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

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 2003
                          Commission File No. 33-95538

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

            Delaware                                             47-0790493
            --------                                             ----------
    (State of Incorporation)                                    (IRS Employer
                                                             Identification No.)

Salton Sea Brine Processing L.P.          California               33-0601721
Salton Sea Power Generation L.P.          California               33-0567411
Fish Lake Power LLC                       Delaware                 33-0453364
Vulcan Power Company                      Nevada                   95-3992087
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

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

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

         Securities registered pursuant to Section 12(b) of the Act: N/A
         Securities registered pursuant to Section 12(g) of the Act: N/A

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

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of each of the  registrants'  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X ]

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

All  common  stock of Salton  Sea  Funding  Corporation  is held by Magma  Power
Company. 100 shares of Common Stock were outstanding on February 27, 2004.


<PAGE>

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

                                     PART I

Item 1.  Business..............................................................4
Item 2.  Properties...........................................................11
Item 3.  Legal Proceedings....................................................11
Item 4.  Submission of Matters to a Vote of Security Holders..................12

                                  PART II

Item 5.  Market for Registrant's Common Equity and Related
           Stockholder Matters................................................13
Item 6.  Selected Financial Data..............................................13
Item 7.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations..........................................16
         Results of Operations for the Years Ended December 2003 and 2002.....16
         Results of Operations for the Years Ended December 2002 and 2001.....18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk...........26
Item 8.  Financial Statements and Supplementary Data..........................27
Item 9.  Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure...........................................76
Item 9A. Controls and Procedures..............................................76

                                 PART III

Item 10. Directors and Executive Officers of the Registrant...................77
Item 11. Executive Compensation...............................................78
Item 12. Security Ownership of Certain Beneficial Owners and Management
           and Related Stockholder Matters....................................78
Item 13. Certain Relationships and Related Transactions.......................79
Item 14. Principal Accountant Fees and Services...............................79

                                  PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K......80
SIGNATURES....................................................................82
EXHIBIT INDEX................................................................102

                                      -2-
<PAGE>

                                     PART I

                 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This report contains  statements  that do not directly or exclusively  relate to
historical facts. These statements are  "forward-looking  statements" within the
meaning  of the  Private  Securities  Litigation  Reform  Act of  1995.  You can
typically  identify  forward-looking  statements  by the use of  forward-looking
words,  such as "may",  "will",  "could",  "project",  "believe",  "anticipate",
"expect", "estimate",  "continue",  "potential", "plan", "forecast", and similar
terms. These statements represent Salton Sea Funding  Corporation's  intentions,
plans,  expectations  and beliefs and are  subject to risks,  uncertainties  and
other   factors.   Many  of  these  factors  are  outside   Salton  Sea  Funding
Corporation's  control and could cause actual results to differ  materially from
such forward-looking statements. These factors include, among others:

     o    general economic and business conditions in the jurisdictions in which
          Salton Sea Funding Corporation's facilities are located;

     o    the  financial  condition  and  creditworthiness  of  our  significant
          customers and suppliers;

     o    governmental,  statutory,  regulatory or administrative initiatives or
          ratemaking  actions  affecting  Salton Sea Funding  Corporation or the
          power generation industries;

     o    weather effects on sales and revenue;

     o    general industry trends;

     o    increased competition in the power generation industry;

     o    fuel and power costs and availability;

     o    changes in business strategy,  development plans or customer or vendor
          relationships;

     o    availability of qualified personnel;

     o    unscheduled outages or repairs;

     o    financial or regulatory  accounting  principles or policies imposed by
          the  Public  Company   Accounting   Oversight   Board,  the  Financial
          Accounting  Standards  Board,  the Securities and Exchange  Commission
          ("SEC") and similar entities with regulatory oversight;

     o    other  risks or  unforeseen  events,  including  wars,  the effects of
          terrorism, embargos and other catastrophic events; and

     o    other business or investment considerations that may be disclosed from
          time to time in SEC filings or in other publicly  disseminated written
          documents.

Salton Sea Funding  Corporation  undertakes no obligation to publicly  update or
revise any forward-looking  statements,  whether as a result of new information,
future  events or  otherwise.  The  foregoing  review of  factors  should not be
construed as exclusive.

In this Annual Report references to kW means kilowatts, MW means megawatts,  kWh
means kilowatt hours, MWh means megawatt hours, and NMW means net megawatts.

                                      -3-
<PAGE>

ITEM 1. BUSINESS.

GENERAL

Salton Sea Funding Corporation ("Funding Corporation"), an indirect wholly-owned
subsidiary of CE Generation,  LLC ("CE Generation"),  is a Delaware  corporation
formed for the sole purpose of issuing securities in its individual  capacity as
principal and as agent acting on behalf of the  Guarantors  (as defined  below).
The  principal  executive  office of the Funding  Corporation  is located at 302
South 36th Street, Suite 400, Omaha,  Nebraska 68131 and its telephone number is
(402) 341-4500.

CE Generation  owns all of the capital  stock of Magma Power Company  ("Magma"),
which owns all of the outstanding capital stock of Funding Corporation.  Through
its  subsidiaries,  CE  Generation  is  primarily  engaged  in the  development,
ownership  and  operation  of  environmentally   responsible  independent  power
production  facilities in the United States utilizing geothermal and natural gas
resources.  CE Generation  has an aggregate net ownership  interest of 769 MW of
electrical generating capacity in power plants in operation in the United States
of  America,  which have an  aggregate  net  capacity of 829 MW  (including  its
interests  in the Salton Sea Projects  and the  Partnership  Projects as defined
below).

All of the  outstanding  stock of Magma was  contributed by  MidAmerican  Energy
Holdings Company ("MEHC") to CE Generation in February 1999. In March 1999, MEHC
sold a 50% interest in CE Generation to El Paso CE  Generation  Holding  Company
("El Paso"). On January 29, 2003, El Paso sold all its interest in CE Generation
to TransAlta USA Inc. ("TransAlta"), an affiliate of TransAlta Corporation.

Magma  directly or indirectly  owns all of the capital  stock of or  partnership
interests in the Funding  Corporation and the  Guarantors,  except for CalEnergy
Minerals  LLC  ("Minerals")  and Salton Sea Minerals  Corp.,  which are owned by
MEHC. The Guarantors are comprised of the Salton Sea Guarantors, the Partnership
Guarantors, and the Royalty Guarantor (collectively, the "Guarantors").

The Salton Sea Guarantors  include Salton Sea Brine Processing L.P.,  Salton Sea
Power Generation L.P.  ("SSPG"),  Salton Sea Power L.L.C.  ("Salton Sea Power"),
and  Fish  Lake  Power  LLC  ("Fish  Lake")   (collectively,   the  "Salton  Sea
Guarantors"),  which own five  operating  geothermal  power  plants  located  in
Imperial  Valley,  California  known as  Salton  Sea I  Project,  Salton  Sea II
Project,  Salton Sea III Project, Salton Sea IV Project and Salton Sea V Project
(the "Salton Sea Projects").

The  Partnership  Guarantors  include the  Vulcan/BN  Geothermal  Power  Company
("Vulcan"),  Elmore, L.P. ("Elmore"),  Leathers,  L.P. ("Leathers"),  Del Ranch,
L.P.  ("Del  Ranch"),  and CE Turbo  LLC  ("CE  Turbo"),  each of which  owns an
operating geothermal power plant located in Imperial Valley, California known as
the Vulcan Project,  the Elmore  Project,  the Leathers  Project,  the Del Ranch
Project and CE Turbo  Project,  respectively  (the  "Partnership  Projects" and,
together  with the Salton Sea  Projects the  "Imperial  Valley  Projects").  The
Partnership  Guarantors  also include  Minerals,  which has  constructed  a zinc
recovery project in the Imperial Valley,  California.  Finally,  the Partnership
Guarantors  include  CalEnergy  Operating  Corporation  ("CEOC"),  Vulcan  Power
Company ("VPC"), San Felipe Energy Company ("San Felipe"), Conejo Energy Company
("Conejo"),  Niguel Energy Company  ("Niguel"),  VPC Geothermal LLC ("VPCG") and
Salton Sea Minerals Corp. VPC and VPCG, collectively own 100% of the partnership
interests in Vulcan.  CEOC and Niguel,  San Felipe and Conejo,  collectively own
90%  partnership  interests  in Elmore,  Leathers  and Del Ranch,  respectively.
Salton Sea Minerals Corp. owns Minerals.

Magma owns the remaining 10% interest in each of Elmore, Leathers and Del Ranch.
CEOC is entitled to receive from Magma, as payment for certain data and services
provided by CEOC,  all of the  partnership  distributions  Magma  receives  with
respect to its 10% ownership  interests in each of the Elmore,  Leathers and Del
Ranch Projects and Magma's special  distributions  equal to 4.5% of total energy
revenue from the Leathers Project.

                                      -4-
<PAGE>

Salton Sea  Royalty  LLC  ("SSRC" or the  "Royalty  Guarantor")  is the  Royalty
Guarantor.  The Royalty  Guarantor  received an  assignment  of certain fees and
royalties  ("Royalties") paid by three Partnership Projects:  Elmore,  Leathers,
and Del Ranch.

CEOC  currently  operates  the Imperial  Valley  Projects.  Affiliates  of Magma
control, through a variety of fee, leasehold,  and royalty interests,  rights to
geothermal  resources for power  production  in the Salton Sea Known  Geothermal
Resource Area ("SSKGRA").  The Funding Corporation  believes that such resources
will be sufficient to operate the Imperial Valley Projects at contract  capacity
under their respective power purchase agreements through the final maturity date
of the securities.

The principal  executive offices of the Salton Sea Guarantors are located at 302
South 36th Street,  Suites 400-B, 400-D, 400-E, 400-K and 400-N, Omaha, Nebraska
68131.  The principal  executive  offices of the  Partnership  Guarantors is 302
South 36th Street, Suite 400-F, 400-G, 400-I, 400-J, 400-L, 400-M, 400-N, 400-O,
400-P,  400-Q,  400-R,  400-S,  400-T,  and 400-U,  Omaha,  Nebraska 68131.  The
principal  executive  office of the Royalty  Guarantor is 302 South 36th Street,
Suite 400-H, Omaha, Nebraska 68131.

THE PROJECTS

Set forth below is a table describing  certain  characteristics  of the Imperial
Valley  Projects,  and the Guarantors'  collective  interests  therein.  All the
projects are located in the Imperial Valley, California.
<TABLE>
<CAPTION>

                                 FACILITY  NET
                                    CAPACITY        NET MW                  COMMERICAL   AGREEMENT       POWER
          POWER PROJECT             (MW) (1)         OWNED        FUEL      OPERATION   EXPIRATION     PURCHASER(2)
-------------------------------  -------------      ------     ----------   ---------   ----------  -----------------
<S>                                 <C>             <C>        <C>           <C>         <C>        <C>
Salton Sea Projects
  Salton Sea I.................      10              10        Geothermal     1987        2017            Edison
  Salton Sea II ...............      20              20        Geothermal     1990        2020            Edison
  Salton Sea III...............      50              50        Geothermal     1989        2019            Edison
  Salton Sea IV................      40              40        Geothermal     1996        2026            Edison
  Salton Sea V.................      49              49        Geothermal     2000       Varies     TransAlta/Riverside/
                                    ---             ---                                                   Minerals(3)
    Total Salton Sea Projects..     169             169
                                    ---             ---

Partnership Projects
  Vulcan.......................      34              34        Geothermal     1986        2016            Edison
  Elmore.......................      38              34        Geothermal     1989        2018            Edison
  Leathers.....................      38              34        Geothermal     1990        2019            Edison
  Del Ranch....................      38              34        Geothermal     1989        2019            Edison
  CE Turbo.....................      10              10        Geothermal     2000       Varies     TransAlta/Minerals(3)
                                    ---             ---

Total Partnership Projects......    158             146
                                    ---             ---
Total power projects............    327             315
                                    ===             ===
</TABLE>

(1)  Actual MW may vary  depending on operating  and  reservoir  conditions  and
     plant  design.  Facility  Net Capacity (in MW)  represents  facility  gross
     capacity (in MW) less parasitic load.  Parasitic load is electrical  output
     used by the facility and not made  available for sale to utilities or other
     outside purchasers. Net MW owned indicates current legal ownership.

(2)  Southern   California  Edison  Company  ("Edison");   TransAlta;   City  of
     Riverside, California ("Riverside") and Minerals.

(3)  Each contract  governing  power  purchases by Minerals will expire 33 years
     from the date of the initial power delivery under such contract. Deliveries
     began in July 2000.  Pursuant to a Transaction  Agreement dated January 29,
     2003,  Salton  Sea  Power and CE Turbo  began  selling  available  power to
     TransAlta on February 12,

                                      -5-
<PAGE>

     2003 based on percentages of the Dow Jones SP-15 Index. The Transaction
     Agreement  shall  continue  until the earlier  of: (a) 30 days  following a
     written notice of termination;  or (b) any other  termination date mutually
     agreed to by the  parties.  No such  termination  has been  given by either
     party.  Each contract  governing power purchases by Minerals will expire 33
     years from the date of the  initial  power  delivery  under such  contract.
     Pursuant to a  Transaction  Agreement  dated  January 29, 2003,  Salton Sea
     Power  which  owns the Salton Sea V  Project,  and CE Turbo  began  selling
     available  power to TransAlta on February 12, 2003 based on  percentages of
     the Dow Jones SP-15 Index.  The Transaction  Agreement shall continue until
     the earlier of: (a) 30 days following a written notice of  termination;  or
     (b) any other  termination date mutually agreed to by the parties.  No such
     notice of  termination  has been given by either party.  Effective  July 1,
     2004,  Salton Sea Power and CE Turbo will also be selling the environmental
     attributes  associated  with up to 931,800 MWh to TransAlta  Marketing (US)
     Inc ("TransAlta  Marketing")  through  December 31, 2008.  Salton Sea Power
     also  entered  into a 10-year  power sales  agreement  for up to 20 MW with
     Riverside in May 2003.

Each of the  Imperial  Valley  Projects,  excluding  the Salton Sea V and the CE
Turbo  Projects,  sells  electricity to Edison  pursuant to a separate  Standard
Offer  No.  4  Agreement  ("SO4  Agreement")  or  a  negotiated  power  purchase
agreement.  Each power purchase  agreement is independent of the others, and the
performance  requirements  specified within one such agreement apply only to the
Project subject to the agreement. The power purchase agreements provide capacity
payments, capacity bonus payments and energy payments. Edison makes fixed annual
capacity payments and capacity bonus payments to the applicable  projects to the
extent that capacity factors exceed certain benchmarks. Except as described, the
price  for  capacity  is  fixed  for  the  life  of the  SO4  Agreements  and is
significantly higher in the months of June through September.

Energy payments under the SO4  Agreements,  excluding the Salton Sea IV Project,
were at increasing  fixed rates for the first ten years after firm operation and
thereafter at a rate based on the cost that Edison  avoids by purchasing  energy
from the project  instead of obtaining the energy from other sources  ("Edison's
Avoided  Cost of  Energy").  In June and  November  2001,  the  Imperial  Valley
Projects,  which receive Edison's Avoided Cost of Energy entered into agreements
that  provide  for  amended  energy  payments  under  the  SO4  Agreements.  The
amendments provide for fixed energy payments per kWh in lieu of Edison's Avoided
Cost of Energy. The fixed energy payment was 3.25 cents per kWh from December 1,
2001 through April 30, 2002 and is 5.37 cents per kWh commencing May 1, 2002 for
a five-year period.  Following the five-year period,  the energy payments revert
back to Edison's Avoided Cost of Energy.

For the years ended  December 31, 2003,  2002 and 2001,  respectively,  Edison's
Average  Avoided Cost of Energy was 5.4 cents per kWh, 3.5 cents per kWh and 7.4
cents per kWh, respectively. Estimates of Edison's future Avoided Cost of Energy
vary substantially from year-to-year, primarily based on the future cost of gas.

The  Imperial  Valley  Projects,  other than the  Salton Sea I Project,  receive
transmission  service from the Imperial  Irrigation District ("IID"), to deliver
electricity to Edison near Mirage,  California.  These projects pay a rate based
on the IID's  cost of  service,  which  was  $1.78  per month per kW of  service
provided  for 2003 and  recalculated  annually.  The  transmission  service  and
interconnection agreements expire in 2015 for the Partnership Projects, 2019 for
the Salton Sea III Project,  2020 for the Salton Sea II Project and 2026 for the
Salton Sea IV Project.  The Salton Sea V Project and the CE Turbo  Project  have
entered into 30-year  agreements with similar terms with the IID. The Salton Sea
I Project  delivers energy to Edison at the project site and has no transmission
service agreement with the IID.

                                      -6-

<PAGE>

SALTON SEA PROJECTS

The Salton Sea I Project  contracts to sell  electricity to Edison pursuant to a
30-year  negotiated  power purchase  agreement,  which commenced on July 1, 1987
(the "Salton Sea I PPA"). The contract capacity and contract  nameplate are each
10 MW. The capacity  payment is based on the firm capacity price,  which adjusts
quarterly  based on a basket of energy  indices for the term of the Salton Sea I
PPA and is currently $158.71 per kW-year. The capacity payment was approximately
$1.5  million in 2003.  The  energy  payment  is  calculated  using a Base Price
(defined as the initial  value of the energy  payment (4.7 cents per kWh for the
second quarter of 1992)),  which is subject to quarterly  adjustments based on a
basket of indices.  The time period  weighted  average energy payment for Salton
Sea I was 6.1 cents per kWh during 2003.

The Salton Sea II Project  contracts to sell electricity to Edison pursuant to a
30-year  modified SO4 Agreement  that  commenced on April 5, 1990.  The contract
capacity and contract  nameplate are 15 MW (16.5 MW during on-peak  periods) and
20 MW, respectively. The price for contract capacity and contract capacity bonus
payments is fixed for the life of the  modified SO4  Agreement.  Pursuant to the
SO4 Agreement,  the maximum annual capacity and bonus payments are approximately
$3.3  million.  Edison is  entitled  to  receive,  at no cost,  5% of all energy
delivered in excess of 80% of contract capacity through September 30, 2004.

The Salton Sea III Project contracts to sell electricity to Edison pursuant to a
30-year modified SO4 Agreement that commenced on February 13, 1989. The contract
capacity and contract nameplate are 47.5 MW and 49.8 MW, respectively. The price
for contract  capacity payments and capacity bonus payments is fixed at $175 per
kW per year.  Pursuant  to the SO4  Agreement,  the  maximum  annual  contracted
capacity and bonus payments are approximately $9.7 million.

The Salton Sea IV Project  contracts to sell 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 I PPA option (20 MW) and to the
original Salton Sea IV SO4 Agreement (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 capacity and
bonus  payments in 2003,  2002 and 2001 were  approximately  $3.9 million,  $5.5
million and $5.7 million, respectively. The energy payment (for deliveries up to
a rate of 39.6 MW) is at a base price,  adjusted  quarterly  based on  specified
indices,  for 55.6% of the total  energy  delivered by the Salton Sea IV Project
and is based on an  energy  payment  schedule  for  44.4%  of the  total  energy
delivered  by the Salton Sea IV Project.  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.

On May 20,  2003,  Salton Sea Power  entered into a power sales  agreement  with
Riverside. Under the terms of the agreement,  Salton Sea Power sells up to 20 MW
of energy  generated from the Salton Sea V Project to Riverside at 6.1 cents per
kWh. Sales under the agreement commenced June 1, 2003 and will terminate May 31,
2013.  Pursuant  to a 33-year  power sales  agreement,  the Salton Sea V Project
sells a portion of its net output to  Minerals  for its full  electrical  energy
requirements  currently estimated to be 19 MW. The agreement provides for energy
payments  based on the  market  rates  available  to the  Salton  Sea V Project,
adjusted for wheeling costs. The Salton Sea V Project sells its remaining output
under the TransAlta Transaction Agreement, as described below.

Commencing January 17, 2001, Salton Sea Power and CE Turbo entered into a series
of transaction  agreements to sell available power from the Salton Sea V Project
to El Paso  based on  day-ahead  price  quotes  received  from El Paso under the
original  agreement  and  based on  percentages  of the Dow  Jones  SP-15  Index
thereafter.   Pursuant  to  a  Transaction  Agreement  ("TransAlta   Transaction
Agreement")  dated January 29, 2003, Salton Sea Power and CE Turbo began selling
available  power to TransAlta on February 12, 2003 based on  percentages  of the
Dow Jones SP-15  Index.  The  Transaction  Agreement  shall  continue  until the
earlier of: (a) 30 days  following a

                                      -7-
<PAGE>

written notice of termination; or (b) any other termination date mutually agreed
to by the parties. No such termination has been given by either party.

PARTNERSHIP PROJECTS

The Vulcan Project  contracts to sell  electricity to Edison under a 30-year SO4
Agreement that commenced on February 10, 1986. The Vulcan Project has a contract
capacity and contract nameplate of 29.5 MW and 34 MW, respectively.  Pursuant to
the  SO4  Agreement,   the  maximum  annual  capacity  and  bonus  payments  are
approximately $5.5 million.

The Elmore Project  contracts to sell  electricity to Edison under a 30-year SO4
Agreement that commenced on January 1, 1989. The contract  capacity and contract
nameplate are 34 MW and 38 MW, respectively.  Pursuant to the SO4 Agreement, the
maximum annual capacity and bonus payments are approximately $7.9 million.

The Leathers  Project  contracts  to sell  electricity  to Edison  pursuant to a
30-year SO4 Agreement that  commenced on January 1, 1990. The contract  capacity
and contract  nameplate are 34 MW and 38 MW,  respectively.  Pursuant to the SO4
Agreement, the maximum annual capacity and bonus payments are approximately $7.5
million.

The Del Ranch Project  contracts to sell  electricity  to Edison under a 30-year
SO4  Agreement  that  commenced on January 2, 1989.  The  contract  capacity and
contract  nameplate  are  34 MW and 38 MW,  respectively.  Pursuant  to the  SO4
Agreement, the maximum annual capacity and bonus payments are approximately $7.9
million.

The CE Turbo Project sells its available  power under the TransAlta  Transaction
Agreement.  The CE Turbo Project may sell its output to Minerals,  pursuant to a
33-year power purchase  agreement.  The agreement  provides for energy  payments
based on the  market  rates  available  to the CE Turbo  Project,  adjusted  for
wheeling costs.

ZINC RECOVERY PROJECT

Minerals  developed  and  owns  the  rights  to  proprietary  processes  for the
extraction of zinc from elements in solution in the geothermal  brine and fluids
utilized at the Imperial Valley Projects.  The plant has  successfully  produced
commercial quality zinc from the Imperial Valley Project's brine. The affiliates
of Minerals may develop  facilities for the extraction of manganese,  silica and
other products as it further develops the extraction technology.

Minerals  constructed the Zinc Recovery  Project,  which is recovering zinc from
the  geothermal  brine  (the  "Zinc  Recovery  Project").  Facilities  have been
installed  near the Imperial  Valley  Projects  sites to extract a zinc chloride
solution  from the  geothermal  brine  through  an ion  exchange  process.  This
solution is being  transported to a central  processing  plant where zinc ingots
are being  produced  through  solvent  extraction,  electrowinning  and  casting
processes.  The Zinc Recovery Project began limited  production in December 2002
and  continued  limited  production  of  non-high  grade zinc  during  2003.  In
September 1999,  Minerals entered into a sales agreement  whereby all high-grade
zinc  produced  by the Zinc  Recovery  Project  will be sold to Comico,  Ltd. at
prevailing market prices. The agreement expires in December 2005.

ROYALTY PROJECTS

The Royalty Guarantor has received an assignment from Magma of certain Royalties
received  from the Elmore,  Leathers and Del Ranch  Projects in exchange for the
provision to those projects of the rights to use certain  geothermal  resources.
Substantially all of the assigned  Royalties are based on a percentage of energy
and capacity revenue of the respective projects. Pursuant to the assignment, the
Royalty  Guarantor  is  entitled to receive the  aggregate  percentages  of such
project's  energy and capacity  revenue as illustrated  in the chart below.  The
Partnership   Guarantors  are  also  entitled  to  receive  Royalties  from  the
Partnership Projects as illustrated in the chart below. Royalties are subject to
netting and reduction from time to time to reflect various  operating  costs, as
reflected

                                      -8-
<PAGE>

in the financial  statements  herein. All such Royalties (other than the various
operating  costs,  as reflected in the  financial  statements)  are payable from
revenue which will constitute Partnership Guarantor's collateral.
<TABLE>
<CAPTION>

                              ROYALTIES TO BE PAID TO ROYALTY         ROYALTIES TO BE PAID TO
                                         GUARANTOR                    PARTNERSHIP GUARANTORS
                              -------------------------------      ----------------------------
                              % OF ENERGY     % OF CAPACITY        % OF ENERGY    % OF CAPACITY
     PROJECT                    REVENUES        REVENUES             REVENUES        REVENUES
---------------------------   -----------     -------------        -----------    -------------

<S>                                <C>            <C>                 <C>            <C>
Del Ranch..................        23.33%         1.00%               5.67%          3.00%
Elmore.....................        23.33          1.00                5.67           3.00
Leathers...................        21.50          0.00                7.50           3.00
Vulcan.....................         0.00          0.00                4.17           0.00
</TABLE>

RELIANCE ON SINGLE UTILITY CUSTOMER

Each of the Vulcan,  Elmore,  Leathers,  Del Ranch, and Salton Sea I-IV Projects
relies on an agreement  with Edison to generate 100% of its  operating  revenue.
The  payments  (excluding  those for power sales from March 22 through  June 22,
2001) under these agreements have  constituted 100% of the operating  revenue of
each Project since its inception,  and may do so for the life of the securities.
Any material failure of Edison to fulfill its contractual  obligations under the
power purchase agreements could have a material adverse effect on the ability of
the Funding Corporation to pay principal of and interest on the Securities.

ZINC PRICE AND SALES

Because most of the Zinc Recovery Project's revenue are and will be derived from
the sale of zinc, earnings are and will be directly related to the price of zinc
in the  domestic  and world  markets.  However,  zinc prices  fluctuate  and are
affected by numerous factors,  including expectations of inflation,  speculative
activities,  currency exchange rates, interest rates, global and regional demand
and production,  political and economic  conditions,  discovery of new deposits,
and production costs in major producing  regions.  The aggregate effect of these
factors,  all of which are beyond the control of the Funding  Corporation or the
Guarantors, is impossible for the Funding Corporation to predict.

OPERATIONAL UNCERTAINTY

Although several of the power projects have been operating for a number of years
and the Zinc Recovery Project is producing limited quantities, the Zinc Recovery
Project is subject to customary  risks  associated  with the operation of metals
processing  plants including  operational  risks,  cost overruns and failures to
perform in  accordance  with  contract  terms.  In  addition,  while each of the
individual  process steps to be utilized in the Zinc Recovery Project (including
ion exchange,  solvent extraction and  electrowinning) has been in operation for
more  than  twenty  years  and  the  demonstration   plant  at  the  SSKGRA  has
successfully  recovered  zinc through this  integrated  process,  the integrated
process for the production of zinc from geothermal  brine has not been attempted
in a large  scale  commercial  facility  for an  extended  period  of time.  Any
material  unremedied  unsatisfactory  operational  issue  of the  Zinc  Recovery
Project could have an adverse  effect on the applicable  Guarantors'  results of
operations.

UNCERTAINTIES RELATING TO EXPLORATION AND DEVELOPMENT OF GEOTHERMAL ENERGY
RESOURCES

Geothermal exploration, development and operations are subject to uncertainties,
which  vary  among  different  geothermal  reservoirs  and are  similar to those
typically associated with oil and gas exploration and development, including dry
holes and  uncontrolled  releases.  Because of the  geological  complexities  of
geothermal reservoirs,  the geographic area and sustainable output of geothermal
reservoirs can only be estimated and cannot be definitively  established.  There
is,  accordingly,  a risk of an unexpected decline in the capacity of geothermal
wells and a risk of geothermal  reservoirs  not being  sufficient  for sustained
generation of the electrical power capacity desired.

                                      -9-
<PAGE>

In  addition,  both the cost of  operations  and the  operating  performance  of
geothermal  power  plants may be  adversely  affected by a variety of  operating
factors.  Production  and injection  wells can require  frequent  maintenance or
replacement.  Corrosion caused by high-temperature and high-salinity  geothermal
fluids may require the  replacement or repair of certain  equipment,  vessels or
pipelines.   New  production  and  injection  wells  may  be  required  for  the
maintenance of current operating levels,  thereby requiring  substantial capital
expenditures.

INSURANCE

The Salton Sea Projects and the Partnership Projects currently possess property,
business interruption, catastrophic and general liability insurance. Proceeds of
insurance received in connection with the Salton Sea Projects will be payable to
the  Depositary for the account of the Salton Sea Guarantors and will be applied
as required under the financing  documents.  There can be no assurance that such
comprehensive insurance coverage will be available in the future at commercially
reasonable  costs  or terms  or that  the  amounts  for  which  the  Salton  Sea
Guarantors and the Partnership  Guarantors are or will be insured will cover all
potential losses.

Because  geothermally  active  areas such as the area in which the  Projects are
located are  subject to frequent  low-level  seismic  disturbances,  and serious
seismic  disturbances  are  possible,  the  power  generating  plants  and other
facilities  at the  Projects  are  designed  and built to  withstand  relatively
significant levels of seismic disturbance.  However,  there is no assurance that
seismic disturbances of a nature and magnitude so as to cause material damage to
the  Projects  or  gathering  systems or a material  change in the nature of the
geothermal  resource  will not occur,  that  insurance  with  respect to seismic
disturbances  will be maintained  by or on behalf of all of the  Projects,  that
insurance proceeds will be adequate to cover all potential losses sustained,  or
that insurance  will continue to be available in the future in amounts  adequate
to insure against such seismic disturbances.

REGULATORY AND ENVIRONMENTAL MATTERS

The Guarantors  are subject to a number of  environmental  laws and  regulations
affecting  many aspects of their  present and future  operations,  including the
disposal of various  forms of  materials  resulting  from  geothermal  reservoir
production  and  the  drilling  and  operation  of  new  wells.  Such  laws  and
regulations  generally  require the  Guarantors to obtain and comply with a wide
variety of  licenses,  permits  and other  approvals.  In  addition,  regulatory
compliance for the construction of new facilities is a costly and time-consuming
process,  and  intricate  and rapidly  changing  environmental  regulations  may
require  major  expenditures  for  permitting  and create the risk of  expensive
delays or material  impairment of project value if projects  cannot  function as
planned  due to  changing  regulatory  requirements  or  local  opposition.  The
Guarantors  and the Projects also remain subject to a varied and complex body of
environmental  and energy  regulations  that both public  officials  and private
individuals  may  seek to  enforce.  There  can be no  assurance  that  existing
regulations  will not be revised or that new regulations  will not be adopted or
become applicable to the Guarantors and the Projects which could have an adverse
impact on their operations.  In particular,  the independent power market in the
United  States  is  dependent  on  the  existing  energy  regulatory  structure,
including the Public Utility  Regulatory  Policies Act and its implementation by
utility  commissions  in the various  states.  The structure of such federal and
state energy  regulations has in the past, and may in the future, be the subject
of  various  challenges  and  restructuring  proposals  by  utilities  and other
industry  participants.  The implementation of regulatory changes in response to
such  challenges  or  restructuring   proposals,   or  otherwise  imposing  more
comprehensive  or stringent  requirements on the Guarantors and Projects,  which
would result in increased  compliance costs could have a material adverse effect
on the Guarantors' and the Projects' results of operations.

                                      -10-

<PAGE>

EMPLOYEES

Employees  necessary  for the  operation  of the  Imperial  Valley  Projects are
provided by CEOC.  As of December  31,  2003,  CEOC  employed  289 people.  CEOC
maintains  a qualified  technical  staff  covering a broad range of  disciplines
including geology, geophysics,  geochemistry,  hydrology,  volcanology, drilling
technology,  reservoir engineering, plant engineering,  construction management,
maintenance services,  production management, and electric power operation. CEOC
employees are not covered by any collective  bargaining  agreement.  The Funding
Corporation believes that CEOC's employee relations are good.

ITEM 2. PROPERTIES.

The Funding  Corporation's most significant  physical properties are its current
interest in operating power facilities and its related real property  interests.
The Funding Corporation  maintains an inventory of approximately 26,000 acres of
geothermal property leases in the Salton Sea area to support the Imperial Valley
Projects. Funding Corporation,  as lessee, pays certain royalties and other fees
to the  property  owners and other  royalty  interest  holders  from the revenue
generated by the Imperial Valley Projects.

Lessors  and  royalty  holders  are  generally  paid a monthly or annual  rental
payment during the term of the lease or mineral  interest,  unless and until the
acreage goes into  production,  in which case the rental typically stops and the
(generally  higher)  royalty  payments  begin.  Leases of federal  property  are
transacted with the Department of Interior, Bureau of Land Management,  pursuant
to standard geothermal leases under the Geothermal Steam Act and the regulations
promulgated  thereunder,  and are for a primary term of 10 years, extendible for
an  additional 5 years if drilling is  commenced  within the primary term and is
diligently pursued for two successive 5-year periods upon certain conditions set
forth in the  regulations.  A secondary  term of up to 40-years is  available so
long as  geothermal  resources  from the property are being  produced or used in
commercial quantities. Leases of state lands may vary in form. Leases of private
lands vary  considerably,  since their terms and  provisions  are the product of
negotiations with the landowners.

ITEM 3. LEGAL PROCEEDINGS.

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

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

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

On March 25, 2002, the Salton Sea II Project's 10 MW turbine went out of service
due to an uncontrollable force event. Such uncontrollable force event ended, and
the Salton Sea II Project  returned to service,  on December  17,  2002.  Edison
failed  to  recognize  the  uncontrollable  force  event and as such did not pay
amounts otherwise due and

                                      -11-
<PAGE>

owing and  improperly  derated the Salton Sea II Project  from 15 MW to 12.5 MW,
under the Salton Sea II Power  Purchase  Agreement.  On January 29, 2003,  SSPG,
owner of the Salton Sea II Project, served a complaint on Edison for such unpaid
amounts and to rescind such deration.

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

On July 10, 2003,  the Salton Sea IV Project's 40 MW turbine went out of service
due to an uncontrollable force event. Such uncontrollable force event ended, and
the Salton Sea IV Project  plant  returned  to service on  September  17,  2003.
Edison  failed to recognize the  uncontrollable  force event and as such has not
paid  amounts  otherwise  due and owing  under the Salton Sea IV Power  Purchase
Agreement totaling approximately $2.3 million. SSPG, with Fish Lake Power, owner
of the  Salton Sea IV  Project  has  served  notices of error to Edison for such
unpaid amounts. As a result, the Guarantors  established  allowance for doubtful
accounts of $1.7 million for capacity payments as of December 31, 2003.

On October 9, 2003,  the  Salton  Sea III  Project's  50 MW turbine  went out of
service due to an uncontrollable  force event. Such  uncontrollable  force event
ended and the Salton Sea III Project  plant  returned to service on December 12,
2003. Edison failed to recognize the uncontrollable  force event and as such has
not paid amounts otherwise due and owing under the Salton Sea III Power Purchase
Agreement totaling approximately $0.7 million. SSPG, owner of the Salton Sea III
Project,  has served  notices of error to Edison for such unpaid  amounts.  As a
result the Guarantors  have  established an allowance for doubtful  accounts for
the full amount of this receivable.

In January 2001, the California Power Exchange ("PX") declared bankruptcy.  As a
result,  the Salton Sea V and CE 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

On May 25, 2001,  Minerals  entered into a services  agreement for  engineering,
procurement and  construction  management  services (the "AMEC  Agreement") with
AMEC E&C Services,  Inc.  ("AMEC") in connection with the resolution of numerous
problems that affected the timely completion of Minerals' Zinc Recovery Project.
Under the AMEC Agreement, AMEC represented that it had certain licenses required
for  its  services  which  Minerals  ultimately  determined  to be  false.  AMEC
submitted  $2.8  million of invoices  to  Minerals  that AMEC claims are due and
payable under the AMEC Agreement.  Minerals filed a lawsuit against AMEC on June
13, 2003 for declaratory  judgment that would (1) prevent  collection by AMEC of
the $2.8 million it claimed to be due and payable and, (2) recover payments made
by  Minerals  to  AMEC  based  on  AMEC's  lack  of a  contractor's  license  in
California. The lawsuit also included claims by Minerals against AMEC for breach
of contract and breach of duty of fiduciary responsibility.  AMEC filed a motion
to compel  arbitration  of the  dispute.  The court ruled  against the motion to
compel arbitration and AMEC has appealed this decision.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Not applicable.

                                      -12-
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
        ISSUER PURCHASES OF EQUITY SECURITIES

Not applicable.

ITEM 6. SELECTED FINANCIAL DATA.

The Funding Corporation
-----------------------

The following tables set forth selected historical  financial and operating data
of the  Funding  Corporation.  The data should be read in  conjunction  with the
financial statements and related notes and other financial information appearing
elsewhere in this Form 10-K (in thousands):
<TABLE>
<CAPTION>

                                                                    YEAR ENDED DECEMBER 31,
                                               ---------------------------------------------------------------
                                                  2003        2002(1)       2001(2)        2000         1999
                                               ---------     ---------     ---------     --------    ---------

<S>                                            <C>           <C>           <C>           <C>         <C>
STATEMENT OF OPERATIONS DATA:
Total revenue .............................    $  36,586     $  39,755     $  41,791     $ 43,718    $ 48,538
Income (loss) before cumulative effect of
  change in accounting principle ..........         (271)           85           (37)         174       1,123
Net income (loss) .........................         (271)         (125)         (137)         174       1,123

BALANCE SHEET DATA:
Total assets ..............................    $ 490,415     $ 570,503     $ 540,580     $565,375    $585,648
Senior secured notes and bonds (3) ........      463,592       491,678       520,250      543,908     568,980
Total stockholder's equity ................       13,653        13,418        13,098       13,235      13,061
</TABLE>

     (1)  2002 net loss includes a $0.2 million goodwill  impairment  recognized
          as a  cumulative  effect  of  change in  accounting  principle  at the
          Guarantors.  Refer  to Note 2 in  "Item 8.  Financial  Statements  and
          Supplementary  Data - Notes to Financial  Statements"  for  additional
          information.

     (2)  2001 net loss  includes  $0.1  million  loss on  cumulative  effect of
          change in accounting  principle at the Guarantors.  Refer to Note 2 in
          "Item  8.  Financial  Statements  and  Supplementary  Data - Notes  to
          Financial Statements" for additional information.

     (3)  Includes current portion.

                                      -13-
<PAGE>

Salton Sea Guarantors
---------------------

The  following  tables set forth  selected  historical  combined  financial  and
operating  data  of the  Salton  Sea  Guarantors.  The  data  should  be read in
conjunction with the financial  statements and related notes and other financial
information appearing elsewhere in this Form 10-K (in thousands):
<TABLE>
<CAPTION>

                                                                    YEAR ENDED DECEMBER 31,
                                              --------------------------------------------------------------
                                               2003(1)       2002(2)       2001(3)       2000(4)      1999
                                              ---------     --------      --------      --------    --------

<S>                                           <C>           <C>           <C>           <C>         <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue ........................    $  83,786     $  84,176     $ 110,941     $ 98,057    $ 81,850
Total revenue ............................       83,428        87,893       113,228       98,410      83,718
Income (loss) before cumulative effect of
  change in accounting principle .........      (37,963)      (12,957)         (807)      28,323      23,045
Net income (loss) ........................      (37,963)      (33,975)       (9,550)      28,323      23,045

BALANCE SHEET DATA:
Total assets .............................    $ 527,439     $ 584,279     $ 629,950     $626,543    $633,014
Senior secured project note(5) ...........      223,647       246,419       266,899      284,217     293,954
Total guarantors' equity .................      250,007       287,970       321,945      331,495     303,172
</TABLE>

     (1)  2003 net loss includes a $23.3 million  impairment of goodwill.  Refer
          to Note 2 in "Item 8. Financial  Statements and  Supplementary  Data -
          Notes to Combined Financial Statements" for additional information.

     (2)  2002  net  loss  includes  a  $21.0  million  impairment  of  goodwill
          recognized as a cumulative  effect of change in accounting  principle.
          Refer to Note 2 in "Item 8.  Financial  Statements  and  Supplementary
          Data  -  Notes  to  Combined  Financial   Statements"  for  additional
          information.

     (3)  2001 net loss  includes  a $15.0  million  asset  impairment.  It also
          includes a $8.7  million  loss on a  cumulative  change in  accounting
          policy.  Refer  to  Note  2  in  "Item  8.  Financial  Statements  and
          Supplementary  Data - Notes  to  Combined  Financial  Statements"  for
          additional information.

     (4)  The Salton Sea V Project commenced  operations in the third quarter of
          2000.

     (5)  Includes current portion.

                                      -14-

<PAGE>

Partnership Guarantors
----------------------

The  following  tables set forth  selected  historical  combined  financial  and
operating  data  of the  Partnership  Guarantors.  The  data  should  be read in
conjunction with the financial statements and related notes, and other financial
information appearing elsewhere in this Form 10-K (in thousands):
<TABLE>
<CAPTION>

                                                                   YEAR ENDED DECEMBER 31,
                                              -------------------------------------------------------------
                                               2003(1)        2002(2)      2001(3)      2000(4)      1999
                                              ---------     ---------     ---------    ---------   ---------

<S>                                           <C>           <C>           <C>          <C>         <C>
STATEMENT OF OPERATIONS DATA:
Operating revenue ........................    $  95,254     $  94,697     $ 119,738    $103,250    $105,921
Total revenue ............................       96,825        96,440       126,318     108,184     114,988
Income (loss) before cumulative effect of
  change in accounting principles ........      (39,698)      (10,828)       22,975      27,180      25,481
Net income (loss) ........................      (39,698)      (10,828)       16,085      27,180      25,481

BALANCE SHEET DATA:
Total assets .............................    $ 988,073     $ 970,197     $ 938,342    $921,701    $901,892
Senior secured project note (5) ..........      239,100       244,116       248,742     250,650     261,212
Total guarantors' equity .................      612,204       601,288       567,579     551,494     524,314
</TABLE>


     (1)  2003 net loss includes a $21.2 million  impairment of goodwill.  Refer
          to Note 2 in "Item 8. Financial  Statements and  Supplementary  Data -
          Notes to Combined Financial Statements" for additional information.

     (2)  During  December  2002,  the Zinc Recovery  Project  became  partially
          operational.

     (3)  2001 net loss  includes a $6.9 million loss on a cumulative  effect of
          change in  accounting  policy.  Refer to Note 2 in "Item 8.  Financial
          Statements  and  Supplementary  Data -  Notes  to  Combined  Financial
          Statements" for additional information.

     (4)  CE Turbo  commenced  operations  in the  third  quarter  of 2000.

     (5)  Includes current portion.

Royalty Guarantor
-----------------

The following tables set forth selected historical  financial and operating data
of the  Royalty  Guarantor.  The data  should  be read in  conjunction  with the
financial statements and related notes and other financial information appearing
elsewhere in this Form 10-K (in thousands):
<TABLE>
<CAPTION>

                                              YEAR ENDED DECEMBER 31,
                                     ----------------------------------------------
                                      2003      2002      2001      2000      1999
                                    -------   -------   -------   -------   -------

<S>                                 <C>       <C>       <C>       <C>       <C>
STATEMENT OF OPERATIONS DATA:
Total revenue ...................   $12,509   $12,577   $16,882   $14,130   $26,274
Net income ......................     8,199     8,171    10,092     7,352    19,222

BALANCE SHEET DATA:
Total assets ....................   $91,884   $83,991   $79,300   $73,670   $71,116
Senior secured project note (1)..       845     1,147     4,607     9,041    13,814
Members' equity .................    91,034    82,835    74,664    64,572    57,220
</TABLE>

     (1)  Includes current portion.

                                      -15-

<PAGE>

ITEM 7.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
         RESULTS OF OPERATIONS.

The following  discussion and analysis  should be read in  conjunction  with the
selected  consolidated  financial data and the financial  statements included in
Items 6 and 8 herein.

FACTORS AFFECTING RESULTS OF OPERATIONS

The capacity factor for a particular project is determined by dividing the total
quantity of  electricity  sold by the product of the project's  capacity and the
total hours in the year.  At December  31, 2003,  the  capacity  factors for the
Salton Sea I Project,  Salton Sea II Project, Salton Sea III Project, Salton Sea
IV Project,  and Salton Sea V Project  plants are based on  capacity  amounts of
approximately 10, 20, 50, 40, and 49 net MW, respectively. At December 31, 2003,
the capacity factors for the Vulcan Project,  Elmore Project,  Leathers Project,
Del Ranch Project,  and CE Turbo Project plants are based on capacity amounts of
approximately 34, 38, 38, 38 and 10 net MW,  respectively.  Each plant possesses
an operating margin,  which allows for production in excess of the amount listed
above.  Utilization of this operating  margin is based upon a variety of factors
and  can be  expected  to  vary  throughout  the  year  under  normal  operating
conditions. The amount of revenues received by these projects is affected by the
extent to which they are able to operate and generate electricity.  Accordingly,
the  capacity and  capacity  factor  figures  provide  information  on operating
performance that has affected the revenues received by these projects.

For the years ended December 31, 2003, 2002 and 2001,  Edison's  Average Avoided
Cost of Energy  was 5.4 cents per kWh,  3.5 cents per kWh and 7.4 cents per kWh,
respectively.  Estimates of Edison's  future Average Avoided Cost of Energy vary
substantially  from  year-to-year  based primarily on the future cost of gas. In
June and November 2001, the Imperial  Valley  Projects,  which receive  Edison's
Avoided Cost of Energy entered into  agreements  that provide for amended energy
payments  under the SO4  Agreements.  The  amendments  provide for fixed  energy
payments per kWh in lieu of Edison's  Avoided  Cost of Energy.  The fixed energy
price  was 3.25  cents  per kWh from  December  1,  2001 to April  30,  2002 and
increased to 5.37 cents per kWh commencing May 1, 2002 through April 30, 2007.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 2003 AND 2002

The Salton Sea  Guarantors'  operating  revenue  decreased $0.4 million to $83.8
million for the year ended  December  31,  2003 from $84.2  million for the same
period in 2002.  The decrease was  primarily due to the impact of a $6.0 million
adjustment  to the Edison  allowance  for  doubtful  accounts  in 2002 and lower
production  due to  extended  overhauls  and the Salton Sea III and IV  Projects
uncontrollable force events in 2003, partially offset by higher average rates in
2003.  The  following  operating  data  represents  the  aggregate  capacity and
electricity production of the Salton Sea Projects:

                                                          YEARS
                                                  ENDED DECEMBER 31,
                                               --------------------------
                                                 2003            2002
                                               ---------       ----------
       Overall capacity factor .........           70.32%           78.4%
       Capacity NMW (weighted average)..           168.4           168.4
       MWh produced ....................       1,037,300       1,156,800

The overall  capacity  factor for the Salton Sea  Guarantors  decreased  in 2003
primarily  due to the  uncontrollable  force events at the Salton Sea III and IV
Projects in 2003.

The Salton Sea  Guarantors'  interest and other income (loss) was $(0.4) million
for the year ended  December 31, 2003 as compared to $3.7  million in 2002.  The
2002  interest  income was due  primarily to a business  interruption  insurance
recovery for lost  revenue at the Salton Sea II Project  from an  uncontrollable
force event

                                      -16-
<PAGE>

The Salton Sea Guarantors' operating expenses, which include royalty, operating,
general and  administrative  expenses  decreased $5.7 million,  or 9.6% to $53.5
million for year ended  December 31, 2003 from $59.2 million for the same period
in 2002.  The decrease was  primarily  due to the second  quarter 2003  warranty
claim settlement with Stone & Webster Inc. ("Stone and Webster"), which included
a $7.6 million reimbursement of incremental operating expenses related to legal,
other  expenses  and  equipment  write-offs.  The decrease was also due to lower
brine  pond and  legal  expenses  in 2003,  partially  offset  by  repair  costs
associated with the Salton Sea III and IV Projects uncontrollable force events.

The Salton Sea Guarantors'  depreciation and amortization increased $4.3 million
to $25.5 million for the year ended December 31, 2003 from $21.2 million for the
same  period  in  2002.  The  increase  was due to a  change  in  salvage  value
assumptions and higher depreciable asset balances in 2003.

The Salton Sea  Guarantors'  interest  expense  decreased  $1.6 million to $18.8
million for the year ended  December  31,  2003 from $20.4  million for the same
period in 2002. The decrease was due to reduced indebtedness.

In accordance with the Statement of Financial  Accounting Standards ("SFAS") No.
142,  "Goodwill  and Other  Intangible  Assets"  ("SFAS  142"),  the  Salton Sea
Guarantors  completed their annual goodwill  impairment  tests during the fourth
quarter  of 2003,  primarily  using a  discounted  cash flow  methodology  as of
October  31,  2003.  As a result  of  these  tests  the  Salton  Sea  Guarantors
recognized a goodwill impairment of $23.3 million in the fourth quarter of 2003.

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

The Partnership  Guarantors'  operating  revenue increased $0.6 million to $95.3
million for the year ended  December  31,  2003 from $94.7  million for the same
period in 2002. The impact of a $14.1 million adjustment to the Edison allowance
for doubtful accounts in 2002 was partially offset by higher average rates under
the settlement  agreement in 2003. The following  operating data  represents the
aggregate capacity and electricity production of the Partnership Projects:

                                                         YEARS
                                                   ENDED DECEMBER 31,
                                               -------------------------
                                                  2003            2002
                                               ---------       ---------
       Overall capacity factor .........            99.7%          101.5%
       Capacity NMW (weighted average) .           158.0           158.0
       MWh produced ....................       1,380,400       1,405,000

The overall capacity factor for the Partnership  Guarantors decreased marginally
in 2003 primarily due to scheduled maintenance outages.

The  Zinc  Recovery  Project  began  limited  production  in  December  2002 and
continued  limited  production of non-high  grade zinc during 2003  resulting in
minimal revenue in both years.

The Partnership  Guarantors' operating expenses decreased $7.6 million, or 8.6%,
to $80.4  million for year ended  December 31, 2003,  from $88.0 million for the
same period in 2002  primarily  due to lower costs  related to the Zinc Recovery
Project and lower legal expenses in 2003 as compared to 2002 in connection  with
the Edison disputes.

The Partnership Guarantors' depreciation and amortization increased $9.9 million
to $33.1 million for the year ended December 31, 2003 from $23.2 million for the
same period in 2002. The increase is due to $7.1 million of  depreciation on the
Zinc Recovery  Project,  which began limited  production in December 2002, and a
change in salvage value assumptions.

                                      -17-
<PAGE>

The  Partnership  Guarantors'  interest  expense,  net of  capitalized  amounts,
increased  $9.7  million to $18.8  million for the year ended  December 31, 2003
from $9.1  million  for the same  period in 2002.  The  increase  was due to the
discontinuance of capitalizing interest on the Zinc Recovery Project,  partially
offset by reduced indebtedness.

In accordance with the SFAS No. 142 the Partnership  Guarantors  completed their
annual goodwill  impairment  tests during the fourth quarter of 2003,  primarily
using a discounted cash flow  methodology as of October 31, 2003. As a result of
these tests the Partnership Guarantors recognized a goodwill impairment of $21.2
million in the fourth quarter of 2003.

The Partnership  Guarantors' income tax was a $17.0 million benefit for the year
ended  December 31, 2003 as compared to a benefit of $13.1  million for the same
period  in 2002.  The  effective  tax rate was 30.0% and 54.8% in 2003 and 2002,
respectively.  Changes in the effective rate are due primarily to the generation
of energy tax credits and changes to depletion deductions.  Income taxes will be
paid by the  parent of the  Partnership  Guarantors  from  distributions  to the
parent  company by the  Partnership  Guarantors,  which occur  after  payment of
operating expenses and debt service.

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

The  Funding  Corporation's  net loss was not  significant  for the years  ended
December 31, 2003 and 2002. The net loss primarily  represents  interest  income
and expense,  net of applicable tax, and the Funding  Corporation's 1% equity in
earnings of the Guarantors.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 2002 AND 2001

The Salton Sea Guarantors'  operating revenue decreased to $84.2 million for the
year ended  December  31, 2002 from $110.9  million for the same period in 2001.
The decrease was primarily due to lower energy rates and lower production due to
more overhauls in 2002. Due to uncertainties  associated with Edison's financial
condition,  Edison's failure to pay and the bankruptcy of the PX, the Salton Sea
Guarantors  established an allowance for doubtful accounts of approximately $9.8
million in the year ended December 31, 2001 as a reduction in operating revenue.
As of December 31, 2002, the balance of the allowance for doubtful  accounts was
$3.8 million. The following operating data represents the aggregate capacity and
electricity production of the Salton Sea Projects:

                                                YEARS ENDED DECEMBER 31,
                                              ---------------------------
                                                 2002             2001
                                              ----------       ----------

       Overall capacity factor .........            78.4%           80.1%
       Capacity NMW (weighted average) .           168.4           168.4
       MWh produced ....................       1,156,800       1,180,900

The Salton Sea Guarantors'  interest and other income  increased to $3.7 million
for the year ended  December  31, 2002 from $2.3  million for the same period in
2001.  The increase was due to a business  interruption  insurance  recovery for
lost  revenue at the Salton Sea II Project  from an  uncontrollable  force event
partially offset by lower interest income due to fewer months of interest earned
on the past due balances from Edison compared to 2001.

The Salton Sea Guarantors' operating expenses decreased to $59.2 million for the
year ended  December  31, 2002,  from $61.6  million for the same period in 2001
primarily due to lower royalty costs due to lower revenue.

The Salton Sea  Guarantors'  depreciation  and  amortization  increased to $21.2
million for the year ended  December  31,  2002 from $17.3  million for the year
ended December 31, 2001. The increase was due to additional  equipment

                                      -18-
<PAGE>

bought in 2002 partially offset by the decrease in goodwill amortization of $1.3
million due the discontinuation of goodwill amortization in 2002.

The Salton Sea Guarantors'  interest expense  increased to $20.4 million for the
year ended  December 31, 2002 from $20.1 million for the year ended December 31,
2001.  The increase  was due  primarily to the  discontinuance  of  capitalizing
interest  on  the  minerals  extraction  process  partially  offset  by  reduced
indebtedness.

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

In accordance with SFAS 142, the Guarantors'  completed their  transitional  and
annual  goodwill  impairment test during the second and fourth quarters of 2002,
primarily  using a discounted  cash flow  methodology  as of January 1, 2002 and
October 31, 2002,  respectively.  The  transitional  impairment test indicated a
potential  goodwill  impairment at the Salton Sea Guarantors and the Partnership
Guarantors.  During  the fourth  quarter,  the  Salton  Sea  Guarantors  and the
Partnership  Guarantors  completed their assessment of the implied fair value of
goodwill.  As a result, an impairment of goodwill was recognized as a cumulative
effect of change in  accounting  principle  of $21.0  million  at the Salton Sea
Guarantors as of January 1, 2002. However, as a result of this test, no goodwill
impairment was recognized at the Partnership Guarantors as of January 1, 2002.

During 2001,  the Salton Sea  Guarantors  changed their policy of accounting for
overhaul  and well  rework  costs.  These  costs,  which had  historically  been
accounted  for using  deferral  methods,  are now expensed as incurred.  The new
policy  went into  effect  January  1, 2001 and  during  2001,  the  Salton  Sea
Guarantors  recorded a cumulative effect of this change of $8.7 million,  net of
tax.

The Partnership Guarantors' operating revenue decreased to $94.7 million for the
year ended  December  31, 2002 from $119.7  million for the same period in 2001.
The decrease was due to lower rates offset by higher  production in 2002. Due to
uncertainties associated with Edison's financial condition,  Edison's failure to
pay and  the  bankruptcy  of PX,  the  Partnership  Guarantors'  established  an
allowance for doubtful accounts of approximately $14.9 million in the year ended
December 31, 2001 as a reduction in operating revenue.  As of December 31, 2002,
the  balance of the  allowance  for  doubtful  accounts  was $2.7  million.  The
following  operating  data  represents  the aggregate  capacity and  electricity
production of the Partnership Projects:

                                                YEARS ENDED DECEMBER 31,
                                               -------------------------
                                                 2002             2001
                                               ---------       ---------

       Overall capacity factor .........           101.5%          100.0%
       Capacity NMW (weighted average) .           158.0           158.0
       MWh produced ....................       1,405,000       1,384,700

The  Partnership  Guarantors'  interest  and  other  income  for the year  ended
December  31, 2002  decreased  to $1.7  million  from $6.6  million for the same
period in 2001.  The  decrease  was due to lower  interest  income  due to fewer
months interest earned on the past due balances from Edison compared to 2001.

The Partnership  Guarantors'  operating  expenses increased to $88.0 million for
the year ended  December  31,  2002,  from $62.7  million for the same period in
2001.  The increase in expenses  from 2001 to 2002 was primarily due to expenses
at the Zinc Recovery Project.

The Partnership  Guarantors'  depreciation and  amortization  increased to $23.2
million for the year ended  December  31,  2002 from $22.8  million for the year
ended December 31, 2001. The increase was due primarily to additional

                                      -19-
<PAGE>

equipment   bought  in  2002  partially  offset  by  the  decrease  in  goodwill
amortization of $3.6 million due to the discontinuation of goodwill amortization
in 2002.

The  Partnership  Guarantors'  interest  expense,  net of  capitalized  amounts,
increased to $9.1 million for the year ended December 31, 2002 from $6.1 million
for the year ended December 31, 2001. The increase was due to the discontinuance
of capitalizing  interest on the minerals extraction process partially offset by
reduced indebtedness.

The  Partnership  Guarantors'  income tax  provision,  decreased to a benefit of
$13.1  million  for the year ended  December  31,  2002 from an expense of $11.7
million for the year ended  December  31,  2001.  The  decrease was due to lower
pre-tax  income.  The  effective  tax rate was 54.8% and 33.8% in 2002 and 2001,
respectively.  The  changes  from  year to year in the  effective  rate  are due
primarily  to  the  generation  and  utilization  of  energy  tax  credits,  the
resolution  of certain tax issues,  primarily  related to depletion  deductions.
Income  taxes  will be paid by the  parent of the  Partnership  Guarantors  from
distributions to the parent company by the Partnership  Guarantors,  which occur
after  payment  of  operating  expenses  and  debt  service.  During  2002,  the
Partnership  Guarantors made considerable progress on several significant income
tax examination matters for prior tax years,  including percentage of depletion,
which resulted in a decrease in income tax expense of $3.1 million in 2002.

During 2001, the Partnership  Guarantors  changed their policy of accounting for
overhaul  and well  rework  costs.  These  costs,  which had  historically  been
accounted  for using  deferral  methods,  are now expensed as incurred.  The new
policy  went into  effect  January  1, 2001 and  during  2001,  the  Partnership
Guarantors  recorded a cumulative effect of this change of $6.9 million,  net of
tax.

The Royalty  Guarantors'  revenue  decreased to $12.6 million for the year ended
December 31, 2002 from $16.9  million for the same period in 2001.  The decrease
was the result of lower energy revenue at the Partnership  Projects resulting in
lower royalty income.

The Royalty  Guarantors'  operating  expenses  decreased to $3.3 million for the
year ended  December 31, 2002 from $4.4 million for the year ended  December 31,
2001.  The  decrease in expenses  from 2001 to 2002 was  primarily  due to lower
royalty revenue from the Partnership Projects.

The Royalty  Guarantors'  amortization  decreased  to $0.9  million for the year
ended  December 31, 2002 from $1.8 million for the year ended December 31, 2001.
The decrease was due to discontinuation of goodwill amortization in 2002.

The Royalty Guarantors'  interest expense decreased to $0.3 million for the year
ended  December 31, 2002 from $0.6 million for the year ended December 31, 2001.
The decrease was due to lower indebtedness.

The Funding  Corporation's net loss was $0.1 million for the year ended December
31, 2002 compared to a net loss of $0.1 million for the year ended  December 31,
2001, which represented  interest income and expense, net of applicable tax, and
the Funding Corporation's 1% equity in earnings of the Guarantors.

RELATED PARTY TRANSACTIONS

On September  29, 2000,  Salton Sea Power and CE Turbo entered into an agreement
to sell all  available  power from the Salton Sea V Project and CE Turbo Project
to El  Paso.  Under  the  terms of the  agreement,  El Paso  purchased  and sold
available power on behalf of Salton Sea Power and CE Turbo,  into the California
Independent System Operator markets.  The purchase price for the available power
was  equivalent to the value  actually  received by El Paso 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 CE Turbo
Project to El Paso.  Under the terms of the  agreement,  at the option of Salton
Sea Power and CE Turbo,  El Paso  purchased all available  power from the Salton
Sea V Project and CE Turbo Project based on day ahead price quotes received from
El Paso.

                                      -20-
<PAGE>

On March 27, 2001 and May 1, 2001,  the owners of the  Guarantors  entered  into
Transaction  Agreements to sell available  power to El Paso based on percentages
of the Dow Jones SP-15  Index.  On June 22, 2001,  the owners of the  Guarantors
(excluding  Salton Sea Power and CE Turbo) ceased selling  available power to El
Paso and  resumed  power  sales  to  Edison  under  the SO4  Agreements  and the
negotiated power purchase  agreements.  Effective  September 16, 2002 Salton Sea
Power and CE Turbo entered into  Transaction  Agreements to sell available power
to El Paso at increased  percentages  of the Dow Jones SP-15 Index.  Pursuant to
these  agreements,  sales to El Paso from the  Guarantors  totaled $1.2 million,
$8.9  million  and  $102.8  million  in 2003,  2002 and 2001,  respectively.  At
December 31, 2003 and 2002, accounts receivable from El Paso were $- million and
$1.4 million, respectively.

Pursuant to a Transaction Agreement dated January 29, 2003, Salton Sea Power and
CE Turbo began selling  available  power to TransAlta on February 12, 2003 based
on percentages of the Dow Jones SP-15 Index.  The  Transaction  Agreement  shall
continue  until the  earlier  of:  (a) 30 days  following  a  written  notice of
termination;  or (b)  any  other  termination  date  mutually  agreed  to by the
parties.  No such  termination has been given by either party.  Pursuant to this
agreement,  sales to TransAlta  totaled $9.9 million in 2003. As of December 31,
2003, accounts receivable from TransAlta were $1.6 million.

On January 21, 2004,  Salton Sea Power and CE Turbo  entered into a Green Energy
Tag Purchase and Sale Agreement to sell the non-power  attributes (the non-power
attributes made available by 1 MWh of generation, a "Green Tag") associated with
up to 931,800  MWh of  available  generation  at the Salton Sea V Project and CE
Turbo  Project  through  December 31, 2008 to TransAlta  Marketing at a price of
$10.00 per Green Tag.  Salton Sea Power and CE Turbo  expect to  commence  sales
under the agreement in July 2004.

Pursuant to the November 1, 1998 Amended and  Restated  Power Sales  Agreements,
Salton Sea Power and CE Turbo are to provide  Minerals with its full  electrical
energy  requirements at the market rates available to them, less wheeling costs.
Pursuant to these  agreements,  sales to Minerals  from Salton Sea Power totaled
$0.9  million,  $0.4 million and $0.9  million for the years ended  December 31,
2003, 2002 and 2001,  respectively,  and there were no sales to Minerals from CE
Turbo for the years  ended  December  31,  2003,  2002 and 2001.  There  were no
material accounts receivable balances at December 31, 2003 and 2002.

On October 13,  1998,  Funding  Corporation  completed  a sale to  institutional
investors of $285.0 million  aggregate  amount of 7.475% Senior Secured Series F
bonds due November  30,  2018.  A portion of the proceeds  were used to fund the
cost of construction of, and was advanced to Minerals,  which is indirectly 100%
owned by Salton Sea Minerals  Corp., a MEHC  affiliate.  The direct and indirect
owners of the Zinc Facility  (the "Zinc  Guarantors",  which include  Salton Sea
Minerals Corp. and Minerals) are among the guarantors of the Funding Corporation
debt.  In  connection  with the  divestiture  of CE  Generation  in  1999,  MEHC
guaranteed  the payment by the Zinc  Guarantors  of a  specified  portion of the
scheduled debt service and certain payments on the Imperial Valley Project Loans
up to the current principal amount of approximately $136.4 million.

On January 30, 2004, the Funding Corporation announced its election to redeem an
aggregate principal amount of approximately  $136.4 million of its 7.475% Senior
Secured Series F Bonds due November 30, 2018, pro rata, at a redemption price of
100% of such aggregate  outstanding  principal amount,  plus accrued interest to
the date of redemption. The trustee delivered a redemption notice to the holders
of the bonds on January 29, 2004. The record date for the redemption is February
15, 2004 and the  redemption  is expected to be completed on March 1, 2004.  The
Corporation  has made a demand on MEHC for the full amount  remaining  on MEHC's
guarantee  of the  Series F Bonds in  order  to fund  the  redemption.  Upon the
expected payment under MEHC's guarantee,  MEHC will no longer have any liability
with respect to its guarantee.

                                      -21-
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Salton Sea Guarantors  generated cash flows from operations of $11.4 million
for the year ended  December 31, 2003  compared  with $24.6 million for the same
period in 2002.  The  decrease was  primarily  due to the timing and receipts of
past due balances from Edison in 2002.

The Partnership Guarantors generated cash flows from operations of $24.7 million
for the year ended  December 31, 2003  compared  with $59.3 million for the same
period in 2002. The decrease was primarily due to the timing of receipts of past
due balances from Edison in 2002.

The Royalty Guarantors  generated cash flows from operations of $9.2 million for
the year ended  December 31, 2003 compared with $9.0 million for the same period
in 2002.

The Salton Sea Guarantors' only source of revenue is payments  received pursuant
to long-term power sales agreements with Edison, other than Salton Sea V Project
revenue and interest  earned on funds on deposit.  The  Partnership  Guarantors'
primary source of revenue is payments received pursuant to long term power sales
agreements  with Edison,  other than CE Turbo Project and Zinc Recovery  Project
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.  Because of the Guarantor's dependence on Edison,
if  Edison  fails  to  fulfill  its  obligations  to  the  projects,   it  could
significantly  impair the ability,  of the  Guarantors,  to fund  operating  and
maintenance  expenses,  payments of interest and  principal  on the  Securities,
projected capital expenditures and debt service reserve fund requirements.

The Salton Sea  Guarantors  cash flow used in investing was $3.8 million for the
year ended  December 31, 2003 compared with $12.7 million for the same period in
2002.  Capital  expenditures  for 2004 are  expected to be  approximately  $10.7
million. Capital expenditures are the primary component of investing activities.

The  Partnership  Guarantors  cash flows used in investing was $24.7 million for
the year ended December 31, 2003 compared with $29.2 million for the same period
in 2002.  Capital  expenditures for 2004 are expected to be approximately  $10.7
million. Capital expenditures are the primary component of investing activities.

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

The CE Turbo  Project  was  constructed  by Stone & Webster,  pursuant to the CE
Turbo Project EPC Contract.  On March 7, 2002,  Vulcan, Del Ranch, and CE Turbo,
the owners of the CE Turbo Project, filed a Demand for Arbitration against Stone
&  Webster  for  breach  of  contract  and  breach  of  warranty   arising  from
deficiencies  in  Stone  &  Webster's  design,  engineering,   construction  and
procurement  of  equipment  for the CE Turbo  Project  pursuant  to the CE Turbo
Project's EPC Contract.  On November 25, 2002,  Vulcan,  Del Ranch, and CE Turbo
entered  into a  settlement  agreement  with  Stone &  Webster.  The  settlement
agreement  resulted in a $3.5  million  payment  from Stone & Webster  which was
recorded as a reduction of incremental capital expenditures.

The Salton Sea Guarantors  cash flows used in financing was $7.6 million for the
year ended  December 31, 2003 compared with $11.9 million for the same period in
2002.  Cash flows used in  financing  reflects  scheduled  debt  repayments  and
changes in amounts due to affiliates.


                                      -22-
<PAGE>

The Partnership Guarantors cash flow used in financing was $- for the year ended
December 31, 2003 compared with $30.0 million for the same period in 2002.  Cash
flows used in financing reflect scheduled debt repayments,  equity contributions
related to the Zinc Recovery Project and changes in amounts due from affiliates.

The Royalty  Guarantors  generated cash flows used in financing was $9.2 million
for the year ended  December  31, 2003  compared  with $9.0 million for the same
period in 2002. Cash flows used in financing  reflects scheduled debt repayments
and changes in amounts due from affiliates.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The Funding Corporation has contractual  obligations and commercial  commitments
that may affect its financial condition.  Contractual obligations to make future
payments arise primarily from long-term debt. Contractual obligations that could
make future payments arise primarily from lines of credit and standby letters of
credit. The following tables identify material obligations and commitments as of
December 31, 2003 (in thousands):
<TABLE>
<CAPTION>

                                                 PAYMENTS DUE BY PERIOD
                                 ------------------------------------------------------
                                             LESS THAN     2-3        4-5       AFTER 5
                                   TOTAL      1 YEAR      YEARS      YEARS       YEARS
                                 --------    ---------   -------    -------    --------
<S>                              <C>         <C>         <C>        <C>        <C>
Contractual cash obligations-
  Long-term debt (1)..........   $463,592    $165,215    $54,536    $53,157    $190,684
                                 ========    ========    =======    =======    ========
</TABLE>

     (1)  Total  less  than one year  includes  $136.4  million  expected  to be
          redeemed on March 1, 2004.

Zinc Recovery Project
---------------------

Minerals  developed  and  owns  the  rights  to  proprietary  processes  for the
extraction of zinc from elements in solution in the geothermal  brine and fluids
utilized at the Imperial Valley Projects.  The plant has  successfully  produced
commercial quality zinc from the Imperial Valley Project's brine. The affiliates
of Minerals may develop  facilities for the extraction of manganese,  silica and
other products as it further develops the extraction technology.

Minerals  constructed the Zinc Recovery  Project,  which is recovering zinc from
the  geothermal  brine  (the  "Zinc  Recovery  Project").  Facilities  have been
installed  near the Imperial  Valley  Projects  sites to extract a zinc chloride
solution  from the  geothermal  brine  through  an ion  exchange  process.  This
solution is being  transported to a central  processing  plant where zinc ingots
are being  produced  through  solvent  extraction,  electrowinning  and  casting
processes.  The Zinc Recovery Project began limited  production in December 2002
and  continued  limited  production  of  non-high  grade zinc  during  2003.  In
September 1999,  Minerals entered into a sales agreement  whereby all high-grade
zinc  produced by the Zinc  Recovery  Project  will be sold to Cominco,  Ltd. at
prevailing market prices. The agreement expires in December 2005.

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 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  failure  to  pay  monetary  obligations  under  the  contract,   the
Guarantors  drew $29.6 million  under the EPC contract  letter of credit on July
20, 2001. The  liquidated  damages have been accounted for as a reduction of the
capitalized  costs of the  project.  After the default  termination  of the Zinc
Recovery  Project  EPC  Contract,  Minerals  entered  into a time and  materials
reimbursable engineer, procure and construction management contract with AMEC to
complete the Zinc Recovery Project. The contract with AMEC has expired.

                                      -23-
<PAGE>

On July 11,  2001,  Kvaerner  filed an Amended  Demand for  Arbitration  against
Minerals  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 filed an Answering Statement and Counterclaim
against Kvaerner. Minerals 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 alleged that its total estimated
damage for  Kvaerner's  breach of contract were in excess of  approximately  $60
million;  however,  Minerals  had offset  approximately  $42.5  million of these
damages by  exercising  its rights under the EPC Contract to claim the retainage
and by drawing on a letter of credit.

On May 23,  2002,  Minerals and  Kvaerner  entered into a Settlement  Agreement.
Under the terms of the agreement,  Minerals retained the amounts drawn under the
letter of credit,  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.

On May 25, 2001,  Minerals  entered into a Services  Agreement for  engineering,
procurement and  construction  management  services (the "AMEC  Agreement") with
AMEC in connection  with the  resolution of numerous  problems that affected the
timely completion of Minerals' Zinc Recovery Project.  Under the AMEC Agreement,
AMEC represented  that it had certain  licenses  required for its services which
Minerals ultimately  determined to be false. AMEC submitted $2.8m of invoices to
Minerals that AMEC claims are due and payable under the AMEC Agreement. Minerals
filed a lawsuit  against  AMEC on June 13, 2003 for  declaratory  judgment  that
would (1) prevent  collection  by AMEC of the $2.8  million it claimed to be due
and payable and, (2) recover  payments  made by Minerals to AMEC based on AMEC's
lack of a contractor's  license in California.  The lawsuit also included claims
by Minerals  against AMEC for breach of contract and breach of duty of fiduciary
responsibility.  AMEC filed a motion to compel  arbitration of the dispute.  The
court ruled against the motion to compel  arbitration and AMEC has appealed this
decision.

OFF BALANCE SHEET ARRANGEMENTS

The  Guarantors  do not have any  obligations  which meet the  definition  of an
off-balance  sheet arrangement and which have or are reasonably likely to have a
material effect on the financial statements.

NEW ACCOUNTING PRONOUNCEMENTS

In December 2003, the FASB issued FASB Interpretation No. 46R, "Consolidation of
Variable Interest Entities" ("FIN 46R"), which served to clarify guidance in FIN
46,  "Consolidation  of  Variable  Interest  Entities"  ("FIN 46") and  provided
additional  guidance  surrounding the application of FIN 46. The adoption of FIN
46R as it relates to special purpose  entities did not have a material effect on
the Company's  financial  position,  results of  operations  or cash flows.  The
Company will evaluate the provisions of FIN 46R related to  non-special  purpose
entities in the first quarter of 2004.

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

                                      -24-
<PAGE>

the accompanying  balance sheets at their undiscounted  amounts.  As of December
31,  2003 and  December  31,  2002,  the  Guarantors  environmental  liabilities
recorded on the balance sheet were not material.

CRITICAL ACCOUNTING POLICIES

The  preparation of financial  statements and related  disclosures in conformity
with  generally  accepted  accounting  principles in the United States  requires
management to make judgments,  assumptions and estimates that affect the amounts
reported in the  financial  statements  and  accompanying  notes.  Note 2 to the
financial  statements  for the year ended  December  31,  2003  included in this
annual report describe the significant  accounting  policies and methods used in
the  preparation  of the financial  statements.  Estimates are used for, but not
limited to, the accounting for the allowance for doubtful  accounts,  impairment
of long-lived assets, income taxes and contingent  liabilities.  Actual results
could differ from these estimates.  The following critical  accounting  policies
are impacted  significantly  by judgments,  assumptions  and  estimates  used by
management in the preparation of the 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  properties,  plants,
contracts and equipment. Depreciation is computed using the straight-line method
based on economic lives. The Guarantors believe the useful lives assigned to the
depreciable assets, which generally range from 3 to 30 years, are reasonable.

The Guarantors  periodically  evaluate long-lived assets,  including properties,
plants,  contracts  and  equipment,  when  events or  changes  in  circumstances
indicate that the carrying  value of these assets may not be  recoverable.  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 that is based on discounted  estimated cash flows from the future use
of the asset.

On January 1, 2002, the  Guarantors  adopted  Statement of Financial  Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"),
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.

In accordance with SFAS 142, the Guarantors determined their reporting units and
completed  their  transitional  impairment  testing  of  goodwill  in the second
quarter  of 2002,  primarily  using a  discounted  cash flow  methodology  as of
January 1, 2002. The transitional impairment tests indicated goodwill impairment
at the Salton Sea and Partnership Guarantors. During the fourth quarter of 2002,
the  Salton  Sea  Guarantors  and the  Partnership  Guarantors  completed  their
assessment of the implied fair value of goodwill.  As a result, an impairment of
goodwill was recognized as a cumulative effect of change in accounting principle
of $21.0 million at the Salton Sea Guarantors as of January 1, 2002. However, as
a result of this test, no goodwill  impairment was recognized at the Partnership
Guarantors as of January 1, 2002. The Funding Corporation  recorded its share of
the Guarantors'  cumulative effect of this change of approximately  $0.2 million
as of January 1, 2002.  Additionally,  the Guarantors

                                      -25-
<PAGE>

completed the 2002 annual goodwill  impairment tests as of October 31, 2002. The
annual  impairment test indicated no goodwill  impairment  existed as of October
31, 2002.

The Guarantors  completed  their 2003 annual  goodwill  impairment  tests in the
fourth quarter of 2003, primarily using a discounted cash flow methodology as of
October 31, 2003. The tests indicated goodwill  impairment at the Salton Sea and
Partnership  Guarantors.  The Salton Sea and  Partnership  Guarantors  completed
their  assessment  of the  implied  fair  value  of  goodwill  and  as a  result
recognized goodwill impairment as of October 31, 2003 of $23.3 million and $21.2
million,  respectively.  The Funding  Corporation's  share of this impairment is
approximately $0.5 million.

Income Taxes
------------

The  Guarantors  are  included  in the  consolidated  income  tax  returns of CE
Generation.  CE  Generation  pays to each  subsidiary an amount equal to the tax
benefits realized in the consolidated income tax returns from the utilization of
the subsidiary's  net operating  losses or tax credits,  or each subsidiary will
pay to CE  Generation an amount equal to the income tax computed on its separate
company  taxable income less the tax benefits  associated with the net operating
losses or tax  credits  generated  by the  subsidiary  which are  utilized in CE
Generation's consolidated income tax return.

Contingent Liabilities
----------------------

The  Guarantors  establish  reserves for estimated loss  contingencies,  such as
environmental, legal and income taxes, when it is management's assessment that a
loss is  probable  and the  amount  of the  loss  can be  reasonably  estimated.
Revisions to contingent liabilities are reflected in operations in the period in
which different facts or information  become known or circumstances  change that
affect the  previous  assumptions  with respect to the  likelihood  or amount of
loss.   Reserves  for  contingent   liabilities  are  based  upon   management's
assumptions  and  estimates,  and advice of legal counsel or other third parties
regarding the probable outcomes of any matters.  Should the outcomes differ from
the  assumptions  and  estimates,   revisions  to  the  estimated  reserves  for
contingent liabilities would be required.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

INTEREST RATE RISK

At December 31, 2003 and 2002, the Funding Corporation had fixed-rate  long-term
debt of $463.6 million and $491.7 million, respectively, in principal amount and
having a fair value of $483.3 million and $464.6  million,  respectively.  These
instruments  are fixed-rate and therefore do not expose the Funding  Corporation
to the risk of earnings loss due to changes in market interest  rates.  However,
the fair  value of these  instruments  would  decrease  by  approximately  $23.3
million and $26.2  million if interest  rates were to increase by 10% from their
levels at December 31, 2003 and 2002, respectively.  In general, such a decrease
in fair  value  would  impact  earnings  and  cash  flows  only  if the  Funding
Corporation  were to reacquire  all or a portion of these  instruments  prior to
their maturity.

                                      -26-
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


                         SALTON SEA FUNDING CORPORATION

     Independent Auditors' Report............................................28
     Balance Sheets..........................................................29
     Statements of Operations................................................30
     Statements of Stockholder's Equity......................................31
     Statements of Cash Flows................................................32
     Notes to Financial Statements...........................................33

                              SALTON SEA GUARANTORS

     Independent Auditors' Report............................................38
     Combined Balance Sheets.................................................39
     Combined Statements of Operations.......................................40
     Combined Statements of Guarantors' Equity...............................41
     Combined Statements of Cash Flows.......................................42
     Notes to Combined Financial Statements..................................43

                             PARTNERSHIP GUARANTORS

     Independent Auditors' Report............................................50
     Combined Balance Sheets.................................................51
     Combined Statements of Operations ......................................52
     Combined Statements of Guarantors' Equity...............................53
     Combined Statements of Cash Flows.......................................54
     Notes to Combined Financial Statements..................................55

                              SALTON SEA ROYALTY LLC

     Independent Auditors' Report............................................68
     Balance Sheets..........................................................69
     Statements of Operations................................................70
     Statements of Members' Equity...........................................71
     Statements of Cash Flows................................................72
     Notes to Financial Statements...........................................73

                                      -27-
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


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

We  have  audited  the  accompanying   balance  sheets  of  Salton  Sea  Funding
Corporation  (the  "Company") as of December 31, 2003 and 2002,  and the related
statements of  operations,  stockholder's  equity and cash flows for each of the
three years in the period ended December 31, 2003.  These  financial  statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position  of Salton  Sea  Funding  Corporation  as of
December 31, 2003 and 2002, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2003, in conformity
with accounting principles generally accepted in the United States of America.

As discussed in Note 2 to the financial statements,  the equity method investees
of Salton Sea Funding  Corporation  changed their accounting policy for goodwill
and other  intangible  asset in 2002 and for  overhaul  and well rework costs in
2001.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 20, 2004

                                      -28-
<PAGE>


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

<TABLE>
<CAPTION>
                                                                       AS OF DECEMBER 31,
                                                                     --------------------
                                                                       2003        2002
                                                                     --------    --------
                                     ASSETS
<S>                                                                  <C>         <C>
Current assets:
  Cash ..........................................................    $ 14,341    $ 19,583
  Restricted cash ...............................................           -      46,293
  Accrued interest receivable and other current assets ..........       2,950       3,228
  Current portion secured project notes from Guarantors .........     165,215      28,086
                                                                     --------    --------
    Total current assets ........................................     182,506      97,190
                                                                     --------    --------
Secured project notes from Guarantors ...........................     298,377     463,592
Investment in 1% of net assets of Guarantors ....................       9,532       9,721
                                                                     --------    --------
TOTAL ASSETS ....................................................    $490,415    $570,503
                                                                     ========    ========

                      LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Accrued interest ..............................................    $  2,945    $  3,156
  Current portion of long-term debt .............................     165,215      28,086
                                                                     --------    --------
    Total current liabilities ...................................     168,160      31,242
                                                                     --------    --------
Due to affiliates ...............................................      10,225      62,251
Senior secured notes and bonds ..................................     298,377     463,592
                                                                     --------    --------
  Total liabilities .............................................     476,762     557,085
                                                                     --------    --------

Commitments and contingencies (Note 4)

Stockholder's equity:
  Common stock authorized - 1,000 shares,
    par value $.01 per share; issued and outstanding 100 shares..           -           -
  Additional paid-in capital ....................................       6,317       5,811
  Retained earnings .............................................       7,336       7,607
                                                                     --------    --------
    Total stockholder's equity ..................................      13,653      13,418
                                                                     --------    --------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY ......................    $490,415    $570,503
                                                                     ========    ========
</TABLE>


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

                                      -29-
<PAGE>

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

                                                   YEAR ENDED DECEMBER 31,
                                             -----------------------------------
                                               2003         2002         2001
                                             --------     --------     ---------

<S>                                             <C>           <C>           <C>
REVENUE:
  Interest income .........................     $ 37,281      $ 39,938      $ 41,389
  Equity in earnings (loss) of Guarantors .         (695)         (183)          402
                                                --------      --------      --------
    Total revenue .........................       36,586        39,755        41,791
COSTS AND EXPENSES:
  General and administrative expenses .....          283           720         1,089
  Interest expense ........................       36,763        38,891        40,765
                                                --------      --------      --------
    Total costs and expenses ..............       37,046        39,611        41,854
                                                --------      --------      --------
INCOME (LOSS) BEFORE INCOME TAXES .........         (460)          144           (63)
  Provision (benefit) for income taxes ....         (189)           59           (26)
                                                --------      --------      --------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
  OF CHANGE IN ACCOUNTING PRINCIPLE .......         (271)           85           (37)
Cumulative effect of change in accounting
  principle, net of tax (Note 2) ..........            -          (210)         (100)
                                                --------      --------      --------
NET LOSS ..................................     $   (271)     $   (125)     $   (137)
                                                ========      ========      ========
</TABLE>

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

                                      -30-

<PAGE>

                         SALTON SEA FUNDING CORPORATION
                       STATEMENTS OF STOCKHOLDER'S EQUITY
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2003
                  (Amounts in thousands, except share amounts)
<TABLE>
<CAPTION>

                                                               ADDITIONAL
                                            COMMON STOCK        PAID-IN    RETAINED       TOTAL
                                          SHARES     AMOUNT     CAPITAL    EARNINGS      EQUITY
                                          ------     ------     -------    --------      ------

<S>                                        <C>      <C>         <C>        <C>          <C>
BALANCE, JANUARY 1, 2001 .............     100      $     -     $5,366     $ 7,869      $ 13,235

  Net loss ...........................       -            -          -        (137)         (137)

-------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001 ...........     100      $     -     $5,366     $ 7,732      $ 13,098

  Net loss ...........................       -            -          -        (125)         (125)

  Adjustments resulting from capital
    transactions of Guarantors .......       -            -        445           -           445

------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002 ...........     100     $      -     $5,811     $ 7,607      $ 13,418

  Net loss ...........................       -            -          -        (271)         (271)

  Adjustments resulting from capital
    transactions of Guarantors .......       -            -        506           -           506

------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003 ...........     100     $      -     $6,317     $ 7,336      $ 13,653
================================================================================================
</TABLE>

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

<PAGE>



                         SALTON SEA FUNDING CORPORATION
                            STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)
<TABLE>
<CAPTION>

                                                           YEAR ENDED DECEMBER 31,
                                                     ------------------------------------
                                                       2003          2002          2001
                                                     --------      --------      --------
<S>                                                  <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................     $   (271)     $   (125)     $   (137)
  Adjustments to reconcile net loss to net
    cash flows from operating activities -
    Equity in loss (earnings) of Guarantors ....          695           393          (232)
  Changes in assets and liabilities:
    Prepaid expenses and other assets ..........          278           123           212
    Accrued liabilities ........................         (211)         (177)         (146)
                                                     --------      --------      --------
      Net cash flows from operating activities .          491           214          (303)
                                                     --------      --------      --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Principal repayments of secured project note
    from Guarantors ............................       28,086        28,572        23,658
                                                     --------      --------      --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of senior secured
    notes and bonds ............................      (28,086)      (28,572)      (23,658)
  Decrease (increase) in restricted cash .......       46,293       (43,344)       (2,949)
  Due to affiliates ............................      (52,026)       58,352          (854)
                                                     --------      --------      --------
    Net cash flows from financing activities ...      (33,819)      (13,564)      (27,461)
                                                     --------      --------      --------
NET CHANGE IN CASH .............................       (5,242)       15,222        (4,106)
Cash at the beginning of year ..................       19,583         4,361         8,467
                                                     --------      --------      --------
CASH AT THE END OF YEAR ........................     $ 14,341      $ 19,583      $  4,361
                                                     ========      ========      ========
SUPPLEMENTAL DISCLOSURE:
  Interest paid ................................     $ 36,941      $ 39,058      $ 40,911
                                                     ========      ========      ========
  Income taxes paid ............................     $      -      $     36      $      -
                                                     ========      ========      ========
</TABLE>

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

                                      -32-
<PAGE>

                         SALTON SEA FUNDING CORPORATION
                          NOTES TO FINANCIAL STATEMENTS


1.   ORGANIZATION AND OPERATIONS

Salton Sea Funding Corporation (the "Funding Corporation"),  which was formed on
June 20, 1995, is a special purpose  Delaware  corporation and was organized for
the sole purpose of acting as issuer of senior secured notes and bonds.  On July
21, 1995,  June 20, 1996 and October 31, 1998,  the Funding  Corporation  issued
$475 million,  $135 million and $285 million,  respectively,  of Senior  Secured
Notes and Bonds (collectively, the "Securities").

The Funding Corporation is a wholly-owned subsidiary of Magma Power Company (the
"Company"),  which in turn  was  wholly-owned  by  MidAmerican  Energy  Holdings
Company  ("MEHC").  On  February  8, 1999,  MEHC  created a new  subsidiary,  CE
Generation,  LLC ("CE Generation") and subsequently  transferred its interest in
the Company and its power  generation  assets located in the Imperial  Valley of
California to CE Generation with certain assets being retained by MEHC. On March
3, 1999, MEHC closed the sale of 50% of its ownership interests in CE Generation
to El Paso CE Generation  Holding  Company ("El Paso").  On January 29, 2003, El
Paso sold all its interest in CE Generation to TransAlta USA Inc. ("TransAlta"),
an affiliate of TransAlta Corporation.

The  Securities  are payable from the proceeds of payments made of principal and
interest  on the  Secured  Project  Notes  from the  Guarantors  to the  Funding
Corporation.  The Securities are also guaranteed on a joint and several basis by
the Salton Sea Guarantors,  the  Partnership  Guarantors and Salton Sea Royalty,
LLC  (collectively  the  "Guarantors").  The  Guarantors are affiliates of Magma
Power Company and the Funding  Corporation  who  collectively  own ten operating
geothermal  power plants and a related zinc  recovery  plant located in Imperial
Valley, California. The guarantees of the Partnership Guarantors and the Royalty
Guarantor are limited to available cash flow. The Funding  Corporation  does not
conduct any operations apart from issuing the Securities.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

Restricted Cash
---------------

The  restricted  cash balance is composed of a debt service fund that is legally
restricted  as to its use and requires  the  maintenance  of a specific  minimum
balance.

Overhaul and Well Rework Costs
------------------------------

During 2001 the Guarantors changed their accounting policy for overhaul and well
rework costs.  These costs,  which had historically been accounted for using the
deferral method,  are now expensed as incurred.  The new policy went into effect
January 1, 2001, and during 2001, the Funding Corporation  recorded its share of
the Guarantors'  cumulative effect of this change of approximately $0.1 million,
net of tax.

                                      -33-

<PAGE>

Investment in Guarantors
------------------------

Since the Funding  Corporation has the ability to assert  significant  influence
over  the  operations  of the  Guarantors,  it  accounts  for  its  one  percent
investment in the Guarantors using the equity method of accounting.

Goodwill
--------

On January 1, 2002,  the Funding  Corporation  adopted  Statement  of  Financial
Accounting  Standards  ("SFAS") No. 142,  "Goodwill and Other Intangible Assets"
("SFAS 142"),  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  consisted solely of its share of the
goodwill amortization at the Guarantors, which has no income tax effect.

In accordance with SFAS 142, the Guarantors determined their reporting units and
completed  their  transitional  impairment  testing  of  goodwill  in the second
quarter  of 2002,  primarily  using a  discounted  cash flow  methodology  as of
January 1, 2002. The transitional impairment tests indicated goodwill impairment
at the Salton Sea and Partnership Guarantors. During the fourth quarter of 2002,
the Salton Sea Guarantors and the Partnership  Guarantors completed their annual
assessment of the implied fair value of goodwill.  As a result, an impairment of
goodwill was recognized as a cumulative effect of change in accounting principle
of $21.0 million at the Salton Sea Guarantors as of January 1, 2002. However, as
a result of this test, no goodwill  impairment was recognized at the Partnership
Guarantors as of January 1, 2002. The Funding Corporation  recorded its share of
the Guarantors'  cumulative effect of this change of approximately  $0.2 million
as of January 1, 2002.  Additionally,  the Guarantors  completed the 2002 annual
goodwill  impairment  tests as of October 31, 2002. The annual  impairment  test
indicated no goodwill impairment existed as of October 31, 2002.

In accordance with SFAS 142, the Guarantors completed their 2003 annual goodwill
impairment  tests in the fourth  quarter of 2003,  primarily  using a discounted
cash flow  methodology  as of October 31,  2003.  The tests  indicated  goodwill
impairment at the Salton Sea and Partnership  Guarantors.  Due to changes in our
zinc  price and  capital  expenditure  forecasts  the cash flow  forecasts  were
revised.  As a result of these  revisions  and the  changes in the fair value of
debt, the tests indicated goodwill  impairment at the Salton Sea and Partnership
Guarantors. The Salton Sea and Partnership Guarantors completed their assessment
of the  implied  fair  value of  goodwill  and as a result  recognized  goodwill
impairment  as  of  October  31,  2003  of  $23.3  million  and  $21.2  million,
respectively.   The  Funding   Corporation's   share  of  this   impairment   is
approximately $0.5 million.

Following is a reconciliation  of net loss as originally  reported for the years
ended  December 31, 2003,  2002 and 2001 to adjusted net income (loss)  assuming
SFAS 142 was in effect for all periods (in thousands):

                                                         2003     2002     2001
                                                        -----    -----    -----

Reported net loss ...................................   $(271)   $(125)   $(137)
Goodwill amortization ...............................       -        -       57
Cumulative effect of change in accounting principle..       -      210        -
                                                        -----    -----    -----
Adjusted net income (loss) ..........................   $(271)   $  85    $ (80)
                                                        =====    =====    =====
                                      -34-

<PAGE>
Fair Values of Financial Instruments
------------------------------------

The fair value of a financial  instrument is the amount in which the  instrument
could be exchanged in a current transaction between willing parties,  other than
in a forced sale or liquidation.  Although  management uses its best judgment in
estimating  the fair value of these  financial  instruments,  there are inherent
limitations in any estimation  technique.  Therefore,  the fair value  estimates
presented herein are not necessarily  indicative of the amounts that the Funding
Corporation could realize in a current transaction.

The methods and assumptions used to estimate fair value are as follows:

Short-term debt - Due to the short-term  nature of the short-term debt, the fair
value approximates the carrying value.

Debt-instruments  - The fair value of all debt  instruments  has been  estimated
based upon quoted market prices as supplied by third-party broker dealers, where
available,  or at the  present  value of future cash flows  discounted  at rates
consistent with comparable maturities with similar credit risks.

Income Taxes
------------

The Funding  Corporation is included in the consolidated income tax returns with
its parent and affiliates. Income taxes are provided on a separate return basis;
however,  tax  obligations  of the Funding  Corporation  will be remitted to the
parent only to the extent of cash flows available  after operating  expenses and
debt service.

3.   SENIOR SECURED NOTES AND BONDS

The Funding Corporation's debt securities (the "Notes and Bonds") are as follows
(in thousands):
<TABLE>
<CAPTION>

                     SENIOR
                     SECURED                                       DECEMBER 31,
  DATE ISSUED       SECURITIES    FINAL MATURITY DATE     RATE        2003         2002
----------------    ----------    -------------------    ------    -----------   --------

<S>                   <C>          <C>                   <C>       <C>           <C>
July 21, 1995         B Bonds      May 30, 2005          7.370%    $ 41,662      $ 56,662
July 21, 1995         C Bonds      May 30, 2010          7.840%     102,014       109,250
June 20, 1996         E Bonds      May 30, 2011          8.300%      43,322        46,322
October 13, 1998      F Bonds      November 30, 2018     7.475%     276,594       279,444
                                                                   --------      --------
                                                                   $463,592      $491,678
                                                                   ========      ========
</TABLE>

Principal and interest payments are made in semi-annual installments.  Principal
maturities  of the Senior  Secured Notes and Bonds are expected to be as follows
(in thousands):

                                              AMOUNT
                                             --------
                          2004 ..........    $165,215
                          2005 ..........      28,620
                          2006 ..........      25,917
                          2007 ..........      25,091
                          2008 ..........      28,065
                          Thereafter ....     190,684
                                             --------
                          Total .........    $463,592
                                             ========

On October 13,  1998,  Funding  Corporation  completed  a sale to  institutional
investors of $285.0 million  aggregate  amount of 7.475% Senior Secured Series F
bonds due November  30,  2018.  A portion of the proceeds  were used to fund the
cost of construction of, and was advanced to, the Zinc Recovery  Project,  which
is indirectly  100% owned

                                      -35-
<PAGE>

by Salton Sea Minerals Corp., a MEHC  affiliate.  The direct and indirect owners
of the Zinc Facility (the "Zinc  Guarantors",  which include Salton Sea Minerals
Corp. and CalEnergy  Minerals,  LLC ("Minerals") are among the guarantors of the
Funding Corporation debt. In connection with the divestiture of CE Generation in
1999 MEHC guaranteed the payment by the Zinc  Guarantors of a specified  portion
of the scheduled debt service and certain  payments on the Secured Project Notes
including the current principal amount of approximately $136.4 million.

On January 30, 2004, the Funding Corporation announced its election to redeem an
aggregate principal amount of approximately  $136.4 million of its 7.475% Senior
Secured Series F Bonds due November 30, 2018, pro rata, at a redemption price of
100% of such aggregate  outstanding  principal amount,  plus accrued interest to
the date of redemption. The trustee delivered a redemption notice to the holders
of the bonds on January 29, 2004. The record date for the redemption is February
15, 2004 and the  redemption  is expected to be completed on March 1, 2004.  The
Corporation  has made a demand on MEHC for the full amount  remaining  on MEHC's
guarantee  of the  Series F Bonds in  order  to fund  the  redemption.  Upon the
expected payment under MEHC's guarantee,  MEHC will no longer have any liability
with respect to its guarantee.

Pursuant to a  depository  agreement,  Funding  Corporation  established  a debt
service  reserve  fund in the form of a letter of credit in the  amount of $67.6
million from which  scheduled  interest and principal  payments  could have been
made. As a result of uncertainties related to Southern California Edison Company
("Edison"),  the letter of credit was not extended beyond its then existing July
2004 expiration  date, and as such cash  distributions  were not available to CE
Generation   until  the  Funding   Corporation  debt  service  reserve  fund  of
approximately  $65.4  million  had been  funded or the letter of credit had been
extended beyond its July 2004 expiration date or replaced. At December 31, 2002,
the fund had a cash balance of $46.3 million.

In May 2003,  the previous  $65.4 million the Funding  Corporation  debt service
reserve  letter of credit was replaced by a $32.7  million  TransAlta  letter of
credit which expires on May 30, 2004,  and a $32.7 million MEHC letter of credit
which expires on June 6, 2006.

These new Funding  Corporation  debt service reserve letters of credit permitted
the cash, which was previously  restricted,  to be included in funds distributed
to CE  Generation  on  May  29,  2003.  During  2003,  the  Funding  Corporation
distributed $69.8 million to CE Generation.

The estimated  fair values of the Senior Secured Notes and Bonds at December 31,
2003 and 2002 were $483.3 million and $464.6 million, respectively.

4.   COMMITMENTS AND CONTINGENCIES

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

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

Edison has disputed a portion of the settlement  agreement and has failed to pay
approximately  $3.9  million of  capacity  bonus  payments  for the months  from
October  2001  through  May 2002.  On  December  10,  2001,  certain  Guarantors
(excluding the Salton Sea I, Salton Sea V and CE Turbo Projects) filed a lawsuit
against Edison in  California's  Imperial  County Superior Court seeking a court
order  requiring  Edison to make the required  capacity bonus payments under the
Power  Purchase  Agreements.  Due to Edison's  failure to pay these  contractual
obligations,  the certain  Guarantors  established  an  allowance  for  doubtful
accounts of  approximately  $2.7 million as

                                      -36-
<PAGE>

of December 31, 2002. In connection with the June 11, 2003 settlement  discussed
below,  the  receivables  associated with this allowance were written off during
2003.

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

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

On July 10, 2003,  the Salton Sea IV Project's 40 MW turbine went out of service
due to an uncontrollable force event. Such uncontrollable force event ended, and
the Salton Sea IV Project  returned to service on  September  17,  2003.  Edison
failed to  recognize  the  uncontrollable  force  event and as such has not paid
amounts otherwise due and owing under the Salton Sea IV Power Purchase Agreement
totaling  approximately  $2.3 million.  Salton Sea Power Generation,  L.P., with
Fish Lake Power  Company,  owner of Salton Sea IV has served notices of error to
Edison  for  such  unpaid  amounts.  As a  result,  the  Guarantors  established
allowance  for doubtful  accounts of $1.7  million for  capacity  payments as of
December 31, 2003.

On October 9, 2003, Salton Sea III's 50 MW turbine went out of service due to an
uncontrollable force event. Such uncontrollable force event ended and Salton Sea
III  returned to service on December 12, 2003.  Edison  failed to recognize  the
uncontrollable  force event and as such has not paid amounts  otherwise  due and
owing under the Salton Sea III Power Purchase Agreement  totaling  approximately
$0.7 million.  Salton Sea Power  Generation  L.P.,  owner of Salton Sea III, has
served  notices  of error to Edison  for such  unpaid  amounts.  As a result the
Guarantors  have  established  an allowance  for doubtful  accounts for the full
amount of this receivable.

In January 2001, the California Power Exchange declared bankruptcy. As a result,
the Salton Sea V and CE 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

                                      -37-

<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska

We have  audited  the  accompanying  combined  balance  sheets of the Salton Sea
Guarantors as of December 31, 2003 and 2002, and the related combined statements
of operations,  Guarantors' equity and cash flows for each of the three years in
the period ended December 31, 2003. The combined  financial  statements  include
the  accounts  of the  companies  discussed  in Note 1,  which are under  common
ownership  and  management.  Our audits also  included  the  combined  financial
statement  schedule listed in Item 15. These financial  statements and financial
statement  schedule  are  the  responsibility  of  the  Salton  Sea  Guarantors'
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such  combined  financial  statements  present  fairly,  in all
material respects,  the combined financial position of the Salton Sea Guarantors
as of December  31, 2003 and 2002 and the combined  results of their  operations
and their  combined  cash flows for each of the three years in the period  ended
December 31, 2003 in conformity with accounting principles generally accepted in
the United  States of America.  Also in our  opinion,  such  combined  financial
statement schedule,  when considered in relation to the basic combined financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.

As  discussed  in Note 2 to the combined  financial  statements,  the Salton Sea
Guarantors  changed their  accounting  policy for goodwill and other  intangible
assets in 2002 and their accounting policy for overhaul and well rework costs in
2001.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 20, 2004

                                      -38-
<PAGE>

                              SALTON SEA GUARANTORS
                             COMBINED BALANCE SHEETS
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                                                                        AS OF DECEMBER 31,
                                                                                      --------------------
                                                                                        2003        2002
                                                                                      --------    --------
                                     ASSETS
<S>                                                                                   <C>         <C>
Current assets:
  Trade accounts receivable, net of allowance of $5,477 and $3,800 respectively...    $ 14,070    $ 19,420
  Trade accounts receivable from affiliates ......................................       1,131       1,104
  Prepaid expenses and other current assets ......................................       4,255       5,283
                                                                                      --------    --------
    Total current assets .........................................................      19,456      25,807
                                                                                      --------    --------
Properties, plants, contracts and equipment, net .................................     507,983     535,220
Goodwill .........................................................................           -      23,252
                                                                                      --------    --------
TOTAL ASSETS .....................................................................    $527,439    $584,279
                                                                                      ========    ========

                       LIABILITIES AND GUARANTORS' EQUITY
Current liabilities:
  Accounts payable ...............................................................    $    146    $    328
  Accrued interest ...............................................................       1,421       1,593
  Other accrued liabilities ......................................................       6,566      12,304
  Current portion of long-term debt ..............................................      24,409      22,765
                                                                                      --------    --------
    Total current liabilities ....................................................      32,542      36,990
                                                                                      --------    --------
Due to affiliates ................................................................      45,652      35,665
Senior secured project note ......................................................     199,238     223,654
                                                                                      --------    --------
  Total liabilities ..............................................................     277,432     296,309
                                                                                      --------    --------

Commitments and contingencies (Note 6)

Guarantors' equity ...............................................................     250,007     287,970
                                                                                      --------    --------
TOTAL LIABILITIES AND GUARANTORS' EQUITY .........................................    $527,439    $584,279
                                                                                      ========    ========
</TABLE>

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

                                      -39-

<PAGE>

                              SALTON SEA GUARANTORS
                        COMBINED STATEMENTS OF OPERATIONS
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31,
                                                                  -------------------------------------
                                                                    2003          2002          2001
                                                                  ---------     ---------     ---------
<S>                                                               <C>           <C>           <C>
REVENUE:
  Operating revenue ..........................................    $  83,786     $  84,176     $ 110,941
  Interest and other (loss) income ...........................         (358)        3,717         2,287
                                                                  ---------     ---------     ---------
    Total revenue ............................................       83,428        87,893       113,228
                                                                  ---------     ---------     ---------
COSTS AND EXPENSES:
  Royalty, operating, general and administrative expense .....       53,480        59,234        61,568
  Depreciation and amortization ..............................       25,520        21,195        17,332
  Interest expense ...........................................       18,810        20,421        21,827
  Less capitalized interest ..................................            -             -        (1,692)
  Goodwill impairment ........................................       23,252             -             -
  Asset impairment ...........................................          329             -        15,000
                                                                  ---------     ---------     ---------
    Total costs and expenses .................................      121,391       100,850       114,035
                                                                  ---------     ---------     ---------
LOSS BEFORE CUMULATIVE EFFECT
  OF CHANGE IN ACCOUNTING PRINCIPLE ..........................      (37,963)      (12,957)         (807)
Cumulative effect of change in accounting principle (Note 2) .            -       (21,018)       (8,743)
                                                                  ---------     ---------     ---------
NET LOSS .....................................................    $ (37,963)    $ (33,975)    $  (9,550)
                                                                  =========     =========     =========
</TABLE>

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

                                      -40-
<PAGE>

                              SALTON SEA GUARANTORS
                    COMBINED STATEMENTS OF GUARANTORS' EQUITY
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2003
                             (Amounts in thousands)

                                                                        AMOUNT
                                                                      ---------

BALANCE, JANUARY 1, 2001 ..........................................   $ 331,495

  Net loss ........................................................      (9,550)

--------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001 ........................................     321,945

  Net loss ........................................................     (33,975)

--------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002 ........................................   $ 287,970

  Net loss ........................................................     (37,963)

--------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003 ........................................   $ 250,007
================================================================================

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

                                      -41-
<PAGE>

                              SALTON SEA GUARANTORS
                        COMBINED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                                                                           YEAR ENDED DECEMBER 31,
                                                                                      --------------------------------
                                                                                        2003        2002        2001
                                                                                      --------    --------    --------
<S>                                                                                   <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss ........................................................................   $(37,963)   $(33,975)   $ (9,550)
  Adjustments to reconcile net loss to net cash provided by operating activities:
    Depreciation and amortization .................................................     25,520      21,195      17,332
    Goodwill impairment ...........................................................     23,252           -           -
    Asset impairment ..............................................................        329           -      15,000
    Cumulative effect of change in accounting principle ...........................          -      21,018       8,743
  Changes in assets and liabilities:
    Accounts receivable, net ......................................................      5,323      16,123     (12,251)
    Prepaid expenses and other assets .............................................      1,028          31      (5,358)
    Accounts payable and accrued liabilities ......................................     (6,092)        228          63
                                                                                      --------    --------    --------
Net cash flows from operating activities ..........................................     11,397      24,620      13,979
                                                                                      --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures, net of warranty settlement ................................     (3,816)    (12,696)    (10,468)
  Decrease in restricted cash .....................................................          -           -          17
                                                                                      --------    --------    --------
    Net cash flows from investing activities ......................................     (3,816)    (12,696)    (10,451)
                                                                                      --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayments of senior secured project note .......................................    (22,772)    (20,480)    (17,318)
  Due to affiliates ...............................................................     15,191       8,556      13,790
                                                                                      --------    --------    --------
    Net cash flows from financing activities ......................................     (7,581)    (11,924)     (3,528)
                                                                                      --------    --------    --------
NET CHANGE IN CASH ................................................................          -           -           -
Cash at beginning of year .........................................................          -           -           -
                                                                                      --------    --------    --------
CASH AT END OF YEAR ...............................................................   $      -    $      -    $      -
SUPPLEMENTAL DISCLOSURE -
                                                                                      ========    ========    ========
    Cash paid for interest, net of capitalized interest ...........................   $ 18,332    $ 19,893    $ 19,536
                                                                                      ========    ========    ========
</TABLE>

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

                                      -42-
<PAGE>

                              SALTON SEA GUARANTORS
                     NOTES TO COMBINED FINANCIAL STATEMENTS

1.   ORGANIZATION AND OPERATIONS

Salton Sea Guarantors (the "Guarantors") (not a legal entity) own 100% interests
in five operating geothermal electric power generating plants (the Salton Sea I,
II, III, IV and V Projects) (collectively,  the "Salton Sea Projects"). All five
plants  are  located  in the  Imperial  Valley of  California.  The  Salton  Sea
Guarantors  guarantee  loans  from  Salton  Sea  Funding  Corporation  ("Funding
Corporation"),  an  indirect  wholly-owned  subsidiary  of Magma  Power  Company
("Magma"), which in turn was wholly-owned by MidAmerican Energy Holdings Company
("MEHC").

On February 8, 1999,  MEHC created a new  subsidiary,  CE  Generation,  LLC ("CE
Generation")  and  subsequently  transferred its interest in Magma and its power
generation assets located in the Imperial Valley of California to CE Generation,
with certain  assets being  retained by MEHC. On March 3, 1999,  MEHC closed the
sale of 50% of its ownership interests in CE Generation to El Paso CE Generation
Holding Company ("El Paso").  On January 29, 2003, El Paso sold all its interest
in CE Generation to TransAlta USA Inc. ("TransAlta"),  an affiliate of TransAlta
Corporation.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------

The accompanying  financial statements of the Guarantors present the accounts of
(1) Salton Sea Brine Processing,  L.P., a California limited partnership between
Magma as a 99%  limited  partner  and  Salton  Sea  Power  Company  ("SSPC"),  a
wholly-owned  subsidiary of Magma, as a 1% general partner, (2) Salton Sea Power
Generation,  L.P., a California  limited  partnership  between  Salton Sea Brine
Processing,  L.P., as a 99% limited partner,  and Salton Sea Power Company, as a
1% general  partner,  (3) assets and  liabilities  attributable to Salton Sea IV
which are held 99% by  Salton  Sea Power  Generation,  L.P.  and 1% by Fish Lake
Power LLC and (4) Salton Sea Power L.L.C., a Delaware limited liability company.
Funding  Corporation owns 1% interests in Salton Sea Power Company and Fish Lake
Power LLC. All of the entities in the  combination  are  affiliates of Magma and
indirect   subsidiaries  of  CE  Generation.   All  intercompany   balances  and
transactions have been eliminated.

Reclassifications
-----------------

Certain amounts in the fiscal 2002 and 2001 financial  statements and supporting
note  disclosures  have  been   reclassified  to  conform  to  the  fiscal  2003
presentation.  Such reclassification did not impact previously reported net loss
or guarantors' equity.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

                                      -43-
<PAGE>

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.

Properties, Plants, Contracts and Equipment
-------------------------------------------

Properties,  plants and equipment are recorded at historical  cost.  The cost of
major   additions  and   betterments  are   capitalized,   while   replacements,
maintenance,  and  repairs  that do not  improve  or  extend  the  lives  of the
respective assets are expensed.

Impairment of Long-Lived Assets
-------------------------------

The  Guarantors'  long-lived  assets consist  primarily of  properties,  plants,
contracts and equipment. Depreciation of the operating power plant and equipment
costs, net of salvage value if applicable,  is computed using the  straight-line
method based on the estimated  economic lives. The Guarantors believe the useful
lives assigned to the operating power plant assets, which generally range from 3
to 30 years,  are  reasonable.  Power sale  agreements have been assigned values
separately  for each of (1) the remaining  portion of the fixed price periods of
the power sales agreements and (2) the 20-year avoided cost periods of the power
sales agreements and are being amortized  separately over such periods using the
straight-line method.

The Salton Sea reservoir contains commercial quantities of extractable minerals.
The carrying value of the mineral  reserves are being  amortized  based upon the
units of production method.

The Guarantors  periodically evaluates long-lived assets,  including properties,
plants and equipment,  when events or changes in circumstances indicate that the
carrying value of these assets may not be recoverable.  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
that is based on  discounted  estimated  cash  flows  from the future use of the
asset.

As a result of these impairment tests, the Guarantors wrote down $.03 million of
equipment in 2003 and $15.0 million, related to a steam turbine, in 2001.

Goodwill
--------

On January 1, 2002, the  Guarantors  adopted  Statement of Financial  Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"),
which  establishes  the  accounting for acquired  goodwill and other  intangible
assets, and provides that goodwill and  indefinite-lived  intangible assets will
not be amortized, but will be tested for impairment on an annual basis.

The Guarantors'  acquired  intangible assets consist of power purchase contracts
(the "contracts") with a cost of $33.4 million and $33.4 million and accumulated
amortization  of $9.9  million and $8.8  million at December  31, 2003 and 2002,
respectively.  Amortization  expense on the contracts was $1.2 million, for each
of the years ended  December 31, 2003,  2002 and 2001.  The  Guarantors'  expect
amortization  expense on the  contracts  to be $1.2 million for each of the five
succeeding fiscal years.

In accordance with SFAS 142, the Guarantors determined their reporting units and
completed  their  transitional  impairment  testing  of  goodwill  in the second
quarter  of 2002,  primarily  using a  discounted  cash flow  methodology  as of
January 1, 2002. The transitional impairment tests indicated goodwill impairment
at the Guarantors.  During the fourth quarter of 2002, the Guarantors  completed
their  assessment  of the  implied  fair  value of  goodwill.  As a

                                      -44-
<PAGE>

result,  an  impairment  of goodwill was  recognized  as a cumulative  effect of
change  in  accounting  principle  of  $21.0  million  as of  January  1,  2002.
Additionally,  the Guarantors completed the 2002 annual goodwill impairment test
as of October  31,  2002.  The annual  impairment  test  indicated  no  goodwill
impairment existed as of October 31, 2002.

The  Guarantors  completed  their 2003 annual  goodwill  impairment  test in the
fourth quarter of 2003, primarily using a discounted cash flow methodology.  Due
to changes in our zinc price and  capital  expenditure  forecasts  the cash flow
forecasts  were revised.  As a result of these  revisions and the changes in the
fair value of debt, the tests  indicated  goodwill  impairment at the Salton Sea
Guarantors.  The test indicated goodwill impairment,  therefore,  the Guarantors
completed their assessment of the implied fair value of goodwill and as a result
recognized  goodwill  impairment  of $23.3  million,  as of  October  31,  2003.
Following is a reconciliation  of net loss as originally  reported for the years
ended December 31, 2003, 2002 and 2001 to adjusted net loss (in thousands):

<TABLE>
<CAPTION>
                                                          2003        2002        2001
                                                        --------    --------    -------

<S>                                                     <C>         <C>         <C>
Reported net loss ...................................   $(37,963)   $(33,975)   $(9,550)
Goodwill amortization ...............................          -           -      1,304
Cumulative effect of change in accounting principle..          -      21,018          -
                                                        --------    --------    -------
Adjusted net loss ...................................   $(37,963)   $(12,957)   $(8,246)
                                                        ========    ========    =======
</TABLE>

The  changes  in the  carrying  amount of  goodwill  for the three  years  ended
December 31, 2003, are as follows (in thousands):

        Balance, January 1, 2001............................  $45,574
        Amortization expense................................   (1,304)
                                                              -------
        Balance, December 31, 2001..........................   44,270
        Cumulative effect of change in accounting principle.  (21,018)
                                                              -------
        Balance, December 31, 2002..........................  $23,252
        Impairment losses...................................  (23,252)
                                                              -------
        Balance, December 31, 2003..........................  $     -
                                                              =======

Capitalization of Interest and Deferred Financing Costs
-------------------------------------------------------

Prior to the commencement of operations, interest is capitalized on the costs of
the  plants  and  geothermal  resource   development  to  the  extent  incurred.
Capitalized  interest and other deferred charges are amortized over the lives of
the related assets.

Deferred  financing  costs are amortized over the term of the related  financing
using the effective interest method.

Overhaul and Well Rework Costs
------------------------------

During 2001, the Guarantors changed their accounting policy for the overhaul and
well rework costs.  These costs, which had historically been accounted for using
the deferral  method,  are now  expensed as  incurred.  The new policy went into
effect  January 1, 2001 and during 2001,  the  Guarantors  recorded a cumulative
effect of this change of approximately $8.7 million.

Fair Values of Financial Instruments
------------------------------------

The fair value of a financial  instrument is the amount in which the  instrument
could be exchanged in a current transaction between willing parties,  other than
in a forced sale or liquidation.  Although  management uses its best judgment in
estimating  the fair value of these  financial  instruments,  there are inherent
limitations in any estimation  technique.  Therefore,  the fair value  estimates
presented  herein  are  not  necessarily  indicative  of the  amounts  that  the
Guarantors could realize in a current transaction.

The methods and assumptions used to estimate fair value are as follows:

Short-term debt - Due to the short-term  nature of the short-term debt, the fair
value approximates the carrying value.

                                      -45-
<PAGE>

Debt-instruments  - The fair value of all debt  instruments  has been  estimated
based upon quoted market prices as supplied by third-party broker dealers, where
available,  or at the  present  value of future cash flows  discounted  at rates
consistent with comparable maturities with similar credit risks.

Contingent Liabilities
----------------------

The  Guarantors  are subject to the  possibility  of various loss  contingencies
arising  in the  ordinary  course  of  business.  The  Guarantors  consider  the
likelihood  of the  loss  or  impairment  of an  asset  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 or an asset has been impaired and
the  amount  of loss  can be  reasonably  estimated.  The  Guarantors  regularly
evaluate current information available to determine whether such accruals should
be adjusted.

Revenue Recognition
-------------------

The Guarantors  recognize revenue and related accounts  receivable from sales of
electricity on an accrual basis.  All of the  Guarantors'  sales of electricity,
except for the Salton Sea V Project,  are to Southern  California Edison Company
("Edison") under long-term power purchase contracts.

Income Taxes
------------

The Guarantors are comprised substantially of partnership interests.  The income
or loss of each  partnership for income tax purposes,  along with any associated
tax credits, is the responsibility of the individual partners.  Accordingly,  no
recognition has been given to federal or state income taxes in the  accompanying
combined financial statements.

Statements of Cash Flows
------------------------

For purposes of the  statements  of cash flows,  the  Guarantors  consider  only
demand deposits at banks to be cash.

3.   PROPERTIES, PLANTS, CONTRACTS AND EQUIPMENT

Properties, plants, contracts and equipment as of December 31 are as follows (in
thousands):

                                                        2003         2002
                                                      ---------    ---------

  Plant and equipment .............................   $ 452,763    $ 458,709
  Power sale agreements ...........................      33,446       33,446
  Mineral reserves ................................      91,811       91,811
  Wells and resource development ..................      66,824       63,975
                                                      ---------    ---------
                                                        644,844      647,941
  Accumulated depreciation and amortization .......    (136,861)    (112,721)
                                                      ---------    ---------
  Property, plants, contracts and equipment, net...   $ 507,983    $ 535,220
                                                      =========    =========

The Salton Sea V Project was  constructed  by Stone & Webster  Inc.  ("Stone and
Webster"),  pursuant to the Salton Sea V Project EPC Contract. On March 7, 2002,
Salton  Sea Power the owner of the  Salton  Sea V  Project,  filed a Demand  for
Arbitration  against  Stone & Webster  for  breach  of  contract  and  breach of
warranty  arising from  deficiencies in Stone & Webster's  design,  engineering,
construction  and procurement of equipment for the Salton Sea V Project pursuant
to the Salton Sea V Project EPC  Contract.  The demand for  arbitration  did not
include a stated claim amount.  On April 25, 2003, Salton Sea Power entered into
a settlement  agreement with Stone & Webster.  The Settlement Agreement resulted
in a total payment of $12.1  million from Stone & Webster in the second  quarter
of 2003 and the arbitration was dismissed. The settlement was recorded as a $4.5
million

                                      -46-
<PAGE>

reduction of incremental  capital  expenditures and a $7.6 million  reduction of
incremental  operating  expenses related to legal,  other expenses and equipment
write-offs.

4.   SENIOR SECURED PROJECT NOTE

The  Guarantors'  project note payable to Funding  Corporation as of December 31
are as follows (in thousands):
<TABLE>
<CAPTION>

                     Senior                                   December 31,
                    Secured                            ----------------------------
   Date issued     Securities    Final Maturity Date    Rate      2003       2002
-----------------  ----------    -------------------   ------   --------   --------
<S>                <C>           <C>                   <C>      <C>        <C>
July 21, 1995      B Bonds       May 30, 2005          7.370%   $ 40,817   $ 55,520
July 21, 1995      C Bonds       May 30, 2010          7.840%    102,014    109,250
October 13, 1998   F Bonds       November 30, 2018     7.475%     80,816     81,649
                                                                --------   --------
                                                                $223,647   $246,419
                                                                ========   ========
</TABLE>

The Guarantors have also guaranteed,  along with other  guarantors,  the debt of
Funding Corporation,  which amounted to $463.6 million at December 31, 2003. The
guarantee issued is  collateralized by a lien on substantially all the assets of
and a pledge of the equity  interests in the Guarantors.  The structure has been
designed to cross  collateralize  cash flows from each  guarantor  without cross
collateralizing all of the guarantors' assets.

Principal  maturities  of the senior  secured  project  note are as follows  (in
thousands):

                                                AMOUNT
                                               --------
                        2004 ...............   $ 24,409
                        2005 ...............     23,917
                        2006 ...............     22,621
                        2007 ...............     22,131
                        2008 ...............     23,494
                        Thereafter .........    107,075
                                               --------
                        Total ..............   $223,647
                                               ========

The estimated fair values of the senior  secured  projects notes at December 31,
2003 and 2002 were $230.4 million and $236.1 million, respectively.

5.   RELATED PARTY TRANSACTIONS

The Guarantors have entered into the following agreements:

o    Amended and Restated Easement Grant Deed and Agreement Regarding Rights for
     Geothermal  Development  dated  February 23, 1994, as amended,  whereby the
     Guarantors acquired from Magma Land I, a wholly-owned  subsidiary of Magma,
     rights  to  extract  geothermal  brine  from the  geothermal  lease  rights
     property  which is  necessary  to operate the Salton Sea Power  Generation,
     L.P. facilities in return for 5% of all electricity revenue received by the
     Guarantors. The amount expensed for the years ended December 31, 2003, 2002
     and 2001 was $3.4 million, $3.6 million and $4.4 million, respectively.

o    Administrative  Services Agreement dated April 1, 1993 with Magma,  whereby
     Magma  will  provide   administrative   and  management   services  to  the
     Guarantors,  excluding Salton Sea IV and V. Fees payable to Magma amount to
     3% of total  electricity  revenue.  The amount expensed for the years ended
     December 31, 2003,  2002 and 2001 was $1.2  million,  $1.2 million and $1.6
     million, respectively.

                                      -47-
<PAGE>

o    Operating  and  Maintenance  Agreement  dated April 1, 1993 with  CalEnergy
     Operating  Corporation  ("CEOC"),  whereby  the  Guarantors  retain CEOC to
     operate the Salton Sea facilities for a period of 32 years. Payment is made
     to CEOC in the form of  reimbursements of expenses  incurred.  During 2003,
     2002  and  2001,  the  Guarantors  reimbursed  CEOC for  expenses  of $14.7
     million, $13.8 million and $16.2 million, respectively.

o    Commencing  January 17,  2001,  Salton Sea Power  entered  into a series of
     transaction  agreements  to sell  available  power  from the  Salton  Sea V
     Project to El Paso,  under which the purchase price was originally based on
     day ahead price quotes  received from El Paso,  and  subsequently  based on
     percentages  of the Dow Jones SP-15  Index.  Pursuant to these  agreements,
     sales to El Paso from the Guarantors totaled $0.8 million, $7.3 million and
     $53.4 million in 2003, 2002 and 2001, respectively.

o    Pursuant to a  Transaction  Agreement  dated  January 29, 2003,  Salton Sea
     Power began selling available power to TransAlta on February 12, 2003 based
     on  percentages  of the Dow Jones SP-15 Index.  The  Transaction  Agreement
     shall continue until the earlier of: (a) 30 days following a written notice
     of termination; or (b) any other termination date mutually agreed to by the
     parties.  No such  termination  has been  given by either  party.  Sales to
     TransAlta from the Guarantors  totaled $7.7 million in 2003. As of December
     31, 2003, accounts receivable from TransAlta were $1.1 million.

o    On January  21,  2004,  Salton Sea Power  entered  into a Green  Energy Tag
     Purchase and Sale Agreement to sell the non-power attributes (the non-power
     attributes made available by 1 MWh of generation, a "Green Tag") associated
     with up to 931,800 MWh of available  generation at the Salton Sea V Project
     through  December 31, 2008 to  TransAlta  Energy  Marketing  (US) Inc. at a
     price of $10.00 per Green Tag.  Salton Sea Power expects to commence  sales
     under their agreement in July 2004.

6.   COMMITMENTS AND CONTINGENCIES

Edison 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.

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

Edison has disputed a portion of the settlement  agreement and has failed to pay
approximately  $1.1  million of  capacity  bonus  payments  for the months  from
October 2001 through May 2002. On December 10, 2001 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. Due to
Edison's  failure to pay the contractual  obligations,  certain  Guarantors have
established an allowance for doubtful accounts of approximately  $0.8 million as
of December 31, 2002. In connection with the June 11, 2003 settlement  discussed
below, the receivables  associated with this allowance were  written-off  during
2003.

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

                                      -48-
<PAGE>

On June 11, 2003, certain Guarantors  (excluding the Salton Sea I and Salton Sea
V projects)  entered into a settlement  agreement with Edison.  The  settlement,
which  relates to the capacity  bonus  payment and Salton Sea II  uncontrollable
force event  disputes,  provides  for a $0.8  million  settlement  payment  from
Edison,  payment of amounts previously withheld for the Unit II deration and the
rescission of such  deration.  The amounts  previously  withheld for the Unit II
deration  were  received  in the  second  quarter  of  2003.  The  $0.8  million
settlement  payment  is  contingent  upon  approval  by  the  California  Public
Utilities Commission.

On July 10,  2003,  Salton Sea IV's 40 MW turbine  went out of service due to an
uncontrollable  force event. Such  uncontrollable  force event ended, and Salton
Sea IV returned to service on September 17, 2003. Edison failed to recognize the
uncontrollable  force event and as such has not paid amounts  otherwise  due and
owing under the Salton Sea IV Power Purchase  Agreement  totaling  approximately
$2.3 million.  Salton Sea Power Generation,  L.P., with Fish Lake Power Company,
owner of Salton Sea IV, has  served  notices of error on Edison for such  unpaid
amounts.  As a result,  the  Guarantors  established  an allowance  for doubtful
accounts of $1.7 million for capacity payments as of December 31, 2003.

On October 9, 2003, Salton Sea III's 50 MW turbine went out of service due to an
uncontrollable force event. Such uncontrollable force event ended and Salton Sea
III  returned to service on December 12, 2003.  Edison  failed to recognize  the
uncontrollable  force event and as such has not paid amounts  otherwise  due and
owing under the Salton Sea III Power Purchase Agreement  totaling  approximately
$0.7 million.  Salton Sea Power  Generation,  L.P., owner of Salton Sea III, has
served  notices of error on Edison for such  unpaid  amounts.  As a result,  the
Guarantors  have  established  an allowance  for doubtful  accounts for the full
amount of this receivable.

In January 2001, the California Power Exchange 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.

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 December 31, 2003 and December 31, 2002,
the environmental liabilities recorded on the balance sheet were not material.

                                      -49-
<PAGE>

                          INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska

We have audited the  accompanying  combined  balance  sheets of the  Partnership
Guarantors as of December 31, 2003 and 2002, and the related combined statements
of operations,  Guarantors' equity and cash flows for each of the three years in
the period ended December 31, 2003. The combined  financial  statements  include
the  accounts  of the  companies  discussed  in Note 1,  which are under  common
ownership  and  management.  Our audits also  included  the  combined  financial
statement  schedule listed in Item 15. These financial  statements and financial
statement  schedule  are  the  responsibility  of  the  Partnership  Guarantors'
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  such  combined  financial  statements  present  fairly,  in all
material respects, the combined financial position of the Partnership Guarantors
as of December  31, 2003 and 2002 and the combined  results of their  operations
and their  combined  cash flows for each of the three years in the period  ended
December 31, 2003, in conformity with accounting  principles  generally accepted
in the United States of America.  Also in our opinion,  such combined  financial
statement schedule,  when considered in relation to the basic combined financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.

As discussed in Note 2 to the combined  financial  statements,  the  Partnership
Guarantors  changed their  accounting  policy for goodwill and other  intangible
assets in 2002 and their accounting policy for overhaul and well rework costs in
2001.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 20, 2004

                                      -50-
<PAGE>

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

                                                                                        AS OF DECEMBER 31,
                                                                                      --------------------
                                                                                        2003        2002
                                                                                      --------    --------
                                     ASSETS
<S>                                                                                   <C>         <C>
Current assets:
  Trade accounts receivable, net of allowance of $791 and $2,696, respectively....    $ 13,500    $ 14,018
  Trade accounts receivable from affiliate .......................................         433         312
  Prepaid expenses and other current assets ......................................      23,257      19,516
                                                                                      --------    --------
    Total current assets .........................................................      37,190      33,846
                                                                                      --------    --------
Restricted cash ..................................................................         441           1
Properties, plants, contracts and equipment, net .................................     636,710     644,951
Management fee ...................................................................      66,603      68,679
Due from affiliates ..............................................................     147,476     101,854
Goodwill .........................................................................      99,653     120,866
                                                                                      --------    --------
TOTAL ASSETS .....................................................................    $988,073    $970,197
                                                                                      ========    ========

                       LIABILITIES AND GUARANTORS' EQUITY
Current liabilities:
  Accounts payable ...............................................................    $  1,883    $  2,903
  Accrued interest ...............................................................       1,519       1,576
  Other accrued liabilities ......................................................      12,812      15,464
  Current portion of long-term debt ..............................................     140,398       5,017
                                                                                      --------    --------
    Total current liabilities ....................................................     156,612      24,960
                                                                                      --------    --------
Senior secured project note ......................................................      98,702     239,099
Deferred income taxes ............................................................     120,555     104,850
                                                                                      --------    --------
  Total liabilities ..............................................................     375,869     368,909
                                                                                      --------    --------

Commitments and contingencies (Note 8)

Guarantors' equity:
  Common stock ...................................................................           3           3
  Additional paid-in capital .....................................................     482,814     432,200
  Retained earnings ..............................................................     129,387     169,085
                                                                                      --------    --------
    Total guarantors' equity .....................................................     612,204     601,288
                                                                                      --------    --------
TOTAL LIABILITIES AND GUARANTORS' EQUITY .........................................    $988,073    $970,197
                                                                                      ========    ========
</TABLE>

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

                                      -51-
<PAGE>

                             PARTNERSHIP GUARANTORS
                        COMBINED STATEMENTS OF OPERATIONS
                             (Amounts in thousands)
<TABLE>
<CAPTION>

                                                                     YEAR ENDED DECEMBER 31,
                                                               -----------------------------------
                                                                 2003         2002         2001
                                                               ---------    ---------    ---------

<S>                                                            <C>          <C>          <C>
REVENUE:
  Operating revenue ........................................   $  95,254    $  94,697    $ 119,738
  Interest and other income ................................       1,571        1,743        6,580
                                                               ---------    ---------    ---------
  Total revenue ............................................      96,825       96,440      126,318
COSTS AND EXPENSES:
  Royalty, operating, general and administrative costs .....      80,386       88,048       62,749
  Depreciation and amortization ............................      33,129       23,209       22,773
  Interest expense .........................................      18,774       19,975       19,330
  Less capitalized interest ................................           -      (10,831)     (13,237)
  Goodwill impairment ......................................      21,213            -            -
                                                               ---------    ---------    ---------
Total costs and expenses ...................................     153,502      120,401       91,615
                                                               ---------    ---------    ---------
INCOME (LOSS) BEFORE INCOME TAXES ..........................     (56,677)     (23,961)      34,703
Provision (benefit) for income taxes .......................     (16,979)     (13,133)      11,728
                                                               ---------    ---------    ---------
INCOME (LOSS) BEFORE CUMULATIVE EFFECT
  OF ACCOUNTING CHANGE .....................................     (39,698)     (10,828)      22,975
Cumulative effect of accounting change, net of tax (Note 2)            -            -       (6,890)
                                                               ---------    ---------    ---------
NET INCOME (LOSS) ..........................................   $ (39,698)   $ (10,828)   $  16,085
                                                               =========    =========    =========
</TABLE>

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

                                      -52-

<PAGE>

                             PARTNERSHIP GUARANTORS
                    COMBINED STATEMENTS OF GUARANTORS' EQUITY
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2003
                  (Amounts in thousands, except share amounts)
<TABLE>
<CAPTION>

                                     COMMON STOCK    ADDITIONAL
                                   ---------------     PAID-IN     RETAINED        TOTAL
                                   SHARES   AMOUNT     CAPITAL     EARNINGS        EQUITY
                                   ------   ------    ----------   --------       ---------

<S>                                   <C>   <C>       <C>          <C>            <C>
BALANCE, JANUARY 1, 2001 ....         3     $   3     $387,663     $ 163,828      $ 551,494

Net income ..................         -         -            -        16,085         16,085

-------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001 ..         3     $   3     $387,663     $ 179,913      $ 567,579

Net loss ....................         -         -            -       (10,828)       (10,828)

Equity contribution .........         -         -       44,537             -         44,537

-------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002 ..         3     $   3     $432,200     $ 169,085      $ 601,288

Net loss ....................         -         -            -       (39,698)       (39,698)

Equity contribution .........         -         -       50,614             -         50,614

-------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003 ..         3     $   3     $482,814     $ 129,387      $ 612,204
===========================================================================================
</TABLE>

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

                                      -53-

<PAGE>

                             PARTNERSHIP GUARANTORS
                        COMBINED STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)
<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                        -----------------------------------
                                                                          2003         2002         2001
                                                                        --------     --------     ---------
<S>                                                                     <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss) income ................................................    $(39,698)    $(10,828)    $ 16,085
  Adjustments to reconcile net (loss) income to net cash flows
  from operating activities:
   Depreciation and amortization ...................................      33,129       23,209       22,773
   Deferred income taxes ...........................................      15,705        2,767          725
   Cumulative effect of change in accounting principle, net of tax..           -            -        6,890
   Asset abandonment ...............................................       1,428            -            -
   Goodwill impairment .............................................      21,213            -            -
 Changes in assets and liabilities:
   Trade accounts receivable, net ..................................         397       45,054      (31,065)
   Prepaid expenses and other current assets .......................      (3,741)        (962)      (4,326)
     Accounts payable and accrued liabilities ......................      (3,729)           5        2,115
                                                                        --------     --------     --------
       Net cash flows from operating activities ....................      24,704       59,245       13,197
                                                                        --------     --------     --------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures related to operating projects ...............     (12,164)      (7,425)     (17,871)
  Construction and other development ...............................     (11,318)     (42,360)     (22,507)
  Liquidated damages ...............................................           -            -       29,648
  (Increase) decrease in restricted cash ...........................        (440)      21,281      (21,176)
  Management fee ...................................................        (758)        (706)      (1,800)
                                                                        --------     --------     --------
    Net cash flows from investing activities .......................     (24,680)     (29,210)     (33,706)
                                                                        --------     --------     --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  (Increase) decrease in due from affiliates .......................     (45,622)     (69,946)      22,417
  Repayment of senior secured project notes ........................      (5,016)      (4,626)      (1,908)
  Equity contribution ..............................................      50,614       44,537            -
                                                                        --------     --------     --------
Net cash flows from financing activities ...........................         (24)     (30,035)      20,509
                                                                        --------     --------     --------
NET CHANGE IN CASH .................................................           -            -            -
Cash at beginning of period ........................................           -            -            -
                                                                        --------     --------     --------
CASH AT THE END OF PERIOD ..........................................    $      -    $       -      $     -
                                                                        ========     ========     ========
SUPPLEMENTAL DISCLOSURE:
   Cash paid for interest, net capitalized interest ................    $ 18,831     $  8,066     $  5,863
                                                                        ========     ========     ========
   Income taxes paid ...............................................   $       -    $       -     $  9,460
                                                                        ========     ========     ========
</TABLE>

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

                                      -54-

<PAGE>

                             PARTNERSHIP GUARANTORS
                     NOTES TO COMBINED FINANCIAL STATEMENTS

1.   ORGANIZATION AND OPERATIONS

The Partnership  Guarantors (the  "Guarantors") (not a legal entity) include the
Vulcan/BN   Geothermal  Power  Company  ("Vulcan"),   Elmore,  L.P.  ("Elmore"),
Leathers, L.P. ("Leathers"), Del Ranch, L.P. ("Del Ranch") and CE Turbo LLC ("CE
Turbo"),  each of which owns an  operating  geothermal  power  plant  located in
Imperial Valley, California known as the Vulcan Project, the Elmore Project, the
Leathers Project, the Del Ranch Project and CE Turbo Project,  respectively (the
"Partnership  Projects").  The  Partnership  Guarantors  also include  CalEnergy
Minerals LLC  ("Minerals"),  which  constructed a zinc  recovery  project in the
Imperial  Valley,  California.   Finally,  the  Partnership  Guarantors  include
CalEnergy Operating Corporation ("CEOC"), Vulcan Power Company ("VPC"), both 99%
owned by Magma  Power  Company  ("Magma")  and 1% owned by  Salton  Sea  Funding
Corporation  (the  "Funding   Corporation")  San  Felipe  Energy  Company  ("San
Felipe"),  Conejo Energy Company  ("Conejo"),  Niguel Energy Company ("Niguel"),
VPC  Geothermal  LLC ("VPCG"),  Salton Sea Minerals Corp. and CE Salton Sea Inc.
VPC and VPCG, collectively own 100% of the partnership interests in Vulcan. CEOC
and Niguel, San Felipe and Conejo, collectively own 90% partnership interests in
each of Elmore, Leathers and Del Ranch, respectively.  Salton Sea Minerals Corp.
owns Minerals.  Salton Sea Minerals Corp. is an indirect wholly-owned subsidiary
of MidAmerican  Energy  Holdings  Company  ("MEHC").  CE Salton Sea Inc. owns CE
Turbo.

Magma owns all of the remaining  10%  interests in each of Elmore,  Leathers and
Del Ranch.  CEOC is entitled to receive from Magma,  as payment for certain data
and  services  provided  by CEOC,  all of the  partnership  distributions  Magma
receives  with  respect to its 10%  ownership  interests  in each of the Elmore,
Leathers and Del Ranch Projects and Magma's special  distributions equal to 4.5%
of total energy revenue from the Leathers Project.

On February 8, 1999,  MEHC created a new  subsidiary,  CE  Generation,  LLC ("CE
Generation")  and  subsequently  transferred its interest in Magma and its power
generation assets located in the Imperial Valley of California to CE Generation,
with certain  assets being  retained by MEHC. On March 3, 1999,  MEHC closed the
sale of 50% of its ownership interests in CE Generation to El Paso CE Generation
Holding Company ("El Paso").  On January 29, 2003, El Paso sold all its interest
in CE Generation to TransAlta USA Inc. ("TransAlta"),  an affiliate of TransAlta
Corporation.

Minerals  developed  and  owns  the  rights  to  proprietary  processes  for the
extraction of zinc from elements in solution in the geothermal  brine and fluids
utilized at the Imperial Valley Projects.  The plant has  successfully  produced
commercial  quality from the Imperial Valley  Project's brine. The affiliates of
Minerals may develop  facilities  for the  extraction of  manganese,  silica and
other products as it further develops the extraction technology.

Minerals  constructed the Zinc Recovery  Project,  which is recovering zinc from
the  geothermal  brine  (the  "Zinc  Recovery  Project").  Facilities  have been
installed  near the Imperial  Valley  Projects  sites to extract a zinc chloride
solution  from the  geothermal  brine  through  an ion  exchange  process.  This
solution is being  transported to a central  processing  plant where zinc ingots
are being  produced  through  solvent  extraction,  electrowinning  and  casting
processes.  The Zinc Recovery Project began limited  production in December 2002
and  continued  limited  production  of  non-high  grade zinc  during  2003.  In
September 1999,  Minerals entered into a sales agreement  whereby all high-grade
zinc  produced  by the Zinc  Recovery  Project  will be sold to Comico,  Ltd. at
prevailing market prices. The agreement expires in December 2005.

                                      -55-

<PAGE>


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------

The accompanying  financial statements of the Guarantors present the accounts of
CEOC,  VPC,  CE  Turbo  and  Minerals  and  their  proportionate  share  of  the
Partnerships  in which  they have an  undivided  interest  in the assets and are
proportionately  liable for their  share of the  liabilities.  All  intercompany
balances and transactions have been eliminated.

Reclassifications
-----------------

Certain amounts in the fiscal 2002 and 2001 financial  statements and supporting
note  disclosures  have  been   reclassified  to  conform  to  the  fiscal  2003
presentation.  Such  reclassification  did not impact  previously  reported  net
income (loss) or retained earnings.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

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.

Properties, Plants, Contracts and Equipment
-------------------------------------------

Properties,  plants and equipment are recorded at historical  cost.  The cost of
major   additions  and   betterments  are   capitalized,   while   replacements,
maintenance,  and  repairs  that do not  improve  or  extend  the  lives  of the
respective assets are expensed.

Impairment of Long-Lived Assets
-------------------------------

The  Guarantors'  long-lived  assets consist  primarily of  properties,  plants,
contracts and equipment. Depreciation of the operating power plant and equipment
costs, net of salvage value if applicable,  is computed using the  straight-line
method based on the estimated  economic lives. The Guarantors believe the useful
lives assigned to the operating power plant assets, which generally range from 3
to 30 years,  are  reasonable.  Power sale  agreements have been assigned values
separately  for each of (1) the remaining  portion of the fixed price periods of
the power sales agreements and (2) the 20-year avoided cost periods of the power
sales agreements and are being amortized  separately over such periods using the
straight-line method.

The Salton Sea reservoir contains commercial quantities of extractable minerals.
The carrying value of the mineral  reserves are being  amortized  based upon the
units of production method.

The Guarantors  periodically evaluates long-lived assets,  including properties,
plants and equipment,  when events or changes in circumstances indicate that the
carrying value of these assets may not be recoverable.  Upon the occurrence of a
triggering  event,  the  carrying  amount of a  long-lived  asset is reviewed to
assess whether the

                                      -56-
<PAGE>

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 that is based on discounted
estimated cash flows from the future use of the asset.

Goodwill
--------

On January 1, 2002, the Guarantors adopted SFAS No. 142 ("SFAS 142"),  "Goodwill
and Other  Intangible  Assets",  which  establishes  the accounting for acquired
goodwill  and  other   intangible   assets,   and  provides  that  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 income (loss) as originally  reported for the years ended
December 31, 2003, 2002 and 2001, to adjusted net income (loss) (in thousands):

                                         2003         2002         2001
                                       --------     --------     -------

       Reported net income (loss) .    $(39,698)    $(10,828)    $16,085
       Goodwill amortization ......           -            -       3,564
                                       --------     --------     -------
       Adjusted net income (loss) .    $(39,698)    $(10,828)    $19,649
                                       ========     ========     =======

In  accordance  with  SFAS No.  142,  the  Guarantors  completed  their  initial
transitional  and annual  goodwill  impairment  tests  during the second and the
fourth  quarters of 2002,  respectively,  primarily using a discounted cash flow
methodology  as of January  1, 2002 and  October  31,  2002,  respectively.  The
transitional  impairment  test indicated  potential  goodwill  impairment at the
Guarantors. During the fourth quarter, the Guarantors completed their assessment
of the implied  fair value of  goodwill.  As a result of this test,  no goodwill
impairment was recognized at the Guarantors as of January 1, 2002. Additionally,
the Guarantors annual goodwill impairment tests indicated no goodwill impairment
existed at October 31, 2002.

The  Guarantors  completed  their 2003  annual  goodwill  impairment  test as of
October  31,  2003.  Due to changes in our zinc  price and  capital  expenditure
forecasts the cash flow forecasts were revised.  As a result of these  revisions
and the  changes  in the fair  value  of  debt,  the  tests  indicated  goodwill
impairment  at  the  Partnership   Guarantors.   The  test  indicated  potential
impairment,  therefore,  the  Guarantors  completed an assessment of the implied
fair  value  of  goodwill  and as a result  recognized  $21.2  million  goodwill
impairment.

The  changes  in the  carrying  amount of  goodwill  for the three  years  ended
December 31, 2003, are as follows (in thousands):

        Balance, January 1, 2001..........................   $124,430
        Amortization expense..............................     (3,564)
                                                             --------
        Balance, December 31, 2001........................    120,866
        Impairment losses.................................          -
                                                             --------
        Balance, December 31, 2002........................   $120,866
        Impairment losses.................................    (21,213)
                                                             --------
        Balance, December 31, 2003........................   $ 99,653
                                                             ========

Capitalization of Interest and Deferred Financing Costs
-------------------------------------------------------

Prior to the commencement of operations, interest is capitalized on the costs of
the  plants  and  geothermal  resource   development  to  the  extent  incurred.
Capitalized  interest and other deferred charges are amortized over the lives of
the related assets.

Deferred  financing  costs are amortized over the term of the related  financing
using the effective interest method.

Overhaul and Well Rework Costs
------------------------------

During 2001 the Guarantors changed their accounting policy for overhaul and well
rework costs.  These costs,  which had historically been accounted for using the
deferral method,  are now expensed as incurred.  The new policy went into effect
January 1, 2001 and during 2001, the Guarantors  recorded a cumulative effect of
this change of approximately $6.9 million, net of tax of $4.7 million.

                                      -57-
<PAGE>

Fair Values of Financial Instruments
------------------------------------

The fair value of a financial  instrument is the amount in which the  instrument
could be exchanged in a current transaction between willing parties,  other than
in a forced sale or liquidation.  Although  management uses its best judgment in
estimating  the fair value of these  financial  instruments,  there are inherent
limitations in any estimation  technique.  Therefore,  the fair value  estimates
presented  herein  are  not  necessarily  indicative  of the  amounts  that  the
Guarantors could realize in a current transaction.

The methods and assumptions used to estimate fair value are as follows:

Short-term debt - Due to the short-term  nature of the short-term debt, the fair
value approximates the carrying value.

Debt-instruments  - The fair value of all debt  instruments  has been  estimated
based upon quoted market prices as supplied by third-party broker dealers, where
available,  or at the  present  value of future cash flows  discounted  at rates
consistent with comparable maturities with similar credit risks.

Contingent Liabilities
----------------------

The  Guarantors  establish  reserves for estimated loss  contingencies,  such as
environmental  and  legal,  when it is  management's  assessment  that a loss is
probable and the amount of the loss can be reasonably estimated.

Revenue Recognition
-------------------

The Guarantors  recognize revenue and related accounts  receivable from sales of
electricity on an accrual basis.  All of the  Guarantors'  sales of electricity,
except for the CE Turbo  Project,  are to  Southern  California  Edison  Company
("Edison") under long-term power purchase contracts.

Management Fee
--------------

Pursuant  to the Magma  Services  Agreement,  Magma  has  agreed to pay CEOC all
equity cash flows and certain  royalties  payable by the  Guarantors in exchange
for providing  data and services to Magma.  As security for the  obligations  of
Magma under the Magma Services  Agreement,  Magma has  collaterally  assigned to
CEOC its rights to such equity cash flows and certain royalties.

Income Taxes
------------

The entities  comprising the Guarantors are included in consolidated  income tax
returns with their parent and affiliates;  however, income taxes are provided on
a separate  return basis.  Tax obligations of the Guarantors will be remitted to
the parent only to the extent of cash flows available  after operating  expenses
and debt service.

Statements of Cash Flows
------------------------

For purposes of the statement of cash flows, the Guarantors consider only demand
deposits at banks to be cash.

                                      -58-

<PAGE>

3.   PROPERTIES, PLANTS, CONTRACTS AND EQUIPMENT AND INTANGIBLE ASSETS

Properties, plants, contracts and equipment as of December 31 are as follows (in
thousands):

                                                        2003         2002
                                                     ---------    ----------
    Cost:
    Power plant and equipment ....................   $ 232,256    $ 222,751
    Zinc recovery project ........................     209,726      202,269
    Power sale agreements ........................     123,588      123,588
    Process license ..............................      46,290       46,290
    Mineral reserves .............................     162,487      162,487
    Wells and resource development ...............     105,210       98,894
                                                     ---------    ---------
                                                       879,557      856,279
    Accumulated depreciation and amortization ....    (242,847)    (191,328)
                                                     ---------    ---------
    Property, plant, contracts and equipment, net.   $ 636,710    $ 664,951
                                                     =========    =========

The CE  Turbo  Project  was  constructed  by Stone &  Webster,  Inc.  ("Stone  &
Webster"),  pursuant  to the CE Turbo  Project EPC  Contract.  On March 7, 2002,
Vulcan,  Del Ranch,  and CE Turbo,  the owners of the CE Turbo Project,  filed a
Demand for Arbitration against Stone & Webster for breach of contract and breach
of warranty arising from deficiencies in Stone & Webster's design,  engineering,
construction  and procurement of equipment for the CE Turbo Project  pursuant to
the CE Turbo Project's EPC Contract.  On November 25, 2002,  Vulcan,  Del Ranch,
and CE Turbo  entered  into a  settlement  agreement  with Stone & Webster.  The
settlement  agreement  resulted in a $3.5  million  payment from Stone & Webster
which was recorded as a reduction of incremental capital expenditures

Intangible Assets

The following table summarizes the acquired  intangible assets as of December 31
(in thousands):

                                                       2003
                                        ---------------------------------
                                        GROSS CARRYING       ACCUMULATED
                                            AMOUNT           AMORTIZATION
                                        --------------       ------------
        Amortized Intangible Assets:
        Power Purchase Contracts......     $123,002           $ 98,463
        Patented Technology...........       46,290             17,314
                                           --------           --------
          Total.......................     $169,292           $115,777
                                           ========           ========


                                                       2002
                                        --------------------------------
                                        GROSS CARRYING      ACCUMULATED
                                            AMOUNT          AMORTIZATION
                                        --------------      ------------
        Amortized Intangible Assets:
        Power Purchase Contracts......     $123,002           $ 96,894
        Patented Technology...........       46,290             15,385
                                           --------           --------
          Total.......................     $169,292           $112,279
                                           ========           ========

Amortization expense on acquired intangible assets was $3.8 million for the year
ended  December 31, 2003 and $3.6 million for the years ended  December 31, 2002
and 2001.  The Guarantors  expect  amortization  expense on acquired  intangible
assets to be $3.5 million for each of the five succeeding fiscal years.

                                      -59-
<PAGE>

4.   SENIOR SECURED PROJECT NOTE

The Guarantors'  project note payable to the Funding  Corporation as of December
31 is as follows (in thousands):
<TABLE>
<CAPTION>

                    SENIOR
                    SECURED                                             DECEMBER 31,
   DATE ISSUED     SECURITIES  FINAL MATURITY DATE   RATE       2003       2002
----------------   ----------  -------------------   ------   --------  ------------
<S>                  <C>        <C>                  <C>      <C>        <C>
June 20, 1996        E Bonds    May 30, 2011         8.300%   $ 43,322   $ 46,322
October 13, 1998     F Bonds    November 30, 2018    7.475%    195,778    197,794
                                                              --------   --------
                                                              $239,100   $244,116
                                                              ========   ========
</TABLE>

Principal  maturities  of the senior  secured  project  note are as follows (in
thousands):

                                              AMOUNT
                                             --------
                          2004 ..........    $140,398
                          2005 ..........       4,265
                          2006 ..........       3,296
                          2007 ..........       2,960
                          2008 ..........       4,572
                          Thereafter ....      83,609
                                             --------
                          Total .........    $239,100
                                             ========

On October 13,  1998,  Funding  Corporation  completed  a sale to  institutional
investors of $285.0 million  aggregate  amount of 7.475% Senior Secured Series F
bonds due November  30,  2018.  A portion of the proceeds  were used to fund the
cost of construction of, and was advanced to, the Zinc Recovery  Project,  which
is indirectly  100% owned by Salton Sea Minerals  Corp., a MEHC  affiliate.  The
direct and indirect  owners of the Zinc Facility (the "Zinc  Guarantors",  which
include  Salton Sea Minerals Corp. and Minerals) are among the guarantors of the
Funding Corporation debt. In connection with the divestiture of CE Generation in
1999, MEHC guaranteed the payment by the Zinc Guarantors of a specified  portion
of the scheduled debt service and certain payments on the Senior Secured Project
Notes up to the current principal amount of approximately $136.4 million.

The Guarantors have also guaranteed,  along with other  guarantors,  the debt of
the Funding Corporation,  which amounted to $463.6 million at December 31, 2003.
The guarantee is  collateralized  by a lien on the available  cash flow of and a
pledge of stock in the  Guarantors.  The  structure  has been  designed to cross
collateralize cash flows from each guarantor without cross  collateralizing  all
of the guarantors' assets.

On January 30, 2004, the Funding Corporation announced its election to redeem an
aggregate principal amount of approximately  $136.4 million of its 7.475% Senior
Secured Series F Bonds due November 30, 2018, pro rata, at a redemption price of
100% of such aggregate  outstanding  principal amount,  plus accrued interest to
the date of redemption. The trustee delivered a redemption notice to the holders
of the bonds on January 29, 2004. The record date for the redemption is February
15, 2004 and the  redemption  is expected to be completed on March 1, 2004.  The
Corporation  has made a demand on MEHC for the full amount  remaining  on MEHC's
guarantee  of the  Series F Bonds in  order  to fund  the  redemption.  Upon the
expected payment under MEHC's guarantee,  MEHC will no longer have any liability
with respect to its guarantee.

The  estimated  fair values of the senior  secured  project note at December 31,
2003 and 2002 were $249.7 million and $227.4 million, respectively.

5.   RELATED PARTY TRANSACTIONS

The Guarantors are party to a 30-year brine supply agreement  through the Vulcan
partnership  and a  technology  license  agreement  for  the  rights  to use the
technology  necessary  for the  construction  and operation of the Vulcan Plant.
Under the brine  supply  agreement,  the  Guarantors  will pay VPC 4.167% of the
contract  energy  component of the price of  electricity  provided by the Vulcan
Plant. In addition,  VPC has been designated as operator of the Vulcan Plant and
receives agreed-upon compensation for such services.

Charges to the Guarantors related to the brine supply agreement amounted to $0.6
million,  $0.7 million and $0.9  million for the years ended  December 31, 2003,
2002 and 2001, respectively. Charges to the Guarantors related to operating fees
on a pro rata basis amounted to $0.6 million,  $0.7 million and $0.8 million for
the years ended December 31, 2003, 2002 and 2001.

                                      -60-
<PAGE>
In addition, the Guarantors entered into the following agreements:

o    Easement  Grant  Deed  and  Agreement   Regarding   Rights  for  Geothermal
     Development,  whereby the Guarantors  acquired from Magma rights to extract
     geothermal  brine  from  the  geothermal  lease  rights  property  which is
     necessary to operate the  Leathers,  Del Ranch and Elmore  Plants in return
     for 17.333%,  on a pro rata basis,  of all energy revenue  received by each
     plant.  The Guarantors'  share of amounts expensed under this agreement for
     2003,  2002 and 2001 were $8.8  million,  $8.5  million and $11.5  million,
     respectively.

o    Ground  Leases  dated March 15 and August 15,  1988 with Magma  whereby the
     Guarantors  lease  from  Magma  for 32  years  the  surface  of the land as
     described in the  Imperial  County  Assessor's  official  records.  Amounts
     expensed  under the ground leases for 2003,  2002 and 2001 were $70,000 per
     year.

o    Administrative  Services  Agreements  whereby  CEOC  will  provide  to  the
     Partnerships  administrative  and  management  services  for a period of 32
     years  through  2020.  Fees  payable to CEOC amount to the greater of 3% of
     total  electricity  revenue  or  $60,000  per month.  The  minimum  monthly
     payments for years  subsequent to 1989 are increased  based on the consumer
     price index of the Bureau of Labor and Statistics. Amounts expensed related
     to these agreements for 2003, 2002 and 2001 amounted to $2.1 million,  $2.1
     million and $2.6 million, respectively.

o    Operating and Maintenance  Agreements whereby the Guarantors retain CEOC to
     operate the plants for a period of 32 years through  2020.  Payment is made
     to CEOC in the form of reimbursements of expenses incurred and a guaranteed
     capacity  payment  ranging  from 10% to 25% of energy  revenue  over stated
     amounts. The Guarantors in 2003, 2002 and 2001 reimbursed CEOC for expenses
     of $17.4  million,  $15.8  million  and $14.6  million,  respectively,  and
     accrued a guaranteed  capacity  payment of $1.6 million and $3.0 million at
     December 31, 2002 and 2001,  respectively.  The Operating  and  Maintenance
     Agreement  was  amended as of December  31,  2002 to remove the  guaranteed
     capacity payments.

o    From September 2000 through  September 2002, CE Turbo entered into a series
     of agreements  to sell all available  power from the CE Turbo Project to El
     Paso.  On March  27,  2001 and May 1,  2001,  the  Guarantor  entered  into
     transaction  agreements  to sell  available  power to El Paso.  On June 28,
     2001,  the  Guarantor  (excluding  the CE  Turbo  Project)  ceased  selling
     available power to El Paso and resumed sales to Edison.  The purchase price
     for the available power under the various agreements was the value actually
     received by El Paso for the sale of such power based upon  day-ahead  price
     quotes  received from El Paso and percentages of the Dow Jones SP-15 Index.
     Pursuant to these agreements,  sales to El Paso from the Guarantors totaled
     $0.4  million,  $1.6  million  and $49.4  million  in 2003,  2002 and 2001,
     respectively.

o    Pursuant to a Transaction  Agreement dated January 29, 2003, CE Turbo began
     selling  available  power  to  TransAlta  on  February  12,  2003  based on
     percentages of the Dow Jones SP-15 Index.  The Transaction  Agreement shall
     continue  until the earlier of (a) 30 days  following  a written  notice of
     termination  or (b) any other  termination  date mutually  agreed to by the
     parties.  No such  notice of  termination  has been given by either  party.
     Pursuant to this  agreement,  sales to TransAlta were $2.2 million in 2003.
     As of December 31,  2003,  accounts  receivable  from  TransAlta  were $0.4
     million.

o    On January 21, 2004 CE Turbo  entered  into a Green Energy Tag Purchase and
     Sale Agreement to sell the non-power  attributes (the non-power  attributes
     made available by 1 MWh of generation, a "Green Tag") associated with up to
     931,800  MWh  of  available  generation  at the CE  Turbo  Project  through
     December 31, 2008 to TransAlta  Energy  Marketing (U.S.) Inc. at a price of
     $10.00 per Green  Tag.  CE Turbo  expects to  commence  sales  under  their
     agreement in July 2004.

                                      -61-
<PAGE>
6.   CONDENSED FINANCIAL INFORMATION (IN THOUSANDS)
<TABLE>
<CAPTION>

                                           VULCAN
                                            POWER         CEOC       ELMORE     DEL RANCH    LEATHERS
                                         ----------   ----------   ----------   ----------   ----------
<S>                                      <C>          <C>          <C>          <C>          <C>
December 31, 2003:
Assets:
  Restricted cash ....................   $        -   $        -   $        -   $        -   $        -
  Accounts receivable and
    other assets .....................            -       17,716        3,628        3,471        3,385
  Due from affiliates ................       33,628       48,297       58,832       59,179       54,883
  Properties, plants, contracts
    and equipment, net ...............       11,202       13,333       51,215       51,037       58,464
  Management fee and Goodwill ........            -            -            -            -            -
   Investments in partnerships .......      121,136      341,755            -            -            -
                                         ----------   ----------   ----------   ----------   ----------
Total assets .........................   $  165,966   $  421,101   $  113,675   $  113,687   $  116,732
                                         ==========   ==========   ==========   ==========   ==========

Liabilities and Guarantors' Equity:
  Accounts payable, accrued
   liabilities and deferred taxes ....          130   $    3,802   $      364   $    1,304   $      671
  Senior secured project note ........            -            -            -            -            -
                                         ----------   ----------   ----------   ----------   ----------

    Total liabilities ................          130        3,802          364        1,304          671
                                         ----------   ----------   ----------   ----------   ----------
   Guarantors' equity ................      165,836      417,299      113,311      112,383      116,061
                                         ----------   ----------   ----------   ----------   ----------
Total liabilities and guarantors'
   equity ............................   $  165,966   $  421,101   $  113,675   $  113,687   $  116,732
                                         ==========   ==========   ==========   ==========   ==========
</TABLE>
<TABLE>
<CAPTION>

                                            VULCAN                             ADJUSTMENTS/   COMBINED
                                             BNG       MINERALS     TURBO      ELIMINATIONS     TOTAL
                                          ---------   ----------   -------      -----------  ----------
<S>                                      <C>          <C>          <C>          <C>          <C>
December 31, 2003:
Assets:
  Restricted cash ....................   $        -   $      441   $        -   $       -    $      441
  Accounts receivable and
    other assets .....................        3,452        4,749          681         108        37,190
  Due from affiliates ................       64,659       56,764       (2,684)   (226,082)      147,476
  Properties, plants, contracts
    and equipment, net ...............       54,141      167,074        9,043     221,201       636,710
  Management fee and Goodwill ........            -            -            -     166,256       166,256
  Investments in partnerships ........            -            -            -    (462,891)            -
                                         ----------   ----------   ----------   ---------    ----------
Total assets .........................   $  122,252   $  229,028   $    7,040   $ (301,408)  $  988,073
                                         ==========   ==========   ==========   ==========   ==========

Liabilities and Guarantors' Equity:
  Accounts payable, accrued
    liabilities and deferred taxes ...   $    1,116   $   22,833   $       80   $  106,469   $  136,769
  Senior secured project note ........            -      136,383            -      102,717      239,100
                                         ----------   ----------   ----------   ----------   ----------

    Total liabilities ................        1,116      159,216           80      209,186      375,869
                                         ----------   ----------   ----------   ----------   ----------
  Guarantors' equity .................      121,136       69,812        6,960     (510,594)     612,204
                                         ----------   ----------   ----------    ----------  ----------
Total liabilities and guarantors'
  equity .............................   $  122,252   $  229,028   $    7,040   $ (301,408)  $  988,073
                                         ==========   ==========   ==========   ==========   ==========
</TABLE>

                                      -62-
<PAGE>

<TABLE>
<CAPTION>

                                           VULCAN
                                           POWER        CEOC      ELMORE      DEL RANCH   LEATHERS
                                         ---------    ---------   ------      ---------   --------
<S>                                      <C>          <C>         <C>         <C>         <C>
December 31, 2002:
Assets:
  Restricted cash ....................   $       -    $       -   $       -   $       -   $       -
  Accounts receivable and
    other assets .....................           3       16,910       3,633       3,767       3,789
  Due from affiliates ................      (7,334)      40,232      54,076      49,828      47,652
  Properties, plants, contracts
    and equipment, net ...............      11,151       13,246      54,499      57,114      63,302
  Management fee and
  Goodwill ...........................           -            -           -           -           -
  Investments in partnerships ........     115,261      334,937           -           -           -
                                         ---------    ---------   ---------   ---------   ---------
Total assets .........................   $ 119,081    $ 405,325   $ 112,208   $ 110,709   $ 114,743
                                         =========    =========   =========   =========   =========

 Liabilities and Guarantors' Equity:
   Accounts payable, accrued
     liabilities and deferred taxes ..   $     223    $   2,512   $   1,062   $   1,129   $     533
   Senior secured project note .......           -            -           -           -           -
                                         ---------    ---------   ---------   ---------   ---------

     Total liabilities ...............         223        2,512       1,062       1,129         533
                                         ---------    ---------   ---------   ---------   ---------
   Guarantors' equity ................     118,858      402,813     111,146     109,580     114,210
                                         ---------    ---------   ---------   ---------   ---------
Total liabilities and guarantors'
   equity ............................   $ 119,081    $ 405,325   $ 112,208   $ 110,709   $ 114,743
                                         =========    =========   =========   =========   =========
</TABLE>
<TABLE>
<CAPTION>

                                           VULCAN                            ADJUSTMENTS/   COMBINED
                                             BNG     MINERALS      TURBO     ELIMINATIONS    TOTAL
                                         ---------   ---------    -------    ------------   --------
<S>                                      <C>         <C>          <C>          <C>          <C>
December 31, 2002:
Assets:
  Restricted cash ....................   $       -   $       1    $       -      $     -     $      1
  Accounts receivable and
    other assets .....................       3,715       1,150          621          258       33,846
  Due from affiliates ................      55,283     (17,026)      (3,805)    (117,052)     101,854
  Properties, plants, contracts
    and equipment, net ...............      57,554     166,771        9,314      212,000      644,951
  Management fee and
  Goodwill ...........................           -           -            -      189,545      189,545
  Investments in partnerships ........           -           -            -     (450,198)           -
                                         ---------   ---------    ---------    ---------    ---------
Total assets .........................   $ 116,552   $ 150,896    $   6,130    $(165,447)   $ 970,197
                                         =========   =========    =========    =========    =========

 Liabilities and Guarantors' Equity:
   Accounts payable, accrued
     liabilities and deferred taxes ..   $   1,291   $  (2,390)   $   1,670    $ 118,763    $ 124,793
   Senior secured project note .......           -     137,790            -      106,326      244,116
                                         ---------   ---------    ---------    ---------    ---------


     Total liabilities ...............       1,291     135,400        1,670      225,089      368,909
                                         ---------   ---------    ---------    ---------    ---------
   Guarantors' equity ................     115,261      15,496        4,460     (390,536)     601,288
                                         ---------   ---------    ---------    ---------    ---------
Total liabilities and guarantors'
   equity ............................   $ 116,552   $ 150,896    $   6,130    $(165,447)   $ 970,197
                                         =========   =========    =========    =========    =========
</TABLE>

                                      -63-
<PAGE>


Condensed  combining  statements  of  operations  including  information  of the
Guarantors'  pro rata  interest in the  respective  entities for the years ended
December 31, 2003, 2002 and 2001 are as follows (in thousands):

<TABLE>
<CAPTION>

                              VULCAN
                              POWER         CEOC      ELMORE     DEL RANCH    LEATHERS
                             --------     --------    -------    ---------    --------
<S>                          <C>          <C>         <C>         <C>         <C>
December 31, 2003:
Revenue .................    $    648     $  5,071    $ 23,821    $ 23,204    $ 23,347
Costs and expenses ......         908          470      21,656      20,402      21,496
                             --------     --------    --------    --------    --------
Net income (loss) .......    $   (260)    $  4,601    $  2,165    $  2,802    $  1,851
                             ========     ========    ========    ========    ========

December 31, 2002:
Revenue .................    $  1,352     $  4,214    $ 23,712    $ 23,702    $ 23,564
Costs and expenses ......         689            -      21,104      19,812      23,705
                             --------     --------    --------    --------    --------
Net income (loss) .......    $    663     $  4,214    $  2,608    $  3,890    $   (141)
                             ========     ========    ========    ========    ========

December 31, 2001:
Revenue .................    $  1,757     $  5,417    $ 31,165    $ 28,446    $ 30,591
Costs and expenses ......         884        1,302      23,787      24,918      25,299
                             --------     --------    --------    --------    --------
Net income (loss) .......    $    873     $  4,115    $  7,378    $  3,528    $  5,292
                             ========     ========    ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                              VULCAN                            ADJUSTMENTS/     COMBINED
                                BNG      MINERALS      TURBO    ELIMINATIONS (1)  TOTAL
                             --------    --------     --------  ---------------- --------
<S>                          <C>         <C>          <C>         <C>            <C>
December 31, 2003:
Revenue .................    $ 21,615    $    659     $  3,388    $ (4,928)      $ 96,825
Costs and expenses ......      15,737      47,001        2,918       5,935        136,523
                             --------    --------     --------    --------       --------
Net income (loss) .......    $  5,878    $(46,342)    $    470    $(10,863)      $(39,698)
                             ========    ========     ========    ========       ========

December 31, 2002:
Revenue .................    $ 22,222    $    288     $  2,246    $ (4,860)      $ 96,440
Costs and expenses ......      15,822      33,413        2,062      (9,339)       107,268
                             --------    --------     --------    --------       --------
Net income (loss) .......    $  6,400    $(33,125)    $    184    $  4,479       $(10,828)
                             ========    ========     ========    ========       ========

December 31, 2001:
Revenue .................    $ 28,375    $    847     $  5,082    $ (5,362)      $126,318
Costs and expenses ......      18,170       5,271        2,797       7,805        110,233
                             --------    --------     --------    --------       --------
Net income (loss) .......    $ 10,205    $ (4,424)    $  2,285    $(13,167)      $ 16,085
                             ========    ========     ========    ========       ========
</TABLE>

(1)  Adjustments and eliminations include,  among other items, the year's income
     tax benefit or provision,  interest expense on senior secured project notes
     (excluding the Minerals debt) and the elimination of  intercompany  royalty
     and administration  charges.  Additionally,  the Guarantors completed their
     2003  annual  goodwill  impairment  test as of October  31,  2003 and, as a
     result of the  assessment,  recognized an impairment of $21.2 million which
     is included as an adjustment to costs and expenses above in 2003.

                                      -64-
<PAGE>

7.   INCOME TAXES

The provision  (benefit)  for income tax for the years ended  December 31, 2003,
2002 and 2001 was as follows (in thousands):

                                          2003         2002         2001
                                        --------     --------     ---------

     Current:
     Federal .......................    $(25,593)    $(12,450)    $  8,190
     State .........................      (7,091)      (3,450)       2,813
                                        --------     --------     --------
                                         (32,684)     (15,900)      11,003
                                        --------     --------     --------

     Deferred:
     Federal .......................      12,172        2,074          880
     State .........................       3,533          693         (155)
                                        --------     --------     --------
                                          15,705        2,767          725
                                        --------     --------     --------
     Total provision ...............    $(16,979)    $(13,133)    $ 11,728
                                        ========     ========     ========

The net deferred tax  liability at December 31, 2003 and 2002 was as follows (in
thousands):

                                                        2003          2002
                                                     ---------     ----------

  Deferred tax liabilities-
     Properties, plant, contracts and equipment..    $ 133,041     $ 116,430
                                                     ---------     ---------
  Deferred tax assets:
     Accruals not currently deductible
       for tax purposes .........................       (4,287)       (3,966)
     Energy credits .............................       (6,142)       (5,557)
     AMT credit .................................       (2,057)       (2,057)
                                                     ---------     ---------
        Total deferred tax assets ...............      (12,486)      (11,580)
                                                     ---------     ---------
  Net deferred tax liabilities ..................    $ 120,555     $ 104,850
                                                     =========     =========

The  reconciliation  of the federal statutory tax rate to the effective tax rate
applicable to income before provision for income taxes is as follows:

                                                 2003      2002      2001
                                                 ----      ----      ----

    Federal statutory rate ..................    35.0%     35.0%     35.0%
    Adjustments to taxes resulting from:
       Percentage depletion .................     4.0      14.5      (8.6)
       Investment and energy tax credits ....     0.9       1.5      (1.2)
       Goodwill impairment/amortization .....    (13.1)       -       3.6
       State taxes, net of federal benefit ..     4.1       5.6       5.0
       Other ................................    (0.9)     (1.8)        -
                                                 ----      ----      ----
    Effective tax rate ......................    30.0%     54.8%     33.8%
                                                 ====      ====      ====

During 2002, the Partnership  Guarantors made  considerable  progress on several
significant  income  tax  examination  matters  for prior tax  years,  including
percentage of depletion,  which  resulted in a decrease in income tax expense of
$3.1 million in 2002.

                                      -65-

<PAGE>

8.   COMMITMENTS AND CONTINGENCIES

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  CE Turbo
Project) for power  delivered in the fourth  quarter 2000 and the first  quarter
2001. Due to Edison's failure to pay contractual obligations, the Guarantors had
established an allowance for doubtful accounts of approximately $14.1 million as
of December 31, 2001.

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

Edison  disputed  a  portion  of the  settlement  agreement  and  failed  to pay
approximately  $2.7  million of  capacity  bonus  payments  for the months  from
October 2001 through May 2002. On December 10, 2001 certain  Guarantors  filed a
lawsuit against Edison in California's  Imperial County Superior Court seeking a
court order requiring Edison to make the required  capacity bonus payments under
the Power Purchase  Agreements.  Due to Edison's  failure to pay the contractual
obligations,  certain  Guarantors  have  established  an allowance  for doubtful
accounts of  approximately  $1.9 million as of December 31, 2002.  In connection
with the June 11, 2003 settlement  discussed below,  the receivables  associated
with this allocation were written off during 2003.

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

In January 2001, the California Power Exchange declared bankruptcy. As a result,
the CE  Turbo  Project  has not  received  payment  for  power  sold  under  the
Transaction  Agreements  during December 2000 and January 2001 of  approximately
$0.8 million. The Guarantors have established an allowance for doubtful accounts
for the full amount of this receivable.

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 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  failure  to  pay  monetary  obligations  under  the  contract,   the
Guarantors  drew $29.6 million  under the EPC contract  letter of credit on July
20,  2001.  The  liquidated  damages  were  accounted  for as a reduction of the
capitalized  costs of the  project.  After the default  termination  of the Zinc
Recovery  Project  EPC  Contract,  Minerals  entered  into a time and  materials
reimbursable  engineer,  procure and construction  management contract with AMEC
E&C Services,  Inc. ("AMEC") to complete the Zinc Recovery Project. The contract
with AMEC has expired.

On July 11,  2001,  Kvaerner  filed an Amended  Demand for  Arbitration  against
Minerals  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 filed an Answering Statement and Counterclaim
against Kvaerner. Minerals 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 alleged that its total estimated
damage

                                      -66-
<PAGE>

for Kvaerner's  breach of contract are in excess of  approximately  $60 million;
however,  Minerals has offset  approximately  $42.5  million of these damages by
exercising  its rights  under the EPC  Contract  to claim the  retainage  and by
drawing on a letter of credit.

On May 23,  2002,  Minerals and  Kvaerner  entered into a Settlement  Agreement.
Under the terms of the agreement,  Minerals retained the amounts drawn under the
letter of credit,  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.

On May 25, 2001,  Minerals  entered into a Services  Agreement for  engineering,
procurement and  construction  management  services (the "AMEC  Agreement") with
AMEC in connection  with the  resolution of numerous  problems that affected the
timely completion of Minerals' Zinc Recovery Project.  Under the AMEC Agreement,
AMEC represented  that it had certain  licenses  required for its services which
Minerals  ultimately  determined  to be false.  AMEC  submitted  $2.8 million of
invoices  to  Minerals  that  AMEC  claims  are due and  payable  under the AMEC
Agreement.  Minerals  filed  a  lawsuit  against  AMEC  on  June  13,  2003  for
declaratory  judgment  that  would (1)  prevent  collection  by AMEC of the $2.8
million it claimed to be due and  payable  and,  (2)  recover  payments  made by
Minerals to AMEC based on AMEC's lack of a  contractor's  license in California.
The lawsuit also included claims by Minerals against AMEC for breach of contract
and breach of duty of  fiduciary  responsibility.  AMEC filed a motion to compel
arbitration  of the  dispute.  The  court  ruled  against  the  motion to compel
arbitration and AMEC has appealed this decision.

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  December  31,  2003  and  2002,  the
environmental liabilities recorded on the balance sheet were not material.

                                      -67-

<PAGE>

INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholder
Magma Power Company
Omaha, Nebraska

We have audited the  accompanying  balance  sheets of the Salton Sea Royalty LLC
(the  "Company")as of December 31, 2003 and 2002, and the related  statements of
operations,  members'  equity and cash flows for each of the three  years in the
period  ended   December  31,  2003.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our  opinion,  such  financial  statements  present  fairly,  in all material
respects,  the  financial  position of the Salton Sea Royalty LLC as of December
31, 2003 and 2002 and the results of its  operations and its cash flows for each
of the three years in the period ended  December 31, 2003,  in  conformity  with
accounting principles generally accepted in the United States of America.

As  discussed  in Note 2 to the  financial  statements,  in 2002 the  Salton Sea
Royalty LLC changed its accounting for goodwill and other intangible assets.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
Omaha, Nebraska
February 20, 2004

                                      -68-

<PAGE>

                             SALTON SEA ROYALTY LLC
                                 BALANCE SHEETS
                  (Amounts in thousands, except per share data)

                                                              AS OF DECEMBER 31,
                                                              ------------------
                                                                2003      2002
                                                              -------    -------
                                     ASSETS
Current assets-Prepaid expenses and other assets .........    $     5    $    13
Royalty stream, net ......................................     13,002     14,011
Goodwill .................................................     30,464     30,464
Due from affiliates ......................................     48,413     39,503
                                                              -------    -------
TOTAL ASSETS .............................................    $91,884    $83,991
                                                              =======    =======

                         LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
  Accrued liabilities ....................................    $     5    $     7
  Current portion of long-term debt ......................        408        304
                                                              -------    -------
    Total current liabilities ............................        413        311
Senior secured project note ..............................        437        845
                                                              -------    -------
  Total liabilities ......................................        850      1,156
                                                              -------    -------

Commitments and contingencies

Members' equity:
  Common stock, par value $.01 per share; 100 shares
    authorized, issued and outstanding ...................          -          -
  Additional paid-in capital .............................      1,561      1,561
  Retained earnings ......................................     89,473     81,274
                                                              -------    -------
    Total members' equity ................................     91,034     82,835
                                                              -------    -------
TOTAL LIABILITIES AND MEMBERS' EQUITY ....................    $91,884    $83,991
                                                              =======    =======

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

                                      -69-

<PAGE>

                             SALTON SEA ROYALTY LLC
                            STATEMENTS OF OPERATIONS
                             (Amounts in thousands)

                                                        YEAR ENDED DECEMBER 31,
                                                     ---------------------------
                                                       2003      2002      2001
                                                     -------   -------   -------

REVENUE - ROYALTY INCOME .........................   $12,509   $12,577   $16,882
COSTS AND EXPENSES:
  Operating, general and administrative expenses..     3,216     3,280     4,420
  Amortization of royalty stream and goodwill ....     1,009       854     1,762
  Interest expense ...............................        85       272       608
                                                     -------   -------   -------
    Total costs and expenses .....................     4,310     4,406     6,790
                                                     -------   -------   -------
NET INCOME .......................................   $ 8,199   $ 8,171   $10,092
                                                     =======   =======   =======

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

                                      -70-

<PAGE>

                             SALTON SEA ROYALTY LLC
                          STATEMENTS OF MEMBERS' EQUITY
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2003
                  (Amounts in thousands, except share amounts)

                                  COMMON STOCK    ADDITIONAL
                                 --------------    PAID-IN    RETAINED    TOTAL
                                 SHARES  AMOUNT    CAPITAL    EARNINGS   EQUITY
                                 ------  ------    -------    --------   ------

BALANCE, JANUARY 1, 2001 ....      100    $   -    $ 1,561    $63,011    $64,572

Net income ..................        -        -          -     10,092     10,092

--------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001 ..      100    $   -    $ 1,561    $73,103    $74,664

Net income ..................        -        -          -      8,171      8,171

--------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002 ..      100    $   -    $ 1,561    $81,274    $82,835

Net income ..................        -        -          -      8,199      8,199

--------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003 ..      100   $    -    $ 1,561    $89,473    $91,034

================================================================================

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

                                      -71-

<PAGE>

                             SALTON SEA ROYALTY LLC
                            STATEMENTS OF CASH FLOWS
                             (Amounts in thousands)
<TABLE>
<CAPTION>

                                                                      YEAR ENDED DECEMBER 31,
                                                                  -------------------------------
                                                                   2003       2002        2001
                                                                  -------    -------    ---------

<S>                                                               <C>        <C>        <C>
CASH FLOW FROM OPERATING ACTIVITIES:
  Net income ..................................................   $ 8,199    $ 8,171    $ 10,092
  Adjustments to reconcile net income to net cash provided by
    operating activities -
    Amortization of royalty stream and goodwill ...............     1,009        854       1,762
  Changes in assets and liabilities:
    Prepaid expenses and other assets .........................         8         18          51
    Accrued liabilities .......................................        (2)       (22)        (28)
                                                                  -------    -------    --------
      Net cash flows from operating activities ................     9,214      9,021      11,877
                                                                  -------    -------    --------

NET CASH FLOWS FROM FINANCING ACTIVITIES:
  Due from affiliates .........................................    (8,910)    (5,561)     (7,443)
  Repayment of senior secured project note ....................      (304)    (3,460)     (4,434)
                                                                  -------    -------    --------
    Net cash flows from financing activities ..................    (9,214)    (9,021)    (11,877)
                                                                  -------    -------    --------
NET CHANGE IN CASH ............................................         -          -           -
Cash at beginning of year .....................................         -          -           -
                                                                  -------    -------    --------
CASH AT END OF YEAR ........................................... $       -  $       -    $      -
                                                                  =======    =======    ========
SUPPLEMENTAL DISCLOSURE -
  Interest paid ...............................................   $    43    $   579    $    585
                                                                  =======    =======    ========
</TABLE>

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

                                      -72-
<PAGE>


                             SALTON SEA ROYALTY LLC
                          NOTES TO FINANCIAL STATEMENTS

1.   ORGANIZATION AND OPERATIONS

Salton Sea Royalty LLC (the "Royalty Company") is a special-purpose  entity, 99%
owned by Magma  Power  Company  ("Magma")  and 1% owned by  Salton  Sea  Funding
Corporation (the "Funding  Corporation") an indirect wholly-owned  subsidiary of
Magma Power Company  ("Magma"),  which in turn was  wholly-owned  by MidAmerican
Energy Holdings Company ("MEHC").

On February 8, 1999,  MEHC created a new  subsidiary,  CE  Generation,  LLC ("CE
Generation")  and  subsequently  transferred its interest in Magma and its power
generation  assets in the Imperial Valley to CE Generation,  with certain assets
being  retained  by MEHC.  On March 3, 1999,  MEHC closed the sale of 50% of its
ownership  interests in CE Generation to El Paso CE Generation  Holding  Company
("El Paso"). On January 29, 2003, El Paso sold all its interest in CE Generation
to TransAlta USA Inc. ("TransAlta"), an affiliate of TransAlta Corporation.

The Royalty Company receives an assignment of royalties and certain fees paid by
three partnership projects;  Del Ranch, Elmore and Leathers  (collectively,  the
"Partnership  Projects").  All of the  Partnership  Projects  are engaged in the
operation  of  geothermal  power  plants  located  in  the  Imperial  Valley  of
California.  Substantially  all  of  the  assigned  royalties  are  based  on  a
percentage of energy and capacity revenue of the Partnership Projects.

Each of the Partnership Projects,  sells electricity generated by the respective
plants pursuant to four long-term power purchase  agreements ("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.  Energy is sold at a rate based on the
cost that  Edison  avoids by  purchasing  energy  from the  project  instead  of
obtaining the energy from other sources ("Avoided Cost of Energy").  In June and
November 2001, the Partnership Projects entered into agreements that provide for
a fixed energy  payment per  kilowatt-hour  ("kWh") in lieu of Edison's  Avoided
Cost of Energy.  The fixed energy payments were 3.25 cents per kWh from December
1, 2001 through April 30, 2002 and 5.37 cents per kWh commencing May 1, 2002 for
a five-year period.  Following the five-year period,  the energy payment reverts
back to Edison's Avoided Cost of Energy.

For the year ended December 31, 2003,  2002 and 2001,  Edison's  average Avoided
Cost of Energy  was 5.4  cents,  3.5 cents and 7.4 cents per kWh,  respectively.
Estimates  of Edison's  future  Avoided Cost of Energy vary  substantially  from
year-to-year, primarily based on the future cost of gas.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation
---------------------

The accompanying  statement of operations  presents revenue and expenses,  which
have been assigned to the Royalty Company under the arrangements described above
on the  accrual  method  of  accounting.  This  presentation  is a carve  out of
information  from Magma and  certain of its  affiliates.  Such  revenue,  net of
related expenses,  guarantee loans from the Funding Corporation,  a wholly-owned
subsidiary of Magma.

The financial statements reflect the acquisition of Magma and the resulting push
down  to  the  Royalty  Company  of  the  accounting  as  a  purchase   business
combination.

                                      -73-
<PAGE>

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

Reclassifications
-----------------

Certain amounts in the fiscal 2002 and 2001 financial  statements and supporting
note  disclosures  have  been   reclassified  to  conform  to  the  fiscal  2003
presentation.  Such  reclassification  did not impact  previously  reported  net
income or retained earnings.

Use of Estimates
----------------

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.

Goodwill
--------

On  January  1,  2002,  the  Royalty  Company  adopted  Statement  of  Financial
Accounting  Standards  ("SFAS") No. 142,  "Goodwill and Other Intangible Assets"
("SFAS 142"),  which  establishes the accounting for acquired goodwill and other
intangible  assets, and provides that goodwill and  indefinite-lived  intangible
assets will not be  amortized,  but will be tested for  impairment  on an annual
basis. The Royalty  Company's related  amortization  consists solely of goodwill
amortization,  which has no income tax effect.  In accordance with SFAS 142, the
Royalty Company tests goodwill for impairment annually,  using a discounted cash
flow  methodology.  No impairment  was  indicated as a result of the  impairment
tests.

Following is a reconciliation of net income as originally reported for the years
ended December 31, 2003, 2002 and 2001, to adjusted net income (in thousands):

                                         2003      2002      2001
                                        ------    ------    -------

            Reported net income ....    $8,199    $8,171    $10,092
            Goodwill amortization ..         -         -        908
                                        ------    ------    -------
            Adjusted net income ....    $8,199    $8,171    $11,000
                                        ======    ======    =======


Royalty Stream
--------------

The Royalty Company's policy is to provide  amortization  expense beginning upon
the commencement of revenue production over the estimated  remaining useful life
of the identifiable assets.

The royalty  streams have been assigned  values  separately  for each of (1) the
remaining  portion of the fixed  price  periods  of the  Projects'  power  sales
agreements and (2) the 20-year avoided cost periods of the Projects' power sales
agreements  and are  amortized  separately  over such periods using the straight
line method. At December 31, 2003 and 2002,  accumulated  amortization was $47.5
million and $46.5 million, respectively.

The  Royalty  Company  periodically  evaluates  long-lived  assets  and  certain
identifiable  assets whenever events or changes in  circumstances  indicate that
the carrying value of these assets may not be  recoverable.  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

                                      -74-
<PAGE>

cash flows that the Royalty  Company  expects 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  that is based on  discounted  estimated  cash flows from the
future use of the asset.

Fair Values of Financial Instruments
------------------------------------

The fair value of a financial  instrument is the amount in which the  instrument
could be exchanged in a current transaction between willing parties,  other than
in a forced sale or liquidation.  Although  management uses its best judgment in
estimating  the fair value of these  financial  instruments,  there are inherent
limitations in any estimation  technique.  Therefore,  the fair value  estimates
presented  herein  are  not  necessarily  indicative  of the  amounts  that  the
Guarantors could realize in a current transaction.

The methods and assumptions used to estimate fair value are as follows:

Short-term debt - Due to the short-term  nature of the short-term debt, the fair
value approximates the carrying value.

Debt-instruments  -- The fair value of all debt  instruments  has been estimated
based upon quoted market prices as supplied by third-party broker dealers, where
available,  or at the  present  value of future cash flows  discounted  at rates
consistent with comparable maturities with similar credit risks.

3.   SENIOR PROJECT NOTE

The Royalty  Company has a project  note  payable to Funding  Corporation  at an
interest rate of 7.37%.  Principal maturities of the senior secured project note
are as follows (in thousands):

                                              AMOUNTS
                                              -------

                            2004 ..........    $408
                            2005 ..........     437
                                               ----
                            Total .........    $845
                                               ====

The  estimated  fair values of the senior  secured  project note at December 31,
2003 and 2002 were $0.9 million and $1.1 million, respectively.

The Royalty Company has also guaranteed,  along with other guarantors,  the debt
of Funding  Corporation,  which amounted to $463.6 million at December 31, 2003.
The guarantee issued is collateralized by a lien on substantially all the assets
of and a pledge of stock in the Royalty Company. The structure has been designed
to  cross   collateralize   cash  flows  from  each   guarantor   without  cross
collateralizing all of the guarantors' assets.

                                      -75-

<PAGE>


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.

     None.

ITEM 9A. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the  participation of
the  Funding  Corporation's  and  the  Guarantors'  management,   including  the
respective  persons  acting  as chief  executive  officer  and  chief  financial
officer,  regarding the effectiveness of the design and operation of the Funding
Corporation's and the Guarantors' disclosure controls and procedures (as defined
in Rule 13a-15(e)  promulgated under the Securities and Exchange Act of 1934, as
amended)  as of  December  31,  2003.  Based  on that  evaluation,  the  Funding
Corporation's and the Guarantors'  management,  including the respective persons
acting as chief executive  officer and chief financial  officer,  concluded that
the Funding Corporation's and the Guarantors' disclosure controls and procedures
were  effective.   There  have  been  no  significant  changes  in  the  Funding
Corporation's  and the  Guarantors'  internal  controls or in other factors that
could significantly affect internal controls.

                                      -76-

<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Set forth below are the current  executive  officers of the Funding  Corporation
and the Guarantors and their positions with the Funding  Corporation and each of
the Guarantors (or general partner thereof):

     EXECUTIVE OFFICER                   POSITION
     -----------------                   --------

     Stefan A. Bird                      President
     Gregory E. Abel*                    Director
     Wayne F. Irmiter                    Vice President and Controller
     Douglas L. Anderson                 Senior Vice President
     Ian A. Bourne                       Director
     J. Thomas Coyle                     Director
     Patrick J. Goodman                  Director
     Mitchell L. Pirnie                  Vice President, General Counsel
                                           and Director

     *    Gregory  E. Abel is  Director  of  CalEnergy  Minerals  and Salton Sea
          Minerals Corp. only.

STEFAN A. BIRD, 37, President of CE Generation,  LLC ("CE  Generation") and each
Guarantor subsidiary,  is responsible for independent power plant operations and
construction in the United States.  Mr. Bird joined  MidAmerican Energy Holdings
Company  ("MEHC")  in  January of 1998 as Project  Development  Manager  and was
promoted to Vice President, Project Development in August 1999. Prior to joining
MEHC,  Mr. Bird held  various  positions  at Koch  Industries  from 1989 to 1997
including Director of Finance,  Latin America for Koch Industries  International
in Mexico City;  Director of Marketing and Risk Manager for Koch Power  Services
in Houston,  Texas;  Senior  Financial  Analyst for Koch  International  Finance
Services in Fribourg,  Switzerland;  Project Manager,  Corporate Development for
Koch Industries in Wichita, Kansas; and Project Engineer and Maintenance Planner
for Koch Refining Company in St. Paul, Minnesota.

GREGORY E. ABEL,  41,  Director for  CalEnergy  Minerals and Salton Sea Minerals
Corp. only. Mr. Abel joined MEHC in 1992. Mr. Abel is a Chartered Accountant and
from 1984 to 1992 he was employed by Price  Waterhouse.  As a Manager in the San
Francisco  office of Price  Waterhouse,  he was  responsible  for clients in the
energy industry.

WAYNE F. IRMITER, 38, Vice President and Controller.  Mr. Irmiter joined MEHC as
Vice President and Chief  Accounting  Officer in November 2002. Mr. Irmiter is a
Certified  Public  Accountant  and  from  1988  to  1993  he  worked  in  public
accounting.  Most  recently,  Mr.  Irmiter  was with  Gateway,  Inc.  in various
management    positions    including    Director-Strategic    Initiatives    and
Director-Finance.

DOUGLAS L. ANDERSON,  45, Senior Vice  President.  Mr.  Anderson  joined MEHC in
February 1993. Prior to that, Mr. Anderson was an attorney in private practice.

IAN A. BOURNE,  56,  Executive  Vice  President and Chief  Financial  Officer of
TransAlta  Corporation  and a  director  of CE  Generation  and  each  Guarantor
subsidiary.  Mr. Bourne joined  TransAlta  Corporation in January 1998 as Senior
Vice  President  and Chief  Financial  Officer and was  appointed to his current
position June 1, 1998. Immediately prior to joining TransAlta  Corporation,  Mr.
Bourne had been Senior Vice President and Chief Financial Officer of Canada Post
Corporation  from 1992.  Prior to 1992 Mr.  Bourne  gained  extensive  financial
experience with General  Electric,  including  positions as European  Treasurer,
based in London;  Chief  Financial  Officer for GE Canada,  and Chief  Financial
Officer for GE Medical Systems Europe, based in Paris.

                                      -77-
<PAGE>

J. THOMAS COYLE,  56,  President of TransAlta  Energy  Marketing U.S. Inc. and a
director of CE  Generation  and each  assigning  subsidiary.  Mr.  Coyle  joined
TransAlta in 1998 as Director,  Risk  Portfolio  Management,  Energy  Marketing.
Prior to joining  TransAlta,  Mr. Coyle held various  positions at  Petro-Canada
from 1986 to 1997 including  Portfolio Manager - Natural Gas Marketing,  Manager
Market Development - Natural Gas Marketing and Risk Manager.

PATRICK J. GOODMAN,  37, Senior Vice  President and Chief  Financial  Officer of
MEHC and Director of CE Generation  and each Guarantor  subsidiary.  Mr. Goodman
joined MEHC in 1995 and served in various accounting  positions including Senior
Vice President and Chief Accounting Officer.  Prior to joining MEHC, Mr. Goodman
was a financial manager for National Indemnity Company and a senior associate at
Coopers & Lybrand.

MITCHELL L.  PIRNIE,  45, Vice  President,  General  Counsel and  Director of CE
Generation  and each  Guarantor  subsidiary.  Mr. Pirnie joined MEHC in November
1997.  Prior to joining MEHC, Mr. Pirnie was engaged in the private  practice of
law in Omaha, Nebraska.

AUDIT COMMITTEE AND AUDIT COMMITTEE FINANCIAL EXPERT

The Funding  Corporation and the Guarantors do not have a separately  designated
audit  committee.   No  member  of  their  respective  Board  of  Directors,  as
applicable,  has the  qualifications  required to be considered  an  independent
audit committee  financial expert for purposes of the SEC rules and regulations.
Currently,  the Funding  Corporation and the Guarantors are not required to have
an  audit   committee  or  an  audit  committee   financial   expert  under  the
Sarbanes-Oxley Act of 2002 or any other applicable regulation.

CODE OF ETHICS

The Funding  Corporation  and the Guarantors  have adopted a code of ethics that
applies to its principal  executive officer,  principal financial officer and to
its controller.  The code of ethics is filed as an exhibit to this annual report
on Form 10-K.

ITEM 11.  EXECUTIVE COMPENSATION.

The Funding  Corporation's and the Guarantors'  directors and executive officers
receive no remuneration for serving in such capacities.

ITEM 12.  SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS.

Description of Capital Stock
----------------------------

As of December 31, 2003, the authorized capital stock of the Funding Corporation
consisted  of 1,000  shares of common  stock,  par  value  $0.01 per share  (the
"Common  Stock"),  of which  100  shares  were  outstanding.  There is no public
trading  market for the Common  Stock.  As of December 31,  2003,  there was one
holder of record of the Common  Stock.  Holders of Common  Stock are entitled to
one vote per share on any matter coming before the stockholders for a vote.

The Funding  Corporation  does not expect in the  foreseeable  future to pay any
dividends on the Common Stock. The Indenture  contains  certain  restrictions on
the payment of dividends with respect to the Common Stock.

                                      -78-
<PAGE>


Principal Holders
-----------------

Since  the  formation  of the  Funding  Corporation  in  June  1995,  all of the
outstanding  shares of Common Stock have been owned by Magma.  Magma directly or
indirectly  owns all of the capital  stock of or  partnership  interests  in the
Funding Corporation and the Guarantors.

ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Other Relationships and Related Transactions
--------------------------------------------

The Salton Sea Projects' and the Partnership  Projects'  geothermal power plants
are  owned,  administered  and  operated  by Magma  or  subsidiaries  of  Magma.
Geothermal  fluid  supplying  these  facilities  is provided  from Magma's (or a
subsidiary's) geothermal resource holdings in the SSKGRA.

In  providing  rights  to  geothermal   resources  and/or   geothermal   fluids,
administering and operating the geothermal power plants, and disposing of solids
from these  facilities,  Magma  (directly  and  through  subsidiaries)  receives
certain royalties,  cost reimbursements and fees for its services and the rights
it provides. See the financial statements in Item 8.

The Funding  Corporation  believes that the  transactions  with related  parties
described  above,  taking into  consideration  all of the  respective  terms and
conditions  of each of the relevant  contracts and  agreements,  are at least as
favorable  to the  Guarantors  as those  which  could  have been  obtained  from
unrelated parties in arms' length negotiations.

Relationship of the Funding Corporation and the Guarantors to Magma and MEHC
----------------------------------------------------------------------------

The Funding  Corporation is a wholly owned direct  subsidiary of Magma organized
for the sole  purpose  of  acting  as  issuer  of the  Securities.  The  Funding
Corporation is restricted,  pursuant to the terms of the Indenture, to acting as
issuer  of  the  Securities  and  other  indebtedness  as  permitted  under  the
Indenture, making loans to the Guarantors pursuant to the Credit Agreements, and
transactions related thereto. The Funding Corporation and each of the Guarantors
(and, in the case of SSBP, SSPG,  Elmore,  Leathers,  Del Ranch and Vulcan,  the
general partners thereof) have been organized and are operated as legal entities
separate and apart from MEHC, El Paso, TransAlta,  CE Generation,  Magma and any
other  Affiliates of MEHC,  El Paso,  TransAlta,  CE  Generation or Magma,  and,
accordingly,  the assets of the Funding  Corporation and the Guarantors (and, in
the case of SSBP,  SSPG,  Elmore,  Leathers,  Del Ranch and Vulcan,  the general
partners thereof) will not be generally  available to satisfy the obligations of
MEHC, El Paso, CE  Generation,  Magma or any other  Affiliates of MEHC, El Paso,
TransAlta, CE Generation or Magma; provided,  however, that unrestricted cash of
the Funding  Corporation  and the Guarantors or other assets which are available
for  distribution  may,  subject to  applicable  law and the terms of  financing
arrangements  of  such  parties,  be  advanced,  loaned,  paid as  dividends  or
otherwise distributed or contributed to MEHC, El Paso, TransAlta, CE Generation,
Magma or Affiliates thereof..

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.

MEHC entered into an administrative  services agreement with CE Generation.  The
agreement includes principal accountant fees and services for CE Generation, the
Funding  Corporation  and  the  Guarantors.  The  Funding  Corporation  and  the
Guarantors  do  not  have  preapproval   policies  and  procedures  and  do  not
specifically identify principal accountant fees and services as they are part of
the  administrative  fees paid to MEHC.  The fees and  services  of the  Funding
Corporation's  and the Guarantors'  principal  accountant are preapproved by the
audit committee of MEHC.

                                      -79-
<PAGE>

                                     PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

          a)   Financial Statements and Schedules

               (i)  Financial Statements

                    Financial  Statements  are  included in Part II of this
                    Form 10-K

               (ii) Financial Statement Schedules


                    See Schedule II on page 81.
                    Schedules not listed above have been omitted  because
                    they are either not  applicable,  not required or the
                    information  required  to be  set  forth  therein  is
                    included in the consolidated  financial statements or
                    notes thereto

          b)   Reports on Form 8-K

               None.

          c)   Exhibits

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

               For the purposes of complying  with the  amendments  to the rules
               governing  Form S-4 effective  July 13, 1990 under the Securities
               Act of 1933, the undersigned hereby undertakes as follows,  which
               undertaking  shall be  incorporated by reference into the Funding
               Corporation's currently effective Registration Statements on Form
               S-4.

               Insofar as  indemnification  for  liabilities  arising  under the
               Securities  Act of 1933 may be permitted to  directors,  officers
               and  controlling  persons of the  registrant,  the registrant has
               been  advised  that in the opinion the  Securities  and  Exchange
               Commission  such  indemnification  is  against  public  policy as
               expressed  in the  Securities  Act of  1933  and  is,  therefore,
               unenforceable.  In the  event  that a claim  for  indemnification
               against  such   liabilities   (other  than  the  payment  by  the
               registrant of expenses incurred or paid by a director, officer or
               controlling person of the registrant in the successful defense of
               any action,  suit or  proceeding)  is asserted by such  director,
               officer or controlling  person in connection  with the securities
               being  registered,  the registrant will, unless in the opinion of
               its counsel the matter has been settled by controlling precedent,
               submit to a court of  appropriate  jurisdiction  the  question of
               whether such  indemnification  by it is against  public policy as
               expressed   in  the  Act  and  will  be  governed  by  the  final
               adjudication of such issue.

          d)   Financial  statements  required  by  Regulations  S-X,  which are
               excluded from the Annual Report by Rule 14a-3(b).

               Not Applicable

                                      -80-
<PAGE>


                                                                   SCHEDULE II


                         SALTON SEA FUNDING CORPORATION
                   COMBINED VALUATION AND QUALIFYING ACCOUNTS
                   FOR THE THREE YEARS ENDED DECEMBER 31, 2003
<TABLE>
<CAPTION>


              COLUMN A               COLUMN B     COLUMN C    COLUMN D    COLUMN E
                                    BALANCE AT   ADDITIONS
                                   BEGINNING OF  CHARGED TO               BALANCE AT
                                      YEAR        INCOME     DEDUCTIONS  END OF YEAR
                                   ------------  ----------  ----------  -----------
<S>                                  <C>          <C>         <C>         <C>
Allowance for doubtful accounts
  Salton Sea Guarantors:

    Year ended 2003 ............     $ 3,800      $ 2,433     $   756     $ 5,477

    Year ended 2002 ............     $ 9,829      $   756     $ 6,785     $ 3,800

    Year ended 2001 ............     $     -      $ 9,829     $     -     $ 9,829


  Partnership Guarantors:

    Year ended 2003 ............     $ 2,696      $     -     $ 1,905     $   791

    Year ended 2002 ............     $14,925      $ 1,905     $14,134     $ 2,696

    Year ended 2001 ............     $     -      $14,925     $     -     $14,925

</TABLE>

                                      -81-
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                         SALTON SEA FUNDING CORPORATION

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                             Date
-----------------------------                       -----------------

/s/ Stefan A. Bird                                  February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/ Wayne F. Irmiter                                February 27, 2004
--------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                              February 27, 2004
----------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                   February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                 February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                              February 27, 2004
----------------------
Patrick J. Goodman
Director


                                      -82-
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                       SALTON SEA BRINE PROCESSING, L.P.,
                        a California limited partnership

                   By: Salton Sea Power Company, a California
                        corporation, its general partner

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                             Date
-------------------------------                     -----------------

/s/ Stefan A. Bird                                  February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                               February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/  Mitchell L. Pirnie                             February 27, 2004
-----------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/  Ian A. Bourne                                  February 27, 2004
------------------
Ian A. Bourne
Director

/s/  J. Thomas Coyle                                February 27, 2004
--------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                              February 27, 2004
----------------------
Patrick J. Goodman
Director

                                      -83-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                       SALTON SEA POWER GENERATION, L.P.,
                        a California limited partnership

                   By: Salton Sea Power Company, a California
                        corporation, its general partner

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                              Date
------------------------------                      -----------------

/s/ Stefan A. Bird                                  February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                               February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                              February 27, 2004
------------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                   February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                 February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                              February 27, 2004
----------------------
Patrick J. Goodman
Director

                                      -84-
<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                               FISH LAKE POWER LLC

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                              Date
-----------------------------                        -----------------

/s/ Stefan A. Bird                                   February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                               February 27, 2004
------------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                    February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                  February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                               February 27, 2004
----------------------
Patrick J. Goodman
Director

                                      -85-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                              VULCAN POWER COMPANY

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                               Date
------------------------------                       -----------------

/s/ Stefan A. Bird                                   February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                               February 27, 2004
-----------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                    February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                  February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                               February 27, 2004
----------------------
Patrick J. Goodman
Director

                                      -86-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                         CALENERGY OPERATING CORPORATION

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                 Date
------------------------------                         ------------------

/s/ Stefan A. Bird                                     February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                  February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                                 February 27, 2004
------------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                      February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                    February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                 February 27, 2004
----------------------
Patrick J. Goodman
Director


                                      -87-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                             SALTON SEA ROYALTY LLC

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                Date
-------------------------------                        -----------------

/s/ Stefan A. Bird                                     February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                  February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                                 February 27, 2004
----------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                      February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                    February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                 February 27, 2004
----------------------
Patrick J. Goodman
Director


                                      -88-


<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                LEATHERS, L.P., a California limited partnership

                      By: CalEnergy Operating Corporation,
                   a Delaware corporation, its general partner

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                    Date
-------------------------------                            -----------------

/s/ Stefan A. Bird                                         February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                      February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                                     February 27, 2004
----------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                          February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                        February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                     February 27, 2004
----------------------
Patrick J. Goodman
Director


                                      -89-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                  ELMORE L.P., a California limited partnership

                      By: CalEnergy Operating Corporation,
                   a Delaware corporation, its general partner

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                Date
-------------------------------                       -----------------

/s/ Stefan A. Bird                                    February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                 February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                                February 27, 2004
------------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                     February 27, 2004
------------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                   February 27, 2004
--------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                February 27, 2004
----------------------
Patrick J. Goodman
Director

                                      -90-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                DEL RANCH L.P., a California limited partnership

                      By: CalEnergy Operating Corporation,
                   a Delaware corporation, its general partner

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                Date
------------------------------                        ------------------

/s/ Stefan A. Bird                                    February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                 February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                                February 27, 2004
----------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                     February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                   February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                February 27, 2004
----------------------
Patrick J. Goodman
Director

                                      -91-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                   VPC GEOTHERMAL LLC., a Delaware corporation

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                              Date
-------------------------------                     -----------------

/s/ Stefan A. Bird                                  February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                               February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                              February 27, 2004
----------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                   February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                 February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                              February 27, 2004
----------------------
Patrick J. Goodman
Director


                                      -92-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                 NIGUEL ENERGY COMPANY, a California corporation

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                Date
-------------------------------                       -----------------

/s/ Stefan A. Bird                                    February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                 February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                                February 27, 2004
------------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                     February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                   February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                February 27, 2004
----------------------
Patrick J. Goodman
Director


                                      -93-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                 CONEJO ENERGY COMPANY, a California corporation


                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                Date
-------------------------------                       ------------------

/s/ Stefan A. Bird                                    February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                 February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                                February 27, 2004
------------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                     February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                   February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                February 27, 2004
----------------------
Patrick J. Goodman
Director


                                      -94-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

               SAN FELIPE ENERGY COMPANY, a California corporation

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                               Date
------------------------------                        -----------------

/s/ Stefan A. Bird                                    February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                 February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                                February 27, 2004
----------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                     February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                   February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                February 27, 2004
----------------------
Patrick J. Goodman
Director


                                      -95-


<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                       VULCAN/BN GEOTHERMAL POWER COMPANY,
                          a Nevada general partnership

                            By: VULCAN POWER COMPANY,
                          a Nevada corporation, Partner

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                Date
------------------------------                        ------------------

/s/ Stefan A. Bird                                    February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                 February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                                February 27, 2004
----------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                     February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                   February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                February 27, 2004
----------------------
Patrick J. Goodman
Director


                                      -96-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                            SALTON SEA POWER L.L.C.,
                      a Delaware Limited Liability Company

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                 Date
-------------------------------                        -----------------

/s/ Stefan A. Bird                                     February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                  February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                                 February 27, 2004
------------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                      February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                    February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                 February 27, 2004
----------------------
Patrick J. Goodman
Director


                                      -97-


<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

               CE TURBO LLC, a Delaware Limited Liability Company

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                Date
------------------------------                        -----------------

/s/ Stefan A. Bird                                    February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)

/s/  Wayne F. Irmiter                                 February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)

/s/ Mitchell L. Pirnie                                February 27, 2004
------------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director

/s/ Ian A. Bourne                                     February 27, 2004
-----------------
Ian A. Bourne
Director

/s/ J. Thomas Coyle                                   February 27, 2004
-------------------
J. Thomas Coyle
Director

/s/ Patrick J. Goodman                                February 27, 2004
----------------------
Patrick J. Goodman
Director


                                      -98-


<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                   CE SALTON SEA INC., a Delaware Corporation

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                 Date
------------------------------                          -----------------

/s/ Stefan A. Bird                                      February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)


/s/  Wayne F. Irmiter                                   February 27, 2004
---------------------
Wayne F. Irmiter
Vice President and Controller
(Principal Accounting Officer)


/s/ Mitchell L. Pirnie                                  February 27, 2004
----------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director


/s/ Ian A. Bourne                                       February 27, 2004
-----------------
Ian A. Bourne
Director


/s/ J. Thomas Coyle                                     February 27, 2004
-------------------
J. Thomas Coyle
Director


/s/ Patrick J. Goodman                                  February __, 2004
----------------------
Patrick J. Goodman
Director

                                      -99-

<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

          CALENERGY MINERALS LLC, a Delaware Limited Liability Company

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                Date
-----------------------------                          -----------------

/s/ Stefan A. Bird                                     February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer)


/s/ Gregory E. Abel                                    February 27, 2004
-------------------
Gregory E. Abel
Director


/s/ Patrick J. Goodman                                 February 27, 2004
----------------------
Patrick J. Goodman
Director, Senior Vice President
  and Chief Financial Officer
(Principal Accounting Officer)


/s/ Mitchell L. Pirnie                                 February 27, 2004
----------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director


                                     -100-


<PAGE>


                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto  duly  authorized,  in the City of Omaha,
State of Nebraska, on February 27, 2004.

                SALTON SEA MINERALS CORP., a Delaware Corporation

                             By: /s/ Stefan A. Bird
                                 ------------------
                                 Stefan A. Bird
                                    President

Pursuant to the  requirements  of the Securities Act of 1933, the Registrant has
duly  caused  this  report to be signed on its behalf by the  undersigned,  each
thereunto duly authorized in the City of Omaha, State of Nebraska,  on the dates
indicated.

     Signature                                                  Date
---------------------------------                        -----------------

/s/ Stefan A. Bird                                       February 27, 2004
------------------
Stefan A. Bird
President
(Principal Executive Officer


/s/  Gregory E. Abel                                     February 27, 2004
--------------------
Gregory E. Abel
Director


/s/  Patrick J. Goodman                                  February 27, 2004
-----------------------
Patrick J. Goodman
Director, Senior Vice President
  and Chief Financial Officer
(Principal Accounting Officer)


/s/ Mitchell L. Pirnie                                   February 27, 2004
------------------------
Mitchell L. Pirnie
Vice President, General Counsel
  and Director


                                     -101-

<PAGE>


                                  EXHIBIT INDEX


Exhibit No.
-----------

3.1       Articles of Incorporation of the Funding Corporation  (incorporated by
          reference  to  Exhibit  3.1 to the  Funding  Corporation  Registration
          Statement on Form S-4 dated August 9, 1995, 33-95538 ("Form S-4")).

3.2       By-laws of the  Funding  Corporation  (incorporated  by  reference  to
          Exhibit 3.2 to the Funding Corporation Form S-4).

3.3       Limited  Partnership  Agreement of SSBP  (incorporated by reference to
          Exhibit 3.3 to the Funding Corporation Form S-4).

3.4       Limited  Partnership  Agreement of SSPG  (incorporated by reference to
          Exhibit 3.4 to the Funding Corporation Form S-4).

3.5       Certificate of Formation of Fish Lake, LLC  (incorporated by reference
          to  Exhibit  3.5 to the  Amendment  No. 1 dated  June 29,  1999 of the
          Funding Corporation Form S-4 ("99 Form S 4)).

3.6       Limited  Liability  Company  Agreement of Fish Lake  (incorporated  by
          reference to Exhibit 3.6 to the Funding Corporation Form 99 Form S-4).

3.7       Articles of Incorporation of VPC (incorporated by reference to Exhibit
          3.7 to the Funding Corporation Form S-4).

3.8       By-laws  of VPC  (incorporated  by  reference  to  Exhibit  3.8 to the
          Funding Corporation Form S-4).

3.9       Articles  of  Incorporation  of CEOC  (incorporated  by  reference  to
          Exhibit 3.9 to the Funding Corporation Form S-4).

3.10      By-laws of CEOC  (incorporated  by  reference  to Exhibit  3.10 to the
          Funding Corporation Form S-4).

3.11      Certificate  of Formation of the Royalty  Guarantor  (incorporated  by
          reference to Exhibit 3.11 to the Funding Corporation 99 Form S-4).

3.12      Limited   Liability   Company   Agreement  of  the  Royalty  Guarantor
          (incorporated by reference to Exhibit 3.12 to the Funding  Corporation
          99 Form S-4).

3.13      Certificate of Formation of VPC Geothermal  (incorporated by reference
          to Exhibit 3.13 to the Funding Corporation 99 Form S 4).

3.14      Limited Liability Company Agreement of VPG Geothermal (incorporated by
          reference to Exhibit 3.14 to the Funding Corporation 99 Form S-4).

3.15      Articles of Incorporation of San Felipe  (incorporated by reference to
          Exhibit 3.15 to the Funding Corporation Registration Statement of Form
          S-4  dated  July 2,  1996,  333-07527  ("Funding  Corporation  II Form
          S-4")).

                                     -102-
<PAGE>


3.16      By-laws of San Felipe  (incorporated  by  reference to Exhibit 3.16 to
          the Funding Corporation II Form S-4).

3.17      Articles of  Incorporation  of Conejo  (incorporated  by  reference to
          Exhibit 3.17 to the Funding Corporation II Form S-4).

3-18      By-laws of Conejo  (incorporated  by  reference to Exhibit 3.18 to the
          Funding Corporation II Form S-4).

3.19      Articles of  Incorporation  of Niguel  (incorporated  by  reference to
          Exhibit 3.19 to the Funding Corporation II Form S-4).

3.20      By-laws of Niguel  (incorporated  by  reference to Exhibit 3.20 to the
          Funding Corporation II Form S-4).

3.21      General Partnership  Agreement of Vulcan (incorporated by reference to
          Exhibit 3.21 to the Funding Corporation II Form S-4).

3.22      Limited Partnership  Agreement of Leathers  (incorporated by reference
          to Exhibit 3.22 to the Funding Corporation II Form S-4).

3.23      Amended  and  Restated  Limited  Partnership  Agreement  of Del  Ranch
          (incorporated by reference to Exhibit 3.23 to the Funding  Corporation
          II Form S-4).

3.24      Amended  and  Restated   Limited   Partnership   Agreement  of  Elmore
          (incorporated by reference to Exhibit 3.24 to the Funding  Corporation
          II Form S-4).

3.25      Certificate of Formation of CalEnergy  Minerals LLC  (incorporated  by
          reference to Exhibit 3.25 to the Funding Corporation 99 Form S-4)

3.26      Limited  Liability   Company  Agreement  of  CalEnergy   Minerals  LLC
          (incorporated by reference to Exhibit 3.26 to the Funding  Corporation
          99 Form S-4).

3.27      Certificate of Formation of CE Turbo LLC (incorporated by reference to
          Exhibit 3.27 to the Funding Corporation 99 Form S-4).

3.28      Limited  Liability  Company Agreement of CE Turbo LLC (incorporated by
          reference to Exhibit 3.28 to the Funding Corporation 99 Form S-4).

3.29      Articles  of  Incorporation  of CESS  (incorporated  by  reference  to
          Exhibit 3.29 to the Funding Corporation 99 Form S-4).

3.30      By-laws of CESS  (incorporated  by  reference  to Exhibit  3.30 to the
          Funding Corporation 99 Form S-4).

3.31      Articles  of  Incorporation  of SSMC  (incorporated  by  reference  to
          Exhibit 3.31 to the Funding Corporation 99 Form S-4).

3.32      By-laws of SSMC  (incorporated  by  reference  to Exhibit  3.32 to the
          Funding Corporation 99 Form S-4).

3.33      Certificate  of Formation of Power LLC  (incorporated  by reference to
          Exhibit 3.33 to the Funding Corporation 99 Form S-4).

                                     -103-
<PAGE>


3.34      Limited  Liability  Company  Agreement of Power LLC  (incorporated  by
          reference to Exhibit 3.34 to the Funding Corporation 99 Form S-4).

4.1(a)    Indenture, dated as of July 21, 1995, between Chemical Trust Company
          of California and the Funding  Corporation  (incorporated by reference
          to Exhibit 4.1(a) to the Funding Corporation FormS-4).

4.1(b)    First Supplemental Indenture,  dated as of October 18, 1995, between
          Chemical  Trust  Company of  California  and the  Funding  Corporation
          (incorporated   by  reference   to  Exhibit   4.1(b)  to  the  Funding
          Corporation Form S-4).

4.1(c)    Second  Supplemental  Indenture,  dated as of June 20, 1996, between
          Chemical  Trust  Company of  California  and the  Funding  Corporation
          (incorporated   by  reference   to  Exhibit   4.1(c)  to  the  Funding
          Corporation II Form S-4).

4.1(d)    Third  Supplemental  Indenture  between  Chemical  Trust  Company of
          California and the Funding  Corporation  (incorporated by reference to
          Exhibit 4.1(d) to the Funding Corporation II Form S-4).

4.1(e)    Fourth  Supplemental  Indenture  between  Chemical  Trust Company of
          California and the Funding  Corporation  (incorporated by reference to
          Exhibit  4.1(e) to the  Funding  Corporation  Form 10-K/A for the year
          ending December 31, 1998).

4.2       Amended and Restated  Salton Sea Secured  Guarantee,  dated as of July
          21,  1995,  by SSBP,  SSPG and Fish  Lake in favor of  Chemical  Trust
          Company of California (incorporated by reference to Exhibit 4.2 to the
          Funding Corporation Form S-4).

4.3       Second Amended and Restated  Partnership  Secured  Limited  Guarantee,
          dated as of October 13, 1998 by CEOC,  and VPC,  Conejo,  Niguel,  Sal
          Felipe,  BNG,  Del  Ranch,  Elmore,  Leathers  and  Vulcan in favor of
          Chemical  Trust  Company of California  (incorporated  by reference to
          Exhibit  4.3(c) to the  Funding  Corporation  Form 10-K/A for the year
          ending December 31, 1998).

4.4       Royalty  Guarantor  Secured  Limited  Guarantee,  dated as of July 21,
          1995, by the Royalty  Guarantor in favor of Chemical  Trust Company of
          California  (incorporated  by  reference to Exhibit 4.4 to the Funding
          Corporation Form S-4).

4.5       Intentionally left blank.

4.6(a)    Collateral Agency and Intercreditor Agreement,  dated as of July 21,
          1995,  by  and  among  Credit   Suisse,   Chemical  Trust  Company  of
          California,  the Funding Corporation and the Guarantors  (incorporated
          by reference to Exhibit 4.6 to the Funding Corporation Form S-4).

4.6(b)    First  Amendment  to  the  Collateral   Agency  and   Intercreditor
          Agreement,  dated as of June 20,  1996,  by and among  Credit  Suisse,
          Chemical Trust Company of California,  the Funding Corporation and the
          Guarantors (incorporated by reference to Exhibit 4.6(b) to the Funding
          Corporation II Form S-4).

4.6(c)    Second  Amendment  to  the  Collateral   Agency  and  Intercreditor
          Agreement,  dated as of October 13, 1998, by and among Credit  Suisse,
          Chemical Trust Company of California,  the Funding Corporation and the
          Guarantors (incorporated by reference to Exhibit 4.6(c) to the Funding
          Corporation Form 10-K/A for the year ending December 31, 1998).

                                     -104-
<PAGE>

4.7       Stock  Pledge  Agreement,  dated as of July 21,  1995,  by Magma Power
          Company in favor of Chemical Trust Company of California (incorporated
          by reference to Exhibit 4.7 to the Funding Corporation Form S-4).

4.8       Intentionally left blank.

4.9       Support  Letter,  dated as of July 21, 1995,  by and among Magma Power
          Company,  the Funding Corporation and the Guarantors  (incorporated by
          reference to Exhibit 4.9 to the Funding Corporation Form S-4).

4.10      Debt Service  Reserve  Letter of Credit and  Reimbursement  Agreement,
          dated as of July 21,  1995,  by and  among  the  Funding  Corporation,
          certain banks and Credit Suisse,  as agent  (incorporated by reference
          to Exhibit 4.10 to the Funding Corporation Form S-4).

4.10(a)   Amendment to Notes and to Amended  Debt Service  Reserve  Letter of
          Credit and  Reimbursement  Agreement,  dated  October 13, 1998, by and
          among the Funding  Corporation,  certain banks and Credit  Suisse,  as
          agent  (incorporated  by reference  to Exhibit  4.10(a) to the Funding
          Corporation Form 10-K/A for the year ending December 31, 1998).

4.11      Revolving  Credit  Agreement,  dated as of July 21, 1995, by and among
          Credit Suisse and the Funding  Corporation  (incorporated by reference
          to Exhibit 4.11 to the Funding Corporation Form S-4).

4.12      Amended and Restated  Salton Sea Credit  Agreement,  dated October 13,
          1998, by and among SSBP, SSPG,  Power LLC and Fish Lake  (incorporated
          by reference to Exhibit 4.12 to the Funding Corporation 99 Form S-4).

4.13      Salton Sea Project Note (SSI),  dated October 13, 1998, by SSBP, SSPG,
          Power  LLC  and  Fish  Lake  in  favor  of  the  Funding   Corporation
          (incorporated by reference to Exhibit 4.13 to the Funding  Corporation
          99 Form S-4).

4.13a     Salton Sea Project Note  (SSIII),  dated  October 13,  1998,  by SSBP,
          SSPG,  Power  LLC and Fish  Lake in favor of the  Funding  Corporation
          (incorporated   by  reference  to  Exhibit   4.13(a)  to  the  Funding
          Corporation 99 Form S-4).

4.14      Amended and Restated Deposit and Disbursement  Agreement,  dated as of
          October 13, 1998, by and among the Funding Corporation, Chemical Trust
          Company of California and the Guarantors.  (incorporated  by reference
          to Exhibit 4.14 to the Funding Corporation 99 Form S-4).

4.15      Partnership  Interest Pledge Agreement,  dated as of July 21, 1995, by
          Magma Power  Company and Salton Sea Power Company in favor of Chemical
          Trust Company of California (incorporated by reference to Exhibit 4.15
          to the Funding Corporation Form S-4).

4.16      Partnership  Interest Pledge Agreement,  dated as of July 21, 1995, by
          SSBP and Salton Sea Power  Company in favor of Chemical  Trust Company
          of  California  (incorporated  by  reference  to  Exhibit  4.16 to the
          Funding Corporation Form S-4).

4.17      Stock  Pledge  Agreement  (Pledge of Stock of Fish Lake by Magma Power
          Company and the Funding  Corporation),  dated as of July 21, 1995,  by
          Magma Power Company and the Funding  Corporation  in favor of Chemical
          Trust Company of California (incorporated by reference to Exhibit 4.17
          to the Funding Corporation Form S-4).

                                     -105-
<PAGE>

4.18      Cost  Overrun   Commitment,   dated  as  of  July  21,  1995,  between
          MidAmerican,  SSPG, SSBP and Fish Lake  (incorporated  by reference to
          Exhibit 4.18 to the Funding Corporation Form S-4).

4.19      Second Amended and Restated  Partnership  Guarantors Credit Agreement,
          dated October 13, 1998, by and among the  Partnership  Guarantors  and
          the Funding Corporation  (incorporated by reference to Exhibit 4.19(c)
          to the Funding Corporation Form 10-K/A).

4.20      Partnership  Guarantors  Security  Agreement and Assignment of Rights,
          dated as of July 21, 1995, by CEOC and VPC in favor of Chemical  Trust
          Company of  California  (incorporated  by reference to Exhibit 4.20 to
          the Funding Corporation Form S-4).

4.21      Stock Pledge Agreement (Pledge of Stock of CEOC by Magma Power Company
          and the  Funding  Corporation),  dated as of July 21,  1995,  by Magma
          Power  Company and  Funding  Corporation  in favor of  Chemical  Trust
          Company of  California  (incorporated  by reference to Exhibit 4.21 to
          the Funding Corporation Form S-4).

4.22      Stock Pledge Agreement  (Pledge of Stock of VPC by Magma Power Company
          and the  Funding  Corporation),  dated as of July 21,  1995,  by Magma
          Power Company and the Funding  Corporation  in favor of Chemical Trust
          Company of  California  (incorporated  by reference to Exhibit 4.22 to
          the Funding Corporation Form S-4).

4.23      Royalty  Guarantor Credit  Agreement,  among the Royalty Guarantor and
          the Funding  Corporation,  dated as of July 21, 1995  (incorporated by
          reference to Exhibit 4.23 to the Funding Corporation Form S-4).

4.24      Royalty  Project  Note,  dated as of July  21,  1995,  by the  Royalty
          Guarantor  in  favor  of  the  Funding  Corporation  (incorporated  by
          reference to Exhibit 4.24 to the Funding Corporation Form S-4).

4.25      Royalty  Security  Agreement and  Assignment of Revenues,  dated as of
          July 21, 1995,  by the Royalty  Guarantor  in favor of Chemical  Trust
          Company of  California  (incorporated  by reference to Exhibit 4.25 to
          the Funding Corporation Form S-4).

4.26      Royalty  Deed of  Trust,  dated as of July 21,  1995,  by the  Royalty
          Guarantor to Chicago Title Company for the use and benefit of Chemical
          Trust Company of California (incorporated by reference to Exhibit 4.26
          to the Funding Corporation Form S-4).

4.27      Stock Pledge Agreement  (Pledge of Stock of Royalty Guarantor by Magma
          Power Company and the Funding Corporation), dated as of July 21, 1995,
          by  Magma  Power  Company  and the  Funding  Corporation  in  favor of
          Chemical  Trust  Company of California  (incorporated  by reference to
          Exhibit 4.27 to the Funding Corporation Form S-4).

4.28      Collateral  Assignment of the Imperial Irrigation District Agreements,
          dated as of July 21,  1995,  by SSBP,  SSPG and Fish  Lake in favor of
          Chemical  Trust  Company of California  (incorporated  by reference to
          Exhibit 4.28 to the Funding Corporation Form S-4).

4.29      Collateral  Assignments of Certain Salton Sea Agreements,  dated as of
          July 21, 1995, by SSBP,  SSPG and Fish Lake in favor of Chemical Trust
          Company of  California  (incorporated  by reference to Exhibit 4.29 to
          the Funding Corporation Form S-4).

4.30      Debt  Service  Reserve  Letter of Credit by Credit  Suisse in favor of
          Chemical  Trust  Company of California  (incorporated  by reference to
          Exhibit 4.30 to the Funding Corporation Form S-4).

                                     -106-
<PAGE>

4.31      Partnership  Project Note (SSI),  dated  October 13, 1998,  by VPC and
          CEOC, Conejo, San Felipe,  Niguel, VPC Geothermal,  Del Ranch, Elmore,
          Leathers,  Vulcan, CE Turbo LLC and CalEnergy Minerals LLC in favor of
          the Funding Corporation  (incorporated by reference to Exhibit 4.31(a)
          to the Funding Corporation Form 10-K/A).

4.31(a)   Partnership Project Note (SSII), dated October 13, 1998, by VPC and
          CEOC, Conejo, San Felipe,  Niguel, VPC Geothermal,  Del Ranch, Elmore,
          Leathers,  Vulcan, CE Turbo LLC and CalEnergy Minerals LLC in favor of
          the Funding Corporation  (incorporated by reference to Exhibit 4.31(b)
          to the Funding Corporation Form 10-K/A).

4.31(b)   Partnership  Project Note (SSIII),  dated October 13, 1998, by VPC
          and CEOC,  Conejo,  San Felipe,  Niguel,  VPC  Geothermal,  Del Ranch,
          Elmore,  Leathers,  Vulcan, CE Turbo LLC and CalEnergy Minerals LLC in
          favor of the Funding Corporation (incorporated by reference to Exhibit
          4.31(c) to the Funding Corporation Form 10-K/A).

4.32      Collateral  Assignment of the Imperial Irrigation District Agreements,
          dated as of June 20, 1996, by Vulcan,  Elmore,  Leathers,  VPC and Del
          Ranch in favor of Chemical  Trust Company of California  (incorporated
          by reference to Exhibit 4.29 to the Funding Corporation II Form S-4).

4.33      Collateral Assignments of Certain Partnership Agreements,  dated as of
          June 20, 1996,  by Vulcan  Elmore,  Leathers and Del Ranch in favor of
          Chemical  Trust  Company of California  (incorporated  by reference to
          Exhibit 4.31 to the Funding Corporation II Form S-4).

4.34      Debt  Service  Reserve  Letter of Credit by Credit  Suisse in favor of
          Chemical  Trust  Company of California  (incorporated  by reference to
          Exhibit 4.32 to the Funding Corporation II Form S-4).

4.35      Intentionally Omitted.

4.36      Intentionally Omitted

4.37      Deed of Trust,  dated as of June 20, 1996,  by Vulcan to Chicago Title
          Company  for  the  use  and  benefit  of  Chemical  Trust  Company  of
          California  (incorporated  by reference to Exhibit 4.35 to the Funding
          Corporation II Form S-4).

4.37(a)   First Amendment to Deed of Trust,  dated October 13, 1998 by Vulcan
          to Chicago  Title  Company for the use and  benefit of Chemical  Trust
          Company of California (incorporated by reference to Exhibit 4.37(a) to
          the Form 10-K/A).

4.38      Deed of Trust,  dated as of June 20, 1996,  by Elmore to Chicago Title
          Company  for  the  use  and  benefit  of  Chemical  Trust  Company  of
          California  (incorporated  by reference to Exhibit 4.36 to the Funding
          Corporation II Form S-4).

4.38(a)   First Amendment to Deed of Trust, dated October 13, 1998, by Elmore
          to Chicago  Title  Company for the use and  benefit of Chemical  Trust
          Company of California (incorporated by reference to Exhibit 4.38(a) to
          the Form 10-K/A).

4.39      Deed of Trust, dated as of June 20, 1996, by Leathers to Chicago Title
          Company  for  the  use  and  benefit  of  Chemical  Trust  Company  of
          California  (incorporated  by reference to Exhibit 4.37 to the Funding
          Corporation II Form S-4).

                                     -107-
<PAGE>

4.39(a)   First  Amendment  to Deed of Trust,  dated  October  13,  1998,  by
          Leathers to Chicago  Title Company for the use and benefit of Chemical
          Trust  Company of  California  (incorporated  by  reference to Exhibit
          4.39(a) to the Form 10-K/A).

4.40      Deed of Trust,  dated as of June 20,  1996,  by Del  Ranch to  Chicago
          Title  Company for the use and benefit of  Chemical  Trust  Company of
          California  (incorporated  by reference to Exhibit 4.38 to the Funding
          Corporation II Form S-4).

4.40(a)   First  Amendment to Deed of Trust,  dated  October 13, 1998, by Del
          Ranch to Chicago  Title  Company  for the use and  benefit of Chemical
          Trust  Company of  California  (incorporated  by  reference to Exhibit
          4.40(a) to the Form 10-K/A).

4.41      Stock Pledge Agreement,  Dated as of June 20, 1996, by CEOC,  pledging
          the stock of Conejo,  Niguel and San Felipe in favor of Chemical Trust
          Company of California  for the benefit of the Secured  Parties and the
          Funding Corporation  (incorporated by reference to Exhibit 4.39 to the
          Funding Corporation II Form S-4).

4.42      Stock Pledge  Agreement,  dated as of June 20, 1996, by VPC,  pledging
          the stock of BNG in favor of Chemical  Trust Company of California for
          the  benefit  of the  Secured  Parties  and  the  Funding  Corporation
          (incorporated by reference to Exhibit 4.40 to the Funding  Corporation
          II Form S-4).

4.43      Partnership  Interest Pledge Agreement,  dated as of June 20, 1996, by
          VPC and BNG, pledging the partnership  interests in Vulcan in favor of
          Chemical  Trust Company of  California  for the benefit of the Secured
          Parties and the Funding  Corporation  (incorporated  by  reference  to
          Exhibit 4.41 to the Funding Corporation II Form S-4).

4.44      Partnership  Interest Pledge Agreement,  dated as of June 20, 1996, by
          Magma,  CEOC and each of Conejo,  Niguel,  San  Felipe,  respectively,
          pledging the partnership  interests in Del Ranch, Elmore and Leathers,
          respectively, in favor of Chemical Trust Company of California for the
          benefit  of  the  Secured   Parties   and  the   Funding   Corporation
          (incorporated by reference to Exhibit 4.42 to the Funding  Corporation
          II Form S-4).

4.45      Agreement regarding Security Documents,  dated as of June 20, 1996, by
          and among the Initial Guarantors, Magma, SSPC, the Funding Corporation
          and Chemical Trust Company of California (incorporated by reference to
          Exhibit 4.45 to the Funding Corporation II Form S-4).

10.1(a)   Salton Sea Deed of Trust,  Assignment of Rents,  Security Agreement
          and Fixture Filing,  dated as of July 21, 1995, by SSBP, SSPG and Fish
          Lake to Chicago  Title  Company  for the use and  benefit of  Chemical
          Trust Company of California (incorporated by reference to Exhibit 10.1
          to the Funding Corporation Form S-4) .

10.1(b)   First  Amendment to Salton Sea Deed of Trust,  Assignment of Rents,
          Security  Agreement  and Fixed  Filing,  dated as of June 20, 1996, by
          SSBP,  SSPG and Fish Lake to  Chicago  Title  Company  for the use and
          benefit of  Chemical  Trust  Company of  California  (incorporated  by
          reference to Exhibit 10.2 to the Funding Corporation II Form S-4).

10.1(c)   Second Amendment to Salton Sea Deed of Trust,  Assignment of Rents,
          Security Agreement and Fixed Filing,  dated as of October 13, 1998, by
          SSBP,  SSPG and Fish Lake to  Chicago  Title  Company  for the use and
          benefit of  Chemical  Trust  Company of  California  (incorporated  by
          reference to Exhibit 10.1(c) to the Form 10-K/A).

                                     -108-
<PAGE>

10.2      Collateral   Assignment   of  Southern   California   Edison   Company
          Agreements,  dated as of July 21, 1995, by SSPG and Fish Lake in favor
          of Chemical Trust Company of California  (incorporated by reference to
          Exhibit 10.3 to the Funding Corporation Form S-4).

10.3      Contract for the  Purchase and Sale of Electric  Power from the Salton
          Sea Geothermal Facility, dated May 9, 1987 (the "Unit 1 Power Purchase
          Agreement"),  between  Southern  California  Edison  Company and Earth
          Energy, Inc. (incorporated by reference to Exhibit 10.4 to the Funding
          Corporation Form S-4).

10.4      Amendment No. 1 to the Unit 1 Power  Purchase  Agreement,  dated as of
          March 30, 1993,  between Southern  California Edison Company and Earth
          Energy, Inc. (incorporated by reference to Exhibit 10.5 to the Funding
          Corporation Form S-4).

10.5      Amendment No. 2 to Unit 1 Power Purchase Agreement, dated November 29,
          1994,   between   Southern   California   Edison   Company   and  SSPG
          (incorporated by reference to Exhibit 10.6 to the Funding  Corporation
          Form S-4).

10.6      Contract for the Purchase and Sale of Electric Power,  dated April 16,
          1985  (the  "Unit  2  Power  Purchase  Agreement"),  between  Southern
          California  Edison  Company  and  Westmoreland  Geothermal  Associates
          (incorporated by reference to Exhibit 10.7 to the Funding  Corporation
          Form S-4).

10.7      Amendment  No.  1 to  Unit 2 Power  Purchase  Agreement,  dated  as of
          December 18, 1987,  between  Southern  California  Edison  Company and
          Earth Energy,  Inc.  (incorporated by reference to Exhibit 10.8 to the
          Funding Corporation Form S-4).

10.8      Power  Purchase  Contract,  dated  April 16,  1985 (the  "Unit 3 Power
          Purchase  Agreement"),  between Southern California Edison Company and
          Union Oil Company of California  (incorporated by reference to Exhibit
          10.9 to the Funding Corporation Form S-4).

10.9      Power Purchase Contract (the "Unit 4 Power Purchase Agreement"), dated
          November 29, 1994,  between Southern  California Edison Company,  SSPG
          and Fish Lake  (incorporated  by  reference  to  Exhibit  10.10 to the
          Funding Corporation Form S-4).

10.10     Plant  Connection  Agreement (Unit 2), dated October 3, 1989,  between
          the Imperial Irrigation District and Earth Energy, Inc.  (incorporated
          by reference to Exhibit 10.11 to the Funding Corporation Form S-4).

10.11     Plant  Connection  Agreement,  dated August 2, 1988 (Unit 3),  between
          the   Imperial   Irrigation   District   and  Desert   Power   Company
          (incorporated by reference to Exhibit 10.12 to the Funding Corporation
          Form S-4).

10.12     Imperial  Irrigation  District Funding and Construction  Agreements as
          amended (Units 2 and 3), dated as of June 29, 1987, among the Imperial
          Irrigation District, Earth Energy, Inc., Chevron Geothermal Company of
          California,  Geo East Mesa No. 3, Inc.,  Magma Power  Company,  Desert
          Power Company,  Geo East Mesa No. 2, Inc., Heber  Geothermal  Company,
          Ormesa  Geothermal,  Ormesa Geothermal II, Vulcan/BN  Geothermal Power
          Company, Union Oil Company of California, Del Ranch L.P., Elmore L.P.,
          Leathers L.P., Geo East Mesa Limited Partnership and Imperial Resource
          Recovery Associates,  L.P. (incorporated by reference to Exhibit 10.13
          to the Funding Corporation Form S-4).

                                     -109-
<PAGE>

10.13     Transmission Service Agreement,  dated as of October 3, 1989 (Unit 2),
          between  the  Imperial  Irrigation  District  and Earth  Energy,  Inc.
          (incorporated by reference to Exhibit 10.14 to the Funding Corporation
          Form S-4).

10.14     Transmission  Service Agreement,  dated as of August 2, 1988 (Unit 3),
          between the Imperial  Irrigation  District  and Desert  Power  Company
          (incorporated by reference to Exhibit 10.15 to the Funding Corporation
          Form S-4).

10.15     Plant  Connection  Agreement  (Unit 4), dated as of July 14, 1995,  by
          and  between  the  Imperial  Irrigation  District,  SSPG and Fish Lake
          (incorporated by reference to Exhibit 10.16 to the Funding Corporation
          Form S-4).

10.16     Letter Agreement,  dated February 2, 1995, between Magma Power Company
          and the Imperial  Irrigation  District  (incorporated  by reference to
          Exhibit 10.17 to the Funding Corporation Form S-4).

10.17     Transmission  Service  Agreement  (Unit 4), dated as of July 14, 1995,
          by and between the Imperial  Irrigation  District,  SSPG and Fish Lake
          (incorporated by reference to Exhibit 10.18 to the Funding Corporation
          Form S-4).

10.18     Transmission  Line  Construction  Agreement  (Unit 4),  dated July 14,
          1995,  between the Imperial  Irrigation  District,  SSPG and Fish Lake
          (incorporated by reference to Exhibit 10.19 to the Funding Corporation
          Form S-4).

10.19     Funding  Agreement,  dated June 15,  1988 (Unit 2),  between  Southern
          California  Edison  Company and Earth Energy,  Inc.  (incorporated  by
          reference to Exhibit 10.20 to the Funding Corporation Form S-4).

10.20     Second Amended and Restated  Administrative Services Agreement, by and
          among  CEOC,  SSBP,  SSPG and  Fish  Lake,  dated as of July 15,  1995
          (incorporated by reference to Exhibit 10.21 to the Funding Corporation
          Form S-4).

10.21     Second  Amended and  Restated  Operating  and  Maintenance  Agreement,
          dated as of July 15,  1995,  by and among Magma Power  Company,  SSBP,
          SSPG and Fish Lake  (incorporated by reference to Exhibit 10.22 to the
          Funding Corporation Form S-4).

10.22     Intentionally Omitted.

10.23     Collateral   Assignment   of  Southern   California   Edison   Company
          Agreements, dated as of June 20, 1996, by Vulcan, Elmore, Leathers and
          Del  Ranch  in  favor  of  Chemical   Trust   Company  of   California
          (incorporated by reference to Exhibit 10.23 to the Funding Corporation
          II Form S-4).

10.24     Administrative Services Agreement,  dated as of June 17, 1996, between
          CEOC and Vulcan  (incorporated  by reference  to Exhibit  10.24 to the
          Funding Corporation II Form S-4).

10.25     Amended  and   Restated   Construction,   Operating   and   Accounting
          Agreement,  dated  as  of  June  17,  1996,  between  VPC  and  Vulcan
          (incorporated by reference to Exhibit 10.25 to the Funding Corporation
          II Form S-4).

10.26     Long Term Power  Purchase  Contract,  dated March 1, 1984, as amended,
          between  SCE and  Vulcan,  as  successor  to  Magma  Electric  Company
          (incorporated by reference to Exhibit 10.26 to the Funding Corporation
          II Form S-4).

                                     -110-
<PAGE>

10.27     Transmission  Service  Agreement,  dated December 1, 1988, between VPC
          and IID  (incorporated  by reference  to Exhibit  10.27 to the Funding
          Corporation II Form S-4).

10.28     Plant Connection Agreement,  dated as of December 1, 1988, between VPC
          and IID  (incorporated  by reference  to Exhibit  10.28 to the Funding
          Corporation II Form S-4).

10.29     Amended and Restated  Administrative  Services Agreement,  dated as of
          June 17, 1996  between CEOC and Elmore  (incorporated  by reference to
          Exhibit 10.29 to the Funding Corporation II Form S-4).

10.30     Amended and Restated Operating and Maintenance Agreement,  dated as of
          June 17, 1996,  between CEOC and Elmore  (incorporated by reference to
          Exhibit 10.30 to the Funding Corporation II Form S-4).

10.31     Long Term Power  Purchase  Contract,  dated June 15, 1984, as amended,
          between  SCE and  Elmore,  as  successor  to  Magma  Electric  Company
          (incorporated by reference to Exhibit 10.31 to the Funding Corporation
          II Form S-4).

10.32     Transmission  Service  Agreement,  dated  as of  August  2,  1988,  as
          amended,  between Elmore and IID (incorporated by reference to Exhibit
          10.32 to the Funding Corporation II Form S-4).

10.33     Plant  Connection  Agreement,  dated as of  August  2,  1988,  between
          Elmore and IID  (incorporated  by  reference  to Exhibit  10.33 to the
          Funding Corporation II Form S-4).

10.34     Amended and Restated  Administrative  Services Agreement,  dated as of
          June 17, 1996, between CEOC and Leathers (incorporated by reference to
          Exhibit 10.34 to the Funding Corporation II Form S-4).

10.35     Amended and Restated Operating and Maintenance Agreement,  dated as of
          June 17, 1996, between CEOC and Leathers (incorporated by reference to
          Exhibit 10.35 to the Funding Corporation II Form S-4).

10.36     Long Term Power Purchase Contract,  dated August 16, 1985, as amended,
          between SCE and Leathers,  as successor to Imperial Energy Corporation
          (incorporated by reference to Exhibit 10.36 to the Funding Corporation
          II Form S-4).

10.37     Transmission  Service  Agreement,  dated as of  October  3,  1989,  as
          amended,  between  Leathers  and IID  (incorporated  by  reference  to
          Exhibit 10.37 to the Funding Corporation II Form S-4).

10.38     Plant  Connection  Agreement,  dated as of October  3,  1989,  between
          Leathers and IID  (incorporated  by reference to Exhibit  10.38 to the
          Funding Corporation II Form S-4).

10.39     Amended and Restated  Administrative  Services Agreement,  dated as of
          June 17, 1996,  between CEOC and Del Ranch  (incorporated by reference
          to Exhibit 10.39 to the Funding Corporation II Form S-4).

10.40     Amended and Restated Operating and Maintenance Agreement,  dated as of
          June 17, 1996,  between CEOC and Del Ranch  (incorporated by reference
          to Exhibit 10.40 to the Funding Corporation II Form S-4).

10.41     Long Term  Power  Purchase  Contract,  dated  February  22,  1984,  as
          amended,   between  SCE  and  Del  Ranch,   as   successor   to  Magma
          (incorporated by reference to Exhibit 10.41 to the Funding Corporation
          II Form S-4).


                                     -111-
<PAGE>

10.42     Transmission  Service  Agreement,  dated  as of  August  2,  1988,  as
          amended,  between  Del Ranch and IID  (incorporated  by  reference  to
          Exhibit 10.42 to the Funding Corporation II Form S-4).

10.43     Plant Connection  Agreement,  dated as of August 2, 1988,  between Del
          Ranch and IID  (incorporated  by  reference  to  Exhibit  10.43 to the
          Funding Corporation II Form S-4).

10.44     Funding  Agreement,  dated  May 18,  1990,  between  SCE and Del Ranch
          (incorporated by reference to Exhibit 10.44 to the Funding Corporation
          II Form S-4).

10.45     Funding  Agreement,  dated  May  18,  1990,  between  SCE  and  Elmore
          (incorporated by reference to Exhibit 10.45 to the Funding Corporation
          II Form S-4).

10.46     Funding  Agreement,  dated June 15,  1990,  between  SCE and  Leathers
          (incorporated by reference to Exhibit 10.46 to the Funding Corporation
          II Form S-4).

10.47     Funding  Agreement,  dated  May 18,  1990,  between  SCE and  Leathers
          (incorporated by reference to Exhibit 10.47 to the Funding Corporation
          II Form S-4).

10.48     Funding  Agreement,  dated  May  18,  1990,  between  SCE  and  Vulcan
          (incorporated by reference to Exhibit 10.48 to the Funding Corporation
          II Form S-4).

14.1      Salton Sea Funding  Corporation  - Code of Ethics for Chief  Executive
          Officer, Chief Financial Officer and Chief Accounting Officer.

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

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

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

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

                                     -112-