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

                                    FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 For the quarterly period ended June 30, 1997

                                       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 333-14495-02

                         PANDA INTERHOLDING CORPORATION
             (Exact name of registrant as specified in its charter)

         Delaware                                     75-2660917
(State or other jurisdiction of                      (IRS Employer
incorporation or organization)                    Identification Number)

            4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244
          (Address of principal executive offices, including zip code)

                                 (972) 980-7159
              (Registrant's telephone number, including area code)

                                      None
              (Former name, former address and former fiscal year,
                         if changed since last report)

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

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 13, 1997.

  Common Stock, Par Value $.01 Per Share                         1,000
<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited) F-1

Item 2. Management's Discussion and Analysis of Financial
        Condition and Results of Operations ...........................  1

                           PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K ..............................  4



<PAGE>
                         PANDA INTERHOLDING CORPORATION
                                AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

                                     ASSETS
                                                                   (UNAUDITED)
                                                  DECEMBER 31        JUNE 30 
                                                     1996             1997
                                                 -------------    -------------
Current assets:
     Cash and cash equivalents ................  $     828,787    $     604,535
     Restricted cash -- current ...............      8,781,393       10,461,401
     Accounts receivable ......................      9,402,685       10,914,061
     Fuel oil, spare parts and supplies .......      7,913,777        7,043,381
     Other current assets .....................        164,905          164,653
                                                 -------------    -------------
         Total current assets .................     27,091,547       29,188,031

Plant and equipment:
     Electric generating facilities ...........    288,716,711      289,447,022
     Furniture and fixtures ...................        494,418          501,417
     Less: accumulated depreciation ...........    (26,539,539)     (32,437,443)
                                                 -------------    -------------
         Total plant and equipment, net .......    262,671,590      257,510,996

Restricted cash -- debt service reserves
  and escrow deposits .........................     17,357,524       18,665,521
Debt issuance costs, net of accumulated
  amortization  of $73,986 and $167,566,
  respectively ................................      3,680,902        3,603,149
                                                 -------------    -------------
                                                 $ 310,801,563    $ 308,967,697
                                                 =============    =============
LIABILITIES AND SHAREHOLDER'S DEFICIT

Current liabilities:
     Accounts payable and accrued expenses:
         Construction costs ...................  $     660,167    $        --
         Interest and letter of credit fees ...      1,186,191        1,156,526
         Operating expenses and other .........      6,935,068        7,970,579
     Current portion of long-term debt ........      5,501,823        5,605,982
                                                 -------------    -------------
              Total current liabilities .......     14,283,249       14,733,087

Deferred Revenue	 						     --	    2,899,857
Long-term debt, less current portion ..........    104,521,718      101,665,979
Capital lease obligation ......................    217,488,645      225,605,268
Advance from parent ...........................     15,387,447       10,409,961
Commitments and contingencies (Note 3)
Shareholder's deficit:
     Common stock, par value $.01; 1,000 shares
           authorized, issued and outstanding .             10               10
     Accumulated deficit ......................    (40,879,506)     (46,346,465)
                                                 -------------    -------------
         Total shareholder's deficit ..........    (40,879,496)     (46,346,455)
                                                 -------------    -------------
                                                 $ 310,801,563    $ 308,967,697
                                                 =============    =============

     See accompanying notes to condensed consolidated financial statements.

                                       F-1
<PAGE>
                         PANDA INTERHOLDING CORPORATION
                                AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                            AND ACCUMULATED DEFICIT
               FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1997
                                   (UNAUDITED)

                                                       1996            1997
                                                   ------------    ------------
Revenue:
     Electric capacity and energy sales ........   $ 14,558,903    $ 32,286,239
     Steam and chilled water sales .............        263,002         284,303
     Interest income ...........................        386,826         858,553
                                                   ------------    ------------
                                                     15,208,731      33,429,095
                                                   ------------    ------------
Expenses:
     Plant operating expenses ..................      5,061,346      13,628,706
     Project development and administrative ....      1,192,659       3,812,520
     Interest expense and letter of credit fees       6,369,754      15,463,344
     Depreciation ..............................      2,106,439       5,897,904
     Amortization of debt issuance costs .......        281,815          93,580
     Amortization of partnership formation costs        266,550            --
                                                   ------------    ------------
                                                     15,278,563      38,896,054
                                                   ------------    ------------
Loss before minority interest ..................        (69,832)     (5,466,959)
Minority interest ..............................     (1,906,083)           --
                                                   ------------    ------------
Net loss .......................................     (1,975,915)     (5,466,959)
Accumulated deficit, beginning of period .......    (14,788,098)    (40,879,506)
                                                   ------------    ------------
Accumulated deficit, end of period .............   $(16,764,013)   $(46,346,465)
                                                   ============    ============

     See accompanying notes to condensed consolidated financial statements.

                                       F-2
<PAGE>

                         PANDA INTERHOLDING CORPORATION
                                AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                            AND ACCUMULATED DEFICIT
              FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997
                                   (UNAUDITED)

                                                       1996            1997
                                                   ------------    ------------
Revenue:
     Electric capacity and energy sales ........   $  6,543,461    $ 14,956,546
     Steam and chilled water sales .............        141,454         153,721
     Interest income ...........................        201,154         687,375
                                                   ------------    ------------
                                                      6,886,069      15,797,642
                                                   ------------    ------------
Expenses:
     Plant operating expenses ..................      2,619,814       5,367,519
     Project development and administrative ....        655,226       1,972,498
     Interest expense and letter of credit fees       3,185,009       7,725,748
     Depreciation ..............................      1,053,219       2,949,026
     Amortization of debt issuance costs .......        140,908         (18,029)
     Amortization of partnership formation costs        133,275            --
                                                   ------------    ------------
                                                      7,787,451      17,996,762
                                                   ------------    ------------
Loss before minority interest ..................       (901,382)     (2,199,120)
Minority interest ..............................       (187,135)           --
                                                   ------------    ------------
Net loss .......................................     (1,088,517)     (2,199,120)
Accumulated deficit, beginning of period .......    (15,675,496)    (44,147,345)
                                                   ------------    ------------
Accumulated deficit, end of period .............   $(16,764,013)   $(46,346,465)
                                                   ============    ============

     See accompanying notes to condensed consolidated financial statements.

                                    F-3


                         PANDA INTERHOLDING CORPORATION
                                AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1997
<TABLE>                             (UNAUDITED)
<CAPTION>
                                                         1996            1997
                                                    ------------    ------------
<S>                                                 <C>             <C>
Operating activities:
   Net loss .....................................   $ (1,975,915)   $ (5,466,959)
   Adjustments to reconcile net loss to net cash
     provided by operating activities:
      Minority interest .........................      1,906,083           --
      Depreciation ..............................      2,106,439       5,897,904
      Amortization of debt issuance costs .......        281,815          93,580
      Amortization of partnership formation costs        266,550            --
      Amortization of loan discount
       and deferred interest ....................         95,366      10,759,616
   Changes in assets and liabilities:
      Accounts receivable .......................        375,340      (1,511,376)
      Fuel oil, spare parts and supplies ........          6,378         870,396
      Other current assets ......................        (30,838)            252 
      Accounts payable and accrued expenses .....      1,804,774       1,005,846
                                                    ------------     -----------
      Net cash provided (used) by operating
       activities ...............................      4,835,992      11,649,259
                                                    ------------     -----------
Investing activities:
   Restricted cash - current ....................     (4,513,354)     (1,680,008)
   Additions to property, plant and equipment ...    (39,000,715)     (1,397,477)
   Restricted cash - debt service reserves and
    escrow deposits .............................        (65,612)     (1,307,997)
                                                    ------------     -----------
      Net cash provided (used) by investing
       activities ...............................    (43,579,681)     (4,385,482)
                                                    ------------     -----------
Financing activities:
   Distributions to minority interest owner .....     (1,127,665)           --
   Advances (to) from parent ....................      1,697,895      (4,977,486)
   Deferred revenue .............................           --         2,899,857
   Proceeds from long-term debt .................     39,864,956            --
   Repayment of long-term debt ..................       (225,000)     (2,751,580)
   Rapayment of capital lease obligations .......           --        (2,642,993)
   Debt issuance costs ..........................       (722,202)        (15,827)
                                                    ------------     -----------
      Net cash provided (used) by financing 
         activities .............................     39,487,984      (7,488,029)
                                                    ------------     -----------

Increase (decrease) in cash and cash equivalents         744,295        (224,252)
Cash and cash equivalents, beginning of period ..      1,160,096         828,787
                                                    ------------     -----------
Cash and cash equivalents, end of period ........   $  1,904,391     $   604,535
                                                    ============     ===========

NON-CASH OPERATING AND FINANCING ACTIVITIES:

Interest expense on capital lease obligation ....   $       --       $10,759,616


     See accompanying notes to condensed consolidated financial statements.
</TABLE>
                                       F-4
<PAGE>
                         PANDA INTERHOLDING CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1997


1. ORGANIZATION AND BASIS OF PRESENTATION

         Panda Interholding Corporation ("Interholding", or collectively with
its subsidiaries the "Company"), a wholly owned subsidiary of Panda Interfunding
Corporation ("PIC"), which in turn is an indirect wholly owned subsidiary of
Panda Energy International, Inc. ("PEII"), was formed in July 1996 to hold the
ownership interests in two independent power projects which were formerly owned
by another subsidiary of PEII. The ownership interests were transferred to the
Company at PEII's historical cost. Because the transfers occurred between
entities under common control, the transactions have been accounted for in a
manner similar to a pooling of interests.

         Interholding, through its wholly owned subsidiaries, holds the
Company's ownership interests in the Rosemary project and the Brandywine project
and has no other independent operations. The entities holding such ownership
interests include the following: Panda Rosemary Corporation ("PRC"), a 91%
general partner in Panda-Rosemary, L.P. ("Panda-Rosemary"); PRC II Corporation
("PRC II"), a 9% limited partner in Panda-Rosemary; Panda Brandywine
Corporation, a 50% general partner in Panda-Brandywine, L.P.
("Panda-Brandywine"); Panda Energy Corporation (a Delaware corporation), a 50%
limited partner in Panda-Brandywine; and Brandywine Water Company. The Company,
through its general and limited partnership interests, owns 100% of
Panda-Rosemary and Panda-Brandywine. Prior to July 31, 1996, the Company owned
10% of Panda-Rosemary. The Rosemary and Brandywine projects are located in the
United States.

         All material intercompany accounts and transactions have been
eliminated in consolidation.

2. SIGNIFICANT ACCOUNTING POLICIES

     The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles and should be read in conjunction
with the audited financial statements for the year ended December
31, 1996. The accompanying unaudited condensed consolidated
financial statements for the three- and six-month periods ended
June 30, 1996 and 1997 include all adjustments, consisting of
normal recurring accruals, which management considers necessary
for a fair presentation of the results for the interim periods.
The results of operations for the three- and six-month periods
ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997. The
amounts presented in the balance sheet as of December 31, 1996
were derived from the Company's audited consolidated financial
statements.

     Allocation of Administrative Costs  -- PEII performs certain
accounting, legal, insurance, and consulting services for the
Company. These general and administrative costs are generally
allocated to the Company using the percentage of time PEII
personnel spent performing these services. The expenses allocated
were $554,000 and $1,055,000 for the six months ended June 30,
1996 and 1997, respectively, and were $288,000 and $500,000 for
the three months ended June 30, 1996 and 1997, respectively.  The
allocated expenses are included in project development and
administrative expenses in the statement of operations.
Management believes the method used to allocate these costs is
reasonable.

	Deferred revenue -- Revenue from the sale of rights to
future interest income from certain of the Company's restricted
cash accounts (debt service reserves and escrow deposits) is
deferred and recognized as interest revenue over the lives of
the related debt obligations.

3.  COMMITMENTS AND CONTINGENCIES

         In July 1996, Panda Funding Corporation ("PFC"), a wholly-owned
subsidiary of PIC, issued $105,525,000 of pooled project bonds ("Series A
Bonds"). The Series A Bonds bear interest at a fixed rate of 11-5/8% payable
semiannually commencing February 20, 1997. Scheduled principal payments are
required semiannually commencing February 20, 1997 and will continue through
maturity on August 20, 2012. The Series A Bonds are subject to mandatory
redemption prior to maturity under certain conditions. The Series A Bonds are
fully and unconditionally guaranteed by PIC. Although not direct obligations of
the Company, the Series A Bonds are guaranteed on a limited basis by
Interholding up to a maximum amount specified by the guarantee agreement which
approximates $25.1 million at December 31, 1996 and March 31, 1997.
Additionally, the Series A Bonds are secured by (i) all of the capital stock of
PFC, PIC and Interholding, (ii) PIC's interest in distributions from
Interholding, and (iii) certain other collateral. The Series A Bonds are
effectively subordinated to the obligations of PIC's subsidiaries under
project-level financing arrangements. The indenture contains certain covenants,
including limitations on distributions, additional debt and certain other
transactions.

         While amounts are outstanding under the Series A Bonds, all
distributions to PIC from Interholding and certain 

                                      F-4
<PAGE>
proceeds received by PIC from another subsidiary will be paid to a collateral
agent. On a monthly basis, the collateral agent will remit to PIC remaining
funds available after satisfaction of PIC's debt service obligations (including
amounts withheld, if necessary, to meet future debt service and reserve fund
requirements as required by the indenture) provided that PIC is in compliance
with the debt covenants.

         In connection with the issuance of the Series A Bonds, PIC advanced to
the Company (i) approximately $25.1 million to partially fund the acquisition of
the outside investor's limited partnership interest in Panda-Rosemary as
discussed in Note 5 to the Company's audited financial statements for 1996, and
(ii) approximately $26.4 million to retire the term loan as discussed in Note 6
to the Company's audited financial statements for 1996.

         In connection with a previous borrowing from Nova Northwest Inc.
("Nova"), Nova received a cash flow participation interest in the distributions
from the Rosemary Project for the term of the Panda-Rosemary L.P. partnership
agreement. Such participation interest amounted to 4.33% of the Company's own
participation interest, which was 10% at the time the agreement was entered
into. The Company has filed an action with the District Court of Dallas County,
Texas seeking a declaratory judgment that Nova's cash flow participation is
0.433% of the Company's 100% interest after the acquisition of the institutional
investor's 90% limited partnership interest. Management believes that the
resolution of this dispute will not have a material effect on the financial
position, results of operations or cash flows of the Company. PEII and Nova each
have the option to convert the present value of cash flow participation, as
defined by the agreement, to PEII common stock at $6 a share.

         In August 1996, Panda-Brandywine and PEPCO commenced discussions
concerning commercial operational requirements of the Brandywine Project and
conversion of the construction loan to long-term financing in the form of a
lease. During these discussions, disagreements arose between Panda-Brandywine
and PEPCO with respect to certain provisions of the Brandywine Power Purchase
Agreement which relate to the determination of the interest rate that is the
basis for reduction in capacity payments thereunder (the "PEPCO Interest Rate
Dispute"). PEPCO and Panda-Brandywine are presently attempting to resolve these
disagreements but there are no assurances that such efforts will be successful.
If the PEPCO Interest Rate Dispute is determined adversely to Panda-Brandywine,
the capacity payments paid by PEPCO under the Brandywine Power Purchase
Agreement (which commenced in January 1997) will be less than originally
anticipated, thereby adversely affecting the revenues realized by
Panda-Brandywine, and consequently, reducing the amount of funds that would be
available for distribution to the Company.

         Raytheon Engineers and Constructors, Inc. ("Raytheon") constructed the
Brandywine Project pursuant to a fixed-price, turnkey engineering, procurement
and construction contract (the "Brandywine EPC Agreement") with
Panda-Brandywine. Raytheon completed the construction and start-up of the
Brandywine Project and has met the requirements for commercial operations and
substantial completion under the Brandywine EPC Agreement, although the date on
which commercial operations were achieved and the entitlement of Raytheon to
certain early completion bonuses under the Brandywine EPC Agreement are the
subject of a dispute between Panda-Brandywine and Raytheon. The Company
estimates that the amount in dispute is less than $1 million and believes that
the resolution of this dispute will not have a material adverse effect upon the
financial position, results of operations or cash flows of the Company.

         The Company has entered into various long-term contracts for the
purchase and transportation of fuel subject to termination only in certain
limited circumstances. These contracts have remaining terms of 10 to 25 years.
The Company's minimum purchase commitment under these contracts is 2.3 million
British thermal units of gas annually from October 31, 1996 through October 31,
2011. In the aggregate, such commitments are not at prices in excess of the
current market.

         PEII is also involved in other legal and administrative proceedings in
the ordinary course of business. Management believes that the amount of ultimate
liability with respect to these matters will not have a material affect on the
financial position, results of operations or cash flows of the Company.

                                       F-5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

         (DOLLAR AMOUNTS ARE IN THOUSANDS UNLESS OTHERWISE NOTED)

GENERAL

         The financial statements reflect the financial data of the entities
that held partnership interests in Panda-Rosemary, L.P. ("Panda-Rosemary") and
Panda-Brandywine, L.P. ("Panda-Brandywine") (collectively the "Project
Entities", which own the Rosemary Facility and the Brandywine Facility,
respectively, as described in the following paragraph) during the periods
presented. In July 1996, these partnership interests were transferred to Panda
Interholding Corporation ("Interholding", or collectively with its subsidiaries
the "Company"), which is a wholly owned subsidiary of Panda Interfunding
Corporation ("PIC"), by PIC's parent and recorded at the parent's historical
cost. PIC and Interholding were incorporated in July 1996 and were not in
existence during the first quarter of 1996; however, the entities that currently
own such partnership interests are wholly-owned subsidiaries of Interholding.
Interholding has no independent operations beyond its ownership of the Project
Entities. Thus, references herein to financial data of the Company are for
convenience of reference, and it should be understood that all such references
are to the financial information of the entities that held such interests during
the periods presented.

         The Company owns 100% equity interests in two completed electric power
generation facilities in the United States: the Rosemary Facility, which began
commercial operations in December 1990, and the Brandywine Facility, which began
commercial operations in October 1996. Prior to July 31, 1996, the Company owned
a 10% equity interest in the Rosemary Facility.

RESULTS OF OPERATIONS

         The Company's revenues from electric power generation are derived from
long-term contracts which include both a fixed capacity payment and a variable
energy payment. The capacity payments, which are based upon the specified power
generating capacity of a project, are designed to cover fixed costs and to
provide an acceptable return on equity. The energy payments, which are based on
actual electricity output, are designed to cover variable costs including fuel
costs and variable operating expenses incurred in connection with electricity
output. Accordingly, the impact of price fluctuations on the results of
operations is generally not material. The extent to which a facility is
dispatched (i.e., required to deliver electricity), and therefore the actual
electricity output for a given period, are subject to the discretion of the
power purchaser, with certain limitations. The capacity payments are the
predominant source of revenue for the Company. The Company currently believes
that it can meet its liquidity requirements solely from the capacity payments in
the unlikely event that its facilities are not dispatched at all. See "Liquidity
and Capital Resources."

  Second Quarter 1997 compared to 1996

      The  Company  recorded a net loss of $2,199 in  the  second quarter of
1997  on revenues of $15,798 compared  to  net loss before minority interest of
$901 on revenues of $6,886 during the same period in 1996. The increase in
revenues in the 1997 period was  primarily  caused by operations of the
Brandywine  Facility (which  commenced  on October 31, 1996), partially
offset by a decrease  in revenues at the Rosemary Facility, and by increased
interest income.  The 1997 period reflects operations of both the Rosemary and
Brandywine  facilities, whereas  the  1996 period includes only the Rosemary
Facility. For the 1997 and 1996 periods, capacity revenues for the Rosemary
Facility were $5,770 and $6,182, respectively, reflecting a contractual
decrease of $412. Energy revenues for the Rosemary Facility for the 1997 and
1996 periods were $738 and $362, respectively.  The increase in energy 
revenues for the Rosemary Facility is attributable to higher dispatch hours
at that facility compared to the 1996 period.  During the second quarter of
1997, the Rosemary Facility was  dispatched 216 hours as compared to 132 hours
in the 1996 period. Capacity revenues and energy revenues from Potomac Electric
Power Company for the Brandywine Facility for the second quarter of 1997 were
$5,000 and $2,505,  respectively.  The Brandywine Facility was dispatched 822 
hours during this period. Additionally, the Company had energy revenues of
$943 from the sale of natural gas to other purchasers.  Plant operating
expenses,  which  included fuel cost, operation  and  maintenance expense,
insurance and property taxes, decreased (as a percentage of  revenues) to
$5,368 (34% of revenues) in the 1997 period from $2,620 (38%  of  revenues)in
1996, primarily due to increased operating efficiencies at the Company's
facilities.

      Project development and administrative expenses were $1,972 (12% of
revenues) and $655 (10% of revenues) for the  1997 and 1996 periods,
respectively.  The increase in 1997 was  primarily attributable to additional
administrative activities related to the commencement of commercial operations
at the Brandywine Facility and higher administrative costs required to support
the increased size and complexity of the Company's operations.

      Interest expense increased to $7,726 (49% of revenues) in the 1997
period from $3,185 (46% of revenues) in 1996 as a result of the increase in
outstanding indebtedness from the issuance of $111.4 million original principal
amount of first mortgage bonds for the Rosemary Facility (the "Rosemary Bonds")
and the capital lease financing for the Brandywine Facility.  The impact of such
new indebtedness was partially offset by the refinancing of the taxable revenue
bonds issued in 1989  for  the Rosemary Facility and the repayment of other term
loan financing on July 31, 1996 from portions of the proceeds of the Rosemary
Bonds and advances from the Company's parent.

       Depreciation, amortization of debt issue costs and amortization of
partnership formation costs amounted to $2,931 (19% of revenues) in the 1997
period and $1,327 (19% of revenues) in 1996.  The increase was primarily
attributable to depreciation for the Brandywine Facility in 1997.

      For the 1996 period, minority interest in net income was $187. There is 
no minority interest in 1997 due to the Company's acquisition on July 31, 1996
of the minority interest holder's limited partnership interest in Panda-
Rosemary. As a result of this acquisition, the Company owns 100% of Panda-
Rosemary.

      As  a  result of the various factors discussed  above, the Company
recorded net losses of $2,199 and $1,089 for the 1997 and 1996 periods, 
respectively.


     First Six Months of 1997 compared to 1996

      The Company recorded a net loss of $5,467 in the first six months of 1997
on revenues of $33,429 compared to net loss before minority interest of $70 on
revenues of $15,209 during the same period in 1996.  The increase in revenues in
the 1997 period was primarily caused by operations of the Brandywine Facility
(which commenced on October 31, 1996), partially offset by a decrease in
revenues at  the  Rosemary Facility, and by  increased  interest income.  The
1997 period reflects operations of both the Rosemary and Brandywine facilities,
whereas the 1996 period includes only the  Rosemary  Facility. For the 1997 and
1996 periods, capacity revenues for the Rosemary Facility were $12,670 and 
$13,600, respectively, reflecting a contractual decrease of  $930.  Energy 
revenues for the Rosemary Facility for the 1997 and 1996  periods were $842 and
$959, respectively.  The  decrease in energy revenues for the Rosemary Facility
is attributable to lower dispatch hours at that facility compared to the 1996
period. During the first six months of 1997, the Rosemary Facility  was
dispatched 243 hours as compared to 267 hours in the 1996 period. Capacity
revenues and energy revenues from Potomac Electric Power Company  for the 
Brandywine Facility for the first six months of 1997 were $10,035 and $5,051,
respectively. The  Brandywine Facility was dispatched 1,709 hours during this
period. Additionally, the Company had energy revenues of $3,688 from the sale
of natural  gas and fuel oil to other purchasers.  Plant operating expenses,
which included fuel cost, operation and maintenance expense, insurance and
property taxes, increased to $13,629 (40% of revenues) in the 1997 period
from $5,061 (33% of revenues) in 1996, primarily due to low margins obtained
on the sale of natural gas and fuel oil to other purchasers.

      Project development and administrative expenses were $3,812 (11% of
revenues) and $1,193 (8% of revenues) for the 1997  and 1996  periods,
respectively.  The increase in 1997 was  primarily attributable to additional
administrative activities related to the commencement of commercial operations
at the Brandywine Facility and higher administrative costs required to support
the increased size and complexity of the Company's operations.

      Interest expense increased to $15,463 (46% of revenues)  in the 1997
period from $6,370 (42% of revenues) in 1996 as a result of the increase in
outstanding indebtedness from the issuance of $111.4 million original principal
amount of first mortgage bonds for the Rosemary Facility (the "Rosemary Bonds")
and  the  capital lease financing  for  the  Brandywine Facility.  The  impact
of such new indebtedness was partially offset by the refinancing of the taxable
revenue bonds issued in 1989  for  the Rosemary Facility and the repayment of 
other term loan financing on July 31, 1996 from portions of the proceeds of the
Rosemary Bonds and advances from the Company's parent.

       Depreciation,  amortization  of  debt  issue   costs and amortization 
of partnership formation costs amounted  to  $5,591 (18% of revenues) in the
1997 period and $2,655 (17% of revenues) in 1996.  The increase was primarily
attributable to depreciation for the Brandywine Facility in 1997.

      For  the  1996 period, minority interest in net income  was $1,906.
There  is  no minority interest in 1997  due  to the Company's acquisition on
July 31, 1996 of the minority interest holder's limited partnership interest
in Panda-Rosemary.  As a result  of  this  acquisition, the Company owns 100%
of Panda-Rosemary.

      As  a  result of the various factors discussed  above, the Company
recorded net losses of $5,467 and $1,976 for  the  1997 and 1996 periods,
respectively.

LIQUIDITY AND CAPITAL RESOURCES

         To date, the Company has obtained cash from operations of the Rosemary
Facility and the Brandywine Facility, borrowings under non-recourse project debt
of Panda-Rosemary and Panda-Brandywine, an equity contribution by Ford Motor
Credit Company ("Ford")(a former minority interest partner in Panda-Rosemary),
senior indebtedness issued to Trust Company of the West, the issuance of the
Rosemary Bonds and advances from the Company's parent. The Company utilized this
cash to refinance the project debt of Panda-Rosemary, fund development and
construction of the Brandywine Facility, service its debt obligations, make
distributions to its parent to fund project development efforts, and for general
and administrative expenses. Additionally, on July 31, 1996, the Company repaid
all outstanding senior indebtedness to Trust Company of the West and purchased
Ford's remaining limited partnership interest in Panda-Rosemary.

         The Project Entities (and therefore the Company) are dependent on
capacity payments under their respective power purchase agreements to meet their
fixed obligations, including payment of project-level debt service. Capacity
payments can be adversely affected by a major equipment failure, resulting in a
facility being unavailable for dispatch for an extended period of time. Capacity
payments can also be subject to reduction pursuant to regulatory disallowance
and, under contractual provisions, as a result of events outside the Company's
control. In 1997, 1999 and 2006, the capacity payments for the Rosemary Facility
are scheduled to decrease by approximately $1.8 million (6.7%), $1.8 million
(7.1%) and $5.4 million (23.1%), respectively, based on the facility's current
capacity rating. The capacity payments for the Brandywine Facility, which
commenced in 1997, are subject to specified downward adjustments in 1998 and
2000, and upward adjustments in 2001 and 2007 through 2021. The Company
currently believes it will be able to continue to meet its obligations during
the periods such reductions are applicable.

         Each of the electric energy purchasers under the power purchase
agreements for the Rosemary 

<PAGE>
Facility and the Brandywine Facility has a contractual right to schedule the
facility for dispatch largely at the purchaser's discretion. Thus, revenues from
energy payments will vary depending on the hours these facilities are dispatched
by such purchasers. The Company currently believes that it can meet its
liquidity requirements solely from the capacity payments in the unlikely event
that these facilities are not dispatched at all.

IMPACT OF INFLATION

         Inflationary increases in the Company's costs, primarily project
development costs, energy costs, and capital costs, may be offset by increases
in revenue as provided in the various purchase agreements, although competition
may limit the Company's ability to fully recover all such increases. The Company
attempts, where possible, to obtain provisions in its power purchase agreements
whereby certain revenue components, such as energy payments, may be adjusted
with inflationary increases. The Company currently believes that inflation will
not have a material adverse effect on the Company's financial position, results
of operations or cash flows in the foreseeable future.

<PAGE>
                           PART II - OTHER INFORMATION

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

         (a)      The following exhibits are filed as part of this Quarterly
                  Report on Form 10-Q:

        EXHIBIT
        NUMBER            EXHIBIT DESCRIPTION
        -------           -------------------
          4.01    Second Supplemental Indenture to Trust Indenture, dated as of
                  January 15, 1997, among Panda-Rosemary Funding Corporation,
                  Panda-Rosemary, L.P. and Fleet National Bank, as Trustee,
                  filed as Exhibit 10.10.1 to the Registration Statement on
                  Form S-1 of Panda Global Energy Company and Panda Global
                  Holdings, Inc. (Registration Nos. 333-29005 and 333-29005-01,
                  respectively) (the "Registration Statement") and incorporated
                  by reference herein.

         10.01    First Amendment to Amended and Restated Security Deposit
                  Agreement, dated as of February 21, 1997, among Panda
                  Brandywine, L.P., General Electric Capital Corporation, 
                  Fleet National Bank, Credit Suisse and First Security Bank,
                  National Association, filed as Exhibit 10.28.1 to the
                  Registration Statement and incorporated by reference herein.

         27.01    Financial Data Schedule.*
------------
* Filed herewith.

         (b)      The Company did not file any reports on Form 8-K during the
                  quarter for which this report is filed.
<PAGE>
                                   SIGNATURES

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

                                         PANDA INTERHOLDING CORPORATION

Date:  August 13, 1997                      By:  /s/ Janice Carter
                                              Janice Carter
                                              Executive Vice President, 
                                              Secretary and Treasurer
<PAGE>
                                  EXHIBIT INDEX
                                                                  SEQUENTIALLY
                                                                    NUMBERED
NUMBER            DESCRIPTION                                        PAGE
------            -----------                                     ------------
27.01         Financial Data Schedule