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

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 2003

                          Commission File No. 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. Employer
       incorporation or organization)                      Identification No.)

    24th Floor, 6750 Building, Ayala Avenue
       Makati, Metro Manila, Philippines                     Not Applicable
       ---------------------------------                     --------------
    (Address of principal executive offices)                   (Zip Code)

                                 (632) 892-0276
                                 --------------
              (Registrant's telephone number, including area code)

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

As of October 31, 2003, 767,162 shares of common stock were outstanding.


<PAGE>


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

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements................................................. 3
Item 2.  Management's Discussion and Analysis of Financial Condition and
           Results of Operations..............................................14
Item 3.  Quantitative and Qualitative Disclosures About Market Risk...........22
Item 4.  Controls and Procedures..............................................22

                         PART II - OTHER INFORMATION

Item 1.  Legal Proceedings....................................................23
Item 2.  Changes in Securities and Use of Proceeds............................23
Item 3.  Defaults Upon Senior Securities......................................23
Item 4.  Submission of Matters to a Vote of Security Holders..................23
Item 5.  Other Information....................................................23
Item 6.  Exhibits and Reports on Form 8-K.....................................23

SIGNATURES....................................................................24
EXHIBIT INDEX.................................................................25

                                      -2-


<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.


                         INDEPENDENT ACCOUNTANTS' REPORT


To the Board of  Directors  and  Stockholders  of CE  Casecnan  Water and Energy
Company, Inc.

We have reviewed the accompanying balance sheets of CE Casecnan Water and Energy
Company,  Inc.  (the  "Company")  as of  September  30,  2003,  and the  related
statements of operations  for each of the  three-month  and  nine-month  periods
ended  September  30, 2003 and 2002,  and the  statements  of cash flows for the
nine-month  periods ended September 30, 2003 and 2002.  These interim  financial
statements are the responsibility of the Company's management.

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information  consists  principally of applying  analytical 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
generally accepted auditing standards,  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 auditing  standards  generally accepted
in the United States of America,  the balance sheet as of December 31, 2002, 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 January 24, 2003, we expressed an unqualified  opinion on those  financial
statements.  In our  opinion,  the  information  set  forth in the  accompanying
balance  sheet  information  as of December  31, 2002,  is fairly  stated in all
material  respects  in  relation  to the  balance  sheet  from which it has been
derived.

/s/ Joaquin Cunanan & Co.

JOAQUIN CUNANAN & CO.
A PRICEWATERHOUSECOOPERS MEMBER FIRM
Makati City, Philippines
October 31, 2003


                                      -3-
<PAGE>



                   CE CASECNAN WATER AND ENERGY COMPANY, INC.
                                 BALANCE SHEETS
                (In thousands of U.S. Dollars, except share data)
<TABLE>
<CAPTION>

                                                                                  AS OF
                                                                      -----------------------------
                                                                      SEPTEMBER 30,    DECEMBER 31,
                                                                           2003            2002
                                                                      -------------    ------------
                                                                       (UNAUDITED)
                                     ASSETS
<S>                                                                      <C>             <C>
Current assets:
  Cash and cash equivalents .......................................      $  3,394        $    705
  Trade receivable, net ...........................................        72,984          51,515
  Accrued interest and other receivable, net ......................         7,766           7,009
  Prepaid insurance and other current assets ......................         3,229           5,562
                                                                         --------        --------
  Total current assets ............................................        87,373          64,791
                                                                         --------        --------
Restricted cash and investments ...................................        39,223           7,078
Bond issue costs, net .............................................         4,200           5,218
Property, plant and equipment, net ................................       439,727         453,507
Deferred income tax ...............................................         5,371           5,371
Other assets ......................................................             -           5,542
                                                                         --------        --------
TOTAL ASSETS ......................................................      $575,894        $541,507
                                                                         ========        ========


                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses ...........................      $ 10,986        $ 10,785
  Accrued interest on notes payable ...............................         3,322           2,048
  Accrued interest on long-term debts .............................        11,771           4,223
  Payable to affiliates ...........................................        34,660          33,342
  Current portion of long-term debt ...............................        45,414          41,468
                                                                         --------        --------
    Total current liabilities .....................................       106,153          91,866
                                                                         --------        --------

Notes payable to affiliates .......................................        51,263          51,263
Long-term debts, net of current portion ...........................       221,778         246,457
                                                                         --------        --------
  Total liabilities ...............................................       379,194         389,586
                                                                         --------        --------

Commitments and contingencies (Notes 2, 3 and 5)

Stockholders' equity:
Capital stock - authorized 2,148,000 shares, one Philippine peso
  ($0.038) par value; 767,162 shares issued and outstanding .......            29              29
Additional paid-in capital ........................................       123,807         123,807
Retained earnings .................................................        72,864          28,085
                                                                         --------        --------
  Total stockholders' equity ......................................       196,700         151,921
                                                                         --------        --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........................      $575,894        $541,507
                                                                         ========        ========
</TABLE>

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

                                      -4-
<PAGE>


                   CE CASECNAN WATER AND ENERGY COMPANY, INC.
                            STATEMENTS OF OPERATIONS
                (In thousands of U.S. Dollars, except share data)

<TABLE>
<CAPTION>
                                                           THREE MONTHS                 NINE MONTHS
                                                        ENDED SEPTEMBER 30,         ENDED SEPTEMBER 30,
                                                      -----------------------     -----------------------
                                                         2003          2002          2003          2002
                                                      ---------     ---------     ---------     ---------
                                                                          (UNAUDITED)
<S>                                                   <C>           <C>           <C>           <C>
REVENUE:
  Delivery of water ..............................    $  22,439     $  20,480     $  66,924     $  60,262
  Sale of electricity ............................       25,737        18,660        45,970        36,849
                                                      ---------     ---------     ---------     ---------
    Total revenue ................................       48,176        39,140       112,894        97,111
                                                      ---------     ---------     ---------     ---------
OPERATING EXPENSES:
  Depreciation ...................................        6,059         5,844        17,477        17,583
  Plant operations ...............................        4,598         2,638        11,947         6,705
  Doubtful accounts ..............................        1,366         3,177         7,778         8,062
                                                      ---------     ---------     ---------     ---------
    Total operating expenses .....................       12,023        11,659        37,202        32,350
                                                      ---------     ---------     ---------     ---------

OPERATING INCOME .................................       36,153        27,481        75,692        64,761

OTHER INCOME (EXPENSE):
  Interest expense, net ..........................      (10,215)      (10,540)      (31,146)      (31,948)
  Other, net .....................................           95           (22)          233           (29)
                                                      ---------     ---------     ---------     ---------
    Total other expense, net .....................      (10,120)      (10,562)      (30,913)      (31,977)
                                                      ---------     ---------     ---------     ---------

NET INCOME .......................................    $  26,033     $  16,919     $  44,779     $  32,784
                                                      =========     =========     =========     =========

NET INCOME PER SHARE .............................    $   33.93     $   22.05     $   58.37     $   42.73
                                                      =========     =========     =========     =========
Average number of common shares outstanding ......      767,162       767,162       767,162       767,162
                                                      =========     =========     =========     =========
</TABLE>

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

                                      -5-
<PAGE>

                   CE CASECNAN WATER AND ENERGY COMPANY, INC.
                            STATEMENTS OF CASH FLOWS
                         (In thousands of U.S. Dollars)
<TABLE>
<CAPTION>

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

<S>                                                                       <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income .........................................................    $ 44,779     $ 32,784
  Adjustments to reconcile net cash flows from operating activities:
    Depreciation .....................................................      17,477       17,583
    Amortization of bond issue costs .................................       1,018        1,121
    Changes in other items:
      Trade receivable, net ..........................................     (21,469)     (33,353)
      Accrued interest and other receivable, net .....................        (757)         (90)
      Prepaid insurance and other current assets .....................       2,333       (1,068)
      Accounts payable and accrued expenses ..........................         201          881
      Accrued interest ...............................................       8,822        7,925
      Payable to affiliates related to operations ....................       1,318          (83)
                                                                          --------     --------
        Net cash flows from operating activities .....................      53,722       25,700
                                                                          --------     --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment .........................      (3,697)      (2,669)
  Other assets .......................................................       5,542        4,582
                                                                          --------     --------
    Net cash flows from investing activities .........................       1,845        1,913
                                                                          --------     --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase in restricted cash and investments ........................     (32,145)     (15,957)
  Repayment of bonds payable .........................................     (20,733)     (17,788)
  Increase in notes payable to affiliates ............................           -       10,500
                                                                          --------     --------
    Net cash flows from financing activities .........................     (52,878)     (23,245)
                                                                          --------     --------

NET INCREASE IN CASH AND CASH EQUIVALENTS ............................       2,689        4,368
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .....................         705        1,078
                                                                          --------     --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ...........................    $  3,394     $  5,446
                                                                          ========     ========
</TABLE>


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

                                      -6-
<PAGE>


                   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"),
without  audit,  pursuant to the rules and  regulations  of the  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, 2003, and the results
of operations for the  three-month  and nine-month  periods ended  September 30,
2003 and 2002, and of cash flows for the nine-month  periods ended September 30,
2003 and 2002.  The results of operations  for the  three-month  and  nine-month
periods ended September 30, 2003 are not  necessarily  indicative of the results
to be expected for the full year.

The  unaudited  financial  statements  should  be read in  conjunction  with the
financial  statements  included in the Company's  Annual Report on Form 10-K for
the year ended  December 31, 2002.  In  particular,  the  Company's  significant
accounting  policies and  practices  are  presented  in Note 2 to the  financial
statements included therein.

The Company's  operations consist of one reportable segment,  the domestic water
delivery and electricity generation industry.

2.   SUBSEQUENT EVENT - NIA ARBITRATION SETTLEMENT

The Philippine National Irrigation  Administration  ("NIA") has paid all amounts
due for  energy  delivery  fees and Water  Delivery  Fees under the terms of the
Casecnan Project  Agreement (the "Project  Agreement") as of September 30, 2003,
except for the tax  compensation  portion of the Water  Delivery  Fees,  none of
which had been paid since  commercial  operations  began on December  11,  2001.
Under  the  terms  of the  Project  Agreement,  NIA had  the  option  of  timely
reimbursing CE Casecnan  directly for certain taxes CE Casecnan paid. If NIA did
not so reimburse CE Casecnan,  certain taxes paid by CE Casecnan would result in
an increase in the Water  Delivery Fee. The payment of certain other taxes by CE
Casecnan would have resulted  automatically in an increase in the Water Delivery
Fee. As of September 30, 2003, CE Casecnan had paid approximately  $59.1 million
in taxes, which pursuant to the foregoing  provisions resulted in an increase in
the Water  Delivery Fee. NIA failed to pay the portion of the Water Delivery Fee
each month related to the payment of these taxes by CE Casecnan.  As a result of
the non-payment of the tax  compensation  portion of the Water Delivery Fees, on
August 19, 2002, CE Casecnan  filed a Statement of Claim against NIA pursuant to
the Rules of  Arbitration  of the  International  Chamber of Commerce  (the "NIA
Arbitration"),  seeking  payment of such  portion of the Water  Delivery Fee and
enforcement of the relevant  provision of the Project  Agreement  going forward.
The  NIA  Arbitration  was  conducted  in  accordance  with  the  rules  of  the
International Chamber of Commerce.

NIA filed its Answer and  Counterclaim  on March 31,  2003.  In its Answer,  NIA
asserted,  among other  things,  that most of the taxes  which CE  Casecnan  had
factored into the Water  Delivery Fee  compensation  formula did not fall within
the  scope  of  the  relevant  section  of  the  Project  Agreement,   that  the
compensation mechanism itself was invalid and unenforceable under Philippine law
and  that  the  Project   Agreement  was   inconsistent   with  the   Philippine
build-operate-transfer  law.  As such,  NIA sought  dismissal  of CE  Casecnan's
claims and a  declaration  from the arbitral  tribunal that the taxes which have
been taken into account in the Water  Delivery Fee  compensation  mechanism were
not  recoverable  thereunder  and that,  at most,  certain taxes may be directly
reimbursed  (rather than compensated for through the Water Delivery Fee) by NIA.
NIA also  counterclaimed for approximately $7 million which it alleges is due to
it as a result of the delayed  completion of the Casecnan Project.  On April 23,
2003,  NIA  filed a  Supplemental  Counterclaim  in which it  asserted  that the
Project Agreement was contrary to Philippine law and public policy and by way of
relief  sought  a  declaration  that the  Project  Agreement  was void  from the
beginning or should be cancelled, or alternatively, an order for reformation


                                      -7-
<PAGE>

of the  Project  Agreement  or any  portions or  sections  thereof  which may be
determined to be contrary to such law and or public  policy.  On May 23, 2003 CE
Casecnan filed its reply to NIA's counterclaims.

On  October  15,  2003,  the  Company  closed  a  transaction  settling  the NIA
Arbitration.  In connection  with the  settlement,  the Company  entered into an
agreement  (the  "Supplemental  Agreement")  with  NIA  which,  in  addition  to
providing  for the  dismissal  with  prejudice  of all claims by CE Casecnan and
counterclaims by NIA in the NIA Arbitration,  supplements and amends the Project
Agreement in certain respects as summarized below:

Payment in Cash and Delivery of Note
------------------------------------

As part of the settlement,  on October 15, 2003, NIA paid to CE Casecnan the sum
of $17.7 million plus Philippine pesos 39.9 million (approximately $0.7 million)
and  delivered  to CE Casecnan  the Republic of the  Philippines  ("ROP")  $97.0
million 8.375% Note due 2013 (the "ROP Note"). Also at closing, the Company paid
to the Philippine Bureau of Internal Revenue ("BIR") approximately $24.4 million
in respect of Philippine income taxes on the foregoing consideration.

The  ROP  Note  is  governed  by  New  York  law  and   constitutes   a  direct,
unconditional,  unsecured  and general  obligation  of the ROP.  The ROP Note is
non-transferable until January 15, 2004, but may be exchanged,  at the option of
the ROP,  for a new note  forming  part of a series  of  direct,  unconditional,
unsecured and general debt obligations of the Philippines with a yield of 8.375%
or lower. If the Philippines issues a series of direct, unconditional, unsecured
and general debt obligations having a yield in excess of 8.375%, the Company has
agreed to accept a series of such new debt with a yield no greater  than 8.375%.
If not exchanged prior to January 15, 2004, the Company has the option,  between
January 15, 2004 and  February  15,  2004,  to put the ROP Note to the ROP for a
price  of par  plus  accrued  interest.  The ROP  Note  has  default  provisions
substantially  identical to those set forth in other recent issuances of direct,
unconditional, unsecured and general obligation of the ROP.

Modifications to Water Delivery Fee
-----------------------------------

Under the Project  Agreement,  the Water Delivery Rate increased by $0.00043 per
cubic  meter for each  $1,000,000  of  certain  taxes paid by CE  Casecnan.  The
Supplemental Agreement amends the per cubic meter Water Delivery Fee calculation
by eliminating this increase,  such that the per cubic meter Water Delivery Rate
remains at $0.029 per cubic meter,  escalated at 7.5%  annually  from January 1,
1994 through the first five years of the Cooperation  Period,  extending through
December 25, 2006. In lieu of such increase,  the Company will be reimbursed for
certain taxes it pays during the remainder of the Cooperation Period.

Under the Project Agreement,  the Water Delivery Fee payable monthly was a fixed
monthly payment based on an average water delivery of 801.9 million cubic meters
per year,  pro-rated  to  approximately  66.8  million  cubic  meters per month,
multiplied  by  the  per  cubic  meter  rate  as  described  above.   Under  the
Supplemental  Agreement the Water Delivery Fee is equal to the Guaranteed  Water
Delivery  Fee plus the  Variable  Delivered  Water  Delivery Fee minus the Water
Delivery Fee Credit.

Guaranteed Water Delivery Fee. For the sixty-month period from December 25, 2003
through  December 25, 2008,  the  Guaranteed  Water Delivery Fee shall equal the
Water  Delivery  Rate,  as described  above,  multiplied by  approximately  66.8
million cubic meters (corresponding to the 801.9 million cubic meters per year).
For each month  beginning  after  December 25, 2008 through the remainder of the
Cooperation  Period,  the  Guaranteed  Water  Delivery Fee shall equal the Water
Delivery   Rate   multiplied   by   approximately   58.3  million  cubic  meters
(corresponding to 700.0 million cubic meters per year).

Variable  Delivered Water Delivery Fee.  Variable  Delivered Water Delivery Fees
will be earned for months  beginning  after  December 25,  2008.  For each month
beginning after December 25, 2008 through the end of the Cooperation Period, the
Variable  Delivered  Water Delivery Fee shall be payable only from the date when
the  cumulative  Total  Available  Water (total  delivered  water plus the water
volume  not  delivered  to NIA as a result of

                                      -8-
<PAGE>

NIA's failure to accept  energy  deliveries at a capacity up to 150 MW) for each
contract  year exceeds 700.0 million  cubic  meters.  Variable  Delivered  Water
Delivery Fees will be earned up to an aggregate maximum of 1,324.7 million cubic
meters for the period from December 25, 2008 through the end of the  Cooperation
Period.  No  additional  variable  water  delivery  fees will be earned over the
1,324.7 million cubic meter threshold.

Water Delivery  Credit.  The Water Delivery  Credit shall be applicable only for
each of the  sixty-months  from December 25, 2008 through  December 25, 2013 and
shall equal the Water  Delivery  Rate as of December 25, 2008  multiplied by the
sum of each Annual  Water Credit  divided by sixty.  The Annual Water Credit for
each  contract  year  starting from December 25, 2003 and ending on December 25,
2008 shall equal 801.9 million cubic meters minus the Total  Available Water for
each contract year. The Total Available Water in any such year will equal actual
deliveries with a minimum threshold of 700.0 million cubic meters.

Modifications to Excess Energy Delivery Fee
-------------------------------------------

Under the  Project  Agreement,  the Excess  Energy  Delivery  Fee was a variable
amount based on actual electrical energy delivered in each month in excess of 19
gigawatt-hour  ("GWh"),  payable  at a  rate  of  $0.1509  per  kWh.  Under  the
Supplemental  Agreement,  the per kWh rate for energy deliveries in excess of 19
GWh per month has been reduced, commencing in 2009, to $0.1132 (escalating at 1%
per annum  thereafter),  provided that any deliveries of energy in excess of 490
GWh but less  than  550 GWh per  year  are paid for at a rate of 1.3  Philippine
pesos  per kWh and  deliveries  in  excess of 550 GWh per year are at no cost to
NIA.

The Supplemental  Agreement provides that NIA would not make further payments on
the unpaid  portion of the  excess  energy  available  for  generation,  but not
generated from the commencement of commercial  operations  through September 28,
2003. For periods after September 28, 2003, the Supplemental  Agreement provides
that if the Casecnan  project is not  dispatched up to 150 MW whenever  water is
available, NIA will pay for excess energy that could have been generated but was
not as a result of such dispatch constraint.

Other Provisions of the Supplemental Agreement
----------------------------------------------

In  connection  with the  settlement of the NIA  Arbitration  and as part of the
Supplemental  Agreement  transaction,  the Company  paid to NIA $1.6  million in
respect of alleged late completion of the Project.  This amount had been accrued
as of  September  30, 2003 and  December  31,  2002.  In  addition,  the Company
received opinions from the Philippine Office of Government  Corporate Counsel as
to the due  authorization  and  enforceability  of  Supplemental  Agreement  and
received  confirmation  from the  Philippine  Department of Finance that the ROP
Note had been duly and validly issued and was enforceable in accordance with its
terms.  The Company also received an opinion from Allen & Overy,  counsel to the
Republic of the Philippines,  as to the enforceability of the ROP Note under New
York law. The Company also received written confirmation from the Private Sector
Assets and Liabilities  Management  Corporation  that the issues with respect to
the  Casecnan  Project  that  had  been  raised  by the  interagency  review  of
independent  power  producers in the  Philippines  or that may have existed with
respect to the Project under the Electric Power Industry Reform Act of 2001 have
been satisfactorily addressed by the Supplemental Agreement.

The Guaranteed Energy Delivery Fee, Force Majeure, Buyout and Dispute Resolution
provisions  of the Project  Agreement,  as well as the  Performance  Undertaking
provided by the ROP, remain unaffected by the Supplemental Agreement and in full
force and effect.

                                      -9-

<PAGE>


3.   TRADE RECEIVABLE, NET

Trade  receivable,  net  pertains to the  receivable  due under the terms of the
Project  Agreement  from  NIA for  water  delivered  to NIA and the  electricity
generated  and  delivered  by the  Company  to  NPC  on  behalf  of  NIA.  Trade
receivable,  net at September  30, 2003 and  December  31, 2002  consists of the
following (in thousands):

                                             SEPTEMBER 30,   DECEMBER 31,
                                                 2003           2002
                                             -------------   ------------

       Water delivery fee ................     $ 83,436        $ 52,854
       Guaranteed energy delivery fee ....        3,676           6,709
       Excess energy delivery fee ........        5,715           4,018
                                               --------        --------
         Trade receivable ................       92,827          63,581
       Allowance for doubtful accounts ...      (19,843)        (12,066)
                                               --------        --------
         Trade receivable, net ...........     $ 72,984        $ 51,515
                                               ========        ========

NIA has paid all  amounts due for energy  delivery  fees and all amounts due for
Water Delivery Fees under the Project Agreement as of September 30, 2003, except
the tax compensation  portion of the Water Delivery Fees, none of which has been
paid since commercial  operations began on December 11, 2001. Under the terms of
the  Project  Agreement,  NIA had the option of timely  reimbursing  CE Casecnan
directly  for certain  taxes CE Casecnan  paid.  If NIA did not so  reimburse CE
Casecnan,  certain taxes paid by CE Casecnan  would result in an increase in the
Water Delivery Fee. The payment of certain other taxes by CE Casecnan would have
resulted automatically in an increase in the Water Delivery Fee. As of September
30,  2003,  CE Casecnan had paid  approximately  $59.1  million in taxes,  which
pursuant  to the  foregoing  provisions  resulted  in an  increase  in the Water
Delivery Fee.

Total revenue was $48.2 million and $39.1  million for the  three-month  periods
ended  September 30, 2003 and 2002,  respectively,  and $112.9 million and $97.1
million  for  the  nine-month   periods  ended  September  30,  2003  and  2002,
respectively.  Included in these  amounts was $10.2 million and $8.8 million for
the  three-month  periods ended September 30, 2003 and 2002,  respectively,  and
$27.9 million and $25.3 million for the nine-month  periods ended  September 30,
2003 and 2002,  respectively,  of tax compensation for Water Delivery Fees under
the Project  Agreement,  none of which has been paid. The Company  estimates the
uncollectible  portion of the Water  Delivery Fee to be $19.8  million and $12.1
million as of September  30, 2003 and December  31,  2002,  respectively.  As of
September 30, 2003 and December 31, 2002, the  cumulative  unpaid portion of the
tax compensation  portion of the Water Delivery Fees invoiced since the start of
commercial operations totaled $64.2 million and $36.3 million, respectively.

The Supplemental  Agreement provides that NIA would not make further payments on
the unpaid  portion of the  excess  energy  available  for  generation,  but not
generated from the commencement of commercial  operations  through September 28,
2003. Based on this provision,  the Company did not record revenues  relating to
excess energy of $9.7 million that could have been generated as of September 30,
2003.

The  allowance  for doubtful  accounts as of September 30, 2003 and December 31,
2002 represents the Company's current estimate of the  uncollectible  portion of
such unpaid Water Delivery Fees as of the respective balance sheet date and does
not reflect any projections  related to future  billings and their  collections.
The Company's accounting for such events is prescribed by Statement of Financial
Accounting  Standards No. 5, "Accounting for  Contingencies" and the accrual for
contingency  involved  considerable  judgment on the part of management  and was
based upon  existing  conditions as to possible gain or loss to the Company when
one or more future events occurred or failed to occur.

                                      -10-
<PAGE>

On  October  15,  2003,  the  Company  closed  a  transaction  settling  the NIA
Arbitration  described  in Note 2 above and revised the  allowance  for doubtful
accounts as of September 30, 2003 to reflect the net  collectible  amounts based
upon the settlement agreement.

4.   RELATED PARTY TRANSACTIONS

In the normal course of business,  the Company  transacts with its affiliates in
the form of advances  for  construction  related  and  operating  expenses.  The
payable to affiliates  was $34.7 million and $33.3 million at September 30, 2003
and  December  31,  2002,  respectively.   Costs  incurred  by  the  Company  in
transactions  with related parties amounted to $0.5 million and $2.2 million for
the  three-month  periods ended September 30, 2003 and 2002,  respectively,  and
$2.0 million and $3.1 million for the  nine-month  periods  ended  September 30,
2003 and 2002, respectively.

As of September  30, 2003 and December  31,  2002,  the Company has  outstanding
$51.3 million of unsecured  subordinated  notes  payable to CE Casecnan  Ltd., a
stockholder,  due November 15, 2005. The unsecured  notes bear interest at LIBOR
plus two percent (2%).  Interest expense on the unsecured notes was $0.4 million
and $0.5 million  during the  three-month  periods ended  September 30, 2003 and
2002 and $1.3  million and $1.4  million  during the  nine-month  periods  ended
September 30, 2003 and 2002. At September 30, 2003, the effective  interest rate
on the notes was 3.25%.  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.

5.   COMMITMENTS AND CONTINGENCIES

CONSTRUCTION CONTRACT ARBITRATION

The Casecnan Project was initially being constructed  pursuant to a fixed-price,
date-certain,  turnkey  construction  contract (the "Hanbo Contract") on a joint
and several  basis by Hanbo  Corporation  ("Hanbo")  and Hanbo  Engineering  and
Construction Co., Ltd. ("HECC"), both of which are South Korean corporations. As
of May 7, 1997,  the Company  terminated  the Hanbo  Contract due to defaults by
Hanbo and HECC including the insolvency of both companies. On the same date, the
Company  entered into a new  fixed-price,  date  certain,  turnkey  engineering,
procurement  and  construction  contract to  complete  the  construction  of the
Casecnan Project (the  "Replacement  Contract").  The work under the Replacement
Contract was  conducted  by a  consortium  consisting  of  Cooperativa  Muratori
Cementisti CMC di Ravenna and Impresa  Pizzarotti & C. Spa.  (collectively,  the
"Contractor"),  working  together with Siemens A.G.,  Sulzer Hydro Ltd., Black &
Veatch and Colenco Power Engineering Ltd.

On  November  20,  1999,  the  Replacement  Contract  was  amended to extend the
Guaranteed  Substantial  Completion  Date for the Casecnan  Project to March 31,
2001. This amendment was approved by the lenders' independent engineer under the
Trust Indenture.

On February 12, 2001, the Contractor  filed a Request for  Arbitration  with the
ICC seeking  schedule relief of up to 153 days through August 31, 2001 resulting
from various alleged force majeure  events.  In its March 20, 2001 Supplement to
Request for  Arbitration,  the Contractor  also seeks  compensation  for alleged
additional  costs of approximately $4 million it incurred from the claimed force
majeure events to the extent it is unable to recover from its insurer.  On April
20,  2001,  the  Contractor  filed a further  supplement  seeking an  additional
compensation  for damages of  approximately  $62  million for the alleged  force
majeure  event (and  geologic  conditions)  related to the collapse of the surge
shaft. The Contractor has alleged that the circumstances surrounding the placing
of the Casecnan Project into commercial operation in December 2001 amounted to a
repudiation of the  Replacement

                                      -11-
<PAGE>

Contract and has filed a claim for unspecified  quantum meruit damages,  and has
further  alleged that the delay  liquidated  damages  clause which  provides for
payments of $125,000 per day for each day of delay in completion of the Casecnan
Project  for  which  the  Contractor  is  responsible  is   unenforceable.   The
arbitration is being  conducted  applying New York law and pursuant to the rules
of the ICC.

Hearings  have  been held in  connection  with this  arbitration  in July  2001,
September 2001,  January 2002, March 2002,  November 2002, January 2003 and July
2003. As part of those  hearings,  on June 25, 2001,  the  arbitration  tribunal
temporarily enjoined CE Casecnan from making calls on the demand guaranty posted
by Banca di Roma in support of the  Contractor's  obligations to CE Casecnan for
delay  liquidated  damages.  As a  result  of  the  continuing  nature  of  that
injunction,  on April 26, 2002, CE Casecnan and the Contractor  mutually  agreed
that no  demands  would be made on the  Banca  di Roma  demand  guaranty  except
pursuant to an arbitration award. As of September 30, 2003, however, CE Casecnan
has received  approximately $6.0 million of liquidated damages from demands made
on the demand guarantees posted by Commerzbank on behalf of the Contractor.  The
$6.0 million was recorded as a reduction in  construction  costs. On November 7,
2002, the ICC issued the  arbitration  tribunal's  partial award with respect to
the Contractor's  force majeure and geologic  conditions claims. The arbitration
panel awarded the Contractor 18 days of schedule relief in the aggregate for all
of the force majeure events and awarded the Contractor $3.8 million with respect
to the cost of the collapsed  surge shaft.  The $3.8 million is shown as part of
the accounts  payable and accrued  expenses  balance at  September  30, 2003 and
December 31, 2002.  All of the  Contractor's  other claims with respect to force
majeure and geologic conditions were denied.

If the Contractor were to prevail on its claim that the delay liquidated damages
clause is unenforceable, CE Casecnan would not be entitled to collect such delay
damages for the period from March 31, 2001 through  December  11,  2001.  If the
Contractor  were to prevail in its  repudiation  claim and prove quantum  meruit
damages in excess of amounts paid to the Contractor, CE Casecnan could be liable
to make additional payments to the Contractor.  CE Casecnan believes all of such
allegations  and claims  are  without  merit and is  vigorously  contesting  the
Contractor's claims.

PROJECT TRANSMISSION LINE

Under the Project Agreement, if NIA is able to accept delivery of water into the
Pantabangan  Reservoir  and NPC has  completed  the Casecnan  Project's  related
transmission line, the Company was liable to pay NIA $5,500 per day for each day
of delay in completion of the Casecnan Project beyond July 27, 2000,  increasing
to $13,500 per day for each day of delay in completion beyond November 27, 2000.
The Casecnan Project  transmission line was completed on August 13, 2001 and NIA
has completed the  installation and testing of the Casecnan  Project's  metering
equipment.  Accordingly,  the Company has  recorded a total of $1.6  million for
liquidated  damages as of September  30, 2003 and December 31, 2002,  payable to
NIA for 120 days of delay.  This is  recorded  as part of  accounts  payable and
accrued  expenses in the balance  sheets and was paid to NIA on October 15, 2003
as described in Note 2.

STOCKHOLDER LITIGATION

Pursuant  to the  share  ownership  adjustment  mechanism  in  the  CE  Casecnan
stockholder  agreement,  which is based upon pro forma financial  projections of
the Casecnan Project prepared following  commencement of commercial  operations,
in February 2002,  MidAmerican Energy Holdings Company  ("MidAmerican")  through
its indirect  wholly owned  subsidiary  CE Casecnan  Ltd.,  advised the minority
stockholder,  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.  In the
complaint,  LPG seeks  compensatory and punitive damages for alleged breaches of
the stockholder  agreement and alleged  breaches of fiduciary  duties  allegedly
owed by CE Casecnan  Ltd.  and  MidAmerican  to LPG.  The  complaint  also seeks
injunctive relief against all defendants and a declaratory  judgment that LPG is
entitled to maintain  its 15% interest in CE  Casecnan.  The impact,  if any, of
this litigation on the Company cannot be determined at this time.

                                      -12-
<PAGE>

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 in the  Philippines in connection  with certain  aspects of its option to
repurchase  such  shares on or prior to  commercial  operation  of the  Casecnan
Project.  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,
will vigorously defend such action.

BIR AUDIT

The BIR,  consistent  with the  Philippine  government's  public  statements  to
increase  tax  revenues,  has  commenced  auditing  the  Company  for all taxes,
including income taxes, for the years 2000 and 2001. In addition, the BIR issued
letters of authority to audit the tax years 1996 through 1998. In May 2003,  the
Company paid $1.0 million of final taxes  related to interest  expense paid from
1996 through  1998. On June 10, 2003,  the BIR issued a notice  stating that the
tax  investigation  for the Company for all internal revenue taxes for the years
1996 through 1998 is closed and  terminated.  On September 26, 2003, the Company
reached  a  settlement  with the BIR in  relation  to the  BIR's  assessment  of
deficiency taxes for the years 2000 and 2001. The settlement comprised a payment
of taxes  amounting to $2.0 million in full and final  termination  of the BIR's
assessment  of taxes.  The Company  believes  that it currently is in compliance
with applicable tax laws and regulations  with respect to all of its tax returns
and filings.

CONCENTRATION OF RISK

NIA's  payments of  obligations  under the Project  Agreement are  substantially
denominated  in United  States  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. 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.

On April 24, 2003, Standard & Poor's Ratings Services ("S&P") lowered its rating
of CE Casecnan to BB from BB+ as a result of S&P's  downgrade of debt securities
issued by the ROP. The downgrade of the ROP debt securities by S&P reflected the
country's  growing  debt  burden  and fiscal  rigidity.  On June 13,  2003,  S&P
downgraded  CE Casecnan's  senior  secured notes rating to B+ from BB and stated
that the outlook for the rating was negative.

On May 8, 2003,  Moody's  Investors  Service  ("Moody's")  placed the Ba2 senior
secured  notes  rating of CE Casecnan on review for possible  downgrade,  noting
NIA's supplemental  counterclaim  seeking to have the Project Agreement declared
void.  Moody's  noted  that  actions  by  government  related  agencies  and the
resulting instability of contractual arrangements was becoming inconsistent with
their rating approach that attaches  significant benefit to offtake arrangements
with those government supported entities. On June 6, 2003, Moody's downgraded CE
Casecnan's senior secured notes rating to B2 from Ba2.

                                      -13-
<PAGE>


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

The following is  management's  discussion  and analysis of certain  significant
factors which have affected the financial condition and results of operations of
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 or any of its subsidiaries
individually.  These  forward-looking  statements  may  include,  among  others,
statements  concerning  revenue and cost trends,  cost recovery,  cost reduction
strategies and anticipated outcomes, pricing strategies,  changes in the utility
industry,  planned  capital  expenditures,  financing  needs  and  availability,
statements of CE Casecnan'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, CE
Casecnan 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.

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,  2002  describes  the  significant  accounting
policies  and  methods  used in the  preparation  of the  Financial  Statements.
Estimates are used for, but not limited to, the accounting for the allowance for
doubtful  accounts and deferred  income taxes.  Actual results could differ from
these 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, 2002.

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

Total  revenue  increased  $9.1  million,  or 23.3%,  to $48.2  million  for the
three-month  period  ended  September  30,  2003  from  $39.1  million  for  the
three-month period ended September 30, 2002. Water delivery revenue increased to
$22.4  million for the  three-month  period ended  September 30, 2003 from $20.5
million  for the  three-month  period  ended  September  30,  2002 due to a 7.5%
increase in the Water  Delivery Fee rate as a result of the  contractual  annual
escalation factor and the accrual of the revenue related to the additional taxes
recoverable  during  operations  pursuant  to the  contract.  Electricity  sales
revenue was $25.7 million for the  three-month  period ended  September 30, 2003
and $18.7 million for the three-month  period ended September 30, 2002. The $7.0
million increase was due primarily to increased generation resulting from higher
water flows in 2003. Revenues from water delivery,  guaranteed energy and excess
energy are 47%, 19% and 34%, respectively, of the total

                                      -14-
<PAGE>

revenue for the  three-month  period ended September 30, 2003 while 52%, 24% and
24%, respectively for the three-month period ended September 30, 2002.

The Supplemental  Agreement provides that NIA would not make further payments on
the unpaid  portion of the  excess  energy  available  for  generation,  but not
generated from the commencement of commercial  operations  through September 28,
2003. Based on this provision,  the Company did not record revenues  relating to
excess energy of $9.7 million that could have been generated as of September 30,
2003.

Operating  expenses  increased $0.3 million to $12.0 million for the three-month
period ended  September 30, 2003 from $11.7 million for the  three-month  period
ended September 30, 2002. Included within operating expenses for the three-month
period ended September 30, 2003 are depreciation,  plant operations and doubtful
accounts expense of $6.1 million,  $4.6 million and $1.4 million,  respectively.
Depreciation  and plant  operations  expense  increased by $0.3 million and $2.0
million,  respectively,  while doubtful accounts expense decreased $1.8 million.
The increase in plant  operations  expense was caused by higher  local  business
taxes and legal costs.  The decrease in doubtful  accounts  expense is primarily
attributable to a reduction for amounts reserved on the tax compensation portion
of the Water Delivery Fees for the three-month  period ended September 30, 2003.
The allowance for doubtful  accounts was adjusted to reflect the net collectible
amounts  based  upon  the  settlement  agreement  (See  "Liquidity  and  Capital
Resources - NIA Arbitration Settlement").

Interest  expense  decreased  slightly by $0.3 million to $10.2  million for the
three-month  period  ended  September  30,  2003  from  $10.5  million  for  the
three-month period ended September 30, 2002. The primary reason for the decrease
was the scheduled payment of debt.

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

Total  revenue  increased  $15.8  million  or 16.3% to  $112.9  million  for the
nine-month period ended September 30, 2003 from $97.1 million for the nine-month
period ended  September  30, 2002.  Water  delivery  revenue  increased to $66.9
million for the  nine-month  period ended  September 30, 2003 from $60.3 million
for the nine-month period ended September 30, 2002 due to a 7.5% increase in the
Water Delivery Fee rate as a result of the contractual  annual escalation factor
and the  accrual of the  revenue  related to the  additional  taxes  recoverable
during operations pursuant to the contract.  Electricity sales revenue was $46.0
million for the nine-month period ended September 30, 2003 and $36.8 million for
the nine-month  period ended  September 30, 2002. The $9.2 million  increase was
due primarily to increased generation resulting from higher water flows in 2003.
Revenues from water delivery,  guaranteed  energy and excess energy are 59%, 24%
and 17%,  respectively,  of the total  revenue for the  nine-month  period ended
September  30,  2003 while 62%,  28% and 10%,  respectively  for the  nine-month
period ended September 30, 2002.

The Supplemental  Agreement provides that NIA would not make further payments on
the unpaid  portion of the  excess  energy  available  for  generation,  but not
generated from the commencement of commercial  operations  through September 28,
2003. Based on this provision,  the Company did not record revenues  relating to
excess energy of $9.7 million that could have been generated as of September 30,
2003.

Operating  expenses  increased  $4.8  million or 14.8% to $37.2  million for the
nine-month period ended September 30, 2003 from $32.4 million for the nine-month
period ended  September 30, 2002.  Included  within  operating  expenses for the
nine-month  period ended September 30, 2003 are  depreciation,  plant operations
and doubtful accounts expense of $17.5 million,  $11.9 million and $7.8 million,
respectively.  Depreciation expense decreased by $0.1 million,  plant operations
expense  increased by $5.2 million and doubtful  accounts  expense  decreased by
$0.3  million.  The  increase in plant  operations  expense was caused by higher
local  business  taxes,  insurance  and legal  costs.  The  decrease in doubtful
accounts is primarily  attributable  to a reduction for amounts  reserved on the
tax compensation  portion of the Water Delivery Fees for the three-month  period
ended  September 30, 2003.  The

                                      -15-
<PAGE>

allowance  for doubtful  accounts  was  adjusted to reflect the net  collectible
amounts  based  upon  the  settlement  agreement  (See  "Liquidity  and  Capital
Resources - NIA Arbitration Settlement").

Interest  expense  decreased  $0.8 million to $31.1  million for the  nine-month
period ended  September  30, 2003 from $31.9 million for the  nine-month  period
ended  September 30, 2002. The primary reason for the decrease was the scheduled
payment of debt  partially  offset by the payment of final taxes  related to the
interest expense paid in 1996 to 1998 to Philippine bondholders.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  cash and cash  equivalents  were $3.4 million and $0.7 million at
September 30, 2003 and December 31, 2002, respectively.

The  Company  generated  cash flows from  operations  of $53.7  million  for the
nine-month period ended September 30, 2003,  compared with $25.7 million for the
same period in 2002.  The increase from 2002 was primarily due to the collection
of  November  2002  revenues  in  February  2003  instead of  December  2002 and
generally  higher  energy and water  delivery  revenues.

The Company  provided $1.8 million from investing  activities for the nine-month
period ended September 30, 2003, compared to $1.9 million for the same period in
2002.

The Company used $52.9 million in financing activities for the nine-month period
ended September 30, 2003, compared to $23.2 million for the same period in 2002.
The increase is due mainly to $2.9 million of  additional  payments on bonds and
an  increase  of $16.1  million in the  restricted  cash  balance  during  2003,
partially offset by $10.5 million of note borrowings from an affiliate in 2002.

CE Casecnan  constructed and operates the Casecnan Project,  which was developed
as an unsolicited proposal under the Philippine  build-operate-transfer  ("BOT")
law, under the terms of the Casecnan Project Agreement (the "Project Agreement")
between  CE  Casecnan  and the  Philippine  National  Irrigation  Administration
("NIA").  Under the Project  Agreement,  CE  Casecnan  developed,  financed  and
constructed  the Casecnan  Project over the  construction  period,  and owns and
operates the Casecnan Project for 20 years (the  "Cooperation  Period").  During
the Cooperation  Period,  NIA is obligated to accept all deliveries of water and
energy,  and so long as the Casecnan Project is physically  capable of operating
and  delivering  in  accordance  with  agreed  levels  set forth in the  Project
Agreement, NIA is obligated to pay CE Casecnan a fixed fee for the delivery of a
threshold volume of water and a fixed fee for the delivery of a threshold amount
of electricity.  In addition,  NIA is obligated to pay a fee for all electricity
delivered in excess of the threshold amount up to a specified amount and will be
obligated to pay a fee for all water delivered in excess of the threshold amount
up to a specified amount beginning after December 25, 2008.

The Republic of the Philippines  ("ROP") has provided a Performance  Undertaking
under which NIA's  obligations under the Project Agreement are guaranteed by the
full faith and credit of the ROP.  The  Project  Agreement  and the  Performance
Undertaking  provide for the  resolution of disputes by binding  arbitration  in
Singapore under international arbitration rules.

NIA's payment  obligations  under the Project  Agreement 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 obligations pertaining to its outstanding debt.

                                      -16-

<PAGE>

NIA ARBITRATION SETTLEMENT

Under  the  terms  of the  Project  Agreement,  NIA had  the  option  of  timely
reimbursing CE Casecnan  directly for certain taxes CE Casecnan paid. If NIA did
not so reimburse CE Casecnan,  certain taxes paid by CE Casecnan would result in
an increase in the Water  Delivery Fee. The payment of certain other taxes by CE
Casecnan would have resulted  automatically in an increase in the Water Delivery
Fee. As of September 30, 2003, CE Casecnan had paid approximately  $59.1 million
in taxes, which pursuant to the foregoing  provisions resulted in an increase in
the Water  Delivery Fee. NIA failed to pay the portion of the Water Delivery Fee
each month related to the payment of these taxes by CE Casecnan.  As a result of
the non-payment of the tax  compensation  portion of the Water Delivery Fees, on
August 19, 2002, CE Casecnan  filed a Statement of Claim against NIA pursuant to
the Rules of  Arbitration  of the  International  Chamber of Commerce  (the "NIA
Arbitration"),  seeking  payment of such  portion of the Water  Delivery Fee and
enforcement of the relevant  provision of the Project  Agreement  going forward.
The  NIA  Arbitration  was  conducted  in  accordance  with  the  rules  of  the
International Chamber of Commerce.

NIA filed its Answer and  Counterclaim  on March 31,  2003.  In its Answer,  NIA
asserted,  among other  things,  that most of the taxes  which CE  Casecnan  had
factored into the Water  Delivery Fee  compensation  formula did not fall within
the  scope  of  the  relevant  section  of  the  Project  Agreement,   that  the
compensation mechanism itself was invalid and unenforceable under Philippine law
and  that  the  Project   Agreement  was   inconsistent   with  the   Philippine
build-operate-transfer  law.  As such,  NIA sought  dismissal  of CE  Casecnan's
claims and a  declaration  from the arbitral  tribunal that the taxes which have
been taken into account in the Water  Delivery Fee  compensation  mechanism were
not  recoverable  thereunder  and that,  at most,  certain taxes may be directly
reimbursed  (rather than compensated for through the Water Delivery Fee) by NIA.
NIA also  counterclaimed for approximately $7 million which it alleges is due to
it as a result of the delayed  completion of the Casecnan Project.  On April 23,
2003,  NIA  filed a  Supplemental  Counterclaim  in which it  asserted  that the
Project Agreement was contrary to Philippine law and public policy and by way of
relief  sought  a  declaration  that the  Project  Agreement  was void  from the
beginning or should be cancelled, or alternatively,  an order for reformation of
the  Project  Agreement  or  any  portions  or  sections  thereof  which  may be
determined to be contrary to such law and or public  policy.  On May 23, 2003 CE
Casecnan filed its reply to NIA's counterclaims.

On  October  15,  2003,  the  Company  closed  a  transaction  settling  the NIA
Arbitration.  In connection  with the  settlement,  the Company  entered into an
agreement  (the  "Supplemental  Agreement")  with  NIA  which,  in  addition  to
providing  for the  dismissal  with  prejudice  of all claims by CE Casecnan and
counterclaims by NIA in the NIA Arbitration,  supplements and amends the Project
Agreement in certain respects as summarized below:

Payment in Cash and Delivery of Note
------------------------------------

As part of the settlement,  on October 15, 2003, NIA paid to CE Casecnan the sum
of $17.7 million plus Philippine pesos 39.9 million (approximately $0.7 million)
and  delivered  to CE Casecnan the ROP $97.0  million  8.375% Note due 2013 (the
"ROP  Note").  Also at closing,  the Company  paid to the  Philippine  Bureau of
Internal  Revenue ("BIR")  approximately  $24.4 million in respect of Philippine
income taxes on the foregoing consideration.

The  ROP  Note  is  governed  by  New  York  law  and   constitutes   a  direct,
unconditional,  unsecured  and general  obligation  of the ROP.  The ROP Note is
non-transferable until January 15, 2004, but may be exchanged,  at the option of
the ROP,  for a new note  forming  part of a series  of  direct,  unconditional,
unsecured and general debt obligations of the Philippines with a yield of 8.375%
or lower. If the Philippines issues a series of direct, unconditional, unsecured
and general debt obligations having a yield in excess of 8.375%, the Company has
agreed to accept a series of such new debt with a yield no greater  than 8.375%.
If not exchanged prior to January 15, 2004, the Company has the option,  between
January 15, 2004 and February  15,  2004,  to put the ROP Note to the ROP, for a
price  of par  plus  accrued  interest.  The ROP  Note  has  default  provisions
substantially  identical to those set forth in other recent issuances of direct,
unconditional, unsecured and general obligation of the ROP.

                                      -17-
<PAGE>

Modifications to Water Delivery Fee
-----------------------------------

Under the Project  Agreement,  the Water Delivery Rate increased by $0.00043 per
cubic  meter for each  $1,000,000  of  certain  taxes paid by CE  Casecnan.  The
Supplemental Agreement amends the per cubic meter Water Delivery Fee calculation
by eliminating this increase,  such that the per cubic meter Water Delivery Rate
remains at $0.029 per cubic meter,  escalated at 7.5%  annually  from January 1,
1994 through the first five years of the Cooperation  Period,  extending through
December 25, 2006. In lieu of such increase,  the Company will be reimbursed for
certain taxes it pays during the remainder of the Cooperation Period.

Under the Project Agreement,  the Water Delivery Fee payable monthly was a fixed
monthly payment based on an average water delivery of 801.9 million cubic meters
per year,  pro-rated  to  approximately  66.8  million  cubic  meters per month,
multiplied  by  the  per  cubic  meter  rate  as  described  above.   Under  the
Supplemental  Agreement the Water Delivery Fee is equal to the Guaranteed  Water
Delivery  Fee plus the  Variable  Delivered  Water  Delivery Fee minus the Water
Delivery Fee Credit.

Guaranteed Water Delivery Fee. For the sixty-month period from December 25, 2003
through  December 25, 2008,  the  Guaranteed  Water Delivery Fee shall equal the
Water  Delivery  Rate,  as described  above,  multiplied by  approximately  66.8
million cubic meters (corresponding to the 801.9 million cubic meters per year).
For each month  beginning  after  December 25, 2008 through the remainder of the
Cooperation  Period,  the  Guaranteed  Water  Delivery Fee shall equal the Water
Delivery   Rate   multiplied   by   approximately   58.3  million  cubic  meters
(corresponding to 700.0 million cubic meters per year).

Variable  Delivered Water Delivery Fee.  Variable  Delivered Water Delivery Fees
will be earned for months  beginning  after  December 25,  2008.  For each month
beginning after December 25, 2008 through the end of the Cooperation Period, the
Variable  Delivered  Water Delivery Fee shall be payable only from the date when
the  cumulative  Total  Available  Water (total  delivered  water plus the water
volume  not  delivered  to NIA as a result of NIA's  failure  to  accept  energy
deliveries  at a capacity up to 150 MW) for each  contract  year  exceeds  700.0
million cubic meters.  Variable  Delivered Water Delivery Fees will be earned up
to an  aggregate  maximum of 1,324.7  million  cubic  meters for the period from
December  25, 2008  through the end of the  Cooperation  Period.  No  additional
variable water delivery fees will be earned over the 1,324.7 million cubic meter
threshold.

Water Delivery  Credit.  The Water Delivery  Credit shall be applicable only for
each of the  sixty-months  from December 25, 2008 through  December 25, 2013 and
shall equal the Water  Delivery  Rate as of December 25, 2008  multiplied by the
sum of each Annual  Water Credit  divided by sixty.  The Annual Water Credit for
each  contract  year  starting from December 25, 2003 and ending on December 25,
2008 shall equal 801.9 million cubic meters minus the Total  Available Water for
each contract year. The Total Available Water in any such year will equal actual
deliveries with a minimum threshold of 700.0 million cubic meters.

Modifications to Excess Energy Delivery Fee
-------------------------------------------

Under the  Project  Agreement,  the Excess  Energy  Delivery  Fee was a variable
amount based on actual electrical energy delivered in each month in excess of 19
gigawatt-hour  ("GWh"),  payable  at a  rate  of  $0.1509  per  kWh.  Under  the
Supplemental  Agreement,  the per kWh rate for energy deliveries in excess of 19
GWh per month has been reduced, commencing in 2009, to $0.1132 (escalating at 1%
per annum  thereafter),  provided that any deliveries of energy in excess of 490
GWh but less  than  550 GWh per  year  are paid for at a rate of 1.3  Philippine
pesos  per kWh and  deliveries  in  excess of 550 GWh per year are at no cost to
NIA.

The Supplemental  Agreement provides that NIA would not make further payments on
the unpaid  portion of the  excess  energy  available  for  generation,  but not
generated from the commencement of commercial  operations  through September 28,
2003. For periods after September 28, 2003, the Supplemental  Agreement provides
that if

                                      -18-
<PAGE>
the  Casecnan  project  is not  dispatched  up to 150 MW  whenever  water  is
available, NIA will pay for excess energy that could have been generated but was
not as a result of such dispatch constraint.

Other Provisions of the Supplemental Agreement
----------------------------------------------

In  connection  with the  settlement of the NIA  Arbitration  and as part of the
Supplemental  Agreement  transaction,  the Company  paid to NIA $1.6  million in
respect of alleged late completion of the Project.  This amount had been accrued
as of  September  30, 2003 and  December  31,  2002.  In  addition,  the Company
received opinions from the Philippine Office of Government  Corporate Counsel as
to the due  authorization  and  enforceability  of  Supplemental  Agreement  and
received  confirmation  from the  Philippine  Department of Finance that the ROP
Note had been duly and validly issued and was enforceable in accordance with its
terms.  The Company also received an opinion from Allen & Overy,  counsel to the
Republic of the Philippines,  as to the enforceability of the ROP Note under New
York law. The Company also received written confirmation from the Private Sector
Assets and Liabilities  Management  Corporation  that the issues with respect to
the  Casecnan  Project  that  had  been  raised  by the  interagency  review  of
independent  power  producers in the  Philippines  or that may have existed with
respect to the Project under the Electric Power Industry Reform Act of 2001 have
been satisfactorily addressed by the Supplemental Agreement.

The Guaranteed Energy Delivery Fee, Force Majeure, Buyout and Dispute Resolution
provisions  of the Project  Agreement,  as well as the  Performance  Undertaking
provided by the ROP, remain unaffected by the Supplemental Agreement and in full
force and effect.

CONSTRUCTION CONTRACT ARBITRATION

The Casecnan Project was initially being constructed  pursuant to a fixed-price,
date-certain,  turnkey  construction  contract (the "Hanbo Contract") on a joint
and several  basis by Hanbo  Corporation  ("Hanbo")  and Hanbo  Engineering  and
Construction Co., Ltd. ("HECC"), both of which are South Korean corporations. As
of May 7, 1997,  the Company  terminated  the Hanbo  Contract due to defaults by
Hanbo and HECC including the insolvency of both companies. On the same date, the
Company  entered into a new  fixed-price,  date  certain,  turnkey  engineering,
procurement  and  construction  contract to  complete  the  construction  of the
Casecnan Project (the  "Replacement  Contract").  The work under the Replacement
Contract was  conducted  by a  consortium  consisting  of  Cooperativa  Muratori
Cementisti CMC di Ravenna and Impresa Pizzarotti & C. Spa.,  (collectively,  the
"Contractor"),  working  together with Siemens A.G.,  Sulzer Hydro Ltd., Black &
Veatch and Colenco Power Engineering Ltd.

On  November  20,  1999,  the  Replacement  Contract  was  amended to extend the
Guaranteed  Substantial  Completion  Date for the Casecnan  Project to March 31,
2001. This amendment was approved by the lenders' independent engineer under the
Trust Indenture.

On February 12, 2001, the Contractor  filed a Request for  Arbitration  with the
ICC seeking  schedule relief of up to 153 days through August 31, 2001 resulting
from various alleged force majeure  events.  In its March 20, 2001 Supplement to
Request for  Arbitration,  the Contractor  also seeks  compensation  for alleged
additional  costs of approximately $4 million it incurred from the claimed force
majeure events to the extent it is unable to recover from its insurer.  On April
20,  2001,  the  Contractor  filed a further  supplement  seeking an  additional
compensation  for damages of  approximately  $62  million for the alleged  force
majeure  event (and  geologic  conditions)  related to the collapse of the surge
shaft. The Contractor has alleged that the circumstances surrounding the placing
of the Casecnan Project into commercial operation in December 2001 amounted to a
repudiation of the  Replacement  Contract and has filed a claim for  unspecified
quantum  meruit  damages,  and has  further  alleged  that the delay  liquidated
damages  clause which  provides for payments of $125,000 per day for each day of
delay in  completion  of the  Casecnan  Project  for  which  the  Contractor  is
responsible is  unenforceable.  The arbitration is being conducted  applying New
York law and pursuant to the rules of the ICC.

                                      -19-
<PAGE>

Hearings  have  been held in  connection  with this  arbitration  in July  2001,
September 2001,  January 2002, March 2002,  November 2002, January 2003 and July
2003. As part of those  hearings,  on June 25, 2001,  the  arbitration  tribunal
temporarily enjoined CE Casecnan from making calls on the demand guaranty posted
by Banca di Roma in support of the  Contractor's  obligations to CE Casecnan for
delay  liquidated  damages.  As a  result  of  the  continuing  nature  of  that
injunction,  on April 26, 2002, CE Casecnan and the Contractor  mutually  agreed
that no  demands  would be made on the  Banca  di Roma  demand  guaranty  except
pursuant to an arbitration award. As of September 30, 2003, however, CE Casecnan
has received  approximately $6.0 million of liquidated damages from demands made
on the demand guarantees posted by Commerzbank on behalf of the Contractor.  The
$6.0 million was recorded as a reduction in  construction  costs. On November 7,
2002, the ICC issued the  arbitration  tribunal's  partial award with respect to
the Contractor's  force majeure and geologic  conditions claims. The arbitration
panel awarded the Contractor 18 days of schedule relief in the aggregate for all
of the force majeure events and awarded the Contractor $3.8 million with respect
to the cost of the collapsed  surge shaft.  The $3.8 million is shown as part of
the accounts  payable and accrued  expenses  balance at  September  30, 2003 and
December 31, 2002.  All of the  Contractor's  other claims with respect to force
majeure and geologic conditions were denied.

If the Contractor were to prevail on its claim that the delay liquidated damages
clause is unenforceable, CE Casecnan would not be entitled to collect such delay
damages for the period from March 31, 2001 through  December  11,  2001.  If the
Contractor  were to prevail in its  repudiation  claim and prove quantum  meruit
damages in excess of amounts paid to the Contractor, CE Casecnan could be liable
to make additional payments to the Contractor.  CE Casecnan believes all of such
allegations  and claims  are  without  merit and is  vigorously  contesting  the
Contractor's claims.

PROJECT TRANSMISSION LINE

Under the Project Agreement, if NIA is able to accept delivery of water into the
Pantabangan  Reservoir  and NPC has  completed  the Casecnan  Project's  related
transmission line, the Company was liable to pay NIA $5,500 per day for each day
of delay in completion of the Casecnan Project beyond July 27, 2000,  increasing
to $13,500 per day for each day of delay in completion beyond November 27, 2000.
The Casecnan Project  transmission line was completed on August 13, 2001 and NIA
has completed the  installation and testing of the Casecnan  Project's  metering
equipment.  Accordingly,  the Company has accrued  $1.6  million for  liquidated
damages as of September  30, 2003 and December 31, 2002,  payable to NIA for 120
days of delay. This is recorded as part of accounts payable and accrued expenses
in the  balance  sheets  and was paid to NIA on October  15,  2003  pursuant  to
settling the NIA Arbitration.

STOCKHOLDER LITIGATION

Pursuant  to the  share  ownership  adjustment  mechanism  in  the  CE  Casecnan
stockholder  agreement,  which is based upon pro forma financial  projections of
the Casecnan Project prepared following  commencement of commercial  operations,
in February 2002,  MidAmerican Energy Holdings Company  ("MidAmerican")  through
its indirect  wholly owned  subsidiary  CE Casecnan  Ltd.,  advised the minority
stockholder,  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.  In the
complaint,  LPG seeks  compensatory and punitive damages for alleged breaches of
the stockholder  agreement and alleged  breaches of fiduciary  duties  allegedly
owed by CE Casecnan  Ltd.  and  MidAmerican  to LPG.  The  complaint  also seeks
injunctive relief against all defendants and a declaratory  judgment that LPG is
entitled to maintain  its 15% interest in CE  Casecnan.  The impact,  if any, of
this litigation on the Company cannot be determined at this time.

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 in the  Philippines in connection  with certain  aspects of its option to
repurchase  such  shares on or prior to  commercial  operation  of the  Casecnan
Project.  MidAmerican believes that San

                                      -20-
<PAGE>

Lorenzo has no valid  basis for any claim and,  if named as a  defendant  in any
action that may be commenced by San Lorenzo, will vigorously defend such action.

BIR AUDIT

The BIR,  consistent  with the  Philippine  government's  public  statements  to
increase  tax  revenues,  has  commenced  auditing  the  Company  for all taxes,
including income taxes, for the years 2000 and 2001. In addition, the BIR issued
letters of authority to audit the tax years 1996 through 1998. In May 2003,  the
Company paid $1.0 million of final taxes  related to interest  expense paid from
1996 through  1998. On June 10, 2003,  the BIR issued a notice  stating that the
tax  investigation  for the Company for all internal revenue taxes for the years
1996 through 1998 is closed and  terminated.  On September 26, 2003, the Company
reached  a  settlement  with the BIR in  relation  to the  BIR's  assessment  of
deficiency taxes for the years 2000 and 2001. The settlement comprised a payment
of taxes  amounting to $2.0 million in full and final  termination  of the BIR's
assessment  of taxes.  The Company  believes  that it currently is in compliance
with applicable tax laws and regulations  with respect to all of its tax returns
and filings.

CONCENTRATION OF RISK

NIA's  payments of  obligations  under the Project  Agreement are  substantially
denominated  in United  States  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. 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.

On April 24, 2003, Standard & Poor's Ratings Services ("S&P") lowered its rating
of CE Casecnan to BB from BB+ as a result of S&P's  downgrade of debt securities
issued by the Republic of the Philippines ("ROP"). The downgrade of the ROP debt
securities  by S&P  reflected  the  country's  growing  debt  burden  and fiscal
rigidity.  On June 13, 2003, S&P  downgraded CE Casecnan's  senior secured notes
rating to B+ from BB and stated that the outlook for the rating was negative.

On May 8, 2003,  Moody's  Investors  Service  ("Moody's")  placed the Ba2 senior
secured  notes  rating of CE Casecnan on review for possible  downgrade,  noting
NIA's supplemental  counterclaim  seeking to have the Project Agreement declared
void.  Moody's  noted  that  actions  by  government  related  agencies  and the
resulting instability of contractual arrangements was becoming inconsistent with
their rating approach that attaches  significant benefit to offtake arrangements
with those government supported entities. On June 6, 2003, Moody's downgraded CE
Casecnan's senior secured notes rating to B2 from Ba2.

                                      -21-

<PAGE>

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, 2002. CE Casecnan's exposure to market risk has not changed materially since
December 31, 2002.

ITEM 4.  CONTROLS AND PROCEDURES.

An evaluation was performed under the supervision and with the  participation of
the Company's  management,  including  the  respective  persons  acting as 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,  2003.  Based on that  evaluation,  the
Company's management, including the respective persons acting as chief executive
officer and chief  financial  officer,  concluded that the Company's  disclosure
controls and procedures were effective.  There have been no significant  changes
in the Company's internal controls or in other factors that could  significantly
affect internal controls.

                                      -22-

<PAGE>


                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

See Notes 2, 3 and 5 to the financial  statements and discussion in management's
discussion and analysis.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

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

Not applicable.

ITEM 5.  OTHER INFORMATION.

Not applicable.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)      EXHIBITS:

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

(b)      REPORTS ON FORM 8-K:

         None.

                                      -23-
<PAGE>

                                   SIGNATURES


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



                                      CE CASECNAN WATER AND ENERGY COMPANY, INC.
                                      ------------------------------------------
                                                     (Registrant)





Date:  November 7, 2003                   /s/  Patrick J. Goodman
                               -------------------------------------------------
                                               Patrick J. Goodman
                               Senior Vice President and Chief Financial Officer

                                      -24-

<PAGE>


                                  EXHIBIT INDEX
Exhibit No.
-----------

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

   31.2      Chief 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.


                                      -25-