SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

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

            For the quarterly period ended March 31, 2001 Commission
                                File No. 33-95538

                         SALTON SEA FUNDING CORPORATION
             (Exact name of registrant as specified in its charter)

                                   47-0790493
                        (IRS Employer Identification No.)

 Salton Sea Brine Processing L.P.       California         33-0601721
 Salton Sea Power Generation L.P.       California         33-0567411
 Fish Lake Power LLC                    Delaware           33-0453364
 Vulcan Power Company                   Nevada             95-3992087
 CalEnergy Operating Corporation        Delaware           33-0268085
 Salton Sea Royalty LLC                 Delaware           47-0790492
 VPC Geothermal LLC                     Delaware           91-1244270
 San Felipe Energy Company              California         33-0315787
 Conejo Energy Company                  California         33-0268500
 Niguel Energy Company                  California         33-0268502
 Vulcan/BN Geothermal Power Company     Nevada             33-3992087
 Leathers, L.P.                         California         33-0305342
 Del Ranch, L.P.                        California         33-0278290
 Elmore, L.P.                           California         33-0278294
 Salton Sea Power L.L.C.                Delaware           47-0810713
 CalEnergy Minerals LLC                 Delaware           47-0810718
 CE Turbo LLC                           Delaware           47-0812159
 CE Salton Sea Inc.                     Delaware           47-0810711
 Salton Sea Minerals Corp.              Delaware           47-0811261
 (Exact name of Registrants          (State or other    (I.R.S. Employer
as specified in their charters)      jurisdiction of    Identification No.)
                                                  incorporation or organization)

                302 S. 36th Street, Suite 400-A, Omaha, NE 68131
            (Address of principal executive offices and Zip Code of
                        Salton Sea Funding Corporation)

               Salton Sea Funding Corporation's telephone number,
                      including area code: (402) 231-1641

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

                                    Yes X       No

     All common stock of Salton Sea Funding Corporation is indirectly held by
Magma Power Company. 100 shares of Common Stock were outstanding on May [14],
2001.

<PAGE>




                         SALTON SEA FUNDING CORPORATION

                                    Form 10-Q

                                 March 31, 2001
                                  -------------

                                 C O N T E N T S


                          PART I: FINANCIAL INFORMATION


Item 1.          Financial Statements                                       Page

SALTON SEA FUNDING CORPORATION

Independent Accountants' Report                                              4

Balance Sheets, March 31, 2001 and December 31, 2000                         5

Statements of Operations for the Three Months Ended
    March 31, 2001 and 2000                                                  6

Statements of Cash Flows for the Three Months Ended
    March 31, 2001 and 2000                                                  7

Notes to Financial Statements                                                8

SALTON SEA GUARANTORS

Independent Accountants' Report                                             10

Combined Balance Sheets, March 31, 2001 and December 31, 2000               11

Combined Statements of Operations for the Three Months Ended
    March 31, 2001 and 2000                                                 12

Combined Statements of Cash Flows for the Three Months Ended
    March 31, 2001 and 2000                                                 13

Notes to Combined Financial Statements                                      14

<PAGE>

PARTNERSHIP GUARANTORS

Independent Accountants' Report                                             16

Combined Balance Sheets, March 31, 2001 and December 31, 2000               17

Combined Statements of Operations for the Three Months Ended
    March 31, 2001 and 2000                                                 18

Combined Statements of Cash Flows for the Three Months Ended
    March 31, 2001 and 2000                                                 19

Notes to Combined Financial Statements                                      20

SALTON SEA ROYALTY LLC

Independent Accountants' Report                                             22

Balance Sheets, March 31, 2001 and December 31, 2000                        23

Statements of Operations for the Three Months Ended
    March 31, 2001 and 2000                                                 24

Statements of Cash Flows for the Three Months Ended
    March 31, 2001 and 2000                                                 25

Notes to Financial Statements                                               26

Item 2.          Management's Discussion and Analysis of
                 Financial Condition and Results of Operations              28


                           PART II: OTHER INFORMATION

Item 1.          Legal Proceedings                                          37
Item 2.          Changes in Securities                                      37
Item 3.          Defaults on Senior Securities                              37
Item 4.          Submission of Matters to a Vote of
                 Security Holders                                           37
Item 5.          Other Information                                          37
Item 6.          Exhibits and Reports on Form 8-K                           37

Signatures                                                                  38

Exhibit Index                                                               39
<PAGE>



INDEPENDENT ACCOUNTANTS' REPORT

Board of Directors and Stockholder
Salton Sea Funding Corporation
Omaha, Nebraska

We have  reviewed  the  accompanying  balance  sheet of the Salton  Sea  Funding
Corporation as of March 31, 2001,  and the related  statements of operations and
cash flows for the three month  periods  ended  March 31,  2001 and 2000.  These
financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America,  the
objective  of which is the  expression  of an opinion  regarding  the  financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to such financial statements for them to be in conformity with generally
accepted  accounting  principles  generally  accepted  in the  United  States of
America.

We have  previously  audited,  in accordance with auditing  standards  generally
accepted  in the  United  States of  America,  the  balance  sheet of Salton Sea
Funding  Corporation  as of December 31,  2000,  and the related  statements  of
operations,  stockholder's  equity,  and cash flows for the year then ended (not
presented  herein);  and in our report dated January 18, 2001 (March 27, 2001 as
to Note 4), we expressed an unqualified  opinion on those financial  statements.
In our opinion,  the information set forth in the accompanying  balance sheet as
of December 31, 2000 is fairly stated, in all material respects,  in relation to
the balance sheet from which it has been derived.


DELOITTE & TOUCHE LLP
Omaha, Nebraska
May 7, 2001

<PAGE>

                         SALTON SEA FUNDING CORPORATION
                                 BALANCE SHEETS
                (Dollars in Thousands, Except per Share Amounts)



                                              March 31,           December 31,
                                                2001                  2000
                                             (unaudited)
ASSETS
Cash                                           $   3,161            $   8,467
Prepaid expenses and other assets                 13,891                3,563
Due from affiliates                                  349                  ---
Current portion of secured project notes
  from Guarantors                                 23,658               23,658
                                                --------            ---------
Total current assets                              41,059               35,688

Secured project notes from Guarantors            520,250              520,250
Investment in 1% of net assets of
    Guarantors                                     9,457                9,437
                                              ----------           ----------
                                               $ 570,766            $ 565,375
                                              ==========           ==========

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued liabilities                            $  13,742            $   3,479
Due to affiliates                                    ---                4,753
Current portion of long term debt                 23,658               23,658
                                               ---------            ---------
Total current liabilities                         37,400               31,890

Senior secured notes and bonds                   520,250              520,250
                                               ---------            ---------
    Total liabilities                            557,650              552,140

Commitments and contingencies (Note 3)

Stockholder's equity:
Common stock--authorized 1,000
    shares, par value $.01 per share;
    issued and outstanding 100 shares                ---                  ---
Additional paid-in capital                         5,366                5,366
Retained earnings                                  7,750                7,869
                                              ----------           ----------
    Total stockholder's equity                    13,116               13,235
                                              ----------           ----------
                                               $ 570,766            $ 565,375
                                              ==========           ==========

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

                         SALTON SEA FUNDING CORPORATION
                            STATEMENTS OF OPERATIONS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                            March 31,
                                                                      2001              2000
Revenues:

<S>                                                             <C>                 <C>
Interest income                                                 $      10,329       $    10,963
Equity in earnings (loss) of Guarantors                                    20               (42)
                                                                    ---------          --------
Total revenues                                                         10,349            10,921
                                                                    ---------          --------

Expenses:

General and administrative expenses                                       289               259
Interest expense                                                       10,263            10,763
                                                                    ---------          --------
Total expenses                                                         10,552            11,022
                                                                    ---------          --------
Loss before income taxes                                                 (203)             (101)
Income tax benefit                                                        (84)              (42)
                                                                    ---------          --------
Net loss                                                        $        (119)      $       (59)
                                                                    =========          ========
</TABLE>

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

<PAGE>

                         SALTON SEA FUNDING CORPORATION
                            STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                        Three Months Ended
                                                                                               March 31,
                                                                                      2001               2000

Cash flows from operating activities:
<S>                                                                              <C>              <C>
     Net loss                                                                    $       (119)    $        (59)
     Adjustments to reconcile net loss to net
         cash flow from operating activities:
     Equity in (earnings) loss of Guarantors                                              (20)              42
     Changes in assets and liabilities:
         Prepaid expenses and other assets                                            (10,328)         (10,877)
         Accrued liabilities                                                           10,263           10,782
                                                                                 ------------     ------------
     Net cash flows from operating activities                                            (204)            (112)
                                                                                 ------------     ------------
Cash flows from financing activities:
     Increase (decrease) in due to affiliates                                          (5,102)           8,746
                                                                                 ------------     ------------
     Net cash flows from financing activities                                          (5,102)           8,746
                                                                                 ------------     ------------
Net change in cash                                                                     (5,306)           8,634

Cash at the beginning of period                                                         8,467            2,086
                                                                                 ------------     ------------
Cash at the end of period                                                        $      3,161     $     10,720
                                                                                 ============     ============
Supplemental disclosures:
     Interest paid                                                               $        ---     $        ---
                                                                                 ============     ============
</TABLE>

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

<PAGE>

                         SALTON SEA FUNDING CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                              ---------------------


1.  General:

In the opinion of management of the Salton Sea Funding Corporation (the "Funding
Corporation"),  the  accompanying  unaudited  financial  statements  contain all
adjustments  (consisting only of normal recurring accruals) necessary to present
fairly the financial position as of March 31, 2001 and the results of operations
for the three  months ended March 31, 2001 and 2000 and cash flows for the three
months ended March 31, 2001 and 2000.  The results of  operations  for the three
months  ended  March 31,  2001 and 2000 are not  necessarily  indicative  of the
results to be expected for the full year.

The  unaudited  financial  statements  should  be read in  conjunction  with the
financial statements included in the Funding Corporation's annual report on Form
10-K for the year ended December 31, 2000.

2.  Accounting Pronouncements:

In June 1998, the Financial  Accounting  Standards Board (FASB) issued SFAS 133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities",  which was
delayed by SFAS 137 and amended by SFAS 138. SFAS 133/138  requires an entity to
recognize  all of  its  derivatives  as  either  assets  or  liabilities  in its
statement of financial  position and measure  those  instruments  at fair value.
Salton Sea Funding Corporation implemented the new standards on January 1, 2001.
The initial adoption of SFAS133/138 did not have a material impact on Salton Sea
Funding Corporation's financial position, results of operations or any impact on
its cash flows.

The FASB's  Derivatives  Implementation  Group continues to identify and provide
guidance on various  implementation  issues  related to SFAS 133/138 that are in
varying  stages of review and clearance by the Derivative  Implementation  Group
and FASB.  Salton Sea Funding  Corporation  has not  determined  if the ultimate
resolution  of those  issues  would  have a  material  impact  on its  financial
statements.

3.  Contingency:

Edison, a wholly-owned  subsidiary of Edison International,  is a public utility
primarily  engaged  in the  business  of  supplying  electric  energy  to retail
customers in Central and Southern California, excluding Los Angeles. The Funding
Corporation  is aware that there have been public  announcements  that  Edison's
financial condition has deteriorated as a result of reduced liquidity.  Based on
public  announcements,  the Funding Corporation  understands that Edison has not
made certain payments to other qualifying  facilities  ("QFs") from which Edison
purchases  power and has not made scheduled  payments of debt service.  Edison's
senior  unsecured  debt  obligations  are  currently  rated  Caa2 (on  watch for
possible downgrade) by Moody's and D by S&P.

Edison has failed to pay approximately $119 million due under the Power Purchase
Agreements  for power  delivered  in November  and  December  2000 and  January,
February and March 2001,  although  the Power  Purchase  Agreements  provide for
billing  and  payment on a schedule  where  payments  would have  normally  been
received in early January,  February,  March, April and May 2001. Edison has not
notified  the  Imperial  Valley  Projects  as to when they can expect to receive
these payments.

On February 21,  2001,  certain  Guarantors  filed a lawsuit  against  Edison in
California's  Imperial  County  Superior  Court seeking a court order  requiring

<PAGE>

Edison to make the required  payments under the Power Purchase  Agreements.  The
lawsuit  also  requested,  among other  things,  that the court order permit the
Guarantors to suspend deliveries of power to Edison and to permit the Guarantors
to sell such power to other purchasers in California.

On March 22, 2001,  the Superior  Court granted  Guarantors'  Motion for Summary
Adjudication  and a  Declaratory  Judgment  ordering  that:  1) under  the Power
Purchase Agreements, Guarantors have the right to temporarily suspend deliveries
of  capacity  and energy to Edison,  2)  Guarantors  are  entitled to resell the
energy  and  capacity  to other  purchasers  and 3) the  interim  suspension  of
deliveries  to Edison shall not in any respect  result in the  modifications  or
termination of the Power Purchase  Agreements and the Power Purchase  Agreements
shall in all respects continue in full force and effect other than the temporary
suspension of deliveries to Edison.  The Guarantors  intend to vigorously pursue
their other remedies in this action in light of Edison's continuing non-payment.

As a result of the March 22, 2001  Declaratory  Judgment,  the  Imperial  Valley
projects suspended deliveries of energy to Edison and entered into a transaction
agreement  with El Paso  Merchant  Energy,  L.P.  ("EPME") in which the Imperial
Valley projects' available power is sold to EPME based on percentages of the Dow
Jones SP-15 Index.

The  Funding  Corporation  is  hopeful  that the  current  Edison  situation  is
temporary and the proceedings in the legal, regulatory,  financial and political
arenas will lead to the improvement of Edison's financial  condition in the near
future  and the  payment  by Edison  of  amounts  due  under the Power  Purchase
Agreements. However, no assurance can be given that this will be the case.

As a result of SoCal  Edison's  failure to make the payments due under the Power
Purchase  Agreements and the recent downgrades of SoCal Edison's credit ratings,
Moody's has downgraded the ratings for the Securities to Caa2 (negative outlook)
and S&P has downgraded the ratings for the Securities to BBB- and has placed the
Securities on "credit watch negative".


<PAGE>





INDEPENDENT ACCOUNTANTS' REPORT

Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska

We have  reviewed  the  accompanying  combined  balance  sheet of the Salton Sea
Guarantors  as of  March  31,  2001,  and the  related  combined  statements  of
operations  and cash flows for the three month  period  ended March 31, 2001 and
2000.  These  financial  statements  are the  responsibility  of the  Salton Sea
Guarantors' management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America,  the
objective  of which is the  expression  of an opinion  regarding  the  financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to such combined financial  statements for them to be in conformity with
generally accepted accounting principles generally accepted in the United States
of America.

We have  previously  audited,  in accordance with auditing  standards  generally
accepted in the United  States of America,  the  combined  balance  sheet of the
Salton  Sea  Guarantors  as of  December  31,  2000,  and the  related  combined
statements of operations,  Guarantors'  equity, and cash flows for the year then
ended (not  presented  herein);  and in our report dated January 18, 2001 (March
27, 2001 as to Note 6), we expressed an  unqualified  opinion on those  combined
financial  statements.  In  our  opinion,  the  information  set  forth  in  the
accompanying combined balance sheet as of December 31, 2000 is fairly stated, in
all material  respects,  in relation to the combined balance sheet from which it
has been derived.


DELOITTE & TOUCHE LLP
Omaha, Nebraska
May 7, 2001


<PAGE>


                              SALTON SEA GUARANTORS
                             COMBINED BALANCE SHEETS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>

                                                                            March 31,              December 31,
                                                                                2001                    2000
                                                                           (unaudited)
ASSETS
Accounts receivable, net of allowance of $12,532 and
<S>                                                                       <C>                    <C>
    $0, respectively                                                      $     42,688           $      24,396
Prepaid expenses and other assets                                                5,982                   8,699
                                                                          ------------           -------------
Total current assets                                                            48,670                  33,095
Restricted cash                                                                    ---                      17
Property, plant, contracts and equipment, net                                  564,457                 566,577
Excess of cost over fair value of net assets
   acquired, net                                                                45,248                  45,574
                                                                          ------------           -------------
                                                                          $    658,375           $     645,263
                                                                          ============           =============


LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable                                                          $      3,477           $           5
Accrued liabilities                                                             12,812                  10,826
Current portion of long term debt                                               17,319                  17,319
                                                                          ------------           -------------
Total current liabilities                                                       33,608                  28,150

Due to affiliates                                                               24,512                  18,720
Senior secured project note                                                    266,898                 266,898
                                                                          ------------           -------------
    Total liabilities                                                          325,018                 313,768

Commitment and contingencies (Note 4)

Total Guarantors' equity                                                       333,357                 331,495
                                                                          ------------           -------------
                                                                          $    658,375           $     645,263
                                                                          ============           =============
</TABLE>

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


<PAGE>


                              SALTON SEA GUARANTORS
                        COMBINED STATEMENTS OF OPERATIONS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                              March 31
                                                                        2001             2000
                                                                  --------------    -------------
Revenues:

<S>                                                               <C>               <C>
Sales of electricity                                              $       32,130    $       8,893
Interest and other income                                                    ---              127
                                                                  --------------    -------------
     Total revenues                                                       32,130            9,020
                                                                  --------------    -------------
Expenses:

Operating, general and administration                                     13,357            5,758
Depreciation and amortization                                              4,370            4,094
Interest expense                                                           5,490            5,840
Less capitalized interest                                                 (1,692)          (3,323)
                                                                  --------------    -------------
     Total expenses                                                       21,525           12,369
                                                                  --------------    -------------
Income (loss) before cumulative effect of accounting change               10,605           (3,349)

Cumulative effect of accounting change                                    (8,743)             ---
                                                                  --------------    -------------
Net income (loss)                                                 $        1,862    $      (3,349)
                                                                  ==============    =============
</TABLE>

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


<PAGE>


                              SALTON SEA GUARANTORS
                        COMBINED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                          Three Months Ended
                                                                                                March 31,
                                                                                          2001            2000
                                                                                ---------------    -------------
Cash flows from operating activities:
<S>                                                                             <C>                <C>
Net income (loss)                                                               $         1,862    $      (3,349)
Adjustments to reconcile net income (loss) to net
    cash flows from operating activities:
       Depreciation and amortization                                                      4,370            4,094
       Cumulative effect of change in accounting principle                                8,743              ---
       Changes in assets and liabilities:
         Accounts receivable                                                            (18,292)           8,129
         Prepaid expenses and other assets                                               (6,026)          (1,111)
         Accounts payable and accrued
          liabilities                                                                     5,458            6,235
                                                                                ---------------    -------------
Net cash flows from operating activities                                                 (3,885)          13,998
                                                                                ---------------    -------------
Cash flows from investing activities:
Capital expenditures                                                                     (1,924)          (6,977)
Decrease in restricted cash                                                                  17            2,094
                                                                                ---------------    -------------
Net cash flows from investing activities                                                 (1,907)          (4,883)
                                                                                ---------------    -------------
Cash flows from financing activities:
 Increase (decrease) in due to affiliates                                                 5,792           (9,115)
                                                                                ---------------    -------------
Net cash flows from financing activities                                                  5,792           (9,115)
                                                                                ---------------    -------------
Net change in cash                                                                          ---              ---
Cash at beginning of period                                                                 ---              ---
                                                                                ---------------    -------------
Cash at end of period                                                           $           ---    $         ---
                                                                                ===============    =============
</TABLE>

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


<PAGE>


                              SALTON SEA GUARANTORS

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                              --------------------


1.  General:

In the opinion of management of the Salton Sea  Guarantors  (the  "Guarantors"),
the  accompanying   unaudited  financial   statements  contain  all  adjustments
(consisting only of normal recurring  accruals)  necessary to present fairly the
financial  position as of March 31, 2001 and the results of  operations  for the
three  months  ended March 31, 2001 and 2000 and cash flows for the three months
ended March 31, 2001 and 2000.  The results of  operations  for the three months
ended March 31, 2001 and 2000 are not  necessarily  indicative of the results to
be expected for the full year.

The  unaudited  financial  statements  shall  be read in  conjunction  with  the
financial statements included in the Funding Corporation's annual report on Form
10-K for the year ended December 31, 2000.

2.  Accounting Policy Change:

The Guarantors  have changed their policy of accounting  for major  maintenance,
overhaul  and well  workover  costs.  These costs which have  historically  been
accounted  for using  deferral  methods,  will be expensed as incurred.  The new
policy  went into  effect  January 1, 2001 and the  Guarantors  have  recorded a
cumulative effect of $8.7 million.

3.  Accounting Pronouncements:

In June 1998, the Financial  Accounting  Standards Board (FASB) issued SFAS 133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities",  which was
delayed by SFAS 137 and amended by SFAS 138. SFAS 133/138  requires an entity to
recognize  all of  its  derivatives  as  either  assets  or  liabilities  in its
statement of financial position and measure those instruments at fair value. The
Guarantors  implemented  the new  standards  on  January 1,  2001.  The  initial
adoption  of  SFAS133/138  did not have a  material  impact on the  Guarantors's
financial position, results of operations or any impact on their cash flows.

The FASB's  Derivatives  Implementation  Group continues to identify and provide
guidance on various  implementation  issues  related to SFAS 133/138 that are in
varying  stages of review and clearance by the Derivative  Implementation  Group
and FASB. The Guarantors have not determined if the ultimate resolution of those
issues would have a material impact on their financial statements.

4.  Contingency:

Edison, a wholly-owned  subsidiary of Edison International,  is a public utility
primarily  engaged  in the  business  of  supplying  electric  energy  to retail
customers in Central and Southern California, excluding Los Angeles. The Funding
Corporation  is aware that there have been public  announcements  that  Edison's
financial condition has deteriorated as a result of reduced liquidity.  Based on
public  announcements,  the Funding Corporation  understands that Edison has not
made certain payments to other qualifying  facilities  ("QFs") from which Edison
purchases  power and has not made scheduled  payments of debt service.  Edison's
senior  unsecured  debt  obligations  are  currently  rated  Caa2 (on  watch for
possible downgrade) by Moody's and D by S&P.

Edison has failed to pay approximately $42.2 million to the Guarantors due under
the Power Purchase  Agreements for power delivered in November and December 2000

<PAGE>

and January,  February and March 2001,  although the Power  Purchase  Agreements
provide for billing and payment on a schedule where payments would have normally
been received in early January,  February, March, April and May 2001. Edison has
not notified the Imperial  Valley Projects as to when they can expect to receive
these payments.

On February 21,  2001,  certain  Guarantors  filed a lawsuit  against  Edison in
California's  Imperial  County  Superior  Court seeking a court order  requiring
Edison to make the required  payments under the Power Purchase  Agreements.  The
lawsuit  also  requested,  among other  things,  that the court order permit the
Guarantors to suspend deliveries of power to Edison and to permit the Guarantors
to sell such power to other purchasers in California.

On March 22, 2001,  the Superior  Court granted  Guarantors'  Motion for Summary
Adjudication  and a  Declaratory  Judgment  ordering  that:  1) under  the Power
Purchase Agreements, Guarantors have the right to temporarily suspend deliveries
of  capacity  and energy to Edison,  2)  Guarantors  are  entitled to resell the
energy  and  capacity  to other  purchasers  and 3) the  interim  suspension  of
deliveries  to Edison shall not in any respect  result in the  modifications  or
termination of the Power Purchase  Agreements and the Power Purchase  Agreements
shall in all respects continue in full force and effect other than the temporary
suspension of deliveries to Edison.  The Guarantors  intend to vigorously pursue
their other remedies in this action in light of Edison's continuing non-payment.

As a result of the March 22, 2001  Declaratory  Judgment,  the  Imperial  Valley
projects suspended deliveries of energy to Edison and entered into a transaction
agreement  with El Paso  Merchant  Energy,  L.P.  ("EPME") in which the Imperial
Valley project's available power is sold to EPME based on percentages of the Dow
Jones SP-15 Index.  The Funding  Corporation  is hopeful that the current Edison
situation is temporary and the proceedings in the legal,  regulatory,  financial
and  political  arenas  will  lead  to the  improvement  of  Edison's  financial
condition  in the near future and the payment by Edison of amounts due under the
Power Purchase Agreements.  However, no assurance can be given that this will be
the case.

As a result of SoCal  Edison's  failure to make the payments due under the Power
Purchase  Agreements and the recent downgrades of SoCal Edison's credit ratings,
Moody's has downgraded the ratings for the Securities to Caa2 (negative outlook)
and S&P has downgraded the ratings for the Securities to BBB- and has placed the
Securities on "credit watch negative".

The  Guarantors  are  contractually  entitled to receive  payments due under the
Power Purchase  Agreements.  However,  due to the uncertainties  associated with
Edison's financial condition and failure to pay, the Guarantors have established
an allowance for doubtful  accounts of approximately  $12.5 million at March 31,
2001.


<PAGE>





INDEPENDENT ACCOUNTANTS' REPORT

Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska

We have reviewed the  accompanying  combined  balance  sheet of the  Partnership
Guarantors  as of  March  31,  2001,  and the  related  combined  statements  of
operations  and cash flows for the three month  periods ended March 31, 2001 and
2000.  These  financial  statements are the  responsibility  of the  Partnership
Guarantors' management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America,  the
objective  of which is the  expression  of an opinion  regarding  the  financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to such combined financial  statements for them to be in conformity with
generally accepted accounting principles generally accepted in the United States
of America.

We have  previously  audited,  in accordance with auditing  standards  generally
accepted in the United  States of America,  the  combined  balance  sheet of the
Partnership  Guarantors  as of  December  31,  2000,  and the  related  combined
statements of  operations,  Guarantors'  equity and cash flows for the year then
ended (not  presented  herein);  and in our report dated January 18, 2001 (March
27, 2001 as to Note 8A), we expressed an  unqualified  opinion on those combined
financial  statements.  In  our  opinion,  the  information  set  forth  in  the
accompanying combined balance sheet as of December 31, 2000 is fairly stated, in
all material  respects,  in relation to the combined balance sheet from which it
has been derived.


DELOITTE & TOUCHE LLP
Omaha, Nebraska
May 7, 2001

<PAGE>


                             PARTNERSHIP GUARANTORS
                             COMBINED BALANCE SHEETS
                             (Dollars in Thousands)
<TABLE>
<CAPTION>
                                                                 March 31,      December 31,
                                                                   2001             2000
                                                             ------------     -------------
                                                               (unaudited)
ASSETS
Accounts receivable, net of allowance of $28,845 and
<S>                                                          <C>              <C>
    $0, respectively                                         $     49,430     $      28,319
Prepaid expenses and other assets                                  18,075            26,661
                                                             ------------     -------------
Total current liabilities                                          67,505            54,980

Restricted cash                                                       ---               106
Due from affiliates                                                25,279            35,066
Property, plant, contracts and equipment, net                     638,835           636,264
Management fee                                                     69,574            70,855
Excess of cost over fair value of net assets
  acquired, net                                                   123,539           124,430
                                                             ------------     -------------
                                                             $    924,732     $     921,701
                                                             ============     =============


LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable                                             $      8,627     $         101
Accrued liabilities                                                20,835            17,722
Current portion of long term debt                                   1,907             1,907
                                                             ------------     -------------
Total current liabilities                                          31,369            19,730

Senior secured project notes                                      248,743           248,743
Deferred income taxes                                              98,764           101,734
                                                             ------------     -------------
Total liabilities                                                 378,876           370,207

Commitments and contingencies (Note 4)

Guarantors' equity:
Common stock                                                            3                 3
Additional paid-in capital                                        387,663           387,663
Retained earnings                                                 158,190           163,828
                                                             ------------     -------------
Total Guarantors' equity                                          545,856           551,494
                                                             ------------     -------------
                                                             $    924,732     $     921,701
                                                             ============     =============
</TABLE>
   The accompanying notes are an integral part of these financial statements.


<PAGE>


                             PARTNERSHIP GUARANTORS
                        COMBINED STATEMENTS OF OPERATIONS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                         Three Months Ended
                                                                              March 31,
                                                                       2001              2000
                                                                -------------     -------------
Revenues:

<S>                                                             <C>               <C>
Sales of electricity                                            $      23,494     $      10,389
Interest and other income                                                  35               476
                                                                -------------     -------------
Total revenues                                                         23,529            10,865
                                                                -------------     -------------
Expenses:

Operating, general and
   administration                                                      14,394             7,790
Depreciation and amortization                                           5,081             4,645
Interest expense                                                        4,793             5,095
Less capitalized interest                                              (4,733)           (4,911)
                                                                -------------     -------------

Total expenses                                                         19,535            12,619
                                                                -------------     -------------

Income (loss) before income taxes                                       3,994            (1,754)

Provision for income taxes expense (benefit)                            1,378              (579)
                                                                -------------     -------------
Income (loss) before cumulative effect of accounting change             2,616            (1,175)

Cumulative effect of accounting change, net of tax                     (8,254)              ---
                                                                -------------     -------------

Net loss                                                        $      (5,638)    $      (1,175)
                                                                =============     =============
</TABLE>


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


<PAGE>



                             PARTNERSHIP GUARANTORS
                        COMBINED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                                                          Three Months Ended
                                                                                                March 31,
                                                                                          2001            2000
                                                                                --------------     -------------
Cash flows from operating activities:
<S>                                                                             <C>                <C>
Net loss                                                                        $       (5,638)    $      (1,175)
Adjustments to reconcile net loss to net
    cash flow from operating activities:
       Depreciation and amortization                                                     5,081             4,645
       Cumulative effect of change in accounting principle, net of tax                   8,254               ---
       Deferred income taxes                                                             1,378              (579)
       Changes in assets and liabilities:
          Accounts receivable                                                          (21,111)            7,336
          Prepaid expenses and other assets                                             (4,016)           (4,563)
          Accounts payable and accrued
           liabilities                                                                  11,639            12,218
                                                                                --------------     -------------
Net cash flows from operating activities                                                (4,413)           17,882
                                                                                --------------     -------------
Cash flows from investing activities:
Capital expenditures                                                                    (6,299)          (60,850)
Decrease in restricted cash                                                                106            33,984
Management fee                                                                             819               197
                                                                                --------------     -------------
Net cash flows from investing activities                                                (5,374)          (26,669)
                                                                                --------------     -------------
Cash flows from financing activities:
Increase in due from affiliates                                                          9,787             8,787
                                                                                --------------     -------------
Net cash flows from financing activities                                                 9,787             8,787
                                                                                --------------     -------------
Net change in cash                                                                         ---               ---

Cash at beginning of period                                                                ---               ---
                                                                                --------------     -------------
Cash at end of period                                                           $          ---     $         ---
                                                                                ==============     =============
</TABLE>

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


<PAGE>


                             PARTNERSHIP GUARANTORS

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                              --------------------

1.  General:

In the opinion of management of the Partnership  Guarantors (the  "Guarantors"),
the accompanying unaudited combined financial statements contain all adjustments
(consisting only of normal recurring  accruals)  necessary to present fairly the
financial  position as of March 31, 2001 and the results of  operations  for the
three  months  ended March 31, 2001 and 2000 and cash flows for the three months
ended March 31, 2001 and 2000.  The results of  operations  for the three months
ended March 31, 2001 and 2000 are not  necessarily  indicative of the results to
be expected for the full year.

The  unaudited  financial  statements  shall  be read in  conjunction  with  the
financial statements included in the Funding Corporation's annual report on Form
10-K for the year ended December 31, 2000.

2.  Accounting Policy Change:

The Guarantors  have changed their policy of accounting  for major  maintenance,
overhaul  and well  workover  costs.  These costs which have  historically  been
accounted  for using  deferral  methods,  will be expensed as incurred.  The new
policy  went into  effect  January 1, 2001 and the  Guarantors  have  recorded a
cumulative effect of $8.3 million, net of tax.

3.  Accounting Pronouncements:

In June 1998, the Financial  Accounting  Standards Board (FASB) issued SFAS 133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities",  which was
delayed by SFAS 137 and amended by SFAS 138. SFAS 133/138  requires an entity to
recognize  all of  its  derivatives  as  either  assets  or  liabilities  in its
statement of financial position and measure those instruments at fair value. The
Guarantors  implemented  the new  standards  on  January 1,  2001.  The  initial
adoption  of  SFAS133/138  did not have a  material  impact on the  Guarantors's
financial position, results of operations or any impact on their cash flows.

The FASB's  Derivatives  Implementation  Group continues to identify and provide
guidance on various  implementation  issues  related to SFAS 133/138 that are in
varying  stages of review and clearance by the Derivative  Implementation  Group
and FASB. The Guarantors have not determined if the ultimate resolution of those
issues would have a material impact on their financial statements.

4.  Contingency:

Edison, a wholly-owned  subsidiary of Edison International,  is a public utility
primarily  engaged  in the  business  of  supplying  electric  energy  to retail
customers in Central and Southern California, excluding Los Angeles. The Funding
Corporation  is aware that there have been public  announcements  that  Edison's
financial condition has deteriorated as a result of reduced liquidity.  Based on
public  announcements,  the Funding Corporation  understands that Edison has not
made certain payments to other qualifying  facilities  ("QFs") from which Edison
purchases  power and has not made scheduled  payments of debt service.  Edison's
senior  unsecured  debt  obligations  are  currently  rated  Caa2 (on  watch for
possible downgrade) by Moody's and D by S&P.

Edison has failed to pay approximately $76.8 million to the Guarantors due under
the Power Purchase  Agreements for power delivered in November and December 2000
and January,  February and March 2001,  although the Power  Purchase  Agreements

<PAGE>

provide for billing and payment on a schedule where payments would have normally
been received in early January,  February, March, April and May 2001. Edison has
not notified the Imperial  Valley Projects as to when they can expect to receive
these payments.

On February 21,  2001,  certain  Guarantors  filed a lawsuit  against  Edison in
California's  Imperial  County  Superior  Court seeking a court order  requiring
Edison to make the required  payments under the Power Purchase  Agreements.  The
lawsuit  also  requested,  among other  things,  that the court order permit the
Guarantors to suspend deliveries of power to Edison and to permit the Guarantors
to sell such power to other purchasers in California.

On March 22, 2001,  the Superior  Court granted  Guarantors'  Motion for Summary
Adjudication  and a  Declaratory  Judgment  ordering  that:  1) under  the Power
Purchase Agreements, Guarantors have the right to temporarily suspend deliveries
of  capacity  and energy to Edison,  2)  Guarantors  are  entitled to resell the
energy  and  capacity  to other  purchasers  and 3) the  interim  suspension  of
deliveries  to Edison shall not in any respect  result in the  modifications  or
termination of the Power Purchase  Agreements and the Power Purchase  Agreements
shall in all respects continue in full force and effect other than the temporary
suspension of deliveries to Edison.  The Guarantors  intend to vigorously pursue
their other remedies in this action in light of Edison's continuing non-payment.

As a result of the March 22, 2001  Declaratory  Judgment,  the  Imperial  Valley
projects suspended deliveries of energy to Edison and entered into a transaction
agreement  with El Paso  Merchant  Energy,  L.P.  ("EPME") in which the Imperial
Valley project's available power is sold to EPME based on percentages of the Dow
Jones SP-15 Index.

The  Funding  Corporation  is  hopeful  that the  current  Edison  situation  is
temporary and the proceedings in the legal, regulatory,  financial and political
arenas will lead to the improvement of Edison's financial  condition in the near
future  and the  payment  by Edison  of  amounts  due  under the Power  Purchase
Agreements. However, no assurance can be given that this will be the case.

As a result of SoCal  Edison's  failure to make the payments due under the Power
Purchase  Agreements and the recent downgrades of SoCal Edison's credit ratings,
Moody's has downgraded the ratings for the Securities to Caa2 (negative outlook)
and S&P has downgraded the ratings for the Securities to BBB- and has placed the
Securities on "credit watch negative".

The  Guarantors  are  contractually  entitled to receive  payments due under the
Power Purchase  Agreements.  However,  due to the uncertainties  associated with
Edison's financial condition and failure to pay, the Guarantors have established
an allowance for doubtful  accounts of approximately  $28.8 million at March 31,
2001.



<PAGE>






INDEPENDENT ACCOUNTANTS' REPORT

Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska

We have reviewed the accompanying balance sheet of the Salton Sea Royalty LLC as
of March 31, 2001,  and the related  statements of operations and cash flows for
the  three  month  periods  ended  March  31,  2001 and  2000.  These  financial
statements are the responsibility of the Salton Sea Royalty LLC's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical  procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with auditing standards generally accepted in the United States of America,  the
objective  of which is the  expression  of an opinion  regarding  the  financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to such financial statements for them to be in conformity with generally
accepted  accounting  principles  generally  accepted  in the  United  States of
America.

We have  previously  audited,  in accordance with auditing  standards  generally
accepted in the United  States of America,  the balance  sheet of the Salton Sea
Royalty LLC as of December 31, 2000,  and the related  statements of operations,
equity,  and cash flows for the year then ended (not presented  herein);  and in
our report dated January 18, 2001 (March 27, 2001 as to Note 5), we expressed an
unqualified  opinion  on  those  financial  statements.   In  our  opinion,  the
information set forth in the accompanying  balance sheet as of December 31, 2000
is fairly  stated,  in all material  respects,  in relation to the balance sheet
from which it has been derived.

DELOITTE & TOUCHE LLP
Omaha, Nebraska
May 7, 2001


<PAGE>


                             SALTON SEA ROYALTY LLC
                                 BALANCE SHEETS
                (Dollars in Thousands, Except per Share Amounts)


                                                   March 31,        December 31,
                                                      2001              2000
                                                  (unaudited)
                                                   ----------       ----------
ASSETS
Prepaid expenses and other assets                  $       69       $       82
                                                   ----------       ----------
Total current assets                                       69               82

Royalty stream, net                                    15,459           15,719
Excess of cost over fair value of net assets
  acquired, net                                        31,145           31,372
Due from affiliates                                    29,081           26,497
                                                   ----------       ----------
                                                   $   75,754       $   73,670
                                                   ==========       ==========


LIABILITIES AND EQUITY
Liabilities:
Accrued liabilities                                $      221       $       57
Current portion of long term debt                       4,434            4,434
                                                   ----------       ----------
Total current liabilities                               4,655            4,491

Senior secured project note                             4,607            4,607
                                                   ----------       ----------
    Total liabilities                                   9,262            9,098

Commitment and contingencies (Note 3)

Equity:
Common stock, par value $.01 per share; 100
  share authorized, issued and outstanding                ---              ---
Additional paid-in capital                              1,561            1,561
Retained earnings                                      64,931           63,011
                                                   ----------       ----------
Total equity                                           66,492           64,572
                                                   ----------       ----------
                                                   $   75,754       $   73,670
                                                   ==========       ==========

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


<PAGE>


                             SALTON SEA ROYALTY LLC
                            STATEMENTS OF OPERATIONS
                             (Dollars in Thousands)
                                   (Unaudited)

                                           Three Months Ended
                                                March 31,
                                         2001              2000
Revenues:
Royalty income                     $     3,463       $       1,560

Expenses:
Operating, general and
     administrative expenses               879                 415
Amortization of royalty stream
   and goodwill                            487                 491
Interest expense                           177                 284
                                   -----------       -------------
Total expenses                           1,543               1,190
                                   -----------       -------------

Net income                         $     1,920       $         370
                                   ===========       =============

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


<PAGE>


                             SALTON SEA ROYALTY LLC
                            STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                              Three Months Ended
                                                                    March 31,
                                                             2001             2000
                                                     -------------    -------------
Cash flows from operating activities:
<S>                                                  <C>              <C>
Net income                                           $       1,920    $         370
Adjustments to reconcile net income to net
    cash flow from operating activities:
       Amortization of royalty stream and goodwill             487              491
       Changes in assets and liabilities:
       Prepaid expenses and other assets                        13               38
       Accrued liabilities and deferred income taxes           164              245
                                                     -------------    -------------
Net cash flows from operating activities                     2,584            1,144
                                                     -------------    -------------
Net cash flows from financing activities:
Increase in due from affiliates                             (2,584)          (1,144)
                                                     -------------    -------------
Net cash flows from financing activities                    (2,584)          (1,144)

Net change in cash                                             ---              ---

Cash at beginning of period                                    ---              ---
                                                     -------------    -------------
Cash at end of period                                $         ---    $         ---
                                                     =============    =============
</TABLE>

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


<PAGE>


                             SALTON SEA ROYALTY LLC

                          NOTES TO FINANCIAL STATEMENTS
                              --------------------

1.  General:

In the opinion of management of the Salton Sea Royalty LLC (the "Company"),  the
accompanying unaudited financial statements contain all adjustments  (consisting
only of normal  recurring  accruals)  necessary to present  fairly the financial
position as of March 31, 2001 and the results of operations for the three months
ended  March 31, 2001 and 2000 and cash flows for the three  months  ended March
31, 2001 and 2000.  The results of  operations  for the three months ended March
31, 2001 and 2000 are not  necessarily  indicative of the results to be expected
for the full year.

The  unaudited  financial  statements  shall  be read in  conjunction  with  the
financial statements included in the Funding Corporation's annual report on Form
10-K for the year ended December 31, 2000.

2.  Accounting Pronouncements:

In June 1998, the Financial  Accounting  Standards Board (FASB) issued SFAS 133,
"Accounting  for  Derivative  Instruments  and  Hedging  Activities",  which was
delayed by SFAS 137 and amended by SFAS 138. SFAS 133/138  requires an entity to
recognize  all of  its  derivatives  as  either  assets  or  liabilities  in its
statement of financial position and measure those instruments at fair value. The
Company  implemented the new standards on January 1, 2001. The initial  adoption
of  SFAS133/138  did not  have a  material  impact  on the  Company's  financial
position, results of operations or any impact on its cash flows.

The FASB's  Derivatives  Implementation  Group continues to identify and provide
guidance on various  implementation  issues  related to SFAS 133/138 that are in
varying  stages of review and clearance by the Derivative  Implementation  Group
and FASB.  The Company has not  determined  if the ultimate  resolution of those
issues would have a material impact on its financial statements.

3.  Contingency:

Edison, a wholly-owned  subsidiary of Edison International,  is a public utility
primarily  engaged  in the  business  of  supplying  electric  energy  to retail
customers in Central and Southern California, excluding Los Angeles. The Funding
Corporation  is aware that there have been public  announcements  that  Edison's
financial condition has deteriorated as a result of reduced liquidity.  Based on
public  announcements,  the Funding Corporation  understands that Edison has not
made certain payments to other qualifying  facilities  ("QFs") from which Edison
purchases  power and has not made scheduled  payments of debt service.  Edison's
senior  unsecured  debt  obligations  are  currently  rated  Caa2 (on  watch for
possible downgrade) by Moody's and D by S&P.

Edison has failed to pay approximately  $119 million to the Guarantors due under
the Power Purchase  Agreements for power delivered in November and December 2000
and January,  February and March 2001,  although the Power  Purchase  Agreements
provide for billing and payment on a schedule where payments would have normally
been received in early January,  February, March, April and May 2001. Edison has
not notified the Imperial  Valley Projects as to when they can expect to receive
these payments.

On February 21,  2001,  certain  Guarantors  filed a lawsuit  against  Edison in
California's  Imperial  County  Superior  Court seeking a court order  requiring
Edison to make the required  payments under the Power Purchase  Agreements.  The

<PAGE>

lawsuit  also  requested,  among other  things,  that the court order permit the
Guarantors to suspend deliveries of power to Edison and to permit the Guarantors
to sell such power to other purchasers in California.

On March 22, 2001,  the Superior  Court granted  Guarantors'  Motion for Summary
Adjudication  and a  Declaratory  Judgment  ordering  that:  1) under  the Power
Purchase Agreements, Guarantors have the right to temporarily suspend deliveries
of  capacity  and energy to Edison,  2)  Guarantors  are  entitled to resell the
energy  and  capacity  to other  purchasers  and 3) the  interim  suspension  of
deliveries  to Edison shall not in any respect  result in the  modifications  or
termination of the Power Purchase  Agreements and the Power Purchase  Agreements
shall in all respects continue in full force and effect other than the temporary
suspension of deliveries to Edison.  The Guarantors  intend to vigorously pursue
their other remedies in this action in light of Edison's continuing non-payment.

As a result of the March 22, 2001  Declaratory  Judgment,  the  Imperial  Valley
projects suspended deliveries of energy to Edison and entered into a transaction
agreement  with El Paso  Merchant  Energy,  L.P.  ("EPME") in which the Imperial
Valley project's available power is sold to EPME based on percentages of the Dow
Jones SP-15 Index.

The  Funding  Corporation  is  hopeful  that the  current  Edison  situation  is
temporary and the proceedings in the legal, regulatory,  financial and political
arenas will lead to the improvement of Edison's financial  condition in the near
future  and the  payment  by Edison  of  amounts  due  under the Power  Purchase
Agreements. However, no assurance can be given that this will be the case.

As a result of SoCal  Edison's  failure to make the payments due under the Power
Purchase  Agreements and the recent downgrades of SoCal Edison's credit ratings,
Moody's has downgraded the ratings for the Securities to Caa2 (negative outlook)
and S&P has downgraded the ratings for the Securities to BBB- and has placed the
Securities on "credit watch negative".


<PAGE>


                       THE SALTON SEA FUNDING CORPORATION

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                       (in thousands, except per kwh data)
                        ---------------------------------

Results of Operations:

The following is  management's  discussion  and analysis of certain  significant
factors which have affected the Salton Sea Funding  Corporation's  (the "Funding
Corporation") and the Salton Sea Guarantors,  the Partnership Guarantors and the
Salton Sea Royalty LLC's  (collectively,  the "Guarantors")  financial condition
and  results of  operations  during the  periods  included  in the  accompanying
statements of operations.

Funding  Corporation  was  organized for the sole purpose of acting as issuer of
senior  secured notes and bonds (the  "Securities").  The Securities are payable
from the  proceeds  of payments  made of  principal  and  interest on the senior
secured  project  notes  by the  Guarantors  to  the  Funding  Corporation.  The
Securities  are guaranteed on a joint and several basis by the  Guarantors.  The
guarantees of the Partnership  Guarantors and Salton Sea Royalty LLC are limited
to available cash flow. The Funding  Corporation does not conduct any operations
apart from the Securities.

Until March 22, 2001, the Vulcan,  Leathers,  Del Ranch and Elmore  partnerships
(collectively, the "Partnership Projects") sold all electricity generated by the
respective plants pursuant to four long-term SO4 Agreements between the projects
and Southern California Edison Company ("Edison").  These SO4 Agreements provide
for capacity  payments,  capacity bonus payments and energy payments.  Edison is
contractually  obligated to make fixed annual capacity  payments to the projects
and, to the extent that capacity factors exceed certain benchmarks,  is required
to make  capacity  bonus  payments.  The price for capacity  and capacity  bonus
payments is fixed for the life of the SO4 Agreements  and the capacity  payments
are significantly higher in the months of June through September.  The price for
energy sold is based on the cost that Edison  avoids by  purchasing  energy from
the Imperial Valley  Partnership  Projects  instead of obtaining the energy from
other sources  (avoided cost of energy) for energy  delivered  pursuant to their
respective SO4 Agreements.

Until  March 22,  2001,  the Salton  Sea I Project  sold  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 5.9 cents per kWh during the three  months
ended  March 31,  2001.  As the  Salton Sea I PPA is not an SO4  Agreement,  the
energy payments do not revert to Edison's avoided cost of energy.


<PAGE>


                       THE SALTON SEA FUNDING CORPORATION

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                       (in thousands, except per kwh data)
                        ---------------------------------

Results of Operations:  (continued)

Until  March 22,  2001,  the  Salton Sea II and  Salton  Sea III  Projects  sold
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 expired on April 4, 2000 for Salton Sea II and expired on February
13, 1999 for Salton Sea III, were 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 price for  energy is  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  March 31,
2004.

Until  March 22,  2001,  the Salton Sea IV Project  sold  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 Power Purchase  Agreement ("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.

Edison's  average  avoided cost of energy was 15.2 cents per kWh and 3.2 per kWh
for the three months ended March 31, 2001 and 2000,  respectively.  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.

The Salton Sea V project,  which commenced operations in the third quarter 2000,
will sell approximately one-third of its net output to a zinc facility, which is
owned by a  subsidiary  of  MidAmerican  and is expected to commence  commercial
operations in mid to late 2001. The remainder of the Salton Sea V output is sold
through other market transactions.

The Turbo project,  which commenced commercial operation in the third quarter of
2000, sells its output through market  transactions.  The Turbo project may sell
its output to a zinc facility which is owned by a subsidiary of MidAmerican  and
is expected to commence commercial operations in mid to late 2001.

On January 17, 2001,  Salton Sea Power L.L.C.  entered into an agreement to sell
available power from Salton Sea V and CE Turbo to El Paso Merchant Energy,  L.P.
("EPME").  Under the terms of the  agreement,  at the option of Salton Sea Power
and CE Turbo, EPME purchases available power from Salton Sea Unit V and CE Turbo
based on day ahead price quotes received from EPME.




<PAGE>


                       THE SALTON SEA FUNDING CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                       (in thousands, except per kwh data)
                        ---------------------------------

Results of Operations:  (continued)

As a result of legal  proceedings with Edison, on March 22, 2001 the Partnership
Projects  and  Salton  Sea I,  Salton  Sea II,  Salton Sea III and Salton Sea IV
suspended  power sales to Edison.  On March 27, 2001 the  Partnership  Projects,
including the Turbo project,  and Salton Sea I, II, III, IV and V entered into a
transaction  agreement to sell  available  power to EPME based on percentages of
the Dow Jones SP-15 Index.  See  discussion in Liquidity and Capital  Resources,
page 34.

The following data includes the aggregate capacity and electricity production of
Salton Sea Units I, II, III, IV and V:
                                              Three Months Ended
                                                    March 31,
                                             2001              2000
                                           -------           -------
Overall capacity factor                      84.1%             45.2%
Capacity (NMW) (average)                     168.4             119.4
kWh produced (in thousands)                305,800           117,900

The overall capacity factor for the Salton Sea Projects  increased for the three
months ended March 31, 2001 compared to the same period in 2000 primarily due to
scheduled  overhauls in 2000. The capacity increased due to the start up of Unit
V in the third quarter of 2000.

The following data includes the aggregate capacity and electricity production of
the Partnership Projects:

                                              Three Months Ended
                                                    March 31,
                                              2001              2000
                                          --------           -------
Overall capacity factor                     101.3%             81.9%
Capacity (NMW) (average)                       158               148
kWh produced (in thousands)                345,700           264,600

The overall capacity factor for the Partnership Projects increased for the three
months ended March 31, 2001 compared to the same period in 2000 due to scheduled
overhauls at all plants in 2000.  The capacity  increased due to the start up of
Turbo in August, 2000.

Revenues:

The Salton Sea  Guarantors'  sales of  electricity  increased to $32,130 for the
three  months  ended March 31,  2001 from $8,893 for the same period in 2000,  a
261.3% increase. This increase was primarily due to higher avoided cost rates in
2001,  the  start  up of  Unit V in the  third  quarter  of 2000  and  scheduled
overhauls  in  2000  which  were  more  extensive   compared  to  2001.  Due  to
uncertainties  associated with Edison's financial  condition and failure to pay,
the  Guarantors  have   established  an  allowance  for  doubtful   accounts  of
approximately $12.5 million which reduced revenues in 2001 compared to 2000.


<PAGE>


                       THE SALTON SEA FUNDING CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                       (in thousands, except per kwh data)
                        ---------------------------------

Revenues:  (continued)


The Partnership  Guarantors'  sales of electricity  increased to $23,494 for the
three  months  ended March 31, 2001 from  $10,389 for the same period in 2000, a
126.1%  increase.  This increase was primarily due to higher avoided cost rates,
the start up of Turbo in the third  quarter of 2000 and more  production  due to
fewer outages  compared to 2000. Due to  uncertainties  associated with Edison's
financial  conditions  and failure to pay, the  Guarantors  have  established an
allowance  for doubtful  accounts of  approximately  $28.9 million which reduced
revenue in 2001 compared to 2000.

The Royalty  Guarantor  revenue  increased  to $3,463 for the three months ended
March 31, 2001 from $1,560 for the same period last year. This was due primarily
to an increase in royalty revenue resulting from higher energy revenue.

Operating Expenses:

The Salton Sea Guarantors' operating expenses, which include royalty, operating,
and general and  administrative  expenses,  increased to $13,357,  for the three
months  ended  March  31,  2001 from  $5,758  for the same  period in 2000.  The
increase was due to higher  royalty  expenses  resulting  from higher  revenues,
higher brine  disposal  costs and the start up of Unit V in the third quarter of
2000.

The  Partnership   Guarantors'   operating  expenses,   which  include  royalty,
operating, and general and administrative expenses, increased to $14,394 for the
three months  ended March 31, 2001 from $7,790 for the same period in 2000.  The
increase  was due to an  increase  in royalty  expenses  resulting  from  higher
revenues,  the start up of Turbo in the third  quarter of 2000 and higher  brine
disposal costs.

The  Royalty  Guarantors'  operating  expenses  increased  to $879 for the three
months ended March 31, 2001 from $415 for the same period in 2000. This increase
was due to higher royalty costs resulting from higher revenue.

Depreciation and Amortization:

The Salton Sea Guarantors' depreciation and amortization increased to $4,370 for
the three months ended March 31, 2001 from $4,094 for the same period of 2000, a
6.7% increase.  This increase was due primarily to the start up of Unit V in the
third quarter of 2000.

The Partnership  Guarantors'  depreciation and amortization  increased to $5,081
for the three  months  ended  March 31,  2001 from $4,645 for the same period in
2000. The increase was due primarily to upgraded  brine handling  system and the
start up of Turbo in the third quarter of 2000.

The Royalty  Guarantors'  amortization was $487 for the three months ended March
31, 2001 compared to $491 for the same period of 2000.


<PAGE>


                       THE SALTON SEA FUNDING CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                       (in thousands, except per kwh data)
                        ---------------------------------

Interest Expense:

The  Salton  Sea  Guarantors'  interest  expense,  net of  capitalized  amounts,
increased  to $3,798 for the three  months  ended March 31, 2001 from $2,517 for
the same period in 2000. The increase was due to lower  capitalized  interest on
construction projects partially offset by reduced indebtedness.

The  Partnership  Guarantors'  interest  expense,  net of  capitalized  amounts,
decreased  to $60 for the three  months  ended  March 31, 2001 from $184 for the
same period in 2000. The decrease was due to reduced indebtedness.

The Royalty Guarantors'  interest expense decreased to $177 for the three months
ended March 31, 2001 from $284 from the same period in 2000.  The  decrease  was
due to reduced indebtedness.

Income Tax Provision:

The Salton Sea  Guarantors are comprised of  partnerships.  Income taxes are the
responsibility  of the partners and Salton Sea Guarantors  have no obligation to
provide funds to the partners for payment of any tax  liabilities.  Accordingly,
the Salton Sea Guarantors have no tax obligations.

The  Partnership  Guarantors  income tax  provision  increased to $1,378 for the
three  months  ended March 31, 2001 from a benefit of $(579) for the same period
in 2000.  This  increase was primarily due to a higher  pre-tax  income.  Income
taxes will be paid by the parent of the  Guarantors  from  distributions  to the
parent company by the Guarantors  which occur after operating  expenses and debt
service.

Income taxes are the responsibility of the partners and Royalty Guarantor has no
obligation to provide funds to the partners for payment of any tax  liabilities.
Accordingly, the Royalty Guarantor has no tax obligations.

Cumulative Effect of Accounting Policy Change:

The Guarantors  have changed their policy of accounting  for major  maintenance,
overhaul  and well  workover  costs.  These costs which have  historically  been
accounted  for using  deferral  methods,  will be expensed as incurred.  The new
policy  went into  effect  January 1, 2001 and the Salton  Sea  Guarantors  have
recorded a cumulative  effect of $8.7 million.  The Partnership  Guarantors have
recorded a cumulative effect of $8.3 million, net of tax.

Net Income:

The Salton Sea Funding  Corporation's  net loss for the three months ended March
31,  2001 was $119  compared  to $59 for the same  period in 2000.  The net loss
primarily represents interest income and expense, net of applicable tax, and the
Salton Sea Funding Corporation's 1% equity in earnings of the Guarantors.


<PAGE>


                       THE SALTON SEA FUNDING CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                       (in thousands, except per kwh data)
                        ---------------------------------

Net Income:  (continued)

The Salton Sea Guarantors'  net income (loss)  increased to $1,862 for the three
months ended March 31, 2001 compared to $(3,349) for the same period of 2000.

The  Partnership  Guarantors'  net loss decreased to $5,638 for the three months
ended March 31, 2001 compared to $1,175 for the same period of 2000.

The Royalty  Guarantors'  net income  increased  to $1,920 for the three  months
ended March 31, 2001 compared to $370 for the same period of 2000.

Liquidity and Capital Resources:

Until  March 22,  2001,  the  operating  Salton Sea  Guarantors'  only source of
revenue was payments  received pursuant to long term power sales agreements with
Edison, other than Salton Sea V revenue and interest earned on funds on deposit.
Until March 22, 2001, the operating  Partnership  Guarantors'  primary source of
revenue was payments  received pursuant to long term power sales agreements with
Edison, other than CE Turbo and interest earned on funds on deposit. The Royalty
Guarantor's  only source of revenue is Royalties  received  pursuant to resource
lease  agreements  with the Partnership  Projects.  If Edison pays the projects,
these  payments,  for each of the  Guarantors,  are expected to be sufficient to
fund operating and maintenance  expenses,  payments of interest and principal on
the Securities,  projected  capital  expenditures  and debt service reserve fund
requirements.

Edison, a wholly-owned  subsidiary of Edison International,  is a public utility
primarily  engaged  in the  business  of  supplying  electric  energy  to retail
customers in Central and Southern California, excluding Los Angeles. The Funding
Corporation  is aware that there have been public  announcements  that  Edison's
financial condition has deteriorated as a result of reduced liquidity.  Based on
public  announcements,  the Funding Corporation  understands that Edison has not
made certain payments to other qualifying  facilities  ("QFs") from which Edison
purchases  power and has not made scheduled  payments of debt service.  Edison's
senior  unsecured  debt  obligations  are  currently  rated  Caa2 (on  watch for
possible downgrade) by Moody's and D by S&P.

Edison has failed to pay approximately $119 million due under the Power Purchase
Agreements  for power  delivered  in November  and  December  2000 and  January,
February and March 2001,  although  the Power  Purchase  Agreements  provide for
billing  and  payment on a schedule  where  payments  would have  normally  been
received in early January,  February,  March, April and May 2001. Edison has not
notified  the  Imperial  Valley  Projects  as to when they can expect to receive
these payments.


<PAGE>


                       THE SALTON SEA FUNDING CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                       (in thousands, except per kwh data)
                        ---------------------------------

Liquidity and Capital Resources: (Continued)

On February 21,  2001,  certain  Guarantors  filed a lawsuit  against  Edison in
California's  Imperial  County  Superior  Court seeking a court order  requiring
Edison to make the required  payments under the Power Purchase  Agreements.  The
lawsuit  also  requested,  among other  things,  that the court order permit the
Guarantors to suspend deliveries of power to Edison and to permit the Guarantors
to sell such power to other purchasers in California.

On March 22, 2001,  the Superior  Court granted  Guarantors'  Motion for Summary
Adjudication  and a  Declaratory  Judgment  ordering  that:  1) under  the Power
Purchase Agreements, Guarantors have the right to temporarily suspend deliveries
of  capacity  and energy to Edison,  2)  Guarantors  are  entitled to resell the
energy  and  capacity  to other  purchasers  and 3) the  interim  suspension  of
deliveries  to Edison shall not in any respect  result in the  modifications  or
termination of the Power Purchase  Agreements and the Power Purchase  Agreements
shall in all respects continue in full force and effect other than the temporary
suspension of deliveries to Edison.  The Guarantors  intend to vigorously pursue
their other remedies in this action in light of Edison's continuing non-payment.

As a result of the March 22, 2001  Declaratory  Judgment,  the  Imperial  Valley
projects suspended deliveries of energy to Edison and entered into a transaction
agreement  with El Paso  Merchant  Energy,  L.P.  ("EPME") in which the Imperial
Valley project's available power is sold to EPME based on percentages of the Dow
Jones  SP-15  Index.  As a result  of the cash  received  from  these  sales and
estimated  future sales,  the  Guarantors  estimated the May 2001  principal and
interest payment will be made from available cash.

The  Funding  Corporation  is  hopeful  that the  current  Edison  situation  is
temporary and the proceedings in the legal, regulatory,  financial and political
arenas will lead to the improvement of Edison's financial  condition in the near
future  and the  payment  by Edison  of  amounts  due  under the Power  Purchase
Agreements. However, no assurance can be given that this will be the case.

As a result  of  Edison's  failure  to make the  payments  due  under  the Power
Purchase  Agreements  and the recent  downgrades  of  Edison's  credit  ratings,
Moody's has downgraded the ratings for the Securities to Caa2 (negative outlook)
and S&P has downgraded the ratings for the Securities to BBB- and has placed the
Securities on "credit watch negative".

The  Guarantors  are  contractually  entitled to receive  payments due under the
Power Purchase  Agreements.  However,  due to the uncertainties  associated with
Edison's financial condition and failure to pay, the Guarantors have established
an allowance for doubtful  accounts of approximately  $41.4 million at March 31,
2001.

CalEnergy Minerals LLC, a Partnership Guarantor ("Minerals LLC"),  developed and
owns the  rights  to  proprietary  processes  for the  extraction  of zinc  from
elements  in  solution  in the  geothermal  brine  and  fluids  utilized  at the
company's  Imperial  Valley  plants.  A pilot  plant has  successfully  produced
commercial quality zinc at the Company's Imperial Valley Project.  The Company's
affiliates  intend to  sequentially  develop  facilities  for the  extraction of
manganese, silver, gold, lead, boron, lithium and other products as they further
develop the extraction technology.

<PAGE>


                       THE SALTON SEA FUNDING CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                       (in thousands, except per kwh data)
                        ---------------------------------

Liquidity and Capital Resources: (Continued)

Minerals LLC is constructing  the Zinc Recovery  Project which will recover zinc
from the geothermal  brine (the "Zinc Recovery  Project").  Facilities are being
installed  near the Imperial  Valley  Project  sites to extract a zinc  chloride
solution  from the  geothermal  brine  through  an ion  exchange  process.  This
solution will be  transported  to a central  processing  plant where zinc ingots
will  be  produced  through  solvent  extraction,   electrowinning  and  casting
processes.  The  Zinc  Recovery  Project  is  designed  to  have a  capacity  of
approximately  30,000  metric  tonnes  per year  and is  scheduled  to  commence
commercial  operations  in mid to late 2001.  In  September  1999,  Minerals LLC
entered into a sales agreement  whereby all high grade zinc produced by the Zinc
Recovery Project will be sold to Cominco, Ltd. The initial term of the agreement
expires in December 2005.

The  Zinc  Recovery   Project  is  being   constructed  by  Kvaerner  U.S.  Inc.
("Kvaerner")  pursuant  to a date  certain,  fixed-price,  turnkey  engineering,
procurement  and   construction   contract  (the  "Zinc  Recovery   Project  EPC
Contract").  Kvaerner is a wholly-owned  indirect subsidiary of Kvaerner ASA, an
internationally  recognized engineering and construction firm experienced in the
metals, mining and processing industries.

Inflation has not had a significant impact on the Guarantors'  operating revenue
and costs.

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

<PAGE>


                       THE SALTON SEA FUNDING CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                       (in thousands, except per kwh data)
                        ---------------------------------

Environmental Liabilities:

The  Company may be exposed to  environmental  costs in the  ordinary  course of
business.  Expenditures for ongoing  compliance with  environmental  regulations
that relate to current  operations are expensed or  capitalized as  appropriate.
Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue  generation,  are expensed.
Liabilities   are  recorded  when   environmental   assessments   indicate  that
remediation  efforts are  probable  and the costs can be  reasonably  estimated.
Estimates of the liability are based upon currently  available  facts,  existing
technology and presently enacted laws and regulations  taking into consideration
the likely  effects of  inflation  and other social and  economic  factors,  and
include  estimates of associated legal costs.  These amounts also consider prior
experience in remediating sites, other companies'  clean-up  experience and data
released by the Environmental  Protection Agency or other  organizations.  These
estimated  liabilities are subject to revision in future periods based on actual
costs or new circumstances,  and are included in the accompanying balance sheets
at their undiscounted  amounts.  As of March 31, 2001 and December 31, 2000, the
environmental liabilities recorded on the balance sheet were not material.



<PAGE>


                         SALTON SEA FUNDING CORPORATION

                           PART II - OTHER INFORMATION


Item 1 - Legal proceedings.

     Neither the Salton Sea Funding  Corporation  nor the Guarantors are parties
to any material  legal  matters  except as noted in footnote 3 of the Salton Sea
Funding Corporation financial statements.

Item 2 - Changes in Securities.

         Not applicable.

Item 3 - Default on Senior Securities.

         Not applicable.

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

         Not applicable.

Item 5 - Other Information.

         Not applicable.

Item 6 - Exhibits and Reports on Form 8-K.

(a)      Exhibits:

              Exhibit 18, Letter of Deloitte & Touche, LLP regarding Change in
Accounting Principles.

         (b)  Reports on Form 8-K:

          Current Report filed January 16, 2001, report of unscheduled  material
          events regarding California  electricity crisis and Edison's financial
          condition.

          Current Report filed January 19, 2001, report of unscheduled  material
          events regarding California  electricity crisis and Edison's financial
          condition.

          Current Report filed February 8, 2001, report of unscheduled  material
          events regarding California  electricity crisis and Edison's financial
          condition.

          Current Report filed February 20, 2001, report of unscheduled material
          events regarding California  electricity crisis and Edison's financial
          condition.

          Current Report filed February 21, 2001,  amended report of unscheduled
          material events regarding  California  electricity crisis and Edison's
          financial condition.

          Current Report filed March 23, 2001,  report of  unscheduled  material
          events regarding California  electricity crisis and Edison's financial
          condition.



<PAGE>


                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934 the  registrant  has duly  caused  this  report  to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Omaha, State
of Nebraska, on this 14th day of May, 2001.


                                         SALTON SEA FUNDING CORPORATION


Date:  May 14, 2001                      /s/    Joseph M. Lillo*
                                         By:    Joseph M. Lillo
                                         Vice President and Controller


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



<PAGE>


                                  EXHIBIT INDEX

Exhibit                                                                    Page
  No.                                                                       No.

  18  Independent Accountants' Report regarding change in accounting        40