UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                 OF THE SECURITIES EXCHANGE ACT OF 1934
               For the quarterly period ended September 30, 2003

                          Commission File No. 33-95538

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

                                          Delaware              47-0790493
                                          --------              ----------
                                   (State of Incorporation)     (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                95-2636765
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                95-3992087
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

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

Salton Sea Funding Corporation's telephone number, including area code:
(402) 341-4500
--------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [x] No [ ]

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [x]

All common stock of Salton Sea Funding  Corporation is indirectly  held by Magma
Power  Company.  As of  October  31,  2003,  100  shares  of common  stock  were
outstanding.


<PAGE>

                                TABLE OF CONTENTS
                                -----------------

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements..................................................3
Item 2.  Management's Discussion and Analysis of Financial Condition and
           Results of Operations..............................................28
Item 3.  Quantitative and Qualitative Disclosures About Market Risk...........36
Item 4.  Controls and Procedures..............................................36

                         PART II - OTHER INFORMATION

Item 1.  Legal Proceedings....................................................37
Item 2.  Changes in Securities and Use of Proceeds............................37
Item 3.  Defaults Upon 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

                                      -2-

<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.


                         INDEPENDENT ACCOUNTANTS' REPORT


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

We  have  reviewed  the  accompanying   balance  sheet  of  Salton  Sea  Funding
Corporation (the "Company") as of September 30, 2003, and the related statements
of operations for the  three-month  and nine-month  periods ended  September 30,
2003 and 2002, and of cash flows for the nine-month  periods ended September 30,
2003 and 2002. These interim financial  statements are the responsibility of the
Company's management.

We  conducted  our  reviews 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 and
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 reviews, we are not aware of any material modifications that should
be made to such interim  financial  statements for them to be in conformity with
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
Funding  Corporation  as of December 31,  2002,  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 24, 2003 (January 29, 2003 as
to Note 6), 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, 2002 is fairly stated, in all material respects,  in relation to
the balance sheet from which it has been derived.


/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Omaha, Nebraska
November 3, 2003

                                      -3-
<PAGE>

                         SALTON SEA FUNDING CORPORATION
                                 BALANCE SHEETS
                        (In thousands, except share data)

<TABLE>
<CAPTION>
                                                                           AS OF
                                                               ----------------------------
                                                               SEPTEMBER 30,   DECEMBER 31,
                                                                   2003            2002
                                                               -------------   ------------
                                                                (UNAUDITED)

                                     ASSETS
<S>                                                                 <C>        <C>
Current assets:
  Cash ........................................................  $ 30,765        $ 19,583
  Restricted cash .............................................         -          46,293
  Accrued interest receivable and other current assets ........    12,146           3,228
  Current portion secured project notes from Guarantors .......    29,337          28,086
                                                                 --------        --------
    Total current assets ......................................    72,248          97,190
                                                                 --------        --------
Secured project notes from Guarantors .........................   448,302         463,592
Investment in 1% of net assets of Guarantors ..................     9,882           9,721
                                                                 --------        --------
TOTAL ASSETS ..................................................  $530,432        $570,503
                                                                 ========        ========

                      LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Accrued interest ............................................  $ 12,136        $  3,156
  Current portion of long-term debt ...........................    29,337          28,086
                                                                 --------        --------
    Total current liabilities .................................    41,473          31,242
                                                                 --------        --------
Due to affiliates .............................................    26,950          62,251
Senior secured notes and bonds ................................   448,302         463,592
                                                                 --------        --------
  Total liabilities ...........................................   516,725         557,085
                                                                 --------        --------

Commitments and contingencies (Note 2)

Stockholder's equity:
  Common stock authorized - 1,000 shares,
    par value $.01 per share; issued and outstanding 100 shares         -               -
  Additional paid-in capital ..................................     6,144           5,811
  Retained earnings ...........................................     7,563           7,607
                                                                 --------        --------
    Total stockholder's equity ................................    13,707          13,418
                                                                 --------        --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ....................  $530,432        $570,503
                                                                 ========        ========
</TABLE>


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

                                      -4-
<PAGE>


                         SALTON SEA FUNDING CORPORATION
                            STATEMENTS OF OPERATIONS
                                 (In thousands)
<TABLE>
<CAPTION>

                                              THREE MONTHS         NINE MONTHS
                                           ENDED SEPTEMBER 30,  ENDED SEPTEMBER 30,
                                           -------------------  -------------------
                                             2003       2002      2003       2002
                                           -------    -------   --------    -------
                                                          (UNAUDITED)
<S>                                        <C>        <C>       <C>         <C>
REVENUE:
  Interest income ......................   $ 9,217    $ 9,984   $ 28,145    $30,057
  Equity in income (loss) of Guarantors         37        156       (172)        34
                                           -------    -------   --------    -------
    Total revenue ......................     9,254     10,140     27,973     30,091
                                           -------    -------   --------    -------
COSTS AND EXPENSES:
  General and administrative expenses ..       107        135        297        581
  Interest expense .....................     9,188      9,679     27,750     29,301
                                           -------    -------   --------    -------
    Total costs and expenses ...........     9,295      9,814     28,047     29,882
                                           -------    -------   --------    -------
INCOME (LOSS) BEFORE INCOME TAXES ......       (41)       326        (74)       209
  Income tax expense (benefit) .........       (17)       134        (30)        86
                                           -------    -------   --------    -------
NET INCOME (LOSS) ......................   $   (24)   $   192   $    (44)   $   123
                                           =======    =======   ========    =======
</TABLE>


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

                                      -5-
<PAGE>

                         SALTON SEA FUNDING CORPORATION
                            STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                                    NINE MONTHS
                                                                                                ENDED SEPTEMBER 30,
                                                                                              ---------------------
                                                                                                2003         2002
                                                                                              --------     --------
                                                                                                   (UNAUDITED)
<S>                                                                                           <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ........................................................................    $    (44)    $    123
  Adjustments to reconcile net income (loss) to net cash flows from operating activities:
    Equity in (income) loss of Guarantors ................................................         172          (34)
    Changes in assets and liabilities:
      Accrued interest receivable and other current assets ...............................      (8,918)      (9,605)
      Accrued interest ...................................................................       8,980        9,534
                                                                                              --------     --------
        Net cash flows from operating activities .........................................         190           18
                                                                                              --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES -
  Principal repayments of secured project notes from Guarantors ..........................      14,039       14,286
                                                                                              --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Decrease (increase) in restricted cash .................................................      46,293      (33,174)
  (Decrease) increase in due to affiliates ...............................................     (35,301)      43,885
  Repayment of senior secured notes and bonds ............................................     (14,039)     (14,286)
                                                                                              --------     --------
    Net cash flows from financing activities .............................................      (3,047)      (3,575)
                                                                                              --------     --------

NET CHANGE IN CASH .......................................................................      11,182       10,729
Cash at the beginning of period ..........................................................      19,583        4,361
                                                                                              --------     --------
CASH AT THE END OF PERIOD ................................................................    $ 30,765     $ 15,090
                                                                                              ========     ========
</TABLE>

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

                                      -6-
<PAGE>

                         SALTON SEA FUNDING CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   GENERAL

In the opinion of  management  of 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,  2003,  and the results of
operations for the three-month  and nine-month  periods ended September 30, 2003
and 2002, and of cash flows for the nine-month  periods ended September 30, 2003
and 2002. The results of operations for the three-month  and nine-month  periods
ended  September  30, 2003 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, 2002.

Certain amounts in the prior year financial statements have been reclassified in
order to conform to current year presentation.  Such  reclassifications  did not
impact previously reported net income or retained earnings.

2.   COMMITMENTS AND CONTINGENCIES

Due to reduced  liquidity,  Southern  California Edison ("Edison") had failed to
pay  approximately  $119 million owed under the Power Purchase  Agreements  with
certain Guarantors (the Imperial Valley Projects, excluding the Salton Sea V and
CE Turbo  Projects) for power delivered in the fourth quarter 2000 and the first
quarter  2001.  Due to  Edison's  failure to pay  contractual  obligations,  the
Guarantors had established an allowance for doubtful  accounts of  approximately
$21.0 million as of December 31, 2001.

Pursuant  to a  settlement  agreement  the final  payment  by Edison of past due
balances was received  March 1, 2002.  Following  the receipt of Edison's  final
payment of past due balances,  the Guarantors  released the remaining  allowance
for doubtful accounts.

Edison has disputed a portion of the settlement  agreement and has failed to pay
approximately  $3.9  million of  capacity  bonus  payments  for the months  from
October 2001 through May 2002. On December 10, 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  capacity bonus payments under
the Power Purchase  Agreements.  Due to Edison's  failure to pay the contractual
obligations,  certain Guarantors  established an allowance for doubtful accounts
of  approximately  $2.7 million as of December 31, 2002. In connection  with the
June 11, 2003 settlement  discussed below, the receivables  associated with this
allowance were written off during 2003.

On March 25,  2002,  Salton  Sea II's 10  megawatt  ("MW")  turbine  went out of
service due to an uncontrollable  force event. Such  uncontrollable  force event
ended, and Salton Sea II returned to service on December 17, 2002. Edison failed
to recognize the  uncontrollable  force event and, as such,  did not pay amounts
otherwise due and owing, and improperly derated Salton Sea II from 15 MW to 12.5
MW under the Salton Sea II power purchase agreement. On January 29, 2003, Salton
Sea Power  Generation L.P., owner of Salton Sea II, served a complaint on Edison
for such unpaid amount and to rescind such deration.

On June 11, 2003, certain Guarantors (the Imperial Valley Projects excluding the
Salton Sea I,  Salton Sea V and CE Turbo  Projects)  entered  into a  settlement
agreement  with Edison.  The  settlement,  which  relates to the capacity  bonus
payment and Salton Sea II uncontrollable  force event disputes,  provides for an
$800,000 settlement payment from Edison,  payment of amounts previously withheld
for the Salton Sea II deration and the recission of such  deration.  The amounts
previously  withheld for the Salton Sea II deration  were received in the second
quarter of 2003. The $800,000  settlement payment is contingent upon approval by
the California Public Utilities Commission.

                                      -7-
<PAGE>

On July 10,  2003  Salton Sea IV's 34 MW turbine  went out of service  due to an
uncontrollable  force event. Such  uncontrollable  force event ended, and Salton
Sea IV returned to service on September 17, 2003. Edison failed to recognize the
uncontrollable  force event and as such has not paid amounts  otherwise  due and
owing under the Salton Sea IV Power Purchase  Agreement  totalling $1.7 million.
On September 19, 2003 and October 17, 2003, Salton Sea Power  Generation,  L.P.,
with Fish Lake Power Company, owner of Salton Sea IV, served notices of error on
Edison  for such  unpaid  amounts.  As a result,  the  Company  has  recorded  a
liability of $1.4 million for capacity payments as of September 30, 2003.

As a result of  uncertainties  related  to  Edison,  the  letter of credit  that
supports the debt service  reserve fund at the Funding  Corporation had not been
extended  beyond its then existing July 2004  expiration  date, and as such cash
distributions  were not available to CE Generation,  LLC ("CE Generation") until
the Funding Corporation debt service reserve fund of approximately $65.4 million
had been funded or the letter of credit had been  extended  beyond its July 2004
expiration  date or  replaced.  As of  December  31,  2002,  the fund had a cash
balance of $46.3 million.

In May 2003, the previous $65.4 million Funding Corporation debt service reserve
letter  of  credit  was  replaced  by  a  $32.7   million   TransAlta  USA  Inc.
("TransAlta"),  a wholly owned  subsidiary of TransAlta  Corporation,  letter of
credit which  expires on May 30, 2004,  and a $32.7 million  MidAmerican  Energy
Holdings Company letter of credit which expires June 6, 2006.

The new Funding Corporation debt service reserve letters of credit permitted the
cash, which was previously restricted, to be included in funds distributed to CE
Generation on May 29, 2003.

Stone & Webster
---------------

The Salton Sea V Project  was  constructed  by Stone & Webster,  Inc.  (formerly
Stone & Webster Engineering Corporation),  a wholly-owned subsidiary of the Shaw
Group  ("Stone & Webster"),  pursuant to a date  certain,  fixed-price,  turnkey
engineering,  procure,  construct and manage contract (the "Salton Sea V Project
EPC Contract").  On March 7, 2002, Salton Sea Power L.L.C. ("Salton Sea Power"),
the owner of the Salton Sea V Project,  filed a Demand for  Arbitration  against
Stone & Webster  for breach of  contract  and breach of  warranty  arising  from
deficiencies  in  Stone  &  Webster's  design,  engineering,   construction  and
procurement of equipment for the Salton Sea V Project pursuant to the Salton Sea
V Project  EPC  Contract.  The demand for  arbitration  did not include a stated
claim  amount.  On April 25,  2003,  Salton Sea Power  entered into a settlement
agreement  with Stone & Webster.  The settlement  agreement  resulted in a total
payment of $12.1 million from Stone & Webster in the second quarter 2003 and the
arbitration  was  dismissed.  The  settlement  was  recorded  as a $4.5  million
reduction of incremental  capital  expenditures and a $7.6 million  reduction of
incremental  operating  expenses related to legal,  other expenses and equipment
write-offs.

On November 25, 2002, Vulcan/BN Geothermal Power Company, Del Ranch, L.P. and CE
Turbo, LLC entered into a settlement agreement with Stone & Webster related to a
Demand for Arbitration against Stone & Webster for breach of contract and breach
of warranty arising from deficiencies in Stone & Webster's design,  engineering,
construction  and  procurement  of  equipment  for  the CE  Turbo  Project.  The
settlement  agreement  resulted in a $3.5  million  payment from Stone & Webster
which was recorded as a reduction of incremental capital expenditures.

Other Commitments and Contracts
-------------------------------

On May 20, 2003,  Salton Sea Power entered into a Power Sales Agreement with the
City of Riverside,  California ("Riverside").  Under the terms of the agreement,
Salton Sea Power will sell up to 20 MW of energy generated from the Salton Sea V
Project to Riverside  at $61 per MW hour.  Sales under the  agreement  commenced
June 1, 2003 and will terminate May 31, 2013.

                                      -8-
<PAGE>

Minerals  LLC  ("Minerals")  contracted  with  Zachry  Construction  Corporation
("Zachry") under a time and materials  contract to do a maximum of $1.32 million
work for the Zinc  Recovery  Project.  Zachry  has  invoiced  Minerals  for $4.7
million of work under this  contract.  Minerals has been unable to  substantiate
Zachry's  invoices.  Zachry  filed a demand for  arbitration  with the  American
Arbitration  Association  (the "AAA") on August 19, 2003 for  collection  of its
claimed  outstanding  invoices.  Although  the AAA has  selected an  arbitration
panel,  neither the AAA nor the panel has  scheduled any hearings on this matter
to date.  Minerals  anticipates that the evidentiary hearing on this matter will
not likely occur prior to the summer of 2004.

3.   RELATED PARTY TRANSACTIONS

On January  29,  2003,  TransAlta  purchased  El Paso's  Merchant  Energy  North
American Company's ("EPME") 50% interest in CE Generation.

Pursuant to a Transaction  Agreement dated January 29, 2003, CE Turbo and Salton
Sea Power began selling available power to a subsidiary of TransAlta on February
12, 2003 based on  percentages  of the Dow Jones SP-15  Index.  The  Transaction
Agreement  shall  continue  until the earlier of (a) 30 days following a written
notice of termination  after October 1, 2003 or (b) any other  termination  date
mutually agreed to by the parties.  No such notice of termination has been given
by either party. Sales, under these agreements,  from the Partnership and Salton
Sea  Guarantors  totaled $2.4 million and $7.5 million for the  three-month  and
nine-month periods ended September 30, 2003, respectively.

Sales to EPME totaled $2.7 million and $6.1 million during the  three-month  and
nine-month periods ended September 30, 2002, respectively.

                                      -9-

<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, 2003,  and the related  combined  statements of
operations for the three-month  and nine-month  periods ended September 30, 2003
and 2002, and of cash flows for the nine-month  periods ended September 30, 2003
and 2002.  These interim  financial  statements  are the  responsibility  of the
Salton Sea Guarantors' management.

We  conducted  our  reviews 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 and
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 reviews, we are not aware of any material modifications that should
be  made  to  such  combined  interim  financial  statements  for  them to be in
conformity with 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,  2002,  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 24, 2003 (January
29, 2003 as to Note 7), 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, 2002 is fairly stated, in
all material  respects,  in relation to the combined balance sheet from which it
has been derived.


/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Omaha, Nebraska
November 3, 2003

                                      -10-
<PAGE>

                              SALTON SEA GUARANTORS
                             COMBINED BALANCE SHEETS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                    AS OF
                                                         ---------------------------
                                                         SEPTEMBER 30,  DECEMBER 31,
                                                             2003           2002
                                                         -------------  ------------
                                                          (UNAUDITED)
                                     ASSETS
<S>                                                         <C>          <C>
Current assets:
  Trade accounts receivable, net .......................    $ 19,091     $ 19,420
  Trade accounts receivable from affiliates ............       1,330        1,104
  Prepaid expenses and other current assets ............       3,445        5,283
                                                            --------     --------
    Total current assets ...............................      23,866       25,807
                                                            --------     --------
Properties, plants, contracts and equipment, net .......     515,881      535,220
Goodwill ...............................................      23,252       23,252
                                                            --------     --------
TOTAL ASSETS ...........................................    $562,999     $584,279
                                                            ========     ========

                       LIABILITIES AND GUARANTORS' EQUITY
Current liabilities:
  Accounts payable .....................................    $  1,424     $    328
  Accrued interest .....................................       5,968        1,593
  Other accrued liabilities ............................      12,428       12,304
  Current portion of long-term debt ....................      23,586       22,765
                                                            --------     --------
    Total current liabilities ..........................      43,406       36,990
                                                            --------     --------
Due to affiliates ......................................      30,602       35,665
Senior secured project note ............................     211,451      223,654
                                                            --------     --------
    Total liabilities ..................................     285,459      296,309
                                                            --------     --------

Commitments and contingencies (Note 4)

Guarantors' equity .....................................     277,540      287,970
                                                            --------     --------
TOTAL LIABILITIES AND GUARANTORS' EQUITY ...............    $562,999     $584,279
                                                            ========     ========
</TABLE>

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

                                      -11-
<PAGE>

                              SALTON SEA GUARANTORS
                        COMBINED STATEMENTS OF OPERATIONS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                 THREE MONTHS             NINE MONTHS
                                                              ENDED SEPTEMBER 30,      ENDED SEPTEMBER 30,
                                                              --------------------    ---------------------
                                                                2003         2002       2003         2002
                                                              --------     -------    --------     --------
                                                                               (UNAUDITED)

<S>                                                           <C>          <C>        <C>          <C>
REVENUE:
  Operating revenue ......................................    $ 26,646     $27,438    $ 64,611     $ 66,936
  Interest and other (loss) income .......................          12       2,185        (467)       2,615
                                                              --------     -------    --------     --------
    Total revenue ........................................      26,658      29,623      64,144       69,551
                                                              --------     -------    --------     --------
COSTS AND EXPENSES:
  Royalty, operating, general and administrative expense .      17,373      14,374      45,646       42,709
  Depreciation and amortization ..........................       4,894       4,721      14,673       15,686
  Interest expense .......................................       4,682       5,053      14,255       15,372
                                                              --------     -------    --------     --------
    Total costs and expenses .............................      26,949      24,148      74,574     $ 73,767
                                                              --------     -------    --------     --------
NET (LOSS) INCOME ........................................    $   (291)    $ 5,475    $(10,430)    $ (4,216)
                                                              ========     =======    ========     ========
</TABLE>


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

                                      -12-
<PAGE>

                              SALTON SEA GUARANTORS
                        COMBINED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                                           NINE MONTHS
                                                                                       ENDED SEPTEMBER 30,
                                                                                      ---------------------
                                                                                        2003         2002
                                                                                      --------     --------
                                                                                           (UNAUDITED)
<S>                                                                                   <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss .......................................................................    $(10,430)    $ (4,216)
  Adjustments to reconcile net loss to net cash flows from operating activities:
    Depreciation and amortization ................................................      14,673       15,686
    Other ........................................................................         172            -
    Changes in assets and liabilities:
      Trade accounts receivable, net .............................................         103       10,223
      Prepaid expenses and other current assets ..................................       1,838         (613)
      Accounts payable and accrued liabilities ...................................       5,595        1,071
                                                                                      --------     --------
        Net cash flows from operating activities .................................      11,951       22,151
                                                                                      --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES -
  Capital expenditures, net of warranty settlement ...............................        (710)      (9,859)
                                                                                      --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of senior secured project note .......................................     (11,382)     (10,240)
  Increase (decrease) in due to affiliates .......................................         141       (2,052)
                                                                                      --------     --------
    Net cash flows from financing activities .....................................     (11,241)     (12,292)
                                                                                      --------     --------
NET CHANGE IN CASH ...............................................................           -            -
Cash at the beginning of period ..................................................           -            -
                                                                                      --------     --------
CASH AT THE END OF PERIOD ........................................................    $      -    $       -
                                                                                      ========     ========
</TABLE>

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

                                      -13-
<PAGE>

                              SALTON SEA GUARANTORS
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   GENERAL

In the opinion of management of 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  September  30,  2003  and the  results  of  operations  for the
three-month  and  nine-month  periods ended  September 30, 2003 and 2002, and of
cash flows for the  nine-month  periods ended  September 30, 2003 and 2002.  The
results of operations for the three-month and nine-month periods ended September
30, 2003 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 Guarantors' Annual Report on Form 10-K for
the year ended December 31, 2002.

Certain amounts in the prior year financial statements have been reclassified in
order to conform to current year presentation.  Such  reclassifications  did not
impact previously reported net income (loss) or Guarantors' equity.

2.   NEW ACCOUNTING PRONOUNCEMENTS

Effective  January  1, 2003,  the  Guarantors  adopted  Statement  of  Financial
Accounting  Standards No. 143,  "Accounting for Asset  Retirement  Obligations".
This statement  provides  accounting and disclosure  requirements for retirement
obligations   associated  with  long-lived  assets.  The  cumulative  effect  of
initially  applying  this  statement  did  not  have a  material  effect  on the
Guarantors' financial position, results of operations or cash flows.

3.   INTANGIBLE ASSETS

The Guarantors'  acquired  intangible assets,  which are included in properties,
plants,  contracts and equipment,  net, consist of power purchase contracts (the
"Contracts")  with a cost of $33.4 million and accumulated  amortization of $9.7
million  and  $8.8  million  at  September  30,  2003  and  December  31,  2002,
respectively.  Amortization  expense on the  Contracts was $0.3 million and $0.9
million for the three-month and nine-month  periods ended September 30, 2003 and
2002, respectively. The Guarantors' expect amortization expense on the Contracts
to be $1.2 million for 2003 and each of the five succeeding fiscal years.

4.   COMMITMENTS AND CONTINGENCIES

Edison and the California Power Exchange
----------------------------------------

Due to reduced  liquidity,  Southern  California Edison ("Edison") had failed to
pay  approximately  $42.3 million owed under the Power Purchase  Agreements with
certain  Guarantors  (the Imperial Valley  Projects,  excluding the Salton Sea V
Project) for power  delivered in the fourth  quarter 2000 and the first  quarter
2001. Due to Edison's failure to pay contractual obligations, the Guarantors had
established an allowance for doubtful accounts of approximately  $6.8 million as
of December 31, 2001.

Pursuant  to a  settlement  agreement  the final  payment  by Edison of past due
balances was received  March 1, 2002.  Following  the receipt of Edison's  final
payment of past due balances,  the Guarantors  released the remaining  allowance
for doubtful accounts.

Edison has disputed a portion of the settlement  agreement and has failed to pay
approximately  $1.1  million of  capacity  bonus  payments  for the months  from
October 2001 through May 2002. On December 10, 2001, the  Guarantors  (excluding
the Salton Sea I and Salton Sea V Projects)  filed a lawsuit  against  Edison in
California's  Imperial  County  Superior  Court seeking a court order  requiring
Edison to make the required  capacity  bonus  payments  under the Power Purchase
Agreements.  Due to Edison's  failure to pay the  contractual  obligations,  the

                                      -14-
<PAGE>

Guarantors  established an allowance for doubtful accounts of approximately $0.8
million as of December 31, 2002. In connection with the June 11, 2003 settlement
discussed below, the receivables associated with this allowance were written off
during 2003.

On March 25,  2002,  Salton  Sea II's 10  megawatt  ("MW")  turbine  went out of
service due to an uncontrollable  force event. Such  uncontrollable  force event
ended, and Salton Sea II returned to service on December 17, 2002. Edison failed
to recognize the  uncontrollable  force event and, as such,  did not pay amounts
otherwise due and owing, and improperly derated Salton Sea II from 15 MW to 12.5
MW under the Salton Sea II power purchase agreement. On January 29, 2003, Salton
Sea Power  Generation L.P., owner of Salton Sea II, served a complaint on Edison
for such unpaid amount and to rescind such deration.

On June 11, 2003, certain Guarantors  (excluding the Salton Sea I and Salton Sea
V Projects)  entered into a settlement  agreement with Edison.  The  settlement,
which  relates to the capacity  bonus  payment and Salton Sea II  uncontrollable
force event disputes,  provides for an $800,000  settlement payment from Edison,
payment of amounts  previously  withheld  for the Salton Sea II deration and the
recission of such deration.  The amounts previously  withheld for the Salton Sea
II deration were received in the second quarter of 2003. The $800,000 settlement
payment  is  contingent  upon  approval  by  the  California   Public  Utilities
Commission.

On July 10,  2003,  Salton Sea IV's 34 MW turbine  went out of service due to an
uncontrollable  force event. Such  uncontrollable  force event ended, and Salton
Sea IV returned to service on September 17, 2003. Edison failed to recognize the
uncontrollable  force event and as such has not paid amounts  otherwise  due and
owing under the Salton Sea IV Power Purchase Agreement totaling $1.7 million. On
September 19, 2003 and October 17, 2003, Salton Sea Power Generation, L.P., with
Fish Lake  Power  Company,  owner of Salton  Sea IV served  notices  of error on
Edison for such unpaid  amounts.  As a result,  the  Guarantors  have recorded a
liability of $1.4 million for capacity payments as of September 30, 2003.

As a result of  uncertainties  related  to  Edison,  the  letter of credit  that
supports the debt service  reserve fund at the Funding  Corporation had not been
extended  beyond its then existing July 2004  expiration  date, and as such cash
distributions  were not available to CE Generation,  LLC ("CE Generation") until
the Funding Corporation debt service reserve fund of approximately $65.4 million
had been funded or the letter of credit had been  extended  beyond its July 2004
expiration  date or  replaced.  As of  December  31,  2002,  the fund had a cash
balance of $46.3 million.

In May 2003, the previous $65.4 million Funding Corporation debt service reserve
letter  of  credit  was  replaced  by  a  $32.7   million   TransAlta  USA  Inc.
("TransAlta"),  a wholly owned  subsidiary of TransAlta  Corporation,  letter of
credit which  expires on May 30, 2004,  and a $32.7 million  MidAmerican  Energy
Holdings Company letter of credit which expires June 6, 2006.

The new Funding Corporation debt service reserve letters of credit permitted the
cash, which was previously restricted, to be included in funds distributed to CE
Generation on May 29, 2003.

Stone & Webster
---------------

The Salton Sea V Project  was  constructed  by Stone & Webster,  Inc.  (formerly
Stone & Webster Engineering Corporation),  a wholly-owned subsidiary of the Shaw
Group  ("Stone & Webster"),  pursuant to a date  certain,  fixed-price,  turnkey
engineering,  procure,  construct and manage contract (the "Salton Sea V Project
EPC Contract).  On March 7, 2002, Salton Sea Power L.L.C.  ("Salton Sea Power"),
the owner of the Salton Sea V Project,  filed a Demand for  Arbitration  against
Stone & Webster  for breach of  contract  and breach of  warranty  arising  from
deficiencies  in  Stone  &  Webster's  design,  engineering,   construction  and
procurement of equipment for the Salton Sea V Project pursuant to the Salton Sea
V Project  EPC  Contract.  The demand for  arbitration  did not include a stated
claim  amount.  On April 25,  2003,  Salton Sea Power  entered into a settlement
agreement  with Stone & Webster.  The settlement  agreement  resulted in a total
payment of $12.1 million from Stone & Webster in the second quarter 2003 and the
arbitration  was  dismissed.  The  settlement  was  recorded  as a $4.5  million
reduction of incremental  capital  expenditures and a $7.6 million  reduction of
incremental  operating  expenses related to legal,  other expenses and equipment
write-offs.

                                      -15-
<PAGE>

Other Commitments and Contracts
-------------------------------

On May 20, 2003,  Salton Sea Power entered into a Power Sales Agreement with the
City of Riverside,  California ("Riverside").  Under the terms of the agreement,
Salton Sea Power will sell up to 20 MW of energy generated from the Salton Sea V
Project to Riverside  at $61 per MW hour.  Sales under the  agreement  commenced
June 1, 2003 and will terminate May 31, 2013.

Minerals  LLC  ("Minerals")  contracted  with  Zachry  Construction  Corporation
("Zachry") under a time and materials  contract to do a maximum of $1.32 million
work for the Zinc  Recovery  Project.  Zachry  has  invoiced  Minerals  for $4.7
million of work under this  contract.  Minerals has been unable to  substantiate
Zachry's  invoices.  Zachry  filed a demand for  arbitration  with the  American
Arbitration  Association  (the "AAA") on August 19, 2003 for  collection  of its
claimed  outstanding  invoices.  Although  the AAA has  selected an  arbitration
panel,  neither the AAA nor the panel has  scheduled any hearings on this matter
to date.  Minerals  anticipates that the evidentiary hearing on this matter will
not likely occur prior to the summer of 2004.

5.   RELATED PARTY TRANSACTIONS

On January 29, 2003,  TransAlta purchased El Paso Merchant Energy North American
Company's ("EPME") 50% interest in CE Generation.

Pursuant to a Transaction  Agreement  dated  January 29, 2003,  Salton Sea Power
began selling  available power to a subsidiary of TransAlta on February 12, 2003
based on percentages  of the Dow Jones SP-15 Index.  The  Transaction  Agreement
shall  continue  until the earlier of (a) 30 days  following a written notice of
termination  after  October 1, 2003 or (b) any other  termination  date mutually
agreed to by the parties. No such notice of termination has been given by either
party. Sales, under this agreement, from the Guarantors totaled $1.8 million and
$6.0 million for the  three-month  and  nine-month  periods ended  September 30,
2003, respectively.

Sales to EPME totaled $2.3 million and $5.1 million during the  three-month  and
nine-month periods ended September 30, 2002, respectively.

                                      -16-

<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, 2003,  and the related  combined  statements of
operations for the three-month  and nine-month  periods ended September 30, 2003
and 2002, and of cash flows for the nine-month  periods ended September 30, 2003
and 2002.  These interim  financial  statements  are the  responsibility  of the
Partnership Guarantors' management.

We  conducted  our  reviews 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 and
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 reviews, we are not aware of any material modifications that should
be  made  to  such  combined  interim  financial  statements  for  them to be in
conformity with 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,  2002,  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 24, 2003 (January
29, 2003 as to Note 9), 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, 2002 is fairly stated, in
all material  respects,  in relation to the combined balance sheet from which it
has been derived.


/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Omaha, Nebraska
November 3, 2003

                                      -17-
<PAGE>

                             PARTNERSHIP GUARANTORS
                             COMBINED BALANCE SHEETS
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                    AS OF
                                                         ---------------------------
                                                         SEPTEMBER 30,  DECEMBER 31,
                                                             2003           2002
                                                         -------------  ------------
                                                          (UNAUDITED)
                                     ASSETS
<S>                                                         <C>         <C>
Current assets:
  Trade accounts receivable, net .......................    $ 22,430    $ 14,018
  Trade accounts receivable from affiliate .............         329         312
  Prepaid expenses and other current assets ............      18,256      19,516
                                                            --------    --------
  Total current assets .................................      41,015      33,846
                                                            --------    --------
Restricted cash ........................................         288           1
Properties, plants, contracts and equipment, net .......     645,245     644,951
Management fee .........................................      67,418      68,679
Due from affiliates ....................................     125,136     101,854
Goodwill ...............................................     120,866     120,866
                                                            --------    --------
TOTAL ASSETS ...........................................    $999,968    $970,197
                                                            ========    ========

                       LIABILITIES AND GUARANTORS' EQUITY
Current liabilities:
  Accounts payable .....................................    $  2,667    $  2,903
  Accrued interest .....................................       6,143       1,576
  Other accrued liabilities ............................      18,083      15,464
  Current portion of long-term debt ....................       5,395       5,017
                                                            --------    --------
  Total current liabilities ............................      32,288      24,960
                                                            --------    --------
Senior secured project note ............................     236,212     239,099
Deferred income taxes ..................................     109,896     104,850
                                                            --------    --------
  Total liabilities ....................................     378,396     368,909
                                                            --------    --------

Commitments and contingencies (Note 4)

Guarantors' equity:
  Common stock .........................................           3           3
  Additional paid-in capital ...........................     465,538     432,200
  Retained earnings ....................................     156,031     169,085
                                                            --------    --------
  Total guarantors' equity .............................     621,572     601,288
                                                            --------    --------
TOTAL LIABILITIES AND GUARANTORS' EQUITY ...............    $999,968    $970,197
                                                            ========    ========
</TABLE>


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

                                      -18-
<PAGE>



                             PARTNERSHIP GUARANTORS
                        COMBINED STATEMENTS OF OPERATIONS
                                 (In thousands)

<TABLE>
<CAPTION>

                                                             THREE MONTHS             NINE MONTHS
                                                          ENDED SEPTEMBER 30,     ENDED SEPTEMBER 30,
                                                          -------------------    --------------------
                                                             2003      2002        2003        2002
                                                           -------   --------    --------    --------
                                                                          (UNAUDITED)
<S>                                                        <C>       <C>         <C>         <C>
REVENUE:
  Operating revenue ....................................   $33,113   $ 33,229    $ 75,364    $ 75,724
  Interest and other income ............................     1,257      1,103       1,328       1,768
                                                           -------   --------    --------    --------
    Total revenue ......................................    34,370     34,332      76,692      77,492
                                                           -------   --------    --------    --------
COSTS AND EXPENSES:
  Royalty, operating, general and administrative costs .    18,602     15,668      61,656      48,373
  Depreciation and amortization ........................     7,983      5,484      22,931      17,636
  Interest expense .....................................     4,729      4,792      14,082      14,328
  Capitalized interest .................................         -     (3,050)          -      (8,798)
                                                           -------   --------    --------    --------
    Total costs and expenses ...........................    31,314     22,894      98,669      71,539
                                                           -------   --------    --------    --------
INCOME (LOSS) BEFORE INCOME TAXES ......................     3,056     11,438     (21,977)      5,953
Income tax expense (benefit) ...........................     1,240      3,602      (8,923)      1,875
                                                           -------   --------    --------    --------
NET INCOME (LOSS) ......................................   $ 1,816   $  7,836    $(13,054)   $  4,078
                                                           =======   ========    ========    ========
</TABLE>


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

                                      -19-
<PAGE>


                             PARTNERSHIP GUARANTORS
                        COMBINED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>

                                                                                                  NINE MONTHS
                                                                                              ENDED SEPTEMBER 30,
                                                                                               2003         2002
                                                                                             --------     --------
                                                                                                  (UNAUDITED)
<S>                                                                                          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss) .....................................................................    $(13,054)    $  4,078
  Adjustments to reconcile net income (loss) to net cash flows from operating activities:
    Depreciation and amortization .......................................................      22,931       17,636
    Deferred income taxes ...............................................................       5,046        1,875
    Other ...............................................................................       1,179            -
    Changes in assets and liabilities:
      Trade accounts receivable, net ....................................................      (8,429)      24,436
      Prepaid expenses and other current assets .........................................       1,260       (1,347)
      Accounts payable and accrued liabilities ..........................................       6,950        8,492
                                                                                             --------     --------
        Net cash flows from operating activities ........................................      15,883       55,170
                                                                                             --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures related to operating projects ....................................     (12,207)     (16,938)
  Construction and other development ....................................................     (10,074)     (39,453)
  (Increase) decrease in restricted cash ................................................        (287)      21,282
  Management fee ........................................................................        (862)        (724)
                                                                                             --------     --------
    Net cash flows from investing activities ............................................     (23,430)     (35,833)
                                                                                             --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase in due from affiliates .......................................................     (23,282)     (36,745)
  Repayment of senior secured project notes .............................................      (2,509)      (2,313)
  Equity contribution ...................................................................      33,338       19,788
                                                                                             --------     --------
    Net cash flows from financing activities ............................................       7,547      (19,270)
                                                                                             --------     --------
NET CHANGE IN CASH ......................................................................           -           67
Cash at beginning of period .............................................................           -            -
                                                                                             --------     --------
CASH AT THE END OF PERIOD ...............................................................    $      -     $     67
                                                                                             ========     ========
</TABLE>

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

                                      -20-
<PAGE>

                             PARTNERSHIP GUARANTORS
                     NOTES TO COMBINED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   GENERAL

In the opinion of management of Partnership  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 September 30, 2003, the results of operations for the three-month
and nine-month  periods ended September 30, 2003 and 2002, and of cash flows for
the  nine-month  periods  ended  September  30,  2003 and 2002.  The  results of
operations for the three-month  and nine-month  periods ended September 30, 2003
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
audited financial  statements  included in the Guarantors' Annual Report on Form
10-K for the year ended December 31, 2002.

Certain amounts in the prior year financial statements have been reclassified in
order to conform to current year presentation.  Such  reclassifications  did not
impact previously reported net income (loss) or retained earnings.

2.   NEW ACCOUNTING PRONOUNCEMENTS

Effective  January  1, 2003,  the  Guarantors  adopted  Statement  of  Financial
Accounting  Standards,  No. 143, "Accounting for Asset Retirement  Obligations".
This statement  provides  accounting and disclosure  requirements for retirement
obligations   associated  with  long-lived  assets.  The  cumulative  effect  of
initially  applying  this  statement  did  not  have a  material  effect  on the
Guarantors' financial position, results of operations or cash flows.

3.   INTANGIBLE ASSETS

The  following  table  summarizes  the  acquired  intangible  assets,  which are
included in properties,  plants,  contracts and equipment,  net, as of September
30, 2003 and December 31, 2002 (in thousands):
<TABLE>
<CAPTION>

                                     SEPTEMBER 30, 2003              DECEMBER 31, 2002
                                -----------------------------   -----------------------------
                                GROSS CARRYING   ACCUMULATED    GROSS CARRYING    ACCUMULATED
                                    AMOUNT       AMORTIZATION       AMOUNT       AMORTIZATION
                                --------------   ------------   --------------   ------------

<S>                                <C>             <C>             <C>             <C>
Amortized Intangible Assets:
Power Purchase Contracts .....     $123,002        $ 98,070        $123,002        $ 96,894
Patented Technology ..........       46,290          16,832          46,290          15,385
                                   --------        --------        --------        --------
  Total ......................     $169,292        $114,902        $169,292        $112,279
                                   ========        ========        ========        ========
</TABLE>

Amortization  expense on acquired  intangible  assets was $0.9  million and $2.6
million for the three-month and nine-month  periods ended September 30, 2003 and
2002,  respectively.  The  Guarantors  expect  amortization  expense on acquired
intangible  assets to be $3.5  million for 2003 and each of the five  succeeding
fiscal years.

4.   COMMITMENTS AND CONTINGENCIES

Due to reduced  liquidity,  Southern  California Edison ("Edison") had failed to
pay  approximately  $76.9 million owed under the Power Purchase  Agreements with
certain  Guarantors  (excluding the CE Turbo Project) for power delivered in the
fourth quarter 2000 and the first quarter 2001.  Due to Edison's  failure to pay
contractual  obligations,  the  Guarantors  had  established  an  allowance  for
doubtful accounts of approximately $14.1 million as of December 31, 2001.

                                      -21-
<PAGE>

Pursuant  to a  settlement  agreement  the final  payment  by Edison of past due
balances was received  March 1, 2002.  Following  the receipt of Edison's  final
payment of past due balances,  the Guarantors  released the remaining  allowance
for doubtful accounts.

Edison has disputed a portion of the settlement  agreement and has failed to pay
approximately  $2.7  million of  capacity  bonus  payments  for the months  from
October 2001 through May 2002. On December 10, 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  capacity bonus payments under
the Power Purchase  Agreements.  Due to Edison's  failure to pay the contractual
obligations,  the Guarantors have established an allowance for doubtful accounts
of  approximately  $1.9 million as of December 31, 2002. In connection  with the
June 11, 2003 settlement  discussed below, the receivables  associated with this
allowance were written off during 2003.

On June 11, 2003,  certain  Guarantors  (excluding the CE Turbo Project) entered
into a settlement  agreement with Edison.  The settlement,  which relates to the
capacity bonus payment and Salton Sea II  uncontrollable  force event  disputes,
provides for an $800,000  settlement  payment  from  Edison,  payment of amounts
previously  withheld  for the Salton Sea II deration  and the  recission of such
deration.  The amounts  previously  withheld for the Salton Sea II deration were
received  in the second  quarter of 2003.  The  $800,000  settlement  payment is
contingent upon approval by the California Public Utilities Commission.

As a result of  uncertainties  related  to  Edison,  the  letter of credit  that
supports the debt service  reserve fund at the Funding  Corporation had not been
extended  beyond its then existing July 2004  expiration  date, and as such cash
distributions  were not available to CE Generation,  LLC ("CE Generation") until
the Funding Corporation debt service reserve fund of approximately $65.4 million
had been funded or the letter of credit had been  extended  beyond its July 2004
expiration  date or  replaced.  As of  December  31,  2002,  the fund had a cash
balance of $46.3 million.

In May 2003, the previous $65.4 million Funding Corporation debt service reserve
letter  of  credit  was  replaced  by  a  $32.7   million   TransAlta  USA  Inc.
("TransAlta"),  a wholly owned  subsidiary of TransAlta  Corporation,  letter of
credit which  expires on May 30, 2004,  and a $32.7 million  MidAmerican  Energy
Holdings Company letter of credit which expires June 6, 2006.

The new Funding Corporation debt service reserve letters of credit permitted the
cash, which was previously  restricted,  to be included in the funds distributed
to CE Generation on May 29, 2003.

5.   RELATED PARTY TRANSACTIONS

On January 29, 2003,  TransAlta purchased El Paso Merchant Energy North American
Company's ("EPME") 50% interest in CE Generation.

Pursuant to a Transaction  Agreement  dated January 29, 2003, CE Turbo LLC began
selling  available power to a subsidiary of TransAlta on February 12, 2003 based
on percentages of the Dow Jones SP-15 Index.  The  Transaction  Agreement  shall
continue  until  the  earlier  of (a) 30 days  following  a  written  notice  of
termination  after  October 1, 2003 or (b) any other  termination  date mutually
agreed to by the parties. No such notice of termination has been given by either
party.  Sales to  TransAlta  from the  Guarantors  totaled $0.6 million and $1.5
million for the three-month and nine-month periods ended September 30, 2003.

Sales to EPME totaled $0.4 million and $1.0 million during the  three-month  and
nine-month periods ended September 30, 2002, respectively.

During the nine-month  period ended September 30, 2003, the Guarantors  received
approximately  $33.3 million in contributions  from MidAmerican  Energy Holdings
Company, one of its partners, to be used for capital expenditures.

                                      -22-

<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  September  30,  2003,  and the  related  statements  of  operations  for the
three-month  and  nine-month  periods ended  September 30, 2003 and 2002, and of
cash flows for the nine-month  periods ended September 30, 2003 and 2002.  These
interim  financial  statements are the  responsibility of the Salton Sea Royalty
LLC's management.

We  conducted  our  reviews 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 and
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 reviews, we are not aware of any material modifications that should
be made to such interim  financial  statements for them to be in conformity with
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, 2002,  and the related  statements of operations,
members' equity,  and cash flows for the year then ended (not presented herein);
and in our report  dated  January 24, 2003  (January  29, 2003 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,
2002 is fairly  stated,  in all  material  respects,  in relation to the balance
sheet from which it has been derived.


/s/ Deloitte & Touche LLP

DELOITTE & TOUCHE LLP
Omaha, Nebraska
November 3, 2003

                                      -23-
<PAGE>

                             SALTON SEA ROYALTY LLC
                                 BALANCE SHEETS
                        (In thousands, except share data)
<TABLE>
<CAPTION>
                                                                         AS OF
                                                             -----------------------------
                                                             SEPTEMBER 30,    DECEMBER 31,
                                                                  2003            2002
                                                             -------------    ------------
                                                              (UNAUDITED)
                                     ASSETS
<S>                                                             <C>             <C>
Prepaid expenses and other current assets ..................    $     7         $    13
Royalty stream, net ........................................     13,370          14,011
Goodwill ...................................................     30,464          30,464
Due from affiliates ........................................     46,267          39,501
                                                                -------         -------
TOTAL ASSETS ...............................................    $90,108         $83,989
                                                                =======         =======

                         LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
  Accrued interest .........................................    $    24         $     7
  Current portion of long-term debt ........................        356             304
                                                                -------         -------
    Total current liabilities ..............................        380             311
                                                                -------         -------
Senior secured project note ................................        639             843
                                                                -------         -------
  Total liabilities ........................................      1,019           1,154
                                                                -------         -------

Commitments and contingencies

Members' equity:
  Common stock, par value $.01 per share;
    100 shares authorized, issued and outstanding ..........          -               -
  Additional paid-in capital ...............................      1,561           1,561
  Retained earnings ........................................     87,528          81,274
                                                                -------         -------
    Total members' equity ..................................     89,089          82,835
                                                                -------         -------
TOTAL LIABILITIES AND MEMBERS' EQUITY ......................    $90,108         $83,989
                                                                =======         =======
</TABLE>


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

                                      -24-
<PAGE>


                             SALTON SEA ROYALTY LLC
                            STATEMENTS OF OPERATIONS
                                 (In thousands)

<TABLE>
<CAPTION>

                                                                THREE MONTHS           NINE MONTHS
                                                             ENDED SEPTEMBER 30,   ENDED SEPTEMBER 30,
                                                             -------------------   -------------------
                                                              2003         2002      2003         2002
                                                             ------       ------    ------       ------
                                                                            (UNAUDITED)

<S>                                                          <C>          <C>       <C>          <C>
REVENUE - ROYALTY INCOME ..................................  $3,284       $3,371    $9,427       $9,585
COSTS AND EXPENSES:
  Royalty, operating, general and administrative expenses .     857          863     2,466        2,488
  Amortization of royalty stream ..........................     214          214       641          641
  Interest expense ........................................      21           76        66          225
                                                             ------       ------    ------       ------
    Total costs and expenses ..............................   1,092        1,153     3,173        3,354
                                                             ------       ------    ------       ------
NET INCOME ................................................  $2,192       $2,218    $6,254       $6,231
                                                             ======       ======    ======       ======
</TABLE>


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

                                      -25-
<PAGE>


                             SALTON SEA ROYALTY LLC
                            STATEMENTS OF CASH FLOWS
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                           NINE MONTHS
                                                                                        ENDED SEPTEMBER 30,
                                                                                       --------------------
                                                                                         2003        2002
                                                                                       -------     -------
                                                                                            (UNAUDITED)
<S>                                                                                    <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income ......................................................................    $ 6,254     $ 6,231
  Adjustments to reconcile net income to net cash flows from operating activities:
    Amortization of royalty stream ................................................        641         641
    Changes in assets and liabilities:
      Prepaid expenses and other current assets ...................................          6          14
      Accrued interest ............................................................         17          42
                                                                                       -------     -------
        Net cash flows form operating activities ..................................      6,918       6,928
                                                                                       -------     -------
NET CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase in due from affiliates .................................................     (6,766)     (5,198)
  Repayment of senior secured project note ........................................       (152)     (1,730)
                                                                                       -------     -------
    Net cash flows from financing activities ......................................     (6,918)     (6,928)
                                                                                       -------     -------
NET CHANGE IN CASH ................................................................          -           -
Cash at beginning of period .......................................................          -           -
                                                                                       -------     -------
CASH AT THE END OF PERIOD .........................................................    $     -     $     -
                                                                                       =======     =======
</TABLE>

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

                                      -26-
<PAGE>



                             SALTON SEA ROYALTY LLC
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   GENERAL

In the opinion of  management  of 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  September  30,  2003,  and the  results of  operations  for the
three-month and nine-month periods ended September 30, 2003 and 2002 and of cash
flows for the nine-month  periods ended September 30, 2003 and 2002. The results
of operations for the  three-month  and nine-month  periods ended  September 30,
2003 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
audited  financial  statements  included in the Company's  Annual Report on Form
10-K for the year ended December 31, 2002.

2.   ROYALTY STREAM

The royalty stream has a cost of $60.5 million and  accumulated  amortization of
$47.1  million and $46.5 million as of September 30, 2003 and December 31, 2002,
respectively.  Royalty  stream  amortization  expense was $0.2  million and $0.6
million for the three-month and nine-month  periods ended September 30, 2003 and
2002, respectively,  and is expected to be $0.8 million for 2003 and each of the
five succeeding fiscal years.

                                      -27-
<PAGE>

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

The following is  management's  discussion  and analysis of certain  significant
factors which have affected the financial condition and results of operations of
Salton Sea Funding  Corporation (the "Funding  Corporation")  and the Salton Sea
Guarantors, the Partnership Guarantors, and Salton Sea Royalty LLC (the "Royalty
Guarantors",  or collectively the "Guarantors"),  during the periods included in
the  accompanying  statements of operations.  This discussion  should be read in
conjunction  with  the  Funding  Corporation's  and the  Guarantors'  historical
financial  statements and the notes to those  statements.  Actual results in the
future could differ significantly from the historical results.

FORWARD-LOOKING STATEMENTS

From  time to  time,  the  Funding  Corporation  and  the  Guarantors  may  make
forward-looking  statements  within the meaning of the federal  securities  laws
that  involve  judgments,  assumptions  and  other  uncertainties  beyond  their
control. These forward-looking  statements may include, among others, statements
concerning revenue and cost trends, cost recovery, cost reduction strategies and
anticipated  outcomes,  pricing  strategies,  changes in the  utility  industry,
planned capital  expenditures,  financing needs and availability,  statements of
the Funding Corporation's or the Guarantors' expectations, beliefs, future plans
and strategies,  anticipated  events or trends and similar  comments  concerning
matters that are not historical facts. These types of forward-looking 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 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 Private Securities  Litigation Reform Act of 1995, the Funding
Corporation  and the Guarantors  have  identified  important  factors that could
cause actual results to differ  materially  from those  expectations,  including
weather  effects on revenues and other  operating  uncertainties,  uncertainties
relating to economic and political  conditions and  uncertainties  regarding the
impact of regulations, changes in government policy and competition. Neither the
Funding  Corporation  nor the  Guarantors  assume any  responsibility  to update
forward-looking information contained herein.

CRITICAL ACCOUNTING POLICIES

The  preparation of financial  statements and related  disclosures in conformity
with  accounting  principles  generally  accepted in the United States  requires
management to make judgments,  assumptions and estimates that affect the amounts
reported in the Combined Financial  Statements and accompanying notes. Note 2 to
the Funding  Corporation's and the Guarantors'  financial statements included in
their annual report on Form 10-K for the year ended  December 31, 2002 describes
the significant  accounting  policies and methods used in the preparation of the
financial statements. Estimates are used for, but not limited to, the accounting
for the allowance  for doubtful  accounts and  impairment of long-lived  assets.
Actual results could differ from these estimates.

For additional  discussion of the Funding Corporation's and Guarantors' critical
accounting  policies,  see  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations  included in the Funding  Corporation's  and
the Guarantors' Annual Report on Form 10-K for the year ended December 31, 2002.

NEW ACCOUNTING PRONOUNCEMENTS

Effective  January 1, 2003, the Funding  Corporation and the Guarantors  adopted
Statement of  Financial  Accounting  Standards  No. 143,  "Accounting  for Asset
Retirement  Obligations".  This  statement  provides  accounting  and disclosure
requirements for retirement  obligations  associated with long-lived assets. The
cumulative  effect of initially  applying this statement did not have a material
effect on the  Funding  Corporation's  or the  Guarantors'  financial  position,
results of operations or cash flows.

                                      -28-
<PAGE>

RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND
2002

For purposes of consistency in financial  presentation,  plant capacity  factors
for the Salton Sea I,  Salton Sea II,  Salton Sea III,  Salton Sea IV and Salton
Sea V plants are based on nominal  capacity amounts of 10, 20, 50, 40 and 49 net
megawatts ("NMW"), respectively and for the Vulcan, Elmore, Leathers, Del Ranch,
and CE Turbo plants are based on capacity  amounts of 34, 38, 38, 38 and 10 NMW,
respectively.  Each  plant  possesses  an  operating  margin,  which  allows for
production in excess of the amounts listed above.  Utilization of this operating
margin is based upon a variety of factors and can be expected to vary throughout
the year under normal operating conditions.

The following  operating data represents the aggregate  capacity and electricity
production  of Salton Sea I,  Salton Sea II,  Salton Sea III,  Salton Sea IV and
Salton Sea V:

                                                     THREE MONTHS
                                                  ENDED SEPTEMBER 30,
                                                  -------------------
                                                    2003        2002
                                                  -------     -------
         Overall capacity factor ...........         72.1%       85.6%
         Capacity NMW (weighted average) ...        168.4       168.4
         MW hours ("MWh") produced .........      268,200     318,300

The overall  capacity  factor for the Salton Sea  Guarantors  decreased  for the
three-month  period ended September 30, 2003 compared to the same period in 2002
primarily  due to an  uncontrollable  force  event in 2003 at the  Salton Sea IV
project.

The following  operating data represents the aggregate  capacity and electricity
production of Vulcan, Elmore, Leathers, Del Ranch and CE Turbo:

                                                    THREE MONTHS
                                                 ENDED SEPTEMBER 30,
                                                --------------------
                                                  2003         2002
                                                -------      -------
           Overall capacity factor ........       102.6%       104.7%
           Capacity NMW (weighted average)        158.0        158.0
           MWh produced ...................     357,800      365,200

The overall  capacity  factor for the Partnership  Guarantors  decreased for the
three-month  period ended September 30, 2003 compared to the same period in 2002
primarily due to maintenance outages.

Southern  California  Edison's ("Edison") Average Avoided Cost of Energy was 5.2
cents per  kilowatt  hour  ("kWh")  and 3.2  cents  per kWh for the  three-month
periods ended September 30, 2003 and 2002,  respectively.  Estimates of Edison's
future  Average  Avoided  Cost of Energy vary  substantially  from year to year.
During 2002, as a result of certain settlement agreements, Edison elected to pay
the Guarantors  (except Salton Sea Projects IV and V and the CE Turbo Project) a
fixed energy price in lieu of Edison's Average Avoided Cost of Energy. The fixed
energy price was 3.25 cents per kWh in the first  quarter 2002 and  increased to
5.37 cents per kWh effective May 1, 2002 through April 30, 2007.

The Salton Sea Guarantors' operating revenue decreased $0.8 million, or 2.9%, to
$26.6  million for the  three-month  period ended  September 30, 2003 from $27.4
million for the same period in 2002.  The  decrease was  primarily  due to lower
production in 2003 due to the Salton Sea IV uncontrollable force event partially
offset by higher average rates in 2003.

The Partnership  Guarantors'  operating  revenue decreased $0.1 million to $33.1
million for the  three-month  period ended September 30, 2003 from $33.2 million
for the same period in 2002. The decrease was primarily due to marginally  lower
production partially offset by slightly higher average rates in 2003.

                                      -29-
<PAGE>

The Royalty  Guarantors'  revenue decreased $0.1 million to $3.3 million for the
three-month  period  ended  September  30,  2003 from $3.4  million for the same
period in 2002.

The Salton Sea Guarantors' operating expenses, which include royalty, operating,
general and administrative expenses,  increased $3.0 million, or 20.8%, to $17.4
million for the three-month  period ended September 30, 2003, from $14.4 million
for the same period in 2002.  The  increase  was  primarily  due to repair costs
associated with the Salton Sea IV uncontrollable  force event,  partially offset
by decreased legal costs related to disputes with Edison in 2002.

The  Partnership   Guarantors'   operating  expenses,   which  include  royalty,
operating,  general and  administrative  expenses,  increased  $2.9 million,  or
18.5%,  to $18.6 million for the  three-month  period ended  September 30, 2003,
from $15.7  million for the same period in 2002.  The  increase in expenses  was
primarily due to operating  expenses at a project which is recovering  zinc from
geothermal brine of certain power projects (the "Zinc Recovery Project"),  which
began limited production in December 2002.

The Royalty Guarantors'  operating expenses,  which include royalty,  operating,
general and  administrative  expenses,  were $0.9  million  for the  three-month
periods ended September 30, 2003 and 2002.

The Salton Sea Guarantors'  depreciation and amortization increased $0.2 million
to $4.9 million for the  three-month  period ended  September 30, 2003 from $4.7
million for the same period in 2002. The increase was due to a change in salvage
value assumptions and higher depreciable asset balances.

The Partnership Guarantors' depreciation and amortization increased $2.5 million
to $8.0 million for the three- month period ended  September  30, 2003 from $5.5
million for the same period in 2002. The increase was due to depreciation on the
Zinc Recovery Project and a change in salvage value assumptions.

The Salton Sea  Guarantors'  interest  expense  decreased  $0.4  million to $4.7
million for the  three-month  period ended  September 30, 2003 from $5.1 million
for the same period in 2002. The decrease was due to reduced indebtedness.

The  Partnership  Guarantors'  interest  expense,  net of  capitalized  amounts,
increased  $3.0  million  to $4.7  million  for  the  three-month  period  ended
September  30, 2003 from $1.7 million for the same period in 2002.  The increase
was  due  to  the  discontinuance  of  capitalizing  interest  on  the  minerals
extraction process, partially offset by reduced indebtedness.

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 expense,  decreased to $1.2 million for
the  three-month  period ended September 30, 2003 from $3.6 million for the same
period in 2002.  The decrease was due to lower income  before tax. The effective
tax rate was  40.6% and 31.5% in 2003 and  2002,  respectively.  Changes  in the
effective  rates are due  primarily to the  generation of energy tax credits and
changes in depletion deductions.  Income taxes will be paid by the parent of the
Guarantors from  distributions  to the parent company by the  Guarantors,  which
occur after payment of operating expenses and debt service.

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

The  Funding  Corporation's  net  income  (loss)  was  not  significant  for the
three-month  periods ended  September  30, 2003 and 2002.  The net income (loss)
primarily represents interest income and expense, net of applicable tax, and the
Funding Corporation's 1% equity in earnings of the Guarantors.

                                      -30-
<PAGE>

RESULTS OF OPERATIONS FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2003 AND
2002

The following  operating data represents the aggregate  capacity and electricity
production  of Salton Sea I,  Salton Sea II,  Salton Sea III,  Salton Sea IV and
Salton Sea V:

                                                    NINE MONTHS
                                                ENDED SEPTEMBER 30,
                                               ---------------------
                                                 2003         2002
                                               --------     --------
           Overall capacity factor ........        69.4%        79.4%
           Capacity NMW (weighted average)        168.4        168.4
           MWh produced ...................     765,800      875,500

The overall  capacity  factor for the Salton Sea  Guarantors  decreased  for the
nine-month  period ended  September 30, 2003 compared to the same period in 2002
primarily due to the uncontrollable force event at Salton Sea IV in 2003.

The following  operating data represents the aggregate  capacity and electricity
production of Vulcan, Elmore, Leathers, Del Ranch and CE Turbo:

                                                    NINE MONTHS
                                                ENDED SEPTEMBER 30,
                                              ----------------------
                                                 2003         2002
                                              ---------    ---------
         Overall capacity factor ........          99.4%       100.4%
         Capacity NMW (weighted average)          158.0        158.0
         MWh produced ...................     1,028,800    1,039,800

The overall capacity factor for the Partnership  Guarantors decreased marginally
for the nine-month  period ended  September 30, 2003 compared to the same period
in 2002 primarily due to maintenance outages.

Edison's  Average Avoided Cost of Energy was 5.6 cents per kWh and 3.2 cents per
kWh for the nine-month periods ended September 30, 2003 and 2002,  respectively.
Estimates of Edison's future Average  Avoided Cost of Energy vary  substantially
from year to year.  During 2002, as a result of certain  settlement  agreements,
Edison  elected to pay the  Guarantors  (except Salton Sea Projects IV and V and
the CE Turbo Project) a fixed energy price in lieu of Edison's  Average  Avoided
Cost of  Energy.  The fixed  energy  price  was 3.25  cents per kWh in the first
quarter 2002 and  increased to 5.37 cents per kWh  effective May 1, 2002 through
April 30, 2007.

The Salton Sea Guarantors' operating revenue decreased $2.3 million, or 3.4%, to
$64.6  million for the  nine-month  period ended  September  30, 2003 from $66.9
million for the same  period in 2002.  The  decrease  was  primarily  due to the
impact of a $6.8 million  adjustment  to the Edison  provision in 2002 and lower
production due to extended overhauls and the Salton Sea IV uncontrollable  force
event in 2003, partially offset by higher average rates in 2003.

The Partnership  Guarantors'  operating  revenue decreased $0.3 million to $75.4
million for the  nine-month  period ended  September 30, 2003 from $75.7 million
for the same period in 2002.  The impact of a $14.1  million  adjustment  to the
Edison provision in 2002 was offset by higher average rates in 2003.

The Royalty  Guarantors'  revenue decreased $0.2 million to $9.4 million for the
nine-month period ended September 30, 2003 from $9.6 million for the same period
in 2002. The decrease was the result of lower energy revenue at the  Partnership
Projects resulting in lower royalty income.

The Salton Sea Guarantors' operating expenses, which include royalty, operating,
general and  administrative  expenses  increased $3.0 million,  or 7.0% to $45.6
million for the  nine-month  period ended  September 30, 2003 from $42.7 million
for the same  period  in 2002.  The  increase  was  primarily  due to  timing of
overhauls, increased pipe replacement costs and repair costs associated with the
Salton Sea IV  uncontrollable  force event. The increase was partially offset by
the second quarter 2003 warranty claim  settlement  with Stone & Webster,  which
included

                                      -31-
<PAGE>

a $7.6 million reimbursement of incremental operating expenses related to legal,
other expenses and equipment write-offs which reduced operating costs.

The  Partnership   Guarantors'   operating  expenses,   which  include  royalty,
operating,  general and  administrative  expenses,  increased $13.3 million,  or
27.5%, to $61.7 million for the nine-month period ended September 30, 2003, from
$48.4  million  for the same  period  in 2002.  The  increase  in  expenses  was
primarily due to operating  expenses at the Zinc Recovery  Project,  which began
limited production in December 2002.

The Royalty Guarantors'  operating expenses,  which include royalty,  operating,
general  and  administrative  expenses,  were $2.5  million  for the  nine-month
periods ended September 30, 2003 and 2002.

The Salton Sea Guarantors'  depreciation and amortization decreased $1.0 million
to $14.7 million for the nine-month  period ended  September 30, 2003 from $15.7
million for the same period in 2002. The decrease was due to the write-off of an
abandoned  project  in 2002,  partially  offset  by a change  in  salvage  value
assumptions and higher depreciable asset balances in 2003.

The Partnership Guarantors' depreciation and amortization increased $5.3 million
to $22.9 million for the nine-month  period ended  September 30, 2003 from $17.6
million for the same period in 2002. The increase is due to  depreciation on the
Zinc Recovery  Project,  which began limited  production in December 2002, and a
change in salvage value assumptions.

The Salton Sea  Guarantors'  interest  expense  decreased  $1.1 million to $14.3
million for the  nine-month  period ended  September 30, 2003 from $15.4 million
for the same period in 2002. The decrease was due to reduced indebtedness.

The  Partnership  Guarantors'  interest  expense,  net of  capitalized  amounts,
increased  $8.5  million  to  $14.0  million  for the  nine-month  period  ended
September  30, 2003 from $5.5 million for the same period in 2002.  The increase
was due to the  discontinuance  of  capitalizing  interest on the Zinc  Recovery
Project, partially offset by reduced indebtedness.

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 was an $8.9  million  benefit  for the
nine-month  period  ended  September  30, 2003 as compared to an expense of $1.9
million for the same period in 2002. The change was due to a pretax loss in 2003
compared to pretax income in 2002. The effective tax rate was 40.6% and 31.5% in
2003 and 2002, respectively.  Changes in the effective rate are due primarily to
the generation of energy tax credits and changes to depletion deductions. Income
taxes will be paid by the parent of the  Guarantors  from  distributions  to the
parent  company by the  Guarantors,  which  occur  after  payment  of  operating
expenses and debt service.

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

The  Funding  Corporation's  net  income  (loss)  was  not  significant  for the
nine-month  period  ended  September  30, 2003 and 2002.  The net income  (loss)
primarily represents interest income and expense, net of applicable tax, and the
Funding Corporation's 1% equity in earnings of the Guarantors.

LIQUIDITY AND CAPITAL RESOURCES

The Salton Sea  Guarantors'  cash flows from operating  activities  decreased to
$12.0  million for the  nine-month  period ended  September  30, 2003 from $22.2
million for the same period in 2002. The Salton Sea  Guarantors'  only source of
revenue is payments  received  pursuant to long-term power sales agreements with
Edison,  other than Salton Sea V Project revenue and interest earned on funds on
deposit. The decrease was primarily due to the receipt of past due balances from
Edison in 2002 and lower earnings in 2003.

                                      -32-
<PAGE>

The Partnership  Guarantors' cash flows from operating  activities  decreased to
$15.9  million for the  nine-month  period ended  September  30, 2003 from $55.2
million for the same period in 2002. The Partnership  Guarantors' primary source
of revenue is payments  received  pursuant to long-term  power sales  agreements
with Edison,  other than the CE Turbo Project and Zinc Recovery  Project revenue
and interest  earned on funds on deposit.  The decrease was primarily due to the
receipt of past due  balances  from  Edison in 2002 and higher net losses due to
the Zinc Recovery Project being in production.

The Royalty Guarantors' cash flow from operating activities was $6.9 million for
the  nine-month   periods  ended  September  30,  2003  and  2002.  The  Royalty
Guarantors'  only source of revenue is royalties  received  pursuant to resource
lease agreements with the Partnership Projects.

Due to reduced  liquidity,  Edison had failed to pay approximately  $119 million
owed under the Power Purchase  Agreements with certain  Guarantors (the Imperial
Valley  Projects,  excluding  the Salton Sea V and CE Turbo  Projects) for power
delivered in the fourth quarter 2000 and the first quarter 2001. Due to Edison's
failure to pay contractual obligations,  the Guarantors established an allowance
for doubtful accounts of approximately $21.0 million as of December 31, 2001.

Pursuant to a settlement  agreement  the final payment by Edison of the past due
balances was received  March 1, 2002.  Following  the receipt of Edison's  final
payment of past due balances,  the Guarantors  released the remaining  allowance
for doubtful accounts.

Edison has failed to pay  approximately  $3.9 million of capacity bonus payments
for the months from October 2001 through May 2002.  On December 10, 2001 certain
Guarantors,  excluding Salton Sea I, Salton Sea V and CE Turbo Projects, filed a
lawsuit against Edison in California's  Imperial County Superior Court seeking a
court order requiring Edison to make the required  capacity bonus payments under
the Power Purchase  Agreements.  Due to Edison's  failure to pay the contractual
obligations,  the Imperial Valley Projects established an allowance for doubtful
accounts of  approximately  $2.7 million as of December 31, 2002.  In connection
with the June 11, 2003 settlement  discussed below,  the receivables  associated
with this allowance were written off during 2003.

On March 25,  2002,  Salton Sea II's 10 MW turbine went out of service due to an
uncontrollable  force event. Such  uncontrollable  force event ended, and Salton
Sea II returned to service, on December 17, 2002. Edison failed to recognize the
uncontrollable  force  event and as such did not pay amounts  otherwise  due and
owing and  improperly  derated  Salton  Sea II from 15 MW to 12.5 MW,  under the
Salton Sea II Power Purchase  Agreement.  On January 29, 2003,  Salton Sea Power
Generation,  L.P., owner of Salton Sea II, served a complaint on Edison for such
unpaid amounts and to rescind such deration.

On June 11, 2003, certain  Guarantors,  excluding Salton Sea I, Salton Sea V and
CE  Turbo  Projects,  entered  into a  settlement  agreement  with  Edison.  The
settlement,  which  relates  to the  capacity  bonus  payment  and Salton Sea II
uncontrollable force event disputes, provides for an $800,000 settlement payment
from  Edison,  payment  of  amounts  previously  withheld  for the Salton Sea II
deration and the recission of such deration. The amounts previously withheld for
the Salton Sea II  deration  were  received in the second  quarter of 2003.  The
$800,000 settlement payment is contingent upon approval by the California Public
Utilities Commission.

On July 10,  2003,  Salton Sea IV's 34 MW turbine  went out of service due to an
uncontrollable  force event. Such  uncontrollable  force event ended, and Salton
Sea IV returned to service on September 17, 2003. Edison failed to recognize the
uncontrollable  force event and as such has not paid amounts  otherwise  due and
owing under the Salton Sea IV Power Purchase Agreement totaling $1.7 million. On
September 17, 2003 and October 19, 2003 Salton Sea Power Generation,  L.P., with
Fish Lake  Power  Company,  owner of Salton  Sea IV served  notices  of error on
Edison for such unpaid amounts. As a result, the Company recorded a liability of
$1.4 million for capacity payments as of September 30, 2003.

As a result of  uncertainties  related  to  Edison,  the  letter of credit  that
supports the debt service  reserve fund at the Funding  Corporation had not been
extended beyond its then existing July 2004 expiration  date, and, as such, cash
distributions  were not available to CE Generation,  LLC ("CE Generation") until
the Funding Corporation debt

                                      -33-
<PAGE>

service  reserve  fund of  approximately  $65.4  million  had been funded or the
letter of credit  had been  extended  beyond  its July 2004  expiration  date or
replaced. As of December 31, 2002, the fund had a cash balance of $46.3 million.

In May 2003,  the previous  $65.4 million  Salton Sea Funding  Corporation  debt
service  reserve letter of credit was replaced by a $32.7 million  TransAlta USA
Inc. ("TransAlta"),  a wholly owned subsidiary of TransAlta Corporation,  letter
of credit which expires on May 30, 2004, and a $32.7 million  MidAmerican Energy
Holdings Company letter of credit which expires June 6, 2006.

The new Funding Corporation debt service reserve letters of credit permitted the
cash, which was previously  restricted,  to be included in the funds distributed
to CE Generation on May 29, 2003.

The Salton Sea V Project  was  constructed  by Stone & Webster,  Inc.  (formerly
Stone & Webster Engineering Corporation),  a wholly-owned subsidiary of the Shaw
Group  ("Stone & Webster"),  pursuant to a date  certain,  fixed-price,  turnkey
engineering,  procure,  construct and manage contract (the "Salton Sea V Project
EPC Contract").  On March 7, 2002, Salton Sea Power L.L.C. ("Salton Sea Power"),
the owner of the Salton Sea V Project,  filed a Demand for  Arbitration  against
Stone & Webster  for breach of  contract  and breach of  warranty  arising  from
deficiencies  in  Stone  &  Webster's  design,  engineering,   construction  and
procurement of equipment for the Salton Sea V Project pursuant to the Salton Sea
V Project  EPC  Contract.  The demand for  arbitration  did not include a stated
claim  amount.  On April 25,  2003,  Salton Sea Power  entered into a settlement
agreement  with Stone & Webster.  The Settlement  Agreement  resulted in a total
payment of $12.1 million from Stone & Webster in the second quarter 2003 and the
arbitration  was  dismissed.  The  settlement  was  recorded  as a $4.5  million
reduction of incremental  capital  expenditures and a $7.6 million  reduction of
incremental  operating  expenses related to legal,  other expenses and equipment
write-offs.

The Salton Sea Guarantors' cash used in investing  activities  decreased to $0.7
million for the nine-month period ended September 30, 2003 from $9.9 million for
the same period in 2002.  During the second quarter of 2003, $4.5 million of the
Stone & Webster  settlement  was recorded as a reduction  to capital  equipment.
Capital expenditures are the primary component of investing activities.

The  Partnership  Guarantors'  cash flow used in investing  activities was $23.4
million for the nine-month period ended September 30, 2003 and $35.8 million for
the same  period in 2002.  Capital  expenditures  are the primary  component  of
investing activities.

Minerals  LLC  ("Minerals")  constructed  the Zinc  Recovery  Project,  which is
recovering zinc from the geothermal  brine.  Facilities have been installed near
the sites of the Imperial  Valley  Projects to extract a zinc chloride  solution
from the  geothermal  brine  through an ion exchange  process.  This solution is
being  transported to a central  processing plant where zinc ingots are produced
through  solvent  extraction,  electrowinning  and casting  processes.  The Zinc
Recovery  Project is  currently  expected  to have a capacity  of  approximately
30,000 metric tonnes per year. Limited production began during December 2002 and
production is expected by  late-2003.  Minerals  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.

Minerals contracted with Zachry Construction Corporation ("Zachry") under a time
and  materials  contract  to do a  maximum  of $1.32  million  work for the Zinc
Recovery  Project.  Zachry has invoiced  Minerals for $4.7 million of work under
this  contract.  Minerals  has been unable to  substantiate  Zachry's  invoices.
Zachry filed a demand for arbitration with the American Arbitration  Association
(the  "AAA")  on August  19,  2003 for  collection  of its  claimed  outstanding
invoices.  Although the AAA has selected an arbitration  panel,  neither the AAA
nor the  panel has  scheduled  any  hearings  on this  matter to date.  Minerals
anticipates  that the  evidentiary  hearing on this matter will not likely occur
prior to the summer of 2004.

Total  capital  costs,  excluding  interest  during  construction,  of the  Zinc
Recovery  Project  are  approximately   $161.1  million,  net  of  payments  for
liquidated  damages,  through  September  30, 2003.  The Zinc  Recovery  Project
anticipates  incurring $6.9 million in capital expenditures during the remainder
of 2003 to optimize production.

                                      -34-
<PAGE>

The Funding  Corporation's net cash flows used in financing  activities was $3.0
million for the nine-month  period ended September 30, 2003 and $3.6 million for
the same period in 2002. The decreased use of cash was primarily due the release
of the restricted cash partially offset by payments made to affiliates.

Salton Sea  Guarantors'  net cash flows used in financing  activities  was $11.2
million for the nine-month period ended September 30, 2003 and $12.3 million for
the same period in 2002.  The  decreased use of cash was primarily due to higher
payments to affiliates during 2002.

Partnership Guarantors' net cash flows from financing activities was a source of
cash totaling $7.5 million for the  nine-month  period ended  September 30, 2003
and use of cash totaling  $19.3 million for the same period in 2002.  The change
was  primarily  due  to  higher  equity  contributions  and  lower  payments  to
affiliates in 2003.

RELATED PARTY TRANSACTIONS

On January 29, 2003,  TransAlta purchased El Paso Merchant Energy North American
Company's ("EPME") 50% interest in CE Generation.

Pursuant to a Transaction  Agreement dated January 29, 2003, CE Turbo and Salton
Sea Power began selling available power to a subsidiary of TransAlta on February
12, 2003 based on  percentages  of the Dow Jones SP-15  Index.  The  Transaction
Agreement  shall  continue  until the earlier of (a) 30 days following a written
notice of termination  after October 1, 2003 or (b) any other  termination  date
mutually agreed to by the parties.  No such notice of termination has been given
by  either  party.  Sales to  TransAlta  from the  Partnership  and  Salton  Sea
Guarantors  totaled  $2.4  million  and $7.5  million  for the  three-month  and
nine-month periods ended September 30, 2003, respectively.

Sales to EPME totaled $2.7 million and $6.1 million during the  three-month  and
nine-month periods ended September 30, 2002, respectively.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

There  have  been  no  material  changes  in  the  contractual  obligations  and
commercial  commitments from the information  provided in Item 7. of the Funding
Corporation's  Annual  Report on Form 10-K for the year ended  December 31, 2002
other than as discussed in the "Liquidity and Capital Resources" section.

                                      -35-

<PAGE>


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no  material  changes in the  market  risk from the  information
provided in Item 7A. Quantitative and Qualitative  Disclosures About Market Risk
of the  Funding  Corporation's  Annual  Report on Form  10-K for the year  ended
December 31, 2002.

ITEM 4.  CONTROLS AND PROCEDURES.

An evaluation was performed under the supervision and with the  participation of
Salton Sea  Funding  Corporation's  management,  including  its chief  executive
officer and chief financial  officer,  regarding the effectiveness of the design
and  operation  of Salton Sea  Funding  Corporation's  disclosure  controls  and
procedures  (as defined in Rule 13a-15(e)  promulgated  under the Securities and
Exchange  Act of 1934,  as  amended) as of  September  30,  2003.  Based on that
evaluation,  Salton Sea Funding  Corporation's  management,  including the chief
executive officer and chief financial officer, concluded that Salton Sea Funding
Corporation's disclosure controls and procedures were effective. There have been
no significant changes in Salton Sea Funding Corporation's  internal controls or
in other factors that could significantly affect internal controls.

                                      -36-

<PAGE>


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

See Note 2 to the financial statements and discussion in Management's Discussion
and Analysis.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

Not applicable.

ITEM 3.  DEFAULTS UPON 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:

         The exhibits listed on the accompanying Exhibit Index are filed as part
of this Quarterly Report.

(B)      REPORTS ON FORM 8-K:

         None.


                                      -37-

<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
                                              ------------------------------
                                                       (Registrant)





Date: November 6,  2003                           /s/  Wayne F. Irmiter
                                              ----------------------------------
                                                       Wayne F. Irmiter
                                                 Vice President & Controller

                                      -38-

<PAGE>


                                  EXHIBIT INDEX
Exhibit No.

  31.1     Chief Executive Officer's Certificate Pursuant to Section 302 of the
           Sarbanes-Oxley Act of 2002.

  31.2     Chief Accounting Officer's Certificate Pursuant to Section 302 of the
           Sarbanes-Oxley Act of 2002.

  32.1     Chief Executive Officer's Certificate Pursuant to Section 906 of the
           Sarbanes-Oxley Act of 2002.

  32.2     Chief Accounting Officer's Certificate Pursuant to Section 906 of the
           Sarbanes-Oxley Act of 2002.

                                      -39-