**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
 
 **FORM
        10-Q**
 
 **[X]
        Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
        Act
        of 1934**
 
 For
        the
        quarterly period ended September 30, 2005
 
 or
 
 **[
        ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
        Act of 1934**
 
 For
        the
        transition period from ________ to _______
 
 Commission
        File No. 001-12995
 
 **CE
        CASECNAN WATER AND ENERGY COMPANY, INC.**
 (Exact
        name of registrant as specified in its charter)
 
 
 Philippines
              
              Not
                  Applicable(State
                  or other jurisdiction of
              
              (I.R.S.
                  Employerincorporation
                  or organization)
              
              Identification
                  No.)24thFloor, 6750 Building, Ayala AvenueMakati,
                  Metro Manila, Philippines
              
              Not
                  Applicable(Address
                  of principal executive offices)
              
              (Zip
                  Code)
 
 011
                  63 2 892-0276(Registrant’s
                  telephone number, including area code)(Former
                  name, former address and former fiscal year, if changed since last
                  report)
 
 
 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 T No **ྑ**
 
 Indicate
        by check mark whether the registrant is an accelerated filer (as defined
        in Rule
        12b-2 of the Exchange Act).
 Yes **མ** No T
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act).
 Yes **མ** No T
 
 All
        of
        the shares of common equity of CE Casecnan Water and Energy Company, Inc.
        are
        privately held by a limited group of investors. As of November 3, 2005, the
        number of outstanding common stock was 767,162 shares, $0.038 par
        value.
  
  
 **TABLE
        OF CONTENTS**
 
 
 
 **PART
                  I - FINANCIAL INFORMATION**Item
                  1.
              Financial
                  Statements
              3Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              11Item
                  3.
              Quantitative
                  and Qualitative Disclosures About Market Risk
              16Item
                  4.
              Controls
                  and Procedures
              16**PART
                  II - OTHER INFORMATION**Item
                  1.
              Legal
                  Proceedings
              17Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds
              17Item
                  3.
              Defaults
                  Upon Senior Securities
              17Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              17Item
                  5.
              Other
                  Information
              17Item
                  6.
              Exhibits
              17Signatures
              
              18Exhibit
                  Index
              
              19
 
 
  2
  
 **PART
        I - FINANCIAL INFORMATION**
 
 **Item
        1.** **Financial
        Statements.**
 
 **Report
        of Independent Registered Public Accounting Firm**
 
 
 To
        the
        Board of Directors and Stockholders of
 CE
        Casecnan Water and Energy Company, Inc.
 
 We
        have
        reviewed the accompanying balance sheet of CE Casecnan Water and Energy Company,
        Inc. (the “Company”) as of September 30, 2005, and the related statements
        of operations for each of the three-month and nine-month periods ended
        September 30, 2005 and 2004 and of cash flows for each of the
        nine-month periods ended September 30, 2005 and 2004. These interim
        financial statements are the responsibility of the Company's
        management.
 
 We
        conducted our review in accordance with standards of the Public Company
        Accounting Oversight Board (United States). A review of interim financial
        information consists principally of applying analytical review procedures
        and
        making inquiries of persons responsible for financial and accounting matters.
        It
        is substantially less in scope than an audit conducted in accordance with
        standards of the Public Company Accounting Oversight Board, the objective
        of
        which is the expression of an opinion regarding the financial statements
        taken
        as a whole. Accordingly, we do not express such an opinion.
 
 Based
        on
        our review, we are not aware of any material modifications that should be
        made
        to the accompanying interim financial statements for them to be in conformity
        with accounting principles generally accepted in the United States of
        America.
 
 We
        previously audited in accordance with standards of the Public Company Accounting
        Oversight Board (United States), the balance sheet as of December 31,
        2004,
        and the related statements of operations, changes in stockholders’ equity and of
        cash flows for the year then ended (not presented herein), and in our report
        dated February 11, 2005, we expressed an unqualified opinion on those
        financial statements. In our opinion, the information set forth in the
        accompanying balance sheet as of December 31, 2004, is fairly stated
        in all
        material respects in relation to the balance sheet from which it has been
        derived.
 
 /s/
        Isla
        Lipana & Co.
 
 ISLA
        LIPANA & CO.
 A
        PricewaterhouseCoopers Member Firm
 Makati
        City, Philippines
 November
        3, 2005
   3
  
 **CE
        CASECNAN WATER AND ENERGY COMPANY, INC.**
 **BALANCE
        SHEETS**
 (Amounts
        in thousands of U.S. Dollars, except share data)
 
 **As
                    of****September 30,**
                
                **December 31,****2005**
                
                **2004****(Unaudited)****ASSETS**Current
                    assets:Cash
                    and cash equivalents
                
                $
                35,249
                
                $
                16,732Restricted
                    cash and investments
                
                
                56,147
                
                
                55,507Trade
                    receivable, net
                
                
                28,136
                
                
                25,242Prepaid
                    insurance and other current assets
                
                
                3,633
                
                
                7,334Total
                    current assets
                
                
                123,165
                
                
                104,815Bond
                    issue costs, net
                
                
                1,978
                
                
                2,678Property,
                    plant and equipment, net
                
                
                349,026
                
                
                365,132Deferred
                    income tax
                
                
                5,371
                
                
                5,371**Total
                    assets**
                
                $
                479,540
                
                $
                477,996**LIABILITIES
                    AND STOCKHOLDERS’ EQUITY**Current
                    liabilities:Accounts
                    payable and accrued liabilities
                
                $
                10,374
                
                $
                12,997Dividends
                    payable
                
                
                17,550
                
                
                15,900Accrued
                    interest
                
                
                15,044
                
                
                8,482Payable
                    to affiliates
                
                
                35,532
                
                
                35,148Current
                    portion of long-term debt
                
                
                45,384
                
                
                54,753Total
                    current liabilities
                
                
                123,884
                
                
                127,280Notes
                    payable
                
                
                51,263
                
                
                51,263Deferred
                    revenue
                
                
                11,151
                
                
                6,120Long-term
                    debt, net of current portion
                
                
                124,338
                
                
                142,345Total
                    liabilities
                
                
                310,636
                
                
                327,008Commitments
                    and contingencies (Note 4)Stockholders’
                    equity:Capital
                    stock - authorized 2,148,000 shares, one Philippine peso $0.038
                    par value;
                    767,162 shares issued and outstanding
                
                
                29
                
                
                29Additional
                    paid-in capital
                
                
                123,807
                
                
                123,807Retained
                    earnings
                
                
                45,068
                
                
                27,152Total
                    stockholders’ equity
                
                
                168,904
                
                
                150,988**Total
                    liabilities and stockholders’ equity**
                
                $
                479,540
                
                $
                477,996
 
  The
        accompanying notes are an integral part of these financial
        statements.
  4
  
 **CE
        CASECNAN WATER AND ENERGY COMPANY, INC.**
 **STATEMENTS
        OF OPERATIONS**
 (Amounts
        in thousands of U.S. Dollars)
 
 **Three
                  Months**
              
              **Nine Months****Ended
                  September 30,**
              
              **Ended
                  September 30,****2005**
              
              **2004**
              
              **2005**
              
              **2004****(Unaudited)****Revenue:**Lease
                  rentals and service contracts
              
              $
              27,721
              
              $
              38,016
              
              $
              69,503
              
              $
              77,443**Operating
                  expenses:**Depreciation
              
              
              5,317
              
              
              5,306
              
              
              16,198
              
              
              16,579Plant
                  operations and other operating expenses
              
              
              2,552
              
              
              2,264
              
              
              6,689
              
              
              6,637Total
                  operating expenses
              
              
              7,869
              
              
              7,570
              
              
              22,887
              
              
              23,216**Operating
                  income**
              
              
              19,852
              
              
              30,446
              
              
              46,616
              
              
              54,227**Other
                  income (expense):**Interest
                  expense
              
              
              (5,982
              )
              
              (7,292
              )
              
              (18,916
              )
              
              (22,476
              )Interest
                  income
              
              
              148
              
              
              311
              
              
              1,281
              
              
              1,152Other,
                  net
              
              
              (102
              )
              
              (5
              )
              
              (52
              )
              
              (83
              )Total
                  other expense, net
              
              
              (5,936
              )
              
              (6,986
              )
              
              (17,687
              )
              
              (21,407
              )**Income
                  before provision for income tax**
              
              
              13,916
              
              
              23,460
              
              
              28,929
              
              
              32,820Provision
                  for income tax
              
              
              13
              
              
              -
              
              
              13
              
              
              -**Net
                  income**
              
              $
              13,903
              
              $
              23,460
              
              $
              28,916
              
              $
              32,820
 
  The
        accompanying notes are an integral part of these financial
        statements.
  5
  
 **CE
        CASECNAN WATER AND ENERGY COMPANY, INC.**
 **STATEMENTS
        OF CASH FLOWS**
 (Amounts
        in thousands of U.S. Dollars)
 
 **Nine
                    Months****Ended
                    September 30,****2005**
                
                **2004****(Unaudited)****Cash
                    flows from operating activities:**Net
                    income
                
                $
                28,916
                
                $
                32,820Adjustments
                    to reconcile net income to cash flows from operating
                    activities:Depreciation
                
                
                16,198
                
                
                16,579Amortization
                    of bond issue costs
                
                
                700
                
                
                887Changes
                    in other items:Trade
                    receivable, net
                
                
                (2,894
                )
                
                (7,478
                )Prepaid
                    insurance and other current assets
                
                
                3,701
                
                
                5,612Accounts
                    payable and accrued interest
                
                
                3,939
                
                
                8,546Deferred
                    revenue
                
                
                5,031
                
                
                3,778Net
                    cash flows from operating activities
                
                
                55,591
                
                
                60,744**Cash
                    flows from investing activities:**Additions
                    to property, plant and equipment
                
                
                (92
                )
                
                (1,723
                )Liquidated
                    damages received, net of amounts accrued
                
                
                -
                
                
                18,900Collection
                    of ROP Note (Note 2)
                
                
                -
                
                
                97,000Increase
                    in restricted cash and investments for debt service obligations
                    and
                    dividends payable
                
                
                (640
                )
                
                (34,393
                )Net
                    cash flows (used in) from investing activities
                
                
                (732
                )
                
                79,784**Cash
                    flows from financing activities:**Increase
                    in payable to affiliates
                
                
                384
                
                
                42Repayment
                    of project financing debt
                
                
                (27,376
                )
                
                (24,681
                )Cash
                    dividends paid
                
                
                (9,350
                )
                
                (72,250
                )Net
                    cash flows used in financing activities
                
                
                (36,342
                )
                
                (96,889
                )**Net
                    change in cash and cash equivalents**
                
                
                18,517
                
                
                43,639**Cash
                    and cash equivalents at beginning of period**
                
                
                16,732
                
                
                4,513**Cash
                    and cash equivalents at end of period**
                
                $
                35,249
                
                $
                48,152**Supplemental
                    disclosure:**Interest
                    paid
                
                $
                13,230
                
                $
                16,472Dividends
                    declared but not paid
                
                $
                1,650
                
                $
                12,750
 
 For
        the
        period ended September 30, 2004, investment in property, plant and
        equipment was reduced by $23.9 million upon settlement of litigation
        and
        the accompanying receipt of cash of $18.9 million and reversal of
        liabilities of $5.0 million.
 
 The
        accompanying notes are an integral part of these financial
        statements.
 
  6
  
 **CE
        CASECNAN WATER AND ENERGY COMPANY, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **(Unaudited)**
 
 **1.**
              **General**
 
 The
        accompanying unaudited interim financial statements have been prepared by
        CE
        Casecnan Water and Energy Company, Inc. (“CE Casecnan” or the “Company”)
        pursuant to the rules and regulations of the United States Securities and
        Exchange Commission for interim financial reporting. In the opinion of the
        management of the Company, the accompanying unaudited financial statements
        contain all adjustments (consisting of normal recurring accruals) necessary
        to
        present fairly the financial position as of September 30, 2005, and
        the
        results of operations for each of the three-month and nine-month periods
        ended
        September 30, 2005 and 2004 and cash flows for the nine-month
        periods
        ended September 30, 2005 and 2004. The results of operations for the
        three-month and nine-month periods ended September 30, 2005 are not
        necessarily indicative of the results to be expected for the full year.
 
 The
        Company has a contract with the Republic of the Philippines (“ROP”), through the
        Philippine National Irrigation Administration (“NIA”) (a ROP-owned and
        controlled corporation), for the development and construction of a hydroelectric
        power plant and related facilities under a build-own-operate-transfer agreement
        (the “Project Agreement”), covering a 20-year cooperation period that commenced
        on December 11, 2001 and will end on December 11, 2021 (the
        “Cooperation Period”). At the end of the Cooperation Period, the combined
        irrigation and 150 megawatt (“MW”) hydroelectric power generation project (the
“Casecnan Project”) will be transferred to the ROP at no cost on an “as is”
        basis. The ROP also signed a Performance Undertaking, which affirms and
        guarantees the obligations of NIA under the contract.
 
 The
        Casecnan Project is dependant upon sufficient rainfall to generate electricity
        and deliver water. The seasonality of rainfall patterns and the variability
        of
        rainfall from year to year, all of which are outside the control of the Company,
        have a material impact on the amounts of electricity generated and water
        delivered by the Casecnan Project. Rainfall has historically been highest
        from
        June through December and lowest from January through May.
 
 The
        unaudited financial statements should be read in conjunction with the financial
        statements and notes thereto included in the Company’s Annual Report on Form
        10-K for the year ended December 31, 2004. In particular, the Company’s
        significant accounting policies are presented in Note 2 to the financial
        statements included therein.
 
 The
        Company’s operations consist of one reportable segment, the water delivery and
        electricity generation industry.
 
 **2.**
              **NIA
                  Arbitration Settlement**
 
 On
        October 15, 2003, the Company closed a transaction settling an arbitral
        proceeding which the Company had initiated against NIA in August 2002. In
        connection with the settlement, CE Casecnan entered into an agreement with
        NIA
        (the “Supplemental Agreement”) which supplements and amends the Project
        Agreement in certain respects. As part
        of the settlement, NIA delivered to CE Casecnan a ROP $97.0 million
        8.375%
        Note due 2013 (the “ROP Note”). The Company had the option, between
        January 14, 2004 and February 14, 2004 to put the ROP Note
        to the ROP,
        for a price of par plus accrued interest.
 
 On
        January 14, 2004, CE Casecnan exercised its right to put the ROP Note
        to
        the ROP and, in accordance with the terms of the put, CE Casecnan received
        $99.2 million (representing $97.0 million par value plus accrued
        interest) from the ROP on January 21, 2004.
 
 **3.**
              **Related
                  Party Transactions**
 
 In
        the
        normal course of business, the Company transacts with its affiliates in the
        form
        of advances for operating expenses. The payable to affiliates was
        $35.5 million and $35.1 million at September 30, 2005
        and
        December 31, 2004, respectively. Costs incurred by the Company in
        transactions with related parties amounted to $0.5 million and $0.2 million
        for
        each of the three-month periods ended September 30, 2005 and 2004,
        respectively, and $1.1 million and $0.8 million, for each of the nine-month
        periods ended September 30, 2005 and 2004, respectively.
   7
  As
        of
        September 30, 2005 and December 31, 2004, the Company had outstanding
        $51.3 million of unsecured subordinated notes payable to CE Casecnan
        Ltd.,
        a stockholder, due November 15, 2005. The notes bear interest at LIBOR
        plus
        two percent which is payable every May 15 and November 15.
        Interest
        expense on the notes was $0.7 million and $0.5 million during
        the
        three-month periods ended September 30, 2005 and 2004, respectively,
        and
        $1.9 million and $1.3 million during the nine-month periods
        ended
        September 30, 2005 and 2004, respectively. Any overdue payment of
        principal
        and interest payable on the notes bears interest at LIBOR plus four percent.
        At
        September 30, 2005, the effective interest rate on the notes
        was
        5.49%. The notes may be prepaid at any time without premium or penalty but
        with
        accrued interest, if any. The unsecured subordinated notes and any and all
        payments, whether of principal, interest or otherwise, are subject in all
        respects to the terms of the Subordination Agreement dated November 15,
        2001 between CE Casecnan Ltd. and the Company in favor of the trustee,
        the
        collateral agent, the co-collateral agent, the depository, any party that
        becomes a permitted counterparty under an Interest Rate/Currency Protection
        Agreement, any party that becomes a working capital facility agent and any
        other
        person that becomes a secured party under the Intercreditor Agreement. On
        November 1, 2005, the Company extended the due date of the notes to November
        1,
        2006 and amended the interest rate to 10% per annum, effective November 1,
        2005.
  **4.**
                **Commitments
                    and Contingencies**
  Stockholder
        Litigation
 
 Pursuant
        to the share ownership adjustment mechanism in the CE Casecnan stockholder
        agreement, which is based upon proforma financial projections of the Casecnan
        Project prepared following commencement of commercial operations, in February
        2002, MidAmerican Energy Holdings Company’s (“MidAmerican”) indirect wholly
        owned subsidiary, CE Casecnan Ltd., advised the minority stockholder
        of the Company, LaPrairie Group Contractors (International) Ltd. (“LPG”), that
        MidAmerican’s indirect ownership interest in CE Casecnan had increased to
        100% effective from commencement of commercial operations. On
        July 8, 2002, LPG filed a complaint in the Superior Court of
        the State
        of California, City and County of San Francisco against, among others,
        CE Casecnan Ltd. and MidAmerican. LPG’s
        complaint, as amended, seeks compensatory and punitive damages arising out
        of CE
        Casecnan Ltd.’s and MidAmerican’s alleged improper calculation of the proforma
        financial projections and alleged improper settlement of the NIA arbitration
        (see note 2). The
        Company is not a defendant in the action. On January 21, 2004, CE
        Casecnan
        Ltd., LPG and the Company entered into a status quo agreement pursuant to
        which
        the parties agreed to set aside certain distributions related to the shares
        subject to the LPG dispute and CE Casecnan agreed not to take any further
        actions with respect to such distributions without at least 15 days’ prior
        notice to LPG. Accordingly, 15% of the dividend declarations in 2004 and
        2005
        totaling $17.6 million was set aside in a separate bank account in
        the name
        of the Company and is shown as restricted cash and investments and dividends
        payable in the accompanying balance sheets. On August 4, 2005, the
        court
        issued a decision, ruling in favor of LPG on five of the eight disputed issues
        in the first phase of the litigation. MidAmerican intends to appeal this decision. On
        September 12, 2005, LPG filed a motion seeking the release of the funds which
        have been set aside pursuant to the status quo agreement referred to above.
        MidAmerican filed its opposition to the motion on October 3, 2005, and at
        the
        hearing on October 26, 2005, the court denied LPG’s motion. At the hearing,
        LPG noted its intent to withdraw all claims arising out of the NIA arbitration
        settlement and the remaining phase of the case is expected to address fiduciary
        duty claims against MidAmerican only.
 
 In
        February 2003, San Lorenzo Ruiz Builders and Developers Group, Inc. (“San
        Lorenzo”), an original shareholder substantially all of whose shares in the
        Company were purchased by MidAmerican in 1998, threatened to initiate legal
        action against the Company in the Philippines in connection with certain
        aspects
        of its option to repurchase such shares. The Company believes that San Lorenzo
        has no valid basis for any claim and, if named as a defendant in any action
        that
        may be commenced by San Lorenzo, the Company will vigorously defend such
        action.
        On July 1, 2005, MidAmerican and CE Casecnan Ltd. commenced
        an action
        against San Lorenzo in the District Court of Douglas County, Nebraska, seeking
        a
        declaratory judgment as to MidAmerican’s and CE Casecnan Ltd.'s rights vis-à-vis
        San Lorenzo in respect of such shares. San Lorenzo filed a motion to dismiss
        on
        September 19, 2005. The motion was heard on October 21, 2005, and the court
        took
        the matter under advisement.
 
  8
  Real
        Property Tax
 
 On
        December 6, 2004, the Municipality of Alfonso Castaneda (the
        “Municipality”), Province of Nueva Vizcaya (the “Province”) passed an ordinance
        which required the submission of a tax clearance from each of the provincial
        treasurer and municipal treasurer as a condition to issuing to CE Casecnan
        the
        annual renewal of its license to operate and business permit. CE Casecnan
        cannot obtain a tax clearance certificate from the Province until real property
        taxes due to the Province are paid. Pursuant to the Supplemental Agreement,
        before paying such real property taxes CE Casecnan must either receive
        direction from NIA and the Philippine Department of Finance (“DOF”) or be
        subject to risk of imminent assessment of penalties for non payment.
        CE Casecnan filed an action in the Regional Trial Court on
        January 21, 2005, against the Municipality and was granted
        a temporary
        restraining order barring the Municipality from closing the Casecnan Project.
        On
        February 7, 2005, the temporary restraining order was extended
        until
        the court resolves the petition for an injunction. On May 25, 2005,
        the
        Province served CE Casecnan a notice of delinquency stating that the assets
        of
        the Casecnan Project located in the Province were scheduled to be sold in
        a
        public auction on July 26, 2005. CE Casecnan filed a complaint for
        injunction with an application for a temporary restraining order on
        July 11, 2005 against the Province, impleading the DOF and NIA as
        necessary
        parties, seeking an order enjoining the Province from proceeding with any
        public
        auction or sale of any Casecnan Project assets. On July 21, 2005,
        the
        Regional Trial Court denied CE Casecnan’s request for a temporary restraining
        order. On July 25, 2005, CE Casecnan paid the real property taxes,
        plus
        interest and penalties, due to the Province of approximately $4.5 million
        and submitted an invoice for reimbursement of such amount to NIA in accordance
        with the Supplemental Agreement. On August 1, 2005, CE Casecnan received
        the business license and mayor’s permit from the Municipality. On August 2,
        2005, NIA rejected the reimbursement of CE Casecnan’s real property tax payment
        to Nueva Vizcaya on the grounds that CE Casecnan failed to obtain a written
        authorization from NIA and the DOF to pay the tax, that the payment was improper
        because of the protest filed by NIA which is pending in the Central Board
        of
        Assessment Appeals, and that CE Casecnan’s payment was premature as the Court of
        Appeals issued a temporary restraining order on July 28, 2005, or two days
        after
        the scheduled auction date. On August 12, 2005, CE Casecnan disputed NIA’s
        rejection of the reimbursement as without basis and constituting anticipatory
        breach under the Supplemental Agreement. CE Casecnan invoked Section 20.1
        on
        dispute resolution of the Agreement and requested a meeting to resolve the
        dispute. On September 1, 2005, CE Casecnan met with NIA and the DOF to discuss
        the tax reimbursement issue. CE Casecnan received confirmation that NIA would
        meet with the DOF and the Office of the Government Corporate Counsel (“OGCC”) to
        resolve the issue. CE Casecnan believes that taxes paid pursuant to the
        Supplemental Agreement will be reimbursed by NIA.
 
 On
        August 3, 2005, CE Casecnan received a tax assessment from the Province
        of
        Nueva Ecija for approximately $4.5 million in respect of Project property
        located in the Province of Nueva Ecija. These taxes have been fully accrued
        as
        of September 30, 2005 and December 31, 2004 as part of accounts
        payable and trade receivable. CE Casecnan forwarded the tax assessment to
        NIA
        and the DOF and sought authorization to pay such taxes. On August 8, 2005,
        NIA
        instructed CE Casecnan in writing to file an appeal before the Local Board
        of
        Assessment Appeals to dispute the assessment within 60 days from receipt
        of the
        Notice Assessment. CE Casecnan filed the appeal on September 30, 2005.
 
 Tax
        Legislation
 
 On
        May 24, 2005, President Arroyo signed an amended tax law, which was
        scheduled to come into effect on July 1, 2005. The law raises the
        corporate
        income tax rate from 32% to 35% through 2008 (reducing to 30% thereafter)
        and
        imposes value-added tax of 10% on, among other goods and services, the
        generation of electricity and the provision of water delivery services. However,
        the law provides that electricity generated from hydro-electric power, such
        as
        the Casecnan Project, shall be subject to value-added tax at zero rate. The
        law
        (and the Project Agreement) also permits CE Casecnan to invoice NIA for
        value-added tax on water delivery fees (and, if electricity generated from
        hydro-electric power were to become subject to value-added tax, on energy
        delivery fees as well). Implementation was deferred until legal challenges
        to
        the tax law were resolved. On October 18, 2005, the Philippine Supreme Court
        issued a final ruling upholding the constitutionality of the tax law and
        implementation is expected on November 1, 2005. The implementation of the
        tax
        law is not expected to have an adverse impact on the Casecnan
        Project.
 
  9
  Concentration
        of Risk
 
 NIA’s
        payments of obligations under the Project Agreement are substantially
        denominated in U.S. Dollars and are the Company’s sole source of operating
        revenues. Because of the Company’s dependence on NIA, any material failure of
        NIA to fulfill its obligations under the Project Agreement and any material
        failure of the ROP to fulfill its obligations under the Performance Undertaking
        would significantly impair the ability of the Company to meet its existing
        and
        future obligations, including obligations pertaining to its outstanding debt.
        No
        stockholders, partners or affiliates of the Company, including MidAmerican,
        and
        no directors, officers or employees of the Company will guarantee or be in
        any
        way liable for payment of the Company’s obligations. As a result, payment of the
        Company’s obligations depends upon the availability of sufficient revenues from
        the Company’s business after the payment of operating expenses.
 
 **5.**
              **Reclassifications**
 
 Certain
        amounts in the 2004 financial statements and supporting note disclosures
        have
        been reclassified to conform to the current period presentation, including
        the
        reclassification of restricted cash and investments to current assets and
        the
        reclassification of changes in restricted cash from financing activities
        to
        investing activities. Such reclassifications did not impact previously reported
        net income or retained earnings.
  10
  **Item
        2.** **Management’s
        Discussion and Analysis of Financial Condition and Results of
        Operations.**
 
 The
        following is management’s discussion and analysis of certain significant factors
        which have affected the financial condition and results of operations of
        CE
        Casecnan Water and Energy Company, Inc. (“CE Casecnan” or the “Company”), during
        the periods included in the accompanying statements of operations. This
        discussion should be read in conjunction with the Company’s historical financial
        statements and the notes to those statements. The Company’s actual results in
        the future could differ significantly from the historical results.
 
 **Forward-Looking
        Statements**
 
 From
        time
        to time, CE Casecnan may make forward-looking statements within the meaning
        of
        the federal securities laws that involve judgments, assumptions and other
        uncertainties beyond the control of the Company. These forward-looking
        statements may include, among others, statements concerning revenue and cost
        trends, cost recovery, cost reduction strategies and anticipated outcomes,
        collections, pricing strategies, changes in the utility industry, financing
        needs and availability, statements of the Company’s expectations, beliefs,
        future plans and strategies, anticipated events or trends and similar comments
        concerning matters that are not historical facts. These types of forward-looking
        statements are based on current expectations and involve a number of known
        and
        unknown risks and uncertainties that could cause the actual results and
        performance of the Company to differ materially from any expected future
        results
        or performance, expressed or implied, by the forward-looking statements.
        In
        connection with the safe harbor provisions of the Private Securities Litigation
        Reform Act of 1995, the Company has identified important factors that could
        cause actual results to differ materially from those expectations, including
        weather effects on revenues and other operating uncertainties, uncertainties
        relating to economic and political conditions and uncertainties regarding
        the
        impact of regulations, changes in government policy and competition. The
        Company
        does not assume any responsibility to update forward-looking information
        contained herein.
 
 **Business**
 
 The
        Company has a contract with the Republic of the Philippines (“ROP”), through the
        Philippine National Irrigation Administration (“NIA”) (a ROP-owned and
        controlled corporation), for the development and construction of a hydroelectric
        power plant and related facilities under a build-own-operate-transfer agreement
        (“Project Agreement”), covering a 20-year cooperation period that commenced on
        December 11, 2001 and will end on December 11, 2021 (“Cooperation
        Period”). At the end of the Cooperation Period, the combined irrigation and 150
        MW hydroelectric power generation project (the “Casecnan Project”) will be
        transferred to the ROP at no cost on an “as is” basis. The ROP also signed a
        Performance Undertaking, which, among others, affirms and guarantees the
        obligations of NIA under the contract.
 
 In
        connection with the settlement of an arbitral proceeding on October 15,
        2003, CE Casecnan entered into an agreement with NIA (the “Supplemental
        Agreement”) which supplements and amends the Project Agreement in certain
        respects.
 
 **Seasonality**
 
 The
        Casecnan Project is dependant upon sufficient rainfall to generate electricity
        and deliver water. The seasonality of rainfall patterns and the variability
        of
        rainfall from year to year, all of which are outside the control of the Company,
        have a material impact on the amounts of electricity generated and water
        delivered by the Casecnan Project. Rainfall has historically been highest
        from
        June through December and lowest from January through May. Therefore, portions
        of the water delivery fees and variable energy fees (described below) can
        produce significant variability in revenue between reporting
        periods.
 
 Under
        the
        Supplemental Agreement, the water delivery fee is payable in a fixed monthly
        payment based upon an average annual water delivery of 801.9 million
        cubic
        meters, pro-rated to approximately 66.8 million cubic meters per month,
        multiplied by the applicable per cubic meter rate through December 25,
        2008. For each contract year starting from December 25, 2003 and ending
        on
        December 25, 2008, a water delivery credit is computed equal to
        801.9 million cubic meters minus the greater of actual water deliveries
        or
        700.0 million cubic meters - the minimum threshold. The water delivery
        credit at the end of the contract year is available to be earned in the
        succeeding contract years ending December 25, 2008. The cumulative
        water delivery credit at December 25, 2008, if any, shall be amortized
        from
        December 25, 2008 through December 25, 2013. Accordingly, in
        recognizing revenue, the water delivery fees are recorded each month pro-rated
        to approximately 58.3 million cubic meters per month until the minimum
        threshold has been reached for the contract year. Subsequent water delivery
        fees
        within the contract year are based on actual water delivered. The cumulative
        water delivery credit was $11.2 million and $6.1 million at
        September 30, 2005 and December 31, 2004, respectively.
 
  11
 The
          Company earns variable energy fees based upon actual energy delivered in
          each
          month in excess of 19.0 gigawatt-hours (“GWh”), payable at a rate of $0.1509 per
          kilowatt-hour (“kWh”). Starting in 2009, the per kWh rate for energy deliveries
          in excess of 19.0 GWh per month is reduced to $0.1132 (escalating at 1%
          per
          annum thereafter), provided that any deliveries of energy in excess of
          490.0
          GWh, but less than 550.0 GWh per year are paid at a rate of 1.3 Philippine
          pesos
          per kWh (reduced to 0.975 Philippine pesos in 2009 and escalated at 1%
          per
          annum) thereafter and deliveries in excess of 550.0 GWh per year are at
          no cost
          to NIA. Within each contract year, no variable energy fees are payable
          until
          energy in excess of the cumulative 19.0 GWh per month for the contract
          year to
          date has been delivered.
  **Results
        of Operations for the Three-Month Periods Ended September 30, 2005
        and
        2004**
 
 The
        following table provides certain operating data of the Casecnan Project for
        the
        three-month periods ended September 30, 2005 and 2004:
 
 **2005**
                
                **2004**Electricity
                    produced (GWh)
                148.2
                
                187.8Water
                    delivered (million cubic meters)
                258.9
                
                328.0
 
 Delivered
        water and associated electricity production was lower in 2005 due to drier
        conditions within the Casecnan watershed.
 
 For
        accounting purposes, the Project Agreement with NIA contains both an operating
        lease and a service contract, which the Company accounted for pursuant to
        the
        provisions of Statement of Financial Accounting Standards No. 13, “Accounting
        for Leases.” Pursuant to the provisions of the Project Agreement, the Company
        earned water and energy fees as follows (in millions):
 
 **2005**
                
                **2004**Water
                    delivery fees
                
                $
                13.4
                
                $
                12.5Guaranteed
                    energy fees
                
                
                9.1
                
                
                9.1Variable
                    energy fees
                
                
                6.9
                
                
                18.0Deferred
                    water delivery fees
                
                
                (1.7
                )
                
                (1.6
                )Total
                    water and energy fees
                
                $
                27.7
                
                $
                38.0
 
 Revenue
        decreased by $10.3 million to $27.7 million for the three-month
        period
        ended September 30, 2005 from $38.0 million for the same period
        in
        2004. The $0.9 million increase in water delivery fees was mainly due to
        the
        7.5% increase in the water delivery rate based on a contractual annual
        escalation factor. The $11.1 million decrease in variable energy fees, which
        is
        based upon actual energy delivered in each month in excess of 19.0 GWh, was
        due
        primarily to the drier conditions in 2005 than in 2004. The deferred water
        delivery fees represent the difference between the actual water delivery
        fees
        earned and water delivery fees invoiced pursuant to the Supplemental
        Agreement.
 
 Plant
        operations and other operating expenses increased $0.3 million to $2.6 million
        for the three-month period ended September 30, 2005 from $2.3 million
        for the same period in 2004, due primarily to maintenance expenditures for
        roads
        and diversion structures.
 
 Interest
        expense decreased $1.3 million to $6.0 million for the three-month
        period ended September 30, 2005 from $7.3 million for the same
        period
        in 2004, due primarily to lower outstanding debt balances resulting from
        the
        scheduled repayment of debt.
 
  12
  **Results
        of Operations for the Nine-Month Periods Ended September 30, 2005
        and
        2004**
 
 The
        following table provides certain operating data of the Casecnan Project for
        the
        nine-month periods ended September 30, 2005 and 2004:
 
 **2005**
              
              **2004**Electricity
                  produced (GWh)
              224.0
              
              285.9Water
                  delivered (million cubic meters)
              387.6
              
              500.2
 
 Delivered
        water and associated electricity production was lower in 2005 due to drier
        conditions within the Casecnan watershed.
 
 For
        accounting purposes, the Project Agreement with NIA contains both an operating
        lease and a service contract, which the Company accounted for pursuant to
        the
        provisions of Statement of Financial Accounting Standards No. 13, “Accounting
        for Leases”. Pursuant to the provisions of the Project Agreement, the Company
        earned water and energy fees as follows (in millions):
 
 **2005**
              
              **2004**Water
                  delivery fees
              
              $
              39.6
              
              $
              36.8Guaranteed
                  energy fees
              
              
              27.3
              
              
              27.3Variable
                  energy fees
              
              
              7.6
              
              
              18.0Deferred
                  water delivery fees
              
              
              (5.0
              )
              
              (4.7
              )Total
                  water and energy fees
              
              $
              69.5
              
              $
              77.4
 
 Revenue
        decreased by $7.9 million to $69.5 million for the nine-month
        period
        ended September 30, 2005 from $77.4 million for the same period
        in
        2004. The $2.8 million increase in water delivery fees was mainly
        due to
        the 7.5% increase in the water delivery rate based on a contractual annual
        escalation factor. The $10.4 million decrease in the variable energy
        fees
        was due primarily to the drier conditions in 2005 than in 2004. The deferred
        water delivery fees represent the difference between the actual water delivery
        fees earned and water delivery fees invoiced pursuant to the Supplemental
        Agreement.
 
 Depreciation
        decreased by $0.4 million to $16.2 million for the nine-month
        period
        ended September 30, 2005 from $16.6 million for the same period
        in
        2004. In April 2004, property, plant and equipment was reduced by the $18.9
        million collected pursuant to the contractor arbitration
        settlement.
 
 Interest
        expense decreased by $3.6 million to $18.9 million for the
        nine-month
        period ended September 30, 2005 from $22.5 million for the
        same period
        in 2004, due to lower outstanding debt balances resulting from the scheduled
        repayment of debt.
 
 **Liquidity
        and Capital Resources**
 
 NIA’s
        payments of obligations under the Project Agreement are substantially
        denominated in U.S. Dollars and are the Company’s sole source of operating
        revenue. Because of the Company’s dependence on NIA, any material failure of NIA
        to fulfill its obligations under the Project Agreement and any material failure
        of the ROP to fulfill its obligations under the Performance Undertaking would
        significantly impair the ability of the Company to meet its existing and
        future
        obligations, including obligations pertaining to its outstanding debt. No
        stockholders, partners or affiliates of the Company, including MidAmerican
        Energy Holdings Company (“MidAmerican”), and no directors, officers or employees
        of the Company will guarantee or be in any way liable for payment of the
        Company’s obligations. As a result, payment of the Company’s obligations depends
        upon the availability of sufficient revenues from the Company’s business after
        the payment of operating expenses.
 
 The
        Company's cash and cash equivalents were $35.2 million and
        $16.7 million at September 30, 2005 and December 31,
        2004,
        respectively.
 
 The
        Company generated cash flows from operations of $55.6 million and
        $60.7
        million for the nine-month periods ended September 30, 2005 and 2004,
        respectively. The decrease in cash from operations in 2005 was primarily
        due to
        lower variable energy fee billings and associated collections and payment
        of
        real property taxes.
  13
  The
        Company used $0.7 million for and generated $79.8 million from
        investing activities for the nine-month periods ended September 30,
        2005
        and 2004, respectively. On January 21, 2004, the Company collected
        $97.0 million from the put of the R OP
        $97.0 million 8.375% Note due 2013 (the “ROP Note”) received
        in connection with the NIA Arbitration Settlement. On April 7, 2004,
        the
        Company received $18.9 million ($19.1 million in proceeds less
        $0.2 million placed in escrow) from the settlement of the International
        Chamber of Commerce arbitration case involving the construction of the project.
        During the nine month period ended September 30, 2004, the Company
        increased its restricted cash related to obligations for debt service and
        unpaid
        dividends by $34.4 million.
 
 The
        Company used $36.3 million and $96.9 million for financing
        activities
        for the nine-month periods ended September 30, 2005 and 2004,
        respectively. During the nine-month period ended September 30, 2005,
        the
        Company declared dividends out of its cash funds amounting to
        $11.0 million, of which $9.3 million was paid and $1.7 million
        was set aside in a separate bank account in the name of the Company and is
        shown
        as restricted cash and investments and dividends payable in the balance sheet.
        During the nine month period ended September 30, 2004, the Company
        distributed dividends out of its cash funds amounting to $85.0 million,
        of
        which $12.8 million was set aside in a separate bank account in the
        name of
        the Company. The increase in restricted cash and payment of dividends was
        largely funded by the collection of the ROP Note and the receipt of
        $18.9 million of cash in connection with the contractor arbitration
        settlement. The Company also made principal payments amounting to
        $27.4 million and $24.7 million on the outstanding balance
        of the
        Series A and B bonds during the nine-month periods ended September 30,
        2005
        and 2004, respectively.
 
 Stockholder
        Litigation
 
 Pursuant
        to the share ownership adjustment mechanism in the CE Casecnan stockholder
        agreement, which is based upon proforma financial projections of the Casecnan
        Project prepared following commencement of commercial operations, in February
        2002, MidAmerican’s indirect wholly owned subsidiary,
        CE Casecnan Ltd., advised the minority stockholder of the Company,
        LaPrairie Group Contractors (International) Ltd. (“LPG”), that MidAmerican’s
        indirect ownership interest in CE Casecnan had increased to 100% effective
        from commencement of commercial operations. On July 8, 2002,
        LPG filed
        a complaint in the Superior Court of the State of California, City and County
        of
        San Francisco against, among others, CE Casecnan Ltd. and MidAmerican. LPG’s
        complaint, as amended, seeks compensatory and punitive damages arising out
        of CE
        Casecnan Ltd.’s and MidAmerican’s alleged improper calculation of the proforma
        financial projections and alleged improper settlement of the NIA arbitration
        (see note 2). The
        Company is not a defendant in the action. On January 21, 2004, CE
        Casecnan
        Ltd., LPG and the Company entered into a status quo agreement pursuant to
        which
        the parties agreed to set aside certain distributions related to the shares
        subject to the LPG dispute and CE Casecnan agreed not to take any further
        actions with respect to such distributions without at least 15 days’ prior
        notice to LPG. Accordingly, 15% of the dividend declarations in 2004 and
        2005,
        totaling $17.6 million was set aside in a separate bank account in
        the name
        of the Company and is shown as restricted cash and investments and dividends
        payable in the accompanying balance sheets. On August 4, 2005, the
        court
        issued a decision, ruling in favor of LPG on five of the eight disputed issues
        in the first phase of the litigation. MidAmerican intends to appeal this decision. On
        September 12, 2005, LPG filed a motion seeking the release of the funds which
        have been set aside pursuant to the status quo agreement referred to above.
        MidAmerican filed its opposition to the motion on October 3, 2005, and at
        the
        hearing on October 26, 2005, the
        court denied LPG’s motion. At the hearing, LPG noted its intent to withdraw
        all claims arising out of the NIA arbitration settlement and the remaining
        phase
        of the case is expected to address fiduciary duty claims against MidAmerican
        only.
 
 In
        February 2003, San Lorenzo Ruiz Builders and Developers Group, Inc. (“San
        Lorenzo”), an original shareholder substantially all of whose shares in the
        Company were purchased by MidAmerican in 1998, threatened to initiate legal
        action against the Company in the Philippines in connection with certain
        aspects
        of its option to repurchase such shares. The Company believes that San Lorenzo
        has no valid basis for any claim and, if named as a defendant in any action
        that
        may be commenced by San Lorenzo, the Company will vigorously defend such
        action.
        On July 1, 2005, MidAmerican and CE Casecnan Ltd. commenced
        an action
        against San Lorenzo in the District Court of Douglas County, Nebraska, seeking
        a
        declaratory judgment as to MidAmerican’s and CE Casecnan Ltd.'s rights vis-à-vis
        San Lorenzo in respect of such shares. San Lorenzo filed a motion to dismiss
        on
        September 19, 2005. The motion was heard on October 21, 2005, and the court
        took
        the matter under advisement.
  14
  Real
        Property Tax
 
 On
        December 6, 2004, the Municipality of Alfonso Castaneda (the
        “Municipality”), Province of Nueva Vizcaya (the “Province”) passed an ordinance
        which required the submission of a tax clearance from each of the provincial
        treasurer and municipal treasurer as a condition to issuing to CE Casecnan
        the
        annual renewal of its license to operate and business permit. CE Casecnan
        cannot obtain a tax clearance certificate from the Province until real property
        taxes due to the Province are paid. Pursuant to the Supplemental Agreement,
        before paying such real property taxes CE Casecnan must either receive
        direction from NIA and the Philippine Department of Finance (“DOF”) or be
        subject to risk of imminent assessment of penalties for non payment.
        CE Casecnan filed an action in the Regional Trial Court on
        January 21, 2005, against the Municipality and was granted
        a temporary
        restraining order barring the Municipality from closing the Casecnan Project.
        On
        February 7, 2005, the temporary restraining order was extended
        until
        the court resolves the petition for an injunction. On May 25, 2005,
        the
        Province served CE Casecnan a notice of delinquency stating that the assets
        of
        the Casecnan Project located in the Province were scheduled to be sold in
        a
        public auction on July 26, 2005. CE Casecnan filed a complaint for
        injunction with an application for a temporary restraining order on
        July 11, 2005 against the Province, impleading the DOF and NIA as
        necessary
        parties, seeking an order enjoining the Province from proceeding with any
        public
        auction or sale of any Casecnan Project assets. On July 21, 2005,
        the
        Regional Trial Court denied CE Casecnan’s request for a temporary restraining
        order. On July 25, 2005, CE Casecnan paid the real property taxes,
        plus
        interest and penalties, due to the Province of approximately $4.5 million
        and submitted an invoice for reimbursement of such amount to NIA in accordance
        with the Supplemental Agreement. On August 1, 2005, CE Casecnan received
        the business license and mayor’s permit from the Municipality. On August 2,
        2005, NIA rejected the reimbursement of CE Casecnan’s real property tax payment
        to Nueva Vizcaya on the grounds that CE Casecnan failed to obtain a written
        authorization from NIA and the DOF to pay the tax, that the payment was improper
        because of the protest filed by NIA which is pending in the Central Board
        of
        Assessment Appeals, and that CE Casecnan’s payment was premature as the Court of
        Appeals issued a temporary restraining order on July 28, 2005, or two days
        after
        the scheduled auction date. On August 12, 2005, CE Casecnan disputed NIA’s
        rejection of the reimbursement as without basis and constituting anticipatory
        breach under the Supplemental Agreement. CE Casecnan invoked Section 20.1
        on
        dispute resolution of the Agreement and requested a meeting to resolve the
        dispute. On September 1, 2005, CE Casecnan met with NIA and the DOF to discuss
        the tax reimbursement issue. CE Casecnan received confirmation that NIA would
        meet with the DOF and the Office of the Government Corporate Counsel (“OGCC”) to
        resolve the issue. CE Casecnan believes that taxes paid pursuant to the
        Supplemental Agreement will be reimbursed by NIA.
 
 On
        August 3, 2005, CE Casecnan received a tax assessment from the Province
        of
        Nueva Ecija for approximately $4.5 million in respect of Project property
        located in the Province of Nueva Ecija. These taxes have been fully accrued
        as
        of September 30, 2005 and December 31, 2004 as part of accounts
        payable and trade receivable. CE Casecnan forwarded the tax assessment to
        NIA
        and the DOF and sought authorization to pay such taxes. On August 8, 2005,
        NIA
        instructed CE Casecnan in writing to file an appeal before the Local Board
        of
        Assessment Appeals to dispute the assessment within 60 days from receipt
        of the
        Notice Assessment. CE Casecnan filed the appeal on September 30, 2005.
 
 Tax
        Legislation
 
 On
        May 24, 2005, President Arroyo signed an amended tax law, which was
        scheduled to come into effect on July 1, 2005. The law raises the
        corporate
        income tax rate from 32% to 35% through 2008 (reducing to 30% thereafter)
        and
        imposes value-added tax of 10% on, among other goods and services, the
        generation of electricity and the provision of water delivery services. However,
        the law provides that electricity generated from hydro-electric power, such
        as
        the Casecnan Project, shall be subject to value-added tax at zero rate. The
        law
        (and the Project Agreement) also permits CE Casecnan to invoice NIA for
        value-added tax on water delivery fees (and, if electricity generated from
        hydro-electric power were to become subject to value-added tax, on energy
        delivery fees as well). Implementation was deferred until legal challenges
        to
        the tax law were resolved. On October 18, 2005, the Philippine Supreme Court
        issued a final ruling upholding the constitutionality of the tax law and
        implementation is expected on November 1, 2005. The implementation of the
        tax
        law is not expected to have an adverse impact on the Casecnan
        Project.
   15
  **Contractual
        Obligations and Commercial Commitments**
 
 During
        the nine months ended September 30, 2005, there were no material
        changes in the contractual obligations and commercial commitments from the
        information provided in Item 7 of the Company’s Annual Report on Form 10-K for
        the year ended December 31, 2004.
 
 **Critical
        Accounting Policies**
 
 The
        preparation of financial statements and related disclosures in conformity
        with
        accounting principles generally accepted in the United States of America
        requires management to make judgments, assumptions and estimates that affect
        the
        amounts reported in the financial statements and accompanying notes. Note
        2 to
        the Company’s financial statements included in its Annual Report on Form 10-K
        for the year ended December 31, 2004 describes the significant accounting
        policies and methods used in the preparation of the financial statements.
        Estimates are used for, but not limited to, the impairment of long-lived
        assets
        and accounting for the allowance for doubtful accounts. Actual results could
        differ from estimates.
 
 For
        additional discussion of the Company’s critical accounting policies, see
“Management’s Discussion and Analysis of Financial Condition and Results of
        Operations” included in the Company’s Annual Report on Form 10-K for the year
        ended December 31, 2004.
 
 **Item
        3.** **Quantitative
        and Qualitative Disclosures About Market Risk.**
 
 For
        quantitative and qualitative disclosures about market risk affecting CE
        Casecnan, see Item 7A “Qualitative and Quantitative Disclosures About Market
        Risk” of CE Casecnan’s Annual Report on Form 10-K for the year ended
        December 31, 2004. CE Casecnan’s exposure to market risk has not
        changed materially since December 31, 2004.
 
 **Item
        4.** **Controls
        and Procedures.**
 
 An
        evaluation was performed under the supervision and with the participation
        of the
        Company’s management, including the chief executive officer and chief financial
        officer, regarding the effectiveness of the design and operation of the
        Company’s disclosure controls and procedures (as defined in Rule 13a-15(e)
        promulgated under the Securities and Exchange Act of 1934, as amended) as
        of
        September 30, 2005. Based on that evaluation, the Company’s
        management, including the chief executive officer and chief financial officer,
        concluded that the Company’s disclosure controls and procedures were effective.
        There have been no changes during the quarter covered by this report in the
        Company’s internal control over financial reporting that has materially
        affected, or is reasonably likely to materially affect, the Company’s internal
        control over financial reporting.
 
  16
  **PART
        II - OTHER INFORMATION**
 
 **Item
        1.** **Legal
        Proceedings.**
 
 For
        a
        description of certain legal proceedings affecting the Company, please review
        Note 4 to the Interim Financial Statements, “Commitments and
        Contingencies”.
 
 **Item
        2.** **Unregistered
        Sales of Equity Securities and Use of Proceeds.**
 
 Not
        applicable.
 
 **Item
        3.** **Defaults
        Upon Senior Securities.**
 
 Not
        applicable.
 
 **Item
        4.** **Submission
        of Matters to a Vote of Security Holders.**
 
 Not
        applicable.
 
 **Item
        5.** **Other
        Information.**
 
 Not
        applicable.
 
 **Item
        6.** **Exhibits.**
 
 The
        exhibits listed on the accompanying Exhibit Index are filed as part of this
        Quarterly Report.
 
  17
  
 **SIGNATURES**
 
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
 
 
 
 CE
                  CASECNAN WATER AND ENERGY COMPANY, INC.(Registrant)Date:
                  November 3, 2005
              
              /s/
                  Patrick J. GoodmanPatrick
                  J. GoodmanSenior
                  Vice President and Chief Financial
                  Officer
 
  18
  **EXHIBIT
        INDEX**
 
 Exhibit
                  No.
              
              Description31.1
              
              Chief
                  Executive Officer’s Certificate Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.31.2
              
              Chief
                  Financial 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.
 
  19