income) on equity investments         (16,068)        (910)         362
  Income (loss) applicable to minority
   interest                                   (35,387)       1,431        3,005
  Changes in other items:
   Accounts receivable                        (34,146)     (13,936)         213
   Accounts payable, accrued liabilities
    and deferred income                        29,799        2,093       12,103
Net cash flows from operating activities      312,588      273,383      222,212
Cash flows from investing activities:
Purchase of Northern, Falcon Seaboard, Partnership Interest
    and Magma, net of cash acquired          (632,014)    (474,443)    (907,614)
Distributions from equity investments          23,960        8,222          ---
Capital expenditures relating to operating
 projects                                    (194,224)     (24,821)     (27,120)
Philippine construction                       (27,334)    (167,160)    (289,655)
Indonesian and other development             (155,963)     (81,068)      (8,973)
Salton Sea IV construction                        ---      (63,772)     (62,430)
Pacific Northwest, Nevada, and Utah
 exploration costs                             (3,128)      (4,885)     (10,445)
Decrease in short-term investments              2,880       33,998       80,565
Decrease (increase) in restricted cash       (116,668)      63,175      (17,452)
Other                                          60,390       (2,910)      11,514
Investment in Casecnan                            ---          ---      (61,177)
Net cash flows from investing activities   (1,042,101)    (713,664)  (1,292,787)
Cash flows from financing activities:
Proceeds from sale of common and treasury stock
 and exercise of stock options                703,624       54,935      299,649
Proceeds from convertible preferred securities
 of subsidiary trusts                         450,000      103,930          ---
Proceeds from issuance of parent company debt 350,000      324,136      200,000
Repayment of parent company debt             (100,000)         ---          ---
Net proceeds from revolver                    (95,000)      95,000          ---
Proceeds from subsidiary and project debt     795,658      428,134      654,695
Repayments of subsidiary and project debt    (271,618)    (210,892)    (176,664)
Deferred charges relating to debt financing   (48,395)     (36,010)     (34,733)
Purchase of treasury stock                    (55,505)     (12,008)      (1,590)
Other                                          13,142       10,756      (29,169)
Net cash flows from financing activities    1,741,906      757,981      912,188
Effect of exchange rate changes               (33,247)       4,860          ---
Net increase (decrease) in cash and
 investments                                  979,146      322,560     (158,387)
Cash and cash equivalents at beginning
 of year                                      472,264      149,704      308,091
Cash and cash equivalents at end of year $  1,451,410   $  472,264   $  149,704
Supplemental Disclosures:
Interest paid (net of amounts capitalized)$   316,060   $   92,829   $   50,840
Income taxes paid                         $    44,483   $   23,211   $   14,812

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

NOTES Consolidated Financial Statements
For the Three Years Ended December 31, 1997
Dollars, Pounds and Shares in Thousands, Except Per Share Amounts

1. Business

CalEnergy  Company,  Inc.  (the "Company") is  a  United  States-based
global   power  company  which  generates,  distributes  and  supplies
electricity  to utilities, government entities, retail  customers  and
other  customers located throughout the world. The Company was founded
in  1971  and  through its subsidiaries is primarily  engaged  in  the
development,  ownership  and operation of environmentally  responsible
independent   power   production   facilities   worldwide    utilizing
geothermal,  natural gas, hydroelectric and other energy sources.   In
addition,  the  Company is engaged in the distribution and  supply  of
electricity  to  approximately  1.5  million  customers  primarily  in
northeast  England as well as the generation and supply of electricity
(together  with other related business activities) throughout  England
and  Wales.   The  Company is also active in  supplying  gas  and  has
applications  for  over 400,000 customers in those areas  of  England,
Wales and Scotland where retail gas competition has been introduced.

The  Company  has  organized several partnerships and  joint  ventures
(herein  referred to as the "Coso Joint Ventures") in order to develop
geothermal  energy at the China Lake Naval Air Weapons  Station,  Coso
Hot  Springs,  China  Lake,  California.  Collectively,  the  projects
undertaken  by these Coso Joint Ventures are referred to as  the  Coso
Project.   In  1992,  the Company entered into the  natural  gas-fired
electrical  generation market through the purchase  of  a  development
opportunity  in Yuma, Arizona which commenced commercial operation  in
May  1994.  In  1993,  the  Company started  developing  a  number  of
international   power  project  opportunities  where   private   power
generating programs have been initiated, including the Philippines and
Indonesia.   In  1995,  the  Company  acquired  Magma  Power   Company
("Magma"). Magma's operating assets included four projects referred to
as  the  Partnership Project in which Magma had a  50%  interest,  and
three  projects referred to as the Salton Sea Project of  which  Magma
owned  100%.  A fourth project included in the Salton Sea Project  was
constructed after the acquisition of Magma and commenced operations in
June  1996.   In  addition, in April 1996, the  Company  acquired  the
remaining  50% interest in the Partnership Project.  In  August  1996,
the   Company  acquired  Falcon  Seaboard  Resources,  Inc.   ("Falcon
Seaboard") which includes significant interests in three operating gas-
fired cogeneration facilities and a related natural gas pipeline.   On
December 24, 1996, CE Electric UK plc ("CE Electric"), which  in  1997
was  70%  owned indirectly by the Company and 30% owned indirectly  by
Peter  Kiewit Sons', Inc. ("PKS"), acquired majority ownership of  the
outstanding   ordinary   share  capital  of  Northern   Electric   plc
("Northern") pursuant to a tender offer ("Tender Offer").  As of March
18,  1997,  CE  Electric effectively owned 100% of  Northern  ordinary
shares.

Northern  is one of the twelve regional electricity companies ("RECs")
which  came  into  existence  as a result  of  the  restructuring  and
subsequent  privatization of the electricity industry  in  the  United
Kingdom  in  1990.  Northern is primarily engaged in the  distribution
and  supply of electricity.  Northern was granted a Public Electricity
Supply ("PES") license under the Electricity Act to supply electricity
in   Northern's  Authorized  Area  ("Authorized  Area").    Northern's
Authorized Area covers approximately 14,400 square kilometers  with  a
population  of  approximately  3.2 million  people  and  includes  the
counties of Northumberland, Tyne and Wear, Durham, Cleveland and North
Yorkshire.  Northern supplies electricity outside its Authorized  Area
pursuant to second tier licenses.  Northern also is involved  in  non-
regulated  activities,  including the supply of  gas  within  England,
Wales   and   Scotland,  the  generation  of  electricity,  electrical
appliance retailing and gas exploration and production.

2. Summary of Significant Accounting Policies

The  consolidated  financial statements include the  accounts  of  the
Company, its wholly-owned subsidiaries, and its proportionate share of
the  partnerships  and joint ventures in which  it  has  an  undivided
interest  in the assets and is proportionally liable for its share  of
liabilities.  Other investments and corporate joint ventures where the
Company  has  the  ability  to  exercise  significant  influence   are
accounted  for  under  the equity method of accounting.   Investments,
where the Company's ability to influence is limited, are accounted for
under the cost method of accounting.  All significant inter-enterprise
transactions  and  accounts  have been  eliminated.   The  results  of
operations of the Company include the Company's proportionate share of
results  of  operations of entities acquired as of the  date  of  each
acquisition.

Cash Equivalents, Investments and Restricted Cash

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.

Investments other than restricted cash are primarily commercial  paper
and money market securities. The restricted cash balance includes such
securities  and mortgage backed securities, and is mainly composed  of
amounts  deposited in restricted accounts from which the Company  will
source  its equity contributions and debt service reserve requirements
relating  to  the  projects.   These funds  are  restricted  by  their
respective  project debt agreements to be used only  for  the  related
project.

At  December 31, 1997, all of the Company's investments are classified
as  held-to-maturity  and are accounted for at  their  amortized  cost
basis.  The carrying amount of the investments approximates  the  fair
value  based  on  quoted market prices as provided  by  the  financial
institution which holds the investments.

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
lives,  between  10 and 30 years. Depreciation of furniture,  fixtures
and  equipment which are recorded at cost, is computed on the straight
line  method  over the estimated useful lives of the  related  assets,
which range from three to ten years.

The   Northern,  Falcon  Seaboard,  Partnership  Interest  and   Magma
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 include the following:

     Property  and equipment of Northern is depreciated  using  a
     systematic  method,  which approximates  the  straight  line
     method over the estimated useful lives of the related assets
     which range from 3-40 years.

     Power sales agreements are amortized separately over (1) the
     remaining  portion  of the scheduled price  periods  of  the
     power  sales agreements and (2) for the Partnership Interest
     and  Magma acquisitions the 20 year avoided cost periods  of
     the power sales agreements using the straight line method.

Capitalized  costs for gas reserves, other than costs  of  unevaluated
exploration  projects and projects awaiting development  consent,  are
depleted using the unit of production method.  Depletion is calculated
based  on  hydrocarbon reserves of properties in  the  evaluated  pool
estimated  to  be  commercially recoverable  and  include  anticipated
future development costs in respect of those reserves.

Expenditures  on major information technology systems are  capitalized
and  depreciated on a straight line basis over the useful life of  the
developed systems which range from 3-10 years.

Well, Resource Development and Exploration Costs

The  Company  follows  the full cost method of  accounting  for  costs
incurred  in  connection  with  the  exploration  and  development  of
geothermal  and natural gas resources.  All such costs, which  include
dry hole costs and the cost of drilling and equipping production wells
and  directly  attributable administrative  and  interest  costs,  are
capitalized  and  amortized  over their estimated  useful  lives  when
production commences.  The estimated useful lives of production  wells
are  ten  to  twenty  years depending on the  characteristics  of  the
underlying  resource; exploration costs and development  costs,  other
than  production  wells,  are generally amortized  over  the  weighted
average  remaining  term  of the Company's power  and  steam  purchase
contracts.

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
Northern  and Magma acquisitions and a 25 year period for  the  Falcon
Seaboard acquisition, both using the straight line method.

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 whenever evidence exists  that
the carrying value is not recoverable.
Deferred Well and Rework Costs

Well rework costs are deferred and amortized over the estimated period
between   reworks.   These   deferred  costs,   net   of   accumulated
amortization,  are $5,421 and $8,371 at December 31,  1997  and  1996,
respectively, and are included in other assets.

Revenue Recognition

Revenues are recorded based upon service rendered and electricity  and
steam  delivered,  distributed or supplied to the end  of  the  month.
Where  there  is  an  overrecovery of supply or distribution  business
revenues  against the maximum regulated amount, revenues are  deferred
equivalent  to  the  overrecovered amount.   The  deferred  amount  is
deducted from revenue and included in other liabilities.  Where  there
is  an underrecovery, no anticipation of any potential future recovery
is made.

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.

Deferred Income Taxes

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.  The Company intends to
repatriate earnings of foreign subsidiaries in the foreseeable future.
As  a result, deferred income taxes are provided for retained earnings
of  international subsidiaries and corporate joint ventures which  are
intended to be remitted.

Fair Values of Financial Instruments

The  following  methods and assumptions were used by  the  Company  in
estimating  fair values of financial instruments as discussed  herein.
Fair values have been estimated based on quoted market prices for debt
issues listed on exchanges. Fair values of financial instruments  that
are  not  actively  traded  are  based on  market  prices  of  similar
instruments and/or valuation techniques using market assumptions.

The  Company assumes that the carrying amount of short-term  financial
instruments approximates their fair value. For these purposes,  short-
term  is  defined as any item that matures, reprices, or represents  a
cash transaction between willing parties within six months or less  of
the measurement date.

Pensions

Northern  contributes  to the Electricity Supply  Pension  Scheme  and
contributions to the scheme are charged to the income statement.   The
capital  cost  of  ex gratia and supplementary pensions  are  normally
charged  to  the  income statement in the period  in  which  they  are
granted.  Variations in pension cost, which are identified as a result
of  actuarial  valuations/reviews,  are  amortized  over  the  average
expected  remaining working lives of employees in proportion to  their
expected  payroll costs.  Differences between the amounts  funded  and
the  amounts  charged to the profit and loss account  are  treated  as
either provisions or prepayments in the balance sheet.

Net Income per Common Share

In  February  1997, the Financial Accounting Standards Board  ("FASB")
adopted Statement of Financial Accounting Standards ("SFAS") No.  128,
"Earnings  per  Share."  SFAS 128 replaced primary and  fully  diluted
earnings  per  share  with  basic  and  diluted  earnings  per  share,
respectively.

Basic  and diluted earnings per common share are based on the weighted
average  number  of  common  shares  outstanding  during  the  period.
Diluted earnings per common share also assumes the conversion  of  the
convertible preferred securities of subsidiary trusts, when  dilutive,
and  the  exercise of all dilutive stock options outstanding at  their
option prices, with the option exercise proceeds and tax benefits used
to repurchase shares of common stock at the average market price using
the treasury stock method.

A reconciliation of basic earnings per share before extraordinary item
to diluted earnings per share before extraordinary item follows:

                         1997                 1996                 1995
                             Per-Share            Per-Share            Per-Share
                Income Shares Amount Income Shares Amount  Income Shares Amount
Basic earnings
per share before
extraordinary
item          $ 51,823  67,268 $0.77 $ 92,461 54,739 $1.69 $62,335 47,249 $1.32
Effect of dilutive securities
 Stock options     ---   1,418            ---  1,881           ---  1,688
 Convertible preferred securities
  of subsidiary
  trusts(1)        ---     ---          2,840  2,517           ---    ---
 Convertible debt  ---     ---          4,968  5,935         6,038  7,258
Diluted earnings per share
 before extraordinary
 item        $  51,823  68,686 $0.75 $100,269 65,072 $1.54 $68,373 56,195 $1.22

(1)  The  convertible  preferred  securities  of  subsidiary  trusts  were
antidilutive in 1997.

Reclassification

Certain  amounts in the fiscal 1996 and 1995 financial statements  and
supporting  footnote disclosures have been reclassified to conform  to
the  fiscal  1997 presentation. Such reclassification did  not  impact
previously reported net income or retained earnings.

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.

New Accounting Pronouncements

In  June 1997, the FASB adopted SFAS No. 130, "Reporting Comprehensive
Income", and No. 131, "Disclosures about Segments of an Enterprise and
Related  Information".  SFAS 130 establishes standards  for  reporting
and  display of comprehensive income and its components in a full  set
of  general  purpose  financial statements.  SFAS  131  redefines  how
operating  segments are determined and requires disclosure of  certain
financial  and  descriptive information about  a  company's  operating
segments.  Both statements will be effective for the Company beginning
January  1,  1998.  The Company has not yet determined the  impact  of
these statements on current disclosures.

3. KDG Acquisition

On  September 11, 1997, the Company signed a definitive agreement with
Kiewit  Diversified Group ("KDG"), a wholly owned subsidiary  of  PKS,
for  the  Company  to  purchase KDG's ownership  interest  in  various
project   partnerships   and  CalEnergy  common   shares   (the   "KDG
Acquisition").   Accordingly,  common stock  and  options  subject  to
redemption have been reclassified in the consolidated balance sheet.

KDG's  ownership interest in CalEnergy comprised approximately  20,231
shares  of  common  stock (assuming exercise by  KDG  of  one  million
options  to  purchase CalEnergy shares), the 30% interest in  Northern
Electric,  as  well  as  the  following  minority  project  interests:
Mahanagdong (45%), Casecnan (35%), Dieng (47%), Patuha (44%) and  Bali
(30%) and other interests in international development stage projects.

CalEnergy paid $1,159,215 for the KDG Acquisition and final closing of
the  transaction  occurred  in January 1998.   CalEnergy  funded  this
acquisition  with available cash and the net proceeds  of  the  equity
offering and the debt offering completed in October 1997.

4.                               Acquisitions

Northern

On  December  24, 1996, CE Electric UK plc ("CE Electric"),  which  in
1997  was 70% owned indirectly by the Company and 30% owned indirectly
by  PKS, acquired majority ownership of the outstanding ordinary share
capital  of  Northern Electric plc ("Northern") pursuant to  a  tender
offer (the "Northern Tender Offer") commenced in the United Kingdom on
November  5,  1996.   As  of March 18, 1997, CE  Electric  effectively
acquired  the  remaining ordinary shares and owned 100% of  Northern's
ordinary shares.

The  Company and PKS contributed to CE Electric approximately $410,000
and $176,000 respectively, of the approximately $1,200,000 required to
acquire all of Northern's ordinary and preference shares in connection
with  the Tender Offer.  The Company obtained such funds from cash  on
hand,  short-term borrowings, and borrowings of approximately $100,000
under  a  Credit Agreement entered into with Credit Suisse on  October
28,  1996  (the "CalEnergy Credit Facility").  The Company has  repaid
the  entire  CalEnergy Credit Facility through the use of proceeds  of
the  Trust  Securities  offering.  The remaining  funds  necessary  to
consummate  the Tender Offer were provided from a pound 560,000  Term  Loan
and  Revolving Facility Agreement, dated October 28, 1996  (the  "U.K.
Credit  Facility").   CE Electric has repaid the  entire  U.K.  Credit
Facility  through the use of proceeds of the senior note and  sterling
bond offerings of CE Electric UK Funding Company.

The Northern acquisition has been accounted for as a purchase business
combination.  All identifiable assets acquired and liabilities assumed
were assigned a portion of the cost of acquiring Northern, equal to
their fair values at the date of the acquisition.  Minority interest
was recorded at historical cost.

In  1993, Northern entered into a contract relating to the purchase of
400  MW  of capacity from a 15.4% owned related party, Teesside  Power
Limited  ("Teesside"),  for a period of 15 years  beginning  April  1,
1993.   The  contract sets escalating purchase prices at predetermined
levels.  Currently the escalating contract prices exceed those paid by
the Company to the electricity pool (the "Pool") which is operated  by
the  National Grid Group.  However, under current price cap regulation
expected to expire in 1998 the Company is able to recover these costs.
For  the  period after the price cap regulation ends, the Company  has
established  a  liability for the estimated loss as a result  of  this
contract.

Northern  utilizes contracts for differences ("CFDs") to mitigate  its
exposure to volatility in the prices of electricity purchased  through
the Pool.  Such contracts allow the Company to effectively convert the
majority  of  its  anticipated Pool purchases  from  market  to  fixed
prices.   As  of  December 31, 1997, CFDs were in  place  to  hedge  a
portion  of electricity purchases of approximately 55,000 GWh  through
the year 2008.

Falcon Seaboard

On  August  7,  1996 the Company completed the acquisition  of  Falcon
Seaboard  for  a  cash price of $229,500 including acquisition  costs.
Through  the  acquisition, the Company indirectly acquired significant
ownership   interests   in  three  operating  gas-fired   cogeneration
facilities  and  a  related  natural-gas pipeline.    The  plants  are
located  in  Texas,  Pennsylvania and New York and  total  520  MW  in
capacity.

The  Falcon Seaboard acquisition has been accounted for as a  purchase
business   combination.    All  identifiable   assets   acquired   and
liabilities  assumed were assigned a portion of the cost of  acquiring
Falcon  Seaboard,  equal  to their fair values  at  the  date  of  the
acquisition.

Edison Mission Energy's Partnership Interest

On  April  17,  1996 the Company completed the acquisition  of  Edison
Mission  Energy's  Partnership Interests 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  Partnership  Interest acquisition has been  accounted  for  as  a
purchase  business combination.  All identifiable assets acquired  and
liabilities  assumed were assigned a portion of the cost of  acquiring
the  Partnership Interest, equal to their fair values at the  date  of
the acquisition.

Unaudited  pro forma combined revenue, income and basic  earnings  per
share  before  extraordinary  item of the  Company,  Northern,  Falcon
Seaboard,  and  the Partnership Interest for the twelve  months  ended
December 31, 1997 and 1996, as if the acquisitions had occurred at the
beginning of 1996 after giving effect to certain pro forma adjustments
related  to  the  acquisitions  were $2,270,911,  $52,430,  and  $0.78
compared  to  $2,162,381, $64,811 and $1.18, respectively.   Excluding
the  $87,000, $1.29 per share, non-recurring charge, pro forma  income
before extraordinary item would have been $139,430 in 1997.

5.Properties, Plants, Contracts and Equipment

Properties, plants, contracts and equipment comprise the following  at
December 31:

                                              1997          1996


Operating project costs:
Distribution system                        $1,237,743     $928,575
Power plants                                1,464,885    1,277,663
Wells and resource development                395,314      377,731
Power sales agreements                        227,535      227,535
Other assets                                  254,973      176,483


Total operating assets                      3,580,450    2,987,987
Less accumulated depreciation and
 amortization                                (497,832)    (271,216)


Net operating assets                        3,082,618    2,716,771


Mineral and gas reserves, net                 297,048      270,851
Construction in progress:
  Malitbog                                        ---      152,411
  Indonesia                                   140,172       81,875
  Other development                             9,072        3,588


 Total                                 $    3,528,910  $ 3,225,496


Coso Project Operating Facilities

The   Coso   Project  operating  facilities  comprise  the   Company's
proportionate share of the assets of three of its Coso Joint Ventures:
Coso Finance Partners ("Navy I Joint Venture"), Coso Energy Developers
("BLM  Joint  Venture"),  and Coso Power Developers  ("Navy  II  Joint
Venture").   The Navy I power plant is located on land  owned  by  and
leased  from the U.S. Navy to December 2009, with a 10 year  extension
at  the  option of the Navy. Under terms of the Navy I Joint  Venture,
current  profits and losses are allocated 46.4% to the  Company.   The
BLM  power  plant is situated on lands leased from the U.S. Bureau  of
Land  Management under a geothermal lease agreement that extends until
October  31, 2035. The lease may be extended to 2075 at the option  of
the  BLM.  Under  the  terms of the BLM Joint Venture  agreement,  the
Company's share of profits and losses is 48%.  Under terms of the Navy
II  Joint  Venture, all profits, losses and capital contributions  for
Navy II are divided equally by the two partners.

The  amount  of royalties paid by Navy I to the U.S. Navy  to  develop
geothermal  energy for Navy I, Unit 1 on the lands owned by  the  Navy
comprises (i) a fee payable during the term of the contract  based  on
the  difference  between the amounts paid by the Navy  to  Edison  for
specified quantities of electricity and the price as determined  under
the  contract (which currently approximates 73% of that  paid  by  the
Navy  to Edison), and (ii) $25,000 payable in December 2009, of  which
the  Company's  share is $11,600. The $25,000 payment  is  secured  by
funds  placed on deposit monthly, which funds, plus accrued  interest,
will  aggregate $25,000. The monthly deposit is currently $50.  As  of
December 31, 1997, the balance of funds deposited approximated $6,337,
which amount is included in restricted cash.

Units  2  and  3 of Navy I and the Navy II power plants  are  on  Navy
lands,  for which the Navy receives a royalty based on electric  sales
revenue at the initial rate of 4% escalating to 22% by the end of  the
contract  in December 2019. The BLM is paid a royalty of  10%  of  the
value  of steam produced by the geothermal resource supplying the  BLM
Plant.

The  Coso  Joint  Ventures had royalty expense included  in  operating
expenses  of $13,458, $13,412 and $13,623 in the years ended  December
31, 1997, 1996 and 1995, respectively.

Imperial Valley Project Operating Facilities

The  Company currently operates eight geothermal power plants  in  the
Imperial Valley in California. The Partnership Project consists of the
Vulcan,  Hoch  (Del  Ranch),  Elmore, and Leathers  Partnerships.  The
remaining  four  plants  which comprise the  Salton  Sea  Project  are
indirect  wholly  owned subsidiaries of the Company. These  geothermal
power  plants consist of Salton Sea I, Salton Sea II, Salton  Sea  III
and  Salton Sea IV. The Partnership Project and the Salton Sea Project
are  collectively  referred  to as the Imperial  Valley  Project.  The
Imperial Valley Project commencement dates and nominal capacities  are
as follows:

      Imperial Valley        Commencement            Nominal
          Plants                  Date              Capacity
      Vulcan                February 10, 1986         34 MW
      Hoch (Del Ranch)      January 2, 1989           38 MW
      Elmore                January 1, 1989           38 MW
      Leathers              January 1, 1990           38 MW
      Salton Sea I          July 1, 1987              10 MW
      Salton Sea II         April 5, 1990             20 MW
      Salton Sea III        February 13, 1989       49.8 MW
      Salton Sea IV         May 24, 1996            39.6 MW

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.

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

The Imperial Valley Projects had royalty expense included in operating
expenses  of $14,343, $10,228 and $10,398 in the years ended  December
31, 1997, 1996 and 1995, respectively.

Significant Customers and Contracts

All  of  the Company's sales of electricity from the Coso Project  and
Imperial  Valley  Project, which comprise approximately  20%  of  1997
operating   revenue,  are  to  Southern  California   Edison   Company
("Edison") and are under long-term power purchase contracts.

The  Coso  Project  and the Partnership Project sell  all  electricity
generated  by  the respective plants pursuant to seven  long-term  SO4
Agreements  between  the  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 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 Edison's Avoided Cost of Energy.

The  scheduled energy price periods of the Coso Project SO4 Agreements
extended until at least August 1997 for each of the units operated  by
the  Navy  I  Partnership and extend until at  least  March  1999  and
January  2000 for each of the units operated by the BLM  and  Navy  II
Partnerships,  respectively. The Company's share of  aggregate  annual
capacity  payments is approximately $17,000 and its share of aggregate
bonus payments is approximately $3,000.

The  scheduled  energy  price periods of the Partnership  Project  SO4
Agreements extended until February 1996 for the Vulcan Partnership and
extend until December 1998, December 1998, and December 1999 for  each
of   the   Hoch   (Del  Ranch),  Elmore  and  Leathers   Partnerships,
respectively.  The annual capacity payments are approximately  $24,500
and  the bonus payments are approximately $4,400 in aggregate for  the
four plants.

Excluding Navy I and Vulcan, which are receiving Edison's Avoided Cost
of  Energy,  the  Company's SO4 Agreements provide  for  energy  rates
ranging  from  12.8 cents per kWh in 1997 to 15.6 cents per kWh  in  1999.   The
weighted  average energy rate for all of the Company's SO4  Agreements
was 12.0 cents per kWh in 1997.

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  1997.
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 $1,100 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 period expires in April 2000 and February 1999  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 $3,300
and $9,700, respectively.

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 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  year  ended  December 31, 1997, and  1996  Edison's  average
Avoided Cost of Energy was 3.3 cents and 2.5 cents, respectively, per kWh  which
is  substantially below the contract energy prices earned for the year
ended December 31, 1997. 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 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 could decline  significantly
after the expiration of the respective scheduled payment periods.

Philippine Projects

The  Upper  Mahiao Project was deemed complete in June 1996 and  began
receiving  capacity  payments pursuant  to  the  Upper  Mahiao  Energy
Conversion  Agreement  ("ECA"), in  July  of  1996.   The  project  is
structured as a ten year build-own-operate-transfer project  ("BOOT"),
in  which  the Company's subsidiary CE Cebu Geothermal Power  Company,
Inc.  ("CE  Cebu"), the project company, is responsible for  providing
operations  and  maintenance during the ten  year  BOOT  period.   The
electricity  generated by the Upper Mahiao geothermal power  plant  is
sold  to  PNOC-Energy Development Corporation ("PNOC-EDC"),  which  is
also responsible for supplying the facility with the geothermal steam.
After the ten year cooperation period, and the recovery by the Company
of  its capital investment plus incremental return, the plant will  be
transferred to PNOC-EDC at no cost.

PNOC-EDC  is obligated to pay for electric capacity that is  nominated
each  year by CE Cebu, irrespective of whether PNOC-EDC is willing  or
able to accept delivery of such capacity.  PNOC-EDC pays to CE Cebu  a
fee (the "Capacity Fee") based on the plant capacity nominated to PNOC-
EDC   in  any  year  (which,  at  the  plant's  design  capacity,   is
approximately 95% of total contract revenues) and a fee  (the  "Energy
Fee")   based  on  the  electricity  actually  delivered  to  PNOC-EDC
(approximately  5%  of total contract revenues).  Payments  under  the
Upper Mahiao ECA are denominated in U.S. Dollars, or computed in  U.S.
dollars  and  paid  in  Philippine pesos at the then-current  exchange
rate, except for the Energy Fee.  Significant portions of the Capacity
Fee and Energy Fee are indexed to U.S. and Philippine inflation rates,
respectively.    PNOC-EDC's  payment  requirements,  and   its   other
obligations under the Upper Mahiao ECA are supported by the Government
of the Philippines through a performance undertaking.

Unit  I  of  the Malitbog Project (the "Malitbog Project") was  deemed
complete in July 1996 and Units II and III in July 1997 at which times
such  units  commenced receiving capacity payments under the  Malitbog
ECA.  The Malitbog Project is owned and operated by Visayas Geothermal
Power  Company  ("VGPC"),  a Philippine general  partnership  that  is
wholly owned, indirectly, by the Company.  Under its contract, VGPC is
to  sell  100%  of  its  output on substantially  the  same  basis  as
described  above for the Upper Mahiao Project to PNOC-EDC, which  will
in  turn  sell  the  power to the National Power  Corporation  of  the
Philippines ("NPC").  However, VGPC receives 100% of its revenues from
such sales in the form of capacity payments.  As with the Upper Mahiao
Project,  the  Malitbog Project is structured as a ten year  BOOT,  in
which  the  Company  is  responsible  for  providing  operations   and
maintenance  for  the  ten  year  BOOT  period.   After  a  ten   year
cooperation  period, and the recovery by the Company  of  its  capital
investment  plus incremental return, the plant will be transferred  to
PNOC-EDC at no cost.

The   Mahanagdong  Project  (the  "Mahanagdong  Project")  was  deemed
complete  in July 1997 and accordingly, the Mahanagdong Project  began
receiving capacity payments pursuant to the Mahanagdong ECA in  August
of  1997.   The Mahanagdong Project is owned and operated by CE  Luzon
Geothermal  Power  Company, Inc., a Philippine  corporation,  that  is
expected  to  be  indirectly  owned by  the  Company  (after  the  KDG
Acquisition)  subject  to  a  minority  partner  participation.    The
electricity generated by the Mahanagdong Project will be sold to PNOC-
EDC  on a "take or pay" basis, which is also responsible for supplying
the  facility with the geothermal steam.  The terms of the Mahanagdong
ECA  are substantially similar to those of the Upper Mahiao ECA.   All
of  PNOC-EDC's obligations under the Mahanagdong ECA are supported  by
the  Government of the Philippines through a performance  undertaking.
The  capacity  fees  are  expected to be approximately  97%  of  total
revenues  at  the  design  capacity levels and  the  energy  fees  are
expected to be approximately 3% of such total revenues.

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 1997 total  2.2 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 average 6.6 cents per  kWh  in  1997,
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  ("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  1997  are $3,032 per month and 2.96 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.

The   NorCon  Project  sells  electricity  to  Niagara  Mohawk   Power
Corporation  ("Niagara")  pursuant  to  a  25  year  negotiated  power
purchase  agreement  (the  "NorCon PPA")  which  provides  for  energy
payments  calculated  pursuant  to  an  adjusting  formula  based   on
Niagara's  ongoing  Tariff Avoided Cost and the  contractual  Long-Run
Avoided Cost.  The NorCon PPA term extends through December 2017.  The
Company  and Niagara are currently engaged in discussions regarding  a
potential restructuring or buyout and termination of the NorCon PPA.

The  Yuma Project sells electricity to 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  contract  term  extends
through May 2024.

Nevada and Utah Properties

Roosevelt  Hot Springs. The Company operates and owns an approximately
70%  interest  in  a geothermal steam field which supplies  geothermal
steam  to a 23 net MW power plant owned by Utah Power & Light  Company
("UP&L") located on the Roosevelt Hot Springs property under a 30-year
steam sales contract.

The  Company  obtained  approximately $20,317 cash  under  a  pre-sale
agreement  with  UP&L  whereby UP&L paid  in  advance  for  the  steam
produced  by  the  steam field. The Company must make certain  penalty
payments  to UP&L if the steam produced does not meet certain quantity
and quality requirements.

Desert  Peak.  The Company is the owner and operator of  a  geothermal
plant at Desert Peak, Nevada that is currently selling electricity  to
Sierra  Pacific  Power  Company ("Sierra") at Sierra's  Avoided  Cost.
Subsequent to year end, an indirect subsidiary of the Company  entered
into a lease agreement whereby they will lease the facility to another
power producer and receive rental payments.

Salton Sea Minerals Extraction

The Company developed and owns the rights to a proprietary process for
the extraction of minerals from elements in solution in the geothermal
brine  and fluids utilized at its Imperial Valley plants (the  "Salton
Sea Extraction Project") as well as the production of power to be used
in  the  extraction process.  A pilot plant has successfully  produced
commercial quality zinc at the Company's Imperial Valley Project.  The
Company  is  also  investigating  producing  silica  from  the  solids
precipitated out of the geothermal power process.

Telephone Flat

Under  a  Bonneville  Power  Administration ("BPA")  geothermal  pilot
program,  the  Company  has been developing a  30  net  MW  geothermal
project  which was originally located in the Newberry Known Geothermal
Resource  Area  in  Deschutes  County,  Oregon  (the  "Telephone  Flat
Project").   Pursuant to an amended power sales contract  the  project
has been relocated to Telephone Flat and BPA has agreed to purchase 30
MW from the project with an option to purchase up to an additional 100
MW.   The  movement  of the project to this alternative  location  and
BPA's   purchase   obligation  are  subject  to  obtaining   a   final
environmental  impact  statement relating to the  new  site  location.
Completion  of  this  project is subject to a  number  of  significant
uncertainties and cannot be assured.

6. Equity Investments

At  December  31,  1997,  the Company had  an  indirect  ownership  of
approximately  35% in the Casecnan Project, a combined irrigation  and
150  net  MW  hydroelectric power generation project  located  on  the
island  of  Luzon  in  the Philippines.  The Company  is  expected  to
indirectly own approximately 70% of the Casecnan Project after the KDG
Acquisition.

The  Company  had  an  indirect ownership of 50%  in  the  Mahanagdong
Project, subject to a minority partner participation. The Company will
indirectly  own  100%  of  the  Mahanagdong  Project  after  the   KDG
Acquisition.

The  Company has an approximate 45% economic interest in Saranac Power
Partners,  L.P. and a 20% economic interest in NorCon Power  Partners,
L.P. as part of the Falcon Seaboard acquisition.

Summary financial information for these equity investments follows:

                                Casecnan     Saranac    NorCon   Mahanagdong
As of and for the year ended
December 31, 1997:
Assets                        $  482,527  $  315,671  $  118,415  $  294,250
Liabilities                      384,369     211,299     115,487     197,575
Net income (loss)                (11,267)     43,097       4,072      14,996

 As of and for the year ended December 31, 1996:
Assets                           492,166     325,174     125,956     240,222
Liabilities                      380,737     213,326     121,223     168,512
Net income (loss)                (11,207)     40,005         (53)        N/A

7.                       Parent Company Debt

 Parent company debt comprises the following at December 31:
                                             1997               1996
Senior discount notes                  $   529,640        $   527,535
9.5% senior notes                          224,205            224,150
7.63% senior notes                         350,000                ---
Limited recourse senior secured notes*     200,000            200,000
CalEnergy credit facility                      ---            100,000
Revolving credit facility                      ---             95,000
                                       $ 1,303,845        $ 1,146,685

*  The  amount of recourse obligation to the parent was $0 at December
31, 1997.

Senior Discount Notes

In  March 1994, the Company issued $400,000 of 10 1/4% Senior Discount
Notes  which  accrete to an aggregate principal amount of $529,640  at
maturity in 2004.  The original issue discount was amortized from  the
issue  date  through  January 15, 1997,  during  which  time  no  cash
interest was paid on the Senior Discount Notes. Cash interest  on  the
Senior  Discount Notes is payable semiannually on January 15 and  July
15  of each year, commencing July 15, 1997.  The Senior Discount Notes
are redeemable at any time on or after January 15, 1999 initially at a
redemption  price  of 105.125% declining to 100% on January  15,  2002
plus  accrued interest to the date of redemption.  The Senior Discount
Notes are unsecured senior obligations of the Company.

The  Senior  Discount Notes prohibit payment of cash dividends  unless
certain  financial  ratios are met and unless  the  dividends  do  not
exceed  50%  of  the Company's accumulated adjusted  consolidated  net
income  as defined, subsequent to April 1, 1994, plus the proceeds  of
any stock issuance.

9.5% Senior Notes

On  September  20, 1996, the Company issued $225,000  of  9.5%  Senior
Notes (the "9.5% Senior Notes") due 2006.  Interest on the 9.5% Senior
Notes  is  payable semiannually on March 15 and September 15  of  each
year, commencing March 15, 1997.  The 9.5% Senior Notes are redeemable
at  any  time on or after September 15, 2001 initially at a redemption
price  of 104.75% declining to 100% on September 15, 2004 plus accrued
interest  to  the  date  of redemption.  The  9.5%  Senior  Notes  are
unsecured senior obligations of the Company.

7.63% Senior Notes

On October 28, 1997, the Company issued $350,000 of 7.63% Senior Notes
(the  "7.63%  Senior Notes") due 2007.  Interest on the  7.63%  Senior
Notes will be payable semiannually on April 15 and October 15 of  each
year, commencing April 15, 1998.  The 7.63% Senior Notes are unsecured
senior obligations of the Company.

Limited Recourse Senior Secured Notes

On  July  21,  1995,  the Company issued $200,000 of  9  7/8%  Limited
Recourse Senior Secured Notes Due 2003 (the "Notes"). Interest on  the
Notes  is  payable on June 30 and December 30 of each year, commencing
December  1995. 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 Company's interest in a secured Magma
note and general assets of the Company equal to the Restricted Payment
Recourse  Amount, as defined in the Note Indenture ("Note Indenture"),
which was $0 at December 31, 1997.

At  any  time or from time to time on or prior to June 30,  1998,  the
Company  may,  at  its option, use all or a portion of  the  net  cash
proceeds  of  a  Company  equity offering  (as  defined  in  the  Note
Indenture)  and shall at any time use all of the net cash proceeds  of
any Magma equity offering (as defined in the Note Indenture) to redeem
up  to  an  aggregate  of 35% of the principal  amount  of  the  Notes
originally  issued  at a redemption price equal  to  109.875%  of  the
principal amount thereof plus accrued interest to the redemption date.
On  or after June 30, 2000, the Notes are redeemable at the option  of
the  Company, in whole or in part, initially at a redemption price  of
104.9375%  declining  to 100% on June 30, 2002  and  thereafter,  plus
accrued interest to the date of redemption.

CalEnergy Credit Facility

On  October 28, 1996, the Company obtained a $100,000 credit  facility
(the  "CalEnergy  Credit Facility") of which  the  Company  had  drawn
$100,000 as of December 31, 1996.   The Company has repaid the  entire
balance of the CalEnergy Credit Facility.

Revolving Credit Facility

On  July 8, 1996, the Company obtained a $100,000 three year revolving
credit  facility.   On  November 26, 1997,  the  credit  facility  was
amended and increased to $400,000 and extended to November 2000.   The
facility  is  unsecured  and  is available  to  fund  working  capital
requirements and finance future business expansion opportunities.

Annual Repayments of Parent Company Debt

There are no annual repayments of the parent company debt due for  the
next five years.

8.  Subsidiary and Project Debt:

Project loans held by subsidiaries and projects which are non recourse
to the Company comprise the following at December 31:
                                                       1997       1996

Salton Sea Notes and Bonds                         $  448,754$   538,982
Northern eurobonds                                    427,732    439,192
U.K. credit facility                                      ---    128,423
CE Electric UK Funding Company Senior Notes           357,331        ---
CE Electric UK Funding Company Sterling Bonds         322,534        ---
Power Resources project debt                          103,334    114,571
Coso Funding Corp. project loans                      106,616    148,346
Construction loans                                    416,744    300,951
Other                                                   5,962      7,927
                                                   $2,189,007 $1,678,392

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 such subsidiary
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  CalEnergy's   direct   or   indirect
subsidiaries  (1)  owning  interests in  the  Coso,  Imperial  Valley,
Saranac, NorCon, Power Resources, Mahanagdong, Malitbog, Upper Mahiao,
Casecnan,  Dieng  and Patuha projects or (2) owning interests  in  the
subsidiaries that own interests in the foregoing projects.

Salton Sea Notes and Bonds

The  Salton Sea Funding Corporation, a wholly owned subsidiary of  the
Company, (the "Funding Corporation") debt securities are as follows:
                                 Final
                                Maturity         December 31,   December 31,
          Senior Secured Series   Date      Rate    1997            1996
July 21, 1995   A Notes      May 30, 2000   6.69%  $ 97,354      $161,732
July 21, 1995   B Bonds      May 30, 2005   7.37%   133,000       133,000
July 21, 1995   C Bonds      May 30, 2010   7.84%   109,250       109,250
June 20, 1996   D Notes      May 30, 2000   7.02%    44,150        70,000
June 20, 1996   E Bonds      May 30, 2011   8.30%    65,000        65,000
                                                   $448,754      $538,982

Principal  and interest payments are made in semi-annual installments.
The  Salton  Sea  Notes and Bonds are secured by  the  Company's  four
existing  Salton Sea plants as well as an assignment of the  right  to
receive  various  royalties payable to Magma in  connection  with  its
Imperial  Valley  properties and distributions  from  the  Partnership
Project.   The  Salton  Sea Notes and Bonds  are  nonrecourse  to  the
Company.

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 $70,430 from which scheduled interest and principal payments
can be made.

Northern Eurobonds

The  Northern  debt includes a debenture due in 1999,  which  bears  a
fixed  interest rate of 12.661%.  The debt also includes bearer  bonds
repayable in 2005 and 2020, bearing fixed interest rates of 8.625% and
8.875%, respectively.

The balance at December 31, 1997 and 1996 consists of the following:

                                        1997               1996
   Debenture due 1999                $ 97,530            $  99,924
   Bearer bonds due 2005              165,236              171,130
   Bearer bonds due 2020              164,966              168,138
                                    $ 427,732            $ 439,192

U.K. Credit Facility

On  October  28,  1996,  CE Holdings, an indirect  subsidiary  of  the
Company, obtained a pound 560,000 five year term loan and revolving  credit
facility (the "U.K. Credit Facility").  The Company did not guarantee,
nor  was it otherwise subject to recourse for, amounts borrowed  under
the  U.K.  Credit  Facility.   The agreement  placed  restrictions  on
distributions  from  CE Electric to any of its shareholders  based  on
certain  financial  ratios.  CE Electric has repaid  the  entire  U.K.
Credit  Facility through the use of proceeds from the senior note  and
sterling  bond  offerings of CE Electric UK Funding Company  described
below.

CE Electric UK Funding Company Senior Notes and Sterling Bonds

On  December  15,  1997, CE Electric UK Funding Company,  an  indirect
subsidiary of the Company (the "Funding Company"), issued $125,000  of
6.853% senior notes due 2004, and $237,000 of 6.995% senior notes  due
2007  (collectively,  the  "CE  Electric  UK  Funding  Company  Senior
Notes"),  and   pound 200,000  of 7.25% Sterling  Bonds  due  2022.  The  CE
Electric  UK Funding Company Senior Notes and Sterling Bonds  prohibit
distributions  to  any  of its shareholders unless  certain  financial
ratios are met by the Funding Company.

Power Resources Project Financing Debt

Power  Resources,  an  indirect wholly-owned subsidiary,  has  project
financing  debt consisting of a term loan payable to a  consortium  of
banks  with interest and principal due quarterly through October 2003.
The debt carries fixed interest rates of 10.385% and 10.625%.

Coso Funding Corp. Project Loans

The  Coso  Funding Corp. project loans are from Coso Funding Corp.,  a
single-purpose corporation formed to issue notes for its  own  account
and  act  as an agent on behalf of the Coso Project.  The Coso Funding
Corp.  project loans carry a fixed interest rate with weighted average
interest  rates  of  8.65% and 8.46% at December 31,  1997  and  1996,
respectively.   The loans have scheduled repayments  through  December
2001.   The Coso Project has established irrevocable letters of credit
of $67,850 as a debt service reserve fund.

Annual Repayments of Subsidiary and Project Debt

The  annual  repayments of the subsidiary and project debt,  excluding
construction  loans,  for  the years beginning  January  1,  1998  and
thereafter are as follows:

                          CE Electric UK
      Salton Sea          Funding Company            Coso
       Notes and Northern Senior Notes and   Power  Funding
         Bonds  Eurobonds  Sterling Bonds  Resources Corp.   Other   Total
1998 $ 106,938 $    ---    $    ---       $ 12,805 $ 38,912  $1,544  $160,199
1999    57,836   97,530         ---         14,268   31,717   1,297   202,648
2000    25,072      ---         ---         16,087    4,080   1,051    46,290
2001    22,376      ---         ---         18,119   31,907     838    73,240
2002    24,298      ---         ---         20,312      ---   1,232    45,842
There-
 after 212,234   330,202    679,865         21,743      ---     --- 1,244,044
      $448,754  $427,732   $679,865       $103,334 $106,616  $5,962$1,772,263

Construction Loans

The Company's allocable share of non-recourse project construction
loans comprise the following at December 31:

                                                1997         1996
       Upper Mahiao                         $  150,628     $150,628
       Malitbog                                176,657      137,881
       CE Indonesia Funding Corp.               89,459       12,442
                                             $ 416,744   $  300,951

The  Upper Mahiao and Malitbog construction loans are scheduled to  be
replaced  by  non-recourse term project financing upon  completion  of
construction and commencement of commercial operations.

Upper Mahiao Construction Loan

Draws  on the construction loan for the Upper Mahiao geothermal  power
project  at  December  31,  1997 totaled  $150,628.  A  consortium  of
international banks provided the construction financing with  variable
interest  rates based on LIBOR or "Prime" with interest  payments  due
every  quarter  and at LIBOR maturity.  The weighted average  interest
rate  at December 31, 1997 and 1996 is approximately 8.43% and  8.01%,
respectively.   The Export-Import Bank of the U.S. ("Ex-Im  Bank")  is
providing  political  risk  insurance  to  commercial  banks  on   the
construction  loan. The construction loan is expected to be  converted
to  a  term  loan  promptly  after NPC  completes  the  full  capacity
transmission  line, which is currently expected in 1998.  The  largest
portion of the term loan for the project will also be provided by  Ex-
Im  Bank.   The term financing for the Ex-Im Bank loan will  be  at  a
fixed interest rate of 5.95%.

Malitbog Construction Loan

Draws  on  the  construction  loan for the Malitbog  geothermal  power
project at December 31, 1997 totaled $176,657. International banks and
the Overseas Private Investment Corporation ("OPIC") have provided the
construction  and  term  loan facilities at  variable  interest  rates
(weighted  average of 8.48% and 8.15% at December 31, 1997  and  1996,
respectively).   The international bank portion of the  debt  will  be
insured  by  OPIC  against political risks and  the  Company's  equity
contribution to Visayas Geothermal Power Company ("VGPC")  is  covered
by political risk insurance from the Multilateral Investment Guarantee
Agency and OPIC. The construction loan is expected to be converted  to
a   term   loan  promptly  after  NPC  completes  the  full   capacity
transmission line, which is currently expected in 1998.

CE Indonesia Funding Corp.

In  June  1997, the Company's indirect special-purpose subsidiary,  CE
Indonesia  Funding  Corp.,  entered into a $400,000  revolving  credit
facility  (which  is  nonrecourse  to  the  Company)  to  finance  the
development  and  construction  of  the  Company's  geothermal   power
facilities  in Indonesia.  This credit facility was used  in  part  to
replace   the  original  project  financing  for  Himpurna  California
Energy's  Dieng Unit I.  At December 31, 1997, the Company's share  of
the credit facility relating to Dieng Unit I was $50,481 and carried a
variable  interest  rate (weighted average of 7.44%  at  December  31,
1997).

On November 18, 1997, Himpurna California Energy announced the funding
of  the  Dieng  Unit  II project pursuant to the CE Indonesia  Funding
Corp.  facility  arranged in June 1997.  At  December  31,  1997,  the
Company's share of the credit facility relating to Dieng Unit  II  was
$11,211  and  carried  a variable interest rate (weighted  average  of
7.48% at December 31, 1997).

On September 2, 1997, Patuha Power announced the funding of the Patuha
Unit  I  project  pursuant to the CE Indonesia Funding Corp.  facility
arranged  in June 1997.  At December 31, 1997, the Company's share  of
the  credit  facility  relating to Patuha was $27,767  and  carried  a
variable  interest  rate (weighted average of 7.44%  at  December  31,
1997).

9. Income Taxes

Provision  for income taxes is comprised of the following at  December
31:
                                     1997      1996     1995

Currently payable:
State                             $   5,084$   7,520    $5,510
Federal                              33,114   19,873    11,138
Foreign                               5,262    2,176       ---
                                     43,460   29,569    16,648
Deferred:
State                                  (264)   1,619       921
Federal                              14,579   9,209     13,062
Foreign                              41,269   1,424        ---
                                     55,584  12,252     13,983
Total                           $    99,044 $41,821    $30,631

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

                                                    1997     1996     1995

Federal statutory rate                             35.00%   35.00%   35.00%
Percentage depletion in excess of cost depletion   (3.77)   (6.12)   (7.38)
Investment and energy tax credits                   (.64)   (8.34)   (1.80)
State taxes, net of federal tax effect              1.59     4.38     4.09
Goodwill amortization                               2.06     2.51     2.53
Non-deductible expense                              1.33      .84     1.10
Lease investment                                     ---      ---    (2.18)
Dividends on convertible preferred securities
  of subsidiary trusts*                            (4.12)   (1.17)     ---
Tax effect of foreign income                        2.64     2.54      ---
Asset valuation impairment                         15.47      ---      ---
Other                                                .75      .15      .20
 Effective tax rate                                50.31%   29.79%   31.56%
 * Dividends on convertible preferred securities of subsidiary trusts
are included in minority interest.
Deferred tax liabilities (assets) are comprised of the following at
December 31:
                                                         1997        1996
Depreciation and amortization, net                  $ 802,215   $ 725,366
Pensions                                               19,441      22,883
Unremitted foreign earnings                            10,781       2,857
Other                                                   3,324       3,262

                                                      835,761     754,368

Deferred contract costs                              (193,996)   (128,745)
Deferred income                                       (12,690)     (9,298)
Energy and investment tax credits                     (42,049)    (55,931)
Advance corporation tax                                   ---     (20,205)
Alternative minimum tax credits                       (39,402)    (50,819)
Accruals not currently deductible for tax purposes    (31,561)    (13,372)
Other                                                  (7,004)     (6,799)
                                                     (326,702)   (285,169)

Net deferred taxes                                   $509,059    $469,199


The  Company  has unused investment and geothermal energy  tax  credit
carryforwards of approximately $42,049 expiring between 2004 and 2012.
The  Company also has approximately $39,402 of alternative minimum tax
credit carryforwards which have no expiration date.

10.   Company-Obligated  Mandatorily Redeemable Convertible  Preferred
Securities of Subsidiary Trusts

The  Company  has  organized special purpose Delaware business  trusts
("Trust  I", "Trust II" and "Trust III" or collectively, the "Trusts")
pursuant  to  their  respective amended and restated  declarations  of
trusts  (collectively,  the  "Declarations").   On  April  12,   1996,
February  26,  1997  and August 12, 1997, the Company,  through  these
Trusts,  issued  Company-obligated mandatorily redeemable  convertible
preferred   securities  (collectively,  the  "Trust  Securities")   as
follows:

    Issuer                   Issue Date        Rate    Amount  Conversion Rate
CalEnergy Capital Trust I   April 12,1996      6.25%   $103,930        1.6728
CalEnergy Capital Trust II  February  26,1997  6.25%   $180,000        1.1655
CalEnergy Capital Trust III August 12, 1997    6.50%   $270,000        1.047

The Company owns all of the common securities of the Trusts. The Trust
Securities  have  a liquidation preference of fifty dollars  each  and
represent  undivided beneficial ownership interests  in  each  of  the
Trusts.  The  assets  of the Trusts consist solely  of  the  Company's
Convertible  Subordinated Debentures due March 10, 2016, February  25,
2012  and  September  1, 2027, respectively, in outstanding  aggregate
principal  amounts  of  $103,930, $180,000 and $270,000,  respectively
(collectively,  the  "Junior Debentures")  issued  pursuant  to  their
respective  indentures.   The indentures  include  agreements  by  the
Company to pay expenses and obligations incurred by the Trusts.   Each
Trust Security with a par value of $50 is convertible at the option of
the holder at any time into shares of CalEnergy Common Stock based  on
the   conversion   rate   and   subject  to  customary   anti-dilution
adjustments.

Until  converted into the Company's Common Stock, the Trust Securities
will  have  no voting rights with respect to the Company  and,  except
under  certain limited circumstances, will have no voting rights  with
respect  to  the  Trusts. Distributions on the Trust  Securities  (and
Junior  Debentures) are cumulative, accrue from the  date  of  initial
issuance  and are payable quarterly in arrears.  The Junior Debentures
are subordinated in right of payment to all senior indebtedness of the
Company  and  the Junior Debentures are subject to certain  covenants,
events  of  default and optional and mandatory redemption  provisions,
all as described in the Junior Debenture indentures.

Pursuant  to  Preferred Securities Guarantee Agreements (collectively,
the  "Guarantees"),  between the Company  and  a  preferred  guarantee
trustee,  the Company has agreed irrevocably to pay to the holders  of
the  Trust  Securities,  to  the extent that  the  Trustee  has  funds
available  to make such payments, quarterly distributions,  redemption
payments and liquidation payments on the Trust Securities.  Considered
together,  the  undertakings  contained in  the  Declarations,  Junior
Debentures,   Indentures   and   Guarantees   constitute   full    and
unconditional  guarantees by the Company of  the  Trusts'  obligations
under the Trust Securities.

11.Preferred Stock

On  December  1,  1988,  the Company distributed  a  dividend  of  one
preferred share purchase right ("right") for each outstanding share of
common  stock. The rights are not exercisable until ten days  after  a
person  or  group  acquires or has the right  to  acquire,  beneficial
ownership of 20% or more of the Company's common stock or announces  a
tender  or  exchange  offer for 30% or more of  the  Company's  common
stock. Each right entitles the holder to purchase one one-hundredth of
a  share of Series A junior preferred stock for $52. The rights may be
redeemed  by  the  Board of Directors up to ten days  after  an  event
triggering  the  distribution of certificates  for  the  rights.   The
rights  will  expire,  unless previously  redeemed  or  exercised,  on
November 30, 1998. The rights are automatically attached to, and trade
with, each share of common stock.

12.Stock Options and Restricted Stock

The Company has issued various stock options. As of December 31, 1997,
a total of 6,949 shares are reserved for stock options, of which 6,780
shares have been granted and remain outstanding at prices of $3.74  to
$40.81 per share.

The  Company  has stock option plans under which shares were  reserved
for  grant  as incentive or non-qualified stock options, as determined
by  the  Board of Directors. The plans allow options to be granted  at
85%  of  their  fair  market value at the date  of  grant.  Generally,
options are issued at 100% of fair market value at the date of  grant.
Options  granted under the 1996 Plan become exercisable over a  period
of two to five years and expire if not exercised within ten years from
the  date of grant or, in some instances, a lesser term. Prior to  the
1996  Plan,  the Company granted 256 options at fair market  value  at
date  of  grant  which had terms of ten years and were exercisable  at
date  of grant. In addition, the Company had issued approximately  138
options to consultants on terms similar to those issued under the 1996
Plan.  The  non-1996  plan options are primarily  options  granted  to
Kiewit.

The  Company  granted 500 shares of restricted common  stock  with  an
aggregate market value of $9,500 in exchange for the relinquishment of
500  stock options which were canceled by the Company. The shares have
all  rights  of  a  shareholder, subject to  certain  restrictions  on
transferability   and   risk  of  forfeiture.  Unearned   compensation
equivalent  to the market value of the shares at the date of  issuance
was  charged  to stockholders' equity. Such unearned compensation  was
amortized over the vesting period of which 125 shares were immediately
vested  and the remaining 375 shares vested through January  1,  1998.
Accordingly,  $5,471, $1,535 and $2,494 of unearned  compensation  was
charged to general and administrative expense in 1997, 1996 and  1995,
respectively.


Transactions in Stock Options

Options Outstanding
                     Shares Available
                      for Grant Under         Option Price  Weighted Avg
                     1996 Option Plan Shares   Per Shares   Option Price Total
Balance December 31, 1994    86        9,601 $3.00 - $19.00     $12.84 $123,277
     Options granted       (396)         396 15.81 -  19.00      18.15    7,188
     Options terminated     571         (571)14.88 -  19.00      18.69  (10,673)
     Options exercised      ---         (135) 3.00 -  15.94       3.41     (460)
     Balance
      December 31,1995      261        9,291  3.00 -  19.00      12.84  119,332

     Options granted     (1,157)       1,157 25.06 -  30.38      28.17   32,590
     Options terminated     468         (468) 3.00 -  19.00      17.96   (8,406)
     Options exercised      ---       (5,203) 3.00 -  21.68      11.13  (57,931)
     Additional shares
  reserved under 1996
  Option Plan               739          ---            ---        ---      ---
     Balance
      December 31, 1996     311        4,777  3.00 -  30.38     17.928    5,585

     Options granted     (2,307)       2,513 29.06 -  40.81     34.80    87,457
     Options terminated     165         (165) 3.00 -  29.06     20.04    (3,307)
     Options exercised      ---         (345) 3.74 -  29.06     13.28    (4,583)
     Additional shares
  reserved under 1996
  Option Plan             2,000          ---            ---       ---       ---

     Balance
      December 31, 1997     169        6,780 $3.74 -$40.81     $24.36  $165,152

     Options exercisable at:
      December 31, 1995                8,229 $3.00 -$19.00     $12.26  $100,886
      December 31, 1996                3,071 $3.00 -$30.38     $14.25  $ 43,770
      December 31, 1997                3,665 $3.74 -$40.19     $18.12  $ 66,425

   The following table summarizes information about stock options outstanding
and exercisable as of December 31, 1997:

                  Options Outstanding               Options Exercisable
                        Weighted      Weighted                 Weighted
Range of     Number     Average    Average Remaining  Number    Average
Exercise  Outstanding   Exercise  Contractual Life  Exercisable Exercise
 Prices                  Price                                   Price
$3.74 $11.99  1,161   $ 11.22     3 years               1,161   $   11.22
12.00  21.99  2,020     16.90     6 years               1,739       16.82
22.00  31.99  1,092     28.10     8 years                 311       28.25
32.00  40.81  2,507     34.83     9 years                 454       34.12
              6,780  $  24.36     7 years               3,665   $   18.12

The Company applies the intrinsic value based method of accounting for
its  stock-based employee compensation plans. If the fair value  based
method  had  been applied for 1997, non-cash compensation expense  and
the effect on net income available to common stockholders and earnings
per  share  would have been approximately $3,600, or $0.05 per  share.
If the fair value based method had been applied for 1996 and 1995, non-
cash  compensation expense and the effect on net income  available  to
common stockholders and earnings per share would have been immaterial.
The fair value for stock options was estimated using the Black-Scholes
option pricing model with assumptions for the risk-free interest  rate
of  5.50%  in 1997 and 6.00% in 1996 and 1995, expected volatility  of
25%  in  1997 and 22% in 1996 and 1995, expected life of approximately
3.7  years  in  1997 and 4.5 years in 1996 and 1995, and  no  expected
dividends.  The weighted average fair value of options granted  during
1997,   1996  and  1995  was  $9.55,  $8.62  and  $5.72  per   option,
respectively.

13.Common Stock Sales & Related Options

On  October  17,  1997, the Company completed the public  offering  of
17,100  shares  of its common stock ("Common Stock") at  $37  7/8  per
share  (the "Public Offering").  In addition, 2,000 shares  of  Common
Stock  were  purchased  from CalEnergy in a direct  sale  by  a  trust
affiliated  with  Walter Scott, Jr., the Chairman and Chief  Executive
Officer of PKS (the "Direct Sale"), contemporaneously with the closing
of  the  Public Offering.  Proceeds from the Public Offering  and  the
Direct Sale were approximately $699,920.

Simultaneous with the acquisition of the remaining equity interest  of
Magma  on  February 24, 1995, the Company completed a public  offering
(the  "Offering")  of  18,170  shares of common  stock,  which  amount
included  a  direct sale by the Company to Kiewit of 1,500 shares  and
the  exercise of underwriter over-allotment options for 1,500  shares,
at  a  price  of  $17.00 per share. The Company received  proceeds  of
$300,388 from the Offering.

14.Asset Valuation Impairment Charge

The  non-recurring  charge of $87,000 represents  an  asset  valuation
impairment  charge  under  Financial  Accounting  Standard  No.   121,
"Accounting  for  the  Impairment of Long-Lived Assets,"  relating  to
CalEnergy's  assets  in Indonesia.  Moreover, the Company  intends  to
continue  to  take  actions to attempt to require  the  Government  of
Indonesia to honor its contractual obligations; however, the  ultimate
outcome  of the current uncertain situation in Indonesia with  respect
to  the possible abrogation by the Indonesian government of the Dieng,
Patuha  and Bali contracts adds significant risk to the completion  of
those  projects.  Consequently, the charge of $87,000  represents  the
amount  by  which the carrying amount of such assets exceed  the  fair
value of the assets determined by discounting the expected future  net
cash flows of the Indonesia projects, assuming proceeds from political
risk insurance and no tax benefits.

15.            Extraordinary Item

On  July 31, 1997, the Finance Act in the United Kingdom was passed by
Parliament  and  included the introduction of  a  one  time  so-called
"windfall  tax" equal to 23% of the difference between the price  paid
for  Northern upon privatization and the Labour government's  assessed
"value" of Northern as calculated by reference to a formula set  forth
in  the  July  budget.  This  amounted to $135,850,  net  of  minority
interest of $58,222, which was recorded as an extraordinary item.  The
first installment was paid December 1, 1997 and the second installment
is payable on December 1, 1998.

16.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 Company
could realize in a current transaction.

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

Debt  instruments  -  The  fair value of all  debt  issues  listed  on
exchanges has been estimated based on the quoted market prices.

Other  financial  instruments - All other financial instruments  of  a
material nature fall into the definition of short-term and fair  value
is estimated as the carrying amount.

The  carrying  amounts  in  the table below  are  included  under  the
indicated captions in Notes 7, 8 and 10.


                                                 1997             1996
                                                   Estimated          Estimated
                                           Carrying   Fair    Carrying   Fair
                                             Value    Value    Value     Value
Senior discount notes                       $529,640 $569,148 $527,535 $556,971
9.5% Senior notes                            224,205  243,615  224,150  229,866
7.63% Senior notes                           350,000  352,857      ---      ---
Limited recourse senior secured notes        200,000  217,829  200,000  212,560
CalEnergy credit facility                        ---      ---  100,000  100,000
Revolving line of credit                         ---      ---  95,000    95,000
Salton Sea notes and bonds                   448,754  463,720  538,982  531,807
Northern eurobonds                           427,732  482,064  439,192  445,830
Construction loans                           416,744  416,744  300,951  300,951
Coso Funding Corp. project loans             106,616  112,932  148,346  153,650
CE Electric UK Funding Company Senior Notes  357,331  357,331      ---      ---
CE Electric UK Funding Company Sterling Bonds322,534  333,257      ---      ---
Power Resources project debt                 103,334  103,334  114,571  114,571
U.K. credit facility                             ---      ---  128,423  128,423
Other                                          5,962    5,962    7,927    7,927
Convertible preferred securities of
  subsidiary trusts                          553,930  514,373  103,930  128,354



17.  Interest Rate Swap Agreements

On  December  15,  1997, CE Electric UK Funding Company  entered  into
certain  interest rate swap agreements for the CE Electric UK  Funding
Company   Senior   Notes  with  two  large  multi-national   financial
institutions.  The swap agreements effectively convert the U.S. dollar
fixed interest rate to a fixed rate in Sterling.  For the $125,000  of
6.853% senior notes, the agreements extend until December 30, 2004 and
convert  the  U.S.  dollar interest rate to a fixed Sterling  rate  of
7.744%.   For  the  $237,000 of 6.995% senior  notes,  the  agreements
extend  until  December 30, 2007 and convert the U.S. dollar  interest
rate to a fixed Sterling rate of 7.737%.  The estimated fair value  of
these swap agreements is approximately $4,929 based on quotes from the
counter party to these instruments and represents the estimated amount
that  the  Company would expect to pay to terminate these  agreements.
It  is  the Company's intention to hold the swap agreements  to  their
intended maturity.

18.  Regulatory Matters

Northern  is subject to price cap regulation.  Price control  formulas
for  the supply and distribution businesses are enforced by the Office
of Electricity Regulation ("OFFER").

In  the distribution business the current price control is expected to
last  until 2000.  The formula was reviewed with effect from April  1,
1995  and  April  1,  1996  which resulted in one-time  reductions  in
allowed income per unit distributed of about 17% and 13% respectively,
with  continuing real reductions in each of the subsequent three years
1997/98  to  1999/2000. The current formula requires  that  each  year
regulated  distribution income per unit is increased or  decreased  by
RPI-Xd  where  RPI reflects the average of the twelve month  inflation
rates recorded for the previous July to December period and Xd is  set
at  3%.   The  formula  also takes account of the  changes  in  system
electrical  losses, the number of customers connected and the  voltage
at which customers receive the units of electricity distributed.

In  the  supply business the current formula applies only to customers
with demands below 100kW.  Under the current formula the purchase cost
of  electricity  and  the cost of transmission, distribution  and  the
fossil  fuel levy are passed through to customers in full.  That  part
of the formula governing Northern's own supply business costs requires
that  this  element of the permitted income falls by 2% per  annum  in
real  terms.  The current formula is due to be replaced from April  1,
1998  with a new formula which will require Northern to reduce  prices
to  those customers protected by the new price control from the  level
prevailing  at  August  1, 1997 by about 4.2% (minus  inflation)  with
effect  from  April  1, 1998 and a further 3% (minus  inflation)  with
effect from April 1, 1999.

The market for electricity supplied to customers with demands over 1MW
was opened to competition in 1990.  In 1994 this limit was reduced  to
0.1MW.   In  1998,  liberalization of the  entire  market  is  due  to
commence in stages with complete liberalization achieved by June 1999.

19.  Pension Commitments

Northern participates in the Electricity Supply Pension Scheme,  which
provides  pension and other related defined benefits, based  on  final
pensionable  pay,  to  substantially  all  employees  throughout   the
Electricity Supply Industry in the United Kingdom.

The  actuarial  computation for December 31,  1997  and  1996  assumed
interest rates of 6.75% and 7.75%, respectively, an expected return on
plan  assets of 7.25% and 8.25%, respectively, and annual compensation
increases of 4.75% and 5.75%, respectively, over the remaining service
lives  of  employees covered under the plan.  Amounts  funded  to  the
pension  are primarily invested in equity and fixed income securities.
Northern's funding policy for the plan is to contribute annually at  a
rate that is intended to remain a level percentage of compensation for
the covered employees.

The   following  table  details  the  funded  status  and  the  amount
recognized  in  the balance sheet of the Company as of   December  31,
1997 and 1996.

Actuarial present value of benefit obligations:         1997           1996
 Vested benefits                                     $  847,694       $ 797,932
 Nonvested benefits                                         ---             ---
Accumulated benefit obligation                          847,694         797,932
Effect of future increase in compensation                40,898          58,218
Projected benefit obligation                            888,592         856,150
Fair value of plan assets                             1,012,601         919,163
Assets in excess of projected benefit obligation        124,009          63,013
Unrecognized net gain                                    61,265             ---
Prepaid pension asset                                $   62,744       $  63,013

Net  periodic pension cost for 1997 included the following  components
(the  components for the period from the acquisition date of  Northern
to December 31, 1996 are not meaningful):

Service cost - benefits earned during the period$   12,600
Interest cost on projected benefit obligation       62,300
Actual return on plan assets                       (71,300)
Net periodic pension cost                       $    3,600

20.  Commitments and Contingencies

Casecnan

In  November  1995,  the  Company closed the financing  and  commenced
construction  of the Casecnan Project, a combined irrigation  and  150
net MW hydroelectric power generation project (the "Casecnan Project")
located in the central part of the island of Luzon in the Republic  of
the Philippines.

CE  Casecnan  Water and Energy Company, Inc., a Philippine Corporation
("CE  Casecnan") which is expected to be approximately 70%  indirectly
owned  by  the Company (after the KDG Acquisition), is developing  the
Casecnan Project. CE Casecnan financed a portion of the costs  of  the
Casecnan Project through the issuance of $125,000 of its 11.45% Senior
Secured  Series  A  Notes due 2005 and $171,500 of its  11.95%  Senior
Secured  Series  B Bonds due 2010 and $75,000 of its Secured  Floating
Rate Notes due 2002, pursuant to an indenture dated as of November 27,
1995, as amended to date.

The  Casecnan Project was being constructed pursuant to a fixed-price,
date-certain, turnkey construction contract (the "Hanbo Contract")  on
a  joint  and several basis by Hanbo Corporation ("Hanbo")  and  Hanbo
Engineering  and Construction Co., Ltd. ("HECC"), both  of  which  are
South  Korean corporations.  As of May 7, 1997, CE Casecnan terminated
the  Hanbo  Contract due to defaults by Hanbo and HECC  including  the
insolvency  of each such company.  On May 7, 1997 CE Casecnan  entered
into  a new turnkey engineering, procurement and construction contract
to complete the construction of the Casecnan Project (the "Replacement
Contract").   The  work  under  the  Replacement  Contract  is   being
conducted   by   a  consortium  consisting  of  Cooperativa   Muratori
Cementisti  CMC di Ravenna and Impressa Pizzarottie & C.  Spa  working
together  with  Siemens A.G., Sulzer Hydro Ltd., Black  &  Veatch  and
Colenco   Power  Engineering  Ltd.  (collectively,  the   "Replacement
Contractor").

In  connection  with  the  Hanbo  Contract  termination,  CE  Casecnan
tendered a certificate of drawing to Korea First Bank ("KFB")  on  May
7,  1997 under the irrevocable standby letter of credit issued by  KFB
as  security  under  the Hanbo Contract to pay for certain  transition
costs  and  other  presently ascertainable  damages  under  the  Hanbo
Contract.  As a result of KFB's wrongful dishonor of the draw request,
CE  Casecnan  filed  an action in New York State  Court.   That  Court
granted  CE  Casecnan's  request  for a  temporary  restraining  order
requiring KFB to deposit $79,329, the amount of the requested draw, in
an  interest bearing account with an independent financial institution
in  the  United  States.  KFB appealed this order, but  the  appellate
court  denied KFB's appeal and on May 19, 1997, KFB transferred  funds
in  the  amount  of  $79,329 to a segregated  New  York  bank  account
pursuant  to  the  Court order.  If KFB were  to  fail  to  honor  its
obligations  under  the Casecnan letter of credit, such  action  could
have  a  material  adverse  effect on  the  Casecnan  Project  and  CE
Casecnan.

On  August 6, 1997, CE Casecnan announced that it had issued a  notice
to  proceed to the Replacement Contractor.  The Replacement Contractor
was already on site and has fully mobilized and commenced engineering,
procurement and construction work on the Casecnan Project.

On  August  27,  1997, CE Casecnan announced that it  had  received  a
favorable summary judgment ruling in New York State Court against KFB.
The  judgment,  which has been appealed by the bank, requires  KFB  to
honor  the  $79,329 drawing by CE Casecnan on the $117,850 irrevocable
standby letter of credit.

On  September  29, 1997, CE Casecnan tendered a second certificate  of
drawing  for  $10,828  to KFB and on December 30,  1997,  CE  Casecnan
tendered  a third certificate of drawing for $2,920 to KFB.  KFB  also
wrongfully  dishonored  these draws, but  pursuant  to  a  stipulation
agreed to deposit the draw amounts in an interest bearing account with
the  same  independent  financial institution  in  the  United  States
pending  resolution of the appeal regarding the first draw and  agreed
to expedite the appeal.

The  receipt of the letter of credit funds from KFB remains  essential
and  CE  Casecnan  will  continue to press  KFB  to  honor  its  clear
obligations under the letter of credit and to pursue Hanbo and KFB for
any  additional damages arising out of their actions to date.  If  KFB
were  to  fail to honor its obligations under the Casecnan  letter  of
credit,  such  action  could have a material  adverse  effect  on  the
Casecnan Project and CE Casecnan.

On  September 2, 1997, Hanbo and HECC filed a Request for  Arbitration
before the International Chamber of Commerce ("ICC").  The Request for
Arbitration  asserts  various claims by  Hanbo  and  HECC  against  CE
Casecnan  relating  to  the  terminated  Hanbo  Contract  and  seeking
damages.   On  October  10, 1997, CE Casecnan served  its  answer  and
defenses  in  response  to  the Request for  Arbitration  as  well  as
counterclaims  against  Hanbo  and HECC  for  breaches  of  the  Hanbo
Contract.  The arbitration proceedings before the ICC are ongoing  and
CE  Casecnan  intends to pursue vigorously its claims  against  Hanbo,
HECC and KFB in the proceedings described above.

Indonesia

On September 20, 1997, a Presidential Decree (the "Decree") was issued
in  Indonesia, providing for government action to the effect that,  in
order  to  address  certain recent fluctuations in the  value  of  the
Indonesian currency, the start-up dates for a number of private  power
projects  would be:  (i) continued according to their initial schedule
(because construction was underway); (ii) postponed as to their start-
up  dates  (because they are not yet in construction)  until  economic
conditions  have  recovered; or (iii) reviewed with a  view  to  being
continued, postponed or rescheduled, depending on the status of  those
projects.   In  the  Decree, Dieng Units 1, 2 and 3  are  approved  to
continue  according to their initial schedule; Patuha Unit 1 and  Bali
Units  1  and 2 are to receive further review to determine whether  or
not  they  should  be  continued  in  accordance  with  their  initial
schedule;  and Bali Units 3 and 4, Patuha Units 2, 3 and 4  and  Dieng
Unit 4 are to be postponed for an unspecified period.  In this regard,
the  Company notes that its contracts and government undertakings  for
the  Dieng, Patuha and Bali projects do not by their terms permit such
categorization  or delays by the government and that the  Company  has
obtained  political risk insurance coverage for its Dieng  and  Patuha
projects. Moreover, the Company intends to continue to take actions to
attempt   to  require  the  Government  of  Indonesia  to  honor   its
contractual obligations; however, subsequent actions by the Government
of Indonesia and continued economic problems in Indonesia have created
further uncertainty as to whether the contracts for such projects will
be abrogated by the Indonesian government and accordingly have created
significant risks to the completion of these projects.  As  a  result,
the  Company recorded a SFAS 121 asset valuation impairment charge  of
$87,000  in  the  fourth quarter of 1997.  This  charge  includes  all
reasonably estimated asset valuation impairments associated  with  the
Company's  assets in Indonesia and gives effect to the political  risk
insurance on such investments.

Edison

On June 9, 1997, Edison filed a complaint alleging breach of the power
purchase  agreements ("SO4 Agreements") between Edison  and  the  Coso
Joint  Ventures  as  a result of alleged improper venting  of  certain
noncondensible  gases at the Coso geothermal energy project.   In  the
complaint  Edison seeks unspecified damages, including the  refund  of
certain  amounts  previously  paid  under  the  SO4  Agreements,   and
termination of the SO4 Agreements.  In September 1997, the Coso  Joint
Ventures  and the Company filed a cross-complaint against  Edison  and
its  affiliates,  The  Mission  Group and  Mission  Power  Engineering
Company  alleging, among other things, that Edison's lawsuit  violates
the 1993 settlement agreement which settled certain litigation arising
from  the construction of certain units at the Coso geothermal project
by  Edison  affiliates. In addition, the Coso Joint Ventures  filed  a
separate  complaint  against  Edison  alleging  breach  of   the   SO4
Agreements, unfair business practices, slander and various other  tort
and  contract  claims.  The actions were effectively  consolidated  in
December  1997.   As  a result of certain procedural  actions  by  the
parties  and a November court order, Edison filed an amended complaint
on  December 16, 1997 and the Coso Joint Ventures amended their cross-
complaint.  The litigation is in its early procedural stages  and  the
pleadings have not been settled.  The Coso Joint Ventures believe that
their  claims and defenses are meritorious and that they will  prevail
if  the  matter  is ultimately heard on its merits.   The  Coso  Joint
Ventures  intend  to vigorously defend this action and  prosecute  all
available counterclaims against Edison.

NYSEG

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  March  15, 1995, the Company  intervened  also  in
opposition to the Petition and asserted similar arguments.   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.
Saranac  and  other  parties have filed motions to  dismiss  and  oral
arguments  on  those  motions were heard on March  2,  1998.   Saranac
believes  that NYSEG's claims are without merit for the  same  reasons
described in the FERC's orders.

Leases

Certain  retail facilities, buildings and equipment are  leased.   The
leases expire in periods ranging from one to 75 years and some provide
for renewal options.

At  December  31,  1997, the Company's future minimum rental  payments
with respect to non-cancelable operating leases were as follows:

 1998                                  $      5,321
 1999                                         4,970
 2000                                         4,914
 2001                                         4,742
 2002                                         4,643
 Thereafter                                  53,905
                                       $     78,495

21.  Geographic Information

The Company operates in one principal industry segment:  the
generation, distribution and supply of electricity to customers
located throughout the world.  Europe consists primarily of Northern.
The Company's operations by geographic area are as follows:

                          1997      1996         1995
Revenue
   Americas              $  570,587$  486,189  $  386,833
   Asia                     102,960    33,282         ---
   Europe                 1,566,442    39,191         ---
   Corporate/Other           30,922    17,533      11,890
                         $2,270,911 $ 576,195   $ 398,723

Operating income *
   Americas               $ 301,589 $ 259,665   $ 209,872
   Asia                      61,131    16,766         ---
   Europe                   191,299     6,163         ---
   Corporate/Other          (12,882)  (10,931)    (10,376)
                          $ 541,137 $ 271,663   $ 199,496

* Operating income excludes the loss on equity investment in Casecnan,
net interest expense and the non-recurring charge.

                                            1997        1996
Identifiable assets
   Americas                              $ 2,268,629 $ 2,364,448
   Asia                                      835,616     649,053
   Europe                                  2,937,686   2,384,789
   Corporate/Other                         1,445,695     231,866
                                         $ 7,487,626 $ 5,630,156

22. QUARTERLY FINANCIAL DATA (UNAUDITED)

Following is a summary of the Company's quarterly results of
operations for the years ended December 31, 1997 and 1996.

                           Three
                           Months
                          Ended *
  1997: (1)               March 31   June 30 September 30 December 31
  Operating revenue       $542,589  $505,922   $527,896   $589,931
  Total revenue            565,976   524,994    551,893    628,048
  Total costs and          506,104   460,184    467,900    639,863
 expenses
  Income (loss) before      59,872    64,810     83,993    (11,815)
 income taxes               22,249    24,342     27,929     24,524
  Provision for income
 taxes
  Income (loss) before      37,623    40,468     56,064    (36,339)
 minority interest          10,175     9,579      9,656     16,583
  Minority interest
  Income (loss) before      27,448    30,889     46,408    (52,922)
 extraordinary item            ---       ---   (135,850)       ---
  Extraordinary item
  Net income (loss)
 attributable to            27,448    30,889    (89,442)   (52,922)
    common  stockholders
  Income (loss) per
 share before extraordinary
  item                     $   .43    $  .49    $   .73    $  (.67)
  Extraordinary item           ---       ---      (2.14)       ---
  Net income (loss) per
 share                     $   .43    $  .49    $ (1.41)   $  (.67)
  Income (loss) per
 share before
    extraordinary item -   $   .42    $  .46    $   .67    $  (.67)
 diluted                       ---       ---      (1.80)       ---
 Extraordinary item -
 diluted
 Net income (loss) per
 share - diluted           $   .42    $  .46    $ (1.13)   $  (.67)


                           Three Months Ended
                                   *
   1996: (112)               March 31 June 30 September 30 December 31
 Operating revenue        $ 75,944  $104,735   $165,487   $172,768
 Total revenue              90,356   115,794    179,048    190,997
 Total costs and            69,398    86,039    121,545    158,809
 expenses
 Income before income       20,958   29,755      57,503     32,188
 taxes                       6,497    9,040      18,325      7,959
 Provision for income
 taxes
 Income before minority     14,461    20,715     39,178     24,229
 interest                      ---     1,443      1,624      3,055
 Minority interest
 Net income attributable
 to common stockholders    $14,461  $19,272     $37,554  $  21,174
 Net income per share      $   .28  $   .37     $   .71  $     .34
 Net income per share -
 diluted                   $   .27  $   .34     $   .61  $     .33

* The Company's operations are seasonal in nature.
(1)  Reflects acquisitions of Northern, Falcon Seaboard and the
Partnership Interest.



INDEPENDENT AUDITORS' REPORT

Board of Directors and Shareholders
CalEnergy Company, Inc.
Omaha, Nebraska

We  have  audited the accompanying consolidated balance sheets  of
CalEnergy Company, Inc. and subsidiaries as of December  31,  1997
and  1996,  and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. 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
CalEnergy Company, Inc. and subsidiaries at December 31, 1997  and
1996 and the results of their operations and their cash flows  for
each of the three years in the period ended December 31, 1997,  in
conformity with generally accepted accounting principles.



Deloitte & Touche LLP
Omaha, Nebraska
February 12, 1998