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 quarter ended June 30, 2001
                          Commission File No. 333-89521


                               CE Generation, LLC
             (Exact name of registrant as specified in its charter)


     Delaware                                               47-0818523
 -----------------                                       -----------------
 (State or other jurisdiction of                         (I.R.S. Employer
 Incorporation or organization)                          Identification No.)

 302 South 36th Street, Suite 400 Omaha, NE               68131
 ------------------------------------------               -----
 (Address of principal executive offices)                 (Zip Code)


       Registrant's telephone number, including area code: (402) 341-4500
                                 --------------

         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 _____


     The members  equity  accounts are held 50% by MidAmerican  Energy  Holdings
Company and 50% by El Paso CE Generation Holding Company as of August 14, 2001.



<PAGE>





                                TABLE OF CONTENTS


Part I  Financial Information.............................................1
  Item 1.    Financial Statements.........................................2
  Item 2.    Management's Discussions and Analysis of
             Financial Condition and Results of Operations...............10


Part II..................................................................18
  Item 1.    Legal Proceedings...........................................18
  Item 2.    Changes in Securities and Use of Proceeds...................18
  Item 3.    Defaults on Senior Securities ..............................18
  Item 4.    Submission of Matters to a Vote of Security Holders.........18
  Item 5.    Other Information ..........................................18
  Item 6.    Exhibits and Reports on Form 8-K............................18

Signatures...............................................................19
































<page>





                         INDEPENDENT ACCOUNTANTS' REPORT


Board of Directors
CE Generation, LLC

     We  have  reviewed  the  accompanying  consolidated  balance  sheet  of  CE
Generation,   LLC  (the  "Company")  as  of  June  30,  2001,  and  the  related
consolidated  statements of operations for the three-month and six-month periods
ended June 30, 2001 and 2000 and the  related  consolidated  statements  of cash
flows for the six-month  periods ended June 30, 2001 and 2000.  These  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 procedures to
financial data and of making inquiries of persons  responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing  standards  generally  accepted in the United States of
America,  the objective of which is the  expression of an opinion  regarding the
financial  statements taken as a whole.  Accordingly,  we do not express such an
opinion.

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

     We have previously audited, in accordance with auditing standards generally
accepted in the United States of America,  the consolidated balance sheets of CE
Generation,  LLC  as of  December  31,  2000,  and  the  related  statements  of
operations,  members'  equity  and cash  flows  for the  year  then  ended  (not
presented  herein);  and in our report dated January 18, 2001 (March 27, 2001 as
to Note 9A), we expressed an unqualified opinion on those consolidated financial
statements.  In our  opinion,  the  information  set  forth in the  accompanying
consolidated  balance  sheet as of December  31, 2000 is fairly  stated,  in all
material respects,  in relation to the consolidated  balance sheet from which it
has been derived.


DELOITTE & TOUCHE LLP
Omaha, Nebraska
July 27, 2001




<PAGE>


                       CE GENERATION, LLC AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Amounts in Thousands)

                                                       June 30,     December 31,
                                                         2001           2000
                                                      -----------   ------------
                                                      (unaudited)

ASSETS
Cash and cash equivalents                             $    77,600    $    36,152
Restricted cash                                            14,538         14,794
Accounts receivable, net of allowance of $82,051
  and $ 0 respectively (Note 2)                            81,075         89,883
Prepaid expenses                                            1,551         19,981
Inventory                                                  22,960         27,424
                                                      -----------    -----------
Total current assets                                      197,724        188,234

Restricted cash                                            14,788          9,618
Properties, plants, contracts and equipment, net        1,320,210      1,355,345
Excess of cost over fair value of
  net assets acquired, net                                271,499        276,294
Note receivable from related party                        140,212        140,528
Deferred financing charges and other assets                13,240         14,426
                                                      -----------    -----------
Total assets                                          $ 1,957,673    $ 1,984,445
                                                      ===========    ===========

LIABILITIES AND EQUITY
Liabilities:
Accounts payable                                      $     3,975    $       140
Accrued interest                                            3,729          4,049
Accrued income taxes                                       38,854          4,175
Other accrued liabilities                                  52,115         60,336
Due to affiliates                                           2,135          2,578
Current portion of long term debt                          68,089         67,473
                                                      -----------    -----------
Total current liabilities                                 168,897        138,751

Project loan                                              183,392        199,006
Salton Sea notes and bonds                                507,805        520,250
Senior secured bonds                                      370,700        377,000
Deferred income taxes                                     202,226        242,059
                                                      -----------    -----------
Total liabilities                                       1,433,020      1,477,066

Minority interest                                          69,004         68,464

Commitments and contingencies (Note 2)

Members' equity                                           461,525        438,915
Accumulated other comprehensive income                     (5,876)            --
                                                      -----------    -----------

Total liabilities and equity                          $ 1,957,673    $ 1,984,445
                                                      ===========    ===========

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


<PAGE>

<TABLE>
<CAPTION>
                       CE GENERATION, LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             (Amounts in Thousands)
                                   (Unaudited)


                                             Three Months Ended        Six Months Ended
                                                  June 30,                  June 30,
                                              2001        2000         2001         2000
                                              ----        ----         ----         ----

Revenue:

                                        <C>         <C>          <C>          <C>
Sales of electricity and steam             $ 124,047   $ 110,456    $ 272,033    $ 202,433
Interest and other income                      5,358       2,049        7,059        4,542
                                           ---------   ---------    ---------    ---------
Total revenues                               129,405     112,505      279,092      206,975

Cost and Expenses:
Fuel                                          29,774      26,796       66,462       55,045
Plant operations                              32,877      23,069       66,693       43,416
Depreciation and amortization                 22,862      19,722       43,512       39,097
Interest expense                              20,184      22,406       41,171       44,801
Less interest capitalized                         --      (1,866)          --       (4,217)
                                           ---------   ---------    ---------    ---------
Total expenses                               105,697      90,127      217,838      178,142
                                           ---------   ---------    ---------    ---------

Income before provision for income taxes      23,708      22,378       61,254       28,833
Provision for income taxes                     5,035       2,749       17,510        3,137
                                           ---------   ---------    ---------    ---------

Income before minority interest and
cumulative effect of accounting change        18,673      19,629       43,744       25,696

Minority interest                              1,301       2,690        6,198        6,791
                                           ---------   ---------    ---------    ---------

Income before cumulative effect
of accounting change                          17,372      16,939       37,546       18,905

Cumulative effect of accounting
change, net of tax                                --          --      (15,386)          --
                                           ---------   ---------    ---------    ---------
Net income                                 $  17,372   $  16,939    $  22,160    $  18,905
                                           =========   =========    =========    =========



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

</TABLE>

<PAGE>


                       CE GENERATION, LLC AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Amounts in Thousands)
                                   (Unaudited)

                                                              Six Months Ended
                                                                   June 30,
                                                             2001         2000
                                                             ----         ----
Cash flows from operating activities:
Net income                                                $ 22,160     $ 18,905
Adjustments to reconcile to cash flows from
    operating activities:
Depreciation and amortization                               43,512       39,097
Cumulative effect of change in accounting
    principle, net of tax                                   15,386           --
Provision for deferred income taxes                        (25,998)      (3,849)
Distributions to minority interest
    less than (in excess) of related income                    540       (3,593)
Changes in other items:
   Accounts receivable                                       8,501       (4,112)
   Due to affiliates                                          (443)         812
   Accounts payable and other accrued liabilities           22,201       (9,639)
   Other assets                                              5,923       (3,394)
                                                          --------     --------

Net cash flows from operating activities                    91,782       34,227

Cash flows from investing activities:
Capital expenditures                                       (11,677)     (41,243)
Consolidation of equity investment's cash                       --        2,559
Decrease (increase) in restricted cash                      (5,170)      18,403
                                                          --------     --------

Net cash flows from investing activities                   (16,847)     (20,281)

Cash flows from financing activities:
Proceeds from revolving loan                                    --       15,000
Proceeds from related party notes                               --       13,000
Repayment of loans                                         (33,743)     (41,321)
Decrease in restricted cash                                    256          179
                                                          --------     --------
Net cash flows from financing activities                   (33,487)     (13,142)
                                                          --------     --------

Net increase in cash and cash equivalents                   41,448          804

Cash and cash equivalents at beginning of period            36,152       29,120
                                                          --------     --------

Cash and cash equivalents at end of period                $ 77,600     $ 29,924
                                                          ========     ========

Supplemental disclosure:
Interest paid, net of capitalized interest                $ 40,648     $ 45,284
                                                          ========     ========
Income taxes paid                                         $  9,544     $  7,202
                                                          ========     ========


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


<PAGE>


                       CE GENERATION, LLC AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1. General:

     In the opinion of the management of CE Generation,  LLC ("CE Generation" or
the "Company") the  accompanying  unaudited  consolidated  financial  statements
contain all adjustments  (consisting of normal recurring  accruals) necessary to
present  fairly the  financial  position  as of June 30, 2001 and the results of
operations  for the three and six months  ended June 30,  2001 and 2000 and cash
flows for the six months ended June 30, 2001 and 2000. The results of operations
for the three and six months  ended June 30,  2001 and 2000 are not  necessarily
indicative of the results to be expected for the full year.

     The unaudited  combined  financial  statements shall be read in conjunction
with the financial  statements  included in the CE  Generation  annual report on
Form 10-K for the year ended December 31, 2000.

2. Commitments and Contingencies

A.  Southern California Edison

     Southern California Edison ("Edison"),  a wholly-owned subsidiary of Edison
International,  is a  public  utility  primarily  engaged  in  the  business  of
supplying   electric  energy  to  retail   customers  in  Central  and  Southern
California, excluding the city of Los Angeles. CE Generation is aware that there
have  been  public   announcements   that  Edison's   financial   condition  has
deteriorated as a result of reduced  liquidity.  Edison's senior  unsecured debt
obligations are currently rated Caa2 by Moody's and D by S&P.

     Edison  failed  to pay  approximately  $119  million  due  under  the Power
Purchase  Agreements  for power  delivered  in November  and  December  2000 and
January, February and March 2001, although the Power Purchase Agreements provide
for billing and payment on a schedule  where  payments  would have normally been
received in early January, February, March, April and May 2001.

     On February 21, 2001, the Imperial  Valley Projects  (excluding  Salton Sea
Unit V and CE Turbo) filed a lawsuit  against  Edison in  California's  Imperial
County  Superior  Court  seeking  a court  order  requiring  Edison  to make the
required  payments  under  the  Power  Purchase  Agreements.  The  lawsuit  also
requested,  among other things,  that the court order permit the Imperial Valley
Projects  to suspend  deliveries  of power to Edison and to permit the  Imperial
Valley Projects to sell such power to other purchasers in California.

     On March 22, 2001, the Superior Court granted the Imperial Valley Projects'
Motion for Summary  Adjudication  and a Declaratory  Judgment  ordering that: 1)
under the Power Purchase Agreements, the Imperial Valley Projects have the right
to  temporarily  suspend  deliveries  of capacity  and energy to Edison,  2) the
Imperial Valley Projects are entitled to resell the energy and capacity to other
purchasers  and 3) the interim  suspension  of deliveries to Edison shall not in
any respect  result in the  modifications  or  termination of the Power Purchase
Agreements and the Power Purchase  Agreements shall in all respects  continue in
full force and effect  other than the  temporary  suspension  of  deliveries  to
Edison.

     As a result of the March 22, 2001 Declaratory Judgment, the Imperial Valley
Projects suspended deliveries of energy to Edison and entered into a transaction
agreement  with El Paso  Merchant  Energy,  L.P.  ("EPME") in which the Imperial
Valley  Projects'  available  power was sold to EPME based on percentages of the
Dow Jones  SP-15  Index.  On June 18, 2001 the  Superior  Court  terminated  the
Imperial  Valley  Projects'  right to resell power  pursuant to the  Declaratory
Judgment.

<PAGE>
     On June 20, 2001, the Imperial Valley Projects (excluding Salton Sea Unit V
and CE Turbo) entered into Agreements  Addressing  Renewable  Energy Pricing and
Payment Issues with Edison ("Settlement Agreements").  The Settlement Agreements
require  Edison make a series of payments to repay the past due  balances  under
the Power Purchase Agreements (the "stipulated  amounts").  The first payment of
approximately  $11.6 million,  which represented 10% of the stipulated  amounts,
was received June 22, 2001. A second partial  payment of 10% is payable within 5
days following the MOU Effective  Date. The "MOU Effective Date" means the first
day  on  which  both  of  the  following  have  occurred:  (a)  all  legislation
implementing the Memorandum of  Understanding  between Edison and the California
Department  of  Water  Resources  dated  April 9,  2001  ("MOU")  or such  other
legislation   based  on  the  MOU  or  otherwise,   that   restores   Edison  to
creditworthiness  has become  effective,  and (b) the  Commission has issued all
orders that are necessary to implement the MOU or other mechanisms  contained in
such  legislation  based on the MOU or  otherwise  which are designed to restore
Edison  to  creditworthiness.  The final  payment,  representing  the  remaining
stipulated amounts,  shall be paid on the 5th business day after Edison receives
proceeds from the financing resulting from the MOU or other mechanisms contained
in such  other  legislation  based on the MOU or  otherwise  restore  Edison  to
creditworthiness.  In  addition  to these  payments,  Edison is required to make
monthly  interest  payments  calculated  at a  rate  of  7%  per  annum  on  the
outstanding stipulated amounts. The Settlement Agreements also provide a revised
energy  pricing  structure,  whereby  Edison  elects to pay the Imperial  Valley
Projects  a  fixed  energy  price  of  5.37  cents/kilowatt  hour in lieu of the
Commission-approved  SRAC  Methodology  under  the  Power  Purchase  Agreements,
commencing on the first day of the month  following  the MOU Effective  Date and
expiring five years from such date. All other contract terms remain unchanged.

     As a result  of the  aforementioned  Settlement  Agreements,  the  Imperial
Valley Projects resumed power sales to Edison on June 22, 2001.  Energy payments
are currently calculated using the SRAC formulas set forth in the Power Purchase
Agreements until the fixed rate period begins.

     As a result of Edison's  failure to make the  payments  due under the Power
Purchase  Agreements  and the  downgrades of Edison's  credit  ratings,  Moody's
downgraded  the  ratings for the Salton Sea Funding  Corporation  (the  "Funding
Corporation")  Securities  to Caa2  (negative  outlook) and S&P  downgraded  the
ratings for the Funding Corporation Securities to BBB- and placed the Securities
on "credit watch negative". Moody's downgraded the ratings for the CE Generation
Securities  to B1 from Baa3  (review  for  possible  downgrade).  Following  the
execution of the  Settlement  Agreements,  Moody's placed the Salton Sea Funding
and CE Generation securities on "credit watch positive".  A failure by Edison to
make these payments as well as subsequent  monthly  payments,  for a substantial
period of time after the  payments  are due, is not  expected to have a material
adverse  effect on the  ability  of CE  Generation  to make  payments  on the CE
Generation bonds due to cash flows from the Gas Projects.  However, there can be
no assurance  that such a failure by Edison  would not cause a material  adverse
effect.

     The Imperial Valley Projects are contractually entitled to receive payments
under the Power Purchase Agreements and Settlement  Agreements.  However, due to
the uncertainties  associated with Edison's  financial  condition and failure to
pay  contractual  obligations,  CE Generation  has  established an allowance for
doubtful  accounts of approximately  $82 million at June 30, 2001. The allowance
for  doubtful  accounts  has been  recorded as a  reduction  of net sales in the
statement of operations.

B.  NYSEG

     On February 14, 1995, New York State Electric Gas ("NYSEG")  filed with the
FERC a Petition for a Declaratory Order, Complaint, and Request for Modification
of Rates in Power  Purchase  Agreements  Imposed  Pursuant to the Public Utility
Regulatory  Policies Act of 1978  ("Petition")  seeking FERC (i) to declare that
the rates NYSEG pays under the Saranac Power Purchase Agreement ("Saranac PPA"),
which was approved by the New York Public Service  Commission (the "PSC"),  were
in excess of the level  permitted  under PURPA and (ii) to authorize  the PSC to
reform the Saranac PPA. On March 14, 1995, the Saranac Partnership intervened in
opposition  to the Petition  asserting,  inter alia,  that the Saranac PPA fully
<PAGE>
complied with PURPA,  that NYSEG's  action was untimely and that the FERC lacked
authority to modify the Saranac PPA. On April 12, 1995,  the FERC by a unanimous
(5-0) decision issued an order denying the various forms of relief  requested by
NYSEG and finding that the rates required under the Saranac PPA were  consistent
with  PURPA  and the  FERC's  regulations.  On May  11,  1995,  NYSEG  requested
rehearing of the order and, by order issued July 19, 1995, the FERC  unanimously
(5-0) denied  NYSEG's  request.  On June 14, 1995,  NYSEG  petitioned the United
States  Court of Appeals for the  District of  Columbia  Circuit  (the "Court of
Appeals")  for  review of FERC's  April 12,  1995  order.  FERC moved to dismiss
NYSEG's  petition for review on July 28, 1995. On October 30, 1996,  all parties
filed final briefs and the Court of Appeals heard oral  arguments on December 2,
1996.  On July 11,  1997,  the Court of Appeals  dismissed  NYSEG's  appeal from
FERC's denial of the petition on jurisdictional grounds.

     On August 7, 1997,  NYSEG filed a complaint in the U.S.  District Court for
the Northern  District of New York against the FERC,  the PSC (and the Chairman,
Deputy  Chairman  and the  Commissioners  of the  PSC as  individuals  in  their
official capacity), the Saranac Partnership and Lockport Energy Associates, L.P.
("Lockport")  concerning the power purchase  agreements  that NYSEG entered into
with the Saranac Partnership and Lockport. NYSEG's suit asserts that the PSC and
the FERC  improperly  implemented  PURPA in  authorizing  the pricing terms that
NYSEG, the Saranac  Partnership and Lockport agreed to in those  contracts.  The
action raises similar legal arguments to those rejected by the FERC in its April
and July 1995 orders. NYSEG in addition asks for retroactive  reformation of the
contracts  as of the date of  commercial  operation  and  seeks a refund of $281
million from the Saranac Partnership.  The Saranac Partnership and other parties
have filed motions to dismiss and oral  arguments on those motions were heard on
March 2, 1998 and again on March 3, 1999.  On  September  30, 2000 the  District
Court granted the motions to dismiss.  NYSEG filed a Notice of Appeal on October
25, 2000  appealing  the decision to the United  States Court of Appeals for the
Second  Circuit.  NYSEG filed its appellate  brief on February 9, 2001. On March
12,  2001  Saranac  filed its  appellate  brief.  Oral  arguments  on the appeal
occurred on June 25, 2001. The Saranac Partnership  believes that NYSEG's claims
are without  merit for the same reasons  described in the FERC's  orders and the
District Court's decision.

3.       Related Party Transactions

     On  September  29,  2000,  Salton Sea Power LLC ("Salton Sea Power") and CE
Turbo LLC ("CE Turbo")  entered into an  agreement to sell all  available  power
from Salton Sea Unit V and CE Turbo to EPME.  Under the terms of the  agreement,
EPME purchased all available power and sold available power, on behalf of Salton
Sea Power and CE Turbo into the California  ISO markets.  The purchase price for
the available  power was equivalent to the value  actually  received by EPME for
the sale of such power, including renewable premiums.

     On  January  17,  2001,  Salton  Sea  Power  and CE  Turbo  entered  into a
transaction  agreement  with  EPME in which  Salton  Sea  Unit V and CE  Turbo`s
available power after sales to the Salton Sea Zinc Recovery  project was sold to
EPME on day ahead basis.

     On March 27, 2001 and May 1, 2001,  the Imperial  Valley  Projects  entered
into  transaction  agreements with EPME in which the Imperial  Valley  Projects'
available  power is sold to EPME  based on  percentages  of the Dow Jones  SP-15
Index. As of June 22, 2001 the Imperial Valley  Projects  (excluding  Salton Sea
Unit V and CE Turbo), are no longer selling power to EPME.

4.       Accounting Pronouncements

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of  Financial  Accounting  Standard  ("SFAS  133"),  "Accounting  for
Derivative  Instruments and Hedging  Activities",  which was delayed by SFAS 137
and amended by SFAS 138. SFAS 133/138 requires an entity to recognize all of its
derivatives  as either  assets or  liabilities  in its  statement  of  financial
position and measure those  instruments  at fair value.  CE Generation  utilizes
derivative  financial  instruments  soley to  manage  the risk that  changes  in
<PAGE>
interest  rates will  affect the  amounts of its future  interest  payments  and
adopted SFAS 133/138  effective  January 1, 2001. As a result of the adoption of
SFAS 133/138,  CE  Generation  recorded the fair value of the interest rate swap
agreements  at  January  1,  2001.  These  interest  rate  swap  agreements  are
considered  cash flow hedges and therefore the offset is recorded in accumulated
other  comprehensive  income.  The  adoption  did not have a material  impact on
results of operations or cash flows.

     The FASB's  Derivatives  Implementation  Group  continues  to identify  and
provide guidance on various  implementation  issues related to SFAS 133/138 that
are  in  the  varying   stages  of  review  and  clearance  by  the   Derivative
Implementation  Group and FASB. CE Generation has not determined if the ultimate
resolution  of those  issues  would  have a  material  impact  on its  financial
statements.

     In June  2001,  FASB  approved  the  issuance  of SFAS No.  141,  "Business
Combinations",  and SFAS No. 142, "Goodwill and Other Intangible Assets".  These
standards,  issued in July 2001, establish accounting and reporting for business
combinations.  SFAS No. 141  requires  all  business  combinations  entered into
subsequent  to June 30, 2001 to be accounted  for using the  purchase  method of
accounting. SFAS No. 142 provides that goodwill and other intangible assets with
indefinite lives will not be amortized,  but will be tested for impairment on an
annual basis.  These  standards  are  effective  for CE Generation  beginning on
January 1, 2002. CE Generation has not quantified the impact  resulting from the
adoption of these standards.

5.       Change in Accounting Policy

     CE  Generation  has changed its  accounting  policy for major  maintenance,
overhaul and well workover  costs.  These costs,  which have  historically  been
accounted for using deferral and accrual methods,  are now expensed as incurred.
The new policy went into effect  January 1, 2001 and the Company has  recorded a
cumulative effect of this change of approximately $15.4 million, net of tax.

6.       Comprehensive Income

     Comprehensive  income for the three and six months  ended June 30, 2001 was
$18.4 million and $16.3 million,  respectively. The comprehensive income for the
six months  ended June 30,  2001,  includes the  transition  adjustment  of $7.7
million, net of tax, related to the initial adoption of SFAS 133.  Comprehensive
income  differs  from net income due to the fair value  adjustment  of cash flow
hedges.


<PAGE>
Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

     The  following  is  management's  discussion  and  analysis of  significant
factors,  which have  affected  CE  Generation,  LLC's ("CE  Generation"  or the
"Company")  financial  condition  and results of  operations  during the periods
included in the  accompanying  statements of  operations.  The Company's  actual
results in the future could differ significantly from the historical results.

Business

     The consolidated  financial  statements reflect the consolidated  financial
statements of CE  Generation,  and its  wholly-owned  subsidiaries,  Magma Power
Company   ("Magma"),   FSRI  Holdings,   Inc.  ("FSRI")  and  Yuma  Cogeneration
Associates.

         The following table sets out information concerning CE Generation
Projects:

PROJECT              FUEL             COMMERCIAL       CAPACITY       LOCATION
                                      OPERATION

Vulcan               Geothermal       1986             34 MW          California
Del Ranch            Geothermal       1989             38 MW          California
Elmore               Geothermal       1989             38 MW          California
Leathers             Geothermal       1990             38 MW          California
CE Turbo             Geothermal       2000             10 MW          California
Salton Sea I         Geothermal       1987             10 MW          California
Salton Sea II        Geothermal       1990             20 MW          California
Salton Sea III       Geothermal       1989             49.8 MW        California
Salton Sea IV        Geothermal       1996             39.6 MW        California
Salton Sea V         Geothermal       2000             49 MW          California
Power Resources      Gas              1988             200 MW         Texas
Yuma                 Gas              1994             50 MW          Arizona
Saranac              Gas              1994             240 MW         New York

     The Vulcan Project, Del Ranch Project, Elmore Project, Leathers Project and
CE Turbo Project are referred to as the Partnership  Projects.  The Salton Sea I
Project,  Salton Sea II Project,  Salton Sea III Project,  Salton Sea IV Project
and Salton  Sea V Project  are  referred  to as the  Salton  Sea  Projects.  The
Partnership Projects and the Salton Sea Projects are collectively referred to as
the Imperial  Valley  Projects.  The Power Resources  Project,  Yuma Project and
Saranac Project are collectively referred to as the Gas Projects.

Factors Affecting Results of Operations

     The capacity factor for a particular  project is determined by dividing the
total quantity of electricity sold by the product of the project's  capacity and
the total hours in the year. The capacity  factors for the Vulcan Project,  Hoch
(Del Ranch)  Project,  Elmore  Project,  Leathers  Project and CE Turbo  Project
plants are based on  capacity  amounts  of 34, 38, 38, 38 and 10 net  megawatts,
respectively.  The  capacity  factors for Salton Sea Unit I Project,  Salton Sea
Unit II  Project,  Salton Sea Unit III  Project,  Salton Sea Unit IV Project and
Salton Sea Unit V Project plants are based on capacity  amounts of 10, 20, 49.8,
39.6 and 49 net megawatts,  respectively.  The capacity  factors for the Saranac
<PAGE>
Project,  Power Resources  Project and Yuma Project plants are based on capacity
amounts of 240, 200 and 50 net megawatts,  respectively. Each plant possesses an
operating  margin,  which allows for  production  in excess of the amount listed
above.  Utilization of this operating  margin is based upon a variety of factors
and  can be  expected  to  vary  throughout  the  year  under  normal  operating
conditions. The amount of revenues received by these projects is affected by the
extent to which they are able to operate and generate electricity.  Accordingly,
the  capacity and  capacity  factor  figures  provide  information  on operating
performance that has affected the revenues received by these projects.

Power Purchase Agreements

     Imperial Valley Projects. As a result of legal proceedings with Edison, the
Imperial Valley  Projects  suspended power sales to Edison on March 22, 2001 and
entered into a transaction  agreement to sell  available  power to EPME. On June
20, 2001, the Imperial  Valley Projects  entered into Agreements  Addressing the
Payment and Pricing  Issues with Edison.  As a result of these  agreements,  the
Imperial  Valley  Projects  resumed power sales to Edison on June 22, 2001.  See
discussion in Liquidity and Capital Resources, page 14.

     The operating  Partnership  Projects  (excluding the CE Turbo Project) sell
all  electricity  generated by the  respective  plants under four  long-term SO4
Agreements  between the  Partnership  Projects and Edison.  These SO4 Agreements
provide for capacity  payments,  capacity  bonus  payments and energy  payments.
Edison is  contractually  obligated to make fixed  annual  capacity and capacity
bonus payments to the Partnership  Projects to the extent that capacity  factors
exceed  benchmarks  set forth in the  agreements.  The price  for  capacity  and
capacity  bonus  payments  is fixed for the life of the SO4  Agreements  and the
capacity  payments  are  significantly  higher  in the  months  of June  through
September.  The price for energy sold is based on the cost that Edison avoids by
purchasing energy from the Partnership  Projects instead of obtaining the energy
from other sources.

     The Salton Sea Unit I Project sells  electricity  to Edison under a 30-year
negotiated  power  purchase  agreement,  which  provides for capacity and energy
payments.  The energy payment is calculated using a base price, which is subject
to quarterly  adjustments based on a basket of indices. The time period weighted
average  energy  payment  for Salton Sea Unit I was 5.9 cents per  kilowatt-hour
during  the six  months  ended  June 30,  2001.  As the  Salton Sea Unit I Power
Purchase  Agreement  ("PPA") is not a SO4 Agreement,  the energy payments do not
revert to payments  based on the cost that Edison  avoids by  purchasing  energy
from Salton Sea Unit I instead of obtaining the energy from other sources.

     The  Salton  Sea Unit II  Project  and  Salton  Sea Unit III  Project  sell
electricity  to Edison under 30-year  modified SO4  Agreements  that provide for
capacity  payments,  capacity bonus payments and energy payments.  The price for
contract  capacity and contract capacity bonus payments is fixed for the life of
the modified SO4 Agreements.  The energy payments for each of the first ten year
periods,  which  period  expired in April 2000 for Salton Sea II and  expired in
February  1999 for Salton Sea III,  were  levelized  at a time  period  weighted
average  of 10.6 cents per  kilowatt-hour  and 9.8 cents per  kilowatt-hour  for
Salton  Sea Unit II and  Salton  Sea Unit  III,  respectively.  Thereafter,  the
monthly  energy  payments are based on the cost that Edison avoids by purchasing
energy from Salton Sea Unit II or III instead of obtaining the energy from other
sources. For Salton Sea Unit II only, Edison is entitled to receive, at no cost,
5% of all energy  delivered in excess of 80% of contract  capacity through March
31, 2004.

     The Salton Sea Unit IV Project sells electricity to Edison under a modified
SO4 Agreement which provided for contract  capacity  payments on 34 megawatts of
capacity at two  different  rates based on the  respective  contract  capacities
deemed  attributable to the original Salton Sea Unit I PPA option (20 megawatts)
and to the original Fish Lake PPA (14 megawatts). The capacity payment price for
the 20 megawatt portion adjusts  quarterly based upon specified  indices and the
capacity  payment price for the 14 megawatt  portion is a fixed  levelized rate.
The energy payment (for deliveries up to a rate of 39.6 megawatts) is at a fixed
rate for 55.6% of the total energy  delivered by Salton Sea Unit IV and is based
on an energy payment  schedule for 44.4% of the total energy delivered by Salton
Sea Unit IV. The  contract  has a 30-year  term,  but Edison is not  required to
<PAGE>
purchase the 20 megawatts of capacity and energy originally  attributable to the
Salton Sea Unit I PPA option after September 30, 2017, the original  termination
date of the Salton Sea Unit I PPA.

     For the six months  ended  June 30,  2001 and 2000,  respectively  Edison's
average  avoided cost of energy was 11.6 cents per  kilowatt-hour  and 3.8 cents
per  kilowatt-hour,  respectively.  Estimates of Edison's future avoided cost of
energy vary substantially from year to year.

     The CE Turbo project,  which  commenced  commercial  operation in the third
quarter of 2000,  sells its output  through  market  transactions.  The CE Turbo
project  may sell its  output to a zinc  facility,  which is  wholly  owned by a
subsidiary of MidAmerican and is expected to commence  commercial  operations in
2002.  The  remainder  of the CE  Turbo  output  is sold  through  other  market
transactions.

     The Salton  Sea Unit V Project,  which  commenced  operations  in the third
quarter of 2000, will sell approximately one-third of its net output to the zinc
facility,  which is wholly owned by a subsidiary of MidAmerican  and is expected
to commence  commercial  operations  in 2002.  The remainder of the Salton Sea V
output is sold through other market transactions.

     As a result of the legal  proceedings  with  Edison,  on March 22, 2001 the
Imperial Valley Projects  suspended power sales to Edison. On March 27, 2001 and
May 1, 2001 the Imperial Valley Projects entered into transaction  agreements to
sell  available  power to EPME based on percentages of the Dow Jones On June 20,
2001 the Imperial  Valley  Projects  (excluding  Salton Sea Unit V and CE Turbo)
entered into Agreements  Addressing  Payment and Pricing Issues with Edison and,
as a result,  resumed power sales to Edison on June 22, 2001.  See discussion in
Liquidity and Capital Resources, page 14.

     Gas  Projects.  The Saranac  Project sells  electricity  to NYSEG under the
Saranac PPA, which provides for capacity and energy payments. Capacity payments,
which  for  the  six  months   ended  June  30,  2001  totaled  2.57  cents  per
kilowatt-hour,  are received  for  electricity  produced  during "peak hours" as
defined in the Saranac PPA and escalate at  approximately  4.1% annually for the
remaining term of the contract.  Energy payments,  which averaged 7.49 cents per
kilowatt-hour for the six months ended June 30, 2001,  escalate at approximately
4.4% annually for the remaining term of the Saranac PPA. The Saranac PPA expires
in June of 2009.

     The Power Resources Project sells  electricity to Texas Utilities  Electric
Company under the Power  Resources  PPA,  which provides for capacity and energy
payments.  Capacity payments and energy payments, which for the six months ended
June 30,  2001 were  $3.48  million  per month and 3.5 cents per  kilowatt-hour,
respectively,  escalate at 3.5%  annually  for the  remaining  term of the Power
Resources PPA. The Power Resources PPA expires in September 2003.

     The Yuma  Project  sells  electricity  to San Diego Gas & Electric  Company
("SDG&E")  under the Yuma PPA.  The energy is sold at a price  based on the cost
that  SDG&E  avoids  by  purchasing  energy  from the Yuma  Project  instead  of
obtaining  the energy from other  sources and the capacity is sold to SDG&E at a
fixed price for the life of the Yuma PPA.  The power is  delivered to SDG&E over
transmission lines constructed and owned by Arizona Public Service Company.

Results of Operations

     Sales of  electricity  and steam  increased to $124.0 million for the three
months  ended June 30, 2001 from $110.5  million for the same period in 2000,  a
12% increase.  For the six months ended June 30, 2001,  sales of electricity and
steam  increased to $272.0  million  from $202.4  million for the same period in
2000.  Approximately  $105 million of the increase was a result of higher energy
prices at the Imperial Valley Projects, and the Yuma Project.  Approximately $30
million of the  increase  was due to the  addition of the Salton Sea V and Turbo
projects in the third quarter of 2000. The remaining increase is attributable to
escalated  contract prices at the Power Resources and Saranac Projects and other
<PAGE>
increases in  production.  The increase is partially  offset by an allowance for
doubtful accounts for the Edison receivables of approximately $82 million.

     The  following   operating  data  represents  the  aggregate  capacity  and
electricity production of the Imperial Valley Projects:

                                     Three Months Ended    Six Months Ended
                                           June 30,            June 30,
                                        2001      2000        2001       2000
                                     -------------------  --------------------

Overall capacity factor                88.2%     88.9%       89.8%      77.2%
Megawatt-hours produced              621,800   519,600   1,273,300    902,100
Capacity (net megawatts)
   (weighted average)                  326.4     267.4       326.4      267.4

     The overall  capacity factor for the Imperial Valley Projects was generally
consistent  with the three months ended June 30, 2001 and 2000 and increased for
the six months  ended June 30,  2001  compared to the same period in 2000 due to
the timing of overhauls and other maintenance. The capacity increased due to the
addition of the Salton Sea Unit V and Turbo Projects in 2000.

     The  following   operating  data  represents  the  aggregate  capacity  and
electricity production of the Gas Projects:

                                     Three Months Ended    Six Months Ended
                                           June 30,            June 30,
                                        2001      2000        2001       2000
                                     -------------------  --------------------

Overall capacity factor                88.1%     86.8%       91.6%      88.5%
Megawatt-hours produced              942,286   927,900   1,949,226  1,892,300
Capacity (net megawatts)(average)        490       490         490        490

     The overall  capacity  factor of the Gas  Projects  reflects  the effect of
contractual  curtailments.  The capacity factors adjusted for these  contractual
curtailments  during the six months  ended June 30, 2001 and 2000 were 96.4% and
96.6%, respectively.

     Interest and other income increased to $5.4 million during the three months
ended June 30, 2001 from $2.0 million for the same period in 2000.  Interest and
other income increased to $7.1 million during the six months ended June 30, 2001
from $4.5 million for the same period in 2000.  The  increases are primarily the
result of  recognizing  interest  income in the second  quarter  2001 related to
interest earned on past due balances from Edison.

     Fuel expenses increased to $29.8 million during the three months ended June
30, 2001 from $26.8 million for the same period in 2000. Fuel expense  increased
to $66.5  million  during the six months ended June 30, 2001 from $55.0  million
for the same period in 2000.  The  increases  are primarily the result of higher
gas prices at Yuma and also a result of increased production.

     Plant operating  expenses  increased during the three months ended June 30,
2001 to $32.9  million from $23.1  million for the same period in 2000.  For the
six month  period  ended June 30, 2001  operating  expenses  increased  to $66.7
million from $43.4 million in 2000. These costs include operating,  maintenance,
resource,  administration and other plant operating expenses. The increases were
<PAGE>
primarily due to increased  operating  costs at the Imperial Valley Projects due
to the  addition  of Salton  Sea V and CE Turbo  Projects  and  increased  brine
disposal costs.

     Depreciation and  amortization  increased to $22.9 million during the three
months ended June 30, 2001 from $19.7  million for the same period in 2000.  For
the six months ended June 30, 2001  depreciation and  amortization  increased to
$43.5  million from $39.1  million in 2000.  The increases are the result of the
addition of the Salton Sea V Project,  CE Turbo  Project  and an upgraded  brine
handling system.

     Interest  expense,  less amounts  capitalized,  decreased  during the three
months  ended June 30,  2001 to $20.2  million  from $20.5  million for the same
period in 2000.  For the six months ended June 30, 2001  interest,  less amounts
capitalized  increased to $41.2 million from $40.6 million in 2000.  The changes
reflect  the  discontinuation  of  capitalized   interest  on  the  construction
projects, partially offset by the repayment of debt.

     The provision for income taxes  increased to $5.0 million  during the three
months  ended June 30, 2001 from $2.7  million for the same period in 2000.  For
the six months ended June 30, 2001,  the  provision  for income tax increased to
$17.5  million from $3.1  million in 2000.  The changes from year to year in the
effective rate are due primarily to the generation and utilization of energy tax
credits and depletion deductions.

     The  Company  has  changed  its  accounting  policy for major  maintenance,
overhaul and well workover  costs.  These costs,  which have  historically  been
accounted  for using the  deferred  and  accrued  methods,  are now  expensed as
incurred.  The cumulative effect of the change in accounting policy represents a
January 1, 2001 write off of prepaid  and  accrued  major  maintenance  and well
workover balances of approximately $15.4 million, net of tax.

Liquidity and Capital Resources

     Cash and cash  equivalents  were $77.6 million at June 30, 2001 as compared
to $36.2  million at December 31, 2000. In addition,  restricted  cash was $29.3
million and $24.4 million at June 30, 2001 and December 31, 2000, respectively.

     Edison,  a  wholly-owned  subsidiary of Edison  International,  is a public
utility primarily engaged in the business of supplying electric energy to retail
customers  in  Central  and  Southern  California,  excluding  Los  Angeles.  CE
Generation  is aware that there have been  public  announcements  that  Edison's
financial condition has deteriorated as a result of reduced liquidity.  Edison's
senior  unsecured debt  obligations are currently rated Caa2 by Moody's and D by
S&P.

     Edison  failed  to pay  approximately  $119  million  due  under  the Power
Purchase  Agreements  for power  delivered  in November  and  December  2000 and
January, February and March 2001, although the Power Purchase Agreements provide
for billing and payment on a schedule  where  payments  would have normally been
received in early January, February, March, April and May 2001.

     On February 21, 2001, the Imperial Valley Projects  (excluding Salton Sea V
and CE Turbo) filed a lawsuit  against Edison in  California's  Imperial  County
Superior  Court  seeking a court  order  requiring  Edison to make the  required
payments under the Power Purchase Agreements.  The lawsuit also requested, among
other  things,  that the court  order  permit the  Imperial  Valley  Projects to
suspend deliveries of power to Edison and to permit the Imperial Valley Projects
to sell such power to other purchasers in California.

     On March 22, 2001, the Superior Court granted the Imperial Valley Projects'
Motion for Summary  Adjudication  and a Declaratory  Judgment  ordering that: 1)
under the Power Purchase Agreements, the Imperial Valley Projects have the right
<PAGE>
to  temporarily  suspend  deliveries  of capacity  and energy to Edison,  2) the
Imperial Valley Projects are entitled to resell the energy and capacity to other
purchasers  and 3) the interim  suspension  of deliveries to Edison shall not in
any respect  result in the  modifications  or  termination of the Power Purchase
Agreements and the Power Purchase  Agreements shall in all respects  continue in
full force and effect  other than the  temporary  suspension  of  deliveries  to
Edison.

     As a result of the March 22, 2001 Declaratory Judgment, the Imperial Valley
Projects suspended deliveries of energy to Edison and entered into a transaction
agreement  with El Paso  Merchant  Energy,  L.P.  ("EPME") in which the Imperial
Valley  Projects'  available  power was sold to EPME based on percentages of the
Dow Jones  SP-15  Index.  On June 18, 2001 the  Superior  Court  terminated  the
Imperial  Valley  Projects'  right to resell power  pursuant to the  Declaratory
Judgment.

     On June 20, 2001, the Imperial Valley Projects (excluding Salton Sea Unit V
and CE Turbo) entered into Agreements  Addressing  Renewable  Energy Pricing and
Payment Issues with Edison ("Settlement Agreements").  The Settlement Agreements
require  Edison make a series of payments to repay the past due  balances  under
the Power Purchase Agreements (the "stipulated  amounts").  The first payment of
approximately  $11.6 million,  which represented 10% of the stipulated  amounts,
was received June 22, 2001. A second partial  payment of 10% is payable within 5
days following the MOU Effective  Date. The "MOU Effective Date" means the first
day  on  which  both  of  the  following  have  occurred:  (a)  all  legislation
implementing the Memorandum of  Understanding  between Edison and the California
Department  of  Water  Resources  dated  April 9,  2001  ("MOU")  or such  other
legislation   based  on  the  MOU  or  otherwise,   that   restores   Edison  to
creditworthiness  has become  effective,  and (b) the  Commission has issued all
orders that are necessary to implement the MOU or other mechanisms  contained in
such  legislation  based on the MOU or  otherwise  which are designed to restore
Edison  to  creditworthiness.  The final  payment,  representing  the  remaining
stipulated amounts,  shall be paid on the 5th business day after Edison receives
proceeds from the financing resulting from the MOU or other mechanisms contained
in such  other  legislation  based on the MOU or  otherwise  restore  Edison  to
creditworthiness.  In  addition  to these  payments,  Edison is required to make
monthly  interest  payments  calculated  at a  rate  of  7%  per  annum  on  the
outstanding stipulated amounts. The Settlement Agreements also provide a revised
energy  pricing  structure,  whereby  Edison  elects to pay the Imperial  Valley
Projects  a  fixed  energy  price  of  5.37  cents/kilowatt  hour in lieu of the
Commission-approved  SRAC  Methodology  under  the  Power  Purchase  Agreements,
commencing  on the first  day of the  month  following  the MOU  Effective  Date
expiring five years from such date. All other contract terms remain unchanged.

     As a result  of the  aforementioned  Settlement  Agreements,  the  Imperial
Valley Projects resumed power sales to Edison on June 22, 2001.  Energy payments
are currently calculated using the SRAC formulas set forth in the Power Purchase
Agreements until the fixed rate period begins.

     As a result of Edison's  failure to make the  payments  due under the Power
Purchase  Agreements  and the  downgrades of Edison's  credit  ratings,  Moody's
downgraded  the  ratings for the Salton Sea Funding  Corporation  (the  "Funding
Corporation")  Securities  to Caa2  (negative  outlook) and S&P  downgraded  the
ratings  for the  Funding  Corporation  Securities  to BBB- and has  placed  the
Securities on "credit watch negative". Moody's downgraded the ratings for the CE
Generation Securities to B1 from Baa3 (review for possible downgrade). Following
the  execution  of the  Settlement  Agreements,  Moody's  placed  the Salton Sea
Funding and CE Generation  securities on "credit watch  positive".  A failure by
Edison to make these  payments as well as  subsequent  monthly  payments,  for a
substantial period of time after the payments are due, is not expected to have a
material  adverse effect on the ability of CE Generation to make payments on the
CE Generation bonds due to cash flows from the Gas Projects.  However, there can
be no assurance that such a failure by Edison would not cause a material adverse
effect.

     The Imperial Valley Projects are contractually entitled to receive payments
under  the  Power  Purchase  Agreements.   However,  due  to  the  uncertainties
associated  with Edison's  financial  condition  and failure to pay  contractual
obligations, CE Generation has established an allowance for doubtful accounts of
<PAGE>
approximately  $82 million at June 30, 2001. The allowance for doubtful accounts
has been recorded as a reduction of net sales in the statement of operations.

     The net revenues,  equity  distributions and royalties from the Partnership
and Salton Sea  Projects  are used to pay  principal  and  interest  payments on
outstanding  senior secured bonds issued by the Salton Sea Funding  Corporation,
the final series of which is scheduled  to mature in November  2018.  The Salton
Sea Funding  Corporation debt is guaranteed by subsidiaries of Magma and secured
by the capital stock of the Salton Sea Funding Corporation.  The proceeds of the
Salton Sea  Funding  Corporation  debt were  loaned by the  Salton  Sea  Funding
Corporation  under loan  agreements and notes to  subsidiaries of Magma and used
for  construction  of  Salton  Sea  Unit V  Project  and the CE  Turbo  Project,
refinancing of  indebtedness  and other  purposes.  Debt service on the Imperial
Valley loans is used to repay debt service on the Salton Sea Funding Corporation
debt.  The Imperial  Valley loans and the  guarantees  of the Salton Sea Funding
Corporation  debt  are  secured  by  substantially  all  of  the  assets  of the
guarantors,  including the Imperial Valley projects, and by the equity interests
in the guarantors.

     The  proceeds  of Series F of the Salton Sea Funding  Corporation  debt are
being used in part to construct the zinc  facility,  and the direct and indirect
owners of the zinc  facility are among the  guarantors of the Salton Sea Funding
Corporation debt.  MidAmerican has guaranteed the payment by the zinc guarantors
of a specified  portion of the  scheduled  debt service on the  Imperial  Valley
loans  described in the preceding  paragraph,  including  the current  principal
amount of approximately $140.2 million and associated interest.

     Certain  information  included  in  this  report  contains  forward-looking
statements made pursuant to the Private Securities Litigation Reform Act of 1995
("Reform Act"). Such 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 Reform Act, the
Company has  identified  important  factors that could cause  actual  results to
differ materially from such expectations, including development and construction
uncertainty,  operating  uncertainty,  acquisition  uncertainty,   uncertainties
relating to doing business outside of the United States,  uncertainties relating
to geothermal  resources,  uncertainties  relating to domestic and international
economic and  political  conditions  and  uncertainties  regarding the impact of
regulations,   changes  in  government   policy,   industry   deregulation   and
competition. Reference is made to all of the Company's SEC filings, incorporated
herein by reference,  for a description of such factors.  The Company assumes no
responsibility to update forward-looking information contained herein.

Environmental Liabilities

     The Company may be exposed to environmental costs in the ordinary course of
business.  Expenditures for ongoing  compliance with  environmental  regulations
that relate to current  operations are expensed or  capitalized as  appropriate.
Expenditures that relate to an existing condition caused by past operations, and
which do not contribute to current or future revenue  generation,  are expensed.
Liabilities   are  recorded  when   environmental   assessments   indicate  that
remediation  efforts are  probable  and the costs can be  reasonably  estimated.
Estimates of the liability are based upon currently  available  facts,  existing
technology and presently enacted laws and regulations  taking into consideration
the likely  effects of  inflation  and other social and  economic  factors,  and
include  estimates of associated legal costs.  These amounts also consider prior
experience in remediating sites, other companies'  clean-up  experience and data
released by the Environmental  Protection Agency or other  organizations.  These
estimated  liabilities are subject to revision in future periods based on actual
costs or new circumstances,  and are included in the accompanying balance sheets
at their  undiscounted  amounts.  As of June 30 2001 and December 31, 2000,  the
environmental liabilities recorded on the balance sheet were not material.


<PAGE>
Inflation

     Inflation  has  not  had  a  significant  impact  on CE  Generation's  cost
structure.

Recent Accounting Pronouncements

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement  of  Financial  Accounting  Standard  ("SFAS")  133,  "Accounting  for
Derivative  Instruments and Hedging  Activities",  which was delayed by SFAS 137
and amended by SFAS 138. SFAS 133/138 requires an entity to recognize all of its
derivatives  as either  assets or  liabilities  in its  statement  of  financial
position and measure those  instruments  at fair value.  CE Generation  utilizes
derivative  financial  instruments  soley to  manage  the risk that  changes  in
interest  rates  will  affect the amount of its  future  interest  payments  and
adopted SFAS 133/138  effective  January 1, 2001. As a result of the adoption of
SFAS 133/138,  CE  Generation  recorded the fair value of the interest rate swap
agreements  at  January  1,  2001.  These  interest  rate  swap  agreements  are
considered  cash flow hedges and therefore the offset is recorded in accumulated
other  comprehensive  income.  The  adoption  did not have a material  impact on
results of operations or cash flows.

     The FASB's  Derivatives  Implementation  Group  continues  to identify  and
provide guidance on various  implementation  issues related to SFAS 133/138 that
are  in  the  varying   stages  of  review  and  clearance  by  the   Derivative
Implementation  Group and FASB. CE Generation has not determined if the ultimate
resolution  of those  issues  would  have a  material  impact  on its  financial
statements.

     In June  2001,  FASB  approved  the  issuance  of SFAS  No.  141,  Business
Combinations,  and SFAS No. 142,  Goodwill and Other  Intangible  Assets.  These
standards,  issued in July 2001, establish accounting and reporting for business
combinations.  SFAS No. 141  requires  all  business  combinations  entered into
subsequent  to June 30, 2001 to be accounted  for using the  purchase  method of
accounting. SFAS No. 142 provides that goodwill and other intangible assets with
indefinite lives will not be amortized,  but will be tested for impairment on an
annual basis.  These  standards  are  effective  for CE Generation  beginning on
January 1, 2002. CE Generation has not quantified the impact  resulting from the
adoption of these standards.

Qualitative and Quantitative Disclosures About Market Risk

     There have been no significant  changes in CE Generation's  market risk the
six months ended June 30, 2001.  For  additional  information  see the Company's
Annual Report on Form 10-K for the year ended December 31, 2000.





<PAGE>






                           Part II Other Information.

Item 1 - Legal Proceedings

         Neither CE Generation nor its subsidiaries are parties to any material
legal matters except those described in Footnote 2 of CE Generation's financial
statements.

Item 2 - Changes in Securities

         Not applicable.

Item 3 - Default on 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
                  None.

         (b)      Report on Form 8-K
                  Current report filed June 20, 2001 reporting that the
                  Company's affiliates have executed settlement agreements with
                  Edison.




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SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) 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,  in the City of Omaha,
State of Nebraska, on this 14th day of August, 2001.

                                   CE Generation, LLC

                                   /s/ Joseph M. Lillo
                                   --------------------------------------------
                                   By:      Joseph M. Lillo
                                   Vice President and Controller