**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 June 30, 2007
 
 **OR**
 
 **[  ]
        Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
        Act
        of 1934**
 
 For
        the
        transition period from ________to_______
 
 Commission
        File No. 001-12995
 
 **CE
        CASECNAN WATER AND ENERGY COMPANY, INC.**
 (Exact
        name of registrant as specified in its charter)
 
 Philippines
              
              Not
                  Applicable(State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              (I.R.S.
                  Employer
                Identification
                  No.)24th
                  Floor, 6750
                  Building, Ayala Avenue
                Makati,
                  Metro Manila, Philippines
              
              Not
                  Applicable(Address
                  of principal executive offices)
              
              (Zip
                  Code)
 
 011
                  63 2 892-0276(Registrant’s
                  telephone number, including area code)Not
                  Applicable(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
 ̈No  T
 
 Indicate
        by check mark whether the registrant is a large accelerated filer, an
        accelerated filer, or a non-accelerated filer. See the definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
        Act. (Check one):
  Large
                  accelerated filer   ̈
              Accelerated
                  filer   ̈
              Non-accelerated
                  filer  T
 
 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 July 26, 2007, the
        number
        of outstanding shares of $0.038 par value common stock was 767,162.
 
 
  **TABLE
        OF CONTENTS**
 
 **PART
        I – FINANCIAL INFORMATION**
 
 3Item
                  1.
              Financial
                  StatementsItem
                  2.
              Management’s
                  Discussion and Analysis of Financial
                  Condition and Results of Operations
              12Item
                  3.
              Quantitative
                  and Qualitative Disclosures About
                  Market Risk
              16Item
                  4.
              Controls
                  and Procedures
              16**PART
                  II – OTHER INFORMATION**Item
                  1.
              Legal
                  Proceedings
              17Item
                  1A.
              Risk
                  Factors
              17Item
                  2.
              Unregistered
                  Sales of Equity Securities and Use of
                  Proceeds
              17Item
                  3.
              Defaults
                  Upon Senior Securities
              17Item
                  4.
              Submission
                  of Matters to a Vote of Security
                  Holders
              17Item
                  5.
              Other
                  Information
              17Item
                  6.
              Exhibits
              17Signatures
              
              18Exhibit
                  Index
              
              19
  2
  **PART
        I – FINANCIAL INFORMATION**
 
 
 **Item
                  1.**
              **Financial
                  Statements.**
 
 
 
 **Report
        of Independent Registered Public Accounting Firm**
 
 
 To
        the
        Board of Directors and 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 June 30, 2007, and the related statements of
        operations for each of the three-month and six-month periods ended
        June 30, 2007 and 2006 and of changes in shareholders’ equity and of
        cash flows for each of the six-month periods ended June 30, 2007 and 2006.
        These
        interim financial statements are the responsibility of the Company's
        management.
 
 We
        conducted our review in accordance with standards of the Public Company
        Accounting Oversight Board (United States). A review of interim financial
        information consists principally of applying analytical review procedures
        and
        making inquiries of persons responsible for financial and accounting matters.
        It
        is substantially less in scope than an audit conducted in accordance with
        standards of the Public Company Accounting Oversight Board, the objective
        of
        which is the expression of an opinion regarding the financial statements
        taken
        as a whole. Accordingly, we do not express such an opinion.
 
 Based
        on
        our review, we are not aware of any material modifications that should be
        made
        to the accompanying interim financial statements for them to be in conformity
        with accounting principles generally accepted in the United States of
        America.
 
 We
        previously audited in accordance with standards of the Public Company Accounting
        Oversight Board (United States), the balance sheet as of December 31, 2006,
        and the related statements of operations, of changes in shareholders’ equity and
        of cash flows for the year then ended (not presented herein), and in our
        report
        dated February 8, 2007, 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, 2006, is fairly stated in all material
        respects in relation to the balance sheet from which it has been
        derived.
 
 /s/
        Isla
        Lipana & Co.
 
 ISLA
        LIPANA & CO.
 A
        PricewaterhouseCoopers Member Firm
 Makati
        City, Philippines
 July
        26,
        2007
 
 3
  **CE
        CASECNAN WATER AND ENERGY COMPANY, INC.**
 **BALANCE
        SHEETS (Unaudited)**
 (Amounts
        in thousands of U.S. Dollars, except share data)
 
 **As
                  of****June
                  30,**
              
              
              **December
                  31,****2007**
              
              
              **2006****ASSETS**Current
                  assets:Cash
                  and cash equivalents
              
              $
              17,508
              
              
              $
              31,946Restricted
                  cash and investments
              
              
              37,083
              
              
              
              62,659Trade
                  receivable, net
              
              
              14,502
              
              
              
              14,002Prepaid
                  insurance and other current assets
              
              
              5,350
              
              
              
              6,008Total
                  current assets
              
              
              74,443
              
              
              
              114,615Property,
                  plant and equipment, net
              
              
              313,551
              
              
              
              324,203Deferred
                  income taxes
              
              
              5,095
              
              
              
              5,095Bond
                  issue costs, net
              
              
              798
              
              
              
              1,057**Total
                  assets**
              
              $
              393,887
              
              
              $
              444,970**LIABILITIES
                  AND SHAREHOLDERS’ EQUITY**Current
                  liabilities:Accounts
                  payable and other accrued liabilities
              
              $
              4,757
              
              
              $
              5,264Dividends
                  payable
              
              
              10,825
              
              
              
              32,475Accrued
                  interest
              
              
              15,545
              
              
              
              15,326Payable
                  to affiliates
              
              
              2,154
              
              
              
              41,011Notes
                  payable
              
              
              51,263
              
              
              
              -Current
                  portion of long-term debt
              
              
              37,730
              
              
              
              37,730Total
                  current liabilities
              
              
              122,274
              
              
              
              131,806Notes
                  payable
              
              
              -
              
              
              
              51,263Deferred
                  revenue
              
              
              3,761
              
              
              
              -Long-term
                  debt, net of current portion
              
              
              49,735
              
              
              
              68,600Total
                  liabilities
              
              
              175,770
              
              
              
              251,669Commitments
                  and contingencies (Note 5)Shareholders’
                  equity:Common
                  shares - 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
              
              
              94,281
              
              
              
              69,465Total
                  shareholders’ equity
              
              
              218,117
              
              
              
              193,301**Total
                  liabilities and shareholders’ equity**
              
              $
              393,887
              
              
              $
              444,970
 
 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 of U.S. Dollars)
 
 **Three
                  Months**
              
              
              **Six
                  Months****Ended
                  June****30,**
              
              
              **Ended
                  June 30,****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006****Revenue:**Lease
                  rentals and service contracts
              
              $
              22,014
              
              
              $
              21,806
              
              
              $
              46,352
              
              
              $
              54,533**Operating
                  expenses:**Depreciation
              
              
              5,401
              
              
              
              5,352
              
              
              
              10,807
              
              
              
              10,745Plant
                  operations and other operating expenses
              
              
              2,103
              
              
              
              2,085
              
              
              
              3,926
              
              
              
              4,080Total
                  operating expenses
              
              
              7,504
              
              
              
              7,437
              
              
              
              14,733
              
              
              
              14,825**Operating
                  income**
              
              
              14,510
              
              
              
              14,369
              
              
              
              31,619
              
              
              
              39,708**Other
                  income (expense):**Interest
                  expense
              
              
              (4,381
              )
              
              
              (5,456
              )
              
              
              (9,031
              )
              
              
              (11,124
              )Interest
                  income
              
              
              671
              
              
              
              710
              
              
              
              1,532
              
              
              
              1,579Other,
                  net
              
              
              900
              
              
              
              419
              
              
              
              1,880
              
              
              
              1,627Total
                  other expense, net
              
              
              (2,810
              )
              
              
              (4,327
              )
              
              
              (5,619
              )
              
              
              (7,918
              )**Income
                  before provision for income tax**
              
              
              11,700
              
              
              
              10,042
              
              
              
              26,000
              
              
              
              31,790**Provision
                  for income tax**
              
              
              558
              
              
              
              578
              
              
              
              1,184
              
              
              
              1,114**Net
                  income**
              
              $
              11,142
              
              
              $
              9,464
              
              
              $
              24,816
              
              
              $
              30,676
 
 The
        accompanying notes are an integral part of these financial
        statements.
  5
  **CE
        CASECNAN WATER AND ENERGY COMPANY, INC.**
 **STATEMENTS
        OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)**
 (Amounts
        in thousands of U.S. Dollars)
   
 **Outstanding**
              
              
              
              
              
              **Additional****Common**
              
              
              **Common**
              
              
              **Paid-in**
              
              
              **Retained****Shares**
              
              
              **Shares**
              
              
              **Capital**
              
              
              **Earnings**
              
              
              **Total****Balance,
                  January 1, 2006**
              
              
              767,162
              
              
              $
              29
              
              
              $
              123,807
              
              
              $
              68,161
              
              
              $
              191,997Net
                  income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              30,676
              
              
              
              30,676Dividends
                  declared
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (56,000
              )
              
              
              (56,000
              )**Balance,
                  June 30, 2006**
              
              
              767,162
              
              
              $
              29
              
              
              $
              123,807
              
              
              $
              42,837
              
              
              $
              166,673
  **Balance,
                  January 1, 2007**
              
              
              767,162
              
              
              $
              29
              
              
              $
              123,807
              
              
              $
              69,465
              
              
              $
              193,301Net
                  income
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              24,816
              
              
              
              24,816**Balance,
                  June 30, 2007**
              
              
              767,162
              
              
              $
              29
              
              
              $
              123,807
              
              
              $
              94,281
              
              
              $
              218,117
 
 The
        accompanying notes are an integral part of these financial
        statements.
 
 
 6
  **CE
        CASECNAN WATER AND ENERGY COMPANY, INC.**
 **STATEMENTS
        OF CASH FLOWS (Unaudited)**
 (Amounts
        in thousands of U.S. Dollars)
 
 **Six
                  Months****Ended
                  June 30,****2007**
              
              
              **2006****Cash
                  flows from operating activities:**Net
                  income
              
              $
              24,816
              
              
              $
              30,676Adjustments
                  to reconcile net income to cash flows from operating
                  activities:Depreciation
              
              
              10,807
              
              
              
              10,745Amortization
                  of bond issue costs
              
              
              259
              
              
              
              344Changes
                  in other items:Trade
                  receivable, net
              
              
              (500
              )
              
              
              8,583Prepaid
                  insurance and other current assets
              
              
              658
              
              
              
              447Accounts
                  payable and other accrued liabilities
              
              
              (507
              )
              
              
              (1,453
              )Accrued
                  interest
              
              
              219
              
              
              
              2,275Deferred
                  revenue
              
              
              3,761
              
              
              
              3,761Net
                  cash flows from operating activities
              
              
              39,513
              
              
              
              55,378**Cash
                  flows from investing activities:**Additions
                  to property, plant and equipment
              
              
              (155
              )
              
              
              (1,488
              )Decrease
                  (increase) in restricted cash and investments for debt
                  service
                bligations
                  and dividends payable
              
              
              25,576
              
              
              
              (10,349
              )Net
                  cash flows from investing activities
              
              
              25,421
              
              
              
              (11,837
              )**Cash
                  flows from financing activities:**Decrease
                  in payable to affiliates
              
              
              (38,857
              )
              
              
              1,138Repayment
                  of project financing debt
              
              
              (18,865
              )
              
              
              (18,007
              )Cash
                  dividends paid
              
              
              (21,650
              )
              
              
              (47,600
              )Net
                  cash flows from financing activities
              
              
              (79,372
              )
              
              
              (64,469
              )**Net
                  change in cash and cash equivalents**
              
              
              (14,438
              )
              
              
              (20,928
              )**Cash
                  and cash equivalents at beginning of period**
              
              
              31,946
              
              
              
              42,317**Cash
                  and cash equivalents at end of period**
              
              $
              17,508
              
              
              $
              21,389
 
 The
        accompanying notes are an integral part of these financial
        statements.
 
 7
 
 **CE
        CASECNAN WATER AND ENERGY COMPANY, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 **(Unaudited)**
 
 **(1)**
              **General**
 
 CE
        Casecnan Water and Energy Company, Inc. (“CE Casecnan” or the “Company”) has a
        contract with the Republic of the Philippines (“ROP”), through the Philippine
        National Irrigation Administration (“NIA”) (a ROP-owned and controlled
        corporation), for the development and construction of a hydroelectric power
        plant and related facilities under a build-own-operate-transfer agreement
        (“Project Agreement”), as amended by the Supplemental Agreement dated
        September 29, 2003, covering a 20-year cooperation period
        (“Cooperation Period”) commencing December 11, 2001, with “take-or-pay”
obligations for 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. The ROP also signed a Performance Undertaking, which, among others,
        affirms and guarantees the obligations of NIA under the Project Agreement.
        CE
        Casecnan is registered with the Philippine Board of Investments as a new
        operator of hydroelectric power plant with pioneer status under the Omnibus
        Investments Code of 1987. Under the terms of its registration, CE Casecnan
        is entitled to certain incentives which include an income tax holiday for
        six
        years from the start of commercial operations. The Casecnan Project Cooperation
        Period began upon commencement of commercial operations on
        December 11, 2001. The income tax holiday will expire on
        December 11, 2007.
 
 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 water delivery fees and variable energy fees can produce significant
        variability in revenue between reporting periods.
 
 The
        Company’s operations are in one reportable segment, the water delivery and
        electricity generation industry.
 
 The
        accompanying 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 U.S. Securities and Exchange
        Commission’s rules and regulations for Form 10-Q and Article 10 of Regulation
        S-X. Accordingly, they do not include all of the information and footnotes
        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 and for the three-month and six-month periods
        ended June 30, 2007. Certain amounts in the prior period Financial
        Statements have been reclassified to conform to the current period presentation.
        Such reclassifications did not impact previously reported net income or retained
        earnings. The results of operations for the three-month and six-month periods
        ended June 30, 2007, 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. Management’s Discussion and Analysis and Note 2 of Notes to
        Financial Statements included in the Company’s Annual Report on Form 10-K for
        the year ended December 31, 2006, describe 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
        critical accounting estimates and significant accounting policies during
        the
        first six months of 2007.
  8
  **(2)           New
        Accounting Pronouncements**
 
 In
        February 2007, the Financial Accounting Standards Board (“FASB”) issued
        Statement of Financial Accounting Standards (“SFAS”) No. 159, “The Fair Value
        Option for Financial Assets and Financial Liabilities - Including an Amendment
        of FASB Statement No. 115” (“SFAS No. 159”). SFAS No. 159 permits entities to
        elect to measure many financial instruments and certain other items at fair
        value. Upon adoption of SFAS No. 159, an entity may elect the fair value
        option
        for eligible items that exist at the adoption date. Subsequent to the initial
        adoption, the election of the fair value option should only be made at initial
        recognition of the asset or liability or upon a remeasurement event that
        gives
        rise to new-basis accounting. The decision about whether to elect the fair
        value
        option is applied on an instrument-by-instrument basis, is irrevocable and
        is
        applied only to an entire instrument and not only to specified risks, cash
        flows
        or portions of that instrument. SFAS No. 159 does not affect any existing
        accounting literature that requires certain assets and liabilities to be
        carried
        at fair value nor does it eliminate disclosure requirements included in other
        accounting standards. SFAS No. 159 is effective for fiscal years beginning
        after
        November 15, 2007. The Company is currently evaluating the impact of adopting
        SFAS No. 159 on its financial position and results of operations.
 
 In
        September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS
        No. 157”). SFAS No. 157 defines fair value, establishes a framework for
        measuring fair value and expands disclosures about fair value measurements.
        SFAS
        No. 157 does not impose fair value measurements on items not already accounted
        for at fair value; rather it applies, with certain exceptions, to other
        accounting pronouncements that either require or permit fair value measurements.
        SFAS No. 157 is effective for fiscal years beginning after November 15, 2007,
        and interim periods within those fiscal years. The Company is currently
        evaluating the impact of adopting SFAS No. 157 on its financial position
        and
        results of operations.
 
 In
        July
        2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in
        Income Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48
        clarifies the accounting for uncertainty in income taxes recognized in
        accordance with SFAS No. 109, “Accounting for Income Taxes,” and prescribes a
        recognition threshold and measurement attribute for the financial statement
        recognition and measurement of a tax position taken or expected to be taken
        in a
        return. Guidance is also provided on de-recognition, classification, interest
        and penalties, accounting in interim periods, disclosure and transition.
        The
        Company adopted the provisions of FIN 48 effective January 1, 2007, and such
        adoption did not have a material effect on the Financial
        Statements.
 
 **(3)           Restricted
        Cash and Investments**
 
 Restricted
        cash and investments consist of the following (in thousands):
 
 June
                  30,2007
              
              
              December 31,2006Debt
                  service reserve fund
              
              $
              24,320
              
              
              $
              25,407Dividend
                  set aside account
              
              
              12,763
              
              
              
              37,252$
              37,083
              
              
              $
              62,659
 
 Refer
        to
        Note 5, shareholder litigation, for additional information concerning the
        movement in the dividend set aside account.
 
 **(4)           Related
        Party Transactions**
 
 In
        the
        normal course of business, the Company transacts with its affiliates in the
        form
        of advances for operating expenses. The payable to affiliates was
        $2.2 million and $41.0 million at June 30, 2007 and December 31, 2006,
        respectively. Costs incurred by the Company in transactions with related
        parties
        amounted to $0.7 million and $0.8 million for each of the three-month
        periods ended June 30, 2007 and 2006, respectively, and $1.6 million and
        $3.4 million for each of the six-month periods ended June 30, 2007 and
        2006, respectively. On April 20, 2007, the Company repaid
        $36.0 million of advances received from affiliates.
  9
  As
        of
        June 30, 2007 and December 31, 2006, the Company had outstanding
        $51.3 million of unsecured subordinated notes payable to CE Casecnan
        Ltd., a shareholder. The notes mature on November 1, 2015, and bear an
        interest rate of LIBOR plus 5.25%; provided, however, that CE Casecnan Ltd.
        can demand payment of the outstanding principal amount at any time prior
        to the
        maturity date. The interest is payable each May 15 and November 15.
        Interest expense on the notes was $1.4 million and $1.3 million during the
        three-month periods ended June 30, 2007 and 2006, respectively, and $2.7
        million
        and $2.5 million during the six-month periods ended June 30, 2007 and 2006,
        respectively. Any overdue payment of principal or interest payable on the
        notes
        shall increase the annual interest rate by two percentage points. At June
        30, 2007, the effective interest rate on the notes was 10.61%. The notes
        may be prepaid at any time without premium or penalty but with accrued interest,
        if any. The notes and any and all payments, whether of principal, interest
        or
        otherwise are subject in all respects to the terms of the Subordination
        Agreement dated November 15, 2001, and as amended on November 1,
        2005, between CE Casecnan Ltd. and the Company in favor of the Trustee, the
        Collateral Agent, the co-collateral agent, the Depositary, any party that
        becomes a Permitted Counterparty under an Interest Rate/Currency Protection
        Agreement, and any party that becomes a working capital facility agent and
        any
        other Person that becomes a secured party under the Intercreditor
        Agreement.
 
 On
        May
        15, 2007, CE Casecnan Ltd. demanded payment in full of the outstanding principal
        amount of the notes and accrued interest. To the extent that the Company
        does
        not have available cash from distributions from the Distribution Fund under
        the
        Depositary Agreement (each, as defined in the Subordination Agreement) to
        pay
        such amount in full, the Company shall be deemed to have satisfied this demand
        by paying, to the extent of such available cash, first accrued but unpaid
        interest on the outstanding principal amount of the notes as of the date
        hereof,
        and then the outstanding principal amount of the notes. To the extent that
        such
        available cash is insufficient to pay any accrued interest and/or outstanding
        principal, the Company shall not be deemed in default and such amounts shall
        remain outstanding and payable pursuant to the terms of the notes and the
        Subordination Agreement. On May 15, 2007, CE Casecnan paid $2.0 million of
        accrued interest expense. CE Casecnan intends to repay the notes and accrued
        interest within the next twelve months. The
        Company expects to generate sufficient cash from operations to pay the notes
        and
        other short-term obligations.
 
 **(5)**
              **Commitments
                  and Contingencies**
 
 Shareholder
        Litigation
  Pursuant
          to the share ownership adjustment mechanism in the CE Casecnan shareholder
          agreement, which is based upon proforma financial projections of the Casecnan
          Project prepared following commencement of commercial operations, in
          February 2002, MidAmerican Energy Holdings Company’s (“MidAmerican”)
          indirect wholly owned subsidiary, CE Casecnan Ltd., advised the
          minority shareholder of the Company, LaPrairie Group Contractors (International)
          Ltd. (“LPG”), that MidAmerican’s indirect ownership interest in CE Casecnan
          had increased to 100% effective from commencement of commercial operations.
          On
          July 8, 2002, LPG filed a complaint in the Superior Court of the State
          of California, City and County of San Francisco, against CE Casecnan Ltd.,
          and MidAmerican. LPG’s complaint, as amended, seeks compensatory and punitive
          damages arising out of CE Casecnan Ltd.’s and MidAmerican’s alleged
          improper calculation of the proforma financial projections and alleged
          improper
          settlement of the NIA arbitration. The Company is not a defendant in the
          action.
          On January 21, 2004, CE Casecnan Ltd., LPG and the Company entered
          into a status quo agreement pursuant to which the parties agreed to set
          aside
          certain distributions related to the shares subject to the LPG dispute
          and CE
          Casecnan agreed not to take any further actions with respect to such
          distributions without at least 15 days prior notice to LPG. Accordingly,
          15% of
          the Company’s dividend declarations from 2004 to 2006 was set aside in a
          separate bank account in the name of the Company and was shown as restricted
          cash and investments and dividends payable in the accompanying Balance
          Sheets.
          On January 3, 2006, the court 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. On
          February 21, 2007, the appellate court issued a decision, and as a result
          of the decision, CE Casecnan Ltd. determined that LPG would retain an
          ownership of 10% of the shares of the Company, with the remaining 5%
          ownership being transferred to CE Casecnan Ltd. subject to certain buy-up
          rights
          under the shareholder agreement. The outcome of the litigation relates
          to the
          shareholder agreement which is a transaction between shareholders of the
          Company
          and is not expected to have any impact on the Company’s results of operations.
          Pursuant to the appellate court decision, on May 7, 2007, the Company
          released $21.7 million of dividends and $3.8 million of accrued
          interest from the dividend set aside account representing the 10% share
          to LPG
          while the remaining 5% share is still held in escrow. The parties have
          submitted
          briefs on the final calculation of the internal rate of return and whether
          LPG
          is entitled to buy-up its interest to 15% and, if so, the buy-up
          price.  The determination of the internal rate of return is pending
          the court’s decision. A hearing is scheduled for October 10, 2007, for further
          proceedings on whether LPG is entitled to buy-up its interest. The parties
          are
          proceeding in the trial court on LPG’s remaining claim against MidAmerican for
          damages for alleged breach of fiduciary duty.
 10
  In
        February 2003, San Lorenzo Ruiz Builders and Developers Group, Inc. (“San
        Lorenzo”), an original shareholder substantially all of whose shares in the
        Company were purchased by MidAmerican in 1998, threatened to initiate legal
        action against the Company in the Philippines in connection with certain
        aspects
        of its option to repurchase such shares. The Company believes that San Lorenzo
        has no valid basis for any claim and, if named as a defendant in any action
        that
        may be commenced by San Lorenzo, the Company will vigorously defend such
        action.
        On July 1, 2005, MidAmerican and CE Casecnan Ltd. commenced
        an action against San Lorenzo in the District Court of Douglas County, Nebraska,
        seeking a declaratory judgment as to MidAmerican’s and CE Casecnan Ltd.’s rights
        vis-à-vis San Lorenzo in respect of such shares. San Lorenzo filed a motion to
        dismiss on September 19, 2005. Subsequently, San Lorenzo purported to
        exercise its option to repurchase such shares. On January 30, 2006,
        San Lorenzo filed a counterclaim against MidAmerican 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. On
        March 9, 2006, the court granted San Lorenzo’s motion to dismiss, but
        has since permitted MidAmerican and CE Casecnan Ltd. to file an amended
        complaint incorporating the purported exercise of the option. The complaint
        has
        been amended and the action is proceeding. The impact, if any, of San Lorenzo’s
        purported exercise of its option and the Nebraska litigation on the Company
        cannot be determined at this time.
 
 Franchise
        Tax
 
 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 of
        2001 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. CE Casecnan filed appeals
        of the assessments with the Regional Trial Court of Nueva Vizcaya. Hearings
        planned for April 27, 2007, were rescheduled for July 27, 2007, and
        August 17, 2007.
 
 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 MidAmerican, 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
  **Item
                  2.**
              **Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations.**
 
 The
        following is management’s discussion and analysis of certain significant factors
        which have affected the financial condition and results of operations of
        CE
        Casecnan Water and Energy Company, Inc. (“CE Casecnan” or the “Company”) during
        the periods included herein. This discussion should be read in conjunction
        with
        the Company’s historical Financial Statements and the related notes thereto
        included elsewhere in this report. The Company’s actual results in the future
        could differ significantly from the historical results.
 
 **Forward-Looking
        Statements**
 
 From
        time
        to time, CE Casecnan may make forward-looking statements within the meaning
        of
        the federal securities laws that involve judgments, assumptions and other
        uncertainties beyond the control of the Company. These forward-looking
        statements may include, among others, statements concerning revenue and cost
        trends, cost recovery, cost reduction strategies and anticipated outcomes,
        collections, pricing strategies, changes in the electric generation industry,
        financing needs and availability, statements of the Company’s expectations,
        beliefs, future plans and strategies, anticipated events or trends and similar
        comments concerning matters that are not historical facts. These types of
        forward-looking statements are based on current expectations and involve
        a
        number of known and unknown risks and uncertainties that could cause the
        actual
        results and performance of the Company to differ materially from any expected
        future results or performance, expressed or implied, by the forward-looking
        statements. In connection with the safe harbor provisions of the Private
        Securities Litigation Reform Act of 1995, the Company has identified important
        factors that could cause actual results to differ materially from those
        expectations, including weather effects on revenues and other operating
        uncertainties, uncertainties relating to economic and political conditions
        and
        uncertainties regarding the impact of regulations, changes in government
        policy
        and competition. The Company does not assume any responsibility to update
        forward-looking information contained herein.
 
 **Business**
 
 The
        Company has a contract with the Republic of the Philippines (“ROP”), through the
        Philippine National Irrigation Administration (“NIA”) (a ROP-owned and
        controlled corporation), for the development and construction of a hydroelectric
        power plant and related facilities under a build-own-operate-transfer agreement
        (“Project Agreement”), as amended by the Supplemental Agreement dated
        September 29, 2003 (the “Supplemental Agreement”), covering a 20-year
        cooperation period (“Cooperation Period”) commencing December 11, 2001, with
“take-or-pay” obligations for 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. The ROP also signed a Performance Undertaking, which,
        among others, affirms and guarantees the obligations of NIA under the Project
        Agreement. CE Casecnan is registered with the Philippine Board of Investments
        as
        a new operator of hydroelectric power plant with pioneer status under the
        Omnibus Investments Code of 1987. Under the terms of its registration, CE
        Casecnan is entitled to certain incentives which include an income tax holiday
        for six years from the start of commercial operations. The Casecnan Project
        Cooperation Period began upon commencement of commercial operations on
        December 11, 2001. The income tax holiday will expire on
        December 11, 2007.
 
 **Seasonality**
 
 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 water delivery fees and variable energy fees (described below) can produce
        significant variability in revenue between reporting periods.
  12
  Under
        the
        Supplemental Agreement, the water delivery fee is payable in a fixed monthly
        payment based upon an average annual water delivery of 801.9 million cubic
        meters, pro-rated to approximately 66.8 million cubic meters per month,
        multiplied by the applicable per cubic meter rate through
        December 25, 2008. The per cubic meter water delivery fee rate is
        $0.029 per cubic meter as of January 1, 1994, and escalated at 7.5% per
        annum, pro-rated on a monthly basis, through the end of the fifth year of
        the
        Cooperation Period and then kept flat at that level for the last 15 years
        of the
        Cooperation Period. For each contract year starting from
        December 25, 2003 and ending on December 25, 2008, a water
        delivery fee credit (deferred revenue) is computed equal to 801.9 million
        cubic meters minus the greater of actual water deliveries or 700.0 million
        cubic meters - the minimum threshold. The water delivery fee credit at the
        end
        of the contract year is available to be earned in the succeeding contract
        year
        through December 25, 2008. The cumulative water delivery fee credit at
        December 25, 2008, if any, shall be amortized from
        December 25, 2008 through December 25, 2013. Accordingly, in
        recognizing revenue, the water delivery fees are recorded each month pro-rated
        to approximately 58.3 million cubic meters per month until the minimum
        threshold has been reached for the contract year. Subsequent water delivery
        fees
        within the current contract year are based on actual water
        delivered.
  The
        Company earns guaranteed energy fees based upon an assumed delivery of 19.0
        gigawatt-hours (“GWh”) per month, at a rate of $0.1596 per kilowatt-hour
        (“kWh”). The Company earns variable energy fees based upon actual energy
        delivered in each month in excess of 19.0 GWh, payable at a rate of $0.1509
        per
        kWh. Starting in 2009, the kWh rate for energy deliveries in excess of 19.0
        GWh
        per month is reduced to $0.1132, escalating at 1% per annum thereafter. Any
        deliveries of energy in excess of 490.0 GWh, but less than 550.0 GWh per
        year
        are paid at a rate of 1.3 Philippine pesos per kWh, reduced to 0.98 Philippine
        pesos starting 2009 and escalated at 1% per annum thereafter. Deliveries
        in
        excess of 550.0 GWh per year are at no cost to NIA. Within each contract
        year,
        no variable energy fees are payable until energy in excess of the cumulative
        19.0 GWh per month for the contract year to date has been
        delivered.
 
 **Results
        of Operations for the Three-Month and Six-Month Periods Ended June 30, 2007
        and
        2006**
 
 The
        following table provides certain operating data of the Casecnan
        Project:
 
 **Second
                  Quarter**
              
              
              **First
                  Six Months****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Electricity
                  produced (GWh)
              
              
              40.1
              
              
              
              58.1
              
              
              
              99.1
              
              
              
              178.7Water
                  delivered (million cubic meters)
              
              
              65.5
              
              
              
              102.1
              
              
              
              168.0
              
              
              
              318.5
 
 For
        accounting purposes, the Project Agreement with NIA contains both an operating
        lease and a service contract, which the Company accounted for pursuant to
        the
        provisions of Statement of Financial Accounting Standards
 No.
        13,
        "Accounting for Leases.”  Pursuant to the provisions of the Project
        Agreement, the Company earned water and energy fees as follows
        (in millions):
 
 **Second
                  Quarter**
              
              
              **First
                  Six Months****2007**
              
              
              **2006**
              
              
              **2007**
              
              
              **2006**Water
                  delivery fees
              
              $
              14.8
              
              
              $
              14.3
              
              
              $
              29.7
              
              
              $
              28.2Guaranteed
                  energy fees
              
              
              9.1
              
              
              
              9.1
              
              
              
              18.2
              
              
              
              18.2Variable
                  energy fees
              
              
              -
              
              
              
              0.3
              
              
              
              2.3
              
              
              
              11.9Deferred
                  water delivery fees
              
              
              (1.9
              )
              
              
              (1.9
              )
              
              
              (3.8
              )
              
              
              (3.8
              )$
              22.0
              
              
              $
              21.8
              
              
              $
              46.4
              
              
              $
              54.5
 
 Revenue
        for the second quarter and the first six months of 2007 was $22.0 and $46.4
        million, respectively, compared to $21.8 million and $54.5 million for the
        same
        periods in 2006. The increase in water delivery fees was mainly due to the
        contractual 7.5% annual escalation factor. The decrease in variable energy
        fees
        was due to lower rainfall in 2007 than in 2006 which resulted in lower water
        deliveries and energy production that did not exceed the minimum threshold
        required to earn variable energy fees. The deferred water delivery fees
        represent the difference between the actual water delivery fees earned and
        water
        delivery fees invoiced pursuant to the Supplemental Agreement.
  13
  Interest
        expense for the second quarter and the first six months of 2007 decreased
        to
        $4.4 million and $9.0 million, respectively, compared to $5.5 million
        and $11.1 million, respectively, for the same periods in 2006, due to lower
        outstanding debt balances resulting from the scheduled repayment of
        debt.
 
 **Liquidity
        and Capital Resources**
 
 CE
        Casecnan constructed and operates the Casecnan Project, which was developed
        as
        an unsolicited proposal under the Philippine build-own-operate-transfer law,
        pursuant to the terms of the Project Agreement. CE Casecnan is registered
        with the Philippine Board of Investments as a new operator of hydroelectric
        power plant with pioneer status under the Omnibus Investments Code of 1987
        (Executive Order No. 226). Under the terms of its registration,
        CE Casecnan is entitled to certain incentives which include an income tax
        holiday for six years from the start of commercial operations, tax and duty-free
        importation of capital equipment, tax credits on domestic capital equipment,
        and
        exemption from customs duties and national internal revenue taxes for the
        importation and unrestricted use of the consigned equipment for the development,
        construction, start-up, testing and operation of the power plant.
        CE Casecnan developed, financed and constructed the Casecnan Project over
        the construction period, and owns and operates the Casecnan Project for the
        term
        of the Cooperation Period, which commenced on December 11, 2001. During the
        Cooperation Period, NIA is obligated to accept all deliveries of water and
        energy, and so long as the Casecnan Project is physically capable of operating
        and delivering in accordance with agreed levels set forth in the Project
        Agreement, NIA is obligated to pay CE Casecnan a fixed fee for the delivery
        of a
        threshold volume of water and a fixed fee for the delivery of a threshold
        amount
        of electricity. In addition, NIA is obligated to pay a fee for all electricity
        delivered in excess of the threshold amount up to a specified amount and
        will be
        obligated to pay a fee for all water delivered in excess of the threshold
        amount
        up to a specified amount beginning after December 25, 2008.
 
 The
        ROP
        has provided a Performance Undertaking under which NIA’s obligations under the
        Project Agreement are guaranteed by the full faith and credit of the ROP.
        The
        Project Agreement and the Performance Undertaking provide for the resolution
        of
        disputes by binding arbitration in Singapore under international arbitration
        rules.
 
 NIA’s
        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’s (“MidAmerican”), 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 $17.5 million and
        $31.9 million at June 30, 2007, and December 31, 2006,
        respectively.
 
 Cash
        flows from operations were $39.5 million and $55.4 million for the
        six-month periods ended June 30, 2007 and 2006, respectively. The decrease
        in
        cash from operations in 2007 was primarily due to lower variable energy revenue
        resulting from lower water flow and related energy generation in 2007 and
        higher
        collections of trade receivables in the first six months of 2006.
 
 Cash
        flows from investing activities were $25.4 million and ($11.8) million for
        the six-month periods ended June 30, 2007 and 2006, respectively. The
        Company decreased its restricted cash and investments related to obligations
        for
        debt service and unpaid dividends in 2007 by paying $25.6 million of dividends
        and accrued interest held in escrow. The Company increased its restricted
        cash
        and investments related to obligations for debt service and unpaid dividends
        in
        2006 by $10.3 million resulting from additional deposits to the escrow
        account.
 
 Cash
        flows from financing activities were ($79.4) million and
        ($64.5) million for the six-month periods ended June 30, 2007 and
        2006, respectively. The Company repaid $38.9 million of advances received
        from
        its affiliates during the six-month period ended June 30, 2007. The Company
        released $21.7 million of dividends held in the escrow account during the
        six-month period ended June 30, 2007. The Company declared dividends totaling
        $56.0 million during the six-month period ended June 30, 2006 (of which
        $8.4 million was set aside in a separate bank account in the name of the
        Company
        and shown as restricted cash and investments and dividends payable in the
        accompanying Balance Sheets). The Company also repaid $18.9 million and $18.0
        million on the balance of its outstanding project financing debt during the
        six-month periods ended June 30, 2007 and 2006, respectively.
  14
  On
          May
          15, 2007, CE Casecnan Ltd. demanded payment in full of the outstanding
          principal
          amount of the notes of $51.3 million and related accrued interest (the
“Notes”).
          In the next twelve months, the Company expects to generate sufficient cash
          from
          operations to pay the Notes and other short term obligations. For a discussion
          of the contractual provisions of the Notes relating to the payment demand
          from
          CE Casecnan Ltd., refer to Note 4 of Notes to the Financial Statements
          included
          in Item 1.
  Shareholder
        Litigation
  Pursuant
          to the share ownership adjustment mechanism in the CE Casecnan shareholder
          agreement, which is based upon proforma financial projections of the Casecnan
          Project prepared following commencement of commercial operations, in
          February 2002, MidAmerican’s indirect wholly owned subsidiary,
          CE Casecnan Ltd., advised the minority shareholder of the Company,
          LaPrairie Group Contractors (International) Ltd. (“LPG”) that MidAmerican’s
          indirect ownership interest in CE Casecnan had increased to 100% effective
          from commencement of commercial operations. On July 8, 2002, LPG filed
          a complaint in the Superior Court of the State of California, City and
          County of
          San Francisco, against CE Casecnan Ltd. and MidAmerican. LPG’s complaint,
          as amended, seeks compensatory and punitive damages arising out of CE Casecnan
          Ltd.’s and MidAmerican’s alleged improper calculation of the proforma financial
          projections and alleged improper settlement of the NIA arbitration. The
          Company
          is not a defendant in the action. On January 21, 2004, CE Casecnan
          Ltd., LPG and the Company entered into a status quo agreement pursuant
          to which
          the parties agreed to set aside certain distributions related to the shares
          subject to the LPG dispute and CE Casecnan agreed not to take any further
          actions with respect to such distributions without at least 15 days prior
          notice
          to LPG. Accordingly, 15% of the Company’s dividend declarations from 2004 to
          2006 was set aside in a separate bank account in the name of the Company
          and was
          shown as restricted cash and investments and dividends payable in the
          accompanying Balance Sheets. On January 3, 2006, the court 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. On February 21, 2007, the appellate court issued a decision,
          and as a result of the decision, CE Casecnan Ltd. determined that LPG would
          retain an ownership of 10% of the shares of the Company, with the
          remaining 5% ownership being transferred to CE Casecnan Ltd. subject to
          certain
          buy-up rights under the shareholder agreement. The outcome of the litigation
          relates to the shareholder agreement which is a transaction between shareholders
          of the Company and is not expected to have any impact on the Company’s results
          of operations. Pursuant to the appellate court decision, on May 7, 2007,
          the
          Company released $21.7 million of dividends and $3.8 million of accrued
          interest
          from the dividend set aside account representing the 10% share to LPG while
          the
          remaining 5% share is still held in escrow. The parties have submitted
          briefs on
          the final calculation of the internal rate of return and whether LPG is
          entitled
          to buy-up its interest to 15% and, if so, the buy-up price.  The
          determination of the internal rate of return is pending the court’s decision. A
          hearing is scheduled for October 10, 2007, for further proceedings on whether
          LPG is entitled to buy-up its interest. The parties are proceeding in the
          trial
          court on LPG’s remaining claim against MidAmerican for damages for alleged
          breach of fiduciary duty.
  In
        February 2003, San Lorenzo Ruiz Builders and Developers Group, Inc. (“San
        Lorenzo”), an original shareholder substantially all of whose shares in the
        Company were purchased by MidAmerican in 1998, threatened to initiate legal
        action against the Company in the Philippines in connection with certain
        aspects
        of its option to repurchase such shares. The Company believes that San Lorenzo
        has no valid basis for any claim and, if named as a defendant in any action
        that
        may be commenced by San Lorenzo, the Company will vigorously defend such
        action.
        On July 1, 2005, MidAmerican and CE Casecnan Ltd. commenced
        an action against San Lorenzo in the District Court of Douglas County, Nebraska,
        seeking a declaratory judgment as to MidAmerican’s and CE Casecnan Ltd.’s rights
        vis-à-vis San Lorenzo in respect of such shares. San Lorenzo filed a motion to
        dismiss on September 19, 2005. Subsequently, San Lorenzo purported to
        exercise its option to repurchase such shares. On January 30, 2006,
        San Lorenzo filed a counterclaim against MidAmerican 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. On
        March 9, 2006, the court granted San Lorenzo’s motion to dismiss, but
        has since permitted MidAmerican and CE Casecnan Ltd. to file an amended
        complaint incorporating the purported exercise of the option. The complaint
        has
        been amended and the action is proceeding.  The impact, if any, of San
        Lorenzo’s purported exercise of its option and the Nebraska litigation on the
        Company cannot be determined at this time.
  15
  Franchise
        Tax
 
 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 of
        2001 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. CE Casecnan filed appeals
        of the assessments with the Regional Trial Court of Nueva Vizcaya. Hearings
        planned for April 27, 2007 were rescheduled for July 27, 2007 and
        August 17, 2007.
 
 **ContractualObligations
        andCommercialCommitments**
 
 During
        the six months ended June 30, 2007, there were no material changes in the
        contractual obligations andcommercialcommitments
        from the
        information provided in Item 7 of the Company’s Annual Report on Form 10-K for
        the year ended December 31, 2006.
 
 **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.
 
 **Critical
        Accounting Policies**
 
 Certain
        accounting policies require management to make estimates and judgments
        concerning transactions that will be settled 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 concentration of
        risk.
 
 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,
        2006. The Company’s critical accounting policies have not changed materially
        since December 31, 2006.
 
 **Item
                  3.**
              **Quantitative
                  and Qualitative Disclosures About Market
                  Risk.**
 
 For
        quantitative and qualitative disclosures about market risk affecting CE
        Casecnan, see Item 7A of CE Casecnan’s Annual Report on Form 10-K for the year
        ended December 31, 2006. CE Casecnan’s exposure to market risk
        has not changed materially since December 31, 2006.
 
 **Item
                  4.**
              **Controls
                  and Procedures.**
 
 An
        evaluation was performed under the supervision and with the participation
        of the
        Company’s management, including the chief executive officer and chief financial
        officer, regarding the effectiveness of the design and operation of the
        Company’s disclosure controls and procedures (as defined in Rule 13a-15(e)
        promulgated under the Securities and Exchange Act of 1934, as amended) as
        of
        June 30, 2007. Based on that evaluation, the Company’s management,
        including the chief executive officer and chief financial officer, concluded
        that the Company’s disclosure controls and procedures were effective. There have
        been no changes during the quarter covered by this report in the Company’s
        internal control over financial reporting that has materially affected, or
        is
        reasonably likely to materially affect, the Company’s internal control over
        financial reporting.
   16
 **PART
        II – OTHER INFORMATION**
 
 **Item
                  1.**
              **Legal
                  Proceedings.**
 
 For
        a
        description of certain legal proceedings affecting the Company, refer to
        Item 3
        of the Company’s Annual Report on Form 10-K for the year ended December 31,
        2006. Material developments to these proceedings during the six-month period
        ended June 30, 2007, are included in Note 5 of Notes to Financial Statements
        included in Item 1.
  **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, 2006.
 
 **Item
                  2.**
              **UnregisteredSales
                  of Equity Securities and Use of
                  Proceeds.**
 
 Not
        applicable.
 
 **Item
                  3.**
              **DefaultsUpon
                  Senior
                  Securities.**
 
 Not
        applicable.
 
 **Item
                  4.**
              **Submission
                  of Matters to a Vote of Security
                  Holders.**
 
 Not
        applicable.
 
 **Item
                  5.**
              **Other
                  Information.**
 
 Not
        applicable.
 
 **Item
                  6.**
              **Exhibits.**
 
 The
        exhibits listed on the accompanying Exhibit Index are filed as part of this
        Quarterly Report.
  17
 
 **SIGNATURES**
 
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
 
 
 
 CE
                  CASECNAN WATER AND ENERGY COMPANY, INC.(Registrant)Date:
                  July 26, 2007
              
              /s/
                  Patrick J. GoodmanPatrick
                  J. GoodmanSenior
                  Vice President and Chief Financial
                  Officer
   
 18
  **EXHIBIT
        INDEX**
 
 Exhibit
                  No.31.1
              
              Chief
                  Executive Officer’s Certificate Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.31.2
              
              Chief
                  Financial Officer’s Certificate Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.32.1
              
              Chief
                  Executive Officer’s Certificate Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.32.2
              
              Chief
                  Financial Officer’s Certificate Pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.
   
 19