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 June 30, 2002
                          Commission File No. 33-95538

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

                                   47-0790493
                        (IRS Employer Identification No.)

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

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

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

All common stock of Salton Sea Funding  Corporation is indirectly  held by Magma
Power Company. 100 shares of Common Stock were outstanding on August 14, 2002.

<PAGE>



                         SALTON SEA FUNDING CORPORATION

                                    Form 10-Q

                                  June 30, 2002
                                  _____________

                                 C O N T E N T S


                          PART I: FINANCIAL INFORMATION


Item 1.          Financial Statements                                      Page

SALTON SEA FUNDING CORPORATION

Independent Accountants' Report                                               4

Balance Sheets, June 30, 2002 and December 31, 2001                           5

Statements of Operations for the Three and Six Months Ended
    June 30, 2002 and 2001                                                    6

Statements of Cash Flows for the Six Months Ended
    June 30, 2002 and 2001                                                    7

Notes to Financial Statements                                                 8

SALTON SEA GUARANTORS

Independent Accountants' Report                                              10

Combined Balance Sheets, June 30, 2002 and December 31, 2001                 11

Combined Statements of Operations for the Three and Six Months Ended
    June 30, 2002 and 2001                                                   12

Combined Statements of Cash Flows for the Six Months Ended
    June 30, 2002 and 2001                                                   13

Notes to Combined Financial Statements                                       14

<PAGE>

PARTNERSHIP GUARANTORS

Independent Accountants' Report                                              17

Combined Balance Sheets, June 30, 2002 and December 31, 2001                 18

Combined Statements of Operations for the Three and Six Months Ended
    June 30, 2002 and 2001                                                   19

Combined Statements of Cash Flows for the Six Months Ended
    June 30, 2002 and 2001                                                   20

Notes to Combined Financial Statements                                       21

SALTON SEA ROYALTY LLC

Independent Accountants' Report                                              25

Balance Sheets, June 30, 2002 and December 31, 2001                          26

Statements of Operations for the Three and Six Months Ended
    June 30, 2002 and 2001                                                   27

Statements of Cash Flows for the Six Months Ended
    June 30, 2002 and 2001                                                   28

Notes to Financial Statements                                                29

Item 2.          Management's Discussion and Analysis of
                 Financial Condition and Results of Operations               31


                           PART II: OTHER INFORMATION

Item 1.          Legal Proceedings                                           39
Item 2.          Changes in Securities                                       39
Item 3.          Defaults on Senior Securities                               39
Item 4.          Submission of Matters to a Vote of
                 Security Holders                                            39
Item 5.          Other Information                                           39
Item 6.          Exhibits and Reports on Form 8-K                            39

Signatures                                                                   40


<PAGE>



INDEPENDENT ACCOUNTANTS' REPORT

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

We have  reviewed  the  accompanying  balance  sheet of the Salton  Sea  Funding
Corporation  (the "Company") as of June 30, 2002, and the related  statements of
operations  for the  three-month  and six-month  periods ended June 30, 2002 and
2001, and the related  statements of cash flows for the six-month  periods ended
June 30, 2002 and 2001. These financial statements are the responsibility of the
Company's management.

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

Based on our review, we are not aware of any material  modifications that should
be  made  to  such  financial  statements  for  them  to be in  conformity  with
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,  2001,  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 17, 2002 (March 1, 2002 as to
Note 4), we expressed an unqualified opinion on those financial  statements.  In
our opinion,  the information set forth in the accompanying  balance sheet as of
December 31, 2001 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
August 2, 2002

<PAGE>

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


<TABLE>
<CAPTION>
                                                                             June 30,                December 31,
                                                                                 2002                     2001
                                                                           (unaudited)
<S>                                                                     <C>                       <C>
ASSETS
Cash                                                                    $        7,783            $        4,361
Restricted cash                                                                 35,964                     2,949
Accrued interest receivable and other assets                                     3,325                     3,351
Current portion of secured project notes
  from Guarantors                                                               28,329                    28,572
                                                                            __________                __________
Total current assets                                                            75,401                    39,233

Secured project notes from Guarantors                                          477,635                   491,678
Investment in 1% of net assets of
    Guarantors                                                                   9,630                     9,669
                                                                            __________                __________
Total assets                                                            $      562,666            $      540,580
                                                                            ==========                ==========

LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued interest                                                        $        3,188            $        3,333
Due to affiliates                                                               40,402                     3,899
Current portion of long term debt                                               28,329                    28,572
                                                                            __________                __________
Total current liabilities                                                       71,919                    35,804

Senior secured notes and bonds                                                 477,635                   491,678
                                                                            __________                __________
    Total liabilities                                                          549,554                   527,482

Commitments and contingencies (Note 3)

Stockholder's equity:
Common stock--authorized 1,000
    shares, par value $.01 per share;
    issued and outstanding 100 shares                                              ---                       ---
Additional paid-in capital                                                       5,449                     5,366
Retained earnings                                                                7,663                     7,732
                                                                            __________                __________
    Total stockholder's equity                                                  13,112                    13,098
                                                                            __________                __________
    Total liabilities and stockholder's equity                           $     562,666             $     540,580
                                                                            ==========                ==========
</TABLE>

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

<PAGE>

                         SALTON SEA FUNDING CORPORATION
                            STATEMENTS OF OPERATIONS
                             (Dollars in Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                    Three Months Ended                   Six Months Ended
                                                           June 30,                           June 30,
                                                      2002              2001             2002             2001
Revenues:

<S>                                             <C>                <C>                <C>              <C>
Interest income                                 $     10,026       $   10,407         $  20,073        $  20,736
Equity in earnings (loss) of Guarantors                 (115)              (3)             (122)             187
                                                   _________         ________           _______          _______
Total revenues                                         9,911           10,404            19,951           20,923
                                                   _________         ________           _______          _______

Expenses:

General and administrative expenses                      219              174               446              463
Interest expense                                       9,797           10,230            19,622           20,493
                                                   _________         ________           _______          _______
Total expenses                                        10,016           10,404            20,068           20,956
                                                   _________         ________           _______          _______
Loss before income taxes                                (105)             ---              (117)             (33)
Income tax benefit                                       (43)             ---               (48)             (14)
                                                   _________         ________           _______          _______
Loss before cumulative effect
of accounting change                            $        (62)     $       ---        $      (69)     $       (19)

Cumulative effect of accounting
change, net of tax                                       ---              ---               ---             (100)
                                                   _________         ________           _______          _______

Net loss                                        $        (62)     $       ---         $     (69)        $   (119)
                                                   _________         ________           _______          _______
</TABLE>


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

<PAGE>



                         SALTON SEA FUNDING CORPORATION
                            STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    Six Months Ended
                                                                          June 30,
                                                                   2002               2001
<S>                                                          <C>              <C>
Cash flows from operating activities:
     Net loss                                                $        (69)    $       (119)
     Adjustments to reconcile net loss to net
         cash flow from operating activities:
     Equity in (earnings) loss of Guarantors. net of contributions    122             (187)
     Equity in cumulative effect of accounting change                 ---              100
     Changes in assets and liabilities:
         Prepaid expenses and other assets                             26               48
         Accrued liabilities                                         (145)            (129)
                                                              ___________       ___________
     Net cash flows from operating activities                         (66)            (287)
                                                              ___________       ___________
Cash flows from investing activities:
     Principal repayments of secured project
     notes from Guarantors                                         14,286           11,829
                                                              ___________       ___________
     Net cash flows from investing activities                      14,286           11,829
                                                              ___________       ___________
Cash flows from financing activities:
     Increase in due to affiliates                                 36,503           21,197
     Increase in restricted cash                                  (33,015)             ---
     Repayment of senior secured notes and bonds                  (14,286)         (11,830)
                                                              ___________       ___________
     Net cash flows from financing activities                     (10,798)           9,367
                                                               __________       __________
Net change in cash                                                  3,422           20,909

Cash at the beginning of period                                     4,361            8,467
                                                              ___________       ___________
Cash at the end of period                                    $      7,783     $     29,376
                                                               ==========       ==========
Supplemental disclosures:
     Interest paid                                           $     19,800     $     20,677
                                                               ==========       ==========
</TABLE>

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

<PAGE>

                         SALTON SEA FUNDING CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                              _____________________

1.  General:

In the opinion of management of the Salton Sea Funding Corporation (the "Funding
Corporation"),  the  accompanying  unaudited  financial  statements  contain all
adjustments  (consisting only of normal recurring accruals) necessary to present
fairly the financial  position as of June 30, 2002 and the results of operations
for the three and six months ended June 30, 2002 and 2001 and cash flows for the
six-months ended June 30, 2002 and 2001. The results of operations for the three
and six-months  ended June 30, 2002 and 2001 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, 2001.

Certain prior year amounts have been  reclassified  to conform with current year
classifications.

2.  Accounting Policies:

On January 1, 2002, the Funding  Corporation adopted SFAS No. 142, "Goodwill and
Other Intangible Assets," which establishes the accounting for acquired goodwill
and  other  intangible  assets  and  provides   goodwill  and   indefinite-lived
intangible assets will not be amortized, but will be tested for impairment on an
annual basis. The Funding  Corporation's related amortization consists solely of
its share of the goodwill  amortization at the  Guarantors,  which has no income
tax effect. Following is a reconciliation of net loss as originally reported for
the three and six-months  ended June 30, 2002 and 2001, to adjusted net loss (in
thousands):


                                      Three Months              Six months
                                     Ended June 30,           Ended June 30,
                                 2002           2001      2002             2001

 Reported net income (loss)  $     (62)      $    ---  $    (69)      $    (119)
 Goodwill amortization             ---             14       ---              29
                                ______          _____     _____           _____
 Adjusted net income (loss)  $     (62)      $     14  $    (69)      $     (90)
                                ======          =====     =====           =====

In accordance with SFAS No. 142, the Guarantors have determined  their reporting
units and completed  their  transitional  impairment  testing of goodwill in the
second quarter  primarily using a discounted cash flow methodology as of January
1, 2002. The results of the transitional  impairment  tests indicated  potential
goodwill impairment at the Salton Sea and Partnership Guarantors. The Guarantors
will determine the potential  impairment  charge, if any, and record such charge
in the financial  statements no later than the period ending  December 31, 2002.
The  impairment  charge  will be recorded  as a  cumulative  effect of change in
accounting as of January 1, 2002.

In October  2001,  FASB issued  SFAS No.  144,  "Accounting  for  Impairment  or
Disposal of Long-Lived Assets".  The standard addresses financial accounting and
reporting  for the  impairment or disposal of  long-lived  assets.  There was no
financial statement impact as a result of the Funding Corporation's  adoption of
SFAS No. 144 on January 1, 2002.



<PAGE>

3.   Contingency:

Southern  California  Edison  ("Edison"),  a  wholly-owned  subsidiary of Edison
International,  is a  public  utility  primarily  engaged  in  the  business  of
supplying   electric  energy  to  retail   customers  in  Central  and  Southern
California,  excluding Los Angeles.  Due to reduced liquidity,  Edison failed to
pay  approximately  $119 million owed under the power purchase  agreements  with
certain  Guarantors  (Imperial Valley  Projects,  excluding the Salton Sea V and
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.

The payment 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.

As a result of  uncertainties  related  to  Edison,  the  letter of credit  that
supports the debt service  reserve fund at the Funding  Corporation has not been
extended  beyond  its  current  July  2004  expiration  date,  and as such  cash
distributions  are  not  available  to CE  Generation,  LLC  until  the  Funding
Corporation  debt service reserve fund of  approximately  $67.6 million has been
funded or the letter of credit has been extended beyond its July 2004 expiration
date or replaced.

In January 2001, the California Power Exchange ("PX") declared bankruptcy.  As a
result,  the Salton Sea V and Turbo Projects have not received payment for power
sold under the Transaction  Agreements  during December 2000 and January 2001 of
approximately  $3.8 million.  The Guarantors  have  established an allowance for
doubtful accounts for the full amount of this receivable.

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  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.  The  Project
entities  will  vigorously  pursue  collection of the capacity  bonus  payments.
However,  due to Edison's  failure to pay the contractual  obligations,  certain
Guarantors have established an allowance for doubtful  accounts of approximately
$1.3 million as of June 30, 2002.


<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  June  30,  2002,  and  the  related  combined  statements  of
operations  for the  three-month  and six-month  periods ended June 30, 2002 and
2001, and the related  statements of cash flows for the six-month  periods ended
June 30, 2002 and 2001. These financial statements are the responsibility of the
Salton Sea Guarantors' management.

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

Based on our review, we are not aware of any material  modifications that should
be made to such combined financial  statements for them to be in conformity with
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,  2001,  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 17, 2002 (March 1,
2002 as to Note 6),  we  expressed  an  unqualified  opinion  on those  combined
financial  statements.  In  our  opinion,  the  information  set  forth  in  the
accompanying combined balance sheet as of December 31, 2001 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
August 2, 2002

<PAGE>

                              SALTON SEA GUARANTORS
                             COMBINED BALANCE SHEETS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                             June 30,              December 31,
                                                                               2002                    2001
                                                                           (unaudited)
<S>                                                                       <C>                    <C>
ASSETS
Accounts receivable, net of allowance of $3,421 and
    $9,829, respectively                                                  $     16,526           $      36,647
Prepaid expenses and other assets                                                4,407                   5,314
                                                                          ____________           _____________
Total current assets                                                            20,933                  41,961

Property, plant, contracts and equipment, net                                  538,233                 543,719
Excess of cost over fair value of net assets
   acquired, net                                                                44,270                  44,270
                                                                          ____________           _____________
   Total assets                                                           $    603,436           $     629,950
                                                                          ============           =============


LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable                                                          $      1,508           $       2,862
Accrued liabilities                                                              6,640                   9,414
Accrued interest                                                                 1,604                   1,721
Current portion of long term debt                                               21,625                  20,487
                                                                          ____________           _____________
Total current liabilities                                                       31,377                  34,484

Due to affiliates                                                               24,771                  27,109
Senior secured project note                                                    235,034                 246,412
                                                                          ____________           _____________
    Total liabilities                                                          291,182                 308,005

Commitment and contingencies (Note 3)

Total Guarantors' equity                                                       312,254                 321,945
                                                                          ____________           _____________
Total liabilities and Guarantors' equity                                  $    603,436           $     629,950
                                                                          ============           =============
</TABLE>

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

<PAGE>

                              SALTON SEA GUARANTORS
                        COMBINED STATEMENTS OF OPERATIONS
                             (Dollars in Thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                         Three Months Ended                 Six Months Ended
                                                               June 30,                           June 30,
                                                      2002            2001              2002              2001
                                                   _________        _________         _________        _________

Revenues:

<S>                                             <C>              <C>               <C>              <C>
Sales of electricity                            $     16,093     $     22,864      $     39,498     $     54,994
Interest and other income                                ---              977               430              977
                                                   _________        _________         _________        _________
Total revenues                                        16,093           23,841            39,928           55,971
                                                   _________        _________         _________        _________
Expenses:

Operating, general and
   administration                                     16,445           14,209            28,335           27,566
Depreciation and amortization                          6,690            4,640            10,965            9,010
Interest expense                                       5,157            5,814            10,319           11,304
Less capitalized interest                                ---              ---               ---           (1,692)
                                                   _________        _________         _________        _________

Total expenses                                        28,292           24,663            49,619           46,188
                                                   _________        _________         _________        _________
Income (loss) before cumulative
  effect of accounting change                        (12,199)            (822)           (9,691)           9,783

Cumulative effect of accounting change                   ---              ---               ---           (8,743)
                                                   _________        _________         _________        _________

Net income (loss)                               $    (12,199)    $       (822)      $    (9,691)    $      1,040
                                                   =========        =========         =========        =========
</TABLE>


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


<PAGE>

                              SALTON SEA GUARANTORS
                        COMBINED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                          Six Months Ended
                                                                              June 30,
                                                                     2002             2001
Cash flows from operating activities:
<S>                                                        <C>                <C>
Net income (loss)                                          $        (9,691)   $       1,040
Adjustments to reconcile net income (loss) to net
  cash flows from operating activities:
    Cumulative effect of change in accounting principle                ---            8,743
    Depreciation and amortization                                   10,965            9,010
Changes in assets and liabilities:
    Accounts receivable                                             20,121           (2,825)
    Prepaid expenses and other assets                                  907           (5,070)
    Accounts payable and accrued liabilities                        (4,245)          (1,791)
                                                              ____________        _________
Net cash flows from operating activities                            18,057            9,107
                                                              ____________        _________
Capital expenditures                                                (5,479)          (3,315)
Decrease in restricted cash                                            ---               17
                                                              ____________       __________
Net cash flows from investing activities                            (5,479)          (3,298)
                                                              ____________       __________
Cash flows from financing activities:
Increase (decrease) in due to affiliates                            (2,338)           2,850
Repayment of senior secured project note                           (10,240)          (8,659)
                                                              ____________       __________
Net cash flows from financing activities                           (12,578)          (5,809)
                                                              ____________       __________
Net change in cash                                                     ---              ---
Cash at beginning of period                                            ---              ---
                                                              ____________       __________
Cash at end of period                                      $           ---    $         ---
                                                           ===============       ==========
</TABLE>


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

<PAGE>

                              SALTON SEA GUARANTORS

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                              ____________________

1.  General:

In the opinion of management of the Salton Sea  Guarantors  (the  "Guarantors"),
the accompanying unaudited combined financial statements contain all adjustments
(consisting only of normal recurring  accruals)  necessary to present fairly the
financial  position as of June 30, 2002 and the  results of  operations  for the
three  and  six-months  ended  June 30,  2002 and  2001 and cash  flows  for the
six-months  ended June 30,  2002 and 2001.  The  results of  operations  for the
three-months ended June 30, 2002 and 2001 are not necessarily  indicative of the
results to be expected for the full year.

The unaudited  combined  financial  statements shall be read in conjunction with
the combined financial  statements included in the Funding  Corporation's annual
report on Form 10-K for the year ended December 31, 2001.

Certain  prior year  amounts  have been  reclassified  in order to conform  with
current year classification.

2.  Accounting Pronouncements:

Effective  January 1, 2001, the Guarantors  changed their accounting  policy for
overhaul and well workover costs.  These costs, had historically  been accounted
for using the deferral method, and are now expensed as incurred.  The Guarantors
have recorded a cumulative  effect of this change of approximately  $8.7 million
in the six months ended June 30, 2001.

On January 1, 2002,  the  Guarantors  adopted SFAS No. 142,  "Goodwill and Other
Intangible  Assets," which  establishes the accounting for acquired goodwill and
other intangible assets, and provides goodwill and  indefinite-lived  intangible
assets will not be  amortized,  but will be tested for  impairment  on an annual
basis.  The  Guarantor's  related  amortization   consists  solely  of  goodwill
amortization. Following is a reconciliation of net income as originally reported
for the three and  six-months  ended June 30,  2002 and 2001,  to  adjusted  net
income (loss) (in thousands):

                                    Three Months              Six months
                                  Ended June 30,              Ended June 30,
                                2002           2001      2002             2001

 Reported net income (loss) $ (12,199)        $ (822)  $ (9,691)      $   1,040
 Goodwill amortization            ---            326        ---             652
                                _____          _____      _____           _____
 Adjusted net income (loss) $ (12,199)        $ (496)  $ (9,691)      $   1,692
                                =====          =====      =====           =====

The Guarantors'  acquired intangible assets consists of power purchase contracts
(the  "contracts")  with a cost of $7.9 million and accumulated  amortization of
$3.0 million at June 30, 2002,  and are included in property,  plant,  contracts
and equipment in the accompanying  combined balance sheet.  Amortization expense
on the  contracts  was $0.2 million for the six months ended June 30, 2002.  The
Guarantors  expect  amortization  expense on the contracts to be $.2 million for
the  remainder  of fiscal 2002 and $.3  million for each of the five  succeeding
fiscal years.

In accordance with SFAS No. 142, the Guarantors have determined  their reporting
units and completed  their  transitional  impairment  testing of goodwill in the
second quarter  primarily using a discounted cash flow methodology as of January
1, 2002. The results of the transitional  impairment  tests indicated  potential
goodwill  impairment  at the  Guarantors.  The  Guarantors  will  determine  the
potential  impairment  charge,  if any, and record such charge in the  financial
statements no later than the period  ending  December 31, 2002.  The  impairment
charge will be recorded as a  cumulative  effect of change in  accounting  as of
January 1, 2002.

August  2001,  FASB  issued  SFAS No.  143,  "Accounting  for  Asset  Retirement
<PAGE>

Obligations".  This standard  addresses  financial  accounting and reporting for
obligations  related to the  retirement  of tangible  long-lived  assets and the
related asset  retirement  costs.  SFAS No. 143 is effective for the Guarantors'
fiscal year beginning  January 1, 2003.  The Guarantors  have not quantified the
impact resulting from the adoption of this standard.

In October  2001,  FASB issued  SFAS No.  144,  "Accounting  for  Impairment  or
Disposal of Long-Lived Assets".  The standard addresses financial accounting and
reporting  for the  impairment or disposal of  long-lived  assets.  There was no
financial  statement impact as a result of the Guarantors'  adoption of SFAS No.
144 on January 1, 2002.

3.  Contingency:

A.  Southern California Edison

Southern  California  Edison  ("Edison"),  a  wholly-owned  subsidiary of Edison
International,  is a  public  utility  primarily  engaged  in  the  business  of
supplying   electric  energy  to  retail   customers  in  Central  and  Southern
California,  excluding Los Angeles.  Due to reduced liquidity,  Edison failed to
pay  approximately  $42.3 million owed under the power purchase  agreements with
certain  Guarantors  (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.

The payment 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.

As a result of  uncertainties  related  to  Edison,  the  letter of credit  that
supports the debt service reserve fund at Salton Sea Funding Corporation has not
been extended  beyond its current July 2004  expiration  date, and as such, cash
distributions  are not  available  to CE  Generation,  LLC until the  Salton Sea
Funding Corporation debt service reserve fund of approximately $67.6 million has
been  funded or the  letter of credit  has been  extended  beyond  its July 2004
expiration date or replaced.

In January 2001, the California Power Exchange ("PX") declared bankruptcy.  As a
result,  the Salton Sea V Project has not received  payment for power sold under
the   Transaction   Agreements   during   December  2000  and  January  2001  of
approximately  $3.0 million.  The Guarantors  have  established an allowance for
doubtful accounts for the full amount of this receivable.

Edison 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 certain
Guarantors  (except the Salton Sea V Project) 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.  The Guarantors  will vigorously  pursue  collection of the capacity
bonus  payments.  However,  due to  Edison's  failure  to pay these  contractual
obligations,  the Guarantors have established an allowance for doubtful accounts
of approximately $.4 million.

B.  Environmental Liabilities

The Guarantors are subject to numerous legislative and regulatory  environmental
protection  requirements  involving air and water pollution,  waste  management,
hazardous chemical use, noise abatement, and land use aesthetics.

State and federal  environmental laws and regulations currently have, and future
modifications  may  have,  the  effect of (i)  increasing  the lead time for the
construction of new facilities,  (ii) significantly increasing the total cost of
new  facilities,  (iii)  requiring  modification  of  the  Guarantors'  existing
facilities,  (iv)  increasing the risk of delay on  construction  projects,  (v)
increasing  the  Guarantors'  cost of  waste  disposal  and  (vi)  reducing  the
reliability  of  service  provided  by the  Guarantors  and the amount of energy
available  from the  Guarantors'  facilities.  Any of such  items  could  have a
substantial  impact on amounts  required to be expended by the Guarantors in the
future.  Expenditures for ongoing compliance with environmental regulations that
relate to  current  operations  are  expensed  or  capitalized  as  appropriate.
<PAGE>

Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue  generation,  are expensed.
Liabilities   are  recorded  when   environmental   assessments   indicate  that
remediation  efforts are  probable  and the costs can be  reasonably  estimated.
Estimates of the liability are based upon currently  available  facts,  existing
technology and presently enacted laws and regulations  taking into consideration
the likely  effects of  inflation  and other social and  economic  factors,  and
include  estimates of associated legal costs.  These amounts also consider prior
experience in remediating sites, other companies'  clean-up  experience and data
released by the Environmental  Protection Agency or other  organizations.  These
estimated  liabilities are subject to revision in future periods based on actual
costs or new circumstances,  and are included in the accompanying balance sheets
at their  undiscounted  amounts.  As of June 30, 2002 and December 31, 2001, the
environmental liabilities recorded on the balance sheet were not material.

4.  Related Party Transactions

On September 29, 2000, Salton Sea Power L.L.C. ("Salton Sea Power") entered into
an  agreement  to sell all  available  power from the Salton Sea V Project to El
Paso Merchant Energy Company  ("EPME").  Under the terms of the agreement,  EPME
purchased  and sold  available  power on behalf of Salton  Sea  Power,  into the
California  ISO  markets.  The  purchase  price  for  the  available  power  was
equivalent  to the value  actually  received by EPME for the sale of such power,
including renewable premiums.

On January 17, 2001,  Salton Sea Power entered into a  Transaction  Agreement to
sell available  power from the Salton Sea V Project to EPME.  Under the terms of
the agreement,  at the option of Salton Sea Power,  EPME purchased all available
power from the Salton Sea V Project  based on day ahead  price  quotes  received
from EPME.

On March 27, 2001 and May 1, 2001,  the  Guarantors  entered into a  Transaction
Agreement to sell available  power to EPME based on percentages of the Dow Jones
SP-15  Index.  On June 28,  2001,  the  Guarantors  (excluding  the Salton Sea V
Project)  ceased  selling  available  power to EPME and  resumed  power sales to
Edison.

Pursuant  to these  agreements,  sales to EPME from the  Guarantors  totaled $.7
million  and $39.2  million  for the  three-months  and $2.9  million  and $48.8
million for the  six-months  ended June 30, 2002 and 2001,  respectively.  As of
June 30, 2002 and  December  31, 2001,  accounts  receivable  from EPME were $.4
million and $.8 million, respectively.


<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  June  30,  2002,  and  the  related  combined  statements  of
operations  for the  three-month  and six-month  periods ended June 30, 2002 and
2001, and the related  statements of cash flows for the six-month  periods ended
June 30, 2002 and 2001. These financial statements are the responsibility of the
Partnership Guarantors' management.

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

Based on our review, we are not aware of any material  modifications that should
be made to such combined financial  statements for them to be in conformity with
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,  2001,  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 17, 2002 (March 1,
2002 as to Note 8A),  we  expressed  an  unqualified  opinion on those  combined
financial  statements.  In  our  opinion,  the  information  set  forth  in  the
accompanying combined balance sheet as of December 31, 2001 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
August 2, 2002

<PAGE>

                             PARTNERSHIP GUARANTORS
                             COMBINED BALANCE SHEETS
                             (Dollars in Thousands)

<TABLE>
<CAPTION>

                                                                               June 30,               December 31,
                                                                                 2002                     2001
                                                                             (unaudited)
ASSETS
<S>                                                                       <C>                      <C>
Cash                                                                      $        269             $           -
Accounts receivable, net of allowance of $1,720 and
    $14,925, respectively                                                       19,485                    59,384
Prepaid expenses and other assets                                               17,458                    19,358
                                                                              ________                  ________
Total current assets                                                            37,212                    78,742

Restricted cash                                                                  5,331                    21,282
Property, plant, contracts and equipment, net                                  659,257                   633,574
Management fee, net                                                             69,056                    70,806
Due from affiliates                                                             48,784                    13,072
Excess of cost over fair value of net assets
  acquired, net                                                                120,866                   120,866
                                                                              ________                 _________
Total assets                                                              $    940,506             $     938,342
                                                                              ========                 =========


LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable                                                          $      2,029             $       5,480
Accrued liabilities                                                             18,054                    12,853
Accrued interest                                                                 1,556                     1,605
Current portion of long term debt                                                4,822                     4,625
                                                                              ________                 _________
Total current liabilities                                                       26,461                    24,563

Senior secured project notes                                                   241,607                   244,117
Deferred income taxes                                                          100,355                   102,083
                                                                              ________                 _________
Total liabilities                                                              368,423                   370,763

Commitments and contingencies (Note 3)

Guarantors' equity:
Common stock                                                                         3                         3
Additional paid-in capital                                                     395,925                   387,663
Retained earnings                                                              176,155                   179,913
                                                                              ________                 _________
Total Guarantors' equity                                                       572,083                   567,579
                                                                              ________                 _________
Total liabilities and Guarantors' equity                                  $    940,506              $    938,342
                                                                              ========                 =========
</TABLE>


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

<PAGE>

                             PARTNERSHIP GUARANTORS
                        COMBINED STATEMENTS OF OPERATIONS
                             (Dollars in Thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      Three Months Ended                 Six Months Ended
                                                            June 30,                          June 30,
                                                      2002             2001             2002            2001
                                                   _________        _________         _________        _________
Revenues:

<S>                                              <C>               <C>              <C>                <C>
Sales of electricity                             $    20,296       $   20,076       $    42,495        $  43,570
Interest and other income                                129              905               665              940
                                                   _________        _________         _________        _________
Total revenues                                        20,425           20,981            43,160           44,510
                                                   _________        _________         _________        _________
Expenses:

Operating, general and
   administration                                     14,419           12,278            32,705           26,672
Depreciation and amortization                          5,365            6,937            12,152           12,018
Interest expense                                       4,782            4,829             9,536            9,622
Less capitalized interest                             (2,910)          (2,750)           (5,748)          (7,483)
                                                   _________        _________         _________        _________

Total expenses                                        21,656           21,294            48,645           40,829
                                                   _________        _________         _________        _________
Income (loss) before income taxes                     (1,231)            (313)           (5,485)           3,681
Provision (benefit) for income taxes                    (387)            (109)           (1,727)           1,269
                                                   _________        _________         _________        _________

Income (loss) before cumulative
  effect of accounting change                           (844)            (204)           (3,758)           2,412

Cumulative effect of accounting
  change, net of tax                                     ---              ---               ---           (8,254)
                                                   _________        _________         _________        _________
Net loss                                          $     (844)        $   (204)       $   (3,758)     $    (5,842)
                                                   =========        =========        ==========        =========
</TABLE>


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

<PAGE>


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

                                                                                          Six Months Ended
                                                                                               June 30,
                                                                                       2002               2001
Cash flows from operating activities:
<S>                                                                             <C>                <C>
Net loss                                                                        $       (3,758)    $      (5,842)
Adjustments to reconcile net loss to net
    cash flow from operating activities:
       Cumulative effect of change in accounting principle, net of tax                     ---             8,254
       Depreciation and amortization                                                    12,152            12,018
       Deferred income taxes                                                            (1,728)            1,269
Changes in assets and liabilities:
          Accounts receivable                                                           39,899           (17,054)
          Prepaid expenses and other assets                                              1,096            (4,073)
          Accounts payable and accrued
           liabilities                                                                   1,701             3,493
                                                                                ______________     _____________
Net cash flows from operating activities                                                49,362            (1,935)
                                                                                ______________     _____________
Cash flows from investing activities:
Capital expenditures                                                                   (12,393)           (7,751)
Capital expenditures - construction                                                    (22,793)          (11,259)
Decrease in restricted cash                                                             15,951               106
Management fee                                                                             333               741
                                                                                ______________     _____________
Net cash flows from investing activities                                               (18,902)          (18,163)
                                                                                ______________     _____________
Cash flows from financing activities:
Repayments of senior secured project notes                                              (2,313)             (954)
Decrease (increase) in due from affiliates                                             (36,140)           21,052
Equity contribution                                                                      8,262               ---

Net cash flows from financing activities                                               (30,191)           20,098
                                                                                ______________     _____________
Net change in cash                                                                         269               ---

Cash at beginning of period                                                                ---               ---
                                                                                ______________     _____________
Cash at end of period                                                           $          269     $         ---
                                                                                ==============     =============

</TABLE>

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

<PAGE>


                             PARTNERSHIP GUARANTORS

                     NOTES TO COMBINED FINANCIAL STATEMENTS
                              ____________________

1.  General:

In the opinion of management of the Partnership  Guarantors (the  "Guarantors"),
the accompanying unaudited combined financial statements contain all adjustments
(consisting only of normal recurring  accruals)  necessary to present fairly the
financial  position as of June 30, 2002 and the  results of  operations  for the
three  and  six-months  ended  June 30,  2002 and  2001 and cash  flows  for the
six-months ended June 30, 2002 and 2001. The results of operations for the three
and six-months  ended June 30, 2002 and 2001 are not  necessarily  indicative of
the results to be expected for the full year.

The unaudited  combined  financial  statements shall be read in conjunction with
the combined financial  statements included in the Funding  Corporation's annual
report on Form 10-K for the year ended December 31, 2001.

2.  Accounting Policies:

Effective  January 1, 2001, the Guarantors  changed their accounting  policy for
overhaul and well workover costs.  These costs, had historically  been accounted
for using the deferral method, and are now expensed as incurred.  The Guarantors
have recorded a cumulative effect of this change of approximately  $8.3 million,
net of tax in the six months ended June 30, 2001.

On January 1, 2002,  the  Guarantors  adopted SFAS No. 142,  "Goodwill and Other
Intangible  Assets," which  establishes the accounting for acquired goodwill and
other intangible  assets and provides goodwill and  indefinite-lived  intangible
assets will not be  amortized,  but will be tested for  impairment  on an annual
basis.  The  Guarantors'  related  amortization   consists  solely  of  goodwill
amortization,  which has no income tax effect.  Following is a reconciliation of
net loss as originally reported for the three and six-months ended June 30, 2002
and 2001, to adjusted net income (loss) (in thousands):

                                    Three Months               Six Months
                                    Ended June 30,            Ended June 30,
                                 2002        2001       2002          2001

 Reported net income (loss)  $    (844)   $   (204)  $  (3,758)   $  (5,842)
 Goodwill amortization             ---         891         ---        1,782
                                 _____      ______       _____        _____
 Adjusted net income (loss)  $    (844)   $    687   $  (3,758)   $  (4,060)
                                 =====      ======       =====        =====

The following  table  summarizes the acquired  intangible  assets as of June 30,
2002 (in thousands):

                                Gross Carrying                  Accumulated
                                    Amount                      Amortization
                                ______________                  ____________
Amortized Intangible Assets:
  Power Purchase Contracts      $  123,002                      $   96,110
  Patented Technology               46,290                          14,421
                                ______________                  ____________
    Total                       $  169,292                      $  110,531
                                ==============                  ============
<PAGE>


Amortization  expense on  acquired  intangible  assets was $1.8  million for the
six-months ended June 30, 2002. The Guarantors  expect  amortization  expense on
acquired  intangible  assets to be $1.8 million for the remainder of fiscal 2002
and $3.5 million for each of the five succeeding fiscal years.

In accordance with SFAS No. 142, the Guarantors have determined  their reporting
units and completed  their  transitional  impairment  testing of goodwill in the
second quarter  primarily using a discounted cash flow methodology as of January
1, 2002. The results of the transitional  impairment  tests indicated  potential
goodwill  impairment  at the  Guarantors.  The  Guarantors  will  determine  the
potential  impairment  charge,  if any, and record such charge in the  financial
statements no later than the period  ending  December 31, 2002.  The  impairment
charge will be recorded as a  cumulative  effect of change in  accounting  as of
January 1, 2002.

In August  2001,  FASB  issued SFAS No. 143,  "Accounting  for Asset  Retirement
Obligations".  This standard  addresses  financial  accounting and reporting for
obligations  related to the  retirement  of tangible  long-lived  assets and the
related asset  retirement  costs.  SFAS No. 143 is effective for the Guarantors'
fiscal year beginning  January 1, 2003.  The Guarantors  have not quantified the
impact resulting from the adoption of this standard.

In October  2001,  FASB issued  SFAS No.  144,  "Accounting  for  Impairment  or
Disposal of Long-Lived Assets".  The standard addresses financial accounting and
reporting  for the  impairment or disposal of  long-lived  assets.  There was no
financial  statement impact as a result of the Guarantors'  adoption of SFAS No.
144 on January 1, 2002.

3.  Contingency:

A.  Southern California Edison

Southern  California  Edison  ("Edison"),  a  wholly-owned  subsidiary of Edison
International,  is a  public  utility  primarily  engaged  in  the  business  of
supplying   electric  energy  to  retail   customers  in  Central  and  Southern
California,  excluding Los Angeles.  Due to reduced liquidity,  Edison failed to
pay  approximately  $76.9 million owed under the power purchase  agreements with
certain  Guarantors  (excluding  the 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.

The payment 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.

In January 2001, the California Power Exchange ("PX") declared bankruptcy.  As a
result,  the Turbo  Project  has not  received  payment for power sold under the
Transaction  Agreements  during December 2000 and January 2001 of  approximately
$.8 million.  The Guarantors have established an allowance for doubtful accounts
for the full amount of this receivable.

Edison 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  (excluding  the Turbo  Project)  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.  The Guarantors  will vigorously  pursue  collection of the capacity
bonus  payments.  However,  due to  Edison's  failure  to pay these  contractual
obligations,  the Guarantors have established an allowance for doubtful accounts
of approximately $.9 million.
<PAGE>

B.  Minerals

The  Zinc  Recovery  Project  was  being   constructed  by  Kvaerner  U.S.  Inc.
("Kvaerner")  pursuant  to a date  certain,  fixed-price,  turnkey  engineering,
procure,   construct  and  manage  contract  (the  "Zinc  Recovery  Project  EPC
Contract").   On  June  14,  2001,  Minerals  LLC  issued  notices  of  default,
termination  and demand  for  payment  of  damages  to  Kvaerner  under the Zinc
Recovery Project EPC Contract due to failure to meet performance obligations. As
a result  of  Kvaerner's  default  under the Zinc  Recovery  EPC  Contract,  the
Guarantors drew $29.6 million under the EPC Contract Letter of Credit ("LOC") on
July 20, 2001 and claimed the retainage and balance of the contract  price.  The
LOC draw, retainage and balance of the contract price have been accounted for as
a reduction of the capitalized costs of the project. The Guarantors have entered
into a time and materials engineering,  procurement and construction  management
contract with AMEC E&C Services, Inc. to complete the Zinc Recovery Project.

On July 11,  2001,  Kvaerner  filed an Amended  Demand For  Arbitration  against
Minerals  LLC  characterizing  the nature of the dispute as  concerns  regarding
change orders and  performance  penalties.  Kvaerner did not state the amount of
its claim.

On August 7, 2001,  Minerals LLC filed an Answering  Statement and  Counterclaim
against  Kvaerner.  Minerals LLC denied all material  allegations  in Kvaerner's
Amended Demand for Arbitration, and asserted a counterclaim against Kvaerner for
breach of contract and specific performance. Minerals LLC alleged that its total
estimated   damage  for   Kvaerner's   breach  of  contract  are  in  excess  of
approximately $60 million;  however, Minerals LLC has offset approximately $42.5
million of these  damages by  exercising  its rights  under the EPC  Contract to
claim the balance of the contract  price,  the  retainage  and by drawing on the
LOC.

On May 23, 2002, Minerals LLC and Kvaerner entered into a Settlement  Agreement.
Under the terms of the agreement,  Minerals retained the amounts drawn under the
LOC,  the EPC  retainage  amounts and the EPC  contract  balance and will pay to
Kvaerner three equal  installments  of $2.25 million payable in January of 2003,
2004 and 2005.

C.  Environmental Liabilities

The Guarantors are subject to numerous legislative and regulatory  environmental
protection  requirements  involving air and water pollution,  waste  management,
hazardous chemical use, noise abatement, and land use aesthetics.

State and federal  environmental laws and regulations currently have, and future
modifications  may  have,  the  effect of (i)  increasing  the lead time for the
construction of new facilities,  (ii) significantly increasing the total cost of
new  facilities,  (iii)  requiring  modification  of  the  Guarantors'  existing
facilities,  (iv)  increasing the risk of delay on  construction  projects,  (v)
increasing  the  Guarantors'  cost of  waste  disposal  and  (vi)  reducing  the
reliability  of  service  provided  by the  Guarantors  and the amount of energy
available  from the  Guarantors'  facilities.  Any of such  items  could  have a
substantial  impact on amounts  required to be expended by the Guarantors in the
future.  Expenditures for ongoing compliance with environmental regulations that
relate to  current  operations  are  expensed  or  capitalized  as  appropriate.
Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue  generation,  are expensed.
Liabilities   are  recorded  when   environmental   assessments   indicate  that
remediation  efforts are  probable  and the costs can be  reasonably  estimated.
Estimates of the liability are based upon currently  available  facts,  existing
technology and presently enacted laws and regulations  taking into consideration
the likely  effects of  inflation  and other social and  economic  factors,  and
include  estimates of associated legal costs.  These amounts also consider prior
experience in remediating sites, other companies'  clean-up  experience and data
released by the Environmental  Protection Agency or other  organizations.  These
estimated  liabilities are subject to revision in future periods based on actual
costs or new circumstances,  and are included in the accompanying balance sheets
at their  undiscounted  amounts.  As of June 30, 2002 and December 31, 2001, the
environmental liabilities recorded on the balance sheet were not material.
<PAGE>

4.  Related Party Transactions

On September  29, 2000,  CE Turbo LLC ("CE Turbo")  entered into an agreement to
sell all available power from the Turbo Project to EPME.  Under the terms of the
agreement,  EPME purchased and sold available power on behalf of CE Turbo,  into
the  California  ISO markets.  The purchase  price for the  available  power was
equivalent  to the value  actually  received by EPME for the sale of such power,
including renewable premiums.

On January 17,  2001,  CE Turbo  entered  into a  Transaction  Agreement to sell
available  power  from  the  Turbo  Project  to  EPME.  Under  the  terms of the
agreement,  at the option of CE Turbo,  EPME purchased all available  power from
the Turbo Project based on day ahead price quotes received from EPME.

On March 27, 2001 and May 1, 2001,  the  Guarantors  entered into a  Transaction
Agreement to sell available  power to EPME based on percentages of the Dow Jones
SP-15 Index.  On June 28, 2001,  the  Guarantors  (excluding  the Turbo Project)
ceased selling available power to EPME and resumed power sales to Edison.

Pursuant to these agreements, sales to EPME from the Company totaled $.2 million
and $30.8 million for the three-months and $.6 million and $49.5 million for the
six months ended June 30, 2002 and 2001,  respectively.  As of June 30, 2002 and
December  31,  2001,  accounts  receivable  from EPME were $.5  million  and $.1
million, respectively.



<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 June 30, 2002, and the related  statements of operations for the  three-month
and six-month  periods ended June 30, 2002 and 2001, and the related  statements
of cash flows for the  six-month  periods  ended June 30,  2002 and 2001.  These
financial  statements  are the  responsibility  of the Salton Sea Royalty  LLC's
management.

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

Based on our review, we are not aware of any material  modifications that should
be  made  to  such  financial  statements  for  them  to be in  conformity  with
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, 2001,  and the related  statements of operations,
equity,  and cash flows for the year then ended (not presented  herein);  and in
our report dated  January 17, 2002 (March 1, 2002 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, 2001
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
August 2, 2002

<PAGE>

                             SALTON SEA ROYALTY LLC
                                 BALANCE SHEETS
                (Dollars in Thousands, Except per Share Amounts)
<TABLE>
<CAPTION>
                                                                              June 30,               December 31,
                                                                                2002                     2001
                                                                            (unaudited)
ASSETS
<S>                                                                      <C>                      <C>
Prepaid expenses and other assets                                        $           22           $           31
                                                                             __________               __________
Total current assets                                                                 22                       31

Royalty stream, net                                                              14,438                   14,865
Excess of cost over fair value of net assets
  acquired, net                                                                  30,464                   30,464
Due from affiliates                                                              36,647                   33,940
                                                                             __________               __________
Total assets                                                             $       81,571           $       79,300
                                                                             ==========               ==========
LIABILITIES AND EQUITY
Liabilities:
Accrued interest                                                         $           17           $           29
Current portion of long term debt                                                 1,882                    3,460
                                                                             __________               __________
Total current liabilities                                                         1,899                    3,489

Senior secured project note                                                         995                    1,147
                                                                             __________               __________
    Total liabilities                                                             2,894                    4,636

Commitment and contingencies (Note 3)

Equity:
Common stock, par value $.01 per share; 100
  share authorized, issued and outstanding                                          ---                      ---
Additional paid-in capital                                                        1,561                    1,561
Retained earnings                                                                77,116                   73,103
                                                                             __________               __________
Total equity                                                                     78,677                   74,664
                                                                             __________               __________
Total liabilities and equity                                              $      81,571            $      79,300
                                                                             ==========               ==========
</TABLE>

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

<PAGE>

                             SALTON SEA ROYALTY LLC
                            STATEMENTS OF OPERATIONS
                             (Dollars in Thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                      Three Months Ended                  Six Months Ended
                                                            June 30,                           June 30,
                                                     2002              2001             2002             2001
                                                   _________        _________         _________        _________

Revenues:
<S>                                                <C>              <C>               <C>              <C>
Royalty income                                     $   2,532        $   2,376         $   6,214        $   5,839

Expenses:
Operating, general and
   administrative expenses                               533              650             1,625            1,529
Amortization of royalty stream
   and goodwill                                          213              488               427              975
Interest expense                                          60              166               149              343
                                                   _________         ________        __________         ________
Total expenses                                           806            1,304             2,201            2,847
                                                   _________         ________        __________         ________
Net income                                         $   1,726         $  1,072        $    4,013         $  2,992
                                                   =========         ========        ==========         ========
</TABLE>

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


<PAGE>

                             SALTON SEA ROYALTY LLC
                            STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)
                                                     Six Months Ended
                                                          June 30,
                                                    2002           2001
Cash flows from operating activities:
Net income                                  $       4,013    $       2,992
Adjustments to reconcile net income to net
    cash flow from operating activities:
       Amortization                                   427              975
       Changes in assets and liabilities:
       Prepaid expenses and other assets                9               26
       Accrued liabilities                            (12)             (16)
                                                _________       __________
Net cash flows from operating activities            4,437            3,977
                                                _________       __________

Net cash flows from financing activities:
Increase in due from affiliates                    (2,707)          (1,760)
Repayment of senior secured project note           (1,730)          (2,217)
                                                _________       __________
Net cash flows from financing activities           (4,437)          (3,977)

Net change in cash                                    ---              ---

Cash at beginning of period                           ---              ---
                                                _________       __________
Cash at end of period                       $         ---    $         ---
                                                =========       ==========

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

<PAGE>

                             SALTON SEA ROYALTY LLC

                          NOTES TO FINANCIAL STATEMENTS
                              ____________________

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 June 30, 2002 and the  results of  operations  for the three and
six-months  ended June 30, 2002 and 2001 and cash flows for the six-months ended
June 30, 2002 and 2001.  The results of operations  for the three and six months
ended June 30, 2002 and 2001 are not necessarily indicative of the results to be
expected for the full year.

The  unaudited  financial  statements  shall  be read in  conjunction  with  the
financial statements included in the Funding Corporation's annual report on Form
10-K for the year ended December 31, 2001.

2.  Accounting Policies:

On January 1, 2002,  the  Company  adopted  SFAS No.  142,  "Goodwill  and Other
Intangible  Assets," which  establishes the accounting for acquired goodwill and
other intangible  assets and provides goodwill and  indefinite-lived  intangible
assets will not be  amortized,  but will be tested for  impairment  on an annual
basis.   The  Company's   related   amortization   consists  soley  of  goodwill
amortization. Following is a reconciliation of net income as originally reported
for the three and  six-months  ended June 30,  2002 and 2001,  to  adjusted  net
income (in thousands):

                                Three Months               Six Months
                               Ended June 30,            Ended June 30,
                             2002           2001     2002             2001

 Reported net income     $   1,726        $ 1,072  $  4,013       $   2,992
 Goodwill amortization         ---            227       ---             454
                          ________         ______   _______         _______
 Adjusted net income     $   1,726       $  1,299  $  4,013       $   3,446
                          ========         ======   =======         =======

The Company's  acquired  intangible  assets consist of the royalty stream with a
cost of $60.5 million and  accumulated  amortization  of $46 million at June 30,
2002.  Amortization  expense  on the  royalty  stream was $0.4  million  for the
six-months ended June 30, 2002. The Company expects  amortization expense on the
royalty  stream to be $0.4  million  for the  remainder  of fiscal 2002 and $0.9
million for each of the five succeeding fiscal years.

In accordance  with SFAS No. 142, the Company has determined its reporting units
and  completed  the  transitional  impairment  testing of goodwill in the second
quarter  primarily  using a discounted  cash flow  methodology  as of January 1,
2002. No impairment  was  indicated as a result of the  transitional  impairment
test.

<PAGE>

3.  Contingency:

Southern  California  Edison  ("Edison"),  a  wholly-owned  subsidiary of Edison
International,  is a  public  utility  primarily  engaged  in  the  business  of
supplying   electric  energy  to  retail   customers  in  Central  and  Southern
California,  excluding Los Angeles.  Due to reduced liquidity,  Edison failed to
pay  approximately  $119 million owed under the power purchase  agreements  with
certain  Guarantors  (Imperial Valley  Projects,  excluding the Salton Sea V and
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.

The payment 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.

As a result of  uncertainties  related  to  Edison,  the  letter of credit  that
supports the debt service reserve fund at Salton Sea Funding Corporation has not
been extended  beyond its current July 2004  expiration  date,  and as such cash
distributions  are not available to CE  Generation  until the Salton Sea Funding
Corporation  debt service reserve fund of  approximately  $67.6 million has been
funded or the letter of credit has been extended beyond its July 2004 expiration
date or replaced.

<PAGE>

                       THE SALTON SEA FUNDING CORPORATION
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS
                        _________________________________

Forward-Looking Statements

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

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 Combined  Financial  Statements in the Annual Report on Form 10-K  describes
the significant  accounting  policies and methods used in the preparation of the
Combined Financial  Statements.  Estimates are used for, but not limited to, the
accounting  for the  allowance for doubtful  accounts,  impairment of long-lived
assets and  contingent  liabilities.  Actual  results  could  differ  from these
estimates. The following critical accounting policies are impacted significantly
by judgments,  assumptions and estimates used in the preparation of the Combined
Financial Statements.

Allowance for Doubtful Accounts

The allowance for doubtful  accounts is based on the  Guarantors'  assessment of
the  collectibility  of specific customer accounts and the aging of the accounts
receivable.  If there is a deterioration of a major customer's credit worthiness
or actual  defaults  are  higher  than the  Guarantors'  historical  experience,
estimates of the recoverability of amounts due could be adversely affected.

Impairment of Long-Lived Assets

The  Guarantors'  long-lived  assets  consist  primarily of property,  plant and
equipment,  goodwill and intangible assets with useful lives, which range from 3
to 40 years.  The Guarantors  believe the useful lives of its long-lived  assets
are reasonable.  The Guarantors evaluate goodwill impairment on an annual basis.
The Guarantors  evaluate the long-lived assets for impairment whenever events or
changes in  circumstances  indicate that the carrying amount of an asset may not
be recoverable.  Triggering events include a significant change in the extent or
manner in which long-lived  assets are being used or in its physical  condition,
in legal factors,  or in the business climate that could affect the value of the
long-lived assets,  including changes in regulation.  The interpretation of such
events  requires  judgment  from  management  as to  whether  such an event  has
occurred  and is  required.  If an event  occurs that could  affect the carrying
value of the asset and  management  does not identify it as a triggering  event,
future results of operations could be significantly affected.

<PAGE>

Upon the occurrence of a triggering  event,  the carrying amount of a long-lived
asset is reviewed to assess  whether the  recoverable  amount has declined below
its carrying  amount.  The  recoverable  amount is the estimated net future cash
flows that the  Guarantors  expect to recover  from the future use of the asset,
undiscounted and without interest,  plus the asset's residual value on disposal.
Where the recoverable  amount of the long-lived  asset is less than the carrying
value,  an  impairment  loss would be  recognized to write down the asset to its
fair value which is based on discounted estimated cash flows from the future use
of the asset.

The  estimated  cash flows arising from future use of the asset that are used in
the impairment  analysis requires  judgment  regarding what the Guarantors would
expect to recover from future use of the asset.  Any changes in the estimates of
cash flows  arising  from future use of the asset or the  residual  value of the
asset on disposal based on changes in the market conditions,  changes in the use
of the assets,  management's  plans, the determination of the useful life of the
assets and  technology  change in the industry  could  significantly  change the
calculation  of the fair  value  or  recoverable  amount  of the  asset  and the
resulting  impairment  loss,  which  could  significantly  affect the results of
operations.

In accordance with SFAS No. 142, the Guarantors have determined  their reporting
units and completed  their  transitional  impairment  testing of goodwill in the
second quarter  primarily using a discounted cash flow methodology as of January
1, 2002. The results of the transitional  impairment  tests indicated  potential
goodwill impairment at the Salton Sea and Partnership Guarantors. The Guarantors
will determine the potential  impairment  charge, if any, and record such charge
in the financial  statements no later than the period ending  December 31, 2002.
The  impairment  charge  will be recorded  as a  cumulative  effect of change in
accounting as of January 1, 2002.

Contingent Liabilities

The  Guarantors are subject to the  possibility  of various loss  contingencies,
including  tax,  legal and  environmental,  arising  in the  ordinary  course of
business.  The Guarantors  consider the likelihood of the loss or the incurrence
of a liability as well as the ability to reasonably  estimate the amount of loss
in determining loss contingencies. An estimated loss contingency is accrued when
it is probable  that a liability has been incurred and the amount of loss can be
reasonably  estimated.  The Guarantors  regularly  evaluate current  information
available to determine whether such accruals should be adjusted.

Results of Operations

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

Revenues:

The Salton Sea Guarantors'  sales of electricity  decreased to $16.1 million for
the three months  ended June 30, 2002 from $22.9  million for the same period in
2001, a 29.7% decrease.  This decrease was due to lower  production and rates in
2002, and a $.9 million  write-off  related to prior year accounts  receivables.
For the six months ended June 30, 2002 sales of  electricity  decreased to $39.5
million from $55.0 million for the same period in 2001, a 28.2% decrease.  Sales
of electricity  for the six-months  ended June 30, 2002 included the impact of a
$6.8  million  reduction  in the  allowance  for  doubtful  accounts.  Sales  of
electricity  for the six months  ended June 30,  2001  included  the impact of a
$12.5 million  increase in the allowance  for doubtful  accounts.  Excluding the
impact of the adjustments related to the allowance for doubtful accounts,  sales
of  electricity  decreased  $34.3  million or 51.2% to $32.7 million for the six
months ended June 30, 2002 from $67.0 million for the six-months  June 30, 2001.
This decrease was primarily due to lower rates and production in 2002.

<PAGE>

The following data includes the aggregate capacity and electricity production of
the Salton Sea Guarantors:

                                  Three Months Ended          Six Months Ended
                                         June 30,                   June 30,
                                    2002         2001       2002            2001

Overall capacity factor             63.2%       75.8%      76.2%           79.9%
Capacity (NMW) (average)            168.4       168.4      168.4           168.4
kWh produced (in thousands)       232,400     278,900    557,200         584,700

The overall  capacity  factor for the Salton Sea  Guarantors  decreased  for the
three and six months  ended June 30,  2002  compared  to the same period in 2001
primarily due to overhauls and other maintenance.  The 2002 overhauls include an
uncontrollable  force event at the Salton Sea II Project.  Salton Sea II's 10 MW
turbine went out of service on March 25th and is expected to be placed back into
service in December.  The  Guarantors  expect to collect lost revenues under the
Salton Sea II PPA and through insurance coverage excluding deductibles.

The Partnership  Guarantors' sales of electricity increased to $20.3 million for
the three months  ended June 30, 2002 from $20.1  million for the same period in
2001, a 1.0%  increase.  This  increase was due to higher  production  offset by
lower rates in 2002 and a write off related to prior year  accounts  receivable.
For the six-months  ended June 30, 2002 sales of electricity  decreased to $42.5
million from $43.6 million for the same period in 2001, a 2.5%  decrease.  Sales
of  electricity  for the six months  ended June 30, 2002  included the impact of
$14.1  million  reduction  in the  allowance  for  doubtful  accounts.  Sales of
electricity  for the six months  ended June 30,  2001  included  the impact of a
$28.9 million  increase in the allowance  for doubtful  accounts.  Excluding the
impact of the adjustments related to the allowance for doubtful accounts,  sales
of  electricity  decreased  $44.1  million or 60.8% to $28.4 million for the six
months ended June 30, 2002 from $72.5  million for the six months ended June 30,
2001.  This  decrease  was due to lower  rates  and  decreased  production  from
scheduled overhauls.

The following data includes the aggregate capacity and electricity production of
the Partnership Guarantors:
<TABLE>
<CAPTION>
                                                          Three Months Ended                Six Months Ended
                                                                June 30,                         June 30,
                                                         2002              2001           2002             2001
<S>                                                    <C>               <C>            <C>             <C>

Overall capacity factor                                 106.8%             99.4%          98.3%          100.3%
Capacity (NMW) (average)                                   158               158            158             158
kWh produced (in thousands)                            368,600           342,900        674,602         688,602
</TABLE>

The overall  capacity  factor for the Partnership  Guarantors  increased for the
three  months  ended June 30,  2002  compared  to the same period in 2001 due to
higher plant  availability.  The decrease for the six months ended June 30, 2002
compared to 2001 was due to scheduled overhauls in 2002.

As a  result  of the  Settlement  Agreements,  Edison  has  elected  to pay  the
Guarantors  (except  Salton Sea Projects IV and V and the 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  kilowatt-hour  from January  through April 30,
2002 and increased to 5.37 cents/per kilowatt hour effective May 1, 2002 through
April 30,  2007.  Edison's  Average  Avoided  Cost of  Energy  was 8.1 cents per
kilowatt-hour  for the three  months  and 11.6 cents per  kilowatt-hour  for the
six-months ended June 30, 2001, respectively.

The Royalty  Guarantor  revenue  increased  to $2.5 million for the three months
ended  June 30,  2002 from $2.4  million  for the same  period  last  year.  The
increase  relates to higher royalties based on higher revenue at the Partnership
Guarantor.  For the six months  ended June 30, 2002  revenue  increased  to $6.2
million from $5.8 million for the same period in 2001.  The increase  relates to
additional royalties recognized on the past due interest payments from Edison.
<PAGE>

Operating Expenses:

The Salton Sea Guarantors' operating expenses, which include royalty, operating,
and general and  administrative  expenses,  increased  to $16.4  million for the
three months ended June 30, 2002 from $14.2 million for the same period in 2001.
For the six months  ended June 30, 2002  operating  expenses  increased to $28.3
million from $27.6 million for the same period in 2001.  The increases  were due
to  higher  costs  from  an  overhaul  offset  by  lower  royalty   expenses  of
approximately $.5 million resulting from lower revenues.

The  Partnership   Guarantors'   operating  expenses,   which  include  royalty,
operating, and general and administrative  expenses,  increased to $14.4 million
for the three months ended June 30, 2002 from $12.3  million for the same period
in 2001. For the six months ended June 30, 2002 operating  expenses increased to
$32.7 million from $26.7 million for the same period in 2001. The increases were
due to higher overhaul costs in 2002.

The Royalty  Guarantors'  operating  expenses  decreased  to $.5 million for the
three months ended June 30, 2002,  from $.7 million for the same period in 2001.
For the six months  ended June 30, 2002  operating  expenses  increased  to $1.6
million from $1.5 million for the same period in 2001.  This increase was due to
higher royalty costs resulting from higher revenue.

Depreciation and Amortization:

The Salton Sea  Guarantors'  depreciation  and  amortization  increased  to $6.7
million for the three  months ended June 30, 2002 from $4.6 million for the same
period  of 2001.  For the six  months  ended  June  30,  2002  depreciation  and
amortization increased to $11.0 million from $9.0 million for the same period in
2001.  These increases were due to significant  capital  additions and the write
off of an abandoned project, partially offset by the discontinuation of goodwill
amortization in 2002 of $ 0.7 million.

The Partnership  Guarantors'  depreciation  and  amortization  decreased to $5.4
million for the three  months ended June 30, 2002 from $6.9 million for the same
period  in  2001.  The  decrease  was  due to the  discontinuation  of  goodwill
amortization  in 2002 of $.9  million.  For the six months  ended June 30,  2002
depreciation and amortization  increased to $12.2 million from $12.0 million for
the same period in 2001.  The increase was due  primarily to capital  additions,
partially offset by the discontinuation of goodwill amortization in 2002 of $1.8
million.

The Royalty  Guarantors'  amortization  decreased  to $0.2 million for the three
months ended June 30, 2002  compared to $.5 million for the same period of 2001.
For the six months  ended June 30, 2002,  amortization  decreased to $.4 million
from $1.0  million for the same period in 2001.  The  decreases  were due to the
discontinuation of goodwill amortization in 2002.

Interest Expense:

The Salton Sea Guarantors'  interest expense,  decreased to $5.2 million for the
three  months ended June 30, 2002 from $5.8 million for the same period in 2001.
The decrease was due to reduced indebtedness.  For the six months ended June 30,
2002 interest expense,  net of capitalized  amounts,  amounts increased to $10.3
million from $9.6  million for the same period in 2001.  The increase was due to
the  discontinuation of capitalized  interest on the minerals extraction process
partially offset by reduced indebtedness.

The  Partnership  Guarantors'  interest  expense,  net of  capitalized  amounts,
decreased  to $1.9  million for the three  months  ended June 30, 2002 from $2.1
million  for  the  same  period  in  2001.  The  decrease  was  due  to  reduced
indebtedness.  For the six months ended June 30, 2002 interest  expense,  net of
capitalized  amounts,  increased  to $3.8 million from $2.1 million for the same
period in 2001. The increase was due to discontinuation of capitalized  interest
on the minerals extraction process.
<PAGE>

The Royalty Guarantors' interest expense decreased to $0.1 million for the three
months ended June 30, 2002 from $0.2  million from the same period in 2001.  For
the six months  ended June 30, 2002  interest  expense  decreased to $.2 million
from $.3 million  from the same period in 2001.  The decrease was due to reduced
indebtedness.

Income Tax Provision:

The Partnership  Guarantors' income tax benefit increased to $.4 million for the
three  months  ended June 30,  2002 from a benefit of $.1  million  for the same
period in 2001.  For the six months ended June 30, 2002 the income tax provision
decreased  to a benefit of $1.7  million from an expense of $1.3 million for the
same period in 2001.  This decrease was primarily due to a lower pre-tax income.
Income taxes will be paid by the parent of the Guarantors from  distributions to
the parent company by the Guarantors,  which occur after operating  expenses and
debt  service.  The  effective  tax rate was 31.5% and 34.5% for the six  months
ended June 30, 2002 and 2001, respectively.

Cumulative Effect of Accounting Policy Change:

On January 1, 2001,  the  Guarantors  changed their policy of accounting for the
overhaul and well workover  costs.  These costs,  which have  historically  been
accounted for using the deferral  method,  are expensed as incurred.  The Salton
Sea Guarantors  recorded a cumulative  effect of $8.7 million.  The  Partnership
Guarantors  recorded a  cumulative  effect of $8.3  million,  net of tax of $4.3
million.

Related Party Transactions

On September 29, 2000, Salton Sea Power L.L.C. ("Salton Sea Power") and CE Turbo
LLC ("CE Turbo")  entered into an agreement to sell all available power from the
Salton  Sea V  Project  and  Turbo  Project  to  EPME.  Under  the  terms of the
agreement, EPME purchased and sold available power on behalf of Salton Sea Power
and CE Turbo,  into the  California  ISO  markets.  The  purchase  price for the
available  power was equivalent to the value  actually  received by EPME for the
sale of such power, including renewable premiums.

On January 17, 2001,  Salton Sea Power and CE Turbo  entered into a  Transaction
Agreement  to sell  available  power  from the  Salton  Sea V Project  and Turbo
Project to EPME.  Under the terms of the agreement,  at the option of Salton Sea
Power and CE Turbo,  EPME  purchased all  available  power from the Salton Sea V
Project and Turbo Project based on day ahead price quotes received from EPME.

On March 27, 2001 and May 1, 2001, the Imperial Valley  Projects  entered into a
Transaction  Agreement to sell  available  power to EPME based on percentages of
the Dow Jones SP-15  Index.  On June 28,  2001,  the  Imperial  Valley  Projects
(excluding the Salton Sea V Project and Turbo Project) ceased selling  available
power to EPME and resumed power sales to Edison.

Pursuant to these agreements, sales to EPME from the Company totaled $.9 million
and $70.1  million for the three months and $3.5  million and $98.3  million for
the six months ended June 30, 2002 and 2001,  respectively.  As of June 30, 2002
and December 31, 2001,  accounts  receivable  from EPME were $.5 million and $.9
million, respectively.

Liquidity and Capital Resources

The Salton Sea  Guarantors'  cash flows from operating  activities  increased to
$18.1  million for the six months  ended June 30, 2002 from $9.1 million for the
same period in 2001. The operating Salton Sea Guarantors' only source of revenue
<PAGE>

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 increase was  primarily  due to the receipt of past due balances from Edison
offset by lower revenues and higher operation and maintenance payments in 2002.

The Partnership  Guarantors' cash flows from operating  activities  increased to
$49.4 million for the six months ended June 30, 2002 from a net cash use of $1.9
million  for the same  period in 2001.  The  operating  Partnership  Guarantors'
primary source of revenue is payments received pursuant to long term power sales
agreements  with  Edison,  other than Turbo  Project and Zinc  Recovery  Project
revenue and interest earned on funds on deposit.  The increase was primarily due
to the receipt of past due balances from Edison.

The Royalty  Guarantors'  cash flow from operations was $4.4 million for the six
months  ended June 30, 2002 from $4.0  million for the same period in 2001.  The
Royalty  Guarantors'  only source of revenue is royalties  received  pursuant to
resource lease agreements with the Partnership Projects.

Edison, a wholly-owned  subsidiary of Edison International,  is a public utility
primarily  engaged  in the  business  of  supplying  electric  energy  to retail
customers  in Central and Southern  California,  excluding  Los Angeles.  Due to
reduced  liquidity,  Edison failed to pay approximately  $119 million owed under
the power purchase agreements with certain Guarantors (Imperial Valley Projects,
excluding the Salton Sea V and 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.

The payment 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.

As a result of  uncertainties  related  to  Edison,  the  letter of credit  that
supports the debt service reserve fund at Salton Sea Funding Corporation has not
been extended  beyond its current July 2004  expiration  date,  and as such cash
distributions  are not available to CE  Generation  until the Salton Sea Funding
Corporation  debt service reserve fund of  approximately  $67.6 million has been
funded or the letter of credit has been extended beyond its July 2004 expiration
date or replaced.

In January 2001, the California Power Exchange ("PX") declared bankruptcy.  As a
result,  the Salton Sea V and Turbo Projects have not received payment for power
sold under the Transaction  Agreements  during December 2000 and January 2001 of
approximately  $3.8 million.  The Guarantors  have  established an allowance for
doubtful accounts for the full amount of this receivable.

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  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.  The Guarantors are
vigorously pursuing collection of the capacity bonus payments.  However,  due to
Edison's  failure  to pay  the  contractual  obligations,  the  Imperial  Valley
Projects have  established an allowance for doubtful  accounts of  approximately
$1.3 million.

The Salton Sea Guarantors' cash flow used in investing  activities  increased to
$5.5  million for the six months  ended June 30, 2002 from $3.3  million for the
same period in 2001. Capital expenditures are the primary component of investing
activities.

The Partnership  Guarantors' cash flow used in investing activities increased to
$18.9  million for the six months ended June 30, 2002 from $18.2 million for the
same period in 2001. Capital expenditures are the primary component of investing
activities.
<PAGE>

Minerals LLC is constructing the Zinc Recovery Project,  which will recover zinc
from the geothermal  brine (the "Zinc Recovery  Project").  Facilities are being
installed  near the sites of the  Imperial  Valley  Projects  to  extract a zinc
chloride  solution from the  geothermal  brine through an ion exchange  process.
This  solution  will be  transported  to a central  processing  plant where zinc
ingots will be produced through solvent  extraction,  electrowinning and casting
processes.  The  Zinc  Recovery  Project  is  designed  to  have a  capacity  of
approximately  30,000  metric  tonnes  per year  and is  scheduled  to  commence
commercial  operations in 2002. In September  1999,  Minerals LLC entered into a
sales  agreement  whereby all  high-grade  zinc  produced  by the Zinc  Recovery
Project will be sold to Cominco,  Ltd. The initial term of the agreement expires
in December 2005.

Total  project   costs  of  the  Zinc  Recovery   Project  are  expected  to  be
approximately  $217.9  million,  net of funds  received in  connection  with the
settlement of disputes with Kvaerner U.S. Inc (Kvaerner),  which is being funded
by $140.5  million of debt and the balance from equity  contributions.  The Zinc
Recovery  Project has  incurred  $187.0  million,  net of the funds  received in
connection  with the settlement  with  Kvaerner,  of such costs through June 30,
2002.

The Zinc Recovery Project was being  constructed by Kvaerner  pursuant to a date
certain,  fixed-price,  turnkey  engineering,   procure,  construct  and  manage
contract (the "Zinc Recovery Project EPC Contract").  On June 14, 2001, Minerals
LLC issued notices of default,  termination and demand for payment of damages to
Kvaerner  under the Zinc  Recovery  Project EPC  Contract due to failure to meet
performance  obligations.  As a result  of  Kvaerner's  default  under  the Zinc
Recovery EPC Contract,  the  Partnership  Guarantors  claimed the balance of the
contract  price,  the  retainage  and drew $29.6  million under the EPC Contract
Letter of Credit on July 20, 2001. The Partnership  Guarantors have entered into
a time and materials  reimbursable  engineering,  procurement  and  construction
management  contract with AMEC E&C Services,  Inc. to complete the Zinc Recovery
Project.

Salton  Sea  Funding  Corporation's  net cash flows  from  financing  activities
decreased  to a net cash use of $10.8  million for the six months ended June 30,
2002 from a net cash flow of $9.4  million for the same  period in 2001.  Salton
Sea Guarantors' net cash flows used in financing  activities  increased to $12.6
million from $5.8 million for the same period in 2001.  Partnership  Guarantors'
net cash used in financing  activities  increased  to $30.2  million for the six
months  ended June 30, 2002 from a net cash  provided  of $20.1  million for the
same period in 2001. The changes in net cash flows from financing activities are
primarily  the result of the funding of the debt  service  reserve fund and debt
repayments.  These  receipts  were  deposited  into cash  accounts at Salton Sea
Funding  Corporation  and are  recorded  as  amounts  due to the  Salton Sea and
Partnership Guarantors.

Environmental Liabilities

The Guarantors are subject to numerous legislative and regulatory  environmental
protection  requirements  involving air and water pollution,  waste  management,
hazardous chemical use, noise abatement and land use aesthetics.

State and federal  environmental laws and regulations currently have, and future
modifications  may  have,  the  effect of (i)  increasing  the lead time for the
construction of new facilities,  (ii) significantly increasing the total cost of
new  facilities,  (iii)  requiring  modification  of  the  Guarantors'  existing
facilities,  (iv)  increasing the risk of delay on  construction  projects,  (v)
increasing  the  Guarantors'  cost of  waste  disposal  and  (vi)  reducing  the
reliability  of  service  provided  by the  Guarantors  and the amount of energy
available  from the  Guarantors'  facilities.  Any of such  items  could  have a
substantial  impact on amounts  required to be expended by the Guarantors in the
future.  Expenditures for ongoing compliance with environmental regulations that
relate to  current  operations  are  expensed  or  capitalized  as  appropriate.
Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue  generation,  are expensed.
Liabilities   are  recorded  when   environmental   assessments   indicate  that
remediation  efforts are  probable  and the costs can be  reasonably  estimated.
Estimates of the liability are based upon currently  available  facts,  existing
<PAGE>

technology and presently enacted laws and regulations  taking into consideration
the likely  effects of  inflation  and other social and  economic  factors,  and
include  estimates of associated legal costs.  These amounts also consider prior
experience in remediating sites, other companies'  clean-up  experience and data
released by the Environmental  Protection Agency or other  organizations.  These
estimated  liabilities are subject to revision in future periods based on actual
costs or new circumstances,  and are included in the accompanying balance sheets
at their  undiscounted  amounts.  As of June 30, 2002 and December 31, 2001, the
Guarantors'  environmental  liabilities  recorded on the balance  sheet were not
material.

Inflation

Inflation has not had a significant Impact on the Guarantors' cost structure.

Quantitative and Qualitative Disclosure 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, 2001.

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, 2001.

<PAGE>

                         SALTON SEA FUNDING CORPORATION

                           PART II - OTHER INFORMATION


Item 1 - Legal proceedings.

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

Item 2 - Changes in Securities.

          Not applicable.

Item 3 - Default on Senior Securities.

          Not applicable.

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

          Not applicable.

Item 5 - Other Information.

          Not applicable.

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

          (a) Exhibits:

               Not applicable.

          (b) Reports on Form 8-K:

               Not applicable.


<PAGE>

                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934 the  registrant  has duly  caused  this  report  to be signed on its
behalf and on behalf of the other registrants by the undersigned  thereunto duly
authorized,  in the City of Omaha,  State of  Nebraska,  on this 14th day of May
2002.


                                   SALTON SEA FUNDING CORPORATION


Date:  August 14, 2002             /s/    Joseph M. Lillo
                                   By:    Joseph M. Lillo
                                          Vice President and Controller