**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10-Q**





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





For
      the
      quarterly period ended March 31, 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
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                No.)24thFloor, 6750 Building, Ayala AvenueMakati,
                Metro Manila, Philippines
            
            Not
                Applicable(Address
                of principal executive offices)
            
            (Zip
                Code)





011
                63 2 892-0276(Registrant’s
                telephone number, including area code)(Former
                name, former address and former fiscal year, if changed since last
                report)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days.


Yes  ̈ 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
                filerT





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


Yes  ̈ No T





All
      of
      the shares of common equity of CE Casecnan Water and Energy Company, Inc. are
      privately held by a limited group of investors. As of April 25, 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 March 31, 2007, and the related statements
      of operations, of changes in shareholders’ equity and of cash flows for each of
      the three-month periods ended March 31, 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


April
      25, 2007


3





**CE
      CASECNAN WATER AND ENERGY COMPANY, INC.**


**BALANCE
      SHEETS (Unaudited)**


(Amounts
      in thousands of U.S. Dollars, except share data)





**As
                of****March 31,**
            
            **December
                31,****2007**
            
            **2006****ASSETS**Current
                assets:Cash
                and cash equivalents
            
            $
            57,059
            
            $
            31,946Restricted
                cash and investments
            
            
            63,545
            
            
            62,659Trade
                receivable, net
            
            
            14,272
            
            
            14,002Prepaid
                insurance and other current assets
            
            
            6,213
            
            
            6,008Total
                current assets
            
            
            141,089
            
            
            114,615Property,
                plant and equipment, net
            
            
            318,793
            
            
            324,203Deferred
                income taxes
            
            
            5,095
            
            
            5,095Bond
                issue costs, net
            
            
            927
            
            
            1,057**Total
                assets**
            
            $
            465,904
            
            $
            444,970**LIABILITIES
                AND SHAREHOLDERS’ EQUITY**Current
                liabilities:Accounts
                payable and other accrued liabilities
            
            $
            5,544
            
            $
            5,264Dividends
                payable
            
            
            32,475
            
            
            32,475Accrued
                interest
            
            
            19,846
            
            
            15,326Payable
                to affiliates
            
            
            41,591
            
            
            41,011Notes
                payable
            
            
            51,263
            
            
            -Current
                portion of long-term debt
            
            
            37,730
            
            
            37,730Total
                current liabilities
            
            
            188,449
            
            
            131,806Notes
                payable
            
            
            -
            
            
            51,263Deferred
                revenue
            
            
            1,880
            
            
            -Long-term
                debt, net of current portion
            
            
            68,600
            
            
            68,600Total
                liabilities
            
            
            258,929
            
            
            251,669Commitments
                and contingencies (Note 5)Shareholders’
                equity:Common
                stock - 2,148,000 shares authorized, one Philippine peso($0.038) par
                value; 767,162 shares issued and outstanding
            
            
            29
            
            
            29Additional
                paid-in capital
            
            
            123,807
            
            
            123,807Retained
                earnings
            
            
            83,139
            
            
            69,465Total
                shareholders’ equity
            
            
            206,975
            
            
            193,301**Total
                liabilities and shareholders’ equity**
            
            $
            465,904
            
            $
            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****Ended
                March 31**,**2007**
            
            **2006****Revenue:**Lease
                rentals and service contracts
            
            $
            24,338
            
            $
            32,727**Operating
                expenses:**Depreciation
            
            
            5,406
            
            
            5,393Plant
                operations and other operating expenses
            
            
            1,823
            
            
            1,995Total
                operating expenses
            
            
            7,229
            
            
            7,388**Operating
                income**
            
            
            17,109
            
            
            25,339**Other
                income (expense):**Interest
                expense
            
            
            (4,650
            )
            
            (5,668
            )Interest
                income
            
            
            861
            
            
            869Other,
                net
            
            
            980
            
            
            1,208Total
                other expense, net
            
            
            (2,809
            )
            
            (3,591
            )**Income
                before provision for income tax**
            
            
            14,300
            
            
            21,748**Provision
                for income tax**
            
            
            626
            
            
            536**Net
                income**
            
            $
            13,674
            
            $
            21,212





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**
            
            **Stock**
            
            **Capital**
            
            **Earnings**
            
            **Total****January 1,
                2006**
            
            
            767,162
            
            $
            29
            
            $
            123,807
            
            $
            68,161
            
            $
            191,997Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            21,212
            
            
            21,212**Balance,
                March 31, 2006**
            
            
            767,162
            
            $
            29
            
            $
            123,807
            
            $
            89,373
            
            $
            213,209**January 1,
                2007**
            
            
            767,162
            
            $
            29
            
            $
            123,807
            
            $
            69,465
            
            $
            193,301Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            13,674
            
            
            13,674**Balance,
                March 31, 2007**
            
            
            767,162
            
            $
            29
            
            $
            123,807
            
            $
            83,139
            
            $
            206,975








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)





**Three
                Months****Ended
                March 31,****2007**
            
            **2006****Cash
                flows from operating activities:**Net
                income
            
            $
            13,674
            
            $
            21,212Adjustments
                to reconcile net income to cash flows from operating
                activities:Depreciation
            
            
            5,406
            
            
            5,393Amortization
                of bond issue costs
            
            
            130
            
            
            172Changes
                in other items:Trade
                receivable, net
            
            
            (270
            )
            
            4,841Prepaid
                insurance and other current assets
            
            
            (205
            )
            
            (325
            )Accounts
                payable and other accrued liabilities
            
            
            280
            
            
            1,593Accrued
                interest
            
            
            4,520
            
            
            5,497Deferred
                revenue
            
            
            1,880
            
            
            1,881Net
                cash flows from operating activities
            
            
            25,415
            
            
            40,264**Cash
                flows from investing activities:**Disposals
                (additions) to property, plant and equipment
            
            
            4
            
            
            (303
            )Increase
                in restricted cash and investments for debt service obligations
                and
              dividends payable
            
            
            (886
            )
            
            (2,537
            )Net
                cash flows used in investing activities
            
            
            (882
            )
            
            (2,840
            )**Cash
                flows from financing activities:**Increase
                (decrease) in payable to affiliates
            
            
            580
            
            
            (1,815
            )Net
                cash flows from (used in) financing activities
            
            
            580
            
            
            (1,815
            )**Net
                change in cash and cash equivalents**
            
            
            25,113
            
            
            35,609**Cash
                and cash equivalents at beginning of period**
            
            
            31,946
            
            
            42,317**Cash
                and cash equivalents at end of period**
            
            $
            57,059
            
            $
            77,926





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 (the “Supplemental Agreement”), covering a 20-year
      cooperation period (“Cooperation Period”) with “take-or-pay” obligations for
      water and electricity. At the end of the Cooperation Period, the combined
      irrigation and 150 MW hydroelectric power generation project (the “Casecnan
      Project”) will be transferred to the ROP at no cost on an “as is” basis. The ROP
      also signed a Performance Undertaking, which, among others, affirms and
      guarantees the obligations of NIA under the 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. In the opinion of management,
      the unaudited Financial Statements contain all adjustments, including normal
      recurring items, considered necessary for a fair presentation of the financial
      position as of March 31, 2007 and the results of operations, of changes in
      shareholders’ equity and of cash flows for the three-month periods ended
      March 31, 2007 and 2006. The results of operations for the three-month
      period ended March 31, 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. These estimates
      include, but are not limited to, allowance for doubtful accounts, long-lived
      asset recovery and the accounting for contingencies. 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. The
      December 31, 2006 financial data have been derived from audited financial
      statements. There have been no significant changes in the Company’s assumptions
      regarding critical accounting estimates during the first three 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 Statement of Financial Accounting Standards 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):





March 31,
                2007
            
            December 31,
                2006Debt
                service reserve fund
            
            $
            25,660
            
            $
            25,407Dividend
                set aside account
            
            
            37,885
            
            
            37,252$
            63,545
            
            $
            62,659





**(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
      $41.6 million and $41.0 million at March 31, 2007 and
      December 31, 2006, respectively. Costs incurred by the Company in
      transactions with related parties amounted to $0.9 million and
      $0.3 million for the three-month periods ended March 31, 2007 and
      2006, respectively.





As
      of
      March 31, 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 $1.3 million and $1.2 million for the three-month
      periods ended March 31, 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 March 31, 2007, the effective interest
      rate on the notes was 10.63%. 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. As a result
      of
      the decision in the shareholder litigation described below, the Company believes
      that CE Casecnan Ltd. will demand payment of notes and accrued interest within
      the next twelve months. Therefore, the notes have been classified as a current
      liability.






9





**(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, totaling
      $32.5 million, was set aside in a separate bank account in the name of the
      Company and is shown as restricted cash and investments and dividends payable
      in
      the accompanying Balance Sheets. On August 4, 2005, the court issued a
      decision, ruling in favor of LPG on five of the eight disputed issues in the
      first phase of the litigation. On January 3, 2006, the court entered a
      judgment in favor of LPG against CE Casecnan Ltd. According to the judgment,
      LPG
      would retain its ownership of 15% of the shares of the Company and distributions
      of the amounts deposited into escrow plus interest at 9% per annum. On
      February 28, 2006, CE Casecnan Ltd. filed an appeal of this judgment
      and the August 4, 2005 decision. On February 21, 2007, the
      appellate court issued a decision reversing the lower court's judgment on one
      of
      the disputed issues. 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.
      Exercise of the buy-up rights under the shareholder agreement is a transaction
      between shareholders of the Company and is not expected to have any impact
      on
      the Company’s financial position or results of operations. On April 4,
      2007, CE Casecnan Ltd. filed a motion for release of the escrow funds to LPG
      (two-thirds) and CE Casecnan Ltd. (one-third). LPG filed an opposition to the
      distribution of one-third of the escrow funds to CE Casecnan Ltd. The Company
      expects the motion to be heard on April 26, 2007. 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. Discovery is ongoing in the case.
      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.






10




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 (“EPIRA”) 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 and
      a
      hearing is scheduled for April 27, 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”) with “take-or-pay” obligations for
      water and electricity. At the end of the Cooperation Period, the combined
      irrigation and 150 MW hydroelectric power generation project (the “Casecnan
      Project”) will be transferred to the ROP at no cost on an “as is” basis. The ROP
      also signed a Performance Undertaking, which, among others, affirms and
      guarantees the obligations of NIA under the 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.





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.




12




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 Periods Ended March 31, 2007 and
      2006**





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





**2007**
            
            **2006**Electricity
                produced (GWh)
            
            
            59.0
            
            
            120.6Water
                delivered (million cubic meters)
            
            
            102.5
            
            
            216.4





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 for the three-month periods ended
      March 31, as follows (in millions):





**2007**
            
            
            **2006**Water
                delivery fees
            
            $
            14.8
            
            $
            13.9Guaranteed
                energy fees
            
            
            9.1
            
            
            9.1Variable
                energy fees
            
            
            2.3
            
            
            11.6Deferred
                water delivery fees
            
            
            (1.9
            )
            
            (1.9
            )Total
                lease rentals and service contracts revenue
            
            $
            24.3
            
            $
            32.7





Revenue
      decreased by $8.4 million to $24.3 million for the three-month period
      ended March 31, 2007 from $32.7 million for the same period in
      2006. The decrease in variable energy fees was due primarily to the lower
      rainfall which resulted in lower electricity production in the first quarter
      of
      2007 than in 2006. The increase in water delivery fees was due to the
      contractual 7.5% annual escalation factor. 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.





Interest
      expense decreased by $1.0 million to $4.7 million for the three-month
      period ended March 31, 2007 from $5.7 million for the same period
      in 2006, due to lower outstanding debt balances resulting from the scheduled
      repayment of debt.




13




**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 $57.1 million and
      $31.9 million at March 31, 2007 and December 31, 2006,
      respectively.





Cash
      flows from operations were $25.4 million and $40.3 million for the
      three-month periods ended March 31, 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 quarter of
      2006.





Cash
      flows used in investing activities were $0.9 million and $2.8 million
      for the three-month periods ended March 31, 2007 and 2006,
      respectively. The Company increased its restricted cash related to obligations
      for debt service and unpaid dividends by $0.9 million and
      $2.5 million, respectively, in the first quarter of 2007 and
      2006.





Cash
      flows from (used in) financing activities were $0.6 million and
      ($1.8) million for the three-month periods ended March 31, 2007
      and 2006, respectively. The Company accrued an additional $0.6 million
      payable to the minority shareholder in 2007. Certain advances from MidAmerican
      to the Company were repaid in 2006.




14




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, totaling $32.5 million, was set aside in a separate bank account in
      the name of the Company and is shown as restricted cash and investments and
      dividends payable in the accompanying Balance Sheets. On
      August 4, 2005, the court issued a decision, ruling in favor of LPG on
      five of the eight disputed issues in the first phase of the litigation. On
      January 3, 2006, the court entered a judgment in favor of LPG against
      CE Casecnan Ltd. According to the judgment, LPG would retain its ownership
      of
      15% of the shares of the Company and distributions of the amounts deposited
      into
      escrow plus interest at 9% per annum. On February 28, 2006, CE
      Casecnan Ltd. filed an appeal of this judgment and the August 4, 2005
      decision. On February 21, 2007, the appellate court issued a decision
      reversing the lower court’s judgment on one of the disputed issues. 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. Exercise of the buy-up rights under the shareholder
      agreement is a transaction between shareholders of the Company and is not
      expected to have any impact on the Company’s financial position or results of
      operations. On April 4, 2007, CE Casecnan Ltd. filed a motion for release
      of the escrow funds to LPG (two-thirds) and CE Casecnan Ltd. (one-third). LPG
      filed an opposition to the distribution of one-third of the escrow funds to
      CE
      Casecnan Ltd. The Company expects the motion to be heard on April 26, 2007.
      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. Discovery is ongoing in the case.
      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 (“EPIRA”) 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 and
      a
      hearing is scheduled for April 27, 2007.




**Contractual
      Obligations and Commercial Commitments**





During
      the three months ended March 31, 2007, there were no material changes
      in the contractual obligations and commercial commitments from the information
      provided in Item 7 of the Company’s Annual Report on Form 10-K for the year
      ended December 31, 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
      March 31, 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, please review
      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
      three-month period ended March 31, 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.**
            **Unregistered
              Sales of Equity Securities and Use of
              Proceeds.**




Not
      applicable.




**Item 3.**
            **Defaults
              Upon Senior Securities.**





Not
      applicable.




**Item 4.**
            **Submission
              of Matters to a Vote of Security
              Holders.**





Not
      applicable.




**Item 5.**
            **Other
              Information.**




Not
      applicable.




**Item 6.**
            **Exhibits.**





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


17





**SIGNATURES**








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











CE
                CASECNAN WATER AND ENERGY COMPANY, INC.(Registrant)Date:
                April 25, 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