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

                                    FORM 10-Q

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

                  For the quarterly period ended June 30, 2003

                          Commission File No. 001-12995

                   CE CASECNAN WATER AND ENERGY COMPANY, INC.
                   ------------------------------------------
             (Exact name of registrant as specified in its charter)


              Philippines                              Not Applicable
    ---------------------------------               --------------------
     (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                 Identification No.)

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

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

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

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

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

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


<PAGE>

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

                         PART I - FINANCIAL INFORMATION

Item 1.    Financial Statements................................................3
Item 2.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations.......................................13
Item 3.    Quantitative and Qualitative Disclosures About Market Risk.........20
Item 4.    Controls and Procedures............................................20

                           PART II - OTHER INFORMATION

Item 1.    Legal Proceedings..................................................21
Item 2.    Changes in Securities and Use of Proceeds..........................21
Item 3.    Defaults Upon Senior Securities....................................21
Item 4.    Submission of Matters to a Vote of Security Holders................21
Item 5.    Other Information..................................................21
Item 6.    Exhibits and Reports on Form 8-K...................................21

SIGNATURES....................................................................22
EXHIBIT INDEX.................................................................23

                                      -2-

<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.


                         INDEPENDENT ACCOUNTANTS' REPORT


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

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

We conducted our review in accordance with standards established by the American
Institute  of  Certified  Public  Accountants.  A review  of  interim  financial
information consists principally of applying analytical review procedures to the
financial  data and making  inquiries of persons  responsible  for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the  expression  of an opinion  regarding the  financial  statements  taken as a
whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material  modifications that should
be made to the  accompanying  interim  financial  statements  for  them to be in
conformity with accounting principles generally accepted in the United States of
America.

We previously audited in accordance with auditing  standards  generally accepted
in the United States of America,  the balance sheet as of December 31, 2002, and
the related  statements of operations,  changes in  stockholders'  equity and of
cash  flows for the year then ended (not  presented  herein),  and in our report
dated January 24, 2003, we expressed an unqualified  opinion on those  financial
statements.  In our  opinion,  the  information  set  forth in the  accompanying
balance  sheet  information  as of December  31, 2002,  is fairly  stated in all
material  respects  in  relation  to the  balance  sheet  from which it has been
derived.

/s/ Joaquin Cunanan & Co.

JOAQUIN CUNANAN & CO.
A PRICEWATERHOUSECOOPERS MEMBER FIRM
Makati City, Philippines
July 22, 2003

                                      -3-

<PAGE>

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

                                                                           AS OF
                                                                   ------------------------
                                                                   JUNE 30,    DECEMBER 31,
                                                                     2003         2002
                                                                   --------    ------------
                                                                  (UNAUDITED)
                                     ASSETS
<S>                                                                <C>            <C>
Current assets:
  Cash and cash equivalents ....................................   $  1,694       $    705
  Trade receivable, net ........................................     59,248         51,515
  Accrued interest and other receivable ........................      9,412          7,009
  Prepaid insurance and other current assets ...................      3,835          5,562
                                                                   --------       --------
    Total current assets .......................................     74,189         64,791
                                                                   --------       --------
Restricted cash and investments ................................     11,319          7,078
Bond issue costs, net ..........................................      4,539          5,218
Property, plant and equipment, net .............................    444,718        453,507
Deferred income tax ............................................      5,371          5,371
Other assets ...................................................          -          5,542
                                                                   --------       --------
TOTAL ASSETS ...................................................   $540,136       $541,507
                                                                   ========       ========


                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses ........................   $  9,883       $ 10,785
  Accrued interest on notes payable ............................      2,903          2,048
  Accrued interest on long-term debts ..........................      3,924          4,223
  Payable to affiliates ........................................     34,304         33,342
  Current portion of long-term debt ............................     45,414         41,468
                                                                   --------       --------
    Total current liabilities ..................................     96,428         91,866
                                                                   --------       --------

Notes payable ..................................................     51,263         51,263
Long-term debts, net of current portion ........................    221,778        246,457
                                                                   --------       --------
  Total liabilities ............................................    369,469        389,586
                                                                   --------       --------

Commitments and contingencies (Notes 2 and 4)

Stockholders' equity:
Capital stock - authorized 2,148,000 shares, one Philippine peso
  ($0.038) par value; 767,162 shares issued and outstanding ....         29             29
Additional paid-in capital .....................................    123,807        123,807
Retained earnings ..............................................     46,831         28,085
                                                                   --------       --------
  Total stockholders' equity ...................................    170,667        151,921
                                                                   --------       --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .....................   $540,136       $541,507
                                                                   ========       ========
</TABLE>

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

                                      -4-
<PAGE>

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

                                                   THREE MONTHS               SIX MONTHS
                                                  ENDED JUNE 30,            ENDED JUNE 30,
                                              ----------------------    ----------------------
                                                2003         2002         2003         2002
                                              ---------    ---------    ---------    ---------
                                                                (UNAUDITED)
<S>                                           <C>          <C>          <C>          <C>
REVENUE:
  Delivery of water .......................   $  22,044    $  21,294    $  44,486    $  39,782
  Sale of electricity .....................      11,175        9,095       20,232       18,189
                                              ---------    ---------    ---------    ---------
    Total revenue .........................      33,219       30,389       64,718       57,971
                                              ---------    ---------    ---------    ---------
OPERATING EXPENSES:
  Depreciation ............................       5,745        5,599       11,418       11,739
  Plant operations ........................       4,173        2,330        7,349        4,067
  Doubtful accounts .......................       2,345        2,625        6,412        4,885
                                              ---------    ---------    ---------    ---------
    Total operating expenses ..............      12,263       10,554       25,179       20,691
                                              ---------    ---------    ---------    ---------

OPERATING INCOME ..........................      20,956       19,835       39,539       37,280

OTHER INCOME (EXPENSE):
  Interest expense ........................     (10,778)     (10,707)     (20,931)     (21,504)
  Other, net ..............................          60           62          138           89
                                              ---------    ---------    ---------    ---------
    Total other expense, net ..............     (10,718)     (10,645)     (20,793)     (21,415)
                                              ---------    ---------    ---------    ---------

NET INCOME ................................   $  10,238    $   9,190    $  18,746    $  15,865
                                              =========    =========    =========    =========

NET INCOME PER SHARE ......................   $   13.35    $   11.98    $   24.44    $   20.68
                                              =========    =========    =========    =========
Average number of common shares outstanding     767,162      767,162      767,162      767,162
                                              =========    =========    =========    =========
</TABLE>

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

                                      -5-
<PAGE>

                   CE CASECNAN WATER AND ENERGY COMPANY, INC.
                            STATEMENTS OF CASH FLOWS
                         (In thousands of U.S. Dollars)
<TABLE>
<CAPTION>
                                                                            SIX MONTHS
                                                                          ENDED JUNE 30,
                                                                       --------------------
                                                                         2003        2002
                                                                       --------    --------
                                                                            (UNAUDITED)
<S>                                                                    <C>         <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income .......................................................   $ 18,746    $ 15,865
  Adjustments to reconcile net cash flows from operating activities:
    Depreciation ...................................................     11,418      11,739
    Amortization of bond issue costs ...............................        679         747
    Changes in other items:
      Trade receivable, net ........................................     (7,733)    (16,838)
      Accrued interest and other receivable ........................     (2,403)         41
      Prepaid insurance and other current assets ...................      1,727         417
      Accounts payable and accrued expenses ........................       (902)        345
      Accrued interest .............................................        556        (647)
      Increase in payable to affiliates related to operations ......        962       2,013
                                                                       --------    --------
        Net cash flows from operating activities ...................     23,050      13,682
                                                                       --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property, plant and equipment .......................     (2,629)     (1,317)
  Other assets .....................................................      5,542       3,087
                                                                       --------    --------
    Net cash flows from investing activities .......................      2,913       1,770
                                                                       --------    --------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase in restricted cash and investments ......................     (4,241)     (4,238)
  Decrease in payable to affiliates related to construction ........          -     (17,788)
  Increase (decrease) in notes payable .............................    (20,733)     10,500
                                                                       --------    --------
    Net cash flows from financing activities .......................    (24,974)    (11,526)
                                                                       --------    --------

NET INCREASE IN CASH AND CASH EQUIVALENTS ..........................        989       3,926
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...................        705       1,078
                                                                       --------    --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .........................   $  1,694    $  5,004
                                                                       ========    ========
</TABLE>

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

                                      -6-
<PAGE>

                   CE CASECNAN WATER AND ENERGY COMPANY, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   GENERAL

The accompanying unaudited interim financial statements have been prepared by CE
Casecnan Water and Energy Company, Inc. ("CE Casecnan" or the "Company") without
audit,  pursuant to the rules and  regulations  of the  Securities  and Exchange
Commission for interim  financial  reporting.  In the opinion of the management,
the  accompanying   unaudited  financial   statements  contain  all  adjustments
(consisting only of normal recurring  accruals)  necessary to present fairly the
financial  position  of the  Company as of June 30,  2003 and the results of its
operations  for the  three-month  and six-month  periods ended June 30, 2003 and
2002 and of cash flows for the  six-month  periods ended June 30, 2003 and 2002.
The results of operations for the three-month  and six-month  periods ended June
30, 2003 are not  necessarily  indicative  of the results to be expected for the
full year.

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

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

2.   TRADE RECEIVABLE, NET

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

                                                JUNE 30,   DECEMBER 31,
                                                  2003         2002
                                                --------   ------------

         Water delivery fee ................    $ 71,971     $ 52,854
         Guaranteed energy delivery fee ....       3,676        6,709
         Excess energy delivery fee ........       2,079        4,018
                                                --------     --------
           Trade receivable ................      77,726       63,581
         Allowance for doubtful accounts ...     (18,478)     (12,066)
                                                --------     --------
           Trade receivable, net ...........    $ 59,248     $ 51,515
                                                ========     ========

NIA has  paid all  amounts  due for  energy  delivery  fees  under  the  Project
Agreement as of June 30, 2003, and all amounts due for Water Delivery Fees under
the Project Agreement except the tax compensation  portion of the Water Delivery
Fees, none of which has been paid since commercial  operations began on December
11, 2001.

Under  the  terms  of the  Project  Agreement,  NIA has  the  option  of  timely
reimbursing CE Casecnan  directly for certain taxes CE Casecnan has paid. If NIA
does not so reimburse CE  Casecnan,  the taxes paid by CE Casecnan  result in an
increase in the Water  Delivery  Fee.  The payment of certain  other taxes by CE
Casecnan  results  automatically in an increase in the Water Delivery Fee. As of
June 30, 2003, CE Casecnan had paid approximately  $58.5 million in taxes, which
as a result of the foregoing provisions has resulted in an increase in the Water
Delivery  Fee. NIA has failed to pay the portion of the Water  Delivery Fee each
month related to the payment of these taxes by CE Casecnan.  As a result of this
non-payment,  on August 19, 2002,  CE Casecnan  filed a Request for  Arbitration
against  NIA,  seeking  payment of such  portion of the Water  Delivery  Fee and

                                      -7-
<PAGE>

enforcement of the relevant  provision of the Project  Agreement  going forward.
The  arbitration  is  being  conducted  in  accordance  with  the  rules  of the
International Chamber of Commerce ("ICC").

NIA filed its Answer and  Counterclaim  on March 31,  2003.  In its Answer,  NIA
asserts,  among  other  things,  that most of the taxes  which CE  Casecnan  has
factored into the Water Delivery Fee compensation formula do not fall within the
scope of the relevant  section of the Project  Agreement,  that the compensation
mechanism itself is invalid and unenforceable  under Philippine law and that the
Project  Agreement is  inconsistent  with the Philippine  build-operate-transfer
("BOT")  law.  As such,  NIA  seeks  dismissal  of CE  Casecnan's  claims  and a
declaration from the arbitral tribunal that the taxes which have been taken into
account in the Water  Delivery Fee  compensation  mechanism are not  recoverable
thereunder and that, at most,  certain taxes may be directly  reimbursed (rather
than  compensated  for  through  the  Water  Delivery  Fee)  by  NIA.  NIA  also
counterclaims  for  approximately  $7 million which it alleges is due to it as a
result of the delayed completion of the Casecnan Project. On April 23, 2003, NIA
filed a Supplemental Counterclaim in which it asserts that the Project Agreement
is contrary to  Philippine  law and public  policy and by way of relief  seeks a
declaration  that the Project  Agreement is void from the beginning or should be
cancelled,  or alternatively,  an order for reformation of the Project Agreement
or any portions or sections  thereof  which may be  determined to be contrary to
such law and or public  policy.  On May 23, 2003 CE Casecnan  filed its reply to
NIA's  counterclaims.  The Company is required to file its brief and  supporting
materials on October 17, 2003. Thereafter,  NIA will file its response brief and
supporting  materials  by December  12,  2003.  The parties  will then  exchange
documents in discovery and make rebuttal filings,  in advance of the hearings on
the claims and  counterclaims  which are  scheduled  for July 2004.  CE Casecnan
intends to vigorously contest all of NIA's assertions and counterclaims.

Total revenue was $33.2 million and $30.4  million for the  three-month  periods
ended June 30, 2003 and 2002, respectively,  and $64.7 million and $58.0 million
for the six-month periods ended June 30, 2003 and 2002,  respectively.  Included
in these amounts was $8.1 million and $8.4 million for the  three-month  periods
ended June 30, 2003 and 2002, respectively,  and $17.7 million and $16.5 million
for the  six-month  periods ended June 30, 2003 and 2002,  respectively,  of tax
compensation for Water Delivery Fees under the Project Agreement,  none of which
has been  paid and the  uncollectible  portion  of which the  Company  currently
estimates to be $2.3 million and $2.6 million for the three-month  periods ended
June 30, 2003 and 2002, respectively,  and $6.4 million and $4.9 million for the
six-month  periods  ended June 30, 2003 and 2002,  respectively.  As of June 30,
2003  and  December  31,  2002,  the  cumulative   unpaid  portion  of  the  tax
compensation  portion of the Water  Delivery  Fees  invoiced  since the start of
commercial operations totaled $54.0 million and $36.3 million, respectively. The
allowance  for  doubtful  accounts  as of June 30,  2003 and  December  31, 2002
represents the Company's current estimate of the  uncollectible  portion of such
unpaid portion of the Water  Delivery Fees and does not reflect any  projections
related to future  billings and their  collections.  Any change in the Company's
assessment of the  potential  outcome of the pending  arbitration  with NIA, and
future  disputes,  if any,  could  significantly  impact such  allowance and the
results  of  operations.  The  receivable,  net of the  allowance  for  doubtful
accounts for the period since commercial operations began, remains less than the
amount of taxes paid.

3.   RELATED PARTY TRANSACTIONS

In the normal course of business,  the Company  transacts with its affiliates in
the form of advances  for  construction  related  and  operating  expenses.  The
payable to  affiliates  was $34.3 million and $33.3 million at June 30, 2003 and
December 31, 2002,  respectively.  Costs incurred by the Company in transactions
with  related  parties  amounted  to  $0.4  million  and  $2.0  million  for the
three-month periods ended June 30, 2003 and 2002, respectively, and $1.5 million
and $2.7  million  for the  six-month  periods  ended  June 30,  2003 and  2002,
respectively.

As of June 30, 2003 and December 31, 2002,  the Company has issued $51.3 million
of unsecured subordinated notes payable to CE Casecnan Ltd., a stockholder,  due
November 15, 2005.  The unsecured  notes bear interest at LIBOR plus two percent
(2%).  Interest expense on the unsecured notes was $0.4 million and $0.5 million
during the three-month periods ended June 30, 2003 and 2002 and $0.8 million and
$0.9 million during the six-month  periods ended June 30, 2003 and 2002. At June
30, 2003, the effective  interest rate on the notes was 3.25%.  The notes may be
prepaid at any time  without  premium or penalty but with accrued  interest,  if
any.  The  unsecured

                                      -8-
<PAGE>

subordinated notes and any and all payments,  whether of principal,  interest or
otherwise  are  subject  in all  respects  to  the  terms  of the  Subordination
Agreement  dated  November 15, 2001 between CE Casecnan  Ltd. and the Company in
favor of the  Trustee,  the  Collateral  Agent,  the  co-collateral  agent,  the
Depository,  any party that becomes a Permitted  Counterparty  under an Interest
Rate/Currency  Protection  Agreement,  any party that becomes a working  capital
facility  agent and any other  Person  that  becomes a secured  party  under the
Intercreditor Agreement.

4.   COMMITMENTS AND CONTINGENCIES

Construction Contract Arbitration
---------------------------------

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

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

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

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

                                      -9-
<PAGE>

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

Project Transmission Line
-------------------------

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

Stockholder Litigation
----------------------

Pursuant  to the  share  ownership  adjustment  mechanism  in  the  CE  Casecnan
stockholder  agreement,  which is based upon pro forma financial  projections of
the Casecnan Project prepared following  commencement of commercial  operations,
in February 2002,  MidAmerican Energy Holdings Company  ("MidAmerican")  through
its indirect  wholly owned  subsidiary  CE Casecnan  Ltd.,  advised the minority
stockholder,  LaPrairie Group Contractors  (International)  Ltd.  ("LPG"),  that
MidAmerican's  indirect  ownership interest in CE Casecnan had increased to 100%
effective from commencement of commercial operations. On July 8, 2002, LPG filed
a complaint in the Superior Court of the State of California, City and County of
San Francisco  against,  among others, CE Casecnan Ltd. and MidAmerican.  In the
complaint,  LPG seeks  compensatory and punitive damages for alleged breaches of
the stockholder  agreement and alleged  breaches of fiduciary  duties  allegedly
owed by CE Casecnan  Ltd.  and  MidAmerican  to LPG.  The  complaint  also seeks
injunctive relief against all defendants and a declaratory  judgment that LPG is
entitled to maintain  its 15% interest in CE  Casecnan.  The impact,  if any, of
this litigation on the Company cannot be determined at this time.

In February  2003, San Lorenzo Ruiz Builders and  Developers  Group,  Inc. ("San
Lorenzo"),  an original  shareholder  substantially  all of whose  shares in the
Company were  purchased by  MidAmerican  in 1998,  threatened to initiate  legal
action in the  Philippines in connection  with certain  aspects of its option to
repurchase  such  shares on or prior to  commercial  operation  of the  Casecnan
Project.  The Company believes that San Lorenzo has no valid basis for any claim
and, if named as a defendant in any action that may be commenced by San Lorenzo,
will vigorously defend such action.

BIR Audit
---------

The  Bureau  of  Internal  Revenue  ("BIR"),   consistent  with  the  Philippine
government's public statements to increase tax revenues,  has commenced auditing
the Company for all taxes,  including income taxes, for the years 2001 and 2000.
In  addition,  the BIR issued  letters of  authority to audit the tax years 1996
through 1998. In May 2003,  the Company paid $1.0 million of final taxes related
to interest  expense paid in 1996 to 1998.  On June 10,  2003,  the BIR issued a
notice  stating  that the tax  investigation  for the Company  for all  internal
revenue taxes for the years 1996 to 1998 is closed and  terminated.  The Company
further believes that it currently is in compliance with applicable tax laws and
regulations with respect to all of its tax returns and filings.

Political Risks
---------------

The Philippine  Congress has passed the Electric  Power  Industry  Reform Act of
2001 ("EPIRA"),  which is aimed at restructuring  the Philippine power industry,
privatization of the NPC and introduction of a competitive  electricity

                                      -10-
<PAGE>

market, among other initiatives.  The implementation of EPIRA may have an impact
on the Company's future  operations in the Philippines and the Philippines power
industry as a whole, the effect of which is not yet determinable or estimable.

In connection with an interagency  review of approximately 40 independent  power
project  contracts in the Philippines,  the Casecnan Project (together with four
other  unrelated  projects) has reportedly  been identified as raising legal and
financial  questions  and,  with  those  projects,   has  been  prioritized  for
renegotiation.  No  written  report  has yet been  issued  with  respect  to the
interagency  review,  and the  timing  and  nature  of steps,  if any,  that the
Philippine Government may take in this regard, are not known. Accordingly, it is
not  known  what,  if any,  impact  the  government's  review  will  have on the
operations  of the  Company.  Company  representatives,  together  with  certain
current and former government officials, also have been requested to appear, and
have appeared during 2002 and 2003,  before a Philippine  Senate committee which
has raised questions and made allegations with respect to the Casecnan Project's
tariff structure and implementation.

On May 5,  2003,  the  Philippine  Supreme  Court  issued  its  ruling in a case
involving  an  unsolicited  BOT project for the  development,  construction  and
operation  of the new  Manila  International  Airport.  Various  members  of the
Philippine  Congress and labor  unions  initiated  the action in the  Philippine
Supreme Court on September 17, 2002 seeking to enjoin the enforcement of the BOT
agreement  with  an  international  consortium  known  as  PIATCO  (the  "PIATCO
Agreement").  The PIATCO  consortium  is unrelated  to the Company.  On March 4,
2003,  PIATCO separately  initiated an ICC arbitration  pursuant to the terms of
the PIATCO Agreement.  The Supreme Court, in its ruling,  stated that there were
no  unresolved  factual  issues and therefore it had original  jurisdiction  and
concluded that the pendency of the  arbitration  did not preclude the court from
ruling on a case brought by non-parties to the PIATCO Agreement, such as members
of the Philippine Congress or nongovernmental organizations.  In a public speech
on November 29, 2002 prior to the December  10, 2002 oral  arguments  before the
Philippine Supreme Court,  Philippine President Arroyo stated that she would not
honor the PIATCO Agreement  because the executive  branch's legal department had
concluded  it was "null and void".  In light of that  announcement,  the project
owners  stopped work on the  project,  which is  approximately  90% complete and
accordingly has not been placed into commercial operation. In its 10 to 3 ruling
(with one abstention)  issued on May 5, 2003, the Philippine Supreme Court ruled
that the PIATCO  Agreement was contrary to Philippine  law and public policy and
was "null and void". CE Casecnan is assessing the impact of the PIATCO ruling on
the Casecnan Project.

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

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

Concentration of Risk
---------------------

NIA's  payments of  obligations  under the Project  Agreement are  substantially
denominated  in United  States  Dollars  and are the  Company's  sole  source of
operating  revenues.  Because of the  Company's  dependence on NIA, any material
failure of NIA to fulfill its  obligations  under the Project  Agreement and any
material  failure of the ROP to fulfill its  obligations  under the  Performance
Undertaking  would  significantly  impair the ability of the Company to meet its
existing and future obligations. No stockholders,  partners or affiliates of the
Company, including MidAmerican,  and no directors,  officers or employees of the
Company  will  guarantee  or be in any way liable for  payment of the  Company's
obligations.  As a result, payment of the Company's obligations depends upon the
availability  of  sufficient  revenues  from the  Company's  business  after the
payment of operating expenses.

                                      -11-
<PAGE>

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

The following is  management's  discussion  and analysis of certain  significant
factors which have affected the financial condition and results of operations of
CE Casecnan Water and Energy  Company,  Inc. ("CE  Casecnan" or the  "Company"),
during the periods included in the accompanying  statements of operations.  This
discussion should be read in conjunction with the Company's historical financial
statements and the notes to those statements.

FORWARD-LOOKING STATEMENTS

From time to time, CE Casecnan may make  forward-looking  statements  within the
meaning of the federal securities laws that involve  judgments,  assumptions and
other uncertainties beyond the control of the Company or any of its subsidiaries
individually.  These  forward-looking  statements  may  include,  among  others,
statements  concerning  revenue and cost trends,  cost recovery,  cost reduction
strategies and anticipated outcomes, pricing strategies,  changes in the utility
industry,  planned  capital  expenditures,  financing  needs  and  availability,
statements of CE Casecnan's expectations,  beliefs, future plans and strategies,
anticipated  events or trends and similar comments  concerning  matters that are
not historical  facts.  These types of  forward-looking  statements are based on
current  expectations  and  involve  a number  of known  and  unknown  risks and
uncertainties that could cause the actual results and performance of the Company
to differ materially from any expected future results or performance,  expressed
or implied,  by the  forward-looking  statements.  In  connection  with the safe
harbor  provisions of the Private  Securities  Litigation Reform Act of 1995, CE
Casecnan has  identified  important  factors that could cause actual  results to
differ materially from those expectations, including weather effects on revenues
and other  operating  uncertainties,  uncertainties  relating  to  economic  and
political  conditions  and  uncertainties  regarding the impact of  regulations,
changes in government  policy and  competition.  The Company does not assume any
responsibility to update forward-looking information contained herein.

CRITICAL ACCOUNTING POLICIES

The  preparation of financial  statements and related  disclosures in conformity
with accounting  principles  generally  accepted in the United States of America
requires management to make judgments, assumptions and estimates that affect the
amounts reported in the Financial  Statements and accompanying  notes. Note 2 to
the Company's  Financial  Statements  included in its Annual Report on form 10-K
for the year ended  December  31,  2002  describes  the  significant  accounting
policies  and  methods  used in the  preparation  of the  Financial  Statements.
Estimates are used for, but not limited to, the accounting for the allowance for
doubtful  accounts and deferred  income taxes.  Actual results could differ from
these estimates.

For additional  discussion of the Company's critical  accounting  policies,  see
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  included in the  Company's  Annual Report on Form 10-K for the year
ended December 31, 2002.

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

Total  revenue  increased  $2.8  million,  or  9.2%,  to $33.2  million  for the
three-month  period ended June 30, 2003 from $30.4  million for the  three-month
period ended June 30, 2002.  Water delivery  revenue  increased to $22.0 million
for the  three-month  period  ended  June 30,  2003 from $21.3  million  for the
three-month  period ended June 30, 2002 and electricity  sales revenue was $11.2
million for the three-month  period ended June 30, 2003 and $9.1 million for the
three-month  period ended June 30, 2002. The increase in water fees was due to a
7.5% increase in Water Delivery Fee rate as a result of the  contractual  annual
escalation factor and the accrual of the revenue related to the additional taxes
recoverable  during  operations  pursuant to the  contract.  See Note 2 - "Trade
receivable,  net." Revenues from water  delivery,  guaranteed  energy and excess
energy generated and delivered are 66%, 28% and 6%,  respectively,  of the total
revenue for the  three-month  period  ended June 30, 2003 while 70%, 30% and 0%,
respectively for the three-month period ended June 30, 2002.

                                      -12-
<PAGE>

Operating  expenses  increased $1.7 million,  or 16.0%, to $12.3 million for the
three-month  period ended June 30, 2003 from $10.6  million for the  three-month
period  ended  June  30,  2002.  Included  within  operating  expenses  for  the
three-month  period ended June 30, 2003 are  depreciation,  plant operations and
doubtful  accounts  expense of $5.7  million,  $4.2  million  and $2.3  million,
respectively.  Depreciation expense increased by $0.1 million, doubtful accounts
expense  decreased  by $0.3  million  and  plant  operations  increased  by $1.9
million.  The increase in plant  operations  was caused by higher local business
taxes, insurance premium amortization and legal costs.

Interest  expense  increased  slightly by $0.1 million to $10.8  million for the
three-month  period ended June 30, 2003 from $10.7  million for the  three-month
period ended June 30, 2002.  The primary reason for the increase was the payment
of  final  taxes  related  to the  interest  expense  paid  in  1996  to 1998 to
Philippine bondholders partially offset by the scheduled payment of debt.

RESULTS OF OPERATIONS FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2003 AND 2002

Total revenue increased $6.7 million or 11.6% to $64.7 million for the six-month
period  ended June 30, 2003 from $58.0  million for the  six-month  period ended
June 30,  2002.  Water  delivery  revenue  increased  to $44.5  million  for the
six-month period ended June 30, 2003 from $39.8 million for the six-month period
ended June 30, 2002 and  electricity  sales  revenue  was $20.2  million for the
six-month  period ended June 30, 2003 and $18.2 million for the six-month period
ended June 30, 2002.  The  increase in water fees was due to a 7.5%  increase in
Water Delivery Fee rate as a result of the contractual  annual escalation factor
and the  accrual of the  revenue  related to the  additional  taxes  recoverable
during  operations  pursuant to the  contract.  See Note 2 - "Trade  Receivable,
net."  Revenues  from  water  delivery,  guaranteed  energy  and  excess  energy
generated and delivered are 69%, 28% and 3%, respectively,  of the total revenue
for the six-month period ended June 30, 2003 while 69%, 31% and 0%, respectively
for the six-month period ended June 30, 2002.

Operating  expenses  increased  $4.5  million or 21.7% to $25.2  million for the
six-month period ended June 30, 2003 from $20.7 million for the six-month period
ended June 30, 2002. Included within operating expenses for the six-month period
ended June 30, 2003 are  depreciation,  plant  operations and doubtful  accounts
expense  of  $11.4  million,  $7.4  million  and  $6.4  million,   respectively.
Depreciation  decreased  by $0.3  million  while plant  operations  and doubtful
accounts expense increased by $3.2 million and $1.5 million,  respectively.  The
increase  in plant  operations  was  caused  by  higher  local  business  taxes,
insurance premium amortization and legal costs.

Interest  expense  decreased  $0.6  million  or 2.8% to  $20.9  million  for the
six-month period ended June 30, 2003 from $21.5 million for the six-month period
ended June 30,  2002.  The primary  reason for the  decrease  was the  scheduled
payment of debt  partially  offset by the payment of final taxes  related to the
interest expense paid in 1996 to 1998 to Philippine bondholders.

LIQUIDITY AND CAPITAL RESOURCES

The Company's  cash and cash  equivalents  were $1.7 million and $0.7 million at
June 30, 2003 and December 31, 2002, respectively.

The  Company  generated  cash flows from  operations  of $23.1  million  for the
six-month  period ended June 30, 2003,  compared with $13.7 million for the same
period in 2002.  The increase from 2002 was  primarily due to the  collection of
November 2002  revenues in February 2003 instead of December  2002. In addition,
operating  cash flows in 2002 were lower due to the  delayed  payment of the May
2002 revenues in July 2002 instead of June 2002.

The Company  provided $2.9 million from  investing  activities for the six-month
period  ended June 30,  2003,  compared  to $1.8  million for the same period in
2002.  The increase is due to increased  VAT  collections  totaling $2.4 million
over the amount for the same period in 2002.

                                      -13-
<PAGE>

The Company used $25.0 million in financing  activities for the six-month period
ended June 30, 2003,  compared to $11.5 million for the same period in 2002. The
increase  is due to a $20.7  million  principal  payment  on the  balance of the
Series A and B bonds in 2003.

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

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

NIA's payment  obligations  under the Project  Agreement are the Company's  sole
source of operating  revenues.  Because of the Company's  dependence on NIA, any
material failure of NIA to fulfill its obligations  under the Project  Agreement
and any  material  failure  of the ROP to  fulfill  its  obligations  under  the
Performance Undertaking would significantly impair the ability of the Company to
meet its obligations pertaining to its outstanding debt.

Construction Contract Arbitration
---------------------------------

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

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

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

                                      -14-
<PAGE>

liquidated  damages  clause which  provides for payments of $125,000 per day for
each day of delay in completion of the Casecnan Project for which the Contractor
is responsible is unenforceable. The arbitration is being conducted applying New
York law and pursuant to the rules of the ICC.

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

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

NIA Arbitration
---------------

Under  the  terms  of the  Project  Agreement,  NIA has  the  option  of  timely
reimbursing CE Casecnan  directly for certain taxes CE Casecnan has paid. If NIA
does not so reimburse CE  Casecnan,  the taxes paid by CE Casecnan  result in an
increase in the Water  Delivery  Fee.  The payment of certain  other taxes by CE
Casecnan  results  automatically in an increase in the Water Delivery Fee. As of
June 30, 2003, CE Casecnan had paid approximately  $58.5 million in taxes, which
as a result of the foregoing provisions has resulted in an increase in the Water
Delivery  Fee. NIA has failed to pay the portion of the water  delivery fee each
month, related to the payment of these taxes by CE Casecnan. As a result of this
non-payment,  on August 19, 2002,  CE Casecnan  filed a Request for  Arbitration
against  NIA,  seeking  payment of such  portion of the water  delivery  fee and
enforcement of the relevant  provision of the Project  Agreement  going forward.
The arbitration is being conducted in accordance with the rules of the ICC.

NIA filed its Answer and  Counterclaim  on March 31,  2003.  In its Answer,  NIA
asserts,  among  other  things,  that most of the taxes  which CE  Casecnan  has
factored into the water delivery fee compensation formula do not fall within the
scope of the relevant  section of the Project  Agreement,  that the compensation
mechanism itself is invalid and unenforceable  under Philippine law and that the
Project  Agreement is  inconsistent  with the  Philippine  BOT law. As such, NIA
seeks  dismissal of CE  Casecnan's  claims and a  declaration  from the arbitral
tribunal that the taxes which have been taken into account in the water delivery
fee  compensation  mechanism are not  recoverable  thereunder and that, at most,
certain taxes may be directly  reimbursed  (rather than  compensated for through
the water  delivery fee) by NIA. NIA also  counterclaims  for  approximately  $7
million  which it alleges is due to it as a result of the delayed  completion of
the Casecnan Project.  On April 23, 2003, NIA filed a Supplemental  Counterclaim
in which it asserts that the Project Agreement is contrary to Philippine law and
public  policy  and by way of  relief  seeks  a  declaration  that  the  Project
Agreement is void from the beginning or should be cancelled,  or  alternatively,
an order for  reformation  of the Project  Agreement or any portions or sections
thereof which may be determined to be contrary to such law and or public policy.
On May 23, 2003 CE Casecnan filed its reply to NIA's counterclaims.  The Company
is  required to file its brief and  supporting  materials  on October 17,  2003.
Thereafter,  NIA will  file its  response  brief  and  supporting  materials  by
December 12, 2003.  The parties

                                      -15-
<PAGE>

will then exchange documents in discovery and make rebuttal filings,  in advance
of the hearings on the claims and  counterclaims  which are  scheduled  for July
2004. CE Casecnan  intends to  vigorously  contest all of NIA's  assertions  and
counterclaims.

Included  in revenue  was $8.1  million  and $8.4  million  for the  three-month
periods ended June 30, 2003 and 2002, respectively,  and $17.7 million and $16.5
million for the six-month periods ended June 30, 2003 and 2002, respectively, of
tax  compensation for Water Delivery Fees under the Project  Agreement,  none of
which has been paid and the uncollectible portion of which the Company currently
estimates to be $2.3 million and $2.6 million for the three-month  periods ended
June 30, 2003 and 2002, respectively,  and $6.4 million and $4.9 million for the
six-month  periods  ended June 30, 2003 and 2002,  respectively.  As of June 30,
2003  and  December  31,  2002,  the  cumulative   unpaid  portion  of  the  tax
compensation  portion of the Water  Delivery  Fees  invoiced  since the start of
commercial operations totaled $54.0 million and $36.3 million, respectively.

Project Transmission Line
-------------------------

Under the Project Agreement, if NIA is able to accept delivery of water into the
Pantabangan  Reservoir  and NPC has  completed  the Casecnan  Project's  related
transmission line, the Company was liable to pay NIA $5,500 per day for each day
of delay in completion of the Casecnan Project beyond July 27, 2000,  increasing
to $13,500 per day for each day of delay in completion beyond November 27, 2000.
The Casecnan Project  transmission line was completed on August 13, 2001 and NIA
has completed the  installation and testing of the Casecnan  Project's  metering
equipment.  Accordingly,  the Company has accrued  $1.6  million for  liquidated
damages as of June 30, 2003 and December  31, 2002,  payable to NIA for 120 days
of delay and this is shown as part of accounts  payable and accrued  expenses in
the balance sheets. In its counterclaim in the pending ICC arbitration,  NIA has
asserted  that it is due  approximately  $7 million of  liquidated  damages as a
result of the delayed completion of the Casecnan Project. See "NIA Arbitration."

Stockholder Litigation
----------------------

Pursuant  to the  share  ownership  adjustment  mechanism  in  the  CE  Casecnan
stockholder  agreement,  which is based upon pro forma financial  projections of
the Casecnan Project prepared following  commencement of commercial  operations,
in February 2002,  MidAmerican Energy Holdings Company  ("MidAmerican")  through
its indirect  wholly owned  subsidiary  CE Casecnan  Ltd.,  advised the minority
stockholder,  LaPrairie Group Contractors  (International)  Ltd., ("LPG"),  that
MidAmerican's  indirect  ownership interest in CE Casecnan had increased to 100%
effective from commencement of commercial operations. On July 8, 2002, LPG filed
a complaint in the Superior Court of the State of California, City and County of
San Francisco  against,  among others, CE Casecnan Ltd. and MidAmerican.  In the
complaint,  LPG seeks  compensatory and punitive damages for alleged breaches of
the stockholder  agreement and alleged  breaches of fiduciary  duties  allegedly
owed by CE Casecnan  Ltd.  and  MidAmerican  to LPG.  The  complaint  also seeks
injunctive relief against all defendants and a declaratory  judgment that LPG is
entitled to maintain  its 15% interest in CE  Casecnan.  The impact,  if any, of
this litigation on the Company cannot be determined at this time.

In February  2003,  San Lorenzo Ruiz Builders and  Developers  Group Inc.  ("San
Lorenzo"),  an original  shareholder  substantially  all of whose  shares in the
Company were  purchased by  MidAmerican  in 1998,  threatened to initiate  legal
action in the  Philippines in connection  with certain  aspects of its option to
repurchase  such  shares on or prior to  commercial  operation  of the  Casecnan
Project.  MidAmerican believes that San Lorenzo has no valid basis for any claim
and, if named as a defendant in any action that may be commenced by San Lorenzo,
will vigorously defend such action.

                                      -16-

<PAGE>

BIR Audit
---------

The  Bureau  of  Internal  Revenue  ("BIR"),   consistent  with  the  Philippine
government's public statements to increase tax revenues,  has commenced auditing
the Company for all taxes,  including income taxes, for the years 2001 and 2000.
In  addition,  the BIR issued  letters of authority to audit the tax years 1998,
1997 and 1996. In May 2003, the Company paid $1.0 million of final taxes related
to interest  expense paid in 1996 to 1998.  On June 10,  2003,  the BIR issued a
notice  stating  that the tax  investigation  for the Company  for all  internal
revenue taxes for the years 1996 to 1998 is closed and  terminated.  The Company
further believes that it currently is in compliance with applicable tax laws and
regulations with respect to all of its tax returns and filings.

Political Risks
---------------

The Philippine  Congress has passed the Electric  Power  Industry  Reform Act of
2001 ("EPIRA"),  which is aimed at restructuring  the Philippine power industry,
privatization of the NPC and introduction of a competitive  electricity  market,
among other  initiatives.  The implementation of EPIRA may have an impact on the
Company's  future  operations  in the  Philippines  and  the  Philippines  power
industry as a whole, the effect of which is not yet determinable or estimable.

In connection with an interagency  review of approximately 40 independent  power
project  contracts in the Philippines,  the Casecnan Project (together with four
other  unrelated  projects) has reportedly  been identified as raising legal and
financial  questions  and,  with  those  projects,   has  been  prioritized  for
renegotiation.  No  written  report  has yet been  issued  with  respect  to the
interagency  review,  and the  timing  and  nature  of  steps,  if any  that the
Philippine Government may take in this regard are not known. Accordingly,  it is
not  known  what,  if any,  impact  the  government's  review  will  have on the
operations  of the  Company.  Company  representatives,  together  with  certain
current and former government officials, also have been requested to appear, and
have appeared during 2002 and 2003,  before a Philippine  Senate committee which
has raised questions and made allegations with respect to the Casecnan Project's
tariff structure and implementation.

On May 5,  2003,  the  Philippine  Supreme  Court  issued  its  ruling in a case
involving  an  unsolicited  BOT project for the  development,  construction  and
operation  of the new  Manila  International  Airport.  Various  members  of the
Philippine  Congress and labor  unions  initiated  the action in the  Philippine
Supreme Court on September 17, 2002 seeking to enjoin the enforcement of the BOT
agreement  with  an  international  consortium  known  as  PIATCO  (the  "PIATCO
Agreement").  The PIATCO  consortium  is unrelated  to the Company.  On March 4,
2003,  PIATCO separately  initiated an ICC arbitration  pursuant to the terms of
the PIATCO Agreement.  The Supreme Court, in its ruling,  stated that there were
no  unresolved  factual  issues and therefore it had original  jurisdiction  and
concluded that the pendency of the  arbitration  did not preclude the court from
ruling on a case brought by non-parties to the PIATCO Agreement, such as members
of the Philippine Congress or nongovernmental organizations.  In a public speech
on November 29, 2002 prior to the December  10, 2002 oral  arguments  before the
Philippine Supreme Court,  Philippine President Arroyo stated that she would not
honor the PIATCO Agreement  because the executive  branch's legal department had
concluded  it was "null and void".  In light of that  announcement,  the project
owners  stopped work on the  project,  which is  approximately  90% complete and
accordingly has not been placed into commercial operation. In its 10 to 3 ruling
(with one abstention)  issued on May 5, 2003, the Philippine Supreme Court ruled
that the PIATCO  Agreement was contrary to Philippine  law and public policy and
was "null and void". CE Casecnan is assessing the impact of the PIATCO ruling on
the Casecnan Project.

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

On May 8, 2003,  Moody's  Investors  Service  ("Moody's")  placed the Ba2 senior
secured  notes  rating of CE Casecnan on review for possible  downgrade,  noting
NIA's supplemental  counterclaim  seeking to have the Project Agreement declared
void.  Moody's  noted  that  actions  by  government  related  agencies  and the
resulting instability

                                      -17-
<PAGE>

of contractual arrangements was becoming inconsistent with their rating approach
that attaches  significant benefit to offtake arrangements with those government
supported  entities.  On June 6, 2003,  Moody's  downgraded CE Casecnan's senior
secured notes rating to B2 from Ba2.

Concentration of Risk
---------------------

NIA's  payments of  obligations  under the Project  Agreement are  substantially
denominated  in United  States  Dollars  and are the  Company's  sole  source of
operating  revenues.  Because of the  Company's  dependence on NIA, any material
failure of NIA to fulfill its  obligations  under the Project  Agreement and any
material  failure of the ROP to fulfill its  obligations  under the  Performance
Undertaking  would  significantly  impair the ability of the Company to meet its
existing and future obligations. No stockholders,  partners or affiliates of the
Company, including MidAmerican,  and no directors,  officers or employees of the
Company  will  guarantee  or be in any way liable for  payment of the  Company's
obligations.  As a result, payment of the Company's obligations depends upon the
availability  of  sufficient  revenues  from the  Company's  business  after the
payment of operating expenses.

                                      -18-
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

For  quantitative  and  qualitative  disclosures  about market risk affecting CE
Casecnan,  see Item 7A "Qualitative  and Quantitative  Disclosures  About Market
Risk" of CE Casecnan's  Annual  Report on Form 10-K for the year ended  December
31, 2002. CE Casecnan's exposure to market risk has not changed materially since
December 31, 2002.

ITEM 4.  CONTROLS AND PROCEDURES.

An evaluation was performed under the supervision and with the  participation of
the  Company's  management,  including  the 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, 2003. 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
significant  changes in the Company's internal controls or in other factors that
could significantly affect internal controls.


                                      -19-
<PAGE>

                           PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

See Notes 2 and 4 to the financial  statements  and  discussion in  management's
discussion and analysis.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

Not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

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

Not applicable.

ITEM 5.  OTHER INFORMATION.

Not applicable.

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

(a)      EXHIBITS:

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

(b) REPORTS ON FORM 8-K:

         The Company filed a current report on Form 8-K on April 30, 2003.

         The Company filed a current report on Form 8-K on May 12, 2003.

         The Company filed a current report on Form 8-K on June 5, 2003.

         The Company filed a current report on Form 8-K on June 9, 2003.

         The Company filed a current report on Form 8-K on June 13, 2003.

         The Company filed a current report on Form 8-K on June 17, 2003.

                                      -20-
<PAGE>
                                   SIGNATURES


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



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





Date:  August 5, 2003                    /s/  Patrick J. Goodman
                           -------------------------------------------------
                                          Patrick J. Goodman
                           Senior Vice President and Chief Financial Officer


                                      -21-
<PAGE>

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

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

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

   32.1     Chief Executive Officer's Certificate Pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002.

   32.2     Chief Financial Officer's Certificate Pursuant to Section 906 of the
            Sarbanes-Oxley Act of 2002.

                                      -22-