SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2000
                          Commission File No. 33-95538

                         SALTON SEA FUNDING CORPORATION
             (Exact name of registrant as specified in its charter)
                                   47-0790493
                        (IRS Employer Identification No.)

(Exact name of Registrants         (State or other        (I.R.S. Employer
as specified in their charters)   jurisdiction of        Identification No.)
                                                  incorporation or organization)
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 LLC                  Delaware               47-0810713
CalEnergy Minerals LLC                Delaware               47-0810718
CE Turbo LLC                          Delaware               47-0812159
CE Salton Sea Inc.                    Delaware               47-0810711
Salton Sea Minerals Corp.             Delaware               47-0811261

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

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

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

                         Yes    X          No

All common stock of Salton Sea Funding  Corporation is indirectly  held by Magma
Power Company. 100 shares of Common Stock were outstanding on June 30, 2000.

<PAGE>

                         SALTON SEA FUNDING CORPORATION

                                    Form 10-Q

                                  June 30, 2000
                                  -------------

                                 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, 2000 and December 31, 1999                            5

Statements of Operations for the Three and Six Months Ended
    June 30, 2000 and 1999                                                     6

Statements of Cash Flows for the Six Months Ended

    June 30, 2000 and 1999                                                     7

Notes to Financial Statements                                                  8

SALTON SEA GUARANTORS

Independent Accountants' Report                                                9

Combined Balance Sheets, June 30, 2000 and December 31, 1999                  10

Combined Statements of Operations for the Three and Six Months Ended
    June 30, 2000 and 1999                                                    11

Combined Statements of Cash Flows for the Six Months Ended

    June 30, 2000 and 1999                                                    12

Notes to Combined Financial Statements                                        13


<PAGE>

PARTNERSHIP GUARANTORS

Independent Accountants' Report                                               14

Combined Balance Sheets, June 30, 2000 and December 31, 1999                  15

Combined Statements of Operations for the Three and Six Months Ended
    June 30, 2000 and 1999                                                    16

Combined Statements of Cash Flows for the Six Months Ended

    June 30, 2000 and 1999                                                    17

Notes to Combined Financial Statements                                        18

SALTON SEA ROYALTY LLC

Independent Accountants' Report                                               19

Balance Sheets, June 30, 2000 and December 31, 1999                           20

Statements of Operations for the Three and Six Months Ended
    June 30, 2000 and 1999                                                    21

Statements of Cash Flows for the Six Months Ended

    June 30, 2000 and 1999                                                    22

Notes to Financial Statements                                                 23

Item 2.          Management's Discussion and Analysis of

                 Financial Condition and Results of Operations                24


                           PART II: OTHER INFORMATION

Item 1.          Legal Proceedings                                            32
Item 2.          Changes in Securities                                        32
Item 3.          Defaults on Senior Securities                                32
Item 4.          Submission of Matters to a Vote of
                 Security Holders                                             32
Item 5.          Other Information                                            32
Item 6.          Exhibits and Reports on Form 8-K                             32

Signatures                                                                    33

Exhibit Index                                                                 34

<PAGE>

INDEPENDENT ACCOUNTANTS' REPORT

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

We have  reviewed  the  accompanying  balance  sheet of the Salton  Sea  Funding
Corporation  as of June 30, 2000,  and the related  statements of operations for
the three and six month  periods ended June 30, 2000 and 1999 and cash flows for
the six month periods ended June 30, 2000 and 1999.  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 Salton Sea
Funding  Corporation  as of December 31,  1999,  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 25, 2000 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, 1999
is fairly  stated,  in all material  respects,  in relation to the balance sheet
from which it has been derived.

DELOITTE & TOUCHE LLP
Omaha, Nebraska
July 21, 2000

<PAGE>

                         SALTON SEA FUNDING CORPORATION

                                 BALANCE SHEETS
                (Dollars in Thousands, Except per Share Amounts)
<TABLE>
<CAPTION>

                                                                             June 30,                  December 31,
                                                                               2000                       1999
                                                                           -----------                 ----------
                                                                           (unaudited)
<S>                                                                     <C>                        <C>
ASSETS
Cash                                                                    $           13             $       2,086
Prepaid expenses and other assets                                                3,506                     3,617
Due from affiliates                                                             19,020                     2,118
Current portion secured project notes from Guarantors                           14,350                    25,072
Total current assets                                                            36,889                    32,893

Secured project notes from Guarantors                                          532,078                   543,908
Investment in 1% of net assets of Guarantors                                     8,903                     8,847
                                                                        $      577,870             $     585,648
                                                                        ==============             =============
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities:
Accrued liabilities                                                     $        3,439             $       3,607
Revolving loan                                                                  15,000                       ---
Current portion of long term debt                                               14,350                    25,072
Total current liabilities                                                       32,789                    28,679

Senior secured notes and bonds                                                 532,078                   543,908
    Total liabilities                                                          564,867                   572,587

Stockholder's equity:
Common stock--authorized 1,000
    shares, par value $.01 per share;
    issued and outstanding 100 shares                                              ---                       ---
Additional paid-in capital                                                       5,366                     5,366
Retained earnings                                                                7,637                     7,695
    Total stockholder's equity                                                  13,003                    13,061
                                                                         $     577,870             $     585,648
                                                                         =============             =============
</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 June 30         Six Months Ended June 30,
                                                      2000             1999              2000            1999
Revenues:

<S>                                               <C>              <C>               <C>              <C>
Interest income                                   $   10,756       $   11,982        $   21,719       $   24,111
Equity in earnings of Guarantors                          98               92                56       __     208

Total revenues                                        10,854           12,074            21,775           24,319
                                                  ----------       ----------        ----------       ----------
Expenses:

General and administrative expenses                      218              188               477              403
Interest expense                                      10,634           11,622            21,397           23,359
                                                  ----------       ----------        ----------       ----------
Total expenses                                        10,852           11,810            21,874           23,762
                                                  ----------       ----------        ----------       ----------
Income (loss) before income taxes                          2              264               (99)             557
Provision for income taxes                                 1              107               (41)             228
                                                  ----------       ----------        ----------       ----------
Net income (loss)                                 $        1       $      157        $      (58)      $      329
                                                  ==========       ==========        ==========       ==========
</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,
                                                                                       2000              1999
Cash flows from operating activities:

<S>                                                                          <C>                 <C>
     Net income (loss)                                                       $            (58)   $         329
     Adjustments to reconcile net income to net
         cash flows from operating activities:
     Equity in earnings of guarantors                                                     (56)            (208)
     Changes in assets and liabilities:
         Prepaid expenses and other assets                                                111            2,073
         Accrued liabilities                                                             (168)            (231)
     Net cash flows from operating activities                                            (171)           1,963

Cash flows from investing activities:
     Principal repayments of secured project notes
       from Guarantors                                                                 22,552           28,918

     Net cash flows from investing activities                                          22,552           28,918

Cash flows from financing activities:

     Increase in due from affiliates                                                  (16,902)          (7,243)
     Proceeds from revolving loan                                                      15,000              ---
     Repayment of senior secured notes and bonds                                      (22,552)         (28,918)

     Net cash flows from financing activities                                         (24,454)         (36,161)

Net change in cash                                                                     (2,073)          (5,280)
Cash at the beginning of period                                                         2,086           17,629

Cash at the end of period                                                    $             13    $      12,349
                                                                             =================   =============

</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, 2000 and the results of operations
for the three and six months ended June 30, 2000 and 1999 and cash flows for the
six months ended June 30, 2000 and 1999. The results of operations for the three
and six months ended June 30, 2000 and 1999 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, 1999.

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

2.  New Borrowings:

On July 21, 1995,  Salton Sea Funding  Corporation  obtained a $15 million seven
year  revolving  credit  agreement  between  Credit Suisse as bank and agent and
other  lenders.  The interest rate is at the Adjusted Base Rate plus .375% or at
the LIBOR  rate plus 100 basis  points.  On May 26,  2000,  Salton  Sea  Funding
Corporation borrowed $15 million under its revolving credit agreement.  The loan
is due in two  installments,  $5  million  on July 26,  2000 and $10  million on
August 28, 2000.

<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,  2000,  and  the  related  combined  statements  of
operations  for the three and six month periods ended June 30, 2000 and 1999 and
cash  flows for the six  month  periods  ended  June 30,  2000 and  1999.  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,  1999,  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 25,  2000,  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, 1999 is fairly stated, in all material respects,  in relation to
the combined balance sheet from which it has been derived.

DELOITTE & TOUCHE LLP
Omaha, Nebraska
July 21, 2000


<PAGE>


                              SALTON SEA GUARANTORS

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

                                                                               June 30,               December 31,
                                                                                 2000                     1999
                                                                              ----------              ------------
                                                                             (unaudited)
ASSETS

<S>                                                                         <C>                      <C>
Accounts receivable                                                         $     15,763             $    11,537
Prepaid expenses and other assets                                                 10,323                  11,695
Total current assets                                                              26,086                  23,232

Restricted cash                                                                    7,845                  10,001
Property, plant, contracts and equipment, net                                    560,401                 552,903
Excess of cost over fair value of net assets
   acquired, net                                                                  46,226                  46,878
                                                                            $    640,558             $   633,014
                                                                            ============             ===========


LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable                                                            $          2             $        33
Accrued liabilities                                                                7,822                   7,862
Current portion of long term debt                                                  9,169                   9,737
Total current liabilities                                                         16,993                  17,632

Due to affiliates                                                                 43,504                  27,993
Senior secured project note                                                      275,558                 284,217
    Total liabilities                                                            336,055                 329,842

Total Guarantors' equity                                                         304,503                 303,172
                                                                            $    640,558             $   633,014
                                                                            ============             ===========
</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
                                                    -------------------------        ---------------------------
                                                      2000             1999              2000             1999
                                                    --------         --------          --------         --------
Revenues:

<S>                                                <C>              <C>               <C>              <C>
Sales of electricity                               $  18,605        $  19,546         $  27,498        $  37,818
Interest and other income                                 86              651               213            1,443
                                                     -------          -------           -------          -------
     Total revenues                                   18,691           20,197            27,711           39,261
                                                     -------          -------           -------          -------
Expenses:

Operating, general and

   administration                                      6,806            6,227            12,564           13,535
Depreciation and amortization                          4,227            4,421             8,321            8,443
Interest expense                                       5,791            6,095            11,631           12,171
Less capitalized interest                             (2,813)          (1,947)           (6,136)          (3,651)
                                                     -------          -------           -------          -------
     Total expenses                                   14,011           14,796            26,380           30,498
                                                     -------          -------           -------          -------
Net income                                         $   4,680         $  5,401          $  1,331         $  8,763
                                                     =======          =======           =======          =======
</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)
                                                            Six Months Ended
                                                                 June 30,
                                                         ----------------------
                                                           2000         1999

Cash flows from operating activities:

Net income                                         $      1,331   $      8,763
Adjustments to reconcile net income to net
    cash flows from operating activities:
       Depreciation and amortization                      8,321          8,443
       Changes in assets and liabilities:
         Accounts receivable                             (4,226)        (4,301)
         Prepaid expenses and other assets                1,372          2,020
         Accounts payable and accrued liabilities           (71)         1,933
Net cash flows from operating activities                  6,727         16,858

Cash flows from investing activities:

Capital expenditures                                    (15,167)       (27,629)
Decrease in restricted cash                               2,156         22,325
Net cash flows from investing activities                (13,011)        (5,304)

Cash flows from financing activities:

Increase (decrease) in due to affiliates                 15,511         (3,516)
Repayments of senior secured project note                (9,227)        (8,038)

Net cash flows from financing activities                  6,284        (11,554)

Net change in cash                                          ---            ---
Cash at beginning of period                                 ---            ---

Cash at end of period                              $        ---   $        ---
                                                   ============   ============

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

<PAGE>


                              SALTON SEA GUARANTORS

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

1.  General:

In the opinion of management of the Salton Sea  Guarantors  (the  "Guarantors"),
the accompanying unaudited combined financial statements contain all adjustments
(consisting only of normal recurring  accruals)  necessary to present fairly the
financial  position as of June 30, 2000 and the  results of  operations  for the
three and six  months  ended  June 30,  2000 and 1999 and cash flows for the six
months ended June 30, 2000 and 1999. The results of operations for the three and
six months ended June 30, 2000 and 1999 are not  necessarily  indicative  of the
results to be expected for the full year.

The unaudited  combined  financial  statements shall be read in conjunction with
the financial statements included in the Funding  Corporation's annual report on
Form 10-K for the year ended December 31, 1999.

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

2.  Related Party Transaction:

Salton Sea Power LLC ("Salton Sea Power"),  a Salton Sea Guarantor,  and El Paso
Merchant  Energy  L.P.  ("EPME")  entered  into  a  power  marketing   agreement
commencing  June 13,  2000 and ending on June 30,  2000.  Under the terms of the
agreement, EPME purchased and Salton Sea Power sold all available power from the
Salton Sea Unit V  project.  EPME sold the  available  power into the bulk power
market.  The  purchase  price of the  available  power is the  value of the cash
actually  received  by EPME  for  the  sale of such  power,  plus  any  realized
renewable premiums.

On June 9,  2000,  Salton  Sea  Power,  entered  into an  agreement  to sell all
available power from the Salton Sea Unit V and CE Turbo projects to EPME.  Under
the terms of the  agreement  commencing  on July 1, 2000 and ending on September
30, 2000,  EPME will  purchase up to 25 MW of  available  power for $53 per MWh,
together  with any  premiums  related to such  power.  EPME will also market any
available  power  which  exceeds  25 MW on behalf  of  Salton  Sea Power and any
available power from CE Turbo LLC.


<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,  2000,  and  the  related  combined  statements  of
operations  for the three and six month  periods ended June 30 2000 and 1999 and
cash  flows for the six  month  periods  ended  June 30,  2000 and  1999.  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,  1999,  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 25,  2000,  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, 1999 is fairly stated, in all material respects,  in relation to
the combined balance sheet from which it has been derived.

DELOITTE & TOUCHE LLP
Omaha, Nebraska
July 21, 2000


<PAGE>


                             PARTNERSHIP GUARANTORS

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


                                                                                June 30,             December 31,
                                                                                  2000                   1999
                                                                              (unaudited)
ASSETS

<S>                                                                       <C>                       <C>
Accounts receivable                                                       $       16,213            $     16,295
Prepaid expenses and other assets                                                 23,874                  18,959
Total current assets                                                              40,087                  35,254

Restricted cash                                                                    6,111                  60,454
Due from affiliates                                                               41,981                  75,274
Property, plant, contracts and equipment, net                                    610,149                 531,427
Management fee                                                                    70,225                  71,489
Excess of cost over fair value of net assets acquired, net                       126,212                 127,994
                                                                          $      894,765            $    901,892
                                                                          ==============            ============


LIABILITIES AND GUARANTORS' EQUITY
Liabilities:
Accounts payable                                                          $        2,252            $      3,925
Accrued liabilities                                                               12,636                  13,534
Current portion of long term debt                                                  2,954                  10,562
Total current liabilities                                                         17,842                  28,021

Senior secured project notes                                                     249,696                 250,650
Deferred income taxes                                                            100,229                  98,907
Total liabilities                                                                367,767                 377,578

Guarantors' equity:
Common stock                                                                           3                       3
Additional paid-in capital                                                       387,663                 387,663
Retained earnings                                                                139,332                 136,648
Total Guarantors' equity                                                         526,998                 524,314
                                                                          $      894,765            $    901,892
                                                                          ==============            ============
</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,
                                                     2000             1999               2000             1999
                                                   ---------        ---------         ---------        ---------
Revenues:

<S>                                                <C>              <C>               <C>              <C>
Sales of electricity                               $  19,628        $  24,222         $  30,017        $  46,252
Interest and other income                                625            2,155             1,101            4,474
                                                   ---------        ---------         ---------        ---------
Total revenues                                        20,253           26,377            31,118           50,726
                                                   ---------        ---------         ---------        ---------
Expenses:

Operating, general and

   administration                                      9,518           11,858            17,308           23,065
Depreciation and amortization                          4,848            6,262             9,493           12,480
Interest expense                                       5,045            5,641            10,140           11,335
Less capitalized interest                             (4,918)          (4,314)           (9,829)          (6,747)
                                                   ---------        ---------         ---------        ---------

Total expenses                                        14,493           19,447            27,112           40,133
                                                   ---------        ---------         ---------        ---------
Income before income taxes                             5,760            6,930             4,006           10,593
Provision for income taxes                             1,901            3,014             1,322            4,131
                                                   ---------        ---------         ---------        ---------

Net income                                         $   3,859        $   3,916         $   2,684       $    6,462
                                                   =========        =========         =========        =========
</TABLE>

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


<PAGE>



                             PARTNERSHIP GUARANTORS
                        COMBINED STATEMENTS OF CASH FLOWS
                             (Dollars in Thousands)
                                   (Unaudited)
                                                           Six Months Ended
                                                                June 30,
                                                        2000              1999
                                                     ---------         --------
Cash flows from operating activities:

Net income                                       $       2,684    $       6,462
Adjustments to reconcile net income to net
    cash flows from operating activities:
       Depreciation and amortization                     9,493           12,480
       Deferred income taxes                             1,322            4,131
       Changes in assets and liabilities:
          Accounts receivable                               82            8,694
          Prepaid expenses and other assets             (4,915)            (428)
          Accounts payable and accrued
           liabilities                                  (2,569)           3,847
                                                     ---------        ---------
Net cash flows from operating activities                 6,097           35,186
                                                     ---------        ---------
Cash flows from investing activities:

Capital expenditures                                   (85,028)         (56,111)
Decrease in restricted cash                             54,343           36,631
Management fee                                            (143)            (851)
                                                     ---------        ---------
Net cash flows from investing activities               (30,828)         (20,331)
                                                     ---------        ---------
Cash flows from financing activities:

Repayments of senior secured project notes              (8,562)         (16,182)
Decrease in due from affiliates                         33,293            1,327
                                                     ---------        ---------
Net cash flows from financing activities                24,731          (14,855)
                                                     ---------        ---------
Net change in cash                                         ---              ---
Cash at beginning of period                                ---              ---
                                                     ---------        ---------
Cash at end of period                        $             --- $            ---
                                                     =========        =========

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


<PAGE>


                             PARTNERSHIP GUARANTORS

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

1.  General:

In the opinion of management of the Partnership  Guarantors (the  "Guarantors"),
the accompanying unaudited combined financial statements contain all adjustments
(consisting only of normal recurring  accruals)  necessary to present fairly the
financial  position as of June 30, 2000 and the  results of  operations  for the
three and six  months  ended  June 30,  2000 and 1999 and cash flows for the six
months ended June 30, 2000 and 1999. The results of operations for the three and
six months ended June 30, 2000 and 1999 are not  necessarily  indicative  of the
results to be expected for the full year.

The unaudited  combined  financial  statements shall be read in conjunction with
the financial statements included in the Funding  Corporation's annual report on
Form 10-K for the year ended December 31, 1999.

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

2.  Property:

The  increase in property,  plant,  contracts  and  equipment is due to the Zinc
Recovery Project and Region II Brine Facility  construction  costs. The decrease
in restricted cash is due to expenditures on these projects.

3.  Revenue:

The decrease in revenue was due to the expiration of the scheduled  price period
at Leathers at December 31, 1999.


<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, 2000, and the related statements of operations for the three and six
month  periods  ended  June 30,  2000 and 1999 and cash  flows for the six month
periods  ended  June 30,  2000 and  1999.  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, 1999,  and the related  statements of operations,
equity,  and cash flows for the year then ended (not presented  herein);  and in
our report dated January 25, 2000, 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, 1999 is fairly  stated,  in all
material  respects,  in  relation  to the  balance  sheet from which it has been
derived.

As discussed in Note 1 to the financial  statements,  Salton Sea Royalty LLC was
converted to a limited  liability company during 1999 and as such the statements
of operations for the three and six months ended June 30, 2000 and 1999 and cash
flows for the six months ended June 30, 2000 and 1999 are not  comparable due to
the change in reporting entity which results in no tax expense in fiscal 2000.

DELOITTE & TOUCHE LLP
Omaha, Nebraska
July 21, 2000


<PAGE>


                             SALTON SEA ROYALTY LLC

                                 BALANCE SHEETS
                (Dollars in Thousands, Except per Share Amounts)
<TABLE>
<CAPTION>

                                                                             June 30,                 December 31,
                                                                               2000                      1999
                                                                           -----------                 ----------
                                                                            (unaudited)
ASSETS

<S>                                                                       <C>                      <C>
Prepaid expenses and other assets                                         $         158            $         235
Total current assets                                                                158                      235

Royalty stream, net                                                              16,247                   16,776
Excess of cost over fair value of net assets acquired, net                       31,826                   32,280
Due from affiliates                                                              19,666                   21,825
                                                                          $      67,897            $      71,116
                                                                          =============            =============

LIABILITIES AND EQUITY
Liabilities:
Accrued liabilities                                                       $          55            $          82
Current portion of long term debt                                                 2,227                    4,773
Total current liabilities                                                         2,282                    4,855

Senior secured project note                                                       6,826                    9,041
    Total liabilities                                                             9,108                   13,896

Equity:
Common stock, par value $.01 per share; 100
  share authorized, issued and outstanding                                            -                        -
Additional paid-in capital                                                        1,561                    1,561
Retained earnings                                                                57,228                   55,659
Total equity                                                                     58,789                   57,220
                                                                          $      67,897            $      71,116
                                                                          =============            =============
</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,
                                                      -----------------------       -----------------------
                                                       2000            1999              2000             1999
                                                      -------         -------          -------          -------
Revenues:
<S>                                           <C>              <C>                 <C>                  <C>
Royalty income                                $        2,707   $        3,770      $      4,267         $ 17,229

Expenses:
Operating, general and

     administrative expenses                             758            1,046             1,173            2,154
Amortization of royalty stream
   and goodwill                                          492            2,448               983            4,897
Interest expense                                         258              446               542              914
---------                                         ----------        ---------        ----------
Total expenses                                         1,508            3,940             2,698            7,965
                                                  ----------       ----------        ----------         --------

Income (loss) before income taxes                      1,199             (170)            1,569            9,264
Provision for (benefit from) income taxes                ---             (113)              ---            3,677
---------                                         ----------        ---------        ----------

Net income (loss)                             $        1,199   $          (57)     $      1,569         $  5,587
                                                  ==========       ==========        ==========         ==========
</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,
                                                            -------------------
                                                             2000         1999
                                                           ---------    --------
Cash flows from operating activities:

Net income                                           $      1,569  $      5,587
Adjustments to reconcile net income to net
    cash flows from operating activities:
       Amortization of royalty stream and goodwill            983         4,897
       Changes in assets and liabilities:
       Prepaid expenses and other assets                       77           139
       Accrued liabilities and deferred income taxes          (27)       (5,671)

Net cash flows from operating activities                    2,602         4,952

Net cash flows from financing activities:

Decrease (increase) in due from affiliates                  2,159          (254)
Repayment of senior secured project note                   (4,761)       (4,698)
                                                        ---------     ---------
Net cash flows from financing activities                   (2,602)       (4,952)

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 the Salton Sea Royalty LLC (the "Company"),  the
accompanying unaudited financial statements contain all adjustments  (consisting
only of normal  recurring  accruals)  necessary to present  fairly the financial
position as of June 30, 2000 and the results of operations for the three and six
months ended June 30, 2000 and 1999 and cash flows for the six months ended June
30, 2000 and 1999.  The results of operations for the three and six months ended
June 30,  2000 and 1999 are not  necessarily  indicative  of the  results  to be
expected for the full year.

The Company was converted to a limited liability company during 1999 and as such
the  statements of  operations  for the three and six months ended June 30, 2000
and 1999 and cash flows for the six months  ended June 30, 2000 and 1999 are not
comparable due to the change in reporting entity which results in no tax expense
in fiscal 2000. Income taxes are now the  responsibility of the partners and the
Company has no  obligation  to provide  funds to the partners for payment of any
tax liabilities. Accordingly, the Company has no tax obligations.

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, 1999.

2.  Revenues:

The second  quarter and year to date decreases were due primarily to a reduction
in royalty income from Leathers due to lower revenues from the expiration of the
scheduled  price period on December 31, 1999. The year to date decrease was also
due to a decrease in East Mesa royalty income related to a royalty settlement.


<PAGE>


                         SALTON SEA FUNDING CORPORATION

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

Results of Operations:

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

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

The  Vulcan,  Leathers,  Del Ranch and Elmore  partnerships  (collectively,  the
"Partnership  Projects") sell all electricity generated by the respective plants
pursuant to four  long-term  SO4  Agreements  between the  projects and Southern
California Edison Company ("Edison").  These SO4 Agreements provide for capacity
payments, capacity bonus payments and energy payments. Edison makes fixed annual
capacity  payments to the  projects  and, to the extent  that  capacity  factors
exceed  certain  benchmarks,  is required to make capacity bonus  payments.  The
price for capacity and capacity  bonus payments is fixed for the life of the SO4
Agreements and the capacity payments are  significantly  higher in the months of
June through September.

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

For 2000, the Partnership Projects are receiving Edison's Avoided Cost of Energy
pursuant to their respective SO4 Agreements.


<PAGE>


                         SALTON SEA FUNDING CORPORATION

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

Results of Operations:  (continued)

The Salton  Sea I Project  sells  electricity  to Edison  pursuant  to a 30-year
negotiated power purchase agreement,  as amended (the "Salton Sea I PPA"), which
provides for  capacity and energy  payments.  The energy  payment is  calculated
using a Base Price which is subject to quarterly  adjustments  based on a basket
of indices. The time period weighted average energy payment for Salton Sea I was
5.5 cents per kWh during the six months ended June 30, 2000. As the Salton Sea I
PPA is not an SO4  Agreement,  the energy  payments  do not  revert to  Edison's
Avoided Cost of Energy.

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

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

Salton Sea Unit V Project will sell approximately one-third of its net output to
a Zinc  facility,  which is a  subsidiary  of  MidAmerican  and is  expected  to
commence operation in the third quarter of 2000. The remainder of the Salton Sea
Unit V output will be sold through the  California  Power Exchange (the "PX") or
in other market  transactions.  The PX was created to establish  markets for the
sale of power on a daily and hourly basis.  Thus, PX prices are expected to have
the characteristics of short term spot prices and to fluctuate from time to time
in a manner that cannot be predicted with accuracy.

For the six months ended June 30, 2000 and 1999,  Edison's  average Avoided Cost
of Energy was 3.8 and 2.7 cents  respectively  per kWh.  Estimates  of  Edison's
future Avoided Cost of Energy vary substantially from year to year.


<PAGE>



                         SALTON SEA FUNDING CORPORATION

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

Results of Operations:  (continued)

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

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

                                   Three Months Ended      Six Months Ended
                                        June 30,                June 30,
                                   --------------------- ---------------------
                                    2000        1999       2000        1999
                                  -------     -------    --------    -------
Overall capacity factor             74.8%       93.3%       60.0%      88.6%
Capacity (NMW) (weighted average)   119.4       119.4       119.4      119.4
kWh produced (in thousands)       195,000     243,300     312,900    459,300

The overall capacity factor for the Salton Sea Projects  decreased for the three
and six months  ended June 30,  2000  compared to the same period in 1999 due to
scheduled overhauls in 2000 which were more extensive compared to 1999.

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

                                  Three Months Ended    Six Months Ended
                                        June 30,             June 30,
                                --------------------- ---------------------
                                     2000      1999       2000      1999
                                  --------   -------    -------   -------
Overall capacity factor             100.4%     94.6%      91.1%    100.7%
Capacity (NMW) (average)               148       148        148      148
kWh produced (in thousands)        324,600   305,900    589,200   647,400


The overall capacity factor for the Partnership Projects increased for the three
months ended June 30, 2000  compared to the same period in 1999 due to scheduled
overhauls in 1999.  The overall  capacity  factor for the  Partnership  Projects
decreased  for the six months ended June 30, 2000 compared to the same period in
1999 due to scheduled overhauls at all plants in the first quarter of 2000.


<PAGE>


                         SALTON SEA FUNDING CORPORATION

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

Results of Operations:  (continued)

Revenues:

The Salton Sea  Guarantors'  sales of  electricity  decreased to $18,605 for the
three  months  ended June 30, 2000 from  $19,546 for the same period in 1999,  a
4.8%  decrease.  For the six months  ended June 30, 2000,  sales of  electricity
decreased to $27,498 from $37,818 in 1999,  a 27.3%  decrease.  These  decreases
were  primarily  due to scheduled  overhauls  in 2000 which were more  extensive
compared to 1999 and the  expiration  of the fixed  price  periods at Salton Sea
Unit II and III in April, 2000 and February, 1999, respectively.

The Partnership  Guarantors'  sales of electricity  decreased to $19,628 for the
three  months  ended June 30, 2000 from  $24,222 for the same period in 1999,  a
19.0%  decrease.  For the six  month  period  ended  June  30,  2000,  sales  of
electricity  decreased to $30,017 from $46,252 in 1999, a 35.1% decrease.  These
decreases were primarily due to the expiration of the scheduled  price period at
Leathers on December 31, 1999 offset by increases  resulting from higher avoided
cost rates in the six months ended June 30, 2000 compared to 1999.

The Royalty  Guarantor  revenue  decreased  to $2,707 for the three months ended
June 30,  2000 from  $3,770 for the same  period  last  year.  For the six month
period  ended June 30, 2000,  revenue  decreased to $4,267 from $17,229 in 1999.
This  decrease  was due  primarily  to a decrease  in East Mesa  royalty  income
related to a royalty  settlement and a reduction in royalty income from Leathers
due to lower revenue.

Operating Expenses:

The Salton Sea Guarantors' operating expenses, which include royalty, operating,
and general and  administrative  expenses,  increased  to $6,806,  for the three
months  ended  June 30,  2000 from  $6,227  for the same  period  in 1999.  This
increase was due to higher  operating  costs resulting from Unit V start up. For
the six month  period  ended June 30,  2000,  operating  expenses  decreased  to
$12,564 from $13,535 in 1999.  This  decrease was primarily due to lower royalty
costs resulting from lower revenues.

The  Partnership   Guarantors'   operating  expenses,   which  include  royalty,
operating, and general and administrative expenses,  decreased to $9,518 for the
three months  ended June 30, 2000 from $11,858 for the same period in 1999.  For
the six month  period  ended June 30,  2000,  operating  expenses  decreased  to
$17,308 from $23,065 in 1999, a 25.0%  decrease.  These decreases were primarily
due to a reduction in royalty expenses due to the lower revenues.

The  Royalty  Guarantors'  operating  expenses  decreased  to $758 for the three
months  ended June 30,  2000 from  $1,046 for the same  period in 1999,  a 27.5%
decrease.  For the six month  period  ended June 30,  2000,  operating  expenses
decreased to $1,173 from $2,154 in 1999, a 45.5% decrease.  These decreases were
due to lower  royalty  costs  due to the end of the  scheduled  price  period at
Leathers.


<PAGE>


                         SALTON SEA FUNDING CORPORATION

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

Results of Operations:  (continued)

Depreciation and Amortization:

The Salton Sea Guarantors' depreciation and amortization decreased to $4,227 for
the three  months ended June 30, 2000 from $4,421 for the same period of 1999, a
4.4% decrease.  For the six month period ended June 30, 2000,  depreciation  and
amortization  decreased to $8,321 from $8,443 in 1999. The decreases were due to
a decrease in step up depreciation charges.

The Partnership  Guarantors'  depreciation and amortization  decreased to $4,848
for the three  months  ended June 30,  2000 from  $6,262 for the same  period in
1999.  For  the  six  month  period  ended  June  30,  2000,   depreciation  and
amortization  decreased to $9,493 from $12,480 in 1999.  The decreases  were due
primarily  to  lower  step up  depreciation  amortization  after  the end of the
scheduled price period at Leathers.

The Royalty  Guarantors'  amortization  was $492 for the three months ended June
30,  2000  compared  to $2,448  for the same  period of 1999.  For the six month
period ended June 30, 2000,  amortization  was $983  compared to $4,897 in 1999.
The  decreases  were due to lower  amortization  after the end of the  scheduled
price period at the partnership plants.

Interest Expense:

The  Salton  Sea  Guarantors'  interest  expense,  net of  capitalized  amounts,
decreased to $2,978 for the three months ended June 30, 2000 from $4,148 for the
same period in 1999, a 28.2%  decrease.  For the six month period ended June 30,
2000,  interest expense,  net of capitalized  amounts,  decreased to $5,495 from
$8,520 in 1999.  The  decreases  were due to  reduced  indebtedness  and  higher
capitalized interest on construction projects.

The  Partnership  Guarantors'  interest  expense,  net of  capitalized  amounts,
decreased  to $127 for the three  months ended June 30, 2000 from $1,327 for the
same period in 1999.  For the six month  period  ended June 30,  2000,  interest
expense,  net of  capitalized  amounts,  decreased  to  $311  from  $4,588.  The
decreases  were  primarily due to reduced  indebtedness  and higher  capitalized
interest on construction projects.

The Royalty Guarantors'  interest expense decreased to $258 for the three months
ended June 30,  2000 from $446 from the same  period in 1999.  For the six month
period  ended June 30,  2000,  interest  expense  decreased to $542 from $914 in
1999. The decreases were due to reduced indebtedness.

Income Tax Provision:

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

The  Partnership  Guarantors  income tax  provision  decreased to $1,901 for the
three  months  ended June 30, 2000 from  $3,014 for the same  period in 1999,  a
36.9% decrease. For the six month period ended June 30,


<PAGE>


                         SALTON SEA FUNDING CORPORATION

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

Results of Operations:  (continued)

2000,  the provision  for income taxes  decreased to $1,322 from $4,131 in 1999.
The decreases were primarily due to a lower pre-tax income. Income taxes will be
paid by the parent of the Guarantors from distributions to the parent company by
the Guarantors which occur after operating expenses and debt service.

The Royalty  Guarantor's  income tax provision was $0 for the three months ended
June 30,  2000  compared to an income tax benefit of $113 for the same period in
1999. For the six month period ended June 30, 2000, the income tax provision was
$0  compared to $3,677 in 1999.  The  decrease  in the  provision  is due to the
change in the  Royalty  Guarantor  from a  corporation  to a  limited  liability
company which is not taxed.  Income taxes are the responsibility of the partners
and Royalty  Guarantor  has no  obligation  to provide funds to the partners for
payment or any tax liabilities.  Accordingly,  the Royalty  Guarantor has no tax
obligations.

Net Income:

The Salton Sea Funding  Corporation's net income for the three months ended June
30, 2000 decreased to $1 compared from $157 for the same period in 1999. For the
six month period ended June 30, 2000, net loss was $58 compared to net income of
$329 in 1999. The net income primarily  represents  interest income and expense,
net of  applicable  tax, and the Salton Sea Funding  Corporation's  1% equity in
earnings of the Guarantors.

The Salton Sea Guarantors'  net income  decreased to $4,680 for the three months
ended June 30, 2000 compared to $5,401 for the same period of 1999.  For the six
month  period ended June 30, 2000,  net income  decreased to $1,331  compared to
$8,763 in 1999.

The Partnership  Guarantors' net income decreased to $3,859 for the three months
ended June 30, 2000 compared to $3,916 for the same period of 1999.  For the six
month period ended June 30, 2000, net income  decreased to $2,684 from $6,462 in
1999.

The Royalty  Guarantors'  net income was $1,199 for the three  months ended June
30, 2000 compared to a net loss of $57 for the same period of 1999.  For the six
month period ended June 30, 2000, net income  decreased to $1,569 from $5,587 in
1999.

Liquidity and Capital Resources:

On July 21, 1995,  Salton Sea Funding  Corporation  obtained a $15 million seven
year  revolving  credit  agreement  between  Credit Suisse as bank and agent and
other  lenders.  The interest rate is at the Adjusted Base Rate plus .375% or at
the LIBOR  rate plus 100 basis  points.  On May 26,  2000,  Salton  Sea  Funding
Corporation borrowed $15 million under its revolving credit agreement.  The loan
is due in two  installments,  $5  million  on July 26,  2000 and $10  million on
August 28, 2000. The proceeds were used for general operating costs.


<PAGE>


                         SALTON SEA FUNDING CORPORATION

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

Liquidity and Capital Resources: (continued)

Salton Sea Minerals LLC, a Partnership Guarantor ("Minerals LLC"), developed and
owns the  rights  to  proprietary  processes  for the  extraction  of zinc  from
elements in solution in the geothermal brine and fluids utilized at its Imperial
Valley plants (the "Zinc  Recovery  Project") as well as the production of power
to be used in the extraction  process.  A pilot plant has successfully  produced
commercial quality zinc at the Company's Imperial Valley Project.

Minerals LLC is constructing  the Zinc Recovery  Project which will recover zinc
from the geothermal brine (the "Zinc Recovery Project"). Four facilities will be
installed near Imperial Valley Project sites to extract a zinc chloride solution
from  the  brine  through  an  ion  exchange  process.  This  solution  will  be
transported  to a central  processing  plant  where zinc ingots will be produced
through  solvent  extraction,  electrowinning  and casting  processes.  The Zinc
Recovery Project is designed to have a capacity of  approximately  30,000 metric
tonnes per year and is scheduled to commence  commercial  operation in the third
quarter of 2000. In September 1999,  Minerals LLC entered into a sales agreement
whereby all zinc produced by the Zinc Recovery  Project will be sold to Cominco,
Ltd. at market value plus a premium.  The initial term of the agreement  expires
in December 2005.

The  Zinc  Recovery   Project  is  being   constructed  by  Kvaerner  U.S.  Inc.
("Kvaerner")  pursuant  to a date  certain,  fixed-price,  turnkey  engineering,
procurement  and   construction   contract  (the  "Zinc  Recovery   Project  EPC
Contract").  Total project costs of the Zinc Recovery Project are expected to be
approximately  $200,900,  which is being  funded by $140,500 of debt and $60,400
from  equity  contributions.  The Company  has  incurred  $152,700 of such costs
through June 30, 2000.

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

Salton Sea V is being  constructed  pursuant  to a date  certain,  fixed  price,
turn-key  engineering,  procurement and construction contract (the "Salton Sea V
EPC  Contract")  by Stone &  Webster  Engineering  Corporation  ("SWEC").  Total
project costs of Salton Sea V are approximately $119,100,  which is being funded
by $83,300 of debt and $35,800 from equity  contributions.  Salton Sea Power LLC
has incurred approximately $102,200 of these costs through June 30, 2000.

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

The  Partnership   Projects  have  upgraded  the  geothermal   brine  processing
facilities  at the  Vulcan  and Del Ranch  Projects  with the  brine  facilities
construction.


<PAGE>


                         SALTON SEA FUNDING CORPORATION

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

Liquidity and Capital Resources: (continued)

The CE Turbo Project is being and the brine  facilities have been constructed by
SWEC pursuant to a date certain,  fixed price, turnkey engineering,  procurement
and construction contract. The CE Turbo Project is scheduled to commence initial
operations  in the  third  quarter  of  2000  and  the  brine  facilities  is in
operation.  Total  project  costs  for both the CE Turbo  Project  and the brine
facilities are expected to be  approximately  $63,700,  which is being funded by
$44,600 of debt and $19,100 from equity contributions.  The Company has incurred
approximately $54,500 of such costs through June 30, 2000.

The EPC contractor's  parent, Stone & Webster,  Incorporated,  voluntarily filed
Chapter  11  Bankruptcy  on June 2, 2000 and has sold  substantially  all of its
assets to Shaw Group Inc.  Shaw Group Inc. has agreed to complete  substantially
all of Stone & Websters' contracts for future and current projects.  The Company
does not believe this  situation  will cause any material  adverse effect on the
final completion of the Company's projects or the Company.

The operating Salton Sea Guarantors' only source of revenue is payments received
pursuant  to long term power sales  agreements  with  Edison,  other than Unit 5
revenue and  interest  earned on funds on  deposit.  The  operating  Partnership
Guarantors' primary source of revenue is payments received pursuant to long term
power  sales  agreements  with Edison  other than CE Turbo and Zinc  revenue and
interest  earned on funds on  deposit.  The Royalty  Guarantor's  only source of
revenue is Royalties  received  pursuant to resource lease  agreements  with the
Partnership Projects.  These payments, for each of the Guarantors,  are expected
to be  sufficient  to fund  operating  and  maintenance  expenses,  payments  of
interest and principal on the Securities,  projected  capital  expenditures  and
debt service reserve fund requirements.

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


<PAGE>


Item 3.  Qualitative and Quantitative Disclosures About Market Risk:

On June 9, 2000,  Salton Sea Power LLC, a subsidiary of CE  Generation,  entered
into an agreement to sell all available  power from the Salton Sea Unit V and CE
Turbo projects to El Paso Merchant Energy, L.P. Under the terms of the agreement
commencing  on July 1, 2000 and ending on September  30, 2000,  El Paso Merchant
Energy will  purchase up to 25 MW of available  power for $53 per MWh,  together
with any premiums  related to such power. El Paso will also market any available
power  which  exceeds 25 MW on behalf of Salton Sea Power LLC and any  available
power from CE Turbo LLC.


<PAGE>


SALTON SEA FUNDING CORPORATION

                           PART II - OTHER INFORMATION


Item 1 - Legal proceedings.

         Neither the Salton Sea Funding  Corporation  nor the Guarantors are
         parties to any material legal matters.

Item 2 - Changes in Securities.

         Not applicable.

Item 3 - Default on Senior Securities.

         Not applicable.

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

         Not applicable.

Item 5 - Other Information.

         Not applicable.

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

         (a)  Exhibits:

              Exhibit 27 - Financial Data Schedule

         (b)  Report on Form 8-K:

              None.


<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act  of  1934  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                         SALTON SEA FUNDING CORPORATION

Date:  August 14, 2000                /s/    Joseph M. Lillo
                                             Joseph M. Lillo
                                             Vice President and
                                             Controller


<PAGE>


                                  EXHIBIT INDEX

Exhibit                                                                     Page
  No.                                                                        No.

  27             Financial Data Schedule                                     36