FORM 10-K

(Mark One)
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934 For the Fiscal year ended December 31, 2001
                                                     -----------------

                                       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 Number 333-83815
                                               ---------


                          Caithness Coso Funding Corp.
                          ----------------------------
             (Exact name of registrant as specified in its charter)

                Delaware                                       94-3328762
                --------                                       ----------
    (State or other jurisdiction of                          (IRS Employer
     incorporation or organization)                         Identification No.)

   Coso Finance Partners               California              68-0133679
   Coso Energy Developers              California              94-3071296
   Coso Power Developers               California              94-3102796
   ---------------------               ----------              ----------
(Exact names of Registrants as  (State or other jurisdiction  (IRS Employer
specified in their characters)      of incorporation)        Identification No.)

           565 Fifth Avenue, 29th Floor, New York, New York      10017-2478
           ------------------------------------------------      ----------
               (Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code      (212) 921-9099
                                                        --------------

Securities registered pursuant to Section 12(g) of the Act:

                  6.80% Series B Senior Secured Notes Due 2001
                  --------------------------------------------
                                (Title of class)

                  9.05% Series B Senior Secured Notes Due 2009
                  --------------------------------------------
                                (Title of class)

     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. [ x ] Yes [ ] No

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation  S-K (229.405 of this chapter) is not  contained  herein,  and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ___ ]

The Registrant's Common Stock is not traded in a public market.

         Aggregate market value of the voting stock held by non-affiliates
         of the registrant:
                                 Not applicable.

                       Documents Incorporated by Reference
<PAGE>




                          CAITHNESS COSO FUNDING CORP.
                           ANNUAL REPORT ON FORM 10-K
                  FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000

                                  Part I                                   Page
                                                                           ----

Item 1.           Business                                                   1

Item 2.           Properties                                                 7

Item 3.           Legal Proceedings                                          9

Item 4.           Submission of Matters to a Vote of Security Holders        9


                                     Part II

Item 5.           Market for the Registrant's Common Equity and
                     Related Stockholder Matters (Not applicable)            9

Item 6.           Selected Financial Data                                    9

Item 7.           Management's Discussion and Analysis of Financial
                     Condition and Results of Operations                     12

Item 7A.          Quantitative and Qualitative Disclosures About
                     Market Risk                                             23

Item 8.           Financial Statements and Supplementary Data                24

Item 9.           Changes in and Disagreements with Accountants on
                     Accounting and Financial Disclosure                     25


                                    Part III


Item 10.          Directors and Executive Officers of the Registrants        25

Item 11.          Executive Compensation                                     27

Item 12.          Security Ownership of Certain Beneficial Owners and
                     Management (Not applicable)                             27

Item 13.          Certain Relationships and Related Transactions             29


                                     Part IV


Item 14.          Exhibits, Financial Statement Schedules and Reports
                     on Form 8-K                                             32







<PAGE>


                                     Part I
Item 1. Business.


The Coso Projects

     The Coso projects  consist of three 80 MW geothermal  power plants,  called
Navy I, BLM and Navy II, certain transmission lines, wells, gathering system and
other related facilities.  The Coso projects are located near one another in the
Mojave Desert approximately 150 miles northeast of Los Angeles,  California, and
have been generating  electricity since the late 1980s. Unlike fossil fuel-fired
power plants, the Coso projects' power plants use geothermal energy derived from
the natural heat of the earth's interior to generate electricity.

     Coso Finance Partners (The Navy I partnership)  owns Navy I and its related
facilities,  Coso  Energy  Developers  (the  BLM  partnership)  owns BLM and its
related facilities and Coso Power Developers (the Navy II partnership) owns Navy
II and its related facilities  (collectively,  the Coso partnerships).  The Coso
partnerships  and their  affiliates own the exclusive right to explore,  develop
and  use,  currently  without  any  known  interference  from  any  other  power
developers, a portion of the Coso Known Geothermal Resource Area.

     The  geothermal  power  plants,  each of which has three  separate  turbine
generator units, have consistently operated above their nominal capacities,  and
the combined  average  capacity factor for the plants has exceeded 100% for each
of the last seven years.

     The Coso  partnerships  sell 100% of the electrical energy generated at the
plants to Southern  California  Edison (Edison) under three  long-term  Standard
Offer No. 4 power purchase  agreements.  Each power purchase  agreement  expires
after the last maturity date of the senior secured notes.  (Edison is one of the
largest investor-owned electric utilities in the United States.) Under the power
purchase agreements, the Coso partnerships receive the following payments:

      *  Capacity payments for being able to produce electricity at certain
         levels. Capacity payments are fixed throughout the lives of the power
         purchase agreements;

      *  Capacity bonus payments if they are able to produce electricity
         above a specified, higher level. The maximum capacity bonus payment
         available is also fixed throughout the lives of the power purchase
         agreements; and

      * Energy payments based on the amount of electricity their respective
        plants actually produce.

     Energy  payments were fixed for the first ten years of firm operation under
the  power  purchase  agreements.  Firm  operation  was  achieved  for each Coso
partnership  when  Edison  and that Coso  partnership  under its power  purchase
agreement  agreed that each  generating unit at a plant was a reliable source of
generation  and could  reasonably  be  expected to operate  continuously  at its
effective  rating.  After the first  ten years of firm  operation  and until its
power purchase agreement expires,  Edison is required to make energy payments to
the Coso partnership based on its avoided cost of energy.  Edison's avoided cost
of energy is Edison's cost to generate  electricity if Edison were to produce it
itself  or buy it from  another  power  producer  rather  than  buy it from  the
relevant Coso partnership.  Future energy payments required to be paid by Edison
to the Coso  partnerships  will  most  likely  be less  than  historical  energy
payments  because  they will be paid based on Edison's  avoided  cost of energy,
instead of the fixed payments paid during the first ten years.  The fixed energy
price period  expired in August 1997 for the Navy I  partnership,  in March 1999
for the BLM  partnership,  and in January 2000 for the Navy II partnership.  The
Edison  power  purchase  agreements  will  expire in August  2011 for the Navy I
partnership; in March 2019 for the BLM partnership;  and in January 2010 for the
Navy II partnership.

                                       1

     Edison  entered  into  an  agreement  (the   "Agreement")   with  the  Coso
partnerships on June 19, 2001 that addressed renewable energy pricing and issues
concerning  California's  energy  crisis.  The  Agreement  which was  amended on
November  30,  2001,  established  May  1,  2002  as  the  date  when  the  Coso
partnerships  will begin  receiving a fixed  avoided cost of energy rate of 5.37
cents per kWh for five (5) years.  Subsequent  to the five year  period,  Edison
will be required to make energy payments to the Coso  partnerships  based on its
avoided  cost of  energy  until  each  partnership's  power  purchase  agreement
expires.


AB1890 Energy Subsidy Payments

     In addition to receiving payments under the power purchase agreements,  the
Coso partnerships qualify for subsidy payments from a special purpose state fund
established under California  Legislature AB1890 (AB1890). The California Energy
Commission  administers the fund.  AB1890,  as amended,  provides,  in part, for
subsidy  payments  from 1998 through 2001 to power  generators  using  renewable
sources of energy,  including geothermal energy, and who are being paid based on
the  avoided  cost of  energy.  The  funds  were  distributed  in the  form of a
production  incentive  payment that subsidizes  renewable  energy producers when
prices  paid for their  electricity  are  below  certain  pre-determined  target
prices.  Under AB1890, the Navy I partnership,  the BLM partnership and the Navy
II partnership  received  subsidy payments for energy delivered to Edison by the
respective Coso partnership,  if Edison's avoided cost of energy falls below 3.0
cents per kWh. This subsidy payment is capped at 1.0 cent per kWh.


Purchase of CalEnergy Interests

     On February 25, 1999,  Caithness  Acquisition  Company, LLC (CAC), a wholly
owned subsidiary of Caithness Energy,  LLC,  (Caithness Energy) purchased all of
the  interests in the Coso  projects  that were owned by CalEnergy  Company Inc.
(CalEnergy),  which is now known as MidAmerican  Energy  Holdings  Company.  The
purchase  price  consisted  of $205.0  million  in cash,  plus $5.0  million  in
contingent  payments,  plus the  assumption of CalEnergy's  and its  affiliates'
share of debt outstanding on the Coso projects which then totaled  approximately
$67.0  million.  In order to complete the purchase,  CAC arranged for short-term
debt financing in the principal amount of approximately $211.5 million. CAC used
a portion of the proceeds  from the Series A note offering that it received from
the Coso partnerships,  together with funds from other sources,  to repay all of
this short-term borrowing.


Operating Strategy

     The Coso partnerships seek to maximize their cash flow at the Coso projects
through active  management of their cost structure and the geothermal  resource.
After CAC'S purchase of all of CalEnergy's  interests in the Coso projects,  the
Coso partnerships retained Coso Operating Company,  (COC) which is an affiliate,
to  maintain  all  three  plants,  the  transmission  lines  and the  geothermal
resource,  including well  drilling.  As a result of the change in operators and
restructuring  of  operator  fees,  the  aggregate  annual fees paid by the Coso
partnerships  to COC  for  such  maintenance  has  been  reduced  significantly.
Payments of operator fees are subordinated to all payments made under the senior
secured notes.  CAC, which purchased the managing  partners interest in the Coso
partnerships, has caused any management fees payable by each Coso partnership to
its partners are  subordinated  to all  payments  made under the senior  secured
notes.

     The Coso projects qualify as Small Power  Qualifying  Facilities (QF) under
the Public Utility Regulatory Policies Act (PURPA) and the rules and regulations
promulgated  under PURPA by the Federal  Energy  Regulatory  Commission  (FERC).
PURPA exempts the Coso projects from certain federal and state regulations.  The
Coso projects must continue to satisfy certain ownership and fuel-use  standards
to maintain  their QF status.  Since their  inception,  the Coso  projects  have
satisfied  these  standards  and expect that they will  continue to do so in the
future.

                                       2

The Sponsor

     Caithness  Energy,   the  principal   operating   subsidiary  of  Caithness
Corporation,  is a developer and owner of independent  power projects and is the
sponsor of the Coso  projects.  Since  1966,  the  current  owners of  Caithness
Corporation  have been  involved  in the  development  of  long-term  investment
opportunities  involving natural resources.  Caithness Corporation is one of the
two original  sponsors of the Coso projects and formed  Caithness Energy in 1995
to consolidate its ownership of independent power projects.

     Caithness  Energy believes that it is currently the second largest owner of
geothermal  power projects in the United States,  based on the total  electrical
generating  capacity of its power projects.  Through its controlled  affiliates,
Caithness Energy owns interests in seven geothermal  plants,  including the Coso
projects,  totaling  414 MW of  generating  capacity.  Caithness  Energy is also
seeking to develop additional  natural gas power projects,  and has interests in
other operating power generating  facilities,  including solar, wind and natural
gas, totaling an additional 696 MW of generating capacity.

     Caithness  Energy  is  headquartered  in New York  City and has  additional
offices in California, Nevada, Colorado and Florida.


The Issuer

     Caithness  Coso  Funding  Corp.   (Funding  Corp.)  is  a  special  purpose
corporation  and a wholly  owned  subsidiary  of the Coso  partnerships.  It was
formed for the purpose of issuing the senior secured notes on behalf of the Coso
partnerships  who  have  jointly,   severally,  and  unconditionally  guaranteed
repayment of the senior secured notes.

     Funding Corp. has no material assets, other than the loans made to the Coso
partnerships,  and does not conduct any business,  other than issuing the senior
secured notes and making the loans to the Coso partnerships.


The Coso Known Geothermal Resource Area

     The Coso  projects  are  located in an area that has been  designated  as a
Known Geothermal Resources Area by the Bureau of Land Management pursuant to the
Geothermal  Steam Act of 1970. The Bureau of Land Management  designates an area
as a Known  Geothermal  Resource  Area when it  determines  that a  commercially
viable  geothermal  resource is likely to exist there.  There are over 100 Known
Geothermal Resource Areas in the United States, most of which are located in the
western United States in tectonically active regions.

     The  Coso  Known  Geothermal  Resource  Area is  located  in  Inyo  County,
California,   approximately  150  miles  northeast  of  Los  Angeles.  The  Coso
geothermal  resource is a  "liquid-dominated"  hot water source contained within
the heterogeneous  fractured granite rocks of the Coso Mountains. It is believed
the heat source for the Coso geothermal resource is a hot molten rock or "magma"
body located at a depth of six-to-seven  miles beneath the surface of the field.
Geochemical  studies indicate that the water in the Coso geothermal  resource is
ancient water that has been there since the ice age or longer.

                                       3

Steam Sharing Program

     In 1994, the Coso partnerships entered into a Geothermal Exchange Agreement
which implemented a steam-sharing  program among the Coso projects.  The purpose
of the  steam-sharing  program is to enhance the  management  and  optimize  the
overall  use of the Coso  geothermal  resource.  Pursuant  to the steam  sharing
program,  the Coso  partnerships  constructed an inter-project  steam supply and
water injection system that links the three Coso projects and BLM North together
via metered  transfer lines through which the Coso  partnerships  exchange steam
and other geothermal resources with one another.

     As part  of the  steam  sharing  program,  the  Coso  partnerships  plan to
conserve the  geothermal  resource  whenever  possible  by, among other  things,
transferring  steam  between and among the Coso  projects and BLM North,  rather
than drilling new wells at the Coso projects' sites prematurely, and expanding a
flexible  field-wide  water  reinjection  program.  While the U.S.  Navy and the
Bureau of Land Management have consented to the steam sharing program,  each has
reserved  the right,  in its sole  discretion,  to withdraw  its consent to such
transfers under certain circumstances.

     In  2001,  the Navy I  partnership  and the  Navy II  partnership  incurred
aggregate  royalties  to the U.S Navy of  approximately  $2.5  million for steam
transferred  by Navy I to Navy II and by Navy II to BLM under the steam  sharing
program  from  geothermal  resources  located on the property on which Navy I or
Navy II, as the case may be, are situated.  Of this amount,  the Navy I and Navy
II partnerships each incurred  approximately  $1.3 million.  The BLM partnership
reimbursed the Navy II partnership  approximately  $0.2 million of the royalties
incurred by the Navy II partnership. The BLM partnership incurs a royalty to the
U.S. Navy for electricity  generated by BLM for steam transferred from U.S. Navy
property and sold to Edison.


Royalty and Revenue-Sharing Arrangements

     The Coso  partnerships  are required to make  royalty  payments to, and are
subject to other revenue-sharing arrangements with, the U.S. Navy, the Bureau of
Land Management and certain other persons.


Navy I

     Under the U.S. Navy contract, as a royalty for Unit 1 at Navy I, the Navy I
partnership  is obligated to partially  reimburse the U.S. Navy for  electricity
supplied to it by Edison from  electricity  generated  at the Navy I plant.  The
reimbursement  payment is based on a pricing  formula  included in the U.S. Navy
contract. The percentage rate of reimbursement changes semiannually,  but cannot
exceed 95% of the price paid by the U.S. Navy to Edison,  in  accordance  with a
weighted  index based on the Consumer  Price Index and price indices for the oil
industry,  the  electric  power plant  industry and the  construction  industry.
Discussions  with the U.S.  Navy are  continuing  to  re-adjust  the  formula to
reflect  recent  activity  in the local  energy  market.  In  November  2001,  a
modification to the calculation of the reimbursement pricing formula was made to
the U.S.  Navy  Contract  resulting in a reduction of accrued  royalties of $6.5
million.

     In addition,  with respect to Unit 1 at Navy I, the Navy I  partnership  is
obligated to pay the U.S.  Navy the sum of $25.0  million on or before  December
31, 2009, the expiration date of the term of the U.S. Navy contract.  Payment of
this obligation will be made from an established  sinking fund to which the Navy
I partnership has been making payments since 1987.

     For Units 2 and 3 at Navy I, the Navy I partnership's  royalty expense is a
fixed  percentage of its  electricity  sales to Edison.  The royalty  expense is
15.0% of  revenues  received  by the Navy I  partnership  through  2003 and will
increase to 20.0% of revenues  received from 2004 through 2009,  the  expiration
date of the U.S. Navy contract.

                                       4


BLM

     The BLM partnership  pays royalties to the Bureau of Land Management  under
the BLM lease. The royalty rate is 10% of the net value of the steam produced by
the BLM  partnership.  This royalty rate is fixed for the life of the BLM Lease.
In addition to this royalty,  the BLM  partnership  is obligated,  in connection
with the assignment of the BLM lease to the BLM partnership, to pay a royalty of
5% based on the value of the steam  produced  to Coso  Land  Company,  a general
partnership  of which CAC and  another  affiliate  of  Caithness  Energy are the
general  partners.  The  royalty is  subordinated  to the payment of all the BLM
partnership's  other royalties,  all debt service and all operating costs of the
BLM partnership. No portion of the royalty accrued to Coso Land Company has been
paid to date.


BLM North

     In  December  of 2000,  the  Bureau of Land  Management  allowed  Coso Land
Company to assign each of the Coso partnerships an undivided  one-third interest
in leases they had  previously  bought from the Los Angeles  Department of Water
and Power (LADWP).  The assignment  required each Coso  partnership to pay $8.00
per acre in additional  rent to the Bureau of Land  Management.  When the leased
property  commences to produce  geothermal steam, the Coso partnerships will pay
monthly  royalties under the LADWP leases of 10% of the value of steam produced,
5% of  the  value  of any  by-products,  and 5% of  the  value  of  commercially
demineralized  water.  The  Bureau  of Land  Management  may  establish  minimum
production  levels and reduce the foregoing  royalties if necessary to encourage
greater recovery of leased resources.


Navy II

     The Navy II  partnership  pays royalties to the U.S Navy under the U.S Navy
contract. The Navy II partnership's royalty expense is a fixed percentage of its
electricity sales to Edison.  The royalty rate was 10.0% of electricity sales to
Edison through 1999,  increased to 18.0% for 2000 through 2004 and will increase
to 20.0% from 2005 through the end of the Navy contract.


Operations and Maintenance

     The operations and  maintenance  services for the Coso projects,  including
the Navy I, BLM, and Navy II transmission  lines,  wells,  gathering system, and
other  related  facilities,   are  performed  by  COC  on  behalf  of  the  Coso
partnerships  pursuant to the Operation  and  Maintenance  agreements.  COC is a
wholly  owned  subsidiary  of CAC that was  initially  formed  by  CalEnergy  to
facilitate  the  transfer  of  operational  control  of the Coso  projects  to a
Caithness Energy affiliate.

     On  February  26,  1999  CalEnergy  ceased to be the  operator  of the Coso
projects, and FPL Energy Operating Services,  Inc. (FPLEOSI), an indirect wholly
owned subsidiary of FPL Energy, Inc., assumed that role. An amended and restated
operation and maintenance  agreement  between  FPLEOSI and the managing  general
partners  was  implemented.  Under  that  agreement,  FPLEOSI  became  the plant
operator  and under a separate  operations  and  maintenance  agreement  COC was
responsible for maintenance of the geothermal resource.  On October 17, 1999 the
operating  agreement  between  FPLEOSI and the  managing  general  partners  was
terminated  and COC  became  the sole  operator  of the plant and  continued  to
maintain the geothermal field.

                                       5

Insurance

     The Coso  partnerships  currently  have  property,  business  interruption,
catastrophe  and general  liability  insurance  for the Coso  projects.  For the
period  February  25,  2001 to February  24, 2002 the plants were  insured up to
their  replacement  cost for general  property damage and over $166.0 million in
the aggregate for business  interruption,  subject to a $50,000  deductible  for
property damage (and a $250,000 deductible for the turbine generator sets), with
a 30-day deductible for business  interruption  (including machinery breakdown).
Catastrophic  insurance  (including  earthquake  and flood) was capped at $200.0
million for property damage,  subject to a minimum deductible of $2.5 million or
5.0% of the  loss.  The  deductible  for  flood  is  $50,000  for any one  loss.
Liability insurance coverage was $51.0 million  (occurrence  based).  Operators'
extra expense (control of well) insurance is $10.0 million per occurrence with a
$150,000 deductible.

     During  the  latter  half of  2001,  conditions  in the  insurance  markets
deteriorated due to increased  claims and events  surrounding the September 11th
terrorist  attacks.  As a result of the difficult market,  the Coso partnerships
renewed  their  coverage for the period  February 25, 2002 to February 25, 2003.
Liability  and  property  coverage  remains  the same  with the  exception  that
catastrophic  occurrences  are now capped at $160.0 million and the  deductibles
under the property program have been increased as follows:

             Business Interruption                   60 Days
             Property Damage                         $250,000
             Turbine Generator Sets                  $500,000
             Earthquake                              5% of Property Value


Employees

     Employees necessary for the operation of the Coso partnerships are provided
by COC,  under  their  respective  operation  and  maintenance  agreements.  COC
maintains  a qualified  technical  staff  covering a broad range of  disciplines
including geology,  geophysics,  geochemistry,  drilling  technology,  reservoir
engineering, plant engineering,  construction management,  maintenance services,
production management, electric power operation and certain accounting services.
As of December 31, 2001, COC employed 92 people to operate and maintain the Coso
projects.


Competition

     The Coso partnerships sell all electrical energy generated at the plants to
Edison under three long-term Standard Offer No. 4 power purchase agreements. The
payments under these agreements have constituted 100% of the operating  revenues
of each power plant since its inception.


Environmental and Regulatory Matters

     The Coso partnerships are subject to environmental  laws and regulations at
the  federal,  state  and  local  levels  in  connection  with the  development,
ownership  and  operation of the Coso  projects.  These  environmental  laws and
regulations  generally  require that a wide variety of permits and  governmental
approvals be obtained to construct and operate an energy-producing facility. The
facility  must then operate in  compliance  with the terms of these  permits and
approvals.  If the  Coso  partnerships  fail  to  operate  their  facilities  in
compliance with applicable laws,  permits and approvals,  governmental  agencies
could levy fines, curtail operations, or seek orders to cease operations.

     The Coso  partnerships  believe  they  are in  compliance  in all  material
respects with all environmental  regulatory  requirements applicable to the Coso
projects, and that maintaining compliance with current governmental requirements
will not  require a material  increase  in capital  expenditures  or  materially
adversely  affect  that Coso  partnership's  financial  condition  or results of
operations.  It is possible,  however,  that future  developments,  such as more
stringent   requirements  of   environmental   laws  and  enforcement   policies
thereunder,  could affect  capital and other costs at the Coso  projects and the
manner in which the Coso partnerships conduct their business.

                                       6

<TABLE>


Financial Information
   (in thousands)

                                                            Years Ended December 31,
                                                            ------------------------

Navy I Partnership                                1999(c)          2000(c)             2001(c)
                                                  -------          -------             -------
<S>                                               <C>               <C>                 <C>
Total Operating Revenue(g)(h)                 $   55,666         $  52,419           $  53,400
Operating Income                                  23,537            23,295              24,218
Total Assets                                     218,192           198,409             193,114


                                                            Years Ended December 31,
                                                            ------------------------

BLM Partnership                                   1999(c)          2000(c)             2001(c)
                                                  -------          ------              -------

Total Operating Revenue(g)(h)                 $   49,877         $  42,174           $  44,041
Operating Income                                  11,343            10,760              12,645
Total Assets                                     216,391           201,312             183,978


                                                            Years Ended December 31,
                                                            ------------------------

Navy II Partnership                               1999(c)          2000(c)             2001(c)
                                                  -------          ------              ------

Total Operating Revenue(g)(h)                 $  113,746          $ 43,054             $36,389
Operating Income                                  70,169             8,471               1,981
Total Assets                                     273,269           195,693             170,058


                                  (c) See Footnotes to Summary Selected Historical Financial and Operating Data
</TABLE>


Item 2.  Properties


Plants

Navy I

     Navy I and its steam  resource  are  located  on the  United  States  Naval
Weapons Center at China Lake. In December of 2000,  Navy I acquired an undivided
one-third  interest in leases previously  purchased from LADWP located on Bureau
of Land Management property.  It commenced operations in 1987.  Geothermal steam
for Navy I is produced  using over 45  production  and  injection  wells located
within a radius of approximately  3,000 feet of Navy I. Navy I consists of three
separate turbine generators,  known as Units 1, 2 and 3, each with approximately
30 MW of electrical  generating  capacity.  Navy I's steam  gathering and piping
systems are  cross-connected  to Navy II via metered transfers to allow steam to
be  transferred  from wells  located on the real  property  covered by the LADWP
leases to Navy I and between Navy I and Navy II,  pursuant to the steam  sharing
program.  Unit 1 commenced  firm  operation in 1987, and Units 2 and 3 commenced
firm operation during 1988. Navy I has an aggregate gross electrical  generating
capacity of approximately 90 MW, and operated at an average  operating  capacity
factor of 108.3%  in 2001,  111.8% in 2000 and 95.4% in 1999,  based on a stated
capacity of 80 MW.

                                       7

BLM

     BLM and its  steam  resource  are  located  on  Bureau  of Land  Management
property,  within the  boundaries of the United  States Naval Weapons  Center at
China Lake. In December of 2000, BLM acquired an undivided one-third interest in
leases previously  purchased from LADWP which are also located on Bureau of Land
Management  property.  It  commenced  operations  in 1989.  BLM is  comprised of
turbine  generators located at two different power blocks: the BLM East site and
the BLM West site. The BLM East site is located  approximately 1.3 miles east of
the BLM West site. Geothermal steam for BLM is produced using over 41 production
and injection  wells located  within a radius of  approximately  4,000 feet from
either the BLM East or the BLM West site. BLM consists of three separate turbine
generators, known as Units 7, 8 and 9. Units 7 and 8 are located at the BLM East
site, each with a generating  capacity of  approximately  30 MW, while Unit 9 is
located at the BLM West site, with a generating capacity of approximately 30 MW.
All three units commenced firm operation  during 1989. BLM's steam gathering and
piping  systems are cross  connected  to Navy II via metered  transfers to allow
steam to be  transferred  between Navy II and BLM pursuant to the steam  sharing
program.   BLM  has  an  aggregate  gross  electrical   generating  capacity  of
approximately  90 MW, and operated at an average  operating  capacity  factor of
102.8% in 2001, 109.4% in 2000 and 105.0% in 1999, based on a stated capacity of
80 MW.


Navy II

     Navy II and its steam  resource  are  located  on the United  States  Naval
Weapons Center at China Lake. In December of 2000, Navy II acquired an undivided
one-third  interest in leases previously  purchased from LADWP which are located
on  Bureau  of Land  Management  property.  It  commenced  operations  in  1989.
Geothermal  steam for Navy II is produced using over 36 production and injection
wells located  within a radius of  approximately  6,000 feet of Navy II. Navy II
consists of three separate turbine  generators,  known as Units 4, 5 and 6, each
with approximately 30 MW of electrical  generating  capacity.  All three Navy II
units  commenced  firm  operation in 1990.  Navy II's steam  supply  systems are
cross-connected  to Navy I and BLM steam supply systems via metered transfers to
allow steam to be transferred  between or among the plants pursuant to the steam
sharing  program.  Navy  II  has  an  aggregate  gross  electrical  capacity  of
approximately  90 MW, and operated at an average  operating  capacity  factor of
104.9% in 2001, 111.1% in 2000 and 112.0% in 1999, based on a stated capacity of
80 MW.


Transmission Lines

     The  electricity  generated  by Navy I is  conveyed  over an  approximately
28.8-mile 115 kilovolt ("kV")  transmission  line on the U.S. Navy and Bureau of
Land  Management  land that is connected to the Edison  substation  at Inyokern,
California.  The Navy I partnership owns and uses this transmission line and its
related  facilities.  The  electricity  generated by BLM and Navy II is conveyed
over an approximately 28.8-mile 230 kV transmission line on U.S. Navy and Bureau
of Land  Management  land that is also  connected  to the Edison  substation  at
Inyokern,  California.  Coso  Transmission  Line  Partners  owns the BLM/Navy II
transmission line and related facilities.

                                       8

Item 3. Legal Proceedings.


Settlement of Litigation


     The Coso  partnerships are currently parties to various items of litigation
relating to day-to-day operations, none of which, if determined adversely, would
be material to the  financial  condition  and results of  operations of the Coso
partnerships, either individually or taken as a whole.


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

      None


                                     Part II


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

      Not applicable.


Item 6. Selected Financial Data.

     The selected  fiscal year end  historical  financial  data has been derived
from the audited financial statements of the Coso partnerships.  The information
contained in the following tables should be read in conjunction with the audited
financial statements and notes thereto included elsewhere in this report.


<TABLE>
<CAPTION>

                                                                   Navy I Partnership
                                                                    (Stand-alone)(a)
                                                           (In thousands, except ratio data)


                                                                                Year Ended December 31,
                                                                                -----------------------

                                                                   1997          1998        1999(c)       2000 (c)     2001 (c)
                                                                   ----          ----        ----          -----        -----
<S>                                                             <C>           <C>          <C>          <C>           <C>
Statement of Operations Data:
      Operating revenues(b)(g)(h)...................            $ 100,431     $  53,153    $ 55,666     $  52,419     $ 53,400
      Operating expenses............................              (33,992)      (31,894)    (32,129)      (29,124)     (29,182)
                                                                ----------    ----------   ---------    ----------    ---------
      Operating income..............................               66,439        21,259      23,537        23,295       24,218

Non-Operating income and (expense):
      Interest expense..............................               (6,260)       (4,210)    (11,573)      (12,493)     (11,732)
      Other expenses................................                  --         (1,046)     (4,377)         (520)        (705)
      Interest and other income, net................                1,980           585       2,234         2,506        2,928
                                                                ----------    ----------   ---------    ----------    ---------

       Net income...................................            $  62,159      $ 16,588    $  9,821     $  12,788    $  14,709
                                                                ==========    ==========   =========    ==========    =========

Operating Data:
      Operating capacity factor (d)(e)..............               103.2%         94.6%       95.4%        111.8%       108.3%
      kWh produced..................................              723,116       662,560     668,388       785,624      758,890



                                     See Footnotes to Summary Selected Historical Financial and Operating Data

</TABLE>

                                       9

<TABLE>
<CAPTION>

                                                                   BLM Partnership
                                                                    (Stand-alone)
                                                           (In thousands, except ratio data)


                                                                                Year Ended December 31,
                                                                                -----------------------

                                                                   1997          1998        1999(c)       2000(c)      2001(c)
                                                                   ----          ----        ----          -----        -----
<S>                                                             <C>            <C>         <C>          <C>            <C>
      Operating revenues (b)(g)(h)..................            $ 102,868     $ 107,199    $ 49,877     $  42,174     $ 44,041
      Operating expenses............................              (43,193)      (44,687)    (38,534)      (31,414)     (31,396)
                                                                ---------     ---------    --------     ---------     --------
      Operating income..............................               59,675        62,512      11,343        10,760       12,645

Non-Operating income and (expense):
      Interest expense .............................               (9,105)       (6,107)     (8,725)       (9,174)      (8,958)
      Other expenses................................                  --         (1,113)     (3,332)         (318)        (440)
      Interest and other income, net................                1,712         1,181       1,066         8,125        3,766
                                                                ---------     ---------    --------     ---------     --------

      Net income....................................            $  52,282     $  56,473    $    352     $   9,393     $  7,013
                                                                =========     =========    ========     =========     ========

Operating Data:
    Operating capacity factor (d)(e)................                99.6%        104.4%      105.0%        109.4%       102.8%
    kWh produced....................................              697,794       731,767     735,840       769,098      720,130


                               See Footnotes to Summary Selected Historical Financial and Operating Data

</TABLE>

<TABLE>
<CAPTION>



                                                                   Navy II Partnership
                                                                    (Stand-alone)
                                                           (In thousands, except ratio data)


                                                                                Year Ended December 31,
                                                                                -----------------------

                                                                   1997          1998        1999 (c)      2000 (c)     2001 (c)
                                                                   ----          ----        -------       -------      -------
<S>                                                             <C>           <C>         <C>           <C>           <C>
Statement of Operations Data:
      Operating revenues (b)(g)(h)..................            $ 112,796     $ 119,564   $ 113,746     $  43,054     $ 36,389
      Operating expenses............................              (37,749)      (41,120)    (43,577)      (34,583)     (34,408)
                                                                ---------     ---------    --------     ---------     --------
      Operating income..............................               75,047        78,444      70,169         8,471        1,981

Non-Operating income and (expense):
      Interest expense..............................              (10,532)       (7,918)    (11,947)       (9,130)      (8,128)
      Other expenses................................                  --         (1,868)     (4,191)         (769)      (1,119)
      Interest and other income, net................                2,187         1,799       2,174         2,868        2,883
                                                                ---------     ---------    --------     ---------     --------

      Net income (loss).............................            $  66,702     $  70,457    $ 56,205     $   1,440     $ (4,383)
                                                                =========     =========    ========     =========     ========

Operating Data:
      Operating capacity factor (d)(e)..............               108.9%        108.6%      112.0%        111.1%       104.9%
      kWh produced..................................              762,821       760,659     785,772       780,709      735,210


                               See Footnotes to Summary Selected Historical Financial and Operating Data
</TABLE>

                                       10

<PAGE>


<TABLE>
<CAPTION>


                                                                                       As of December 31,
                                                                                       ------------------


                                                                   1997          1998        1999            2000       2001
                                                                   ----          ----        ----            ----       ----
Balance Sheet Data (in thousands):
----------------------------------
<S>                                                             <C>           <C>          <C>          <C>            <C>
Navy I Partnership (stand-alone)(a)
     Cash...........................................            $   2,888     $     --    $   7,821     $   3,506     $    264
     Restricted cash and investments................                6,479         7,524      25,001        22,996       21,325
     Property, plant and equipment, net.............              186,399       180,189     153,879       149,076      140,437
     Power purchase agreement, net..................                  --            --       13,388        12,240       11,093
     Total assets...................................              209,390       202,266     218,192       198,409      193,114
     Project loans:
       Existing project debt, payable to
          Coso Funding Corp.........................               45,666        40,566         --            --           --
     Project notes (f)..............................                  --            --      151,550       134,984      122,550
     Partners' capital..............................              155,568       149,933      49,362        46,871       52,425

BLM Partnership (stand-alone)
     Cash...........................................            $     873     $     --    $   6,423     $   5,862     $    --
     Restricted cash and investments................                  290           290       9,806        14,502        7,368
     Property, plant and equipment, net.............              198,296       202,270     165,650       153,618      148,417
     Power purchase agreement, net..................                  --            --       20,549        19,510       18,437
     Total assets...................................              225,172       228,381     216,391       201,312      183,978
     Project loans:
       Existing project debt, payable to
          Coso Funding Corp.........................               76,654        37,958         --            --           --
     Project notes (f)..............................                  --            --      107,900       100,907       96,250
     Partners' capital..............................              124,113       163,191      79,350        69,245       52,762


Navy II Partnership (stand-alone)
     Cash...........................................            $   1,148     $     818   $   6,020     $   7,741     $    --
     Restricted cash and investments................                  --            --       54,338        10,214        5,517
     Property, plant and equipment, net.............              199,134       188,840     147,522       136,947      124,665
     Power purchase agreement, net..................                  --            --       28,409        25,614       22,820
     Total assets...................................              228,653       220,867     273,269       195,693      170,058
     Project loans:
       Existing project debt, payable to
          Coso Funding Corp.........................               97,267        61,323         --            --           --
     Project notes (f)..............................                  --            --      153,550        94,176       84,200
     Partners' capital..............................              125,413       153,661     104,331        87,423       62,220





                               See Footnotes to Summary Selected Historical Financial and Operating Data

</TABLE>

                                       11

      Footnotes to Summary Selected Historical Financial and Operating Data

(a)  Reflects the combined  financial results of the Navy I partnership and Coso
     Finance Partners II, a California general  partnership ("CFP II"). The Navy
     I  partnership  and  CFP II were  first  formed  as  separate  entities  to
     facilitate the initial bank financing for the  construction and development
     of Navy I.  Initially,  the Navy I  partnership  acquired all of the assets
     relating to the first turbine  generator unit at Navy I and CFP II acquired
     all of the  assets of Navy I relating  to the  second  and third  generator
     units at Navy I. In 1988,  CFP II assigned all of its rights and  interests
     in the second and third generator units at Navy I to the Navy I partnership
     in return for a 5.0%  royalty to be paid based on the Navy I  partnership's
     steam  production.  Since the Navy I  partnership  and CFP II operate under
     common  ownership  and  management   control,   the  historical   financial
     statements  of  the  entities  have  been  combined  after  elimination  of
     intercompany amounts related to the royalty arrangement. CFP II merged with
     and into the Navy I partnership and the accrued  royalty was  extinguished.
     In  addition,  the  royalty  will no longer be  accrued  from and after the
     Series A note offering.

(b)  The fixed energy price periods expired for the Navy I partnership in August
     1997, for the BLM partnership in March 1999 and for the Navy II partnership
     in January 2000.

(c)  After CAC's purchase of all of  CalEnergy's  interests in the Coso projects
     on  February  25,  1999,  the  Coso  partnerships  adopted  a new  basis of
     accounting and, accordingly, the financial information for the period after
     the  acquisition  is presented on a different  cost basis than that for the
     period before the acquisition and therefore is not comparable. The purchase
     price was allocated to the portion of the assets and liabilities  purchased
     from CalEnergy based on their fair values, with the amount of fair value of
     net assets in excess of the purchase  price being  allocated to  long-lived
     assets on a pro-rata basis.

(d)  Based on a stated capacity of 80 MW.

(e)  The variance in the operating  capacity factors for the Navy I partnership,
     the BLM partnership, and the Navy II partnership are due to the transfer of
     steam  from the  Navy I  partnership  to the BLM and Navy II  partnership's
     under the steam sharing program.

(f)  Reflects  indebtedness owed to Funding Corp., which loaned all the proceeds
     from the offering to the Coso partnerships at interest rates and maturities
     identical to the interest rates and maturities of the senior secured notes.

(g)  Reflects  non-recognition  of operating revenues for the period November 1,
     2000 through  March 26, 2001,  based on  non-collection  of amounts due for
     power generated and sold to Edison.

(h)  Certain   reclassifications  have  been  made  to  the  2000  statement  of
     operations to conform to the 2001 presentation.


Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

     Except for historical financial  information  contained herein, the matters
discussed in this annual  report may be  considered  forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities  Exchange Act of 1934, as amended,  and subject to
the safe harbor created by the Securities  Litigation  Reform Act of 1995.  Such
statements  include  declarations   regarding  the  intent,  belief  or  current
expectations  of Caithness Coso Funding Corp.  ("Funding  Corp."),  Coso Finance
Partners  ("the  Navy  I  partnership"),   Coso  Energy   Developers  ("the  BLM
partnership"),   and  Coso  Power  Developers  ("the  Navy  II   partnerships"),
collectively,  (the "Coso  partnerships") and their respective  management.  Any
such  forward-looking  statements are not guarantees of future  performance  and
involve  a number  of risks  and  uncertainties;  actual  results  could  differ
materially from those indicated by such  forward-looking  statements.  Among the
important  factors that could cause  actual  results to differ  materially  from
those  indicated by such  forward-looking  statements are: (i) risks relating to
the uncertainties in the California energy market,  (ii) the financial viability
of  Southern  California  Edison,  ("Edison"),  (iii)  the  information  is of a
preliminary nature and may be subject to further adjustment,  (iv) risks related
to the  operation of power plants (v) the impact of avoided cost  pricing,  (vi)
general operating risks,  (vii) the dependence on third parties,  (viii) changes
in government regulation, (ix) the effects of competition, (x) the dependence on
senior management, (xi) fluctuations in quarterly results and (xii) seasonality.

                                       12

General

     The Coso projects consist of three 80MW geothermal power plants,  which are
referred  to as Navy I, BLM and Navy II, and their  transmission  lines,  wells,
gathering  systems and other related  facilities.  The Coso projects are located
near one another at the United  States  Naval Air Weapons  Center at China Lake,
California.  The Navy I partnership owns Navy I and its related facilities.  The
BLM  partnership  owns BLM and its related  facilities.  The Navy II partnership
owns Navy II and its related facilities. Affiliates of Caithness Corporation and
CalEnergy Company, Inc. ("CalEnergy"),  which is now known as MidAmerican Energy
Holdings  Company,  formed  the  Coso  partnerships  in the  1980s  to  develop,
construct,  own and operate the Coso  projects.  On February 25, 1999  Caithness
Acquisition  Company,  LLC, (CAC) purchased all of CalEnergy's  interests in the
Coso  projects  for $205.0  million  in cash,  plus $5.0  million in  contingent
payments,  plus the assumption of CalEnergy's and its affiliates'  share of debt
outstanding at the Coso projects which then totaled approximately $67.0 million.

     Each Coso partnership  sells 100% of the electrical energy generated at its
plant to Edison under a long-term Standard Offer No.4 power purchase  agreement.
Each power purchase  agreement expires after the final maturity date of the 6.8%
Series B Senior Secured Notes and the 9.05% Series B Senior Secured Notes issued
by Funding Corp.

     Each Coso partnership is entitled to the following payments under its power
purchase agreement:

*    Capacity payments for being able to produce  electricity at certain levels.
     Capacity  payments  are fixed  throughout  the life of each power  purchase
     agreement;

*    Capacity  bonus  payments  if the  Coso  partnership  is  able  to  produce
     electricity  above a specified  higher level.  The maximum annual  capacity
     bonus  payment  available is also fixed  throughout  the life of each power
     purchase agreement; and

*    Energy  payments  which are based on the  amount  of  electricity  the Coso
     partnership's plant actually produces.

     Energy  payments were fixed for the first ten years of firm operation under
each power purchase  agreement.  After the first ten years of firm operation and
until a Coso partnership's power purchase agreement expires, Edison makes energy
payments  to the Coso  partnership  based on  Edison's  avoided  cost of energy.
Edison's  avoided  cost of energy is Edison's  cost to generate  electricity  if
Edison were to produce it itself or buy it from another  power  producer  rather
than buy it from the Coso  partnerships.  The power  purchase  agreement for the
Navy I partnership will expire in August 2011, the power purchase  agreement for
the BLM partnership will expire in March 2019, and the power purchase  agreement
for the Navy II partnership  will expire in January 2010. The fixed energy price
period expired in August 1997 for the Navy I partnership,  in March 1999 for the
BLM partnership and in January 2000 for the Navy II partnership.

                                       13

     For the year ended December 31, 2001,  Edison's annual average avoided cost
of energy paid to the Navy I, the BLM and the Navy II Partnerships was 7.5 cents
per kWh,  which is  significantly  below the fixed energy  prices  earned by the
partnerships  prior to the expiration of the fixed energy price periods of their
respective power purchase agreements.

     Edison entered into an agreement  ("Agreement")  with the Coso partnerships
on June 19, 2001 that addressed  renewable energy pricing and issues  concerning
California's  energy  crisis.  The  Agreement  which was amended on November 30,
2001, established May 1, 2002, as the date when the Coso partnerships will begin
receiving a fixed avoided cost of energy rate of 5.37 cents per kWh for five (5)
years.  Subsequent  to the five year  period,  Edison  will be  required to make
energy  payments to the Coso  partnerships  based on it's avoided cost of energy
until each partnership's power purchase agreement expires.

     In 1994, the Coso partnerships  implemented a steam-sharing  program, under
the Coso Geothermal Exchange Agreement. The purpose of the steam-sharing program
is to enhance the management of the Coso geothermal resource and to optimize the
resource's overall benefits to the Coso partnerships by transferring steam among
the Coso projects.  Under the steam sharing program,  the partnership  receiving
the steam transfer  splits revenue  earned from  electricity  generated with the
partnership that transferred the steam.

     The Coso  partnerships  are required to make  royalty  payments to the U.S.
Navy and the Bureau of Land  Management.  The Navy I partnership  pays a royalty
for Unit I through  reimbursement  of  electricity  supplied to the U.S. Navy by
Edison from  electricity  generated at the Navy I plant.  The  reimbursement  is
based on a pricing  formula  that is included in the U.S.  Navy  Contract.  This
formula is largely  based upon the tariff  rates  charged by Edison,  which have
recently been increased by the California  Public Utilities  Commission  (CPUC).
Discussions  with the U.S.  Navy are  continuing  to  re-adjust  the  formula to
reflect  recent  activity  in the local  energy  market.  In  November  2001,  a
modification to the calculation of the reimbursement pricing formula was made to
the U.S.  Navy  Contract  resulting in a reduction of accrued  royalties of $6.5
million. For Units 2 and 3, the Navy I partnership's royalty expense paid to the
U.S. Navy is a fixed percentage of electricity  sales at 15% of revenue received
by the  Navy I  partnership  through  2003 and will  increase  to 20% from  2004
through  2009. In addition,  the Navy I partnership  is required to pay the U.S.
Navy $25.0  million in  December  2009,  the date their  contract  expires.  The
payment is secured by funds placed on deposit monthly,  which funds plus accrued
interest will aggregate $25.0 million.  Currently, the monthly amount to deposit
is  approximately  $.6 million.  The BLM  partnership  pays a 10% royalty to the
Bureau of Land Management based on the net value of steam produced.  The Navy II
partnership  pays a royalty  to the U.S.  Navy  based on a fixed  percentage  of
electricity  sales to Edison.  The  royalty  rate was 10% of  electricity  sales
through  1999,  and  increased to 18% for 2000 through 2004 and will increase to
20% from 2005 through the end of the contract term. The Coso  partnerships  also
pay other royalties, at various rates which in the aggregate are not material.

     Funding Corp is a special purpose corporation and a wholly owned subsidiary
of the Coso  partnerships.  It was formed for the  purpose of issuing the senior
secured notes on behalf of the Coso  partnerships  who have jointly,  severally,
and unconditionally guaranteed repayment of the senior secured notes.

     On May 28,  1999,  Funding  Corp.  issued  $110.0  million of 6.80%  senior
secured notes due in 2001 and $303.0  million of 9.05% senior  secured notes due
in 2009.  The proceeds from the notes were loaned to the Coso  partnerships  and
are payable to Funding  Corp from  payments  of  principal  and  interest on the
notes.  Funding Corp. does not conduct any other  operations  apart from issuing
the notes.

                                       14

     Under the  depository  agreement  with the trustee for the notes,  the Coso
partnerships  established  accounts with a depository and pledged those accounts
as  security  for the benefit of the holders of the senior  secured  notes.  All
amounts  deposited  with  the  depository  are,  at the  direction  of the  Coso
partnerships,  invested by the depository in permitted investments. All revenues
or other proceeds  actually received by the Coso partnerships are deposited in a
revenue  account and withdrawn  upon receipt by the  depository of a certificate
from the relevant Coso partnerships  detailing the amounts to be paid from funds
in its respective revenue account.

     Periodic  increases in natural gas prices and imbalances between supply and
demand,  among other  factors,  have at times led to  significant  increases  in
wholesale  electricity  prices in California.  During those periods,  Edison had
fixed  tariffs with their retail  customers  that were  significantly  below the
wholesale   prices  it  paid  in   California.   This  resulted  in  significant
under-recoveries  by Edison of its  electricity  purchase  costs. On January 16,
2001 Edison  announced that it was  temporarily  suspending  payments for energy
provided,  including  the energy  provided by the Coso  partnerships,  pending a
permanent  solution  to its  liquidity  crisis.  This  cash flow  shortfall  has
adversely  affected  Edison's  liquidity  and in turn  it did  not pay the  Coso
partnerships  for energy delivered from November 2000 through March 26, 2001. As
of December 31, 2001,  the Coso  partnerships  were unable to determine the time
frame during which any future payments would be received. Due to the uncertainty
surrounding Edison's ability to make payment on past due amounts, collection was
not  reasonably  assured  and the Navy I, BLM and Navy II  partnerships  had not
recognized   revenue  of  $22.0  million,   $21.8  million  and  $22.7  million,
respectively, from Edison for Energy delivered during the period January 1, 2001
through March 26, 2001. The provision for doubtful accounts  previously recorded
as of  December  31, 2000 by the Navy I, BLM and Navy II  partnerships  of $15.2
million, $15.3 million and $15.3 million, respectively, has been reclassified to
conform with the 2001 presentation.  In addition, the Coso partnerships will not
recognize such revenue until payment from Edison is received.

     Pursuant  to a CPUC  order,  Edison  resumed  making  payments  to the Coso
partnerships  beginning with power generated on March 27, 2001. Edison also made
a payment equal to 10% of the unpaid  balance for power  generated from November
1, 2000 to March 26, 2001,  and  continues  to pay  interest on the  outstanding
amount at 7% per annum.  That payment was made pursuant to the Agreement between
Edison and the Coso  partnerships  described  above.  On March 1,  2002,  Edison
reached certain financing  milestones and paid the Coso partnerships for revenue
generated  but not  recognized  for the period  November  2000 through March 26,
2001. As such,  the Coso  partnership  will  recognize this revenue in the first
quarter of 2002.


Capacity Utilization

     For purposes of consistency in financial presentation, the plant capacity
factor for each of the Coso partnerships is based on a nominal capacity amount
of 80MW (240MW in the aggregate). The Coso partnerships have a gross operating
capacity that allows for the production of electricity in excess of their
nominal capacity amounts. Utilization of this operating margin is based upon a
number of factors and can be expected to vary throughout the year under normal
operating conditions.

     The following  data includes the operating  capacity  factor,  capacity and
electricity  production  (in kWh) for each  Coso  partnership  on a  stand-alone
basis:

                                                 Year Ended December 31,
                                                 -----------------------

     Navy I Partnership                       2001         2000          1999
     (stand alone)                            ----         ----          ----
     Operating capacity factor              108.3%       111.8%         95.4%
     Capacity (MW) (average)                 86.63        89.44         76.34
     kWh produced (000s)                   758,890      785,624       668,388

     BLM Partnership (stand alone)
     Operating capacity factor              102.8%       109.4%        105.0%
     Capacity (MW) (average)                 82.21        87.56         84.00
     kWh produced (000s)                   720,130      769,098       735,840

     Navy II Partnership (stand alone)
     Operating capacity factor              104.9%       111.1%        112.1%
     Capacity (MW) (average)                 83.93        88.88         89.70
     kWh produced (000s)                   735,210      780,709       785,772

                                       15

     Total energy  production  for the Navy I partnership  was 758.9 million kWh
for 2001, as compared to 785.6  million kWh for 2000, a decrease of 3.4%.  Total
energy  production  for the BLM  partnership  was 720.1 million kWh for 2001, as
compared  to 769.1  million  kWh in 2000,  a  decrease  of  6.4%.  Total  energy
production  for the Navy II  partnership  was 735.2  million  kWh for  2001,  as
compared to 780.7  million kWh in 2000, a decrease of 5.8%.  These  decreases in
energy  production  were  primarily due to the deferment of certain  capital and
maintenance  projects by the Coso  partnerships,  due to  non-payment  by Edison
during the period  November 1, 2000 through March 26, 2001.  These projects have
been resumed as Edison has resumed payment for production starting in late March
2001.

     Total energy  production  for the Navy I partnership  was 785.6 million kWh
for 2000, as compared to 668.4  million kWh for 1999, an increase of 17.5%.  The
increase in Navy I partnership's  energy production is attributable to increased
production  resulting  from  decreased  steam  transfers  and the  outage of one
turbine generator unit during a portion of 1999. Total energy production for the
BLM partnership was 769.1 million kWh for 2000, as compared to 735.8 million kWh
in  1999,  an  increase  of  4.5%.  Total  energy  production  for  the  Navy II
partnership  was 780.7 million kWh for 2000, as compared to 785.8 million kWh in
1999, a decrease of 0.6%.

<PAGE>

Results of Operations for the years ended December 31, 2001, 2000, and 1999.
----------------------------------------------------------------------------

     The following  discusses the results of operations of the Coso partnerships
for the years ended December 31, 2001,  2000 and 1999 (dollar  amounts in tables
in thousands, except per kWh data):

<TABLE>
<CAPTION>

Revenue

                                       2001                       2000                         1999
                                       ----                       ----                         ----
                                  $          cents/kWh        $         cents/kWh          $         cents/kWh
                                  -          ---------        -         ---------          -         ---------
Total Operating Revenues
<S>                             <C>             <C>         <C>            <C>           <C>             <C>
Navy I partnership              53,400          7.0         52,419         6.7           55,666          8.3
BLM partnership                 44,041          6.1         42,174         5.5           49,877          6.8
Navy II partnership             36,389          5.0         43,054         5.5          113,746         14.5

Capacity & Bonus Revenues
Navy I partnership              13,210          1.7         13,429         1.7           13,372          2.0
BLM partnership                 12,908          1.8         13,122         1.7           13,938          1.9
Navy II partnership             12,978          1.8         13,195         1.7           14,018          1.8

Energy Revenues
Navy I partnership              40,190          5.3         38,990         5.0           42,294          6.3
BLM partnership                 31,133          4.3         29,052         3.8           35,939          4.9
Navy II partnership             23,411          3.2         29,859         3.8           99,728         12.7


</TABLE>


     Total  operating  revenues for the Navy II  partnership,  which  consist of
capacity  payments,  capacity  bonus  payments and energy  payments,  were $36.4
million for 2001,  as compared to $43.1  million in 2000,  an decrease of 15.5%.
Total energy  revenues for the Navy II partnership  were $23.4 million for 2001,
as compared to $29.9  million in 2000,  an decrease of 21.7%.  The  decreases in
total  operating  revenues and energy  revenues for 2001 were  primarily  due to
nonpayment  by Edison for three  months  ended  March 31,  2001,  as compared to
November and December  revenues in 2000,  resulting from the Edison's  liquidity
crisis discussed above, partially offset by decreases in steam transfer revenues
and the previously discussed decrease in generation.

                                       16

     Total  operating  revenues  for the Navy I  partnership,  which  consist of
capacity  payments,  capacity  bonus  payments and energy  payments,  were $52.4
million for 2000,  as compared  to $55.7  million in 1999,  an decrease of 5.9%.
Total energy revenues for the Navy I partnership were $39.0 million for 2000, as
compared to $42.3  million in 1999, a decrease of 7.8%.  The  decreases in total
operating revenues and energy revenues for 2000 were primarily due to nonpayment
by Edison  for  November  and  December  revenues  in 2000,  resulting  from the
Edison's liquidity crisis, discussed above.

     Total operating revenues for the BLM partnership, which consist of capacity
payments,  capacity bonus payments and energy  payments,  were $42.2 million for
2000, as compared to $49.9  million in 1999, an increase of 15.4%.  Total energy
revenues for the BLM  partnership  were $29.1  million for 2000,  as compared to
$35.9  million in 1999, a decrease of 18.9%.  The  decreases in total  operating
revenues and energy revenues for 2000 were primarily due to nonpayment by Edison
for  November  and  December  revenues  in 2000,  resulting  from  the  Edison's
liquidity crisis, discussed above.

     Total  operating  revenues for the Navy II  partnership,  which  consist of
capacity  payments,  capacity  bonus  payments and energy  payments,  were $43.1
million for 2000,  as compared to $113.7  million in 1999,  a decrease of 62.1%.
Total energy  revenues for the Navy II partnership  were $29.9 million for 2000,
as  compared  to $99.7  million  in  1999,  a  decrease  of  70.0%.  The Navy II
partnerships energy revenues decreased by $69.8 million due to the expiration of
the fixed energy price period  under the Navy II  partnership's  power  purchase
agreement in January 2000 and the receipt of energy  payments  based on Edison's
avoided cost of energy since that time and nonpayment by Edison for November and
December revenues in 2000,  resulting from Edison's liquidity crisis,  discussed
above.  Until January 2000, and during 1999,  the Navy II  partnership  received
approximately 14.5 cents per kWh for energy delivered. Under the avoided cost of
energy formula, the Navy II partnership received an average of approximately 6.0
cents per kWh for energy  delivered  for the period  February  2000 to  December
2000.

<PAGE>

<TABLE>
<CAPTION>

Interest and Other Income

                                       2001                       2000                         1999
                                       ----                       -----                        ----
                                  $          cents/kWh        $         cents/kWh          $         cents/kWh
                                  -          ---------        -         ---------          -         ---------
<S>                              <C>            <C>          <C>           <C>            <C>            <C>

Navy I partnership               2,928          0.4          2,506         0.3            2,234          0.3
BLM partnership                  3,766          0.5          8,125         1.1            1,066          0.1
Navy II partnership              2,883          0.4          2,868         0.4            2,174          0.3
</TABLE>



     The Navy I  partnership's  interest  and other  income was $2.9  million in
2001,  as compared to $2.5 million in 2000,  an increase of 16.0%.  The increase
was primarily due to interest on amounts in arrears owed by Edison in 2001.  The
BLM  partnership's  interest  and other  income  was $3.8  million  in 2001,  as
compared  to $8.1  million  in 2000,  a decrease  of 53.1%.  This  decrease  was
primarily  due to legal  settlements  paid during 2000, of $6.1 million from Dow
Chemical  Company and $600,000 for legal fees related to the Edison  litigation,
partially offset by an increase in interest income on amounts in arrears owed by
Edison in 2001.

     The Navy I  partnership's  interest  and other  income was $2.5  million in
2000,  as compared to $2.2 million in 1999,  an increase of 13.6%.  The increase
was  primarily  due to a  settlement  of $600,000  for legal fees related to the
Edison  litigation  and  increased  interest  income from  higher cash  reserves
balances  required by the senior  secured notes issued on May 28, 1999.  The BLM
partnership's interest and other income was $8.1 million in 2000, as compared to
$1.1 million in 1999, an increase of $7.0  million.  This increase was primarily
due to a legal settlement of $6.1 million with Dow Chemical Company,  settlement
of  $600,000  for legal fees  related to the Edison  litigation,  and  increased
interest  income  from  higher  cash  reserves  balances  required by the senior
secured  notes issued on May 28, 1999.  The Navy II  partnership's  interest and
other income was $2.9 million in 2000,  as compared to $2.2 million in 1999,  an
increase of 31.8%.  The increase was  primarily  due to a settlement of $600,000
for legal fees related to the Edison litigation and increased in interest income
from higher cash reserves  balances  required by the senior secured notes issued
on May 28, 1999.

                                       17

<TABLE>
<CAPTION>
Edison Legal Expenses and Settlement Costs


                                       2001                       2000                         1999
                                       ----                       ----                         ----
                                  $          cents/kWh        $         cents/kWh          $         cents/kWh
                                  -          ---------        -         ---------          -         ---------
<S>                               <C>            <C>          <C>           <C>            <C>            <C>

Navy I partnership                --            0.0           --           0.0            2,373          0.4
BLM partnership                   --            0.0           --           0.0            4,169          0.6
Navy II partnership               --            0.0           --           0.0            5,819          0.7
</TABLE>


     Edison legal expenses and settlement  costs  decreased in 2000 for the Navy
I, BLM and Navy II partnerships by $2.4 million,  $4.2 million and $5.8 million,
respectively.  The changes for 2000  resulted  from,  among other  expenses,  an
accrued settlement obligation with Edison.


<TABLE>
<CAPTION>

Plant Operations


                                       2001                       2000                         1999
                                       ----                       ----                         ----
                                  $          cents/kWh        $         cents/kWh          $         cents/kWh
                                  -          ---------        -         ---------          -         ---------
<S>                               <C>           <C>          <C>           <C>           <C>             <C>

Navy I partnership               9,010          1.2          8,609         1.1           10,017          1.5
BLM partnership                 10,221          1.4         12,008         1.6           15,568          2.1
Navy II partnership              9,679          1.3          9,409         1.2           10,873          1.4
</TABLE>


     The BLM partnership's  operating expenses,  including operating and general
and  administrative  expenses  were $10.2  million in 2001, as compared to $12.0
million in 2000, a decrease of 15.0%.  The  decrease in  operating  expenses for
2001 as compared to 2000,  was primarily due to a reduction in current  property
taxes by an offset of a partial  refund of an  appealed  amount  and lower  well
maintenance and workover costs during 2001.

     The  Navy I  partnership's  operating  expenses,  including  operating  and
general and  administrative  expenses  were $8.6 million in 2000, as compared to
$10.0  million in 1999,  a decrease of 14.0%.  The BLM  partnership's  operating
expenses, including operating and general and administrative expenses were $12.0
million in 2000, as compared to $15.6 million in 1999, a decrease of 23.1%.  The
Navy II partnership's  operating  expenses  including  operating and general and
administrative  expenses were $9.4 million in 2000, as compared to $10.9 million
in 1999, a decrease of 13.8%.  The decreases  for each of the Coso  partnerships
for 2000 as compared to 1999, was primarily due to the continued  implementation
of  management's  plan to reduce the work force and other operating  costs.  The
replacement  of the Coso  project's  prior  operator and  managing  partner also
contributed to the overall reduction in plant operating costs.


<TABLE>
<CAPTION>

Royalty Expenses


                                       2001                       2000                         1999
                                       ----                       ----                         ----
                                  $          cents/kWh        $         cents/kWh          $         cents/kWh
                                  -          ---------        -         ---------          -         ---------
<S>                              <C>            <C>         <C>            <C>           <C>             <C>

Navy I partnership               9,950          1.3         10,921         1.4           10,157          1.5
BLM partnership                  5,203          0.7          4,045         0.5            3,148          0.4
Navy II partnership              9,377          1.3         10,104         1.3           12,077          1.5
</TABLE>

                                       18

     The Navy I partnership's  royalty  expenses were $10.0 million for 2001, as
compared  to $10.9  million  in 2000,  a  decrease  of 8.3%.  The  decrease  was
primarily  due  to a $6.5  million  royalty  reimbursement  resulting  from  the
modification  to the  calculation  of the Unit 1 royalty  reimbursement  pricing
formula.  The decrease was  partially  offset by higher  royalty  charges due to
increased  energy revenues caused by the increase in the average avoided cost of
energy  from 5.8  cents per kWh in 2000,  to 7.5 cents per kWh in 2001.  The BLM
partnership's  royalty  expenses were $5.2 million for 2001, as compared to $4.0
million in 2000,  an increase of 30.0%.  The  increase was due to an increase in
energy  revenues  caused by the  increase in the average  avoided cost of energy
from  5.8  cents  per kWh in 2000,  to 7.5  cents  per kWh in 2001.  The Navy II
partnership's  royalty expenses were $9.4 million for 2001, as compared to $10.1
million in 2000,  a decrease  of 6.9%.  The  decrease  was due to a decrease  in
internally-produced steam over the same period in 2000.

     The Navy I partnership's  royalty  expenses were $10.9 million for 2000, as
compared to $10.2 million in 1999, an increase of 6.9%.  The increase was due to
an increase in energy  revenues  caused by the  increase in the average  avoided
cost of energy from 3.1 cents per kWh in 1999 to 5.8 cents per kWh in 2000.  The
BLM  partnership's  royalty  expenses were $4.0 million for 2000, as compared to
$3.1 million in 1999, an increase of 29.0%. This increase was due to an increase
in energy  revenues caused by the increase in the average avoided cost of energy
from  3.1  cents  per kWh in 1999 to 5.8  cents  per kWh in  2000.  The  Navy II
partnership's royalty expenses were $10.1 million for 2000, as compared to $12.1
million in 1999,  a decrease  of 16.5%.  The  decrease  was  primarily  due to a
reduction in the Navy II partnerships energy revenues,  caused by the expiration
of the fixed energy price period under the Navy II partnership's  power purchase
agreement in January 2000, and the receipt of energy  payments based on Edison's
average avoided cost of energy since that time.  Under the average avoided costs
of energy formula,  the Navy II partnership received an average of approximately
6.0 cents per kWh for energy  delivered for the period February 2000 to December
2000. The decrease in the Navy II partnerships  royalty  expenses were partially
offset by an increase in royalty rate from 10% to 18% as of January 2000.

<TABLE>
<CAPTION>

Depreciation and Amortization


                                       2001                       2000                         1999
                                       ----                       ----                         ----
                                  $          cents/kWh        $         cents/kWh          $         cents/kWh
                                  -          ---------        -         ---------          -         ---------
<S>                             <C>             <C>          <C>           <C>           <C>             <C>

Navy I partnership              10,222          1.3          9,594         1.2            9,582          1.4
BLM partnership                 15,972          2.2         15,361         2.0           15,649          2.1
Navy II partnership             15,352          2.1         15,070         1.9           14,808          1.9
</TABLE>

     The Navy I partnership's  depreciation and  amortization  expense was $10.2
million for 2001, as compared to $9.6 million in 2000, an increase of 6.3%.  The
Navy I Partnership's increase in depreciation and amortization expense for 2001,
as  compared  to the same period in 2000,  was  primarily  due to an increase in
capitalized assets in 2001.

<TABLE>
<CAPTION>

Interest Expense

                                       2001                       2000                         1999
                                       ----                       ----                         ----
                                  $          cents/kWh        $         cents/kWh          $         cents/kWh
                                  -          ---------        -         ---------          -         ---------
<S>                             <C>             <C>          <C>           <C>            <C>            <C>

Navy I partnership              11,732          1.5         12,493         1.6            9,611          1.4
BLM partnership                  8,958          1.2          9,174         1.2            7,310          1.0
Navy II partnership              8,127          1.1          9,130         1.2            9,937          1.3
</TABLE>


     The Navy I  partnership's  interest  expense was $11.7 million for 2001, as
compared to $12.5 million in 2000, a decrease of 6.4%. The Navy II partnership's
interest expense was $8.1 million for 2001, as compared to $9.1 million in 2000,
a decrease of 11.0%.  These decreases in interest  expense for 2001, as compared
to the same period in 2000,  were due to reductions  in the principal  amount of
the project loan from Funding Corp.

                                       19

     The Navy I  partnership's  interest  expense was $12.5  million in 2000, as
compared to $9.6 million in 1999,  an increase of 30.2%.  The BLM  partnership's
interest  expense was $9.2 million in 2000, as compared to $7.3 million in 1999,
an  increase  of 26.0%.  The Navy II  partnership's  interest  expense  was $9.1
million in 2000,  as compared to $9.9 million in 1999,  a decrease of 8.1%.  The
increases in interest expense for the Navy I partnership and the BLM partnership
and the decrease in interest  expense for the Navy II  partnership  for the year
2000, as compared to 1999, were the result of higher  outstanding  debt balances
under the $413 million senior secured notes issued on May 28, 1999.


Interest Expense - Acquisition Debt

     The  Navy I, BLM and  Navy II  partnerships  incurred  interest  expense  -
acquisition debt of $2.0 million,  $1.4 million, and $2.0 million,  respectively
in 1999.  This interest  expense  related to  acquisition  debt in the amount of
$211.5 million and was incurred on February 25, 1999 to acquire the interests of
CalEnergy in the Coso  partnerships.  This  acquisition debt was repaid with the
proceeds of the $413.0 million senior secured notes issued on May 28, 1999.


Costs Related to Acquisition Debt

     The Navy I, BLM and Navy II  partnerships  incurred  other expenses of $1.6
million,  $1.3 million and $1.5  million,  respectively,  for the twelve  months
ended  December 31,  1999.  These other  expenses,  which  consist  primarily of
lending,  legal and other fees, related to the acquisition debt in the amount of
$211.5 million incurred on February 25, 1999 to acquire Cal Energy's interest in
the Coso partnerships. This acquisition debt was repaid with the proceeds of the
$413.0 million senior secured notes issued on May 28, 1999.


Loss on early extinguishment of debt

     The Navy I,  BLM and  Navy II  partnerships  recorded  a loss on the  early
extinguishment  of their  previous  debt in the  amounts of $2.4  million,  $1.8
million and $2.1 million, respectively, for the twelve months ended December 31,
1999.  This  loss was due to  premium  and  other  costs  incurred  to repay the
existing  project debt of the Coso  partnerships  before its scheduled  maturity
date.  These costs included  tender premiums paid to the holders of the previous
debt and the write off of the  remaining  balance of  deferred  financing  costs
related to the issuance of the previous  debt. The previous debt was repaid with
the proceeds of the $413.0 million senior secured notes issued on May 28, 1999.


Liquidity and Capital Resources

     Each of the  Navy I  partnership,  the  BLM  partnership  and  the  Navy II
partnership derive  substantially all of their cash flow from Edison under their
power purchase  agreements and from interest  income earned on funds on deposit.
As of December 2001, the 6.8% notes were repaid,  subsequently  leaving the Coso
partnerships with more cash flow annually. The Coso partnerships have used their
cash primarily for capital  expenditures for power plant improvements,  resource
and operating costs,  distributions to partners and payments with respect to the
project debt.

     The Coso  partnerships  ability to meet their  obligations as they come due
will depend upon the ability of Edison to meet its  obligations  under the terms
of the standard offer No. 4 power  purchase  agreements.  Edison's  shortfall in
collections,  coupled with its near term capital  requirements,  materially  and
adversely  affected its liquidity.  In resolution of that issue,  Edison settled
with the CPUC on  October  2, 2001,  enabling  it to recover in retail  electric
rates its historical  shortfall in electric  purchase costs.  Immediately  after
this  settlement,  Edison  and each of the  Coso  partnerships  entered  into an
amendment of their respective Agreement (referenced above) pertaining to partial
payment and interest  payments relating to Edison's past due obligations for the
period from November 2000 through March 26, 2001. The Agreement, as amended, was
approved by CPUC in January of 2002,  and  established  the fixed  energy  rates
discussed  above and set payment terms for the past due amounts owed to the Coso
partnerships by Edison.  It is anticipated that these recent  arrangements  will
eliminate  some of the  uncertainty of collection of amounts owed to the Navy I,
BLM and Navy II partnerships of $37.3 million, $37.1 million, and $38.0 million,
respectively,  for  electricity  delivered  from November 2000 through March 26,
2001 and  forward.  Edison's  failure to pay its future  obligations  may have a
material adverse effect on the Coso  partnership's  ability to make debt service
payments  to  Funding  Corp.  as they come due under the  Funding  Corp.  notes.
Current year cash flow from  operations  was sufficient to fully retire the $110
million senior secured note that came due on December 15, 2001.

                                       20

     On March 1, 2002, Edison reached certain financing  milestones and paid the
Coso  partnerships  for  revenue  generated  but not  recognized  for the period
November  2000  through  March 26, 2001.  As such,  the Coso  partnerships  will
recognize this revenue in the first quarter of 2002.

     The following  table sets forth a summary of each Coso  partnership's  cash
flows for the years ended December 31, 2001, December 31, 2000, and December 31,
1999.
<TABLE>
<CAPTION>

                                                                 2001            2000            1999
                                                                 ----            ----            ----
<S>                                                           <C>             <C>             <C>
Navy I partnership (stand alone)
 Net cash provided by operating activities                    $ 17,112        $ 29,168        $ 24,388
 Net cash provided by (used in) investing activities             1,235          (1,638)        (24,094)
 Net cash provided by (used in) financing activities           (21,589)       ( 31,845)          7,527
                                                              --------        --------        --------
      Net change in cash and cash equivalents                 $ (3,242)       $ (4,315)       $  7,821
                                                              ========        ========        ========

BLM partnership (stand alone)
 Net cash provided by operating activities                    $ 24,855        $ 32,916        $ 29,806
 Net cash (used in) investing activities                        (2,564)         (6,986)        (16,699)
 Net cash (used in) financing activities                       (28,153)        (26,491)        ( 6,684)
                                                              --------        --------        --------
      Net change in cash and cash equivalents                 $ (5,862)       $   (561)       $  6,423
                                                              ========        ========        ========

Navy II partnership (stand alone)
 Net cash provided by operating activities                    $ 18,634        $ 37,019        $ 74,802
 Net cash provided by (used in) investing activities             4,421          42,424         (58,752)
 Net cash (used in) financing activities                       (30,796)        (77,722)        (10,848)
                                                              --------        --------        --------
      Net change in cash and cash equivalents                 $ (7,741)       $  1,721        $  5,202
                                                              ========        ========        ========
</TABLE>



     The Navy I partnership's cash flows from operating  activities decreased by
$12.1  million  in 2001 as  compared  to 2000,  primarily  due to  increases  in
accounts receivable and related parties receivables.

     Cash from investing activities at the Navy I partnership  increased by $2.9
million in 2001 as compared  to 2000,  primarily  due to a decreases  in capital
expenditures in 2001.

     The Navy I partnership's cash flows used in financing  activities decreased
by $10.3 million in 2001 as compared to 2000, primarily due to a decrease in the
payment  amount on the project loan from Funding  Corp.,  and a reduction in the
distributions paid in 2001.

                                       21

     The BLM  partnership's  cash flows from operating  activities  decreased by
$8.1  million in 2001 as  compared  to 2000,  primarily  due to an  increase  in
accounts receivable, partially offset by increases in related parties payables.

     Cash used in investing activities at the BLM partnership  decreased by $4.4
million in 2001 as compared to 2000,  primarily  due to a decrease in restricted
cash requirements associated with the project loan from Funding Corp., partially
offset by an increase in capital expenditures in 2001.

     The BLM partnership's cash used in financing  activities  increased by $1.7
million  in  2001  as  compared  to  2000,  primarily  due  to  an  increase  in
distributions in 2001,  partially offset by lower repayments of the project loan
from Funding Corp.

     The Navy II partnership's cash flows from operating activities decreased by
$18.4  million in 2001 as compared  to 2000,  primarily  due to the  increase in
account  receivable,  partially  offset by an increase in amounts due to related
parties.

     Cash flows from investing  activities at the Navy II partnership  decreased
by $38.0 million in 2001 as compared to 2000,  primarily due to lower repayments
of  the  project  loan  from  Funding  Corp.,  and  decreases  in  2001  capital
expenditures.

     The Navy II partnership's  cash used in financing  activities  decreased by
$46.9 million in 2001 as compared to 2000,  primarily due to lower repayments of
the project loan from Funding Corp.

     The Navy I partnership's cash flows from operating  activities increased by
$4.8  million in 2000 as compared to 1999,  primarily  due to an increase in net
income,  decreases  in both  accounts  receivable  and amounts due from  related
parties, partially offset by decreases in trade payables.

     Cash used in investing  activities at the Navy I  partnership  decreased by
$22.5  million  in 2000 as  compared  to 1999,  primarily  due to  decreases  in
restricted cash requirements associated with the project loan from Funding Corp.

     The Navy I partnership's cash flows from financing  activities decreased by
$39.4  million in 2000 as compared to 1999,  primarily  due to the project  loan
from Funding Corp in 1999,  partially offset by both lower repayments of project
financing loans and decreased distributions to partners in 2000.

     The BLM  partnership's  cash flows from operating  activities  increased by
$3.1 million in 2000 as compared 1999,  primarily due to increases in net income
and amounts due to related parties, and a decrease in accounts receivable.

     Cash used in investing activities at the BLM partnership  decreased by $9.7
million  in 2000  as  compared  to  1999,  due to a  reduction  in 2000  capital
expenditures.

     The BLM partnership's cash used in financing  activities increased by $19.8
million in 2000 as compared  to 1999,  primarily  due to the  project  loan from
Funding  Corp in 1999,  partially  offset by both  lower  repayments  of project
financing loans and decreased distributions to partners in 2000.

     The Navy II partnership's cash flows from operating activities decreased by
$37.8  million in 2000 as compared to 1999,  primarily  due to a decrease in net
income caused by the  expiration of the fixed energy price period under the Navy
II  Partnership's  power  purchase  agreement in January 2000 and the receipt of
energy payments based on Edison's  avoided cost of energy since that time. Under
the avoided costs of energy formula, the Navy II partnership received an average
of approximately  6.0 cents per kWh for energy delivered for the period February
2000 to  December  2000.  The  decrease  in net income was  partially  offset by
decreases in accounts receivable and amounts due from related parties.

                                       22

     Cash flows from investing  activities at the Navy II partnership  increased
by $100.9  million in 2000 as compared to 1999,  primarily  due to a decrease in
restricted cash requirements associated with the project loan from Funding Corp.

     The Navy II partnership's  cash used in financing  activities  increased by
$66.9  million in 2000 as compared to 1999,  primarily  due to the project  loan
from Funding Corp in 1999,  partially offset by both lower repayments of project
financing loans and decreased distributions to partners in 2000.


Item 7A. Quantitative and Qualitative Disclosures about Market Risk.


Risk Factors

     Operating the Coso projects involves, among other things, general economic,
financial,  competitive,  legislative,  regulatory  and other  factors  that are
beyond our control.  Changes in these  factors  could make it more  expensive to
operate the Coso projects, or require additional capital expenditures, or reduce
certain  benefits  currently  available  to the Coso  partnerships.  There are a
variety of other risks that affect the Coso  projects,  some of which are beyond
our control, including:

     *    One or more of the Coso projects could perform below  expected  levels
          of output or efficiency;

     *    In light of the uncertainty of the California energy market,  Edison's
          financial  viability  is  uncertain.  If  Edison  were to  enter  into
          bankruptcy proceedings,  the power purchase contracts could be amended
          and  any  accounts   receivable   from  Edison  could  be  reduced  or
          eliminated;

     *    The Coso geothermal resource could be interrupted or unavailable;

     *    Operating costs could increase;

     *    Changes  in  the  regulatory   structure   which  govern  the  current
          operations of the Coso partnerships.

     *    Competition may lead to an accelerated depletion of the resource;

     *    Energy prices paid by Edison could decrease or terminate;

     *    Delivery of electrical energy to Edison could be disrupted;

     *    Environmental  problems  could  arise  which  could lead to fines or a
          shutdown of one or more plants;

     *    Plant units and  equipment  have broken down or failed in the past and
          could break down or fail in the future;

     *    The operators of the Coso projects could suffer labor disputes;

     *    The   government   could  change  permit  or   governmental   approval
          requirements;

     *    Third parties could fail to perform their  contractual  obligations to
          the Coso partnerships; and

     *    Catastrophic events, such as fires, earthquakes,  explosions,  floods,
          severe  storms or other  occurrences,  could affect one or more of the
          Coso projects or Edison.

     In  addition,   the  Coso  partnerships  must  meet  specified  performance
requirements under their respective power purchase  agreements during the months
of June through  September  to continue to qualify for the maximum  capacity and
capacity  bonus  payments.  If one or more of the events  listed above occur and
substantially  affect the  performance of one or more of the plants during these
months, operating revenues would be significantly decreased.

                                       23

Item 8.  Financial Statements and Supplementary Data.

                                       24


                        CAITHNESS COSO FUNDING CORP. AND
                          COSO OPERATING PARTNERSHIPS

                                      Index


Caithness Coso Funding Corp:
----------------------------
KPMG LLP Independent Auditors' Report                          F-1
Balance Sheet as of December 31, 2001 and 2000                 F-2
Statement of Income for the years ended
     December 31, 2001, 2000 and 1999                          F-3
Statement of Cash Flows for the years
     ended December 31, 2001, 2000 and 1999                    F-4
Notes to Financial Statements                                  F-5

Coso Finance Partners:
----------------------
KPMG LLP Independent Auditors' Report                          F-6
Balance Sheets as of December 31, 2001 and 2000                F-7
Statements of Operations for the twelve-months
    ended December 31, 2001 and 2000, two-months
    ended February 28, 1999, ten-months ended
    December 31, 1999 and twelve-months ended
    December 31, 1999                                          F-8
Statements of Partners'  Capital for the years
    ended December 31, 2001, 2000 and 1999                     F-9
Statements of Cash Flows for the twelve-months
    ended December 31, 2001 and 2000, two-months
    ended February 28, 1999, ten-months ended
    December 31, 1999,and twelve-months ended
    December 31, 1999                                          F-10
Notes to Financial Statements                                  F-11

Coso Energy Developers:
-----------------------
KPMG LLP Independent Auditors' Report                          F-12
Balance Sheets as of December 31, 2001 and 2000                F-13
Statements of Operations for the twelve-months ended
    December 31, 2001 and 2000, two-months
    ended February 28, 1999, ten-months ended
    December 31, 1999, twelve-months ended
    December 31, 1999                                          F-14
Statements of Partners' Capital for the years
    ended December 31, 2001, 2000 and 1999                     F-15
Statements of Cash Flows for the twelve-months
    ended December 31, 2001 and 2000, two-months
    ended February 28, 1999 ten-months ended
    December 31, 1999, twelve-months ended
    December 31, 1999                                          F-16
Notes to Financial Statements                                  F-17

Coso Power Developers:
----------------------
KPMG LLP Independent Auditors' Report                          F-18
Balance Sheets as of December 31, 2001 and 2000                F-19
Statements of cash flows for the twelve-months
    ended December 31, 2001 and 2000, two-months
    ended February 28, 1999, ten-months ended
    December 31, 1999, twelve-months ended
    December 31, 1999                                          F-20
Statements of Partners' Capital for the years
    ended December 31, 2001, 2000 and 1999                     F-21
Statements of Cash Flows for the twelve-months
    ended December 31, 2001 and 2000, two-months
    ended February 28, 1999 ten-months ended
    December 31, 1999, twelve-months ended
    December 31, 1999                                          F-22
Notes to Financial Statements                                  F-23


Supplemental Unaudited Condensed quarterly
    Financial information for 2000 and 1999                    F-24



Coso Partnerships:
------------------
Supplemental Condensed Combined Financial
     Information for Coso Partnerships:
Unaudited Condensed Combined Balance Sheets as
    of December 31, 2001 and 2000                              F-25
Unaudited Condensed Combined Statements of
    Operations for the  twelve-months ended
    December 31, 2001 and 2000, two-months ended
    February 28, 1999, ten-months ended
    December 31, 1999, twelve months ended
    December 31, 1999                                          F-26
Unaudited Condensed Combined Statements of
    Cash Flows for the twelve-months ended
    December 31, 2001 and 2000, two months ended
    February 28, 1999, ten-months ended
    December 31, 1999, twelve-months ended
    December 31, 1999                                          F-27
Notes to the Unaudited Condensed Combined
    Financial Statements                                       F-28
<PAGE>


                          Independent Auditors' Report



The Partners
Caithness Coso Funding Corp.:


We have audited the accompanying  balance sheets of Caithness Coso Funding Corp.
as of December 31, 2001 and 2000, and the related  statements of income and cash
flows for each of the years in the three-year  period ended  December 31,  2001.
These financial  statements are the responsibility of the Company's  management.
Our responsibility is to express an opinion on these financial  statements based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Caithness Coso Funding Corp. as
of December 31, 2001 and 2000,  and the results of its  operations  and its cash
flows for each of the years in the three-year period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.


March 1, 2002



/s/KPMG LLP
-----------
   KPMG LLP

                                      F-1
<PAGE>



                                               CAITHNESS COSO FUNDING CORP.

                                                      Balance Sheets

                                                December 31, 2001 and 2000

                                                  (Dollars in thousands)

<TABLE>
<CAPTION>

                  Assets                                                    2001                  2000
                                                                        -------------         -------------
<S>                                                                <C>                            <C>

Accrued interest receivable                                         $        1,225                 1,286
Project loan to Coso Finance Partners                                      122,550               134,984
Project loan to Coso Energy Developers                                      96,250               100,907
Project loan to Coso Power Developers                                       84,200                94,176
                                                                        -------------         -------------

                 Total assets                                       $      304,225               331,353
                                                                        =============         =============
                     Liabilities and Stockholders Equity
Senior secured notes:
     Accrued interest payable                                       $        1,225                 1,286
     6.8% notes due December 15, 2001                                          --                 27,067
     9.05% notes due December 15, 2009                                     303,000               303,000
                                                                        -------------         -------------

                 Total liabilities                                         304,225               331,353

Stockholders  equity (note 5)                                                  --                    --
                                                                        -------------         -------------

                 Total liabilities and stockholders  equity         $      304,225               331,353
                                                                        =============         =============

</TABLE>

See accompanying notes to financial statements.

                                      F-2

<PAGE>


                                         CAITHNESS COSO FUNDING CORP.

                                              Statements of Income

                                 Years ended December 31, 2001, 2000 and 1999

                                              (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                            2001                  2000                  1999
                                                                        -------------         -------------       -------------
<S>                                                                         <C>                   <C>                    <C>

Revenue:
     Interest income                                                $       28,820                30,799                20,491

Expense:
     Interest expense                                                      (28,820)              (30,799)              (20,491)
                                                                        -------------         -------------       -------------

Net income                                                          $          --                    --                    --
                                                                        =============         =============       =============

See accompanying notes to financial statements.
</TABLE>


                                      F-3
<PAGE>

<TABLE>
<CAPTION>

                                              CAITHNESS COSO FUNDING CORP.

                                                Statements of Cash Flows

                                      Years ended December 31, 2001, 2000 and 1999

                                                 (Dollars in thousands)


                                                                            2001                  2000                  1999
                                                                        -------------         -------------       -------------
<S>                                                                          <C>                   <C>                   <C>

Cash flows from investing activities                                $       27,128                83,039              (414,392)
                                                                        -------------         -------------       -------------

Cash flows from financing activities                                       (27,128)              (83,039)              414,392
                                                                        -------------         -------------       -------------

                 Net changes in cash                                           --                    --                    --

Cash at beginning of year                                                      --                    --                    --
                                                                        -------------         -------------       -------------

Cash at end of year                                                 $          --                    --                    --
                                                                        =============         =============       =============
Supplemental cash flow disclosures:
     Interest paid                                                  $       28,881                30,905                20,491
                                                                        =============         =============       =============

See accompanying notes to financial statements.
</TABLE>

                                      F-4
<PAGE>

                          CAITHNESS COSO FUNDING CORP.

                          Notes to Financial Statements

                        December 31, 2001, 2000 and 1999

                             (Dollars in thousands)




(1)  Organization of the Corporation

     Caithness Coso Funding Corp.  (Funding  Corp.),  which was  incorporated on
     April 22, 1999, is a single-purpose  Delaware  corporation  formed to issue
     senior  secured notes (Notes) for its own account and as an agent acting on
     behalf of Coso Finance Partners (CFP),  Coso Energy  Developers  (CED), and
     Coso  Power  Developers  (CPD),   collectively,   the  "Partnerships."  The
     Partnerships are California general partnerships.

     On May 28,  1999,  Funding  Corp.  sold  $413,000  of Notes  (see  note 4).
     Pursuant to separate  credit  agreements  between  Funding  Corp.  and each
     partnership (Credit Agreements),  the net proceeds from the offering of the
     Notes were loaned to the Partnerships. Payment of the Notes is provided for
     by payments made by the Partnerships  under their respective  project loans
     (see note 3). Funding Corp. has no material assets,  other than the project
     loans, and does not conduct any operations apart from issuing the Notes and
     making the project loans to the Partnerships.

(2)  Summary of Significant Accounting Policies

     Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that  affect the  reported  amounts  of  assets,  liabilities,
     stockholders   equity,  and disclosure of contingent assets and liabilities
     at the  date of the  financial  statements  and  the  reported  amounts  of
     revenues and expenses  during the reporting  period.  Actual  results could
     differ from those estimates.

     Fair Value of Financial Instruments

     Based on quoted  market  rates of the Notes,  the fair value of the project
     loans and  underlying  Notes as of  December  31, 2001 and 2000 is $-0- and
     $26,796,  respectively,  for the Notes  maturing in 2001,  and $303,000 and
     $322,979, respectively, for the Notes maturing in 2009.

     New Accounting Pronouncements

     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
     Statement of Financial  Accounting Standards (SFAS) No. 133, Accounting for
     Derivative  Instruments and Hedging  Activities.  In June 2000, FASB issued
     SFAS No. 138,  Accounting for Certain  Derivative  Instruments  and Certain
     Hedging  Activities,  which  amended  SFAS No.  133 and  addressed  certain
     implementation  issues.  SFAS No.  133,  as  amended,  requires  that every
     derivative instrument (including certain derivative instruments embedded in
     other  contracts)  be recorded  in the balance  sheet as either an asset or
     liability  measured at its fair value.  The  Statement  also  requires that
     changes in the derivative's fair value be recognized  currently in earnings
     unless specific hedge  accounting  criteria are met. Funding Corp. does not
     have any derivative  instruments and therefore the adoption in 2001 of SFAS
     No. 133, as amended,  will not have any effect on Funding Corp.'s financial
     statements.

     In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
     No.142,  Goodwill and Other Intangible Assets.  SFAS No. 141 requires that
     the purchase  method of accounting  be used for all business  combinations.
     SFAS No. 141  specifies  criteria  that  intangible  assets  acquired  in a
     business  combination  must meet to be recognized  and reported  separately
     from  goodwill.  SFAS No. 142 will  require that  goodwill  and  intangible
     assets with  indefinite  useful lives no longer be  amortized,  but instead
     tested for impairment at least  annually in accordance  with the provisions
     of SFAS No. 142.  SFAS No. 142 also requires  that  intangible  assets with
     estimable useful lives be amortized over their respective  estimated useful
     lives to their  estimated  residual  values and reviewed for  impairment in
     accordance  with SFAS No.  121 and,  subsequently,  SFAS No.  144 after its
     adoption.

     Funding  Corp.  adopted the  provisions of SFAS No. 141 as of July 1, 2001,
     and Funding  Corp.'s  management is in the process of evaluating the impact
     of SFAS No.142 and believes there is no material impact to Funding Corp.'s
     financial statements.

     In October 2001, FASB issued SFAS No. 144, Accounting for the Impairment or
     Disposal of Long-Lived  Assets.  SFAS No. 144 is effective for fiscal years
     beginning after December 15, 2001, and replaces SFAS No. 121 and provisions
     of APB Opinion No.30 for the disposal of segments of a business.  SFAS No.
     144 creates one  accounting  model,  based on the framework  established in
     SFAS No. 121 to be applied to all long-lived assets including  discontinued
     operations.  Funding  Corp. is required to adopt SFAS No. 144 on January 1,
     2002,  and  believes  there will be no material  effect on Funding  Corp.'s
     financial statements.

(3)  Project Loans to the Partnerships

     Pursuant to each Credit Agreement, each partnership shall make project loan
     payments in scheduled  installment  amounts which,  in the  aggregate,  are
     sufficient to enable Funding Corp. to pay scheduled  principal and interest
     on the Notes (see note 4).

     The Notes are general  obligations  of Funding  Corp.,  and are secured and
     perfected by: (1) first priority pledge of the promissory  notes evidencing
     each partnership's obligation to repay the loan; (2) first priority lien on
     the funds in the debt service cash  accounts of the  Partnerships;  and (3)
     first priority  pledge of all of the  outstanding  capital stock of Funding
     Corp. These obligations are unconditionally  guaranteed by the Partnerships
     and  are  secured  and  perfected  by  substantially   all  assets  of  the
     Partnerships and the equity interests in the  Partnerships.  Funding Corp.,
     CPD, CED, and CFP are jointly and severally liable for the repayment of the
     Notes.

(4)  Senior Secured Notes

     On May 28, 1999,  Funding Corp.  completed a $413,000  underwritten  public
     debt offering consisting of $110,000 6.8% Notes due 2001 and $303,000 9.05%
     Notes due 2009.  The Notes were issued under an  indenture  dated as of May
     28, 1999 between Funding Corp. and the trustee, U.S. Bank Trust NA. Payment
     of the Notes is provided for by payments to be made by the  Partnerships on
     their respective  project loans (see note 3). Interest is payable each June
     15 and December 15.

     The annual  maturity  of the Notes for each year  ending  December 31 is as
     follows:

               Year ending December 31                 Amount
               -----------------------           -------------------
                       2002                  $            21,771
                       2003                               27,618
                       2004                               31,332
                       2005                               35,480
                       2006                               38,286
                       Thereafter                        148,513
                                                --------------------
                                             $           303,000
                                                ====================

     The Note indentures contain certain restrictive covenants that, among other
     things, limit the ability to incur additional  indebtedness,  release funds
     from reverse accounts, make distributions, create loans, and enter into any
     transaction, merger, or consolidation.

(5)  Stockholders' Equity

     Funding Corp. is authorized to issue 1,000 shares of common stock, one cent
     par value per share. Upon  incorporating in 1999,  Funding Corp. issued 100
     common shares to CFP, CED, and CPD.

(6)  Risks and Uncertainties

     The Partnerships future results of operations involve a number of risks and
     uncertainties.  Periodic  increases  in natural  gas prices and  imbalances
     between  supply and demand,  among other  factors,  have led to significant
     increases  in  wholesale   electricity   prices  in  California.   Southern
     California Edison (Edison) is the only customer of the Partnerships. During
     those periods, Edison had fixed tariffs with its retail customers that were
     significantly  below  the  wholesale  prices  it paid in  California.  That
     resulted  in  significant  under-recoveries  by Edison  of its  electricity
     purchase  costs.  On  January  16,  2001,  Edison  announced  that  it  was
     temporarily  suspending  payment for energy provided,  including the energy
     provided by the Partnerships, pending a permanent solution to its liquidity
     crisis. Subsequently,  pursuant to a California Public Utilities Commission
     (CPUC) order, Edison resumed making payments to the Partnerships  beginning
     with power generated on March 27, 2001.  Edison also made payments equal to
     10% of the unpaid  balance  for power  generated  from  November 1, 2000 to
     March 26, 2001, and continues to pay interest on the outstanding  amount at
     7%  per  annum.  That  payment  was  made  pursuant  to an  agreement  (the
     Agreement)  with  Edison  entered  into on June  19,  2001  that  addressed
     renewable energy pricing and issues concerning  California's energy crisis.
     The  Agreement,  which was amended on November 30, 2001 and  received  CPUC
     approval  in  January  2002,  established  May 1, 2002 as the date when the
     Partnerships  will begin  receiving a fixed  avoided cost of energy rate of
     5.37 cents per kwh for five (5) years.  Subsequent to the five-year period,
     Edison will be required to make energy payments to the  Partnerships  based
     on its  avoided  cost of  energy  until  their  respective  power  purchase
     agreement  expires.  Beyond the five-year period,  the Partnerships  cannot
     predict  the likely  level of avoided  cost of energy  prices  under  their
     respective power purchase contract and, accordingly, the revenues generated
     by the Partnerships could fluctuate significantly.

     As of December 31, 2001, the Partnerships were unable to determine the time
     frame  during  which any  future  payments  would be  recieved.  Due to the
     uncertainty  surrounding  Edison's  ability  to make  payment  on past  due
     amounts,  collection was not reasonably  assured and the Partnerships  have
     not recognized  revenue from Edison for energy  delivered during the period
     January 1, 2001 through March 26, 2001. The partnerships will not recognize
     this revenue until paymemt from Edison is recieved (see note 7)

(7)  Subsequent Event

     On March 1, 2002, Edison reached certain financing  milestones and paid the
     Partnerships for revenue generated but not recognized for the November 2000
     through March 26, 2001.  As such,  the  Partnerships  will  recognize  this
     revenue in the first quarter of 2002.

                                      F-5


<PAGE>


                           Independent Auditors' Report



The Partners and Management Committee
Coso Finance Partners:


We have audited the  accompanying  balance sheets of Coso Finance Partners as of
December 31, 2001 and 2000, and the related statements of operations,  partners'
capital,  and cash flows for each of the years in the  three-year  period  ended
December 31, 2001.  These  financial  statements are the  responsibility  of the
Partnership's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the 2000 and 1999 financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of Coso  Finance
Partners as of December 31, 2001 and 2000,  and the results of their  operations
and  their  cash  flows  for each of the years in the  three-year  period  ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.

As discussed in note 3 to the financial statements, effective February 25, 1999,
Caithness  Acquisition Company, LLC acquired all of the partnership interest not
already owned by its affiliates,  ESCA LLC and ESCA II Limited Partnership, in a
business  combination   accounted  for  as  a  purchase.  As  a  result  of  the
acquisition,  the financial  information for the period after the acquisition is
presented  on a  different  cost  basis  than  that for the  period  before  the
acquisition and, therefore, is not comparable.


March 1, 2002




/s/  KPMG LLP
-------------
     KPMG LLP

                                      F-6

<PAGE>

<TABLE>
<CAPTION>

                                             COSO FINANCE PARTNERS

                                                 Balance Sheets

                                            December 31, 2001 and 2000

                                            (Dollars in thousands)


                Assets                                                      2001                  2000
                                                                        -------------         -------------
<S>                                                                         <C>                    <C>

Cash and cash equivalents                                           $          264                 3,506
Restricted cash and investments (note 2)                                    21,325                22,996
Accounts receivable, net (note 2)                                            3,454                   521
Prepaid expenses and other assets                                              650                   809
Amounts due from related parties  (note 8)                                   9,362                 1,960
Property, plant, and equipment,  net (notes 3 and 5)                       140,437               149,076
Investment in New CLPSI Company, LLC (note 4)                                4,005                 4,072
Power purchase contract, net (note 3)                                       11,093                12,240
Deferred financing costs, net (note 2)                                       2,524                 3,229
                                                                        -------------         -------------

                 Total assets                                       $      193,114               198,409
                                                                        =============         =============
                       Liabilities and Partners'  Capital

Accounts payable and accrued liabilities (note 6)                   $       17,578                15,857
Amounts due to related parties (note 8)                                        561                   697
Project loans (note 7)                                                     122,550               134,984
                                                                        -------------         -------------

                 Total liabilities                                         140,689               151,538

Commitments and contingencies (notes 6, 7, and 9)

Partners'  capital                                                          52,425                46,871
                                                                        -------------         -------------

                 Total liabilities and partners'  capital           $      193,114               198,409
                                                                        =============         =============

See accompanying notes to financial statements.
</TABLE>

                                      F-7
<PAGE>

<TABLE>
<CAPTION>

                                                           COSO FINANCE PARTNERS

                                                         Statements of Operations

                                           Years ended December 31, 2001, 2000, and 1999 (note 3)

                                                          (Dollars in thousands)


                                            Twelve months    Twelve months    Two months       Ten months      Twelve months
                                               ended            ended           ended            ended            ended
                                            December 31,     December 31,    February 28,     December 31,     December 31,
                                               2001             2000            1999             1999             1999
                                           --------------  --------------   --------------   --------------   --------------
                                                                             (old basis)      (new basis)
<S>                                             <C>              <C>             <C>              <C>              <C>
Revenue:
   Energy revenues (notes 2, 8, and 10)   $    40,190           38,990           8,098           34,196          42,294
   Capacity payments                           13,210           13,429             474           12,898          13,372
   Interest and other income                    2,928            2,506             824            1,410           2,234

                                           --------------  --------------   --------------   --------------   --------------

                 Total revenue                 56,328           54,925           9,396           48,504          57,900
                                           --------------  --------------   --------------   --------------   --------------

Operating expenses:
   Plant operating expenses                     9,010            8,609           2,556            7,461          10,017
   Royalty expense (note 6)                     9,950           10,921             987            9,170          10,157
   Depreciation and amortization               10,222            9,594           1,604            7,978           9,582
   Edison legal expenses and
        settlement costs (note 9)                 --               --              569            1,804           2,373
                                           --------------  --------------   --------------   --------------   --------------

                 Total operating expenses      29,182           29,124           5,716           26,413          32,129
                                           --------------  --------------   --------------   --------------   --------------

                 Operating income              27,146           25,801           3,680           22,091          25,771
                                           --------------  --------------   --------------   --------------   --------------
Other expenses:
   Interest expense                            11,732           12,493             645            8,966           9,611
   Interest expense - acquisition debt            --               --              --             1,962           1,962
   Costs related to acquisition debt              --               --              --             1,611           1,611
   Amortization on deferred financing             705              520              18              373             391
                                           --------------  --------------   --------------   --------------   --------------

                 Total other expenses          12,437           13,013             663           12,912          13,575
                                           --------------  --------------   --------------   --------------   --------------

                 Income before
                    extraordinary item         14,709           12,788           3,017            9,179          12,196

Extraordinary item - loss on
   extinguishment of debt (note 7)                --               --              --             2,375           2,375
                                           --------------  --------------   --------------   --------------   --------------

              Net income                  $    14,709           12,788           3,017            6,804           9,821
                                           ==============  ==============   ==============   ==============   ==============

See accompanying notes to financial statements.
</TABLE>

                                      F-8

<PAGE>

<TABLE>
<CAPTION>

                                                   COSO FINANCE PARTNERS

                                              Statements of Partners' Capital

                                  Years ended December 31, 2001, 2000, and 1999 (note 3)

                                                  (Dollars in thousands)


                                        Coso Finance Partners                    Coso Finance Partners II
                                  --------------------------------          ----------------------------------

                                                                                       China Lake
                                              China Lake       New        ESCA II      Geothermal
                                   ESCA       Operating       CLOC,       Limited      Management       New
                                   LLC       Company, Inc.     LLC       Partnership  Company, Inc.    CLGMC       Total
                                 ----------  ------------- ----------  -------------- -------------  --------     --------
<S>                               <C>               <C>        <C>           <C>           <C>          <C>          <C>

Balance at December 31, 1998     $  66,918      62,272           --         11,214         9,529           --      149,933

Transfer of capital                    --      (62,272)       62,272           --         (9,529)        9,529         --

Combination reclassifications       11,214         --          9,529       (11,214)          --         (9,529)        --

Net income                           5,264         --          4,557           --            --            --        9,821

Effect of purchase accounting          --          --         (6,935)          --            --            --       (6,935)

Distributions to partners          (55,453)        --        (48,004)          --            --            --     (103,457)
                                 ----------  -------------  ----------  ------------  -------------  ----------  ---------

Balance at December 31, 1999        27,943         --         21,419           --            --            --       49,362

Net income                           6,854         --          5,934           --            --            --       12,788

Distributions to partners           (8,190)        --         (7,089)          --            --            --      (15,279)
                                 ----------  -------------  ----------  ------------  -------------  ----------  ---------

Balance at December 31, 2000        26,607         --         20,264           --            --            --       46,871

Net income                           7,884         --          6,825           --            --            --       14,709

Distributions to partners           (4,907)        --         (4,248)          --            --            --       (9,155)
                                 ----------  -------------  ----------  ------------  -------------  ----------  ---------

Balance at December 31, 2001     $  29,584         --         22,841           --            --            --       52,425
                                 ==========  =============  ==========  ============  =============  ==========  =========

See accompanying notes to financial statements.
</TABLE>

                                      F-9

<PAGE>

<TABLE>
<CAPTION>

                                                  COSO FINANCE PARTNERS

                                                Statements of Cash Flows

                                 Years ended December 31, 2001, 2000, and 1999 (note 3)

                                                 (Dollars in thousands)


                                                     Twelve months   Twelve months    Two months     Ten months    Twelve months
                                                         ended           ended          ended          ended           ended
                                                     December 31,    December 31,    February 28,   December 31,    December 31,
                                                         2001            2000            1999           1999            1999
                                                     -------------  --------------   -------------- --------------  --------------
                                                                                      (old basis)      (new basis)
<S>                                                  <C>              <C>             <C>             <C>            <C>

Cash flows from operating activities:
  Net income                                         $  14,709          12,788            3,017          6,804         9,821
  Adjustments to reconcile net income to net
    cash provided by operating activities:
       Depreciation and amortization                    10,222           9,594            1,604          7,978         9,582
       Amortization of deferred financing costs            705             520               18            373           391
       Write-off of deferred financing costs               --              --               --             177           177
       Changes in operating assets and liabilities:
         Accounts receivable, prepaid
         expenses, and other assets                     (2,774)          4,304            1,015           (994)           21
         Investment in New CLPSI Company, LLC               67             140               19            (92)          (73)
         Accounts payable and accrued liabilities        1,721            (859)             378          4,253         4,631
         Amounts due from related parties               (7,402)          2,548           (1,751)         1,025          (726)
         Amounts due to related parties                   (136)            133              594            (30)          564
                                                      -----------  --------------  -------------- --------------  --------------
              Net cash provided by
                operating activities                    17,112          29,168            4,894         19,494        24,388
                                                      -----------  --------------  -------------- --------------  --------------

Cash flows from investing activities:
    Capital expenditures                                  (436)         (3,643)            (571)        (5,904)       (6,475)
    Decrease (increase) in restricted cash               1,671           2,005             (194)       (17,425)      (17,619)
                                                      -----------  --------------  -------------- --------------  --------------
              Net cash provided by (used in)
                investing activities                     1,235          (1,638)            (765)       (23,329)      (24,094)
                                                      -----------  --------------  -------------- --------------  --------------
Cash flows from financing activities:
    Distributions to partners                           (9,155)        (15,279)              --       (103,457)     (103,457)
    Increase in project financing debt                     --              --                --        151,550       151,550
    Repayment of project financing loans               (12,434)        (16,566)              --        (40,566)      (40,566)
                                                      -----------  -------------   -------------- --------------  --------------
              Net cash (used in) provided by
                financing activities                   (21,589)        (31,845)              --          7,527         7,527
                                                      -----------  --------------  -------------- --------------  --------------
              Net change in cash and
                cash equivalents                        (3,242)         (4,315)           4,129          3,692         7,821

Cash and cash equivalents at beginning of year           3,506           7,821              --           4,129           --
                                                      -----------  --------------  -------------- --------------  --------------

Cash and cash equivalents at end of year             $     264           3,506            4,129          7,821         7,821
                                                      ===========  ==============  ============== ==============  ==============

Supplemental cash flow disclosure:
    Cash paid for interest                           $  11,763          12,532              --          10,694        10,694
                                                      ===========  ==============  ============== ==============  ==============


Schedule of noncash investing activities
    as a result of purchase:
      Fair value of power purchase contract                --              --               --          14,344        14,344
      Reduction in property, plant, and equipment          --              --               --         (24,316)      (24,316)
      Net increase in other assets                         --              --               --           3,733         3,733
      Liabilities assumed                                  --              --               --            (696)         (696)
                                                      -----------  --------------  -------------- --------------  --------------
              Reduction in partners'  capital        $     --              --               --          (6,935)       (6,935)
                                                      ===========  ==============  ============== ==============  ==============

See accompanying notes to financial statements.

</TABLE>

                                      F-10

<PAGE>

                              COSO FINANCE PARTNERS

                          Notes to Financial Statements

                        December 31, 2001, 2000, and 1999

                             (Dollars in thousands)




(1)  Organization, Operation, and Business of the Partnerships

     Coso Finance Partners (CFP or the Partnership) and Coso Finance Partners II
     (CFP II) were formed on July 7,  1987 in connection with the refinancing of
     the construction of a 30-net-megawatt  (NMW) geothermal power plant and the
     expansion  of  that  power  plant  from  30 NMW to  approximately  80  NMW,
     constructed  on behalf of China  Lake Joint  Venture  (CLJV) on land at the
     China  Lake  Naval Air  Weapons  Station,  Coso Hot  Springs,  China  Lake,
     California.

     CFP acquired the assets and assumed the liabilities of CLJV insofar as they
     related  to the first  turbine  generator  set of the  power  plant and the
     related  geothermal  resources.  CFP II acquired the assets and assumed the
     liabilities of CLJV insofar as they related to the second and third turbine
     generator sets, together with the related geothermal  resources.  The three
     turbine  generators  that  comprise  the power  plant have the  capacity to
     produce an aggregate of  approximately  80 NMWs. CFP and CFP II were formed
     as separate entities in order to facilitate bank financing of the completed
     power plant and power plants under construction, respectively. In 1988, CFP
     II assigned its assets and  liabilities to CFP in exchange for a royalty of
     5% of the value of the steam produced.

     In May of 1999,  CFP merged  with CFP II, with CFP  surviving  as a general
     partnership owned by ESCA LLC (ESCA) and New CLOC Company,  LLC (New CLOC),
     both  Delaware  limited  liability  companies.  CFP and CFP II were general
     partnerships  between  China  Lake  Operating  Company  (CLOC),  a Delaware
     corporation wholly owned by CalEnergy Company, Inc. (CalEnergy),  now known
     as MidAmerican Energy Holding Company,  and ESCA, and China Lake Geothermal
     Management  Company  (CLGMC),  a  Delaware   corporation  wholly  owned  by
     CalEnergy,  and ESCA II Limited Partnership (ESCA II),  respectively.  ESCA
     was a California  limited liability  company owned by Caithness  Geothermal
     1980, Ltd.,  Caithness  Power,  L.L.C.,  and ESI Geothermal,  Inc. (ESI) (a
     subsidiary  of  FPL  Group,   Inc.).  ESCA  II  was  a  California  limited
     partnership  among Caithness  Geothermal 1980, Ltd., Mojave Power II, Inc.,
     and ESI Geothermal II, Inc. (a subsidiary of FPL Group, Inc.).

     On February 25, 1999,  Caithness  Acquisition  Company, LLC (CAC), a wholly
     owned subsidiary of Caithness Energy, LLC and an affiliate of ESCA and ESCA
     II,  purchased all of  CalEnergy's  interest in CLOC and CLGMC (see note 3)
     and formed two wholly  owned  subsidiaries,  New CLOC,  a Delaware  limited
     liability  company,  and New CLGMC Company (New CLGMC),  a Delaware limited
     liability company.  In May of 1999, ESCA II merged into ESCA, and New CLGMC
     merged into New CLOC. In October 1999,  CAC purchased all of ESI's interest
     in ESCA and ESCA II. The new managing partner of CFP became New CLOC.

     The  Partnership  sells all  electricity  produced to  Southern  California
     Edison  (Edison) under a 24-year power purchase  contract (PPC) expiring in
     2011. Under the terms of the PPC, Edison makes payments to CFP as follows:

*    Contractual  payments for energy delivered,  which payments escalated at an
     average rate of  approximately  7.6% for the first ten years after the date
     of firm  operation  (scheduled  energy price  period).  After the scheduled
     energy price  period,  the energy  payment  adjusted to the actual  avoided
     energy  cost  experienced  by  Edison.  In  August  1997,  the  Partnership
     completed the first ten-year period. At that time, Edison ceased paying the
     scheduled  energy rates.  For the years ended December 31, 2001,  2000, and
     1999,  Edison's  average  avoided cost of energy was 7.46,  5.80,  and 3.13
     cents per kilowatt  (kWh),  respectively.  Edison entered into an agreement
     (the  Agreement)  with the  Partnership  on  June 19,  2001 that  addressed
     renewable energy pricing and issues concerning  California's energy crisis.
     The Agreement,  which was amended on November 30,  2001, established May 1,
     2002  as the  date  when  the  Partnership  will  begin  receiving  a fixed
     avoided-cost-of-energy  rate of 5.37  cents  per kWh for  five  (5)  years.
     Subsequent to the five-year period,  Edison will be required to make energy
     payments to the  Partnership  based on its avoided cost of energy until its
     PPC expires.  Beyond the five-year period,  the Partnership  cannot predict
     the  likely  level of  avoided  cost of  energy  prices  under the PPC and,
     accordingly,  the revenues  generated by the  Partnership  could  fluctuate
     significantly:

*    Capacity payments which remain fixed over the life of the PPC to the extent
     that actual energy  delivered  exceeds minimum levels of the plant capacity
     defined in the PPC; and

*    Bonus  payments to the extent that actual energy  delivered  exceeds 85% of
     the plant  capacity  stated in the PPC. In 2001,  2000, and 1999, the bonus
     payments aggregated $2,237, $2,250, and $1,345, respectively.

     CalEnergy  served  as the  operator  for CFP,  maintaining  the  accounting
     records and  operating  the plant day to day,  until  February 1, 1999,  at
     which time Coso Operating  Company LLC (COC), a Delaware limited  liability
     company,  became  operator  pursuant to certain  operations and maintenance
     agreements with CLOC, the managing general partner.  COC was a wholly owned
     subsidiary of CalEnergy until  February 25,  1999, when CalEnergy  assigned
     all of its interest and rights in COC to CAC, which became manager and sole
     member.

     On February  25,  1999,  CFP entered  into two  operating  and  maintenance
     agreements,  one with FPL Operating Services,  Inc. (FPL) and a second with
     COC. The initial term of the FPL  operating and  maintenance  agreement was
     for three  years,  to provide  for the  operation  and  maintenance  of the
     geothermal  power  facilities and the  interconnection  to the transmission
     line. The term of the COC agreement is through December 31, 2009 to provide
     field services and administrative services for the Partnership.  On October
     17, 1999,  the operating  agreement  with FPL was terminated and COC became
     the sole operator of all Partnership operations.

     At formation,  and as  subsequently  amended,  the terms of the partnership
     agreements  provided  that  distributable  cash flow  before  "payout"  was
     allocated  10% to CLOC as  managing  partner and 90% in  proportion  to the
     remaining  sums  necessary  to be  distributed  to each  partner to achieve
     payout. "Payout" occurred in June 1996 and is defined as the point at which
     each  partner  had  received  aggregate  cash  distributions  from  the 90%
     allocation in amounts equal to their  accumulated cash  contributions  plus
     amounts  equal  to 10%  simple  interest  on the  cash  contributions.  For
     purposes of allocating net income to partners'  capital  accounts,  profits
     and losses  are  allocated  based on the  aforementioned  percentages.  For
     income tax purposes,  certain deductions and credits are subject to special
     allocations  as  defined  in the  partnership  agreements.  Cash flow after
     "payout"  is  allocated  53.6%  and  46.4% to ESCA  and New CLOC  (formerly
     CLOC/CLGMC), respectively.

(2)  Summary of Significant Accounting Policies

     Accounts Receivable and Revenue Recognition

     Accounts  receivable  primarily  consist  of  receivables  from  Edison for
     electricity  delivered  and sold under the PPC. In addition,  the U.S. Navy
     (Navy) reimburses CFP for electricity paid on their behalf (see note 6). As
     of December 31, 2001 and 2000, the balance due from the Navy was $1,218 and
     $477, respectively.

     Operating  revenues  are  recognized  as income  during the period in which
     electricity  is delivered to Edison.  Revenue was  recognized  based on the
     payment rates  scheduled in CFP's PPC with Edison through August 1997. From
     August 1997 through May 1, 2002,  and  subsequent to the  five-year  period
     stated in the Agreement,  revenue is recognized  based on Edison's  avoided
     energy cost until the Partnership's PPC expires.

     Periodic  increases in natural gas prices and imbalances between supply and
     demand, among other factors,  have at times led to significant increases in
     wholesale  electricity prices in California.  During those periods,  Edison
     had fixed tariffs with their retail customers that were significantly below
     the wholesale  prices it paid in  California.  That resulted in significant
     under-recoveries   by  Edison  of  its   electricity   purchase  costs.  On
     January 16,  2001,  Edison  announced  that it was  temporarily  suspending
     payments  for  energy  provided,  including  the  energy  provided  by  the
     Partnership,   pending  a  permanent  solution  to  its  liquidity  crisis.
     Subsequently,  pursuant to a California Public Utilities  Commission (CPUC)
     order,  Edison resumed making  payments to the  Partnership  beginning with
     power generated on March 27, 2001.  Edison also made a payment equal to 10%
     of the unpaid  balance for power  generated  from November 1, 2000 to March
     26, 2001, and continues to pay interest on the outstanding amount at 7% per
     annum.  That payment was made pursuant to the Agreement  between Edison and
     the  Partnership  described  in note 1. The  Agreement  as  amended,  which
     received  CPUC  approval in January of 2002,  established  the fixed energy
     rates  discussed  above and set payment  terms for past due amounts owed to
     the  Partnership by Edison.  As of  December 31,  2001, the Partnership was
     unable to determine the time frame during which any future  payments  would
     be received.  Due to the uncertainty  surrounding  Edison's ability to make
     payment on past due amounts,  collection was not reasonably assured and the
     Partnership  had not  recognized  revenue of $22,019 from Edison for energy
     delivered during the period  January 1,  2001 through  March 26,  2001. The
     provision for doubtful accounts previously recorded as of December 31, 2000
     of $15,234 has been reclassified to conform with the 2001 presentation.  In
     addition,  the  Partnership  will not recognize this revenue until payments
     from Edison are received (see note 10).

     Fixed Assets and Depreciation

     The  costs  of major  additions  and  betterments  are  capitalized,  while
     replacements,  maintenance,  and repairs which do not improve or extend the
     lives of the respective assets are expensed currently.

     Depreciation of the operating power plant and transmission line is computed
     on a straight-line basis over their estimated useful lives of 30 years and,
     for  significant  additions,  the  remainder  of the 30-year  life from the
     plant's commencement of operations.

     Recoverability of Long-Lived Assets

     An   impairment   loss  is  recognized   whenever   events  or  changes  in
     circumstances indicate that the carrying amounts of long-lived tangible and
     intangible assets is not recoverable.  The Partnership considers historical
     performance  and future  estimated  results in its  evaluation of potential
     impairment  and then  compares  the  carrying  amount  of the  asset to the
     estimated  future cash flows  expected to result from the use of the asset.
     If the carrying amount of the asset exceeds estimated expected undiscounted
     future cash flows before interest  charges,  the  Partnership  measures the
     amount of the  impairment by comparing the carrying  amount of the asset to
     its fair  value.  The  estimation  of fair value is  generally  measured by
     discounting expected future cash flows at the rate the Partnership utilizes
     to evaluate  potential  investments.  The Partnership  estimates fair value
     based on the best  information  available using estimates,  judgments,  and
     projections as considered necessary.

     Wells and Resource Development Costs

     The  Partnership  follows  the  full-cost  method of  accounting  for costs
     incurred in connection  with the  exploration and development of geothermal
     resources.  All such  costs,  which  include  dry hole  costs,  the cost of
     drilling and equipping  production wells, and  administrative  and interest
     costs directly  attributable to the project,  are capitalized and amortized
     over their estimated useful lives when production commences.  The estimated
     useful lives of production wells are ten years each;  exploration costs and
     development costs, other than production wells, are amortized over 30 years
     and, for significant additions,  the remainder of the 30-year life from the
     plant's commencement of operations.

     Deferred Plant Overhaul Costs and Well Rework Costs

     Plant overhaul  costs are deferred and amortized over the estimated  period
     between overhauls,  as these costs extend the useful life of the respective
     assets.  These  deferred  costs of $490 and $497 at  December 31,  2001 and
     2000,  respectively,  are  included  in  property,  plant,  and  equipment.
     Currently,  plant overhauls are amortized over three to four years from the
     point of completion.

     Production  and  injection  rework costs are expensed as incurred.  For the
     years ended December 31, 2001,  2000, and 1999,  such costs were $561, $42,
     and $47, respectively.

     Reclassifications

     Certain  reclassifications have been made to the 2000 balance sheet and the
     2000 and 1999  statements  of  operations  and cash flows to conform to the
     2001 presentation.

     Deferred Financing Costs

     Deferred  financing  costs as of December 31, 2001 and 2000 consist of loan
     fees and other costs of financing  that are amortized  over the term of the
     related  financing.  In  1999,  fees  of  $1,984  associated  with  certain
     short-term  financing  were fully expensed and included in costs related to
     acquisition  debt,  and a refinancing of this debt resulted in new deferred
     financing costs of $4,122. The $215 balance of the deferred financing costs
     at the date of  acquisition  related  to the  refinanced  project  debt was
     included in the extraordinary  loss recorded at the time of the refinancing
     (see note 7).  Accumulated  amortization  at December 31, 2001 and 2000 was
     $1,598 and $893, respectively.

     Income Taxes

     There  is  no  provision   for  income  taxes  since  such  taxes  are  the
     responsibility of the partners.

     Cash and Cash Equivalents

     For purposes of the statements of cash flows, the Partnership considers all
     money market instruments  purchased with initial maturities of three months
     or less to be cash equivalents.

     Restricted Cash and Investments

     As of December 31, 2001 and 2000, all of the Partnership's investments were
     classified as held to maturity and reported at amortized  cost.  Restricted
     cash and investments  include a capital  expenditure  reserve and a sinking
     fund  related  to a lump-sum  royalty  payment of $25,000 to be paid to the
     Navy in 2009 (see note 6) totaling  $10,894 and $9,838 at December 31, 2001
     and 2000,  respectively.  This account  comprised  various  mortgage-backed
     securities with maturities ranging from 2000 through 2005.  Restricted cash
     and  investments  also  include a sinking fund for the project debt service
     required  by the  project  loans  (see  note 7).  The  carrying  amount  of
     restricted cash and investments at December 31,  2001 and 2000 approximated
     fair  value,  which is based on quoted  market  prices as  provided  by the
     financial institution which holds the investments.

     Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets,  liabilities,  and
     partners'  capital and disclosure of contingent  assets and  liabilities at
     the date of the financial statements, and the reported amounts of revenues,
     expenses,  and  allocation of profits and losses during the period.  Actual
     results could differ significantly from those estimates.

     Fair Value of Financial Instruments

     The  carrying  amount of cash and cash  equivalents,  accounts  receivable,
     prepaid  expenses  and other  assets,  amounts  due from  related  parties,
     accounts  payable  and  accrued  liabilities,  and  amounts  due to related
     parties  approximated fair value as of December 31, 2001 and 2000,  because
     of the relatively short maturities of these instruments.  The project loans
     as of December 31, 2001 and 2000 have an  estimated  fair value of $122,550
     and $132,103,  respectively, based on the quoted market price of the senior
     secured notes and the Caithness Coso Funding Corp. notes, respectively (see
     note 7).

     The investment in New CLPSI Company, LLC (see note 4) approximates the fair
     value.

     New Accounting Pronouncements

     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
     Statement of Financial  Accounting Standards (SFAS) No. 133, Accounting for
     Derivative  Instruments and Hedging  Activities.  In June 2000, FASB issued
     SFA No.  138,  Accounting for Certain  Derivative  Instruments and Certain
     Hedging  Activities,  which  amended  SFAS No.  133 and  addressed  certain
     implementation  issues.  SFAS No.  133,  as  amended,  requires  that every
     derivative instrument (including certain derivative instruments embedded in
     other  contracts)  be recorded  in the balance  sheet as either an asset or
     liability  measured at its fair value.  The  Statement  also  requires that
     changes in the derivative's fair value be recognized  currently in earnings
     unless specific hedge accounting criteria are met. The Partnership does not
     have any derivative  instruments  and,  therefore,  the adoption in 2001 of
     SFAS No.  133,  as  amended,  did not have any effect on the  Partnership's
     financial statements.

     In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
     No. 142,  Goodwill and Other Intangible Assets.  SFAS No. 141 requires that
     the purchase  method of accounting  be used for all business  combinations.
     SFAS No. 141 also specifies  criteria that intangible  assets acquired in a
     business  combination  must meet to be recognized  and reported  separately
     from  goodwill.  SFAS No. 142 will  require that  goodwill  and  intangible
     assets with indefinite useful lives no longer be amortized,  but instead be
     tested for impairment at least  annually in accordance  with the provisions
     of SFAS No. 142.  SFAS No. 142 also requires  that  intangible  assets with
     estimable useful lives be amortized over their respective  estimated useful
     lives to their estimated residual values, and be reviewed for impairment in
     accordance  with SFAS  No. 121  and,  subsequently,  SFAS No. 144 after its
     adoption.

     The Partnership  adopted the provisions of SFAS No. 141 as of July 1, 2001.
     The Partnership's  management is in the process of evaluating the impact of
     implementing  SFAS No. 142 and is unable to estimate the effect, if any, on
     the Partnership's financial statements.

     In October 2001, FASB issued SFAS No. 144, Accounting for the Impairment or
     Disposal of Long-Lived  Assets.  SFAS No. 144 is effective for fiscal years
     beginning after December 15, 2001, and replaces SFAS No. 121 and provisions
     of APB Opinion No. 30 for the disposal of segments of a business.  SFAS No.
     144 creates one  accounting  model,  based on the framework  established in
     SFAS No. 121, to be applied to all long-lived assets including discontinued
     operations. The Partnership is required to adopt SFAS No. 144 on January 1,
     2002 and  believes  there will be no material  effect on the  Partnership's
     financial statements.

(3)  Acquisition Accounting

     On February 25, 1999, CAC purchased all of CalEnergy's  interest in CFP and
     CFP II, Coso Energy  Developers  (CED),  and Coso Power  Developers  (CPD),
     collectively known as the Coso Partnerships,  for approximately $205,500 in
     cash plus the assumption of debt of  approximately  $139,800.  The purchase
     price  allocated to CFP was  approximately  $62,000 plus the  assumption of
     debt of approximately  $40,600. The acquisition was accounted for under the
     purchase  method,  and no goodwill was  recorded.  After CAC's  purchase of
     CalEnergy's  interest in CFP, a new basis of  accounting  was adopted  and,
     therefore,  the financial  information for the period after the acquisition
     is presented on a different  cost basis than that for the period before the
     acquisition and, therefore, is not comparable.

     The  purchase  price  was  allocated  to  the  portion  of the  assets  and
     liabilities  purchased from CalEnergy based upon their fair value, with the
     amount of fair value of net assets in excess of the  purchase  price  being
     allocated  to  long-lived  assets on a pro rata  basis.  These  adjustments
     resulted in a net decrease of $24,316 in the amounts allocated to property,
     plant, and equipment, and an increase of $14,344 in the amount allocated to
     PPC. The PPC is being amortized on a straight-line basis over the remaining
     term of the PPC of 12.5  years as of the date of  acquisition.  Accumulated
     amortization  on the PPC at  December  31,  2001 and 2000  was  $3,251  and
     $2,104, respectively.

(4)  Investment in New CLPSI Company, LLC

     New CLPSI Company,  LLC (CLPSI) is a wholly owned  subsidiary of CAC. CLPSI
     purchases,  stores,  and distributes spare parts to the Coso  Partnerships.
     Also,  certain other facilities  utilized by the Coso Partnerships are held
     by CLPSI.  CFP's  investment  in CLPSI  represents  funds  advanced for the
     purchase of spare parts  inventory and other assets.  Spare parts inventory
     held by CLPSI on behalf of CFP is valued at the lower of cost or market.

(5)  Property, Plant, and Equipment

     Property, plant, and equipment at December 31, 2001 and 2000 consist of the
     following:

                                                         2001          2000
                                                         ----          ----
       Power plant and gathering system            $    154,506       154,506
       Transmission line                                  5,746         5,746
       Wells and resource development costs              68,832        68,466
                                                        -------       -------
                                                        229,084       228,718
       Less accumulated depreciation and
           amortization                                 (88,647)      (79,642)
                                                        -------       -------
                                                   $    140,437       149,076
                                                        =======       =======

     The transmission line costs represent the Partnership's  share of the costs
     of  construction  of  transmission  lines from Inyokern,  California to the
     Edison  substation  at  Kramer,  California  and from  Kramer to the Edison
     substation at Victorville, California.

(6)  Royalty Expense

     Royalty expense is summarized as follows:

                             2001          2000          1999
                             ----          ----          ----
     Unit 1              $   4,889         3,824         3,852
     Units 2 and 3           5,061         7,097         6,305
                             -----         -----         -----
     Total               $   9,950        10,921        10,157
                             =====        ======        ======

     The Navy I partnership  pays a royalty for Unit I through  reimbursement of
     electricity  supplied to the Navy by Edison from  electricity  generated at
     the Navy I plant.  The  reimbursement is based on a pricing formula that is
     included  in the Navy  contract.  This  formula is  largely  based upon the
     tariff rates charged by Edison,  which have recently been  increased by the
     CPUC.  Discussions  with the Navy are continuing to readjust the formula to
     reflect  recent  activity in the local energy  market.  In November 2001, a
     modification  to the calculation of the  reimbursement  pricing formula was
     made to the Navy contract  resulting in a reduction of accrued royalties of
     $6.5 million.  For Units 2 and 3, the Navy I partnership's  royalty expense
     paid to the  Navy is a fixed  percentage  of  electricity  sales  at 15% of
     revenue received by the Navy I partnership  through 2003, and will increase
     to 20% from 2004 through 2009.

     In addition,  CFP is required to pay the Navy $25,000 in December 2009, the
     date the  contract  expires.  The  payment is  secured  by funds  placed on
     deposit monthly,  which funds plus accrued interest will aggregate $25,000.
     Currently,  the monthly  amount to be deposited is  approximately  $60. The
     balance  included in accounts  payable and accrued  liabilities at December
     31, 2001 and 2000 was $11,098 and $9,862, respectively.

(7)  Project Loans

     In order to complete  the purchase of  CalEnergy's  interest in CFP and CFP
     II, CAC  arranged for  short-term  debt  financing  of  $211,500,  of which
     approximately  $77,610 was  allocated  to CFP.  As a result of  "push-down"
     accounting, the short-term debt was reflected in the financial statement of
     CFP and was repaid on May 28,  1999 from a portion of the proceeds from the
     offering of senior  secured  notes.  Financing  costs  associated  with the
     short-term financing are included in interest expense - acquisition debt.

     On May 28, 1999,  Caithness Coso Funding Corp.  (Funding  Corp.),  a wholly
     owned subsidiary of the Coso Partnerships, raised $413,000 from an offering
     of senior secured notes. Funding Corp. loaned approximately $151,550 to CFP
     from the $413,000 debt raised from the offering of senior  secured notes on
     terms consistent with those of the senior secured notes. The loan consisted
     of one note of $29,000 at 6.80%  which was paid off on December  15,  2001,
     and another of $122,550 at 9.05% which has  payments  due at various  dates
     through  December 15,  2009.  Through this financing,  the existing project
     loan and short-term  financing of $118,176 were repaid and an extraordinary
     loss of $2,375 from the early extinguishment of this debt was incurred. The
     extraordinary loss was due to a premium and other costs incurred to pay the
     existing project loan before its maturity date.

     The annual  maturity of the project loans for each year ending  December 31
     is as follows:



             Year ending December 31:                    Amount
             ------------------------                   --------

                     2002                             $  11,597
                     2003                                13,408
                     2004                                10,694
                     2005                                15,100
                     2006                                16,160
                  Thereafter                             55,591
                                                        -------
                                                      $ 122,550
                                                        =======

     The loans contain certain  restrictive  covenants that, among other things,
     limit the Partnership's ability to incur additional  indebtedness,  release
     funds from reserve accounts,  make  distributions,  create liens, and enter
     into any transaction of merger or consolidation.

     The  Partnership,  Funding  Corp.,  CPD, and CED are jointly and  severally
     liable for the repayment of the senior secured notes.

     The  annual  maturity  of the  senior  secured  notes for each year  ending
     December 31 is as follows:




             Year ending December 31:                   Amount
             ------------------------                   -------
                     2002                             $  21,771
                     2003                                27,618
                     2004                                31,332
                     2005                                35,480
                     2006                                38,286
                  Thereafter                            148,513
                                                        -------
                                                      $ 303,000
                                                        =======

(8)  Related Party Transactions

     The amounts due from and to related  parties at December  31, 2001 and 2000
     consist of the following:

                                               2001                   2000
                                              -----                   -----
     Amounts due from related parties:
         Coso Operating Company           $     231                     --
         CPD for steam sharing                7,376                   1,357
         CED for steam sharing                1,755                     603
                                              -----                   -----
                                          $   9,362                   1,960
                                              =====                   =====

     Amounts due to related parties:
         Caithness Coso Funding Corp.     $     494                     525
         Coso Operating Company                 --                       60
         Caithness Operating Company             67                     112
                                              -----                   -----
                                          $     561                     697
                                              =====                   =====

     COC is reimbursed monthly for  non-third-party  costs incurred on behalf of
     CFP. These costs are comprised principally of direct operating costs of the
     CFP geothermal facility, allocable general and administrative costs, and an
     operator  fee.  The amount due from COC relates to advances for payments of
     operating  expenses.  The amount due to COC relates to  reimbursements  for
     payment of operating expenses.

     Both  CalEnergy  and ESCA were  reimbursed  at amounts  approved  for their
     respective  costs  incurred in relation  to the CFP  Management  Committee.
     Prior to May 28, 1999, CalEnergy received $25, while ESCA received $129.

     As of  May 28,  1999,  the  management  committee  fee was  eliminated  and
     replaced  by a  non-managing  fee  payable  to ESCA.  For the  years  ended
     December 31, 2001 and 2000, ESCA received $237 and $234, respectively.

     The amount due to Funding Corp. is accrued interest for 15 days in December
     related to the project loans (see note 7).

     CFP is charged by CLPSI for both its inventory usage and its portion of the
     expenses of operating  CLPSI.  The charges to CFP from CLPSI in 2001, 2000,
     and  1999,   which  are  included  in  plant   operating   expenses,   were
     approximately $147, $43, and $65, respectively.

     During 1994, the Coso  Partnerships  entered into steam sharing  agreements
     under  which  the  partnerships  may  transfer  steam,  with the  resulting
     incremental revenue and royalty expense shared equally by the partnerships.
     In the second half of 1995,  interconnection  facilities between the plants
     were  completed  and the  transfer of steam  commenced.  CFP steam  sharing
     revenue,  net of royalties  and other  related  costs,  amounted to $7,938,
     $5,962, and $17,579 in 2001, 2000, and 1999, respectively.

(9)  Settlement of Litigation

     In February 2000, the Coso  Partnerships  reached a settlement with Edison,
     subject  to the  approval  of the CPUC,  which  approval  was  received  in
     December  2000.  The case  has not been  dismissed  pending  completion  of
     certain  obligations  under  the  settlement  agreements.  The  cost of the
     settlement will be allocated among the Coso Partnerships. A portion of that
     cost was reflected in the purchase accounting applied to the acquisition of
     CalEnergy's  interest in the  Partnership  (see note 3). The balance of the
     settlement was charged to settlement of litigation and related expenses.

(10) Subsequent Event

     On March 1,  2002, Edison reached certain financing milestones and paid the
     Partnership  for  revenue  generated  but not  recognized  for  the  period
     November  2000  through  March 26,  2001.  As such,  the  Partnership  will
     recognize this revenue in the first quarter of 2002.

                                      F-11

<PAGE>

                          Independent Auditors'  Report



The Partners and Management Committee
Coso Energy Developers:


We have audited the accompanying  balance sheets of Coso Energy Developers as of
December 31, 2001 and 2000, and the related statements of operations,  partners'
capital,  and cash flows for each of the years in the  three-year  period  ended
December 31,  2001.  These financial  statements are the  responsibility  of the
Partnership's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the 2001 and 2000 financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of  Coso  Energy
Developers as of December 31, 2001 and 2000,  and the results of its  operations
and its  cash  flows  for  each of the  years  in the  three-year  period  ended
December 31,  2001, in conformity with accounting  principles generally accepted
in the United States of America.

As discussed in note 3 to the financial statements, effective February 25, 1999,
Caithness  Acquisition Company, LLC acquired all of the partnership interest not
already  owned by its  affiliate,  Caithness  Coso  Holdings  LLC, in a business
combination  accounted for as a purchase.  As a result of the  acquisition,  the
financial  information  for the period after the  acquisition  is presented on a
different  cost  basis  than that for the period  before  the  acquisition  and,
therefore, is not comparable.



March 1, 2002


/S/  KPMG LLP
--------------
     KPMG LLP

                                      F-12

<PAGE>

                                                  COSO ENERGY DEVELOPERS

                                                      Balance Sheets

                                                December 31, 2001 and 2000

                                                  (Dollars in thousands)
<TABLE>
<CAPTION>


               Assets                                                    2001                  2000

                                                                     -------------         ------------
<S>                                                                      <C>                    <C>

Cash and cash equivalents                                         $         --                  5,862
Restricted cash and investments (note 2)                                  7,368                14,502
Accounts receivable, net (note 2)                                         2,939                    40
Prepaid expenses and other assets                                           849                 1,013
Amounts due from related parties (note 8)                                   401                   365
Property, plant, and equipment (notes 3 and 6)                          148,417               153,618
Investment in New CLPSI Company, LLC  (note 5)                              789                 1,051
Investments in Coso Transmission Line Partners (note 4)                   2,738                 2,871
Power purchase contract, net (note 3)                                    18,437                19,510
Deferred financing costs, net (note 2)                                    2,040                 2,480
                                                                     -------------         ------------

                 Total assets                                     $     183,978               201,312
                                                                     =============         ============

                       Liabilities and Partners' Capital

Accounts payable and accrued liabilities                          $       7,699                 6,839
Amounts due to related parties (note 8)                                  27,267                24,321
Project loan (note 7)                                                    96,250               100,907
                                                                     -------------         ------------

                 Total liabilities                                      131,216               132,067

Commitments and contingencies (notes 7 and 9)

Partners'  capital                                                       52,762                69,245
                                                                     -------------         ------------

                 Total liabilities and partners' capital          $     183,978               201,312
                                                                     =============         ============
</TABLE>

See accompanying notes to financial statements.

                                      F-13

<PAGE>
<TABLE>
<CAPTION>

                                                  COSO ENERGY DEVELOPERS

                                                 Statements of Operations

                                  Years ended December 31, 2001, 2000, and 1999 (note 3)

                                                  (Dollars in thousands)



                                                   Twelve months    Twelve months     Two months       Ten months     Twelve months
                                                        ended            ended           ended            ended            ended
                                                     December 31,     December 31,     February 28,     December 31,    December 31,
                                                        2001             2000             1999             1999            1999
                                                   -------------    --------------    -------------    -------------  -------------
                                                                                       (old basis)      (new basis)
<S>                                                     <C>              <C>              <C>              <C>             <C>
Revenues:
   Energy revenues (notes 2, 8, and 10)            $   31,133           29,052           16,716           19,223          35,939
   Capacity payments                                   12,908           13,122              817           13,121          13,938
   Interest and other income                            3,766            8,125               78              988           1,066
                                                     -----------    --------------    -------------    -------------   -------------

                 Total revenues                        47,807           50,299           17,611           33,332          50,943
                                                     -----------    --------------    -------------    -------------  --------------

Operating expenses:
   Plant operating expense                             10,221           12,008            3,470           12,098          15,568
   Royalty expense                                      5,203            4,045            1,592            1,556           3,148
   Depreciation and amortization                       15,972           15,361            2,550           13,099          15,649
   Edison legal expenses and
        settlement costs (note 9)                         --               --               569            3,600           4,169
                                                     -----------    --------------    -------------    -------------  --------------

                 Total operating expenses              31,396           31,414            8,181           30,353          38,534
                                                     -----------    --------------    -------------    -------------  --------------

                 Operating income                      16,411           18,885            9,430            2,979          12,409
                                                     -----------    --------------    -------------    -------------  --------------

Other expenses:
   Interest expense                                     8,958            9,174              602            6,708           7,310
   Interest expense - acquisition debt (note 3)           --               --               --             1,415           1,415
   Costs related to acquisition debt (note 3)             --               --               --             1,262           1,262
   Amortization of deferred financing                     440              318               14              234             248
                                                     -----------    --------------    -------------    -------------  --------------

                 Total other expenses                   9,398            9,492              616            9,619          10,235
                                                     -----------    --------------    -------------    -------------  --------------

                 Income (loss) before
                    extraordinary item                  7,013            9,393            8,814           (6,640)          2,174

Extraordinary item - loss on
   extinguishment of debt (note 7)                        --               --               --             1,822           1,822
                                                     -----------    --------------    -------------    -------------  --------------

                 Net income (loss)                 $    7,013            9,393            8,814           (8,462)            352
                                                     ===========    ==============    =============    =============  ==============

See accompanying notes to financial statements.
</TABLE>

                                      F-14

<PAGE>

<TABLE>
<CAPTION>

                                                       COSO ENERGY DEVELOPERS

                                                   Statements of Partners' Capital

                                        Years ended December 31, 2001, 2000, and 1999 (note 3)

                                                       (Dollars in thousands)


                                                  Caithness             Coso
                                                    Coso             Hotsprings              New
                                                  Holdings          Intermountain            Chip
                                                     LLC             Powers, Inc.         Company, LLC          Total
                                                  ---------         -------------         ------------         --------
<S>                                                 <C>                 <C>                  <C>                 <C>

Balance at December 31, 1998                    $   87,896              75,295                  --             163,191

Transfer of capital                                    --              (75,295)              75,295                --

Distributions to partners                          (39,846)                --               (36,780)           (76,626)

Net income                                             183                 --                   169                352

Effect of purchase accounting                          --                  --                (7,567)            (7,567)
                                                  ---------         -------------         ------------         --------

Balance at December 31, 1999                        48,233                 --                31,117             79,350

Distributions to partners                          (10,139)                --                (9,359)           (19,498)

Net income                                           4,884                 --                 4,509              9,393
                                                  ---------         -------------         ------------         --------

Balance at December 31, 2000                        42,978                 --                26,267             69,245

Distributions to partners                          (12,218)                --               (11,278)           (23,496)

Net income                                           3,647                 --                 3,366              7,013
                                                  ---------         -------------         ------------         --------

Balance at December 31, 2001                    $   34,407                 --                18,355             52,762
                                                  =========         =============         ============         ========

See accompanying notes to financial statements.

</TABLE>

                                      F-15

<PAGE>

<TABLE>
<CAPTION>

                                                           COSO ENERGY DEVELOPERS

                                                          Statements of Cash Flows

                                           Years ended December 31, 2001, 2000, and 1999 (note 3)

                                                           (Dollars in thousands)


                                                        Twelve months   Twelve months    Two months      Ten months    Twelve months
                                                            ended           ended          ended           ended           ended
                                                        December 31,    December 31,    February 28,    December 31,    December 31,
                                                            2001            2000            1999            1999             1999
                                                        -------------   -------------   ------------    ------------   -------------
                                                                                         (old basis)     (new basis)
<S>                                                          <C>             <C>             <C>             <C>              <C>

Cash flows from operating activities:
  Net income (loss)                                     $    7,013           9,393           8,814           (8,462)            352
  Adjustments to reconcile net income (loss) to
    net cash provided by operating activities:
      Depreciation and amortization                         15,972          15,361           2,550           13,099          15,649
      Amortization of deferred financing costs                 440             318              14              234             248
      Write-off of deferred financing costs                    --              --              --               161             161
      Changes in operating assets and liabilities:
         Accounts receivable, prepaid expenses,
           and other assets                                 (2,735)          5,142            (944)          14,833          13,889
         Investment in Coso Transmission
           Line Partners                                       133             110            (823)             949             126
         Investment in New CLPSI Company, LLC                  262             177             141              198             339
         Accounts payable and accrued liabilities              860             158          (1,248)           2,215             967
         Amounts due from related parties                      (36)            396              (6)            (461)           (467)
         Amounts due to related parties                      2,946           1,861           2,055           (3,513)         (1,458)
                                                           ----------   -------------   ------------    ------------   -------------
               Net cash provided by
                 operating activities                       24,855          32,916          10,553           19,253          29,806
                                                           ----------   -------------   ------------    ------------   -------------
Cash flows from investing activities:
  Capital reimbursements (expenditures)                     (9,698)         (2,290)            316           (7,252)         (6,936)
  Decrease (increase) in restricted cash                     7,134          (4,696)             43           (9,806)         (9,763)
                                                           ----------   -------------   ------------    ------------   -------------
               Net cash provided by (used in)
                 investing activities                       (2,564)         (6,986)            359          (17,058)        (16,699)
                                                           ----------   -------------   ------------    ------------   -------------
Cash flows from financing activities:
  Distributions to partners                                (23,496)        (19,498)            --           (76,626)        (76,626)
  Increase in project financing debt                           --              --              --           107,900         107,900
  Repayment of project financing loans                      (4,657)         (6,993)            --           (37,958)        (37,958)
                                                           ----------   -------------   ------------    ------------   -------------
               Net cash used in
               financing activities                        (28,153)        (26,491)            --            (6,684)         (6,684)
                                                           ----------   -------------   ------------    ------------   -------------
               Net change in cash and
                 cash equivalents                           (5,862)           (561)         10,912           (4,489)          6,423

Cash and cash equivalents at beginning of year               5,862           6,423             --            10,912             --
                                                           ----------   -------------   ------------    ------------   -------------

Cash and cash equivalents at end of year                $      --            5,862          10,912            6,423           6,423
                                                           ==========   =============   ============    ============   =============
Supplemental cash flow disclosure:
     Cash paid for interest                             $    8,964           9,187             --             8,117           8,117
                                                           ==========   =============   ============    ============   =============
Schedule of noncash investing activities
as a result of purchase:
        Fair value of power purchase contract           $      --              --              --            21,443          21,443
        Reduction in property, plant, and equipment            --              --              --           (29,304)        (29,304)
        Net increase in other assets                           --              --              --             2,694           2,694
        Liabilities assumed                                    --              --              --            (2,400)         (2,400)
                                                           ----------   -------------   ------------    ------------   -------------

                 Reduction in partners' capital         $      --              --              --            (7,567)         (7,567)
                                                           ==========   =============   ============    ============   =============

See accompanying notes to financial statements.
</TABLE>

                                      F-16

<PAGE>

                             COSO ENERGY DEVELOPERS

                          Notes to Financial Statements

                        December 31, 2001, 2000, and 1999

                             (Dollars in thousands)




(1)  Organization, Operation, and Business of the Partnership

     Coso Energy  Developers (CED or the  Partnership)  was founded on March 31,
     1988, in connection with financing the  construction of a geothermal  power
     plant on land leased from the U.S. Bureau of Land Management  (BLM) at Coso
     Hot Springs, China Lake, California.  CED is a general partnership owned by
     Caithness Coso Holdings,  LLC (CCH), a California limited liability company
     and, until February 25,  1999, Coso Hotsprings  Intermountain  Powers, Inc.
     (CHIP),  a Delaware  corporation  wholly owned by CalEnergy  Company,  Inc.
     (CalEnergy),  now known as MidAmerican Energy Holding Company.  On February
     25,  1999,  Caithness  Acquisition  Company,  LLC  (CAC),  a  wholly  owned
     subsidiary of Caithness Energy,  LLC and an affiliate of CCH, purchased all
     of  CalEnergy's  interest  in CHIP (see note 3) and  formed a wholly  owned
     subsidiary,  New CHIP Company, LLC (New CHIP), a Delaware limited liability
     company, to become the new managing general partner of CED.

     The CED  power  plants  are  located  on land  owned by the BLM.  There are
     turbine  generators located at both the East and West power locks. CED pays
     royalties to BLM of 10% of the net value of the steam produced.

     The primary BLM  geothermal  lease had an initial  term of ten years (1998)
     and thereafter is subject to automatic extension until October 31, 2035, so
     long as geothermal steam is commercially  produced. In addition,  the lease
     may be extended to 2075 at the option of the BLM. Coso Land Company  (CLC),
     the original  leaseholder,  retained a 5% overriding royalty interest based
     on the  value  of the  steam  produced.  CLC  was a joint  venture  between
     CalEnergy  and an  affiliate  of  CCH.  On  February  25,  1999,  CalEnergy
     transferred all its interest and rights in CLC to CAC.

     The  Partnership  sells all  electricity  produced to  Southern  California
     Edison (Edison) under a 30-year power purchase  contract (the PPC) expiring
     in 2019.  Under  the  terms of the PPC,  Edison  makes  payments  to CED as
     follows:

*    Contractual  payments for energy delivered,  which payments escalated at an
     average rate of  approximately  7.6% for the first ten years after the date
     of firm  operation  (scheduled  energy price  period).  After the scheduled
     energy price  period,  the energy  payment  adjusted to the actual  avoided
     energy  cost  experienced  by  Edison.  In March of 1999,  the  Partnership
     completed the ten-year  fixed price payment period and Edison ceased paying
     the scheduled  energy rates.  For the years ended December 31, 2001,  2000,
     and 1999,  Edison's average avoided cost of energy was 7.46, 5.80, and 3.13
     cents  per  kwh,  respectively.  Edison  entered  into  an  agreement  (the
     Agreement) with the Partnership on June 19,  2001 that addressed  renewable
     energy  pricing  and issues  concerning  California's  energy  crisis.  The
     Agreement, which was amended on November 30,  2001, established May 1, 2002
     as the date when the Partnership  will begin receiving a fixed avoided cost
     of energy rate of 5.37 cents per kwh for five (5) years.  Subsequent to the
     five-year  period,  Edison will be required to make energy  payments to the
     Partnership  based on its  avoided  cost of energy  until its PPC  expires.
     Beyond the five-year  period,  the  Partnership  cannot  predict the likely
     level of avoided cost of energy prices under the PPC and, accordingly,  the
     revenues generated by the Partnership could fluctuate significantly;

*    Capacity payments which remain fixed over the life of the PPC to the extent
     that actual energy  delivered  exceeds minimum levels of the plant capacity
     defined in the PPC; and

*    Bonus payments to the extent that actual energy delivery exceeds 85% of the
     plant  capacity  stated in the PPC.  In 2001,  2000,  and  1999,  the bonus
     aggregated $2,194, $2,230, and $2,200, respectively.

     CalEnergy  served  as the  operator  for CED,  maintaining  the  accounting
     records and operating the plant day-to-day, until February 1, 1999 at which
     time when Coso Operating  Company LLC (COC), a Delaware  limited  liability
     company,  became  operator  pursuant to certain  operations and maintenance
     agreements with CHIP, the managing general partner.  COC was a wholly owned
     subsidiary of CalEnergy until February 25, 1999 when CalEnergy assigned all
     of its interest and right in COC to CAC,  which became its manager and sole
     member.

     On February  25,  1999,  CED entered  into two  operating  and  maintenance
     agreements,  one with FPL Operating Services,  Inc. (FPL) and a second with
     COC. The initial term of the FPL  operating and  maintenance  agreement was
     for three  years,  to provide  for the  operation  and  maintenance  of the
     geothermal  power  facilities and the  interconnection  to the transmission
     line. The term of the COC agreement is through December 31, 2009 to provide
     field services and administrative services for the Partnership.  On October
     17, 1999,  the operating  agreement  with FPL was terminated and COC became
     the sole operator of all Partnership operations.

     At  formation,  and as  subsequently  amended,  the  partnership  agreement
     provided that  distributable  cash flow before "payout" was allocated 3.81%
     to CHIP as  managing  partner and 96.19%  allocated  in  proportion  to the
     remaining  sums  necessary  to be  distributed  to each  partner to achieve
     payout.  "Payout"  was  defined  as the  point at which  each  partner  had
     received aggregate cash distributions from the 96.19% allocation in amounts
     equal to their accumulated capital contributions. Cash flow after "payout,"
     which occurred in June 1994, is allocated 48% to New CHIP  (formerly  CHIP)
     and 52% to CCH. For purposes of allocating net income to partners'  capital
     accounts,  profits  and losses are  allocated  based on the  aforementioned
     capital  percentages.  For  income tax  purposes,  certain  deductions  and
     credits are subject to special  allocations  as defined in the  partnership
     agreement.

(2)  Summary of Significant Accounting Policies

     Accounts Receivable and Revenue Recognition

     Accounts  receivable  primarily  consist  of  receivables  from  Edison for
     electricity  delivered  and sold  under  the PPC.  Operating  revenues  are
     recognized as income during the period in which electricity is delivered to
     Edison.  Revenue was  recognized  based on the payment  rates  scheduled in
     CED's PPC with Edison  through  March 1999.  From March 1999 through May 1,
     2002,  and  subsequent  to the five-year  period  stated in the  Agreement,
     revenue is  recognized  based on Edison's  avoided  energy cost,  until the
     Partnership's PPC expires.

     Periodic  increases in natural gas prices and imbalances between supply and
     demand, among other factors,  have at times led to significant increases in
     wholesale  electricity prices in California.  During those periods,  Edison
     had fixed tariffs with their retail customers that were significantly below
     the wholesale  prices it paid in  California.  That resulted in significant
     under-recoveries   by  Edison  of  its   electricity   purchase  costs.  On
     January 16,  2001,  Edison  announced  that it was  temporarily  suspending
     payments  for  energy  provided,  including  the  energy  provided  by  the
     Partnership,   pending  a  permanent  solution  to  its  liquidity  crisis.
     Subsequently,  pursuant to a California Public Utilities  Commission (CPUC)
     order,  Edison resumed making  payments to the  Partnership  beginning with
     power generated on March 27, 2001.  Edison also made a payment equal to 10%
     of the unpaid  balance from power  generated from November 1, 2000 to March
     26, 2001 and continues to pay interest on the outstanding  amount at 7% per
     annum.  That payment was made pursuant to the Agreement  between Edison and
     the  Partnership  described  in note 1. The  Agreement  as  amended,  which
     received CPUC approval in January 2002,  established the fixed energy rates
     discussed  above and set  payment  terms for past due  amounts  owed to the
     Partnership by Edison. As of December 31,  2001, the Partnership was unable
     to  determine  the time frame  during  which any future  payments  would be
     received.  Due to the  uncertainty  surrounding  Edison'  ability  to make
     payment on past due amounts,  collection was not reasonably assured and the
     Partnership  had not  recognized  revenue of $21,789 from Edison for energy
     delivered during the period  January 1,  2001 through  March 26,  2001. The
     provision for doubtful accounts previously recorded as of December 31, 2000
     of $15,279 has been reclassified to conform with the 2001 presentation.  In
     addition,  the  Partnership  will not recognize this revenue until payments
     from Edison are received (see note 10).

     Fixed Assets and Depreciation

     The  costs  of major  additions  and  betterments  are  capitalized,  while
     replacements,  maintenance and repairs,  which do not improve or extend the
     life of the respective assets, are expensed currently.

     Depreciation  of the power  plant and  transmission  line is  computed on a
     straight-line  basis over their estimated  useful life of 30 years and, for
     significant  additions,  the remainder of the 30-year life from the plant's
     commencement of operations.

     Recoverability of Long-Lived Assets

     An   impairment   loss  is  recognized   whenever   events  or  changes  in
     circumstances indicate that the carrying amounts of long-lived tangible and
     intangible assets are not recoverable. The Partnership considers historical
     performance  and future  estimated  results in its  evaluation of potential
     impairment  and then  compares  the  carrying  amount  of the  asset to the
     estimated  future cash flows  expected to result from the use of the asset.
     If the carrying amount of the asset exceeds estimated expected undiscounted
     future cash flows before interest  charges,  the  Partnership  measures the
     amount of the  impairment by comparing the carrying  amount of the asset to
     its fair  value.  The  estimation  of fair value is  generally  measured by
     discounting expected future cash flows at the rate the Partnership utilizes
     to evaluate  potential  investments.  The Partnership  estimates fair value
     based on the best  information  available using estimates,  judgments,  and
     projections as considered necessary.

     Wells and Resource Development Costs

     CED  follows  the  full-cost  method of  accounting  for costs  incurred in
     connection with the  exploration  and development of geothermal  resources.
     All such costs,  which  include dry hole  costs,  the cost of drilling  and
     equipping  production wells, and administrative and interest costs directly
     attributable  to the  project  are  capitalized  and  amortized  over their
     estimated  useful lives when  production  commences.  The estimated  useful
     lives  of  production  wells  are 10  years  each;  exploration  costs  and
     development costs, other than production wells, are amortized over 30 years
     and, for significant additions,  the remainder of the 30-year life from the
     plant's commencement of operations.

     Deferred Plant Overhaul Costs and Well Rework Costs

     Plant overhaul  costs are deferred and amortized over the estimated  period
     between overhauls as these costs extend the life of the respective  assets.
     These  deferred  costs  of $519  and $100 at  December 31, 2001  and  2000,
     respectively,  are included in property,  plant, and equipment.  Currently,
     plant   overhauls  are  amortized  over  three  years  from  the  point  of
     completion.

     Production and injection  rework costs are expensed as incurred  during the
     year.  For the years ended December 31, 2001,  2000,  and 1999,  such costs
     were $160, $653, and $676, respectively.

     Reclassifications

     Certain  reclassifications have been made to the 2000 balance sheet and the
     2000 and 1999  statements  of  operations  and cash flows to conform to the
     2001 presentation.

     Deferred Financing Costs

     Deferred  financing  costs as of December 31, 2001 and 2000 consist of loan
     fees and other costs of financing  that are amortized  over the term of the
     related financing. On February 25, 1999, the fees of $1,408 associated with
     certain  short-term  financing  were fully  expensed  and included in costs
     related to acquisition debt, and a refinancing of this debt resulted in new
     deferred  financing  costs of  $3,032.  The $148  balance  of the  deferred
     financing  costs  at the  date of  acquisition  related  to the  refinanced
     project debt was included in the extraordinary loss recorded at the time of
     the refinancing (see note 7). Accumulated amortization at December 31, 2001
     and 2000 was $992 and $552, respectively.

     Income Taxes

     There  is  no  provision   for  income  taxes  since  such  taxes  are  the
     responsibility of the partners.

     Cash and Cash Equivalents

     For  purposes of the  statements  of cash flows,  CED  considers  all money
     market  instruments  purchased with an initial  maturity of three months or
     less to be cash equivalents.

     Restricted Cash and Investments

     As of December 31, 2001 and 2000, all of the Partnership's investments were
     classified as held to maturity and reported at amortized cost.  Included in
     restricted  cash and  investments  are  capital  expenditure  reserves  and
     sinking fund  requirements  for the project  debt  service  required by the
     project  loans (see note 7). The  carrying  amount of  restricted  cash and
     investments at December 31, 2001 and 2000 approximated fair value, which is
     based on quoted  market  prices as provided by the  financial  institution,
     which holds the investments.

     Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets,  liabilities,  and
     partners'  capital and disclosure of contingent  assets and  liabilities at
     the date of the financial  statements and the reported amounts of revenues,
     expenses,  and the  allocation  of profits  and losses  during the  period.
     Actual results could differ significantly from those estimates.

     Fair Value of Financial Instruments

     The  carrying  amount of cash and cash  equivalents,  accounts  receivable,
     prepaid  expenses  and other  assets,  amounts  due from  related  parties,
     accounts  payable  and  accrued  liabilities,  and  amounts  due to related
     parties  approximated fair value as of December 31, 2001 and 2000,  because
     of the relatively short maturity of these instruments. The project loans as
     of December 31, 2001 and 2000 have an  estimated  fair value of $96,250 and
     $98,694,  respectively,  based on the  quoted  market  price of the  senior
     secured notes and the COSO Funding Corp. notes, respectively (see note 7).

     The  investments  in Coso  Transmission  Line Partners (see note 4) and New
     CLPSI Company, LLC (see note 5) approximate the fair value.

     New Accounting Pronouncements

     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
     Statement of Financial  Accounting Standards (SFAS) No. 133, Accounting for
     Derivative  Instruments and Hedging  Activities.  In June 2000, FASB issued
     SFAS No. 138,  Accounting for Certain  Derivative  Instruments  and Certain
     Hedging  Activities,  which  amended  SFAS No.  133 and  addressed  certain
     implementation  issues.  SFAS No.  133,  as  amended,  requires  that every
     derivative instrument (including certain derivative instruments embedded in
     other  contracts)  be recorded  in the balance  sheet as either an asset or
     liability  measured at its fair value.  The  Statement  also  requires that
     changes in the derivative's fair value be recognized  currently in earnings
     unless specific hedge accounting criteria are met. The Partnership does not
     have any derivative  instruments  and,  therefore,  the adoption in 2001 of
     SFAS No.  133,  as  amended,  did not have any effect on the  Partnership's
     financial statements.

     In June 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS
     No. 142,  Goodwill and Other Intangible Assets.  SFAS No. 141 requires that
     the purchase  method of accounting  be used for all business  combinations.
     SFAS No. 141  specifies  criteria  that  intangible  assets  acquired  in a
     business  combination  must meet to be recognized  and reported  separately
     from  goodwill.  SFAS No. 142 will  require that  goodwill  and  intangible
     assets with  indefinite  useful lives no longer be  amortized,  but instead
     tested for impairment at least  annually in accordance  with the provisions
     of SFAS No. 142.  SFAS No. 142 also requires  that  intangible  assets with
     estimable useful lives be amortized over their respective  estimated useful
     lives to their estimated  residual  values,  and reviewed for impairment in
     accordance  with  SFAS No.  121 and  subsequently,  SFAS No.  144 after its
     adoption.

     The  Partnership  adopted the provisions of SFAS No. 141 as of July 1, 2001
     and the Partnership's management is in the process of evaluating the impact
     of implementing  SFAS No. 142 and is unable to estimate the effect, if any,
     on the Partnership's financial statements.

     In October 2001, FASB issued SFAS No. 144, Accounting for the Impairment or
     Disposal of Long-Lived  Assets.  SFAS No. 144 is effective for fiscal years
     beginning after December 15, 2001, and replaces SFAS No. 121 and provisions
     of APB Opinion No. 30 for the disposal of segments of a business.  SFAS No.
     144 creates one  accounting  model,  based on the framework  established in
     SFAS No. 121, to be applied to all long-lived assets including discontinued
     operations. The Partnership is required to adopt SFAS No. 144 on January 1,
     2002 and believes  there will be no effect on the  Partnership's  financial
     statements.

(3)  Acquisition Accounting

     On February 25, 1999,  CAC  purchased all of  CalEnergy's  interest in CED,
     Coso Power Developers  (CPD), Coso Finance Partners (CFP), and Coso Finance
     Partners  II (CFP II),  collectively  known as the Coso  Partnerships,  for
     approximately $205,500 in cash plus the assumption of debt of approximately
     $139,800.  Allocated  to CED  from the  purchase  price  was  approximately
     $69,000  plus  the  assumption  of  debt  of  approximately   $37,900.  The
     acquisition  was accounted for under the purchase  method,  and no goodwill
     was recorded.  After CAC's purchase of  CalEnergy's  interest in CED, a new
     basis of accounting was adopted and, therefore,  the financial  information
     for the period after the acquisition is presented on a different cost basis
     than that for the period  before the  acquisition  and,  therefore,  is not
     comparable.

     The  purchase  price  was  allocated  to  the  portion  of the  assets  and
     liabilities purchased from CalEnergy based upon their fair values, with the
     amount of fair value of net assets in excess of the  purchase  price  being
     allocated  to  long-lived  assets on a pro rata  basis.  These  adjustments
     resulted in a net decrease of $29,304 in the recorded amounts  allocated to
     property,  plant,  and equipment and an increase of $21,443 in the recorded
     amounts allocated to the PPC. The PPC is being amortized on a straight-line
     basis  over  the  remaining  term of the PPC of 20  years as of the date of
     acquisition.  Accumulated  amortization on the PPC at December 31, 2001 and
     2000 was $3,006 and $1,933, respectively.

(4)  Investment in Coso Transmission Line Partners

     Coso  Transmission  Line Partners (CTLP) is a partnership,  between CED and
     CPD, which owns the transmission  line and facilities  connecting the power
     plants owned by CED and CPD to the transmission  line, owned by Edison,  at
     Inyokern,  California,  located 28 miles south of the plants.  CTLP charges
     CED and CPD for the use of the transmission line at amounts  sufficient for
     CTLP to recover its operating  costs.  These charges are recorded by CED as
     operating  expenses and  reflected as a reduction  in CED's  investment  in
     CTLP.

(5)  Investment in New CLPSI Company, LLC

     New CLPSI Company,  LLC (CLPSI) is a wholly owned  subsidiary of CAC. CLPSI
     purchases,  stores,  and distributes spare parts to the Coso  Partnerships.
     Also,  certain other facilities  utilized by the Coso Partnerships are held
     by CLPSI.  CED's  investments  in CLPSI  represent  funds  advanced for the
     purchase of spare parts  inventory and other assets.  Spare parts inventory
     held by CLPSI on behalf of CED is valued at the lower of cost or market.

(6)  Property, Plant, and Equipment

     Property, plant, and equipment at December 31, 2001 and 2000 consist of the
     following:

                                                           2001        2000
                                                          ------      ------

     Power plant and gathering system                  $  146,631     146,500
     Transmission line                                      9,120       9,120
     Wells and resources development costs                 91,452      82,624
                                                          -------     -------
                                                          247,203     238,244

     Less accumulated depreciation and amortization       (98,786)    (84,626)
                                                          -------     -------
                                                       $  148,417     153,618
                                                          =======     =======

     The transmission line costs represent the Partnership's  share of the costs
     of  construction  of  transmission  lines from Inyokern,  California to the
     Edison  substation  at  Kramer,  California  and from  Kramer to the Edison
     substation at Victorville, California.

(7)  Project Loan

     In order to complete  the  purchase  of  CalEnergy's  interest in CED,  CAC
     arranged for short-term  debt  financing of $211,500,  of which $55,256 was
     allocated to CED. As a result of  "push-down"  accounting,  the  short-term
     debt was  reflected in the  financial  statements  of CED and was repaid on
     May 28,  1999 from a portion of the  proceeds  from the  offering of senior
     secured notes. Financing costs associated with the short-term financing are
     included in interest expense - acquisition debt.

     On May 28, 1999,  Caithness Coso Funding Corp.  (Funding  Corp.),  a wholly
     owned subsidiary of the Coso Partnerships  raised $413,000 from an offering
     of senior secured notes. Funding Corp. loaned approximately $107,900 to CED
     from the $413,000 debt raised from the offering of senior  secured notes on
     terms consistent with those of the senior secured notes. The loan consisted
     of one note of $11,650 at 6.80% which was paid off on December 15, 2001 and
     another of  $96,250  at 9.05%,  which has  payments  due at  various  dates
     through  December 15, 2009.  Through this financing,  the existing  project
     loan  and  short-term  financing  loans  of  $93,214  were  repaid  and  an
     extraordinary loss of approximately $1,822 from the early extinguishment of
     this debt was  incurred.  The  extraordinary  loss was due to a premium and
     other costs  incurred to pay the existing  project loan before its maturity
     date.

     The annual  maturity of the project loans for each year ending  December 31
     is as follows:

            Year ending December 31:                 Amount
            ------------------------                 ------
                    2002                         $    6,375
                    2003                              5,055
                    2004                              9,920
                    2005                              8,683
                    2006                             10,388
                    Thereafter                       55,829
                                                     ------
                                                 $   96,250
                                                     ======

     The loans contain  certain  restrictive  covenants that among other things,
     limit the Partnership's ability to incur additional  indebtedness,  release
     funds from reserve accounts,  make  distributions,  create liens, and enter
     into any transaction of merger or consolidation.

     The  Partnership,  Funding  Corp.,  CPD, and CFP are jointly and  severally
     liable for the repayment of the senior secured notes.

     The  annual  maturity  of the  senior  secured  notes for each year  ending
     December 31 is as follows:

            Year ending December 31:                 Amount
            -----------------------                 -------
                    2002                         $   21,771
                    2003                             27,618
                    2004                             31,332
                    2005                             35,480
                    2006                             38,286
                    Thereafter                      148,513
                                                    -------
                                                 $  303,000
                                                    =======


(8)  Related Party Transactions

     The amounts due from and to related parties at  December 31,  2001 and 2000
     consist of the following:

                                                      2001               2000
                                                      ----               ----
     Amounts due from related parties:
           Coso Land Company:
             Principal                            $    141                141
             Accrued interest                          260                224
                                                    -------            ------
                                                  $    401                365
                                                    =======            ======

     Amounts due to related parties:
           CPD for steam sharing                  $    283                127
           CFP for steam sharing                     1,755                603
           Coso Land Company                        24,214             22,532
           Caithness Coso Funding Corp.                392                397
           Coso Operating Company LLC                  555                564
           Caithness Operating Company, Inc.            68                 98
                                                    -------            ------
                                                  $ 27,267             24,321
                                                    =======            ======

     COC is reimbursed monthly for  non-third-party  costs incurred on behalf of
     CED. These costs are comprised principally of direct operating costs of CED
     geothermal  facility,  allocable general and  administrative  costs, and an
     operator fee. The amount due to COC relates to reimbursements  for payments
     of operating expenses.

     Both CCH and  CalEnergy  were  reimbursed  at  amounts  approved  for their
     respective  costs  incurred in relation  to the CED  Management  Committee.
     Prior to May 28, 1999 CalEnergy received $25, while CCH received $130.

     As of May 28, 1999, the  management  committee  fees were  eliminated,  and
     replaced by a non-managing fee payable to CCH. For the years ended December
     31, 2001 and 2000, CCH received $237 and $234, respectively.

     As indicated in note 1,  CLC is entitled to a royalty of 5% of the value of
     steam used by CED to produce the  electricity  sold to Edison.  The royalty
     due CLC for the years ended  December 31, 2001,  2000, and 1999 was $1,684,
     $1,195,  and  $771,  respectively.  Payment  of  royalties  due  to  CLC is
     subordinated to payment of the project loans (see note 7).

     CED is charged  for its use of the  transmission  line  owned by CTLP.  The
     amount of such net charges,  which are included in plant operating expenses
     were $114, $157, and $126 for the years ended December 31,  2001, 2000, and
     1999, respectively.

     CED is charged by CLPSI for both its inventory usage and its portion of the
     expenses of operating  CLPSI. The 2001, 2000, and 1999 costs charged to CED
     from  CLPSI,  which  are  included  in  plant  operating   expenses,   were
     approximately $324, $359, and $143, respectively.

     The amount due to Caithness Coso Funding Corp.  represents accrued interest
     for fifteen days in December related to the project loans (see note 7).

     On December 16, 1992,  CED retired  CLC's  promissory  note due  CalEnergy,
     resulting in the loan from CED to CLC of $141. Interest was accrued on this
     loan for the years ended December 31, 2001, 2000, and 1999 at 10.0%, 10.0%,
     and 12.5%,  respectively.  Interest  on the note was $36,  $34,  and $34 in
     2001, 2000, and 1999, respectively.

     During 1994, the Coso  Partnerships  entered into steam sharing  agreements
     under  which  the  partnerships  may  transfer  steam,  with the  resulting
     incremental revenue and royalty expense shared equally by the partnerships.
     In the second half of 1995,  interconnection  facilities between the plants
     were  completed  and the  transfer of steam  commenced.  CED steam  sharing
     resulted in an expense,  net of royalties  and other  related costs for the
     years ended  December  31,  2001,  2000,  and 1999 of $1,085,  $2,712,  and
     $6,103, respectively.

(9)  Settlement of Litigation

     In February 2000, the Coso  Partnerships  reached a settlement with Edison,
     subject  to the  approval  of the CPUC,  which  approval  was  received  in
     December 2000. The case has not yet been  dismissed  pending  completion of
     certain  obligations  under  the  settlement  agreements.  The  cost of the
     settlement  was allocated  among the Coso  Partnerships.  A portion of that
     cost was reflected in the purchase accounting applied to the acquisition of
     CalEnergy's  interest in the  Partnership  (see note 3). The balance of the
     settlement was charged to settlement of litigation and related expenses.

     In December 1999, the  Partnership  and Dow Chemical  Company (Dow) entered
     into a confidential  settlement  agreement  which was effective  January 1,
     2000 to resolve  CED's  claim to  recover  damages  incurred  related to an
     installation in 1992 by Dow of a hydrogen sulfide abatement system.

(10) Subsequent Event

     On March 1,  2002, Edison reached certain financing milestones and paid the
     Partnership  for  revenue  generated  but not  recognized  for  the  period
     November  2000  through  March 26,  2001.  As such,  the  Partnership  will
     recognize this revenue in the first quarter of 2002.

                                      F-17

<PAGE>


                          Independent Auditors' Report



The Partners and Management Committee
Coso Power Developers:


We have audited the  accompanying  balance sheets of Coso Power Developers as of
December 31, 2001 and 2000, and the related statements of operations,  partners'
capital,  and cash flows for each of the years in the  three-year  period  ended
December 31,  2001.  These financial  statements are the  responsibility  of the
Partnership's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the 2001 and 2000 financial statements referred to above present
fairly,  in  all  material  respects,  the  financial  position  of  Coso  Power
Developers as of  December 31,  2001 and 2000, and the results of its operations
and its  cash  flows  for  each of the  years  in the  three-year  period  ended
December 31, 2001 in conformity with accounting principles generally accepted in
the United States of America.

As discussed in note 3 to the financial statements, effective February 25, 1999,
Caithness  Acquisition Company, LLC acquired all of the partnership interest not
already owned by its  affiliates,  Navy II Group LLC, in a business  combination
accounted  for as a  purchase.  As a result of the  acquisition,  the  financial
information  for the period  after the  acquisition  is presented on a different
cost basis than that for the period before the acquisition  and,  therefore,  is
not comparable.



March 1, 2002


/s/  KPMG LLP
--------------
     KPMG LLP

                                      F-18

<PAGE>

                                                  COSO POWER DEVELOPERS

                                                      Balance Sheets

                                                December 31, 2001 and 2000

                                                  (Dollars in thousands)

<TABLE>
<CAPTION>


                   Assets                                                                 2001                  2000
                                                                                  -------------------   -------------------
<S>                                                                                       <C>                    <C>

Cash and cash equivalents                                                      $               --                 7,741
Restricted cash and investments (note 2)                                                    5,517                10,214
Accounts receivable, net (note 2)                                                           3,210                    29
Prepaid expenses and other assets                                                             660                   849
Amounts due from related parties (note 8)                                                   6,139                 5,953
Property, plant, and equipment, net (notes 3 and 6)                                       124,665               136,947
Investment in New CLPSI Company, LLC  (note 5)                                              1,913                 1,963
Investment in Coso Transmission Line Partners (note 4)                                      3,398                 3,528
Power purchase contract, net (note 3)                                                      22,820                25,614
Deferred financing costs, net (note 2)                                                      1,736                 2,855
                                                                                  -------------------   -------------------

                 Total assets                                                  $          170,058               195,693
                                                                                  ===================   ===================

                      Liabilities and Partners' Capital

Accounts payable and accrued liabilities (notes 1 and 9)                       $           15,860                12,278
Amounts due to related parties (note 8)                                                     7,778                 1,816
Project loans (note 7)                                                                     84,200                94,176
                                                                                  -------------------   -------------------
                 Total liabilities                                                        107,838               108,270


Commitments and contingencies (notes 7 and 9)

Partners' capital                                                                          62,220                87,423
                                                                                  -------------------   -------------------

                 Total liabilities and partners'  capital                      $          170,058               195,693
                                                                                  ===================   ===================

See accompanying notes to financial statements.
</TABLE>

                                      F-19

<PAGE>

<TABLE>
<CAPTION>

                                                  COSO POWER DEVELOPERS

                                                 Statements of Operations

                                  Years ended December 31, 2001, 2000, and 1999 (note 3)

                                                  (Dollars in thousands)


                                               Twelve months   Twelve months    Two months      Ten months    Twelve months
                                                  ended           ended          ended            ended           ended
                                               December 31,    December 31,    February 28,     December 31,  December 31,
                                                  2001            2000            1999            1999            1999
                                              --------------  --------------  -------------   -------------  --------------
                                                                               (old basis)     (new basis)
<S>                                           <C>               <C>             <C>            <C>            <C>
Revenues:
   Energy revenues (notes 2, 8, and 10)     $     23,411          29,859         16,687          83,041          99,728
   Capacity payments                              12,978          13,195            822          13,196          14,018
   Interest and other income                       2,883           2,868            150           2,024           2,174
                                              --------------  --------------  -------------   -------------  --------------

              Total revenues                      39,272          45,922         17,659          98,261         115,920
                                              --------------  --------------  -------------   -------------  --------------

Operating expenses:
   Plant operating expense                         9,679           9,409          2,626           8,247          10,873
   Royalty expense                                 9,377          10,104          1,806          10,271          12,077
   Depreciation and amortization                  15,352          15,070          2,339          12,469          14,808
   Edison legal expenses and
        settlement costs (note 9)                    --              --             569           5,250           5,819
                                              --------------  --------------  -------------   -------------  --------------

              Total operating expenses            34,408          34,583          7,340          36,237          43,577
                                              --------------  --------------  -------------   -------------  --------------

              Operating income                     4,864          11,339         10,319          62,024          72,343
                                              --------------  --------------  -------------   -------------  --------------

Other expenses:
   Interest expense                                8,128           9,130            933           9,004           9,937
   Interest expense - acquisition debt               --              --             --            2,010           2,010
   Costs related to acquisition debt                 --              --             --            1,473           1,473
   Amortization on deferred financing              1,119             769             20             551             571
                                              --------------  --------------  -------------   -------------  --------------

              Total other expenses                 9,247           9,899            953          13,038          13,991
                                              --------------  --------------  -------------   -------------  --------------

              Income (loss) before
                 extraordinary item               (4,383)          1,440          9,366          48,986          58,352

Extraordinary item - loss on
   extinguishment of debt (note 7)                   --              --             --            2,147           2,147
                                              --------------  --------------  -------------   -------------  --------------

              Net (loss) income             $     (4,383)          1,440          9,366          46,839          56,205
                                              ==============  ==============  =============   =============  ==============


See accompanying notes to financial statements.
</TABLE>

                                      F-20

<PAGE>

<TABLE>
<CAPTION>

                                                  COSO POWER DEVELOPERS

                                             Statements of Partners' Capital

                                  Years ended December 31, 2001, 2000, and 1999 (note 3)

                                                  (Dollars in thousands)



                                                Caithness
                                                 Navy II               Coso                 New
                                                  Group,            Technology              CTC
                                                   LLC             Corporation           Company, LLC            Total
                                             -----------------   -----------------    -------------------  ---------------.
<S>                                                  <C>                <C>                   <C>                   <C>

Balance at December 31, 1998             $           76,830.5            76,830.5                --              153,661.0

Transfer of capital                                     --              (76,830.5)            76,830.5               --

Distributions to partners                           (51,537.5)              --               (51,537.5)         (103,075.0)

Net income                                           28,102.5               --                28,102.5            56,205.0

Effect of purchase accounting                           --                  --                (2,460.0)           (2,460.0)
                                             -----------------   -----------------    -----------------   -----------------
Balance at December 31, 1999                         53,395.5               --                50,935.5           104,331.0

Distributions to partners                            (9,174.0)              --                (9,174.0)          (18,348.0)

Net income                                              720.0               --                   720.0             1,440.0
                                             -----------------   -----------------    -----------------   -----------------

Balance at December 31, 2000                         44,941.5               --                42,481.5            87,423.0

Distributions to partners                           (10,410.0)              --               (10,410.0)          (20,820.0)

Net loss                                             (2,191.5)              --                (2,191.5)           (4,383.0)
                                             -----------------   -----------------    -----------------   -----------------

Balance at December 31, 2001             $           32,340.0               --                29,880.0            62,220.0
                                             =================   =================    =================   =================

See accompanying notes to financial statements.
</TABLE>

                                      F-21

<PAGE>
<TABLE>
<CAPTION>

                                                  COSO POWER DEVELOPERS

                                                 Statements of Cash Flows

                                  Years ended December 31, 2001, 2000, and 1999 (note 3)

                                                  (Dollars in thousands)



                                                      Twelve months    Twelve months  Two months    Ten months      Twelve months
                                                         ended            ended         ended          ended           ended
                                                       December 31,    December 31,   February 28,   December 31,   December 31,
                                                          2001            2000           1999           1999            1999
                                                      --------------  --------------  ------------  --------------  --------------
                                                                                      (old basis)    (new basis)

<S>                                                        <C>             <C>            <C>           <C>              <C>

Cash flows from operating activities:
   Net (loss) income                                  $    (4,383)         1,440          9,366        46,839           56,205
   Adjustments to reconcile net (loss) income to
     net cash provided by operating activities:
       Depreciation and amortization                       15,352         15,070          2,339        12,469           14,808
       Amortization of deferred financing costs             1,119            769             20           551              571
       Write-off of deferred financing costs                  --             --             --            217              217
       Changes in operating assets and liabilities:
         Accounts receivable, prepaid
           expenses, and other assets                      (2,992)        19,662           (909)          329             (580)
         Investment in Coso Transmission Line
           Partners                                           130            132           (989)        1,131              142
         Investment in New CLPSI Company, LLC                  50            135             52           (64)             (12)
         Accounts payable and accrued liabilities           3,582            115            439         3,997            4,436
         Amounts due from related parties                    (186)         1,105          1,432        (3,740)          (2,308)
         Amounts due to related parties                     5,962         (1,409)         2,088          (765)           1,323
                                                      --------------  --------------  ------------  --------------  --------------
             Net cash provided by operating
               activities                                  18,634         37,019         13,838        60,964           74,802
                                                      --------------  --------------  ------------  --------------  --------------

Cash flows from investing activities:
   Capital expenditures                                      (276)        (1,700)        (1,182)       (3,232)          (4,414)
   Decrease (increase) in restricted cash                   4,697         44,124            --        (54,338)         (54,338)
                                                      --------------  --------------  ------------  --------------  --------------
             Net cash provided by (used in)
               investing activities                         4,421         42,424         (1,182)      (57,570)         (58,752)
                                                      --------------  --------------  ------------  --------------  --------------

Cash flows from financing activities:
   Distributions to partners                              (20,820)       (18,348)           --       (103,075)        (103,075)
   Increase in project financing debt                         --             --             --        153,550          153,550
   Repayment of project financing loan                     (9,976)       (59,374)           --        (61,323)         (61,323)
                                                      --------------  --------------  ------------  --------------  --------------

             Net cash used in financing activities        (30,796)       (77,722)           --        (10,848)         (10,848)
                                                      --------------  --------------  ------------  --------------  --------------
             Net change in cash and cash
               equivalents                                 (7,741)         1,721         12,656        (7,454)           5,202

Cash and cash equivalents at beginning of year              7,741          6,020            818        13,474              818
                                                      --------------  --------------  ------------  --------------  --------------

Cash and cash equivalents at end of year              $       --           7,741         13,474         6,020            6,020
                                                      ==============  ==============  ============  ==============  ==============

Supplemental cash flow disclosure:
   Cash paid for interest                             $     8,154          9,183            --         11,060           11,060
                                                      ==============  ==============  ============  ==============  ==============

Schedule of noncash investing activities as
a result of purchase:
     Fair value of power purchase contract                    --             --             --         30,738           30,738
     Reduction in property, plant, and
       equipment                                              --             --             --        (33,536)         (33,536)
     Net increase in other assets                             --             --             --          4,084            4,084
     Liabilities assumed                                      --             --             --         (3,746)          (3,746)
                                                      --------------  --------------  ------------  --------------  --------------
             Reduction in partners' capital           $       --             --             --         (2,460)          (2,460)
                                                      ==============  ==============  ============  ==============  ==============

See accompanying notes to financial statements.
</TABLE>

                                      F-22

<PAGE>

                              COSO POWER DEVELOPERS

                          Notes to Financial Statements

                        December 31, 2001, 2000, and 1999

                             (Dollars in thousands)



(1)  Organization, Operation, and Business of the Partnership

     Coso Power  Developers (CPD or the Partnership) was formed on July 31, 1989
     in connection with financing the  construction of a geothermal  power plant
     on land at the China Lake Naval Air  Weapons  Station at Coso Hot  Springs,
     China Lake, California. CPD is a general partnership between Caithness Navy
     II Group LLC (Navy II), a Delaware limited  liability  company,  and, until
     February  25,  1999,   Coso  Technology   Corporation   (CTC),  a  Delaware
     corporation  wholly  owned by  CalEnergy,  Inc.  (CalEnergy),  now known as
     MidAmerica  Energy  Holdings  Company.  On  February  25,  1999,  Caithness
     Acquisition  Company,  LLC (CAC),  a wholly owned  subsidiary  of Caithness
     Energy,  LLC and an  affiliate  of Navy II,  purchased  all of  CalEnergy's
     interest in CTC (see note 3) and formed a wholly owned subsidiary,  New CTC
     Company, LLC (New CTC), a Delaware limited liability company, to become the
     new managing general partner of CPD.

     The power plant is located on land owned by the U.S. Navy.  Under the terms
     of a 30-year  contract with the U.S. Navy to develop  geothermal  energy on
     its land,  CPD pays a royalty to the U.S.  Navy which was  initially  4% of
     revenues,  increased  to 10% of  revenues  at  December  31,  1998,  and is
     currently  18% of revenues  (as of  December 24,  1999).  The royalty  will
     increase to 20% of revenues after December 15, 2004. The U.S. Navy contract
     will expire in 2010.  At  December  31,  2001,  royalties  payable  totaled
     $6,431.

     The  Partnership  sells all  electricity  produced to  Southern  California
     Edison (Edison) under a 20-year power purchase  contract (the PPC) expiring
     in 2010.  Under  the  terms of the PPC,  Edison  makes  payments  to CPD as
     follows:

*    Contractual  payments for energy  delivered,  which escalated at an average
     rate of  approximately  7.6% for the first ten years after the date of firm
     operation  (scheduled  energy price  period).  The  scheduled  energy price
     period  extended  until  January  2000.  After the  scheduled  energy price
     period,  the energy  payment  adjusted  to the actual  avoided  energy cost
     experienced  by Edison.  For the years ended  December 31, 2001,  2000, and
     1999,  Edison's  average  avoided cost of energy was 7.46,  5.80,  and 3.13
     cents  per  kwh,  respectively.  Edison  entered  into  an  agreement  (the
     Agreement) with the Partnership on June 19,  2001 that addressed  renewable
     energy  pricing  and issues  concerning  California's  energy  crisis.  The
     Agreement, which was amended on November 30,  2001, established May 1, 2002
     as the date when the Partnership  will begin receiving a fixed avoided cost
     of energy rate of 5.37 cents per kWh for five (5) years.  Subsequent to the
     five-year  period,  Edison will be required to make energy  payments to the
     Partnership  based on its  avoided  cost of energy  until its PPC  expires.
     Beyond the five-year  period,  the  Partnership  cannot  predict the likely
     level of avoided cost of energy prices under the PPC and, accordingly,  the
     revenues generated by the Partnership could fluctuate significantly;

*    Capacity payments which remain fixed over the life of the PPC to the extent
     that actual energy  delivered  exceeds minimum levels of the plant capacity
     defined in the PPC; and

*    Bonus  payments to the extent that actual energy  delivered  exceeds 85% of
     the plant  capacity  stated in the PPC. In 2001,  2000, and 1999, the bonus
     payments aggregated $2,248, $2,248, and $2,248, respectively.


     CalEnergy  served  as the  operator  for CPD,  maintaining  the  accounting
     records and  operating  the plant day to day,  until  February 1, 1999,  at
     which time Coso Operating  Company LLC (COC), a Delaware limited  liability
     company,  became  operator  pursuant to certain  operations and maintenance
     agreements with CTC, the managing general  partner.  COC was a wholly owned
     subsidiary of CalEnergy  until February 25, 1999,  when CalEnergy  assigned
     all of its interest and rights in COC to CAC, which became manager and sole
     member.

     On February  25,  1999,  CPD entered  into two  operating  and  maintenance
     agreements,  one with FPL Operating Services,  Inc. (FPL) and a second with
     COC. The initial terms of the FPL operating and maintenance  agreement were
     for three  years,  to provide  for the  operation  and  maintenance  of the
     geothermal  power  facilities and the  interconnection  to the transmission
     line. The term of the COC agreement is through December 31, 2009 to provide
     field services and administrative services for the Partnership.  On October
     17, 1999,  the operating  agreement  with FPL was terminated and COC became
     the sole operator of all Partnership operations.

     At  formation,  and as  subsequently  amended,  the  partnership  agreement
     provides  that cash flows before and after  "payout" are allocated 50% each
     to New CTC (formerly  CTC) and Navy II.  "Payout,"  which has occurred,  is
     defined  as the  point  at  which  each  partner  received  aggregate  cash
     distributions in an amount equal to its accumulated capital  contributions.
     For purposes of allocating net income to partners' capital accounts and for
     income  tax  purposes,  profits  and  losses  are  allocated  based  on the
     aforementioned capital percentages.

(2)  Summary of Significant Accounting Policies

     Accounts Receivable and Revenue Recognition

     Accounts  receivable  primarily  consists  of  receivables  from Edison for
     electricity delivered and sold under the PPC.

     Operating  revenues  are  recognized  as income  during the period in which
     electricity  is delivered to Edison.  Revenue was  recognized  based on the
     payment  rates  scheduled in CPD's PPC with Edison,  through  January 2000.
     From January  2000 through May 1, 2002,  and  subsequent  to the  five-year
     period stated in the  Agreement,  revenue is  recognized  based on Edison's
     avoided energy cost, until the Partnership's PPC expires.

     Periodic  increases in natural gas prices and imbalances between supply and
     demand, among other factors,  have at times led to significant increases in
     wholesale  electricity prices in California.  During those periods,  Edison
     had fixed tariffs with its retail customers that were  significantly  below
     the wholesale  prices it paid in  California.  That resulted in significant
     under-recoveries  by Edison of its  electricity  purchase costs. On January
     16, 2001, Edison announced that it was temporarily  suspending payments for
     energy provided, including the energy provided by the Partnership,  pending
     a permanent solution to its liquidity crisis.  Subsequently,  pursuant to a
     California Public Utilities  Commission (CPUC) order, Edison resumed making
     payments to the  Partnership  beginning  with power  generated on March 27,
     2001.  Edison  also made a payment  equal to 10% of the unpaid  balance for
     power  generated  from  November 1, 2000 to March 26, 2001 and continues to
     pay interest on the  outstanding  amount at 7% per annum.  That payment was
     made pursuant to the Agreement between Edison and the Partnership described
     in note 1. The  Agreement  as  amended,  which  received  CPUC  approval in
     January of 2002, established the fixed energy rates discussed above and set
     payment terms for past due amounts owed to the Partnership by Edison. As of
     December 31, 2001, the  Partnership  was unable to determine the time frame
     during which any future payments would be received.  Due to the uncertainty
     surrounding   Edison's  ability  to  make  payment  on  past  due  amounts,
     collection  was  not  reasonably   assured  and  the  Partnership  had  not
     recognized  revenue of $22,733 from Edison for energy  delivered during the
     period  January 1, 2001 through March 26, 2001.  The provision for doubtful
     accounts  previously  recorded as of December  31, 2000 of $15,312 has been
     reclassified  to  conform  with the 2001  presentation.  In  addition,  the
     Partnership  will not recognize this revenue until payments from Edison are
     received (see note 10).

     Fixed Assets and Depreciation

     The  costs  of major  additions  and  betterments  are  capitalized,  while
     replacements,  maintenance,  and repairs which do not improve or extend the
     life of the respective assets are expensed currently.

     Depreciation  of the power  plant and  transmission  line is  computed on a
     straight-line  basis over their estimated  useful life of 30 years and, for
     significant  additions,  the remainder of the 30-year life from the plant's
     commencement of operations.

     Recoverability of Long-Lived Assets

     An   impairment   loss  is  recognized   whenever   events  or  changes  in
     circumstances indicate that the carrying amounts of long-lived tangible and
     intangible assets is not recoverable.  The Partnership considers historical
     performance  and future  estimated  results in its  evaluation of potential
     impairment,  and then  compares  the  carrying  amount  of the asset to the
     estimated  future cash flows  expected to result from the use of the asset.
     If the carrying amount of the asset exceeds estimated expected undiscounted
     future cash flows before interest  charges,  the  Partnership  measures the
     amount of the  impairment by comparing the carrying  amount of the asset to
     its fair  value.  The  estimation  of fair value is  generally  measured by
     discounting expected future cash flows at the rate the Partnership utilizes
     to evaluate  potential  investments.  The Partnership  estimates fair value
     based on the best  information  available using estimates,  judgments,  and
     projections as considered necessary.

     Wells and Resource Development Costs

     CPD  follows  the  full-cost  method of  accounting  for costs  incurred in
     connection with the  exploration  and development of geothermal  resources.
     All such costs,  which  include dry hole costs,  the costs of drilling  and
     equipping  production wells, and administrative and interest costs directly
     attributable  to the project,  are  capitalized  and  amortized  over their
     estimated  useful lives when  production  commences.  The estimated  useful
     lives of  production  wells  are ten  years  each;  exploration  costs  and
     development costs, other than production wells, are amortized over 30 years
     and, for significant additions,  the remainder of the 30-year life from the
     plant's commencement of operations.

     Deferred Plant Overhaul Costs and Well Rework Costs

     Plant overhaul  costs are deferred and amortized over the estimated  period
     between overhauls, as these costs extend the useful lives of the respective
     assets.  These  deferred  costs of $281 and $333 at  December 31,  2001 and
     2000,  respectively,  are  included  in  property,  plant,  and  equipment.
     Currently, plant overhauls are amortized over three years from the point of
     completion.

     Production  and  injection  rework costs are expensed as incurred.  For the
     years ended December 31, 2001,  2000, and 1999,  such costs were $533, $32,
     and $101, respectively.

     Reclassifications

     Certain reclassifications have been made to the 2000 and 1999 statements of
     operations and cash flows to conform to the 2001 presentation.

     Deferred Financing Costs

     Deferred  financing  costs as of December 31, 2001 and 2000 consist of loan
     fees and other costs of financing  that are amortized  over the term of the
     related  financing.  In  1999,  fees  of  $1,473  associated  with  certain
     short-term  financing  were fully expensed and included in costs related to
     acquisition  debt,  and a refinancing of this debt resulted in new deferred
     financing costs of $4,175. The $179 balance of the deferred financing costs
     at the date of  acquisition  related  to the  refinanced  project  debt was
     included in the extraordinary  loss recorded at the time of the refinancing
     (see note 7).  Accumulated  amortization at December 31,  2001 and 2000 was
     $2,439 and $1,320, respectively.

     Income Taxes

     There  is  no  provision   for  income  taxes  since  such  taxes  are  the
     responsibility of the partners.

     Cash and Cash Equivalents

     For  purposes of the  statements  of cash flows,  CPD  considers  all money
     market  instruments  purchased  with initial  maturities of three months or
     less to be cash equivalents.

     Restricted Cash and Investments

     As of December 31, 2001 and 2000, all of the Partnership's investments were
     classified as held to maturity and reported at amortized cost.  Included in
     restricted  cash and  investments  are  capital  expenditure  reserves  and
     sinking fund  requirements  for the project  debt  service  required by the
     project  loans (see note 7). The  carrying  amount of  restricted  cash and
     investments at December 31, 2001 and 2000 approximated fair value, which is
     based on quoted  market  prices as  provided by the  financial  institution
     which holds the investments.

     Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that  affect the  reported  amounts  of  assets,  liabilities,
     partners'  capital,  and disclosure of contingent assets and liabilities at
     the date of the financial  statements and the reported amounts of revenues,
     expenses,  and the  allocation of profits and losses during the  reportable
     period. Actual results could differ significantly from those estimates.

     Fair Value of Financial Instruments

     The  carrying  amount of cash and cash  equivalents,  accounts  receivable,
     prepaid  expenses  and other  assets,  amounts  due from  related  parties,
     accounts  payable  and  accrued  liabilities,  and  amounts  due to related
     parties  approximated fair value as of December 31,  2001 and 2000, because
     of the relatively short maturity of these instruments. The project loans as
     of December 31, 2001 and 2000 have an  estimated  fair value of $84,200 and
     $93,866,  respectively,  based on the  quoted  market  price of the  senior
     secured notes and the Coso Funding Corp. notes, respectively (see note 7).

     The  investments  in Coso  Transmission  Line Partners (see note 4) and New
     CLPSI Company, LLC (see note 5) approximate fair value.

     New Accounting Pronouncements

     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
     Statement of Financial  Accounting Standards (SFAS) No. 133, Accounting for
     Derivative  Instruments and Hedging  Activities.  In June 2000, FASB issued
     SFAS No. 138,  Accounting for Certain  Derivative  Instruments  and Certain
     Hedging  Activities,  which  amended  SFAS No.  133 and  addressed  certain
     implementation  issues.  SFAS No.  133,  as  amended,  requires  that every
     derivative instrument (including certain derivative instruments embedded in
     other  contracts)  be recorded  in the balance  sheet as either an asset or
     liability  measured at its fair value.  The  Statement  also  requires that
     changes in the derivative's fair value be recognized  currently in earnings
     unless specific hedge accounting criteria are met. The Partnership does not
     have any derivative  instruments and,  therefore,  the adoption in 2001, of
     SFAS No.  133,  as  amended,  did not have any effect on the  Partnership's
     financial statements.

     In June 2001,  FASB issued SFAS No. 141,  Business  Combinations  (SFAS No.
     141) and SFAS No. 142, Goodwill and Other Intangible Assets (SFAS No. 142).
     SFAS No. 141 requires  that the purchase  method of  accounting be used for
     all business combinations.  SFAS No. 141 specifies criteria that intangible
     assets  acquired in a business  combination  must meet to be recognized and
     reported separately from goodwill.  SFAS No. 142 will require that goodwill
     and intangible  assets with indefinite useful lives no longer be amortized,
     but instead tested for impairment at least annually in accordance  with the
     provisions  of SFAS No. 142.  SFAS No. 142 also  requires  that  intangible
     assets with  estimable  useful  lives be  amortized  over their  respective
     estimated useful lives to their estimated residual values, and reviewed for
     impairment in accordance with SFAS No. 121 and  subsequently,  SFAS No. 144
     after its adoption.

     The Partnership  adopted the provisions of SFAS No. 141 as of July 1, 2001,
     and the Partnership's management is in the process of evaluating the impact
     of implementing SFAS No. 142 and is unable to estimate the effects, if any,
     on the Partnership's financial statements.

     In October 2001, FASB issued  Statement of Financial  Accounting  Standards
     No. 144 (SFAS No.  144),  Accounting  for the  Impairment  or  Disposal  of
     Long-Lived  Assets.  This Statement is effective for fiscal years beginning
     after  December 15, 2001,  and replaces SFAS No. 121 and  provisions of APB
     Opinion  No. 30 for the disposal of segments of a business.  The  statement
     creates one accounting  model,  based on the framework  established in SFAS
     No. 121 to be  applied  to all  long-lived  assets  including  discontinued
     operations. The Partnership is required to adopt SFAS No. 144 on January 1,
     2002 and believes  there will be no effect on the  Partnership's  financial
     statements.

(3)  Acquisition Accounting

     On  February 25,  1999, CAC purchased all of  CalEnergy's  interest in CPD,
     Coso Energy Developers (CED), Coso Finance Partners (CFP), and Coso Finance
     Partners  II (CFP II),  collectively  known as the Coso  Partnerships,  for
     approximately $205,500 in cash plus the assumption of debt of approximately
     $139,800.  The purchase price  allocated to CPD was  approximately  $74,500
     plus the assumption of debt of approximately  $61,300.  The acquisition was
     accounted  for under the purchase  method,  and no goodwill  was  recorded.
     After  CAC's  purchase  of  CalEnergy's  interest  in CPD,  a new  basis of
     accounting was adopted and,  therefore,  the financial  information for the
     period after the  acquisition  is presented on a different  cost basis than
     that  for  the  period  before  the  acquisition  and,  therefore,  is  not
     comparable.

     The  purchase  price  was  allocated  to  the  portion  of the  assets  and
     liabilities purchased from CalEnergy based upon their fair values, with the
     amount of fair value of net assets in excess of the  purchase  price  being
     allocated  to  long-lived  assets on a pro rata  basis.  These  adjustments
     resulted in a net decrease of $33,536 in the recorded amounts  allocated to
     the value of property,  plant,  and equipment and an increase of $30,738 in
     the recorded amounts  allocated to the PPC. The PPC is being amortized on a
     straight-line  basis over the  remaining  term of the PPC of 11 years as of
     the date of  acquisition.  Accumulated  amortization on the PPC at December
     31, 2001 and 2000 was $7,918 and $5,124, respectively.

(4)  Investment in Coso Transmission Line Partners

     Coso  Transmission  Line Partners  (CTLP) is a partnership  between CPD and
     CED, which owns the transmission  line and facilities  connecting the power
     plants owned by CPD and CED to the transmission  line, owned by Edison,  at
     Inyokern,  California,  located 28 miles south of the plants.  CTLP charges
     CPD and CED for the use of the transmission line at amounts  sufficient for
     CTLP to recover its operating  costs.  These charges are recorded by CPD as
     operating  expenses and  reflected as a reduction  in CPD's  investment  in
     CTLP.

(5)  Investment in New CLPSI Company, LLC

     New CLPSI Company,  LLC (CLPSI) is a wholly owned  subsidiary of CAC. CLPSI
     purchases,  stores,  and distributes spare parts to the Coso  Partnerships.
     Also,  certain other facilities  utilized by the Coso Partnerships are held
     by CLPSI.  CPD's  investments  in CLPSI  represent  funds  advanced for the
     purchase of spare parts  inventory and other assets.  Spare parts inventory
     held by CLPSI on behalf of CPD is valued at the lower of cost or market.

(6)  Property, Plant, and Equipment

     Property, plant, and equipment at December 31, 2001 and 2000 consist of the
     following:

                                                    2001               2000
                                                ---------------    ------------

     Power, plant, and gathering system        $    142,712           142,350
     Transmission line                                7,245             7,245
     Wells and resources development costs           59,695            60,010
                                                ---------------    -------------
                                                    209,652           209,605

     Less accumulated depreciation
     and amortization                               (84,987)          (72,658)
                                                  ---------------    -----------
                                               $    124,665           136,947
                                                  ===============    ===========

     The transmission line costs represent the Partnership's  share of the costs
     of  construction  of  transmission  lines from Inyokern,  California to the
     Edison  substation  at Kramer,  California,  and from  Kramer to the Edison
     substation at Victorville, California.

(7)  Project Loans

     In order to complete  the  purchase  of  CalEnergy's  interest in CPD,  CAC
     arranged for short-term debt financing of $211,500,  of which approximately
     $78,634 was allocated to CPD. As a result of  "push-down"  accounting,  the
     short-term  debt was reflected in the  financial  statements of CPD and was
     repaid on May 28,  1999 from a portion of the proceeds from the offering of
     senior  secured  notes.  Financing  costs  associated  with the  short-term
     financing are included in interest expense - acquisition debt.

     On May 28,  1999,  Caithness  Coso Funding  Corp.  (Funding  Corp.)  raised
     $413,000 from an offering of senior  secured  notes.  Funding Corp.  loaned
     approximately  $153,550  to CPD  from the  $413,000  debt  raised  from the
     offering  of senior  secured  notes on terms  consistent  with those of the
     senior  secured  notes.  The loan consisted of one note of $69,350 at 6.80%
     which was paid off on  December  15,  2001 and  another  note of $84,200 at
     9.05% which has payments due at various  dates  through  December 15, 2009.
     Through this financing,  the existing project loan and short-term financing
     of  approximately   $139,957  was  repaid  and  an  extraordinary  loss  of
     approximately  $2,147  from  the  early  extinguishment  of this  debt  was
     incurred.  The  extraordinary  loss was due to a premium  and  other  costs
     incurred to pay the existing project loan before its maturity date.


     The annual  maturity of the project loans for each year ending  December 31
     is as follows:


                   Year ending December 31:                Amount
                   ------------------------                ------
                            2002                        $   3,799
                            2003                            9,155
                            2004                           10,718
                            2005                           11,697
                            2006                           11,738
                            Thereafter                     37,093
                                                           ------
                                                        $  84,200
                                                           ======

     The loans contain certain  restrictive  covenants that, among other things,
     limit the Partnership's ability to incur additional  indebtedness,  release
     funds from reserve  amounts,  make  distributions,  create loans, and enter
     into any transaction of merger or consolidation.

     The  Partnership,  Funding  Corp.,  CED, and CFP are jointly and  severally
     liable for the repayment of the senior secured notes.

     The  annual  maturity  of the  senior  secured  notes for each year  ending
     December 31 is as follows:


                   Year ending December 31:                Amount
                   ------------------------                ------
                            2002                        $  21,771
                            2003                           27,618
                            2004                           31,332
                            2005                           35,480
                            2006                           38,286
                            Thereafter                    148,513
                                                          -------
                                                        $ 303,000
                                                          =======

(8)  Related Party Transactions

     The amounts due from and to related parties at  December 31,  2001 and 2000
     consist of the following:

                                                         2001               2000
                                                         ----               ----
     Amounts due from related parties:
        CED for steam sharing                         $   283                127
        Coso Operating Company                          1,409              1,784
        China Lake Joint Venture:
        Principal                                       1,562              1,562
        Accrued interest                                2,885              2,480
                                                        -----              -----
                                                      $ 6,139              5,953
                                                        =====              =====

     Amounts due to related parties:
        CFP for steam sharing                         $ 7,376              1,357
        Caithness Coso Funding Corp.                      339                365
        Caithness Operating Company                        63                 94
                                                        -----              -----
                                                      $ 7,778              1,816
                                                        =====              =====

     COC is reimbursed monthly for  non-third-party  costs incurred on behalf of
     CPD. These costs are comprised principally of direct operating costs of the
     CPD geothermal facility, allocable general and administrative costs, and an
     operator  fee.  The amount due from COC relates to advances for payments of
     operating expenses.

     Both  CalEnergy and Navy II were  reimbursed at amounts  approved for their
     respective  costs  incurred in relation  to the CPD  Management  Committee.
     Prior to May 28, 1999, CalEnergy received $25, while Navy II received $130.

     As of May 28, 1999,  the  management  committee  fees were  eliminated  and
     replaced  by a  nonmanaging  fee  payable to  Navy II.  For the years ended
     December 31, 2001 and 2000, Navy II received $237 and $234, respectively.

     CPD is charged for its use of the transmission  line owned by CTLP. For the
     years  ended  December 31,  2001,  2000,  and 1999,  the amount of such net
     charges was $129, $179, and $141, respectively.

     CPD is charged by CLPSI for both its inventory usage and its portion of the
     expenses of operating  CLPSI.  The charges to CPD from CLPSI in 2001, 2000,
     and  1999,   which  are  included  in  plant   operating   expenses,   were
     approximately $148, $318, and $78, respectively.

     On  December  16,  1992,  CPD  retired  China Lake Joint  Venture's  (CLJV)
     promissory  note due  CalEnergy,  resulting in the loan from CPD to CLJV of
     $1,562 at December 31, 1992.  CLJV is an affiliated  venture.  Interest has
     been accrued on this loan for the years ended December 31, 2001,  2000, and
     1999 at 10.0%,  10.0%,  and 12.5%,  respectively.  Interest on the loan was
     $405, $371, and $421 in 2001, 2000, and 1999, respectively.  The amount due
     to Funding  Corp.  represents  accrued  interest  for 15 days in  December,
     related to the project loans (see note 7).

     During 1994, the Coso  Partnerships  entered into steam sharing  agreements
     under  which  the  partnerships  may  transfer  steam,  with the  resulting
     incremental revenue and royalty expense shared equally by the partnerships.
     In the second half of 1995,  interconnection  facilities between the plants
     were  completed  and the  transfer of steam  commenced.  CPD steam  sharing
     resulted  in an expense,  net of  royalties  and other  related  costs,  of
     $9,634,  $5,751,  and $18,618 for the years ended December 31, 2001,  2000,
     and 1999, respectively.

(9)  Settlement of Litigation

     In February 2000, the Coso  Partnerships  reached a settlement with Edison,
     subject  to the  approval  of the CPUC,  which  approval  was  received  in
     December 2000. The case has not yet been  dismissed  pending  completion of
     certain  obligations  under  the  settlement  agreements.  The  cost of the
     settlement will be allocated among the Coso Partnerships. A portion of that
     cost was reflected in the purchase accounting applied to the acquisition of
     CalEnergy's  interest in the  Partnership  (see note 3). The balance of the
     settlement was charged to settlement of litigation and related expenses.

(10) Subsequent Event

     On March 1,  2002, Edison reached certain financing milestones and paid the
     Partnership  for  revenue  generated  but not  recognized  for  the  period
     November  2000  through  March 26,  2001.  As such,  the  Partnership  will
     recognize this revenue in the first quarter of 2002.

                                      F-23

<PAGE>

<TABLE>
<CAPTION>

Quarterly Data (Unaudited)

                                                   March 31(a)(b)   June 30(a)(c)   September 30(a)     December 31(a)
                                                   --------------   -------------   ---------------     --------------
<S>                                                     <C>              <C>            <C>                  <C>

Caithness Coso Funding Corp:

        2001
        Total revenues                             $     8,601           5,997          7,105               7,117
        Operating income                                   --              --             --                  --
            Net income                             $       --              --             --                  --

        2000
        Total revenues                             $     9,221           7,708          7,671               6,199
        Operating income                                   --              --             --                  --
            Net income                             $       --              --             --                  --

        1999
        Total revenues                             $       --            4,986         11,459               4,046
        Operating income                                   --              --             --                  --
            Net income                             $       --              --             --                  --

Coso Finance Partners:

       2001
       Total revenues                              $     6,188          24,835         16,833               8,472
       Operating income (loss)                          (1,843)         16,498          5,126               7,365
       Income (loss) before extraordinary Item          (4,957)         13,397          2,100               4,169
            Net income (loss)                      $    (4,957)         13,397          2,100               4,169

       2000
       Total revenues                              $     9,303          13,483         22,929               9,210
       Operating income                                  3,689           6,958         13,781               1,373
       Income (loss) before extraordinary Item             386           3,709         10,556              (1,863)
            Net income (loss)                      $       386           3,709         10,556              (1,863)

       1999
       Total revenues                              $    14,859          12,648         18,648              11,745
       Operating income                                  6,451           5,667          9,333               4,320
       Income (loss) before extraordinary item           4,158           1,346          6,123                 569
            Net income (loss)                      $     4,158          (1,029)         6,123                 569

Coso Energy Developers:

        2001
        Total revenues                             $     1,445          23,529         15,095               7,738
        Operating income (loss)                         (7,730)         15,595          7,735                 811
        Income (loss) before extraordinary item        (10,066)         13,264          5,431              (1,616)
            Net income (loss)                      $   (10,066)         13,264          5,431              (1,616)

        2000
        Total revenues                             $    12,495          11,628         20,311               5,865
        Operating income                                 6,015           4,699         11,880              (3,709)
        Income (loss) before extraordinary item          3,627           2,345          9,514              (6,093)
            Net income (loss)                      $     3,627           2,345          9,514              (6,093)

        1999
        Total revenues                             $    21,573           7,097         14,674               7,599
        Operating income                                10,266          (1,059)         6,130              (2,928)
        Income (loss) before extraordinary item          8,417          (4,690)         3,817              (5,370)
            Net income (loss)                      $     8,417          (6,512)         3,817              (5,370)

Coso Power Developers:

        2001
        Total revenues                             $    (2,196)         20,133         13,934               7,401
        Operating income (loss)                        (11,636)         11,246          5,388                (134)
        Income (loss) before extraordinary item        (13,903)          8,991          3,193              (2,664)
            Net income (loss)                      $   (13,903)          8,991          3,193              (2,664)

        2000
        Total revenues                             $    10,317          11,812         20,207               3,586
        Operating income                                 2,739           3,577         10,827              (5,804)
        Income (loss) before extraordinary item            193           1,077          8,349              (8,179)
            Net income (loss)                      $       193           1,077          8,349              (8,179)

        1999
        Total revenues                             $    24,943          28,637         34,763              27,577
        Operating income                                14,058          19,082         25,366              13,837
        Income before extraordinary item                11,313          14,428         22,171              10,440
            Net income                             $    11,313          12,281         22,171              10,440

</TABLE>

(a)  In the opinion of the Caithness  Coso Funding Corp.  and the  Partnerships,
     all adjustments,  which consist of normal  recurring  accruals to present a
     fair statement of the amounts shown for such periods, have been made.

(b)  The provision  for doubtful  accounts  previously  recorded for the quarter
     ended March 31, 2001 for Coso Finance Partners, Coso Energy Developers, and
     Coso Power Developers of $25,817,  $25,950 and $26,998,  respectively,  has
     been  reclassified  as a  reduction  of revenue  to  conform  with the 2001
     financial statements presentation.

(c)  The income  from the  reduction  in the  provision  for  doubtful  accounts
     previously  recorded  for the quarter  ended June 30, 2001 for Coso Finance
     Partners,  Coso  Energy  Developers,  and Coso Power  Developers  of $4,204
     $4,120  and  $4,265,  respectively,  has been  reclassified  to  revenue to
     conform with the 2001 financial statements presentation.


                                      F-24


Supplemental Condensed Combined Financial Information for Coso Partnerships

The  following  information  presents  unaudited  condensed  combined  financial
statements of the Coso  Partnerships.  These  financial  statements  represent a
compilation of the financial  statements of Caithness  Coso Funding Corp.,  Coso
Finance  Partners,  Coso Energy  Developers  and Coso Power  Developers  for the
periods indicated.  This supplemental  financial  information is not required by
GAAP and has been provided to facilitate a more  comprehensive  understanding of
the  financial   position,   operating  results  and  cash  flows  of  the  Coso
partnerships as a whole, which jointly and severally  guarantee the repayment of
Caithness Coso Funding  Corp's senior notes.  The unaudited  condensed  combined
financial  statements  should  be  read  in  conjunction  with  each  individual
partnerships financial statements and their accompanying notes.

<PAGE>

<TABLE>
<CAPTION>


                                COSO PARTNERSHIPS

                   UNAUDITED CONDENSED COMBINED BALANCE SHEETS

                           December 31, 2001 and 2000

                             (Dollars in thousands)



                 Assets                                           2001             2000
                                                                  ----             ----
<S>                                                               <C>               <C>
Cash                                                            $    264         $  17,109
Restricted cash and investments                                   34,210            47,712
Accounts receivable, net                                           9,603               590
Prepaid expenses and other assets                                  2,159             2,671
Amounts due from related parties                                   6,488             6,191
Property, plant and equipment, net                               413,519           439,641
Power purchase agreement, net                                     52,350            57,364
Investments                                                       12,843            13,485
Deferred financing costs, net                                      6,300             8,564
                                                               ---------        ----------

          Total assets                                         $ 537,736        $  593,327
                                                               =========        ==========


          Liabilities and Partners' Capital

Accounts payable and accrued liabilities                       $  42,362        $   36,261
Amounts due to related parties                                    24,967            23,460
Project loan                                                     303,000           330,067
                                                               ---------        ----------

          Total liabilities                                      370,329           389,787


Partners' capital                                                167,407           203,540
                                                               ---------        ----------

          Total liabilities and partners' capital              $ 537,736        $  592,327
                                                               =========        ==========


</TABLE>



                                      F-25

<PAGE>


<TABLE>
<CAPTION>

                                                     COSO PARTNERSHIPS

                                   UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS

                                        Year ended December 31, 2001, 2000 and 1999

                                                  (Dollars in thousands)


                                        Twelve-Months    Twelve-Months  Two-Months    Ten-Months   Twelve-Months
                                            Ended           Ended          Ended         Ended         Ended
                                         December 31,      December     February 28,    December     December 31,
                                            2001             2000          1999          1999          1999
                                         -------------   -------------  -----------   -----------  -------------
                                                                        (old basis)   (new basis)
<S>                                         <C>               <C>         <C>           <C>            <C>
Revenue:
   Energy revenues                       $   94,734           97,901       41,501       136,460        177,961
   Capacity payments                         39,096           39,746        2,113        39,215         41,328
   Interest and other income                  9,577           13,499        1,052         4,422          5,474
                                            -------          -------       ------       -------        -------

          Total revenue                     143,407          151,146       44,666       180,097        224,763
                                            -------          -------       ------       -------        -------

Operating expenses:
   Plant operating expenses                  28,910           30,026        8,652        27,806         36,458
   Royalty expense                           24,530           25,070        4,385        20,997         25,382
   Depreciation and amortization             41,546           40,025        6,493        33,546         40,039
   Edison legal expense and
          settlement costs                      --               --         1,707        10,654         12,361
                                            -------           ------        -----        ------         ------

          Total operating expenses           94,986           95,121       21,237        93,003        114,240
                                            -------          -------       ------       -------        -------

  Operating income                           48,421           56,025       23,429        87,094        110,523
                                            -------          -------       ------       -------        -------

  Other expenses:
    Interest expense                         28,818           30,797        2,180        24,678         26,858
    Interest  expense-acquisition debt          --               --           --          5,387          5,387
    Costs  related  to  acquisition debt        --               --           --          4,346          4,346
    Amortization on deferred financing        2,264            1,607           52         1,158          1,210
                                            -------          -------       ------       -------        -------

          Total other expenses               31,082           32,404        2,232        35,569         37,801
                                            -------          -------       ------       -------        -------


      Income before extraordinary item       17,339           23,621       21,197        51,525         72,722

 Extraordinary item-loss on
    extinguishment of debt                      --               --           --          6,344          6,344
                                            -------          -------       ------       -------        -------

          Net income                     $   17,339           23,621       21,197        45,181         66,378
                                            =======          =======       ======       =======        =======


</TABLE>



                                                           F-26
<PAGE>

<TABLE>
<CAPTION>


                                                     COSO PARTNERSHIPS

                                   UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS

                                       Years ended December 31, 2001, 2000 and 1999

                                                  (Dollars in thousands)


                                                      Twelve-Months   Twelve-Months   Two-Months     Ten-Months      Twelve-Months
                                                         Ended           Ended          Ended          Ended             Ended
                                                      December 31,    December 31,    February 28,   December 31,     December 31,
                                                         2000             2000          1999           1999             2000
                                                      -------------   -------------   -----------   ------------     -------------
                                                                                      (old basis)    (new basis)

<S>                                                         <C>            <C>            <C>            <C>                <C>

Net cash provided by operating activities............ $   60,601          99,103        29,285          99,711          128,996
Net cash provided by (used in) investing activities..      3,092          33,800        (1,588)        (97,957)         (99,545)
Net cash provided by (used in) financing activities..    (80,538)       (136,058)          --          (10,005)         (10,005)
                                                      -------------   -------------   -----------   ------------     -------------

Net change in cash and cash equivalents.............. $  (16,845)         (3,155)       27,697         (8,251)          19,446
                                                      =============   =============   ===========   ============     =============


Supplemental cash flow disclosure:
        Cash paid for interest....................... $   28,881          30,902            --          29,871           29,871
                                                      =============   =============   ===========   ============     =============

</TABLE>




                                                           F-27

<PAGE>

                                COSO PARTNERSHIPS

                        NOTES TO THE UNAUDITED CONDENSED

                          COMBINED FINANCIAL STATEMENTS

                        December 31, 2001, 2000 and 1999


(1)  Basis of Presentation

     The accompanying  unaudited  condensed combined  financial  statements were
     derived from the stand alone financial statements of Caithness Coso Funding
     Corp.,  Coso  Finance  Partners,  Coso  Energy  Developers  and Coso  Power
     Developers.  All intercompany  accounts and  transactions  were eliminated.
     This  financial   information  has  been  provided  to  facilitate  a  more
     comprehensive  understanding of the financial  position,  operating results
     and cash flows of the Coso Partnerships as a whole. The unaudited condensed
     combined  financial   statements  should  read  in  conjunction  with  each
     individual partnership's financial statements.

(2)  Acquisition

     On February 25, 1999,  Caithness  Acquisition  Company, LLC (CAC), a wholly
     owned subsidiary of Caithness Energy,  LLC,  purchased all of the interests
     in the Coso projects that were owned by CalEnergy Company Inc. (CalEnergy),
     which is now known as MidAmerican  Energy  Holdings  Company.  The purchase
     price  consisted of $205.0 million in cash, plus $5.0 million in contingent
     payments,  plus the assumption of CalEnergy's and its affiliates'  share of
     debt  outstanding.  The  acquisition  was  accounted for under the purchase
     method,  and  no  goodwill  was  recorded.  After  Caithness  Acquisition's
     purchase  of  CalEnergy's  interest  in Coso  Partnerships,  a new basis of
     accounting was adopted and is referred to as "New Basis" as compared to the
     former cost basis  which is  referred  to as "Old  Basis" in the  financial
     statements.  The purchase  price was allocated to the portion of the assets
     and liabilities purchased from CalEnergy based upon their fair values, with
     the  amount of fair  value of net  assets in excess of the  purchase  price
     being allocated to long-lived assets on a pro-rata basis.

     In  order  to  complete  the  purchase  of  CalEnergy's  interest  in  Coso
     Partnerships,  Caithness Acquisition arranged for short-term debt financing
     of approximately $211.5 million. This short-term debt was repaid on May 28,
     1999 from a portion of the  proceeds  from the  offering of senior  secured
     notes (see note 3).

(3)  Debt Financing

     On May 28, 1999 Caithness Coso Funding Corp.  loaned  approximately  $413.0
     million  to Coso  Partnerships  from a  portion  of the  proceeds  from the
     offering of senior secured  notes.  The loan consists of one note of $110.0
     million with an interest  rate of 6.80% and another of $303.0  million with
     an interest  rate of 9.05% with  maturity  dates of  December  15, 2001 and
     December 15, 2009,  respectively.  All prior project loans of approximately
     $351.4  million  were repaid  from the  proceeds  of the  financing  and an
     extraordinary loss from the early  extinguishment of this debt was incurred
     for approximately $6.3 million. The extraordinary loss was due to a premium
     and other costs incurred to pay the prior project loans before maturity.

(4)  Reclassifications

     Certain  reclassifications  have  been  made  to  the  2000,  statement  of
     operations to conform to the 2001 presentation.


                                      F-28

<PAGE>


Item 9.  Changes  in  and  disagreements  with  Accountants  on  Accounting  and
     Financial Disclosure.

     Since 1991, Caithness Energy and CalEnergy, the then present co-sponsors of
the Coso projects, had engaged PricewaterhouseCoopers LLP to audit the financial
statements of the Coso partnerships.  On February 25, 1999, CAC purchased all of
CalEnergy's  interests in the Coso projects,  and Caithness  Energy engaged KPMG
LLP, its own independent certified public accountants, to audit future financial
statements  of the Coso  partnerships.  In  connection  with the  audits  of the
financial statements of Coso Finance Partners and Coso Finance Partners II, Coso
Energy  Developers  and Coso Power  Developers for the period ended February 25,
1999, (i) Caithness Energy had no disagreements with  PricewaterhouseCoopers LLP
on any  matter  of  accounting  principles  or  practices,  financial  statement
disclosure or auditing scope or procedure,  which  disagreements if not resolved
to the satisfaction of PricewaterhouseCoopers LLP would have caused them to make
reference  thereto in their reports on the financial  statements for such years,
and (ii) the reports of PricewaterhouseCoopers  LLP on the Coso partnerships did
not contain any adverse opinion or disclaimer of opinion,  and were not modified
as to uncertainty, audit scope or accounting principles except for the reference
to the Coso  partnerships'  adoption in 1998 of  Statement of Position No. 98-5,
"Reporting on the Costs of Start-up Activities."


                                    Part III


Item 10. Directors and Executive Officers of the Registrant.


     The following  table sets forth the persons who served as our directors and
executive officers as of December 31, 2001:

<TABLE>
<CAPTION>

Name                                Age                   Position(s)
----                                ---                   -----------
<S>                                 <C>     <C>

James D. Bishop, Sr.                68      Director, Chairman and Chief Executive Officer

Leslie J. Gelber                    45      Director, President and Chief Operating Officer

James D. Bishop, Jr.                41      Director, Vice Chairman

Christopher T. McCallion            40      Director, Executive Vice President and Chief
                                            Financial Officer

Kenneth Hoffman                     49      Senior Vice President

Larry K. Carpenter                  52      Director, Executive Vice President

Mark A. Ferrucci                    49      Director

David V. Casale                     38      Vice President and Controller

John A. McNamara                    42      Vice President Finance

Barbara Bishop Gollan               43      Vice President

</TABLE>

     James D. Bishop,  Sr., Chairman,  Chief Executive Officer and a Director of
Funding  Corp.  and of Caithness  Energy,  has served as a Director of Caithness
Corporation  since  its  inception  in 1975.  Mr.  Bishop  served  as  Caithness
Corporation's President from its inception until December 1986 and has served as
Chairman of Caithness  Corporation since January 1987. Mr. Bishop also serves as
a  director  for  various  other  entities  which  engage in  independent  power
production and natural resource exploration and development.  Mr. Bishop holds a
Master of Business  Administration  degree from  Harvard  Business  School and a
Bachelor of Arts degree from Yale University.  Mr. Bishop is the father of James
D. Bishop, Jr. and Barbara Bishop Gollan.

                                       25

     Leslie J.  Gelber,  President,  Chief  Operating  Officer and a Director of
Funding  Corp.  and of  Caithness  Energy,  has  served as  President  and Chief
Operating Officer of Caithness  Corporation since January 1999. Prior to joining
Caithness  Corporation,  Mr. Gelber  served as President of Cogen  Technologies,
Inc., which is also engaged in the field of independent power  production,  from
August 1998 until December 1998.  From July 1993 to July 1998, Mr. Gelber served
as President of ESI Energy,  Inc., the  non-regulated  independent power company
owned by FPL Group,  Inc. Mr.  Gelber holds a Master of Business  Administration
degree  from the  University  of Miami and holds a  Bachelor  of Arts  degree in
Economics from Alfred University.

     James D. Bishop,  Jr., Vice Chairman and a Director of Funding Corp. and of
Caithness Energy,  joined Caithness  Corporation in 1988 and served as President
and Chief Operating  Officer of Caithness  Corporation  from November 1995 until
December  1998.  Mr.  Bishop  also  serves on all the  boards of  directors  and
management  committees  of the  entities  and  joint  ventures  affiliated  with
Caithness  Corporation.  Mr.  Bishop  holds a Master of Business  Administration
degree from the Kellogg Graduate School of Management at Northwestern University
and holds a Bachelor of Science degree from Trinity  College.  Mr. Bishop is the
son of James D. Bishop, Sr. and the brother of Barbara Bishop Gollan.

     Christopher T. McCallion, Executive Vice President, Chief Financial Officer
and a  Director  of  Funding  Corp.  and of  Caithness  Energy,  served  as Vice
President  and  Controller of Caithness  Corporation  from July 1991 to November
1995, and has served as Executive Vice President and Chief Financial  Officer of
Caithness  Corporation  since November 1995. Mr.  McCallion  holds a Bachelor of
Science degree from Seton Hall University.

     Kenneth P. Hoffman a Senior Vice President of Funding Corp and of Caithness
Energy,  joined  Caithness  Corporation  in  March of  2000.  Prior  to  joining
Caithness,  Mr. Hoffman was a Vice President of FPL Energy, Inc. From 1989 until
1993 he was the Vice President of Business Management of ESI Energy, Inc. Before
1989,  Mr.  Hoffman was employed by Florida Power & Light  Company.  Mr. Hoffman
holds a Master of  Business  Administration  degree from  Florida  International
University  and a  Bachelor  of  Science  degree  from  Rochester  Institute  of
Technology.

     Larry K.  Carpenter,  Executive  Vice  President  and a Director of Funding
Corp.  and of Caithness  Energy,  has served as an Executive  Vice  President of
Caithness   Corporation   since  January  1999.   Prior  to  joining   Caithness
Corporation,  Mr.  Carpenter  served as Vice  President  of  Development  at ESI
Energy,  Inc., the  non-regulated  independent  power company owned by FPL Group
Inc.,  from 1985 to December  1998.  Mr.  Carpenter  holds a Bachelor of Science
degree in Electrical Engineering from the University of Florida.

     Mark  A.  Ferrucci,  a  Director  of  Funding  Corp.,  has  served  as  the
independent  director of Funding Corp.  since May 1999. Since 1997, Mr. Ferrucci
has been an employee of CT  Corporation  System,  an  independent  company  that
provides corporate and UCC services to businesses and law firms. From 1977 until
1992, Mr. Ferrucci served as CT Corporation  System's Assistant Secretary and as
Assistant Vice President of CT Corporation System from 1992 until the present.

     David V. Casale,  a Vice  President and the Controller of Funding Corp. and
of Caithness Energy joined Caithness Corporation in December 1991 and has served
as a Vice President and as its  Controller  since November 1995. Mr. Casale also
serves on the boards of directors of joint  ventures  affiliated  with Caithness
Corporation. Mr. Casale holds a Bachelor of Arts degree from Adelphi University.

                                       26

     John A. McNamara,  Vice President Finance of Funding Corp. and of Caithness
Energy, joined Caithness Corporation in September of 1990 and has served as Vice
President since 1999. Prior to joining Caithness, Mr. McNamara was a broker with
Bradley & Company, an account executive with First Georgetown  Securities,  Inc.
and a staff member of the United States Senate  Committee on Small Business.  He
received a Masters of Business  Administration degree from Georgetown University
and a Bachelor of Arts degree from Denison University.

     Barbara Bishop  Gollan,  a Vice President of Funding Corp. and of Caithness
Energy,  joined  Caithness  Corporation  as Vice  President in October 1990. Ms.
Gollan has authored and  co-authored a number of technical  papers on geothermal
systems,  which were presented to the Geothermal Resources Council, the Geologic
Society of America and the  Stanford  Geothermal  Workshop.  Ms.  Gollan holds a
Master of Science degree in Geology and  Geochemistry  from Stanford  University
and holds a Bachelor of Arts  degree from  Amherst  College.  Ms.  Gollan is the
daughter of Mr. James D. Bishop, Sr. and the sister of James D. Bishop, Jr.

     The Board of Directors  appointed Mr. Ferrucci as an independent  director.
The  unanimous  affirmative  vote  of our  Board  of  Directors  (including  Mr.
Ferrucci) is required  before certain actions can be taken,  including,  but not
limited to, (1)  engaging in any  business  or activity  other than  issuing the
senior secured notes and making the related loans to the Coso partnerships,  (2)
incurring  any debt, or assuming or  guaranteeing  any debt of any other entity,
(3)  dissolving or  liquidating,  (4)  consolidating,  merging or selling all or
substantially  all of our assets or (5) instituting any bankruptcy or insolvency
proceedings.


Item 11. Executive Compensation.

     None of the directors or executive  officers of Funding Corp.  receives any
compensation for his or her services, except Mr. Ferruci, who receives $8,400 in
compensation annually for services provided.


Item 12.  Security Ownership of Certain Beneficial Owners and Management.

     The following table sets forth, as of December 31, 2001 certain information
regarding the beneficial ownership of Coso Funding Corp.'s voting securities and
the  beneficial  ownership  of  the  voting  securities  of  each  of  the  Coso
partnerships by:

(1)  Each person who is known by us and the Coso  partnerships  to  beneficially
     own 5% or more of Coso Funding  Corp.'s voting  securities or 5% or more of
     the voting securities of any Coso partnership,

(2)  Each of Coso Funding Corp.'s directors and executive  officers who also act
     in  similar  capacities  on behalf  of the  managing  partner  of each Coso
     partnership  and each of the delegates to the management  committee of each
     Coso partnership, and

(3)  All of Coso Funding Corp.'s  directors and executive  officers who also act
     in similar capacities for the managing partnership of each Coso partnership
     and  all  of the  delegates  to  the  management  committee  of  each  Coso
     partnership as a group.

     Beneficial  ownership has been  determined  in  accordance  with Rule 13d-3
under the  Securities  Exchange  Act of 1934,  as amended.  Except as  otherwise
noted, each person named below has an address in care of our principal executive
offices.

                                       27

<TABLE>
<CAPTION>

                         Beneficial Ownership of Coso Funding Corp. and the Coso Partnerships

                                             Percent Indirect   Percent Indirect   Percent Indirect  Percent Indirect
                                                Beneficial         Beneficial         Beneficial        Beneficial
            Name and Address of                Ownership in       Ownership in       Ownership in      Ownership in
             Beneficial Owner                  Coso Funding        the Navy I          the BLM          The Navy II
             ----------------                     Corp.           Partnership        Partnership        Partnership
                                             ----------------   ----------------   ----------------  ----------------
<S>                                          <C>                 <C>                <C>               <C>

James D. Bishop, Sr. (1)(2)...............         0.6%               1.0%               --                0.7%

Leslie J. Gelber (1)(3)...................         --                 --                 --                --

James D. Bishop, Jr. (1)(4)...............        25.0%              24.5%              28.0%             22.6%

Christopher T. McCallion (1)(3)...........         --                 --                 --                --

Larry K. Carpenter (1)(3).................         --                 --                 --                --

Mark A. Ferrucci..........................         --                 --                 --                --

David V. Casale (1)(3)....................         --                 --                 --                --

John A. McNamara (1)(3).................           --                 --                 --                --

Barbara Bishop Gollan (1)(3)(5).........           --                 --                 --                --

Dominion Energy, Inc. (6)................          *                  --                7.8%               2.8%
   901 East Byrd Street
   Richmond, VA 23219

Mojave Energy Company (7).................         6.1%               5.5%              7.7%               5.2%
   c/o Davenport Resources, Inc.
   200 Railroad Avenue, 3rd floor
   Greenwich, CT  06830

All directors, executive officers and
management committee delegates as a group.
                                                  35.3%              30.9%             43.6%              31.3%
</TABLE>


*    Less  than  5.0%.

(1)  The  address  of  such  person  is  c/o  Caithness
     Corporation, 565 Fifth Avenue, 29th Floor, New York, New York 10017-2478.

(2)  The beneficial  ownership of James D. Bishop, Sr.'s interests is based upon
     his  ownership of shares of common stock of Mojave  Power,  Inc. and Mojave
     Power II, Inc. which own,  indirectly  through  various  entities,  general
     partnership   interests  in  the  Navy  I  partnership   and  the  Navy  II
     partnership.  In addition to these interests,  James D. Bishop,  Sr. is the
     beneficiary  of The James D. Bishop  Trust--2001  ( "Bishop,  Sr. Trust "),
     which owns shares of common stock of Caithness  Corporation  and membership
     units in Caithness 1997, LLC. Caithness Corporation and Caithness 1997, LLC
     own, indirectly through various entities,  general partnership interests in
     the Navy I partnership,  the BLM  partnership  and the Navy II partnership,
     which  collectively  own all of the shares of common stock of Funding Corp.
     The voting  rights to the shares of common stock of  Caithness  Corporation
     held by the  Bishop,  Sr.  Trust  have been  transferred  to The  Caithness
     Entities  Voting  Trust,  the trustee of which is James D. Bishop,  Jr. The
     Bishop, Sr. Trust is irrevocable. James D. Bishop, Sr., therefore, does not
     have  voting or  investment  power  over  these  shares of common  stock of
     Caithness  Corporation.

                                       28

(3)  Owner of economic  interests  in the Coso  partnerships  through  Caithness
     Corporation's  employee  incentive plans,  which economic interests are not
     listed on this table.

(4)  James D. Bishop,  Jr. is: (i) the  beneficiary of The James D. Bishop,  Jr.
     Irrevocable  Trust--1996  (the "Bishop,  Jr. Trust "), which owns shares of
     common stock of Caithness  Corporation,  and membership  units in Caithness
     1997,  LLC,  the  voting  rights  of which  have  been  transferred  to the
     Caithness  Entities Voting Trust,  the trustee of which is James D. Bishop,
     Jr.;  (ii) the owner of common  stock of Caithness  Corporation  and Mojave
     Power,  Inc, and  membership  units in Caithness  1997,  LLC; and (iii) the
     trustee of The Caithness  Entities Voting Trust which possesses sole voting
     control over the shares of common stock of  Caithness  Corporation  held by
     the Bishop,  Sr. Trust, The Barbara Bishop Gollan  Irrevocable  Trust--1996
     (the "Gollan Trust "), The Elizabeth Bishop DeLuca Irrevocable  Trust--1996
     and The Linda Bishop Fotiu Irrevocable Trust--1996. The interests listed in
     (i) and (ii) above entitle James D. Bishop,  Jr. to the following  indirect
     beneficial  ownership  interests:  Funding Corp. (1.6%); Navy I partnership
     (1.6%); BLM partnership  (1.5%); and Navy II partnership  (1.6%).  James D.
     Bishop, Jr. disclaims beneficial ownership of the interests listed in (iii)
     above.

(5)  Barbara Bishop Gollan is the  beneficiary  of the Gollan Trust,  which owns
     shares of common stock of Caithness  Corporation,  and membership  units in
     Caithness  1997,  LLC.  The voting  rights to the shares of common stock of
     Caithness Corporation held by the Gollan Trust have been transferred to The
     Caithness  Entities Voting Trust,  the trustee of which is James D. Bishop,
     Jr. The Gollan Trust is irrevocable. Barbara Bishop Gollan, therefore, does
     not have voting or  investment  power over these  shares of common stock of
     Caithness  Corporation.

(6)  Dominion  Energy,  Inc. owns: (i) a limited  liability  company  membership
     interest in Caithness BLM Group, LP, a Delaware limited partnership,  which
     owns a limited  liability  company  membership  interest in Caithness  Coso
     Holdings,  LLC,  which  owns a  general  partnership  interest  in the  BLM
     partnership;  and (ii) a limited liability company  membership  interest in
     Navy II Group  which  owns a general  partnership  interest  in the Navy II
     partnership.

(7)  Mojave Energy Company owns limited liability company  membership  interests
     in Caithness Power, LLC, which owns,  indirectly  through various entities,
     general partnership interests in each of the Coso partnerships.


Item 13. Certain Relationships and Related Transactions.

The Coso Partnerships

     Each of the Coso partnerships has two general partners,  a managing partner
and  a  non-managing  partner.   Under  the  amended  and  restated  partnership
agreement,   the  managing   partner  of  each  Coso  partnership  is  generally
responsible  for the  management  and  control of the  day-to-day  business  and
affairs.  The managing  partner of the Navy I  partnership  is New CLOC Company,
LLC, a Delaware  limited  liability  company,  the  managing  partner of the BLM
partnership is New CHIP Company,  LLC, a Delaware limited  liability company and
the  managing  partner of the Navy II  partnership  is New CTC  Company,  LLC, a
Delaware  limited  liability  company.  The  non-managing  partner of the Navy I
partnership is ESCA, LLC, a Delaware limited liability company, the non-managing
partner of the BLM  partnership  is  Caithness  Coso  Holdings,  LLC, a Delaware
limited  liability  company,  and  the  non-managing  partner  of  the  Navy  II
partnership  is  Caithness  Navy II Group,  LLC,  a Delaware  limited  liability
company.

     Each managing partner is a limited  liability  company managed by a manager
who is appointed by Caithness Acquisition Company, LLC (CAC), the sole member of
each  managing  partner.  The manager is  responsible  for the  ordinary  course
management and operations by its Coso  partnership.  CAC has appointed itself as
the manager of each managing partner. CAC has also appointed Mr. Ferrucci as the
independent manager of each managing partner. (In addition, each of the managing
members  of  the  non-managing  partners  has  appointed  Mr.  Ferrucci  as  the
independent  manager  of  that  non-managing   partner.)  The  approval  of  the
independent manager is required before the managing partner (or the non-managing
partner,  as the case may be) may take  certain  actions that do not involve the
ordinary course  management and operations by the Coso  partnerships of the Coso
projects,  including,  among others, (1) commencing any bankruptcy or insolvency
proceeding involving the managing partner, (2) incurring any debt in the name of
the managing partner for which it would be liable, (3) dissolving,  liquidating,
consolidating or merging,  or selling all or substantially all of the assets of,
its  respective  Coso  partnership,  or (4) engaging in any business or activity
other than acting as the managing  partner of its respective  Coso  partnership.
Each managing  partner also has its  officers,  who are also officers of Funding
Corp. , who act on behalf of the managing partners of the Coso partnerships.

                                       29

     CAC, a limited liability company, is the manager and sole member of each of
the managing  partners.  Caithness Energy, LLC (Caithness Energy) as the manager
and sole owner of CAC, has delegated its role as manager of CAC to the CAC board
of directors,  including  the power to manage the managing  partners of the Coso
partnerships.  Each  managing  partner's  officers are also the officers of CAC.
None of the  persons  acting  on behalf of the Coso  partnerships  receives  any
compensation  from the Coso  partnerships  for his or her services,  except that
nominal compensation is paid in consideration for Mr. Ferrucci's services.

     Caithness  Energy  is  governed  by a  board  of  directors  and not by its
members. The directors of Funding Corp., other than Mr. Ferrucci, also currently
serve as  members  of the board of  directors  of  Caithness  Energy.  Under the
limited liability company agreement of Caithness Energy,  Caithness  Corporation
is  entitled  to  appoint  a number of  members  to the  Board of  Directors  of
Caithness  Energy who hold,  in the  aggregate,  a majority  of the votes of all
members of such board of directors.  Caithness  Corporation's present appointees
are Messrs. Bishop, Sr., and Bishop, Jr. In addition,  Messrs. Gelber, Carpenter
and  McCallion  serve as voting  members of the board of  directors of Caithness
Energy  pursuant to their  individual  executive  compensation  agreements  with
Caithness Energy. These five individuals,  together with Mr. Ferrucci,  serve as
the CAC board of directors.


Management Committees

     Under  the  amended  and  restated  partnership   agreement  of  each  Coso
partnership,  the managing  partner is subject to the directives of a management
committee which oversees the business  operations of the Coso  partnership.  The
managing  partner of a Coso  partnership may not take certain  specific  actions
without  the  consent  of the  management  committee  of that Coso  partnership.
However,  the  management  committee may not direct the managing  partner of the
Coso  partnership  to take any action  over which the  independent  manager  has
exclusive  authority without the requisite approval of the independent  manager.
The management  committee of each Coso  partnership  consists of four delegates,
two of  which  are  appointed  by the  managing  partner  and two of  which  are
appointed by the non-managing partner. Each partner may substitute or change its
delegates.

     Under  the  amended  and  restated  partnership   agreements  of  the  Coso
partnerships,  each partner may appoint one delegate  with multiple  votes.  The
names of the  delegates  appointed  by  affiliates  of  Caithness  Energy to the
management committees of the Coso partnerships are set forth below.

     As of December  31,  2001,  the  following  persons were the members of the
management  committee of each Coso partnership,  as applicable.  Each person has
two votes on each management committee on which he serves:

<TABLE>
<CAPTION>


        Name                      Age                  Partnership(s)
        ----                      ---                  --------------
        <S>                       <C>    <C>
James D. Bishop, Jr.              41     Navy I partnership, BLM partnership,
                                         Navy II partnership

Christopher T. McCallion          40     Navy I partnership, BLM partnership,
                                         Navy II partnership

                                       30

 Certain information regarding Messrs. Bishop and McCallion is provided above.

</TABLE>

Management Committee Fees

     The members of the  management  committees  are not  entitled to any direct
compensation  from Funding Corp. or the Coso  partnerships.  However,  each Coso
partnership   previously  paid  its  two  general  partner's  annual  management
committee fees for their participation on the management  committee of that Coso
partnership.  The following  table sets forth,  for the years ended December 31,
1998, 1999, 2000 and 2001, the total amount of management committee fees paid or
payable by each of the Coso partnerships to its partners:

<TABLE>
<CAPTION>

                                                             Year Ended December 31
                                                             ----------------------

                                             1998             1999             2000            2001
                                             ----             ----             ----            ----
<S>                                           <C>              <C>             <C>              <C>
Navy I Partnership
     New CLOC....................         $     --         $     --       $       --      $       --
     Predecessor of New CLOC                147,000           25,000              --              --
     ESCA........................           221,000          258,000          234,000         237,000
                                            -------          -------          -------         -------
                                          $ 368,000        $ 283,000      $   234,000     $   237,000
                                            =======          =======          =======         =======
BLM Partnership
     New CHIP....................         $     --         $     --       $       --      $       --
     Predecessor of New CHIP                148,000           25,000              --              --
     CCH.........................           223,000          259,000          234,000         237,000
                                            -------          -------          -------         -------
                                          $ 371,000        $ 284,000      $   234,000     $   237,000
                                            =======          =======          =======         =======

Navy II Partnership..............
     New CTC.....................         $     --         $     --       $       --      $       --
     Predecessor of New CTC......           148,000           25,000              --              --
     Navy II Group...............           223,000          259,000          234,000         237,000
                                            -------          -------          -------         -------
                                          $ 371,000        $ 284,000      $   234,000     $   237,000
                                            =======          =======          =======         =======
</TABLE>


     The Coso  partnerships  no longer pay  management  committee  fees to their
managing partners.


Funding Corp.

     As of June  30,  1999,  the  authorized  capital  stock  of  Funding  Corp.
consisted of 1,000 shares of common stock,  par value 1 cent per share, of which
300 shares were  outstanding.  The outstanding  common stock is owned equally by
the Coso partnerships.


Coso Partnerships

     The  directors and  executive  officers  also act in similar  capacities on
behalf of the  managing  partner of each Coso  partnership  and,  except for Mr.
Ferrucci, on behalf of CAC and Caithness Energy.  Several of these directors and
executive officers beneficially own the securities of Caithness Corporation, who
beneficially owns the majority of membership interests of Caithness Energy.

                                       31


                                     Part IV


Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K.

(a)      Documents filed as part of this report:

         Financial Statements and Schedules

(b)      Current reports on Form 8-K:

         The Coso Partnerships filed current reports on Form 8-K dated December
         1, 2001 reporting an amendment to the agreement entered into on June
         19, 2001 between Edison and the Coso partnerships that addresses
         renewable energy pricing and payment issues.

(c)      Exhibits:

         The exhibits listed on the accompanying Index to Exhibits are filed as
         part of this Annual Report.


                                INDEX TO EXHIBITS

  Exhibit
   Number                                            Description of Exhibit
   ------                                            ----------------------

3.1       Certificate of Incorporation of Caithness Coso Funding Corp.*

3.2       Bylaws of Caithness Coso Funding Corp.*

3.3       Third  Amended and  Restated  Partnership  Agreement  of Coso  Finance
          Partners, dated as of May 28, 1999.*

3.4       Third  Amended  and  Restated  Partnership  Agreement  of Coso  Energy
          Developers, dated as of May 28, 1999.*

3.5       Third  Amended  and  Restated  Partnership  Agreement  of  Coso  Power
          Developers, dated as of May 28, 1999.*

3.6       Amendment  Agreement,  dated as of May 28,  1999,  by and  among  Coso
          Finance  Partners,   Caithness  Acquisition  Company,  LLC,  New  CLOC
          Company, LLC, ESCA, LLC and Coso Operating Company LLC.*

3.7       Amendment  Agreement,  dated as of May 28,  1999,  by and  among  Coso
          Energy  Developers,  Caithness  Acquisition  Company,  LLC,  New  CHIP
          Company, LLC, Caithness Coso Holdings,  LLC and Coso Operating Company
          LLC.*

3.8       Amendment Agreement, dated as of May 28, 1999, by and among Coso Power
          Developers,  Caithness Acquisition Company, LLC, New CTC Company, LLC,
          Caithness Navy II Group, LLC and Coso Operating Company LLC.*

4.1       Indenture,  dated as of May 28,  1999,  among  Caithness  Coso Funding
          Corp.,  Coso  Finance  Partners,  Coso Energy  Developers,  Coso Power
          Developers, and U.S. Bank Trust National Association as trustee and as
          collateral agent.*

4.3       Notation  of  Guarantee,  dated as of May 28,  1999,  of Coso  Finance
          Partners.*

                                       32

4.4       Notation  of  Guarantee,  dated  as of May 28,  1999,  of Coso  Energy
          Developers.*

4.5       Notation  of  Guarantee,  dated  as of May 28,  1999,  of  Coso  Power
          Developers.*

4.6       Registration Rights Agreement,  dated as of May 28, 1999, by and among
          Caithness  Coso  Funding  Corp.,  Coso Finance  Partners,  Coso Energy
          Developers,  Coso Power Developers,  and Donaldson,  Lufkin & Jenrette
          Securities Corporation.*

10.1      Deposit and  Disbursement  Agreement,  dated as of May 28, 1999, among
          Caithness  Coso  Funding  Corp.,  Coso Finance  Partners,  Coso Energy
          Developers,  Coso  Power  Developers,  and U.S.  Bank  Trust  National
          Association, as collateral agent, as trustee, and as depositary.*

10.2      Credit  Agreement,  dated as of May 28, 1999,  between  Caithness Coso
          Funding Corp. and Coso Finance Partners.*

10.3      Promissory  Note  due  2001 of  Coso  Finance  Partners  in  favor  of
          Caithness Coso Funding Corp.*

10.4      Promissory  Note  due  2009 of  Coso  Finance  Partners  in  favor  of
          Caithness Coso Funding Corp.*

10.5      Credit  Agreement,  dated as of May 28, 1999,  between  Caithness Coso
          Funding Corp. and Coso Energy Developers.*

10.6      Promissory  Note  due  2001 of Coso  Energy  Developers  in  favor  of
          Caithness Coso Funding Corp.*

10.7      Promissory  Note  due  2009 of Coso  Energy  Developers  in  favor  of
          Caithness Coso Funding Corp.*

10.8      Credit  Agreement,  dated as of May 28, 1999,  between  Caithness Coso
          Funding Corp. and Coso Power Developers.*

10.9      Promissory  Note  due  2001 of  Coso  Power  Developers  in  favor  of
          Caithness Coso Funding Corp.*

                                       33

10.10     Promissory  Note  due  2009 of  Coso  Power  Developers  in  favor  of
          Caithness Coso Funding Corp.*

10.11     Purchase  Agreement,  dated as of May 21, 1999, by and among Caithness
          Coso Funding  Corp.,  as Issuer,  Coso Finance  Partners,  Coso Energy
          Developers and Coso Power  Developers,  as guarantors,  and Donaldson,
          Lufkin & Jenrette Securities Corporation, as initial purchaser.*

10.12     Security  Agreement,  dated as of May 28, 1999,  executed by and among
          Caithness  Coso Funding  Corp.  in favor of U.S.  Bank Trust  National
          Association, as collateral agent.*

10.13     Security  Agreement,  dated as of May 28, 1999,  executed by and among
          Coso  Finance   Partners  in  Favor  of  U.S.   Bank  Trust   National
          Association, as collateral agent.*

10.14     Security Agreement,  dated as of May 28, 1999, executed by Coso Energy
          Developers  in favor  of U.S.  Bank  Trust  National  Association,  as
          collateral agent.*

10.15     Security  Agreement,  dated as of May 28, 1999, executed by Coso Power
          Developers  in favor  of U.S.  Bank  Trust  National  Association,  as
          collateral agent.*

10.18     Security  Agreement  (Navy I  project  permits),  dated  as of May 28,
          1999,  executed by Coso  Operating  Company LLC in favor of U.S.  Bank
          Trust National Association, as collateral agent.*

10.19     Security  Agreement (BLM project  permits),  dated as of May 28, 1999,
          executed by Coso  Operating  Company  LLC in favor of U.S.  Bank Trust
          National Association, as collateral agent.*

10.20     Security  Agreement  (Navy II  project  permits),  dated as of May 28,
          1999,  executed by Coso  Operating  Company LLC in favor of U.S.  Bank
          Trust National Association, as collateral agent.*

10.24     Deed of  Trust,  Assignment  of Rents,  Fixture  Filing  and  Security
          Agreement, dated as of May 28, 1999, executed by Coso Finance Partners
          in favor of U.S. Bank Trust National  Association,  as trustee, and as
          beneficiary.*

10.25     Deed of  Trust,  Assignment  of Rents,  Fixture  Filing  and  Security
          Agreement,  dated  as  of  May  28,  1999,  executed  by  Coso  Energy
          Developers  in favor  of U.S.  Bank  Trust  National  Association,  as
          trustee, and as beneficiary.*

10.26     Deed of  Trust,  Assignment  of Rents,  Fixture  Filing  and  Security
          Agreement, dated as of May 28, 1999, executed by Coso Power Developers
          in favor of U.S. Bank Trust National  Association,  as trustee, and as
          beneficiary.*

10.27     Deed of  Trust,  Assignment  of Rents,  Fixture  Filing  and  Security
          Agreement,  dated as of May 28,  1999,  executed by Coso  Transmission
          Line Partners in favor of U.S.  Bank Trust  National  Association,  as
          trustee, and as beneficiary.*

10.28     Deed of  Trust,  Assignment  of Rents,  Fixture  Filing  and  Security
          Agreement,  dated as of May 28,  1999,  executed  by China  Lake Joint
          Venture in favor of U.S. Bank Trust National Association,  as trustee,
          and as beneficiary.*

10.29     Deed of  Trust,  Assignment  of Rents,  Fixture  Filing  and  Security
          Agreement,  dated as of May 28, 1999, executed by Coso Land Company in
          favor of U.S.  Bank Trust  National  Association,  as trustee,  and as
          beneficiary.*

10.30     Stock  Pledge  Agreement,  dated as of May 28,  1999,  by Coso Finance
          Partners, Coso Energy Developers and Coso Power Developers in favor of
          U.S. Bank Trust National Association, as Collateral agent.*

10.31     Partnership  Interest  Pledge  Agreement (Navy I), dated as of May 28,
          1999, by ESCA,  LLC and New CLOC  Company,  LLC, in favor of U.S. Bank
          Trust National Association, as collateral agent.*

10.32     Partnership  Interest  Pledge  Agreement  (BLM),  dated  as of May 28,
          1999, by Caithness  Coso Holdings,  LLC and New CHIP Company,  LLC, in
          favor of U.S. Bank Trust National Association, as Collateral agent.*

10.33     Partnership  Interest Pledge  Agreement (Navy II), dated as of May 28,
          1999,  by Caithness  Navy II Group,  LLC and New CTC Company,  LLC, in
          favor of U.S. Bank Trust National Association, as collateral agent.*

10.34     Partnership  Interest  Pledge  Agreement  (CTLP),  dated as of May 28,
          1999, by Coso Energy Developers and Coso Power Developers, in favor of
          U.S. Bank Trust National Association, as Collateral agent.*

10.35     Partnership  Interest  Pledge  Agreement  (CLJV),  dated as of May 28,
          1999, by Caithness  Acquisition  Company, LLC and Caithness Geothermal
          1980 Ltd.,  LP, in favor of U.S. Bank Trust National  Association,  as
          collateral agent.*

10.36     Partnership  Interest  Pledge  Agreement  (CLC),  dated  as of May 28,
          1999, by Caithness  Acquisition  Company, LLC and Caithness Geothermal
          1980 Ltd.,  LP, in favor of U.S. Bank Trust National  Association,  as
          collateral agent.*

10.37     Promissory  Notes  Security  Agreement,  dated as of May 28, 1999,  by
          Caithness  Coso Funding  Corp.,  in favor of U.S. Bank Trust  National
          Association, as collateral agent.*

                                       34

10.38     Original  Service Contract  N62474-79-C-5382,  dated December 6, 1979,
          between U.S. Naval Weapons Center and California Energy Company, Inc.,
          Contractor (the "Navy Contract "), including all Amendments thereto.*

10.39     Escrow  Agreement,  dated December 16, 1992, as amended,  by and among
          Coso Finance Partners, Bank of America and the Navy.*

10.40     Offer to Lease and Lease for Geothermal  Resources,  Serial No. 11402,
          dated April 29, 1985 but Effective May 1, 1985, from the United States
          of  America,  acting  through  the  Bureau  of  Land  Management,   to
          California Energy Company,  Inc.; as assigned by Assignment  Affecting
          Record Title to Geothermal  Resources Lease,  dated June 24, 1985, but
          effective July 1, 1985 from California  Energy  Company,  Inc. to Coso
          Land Company;  as assigned by Assignment of Record Title Interest in a
          Lease for Oil and Gas or Geothermal  Resources,  dated April 20, 1988,
          but  effective  May 1, 1988 from Coso Land Company to Coso  Geothermal
          Company; as assigned by Assignment of Record Title Interest in a Lease
          for Oil and Gas or  Geothermal  Resources  dated  April  20,  1988 but
          effective  May 1, 1988 from Coso  Geothermal  Company  to Coso  Energy
          Developers.*

10.41     Geothermal  Resources Lease,  Serial No. CA-11383,  by and between the
          United  States  of  America,   acting   through  the  Bureau  of  Land
          Management,  and the  LADWP,  effective  as of  January  1,  1988;  as
          assigned by Lease  Assignment  Agreement by and between LADWP and Coso
          Land Company,  dated  September 10, 1997; as assigned by Assignment of
          Record  Title  Interest  in  Lease  for  Oil  and  Gas  or  Geothermal
          Resources, by and between the United States of America, acting through
          the  Bureau  of Land  Management,  and Coso  Land  Company,  effective
          January 1, 1998;  and as  extended  by  Extension  of primary  term of
          CACA-11383 to September 23, 2004.*

10.42     Geothermal  Resources Lease,  Serial No. CA-11384,  by and between the
          United  States  of  America,   acting   through  the  Bureau  of  Land
          Management,  and the LADWP,  effective  as of  February  1,  1982;  as
          assigned by Lease  Assignment  Agreement by and between LADWP and Coso
          Land Company,  dated  September 10, 1997; as assigned by Assignment of
          Record  Title  Interest  in a Lease  for  Oil  and  Gas or  Geothermal
          Resources  (CACA-11384),  by and between the United States of America,
          acting through the Bureau of Land  Management,  and Coso Land Company,
          effective  as of January 1, 1998;  and as  extended  by  extension  of
          primary term of CACA-11385 to December 24, 2002.*

10.43     Geothermal  Resources Lease,  Serial No. CA-11385,  by and between the
          United  States  of  America,   acting   through  the  Bureau  of  Land
          Management,  and the LADWP,  effective  as of  February  1,  1982;  as
          assigned by Lease  Assignment  Agreement by and between LADWP and Coso
          Land Company,  dated  September 10, 1997; as assigned by Assignment of
          Record  Title  Interest  in a Lease  for  Oil  and  Gas or  Geothermal
          Resources  (CACA-11385)  by and between the United  States of America,
          acting Through the Bureau of Land  Management,  and Coso Land Company,
          effective  as of January 1, 1998;  and as  extended  by  extension  of
          primary term of CACA-11385 to December 24, 2002.*

10.44     License for Electric Power Plant Site Utilizing  Geothermal  Resources
          between the United States of America,  Licensor, through the Bureau of
          Land Management, and Coso Energy Developers, Licensee, Serial No. CACA
          22512, dated March 8, 1989 (expires 3/8/19).*

10.45     License for Electric Power Plant Site Utilizing  Geothermal  Resources
          between  the United  States of America,  acting  through the Bureau of
          Land  Management,  and Coso Energy  Developers,  Licensee,  Serial No.
          25690, dated 12/29/1989 (expires 12/28/19).*

10.46     Right of Way  CA-18885 by and  between  the United  States of America,
          acting through the Bureau of Land  Management,  and California  Energy
          Company, Inc., dated May 7, 1986 (telephone cable)(expires 5/7/16).*

                                       35

10.47     Right of Way  CA-13510 by and  between  the United  States of America,
          acting through the Bureau of Land  Management,  and California  Energy
          Company,  Inc.,  dated  April  12,  1984  (Coso  office  site)(expires
          4/12/14).*

10.48     Agreement  of Transfer  and  Assignment  (Navy I  Transmission  Line),
          dated July 14, 1987,  among China Lake Joint  Venture and Coso Finance
          Partners.*

10.49     Agreement  of Transfer and  Assignment  (Navy II  Transmission  Line),
          dated July 31, 1989, among Coso Power Developers and Coso Transmission
          Line Partners.*

10.50     Agreement of Transfer and Assignment (BLM  Transmission  Line),  dated
          July 31, 1989, among Coso Energy Developers and Coso Transmission Line
          Partners.*

10.51     Agreement  Regarding  Overriding  Royalty (CLC Royalty),  dated May 5,
          1988, between Coso Energy Developers and Coso Land Company.*

10.52     Coso  Geothermal  Exchange  Agreement,  dated January 11, 1994, by and
          among  Coso  Finance  Partners,  Coso  Energy  Developers,  Coso Power
          Developers, and California Energy Company, Inc.*

10.53     Amendment  to Coso  Geothermal  Exchange  Agreement,  dated  April 12,
          1995, by and among Coso Finance Partners, Coso Energy Developers, Coso
          Power Developers, and California Energy Company, Inc.*

10.55     Operation and Maintenance  Agreement  (Navy I Project),  dated May 28,
          1999,  by and among  FPL  Energy  Operating  Services,  Inc.  and Coso
          Operating Company, LLC and New CLOC Company, LLC.*

10.56     Operation  and  Maintenance  Agreement  (BLM  Project),  dated May 28,
          1999,  by and among  FPL  Energy  Operating  Services,  Inc.  and Coso
          Operating Company, LLC and New CHIP Company, LLC.*

10.57     Operation and Maintenance  Agreement (Navy II Project),  dated May 28,
          1999,  by and among  FPL  Energy  Operating  Services,  Inc.  and Coso
          Operating Company, LLC and New CTC Company, LLC.*

10.58     Field  Operation and  Maintenance  Agreement  (Navy I), dated February
          25, 1999,  between Coso Operating  Company,  LLC and New CLOC Company,
          LLC.*

10.59     Field  Operations and Maintenance  Agreement (Navy II), dated February
          25, 1999,  between Coso  Operating  Company,  LLC and New CTC Company,
          LLC.*

10.60     Field Operations and Maintenance  Agreement (BLM),  dated February 25,
          1999, between Coso Operating Company, LLC and New CHIP Company, LLC.*

10.61     Purchase  Agreement,  dated  as of  January  16,  1999,  by and  among
          Caithness Energy,  L.L.C.,  Caithness  Acquisition  Company,  LLC, and
          California Energy Company, Inc.*

10.62     Agreement Concerning Consideration,  dated as of February 25, 1999, by
          and among Caithness Energy,  L.L.C.,  Caithness  Acquisition  Company,
          L.L.C., New CLOC Company, LLC, New CHIP Company, LLC, New CTC Company,
          LLC, and CalEnergy Company, Inc.*

10.63     Future  Revenue  Agreement,  dated  February 25, 1999,  by and between
          Caithness Energy, L.L.C.,  Caithness Acquisition Company, LLC, New CTC
          Company,  LLC, New CLOC  Company,  LLC,  NewCHIP  Company,  LLC,  Coso
          Finance Partners, Coso Energy Developers,  Coso Power Developers,  and
          California Energy Company, Inc.*

                                       36

10.64     Acknowledgment  and   Agreement--Release,   dated  January  16,  1999,
          executed  by  Caithness  Resources,   Inc.,   Caithness   Corporation,
          Caithness  Power,   L.L.C.,   James  Bishop  Sr.,  and  Caithness  CEA
          Geothermal, LP (appended to Exhibit 10.61).*

10.65     Acknowledgment and Agreement--Indemnity,  dated May 28, 1999, executed
          by Coso Finance  Partners,  New CLOC  Company,  LLC,  ESCA,  LLC, Coso
          Energy  Developers,  New CHIP Company,  LLC,  Caithness Coso Holdings,
          LLC, Coso Power Developers,  New CTC Company,  LLC, and Caithness Navy
          II Group, LLC.*

10.66     Acknowledgment and  Agreement--Release,  dated May 28, 1999,  executed
          by Coso Finance  Partners,  New CLOC  Company,  LLC,  ESCA,  LLC, Coso
          Energy  Developers,  New CHIP Company,  LLC,  Caithness Coso Holdings,
          LLC, Coso Power Developers,  New CTC Company,  LLC, and Caithness Navy
          II Group, LLC.*

10.67     Acknowledgment  and  Agreement--Indemnity,  dated  January  16,  1999,
          executed  by  Caithness  Resources,   Inc.,   Caithness   Corporation,
          Caithness Power, L.L.C., China Lake Operating Company, Coso Technology
          Corporation  and Coso  Hotsprings  Intermountain  Power  (appended  to
          Exhibit 10.61).*

10.68     Power  Purchase  Agreement  (modified  Standard  Offer No.4) (Navy I),
          dated  as of  June  4,  1984,  as  Amended,  by and  between  Southern
          California  Edison  Company and Coso Finance  Partners (as assignee of
          China Lake Joint Venture).*

10.69     Power Purchase  Agreement  (modified Standard Offer No.4) (BLM), dated
          as of February  1, 1985,  by and between  Southern  California  Edison
          Company and Coso Energy  Developers  (as  assignee of China Lake Joint
          Venture).*

10.70     Power  Purchase  Agreement  (modified  Standard Offer No.4) (Navy II),
          dated as of  February  1, 1985,  by and  between  Southern  California
          Edison  Company and Coso Power  Developers  (as assignee of China Lake
          Joint Venture).*

10.72     Interconnection  and Integration  Facilities  Agreement (BLM project),
          dated December 15, 1988,  Between Southern  California  Edison Company
          and Coso Energy Developers (as assignee of China Lake Joint Venture).*

10.73     Interconnection   and  Integration   Facilities   Agreement  (Navy  II
          project),  dated December 15, 1988, Between Southern California Edison
          Company  and Coso Power  Developers  (as  assignee of China Lake Joint
          Venture).*

10.77     Operating Fee  Subordination  Agreement  (Navy I), dated as of May 28,
          1999, by and among Coso  Operating  Company,  LLC, and U.S. Bank Trust
          National Association, as collateral agent.*

10.78     Operating  Fee  Subordination  Agreement  (BLM),  dated  as of May 28,
          1999, by and among Coso  Operating  Company,  LLC, and U.S. Bank Trust
          National Association, as collateral agent.*

10.79     Operating Fee  Subordination  Agreement (Navy II), dated as of May 28,
          1999, by and among Coso  Operating  Company,  LLC, and U.S. Bank Trust
          National Association, as collateral agent.*

10.80     Management Fee  Subordination  Agreement (Navy I), dated as of May 28,
          1999,  by and among ESCA,  LLC, New CLOC  Company,  LLC,  Coso Finance
          Partners,  and U.S.  Bank Trust  National  Association,  as collateral
          agent.*

10.81     Management  Fee  Subordination  Agreement  (BLM),  dated as of May 28,
          1999, by and among  Caithness  Coso  Holdings,  LLC, New CHIP Company,
          LLC, Coso Energy Developers, and U.S. Bank Trust National Association,
          as collateral agent.*

                                       37

10.82     Management Fee Subordination  Agreement (Navy II), dated as of May 28,
          1999, by and among Caithness Navy II Group, LLC, New CTC Company, LLC,
          Coso Power Developers,  and U.S. Bank Trust National  Association,  as
          collateral agent.*

10.83     Cotenancy  Agreement,  dated as of May 28,  1999,  by and  among  Coso
          Finance Partners, Coso Energy Developers, and Coso Power Developers.*

10.84     Acquisition  Agreement,  dated as of May 28,  1999,  among  Coso  Land
          Company,  Coso Finance Partners,  Coso Energy  Developers,  Coso Power
          Developers, and Coso Operating Company, LLC.*

10.85     Assignment and Assumption Agreement,  dated as of May 28, 1999, by and
          among MidAmerican Energy Holdings Company as  successor-in-interest to
          Cal  Energy  Company,   Inc.,  Coso  Energy  Developers,   Coso  Power
          Developers and Coso Finance Partners.*

21.1      Subsidiaries of Caithness Coso Funding Corp.,  Coso Finance  Partners,
          Coso Energy Developers, and Coso Power Developers.*

23.3      Consent of Sandwell Engineering Inc.*

23.4      Consent of Henwood Energy Services, Inc.*

23.5      Consent of GeothermEx, Inc.*

23.6      Consent  of  Riordan  &  McKinzie,   A  Professional  Law  Corporation
          (included in Exhibit 5.1).*

23.7      Consent of Reed Smith Shaw & McClay LLP (included in Exhibit 5.2).*

24.1      Powers of Attorney (included on pages II-9, II-11, II-13 and II-15).*

25.1      Form T-1 Statement of Eligibility and Qualification of U.S. Bank Trust
          National Association as Trustee.*

27.1      Financial Data Schedule--Form SX--Caithness Coso Funding Corp.

27.2      Financial Data Schedule--Form SX--Coso Finance Partners.

27.3      Financial Data Schedule--Form SX--Coso Energy Developers.

27.4      Financial Data Schedule--Form SX--Coso Power Developers.

99.1      Sale Agreement by and between Caithness  Acquisition Company, LLC, and
          ESI Geothermal, Inc. dated as of October 6, 1999.**

99.2      Assignment,  Assumption and Novation Agreement (Coso Finance Partners)
          by and between FPL Energy Operating Services,  Inc. and Coso Operating
          Company, LLC dated October 18, 1999.**

99.3      Assignment, Assumption and Novation Agreement (Coso Energy Developers)
          by and between FPL Energy Operating Services,  Inc. and Coso Operating
          Company, LLC dated October 18, 1999.**

99.4      Assignment,  Assumption and Novation Agreement (Coso Power Developers)
          by and between FPL Energy Operating Services,  Inc. and Coso Operating
          Company, LLC dated October 18, 1999.**

                                       38

     *    Incorporated  herein by reference from the  Registration  Statement on
          Form S-4,  Registration  No.  333-83815  filed with the Securities and
          Exchange  Commission  (the SEC) by Coso  Funding  Corp.  on October 7,
          1999, as amended.

     **   Incorporated  herein by  reference  from the Form 8-K on report  dated
          October 18, 1999 for Coso Funding Corp., filed with the SEC.


<PAGE>

                                  EXHIBIT 27.1
                                    Form S-X
                       Commercial and Industrial Companies


Financial Data Schedule Worksheet for:      CAITHNESS COSO FUNDING CORP.
                                            ----------------------------
Review the following  list of tags for Article 5 and fill in the correct data in
the  column(s)  provided.  Generally,  only one  column of  information  will be
required,  however,  two columns are provided if required in the Financial  Data
Schedule.

Unless otherwise  noted, all tags are required.  A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated.  Values not provided will be entered as "0" (zero).  Missing dates
will be entered as "TO COME".  Please be sure to verify all  information  in the
EDGARized exhibit.

To  include  a  footnote,  place a number in  parentheses  next to the value and
provide  the text of each  corresponding  footnote  at the end of the  worksheet
form.

Do you wish to include a LEGEND?       This schedule  contains summary financial
                      Yes  X No        information extracted from *_____________
                   ---   ---           and_is equalified in its entirety by
                                       reference to such financial statements.
                                       *Identify the financial statement(s) to
                                       be referenced in the legend:


RESTATED

Are your financials being "restated"          (NO VALUE REQUIRED)
from a previously file period?
                      Yes  X No
                   ---    ---
CIK                                       Use this section only for coregistrant
Does this data apply to a coregistrant    filings.
                      Yes  X No
                   ---    ---             COREGISTRANT CIK:

NAME                                      Use this section only for coregistrant
Does this data apply to a coregistrant    filings.
                      Yes  X No
                   ---    ---             COREGISTRANT NAME:

MULTIPLIER
Do the financials require a multiplier        X 1,000       1,000,000,000
                                             ---         ----
other than 1 (one)?
                    X Yes    No                 1,000,000    1,000,000,000,000
                   ---    ---                ---         ----

CURRENCY                                       CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
                      Yes  X No
                   ---    ---
PERIOD TYPE                                     - MOS          - MOS
                                         -- ----         -- ----
                                               X YEAR        X  YEAR
                                              ---           ---
                                            (for annual report filings)
                                              OTHER           OTHER
                                          ----           ----
FISCAL YEAR END
(example: DEC-31-1997)                      Dec - 31 - 2000      DEC - 31 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

PERIOD START
(example: JAN-01-1997)                      Jan - 01 - 2000      JAN - 01 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

PERIOD END
(example: SEP-30-1997)                      Dec - 31 - 2000      DEC - 31 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

EXCHANGE RATE                               EXCHANGE RATE:       EXCHANGE RATE:

Is the exchange rate other than 1
(one)? Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
                      Yes  X No
                   ---    ---
<PAGE>

<TABLE>
<CAPTION>
                                         PERIOD TYPE Year            PERIOD TYPE Year
                                                     ----                        ----
<S>                                                     <C>                         <C>
CASH                                                         0                           0
SECURITIES                                                   0                           0
RECEIVABLES                                            331,353                     304,225
ALLOWANCES                                                   0                           0
INVENTORY                                                    0                           0
CURRENT ASSETDS                                          1,286                       1,225
PP&E                                                         0                           0
DEPRECIATION                                                 0                           0
TOTAL ASSETS                                           331,353                     304,225
CURRENT LIABILITIES                                      1,286                       1,225
BONDS                                                  330,067                     303,000
PREFERRED MANDATORY                                          0                           0
PREFERRED                                                    0                           0
COMMON                                                       0                           0
OTHER SE                                                     0                           0
TOTAL LIABILITY AND EQUITY                             331,353                     304,225
SALES                                                        0                           0
TOTAL REVENUES                                          30,799                      28,820
CGS                                                          0                           0
TOTAL COSTS                                                  0                           0
OTHER EXPENSES                                               0                           0
LOSS PROVISION                                               0                           0
INTEREST EXPENSES                                       30,799                      28,820
INCOME PRETAX                                                0                           0
INCOME TAX                                                   0                           0
INCOME CONTINUING                                            0                           0
DISCONTINUED                                                 0                           0
EXTRAORDINARY                                                0                           0
CHANGES                                                      0                           0
NET INCOME                                                   0                           0
EPS BASIC                                                    0                           0
(Value may contain up to 3 decimal places)
EPS DILUTED                                                  0                           0
(Value may contain up to 3 decimal places)

                    Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
</TABLE>


<PAGE>
                                  EXHIBIT 27.2
                                    Form S-X
                       Commercial and Industrial Companies


Financial Data Schedule Worksheet for:      COSO FINANCE PARTNERS
                                            ---------------------
Review the following  list of tags for Article 5 and fill in the correct data in
the  column(s)  provided.  Generally,  only one  column of  information  will be
required,  however,  two columns are provided if required in the Financial  Data
Schedule.

Unless otherwise  noted, all tags are required.  A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated.  Values not provided will be entered as "0" (zero).  Missing dates
will be entered as "TO COME".  Please be sure to verify all  information  in the
EDGARized exhibit.

To  include  a  footnote,  place a number in  parentheses  next to the value and
provide  the text of each  corresponding  footnote  at the end of the  worksheet
form.

Do you wish to include a LEGEND?       This schedule  contains summary financial
                      Yes  X No        information extracted from *_____________
                   ---   ---           and_is equalified in its entirety by
                                       reference to such financial statements.
                                       *Identify the financial statement(s) to
                                       be referenced in the legend:


RESTATED

Are your financials being "restated"          (NO VALUE REQUIRED)
from a previously file period?
                      Yes  X No
                   ---    ---
CIK                                       Use this section only for coregistrant
Does this data apply to a coregistrant    filings.
                      Yes  X No
                   ---    ---             COREGISTRANT CIK:

NAME                                      Use this section only for coregistrant
Does this data apply to a coregistrant    filings.
                      Yes  X No
                   ---    ---             COREGISTRANT NAME:

MULTIPLIER
Do the financials require a multiplier        X 1,000        1,000,000,000
                                             ---         ----
other than 1 (one)?
                    X Yes    No                 1,000,000    1,000,000,000,000
                   ---    ---                ---         ----

CURRENCY                                       CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
                      Yes  X No
                   ---    ---
PERIOD TYPE                                     - MOS          - MOS
                                         -- ----         -- ----
                                               X YEAR        X  YEAR
                                              ---           ---
                                            (for annual report filings)
                                              OTHER           OTHER
                                          ----           ----
FISCAL YEAR END
(example: DEC-31-1997)                      Dec - 31 - 2000      DEC - 31 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

PERIOD START
(example: JAN-01-1997)                      Jan - 01 - 2000      JAN - 01 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

PERIOD END
(example: SEP-30-1997)                      Dec - 31 - 2000      DEC - 31 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

EXCHANGE RATE                               EXCHANGE RATE:       EXCHANGE RATE:

Is the exchange rate other than 1
(one)? Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
                      Yes  X No
                   ---    ---
<PAGE>

<TABLE>
<CAPTION>
                                         PERIOD TYPE Year            PERIOD TYPE Year
                                                     ----                        ----
<S>                                                     <C>                         <C>
CASH                                                     3,506                         264
SECURITIES                                              22,996                      21,325
RECEIVABLES                                              2,481                      12,816
ALLOWANCES                                                   0                           0
INVENTORY                                                    0                           0
CURRENT ASSETS                                           6,796                      13,730
PP&E                                                   228,718                     229,084
DEPRECIATION                                            79,642                      88,647
TOTAL ASSETS                                           198,409                     193,114
CURRENT LIABILITIES                                     16,554                      18,139
BONDS                                                  134,984                     122,550
PREFERRED MANDATORY                                          0                           0
PREFERRED                                                    0                           0
COMMON                                                       0                           0
OTHER SE                                                     0                           0
TOTAL LIABILITY AND EQUITY                             198,409                     193,114
SALES                                                   67,653                      75,419
TOTAL REVENUES                                          70,159                      78,347
CGS                                                          0                           0
TOTAL COSTS                                                  0                           0
OTHER EXPENSES                                          44,358                      51,201
LOSS PROVISION                                               0                           0
INTEREST EXPENSES                                       13,013                      12,437
INCOME PRETAX                                                0                           0
INCOME TAX                                                   0                           0
INCOME CONTINUING                                            0                           0
DISCONTINUED                                                 0                           0
EXTRAORDINARY                                                0                           0
CHANGES                                                      0                           0
NET INCOME                                              12,788                      14,709
EPS BASIC                                                    0                           0
(Value may contain up to 3 decimal places)
EPS DILUTED                                                  0                           0
(Value may contain up to 3 decimal places)

                    Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
</TABLE>


<PAGE>

                                  EXHIBIT 27.3
                                    Form S-X
                       Commercial and Industrial Companies

Financial Data Schedule Worksheet for:      COSO ENERGY DEVELOPERS
                                            ----------------------
Review the following  list of tags for Article 5 and fill in the correct data in
the  column(s)  provided.  Generally,  only one  column of  information  will be
required,  however,  two columns are provided if required in the Financial  Data
Schedule.

Unless otherwise  noted, all tags are required.  A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated.  Values not provided will be entered as "0" (zero).  Missing dates
will be entered as "TO COME".  Please be sure to verify all  information  in the
EDGARized exhibit.

To  include  a  footnote,  place a number in  parentheses  next to the value and
provide  the text of each  corresponding  footnote  at the end of the  worksheet
form.

Do you wish to include a LEGEND?       This schedule  contains summary financial
                      Yes  X No        information extracted from *_____________
                   ---   ---           and_is equalified in its entirety by
                                       reference to such financial statements.
                                       *Identify the financial statement(s) to
                                       be referenced in the legend:


RESTATED

Are your financials being "restated"          (NO VALUE REQUIRED)
from a previously file period?
                      Yes  X No
                   ---    ---
CIK                                       Use this section only for coregistrant
Does this data apply to a coregistrant    filings.
                      Yes  X No
                   ---    ---             COREGISTRANT CIK:

NAME                                      Use this section only for coregistrant
Does this data apply to a coregistrant    filings.
                      Yes  X No
                   ---    ---             COREGISTRANT NAME:

MULTIPLIER
Do the financials require a multiplier        X 1,000        1,000,000,000
                                             ---         ----
other than 1 (one)?
                    X Yes    No                 1,000,000    1,000,000,000,000
                   ---    ---                ---         ----

CURRENCY                                       CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
                      Yes  X No
                   ---    ---
PERIOD TYPE                                     - MOS          - MOS
                                         -- ----         -- ----
                                               X YEAR        X  YEAR
                                              ---           ---
                                            (for annual report filings)
                                              OTHER           OTHER
                                          ----           ----
FISCAL YEAR END
(example: DEC-31-1997)                      Dec - 31 - 2000      DEC - 31 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

PERIOD START
(example: JAN-01-1997)                      Jan - 01 - 2000      JAN - 01 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

PERIOD END
(example: SEP-30-1997)                      Dec - 31 - 2000      DEC - 31 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

EXCHANGE RATE                               EXCHANGE RATE:       EXCHANGE RATE:

Is the exchange rate other than 1
(one)? Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
                      Yes  X No
                   ---    ---
<PAGE>

<TABLE>
<CAPTION>
                                         PERIOD TYPE Year            PERIOD TYPE Year
                                                     ----                        ----
<S>                                                     <C>                         <C>
CASH                                                     5,862                           0
SECURITIES                                              14,502                       7,368
RECEIVABLES                                                405                       3,340
ALLOWANCES                                                   0                           0
INVENTORY                                                    0                           0
CURRENT ASSETS                                           7,280                       4,189
PP&E                                                   238,244                     247,203
DEPRECIATION                                            84,626                      98,786
TOTAL ASSETS                                           201,312                     183,978
CURRENT LIABILITIES                                     31,160                      34,966
BONDS                                                  100,907                      96,250
PREFERRED MANDATORY                                          0                           0
PREFERRED                                                    0                           0
COMMON                                                       0                           0
OTHER SE                                                     0                           0
TOTAL LIABILITY AND EQUITY                             201,312                     183,978
SALES                                                   57,453                      65,830
TOTAL REVENUES                                          65,578                      69,596
CGS                                                          0                           0
TOTAL COSTS                                                  0                           0
OTHER EXPENSES                                          46,693                      53,185
LOSS PROVISION                                               0                           0
INTEREST EXPENSES                                        9,492                       9,398
INCOME PRETAX                                                0                           0
INCOME TAX                                                   0                           0
INCOME CONTINUING                                            0                           0
DISCONTINUED                                                 0                           0
EXTRAORDINARY                                                0                           0
CHANGES                                                      0                           0
NET INCOME                                               9,393                       7,013
EPS BASIC                                                    0                           0
(Value may contain up to 3 decimal places)
EPS DILUTED                                                  0                           0
(Value may contain up to 3 decimal places)

                    Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
</TABLE>



<PAGE>

                                  EXHIBIT 27.4
                                    Form S-X
                       Commercial and Industrial Companies

Financial Data Schedule Worksheet for:      COSO POWER DEVELOPERS
                                            ---------------------
Review the following  list of tags for Article 5 and fill in the correct data in
the  column(s)  provided.  Generally,  only one  column of  information  will be
required,  however,  two columns are provided if required in the Financial  Data
Schedule.

Unless otherwise  noted, all tags are required.  A response is required for each
item within the schedule. Use the value "0" (zero) if information is immaterial,
inapplicable or unknown. Decimals may not be used to state financial data except
as indicated.  Values not provided will be entered as "0" (zero).  Missing dates
will be entered as "TO COME".  Please be sure to verify all  information  in the
EDGARized exhibit.

To  include  a  footnote,  place a number in  parentheses  next to the value and
provide  the text of each  corresponding  footnote  at the end of the  worksheet
form.

Do you wish to include a LEGEND?       This schedule  contains summary financial
                      Yes  X No        information extracted from *_____________
                   ---   ---           and_is equalified in its entirety by
                                       reference to such financial statements.
                                       *Identify the financial statement(s) to
                                       be referenced in the legend:


RESTATED

Are your financials being "restated"          (NO VALUE REQUIRED)
from a previously file period?
                      Yes  X No
                   ---    ---
CIK                                       Use this section only for coregistrant
Does this data apply to a coregistrant    filings.
                      Yes  X No
                   ---    ---             COREGISTRANT CIK:

NAME                                      Use this section only for coregistrant
Does this data apply to a coregistrant    filings.
                      Yes  X No
                   ---    ---             COREGISTRANT NAME:

MULTIPLIER
Do the financials require a multiplier        X 1,000        1,000,000,000
                                             ---         ----
other than 1 (one)?
                    X Yes    No                 1,000,000    1,000,000,000,000
                   ---    ---                ---         ----

CURRENCY                                       CURRENCY OF FINANCIAL DATA:
Is the currency used other than US
Dollars? Use in conjunction with
EXCHANGE RATE tag.
                      Yes  X No
                   ---    ---
PERIOD TYPE                                     - MOS          - MOS
                                         -- ----         -- ----
                                               X YEAR        X  YEAR
                                              ---           ---
                                            (for annual report filings)
                                              OTHER           OTHER
                                          ----           ----
FISCAL YEAR END
(example: DEC-31-1997)                      Dec - 31 - 2000      DEC - 31 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

PERIOD START
(example: JAN-01-1997)                      Jan - 01 - 2000      JAN - 01 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

PERIOD END
(example: SEP-30-1997)                      Dec - 31 - 2000      DEC - 31 - 2001
                                            ---------------      ---------------
                                            mmm - dd - yyyy      mmm - dd - yyyy

EXCHANGE RATE                               EXCHANGE RATE:       EXCHANGE RATE:

Is the exchange rate other than 1
(one)? Value may contain up to 5
decimal places) Use in conjunction
with CURRENCY tag.
                      Yes  X No
                   ---    ---

<PAGE>

<TABLE>
<CAPTION>
                                         PERIOD TYPE Year            PERIOD TYPE Year
                                                     ----                        ----
<S>                                                     <C>                         <C>
CASH                                                     7,741                           0
SECURITIES                                              10,214                       5,517
RECEIVABLES                                              5,982                       9,349
ALLOWANCES                                                   0                           0
INVENTORY                                                    0                           0
CURRENT ASSETS                                          14,572                      10,009
PP&E                                                   209,605                     209,652
DEPRECIATION                                            72,658                      84,987
TOTAL ASSETS                                           195,693                     170,058
CURRENT LIABILITIES                                     14,094                      23,638
BONDS                                                   94,176                      84,200
PREFERRED MANDATORY                                          0                           0
PREFERRED                                                    0                           0
COMMON                                                       0                           0
OTHER SE                                                     0                           0
TOTAL LIABILITY AND EQUITY                             195,639                     170,058
SALES                                                   58,366                      59,122
TOTAL REVENUES                                          61,234                      62,005
CGS                                                          0                           0
TOTAL COSTS                                                  0                           0
OTHER EXPENSES                                          49,895                      57,141
LOSS PROVISION                                               0                           0
INTEREST EXPENSES                                        9,899                       9,247
INCOME PRETAX                                                0                           0
INCOME TAX                                                   0                           0
INCOME CONTINUING                                            0                           0
DISCONTINUED                                                 0                           0
EXTRAORDINARY                                                0                           0
CHANGES                                                      0                           0
NET INCOME                                               1,440                      (4,383)
EPS BASIC                                                    0                           0
(Value may contain up to 3 decimal places)
EPS DILUTED                                                  0                           0
(Value may contain up to 3 decimal places)

                    Footnote Text: (Note: Each footnote cannot exceed 256 characters, including spaces)
</TABLE>

<PAGE>

                                   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.


Date:  March 14, 2002                   CAITHNESS COSO FUNDING CORP.,
                             a Delaware corporation

                                           By: /S/ CHRISTOPHER T. MCCALLION
                                               ----------------------------
                                                   Christopher T. McCallion
                                                   Executive Vice President &
                                                   Chief Financial Officer
                                                   (Principal Financial and
                                                   Accounting Officer)


                                           COSO FINANCE PARTNERS
                                           a California general partnership

                                           By: New CLOC Company, LLC,
                                                   its Managing General Partner

                                           By: /S/ CHRISTOPHER T. MCCALLION
                                               ----------------------------
                                                   Christopher T. McCallion
                                                   Executive Vice President &
                                                   Chief Financial Officer
                                                   (Principal Financial and
                                                   Accounting Officer)


                                           COSO ENERGY DEVELOPERS
                                           a California general partnership

                                           By: New CHIP Company, LLC,
                                                   its Managing General Partner

                                           By: /S/ CHRISTOPHER T. MCCALLION
                                               ----------------------------
                                                   Christopher T. McCallion
                                                   Executive Vice President &
                                                   Chief Financial Officer
                                                   (Principal Financial and
                                                   Accounting Officer)




                                           COSO POWER DEVELOPERS
                                           a California general partnership

                                           By: New CTC Company, LLC,
                                                   its Managing General Partner

                                           By: /S/ CHRISTOPHER T. MCCALLION
                                               ----------------------------
                                                   Christopher T. McCallion
                                                   Executive Vice President &
                                                   Chief Financial Officer
                                                   (Principal Financial and
                                                   Accounting Officer)



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>

<S>                                                          <C>                                 <C>
                  Signature                                 Title                                Date

    /S/  JAMES D. BISHOP, SR.                      Director, Chairman and Chief              March 14, 2002
-----------------------------------------------    Executive Officer (Principal
         James D. Bishop, Sr.                      Executive Officer)


  /S/   CHRISTOPHER T. MCCALLION                   Director, Executive Vice President        March 14, 2002
-----------------------------------------------    and Chief Financial Officer
        Christopher T. McCallion                   (Principal Accounting Officer)


 /S/    LESLIE J. GELBER                           Director, President and Chief             March 14, 2002
-----------------------------------------------    Operating Officer
        Leslie J. Gelber

 /S/    JAMES D. BISHOP, JR.                       Director                                  March 14, 2002
-----------------------------------------------
        James D. Bishop, Jr.

/S/     LARRY K. CARPENTER                         Director                                  March 14, 2002
-----------------------------------------------
        Larry K. Carpenter

/S/     MARK A. FERRUCCI                           Director                                  March 14, 2002
-----------------------------------------------
        Mark A. Ferrucci

</TABLE>