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 September 30, 1999
                          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.             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 LLC                         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 Corporation              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 September  30,
1999.

<PAGE>

                         SALTON SEA FUNDING CORPORATION

                                    Form 10-Q

                               September 30, 1999

                                  -------------

                                 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, September 30, 1999 and December 31, 1998                     5

Statements of Operations for the Three and Nine Months Ended

    September 30, 1999 and 1998                                              6

Statements of Cash Flows for the Nine Months Ended

    September 30, 1999 and 1998                                              7

Notes to Financial Statements                                                8

SALTON SEA GUARANTORS

Independent Accountants' Report                                              9

Combined Balance Sheets, September 30, 1999 and December 31, 1998           10

Combined Statements of Operations for the Three and Nine Months Ended
    September 30, 1999 and 1998                                             11

Combined Statements of Cash Flows for the Nine Months Ended
    September 30, 1999 and 1998                                             12

Notes to Combined Financial Statements                                      13

<PAGE>

PARTNERSHIP GUARANTORS

Independent Accountants' Report                                             14

Combined Balance Sheets, September 30, 1999 and December 31, 1998           15

Combined Statements of Operations for the Three and Nine Months Ended
    September 30, 1999 and 1998                                             16

Combined Statements of Cash Flows for the Nine Months Ended
    September 30, 1999 and 1998                                             17

Notes to Combined Financial Statements                                      18

SALTON SEA ROYALTY COMPANY

Independent Accountants' Report                                             19

Balance Sheets, September 30, 1999 and December 31, 1998                    20

Statements of Operations for the Three and Nine Months Ended
    September 30, 1999 and 1998                                             21

Statements of Cash Flows for the Nine Months Ended

    September 30, 1999 and 1998                                             22

Notes to Financial Statements                                               23

ITEM 2.          Management's Discussion and Analysis of

                 Financial Condition and Results of Operations              24


                           PART II: OTHER INFORMATION

ITEM 1.          Legal Proceedings                                          33

-------
ITEM 2.          Changes in Securities                                      33

-------
ITEM 3.          Defaults on Senior Securities                              33

-------
ITEM 4.          Submission of Matters to a Vote of

------           Security Holders                                           33
ITEM 5.          Other Information                                          33

-------
ITEM 6.          Exhibits and Reports on Form 8-K                           33
-------

Signatures                                                                  34

Exhibit Index                                                               35

<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 September 30, 1999,  and the related  statements of operations
for the three and nine month periods ended  September 30, 1999 and 1998 and cash
flows for the nine  month  periods  ended  September  30,  1999 and 1998.  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  generally  accepted  auditing  standards,  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.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the balance sheet of Salton Sea Funding  Corporation  as of December
31, 1998, 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 28, 1999, (March 3, 1999 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, 1998 is fairly stated,  in
all material  respects,  in relation to the balance sheet from which it has been
derived.

DELOITTE & TOUCHE LLP

Omaha, Nebraska
October 25, 1999

<PAGE>

                         SALTON SEA FUNDING CORPORATION

                                 BALANCE SHEETS

                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                September 30,      December 31,
                                                     1999              1998

                                                 -----------       ----------
                                                 (unaudited)

ASSETS

Cash                                            $     34,868       $  17,629
Prepaid expenses and other assets                     15,822           6,768
Secured project notes from Guarantors                597,898         626,816
Investment in 1% of net assets of
    Guarantors                                         8,557           8,124
                                                  ----------      ----------
                                                 $   657,145       $ 659,337
                                                  ==========      ==========

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:

Accrued liabilities                           $       15,076       $   3,971
Due to affiliates                                     31,666          16,612
Senior secured notes and bonds                       597,898         626,816
                                                  ----------      ----------
    Total liabilities                                644,640         647,399

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                                      7,139           6,572
                                                  ----------      ----------
    Total stockholder's equity                        12,505          11,938
                                                  ----------      ----------
                                                $    657,145       $ 659,337
                                                  ==========      ==========

                     The  accompanying  notes  are an  integral  part  of  these

financial statements.

<PAGE>

                         SALTON SEA FUNDING CORPORATION

                            STATEMENTS OF OPERATIONS

                             (DOLLARS IN THOUSANDS)

                                   (UNAUDITED)

                                     Three Months Ended   Nine Months Ended
                                        September 30        September 30,

                                        1999      1998     1999      1998
                                    ---------  --------    ------    ------
Revenues:

Interest income ..............        $11,625   $ 8,663   $35,736   $26,372
EQUITY IN EARNINGS OF GUARANTORS          225       383       433       780
                                      -------   -------   -------   -------

Total revenues ...............         11,850     9,046    36,169    27,152
                                      -------   -------   -------   -------

Expenses:

General and administrative expenses       148       336       551       809
Interest expense .............         11,300     8,074    34,659    24,353
                                      -------   -------   -------   -------
Total expenses ...............         11,448     8,410    35,210    25,162
                                      -------   -------   -------   -------
Income before income taxes ...            402       636       959     1,990
Provision for income taxes ...            164       261       392       816
                                      -------   -------   -------   -------
Net income ...................        $   238   $   375   $   567   $ 1,174
                                      =======   =======   =======   =======

                     The  accompanying  notes  are an  integral  part  of  these

financial statements.

<PAGE>

                         SALTON SEA FUNDING CORPORATION

                            STATEMENTS OF CASH FLOWS

                             (DOLLARS IN THOUSANDS)

                                   (UNAUDITED)

                                                               Nine Months Ended

                                                                   SEPTEMBER 30,
                                                               1999         1998

Cash flows from operating activities:

     Net income                                          $     567   $    1,174
     Adjustments to reconcile net income to net
         cash flows from operating activities:

     Equity in earnings of guarantors                         (433)        (780)
     Changes in assets and liabilities:
         Prepaid expenses and other assets                  (9,054)      (7,409)
         Accrued liabilities                                11,105        7,182
                                                         ---------     ---------

     Net cash flows from operating activities                2,185          167
                                                         ---------     ---------
Cash flows from investing activities:
     Principal repayments of secured project notes

       from Guarantors                                      28,918       53,469
                                                         ---------    ----------
     Net cash flows from investing activities               28,918       53,469
                                                         ---------    ----------
Cash flows from financing activities:

     Increase in due to affiliates                          15,054       48,767
     Repayment of senior secured notes and bonds           (28,918)     (53,469)
                                                        ----------     ---------
     Net cash flows from financing activities              (13,864)      (4,702)
                                                        ----------     ---------
Net change in cash                                          17,239       48,934
Cash at the beginning of period                             17,629       15,568
                                                        ----------     ---------
Cash at the end of period                          $        34,868    $  64,502
                                                        ==========     =========


                     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  September  30,  1999 and the  results of
operations  for the three and nine months ended  September 30, 1999 and 1998 and
cash flows for the nine months ended September 30, 1999 and 1998. The results of
operations  for the three and nine months ended  September 30, 1999 and 1998 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, 1998.

The  Funding  Corporation  was formed on June 20,  1995 for the sole  purpose of
acting as issuer of senior secured notes and bonds.

2. DISPOSITION OF POWER GENERATION ASSETS:

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

<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 September  30, 1999,  and the related  combined  statements of
operations  for the three and nine month  periods  ended  September 30, 1999 and
1998 and cash flows for the nine month  periods  ended  September  30,  1999 and
1998.  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  generally  accepted  auditing  standards,  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.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the  combined  balance  sheet of the  Salton  Sea  Guarantors  as of
December  31,  1998,  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 28, 1999, (March 3, 1999 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, 1998 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
October 25, 1999

<PAGE>

                              SALTON SEA GUARANTORS

                             COMBINED BALANCE SHEETS

                             (DOLLARS IN THOUSANDS)

                                                September 30,   December 31,
                                                    1999           1998

                                                 ----------      ---------
                                                (unaudited)

ASSETS

Restricted cash                                  $   20,625     $  71,673
Accounts receivable                                  18,326        15,957
Prepaid expenses and other assets                    12,513        12,410
Property, plant, contracts and equipment, net       528,013       480,293
Excess of cost over fair value of net assets

   acquired, net                                     47,204        48,182
                                                  ---------      ---------
                                                  $ 626,681     $ 628,515
                                                   ========       ========


LIABILITIES AND GUARANTORS' EQUITY
Liabilities:

Accounts payable                              $           3     $     504
Accrued liabilities                                   7,852         7,166
Due to affiliates                                    15,930        30,688
Senior secured project note                         301,992        310,030
                                                  ---------      ---------
    Total liabilities                               325,777       348,388

Total Guarantors' equity                            300,904       280,127
                                                  ---------      ---------
                                                  $ 626,681     $ 628,515
                                                  =========      =========

                     The  accompanying  notes  are an  integral  part  of  these

financial statements.

<PAGE>

                              SALTON SEA GUARANTORS

                        COMBINED STATEMENTS OF OPERATIONS

                             (DOLLARS IN THOUSANDS)

                                   (UNAUDITED)

                                Three Months Ended        Nine Months Ended
                                   September 30              September 30

                                 1999        1998          1999         1998
                               --------    --------      --------     --------
Revenues:

Sales of electricity          $  27,043   $  34,359     $  64,861    $  82,156
Interest and other income           425           8         1,868           30
                                -------     -------       -------      -------
     Total revenues              27,468      34,367        66,729       82,186
                                -------     -------       -------      -------
Expenses:

Operating, general and

   administration                 7,655       7,963        21,190       22,510
Depreciation and amortization     4,225       3,724        12,668       11,164
Interest expense                  6,063       5,013        18,234       15,472
Less capitalized interest        (2,489)     (1,513)       (6,140)      (4,125)
                                -------     -------       -------      -------
     Total expenses              15,454      15,187        45,952       45,021
                                -------     -------       -------      -------
Net income                    $  12,014    $ 19,180     $  20,777     $ 37,165
                                =======     =======       =======      =======

                     The  accompanying  notes  are an  integral  part  of  these

financial statements.

<PAGE>

                              SALTON SEA GUARANTORS

                        COMBINED STATEMENTS OF CASH FLOWS

                             (DOLLARS IN THOUSANDS)

                                   (UNAUDITED)

                                                         Nine Months Ended
                                                            September 30,

                                                        --------------------
                                                        1999              1998
                                                   ------------        ---------
Cash flows from operating activities:

Net income                                         $    20,777       $   37,165
Adjustments to reconcile net income to net
    cash flows from operating activities:

       Depreciation and amortization                    12,668           11,164
       Changes in assets and liabilities:
         Accounts receivable                            (2,369)          (6,933)
         Prepaid expenses and other assets                (103)           1,342
Accounts payable and accrued

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                   185            5,413
                                                     ---------        ---------
Net cash flows from operating activities                31,158           48,151
                                                     ---------        ---------
Cash flows from investing activities:

Capital expenditures                                   (59,410)          (5,222)
Decrease in restricted cash                             51,048              ---
                                                     ---------        ---------
NET CASH FLOWS FROM INVESTING ACTIVITIES                (8,362)          (5,222)
                                                     ---------        ---------

Cash flows from financing activities:

Decrease in due to affiliates                          (14,758)         (23,204)
 Repayments of senior secured project note              (8,038)         (19,725)
                                                     ---------        ---------
Net cash flows from financing activities               (22,796)         (42,929)
                                                     ---------        ---------
Net change in cash                                         ---              ---
Cash at beginning of period                                ---              ---
                                                     ---------        ---------
Cash at end of period                           $          ---   $          ---
                                                     =========        =========


                     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 combined financial statements contain all adjustments
(consisting only of normal recurring  accruals)  necessary to present fairly the
financial  position as of September 30, 1999 and the results of  operations  for
the three and nine months ended  September  30, 1999 and 1998 and cash flows for
the nine months ended September 30, 1999 and 1998. The results of operations for
the three and nine months ended  September 30, 1999 and 1998 are not necessarily
indicative of the results to be expected for the full year.

The unaudited  combined  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, 1998.

The combined  financial  statements  include the accounts of the partnerships in
which the Guarantors have a 100% interest.

2. DISPOSITION OF POWER GENERATION ASSETS:

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

<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 September  30, 1999,  and the related  combined  statements of
operations for the three and nine month periods ended September 30 1999 and 1998
and cash flows for the nine month  periods  ended  September  30, 1999 and 1998.
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  generally  accepted  auditing  standards,  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.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the  combined  balance  sheet of the  Partnership  Guarantors  as of
December  31,  1998,  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 28,  1999,  (March 3, 1999 as to Note
10), 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, 1998 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
October 25, 1999

<PAGE>

                             PARTNERSHIP GUARANTORS

                             COMBINED BALANCE SHEETS

                             (DOLLARS IN THOUSANDS)

                                                September 30,     December 31,
                                                    1999             1998

                                                (unaudited)

ASSETS

Restricted cash                                   $ 113,729       $ 164,983
Accounts receivable                                  25,572          33,404
Prepaid expenses and other assets                    17,131          23,088
Due from affiliates                                 130,355         121,130
Property, plant, contracts and equipment, net       470,715         399,817
Management fee                                       71,770          71,596
Excess of cost over fair value of net assets

  acquired, net                                     128,885         131,558
                                                  ---------       ---------
                                                  $ 958,157       $ 945,576
                                                  =========       =========


LIABILITIES AND GUARANTORS' EQUITY
Liabilities:

Accounts payable                                 $    2,894       $   1,879
Accrued liabilities                                  53,941          53,647
Senior secured project notes                        277,394         293,576
Deferred income taxes                               109,089          97,641
                                                  ---------       ---------
Total liabilities                                   443,318         446,743

Commitments and Contingencies (Note 3)

Guarantors' equity:

Common stock                                              3               3
Additional paid-in capital                          387,663         387,663
Retained earnings                                   127,173         111,167
                                                  ---------       ---------
Total Guarantors' equity                            514,839         498,833
                                                  ---------       ---------
                                                  $ 958,157       $ 945,576
                                                  =========       =========



                     The  accompanying  notes  are an  integral  part  of  these

financial statements.

<PAGE>

                             PARTNERSHIP GUARANTORS

                        COMBINED STATEMENTS OF OPERATIONS

                             (DOLLARS IN THOUSANDS)

                                   (UNAUDITED)

                                 Three Months Ended        Nine Months Ended
                                   September 30,             September 30,

                                  1999         1998        1999        1998
                               ---------    ---------    ---------   ---------
Revenues:

Sales of electricity           $  35,940    $  51,060   $  82,192  $  124,731
Interest and other income          1,467        1,743       5,941       3,775
                               ---------    ---------   ---------   ---------
Total revenues                    37,407       52,803      88,133     128,506
                               ---------    ---------   ---------   ---------

Expenses:

Operating, general and

   administration                 12,483       16,937      35,548      46,721
Depreciation and amortization      6,241       12,146      18,721      36,312
Interest expense                   5,483        2,435      16,818       8,188
Less capitalized interest         (3,662)      (2,257)    (10,409)     (7,144)
                               ---------    ---------   ---------   ---------

Total expenses                    20,545       29,261      60,678      84,077
                               ---------    ---------   ---------   ---------
Income before income taxes        16,862       23,542      27,455      44,429
Provision for income taxes         7,318        9,122      11,449      17,280
                               ---------    ---------   ---------   ---------

Net income                     $   9,544    $  14,420   $  16,006   $  27,149
                               =========    =========   =========   =========



                     The  accompanying  notes  are an  integral  part  of  these

financial statements.

<PAGE>

                             PARTNERSHIP GUARANTORS

                        COMBINED STATEMENTS OF CASH FLOWS

                             (DOLLARS IN THOUSANDS)

                                   (UNAUDITED)

                                                       Nine Months Ended
                                                          September 30,

                                                    1999               1998
                                                 ---------            ---------
Cash flows from operating activities:

Net income                                        $  16,006         $  27,149
Adjustments to reconcile net income to net
    cash flows from operating activities:

       Depreciation and amortization                 18,721            36,312
       Deferred income taxes                         11,449            17,280
       Changes in assets and liabilities:

          Accounts receivable                         7,833           (18,951)
          Prepaid expenses and other assets           5,957            (4,737)
          Accounts payable and accrued
           liabilities                                1,307             2,378
                                                  ---------         ---------
Net cash flows from operating activities             61,273            59,431
                                                  ---------         ---------
Cash flows from investing activities:

Capital expenditures                                (84,837)          (32,156)
Decrease in restricted cash                          51,254               ---
Management fee                                       (2,283)           (3,242)
                                                  ---------         ---------
Net cash flows from investing activities            (35,866)          (35,398)
                                                  ---------         ---------
Cash flows from financing activities:

Repayments of senior secured project notes          (16,182)          (25,881)
Increase (decrease) in due from affiliates           (9,225)            1,848
                                                  ---------         ---------
Net cash flows from financing activities            (25,407)          (24,033)
                                                  ---------         ---------
Net change in cash                                      ---               ---
Cash at beginning of period                             ---               ---
                                                  ---------         ---------
Cash at end of period                             $     ---         $     ---
                                                  =========         =========

                     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 September 30, 1999 and the results of  operations  for
the three and nine months ended  September  30, 1999 and 1998 and cash flows for
the nine months ended September 30, 1999 and 1998. The results of operations for
the three and nine months ended  September 30, 1999 and 1998 are not necessarily
indicative of the results to be expected for the full year.

The unaudited  combined  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, 1998.

The  combined  financial  statements  include  the  proportionate  share  of the
accounts of the partnerships in which the Guarantors have an interest.

2. DISPOSITION OF POWER GENERATION ASSETS:

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

3. CONTINGENCIES:

On February 26, 1998, Del Ranch and Elmore initiated an action against Edison in
Imperial  County  Superior  Court for  payment  for energy  delivered  to Edison
pursuant to long term power sale  agreements at the escalated rate of 14.6 cents
for 1998.  For the Elmore and Del Ranch  partnerships,  Edison has asserted that
prices should not be escalated for 1998 and made payments for energy  deliveries
at 13.6 cents per kWh in 1998. This issue,  along with other issues, was settled
in September, 1999, subject to California Public Utilities  Commission approval,
with a net payment from Edison of approximately $3.7 million, which was received
in October,  1999,  and a reduction of  approximately  $2.7 million was recorded
within Sales of Electricity on the income statement.

<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
Company as of September 30, 1999,  and the related  statements of operations for
the three and nine month  periods  ended  September  30,  1999 and 1998 and cash
flows for the nine  month  periods  ended  September  30,  1999 and 1998.  These
financial  statements are the responsibility of the Salton Sea Royalty 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  generally  accepted  auditing  standards,  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.

We have  previously  audited,  in accordance  with generally  accepted  auditing
standards,  the balance  sheet of the Salton Sea Royalty  Company as of December
31, 1998, and the related  statements of operations,  equity, and cash flows for
the year then ended (not presented herein);  and in our report dated January 28,
1999, (March 3, 1999 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, 1998 is fairly  stated,  in all
material  respects,  in  relation  to the  balance  sheet from which it has been
derived.

DELOITTE & TOUCHE LLP

Omaha, Nebraska
October 25, 1999

<PAGE>

                           SALTON SEA ROYALTY COMPANY

                                 BALANCE SHEETS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                               September 30,     December 31,
                                                    1999            1998

                                               -----------        -----------
                                                (unaudited)

ASSETS

Due from affiliates                              $   54,091      $   50,928
Royalty stream, net                                  17,291          22,932
Excess of cost over fair value of net assets

  acquired, net                                      32,507          33,188
Prepaid expenses and other assets                       304             513
                                                 ----------      ----------
                                                 $  104,193      $  107,561
                                                 ==========      ==========


LIABILITIES AND EQUITY
Liabilities:

Accrued liabilities                              $   36,629       $  39,584
Senior secured project note                          18,512          23,210
Deferred income taxes                                 4,541           6,769
                                                 ----------      ----------
    Total liabilities                                59,682          69,563

Equity:

Common stock, par value $.01 per share; 100

  share authorized, issued and outstanding                -               -
Additional paid-in capital                            1,561           1,561
Retained earnings                                    42,950          36,437
                                                 ----------      ----------
Total equity                                         44,511          37,998
                                                 ----------      ----------
                                                 $  104,193      $  107,561
                                                 ==========      ==========

                     The  accompanying  notes  are an  integral  part  of  these

financial statements.

<PAGE>

                           SALTON SEA ROYALTY COMPANY

                            STATEMENTS OF OPERATIONS

                             (DOLLARS IN THOUSANDS)

                                   (UNAUDITED)

                                      Three Months Ended    Nine Months Ended
                                         September 30,         September 30,

                                    ---------------------  ---------------------
                                         1999      1998      1999        1998
                                       -------    -------  -------     -------
Revenues:

Royalty income                      $    4,495  $  12,846  $ 21,724  $  37,526

Expenses:
Operating, general and

   administrative expenses               1,258      2,204     3,412      6,095
Amortization of royalty stream
   and goodwill                          1,425      2,449     6,322      7,346
Interest expense                           398        657     1,312      2,172
                                     ---------  ---------  --------  ---------
Total expenses                           3,081      5,310    11,046     15,613
                                     ---------  ---------  --------  ---------

Income before income taxes               1,414      7,536    10,678     21,913
Provision for income
taxes                                      488      2,833     4,165      8,249
                                     ---------  ---------  --------- ---------

Net income                           $     926  $   4,703  $  6,513  $  13,664
                                     =========  =========  ========  =========

                     The  accompanying  notes  are an  integral  part  of  these

financial statements.

<PAGE>

                           SALTON SEA ROYALTY COMPANY

                            STATEMENTS OF CASH FLOWS

                             (DOLLARS IN THOUSANDS)

                                   (UNAUDITED)

                                                           Nine Months Ended
                                                             September 30,

                                                       -----------------------
                                                            1999        1998

                                                        ---------     --------
Cash flows from operating activities:

Net income                                              $   6,513   $   13,664
Adjustments to reconcile net income to net
    cash flows from operating activities:

       Amortization of royalty stream and goodwill          6,322        7,346
       Changes in assets and liabilities:
       Prepaid expenses and other assets                      209          351
       Accrued liabilities and deferred income taxes       (5,183)      17,260

Net cash flows from operating activities                    7,861       38,621

Net cash flows from financing activities:

Increase in due from affiliates                            (3,163)     (30,758)
Repayment of senior secured project note                   (4,698)      (7,863)
                                                        ---------    ---------
Net cash flows from financing activities                   (7,861)     (38,621)

Net change in cash                                            ---          ---
Cash at beginning of period                                   ---          ---
                                                        ---------    ---------
Cash at end of period                                 $       ---    $    ----
                                                        =========    =========

                     The  accompanying  notes  are an  integral  part  of  these

financial statements.

<PAGE>

                           SALTON SEA ROYALTY COMPANY

                          NOTES TO FINANCIAL STATEMENTS

                              --------------------

1.  GENERAL:

In the opinion of management of the Salton Sea Royalty Company (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 September 30, 1999 and the results of  operations  for
the three and nine months ended  September  30, 1999 and 1998 and cash flows for
the nine months ended September 30, 1999 and 1998. The results of operations for
the three and nine months ended  September 30, 1999 and 1998 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, 1998.

2. DISPOSITION OF POWER GENERATION ASSETS:

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

<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  Company'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  Company are
limited to available  cash flow.  The Funding  Corporation  does not conduct any
operations apart from the Securities.

The  Vulcan,  Leathers,  Del Ranch and Elmore  partnerships  (collectively,  the
"Partnership  Projects") sell 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 makes 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.  Energy is sold at increasing  scheduled  rates for the
first ten years of each plants  operations  and  thereafter at Edison's  Avoided
Cost of Energy.

The scheduled  energy price periods of the  Partnership  Project SO4  Agreements
extended until February 1996 for the Vulcan  Partnership,  December 1998 for the
Hoch (Del Ranch) and Elmore Partnerships, and extend until December 1999 for the
Leathers Partnership.

For 1999, Vulcan,  Hoch and Elmore are receiving Edison's Avoided Cost of Energy
pursuant to their  respective  SO4  Agreements.  The SO4  Agreement for Leathers
provides for energy rates of 15.6 cents per kWh in 1999.

<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)

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

The  Salton  Sea II and  Salton  Sea III  Projects  sell  electricity  to Edison
pursuant to 30-year modified SO4 Agreements that provide for capacity  payments,
capacity bonus payments and energy payments. The price for contract capacity and
contract  capacity  bonus  payments  is fixed for the life of the  modified  SO4
Agreements.  The energy  payments for the first ten year period,  which  expires
April 4, 2000 for Salton Sea II and expired on February  13, 1999 for Salton Sea
III, are levelized at a time period  weighted  average of 10.6 cents per kWh and
9.8  cents  per  kWh  for  Salton  Sea  II and  Salton  Sea  III,  respectively.
Thereafter,  the monthly  energy  payments  will be at Edison's  Avoided Cost of
Energy. For Salton Sea II only, Edison is entitled to receive, at no cost, 5% of
all energy  delivered in excess of 80% of contract  capacity  through  March 31,
2004.

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

For the nine months ended September 30, 1999,  Edison's  average Avoided Cost of
Energy was 2.9 cents per kWh which is  substantially  below the contract  energy
prices earned for the nine months ended September 30,1999. Estimates of Edison's
future Avoided Cost of Energy vary substantially from year to year.

<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)

The Company  cannot  predict the likely level of Avoided  Cost of Energy  prices
under the SO4  Agreements  and the modified SO4  Agreements at the expiration of
the scheduled  payment periods.  The revenues  generated by each of the projects
operating  under such  Agreements  will likely decline  significantly  after the
expiration of the respective scheduled payment periods.

The following data includes the aggregate capacity and electricity production of
Salton Sea Units I, II, III and IV:

                                  Three Months Ended       Nine Months Ended
                                     September 30,           September 30,

                                ---------------------   ---------------------
                                  1999         1998          1999       1998
                                --------     -------       ------      ------
Overall capacity factor           96.4%        98.7%        91.2%       93.1%
Capacity (NMW) (average)          119.4        119.4        119.4       119.4
kWh produced (in thousands)     254,200      260,200      713,500     728,100

The overall capacity factor for the Salton Sea Projects decreased marginally for
the nine months ended September 30, 1999 compared to the same period in 1998 due
to increased  overhauls and  injection  limitations  which are  currently  being
addressed.

The following data includes the aggregate capacity and electricity production of
Vulcan, Del Ranch, Elmore and Leathers:

                                Three Months Ended           Nine Months Ended
                                   September 30,               September 30,

                              ---------------------      ----------------------
                                  1999        1998             1999        1998
                               --------    --------         --------   ---------
Overall capacity factor          105.2%      105.5%           102.2%       99.2%
Capacity (NMW) (average)            148         148              148        148
kWh produced (in thousands)     343,600     344,900          991,000     961,500


The overall capacity factor for the Partnership  Projects increased for the nine
months  ended  September  30,  1999  compared  to the same period in 1998 due to
scheduled overhauls at Leathers and Elmore in 1998.

<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)

Revenues:

The Salton Sea  Guarantors'  sales of  electricity  decreased to $27,043 for the
three months ended  September 30, 1999 from $34,359 for the same period in 1998,
a 21.3%  decrease.  For the nine  months  ended  September  30,  1999,  revenues
decreased to $64,861 from $82,156 in 1998,  a 21.1%  decrease.  These  decreases
were  primarily  due to the  expiration  of the fixed price period at Salton Sea
Unit III in February, 1999.

The Partnership  Guarantors'  sales of electricity  decreased to $35,940 for the
three months ended  September 30, 1999 from $51,060 for the same period in 1998,
a 29.6% decrease.  For the nine month period ended September 30, 1999,  sales of
electricity decreased to $82,192 from $124,731 in 1998, a 34.1% decrease.  These
decreases were primarily due to the expiration of the scheduled  price period at
Elmore and Del Ranch at December 31, 1998.

The Royalty  Guarantor  revenue  decreased  to $4,495 for the three months ended
September  30, 1999 from  $12,846  for the same  period last year.  For the nine
month period ended September 30, 1999, revenue decreased to $21,724 from $37,526
in 1998.  This  decrease  was due  primarily  to a decrease in East Mesa royalty
income  related to a royalty  settlement  and a reduction in royalty income from
Del Ranch and Elmore due to lower revenue.

Operating Expenses:

The Salton Sea Guarantors' operating expenses, which include royalty, operating,
and general and  administrative  expenses,  decreased  to $7,655,  for the three
months ended September 30, 1999 from $7,963 for the same period in 1998. For the
nine month period ended  September  30, 1999,  operating  expenses  decreased to
$21,190  from  $22,510 in 1998.  These  decreases  were  primarily  due to lower
royalty costs resulting from lower revenues.

The  Partnership   Guarantors'   operating  expenses,   which  include  royalty,
operating, and general and administrative expenses, decreased to $12,483 for the
three months ended  September 30, 1999 from $16,937 for the same period in 1998.
For the nine month period ended September 30, 1999, operating expenses decreased
to  $35,548  from  $46,721  in 1998,  a 23.9%  decrease.  These  decreases  were
primarily due to a reduction in royalty expenses due to the lower revenues.

The Royalty  Guarantors'  operating  expenses  decreased to $1,258 for the three
months ended September 30, 1999 from $2,204 for the same period in 1998, a 42.9%
decrease. For the nine month period ended September 30, 1999, operating expenses
decreased to $3,412 from $6,095 in 1998, a 44.0% decrease.  These decreases were
due to lower royalty costs due to the end of the scheduled  price periods at Del
Ranch and Elmore.

<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)

Depreciation and Amortization:

The Salton Sea Guarantors' depreciation and amortization increased to $4,225 for
the three  months  ended  September  30, 1999 from $3,724 for the same period of
1998, a 13.5%  increase.  For the nine month period  ended  September  30, 1999,
depreciation  and  amortization  increased to $12,668 from $11,164 in 1998.  The
increase was due to an adjustment to the step up depreciation charges.

The Partnership  Guarantors'  depreciation and amortization  decreased to $6,241
for the three months ended  September  30, 1999 from $12,146 for the same period
in 1998. For the nine month period ended  September 30, 1999,  depreciation  and
amortization  decreased to $18,721  from  $36,312 in 1998.  The decrease was due
primarily  to  lower  step up  depreciation  amortization  after  the end of the
scheduled price periods at Del Ranch and Elmore.

The  Royalty  Guarantors'  amortization  was $1,425 for the three  months  ended
September 30, 1999 compared to $2,449 for the same period of 1998.  For the nine
month  period ended  September  30, 1999,  amortization  was $6,322  compared to
$7,346 in 1998. The decrease was due to lower  amortization  associated with the
end of the scheduled price periods at Del Ranch and Elmore.

Interest Expense:

The  Salton  Sea  Guarantors'  interest  expense,  net of  capitalized  amounts,
increased to $3,574 for the three months  ended  September  30, 1999 from $3,500
for the same period in 1998,  a 2.1%  increase.  For the nine month period ended
September 30, 1999, interest expense, net of capitalized  amounts,  increased to
$12,094 from $11,347 in 1998.  The  increases  were  primarily  due to increased
indebtedness from the issuance of the Series F notes in October 1998.

The  Partnership  Guarantors'  interest  expense,  net of  capitalized  amounts,
increased to $1,821 for the three months ended  September 30, 1999 from $178 for
the same period in 1998.  For the nine month  period ended  September  30, 1999,
interest expense, net of capitalized  amounts,  increased to $6,409 from $1,044.
The increases were primarily due to increased  indebtedness from the issuance of
the Series F notes in October 1998.

The Royalty Guarantors'  interest expense decreased to $398 for the three months
ended  September  30, 1999 from $657 from the same period in 1998.  For the nine
month period ended September 30, 1999, interest expense decreased to $1,312 from
$2,172 in 1998. 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.

<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)

The  Partnership  Guarantors  income tax  provision  decreased to $7,318 for the
three months ended September  30,1999 from $9,122 for the same period in 1998, a
19.8%  decrease.  For the nine  month  period  ended  September  30,  1999,  the
provision  for income taxes  decreased  to $11,449  from  $17,280 in 1998.  This
decrease was primarily due to a lower 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.

The Royalty Guarantor's income tax provision was $488 for the three months ended
September  30, 1999  compared to an income tax  provision of $2,833 for the same
period in 1998. For the nine month period ended  September 30, 1999,  income tax
provision  decreased  to  $4,165  from  $8,249  in 1998.  These  decreases  were
primarily due to lower pre-tax income.  Tax obligations of the Royalty Guarantor
will be  remitted  to the  parent  company  only  to the  extent  of cash  flows
available after operating expenses and debt service.

Net Income:

The Salton Sea  Funding  Corporation's  net  income for the three  months  ended
September  30, 1999  decreased  to $238  compared to $567 for the same period in
1998. For the nine month period ended  September 30, 1999, net income  decreased
to $563 from $1,174 in 1998. The net income primarily represents interest income
and expense, net of applicable tax, and the Salton Sea Funding  Corporation's 1%
equity in earnings of the Guarantors.

The Salton Sea Guarantors' net income  decreased to $12,014 for the three months
ended  September 30, 1999  compared to $19,180 for the same period of 1998.  For
the nine month period ended September 30, 1999, net income  decreased to $20,777
compared to $37,165 in 1998.

The Partnership  Guarantors' net income decreased to $9,544 for the three months
ended  September 30, 1999  compared to $14,420 for the same period of 1998.  For
the nine month period ended September 30, 1999, net income  decreased to $16,006
from $27,149 in 1998.

The Royalty  Guarantors' net income decreased to $926 for the three months ended
September 30, 1999 compared to $4,703 for the same period of 1998.  For the nine
month  period ended  September  30,  1999,  net income  decreased to $6,513 from
$13,664 in 1998.

<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:

CalEnergy Minerals LLC, a Partnership Guarantor ("Minerals LLC"),  developed and
owns the rights to  proprietary  processes  for the  extraction of minerals from
elements in solution in the geothermal brine and fluids utilized at its Imperial
Valley plants (the "Salton Sea Extraction Project") as well as the production of
power to be used in the  extraction  process.  A pilot  plant  has  successfully
produced  commercial quality zinc at the Company's Imperial Valley Project.  The
Company  intends  to  sequentially  develop  facilities  for the  extraction  of
manganese,  silver,  gold, lead, boron, lithium and other products as it further
develops the extraction technology.  The Company is also investigating producing
silica as an extraction project. Silica is used as a filler for such products as
paint, plastics and high temperature cement.

Minerals LLC is constructing  the Zinc Recovery  Project which will recover zinc
from the geothermal  brine (the "Zinc  Recovery  Project").  Facilities  will be
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  operation in mid-2000.  In September  1999,  CalEnergy  Minerals LLC
entered into a sales  agreement  whereby all 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.  Total  project  costs of the Zinc
Recovery  Project are expected to be  approximately  $200,900.  Minerals LLC has
incurred approximately $60,500 of such costs through September 30, 1999.

Salton  Sea Power LLC, a Salton Sea  Guarantor,  is  constructing  Salton Sea V.
Salton  Sea V  will  be a 49 net MW  geothermal  power  plant  which  will  sell
approximately  one-third  of its net output to the Zinc  Recovery  Project.  The
remainder will be sold through the California Power Exchange ("PX").

Salton Sea V is being  constructed  pursuant  to a date  certain,  fixed  price,
turn-key  engineering,  procurement and construction contract (the "Salton Sea V
EPC  Contract")  by Stone & Webster  Engineering  Corporation.  Salton  Sea V is
scheduled to commence commercial  operation in mid-2000.  Total project costs of
Salton Sea V are expected to be approximately $119,100. Salton Sea Power LLC has
incurred approximately $61,300 of such costs through September 30, 1999.

CE Turbo LLC, a Partnership Guarantor, is constructing the CE Turbo Project. The
CE Turbo  Project  will have a  capacity  of 10 net MW. The net output of the CE
Turbo Project will be sold to the Zinc Recovery Project or sold through the PX.

The  Partnership   Projects  are  upgrading  the  geothermal   brine  processing
facilities  at the  Vulcan  and Del  Ranch  Projects  with  the  Region  2 Brine
Facilities  Construction.  In  addition  to  incorporating  the pH  modification
process,  which has reduced operating costs at the Salton Sea Projects, the new,
more efficient

<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)

facilities will achieve economies through improved brine processing  systems and
the utilization of more modern equipment.  The Partnership Projects expect these
improvements  will reduce  brine-handling  operating costs at the Vulcan Project
and the Del Ranch Project.

The CE Turbo Project and the Region 2 Brine  Facilities  Construction  are being
constructed  by  SWEC  pursuant  to  a  date  certain,   fixed  price,   turnkey
engineering,  procurement and  construction  contract (the "Region 2 Upgrade EPC
Contract").  The  obligations  of  SWEC  are  guaranteed  by  Stone  &  Webster,
Incorporated.  The CE Turbo Project is scheduled to commence initial  operations
in early-2000 and the Region 2 Brine Facilities  Construction is scheduled to be
completed in  early-2000.  Total project costs for both the CE Turbo Project and
the Region 2 Brine  Facilities  Construction  are  expected to be  approximately
$63,700.  The Company has incurred  approximately  $29,300 of such costs through
September 30, 1999.

Total  equity  funding  for the Zinc  Recovery  Project,  Salton Sea V, CE Turbo
Project  and the  Region  2 Brine  Facilities  Construction  is  expected  to be
approximately $122,500.

The  operating  Salton Sea  Guarantors'  primary  source of revenue is  payments
received pursuant to long term power sales agreements with Edison. The operating
Partnership  Guarantors' primary source of revenue is payments received pursuant
to long term power sales  agreements with Edison.  The Royalty  Guarantor's only
source of revenue is Royalties  received  pursuant to resource lease  agreements
with the Partnership 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.

What is generally  known as the year 2000 ("Y2K")  computer  issue arose because
many  existing  computer  programs  and  embedded  systems use only the last two
digits to refer to a year.  Therefore,  those computer  programs do not properly
distinguish  between  a year  that  begins  with "20"  instead  of "19".  If not
corrected,  many computer  applications  could fail or create erroneous results.
The failure to correct a material Y2K item could result in an  interruption  in,
or a failure of, certain normal business activities or operations  including the
generation,  distribution,  and  supply  of  electricity.  Such  failures  could
materially and adversely affect the Company's  results of operations,  liquidity
and financial condition.

The Y2K issue creates uncertainty for the Company from potential issues with its
own  computer  systems and from third  parties  with whom the  Company  deals on
transactions  worldwide.  The Company's operations utilize systems and equipment
provided  by other  organizations.  As a result,  Y2K  readiness  of  suppliers,
vendors,  service providers or customers could impact the Company's  operations.
The Company is  assessing  the  readiness of such  constituent  entities and the
impacts on those entities that rely upon the Company's services.  The Company is
unable to  determine at this time  whether the  consequences  of Y2K failures of
third  parties  will  have  a  material  impact  on  the  Company's  results  of
operations, liquidity or financial condition.

<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)

The  Company  has  commenced,  for all of its  information  systems,  a Y2K date
conversion   project  to  address  all  necessary  code  changes,   testing  and
implementation  in order to resolve  the Y2K issue.  The  Company  created a Y2K
project team to identify,  assess and correct all of its information  technology
(IT) and non-IT  systems,  as well as,  identify and assess third party systems.
The Company has identified and assessed  substantially  all of its IT and non-IT
systems and is currently in the process of repairing or replacing  those systems
which it believes are not year 2000 compliant.  Through  September 30, 1999, the
Company is approximately 100% complete in repairing or replacing those systems.

Total Y2K expenditures,  for both repairing or replacing  non-compliant systems,
are expected to total  approximately $100. The Company has renovated or replaced
several  non-compliant  systems to gain  enhanced  functionalities.  The cost of
these types of renovations  and  replacements is not reported herein since their
development and installation were not driven by Y2K concerns. The Company is not
aware of any additional material costs needed to be incurred to bring all of its
systems into  compliance;  however,  there is no assurance that additional costs
will not be incurred.

A contingency plan identifying credible worst-case scenarios is being developed.
The  contingency  plan is comprised  of both  mitigation  and recovery  aspects.
Mitigation  entails  planning  to  reduce  the  impact of  unresolved  year 2000
problems,  and recovery  entails  planning to restore services in the event that
year 2000 problems occur. Although plans are substantially  complete,  they will
be refined throughout the remainder of the year, based on results of contingency
planning drills and changes in circumstances.

Although management believes that the Y2K project will be substantially complete
before January 1, 2000, any  unforeseen  failures of the Company's  and/or third
parties'  computer systems could have a material impact on the Company's ability
to conduct its business.

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 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>

                         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.

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 27 - Financial Data Schedule

         (B) REPORT ON FORM 8-K:

                 Not applicable.

<PAGE>

                                   SIGNATURES

Pursuant  to the  requirements  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.

                         SALTON SEA FUNDING CORPORATION

Date:  November 12, 1999    /s/ Patrick J. Goodman

                               Patrick J. Goodman

                               Senior Vice President and

                             Chief Financial Officer

                                     <PAGE>

                                  EXHIBIT INDEX

Exhibit                                                                  Page
  NO.                                                                     NO.

  27             Financial Data Schedule                                  36