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 March 31, 2009





or





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





For the
transition period from ________to________







Commission
                          
                          Exact
      name of registrant as specified in its charter;
                          
                          IRS
      EmployerFile
      Number
                          
                          State
      or other jurisdiction of incorporation or
    organization
                          
                          Identification No.001-12995
                          
                          CE
      CASECNAN WATER AND ENERGY COMPANY, INC.
                          
                          Not
      Applicable24th
      Floor, 6750 Building, Ayala AvenueMakati,
      Metro Manila, Philippines011
      63 2 892-0276N/A(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 has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


Yes   No  





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
the definitions of “large accelerated filer,” ”accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer 
            Accelerated
      filer 
            Non-accelerated
      filer T
            Smaller
      reporting company  





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes   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 April 23, 2009, the number
of outstanding shares of $0.038 par value common stock was 767,162.









TABLE OF
CONTENTS







PART
      IItem 1.
                      Financial Statements
                      3Item 2.
                      Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
                      13Item 3.
                      Quantitative and Qualitative Disclosures
      About Market Risk
                      17Item 4.
                      Controls and
    Procedures
                      17PART
      IIItem 1.
                      Legal Proceedings
                      18Item 1A.
                      Risk Factors
                      18Item 2.
                      Unregistered Sales of Equity Securities and Use
      of Proceeds
                      18Item 3.
                      Defaults Upon Senior Securities
                      18Item 4.
                      Submission of Matters to a Vote of Security
      Holders
                      18Item 5.
                      Other Information
                      18Item 6.
                      Exhibits
                      18Signatures
                      
                      19Exhibit Index
                      
                      20


2


PART
I




Item
      1.
            Financial
  Statements





REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Board of Directors and Shareholders 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 March 31, 2009, and the related statements of
operations, cash flows, and changes in shareholders’
equity for the three-month period then ended. These interim financial
statements are the responsibility of the Company's management.
 
 We
conducted our review in accordance with the 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 the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an
opinion.
 
 Based on
our review, we are not aware of any material modifications that should be made
to such interim financial statements for them to be in conformity with
accounting principles generally accepted in the United States of
America.
 
 We have
previously audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the balance sheet of CE Casecnan
Water and Energy Company, Inc. as of December 31, 2008, and the related
statement of operations, changes in stockholders’ equity, and cash flows for the
year then ended (not presented herein); and in our report dated February 27,
2009, 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, 2008 is fairly stated, in all
material respects, in relation to the balance sheet from which it has been
derived.
 
 The
accompanying financial information for the three-month period ended March 31,
2008, was not reviewed by us and, accordingly, we do not express any form of
assurance on this information.
 
 
 
 
 Manabat,
Delgado, Amper & Co.
 Deloitte
& Touche
 Makati
City, Philippines
 April 24,
2009




3





CE
CASECNAN WATER AND ENERGY COMPANY, INC.


BALANCE
SHEETS (Unaudited)


(Amounts
in thousands, except share data)





As
      ofMarch 31,
                    
                    
                    December 31,2009
                    
                    
                    2008ASSETSCurrent
      assets:Cash
      and cash equivalents
                    
                    $
                    43,357
                    
                    
                    $
                    49,350Restricted
      cash and investments
                    
                    
                    32,088
                    
                    
                    
                    22,881Trade
      receivable, net
                    
                    
                    18,250
                    
                    
                    
                    20,308Other
      current assets
                    
                    
                    7,936
                    
                    
                    
                    7,387Total
      current assets
                    
                    
                    101,631
                    
                    
                    
                    99,926Property,
      plant and equipment, net
                    
                    
                    276,351
                    
                    
                    
                    281,485Other
      investments
                    
                    
                    14,822
                    
                    
                    
                    14,096Deferred
      income taxes
                    
                    
                    6,692
                    
                    
                    
                    6,995Other
                    
                    
                    183
                    
                    
                    
                    222Total
      assets
                    
                    $
                    399,679
                    
                    
                    $
                    402,724LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable and other accrued liabilities
                    
                    $
                    1,044
                    
                    
                    $
                    1,748Dividends
      payable
                    
                    
                    11,325
                    
                    
                    
                    10,825Accrued
      interest
                    
                    
                    1,383
                    
                    
                    
                    3,067Accrued
      property, income and other taxes
                    
                    
                    8,789
                    
                    
                    
                    5,817Payable
      to affiliates
                    
                    
                    2,598
                    
                    
                    
                    2,726Notes
      payable
                    
                    
                    -
                    
                    
                    
                    7,115Current
      portion of long-term debt
                    
                    
                    13,720
                    
                    
                    
                    13,720Total
      current liabilities
                    
                    
                    38,859
                    
                    
                    
                    45,018Long-term
      debt
                    
                    
                    17,150
                    
                    
                    
                    17,150Total
      liabilities
                    
                    
                    56,009
                    
                    
                    
                    62,168Commitments
      and contingencies (Note 6)Shareholders’
      equity:Common
      stock – 2,148,000 shares authorized, one Philippine peso ($0.038) par
      value; 767,162 shares issued and outstanding
                    
                    
                    29
                    
                    
                    
                    29Additional
      paid-in capital
                    
                    
                    123,807
                    
                    
                    
                    123,807Retained
      earnings
                    
                    
                    224,445
                    
                    
                    
                    221,839Accumulated
      other comprehensive loss, net
                    
                    
                    (4,611
                    )
                    
                    
                    (5,119
                    )Total
      shareholders’ equity
                    
                    
                    343,670
                    
                    
                    
                    340,556Total
      liabilities and shareholders’ equity
                    
                    $
                    399,679
                    
                    
                    $
                    402,724





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


4





CE
CASECNAN WATER AND ENERGY COMPANY, INC.


STATEMENTS
OF OPERATIONS (Unaudited)


(Amounts
in thousands)





Three-Month
      PeriodsEnded
      March 31,2009
                  
                  
                  2008Revenue:Lease
      rentals and service contracts
                  
                  $
                  23,499
                  
                  
                  $
                  28,894Operating
      expenses:Depreciation
                  
                  
                  5,494
                  
                  
                  
                  5,402Plant
      operations and other operating expenses
                  
                  
                  1,969
                  
                  
                  
                  2,219Total
      operating expenses
                  
                  
                  7,463
                  
                  
                  
                  7,621Operating
      income
                  
                  
                  16,036
                  
                  
                  
                  21,273Other
      income (expense):Interest
      expense
                  
                  
                  (1,016
                  )
                  
                  
                  (3,102
                  )Interest
      income
                  
                  
                  250
                  
                  
                  
                  662Other,
      net
                  
                  
                  693
                  
                  
                  
                  937Total
      other income (expense)
                  
                  
                  (73
                  )
                  
                  
                  (1,503
                  )Income
      before income tax expense
                  
                  
                  15,963
                  
                  
                  
                  19,770Income
      tax expense
                  
                  
                  3,357
                  
                  
                  
                  6,909Net
      income
                  
                  $
                  12,606
                  
                  
                  $
                  12,861





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


5





CE
CASECNAN WATER AND ENERGY COMPANY, INC.


STATEMENTS
OF CASH FLOWS (Unaudited)


(Amounts
in thousands)





Three-Month
      PeriodsEnded
      March 31,2009
                                
                                
                                2008Cash
      flows from operating activities:Net
      income
                                
                                $
                                12,606
                                
                                
                                $
                                12,861Adjustments
      to reconcile net income to net cash flows from operating
      activities:Depreciation
                                
                                
                                5,494
                                
                                
                                
                                5,402Amortization
      of bond issue costs
                                
                                
                                39
                                
                                
                                
                                79Provision
      for deferred income taxes
                                
                                
                                85
                                
                                
                                
                                195Changes
      in other operating assets and liabilities:Trade
      receivable, net
                                
                                
                                2,058
                                
                                
                                
                                5,075Other
      current assets
                                
                                
                                (549
                                )
                                
                                
                                (495
                                )Accounts
      payable and other accrued liabilities
                                
                                
                                (704
                                )
                                
                                
                                (1,145
                                )Accrued
      interest
                                
                                
                                (1,684
                                )
                                
                                
                                2,828Accrued
      property, income and other taxes
                                
                                
                                2,972
                                
                                
                                
                                6,710Deferred
      revenue
                                
                                
                                -
                                
                                
                                
                                1,880Net
      cash flows from operating activities
                                
                                
                                20,317
                                
                                
                                
                                33,390Cash
      flows from investing activities:Capital
      expenditures
                                
                                
                                (360
                                )
                                
                                
                                (2
                                )Increase
      in restricted cash and investments
                                
                                
                                (9,207
                                )
                                
                                
                                (402
                                )Net
      cash flows from investing activities
                                
                                
                                (9,567
                                )
                                
                                
                                (404
                                )Cash
      flows from financing activities:Increase
      in payable to affiliates
                                
                                
                                (128
                                )
                                
                                
                                (17
                                )Repayment
      of notes payable
                                
                                
                                (7,115
                                )
                                
                                
                                -Dividends
      paid
                                
                                
                                (9,500
                                )
                                
                                
                                -Net
      cash flows from financing activities
                                
                                
                                (16,743
                                )
                                
                                
                                (17
                                )Net
      change in cash and cash equivalents
                                
                                
                                (5,993
                                )
                                
                                
                                32,969Cash
      and cash equivalents at beginning of period
                                
                                
                                49,350
                                
                                
                                
                                31,083Cash
      and cash equivalents at end of period
                                
                                $
                                43,357
                                
                                
                                $
                                64,052


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




6





CE
CASECNAN WATER AND ENERGY COMPANY, INC.


STATEMENTS
OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)


(Amounts in
thousands)





AccumulatedAdditional
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        OtherCommon
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        Paid-in
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        Retained
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        ComprehensiveStock
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        Capital
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        Earnings
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        Loss,
      net
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        TotalBalance,
      January 1, 2008
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        29
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        123,807
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        148,004
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        271,840Net
      income
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        12,861
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        12,861Other
      comprehensive loss
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (1,181
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (1,181
                                                                                                                                        )Balance,
      March 31, 2008
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        29
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        123,807
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        160,865
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (1,181
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        283,520Balance,
      January 1, 2009
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        29
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        123,807
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        221,839
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (5,119
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        340,556Net
      income
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        12,606
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        12,606Other
      comprehensive income
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        508
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        508Dividends
      declared
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (10,000
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        -
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        (10,000
                                                                                                                                        )Balance,
      March 31, 2009
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        29
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        123,807
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        224,445
                                                                                                                                        
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        (4,611
                                                                                                                                        )
                                                                                                                                        
                                                                                                                                        $
                                                                                                                                        343,670




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




7





CE
CASECNAN WATER AND ENERGY COMPANY, INC.


NOTES
TO FINANCIAL STATEMENTS


(Unaudited)


(in U.S.
dollars, unless indicated otherwise)




(1)
            General







CE Casecnan
Water and Energy Company, Inc. (the “Company” or “CE Casecnan”) is a
privately held Philippine corporation formed indirectly by MidAmerican Energy
Holdings Company (“MEHC”) and was registered with the Philippine Securities and
Exchange Commission on September 21, 1994. The Company is 70% owned by
CE Casecnan II, Inc., 20% owned by CE Casecnan Ltd., a
Bermuda-registered corporation, which are both indirectly wholly owned
subsidiaries of MEHC, and 10% owned by a third party. MEHC is a consolidated
subsidiary of Berkshire Hathaway Inc.





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,
as amended by the Supplemental Agreement dated September 29, 2003 (“Project
Agreement”), covering a 20-year cooperation period (“Cooperation Period”) ending
December 11, 2021, with obligations for the delivery of water and
electricity. At the end of the Cooperation Period, the combined irrigation and
150 megawatt hydroelectric power generation project (the “Casecnan Project”)
will be transferred to the ROP at no cost on an “as is” basis. NIA’s obligations
under the Project Agreement are guaranteed by the full faith and credit of the
ROP (the “Performance Undertaking”).





The
Casecnan Project is dependent 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 contractual terms
for variable water and energy delivery fees can produce significant variability
in revenue between reporting periods.





The
unaudited Financial Statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“GAAP”) for
interim financial information and the United States Securities and Exchange
Commission’s (“SEC”) rules and regulations for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the disclosures required
by GAAP for annual financial statements. Management believes the unaudited
Financial Statements contain all adjustments (consisting only of normal
recurring adjustments) considered necessary for the fair presentation of the
Financial Statements as of March 31, 2009, and for the three-month periods
ended March 31, 2009 and 2008. The results of operations for the
three-month period ended March 31, 2009 are not necessarily indicative of
the results to be expected for the full year.





The
preparation of the unaudited Financial Statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
may differ from the estimates used in preparing the unaudited Financial
Statements. Note 2 of Notes to Financial Statements included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008 describes
the most significant accounting estimates and policies used in the preparation
of the Financial Statements. There have been no significant changes in the
Company’s assumptions regarding significant accounting policies during the first
three months of 2009.






(2)
            New
      Accounting Pronouncements





In
April 2009, the Financial Accounting Standards Board (the “FASB”)
issued Staff Position (“FSP”) No. FAS 107-1 and APB 28-1, “Interim
Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1”).
FSP FAS 107-1 requires publicly traded companies to include the annual fair
value disclosures required for all financial instruments within the scope of
Statement of Financial Accounting Standards (“SFAS”) No. 107, “Disclosures about
Fair Value of Financial Instruments,” in interim financial statements. FSP
FAS 107-1 is effective for financial statements issued after June 15,
2009, with early application permitted. The Company will include the disclosures
required by FSP FAS 107-1 within Notes to Financial Statements in its
June 30, 2009 interim financial statements.





8


In
April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
“Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP
FAS 115-2”). FSP FAS 115-2 amends current other-than-temporary
impairment guidance for debt securities to require a new other-than-temporary
impairment model that would shift the focus from an entity’s intent to hold the
debt security until recovery to its intent to sell the debt security. The
existing other-than-temporary impairment models for equity securities will
continue to apply. In addition, FSP FAS 115-2 addresses whether an
other-than-temporary impairment should be recognized in earnings, other
comprehensive income, or some combination thereof. FSP FAS 115-2 also
expands the already required annual disclosures about other-than-temporary
impairment for debt and equity securities and requires companies to include
these expanded disclosures in interim financial statements. FSP FAS 115-2
is effective for financial statements issued after June 15, 2009, with
early application permitted. The Company is currently evaluating the impact of
adopting FSP FAS 115-2 on its financial results and disclosures included
within Notes to Financial Statements.





In
April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value
When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP
FAS 157-4”). FSP FAS 157-4 clarifies the application of SFAS
No. 157, “Fair Value Measurements,” (SFAS No. 157”) in determining
when a market is not active and if a transaction is not orderly. In addition,
FSP FAS 157-4 amends SFAS No. 157 to require disclosures in interim
and annual periods of the inputs and valuation techniques used to measure fair
value and a discussion of changes in valuation techniques and related inputs, if
any, during the period. FSP FAS 157-4 also amends SFAS No. 157 to
define “major categories” to be consistent with those described in SFAS
No. 115, “Accounting for Certain Investments in Debt and Equity
Securities.” FSP FAS 157-4 is effective for financial statements issued
after June 15, 2009, with early application permitted. The Company is
currently evaluating the impact of adopting FSP FAS 157-4 on its financial
results and disclosures included within Notes to Financial
Statements.






(3)
            Restricted
      Cash and Investments and Other
Investments




Restricted
cash and investments consist of the following (in thousands):




March
      31, 2009
                    
                    
                    December
      31, 2008Dividend
      set aside account
                    
                    $
                    13,780
                    
                    
                    $
                    13,279Debt
      service reserve fund
                    
                    
                    18,308
                    
                    
                    
                    9,602$
                    32,088
                    
                    
                    $
                    22,881
  Restricted
cash and investments are invested in money-market accounts holding U.S.
government securities. Other investments consist of auction rate securities with
a carrying value of $14.8 million and $14.1 million at March 31, 2009
and December 31, 2008, respectively. The investments earned interest at 2.6% and
2.5% at March 31, 2009 and December 31, 2008, respectively. The investments have
a remaining weighted average maturity of 22 years and are classified as
available-for-sale securities.





With the
liquidity issues experienced in global credit and capital markets, the
$21.4 million par value of auction rate securities held by the Company at
March 31, 2009, have experienced multiple failed auctions as the amount of
securities submitted for sale has exceeded the amount of purchase orders. The
securities are rated Baa1 by Moody’s Investors Service and AA- and A by Standard
& Poor’s at March 31, 2009. Although there is no current liquid market for
the auction rate securities, the Company believes the underlying
creditworthiness of the repayment sources for these securities’ principal and
interest has not materially deteriorated. Further, the Company has the intent
and ability to hold the auction rate securities for a period of time sufficient
to allow for any anticipated recovery in the credit and capital markets that
would facilitate the periodic auction and sale of these securities. Therefore,
the Company considers the auction rate securities to be temporarily impaired. At
March 31, 2009, the Company’s pre-tax temporary impairment of the auction rate
securities totaled $6.6 million. If the underlying assets and the
guarantors of the auction rate securities experience credit deterioration, the
Company may not ultimately realize the par value of the investments held at
March 31, 2009.




9




(4)
            Income
      Taxes  During
the three-months periods ended March 31, 2009 and 2008, CE Casecnan incurred
$3.4 million and $6.9 million, respectively, of income taxes. The
following table reconciles the Philippine statutory tax rate to the effective
tax rate applicable to income before income tax:





Three-Month
      PeriodsEnded
      March 31,2009
                
                
                2008Philippine
      statutory rate
                
                
                30
                %
                
                
                35
                %Optional
      standard deduction
                
                
                (9
                )
                
                
                -Effective
      tax rate
                
                
                21
                %
                
                
                35
                %





The
Company’s deferred income tax asset of $6.7 million and $7.0 million
as of March 31, 2009 and December 31, 2008, respectively, consists mainly of the
difference between the financial reporting basis and the tax reporting basis for
development and construction costs.






(5)
            Related
      Party Transactions








In the
normal course of business, the Company transacts with related parties on
commercial terms comparable to transactions with third parties. The payable to
affiliates was $2.6 million and $2.7 million at March 31, 2009 and
December 31, 2008, respectively. Costs incurred by the Company in
transactions with related parties amounted to $0.4 million for each of the
three-month periods ended March 31, 2009 and 2008, and consist primarily of cost
allocations.




As of
December 31, 2008, the Company had outstanding $7.1 million of
unsecured subordinated notes payable (the “Notes”) to CE Casecnan Ltd., a
shareholder. The Notes had a maturity of November 1, 2015, and bore an
interest rate consisting of the London Interbank Offer Rate plus 5.25%. However,
the Notes were redeemable at any time prior to maturity upon demand from CE
Casecnan Ltd. Interest expense on the Notes was $0.1 million and
$1.0 million for the three-month periods ended March 31, 2009 and
2008, respectively. On February 5, 2009, CE Casecnan repaid the
outstanding Notes in full.




(6)
            Commitments
      and Contingencies




Shareholder
Litigation





In
February 2002, pursuant to the share ownership adjustment mechanism in the
CE Casecnan shareholder agreement, CE Casecnan Ltd. advised the
minority shareholder of the Company, LaPrairie Group Contractors (International)
Ltd. (“LPG”) that MEHC’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 CE Casecnan Ltd. and
MEHC. On January 3, 2006, the Superior Court of the State of
California entered a judgment in favor of LPG against CE Casecnan Ltd. Pursuant
to the judgment, 15% of the distributions of the Company was deposited into
escrow plus interest at 9% per annum. The judgment was appealed, and as a result
of the appellate decision, CE Casecnan Ltd. determined that LPG would retain
ownership of 10% of the shares of the Company, with the remaining 5% share to be
transferred to CE Casecnan Ltd. subject to certain buy-up rights under the
shareholder agreement, which are also being litigated. Certain predicate issues
have been determined by the court and the remaining issues are fully briefed and
pending before the court. Exercise of the buy-up rights is a transaction between
shareholders and is not expected to have any impact on the Company’s results of
operations.





On
July 1, 2005, MEHC and CE Casecnan Ltd. commenced an action
against San Lorenzo Ruiz Builders and Developers Group, Inc. (“San
Lorenzo”) in the District Court of Douglas County, Nebraska, seeking a
declaratory judgment as to San Lorenzo’s right to repurchase 15% of the
shares in the Company. On January 30, 2006, San Lorenzo filed a
counterclaim against MEHC and CE Casecnan Ltd. seeking declaratory
relief that it has effectively exercised its option to purchase 15% of the
shares of the Company, that it is the rightful owner of such shares and that it
is due all dividends paid on such shares. Currently, the action is in the
discovery phase, and a trial has been set to begin in November 2009. The impact,
if any, of this litigation on the Company cannot be determined at this
time.




10


Supplemental Real Property
Tax





On
July 1, 2008, CE Casecnan received a supplemental real property tax
assessment totaling $28.6 million from the province of Nueva Ecija and the
municipality of Pantabangan for the tax years 2002 through the second quarter of
2008. CE Casecnan forwarded the assessment to NIA and the Philippine Department
of Finance (“DOF”), which must authorize any payment for real property taxes and
are obligated to reimburse the Company pursuant to the Project Agreement. On
December 19, 2008, pursuant to written authorization from NIA and the DOF,
CE Casecnan tendered $6.8 million as partial payment of the supplemental
assessment and recorded a receivable of an equal amount for the expected full
reimbursement to CE Casecnan from NIA. On January 16, 2009, CE Casecnan
filed a protest on the supplemental assessment which the provincial treasurer
failed to resolve timely. CE Casecnan will file an appeal with the Local Board
of Assessment Appeals by May 16, 2009. No liability for supplemental real
property tax has been recognized as the Company believes that the claim is
without merit.





On March
12, 2009, CE Casecnan received a supplemental real property tax assessment
totaling $36.5 million from the province of Nueva Vizcaya for the tax years 2002
to 2009. CE Casecnan forwarded the assessment to NIA and the DOF”), which must
authorize any payment for real property taxes and are obligated to reimburse the
Company pursuant to the Project Agreement. NIA instructed CE Casecnan to file an
appeal of the supplemental assessment with the Local Board of Assessment Appeals
by May 11, 2009. Discussions among the parties to resolve the matter are
ongoing. No liability for supplemental real property tax has been recognized as
the Company believes that the claim is without merit.





National Wealth
Tax





On July
17, 2008, CE Casecnan received an assessment totaling $4.1 million from the
municipality of Alfonso Castaneda for a share of national wealth tax it claims
is owed by the Company for the years from 2002 through 2007. CE Casecnan
forwarded the assessment to NIA and the DOF, which must authorize any payment
for national wealth taxes and are obligated to reimburse the Company pursuant to
the Project Agreement. On September 24, 2008, CE Casecnan received a
temporary restraining order to enjoin the municipality of Alfonso Castaneda from
pursuing its collection efforts until the matter can be decided by the court. A
pre-trial hearing was held on December 11, 2008. The proceedings were
suspended indefinitely to allow the municipality of Alfonso Castaneda to provide
other local government units the opportunity to intervene in the case. No
liability for national wealth tax has been recognized as the Company believes
that the claim is without merit.





Franchise
Tax





In 2006,
CE Casecnan received franchise tax assessments for the years 2001 to 2006
totaling $2.2 million from the Province of Nueva Vizcaya. CE Casecnan
believes that franchise tax is imposed on companies which have a secondary or
special franchise from the government. CE Casecnan is an independent power
producer and does not have a government franchise. The Electric Power Industry
Reform Act provides that independent power generation is not a public utility
operation and does not require a franchise. Therefore, the Company has not
recognized a liability relating to these assessments. In 2006, CE Casecnan
filed appeals of the assessments which are currently pending before the Supreme
Court Office of the Court Administrator for reassignment to another court to
hear and decide the cases.





Concentration of
Risk





NIA’s
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 shareholders,
partners or affiliates of the Company, including MEHC, and no directors,
officers or employees of the Company have guaranteed or will 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 revenue from
the Company’s business after the payment of operating expenses.




11




(7)
            Fair
      Value Measurements





The
Company has auction rate securities that are measured at fair value in the
Financial Statements. The Company uses a three level hierarchy for determining
fair value and a financial asset or liability classification within the
hierarchy is determined based on the lowest level input that is significant to
the fair value measurement. The auction rate securities were valued using
internally developed discounted cash flow models based on available observable
market data and the Company’s judgment about the assumptions, including
liquidity and nonperformance risks, which market participants would use in
pricing the asset. As such, the Company considers these securities to be valued
using Level 3 inputs. The following table reconciles the beginning and ending
balance of the Company’s auction rate securities measured at fair value on a
recurring basis (in thousands):





Three-Month
      PeriodsEnded
      March 31,2009
                
                
                2008Beginning
      balance
                
                $
                14,096
                
                
                $
                21,409Unrealized
      gains (losses) included in other comprehensive (loss)
    income
                
                
                726
                
                
                
                (1,817
                )Ending
      balance
                
                $
                14,822
                
                
                $
                19,592








(8)
            Comprehensive
      Income and Components of Accumulated Other Comprehensive Loss,
      Net





Comprehensive
income consists of the following components (in thousands):




Three-Month
      PeriodsEnded
      March 31,2009
                  
                  
                  2008Net
      income
                  
                  $
                  12,606
                  
                  
                  $
                  12,861Other
      comprehensive income (loss) – unrealized gains (losses) on
      marketablesecurities, net of tax of $218 and $(636)
                  
                  
                  508
                  
                  
                  
                  (1,181
                  )Comprehensive
      income
                  
                  $
                  13,114
                  
                  
                  $
                  11,680





Accumulated
other comprehensive loss, net, consists of unrealized losses on marketable
securities totaling $4.6 million, net of tax of $2.0 million, and
$5.1 million, net of tax of $2.2 million, as of March 31, 2009
and December 31, 2008, respectively.




12


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
that 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 herein. Explanations include management’s best estimate of
the impact of weather and other factors. This discussion should be read in
conjunction with the Company’s historical unaudited Financial Statements and
Notes to Financial Statements included in Item 1 of this Form 10-Q. The
Company’s actual results in the future could differ significantly from the
historical results.





Forward-Looking
Statements





This
report contains statements that do not directly or exclusively relate to
historical facts. These statements are “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements can typically be identified by the use of forward-looking words, such
as “may,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,”
“continue,” “intend,” “potential,” “plan,” “forecast” and similar terms. These
statements are based upon the Company’s current intentions, assumptions,
expectations and beliefs and are subject to risks, uncertainties and other
important factors. Many of these factors are outside the Company’s control and
could cause actual results to differ materially from those expressed or implied
by the Company’s forward-looking statements. These factors include, among
others:





·
            changes
      in weather conditions that could affect operating
  revenue;




·
            general
      economic, political and business conditions in the Philippines and
      throughout the world;




·
            changes
      in governmental, legislative or regulatory requirements affecting the
      Company or the power generation
industry;




·
            availability
      of qualified personnel;




·
            the
      impact of new accounting pronouncements or changes in current accounting
      estimates and assumptions on financial results;
  and




·
            other
      business or investment considerations that may be disclosed from time to
      time in the Company’s filings with the United States Securities and
      Exchange Commission (“SEC”) or in other publicly disseminated written
      documents.







Further
details of the potential risks and uncertainties affecting the Company are
described in the Company’s filings with the SEC, including Item 1A and other
discussions contained in this Form 10-Q. The Company undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise. The foregoing review of factors
should not be construed as exclusive.





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,
as amended by the Supplemental Agreement dated September 29, 2003 (the
“Project Agreement”), covering a 20-year cooperation period (“Cooperation
Period”) ending December 11, 2021, with  obligations for the
delivery of water and electricity. At the end of the Cooperation Period, the
combined irrigation and 150 megawatt hydroelectric power generation project
(the “Casecnan Project”) will be transferred to the ROP at no cost on an “as is”
basis. NIA’s obligations under the Project Agreement are guaranteed by the full
faith and credit of the ROP (the “Performance Undertaking”). The Project
Agreement and the Performance Undertaking provide for the resolution of disputes
by binding arbitration in Singapore under international arbitration
rules.





Results
of Operations for the Three-Month Periods Ended March 31, 2009 and
2008





The
Casecnan Project is dependent 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 contractual terms
for variable water and energy delivery fees can produce significant variability
in revenue between reporting periods.





13




Prior to
December 25, 2008, the water delivery fee was a fixed monthly payment based upon
an assumed annual water delivery of 801.9 million cubic meters, prorated to
66.8 million cubic meters per month, multiplied by the water delivery fee rate
of $0.07381 per cubic meter. For each contract year starting from
December 25, 2003 and ending on December 25, 2008, a water delivery
fee credit, or deferred revenue, was computed equal to 801.9 million cubic
meters minus the greater of actual water deliveries or 700.0 million cubic
meters - the annual minimum water delivery threshold. Accordingly, in
recognizing revenue, the water delivery fees were recorded each month prorated
to 58.3 million cubic meters until the minimum threshold had been reached for
the current contract year. The water delivery fee credit at the end of each
contract year, if any, was available to be earned in the succeeding contract
year through December 25, 2008. All water delivery credits available under
the contract were earned by the Company as of December 25,
2008.





For
contract years from December 25, 2008 through the end of the Cooperation
Period, December 11, 2021, guaranteed water delivery fees are
$51.7 million, calculated as the annual minimum water delivery threshold
multiplied by $0.07381.





Variable
water delivery fees are earned for all water deliveries within the contract
year, if any, exceeding the annual minimum water delivery threshold multiplied
by $0.07381, until a cumulative 1.324 billion cubic meters of water subject
to variable water delivery fees have been delivered.





Guaranteed
energy delivery fees are $36.4 million per year, calculated as the assumed
annual delivery of 228.0 Gigawatt-hours (“GWh”), prorated to 19.0 GWh per
month and multiplied by $0.1596 per kilowatt-hour (“kWh”).





The
Company earns variable energy delivery fees in each contract year based upon
actual energy delivered in excess of 228.0 GWh, multiplied by the applicable
rate, until cumulative energy of 490.0 GWh per year are delivered. Prior to
December 25, 2008, the rate was $0.1509 per kWh. Thereafter, the variable energy
delivery rate is $0.1132 per kWh for the contract year ending December 25, 2009,
escalating at 1% per annum. Energy deliveries between 490.0 GWh and
550.0 GWh within a contract year earn variable energy delivery fees at a
rate of 1.3 Philippine pesos (“pesos”) per kWh prior to December 25, 2008 and
1.0 pesos per kWh thereafter, escalating at 1% per annum. Energy deliveries
above 550.0 GWh per year are at no cost to NIA. Within each contract year,
no variable energy delivery fees are payable until energy in excess of the
cumulative 19.0 GWh per month for the contract year to date has been
delivered.





The
following table provides certain operating data of the Casecnan Project for the
three-month periods ended March 31:





2009
                
                
                2008Electricity
      produced (GWh)
                
                
                65.8
                
                
                
                99.4Water
      delivered (million cubic meters)
                
                
                111.9
                
                
                
                172.3





The
Company's water and energy fees for the three-month periods ended March 31 are
as follows (in millions):





2009
                
                
                2008Water
      delivery fees
                
                $
                12.8
                
                
                $
                14.8Guaranteed
      energy fees
                
                
                9.1
                
                
                
                9.1Variable
      energy fees
                
                
                1.6
                
                
                
                6.9Deferred
      water delivery fees
                
                
                -
                
                
                
                (1.9
                )$
                23.5
                
                
                $
                28.9





Revenue
decreased $5.4 million for 2009 compared to 2008. The decrease in variable
energy fees was due to higher than normal water flow which resulted in higher
electricity production in 2008 as compared to 2009 and a lower price for
variable energy fees in 2009. The deferred water delivery fees in 2008 represent
the difference between the actual water delivery fees earned and water delivery
fees invoiced pursuant to the Project Agreement.





Plant
operations and other operating expenses decreased $0.2 million for 2009 compared
to 2008 due primarily to lower general and administrative costs.





Interest
expense decreased $2.1 million for 2009 compared to 2008 due to lower
outstanding debt balances resulting from the scheduled repayment of long-term
debt and the repayment of notes payable.





Interest
income decreased $0.4 million for 2009 compared to 2008 as a result of lower
interest rates.




14





Income
tax expense decreased $3.5 million for 2009 compared to 2008 due to lower
taxable income, a reduction in the Philippine statutory tax rate from 35% to
30%, and the adoption of the optional standard deduction method for calculating
income tax liabilities.





Liquidity
and Capital Resources





NIA’s
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 shareholders,
partners or affiliates of the Company, including MidAmerican Energy Holdings
Company, and no directors, officers or employees of the Company have guaranteed
or will 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 revenue from the Company’s business after the payment of operating
expenses.





The
Company’s cash and cash equivalents were $43.4 million and
$49.4 million at March 31, 2009 and December 31, 2008,
respectively.





Cash Flows from Operating
Activities





Net cash
flows from operating activities for the three-month periods ended March 31, 2009
and 2008 were $20.3 million and $33.4 million, respectively. The
decrease in operating cash flows for the first quarter of 2009 was primarily due
to lower variable energy fees earned, timing of revenue collections, and payment
of interest related to notes payable.





Cash Flows from Investing
Activities





Net cash
flows from investing activities for the three-month periods ended March 31, 2009
and 2008 were $(9.6) million and $(0.4) million, respectively. In 2009, the
Company increased its restricted cash and investments balance by $8.7 million to
cover the scheduled May 15, 2009 repayment obligations on the Company’s
long-term debt.





Cash Flows from Financing
Activities





Net cash
flows from financing activities the three-month periods ended March 31, 2009 and
2008 were $(16.7) million and $- million, respectively. In 2009, the
Company repaid the remaining $7.1 million of notes payable to CE Casecnan
Ltd. and paid $9.5 million of dividends on common stock.





Auction
Rate Securities





With the
liquidity issues experienced in global credit and capital markets, the
$21.4 million par value of auction rate securities held by the Company at
March 31, 2009, have experienced multiple failed auctions as the amount of
securities submitted for sale has exceeded the amount of purchase orders. The
securities are rated Baa1 by Moody’s Investors Service and AA- and A by Standard
& Poor’s at March 31, 2009. Although there is no current liquid market
for the auction rate securities, the Company believes the underlying
creditworthiness of the repayment sources for these securities’ principal and
interest has not materially deteriorated. Further, the Company has the intent
and ability to hold the auction rate securities for a period of time sufficient
to allow for any anticipated recovery in the credit and capital markets that
would facilitate the periodic auction and sale of these securities. At
March 31, 2009, the Company’s pre-tax temporary impairment of the auction
rate securities totaled $6.6 million. If the underlying assets and the
guarantors of the auction rate securities experience credit deterioration, the
Company may not ultimately realize the par value of the investments held at
March 31, 2009.




15


Supplemental
Real Property Tax





On
July 1, 2008, CE Casecnan received a supplemental real property tax
assessment totaling $28.6 million from the province of Nueva Ecija and the
municipality of Pantabangan for the tax years 2002 through the second quarter of
2008. CE Casecnan forwarded the assessment to NIA and the Philippine Department
of Finance (“DOF”), which must authorize any payment for real property taxes and
are obligated to reimburse the Company pursuant to the Project Agreement. On
December 19, 2008, pursuant to written authorization from NIA and the DOF,
CE Casecnan tendered $6.8 million as partial payment of the supplemental
assessment and recorded a receivable of an equal amount for the expected full
reimbursement to CE Casecnan from NIA. On January 16, 2009, CE Casecnan
filed a protest on the supplemental assessment which the provincial treasurer
failed to resolve timely. CE Casecnan will file an appeal with the Local Board
of Assessment Appeals by May 16, 2009. No liability for supplemental real
property tax has been recognized as the Company believes that the claim is
without merit.





On March
12, 2009, CE Casecnan received a supplemental real property tax assessment
totaling $36.5 million from the province of Nueva Vizcaya for the tax years 2002
to 2009. CE Casecnan forwarded the assessment to NIA and the DOF, which must
authorize any payment for real property taxes and are obligated to reimburse the
Company pursuant to the Project Agreement. NIA instructed CE Casecnan to file an
appeal of the supplemental assessment with the Local Board of Assessment Appeals
by May 11, 2009. Discussions among the parties to resolve the matter are
ongoing. No liability for supplemental real property tax has been recognized as
the Company believes that the claim is without merit.





National
Wealth Tax





On
July 17, 2008, CE Casecnan received an assessment totaling
$4.1 million from the municipality of Alfonso Castaneda for a share of
national wealth tax it claims is owed by the Company for the years from 2002
through 2007. CE Casecnan forwarded the assessment to NIA and the DOF, which
must authorize any payment for national wealth taxes and are obligated to
reimburse the Company pursuant to the Project Agreement. On September 24,
2008, CE Casecnan received a temporary restraining order to enjoin the
municipality of Alfonso Castaneda from pursuing its collection efforts until the
matter can be decided by the court. A pre-trial hearing was held on
December 11, 2008. The proceedings were suspended indefinitely to allow the
municipality of Alfonso Castaneda to provide other local government units the
opportunity to intervene in the case. No liability for national wealth tax has
been recognized as the Company believes that the claim is without
merit.





Franchise
Tax





In 2006,
CE Casecnan received franchise tax assessments for the years 2001 to 2006
totaling $2.2 million from the Province of Nueva Vizcaya. CE Casecnan
believes that franchise tax is imposed on companies which have a secondary or
special franchise from the government. CE Casecnan is an independent power
producer and does not have a government franchise. The Electric Power Industry
Reform Act provides that independent power generation is not a public utility
operation and does not require a franchise. Therefore, the Company has not
recognized a liability relating to these assessments. In 2006, CE Casecnan
filed appeals of the assessments which are currently pending before the Supreme
Court Office of the Court Administrator for reassignment to another court to
hear and decide the cases.





Contractual
Obligations





Subsequent
to December 31, 2008, there were no material changes outside the normal
course of business in contractual obligations from the information provided in
Item 7 of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.





New
Accounting Pronouncements





For a
discussion of new accounting pronouncements affecting the Company, refer to Note
2 of Notes to Financial Statements included in Item 1 of this Form
10-Q.




16


Critical
Accounting Policies





Certain
accounting policies require management to make estimates and judgments
concerning transactions that will be settled several years in the future.
Amounts recognized in the Financial Statements from such estimates are
necessarily based on numerous assumptions involving varying and potentially
significant degrees of judgment and uncertainty. Accordingly, the amounts
currently reflected in the Financial Statements will likely increase or decrease
in the future as additional information becomes available. Estimates are used
for, but not limited to, the allowance for doubtful accounts and auction rate
securities – measurement principles. For additional discussion of the Company’s
critical accounting policies, see Item 7 of the Company’s Annual Report on Form
10-K for the year ended December 31, 2008. The Company’s critical
accounting policies have not changed materially since December 31,
2008.





Item
      3.
            Quantitative and Qualitative Disclosures About
      Market Risk





For
quantitative and qualitative disclosures about market risk affecting the
Company, see Item 7A of the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008. The Company’s exposure to market risk and its
management of such risk has not changed materially since
December 31, 2008.





Item
      4.
            Controls and
  Procedures





At the
end of the period covered by this Quarterly Report on Form 10-Q, the Company
carried out an evaluation, under the supervision and with the participation of
the Company’s management, including the President (principal executive officer)
and the Chief Financial Officer (principal financial officer), of 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). Based upon that evaluation, the Company’s
management, including the President (principal executive officer) and the Chief
Financial Officer (principal financial officer), concluded that the Company’s
disclosure controls and procedures were effective to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms, and is accumulated and
communicated to management, including the Company’s
President  (principal executive officer) and the Chief Financial
Officer (principal financial officer), or persons performing similar functions,
as appropriate to allow timely decisions regarding required disclosure. There
has been no change in the Company’s internal control over financial reporting
during the quarter ended March 31, 2009 that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.


17




PART
II





Item
      1.
                  Legal
Proceedings





None.





Item
      1A.
                Risk
Factors





There has
been no material change to the Company’s risk factors from those disclosed in
Item 1A of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2008.





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.


18





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:
      April 24, 2009
                
                /s/ Patrick J. GoodmanPatrick J. GoodmanSenior
      Vice President and Chief Financial Officer(principal
      financial and accounting
officer)





19


EXHIBIT INDEX





Exhibit No.
                        
                        Description31.1
                        
                        Principal
      Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2
                        
                        Principal
      Financial Officer Certification Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
                        
                        Principal
      Executive Officer Certification Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002.32.2
                        
                        Principal
      Financial Officer Certification Pursuant to Section 906 of the
      Sarbanes-Oxley Act of
2002.











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