SECURITIES AND EXCHANGE COMMISSION
                        Washington, D.C.  20549

                               FORM 10-K


[x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

          For the fiscal year ended December 31, 1997.

                                  OR

[   ]  TRANSITION  REPORT  PURSUANT TO  SECTION  13  OR  15(d)  OF  THE
SECURITIES 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)

   Securities Registered Pursuant to Section 12(b) of the Act:  None

  Securities Registered Pursuant to Section 12 (g) of the Act:  None

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

Indicate  by check mark if disclosure of delinquent filers pursuant  to
Item  405  of Regulation S-K 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 Park III of this
Form 10-K or any amendment to this Form 10-K [x].

Aggregate  market value of voting stock held by non-affiliates  of  the
registrant  is  not reflected herein because all voting  stock  of  the
registrant is owned by an affiliate thereof.

As  of March 25, 1998, the registrant had 1,000 shares of Common Stock,
$.01 par value, issued and outstanding.

                  Documents Incorporated by Reference
                                 None



                        TABLE OF CONTENTS


                             PART I
                                                             Page

Item 1.  Business                                                 1

Item 2.  Properties                                              16

Item 3.  Legal Proceedings                                       16

Item 4.  Submission of Matters to a Vote of Security Holders     19

                             PART II

Item 5.  Market for Registrant's Common Equity
         and Related Shareholder Matters                         19

Item 6.  Selected Financial Data                                 20

Item 7.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations           21

Item 8.  Financial Statements and Supplementary Data             25

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

                            PART III

Item 10. Directors and Executive Officers of the Registrant      25

Item 11. Executive Compensation                                  27

Item 12. Security Ownership of Certain Beneficial
         Owners and Management                                   27

Item 13. Certain Relationships and Related Transactions          28

                             PART IV

Item 14. Exhibits, Financial Statement Schedules, and
         Reports on Form 8-K.                                    28



         DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

     This  Annual  Report on Form 10-K includes  "forward-looking
statements"  within the meaning of Section 27A of the  Securities
Act  of  1933 and Section 21E of the Securities Exchange  Act  of
1934.  All  statements other than statements of  historical  fact
included  in this Annual Report on Form 10-K, including,  without
limitation,  statements  regarding financial  position,  projects
under  evaluation or development, construction or  other  budgets
and  plans  and  objectives for future operations,  are  forward-
looking  statements.  Although  the  Company  believes  that  the
expectations  reflected  in such forward-looking  statements  are
reasonable, it can give no assurance that such expectations  will
prove  to  have been correct. Important factors that could  cause
actual   results   to  differ  materially  from   the   Company's
expectations  ("Cautionary Statements")  include  the  impact  of
geopolitical  occurrences world-wide; the  results  of  financing
efforts;  risks under contracts and swap agreements;  changes  in
laws  and  regulations; unforeseen engineering and mechanical  or
technological  difficulties; and other  risks  described  in  the
registrant's  filings from time to time with the  Securities  and
Exchange  Commission.  All subsequent written and  oral  forward-
looking statements attributable to the Company or persons  acting
on  its  behalf are expressly qualified in their entirety by  the
Cautionary Statements.


Item 1.    Business

General

     Panda   Interholding  Corporation  (the  "Company")  is   an
indirect  wholly-owned subsidiary of Panda Energy  International,
Inc.,  a  Delaware  corporation, ("PEII"), and was  organized  in
Delaware on July 1, 1996.  The Company has been organized for the
purposes of working with PEII and its affiliates in (i) investing
in  and holding direct and indirect interests in entities engaged
in   the  development,  construction,  ownership,  operation  and
management  of electric generating facilities, sources  of  fuel,
pipelines  and other infrastructure projects, (ii) the  marketing
of  electric  power,  thermal energy  and  fuel,  and  (iii)  the
financing  of  any of the above, including the entering  into  of
indentures,  contracts  and  other  agreements  entered  into  in
connection  with the purposes described in clauses (i)  and  (ii)
above.

     The  principal executive offices of the Company are  located
at  4100 Spring Valley Road, Suite 1001, Dallas, Texas 75244. The
telephone number at such offices is (972) 980-7159.

     The  Company  operates in only one segment:  electric  power
generation.    Financial  information  regarding  the   Company's
industry  segment  and domestic operations is set  forth  in  the
financial statements hereto.

Strategy

     The  Company and its affiliates primarily are engaged in the
domestic     and    international    development,    acquisition,
construction,   ownership  and  operation   of   electric   power
generation facilities.

     The  principal  business strategy of  the  Company  and  its
affiliates  is to use their experience in evaluating, developing,
constructing,  financing and managing electric  power  generation
facilities   to   provide  low-cost  electricity   and   electric
generating capacity.  In addition, the Company believes that  the
global trend of electricity market restructuring has created  new
business opportunities for businesses like the Company.  There is
a  trend  away  from government-owned electricity systems  toward
deregulated, competitive market structures, in both domestic  and
international markets.  Many countries have rewritten their  laws
and regulations to allow foreign investment and private ownership
of  electricity generation, transmission or distribution systems.
Some  countries have been or are in the process of  "privatizing"
their  electricity systems by selling all or part of such systems
to  private  investors.  As a result, the Company  believes  that
there  is  demand  for  both  new and more  efficiently  operated
electric generating capacity in many regions around the world.

     The  Company  and its affiliates therefore are  continuously
engaged  in  the evaluation of opportunities for the  development
and acquisition of additional domestic and international electric
power  generation facilities.  For example, the Company  and  its
affiliates  currently are evaluating the development  of  various
merchant plant facilities in the United States.  Such facilities,
if  developed  and  constructed, could  take  advantage  of  cost
effective construction and new technology, as well as an  ability
to sell power into markets with growing demand and aging supplies
of  energy.   Also, the People's Republic of China  (the  "PRC"),
Nepal,  Brazil  and  Central  America are  current  international
strategic target markets for the Company and its affiliates.

     Substantial risks exist to the successful completion of  any
domestic  or  international projects under development  or  being
considered for acquisition, including, as the case may be,  those
relating   to  political  risk,  exchange  rate  risk,   currency
inconvertibility,  financing,  governmental  approvals,   siting,
construction  and permitting, as well as possible termination  of
any  applicable power sales agreement as a result of the  failure
to  meet  certain construction milestones.  No assurance  can  be
given  that  any  projects being evaluated or  developed  by  the
Company  or any of its affiliates will be completed. Further,  no
assurance  can be given that any projects developed  by  PEII  or
other  affiliates  of  the Company would be  contributed  to  the
Company's portfolio of projects, depending on the application  of
various agreements among PEII and certain of its affiliates.

     The  major changes currently taking place in the independent
power   producer  industry  are  necessitating  changes  in   the
financing  capabilities  of  companies  such  as  PEII  (and  its
affiliates), particularly in respect to the financing  of  larger
size  projects  and  merchant plants.  In this  regard,  PEII  is
looking to reduce its costs of funds, find new sources of  equity
capital  and  increase  its financing flexibility.   Accordingly,
PEII  has commenced a strategic initiative whereby it is  seeking
potential  strategic  partners  to  help  address  these  issues.
Donaldson,  Lufkin  &  Jenrette Securities Corporation  has  been
engaged  by  PEII  to  assist PEII in this search  for  strategic
partners. However, there can be no assurance that any transaction
with  strategic partners will ever take place, or, in  the  event
any  such  transaction  does take place,  as  to  the  nature  or
structure thereof.

Plants in Operation

  The Panda-Rosemary Facility

      General.  The Panda-Rosemary Facility (herein so called) is
a combined-cycle cogeneration facility located in Roanoke Rapids,
North  Carolina,  with  a total electric generating  capacity  of
approximately  180  megawatts. A cogeneration  facility  produces
electric energy and forms of useful thermal energy (such as  heat
or  steam),  used for industrial, commercial, heating or  cooling
purposes through the sequential use of one or more energy inputs.
A properly designed and constructed cogeneration facility is able
to  convert  the  energy contained in the input  fuel  source  to
useful energy outputs more efficiently than plants employing what
was,  historically,  conventional utility  electrical  generation
technology. The Panda-Rosemary Facility uses natural gas  as  its
primary  fuel  input  to  produce electric  energy  for  sale  to
Virginia  Electric Power Company ("VEPCO") and to produce  useful
thermal energy in the form of steam and chilled water for sale to
The   Bibb  Company  ("Bibb")  pursuant  to  the  Rosemary  Steam
Agreement  (herein  so  called).   On  February  18,  1997,  Bibb
announced  that it would sell the textile facility  to  WestPoint
Stevens,  Inc.  ("WestPoint").   The  closing  of  the  sale  was
reported  in  the news media on February 21, 1997.  The  Rosemary
Steam  Agreement  cannot be assigned without  the  Panda-Rosemary
Partnership's consent, which has not been given as  of  the  date
hereof.  While there has been no resolution to this matter as  of
the  date  hereof, it is assumed that (for purposes of discussion
herein only) the sale of the textile facility has closed and that
WestPoint  is  the  purchasing party  under  the  Rosemary  Steam
Agreement  and  lessor  under the Rosemary  Site  Lease  (defined
below).   The  Panda-Rosemary Partnership has continued  to  sell
steam  and  chilled  water to the purchaser in substantially  the
same amounts as it sold prior to the announcement of the sale.

      The  Panda-Rosemary Facility uses No.  2  fuel  oil  as  an
alternate  fuel  in the event gas supplies or transportation  are
curtailed.   The   Panda-Rosemary  Facility  was   designed   and
constructed by Hawker Siddeley Power Engineering.

      The Panda-Rosemary Facility began commercial operations  in
December  1990.  The Panda-Rosemary Facility is  certified  as  a
Qualifying Facility ("QF") under PURPA (defined below)  and  thus
is  exempt  from  rate  regulation as an electric  utility  under
federal  and  state law, provided that it continues to  meet  the
applicable requirements of the Public Utility Regulatory Policies
Act of 1978 ("PURPA").

      The Panda-Rosemary Facility is designed to be operated in a
combined-cycle mode. It uses natural gas or fuel oil to power two
General Electric combustion turbine generators, a GE Frame 6  and
a  GE  Frame 7, each fitted with a heat recovery steam  generator
("HRSG").  The  HRSGs  use the reject heat  from  the  combustion
turbines  that might otherwise dissipate to produce  steam  which
drives  a  steam  turbine  generator. The  combustion  and  steam
turbines  generate electric energy for sale to  VEPCO.  When  the
Panda-Rosemary Facility is being dispatched, some  of  the  steam
produced  by the HRSGs is sold and some is used in two absorption
chillers  to  supply chilled water. The combustion  turbines  use
natural gas as their primary fuel and can use No. 2 fuel  oil  as
an alternate fuel. When the facility is not being dispatched, two
auxiliary  boilers are available to be used to produce steam  for
direct  use and to produce chilled water for use by the purchaser
under  the  Rosemary Steam Agreement. The design  of  the  Panda-
Rosemary  Facility  permits  flexible  operation,  including  the
production of both electricity and a sufficient amount of thermal
energy  to meet QF requirements, using either one or both of  the
combustion turbine generators.

     Sale   of  Capacity  and  Electricity.   The  Panda-Rosemary
Partnership  (herein  so  called), is an  indirect  wholly  owned
subsidiary of the Company which owns the Panda-Rosemary Facility.
It  sells  electric capacity and energy to VEPCO  pursuant  to  a
Power  Purchase  and  Operating Agreement  (the  "Rosemary  Power
Purchase  Agreement"). The Rosemary Power Purchase Agreement  has
an initial term ending December 26, 2015, and may be extended for
periods of up to five years if the parties so agree.

      VEPCO has the right to dispatch the Panda-Rosemary Facility
(i.e.,    require   the   Panda-Rosemary  Facility   to   deliver
electricity)  on  a  daily basis within  certain  guidelines  and
design  limits (which specify load levels, start-up and  shutdown
times  and  minimum  run times consistent  with  prudent  utility
practice).

     The Rosemary Power Purchase Agreement provides for two types
of  payments:  a  capacity payment and  an  energy  payment.  The
capacity payment is a fixed charge required to be paid regardless
of  whether the Panda-Rosemary Facility is dispatched, subject to
reductions  under  certain  circumstances  as  described   below.
Energy  payments  are calculated based on the  actual  electrical
output  transmitted to VEPCO and are designed to  compensate  the
Panda-Rosemary Partnership for its cost of fuel and its  variable
operations and maintenance expense.

      Monthly  capacity  payments  throughout  the  term  of  the
Rosemary  Power Purchase Agreement are calculated by  multiplying
the   Panda-Rosemary  Facility's  "Dependable  Capacity"  by  the
following rates: $11.654 per kilowatt per month through  December
1998;  $10.821 per kilowatt per month through December 2005;  and
$8.321  per kilowatt per month through December 2015. The  Panda-
Rosemary   Facility's  Dependable  Capacity  is   currently   165
megawatts for the summer period and 198 megawatts for the  winter
period,  which  are  the maximum Dependable Capacity  levels  for
which  capacity  payments must be made under the  Rosemary  Power
Purchase  Agreement. Dependable Capacity is determined  by  semi-
annual  tests which may be requested by VEPCO.  Capacity payments
may be reduced in certain circumstances.

       Energy  payments  are  calculated  based  on  the   actual
electrical  output  transmitted to  VEPCO  and  are  designed  to
compensate  the Panda-Rosemary Partnership for its cost  of  fuel
and its variable operations and maintenance expense.

      The Panda-Rosemary Partnership is required to maintain  the
Panda-Rosemary Facility as a QF. VEPCO may terminate the Rosemary
Power  Purchase Agreement within one year after the  loss  of  QF
certification if the Panda-Rosemary Partnership has not  obtained
all  necessary  governmental  or  regulatory  approvals  for  the
Rosemary  Power  Purchase Agreement to remain in effect  and  for
electricity to continue to be sold to VEPCO.

     Steam   and   Chilled   Water  Sales.   The   Panda-Rosemary
Partnership sells steam and chilled water for use in its  textile
manufacturing  facility, located adjacent to  the  Panda-Rosemary
Facility,  pursuant  the Rosemary Steam Agreement.  The  Rosemary
Steam Agreement has an initial term that expires on December  26,
2015. Upon expiration of the initial term, the purchaser has  the
option to (i) negotiate a 10-year extension of the Rosemary Steam
Agreement, (ii) purchase the Panda-Rosemary Facility with VEPCO's
consent  or  (iii) terminate the Rosemary Steam  Agreement.   The
purchaser is obligated to pay $1.00 per 1,000 pounds of steam for
the  first 45,000 pounds of steam delivered in an hour and  $2.50
per  1,000 pounds of steam for any additional quantities of steam
delivered  in  an hour.  The purchaser is obligated  to  pay  the
following fixed prices for chilled water: $0.035/ton/hour through
December 27, 2000; $0.04/ton/hour thereafter through December 27,
2005;  $0.045/ton/hour thereafter through December 27, 2010;  and
$0.05/ton/hour thereafter through December 27, 2015.

     Site  Lease.  The 4.83 acre site on which the Panda-Rosemary
Facility  is  located is leased to the Panda-Rosemary Partnership
pursuant  to  a  Real Property Lease and Easement Agreement  (the
"Rosemary  Site Lease") in exchange for a nominal  yearly  rental
payment.  The initial term of the Rosemary Site Lease expires  on
December 31, 2015 and is automatically extended on the same terms
and  conditions for 10 years if the Rosemary Steam  Agreement  is
extended  for an additional 10-year period. At the Panda-Rosemary
Partnership's option, the initial term of the Rosemary Site Lease
may  also be extended on the same terms and conditions for a  10-
year term if the Panda-Rosemary Partnership gives the lessor  two
years' notice prior to December 31, 2015 and for an additional 10-
year term if the Panda-Rosemary Partnership gives the lessor  two
years'  notice prior to December 31, 2025, regardless of  whether
the Rosemary Steam Agreement is extended or terminated.

     Gas   Supply   and   Fuel  Management.   The  Panda-Rosemary
Partnership purchases certain quantities of natural gas on a firm
basis  from Natural Gas Clearinghouse ("NGC") pursuant to  a  Gas
Purchase  Contract  (the  "Rosemary Gas Supply  Agreement").  The
Rosemary  Gas Supply Agreement is effective through November  30,
2005,  and  thereafter from month-to-month  until  terminated  by
either NGC or the Panda-Rosemary Partnership.  NGC has agreed  to
deliver  natural  gas  on  a  firm basis  to  the  Panda-Rosemary
Partnership,  at pipeline points near the Gulf of Mexico  or  (at
the  Panda-Rosemary Partnership's request and  using  the  Panda-
Rosemary Partnership's firm transportation arrangements)  to  the
Panda-Rosemary Pipeline, up to the total contract quantity  under
the  Firm Gas Transportation Agreements (as defined below), which
is  currently  the  thermal equivalent of 3,075  Mcf  (one  "Mcf"
constitutes  one thousand cubic feet of natural gas)  of  natural
gas per day. The firm natural gas supplied under the Rosemary Gas
Supply  Agreement enables the Panda-Rosemary Partnership to  have
adequate  natural gas supplies available to meet its estimate  of
the  requirements for steam and chilled water under the  Rosemary
Steam Agreement.

     The price paid by the Panda-Rosemary Partnership for natural
gas  delivered  by  NGC is generally equal to  an  indexed  price
(based  upon monthly market-price indices determined by reference
to  the  receipt  points where NGC delivers  gas  to  the  Panda-
Rosemary   Partnership)  plus  $0.04  per  MMBtu   (one   "MMBtu"
constitutes one million British thermal units). If natural gas is
required in daily volumes that are greater than those included in
monthly  estimates  delivered to NGC, the price  for  the  excess
volume  required  is  equal  to NGC's  actual  cost  incurred  in
acquiring such excess plus $0.04 per MMBtu. If the Panda-Rosemary
Partnership  fails  to purchase the amount  included  in  monthly
estimates  delivered to NGC, and such failure is not  excused  by
force  majeure, the Panda-Rosemary Partnership must pay  NGC,  as
liquidated  damages for such failure, $0.14  for  each  MMBtu  of
natural gas not purchased below the monthly estimates delivered.

     Gas Transportation.  The Panda-Rosemary Partnership receives
firm  transportation service that provides for  delivery  to  the
Panda-Rosemary Pipeline of up to the thermal equivalent of  3,075
Mcf of natural gas per day.

      The  rates and most of the significant terms and conditions
of  service  under these firm gas transportation agreements,  are
set  forth in the respective pipeline's effective Federal  Energy
Regulatory  Commission ("FERC") gas tariff.  These  rates,  terms
and  conditions are subject to review, approval and  modification
by FERC.

      Panda-Rosemary  Pipeline.   The Panda-Rosemary  Partnership
owns,   and  North  Carolina  Natural  Gas  Corporation  ("NCNG")
operates  and  maintains for the Panda-Rosemary Partnership,  the
Panda-Rosemary Pipeline (herein so called), which runs for  10.26
miles through portions of Halifax and Northampton Counties, North
Carolina. The Panda-Rosemary Pipeline is located under, over  and
upon   properties  owned,  in  certain  instances,   by   private
landowners and, in others, by the State of North Carolina or  the
City  of  Roanoke  Rapids,  pursuant to  easement  agreements  or
encroachment  agreements. The Panda-Rosemary Pipeline  terminates
on  a  1.26-acre  parcel  in Pleasant Hill Township,  Northampton
County,  North  Carolina, which is owned  by  the  Panda-Rosemary
Partnership.   The   meter  stations  and   certain   appurtenant
facilities   interconnecting  the  Panda-Rosemary  Pipeline   and
certain  interstate  pipeline  facilities  are  located  on  this
parcel.

      The  Panda-Rosemary Partnership has entered into a Pipeline
Operating   Agreement   with   NCNG  (the   "Pipeline   Operating
Agreement"),  pursuant to which NCNG has agreed  to  operate  the
Panda-Rosemary Pipeline and provide certain natural gas balancing
services  for the Panda-Rosemary Partnership's gas supplies.  The
term of the Pipeline Operating Agreement continues until December
27,  2005, and may be extended for two additional periods of five
years each upon the agreement of the parties.

      Fuel Oil.  The Panda-Rosemary Facility was constructed with
the  capability to operate on No. 2 fuel oil and is  designed  to
change fuel sources from natural gas to fuel oil and back without
interrupting  the  generation of electricity. The  Panda-Rosemary
Facility  currently  has on-site storage  for  approximately  2.0
million  gallons of fuel oil, a supply sufficient to operate  the
Panda-Rosemary Facility at full load for approximately 168 hours.
The  Panda-Rosemary Partnership purchases fuel  oil  on  a  spot-
market  basis. Since the fuel oil suppliers either own their  own
trucks  or have contracts with local trucking firms for  regional
truck  delivery and the purchase price includes delivery  to  the
Panda-Rosemary Facility, the Panda-Rosemary Partnership does  not
independently arrange trucking service from the terminals to  the
Panda-Rosemary Facility.

      Operations and Maintenance.  The Panda-Rosemary Partnership
purchases  operations  and maintenance services  for  the  Panda-
Rosemary Facility from Panda Global Services, Inc. pursuant to an
Operation   and   Maintenance  Agreement   (the   "Rosemary   O&M
Agreement")  which  expires  on December  31,  2003.   Under  the
Rosemary  O&M Agreement,  Panda Global Services, Inc.  is  to  be
paid  a  fixed monthly fee of approximately  $140,000  per  month
during  1998,  with annual adjustments based on  changes  in  the
consumer  price  index  for subsequent years.  In  addition,  the
agreement  includes  bonus  and  penalty  provisions   based   on
maintenance  of dependable capacity levels, availability  of  the
Panda-Rosemary  Facility  for dispatch  and  the  achievement  of
certain  safety  and  training goals established  by  the  Panda-
Rosemary Partnership.

  The Panda-Brandywine Facility

      General.  The Panda-Brandywine Facility (herein so  called)
is  a combined-cycle cogeneration facility located in Brandywine,
Maryland   (near   Washington,  D.C.),  with  a  total   electric
generating  capacity  of  230  megawatts.   The  Panda-Brandywine
Facility  uses natural gas as its primary fuel input  and  No.  2
fuel oil as an alternative fuel in the event that gas supplies or
transportation are curtailed. The Panda-Brandywine  Facility  was
constructed   by   Raytheon  Engineers  and  Constructors,   Inc.
("Raytheon")  pursuant  to  the  Amended  and  Restated   Turnkey
Cogeneration  Facility  Agreement  between  the  Panda-Brandywine
Partnership   (herein  so  called),  an  indirect  wholly   owned
subsidiary   of  the  Company  which  owns  the  Panda-Brandywine
Facility,   and   Raytheon  (the  "Brandywine  EPC   Agreement").
Raytheon  has met its performance guarantees and the requirements
for  commercial operations and substantial completion  under  the
Brandywine  EPC  Agreement although the date on which  commercial
operations  was achieved is the subject of a dispute between  the
Panda-Brandywine Partnership and Raytheon.  The Company currently
believes  that the total amount in dispute is approximately  $1.0
million.   Such amount, if owed, would be payable over  time  and
from  cash  flows  from the operation of the Brandywine  Facility
which  may  otherwise  have  been  available  for  distributions.
Pursuant  to  a  power purchase agreement (the "Brandywine  Power
Purchase  Agreement") entered into in 1991 and amended  in  1994,
the  Panda-Brandywine  Partnership sells  the  capacity  of,  and
energy  produced  by,  the Panda-Brandywine Facility  to  Potomac
Electric  Power  Company  ("PEPCO"), a utility  that  serves  the
District of Columbia and parts of Maryland.  The Panda-Brandywine
Facility  commenced  commercial operations under  the  Brandywine
Power  Purchase Agreement on October 31, 1996.  The term  of  the
Brandywine  Power Purchase Agreement will expire on  October  30,
2021.

     The  Panda-Brandywine Facility is currently  leased  by  the
Panda-Brandywine Partnership pursuant to the Brandywine  Facility
Lease  (herein  so called).  The initial term of  the  Brandywine
Facility Lease is 20 years. At the end of the initial lease term,
so long as no default or event of default shall have occurred and
be  continuing  under the Brandywine Facility Lease,  the  Panda-
Brandywine  Partnership may renew the Brandywine  Facility  Lease
for  two consecutive five-year terms.  Alternatively, the  Panda-
Brandywine Partnership may purchase the Panda-Brandywine Facility
at  fair sales market value at the end of the initial lease  term
or any renewal term. If the Panda-Brandywine Partnership does not
renew  the  Brandywine  Facility Lease  or  purchase  the  Panda-
Brandywine  Facility, it must surrender possession of the  Panda-
Brandywine Facility.

      The  Panda-Brandywine Facility is certified as a  QF  under
PURPA  and  thus  is exempt from rate regulation as  an  electric
utility  under  federal and state law, provided  that,  upon  and
during commercial operations, it continues to meet the applicable
requirements of PURPA.

        Operations   and   Maintenance.    The   Panda-Brandywine
Partnership  purchases operations and maintenance  services  from
Ogden  Brandywine Operations, Inc. ("Ogden Brandywine")  pursuant
to  an  Operation and Maintenance Agreement (the "Brandywine  O&M
Agreement").  The  Brandywine O&M Agreement  is  effective  until
October 31, 1999, and may be extended thereafter by agreement  of
the parties.

      Sale  of  Capacity,  Electricity  and  Steam.   The  Panda-
Brandywine  Partnership  sells electric capacity  and  energy  to
PEPCO  pursuant  to the Brandywine Power Purchase Agreement.  The
Brandywine  Power  Purchase Agreement has an  initial  term  that
expires  in October 2021, 25 years from the commercial operations
date, and may be extended by agreement of the parties.

      The  Brandywine Power Purchase Agreement provides  for  two
payments: a capacity payment and an energy payment. The  capacity
payment  is  a fixed charge to be paid regardless of whether  the
Panda-Brandywine Facility is dispatched, subject to reduction  in
certain  circumstances. Monthly capacity payments throughout  the
term of the Brandywine Power Purchase Agreement are based on  the
Panda-Brandywine  Facility's dependable  capacity,  the  capacity
rate and other factors. The capacity rate is a fixed schedule  of
payments  for  each of the 25 years of the initial  term  of  the
Brandywine  Power Purchase Agreement, ranging (in  kilowatt  hour
per  month)  from  $13.74 in 1997 to $23.63 in 2014,  subject  to
various adjustments, and also is subject to certain modifications
thereto, as described in "Dispute With PEPCO Over Calculation  of
Capacity Payments" below.

     The energy payment is determined in accordance with a series
of   formulas  that  reflect  specified  heat  rates,  hours   of
synchronization  and  operation and a combination  of  fixed  and
market  prices  for  natural gas. The Brandywine  Power  Purchase
Agreement  provides that the energy price will  be  increased  to
compensate  the  Panda-Brandywine Partnership  for  its  variable
costs  of  fuel  oil  if the gas supply is interrupted.  In  such
event,  the Brandywine Power Purchase Agreement specifies a  base
cost  of  oil,  which is escalated at the annual rate  of  change
according to an oil index described therein.

      The  Panda-Brandywine Partnership has constructed a  seven-
mile  long  electric  transmission line  to  connect  the  Panda-
Brandywine  Facility  and the transmission facilities  of  PEPCO.
Consolidated Rail Corporation entered into an agreement with  the
Panda-Brandywine   partnership  to  provide   transmission   line
easements  for  a portion of the transmission line.   The  Panda-
Brandywine  Partnership transferred ownership of the transmission
line to PEPCO on October 30, 1996.

     The   Panda-Brandywine  Partnership  sells  steam   to   the
Brandywine  Water  Company pursuant to a  Steam  Sales  Agreement
dated   March   30,  1995  (the  "Brandywine  Steam  Agreement").
Brandywine  Water  Company, which is  an  indirect  wholly  owned
subsidiary  of the Company, uses the steam to generate  distilled
water  which is sold locally. This production and sale of thermal
energy allows the Panda-Brandywine Facility to achieve QF status.
The  Brandywine Steam Agreement continues until October 31,  2021
and  may  be  extended by agreement of the parties for additional
terms of five years.

     Gas   Supply  and  Fuel  Management.   The  Panda-Brandywine
Partnership  purchases  both firm and interruptible  natural  gas
supply from Cogen Development Company ("CDC") pursuant to the Gas
Sales  Agreement,  dated  March  30,  1995,  between  the  Panda-
Brandywine  Partnership and CDC (the "Brandywine Gas Agreement").
MCN   Corporation,   the   parent   corporation   of   CDC,   has
unconditionally   guaranteed   the   payment   and    performance
obligations  of  CDC  under  the Brandywine  Gas  Agreement.  The
Brandywine Gas Agreement commenced October 31, 1996 and continues
until  October 31, 2011, and thereafter is automatically  renewed
for an additional two-year term unless terminated by either party
upon nine months' written notice.

     CDC is obligated to sell and deliver to the Panda-Brandywine
Partnership,  at  receipt points along  the  pipeline  system  of
Columbia Gas, up to 24,240 MMBtu of natural gas per day on a firm
basis  and  up to 24,240 MMBtu of gas per day on an interruptible
basis.  Gas  delivered by CDC within the firm basis  limit  falls
within  one of the three following categories: "Limited  Dispatch
Gas,"  "Scheduled Dispatch Gas" or "Dispatchable  Gas"  (each  as
defined in the Brandywine Gas Agreement).

      The  price  for  the natural gas delivered  by  CDC  varies
dependent upon the category of the natural gas delivered.

     Gas   Transportation.   The   Panda-Brandywine   Partnership
purchases  firm natural gas transportation service from  Columbia
Gas  Transmission  Corporation ("Columbia Gas")  pursuant  to  an
Amended and Restated FTS Service Agreement (the "Columbia Gas  FT
Agreement").   Service  under  the  Columbia  Gas  FT   Agreement
commenced  on  November 1, 1996 and continues until  October  31,
2021,  and  year-to-year thereafter unless terminated  by  either
party upon six months' notice.

      Columbia  Gas  is obligated to provide the Panda-Brandywine
Partnership with up to 24,240 Dekatherms ("Dth") per day of  firm
natural  gas  transportation service from a  receipt  point  near
Monclova,  Ohio to an interconnection between the  facilities  of
Columbia  Gas  and  Cove  Point LNG  Limited  Partnership  ("Cove
Point")  in  Loudoun County, Virginia. Columbia Gas provides  the
firm transportation service pursuant to the terms of the Columbia
Gas  FT  Agreement  rate  schedule  and  the  general  terms  and
conditions of Columbia Gas's effective FERC natural gas tariff.

      The  Panda-Brandywine Partnership purchases from Cove Point
firm natural gas transportation service to transport natural  gas
delivered  by  Columbia  Gas  to the  facilities  of  Cove  Point
pursuant  to  a  FTS  Service  Agreement  (the  "Cove  Point   FT
Agreement"). The Cove Point FT Agreement continues until  October
31, 2021.

      Cove  Point  is  obligated to provide the  Panda-Brandywine
Partnership  with  up to 24,000 Dth per day of firm  natural  gas
transportation  service  from  an  interconnection  between   the
facilities of Cove Point and Columbia Gas in Loudoun, Virginia to
an  interconnection  between the facilities  of  Cove  Point  and
Washington Gas Light Company ("WGL") in Charles County, Maryland.
Cove  Point provides the firm transportation service pursuant  to
the Cove Point FT Agreement, and the general terms and conditions
of its effective FERC natural gas tariff.

      The Panda-Brandywine Partnership purchases from WGL natural
gas  transportation, natural gas sales and natural gas  balancing
services  pursuant to a Gas Transportation and  Supply  Agreement
(the   "WGL  Agreement").  The  WGL  Agreement  continues   until
October  31,  2021,  and  thereafter will  continue  year-to-year
unless  terminated  by  either party  upon  six  months'  written
notice.

     WGL is obligated to provide the Panda-Brandywine Partnership
with  firm transportation service, up to the quantity of  natural
gas  nominated  for  such  service  on  a  given  day,  from   an
interconnection between the facilities of Cove Point and  WGL  in
Charles  County, Maryland to the interconnection between the  WGL
facilities and the Panda-Brandywine Facility, provided  that  WGL
only  must use its best efforts to deliver transportation natural
gas  to  the Panda-Brandywine Facility when the pressure  on  the
Cove  Point pipeline is less than 500 psig. During the months  of
January,  February and December of any calendar  year,  WGL  may,
under  certain  circumstances, request that the  Panda-Brandywine
Partnership  release  to WGL for its system  use  a  quantity  of
natural  gas purchased by the Panda-Brandywine Partnership  under
the Brandywine Gas Agreement and transported to the WGL system.

     Fuel  Oil.   The  Panda-Brandywine Facility was  constructed
with  the  capability to operate on No. 2 fuel oil  and  has  the
ability  to change fuel sources from natural gas to fuel oil  and
back  without  interrupting the generation  of  electricity.  The
Panda-Brandywine  Facility has on-site storage for  approximately
two  million gallons of fuel oil, a supply sufficient to  operate
the  Panda-Brandywine Facility at full load for approximately six
days.  In accordance with the fuel management plan for the Panda-
Brandywine   Facility,  which  the  Panda-Brandywine  Partnership
developed with the assistance of its fuel manager (CDC) and which
was  approved  by  PEPCO, the Panda-Brandywine  Partnership  will
endeavor  to  enter  into  fuel  oil  supply  and  transportation
contracts  by October 10 of each year that will have  a  duration
through   the  immediately  succeeding  winter  season  (November
through March).

     The  Panda-Brandywine Partnership has entered into  a  Sales
Agreement  with  Northridge Petroleum Corporation  ("Northridge")
and  related  Storage  Agreement  with  Stratus  Terminals,  Inc.
pursuant to which the Panda-Brandywine Partnership purchased  and
maintains one million gallons of No. 2 fuel oil in storage  tanks
located near Baltimore, Maryland.  The respective terms of  these
Agreements commenced December 1, 1997 and terminate February  28,
1999.   The Panda-Brandywine Partnership has access to the stored
fuel  oil  at  all  times.  Upon request of the  Panda-Brandywine
Partnership,  Northridge will use its best efforts  to  replenish
any fuel oil removed from the storage tank at market-based prices
plus  additional storage charges.  If Northridge is not  able  to
purchase  the requested fuel oil within a specified time  period,
the  Panda-Brandywine Partnership may purchase such fuel oil from
another supplier.

      The  Panda-Brandywine Partnership has also entered into  an
agreement (the "Hardesty Transportation Agreement") with Hardesty
&  Son,  Inc. ("Hardesty") pursuant to which the Panda-Brandywine
Partnership has rights to firm transportation of a minimum of  20
truckloads  of  fuel  oil per day during the months  of  December
through  February and ten truckloads of fuel oil per  day  during
the months of March through November.  Hardesty will use its best
efforts to provide additional transportation upon the request  of
the  Panda-Brandywine  Partnership.  If  Hardesty  is  unable  to
provide such additional transportation when requested, the Panda-
Brandywine  Partnership  may use other means  of  delivery.   The
Hardesty Transportation Agreement continues until October 1, 1998
and  will automatically be renewed for successive one-year  terms
unless terminated by either party.

      Water.  The Panda-Brandywine Partnership has entered into a
25-year Treated Effluent Water Purchase Agreement ("Water  Supply
Agreement")  with  the County Commissioners  of  Charles  County,
Maryland to purchase up to 2.7 million gallons per day of treated
effluent from a local sewage treatment plant. Treated effluent is
a  byproduct of the sewage treatment process and is used  as  the
primary  cooling water source for the Panda-Brandywine Facility's
cooling  towers.  The  treated effluent is transported  from  the
sewage  treatment  plant to the Panda-Brandywine  Facility  by  a
buried  transmission pipeline that has the capacity to supply  up
to 3.0 million gallons per day.

      Dispute  With PEPCO Over Calculation of Capacity  Payments.
In  late August 1996, the Panda-Brandywine Partnership and  PEPCO
commenced    discussions    concerning    commercial    operation
requirements  of the Panda-Brandywine Facility and conversion  of
the  construction  loan  to long-term  financing.   During  these
discussions, two disagreements arose between the Panda-Brandywine
Partnership  and  PEPCO  as to how capacity  payments  should  be
calculated under the Brandywine Power Purchase Agreement.

     The  Panda-Brandywine Partnership has  reached  a  tentative
agreement  with  PEPCO  to  make  certain  modifications  to  the
Brandywine Power Purchase Agreement, which modifications  resolve
various  outstanding issues as to the method  of  calculation  of
capacity payments thereunder.

     The   first   significant  outstanding  issue   involved   a
disagreement between the Panda-Brandywine Partnership  and  PEPCO
as  to  the date on which the yield to maturity on United  States
Treasury  Bonds  with a maturity of 12 years ("12-year  T-Bonds")
should  be  determined under a provision in the Brandywine  Power
Purchase Agreement that requires capacity payments to be  reduced
if such interest rate is less than 8%. Such provision states that
the  interest  rate of 12-year T-Bonds is to be  determined,  and
adjustments  to capacity payments made, as of the date  that  the
interest  rate  for permanent financing for the  Panda-Brandywine
Facility  is  designated pursuant to an executed  commitment  for
such   financing.   On  October  6,  1994,  the  Panda-Brandywine
Partnership  entered  into  a  written  commitment  with  General
Electric  Capital  Corporation ("GE  Capital")  with  respect  to
permanent  financing  for  the Panda-Brandywine  Facility,  which
commitment  designated  an  interest  rate  for  such  financing.
Accordingly,  the Panda-Brandywine Partnership took the  position
that  October  6, 1994 should be the date used to  determine  the
interest  rate  of  12-year T-Bonds under  the  Brandywine  Power
Purchase Agreement. The interest rate for 12-year T-Bonds on such
date  was  7.94%  per annum. PEPCO, on the other hand,  took  the
position  that  since  the  interest  rate  designated  in   such
commitment  was  a  floating  rate,  the  date  to  be  used  for
determining the interest rate of 12-year T-Bonds was the  closing
date  of  the  conversion  of  the Brandywine  construction  loan
facility to long-term financing in the form of a leveraged lease,
which  occurred on December 18, 1996. The interest rate  for  12-
year T-Bonds on such date was 6.36%.

     The   second   significant  outstanding  issue  involved   a
disagreement  between PEPCO and the Panda-Brandywine  Partnership
as to the determination of PEPCO's system peak load, which is the
basis  for  certain  reductions in capacity  payments  under  the
Brandywine   Power  Purchase  Agreement.  Under  such  provision,
capacity  payments  are  to be reduced, commencing  in  2006,  if
PEPCO's system peak load does not exceed 5,697 megawatts prior to
1998, and are reduced by a greater amount if PEPCO's system  peak
load  does  not  exceed  such amount prior  to  1999.  PEPCO  and
Baltimore  Gas  &  Electric Company ("BG&E") had announced  their
intention to merge during 1997 into a new entity to be  known  as
Constellation Energy Corporation ("Constellation"), and PEPCO had
asked  the  Panda-Brandywine Partnership to agree that peak  load
under the Brandywine Power Purchase Agreement would be calculated
on  the  basis of the pre-merger PEPCO system and not  the  post-
merger Constellation system. Peak load based on the Constellation
system  would have greatly exceeded 5,679 megawatts during  1997.
However,  PEPCO's position was that the parties intended  to  use
the  then existing PEPCO system in calculating peak load and that
the  merger with BG&E should be disregarded for such purpose. The
Panda-Brandywine  Partnership disagreed with such  position.  The
Brandywine   Power  Purchase  Agreement  does  not  contain   any
provision    requiring   adjustments   due    to    mergers    or
reorganizations.   It  was  the  Panda-Brandywine   Partnership's
position that Constellation, as the successor of PEPCO, would  be
substituted  for  PEPCO  under  the  Brandywine  Power   Purchase
Agreement and the Constellation system would be used to calculate
peak  load.   It  is  the Panda-Brandywine Partnership's  current
understanding that the proposed merger between PEPCO and BG&E has
been terminated.

     Under  the  agreement, the first issue discussed  above  was
resolved  by adjusting the schedule for capacity payments  to  be
made  by  PEPCO   to the Panda-Brandywine Partnership  under  the
Brandywine  Power  Purchase Agreement such  that  the  amount  of
capacity payments to be made during the first ten years following
the  commencement  of commercial operations  (which  occurred  on
October  31,  1996) will be increased and the amount of  capacity
payments to be made during the last fifteen years of the term  of
the Brandywine Power Purchase Agreement (which expires on October
30,  2021)  will be reduced.  The agreement provides  that  PEPCO
will  pay to the Panda-Brandywine Partnership within two business
days following the effective date of the settlement (as discussed
below)   approximately   $3.8  million,  which   represents   the
difference between the previously scheduled capacity payments and
the  capacity payments due under the agreement for the first nine
months of 1997.

      The  second  issue  discussed above  was  resolved  by  the
tentative  agreement  of  both parties  to  base  the  peak  load
adjustment on PEPCO's peak load.

       In   return  for  the  resolution  of  the  aforementioned
significant  issues,  PEPCO has agreed that the  Panda-Brandywine
Partnership may acquire the exclusive right to broker (as defined
by  FERC) capacity from the Panda-Brandywine Facility for resale,
up to certain specified amounts and for specified periods.  PEPCO
will  sell  the  capacity  pursuant to  its  power  sales  tariff
currently on file with the FERC.  The amount of released capacity
to  be  made  available  for brokering  to  the  Panda-Brandywine
Partnership is 130 megawatts for the period January -  May  1998,
200  megawatts  for  the period June 1998 -  May  1999,  and  100
megawatts  for  the  period  June  1999-May  2000.   The   Panda-
Brandywine  Partnership  will pay PEPCO $1.25/kilowatt/month  for
the capacity released.

      In  addition,  PEPCO has agreed to release  to  the  Panda-
Brandywine Partnership on a periodic basis through the year  2002
the rights to sell energy for resale, which energy may or may not
be  from  the  capacity released described above.  Such  releases
will  be  based  upon  PEPCO's  projections  of  future  facility
operations required to serve PEPCO's needs.  Sales of energy  not
related  to released capacity will be subject to the availability
of  the  Panda-Brandywine Facility.  Sales of energy outside  the
Pennsylvania-New Jersey-Maryland Interconnection ("PJM Pool") not
related to released capacity will be on an interruptible basis in
accordance with PJM Pool rules and requirements.

      In  connection  with sales of released energy,  the  Panda-
Brandywine Partnership may function as a power marketer or  power
broker  (in  either  case, as defined by FERC).   If  the  Panda-
Brandywine Partnership elects to function as a power marketer, it
must become a member of the PJM Pool.  In either case, the Panda-
Brandywine  Partnership will be required to obtain all  necessary
authorizations  and  approvals to engage  in  such  transactions,
including any authorizations and approvals required by FERC.   If
the  Panda-Brandywine Partnership functions as a power  marketer,
it  will be required to pay PEPCO a base fee equal to two percent
of  the  Panda-Brandywine Partnership's gross revenues from  each
sale  of  released  energy, subject to  an  additional  incentive
payment  of  up  to 50% of the base fee based on  the  timing  of
releases by PEPCO of blocks of energy available for resale by the
Panda-Brandywine Partnership.

      If  the  Panda-Brandywine Partnership functions as a  power
broker,  it will be required to pay PEPCO a base fee, subject  to
the  incentive adjustment as described above, plus an  additional
fee of one percent of the gross revenues from each sale.  The PJM
Pool, not PEPCO, will supply transmission service.  The agreement
also  provides that PEPCO will enter into good faith negotiations
with  the  Panda-Brandywine Partnership prior to the end  of  the
year  2002  with respect to energy releases after 2002,  although
neither  party  is  obligated to enter into  any  such  agreement
unless it is to their mutual economic benefit.

       The  agreement  further  provides  that  for  purposes  of
determining  PEPCO's  system peak load which  is  the  basis  for
reductions  in  capacity  payments  under  the  Brandywine  Power
Purchase  Agreement following any merger or other combination  of
PEPCO  with another utility, the actual peak load experienced  by
the  portion  of  the  merged or combined company's  system  that
constituted  the PEPCO system prior to such merger or combination
shall be used.

      The  agreement  further provides that the  Panda-Brandywine
Partnership will enter into good faith negotiations with PEPCO on
a buyout or buydown of the Brandywine Power Purchase Agreement in
a manner that maximizes and equitably shares the benefits of such
transaction  between  the  parties,  although  neither  party  is
obligated to enter into any buyout or buydown agreement unless it
is to their mutual economic benefit.

      The effectiveness of the agreement with PEPCO is subject to
the consent of the financing parties, including GE Capital, under
the  long-term  financing arrangements for  the  Panda-Brandywine
Facility.   In this regard, the Panda-Brandywine Partnership  has
commenced  discussions with GE Capital and  the  other  financing
parties  concerning such consents, and has executed an  agreement
in principle with GE Capital.  Among other things, this agreement
in principle provides for (i) the re-allocation of lease payments
from  the Panda-Brandywine Partnership to GE Capital in order  to
match the revised capacity payments schedule with PEPCO, (ii) the
reimbursement  to GE Capital by the Panda-Brandywine  Partnership
of  certain fees, and (iii) certain technical amendments  to  the
applicable financing documents.  The closing of the agreement  in
principle  is  subject to several conditions, including  but  not
limited to written consents from all other financing parties  and
other  applicable  parties, receipt of legal opinions  concerning
the  tax and regulatory consequences of the transaction, and  the
preparation  of definitive legal documentation of the transaction
to the satisfaction of all parties involved.

      To  the  Company's  knowledge, no regulatory  consents  are
required in order for the agreement between PEPCO and the  Panda-
Brandywine Partnership to take effect.  There can be no assurance
that  the  requisite  consents  from  GE  Capital  or  the  other
applicable  financing  parties  can  be  obtained  or  that   the
agreement with PEPCO will ever become effective.

Competition

      The business of developing electric generating power plants
is intensely competitive.  The Company and its affiliates compete
both  domestically  and  internationally with  other  independent
power producers, including affiliates of utilities.

     Development  of  new  power generation projects  in  foreign
markets is difficult and expensive, and many competitors in these
foreign  markets have significantly larger capital resources  and
greater local market expertise than the Company. In addition, due
to  increased competition in the United States, there has been an
increasing number of entrants into these foreign markets.

      In  the  United  States, over the past  decade,  developing
electric generating power plants has become a progressively  more
difficult,  expensive and competitive process. In  recent  years,
more  of  such transactions have been awarded through competitive
bidding. Increased competition also has lowered profit margins of
successful projects in the United States.

Regulatory Matters

  Regulation of the Electric Power Industry in the United States

     Projects  of  the Company located in the United  States  are
subject to complex and stringent energy, environmental and  other
governmental laws and regulations at the federal, state and local
levels   in  connection  with  the  development,  ownership   and
operation of its electricity generation facilities. Federal  laws
and  regulations govern transactions by electric and gas  utility
companies, the types of fuel that may be utilized by an  electric
generating  facility, the type of energy that may be produced  by
such  a facility and the ownership of the facility. State utility
regulatory  commissions  must approve the  rates  and  terms  and
conditions  under which public utilities sell electric  power  at
retail and, under certain circumstances, purchase electric  power
from  independent  producers. Under certain  circumstances  where
specific  exemptions  are  otherwise unavailable,  state  utility
regulatory  commissions  may have broad  jurisdiction  over  non-
utility  electric  power generation facilities. Energy  producing
projects  located  in  the  United States  also  are  subject  to
federal,  state  and  local  laws and administrative  regulations
governing the emissions and other substances produced, discharged
or  disposed  of  by  a  facility and the geographical  location,
zoning,  land use and operation of a facility. Applicable federal
environmental laws typically have state and local enforcement and
implementation   provisions.   These   environmental   laws   and
regulations generally require that a variety of permits and other
approvals be obtained before the commencement of construction  or
operation  of an energy-producing facility and that the  facility
then operate in compliance with those permits and approvals.

  Federal and State Energy Regulation

     PURPA.  PURPA  and  the  regulations promulgated  thereunder
provide  certain rate and regulatory incentives  to  an  electric
generating  facility that is a qualifying cogeneration  or  small
power production facility (a "QF" or "Qualifying Facility").  The
Panda-Rosemary  Facility  and the Panda-Brandywine  Facility  are
QFs.   A  cogeneration  facility is a QF if it  (i)  sequentially
produces both electricity and useful thermal energy that is  used
for  industrial,  commercial, heating or cooling  purposes,  (ii)
meets certain energy efficiency and operating standards when  oil
or  natural  gas is used as a fuel source and (iii) is  not  more
than  50%-owned by an electric utility, electric utility  holding
company or an entity or person owned by either or any combination
thereof.

     Under PURPA and the regulations promulgated thereunder,  QFs
receive two primary benefits. First, most types of QFs are exempt
from most provisions of the Public Utility Holding Company Act of
1935,  as  amended  ("PUHCA"), and from most  provisions  of  the
Federal  Power  Act, as amended (the "FPA"), while  all  QFs  are
exempt  from certain state laws relating to organizational,  rate
and  financial regulation. Second, regulations promulgated by the
FERC  under  PURPA  require that (i) electric utilities  purchase
electricity generated by QFs, construction of which commenced  on
or  after  November 9, 1978, at a price based on  the  purchasing
utility's  full  "avoided  costs" and  (ii)  the  utilities  sell
supplementary,  back-up, maintenance and interruptible  power  to
the  QFs  on a just and reasonable and non-discriminatory  basis.
PURPA  and the regulations promulgated thereunder define "avoided
costs"  as  the  "incremental costs to  an  electric  utility  of
electric  energy or capacity or both which, but for the  purchase
from  the  qualifying  facility or  qualifying  facilities,  such
utility  would generate itself or purchase from another  source."
Utilities  may also purchase power from QFs at prices other  than
"avoided  costs"  pursuant to negotiations as  provided  by  FERC
regulations.  Any merchant plant, if developed and constructed by
the Company in the United States probably would not qualify as  a
QF, but nonetheless probably would be exempt from most provisions
of  PUHCA by virtue of being an "exempt wholesale generator"  "or
"EWG" (described hereinbelow).

     The  FERC's  regulations  also provide  that  if  energy  or
capacity is provided pursuant to a legally enforceable obligation
over  a  specified term, avoided costs may be determined, at  the
option  of  the QF, either at the time the energy or capacity  is
delivered  or  as  calculated  at  the  time  the  obligation  is
incurred.  The FERC's regulations further provide  that,  in  the
case  of rates based on estimates of avoided costs over the  term
of  a contract, the rates do not violate the FERC's rates if  the
rates for such purchases differ from avoided costs at the time of
delivery.

     In  certain  instances, payments based  upon  avoided  costs
estimated  at the time a contract is entered into have proven  to
be  greater  than  a  utility's avoided  costs  at  the  time  of
delivery. Many utilities have attempted to minimize the disparity
by  implementing  strategies  designed  to  reduce  avoided  cost
payments  under  such  contracts to  levels  that  the  utilities
believe  will  be more competitive in a short-term marginal  cost
electric  energy  market.  Such strategies  include  attempts  to
renegotiate  or buy out power purchase contracts with  QFs.  Some
utilities  have sought rigorously to enforce the  terms  of  such
contracts and to exercise their contractual termination rights if
the  contracts  are  not  strictly observed.  In  addition,  some
utilities  have  engaged  in  litigation  and  regulatory  action
against QFs to achieve these ends.

     The  FERC  has refused to disturb QF contract rates  on  two
operating projects where estimates of a utility's avoided  costs,
calculated  at  the time the contracts were signed,  were  higher
than  the  actual avoided costs at the time of delivery  and  the
contract rates were not challenged at the time the contracts were
signed  and were not the subject of an ongoing challenge  to  the
state's avoided cost determination. New York State Electric & Gas
Corporation,   71  FERC   61,027,  reconsideration   denied,   72
FERC  61,067 (1995). This decision is currently the subject of  a
complaint  filed  in  the United States District  Court  for  the
Northern District of New York.

     Relying  in part on the FERC's regulations, a federal  court
of appeals has held that once a state commission has approved (by
final  and  nonappealable  order) a QF  contract  rate  as  being
consistent  with  avoided costs, just, reasonable  and  prudently
incurred,  any  action  or  order  by  the  state  commission  to
reconsider  its  approval or deny the pass-through  of  the  QF's
charges  to the utility's retail customers under purported  state
authority  is preempted by PURPA. Freehold Cogeneration  Assocs.,
L.P.  v. Board of Regulatory Comm'rs of New Jersey,  44 F.3d 1178
(3rd  Cir.), cert. denied sub nom., Jersey Central Power &  Light
Co.  v.  Freehold  Cogeneration Assocs., L.P.,   116  S.  Ct.  68
(1995).

     In  Independent Energy Producers Assoc. v. California Public
Utilities Comm'n,  36 F.3d 848 (9th Cir. 1994), the U.S. Court of
Appeals  for the Ninth Circuit held that states are not preempted
by  PURPA from instituting a program that requires QFs to  submit
operating data, to purchasing utilities for monitoring compliance
with   QF   status  requirements,  as  long  as  the   monitoring
requirements  do not impose an undue burden on the QFs.  However,
the same court determined that states and utilities are preempted
by  federal law from taking action on their determination that  a
QF  is no longer in compliance with QF status requirements, other
than  requesting that the FERC revoke the facility's  QF  status,
either by filing a request for revocation or by filing a petition
for a declaratory order that the facility is no longer a QF.

     On  May  29,  1996,  VEPCO filed with the State  Corporation
Commission of the Commonwealth of Virginia ("SCC") a request  for
authorization to institute a formal QF status monitoring program.
On  June  13,  1997, the SCC issued an order authorizing  such  a
monitoring program. The order states that the monitoring  program
would  apply  to  all QFs that have entered into  power  purchase
agreements  with  VEPCO. Under the program, QFs  must  submit  to
VEPCO  by  July 1 of each year certain operational data from  the
previous  year  and  indicate significant changes  from  previous
years.   VEPCO must report to the SCC by October 1 of  each  year
the  results of VEPCO's QF compliance evaluation.  VEPCO may seek
a  declaration from the FERC that a QF does not qualify under the
FERC's rules.

     The   North  Carolina  Utilities  Commission  ("NCUC")   has
disallowed  the  pass-through to VEPCO's  North  Carolina  retail
rates of a portion of capacity payments VEPCO had been making  to
several non-utility generation plants. The capacity payment rates
for  the plants had been determined by an arbitrator and approved
by  the  SCC.  The NCUC found that bids from a 1988  solicitation
(the  "1988 VEPCO Solicitation") were available at the  time  the
contract  was  approved  and should have been  used,  instead  of
arbitration, to determine VEPCO's avoided costs. The  NCUC  ruled
that  rates in excess of the rates derived from bids received  in
the  1988 VEPCO Solicitation were therefore disallowed in VEPCO's
North  Carolina  retail rates. The North Carolina  Supreme  Court
upheld  the  NCUC's  decision, saying that the  NCUC  had  simply
disallowed  rates  above avoided costs. North Carolina  Utilities
Comm'n  v.  North Carolina Power,  338 N.C 412,  450  S.E.2d  896
(1994).  The United States Supreme Court declined to review  that
decision.

     While  the Rosemary Power Purchase Agreement with VEPCO  was
not  specifically approved by the SCC, the SCC  did  approve  the
1988  VEPCO  Solicitation that resulted  in  the  Rosemary  Power
Purchase  Agreement.  Although  the  NCUC  used  the  1988  VEPCO
Solicitation to determine the avoided costs in the North Carolina
decision discussed above, there can be no assurance that it would
not  disallow  the  pass-through of the Rosemary  Power  Purchase
Agreement rates, which arose from the 1988 VEPCO Solicitation. If
the  NCUC  were to disallow such pass-through, and if the  courts
were  to  allow the decision to stand, the Company believes  that
any  such disallowance would affect only that portion of  VEPCO's
rates  allocated  to  its North Carolina  retail  customers.  The
Brandywine Power Purchase Agreement has been approved by both the
Maryland and District of Columbia Public Service Commissions.

     The  Company endeavors to develop its U.S. projects, monitor
compliance  by the U.S. projects with applicable regulations  and
choose  its  customers in a manner which minimizes the  risks  of
losing QF status. Certain factors necessary to maintain QF status
are, however, subject to the risk of events outside the Company's
control.  For  example,  loss  of a thermal  energy  customer  or
failure of a thermal energy customer to take required amounts  of
thermal  energy from a cogeneration facility that is a  QF  could
cause  the facility to fail to satisfy the criteria required  for
QF  status  regarding the level of useful thermal energy  output.
Upon  the occurrence of such an event, the Company would seek  to
replace  the thermal energy customer or find another use for  the
thermal  energy that meets PURPA's requirements, but no assurance
can be given that this would be possible.

     If  one of the U.S. projects which is a QF and in which  the
Company  has  an interest should lose its status as  a  QF,  such
project would no longer be entitled to the exemptions from  PUHCA
and  the  FPA.  This  could  subject the  U.S.  project  to  rate
regulation  as a public utility under the FPA and state  law  and
could  result  in  the  Company  or  certain  of  its  affiliates
inadvertently becoming a public utility holding company by owning
more  than  10%  of the voting securities of, or  controlling,  a
facility  that would no longer be exempt from PUHCA.  This  could
cause all of the Company's remaining U.S. projects which are  QFs
to  lose  their QF status, because QFs may not be controlled,  or
more than 50%-owned, by public utility holding companies. Loss of
QF status could also trigger defaults under covenants to maintain
QF   status   in  the  Company's  U.S.  project  power   purchase
agreements,  steam sales agreements and financing agreements  and
result  in termination, penalties or acceleration of indebtedness
under  such  agreements. A facility may lose its QF status  on  a
retroactive or a prospective basis.

     If  a  U.S. project which is a QF were to lose its QF status
(because,  for example, it lost its steam customer), the  Company
and  its affiliates could attempt to avoid holding company status
(and thereby protect the QF status of its other QF projects) on a
prospective  basis  by restructuring its interests  in  the  U.S.
project.  For  instance,  the Company  could  change  its  voting
interest  in  the  entity  owning the  nonqualifying  project  to
nonvoting  or limited partnership interests and sell  the  voting
interest  to  an individual or company which could  tolerate  the
lack  of  exemption  from  PUHCA, or by  otherwise  restructuring
ownership  of the project so as not to become a holding  company.
These  actions, however, would require approval of the Securities
and  Exchange Commission (the "SEC") or a no-action  letter  from
the  SEC,  and  would  result  in a  loss  of  control  over  the
nonqualifying  project,  could  result  in  a  reduced  financial
interest  therein  and  might result in  a  modification  of  the
operation and maintenance agreement relating to such project.   A
reduced financial interest could result in a gain or loss on  the
sale  of  the  interest  in  such project,  the  removal  of  the
affiliate through which the ownership interest is held  from  the
consolidated  income  tax  group or  the  consolidated  financial
statements of the Company and its affiliates, or a change in  the
results of operations of the Company and its affiliates. Loss  of
QF  status  on  a  retroactive basis could lead to,  among  other
things, fines and penalties being levied against the Company  and
its  affiliates, and its subsidiaries and claims by utilities for
refund of payments previously made.

     Under the Energy Policy Act of 1992 ("Energy Policy Act"), a
company  engaged  exclusively in the business  of  owning  and/or
operating  a facility used for the generation of electric  energy
exclusively for sale at wholesale may be exempted from  PUHCA  as
an  "exempt  wholesale generator" or "EWG." An  exempt  wholesale
generator may not make retail sales of electricity in the U.S. If
a project can be qualified as an EWG under Section 32 of PUHCA it
will  be exempt from PUHCA even if it does not qualify as  a  QF.
Therefore,  if  a QF in the Company's project portfolio  were  to
lose  its QF status, the Company could apply to have the  project
qualified as an EWG. However, assuming this changed status  would
be  permissible under the terms of the applicable power  purchase
agreement,  rate  approval  from  FERC  would  be  required.   In
addition,  the  project  would  be  required  to  cease   selling
electricity  to any retail customers (such as the thermal  energy
customer) and could become subject to state regulation  of  sales
of thermal energy.

     PUHCA.  PUHCA provides that any corporation, partnership  or
other  entity  or  organized group that owns, controls  or  holds
power to vote 10% or more of the outstanding voting securities of
a  "public  utility  company" or a company  that  is  a  "holding
company"  of  a  public utility company is subject to  regulation
under  PUHCA, unless an exemption is established or an SEC  order
declaring  it not to be a holding company is granted.  Registered
holding companies under PUHCA are required to limit their utility
operations  to a single integrated utility system and  to  divest
any other operations not functionally related to the operation of
the utility system. In addition, a public utility company that is
a  subsidiary  of  a registered holding company  under  PUHCA  is
subject  to  financial  and organizational regulation,  including
approval by the SEC of certain of its financing transactions.

     As  discussed above, most types of QFs are exempt from  most
of  the  provisions of PUHCA. A foreign utility company  is  also
exempt from most of the provisions of PUHCA if certain notice and
other requirements are satisfied.

     FPA.   Under  the  FPA,  the FERC has exclusive  rate-making
jurisdiction over wholesale sales of electricity and transmission
in interstate commerce. These rates may be determined on either a
cost-of-service basis or a market-based approach. If a QF in  the
Company's project portfolio were to lose its QF status, the rates
set  forth in the applicable power purchase agreement would  have
to  be  filed  with the FERC and would be subject to initial  and
potentially subsequent reviews by the FERC under the  FPA,  which
could result in reductions to the rates.

     Industry   Restructuring  Proposals.   The   United   States
Congress  is  currently considering legislation to  repeal  PURPA
entirely,  or  at least to repeal the obligation of utilities  to
purchase  from  QFs.  There is strong Congressional  support  for
grandfathering  contracts of existing QFs if such legislation  is
passed,  and  also  support for requiring  utilities  to  conduct
competitive  bidding  for new electric generation  if  the  PURPA
purchase obligation is eliminated.

     The  FERC  and many state utility commissions are  currently
studying  a  number  of  proposals to  restructure  the  electric
utility industry in the United States to permit utility customers
to choose their utility supplier in a competitive electric energy
market.  The FERC has issued a final rule requiring utilities  to
offer  wholesale  customers and suppliers open  access  on  their
transmission  lines, on a basis comparable to the utilities'  own
use  of the lines. Although the rule (Order No. 888) is currently
the  subject of a petition for review in the United States  Court
of  Appeals  for  the D.C. Circuit, many utilities  have  already
filed  "open  access" tariffs. The utilities  contend  that  they
should  recover from departing customers their fixed  costs  that
will  be  "stranded"  if  their wholesale  customers  choose  new
electric  power  suppliers.  These  stranded  costs  include  the
capacity  costs  utilities are required  to  pay  under  many  QF
contracts,  which the utilities view as excessive  when  compared
with  current  market  prices for capacity.  Many  utilities  are
therefore  seeking  ways  to  lower  these  contract  prices   or
terminate  the  contracts altogether,  out  of  fear  that  their
shareholders  will  have to bear all or part of  such  "stranded"
costs.  Some utilities have engaged in litigation against QFs  to
achieve  these  ends.  The FERC's rule allows  full  recovery  of
"legitimate and verifiable" prudently incurred stranded costs  at
the wholesale level. However, the FERC has jurisdiction over only
a  small percentage of electric rates, and there is likely to  be
litigation  over whether wholesale stranded costs are "legitimate
and verifiable."

     In  addition to restructuring proposals being considered  by
regulatory  agencies, a number of bills have been  introduced  in
the  U.S. Congress to promote electric utility restructuring  and
deregulation of electric rates. These bills differ as to how  and
to what extent a utility's "stranded" or "transition" costs would
be  recoverable if current captive customers left  the  utility's
system. The existence of this legislation may increase the desire
of  utilities  to  renegotiate, buy out or attempt  to  terminate
existing  power  purchase agreements containing prices  that  the
utilities  believe  will  not  be  competitive  in  a  short-term
marginal  cost electric energy market. In addition,  if  electric
energy  prices  are deregulated, electric energy  producers  will
have  to  sell electric energy at competitive market prices.   In
Virginia, a restructuring bill has passed the two houses  of  the
state  legislature,  and  has been sent to  the  governor,  whose
signature is required for such bill to become law.

     State   Regulations.    State  public  utility   commissions
("PUCs") have broad authority to regulate both the rates  charged
by  and  financial  activities  of  electric  utilities,  and  to
promulgate regulations implementing PURPA. Since a power purchase
agreement  will become a part of a utility's cost structure  (and
therefore  generally  is reflected in its  retail  rates),  power
purchase   agreements  from  independent  power   producers   are
potentially   subject  to  the  regulatory   purview   of   PUCs,
particularly  the process by which the utility has  entered  into
the  power purchase agreements. If a PUC has approved the process
by which a utility secures its power supply, a PUC generally will
be  inclined  to allow a utility to "pass through"  the  expenses
associated  with an independent power contract to  the  utility's
retail  customers. Moreover, a federal court of appeals has  held
in   one   instance  that  a  PUC  may  not  disallow  the   full
reimbursement to a utility for the purchase of electricity from a
QF  once  the PUC has approved the rates as consistent  with  the
requirements of PURPA. See Freehold Cogeneration Assocs., L.P. v.
Board  of  Regulatory Comm'rs of New Jersey, 44  F.3d  1178  (3rd
Cir.), cert. denied sub nom., Jersey Central Power and Light  Co.
v.  Freehold Cogeneration Assocs., L.P., 116 S. Ct. 68 (1995). In
addition,  retail sales of electricity or thermal  energy  by  an
independent  power  producer may be subject  to  PUC  regulation,
depending on state law.

     Independent power producers that are not QFs under PURPA are
considered to be public utilities in many states and are  subject
to  broad  regulation by PUCs ranging from the  requirement  that
certificates of public convenience and necessity be  obtained  to
regulation  of  organizational, accounting, financial  and  other
corporate matters. However, sales of electricity at wholesale (as
are  currently  contemplated  by the Company  regarding  merchant
plants  which  it might develop in the U.S.) are subject  to  the
exclusive  regulatory  jurisdiction of  the  FERC.  In  addition,
states  may  assert jurisdiction over the siting and construction
of  such facilities, and over the issuance of securities and  the
sale or other transfer of assets by these facilities that are not
QFs.

     State  PUCs  also have jurisdiction over the  transportation
and  retail  sale of natural gas by local distribution companies.
Each state's regulatory laws are somewhat different; however, all
generally require a local distribution company to obtain approval
from  the  PUC to provide services and construct facilities.  The
rates  of  local  distribution companies are usually  subject  to
continuing oversight by the PUC.

     In  the  case  of  the Panda-Rosemary Facility,  the  Panda-
Rosemary Partnership is subject to a number of conditions imposed
by the North Carolina Utilities Commission ("NCUC") pursuant to a
Certificate   of  Public  Convenience  and  Necessity   ("CPCN"),
including  that  the  Panda-Rosemary Facility  and  the  Rosemary
Pipeline  both  be owned by the Panda-Rosemary Partnership,  that
the  Panda-Rosemary Partnership not transport gas for or sell  or
deliver  gas to any other entity, that all electricity  generated
at the Panda-Rosemary Facility be sold to an electric utility and
that  all  thermal energy produced at the Panda-Rosemary Facility
be sold only to the textile mill to which steam and chilled water
from  the  Panda-Rosemary Facility are currently  delivered.   On
February  18, 1997, The Bibb Company ("Bibb") announced  that  it
would   sell   the  textile  mill  to  WestPoint  Stevens,   Inc.
("WestPoint").  The closing of the sale was reported in the  news
media  on February 21, 1997.  If, in fact, Bibb is no longer  the
owner  of  the  textile mill, the Panda-Rosemary  Partnership  is
obligated  to notify the NCUC and VEPCO and the NCUC could  order
such   further  proceedings  as  it  deemed  appropriate,   which
proceedings  could  result  in revocation  of  the  CPCN  or  the
imposition of other conditions.

     Natural  Gas  Regulation.  The Company has an indirect  100%
interest  in  and  operates  two natural  gas-fired  cogeneration
projects in the United States, one of which is owned and  one  of
which is under a long term lease financing arrangement. The  cost
of  natural gas (other than debt costs) is ordinarily the largest
expense  of  a  gas-fired power project and is  critical  to  the
project's economics. The risks associated with using natural  gas
can  include the need to arrange transportation of the gas across
great  distances, including obtaining removal, export and  import
authority  if the gas is transported from Canada, the possibility
of  interruption  of  the  natural gas supply  or  transportation
(depending  on the quality of the natural gas reserves  purchased
or dedicated to the project, the financial and operating strength
of  the  gas supplier and whether firm or non-firm transportation
is  purchased), and obligations to take a minimum quantity of gas
or pay for it (take-or-pay obligations).

     Pursuant  to  the Natural Gas Act, the FERC has jurisdiction
over  the transportation and storage of natural gas in interstate
commerce.  With respect to most transactions that do not  involve
the construction of pipeline facilities, regulatory authorization
can  be  obtained on a self-implementing basis. However, pipeline
rates for such services are subject to continuing FERC oversight.
Order  No.  636, issued by the FERC in April 1992,  mandated  the
restructuring  of  interstate  natural  gas  pipeline  sales  and
transportation services. The restructuring required by  the  rule
includes (i) the separation ("unbundling") of a pipeline's  sales
and  transportation  services,  (ii)  the  implementation  of   a
straight  fixed-variable rate design methodology under which  all
of a pipeline's fixed costs are recovered through its reservation
charge,  (iii) the implementation of a capacity release mechanism
under  which holders of firm transportation capacity on pipelines
can  release that capacity for resale by the pipeline,  and  (iv)
the  opportunity for pipelines to recover 100% of their prudently
incurred  costs ("transition costs") associated with implementing
the restructuring mandated by the rule.

     Environmental  Regulations.  The  development,  construction
and  operation of power projects in the United States is  subject
to  extensive  federal,  state and  local  laws  and  regulations
adopted  for  the protection of the environment and  to  regulate
land use. The laws and regulations applicable to the Company  and
its  subsidiaries  primarily involve the discharge  of  emissions
into the water and air and the use of water, but can also include
wetlands  preservation, endangered species,  waste  disposal  and
noise  regulations.  These  laws and regulations  in  many  cases
require  a  lengthy  and complex process of  obtaining  licenses,
permits and approvals from federal, state and local agencies.

     Noncompliance  with environmental laws and  regulations  can
result in the imposition of civil or criminal fines or penalties.
In some instances, environmental laws also may impose clean-up or
other  remedial  obligations  in  the  event  of  a  release   of
pollutants  or  contaminants into the environment. The  following
federal  laws  are among the more significant environmental  laws
that  may apply to the Company and its domestic subsidiaries.  In
most  cases,  analogous  state laws also exist  that  may  impose
similar,  and in some cases more stringent, requirements  on  the
Company and its subsidiaries.

     Clean  Air Act.  The Federal Clean Air Act, as amended  (the
"Clean  Air  Act"), provides for the regulation, largely  through
state  implementation  of federal requirements,  of  ambient  air
quality  and emissions of air pollutants from certain  facilities
and  operations.  As originally enacted, the Clean  Air  Act  set
guidelines  for  emissions standards for major pollutants  (e.g.,
sulfur  dioxide  and nitrogen oxide) from new sources.  The  1990
Clean Air Act Amendments tightened regulations on emissions  from
existing  sources, particularly previously exempted  older  power
plants.

     Clean  Water Act.  The Federal Clean Water Act,  as  amended
(the  "Clean  Water  Act"),  also provides  for  the  regulation,
largely through state implementation of federal requirements,  of
the  quality  of  surface  waters  and  imposes  limitations   on
discharges to those waters from point sources, including  certain
facilities   and   operations.  The   water   quality   standards
established under the Clean Water Act are used as the  basis  for
developing  specific pollutant discharge limitations  from  point
sources. The discharge limitations are incorporated into  permits
called  National Pollutant Discharge Elimination System ("NPDES")
permits.  The  Clean  Water  Act also imposes  requirements  with
respect  to  the  discharge of stormwater runoff from  industrial
sites.   Those   requirements  are  implemented   through   state
stormwater discharge permits. The Clean Water Act also  restricts
discharges of fill materials to wetlands.

     Resource   Conservation  and  Recovery  Act.   The  Resource
Conservation  and  Recovery Act of 1976  ("RCRA")  regulates  the
generation,  treatment,  storage,  handling,  transportation  and
disposal of solid and hazardous waste.

     Comprehensive  Environmental  Response,  Compensation,   and
Liability   Act.    The  Comprehensive  Environmental   Response,
Compensation, and Liability Act of 1980, as amended ("CERCLA"  or
"Superfund"), requires the remediation of sites from which  there
has  been a release or threatened release of hazardous substances
and  authorizes the United States Environmental Protection Agency
to  take  any  necessary  response  action  at  Superfund  sites,
including ordering potentially responsible parties liable for the
release  to take or pay for such actions. Potentially Responsible
Parties  are  broadly defined under CERCLA to  include  past  and
present   owners  and  operators  of  such  sites,  as  well   as
generators, arrangers and transporters of wastes sent to a site.

  Foreign Regulations

      Besides  domestic projects, the Company and its  affiliates
are  engaged  in the evaluation and development of  international
electric  power generation facilities. Each country and  locality
has   separate  laws  and  regulations  governing   the   siting,
permitting, ownership and power sales from electric power plants.
These  laws and regulations are often quite different than  those
in effect in the United States, and depending on the country, can
be  complex and stringent in regard to the development, ownership
and operation of electric power plants.

      In  addition, energy producing projects located in  foreign
countries often are subject to stringent environmental  and  land
use  regulations as well.  Based on current trends,  the  Company
expects  that  environmental and land use  regulations  affecting
electricity producing power plants located outside the U.S.  will
likely  become more stringent over time.  This appears to be  due
in  part  to  a greater participation by local citizenry  in  the
monitoring   and  enforcement  of  environmental   laws,   better
enforcement  of  applicable environmental laws by the  regulatory
agencies,  and  the adoption of more sophisticated  environmental
requirements.  If foreign environmental and land use  regulations
were to change in the future, the Company and its affiliates will
have  to  take  these changes into account in  their  efforts  to
develop  electricity producing power plants in foreign countries.
Such  projects  could become more difficult to evaluate,  develop
and operate as a result.

Employees

      At  December 31, 1997, the Company and its subsidiaries had
no employees.

      Robert  W. Carter is Chairman of the Board, Chief Executive
Officer  and  also  a director of the Company. Janice  Carter  is
Executive Vice President, Secretary and Treasurer of the Company,
and  is  married  to  Robert  W. Carter.   Otherwise,  no  family
relationships exist among the directors and executive officers of
the Company.

     All  executive officers of the Company are elected  annually
by  the  Board  of  Directors of the Company  to  serve  in  such
capacities until their successors are duly elected and qualified.

Item 2.   Properties.

      The information regarding the properties of the Company  is
set  forth  under  Item 1.  Business above and in  the  Notes  to
Consolidated  Financial Statements included in  Part  II  hereof.
The  Company's  principal office, located at 4100 Spring  Valley,
Suite  1001, Dallas, Texas  75244, is leased by PEII, which lease
expires May 2001.

Item 3.   Legal Proceedings.

     The  Company  is  not  a  party to  any  legal  proceedings.
However, affiliates of the Company are claimants or defendants in
various  legal  proceedings which have  arisen  in  the  ordinary
course  of business.  The Company believes such claims and  legal
actions,  individually  or  in the aggregate,  will  not  have  a
material  adverse effect on the business, financial condition  or
results of operations of the Company and its subsidiaries,  taken
as a whole.

NNW, Inc. Proceeding

     On  July 12, 1996, Panda Energy Corporation, an affiliate of
the  Company  ("PEC"), filed an action against NNW, Inc.  ("NNW")
captioned  Panda  Energy  Corporation v.  NNW,  Inc.  f/k/a  Nova
Northwest Inc. (No. 96-07151-C), in the District Court of  Dallas
County,  Texas (68th Judicial District). PEC's petition sought  a
declaratory  judgment  that  the NNW's  cash  flow  participation
rights in PEC's credit agreement with NNW remain at 0.433%  after
the  restructuring  of  the Panda-Rosemary  Partnership  interest
pursuant  to  the terms of such credit agreement  with  NNW.  The
parties  settled  this dispute in December  1997  pursuant  to  a
settlement agreement and mutual release of claims, the  terms  of
which  are  maintained as confidential pursuant to the provisions
of  such agreement.  PEC does not believe that the terms of  this
settlement  agreement and mutual release of claims  will  have  a
material  adverse effect on the business, financial condition  or
results  of  operations of PEC and its subsidiaries, taken  as  a
whole or the Company and its subsidiaries, taken as a whole.

Heard Proceedings

     PEC   is  a  party  to  a  lawsuit  captioned  Panda  Energy
Corporation, Plaintiff v. Heard Energy Corporation, CLF Energia Y
Electricidad,  S.A.,  Robert A. Wolf, Armin Alexander  Budzinsky,
Edward  R.  Gwynn, Donald L. Kinney, Morgan Stanley & Co.,  Inc.,
Allstate  Insurance  Company, Allstate  Life  Insurance  Company,
Entergy  Corporation, Entergy Enterprises, Inc.,  Entergy  Power,
Inc., Entergy Power Development Corporation, Anil Desai, Drs. IR.
Poerwanto  P.,  and PT Panca Serodja Pradhana,  Defendants,  (No.
94-0672-J),  District  Court  of  Dallas  County,  Texas   (191st
Judicial  District). PEC initiated this litigation in April  1994
and  alleges that defendants Wolf, Gwynn and Kinney,  former  PEC
employees,  formed a competing company (Heard Energy Corporation)
and  misappropriated certain of PEC's international power project
opportunities.  PEC  alleges that the other defendants  knowingly
participated,    collaborated    and/or    conspired    in    the
misappropriation.   PEC   alleges   causes    of    action    for
misappropriation, conspiracy, fraud, breach of  contract,  breach
of  fiduciary duty and legal malpractice against one or  more  of
the defendants and alleges damages in an unspecified amount.

     Defendant  Morgan Stanley filed a counterclaim on  September
14, 1995 against PEC, alleging that it had performed services for
PEC   pursuant  to  an  engagement  agreement  relating  to   the
Brandywine  Project. PEC terminated the engagement  agreement  on
May  4,  1993.  Morgan  Stanley  alleges  that  the  services  it
performed  prior  to such termination included assisting  PEC  in
obtaining  certain  regulatory  approvals,  preparing   a   draft
solicitation booklet and identifying potential project  financing
sources,  including  GE Capital. Morgan Stanley  further  alleges
that  PEC obtained financing from GE Capital after Morgan Stanley
was  terminated,  and  that  Morgan  Stanley  is  entitled  to  a
"transaction fee," either pursuant to the engagement agreement or
based on the value of the services it allegedly performed, in  an
amount  of not less than $4.3 million, plus attorneys'  fees  and
interest.

     Defendants Heard Energy Corporation, Wolf, Gwynn, Kinney and
Budzinsky  (the  "Heard Defendants") also  filed  a  counterclaim
during  November 1994 against PEC and a third-party claim against
Robert Carter and Janice Carter, alleging that PEC, Robert Carter
and  Janice Carter negligently made misrepresentations  of  PEC's
lack  of  a continued interest in developing international  power
projects.  The Heard Defendants allege that they would  not  have
engaged   in  allegedly  competing  international  power  project
transactions  but  for  these misrepresentations  and  that  they
incurred damages in the amount of approximately $5.0 million as a
result   of  these  misrepresentations,  such  damages  allegedly
consisting  of  expenses  incurred by Heard  Energy  Corporation,
certain  portions  of  which  allegedly  are  guaranteed  by  the
individual  Heard  Defendants. In both the counterclaim  and  the
third-party claim, the Heard Defendants further allege that  PEC,
Robert Carter and Janice Carter violated a confidentiality  order
relating  to  certain documents produced by the Heard  Defendants
during  the  discovery phase of this action  by  misappropriating
confidential  information in these documents for the  purpose  of
gaining  a  competitive advantage over Heard Energy  Corporation.
The  Heard  Defendants seek $5.0 million in damages  as  well  as
unspecified "exemplary" damages based on this alleged  violation.
PEC believes that the Heard Defendants' discovery order claim  is
not actionable as a claim for damages.

     On  March 15, 1996, all of the defendants filed motions  for
summary judgment, and PEC filed motions for summary judgment with
respect   to   Morgan  Stanley's  counterclaim  and   the   Heard
Defendants'  counterclaim and third-party claim. By letter  dated
April 30, 1996, the court advised all counsel that it intended to
grant  the  defendants' motions for summary judgment,  indicating
that PEC could not show legally sufficient evidence of damages to
sustain its claims. This order was entered on June 19, 1996.

     PEC has appealed the court's ruling. In light of the court's
ruling  and  pending  the appeal, Morgan Stanley  and  the  Heard
Defendants  have dismissed without prejudice their  counterclaims
and  third-party claims, and PEC has agreed that  any  applicable
statutes  of  limitations or other time-based  defenses  will  be
tolled during the pendency of the appeal.

     The  Company  has  been informed by PEC that  PEC  does  not
believe that either the Morgan Stanley counterclaim or the  Heard
Defendants' counterclaims and third-party claims will be  refiled
unless  and  until the judgment dismissing PEC's  claims  against
those parties is reversed and remanded to the trial court by  the
appellate  court. In any event, PEC does not believe  that  these
counterclaims  or  third-party claims, if  reasserted,  have  any
merit,  nor  does  PEC believe that these claims,  if  eventually
decided adversely to PEC, would have a material adverse effect on
the business, financial condition or results of operations of PEC
and  its  subsidiaries, taken as a whole or the Company  and  its
subsidiaries, taken as a whole.

Brandywine Proceeding

     On  June 26, 1996, certain plaintiffs commenced a proceeding
against   the  Panda-Brandywine  Partnership  and  one   of   its
contractors (as well as other subcontractors) captioned  Jeannine
McConnell, McConnell Pool Service, Inc. and McConnell  Fuel  Oil,
Inc. v. Panda-Brandywine, L.P. and Flippo Construction (Case  No.
CV 96-1344) in the Circuit Court for Charles County, Maryland. In
this  proceeding, plaintiffs allege that in connection  with  the
construction of an effluent water pipeline, a contractor for  the
Panda-Brandywine Partnership, Flippo Construction ("Flippo") (and
its  subcontractors)  and the Panda-Brandywine  Partnership  left
their  easement  and inadvertently trespassed on  to  plaintiffs'
property.  While  on  plaintiffs'  property,  Flippo   (and   its
subcontractors)  and  the Panda-Brandywine Partnership  allegedly
dug  a  deep  and  wide hole which extended onto the  plaintiff's
property  to  locate a buried pipe. Plaintiffs allege  that  this
trespass  damaged the property, decreased its fair  market  value
and resulted in loss of use thereof. Plaintiffs claim damages  in
numerous counts that aggregate to $3.25 million in actual damages
against  each  defendant plus punitive damages  aggregating  $3.0
million against all defendants.

     The   Panda-Brandywine  Partnership  intends  to  vigorously
contest  this proceeding. The Company does not believe  that  the
outcome of this proceeding will have any material adverse  effect
on  the business, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole, or the Panda-
Brandywine  Partnership. In the opinion of  the  Panda-Brandywine
Partnership  and  the Company, the contract  between  the  Panda-
Brandywine  Partnership and Flippo requires Flippo  to  hold  the
Panda-Brandywine Partnership harmless for any activities relating
to the plaintiffs' property.

Florida Power Proceedings

     In  January  1995,  Florida  Power  Corporation,  a  Florida
corporation ("Florida Power"), commenced a proceeding before  the
Florida   Public   Service  Commission   against   the   Kathleen
Partnership,  an  affiliate  of the  Company,  captioned  In  re:
Petition  for  Declaratory  Statement Regarding  Eligibility  for
Standard  Offer Contract and Payment Thereunder by Florida  Power
Corporation, Case No. 950110-EI. Florida Power's petition  sought
a  declaratory statement that a power purchase agreement  between
Panda-Kathleen, L.P., an affiliate of the Company (the  "Kathleen
Partnership") and Florida Power, is not available to the Kathleen
Partnership   because   the   Kathleen   Partnership's   proposed
cogeneration  facility allegedly is not in  compliance  with  the
Florida PSC's rules (because it may be capable of exceeding 75 MW
in  electric generating capacity). Additionally, if the  contract
is  "available" to the Kathleen Partnership, Florida Power sought
a declaratory statement that it is only obligated to pay capacity
payments  under  the  power purchase agreement  relating  to  the
Kathleen  Facility  for a term of 20 years rather  than  for  the
entire 30-year term of the power purchase agreement. The Kathleen
Partnership   filed  a  cross-petition  seeking   a   declaratory
statement  that  the  milestone  dates  in  the  power   purchase
agreement  must  be  extended  due to  Florida  Power's  improper
actions  and as a result of the delays in developing the Kathleen
Facility  caused  by  Florida Power's petition  and  the  ensuing
proceeding before the Florida PSC. The Kathleen Partnership filed
a motion to dismiss the proceeding based on lack of jurisdiction,
but  that  motion was denied by the Florida PSC. In  February  of
1996, the Florida PSC held a one-day hearing.

     On  May 20, 1996, the Florida PSC issued a decision granting
Florida  Power's  petition, and holding that the  power  purchase
agreement  is not available to the Kathleen Facility as  proposed
because it has an electric generating capacity in excess of 75 MW
and  that  Florida  Power  is  only obligated  to  make  capacity
payments  under the power purchase agreement for  20  years.  The
Florida  PSC's  decision also granted the Kathleen  Partnership's
cross-petition  insofar as it grants the Kathleen Partnership  an
18-month   extension   to  meet  the  construction   commencement
milestone  date and an 18-month extension to meet the  commercial
operation  milestone date. The Kathleen Partnership has  appealed
the  Florida  PSC's order to the Florida Supreme  Court  and  the
Florida   Supreme  Court  upheld  the  decision.   The   Kathleen
Partnership filed a Writ of Certiorari with the Supreme Court  of
the United States regarding this matter in February, 1998.

     There  are two actions related to this matter pending before
the  Florida  Supreme Court and the United States District  Court
for the Middle District of Florida.  The Company does not believe
that an adverse result in this case would have a material adverse
effect  on  the  business,  financial  condition  or  results  of
operations of the Company and its subsidiaries, taken as a whole.

National Development and Research Corporation Proceeding

      On  October  14,  1997,  Panda Global  Energy  Company,  an
affiliate of the Company ("PGE"), commenced a proceeding  in  the
District   Court  of  Dallas  County,  101st  Judicial   District
captioned Panda Global Energy Company v. National Development and
Research  Corporation  and Robert E. Tang,  Case  No.  97-9315-E.
PGE's  petition sought a declaratory judgment for the termination
of  various  agreements between PGE and National Development  and
Research  Corporation ("NDR") regarding the development of  power
projects  in the PRC.  On December 9, 1997 NDR filed  a  counter-
claim  against  PGE  and Robert W. Carter asserting  that,  among
other things, such agreements are still in effect and that NDR is
entitled   to  certain  payments  thereunder.   This   proceeding
currently  is  in  the  discovery stage.  The  Company  does  not
believe  that an adverse result in this proceeding would  have  a
material  adverse effect on the business, financial condition  or
results  of  operations of PGE and its subsidiaries, taken  as  a
whole, or the Company and its subsidiaries, taken as a whole.

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

      No  matters  were  submitted to a vote of security  holders
during  the  fourth  quarter of the Company's fiscal  year  ended
December 31, 1997.

                             PART II

Item 5.   Market for the Registrant's Common Stock and Related
Security Holder Matters.

There  is  no established market for the Company's Common  Stock,
$.01  par  value, all of which is owned by PEC.  The Company  has
not  paid cash dividends on shares of its capital stock since its
inception

Item 6.   Selected Financial Data.

                             SELECTED FINANCIAL DATA
                          (in thousands, except ratios)
     Presented below are selected consolidated financial data for the Company as
of  and  for each of the years in the five-year period ended December 31,  1997,
which  have  been derived from the Company's financial statements. The  selected
financial  data  should  be read in conjunction with the  information  contained
under  the caption, "Management's Discussion and Analysis of Financial Condition
and  Results  of  Operations" and the consolidated financial statements  of  the
Company, including the notes thereto, included elsewhere herein.

<TABLE>
                                          Year Ended December 31,
                             1993      1994       1995        1996        1997
<S>                        <C>        <C>        <C>          <C>       <C>
Revenue:
Electric capacity and      $29,856    $30,664    $29,859      $32,273   $ 65,004
energy sales:
Steam and chilled water        618        650        473          503        624
sales
Interest income                365        603        895        1,228      1,528
  Total revenue             30,839     31,917     31,227       34,004     67,156

Expenses:
Plant operating expenses     7,676      8,940      9,348       12,050     26,245
Development and              2,278      1,376      1,821        3,533      8,083
administrative expenses
Interest expense            11,066     11,018     11,716       14,303     31,011
Depreciation                 4,282      4,208      4,210        5,532     11,575
Amortization - Debt            502        600        554          403        349
 issuance costs
Amortization -                 533        533        533          533          -
Partnership formation
 costs
Total expenses              26,337     26,675     28,182       36,354     77,263

Income (loss) before
 taxes and minority
 interest                    4,502      5,242      3,045      (2,350)   (10,107)
Minority interest           (5,474)    (5,700)    (5,048)      (2,405)         -
Provision for income
 taxes                           -          -          -            -          -
Income (loss) before
 extraordinary items          (972)      (458)    (2,003)      (4,755)   (10,107)

Extraordinary loss,
 net (1)                         -          -          -      (21,336)         -
Net loss                     $(972)     $(458)   $(2,003)    $(26,091)  $(10,107)


Other Data:
Ratio of earnings to
 fixed charges(2)             1.39x      1.36x        (2)          (2)        (2)


                                                    December 31,
                              1993       1994      1995          1996       1997

<S>                         <C>        <C>        <C>          <C>       <C>
Balance Sheet Data:
Cash and other current
 assets                     $14,084    $15,538    $11,333      $27,092   $ 26,901
Power plant and
 equipment (net)              93,815     94,893    216,794      262,672    253,935
Reserves and escrow
 deposits, and other
 assets                      14,901     14,728     14,722       21,038     23,937
Total assets
                           $122,800   $125,159   $242,849     $310,802   $304,773


Current liabilities        $11,252    $12,531    $18,457      $14,283    $11,823
Deferred revenue                --         --         --           --      8,943
Long-term debt
 (including capital
 lease obligation), less
 current portion            98,454   106,343    234,608      322,011    329,983
Advances from Parent
Minority interest           34,479     35,588     36,836       15,387      5,010
Shareholder's deficit      (21,385)   (29,303)   (47,052)     (40,879)   (50,986)
Total liabilities and
 shareholder's deficit
                          $122,800   $125,159   $242,849     $310,802   $304,773


</TABLE>

Notes (in thousands):
(1)   In 1996, there was an extraordinary loss from early extinguishment of
debt of $21,336.
(2)   For purposes of computing the ratio of earnings to fixed charges,
earnings represent income (loss) before minority interest, taxes and
extraordinary items plus  fixed charges exclusive of capitalized interest.
Fixed charges consist of interest expense, capitalized interest and
amortization of debt issuance costs.  Earnings were insufficient to cover
fixed charges in 1995 by $2,748, in 1996 by $13,405 and in 1997 by $10,107.
In 1994, 1995 and 1996, fixed charges included capitalized interest of
$803, $5,793 and $11,055, respectively.


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

 Management's Discussion and Analysis of Financial Condition and
                      Results of Operations

     (Dollar amounts are in thousands unless otherwise noted)

General

      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.

            1997 compared to 1996

      The  Company  incurred a net loss of  $10,107  in  1997  on
revenues of $67,156 compared to net loss before minority interest
and  extraordinary item of $2,350 on revenues of  $34,004  during
1996.   The increase in revenues in 1997 was primarily caused  by
operations of the Brandywine Facility (which commenced on October
31, 1996) and by increased interest income, partially offset by a
decrease in revenues at the Rosemary Facility.  The 1997  results
include   operations   of  both  the  Rosemary   and   Brandywine
facilities,  whereas the 1996 results include operations  of  the
Rosemary Facility for a full year and the Brandywine Facility for
the  final  two  months  of  1996. For 1997  and  1996,  capacity
revenues  for  the  Rosemary Facility were $25,361  and  $27,204,
respectively, reflecting a contractual decrease of $1,843. Energy
revenues for the Rosemary Facility for 1997 and 1996  were $2,355
and  $2,011,  respectively.  The increase in energy revenues  for
the Rosemary Facility is attributable to higher dispatch hours at
that  facility  compared  to  1996.  During  1997,  the  Rosemary
Facility  was  dispatched 743 hours as compared to 636  hours  in
1996.    Capacity  revenues  and  energy  revenues  from  Potomac
Electric Power Company ("PEPCO") for the Brandywine Facility  for
1997  were  $21,612  and $11,905, respectively.   The  Brandywine
Facility  was  dispatched  3,552  hours  during  1997.   Capacity
revenues  for  the Brandywine Facility for 1997 were  lower  than
originally anticipated due to a disagreement with PEPCO over  the
calculation of the capacity payments.  As discussed in Note 8  to
the consolidated financial statements, the Company and PEPCO have
reached  a  tentative  agreement  under  which  PEPCO  will   pay
approximately  $3.8  million to the Company for  the  retroactive
effect  of higher capacity payments for the first nine months  of
1997.   In  October  1997,  PEPCO  commenced  increased  capacity
payments  to  the  Company  under  the  terms  of  the  tentative
agreement.   The  agreement is subject  to  the  consent  of  the
financing parties.  Additionally, the Company had energy revenues
of  $3,771  from the sale of natural gas and fuel  oil  to  other
purchasers in the 1997.  Plant operating expenses, which included
fuel  cost,  operation  and maintenance  expense,  insurance  and
property taxes, increased to $26,245 (39% of revenues)  in   1997
from  $12,050  (35%  of  revenues)  in  1996,  primarily  due  to
commencement of operations at the Brandywine Facility  and  lower
margins obtained on the sale of natural gas and fuel oil to other
purchasers.   Additionally,  the 1996  plant  operating  expenses
included  approximately  $700 for the  insurance  deductible  and
other non-covered costs relating to hurricane damage sustained in
September 1996 at the Rosemary Facility.

      Project development and administrative expenses were $8,083
(12% of revenues) and $3,533 (10% of revenues) for 1997 and 1996,
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 $31,011 (46% of revenues)  in
1997   from $14,302 (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  $11,923
(18%  of revenues) in  1997 and $6,468 (19% of revenues) in 1996.
The  increase was primarily attributable to depreciation for  the
Brandywine Facility in 1997.

     For 1996, minority interest in net income was $2,405.  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.

      For  1996,  the Company incurred an extraordinary  loss  on
early  extinguishment  of debt of $21,336  as  a  result  of  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 the Series A Bonds.

      As  a  result of the various factors discussed  above,  the
Company  incurred net losses of $10,107 and $26,091 for 1997  and
1996,  respectively.

     1996 compared to 1995

     The Company incurred a net loss before extraordinary item of
$4,755 in 1996 on revenues of $34,004, compared to a net loss  of
$2,003  on  revenues  of $31,227 in 1995.   The  9%  increase  in
revenues  was primarily caused by the commencement of  commercial
operations at the Brandywine Facility on October 31, 1996 and  by
increased interest income.  For 1996 and 1995, capacity  revenues
were $27,204 in both periods and energy revenues were $5,070  and
$2,655,  respectively.   Capacity  revenues  for  the  Brandywine
Facility   commenced  in  January  1997;  accordingly,   capacity
revenues  for 1996 and 1995 relate only to the Rosemary Facility.
The increase in energy revenues is attributable to operations  of
the  Brandywine  Facility  for  the  last  two  months  of  1996,
partially offset by a decrease in energy revenues at the Rosemary
Facility  which  resulted  from  lower  dispatch  hours  at  that
facility  compared  to 1995.  During 1996, the Rosemary  Facility
was  dispatched  635 hours as compared to 2,224  hours  in  1995,
resulting in a decrease in energy revenues from that facility  of
$644.   (The  number  of dispatched hours in 1995  was  unusually
high,  as  explained  below.)  Plant  operating  expenses,  which
included  fuel cost, operation and maintenance expense, insurance
and  property  taxes related to the Rosemary  Facility  (and  the
Brandywine Facility commencing October 31, 1996), increased  from
$9,348  (30%  of revenues) in 1995 to $12,050 (35%  of  revenues)
during the same period in 1996, primarily due to the inclusion of
the costs of operating the Brandywine Facility for two months  in
1996.    Because  the  Brandywine  Facility  earned  no  capacity
revenues  during its period of operation in 1996, plant operating
expenses (and all other categories of expenses) were higher  than
normal as a percentage of revenues.  Another significant cause of
the   increased  plant  operating  expenses  was  the   insurance
deductible  and  other  non-covered costs of  approximately  $700
relating to hurricane damage sustained in September 1996  at  the
Rosemary Facility as discussed below.  Other factors contributing
to  the  increase  in plant operating expenses  at  the  Rosemary
Facility included additional scheduled maintenance  costs and the
fuel  cost  increases  relating to  increased  operation  of  the
auxiliary boiler for steam and chilled water production.

     Project development and administrative expenses were  $1,821
(6%  of revenues) and $3,533 (10% of revenues) for 1995 and 1996,
respectively.  The increase in 1996 was primarily attributable to
the  commencement  of  commercial operations  at  the  Brandywine
Facility on October 31, 1996.

     Interest expense increased from $11,716 (38% of revenues) in
1995  to  $14,303 (42% of revenues) in 1996 as a  result  of  the
increase in outstanding indebtedness under a term loan which  was
partially  offset  by  the  scheduled  reduction  in  outstanding
indebtedness under the taxable revenue bonds issued in  1989  for
the  Rosemary  Facility,  and as a  result  of  the  increase  in
outstanding indebtedness from the issuance of the Rosemary  Bonds
on  July  31,  1996.   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  a
term  loan  on  July  31,  1996.  Additionally,  commencement  of
commercial operations at the Brandywine Facility resulted in  the
recognition of interest expense on the related debt for the  last
two months of 1996.  Prior to commercial operations, interest  on
the Brandywine debt was capitalized.

     Depreciation,   amortization  of  debt   issue   costs   and
amortization of partnership formation costs increased from $5,297
(17%  of  revenues) in 1995 to $6,468 (19% of revenues) in  1996.
The  increase  was primarily attributable to the commencement  of
commercial  operations at the Brandywine Facility on October  31,
1996.

     On  September 6, 1996, a transformer and two switches at the
Rosemary   Facility  sustained  damage  from  a   hurricane.    A
substitute  transformer was temporarily installed pending  repair
of  the  damaged  transformer, which was substantially  completed
during  the  first  quarter of 1997.  The Company  estimated  the
total  cost to repair the Rosemary Facility (including substitute
transformer rental costs) at approximately $2,450, all  of  which
was  covered by insurance except for deductible and certain  non-
covered  items in the amount of approximately $700.   This  event
did not have a material adverse effect on the Company's financial
condition or results of operations.

     For  1996  and  1995, minority interest in  net  income  was
$2,405 and $5,048, respectively.  The decrease in 1996 was due to
lower  net  income  (before minority interest  and  extraordinary
item) in the Rosemary Partnership and the acquisition on July 31,
1996  of  the  minority  interest  holder's  limited  partnership
interest as discussed below.

     In  connection with the issuance of the Rosemary  Bonds  and
advances  from  its  parent, the Company refinanced  the  taxable
revenue bonds issued in 1989 for the Rosemary Facility and repaid
a  term  loan.   The  Company incurred an extraordinary  loss  of
$21,336   on  the  early  extinguishment  of  these  obligations.
Additionally, the Company acquired the minority interest holder's
limited  partnership interest in the Rosemary Partnership  for  a
purchase  price  of approximately $34,256.  As a result  of  this
acquisition,  the Company owns 100% of the Rosemary  Partnership.
The  acquisition was accounted for using the purchase  method  of
accounting.   The excess of minority interest over  the  purchase
price  (approximately $3.8 million) was allocated  to  plant  and
equipment.

     As  a  result  of the various factors discussed  above,  the
Company  incurred net losses of $26,091 and $2,003 for  1996  and
1995 respectively.

  1995 compared to 1994

     The  Company  incurred a net loss of $2,003 on  revenues  of
$31,227 in 1995 compared to $458 on revenues of $31,917 in  1994.
The  decrease in revenues was primarily the result of a scheduled
contractual  decrease in capacity payments of $1,526,  which  was
partially  offset  by  additional  income  generated  due  to  an
increase  in  the  number  of  hours the  Rosemary  Facility  was
dispatched  by  VEPCO  and an increase in  interest  income.  The
Rosemary  Facility was dispatched 2,224 hours in 1995 versus  764
hours  in  1994,  due primarily to forced outages  at  two  VEPCO
generating  plants that are not likely to be repeated.  For  1995
and  1994, capacity revenues were $27,204 and $28,730 and  energy
revenues  were $2,655 and $1,934, respectively. For approximately
1,200  of the dispatch hours in 1995, the Rosemary Facility  used
natural  gas  provided directly by VEPCO under a special  fueling
arrangement   provided  for  in  the  Rosemary   Power   Purchase
Agreement.  The  Rosemary Facility's margin on  energy  sales  is
lower  when VEPCO supplies natural gas for the Rosemary  Facility
than when the Rosemary Facility is dispatched under normal energy
pricing  terms. However, overall margins at the Rosemary Facility
are increased in such circumstances (relative to not operating at
all)  by the ability to provide steam and chilled water from  the
steam  turbine offtake, which reduces the operating costs of  the
auxiliary boilers.

     Plant   operating  expenses,  which  included   fuel   cost,
operations and maintenance expense, insurance and property  taxes
related  to the Rosemary Facility, were $9,348 (30% of  revenues)
in  1995  as  compared  to  $8,940 (28%  of  revenues)  in  1994,
primarily due to additional maintenance expenses and fuel related
costs  incurred due to the increase in the number  of  hours  the
Rosemary  Facility  was dispatched by VEPCO. Project  development
and administrative expense increased from $1,376 (4% of revenues)
in  1994  to  $1,821 (6% of revenues) in 1995  primarily  due  to
additional  administrative expenses relating to  construction  of
the Brandywine Facility.

     Interest  expense  was  $11,716 (38% of  revenues)  in  1995
compared  to  $11,018 (35% of revenues) in 1994. The increase  in
1995  was  attributable  to additional borrowings.  Depreciation,
amortization of debt issue costs and amortization of  partnership
formation costs were stable and collectively amounted to  17%  of
revenues in 1995 and 1994.

     In  1995,  the  Company incurred a net  loss  of  $2,003  as
compared  to a net loss of $458 in 1994. An allocation of  $5,048
was  made in 1995 for minority interest, a decrease of $652  from
1994  as  a result of the overall decrease in net income  of  the
Rosemary Partnership.

Liquidity and Capital Resources

      In  1997, the Company obtained cash from operations of  the
Rosemary  Facility  and  the  Brandywine  Facility.  The  Company
utilized  this  cash  to  service  its  debt  obligations,   make
distributions to its parent to fund project development  efforts,
and for general and administrative expenses.

      In  1996, the Company obtained cash from operations of  the
Rosemary Facility, issuance of the Rosemary Bonds, advances  from
its parent and borrowings under non-recourse project debt for the
Brandywine Facility.  The Company utilized this cash to refinance
existing   debt,  fund  development  and  construction   of   the
Brandywine  Facility,  service  its  debt  obligations,  and  for
general  and administrative expenses.  Additionally, the  Company
purchased  the  minority  interest  holder's  remaining   limited
partnership interest in Panda-Rosemary.

      The  principal future cash requirement  of the Company will
be payment of its debt service obligations. The Company will rely
almost  exclusively on cash generated by the project entities  to
meet  its  cash requirements.  The project entities'  ability  to
generate such cash will depend upon the financial performance  of
the  Rosemary Facility and the Brandywine Facility.  The  Company
currently  believes that it will have sufficient  liquidity  from
the  cash flows from the project entities, together with  amounts
held in debt service reserves and other restricted cash reserves,
to  satisfy  its  obligations.   The  Company's  restricted  cash
balances  are available only for specific uses as stated  in  the
indentures, such as payment of debt service obligations,  project
construction  and  overhaul, and are not  available  for  general
corporate purposes.

      The  project  entities are dependent on  capacity  payments
under  their respective power purchase agreements to  meet  their
fixed  obligations,  including  payment  of  project-level   debt
service,  and  to  make distributions to the  Company.   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 1999 and 2006, the capacity payments  for
the  Rosemary Facility are scheduled to decrease by approximately
$1.8 million (7.1%) and $5.4 million (23.1%), respectively, based
on the facility's current capacity rating.  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 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.

Year 2000 Matters

The Year 2000 Issue is the result of computer programs being
written using two digits rather than four to define the
applicable year. Any of the  Company's computer programs that
have time-sensitive software may recognize a  date using "00" as
the year 1900 rather than the year 2000. This could result in  a
system failure or miscalculations causing disruptions of
operations,  including, among other things, a temporary inability
to process transactions,  send invoices, or engage in similar
normal business activities.

In 1998, the Company initiated a review of existing accounting
software to determine the impact of the Year 2000 Issue.
Although such review is still in process, management estimates
that the Year 2000 Issue will not pose significant operational
problems for its  computer systems. All costs associated with
this conversion, which are not anticipated to be material, are
being expensed as incurred.

Item 8.   Financial Statements and Supplementary Data.

      The  Financial  Statements  and  Supplementary  Data  filed
herewith begin on page F-1 hereof.

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

None

                            PART III

Item 10.  Directors and Executive Officers of the Registrant.

     The  number of members of the Board of Directors of  Company
has been set at two, but the number may be increased or decreased
by  the Board of Directors or the stockholders. Directors of  the
Company  are  elected  annually and each elected  director  holds
office  until a successor is elected. Robert W. Carter and  Brian
G.  Trueblood  are  the current directors of  the  Company.   All
executive  officers of the Company are elected  annually  by  the
Board  of  Directors of the Company to serve in  such  capacities
until their respective successors are duly elected and qualified.

     The  Certificate  of Incorporation of the  Company  provides
that  the Company shall always have an individual serving  as  an
"Independent  Director"  who shall have  the  right  to  vote  or
consent  only on, and whose affirmative vote or consent shall  be
required  with  respect to, any decision by the  Company  or  the
Board  of  Directors  of the Company to  (i)  file  a  bankruptcy
petition, make an assignment for the benefit of creditors,  apply
for the appointment of a custodian, receiver or trustee for it or
its  property, consent to the filing of such proceeding or  admit
in  writing to its inability to pay its debts generally  as  they
become   due;   (ii)   commence  the  dissolution,   liquidation,
consolidation, merger or sale of all or substantially all of  its
assets;  (iii) amend the Certificate of Incorporation to  broaden
the purposes of the Company and in other respects; (iv) authorize
the  Company to engage in any activity other than those set forth
in  the  Certificate  of  Incorporation,  or  (v)  authorize  any
subsidiary  with an Independent Director to take any  action  set
forth  in (i) through (iv).  The Certificate of Incorporation  of
the  Company provides that the Independent Director  shall  be  a
person  who is not and has not been, for the five years preceding
his  election, (i) a direct or indirect legal or beneficial owner
of  the  Company or its affiliates (or a member of the  immediate
family  of  such  owner),  (ii)  a creditor,  supplier,  officer,
director,  promoter, underwriter, manager or  contractor  of  the
Company  or  any of its affiliates (or a member of the  immediate
family of any such officer or director) or (iii) a person  (or  a
member  of  the  immediate family of a person)  employed  by  the
Company  or  any of its affiliates or by any creditor,  supplier,
employee,  stockholder, officer, director, promoter, underwriter,
manager  or  contractor  thereof. The Independent  Director  may,
however,  serve  in  such capacity for other  affiliates  of  the
Company.   In March 1998, Brian G. Trueblood was elected  as  the
Independent Director of the Company.

     The  following table sets forth the names and  ages  of  the
directors  and  the executive officers of the Company  and  their
positions with the Company. Since the formation of  the  Company,
each executive officer of the Company has held the same office(s)
with  the  Company  that  he  or she has  held  with  each  other
corporation that is currently affiliated with the Company.

         Name           Age   Position with the Issuer and the Company

  Robert W. Carter       59   Director, Chairman of the Board  and
                              Chief Executive Officer
  Darol S. Lindloff      59   President
  Janice Carter          55   Executive Vice President, Secretary and Treasurer
  William C. Nordlund    43   Executive Vice President, Finance
  Ralph T. Killian       51   Executive Vice President and
                              Operations Manager
  Steven W. Crain        47   Senior Vice President, Business Development
  Ted C. Hollon          47   Senior Vice President, Project Development
  L. Stephen Rizzieri    42   Senior Vice President and General Counsel
  Brian G. Trueblood     36   Independent Director

     Robert  W.  Carter has been the Chairman of  the  Board  and
Chief  Executive  Officer of PEII, an affiliate of  the  Company,
since  January 1995. Mr. Carter has held similar chief  executive
positions  with  PEC, also an affiliate of the Company,  and  its
subsidiaries  since he founded PEC in 1982.  Mr. Carter  also  is
President  of  Robert  Carter Oil & Gas, Inc.  (an  oil  and  gas
exploration  company), which he founded in  1980.  From  1978  to
1980,  Mr.  Carter was Vice President of oil and gas lease  sales
for  Reserve  Energy  Corporation (an  oil  and  gas  exploration
company).  From 1974 to 1978, he served as a marketing consultant
to  Forward Products, Inc. (a petrochemical company). Mr.  Carter
was Executive Vice President of Blasco Industries (a chemical and
textile  manufacturer) from 1970 to 1974. He served  as  a  sales
representative  and  sales manager for  Olin  Mathieson  Chemical
Corporation (a petrochemical, pulp and paper company)  from  1965
to  1970.  From  1960 to 1965, he was a sales representative  for
Inland,  Mead  Paper Company in Atlanta. Mr. Carter attended  the
University of Georgia.  Mr. Carter is married to Janice Carter.

     Darol  S.  Lindloff  was  appointed  President  of  PEII  in
February 1997. Prior thereto, he served as Senior Vice President,
project Development of PEII from January 1996. He served as  Vice
President  of  PEII  from January 1993 to  January  1996  in  the
capacities  of  Business  Development,  Technical  Director   and
project Development. Mr. Lindloff served as Marketing Manager for
PEC  from October 1989 until January 1993. From December 1987  to
October  1989,  Mr.  Lindloff established a  regional  office  in
Dallas   for   Southwest  Research  Institute  (a  research   and
development  company)  and  served  as  Regional  Director.  From
January  1986  to  December  1987, Mr.  Lindloff  worked  on  the
development of cogeneration facilities for Hawker Siddeley  Power
Engineering,  Inc. (a British engineering company).  During  1984
and 1985, he worked in the development of cogeneration facilities
for  Central  & Southwest Corporation's subsidiary, C&SW  Energy,
Inc.   (an   energy   company).  Mr.  Lindloff   graduated   from
Southwestern  University with a Bachelor  of  Science  degree  in
organic chemistry.

     Janice   Carter  has  been  the  Executive  Vice  President,
Secretary, Treasurer and a Director PEII since January  1995  and
has  served  in such capacities with PEC since its  inception  in
1982.  From  1975  to  1980, Mrs. Carter was  office  manager  of
Reserve Energy Corporation. From 1969 to 1972, Mrs. Carter worked
for  University  Computing, and from 1962 to  1968  she  directed
administration   for   the   engineering   department   of   Otis
Engineering, a division of Halliburton International. Mrs. Carter
also  serves as Vice President and Secretary/Treasurer of  Robert
Carter   Oil  &  Gas,  Inc.  Mrs.  Carter  attended  Texas   Tech
University. Mrs. Carter is married to Robert W. Carter.

     William  C. Nordlund has served as Executive Vice President,
Finance of PEII since February 1997. Prior thereto, he served  as
Senior  Vice  President and General Counsel of PEII since  August
1996, as Vice President and General Counsel of PEII since January
1995  and  of  PEC since January 1994. Mr. Nordlund  was  General
Counsel  of  PEC from April 1993 to January 1994. He  was  Senior
Vice President and General Counsel from August 1992 to April 1993
and  Vice  President and General Counsel from September  1991  to
August  1992  for  The  Oxford Energy  Company,  a  developer  of
independent  power facilities. From July 1990 to September  1991,
Mr.  Nordlund was an attorney with Constellation Holdings,  Inc.,
an  affiliate of Baltimore Gas & Electric Company which developed
independent  power  facilities. Prior to  July  1990,  he  was  a
partner  in  the  law firm of Winston & Strawn  in  Chicago.  Mr.
Nordlund  earned  a  Bachelor  of  Arts  degree  from  Vanderbilt
University,  a  Juris Doctor degree from Duke  University  and  a
Master of Management degree from the J.L. Kellogg Graduate School
of Business at Northwestern University.

     Ralph  T.  Killian served as Senior Vice President  of  PEII
since  May  1994,  and  has  been Executive  Vice  President  and
Operations  Manager  since March 1998.  Mr. Killian  has  overall
responsibility for asset management which includes  operations  &
maintenance,   fuel,  procurement  and  management,   and   power
marketing  for  facilities.   Mr.  Killian  also  leads  a  group
responsible  for  development of PEII's merchant  plants  in  the
United States.  Between November 1989 and April 1994, Mr. Killian
served as Vice President of Natural Resources for PEC.  From 1988
to   1989,  he  was  Senior  Vice  President  of  Texas   Eastern
Corporation  (an  energy company).  From 1969 to  1988,  he  held
various   natural   gas  marketing  and  engineering   management
positions  with  Amoco Corporation (an energy company)  including
Regional  Natural  Gas  Marketing Manager  for  Amoco  Production
Company's  Denver  region.   Mr.  Killian  graduated   from   the
University  of  Florida  with a Bachelor  of  Science  degree  in
chemical engineering.

     Steven  W.  Crain  has  served  as  Senior  Vice  President,
Business  Development  of PEII since February  1997.   Mr.  Crain
joined  Panda in 1996, originally serving as Director of Business
Development for the Asian sub-continent.  Prior to joining Panda,
Mr.  Crain  served  for over 18 years in various  capacities  for
Eagleton  Engineering  Company, an engineering  and  construction
management  firm  specializing in  oil  and  gas  processing  and
transportation.   Mr.  Crain  served  as  a  Vice  President  for
Business  Development and member of the Board of  Directors  from
1987  and 1995.  He also served as the resident Managing Director
of the Eagleton Saudi Arabia office for six years.   From 1974 to
1977,  Mr.  Crain  served as a Design Engineer for  Stearns-Roger
(now  Raytheon)  where he was involved in  the  design  of  coal-
burning  power  plants.  Mr. Crain earned a Bachelor  of  Science
Degree in Electrical Engineering from Rice University, and  is  a
registered professional engineer.

     Ted  C.  Hollon has served as Senior Vice President, Project
Development  of  PEII since August 1997.  Prior  to  his  current
position,  he served as Vice President of Construction  for  PEII
since  March 1995.  Mr. Hollon served as project manager for  the
Company's 230 megawatt Panda-Brandywine Facility from March  1993
until  March 1995.  Mr. Hollon previously held various  positions
with several prominent international engineering and construction
companies  such  as Brown & Root International and  CSR  Serrine.
Mr.  Hollon  has  over  25  years of  international  construction
experience.   He earned a Bachelor of Science degree  from  Texas
A&M University.

     L. Stephen Rizzieri has served as Vice President and General
Counsel  of  PEII  since February 1997 and has been  Senior  Vice
President and General Counsel since March 1998. Prior thereto, he
served  as  Deputy General Counsel since April  1996.  From  1993
until he joined PEII, he was Assistant General Counsel of ENSERCH
Development   Corporation,  the  independent  power   development
affiliate of ENSERCH Corporation. From 1985 to 1993, Mr. Rizzieri
served in various capacities with Sunshine Mining Company and its
affiliated companies, most recently as Assistant General  Counsel
and Secretary. From 1981 to 1985, he served in various capacities
with Woods Petroleum Corporation (which was purchased by Sunshine
Mining  Company  in 1985) and its affiliates,  most  recently  as
President of Woods Securities Corporation. In 1980, Mr.  Rizzieri
served as Deputy General Counsel - Enforcement Division, Oklahoma
Securities  Commission. Mr. Rizzieri earned a  Bachelor  of  Arts
degree  from  the State University of New York at Geneseo  and  a
Juris Doctor degree from the University of Oklahoma.

     Brian  G. Trueblood became the Independent Director  of  the
Company  in  March 1997. He has served since February  1997,  and
also from September 1989 through August 1994, as a senior partner
in  the  Dallas  office  of  Lucas Associates  (an  Atlanta-based
executive  search firm). From August 1994 to February  1997,  Mr.
Trueblood  served  as  Vice President of TNS  Partners,  Inc.  (a
Dallas-based  retained  executive  search  firm).  Mr.  Trueblood
received a Bachelor of Science degree in general engineering from
the United States Military Academy. Mr. Trueblood also serves  as
the Independent Director of various other subsidiaries of PEII.

Item 11.  Executive Compensation and Benefits

     No  cash,  stock options or other non-cash compensation  has
been paid or is proposed to be paid in the current calendar year,
or  in the last completed fiscal year, to any of the officers and
directors  listed under "Management" for their  services  to  the
Company. Mr. Trueblood is currently paid $1,000 annually  by  the
Company for serving as an Independent Director thereof.

Item  12.   Security Ownership of Certain Beneficial  Owners  and
Management

      Panda Interfunding Corporation owned beneficially, at March
25,   1998,  one  hundred  percent  (100%)  of  the  issued   and
outstanding shares of the Company's common stock, $.01 par value,
which  is the only security entitled to vote for the election  of
the  Company's directors.  No director or officer of the  Company
owns any shares of any class of the Company's equity securities.

Item 13.  Certain Relationships and Related Transactions

      Since the date of incorporation of the Company, there  have
been  no  transactions, and there currently are not any  proposed
transactions,  or series of similar transactions,  to  which  the
Company  (or any of it's subsidiaries) was or is to be party,  in
which the amount involved exceeds $60,000 and in which a director
or  executive  officer of the Company, has a  material  interest.
Additionally, there are no business relationships that  currently
exist  or  have  existed since the date of incorporation  of  the
Company, involving the Company, on the one hand, and any director
of  the Company (or an affiliate thereof), on the other hand.  No
director or executive officer of the Company has been indebted to
the Company, since the date of incorporation of the Company.

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

     (a)  The  following documents are filed as a  part  of  this
          Annual Report on Form 10-K:

     1.   Consolidated Financial Statements.

      See  Index to Financial Statements and Financial  Statement
Schedules on page F-1 hereof.

     2.   Consolidated Financial Statement Schedules.

      See  Index to Financial Statements and Financial  Statement
Schedules on page F-1 hereof.

      Schedules other than those listed on the accompanying Index
to  Financial  Statements and Financial Statement  Schedules  are
omitted  for  the reason that they are either not  required,  not
applicable  or  the  required information   is  included  in  the
consolidated financial statements or notes thereto.

     3.   Exhibits.

Exhibit
Number    Exhibit Description

3.01      Certificate of Incorporation of Panda Interholding
          Corporation. (1)

3.02      Bylaws of Panda Interholding Corporation. (1)

4.01      Trust  Indenture  dated  July  31,  1996,  among  Panda
          Funding Corporation, Panda Interfunding Corporation and
          Bankers Trust Company, as Trustee. (1)

4.02      First  Supplemental Indenture to Trust Indenture, dated
          July  31, 1996, among Panda Funding Corporation,  Panda
          Interfunding Corporation and Bankers Trust Company,  as
          Trustee. (1)

4.03      Second Supplemental Indenture to Trust Indenture, dated
          January 6, 1997, among Panda Funding Corporation, Panda
          Interfunding Corporation and Bankers Trust Company,  as
          Trustee. (1)

4.04      Form of 11-5/8% Pooled Project Bonds, Series A due 2012
          of Panda Funding Corporation. (1)

4.05      Form  of  11-5/8% Pooled Project Bonds, Series A-1  due
          2012 of Panda Funding Corporation. (1)

4.06      Registration  Rights Agreement, dated  July  31,  1996,
          among  Panda  Funding Corporation,  Panda  Interfunding
          Corporation and Jefferies & Company Inc. (1)

4.07      Collateral Agency Agreement, dated July 31, 1996, among
          Panda    Interfunding   Corporation,   Panda    Funding
          Corporation  and Bankers Trust Company, as Trustee  and
          Collateral Agent. (1)

4.08      Subrogation and Contribution Agreement, dated July  31,
          1996,   among  Panda  Interfunding  Corporation,  Panda
          Funding  Corporation and Panda Interholding Corporation
          and  each  PIC U.S. Entity that is a signatory thereto.
          (1)

4.09      Guaranty  Agreement  (PIC  U.S.  Entity  Subsidiaries),
          dated  July  31, 1996 by Panda Interholding Corporation
          in  favor of Bankers Trust Company, as Collateral Agent
          for the benefit of the Secured Parties. (1)

10.01     PIC  Loan Agreement, dated July 31, 1996, between Panda
          Funding  Corporation, as Lender, and Panda Interfunding
          Corporation, as Borrower. (1)

10.02     Loan  Agreement,  dated July 31,  1996,  between  Panda
          Interfunding  Corporation, as Lender, and Panda  Cayman
          Interfunding Company, as Borrower. (1)

10.03     Promissory    Note   issued   by   Panda   Interfunding
          Corporation   on  July  31,  1996  to   Panda   Funding
          Corporation  in  the  original  principal   amount   of
          $105,525,000,  endorsed to Bankers  Trust  Company,  as
          Collateral Agent. (1)

10.04     Security Agreement, dated July 31, 1996, between  Panda
          Interfunding Corporation and Bankers Trust Company,  as
          Collateral Agent. (1)

10.05     Security Agreement, dated July 31, 1996, between  Panda
          Funding  Corporation  and  Bankers  Trust  Company,  as
          Collateral Agent. (1)

10.06     Security Agreement, dated July 31, 1996, between  Panda
          Cayman  Interfunding  Company,  as  Debtor,  and  Panda
          Interfunding Corporation, as Secured Party. (1)

10.07     Stock  Pledge Agreement (Panda Interfunding Corporation
          Stock),  dated  July  31, 1996,  between  Panda  Energy
          Corporation  and Bankers Trust Company,  as  Collateral
          Agent. (1)

10.08     Stock  Pledge Agreement (Panda Funding Corporation  and
          PIC  Entity Stock), dated July 31, 1996, between  Panda
          Interfunding Corporation and Bankers Trust Company,  as
          Collateral Agent. (1)

10.09     Trust  Indenture,  dated July 31,  1996,  among  Panda-
          Rosemary Funding Corporation, Panda-Rosemary, L.P.  and
          Fleet National Bank, as Trustee. (1)

10.10     First  Supplemental Indenture to Trust Indenture, dated
          July    31,   1996,   among   Panda-Rosemary    Funding
          Corporation,  Panda-Rosemary, L.P. and  Fleet  National
          Bank, as Trustee. (1)

10.10.1   Second Supplemental Indenture to Trust Indenture, dated
          January   15,   1997,   among  Panda-Rosemary   Funding
          Corporation,  Panda-Rosemary, L.P. and  Fleet  National
          Bank, as Trustee. (1)

10.11     Form  of 8-5/8% First Mortgage Bonds due 2016 of Panda-
          Rosemary Funding Corporation. (1)

10.12     Deposit  and  Disbursement Agreement,  dated  July  31,
          1996,  among Panda-Rosemary Funding Corporation, Panda-
          Rosemary,  L.P.,  Fleet National  Bank,  as  Collateral
          Agent,  and  Fleet National Bank, as Depositary  Agent.
          (1)

10.13     Collateral  Agency and Intercreditor  Agreement,  dated
          July   31,   1996,   among   Panda   Rosemary   Funding
          Corporation, Panda-Rosemary, L.P., The L/C Issuer,  The
          Trustee  Under  The  Trust  Indenture,  The  Depositary
          Agent,  The  Collateral  Agent and  The  Other  Secured
          Parties, all as named therein. (1)

10.14     Deed  of  Trust and Security Agreement, dated July  31,
          1996,  by Panda-Rosemary, L.P., Grantor, Ross J. Smyth,
          Trustee, and Fleet National Bank, as Collateral  Agent,
          the Beneficiary. (1)

10.15     Security  Agreement,  dated July 31,  1996,  by  Panda-
          Rosemary,  L.P. to Fleet National Bank,  as  Collateral
          Agent. (1)

10.16     Security  Agreement,  dated July 31,  1996,  by  Panda-
          Rosemary Funding Corporation to Fleet National Bank, as
          Collateral Agent. (1)

10.17     General  Partner  Pledge and Security Agreement,  dated
          July  31, 1996, by Panda-Rosemary Corporation to  Fleet
          National Bank, as Collateral Agent. (1)

10.18     Limited  Partner  Pledge and Security Agreement,  dated
          July  31, 1996, by PRC II Corporation to Fleet National
          Bank, as Collateral Agent. (1)

10.19     Stock  Pledge  and Security Agreement, dated  July  31,
          1996,   by  Panda  Interholding  Corporation  to  Fleet
          National Bank, as Collateral Agent. (1)

10.20     Stock  Pledge  and Security Agreement, dated  July  31,
          1996,  by Panda-Rosemary, L.P. to Fleet National  Bank,
          as Collateral Agent. (1)

10.21     Partnership  Guaranty, dated July 31, 1996,  by  Panda-
          Rosemary,  L.P.  in  favor of Fleet National  Bank,  as
          Trustee. (1)

10.22     Reimbursement  Agreement, dated July 31, 1996,  between
          Panda-Rosemary,     L.P.,    Panda-Rosemary     Funding
          Corporation  and Bayerische Vereinsbank  AG,  New  York
          Branch. (1)

10.23     Irrevocable  Direct  Pay Letter  of  Credit  issued  by
          Bayerische Vereinsbank AG. (1)

10.24     Construction Loan Agreement and Lease Commitment, dated
          March  30,  1996,  between Panda-Brandywine,  L.P.  and
          General Electric Capital Corporation. (1)

10.24.1   Participation Agreement, dated December 18, 1996, among
          Panda-Brandywine,  L.P., Panda Brandywine  Corporation,
          General  Electric Capital Corporation,  Fleet  National
          Bank,  First  Security Bank, National Association,  and
          Credit Suisse. (1)

10.24.2   Letter   of   Credit  Reimbursement  Agreement,   dated
          December 18, 1996, among Panda-Brandywine, L.P.,  Panda
          Brandywine  Corporation  and General  Electric  Capital
          Corporation. (1)

10.24.3   Equity  Loan Facility Letter Agreement, dated  December
          18,  1996,  among  Panda Brandywine Corporation,  Panda
          Energy   Corporation  and  General   Electric   Capital
          Corporation. (1)

10.25     Bill  of  Sale and Severance Agreement, dated  December
          30,  1996,  between Panda-Brandywine, L.P., as  Seller,
          and Fleet National Bank, Owner Trustee, as Buyer. (1)

10.26     Facility Lease, dated December 18, 1996, between  Fleet
          National  Bank, as Owner Trustee, and Panda-Brandywine,
          L.P. (1)

10.27     Steam  Lease,  dated as of December 18,  1996,  between
          Panda-Brandywine,  L.P. and Brandywine  Water  Company.
          (1)

10.28     Amended and Restated Security Deposit Agreement,  dated
          December 18, 1996, among Panda-Brandywine, L.P.,  Panda
          Brandywine   Corporation,  General   Electric   Capital
          Corporation,  Fleet National Bank,  Credit  Suisse  and
          First Security Bank, National Association. (1)

10.28.1   First   Amendment  to  Amended  and  Restated  Security
          Deposit Agreement, dated February 21, 1997, among Panda
          Brandywine, L.P., General Electric Capital Corporation,
          Fleet  National Bank, Credit Suisse and First  Security
          Bank, National Association. (1)

10.29     Amended   and  Restated  Deed  of  Trust  and  Security
          Agreement,   dated  December  18,   1996,   by   Panda-
          Brandywine,  L.P.  to Chicago Title Insurance  Company,
          Trustee  for  the  benefit of Fleet National  Bank,  as
          Security Agent, Beneficiary. (1)

10.30     Amended  and Restated Steam Lessee Security  Agreement,
          dated December 18, 1996, by Brandywine Water Company in
          favor of Fleet National Bank, as Security Agent. (1)

10.31     Amended and Restated Security Agreement, dated December
          18,  1996, by Panda-Brandywine, L.P. in favor of  Fleet
          National Bank, as Security Agent. (1)

10.32     Amended  and  Restated Trust Agreement, dated  December
          18, 1996, between General Electric Capital Corporation,
          as Owner Participant, and Fleet National Bank, as Owner
          Trustee. (1)

10.33     Amended  and Restated General Partner Pledge Agreement,
          dated   December   18,   1996,  by   Panda   Brandywine
          Corporation to Fleet National Bank, as Security  Agent.
          (1)

10.34     Amended  and Restated Limited Partner Pledge Agreement,
          dated  December 18, 1996,  by Panda Energy  Corporation
          to Fleet National Bank, as Security Agent. (1)

10.35     Amended  and  Restated  Stock Pledge  Agreement,  dated
          December 18, 1996, by Panda Interholding Corporation to
          Fleet National Bank, as Security Agent. (1)

10.36     Assumption Agreement and Release, dated July 31,  1996,
          by  Panda Interholding Corporation in favor of  General
          Electric  Capital Corporation and Fleet National  Bank.
          (1)

10.37     Power  Purchase and Operating Agreement, dated  January
          24, 1989, between Panda Energy Corporation and Virginia
          Electric and Power Company. (1)

10.38     Amendment   No.  1  to  Power  Purchase  and  Operating
          Agreement, dated October 24, 1989, between Panda Energy
          Corporation  and Virginia Electric and  Power  Company.
          (1)

10.39     Amendment   No.  2  to  Power  Purchase  and  Operating
          Agreement, dated July 30, 1993, between Panda-Rosemary,
          L.P. and Virginia Electric and Power Company. (1)

10.40     Fuel  Supply  Management Agreement, dated  October  10,
          1990,  between Panda-Rosemary Corporation  and  Natural
          Gas Clearinghouse. (1)

10.41     Amendment  No.  1 to Fuel Supply Management  Agreement,
          dated March 5, 1991, between Panda-Rosemary Corporation
          and Natural Gas Clearinghouse. (1)

10.42     Gas  Purchase  Contract, dated April 12, 1990,  between
          Panda-Rosemary    Corporation    and    Natural     Gas
          Clearinghouse. (1)

10.43     Amendment  of  Gas  Purchase  Contract  between  Panda-
          Rosemary Corporation and Natural Gas Clearinghouse. (1)

10.44     Pipeline Operating Agreement, dated February 14,  1990,
          between   Panda   Energy  Corporation,   Panda-Rosemary
          Corporation and North Carolina Natural Gas Corporation.
          (1)

10.45     Amendment No. 1 to Pipeline Operating Agreement,  dated
          May  7,  1990, between Panda Energy Corporation, Panda-
          Rosemary  Corporation  and North Carolina  Natural  Gas
          Corporation. (1)

10.46     Assignment  Agreement,  dated June  15,  1990,  between
          Panda    Energy    Corporation    and    Panda-Rosemary
          Corporation. (1)

10.47     Amendment No. 2 to Pipeline Operating Agreement,  dated
          November  19,  1991,  among Panda  Energy  Corporation,
          Panda-Rosemary  Corporation and North Carolina  Natural
          Gas Corporation. (1)

10.48     Real  Property Lease and Easement Agreement, dated June
          9,  1989,  between The Bibb Company and  Panda-Rosemary
          Corporation. (1)

10.49     First  Amendment  to Real Property Lease  and  Easement
          Agreement,  dated  October 1, 1989,  between  The  Bibb
          Company and Panda-Rosemary Corporation. (1)

10.50     Second  Amendment to Real Property Lease  and  Easement
          Agreement,  dated  January 31, 1990, between  The  Bibb
          Company and Panda-Rosemary Corporation. (1)

10.51     Leasehold  and Real Property Assignment and  Assumption
          Agreement,  dated  January  6,  1992,  between   Panda-
          Rosemary Corporation and Panda-Rosemary, L.P. (1)

10.52     Third  Amendment  to Real Property Lease  and  Easement
          Agreement,  dated  March  15, 1996,  between  The  Bibb
          Company and Panda-Rosemary, L.P. (1)

10.53     Cogeneration Energy Supply Agreement, dated January 12,
          1989,  between Panda Energy Corporation  and  The  Bibb
          Company. (1)

10.54     First   Amendment   to   Cogeneration   Energy   Supply
          Agreement, dated October 1, 1989, between Panda  Energy
          Corporation,  Panda-Rosemary Corporation and  The  Bibb
          Company. (1)

10.55     Service   Agreement,  dated  July  26,  1996,   between
          Transcontinental Gas Pipe Line Corporation  and  Panda-
          Rosemary, L.P. (1)

10.55.1   Form  of  Amendment  to  Service  Agreement,  effective
          January 1, 1997, between Transcontinental Gas Pipe Line
          Corporation and Panda-Rosemary, L.P. (1)

10.56     Service  Agreement  Applicable  to  Transportation   of
          Natural  Gas Under Rate Schedule FT, dated  August  20,
          1996,  between CNG Transmission Corporation and  Panda-
          Rosemary, L.P. (1)

10.57     Gas  Transportation Agreement, dated  August  1,  1996,
          between  Texas Gas Transmission Corporation and  Panda-
          Rosemary, L.P. (1)

10.58     Assignment  and  Assumption Agreement,  dated  May  15,
          1989,  between  Panda  Energy  Corporation  and  Panda-
          Rosemary Corporation. (1)

10.59     Bill  of  Sale and Assignment and Assumption Agreement,
          dated   January   6,   1992,   between   Panda-Rosemary
          Corporation and Panda-Rosemary, L.P. (1)

10.60     Assignment  and Assumption Agreement, dated January  6,
          1992,  between  Panda  Energy  Corporation  and  Panda-
          Rosemary Corporation. (1)

10.61     Power Purchase Agreement, dated August 9, 1991, between
          Panda-Brandywine,  L.P.  and  Potomac  Electric   Power
          Company. (1)

10.62     First  Amendment  to  Power Purchase  Agreement,  dated
          September 16, 1994, between Panda-Brandywine, L.P.  and
          Potomac Electric Power Company. (1)

10.62.1   Present  Assignment of Power Purchase Agreement,  dated
          December  18, 1996, by Panda-Brandywine, L.P. to  Fleet
          National  Bank,  as Owner Trustee, for the  benefit  of
          General   Electric   Capital  Corporation,   as   Owner
          Participant. (1)

10.62.2   Amended  and  Restated  Consent  and  Agreement,  dated
          December   30,  1996,  among  Potomac  Electric   Power
          Company,  Panda-Brandywine, L.P., Fleet National  Bank,
          as  Security Agent and Owner Trustee, General  Electric
          Capital  Corporation, as the issuer of the  Letters  of
          Credit,  the  Interest Hedging Counterparty  and  Owner
          Participant,    First    Security    Bank,     National
          Association,  as Indenture Trustee, and Credit  Suisse,
          as Administrative Agent. (1)

10.63     Amended  and  Restated  Turnkey  Cogeneration  Facility
          Agreement,   dated  March  30,  1995,  between   Panda-
          Brandywine, L.P. and Raytheon Engineers & Constructors,
          Inc. (1)

10.64     Raytheon  Parent Guaranty, dated May 18, 1994,  between
          Raytheon Company and Panda-Brandywine, L.P. (1)

10.65     Steam  Sales  Agreement, dated March 30, 1995,  between
          Panda-Brandywine,  L.P. and Brandywine  Water  Company.
          (1)

10.66     Gas  Sales  Agreement, dated March  30,  1995,  between
          Cogen  Development Company and Panda  Brandywine,  L.P.
          (1)

10.67     Precedent  Agreement, dated February 25, 1994,  between
          Columbia  Gas  Transmission   Corporation  and   Panda-
          Brandywine, L.P. (1)

10.68     Amending  Agreement,  dated  March  24,  1995,  between
          Columbia   Gas  Transmission  Corporation  and   Panda-
          Brandywine, L.P. (1)

10.69     Amended and Restated FTS Service Agreement, dated March
          23, 1995, between Columbia Gas Transmission Corporation
          and Panda-Brandywine, L.P. (1)

10.70     FTS  Service  Agreement, dated of as  March  30,  1995,
          between  Cove Point LNG Limited Partnership and  Panda-
          Brandywine, L.P. (1)

10.71     Gas Transportation and Supply Agreement, dated November
          10, 1994, between Panda-Brandywine, L.P. and Washington
          Gas Light Company. (1)

10.72     Amended  and  Restated Site Lease, dated  December  18,
          1996, between Panda-Brandywine, L.P. and Fleet National
          Bank, as Owner Trustee. (1)

10.73     Amended and Restated Site Sublease, dated December  18,
          1996,  between Fleet National Bank,  Owner Trustee,  as
          Sublessor,  and Panda-Brandywine, L.P.,  as  Sublessee.
          (1)

10.74     Purchase Agreement, dated July 26, 1996, between  Panda
          Funding Corporation and Jefferies & Company, Inc. (1)

10.75     Additional  Projects  Contract, dated  July  31,  1996,
          among  Panda  Energy International, Inc., Panda  Energy
          Corporation, and Panda Interfunding Corporation. (1)

10.76     Non-Petition  Agreement, dated  July  31,  1996,  among
          Panda   Interfunding  Corporation,  Panda  Interholding
          Corporation,   Panda-Rosemary   Corporation,   PRC   II
          Corporation,  Panda-Rosemary  Funding  Corporation  and
          Panda-Rosemary, L.P. (1)

10.77     Non-Petition  Agreement, dated  July  31,  1996,  among
          Panda    Funding   Corporation,   Panda    Interholding
          Corporation, Panda Interfunding Corporation  and  Panda
          (Cayman) Interfunding Company. (1)

12.00     Computation of Ratio of Earnings to Fixed Charges. (2)

21.00     Subsidiaries of Registrant. (2)

24.00     Powers of Attorney, included on signature page hereof.(2)

27.00     Financial Data Schedule. (2)


(1)        Previously  filed  as an exhibit to  the  Registration
  Statement  on  Form S-1 (Registration No. 333-19445)  of  Panda
  Funding  Corporation, Panda Interfunding Corporation and  Panda
  Interholding  Corporation (affiliates of the  registrant),  and
  incorporated herein by reference.
 (2)      Filed herewith.

   (b) Reports on Form 8-K.  None.

     Supplemental Information to be Furnished With Reports  Filed
Pursuant  to Section 15(d) of the Act by Registrants  Which  Have
Not Registered Securities Pursuant to Section 12 of the Act.

       No  annual  report  or  proxy  statement  or  other  proxy
soliciting  material  was  sent  to  security  holders   of   the
registrant during the registrant's last fiscal year.



                 INDEX TO FINANCIAL STATEMENTS


Panda  Interholding  Corporation  and  Subsidiaries  Consolidated
Financial Statements:

  Independent Auditors' Report                             F-2

  Consolidated Balance Sheets as of December 31, 1996
    and 1997                                               F-3

  Consolidated Statements of Operations for the years
    ended December 31, 1995, 1996 and 1997                 F-5

  Consolidated Statements of Shareholder's Deficit for the
    years ended December 31, 1995, 1996 and 1997           F-6

  Consolidated Statements of Cash Flows for the years
    ended December 31, 1995, 1996 and 1997                 F-7

  Notes to Consolidated Financial Statements for the
    years ended December 31, 1995, 1996 and 1997           F-8

                               F-1



                  INDEPENDENT AUDITORS' REPORT




To the Board of Directors
of Panda Energy International, Inc.:

We  have audited the accompanying consolidated balance sheets  of
Panda  Interholding Corporation and subsidiaries (the  "Company")
as  of  December 31, 1996 and 1997, and the related  consolidated
statements  of operations, shareholder's deficit and  cash  flows
for  each  of  the three years in the period ended  December  31,
1997.    These   consolidated  financial   statements   are   the
responsibility of the Company's management. Our responsibility is
to  express an opinion on these consolidated financial statements
based on our audits.

We  conducted  our  audits in accordance with generally  accepted
auditing  standards.  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, such consolidated financial statements  present
fairly, in all material respects, the financial position  of  the
Company  at December 31, 1996 and 1997, and the results of  their
operations  and their cash flows for each of the three  years  in
the  period ended December 31, 1997, in conformity with generally
accepted accounting principles.




DELOITTE & TOUCHE LLP

Dallas, Texas
March 23, 1998

						F-2

                         PANDA INTERHOLDING CORPORATION
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1997

                                     ASSETS
<TABLE>
<CAPTION>
                                                                   1996             1997
                                                              -------------    -------------
<S>                                                           <C>              <C>
Current assets:
  Cash and cash equivalents ...............................   $     828,787    $   2,922,990
  Restricted cash - current ...............................       8,781,393        9,357,680
  Accounts receivable .....................................       9,402,685        8,098,231
  Fuel oil, spare parts and supplies ......................       7,913,777        6,264,549
  Other current assets ....................................         164,905          257,877
                                                              -------------    -------------
    Total current assets ..................................      27,091,547       26,901,327

Plant and equipment:
  Electric generating facilities ..........................     288,716,711      291,515,328
  Furniture and fixtures ..................................         494,418          533,663
  Less: accumulated depreciation ..........................     (26,539,539)     (38,114,058)
                                                              -------------    -------------
    Total plant and equipment, net ........................     262,671,590      253,934,933

Restricted cash - debt service reserves and escrow deposits      17,357,524       20,602,976

Debt issuance costs, net of accumulated
  amortization of $73,986 and $522,489 respectively .......       3,680,902        3,333,436
                                                              -------------    -------------
                                                              $ 310,801,563    $ 304,772,672
                                                              =============    =============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>
                         PANDA INTERHOLDING CORPORATION
                                AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1996 AND 1997

                      LIABILITIES AND SHAREHOLDER'S DEFICIT
<TABLE>
<CAPTION>
                                                                1996             1997
                                                           -------------    -------------
<S>                                                        <C>              <C>
Current liabilities:
  Accounts payable and accrued expenses:
    Construction costs .................................   $     660,167    $        --
    Interest and letter of credit fees .................       1,186,191        1,126,876
    Operating expenses and other .......................       6,935,068        4,879,522
  Current portion of long-term debt ....................       5,501,823        5,816,974
                                                           -------------    -------------
      Total current liabilities ........................      14,283,249       11,823,372

Deferred revenue .......................................            --          8,942,868

Long term debt, less current portion ...................     104,521,718       98,704,745

Capital lease obligation ...............................     217,488,645      231,278,528

Advances from parent ...................................      15,387,447        5,009,539

Commitments and contingencies (Note 8)

Shareholder's deficit:
  Common stock, $.01 par value; 1,000 shares authorized,
     issued and outstanding ............................              10               10
  Accumulated deficit ..................................     (40,879,506)     (50,986,390)
                                                           -------------    -------------
                                                             (40,879,496)     (50,986,380)
                                                           -------------    -------------
                                                           $ 310,801,563    $ 304,772,672
                                                           =============    =============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                         PANDA INTERHOLDING CORPORATION
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
                                                                                     1995               1996               1997
                                                                                 ------------       ------------       ------------
<S>                                                                              <C>                <C>                <C>
REVENUE:
  Electric capacity and energy sales .....................................      $ 29,858,475       $ 32,273,736       $ 65,004,373
  Steam and chilled water sales ..........................................           473,040            502,757            623,934
  Interest income ........................................................           895,268          1,227,669          1,527,650
                                                                                 ------------       ------------       ------------
                                                                                   31,226,783         34,004,162         67,155,957
                                                                                 ------------       ------------       ------------

EXPENSES:
  Plant operating expenses ...............................................         9,347,707         12,050,495         26,245,012
  Project development and administrative .................................         1,821,376          3,533,348          8,083,348
  Interest expense and letter of credit fees .............................        11,715,929         14,302,645         31,011,459
  Depreciation ...........................................................         4,209,453          5,531,502         11,574,519
  Amortization of debt issuance costs ....................................           554,311            402,770            348,503
  Amortization of partnership formation costs ............................           533,116            533,100               --
                                                                                 ------------       ------------       ------------
                                                                                   28,181,892         36,353,860         77,262,841
                                                                                 ------------       ------------       ------------
INCOME (LOSS) BEFORE MINORITY INTEREST AND EXTRAORDINARY ITEM ............         3,044,891         (2,349,698)       (10,106,884)

  Minority interest ......................................................        (5,047,580)        (2,405,160)              --
                                                                                 ------------       ------------       ------------
LOSS BEFORE EXTRAORDINARY ITEM ...........................................        (2,002,689)        (4,754,858)       (10,106,884)

  Extraordinary item - loss on early extinguishment of debt ..............              --          (21,336,550)              --
                                                                                 ------------       ------------       ------------
NET LOSS .................................................................      $ (2,002,689)      $(26,091,408)      $(10,106,884)
                                                                                 ============       ============       ============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                         PANDA INTERHOLDING CORPORATION
                                AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF SHAREHOLDER'S DEFICIT
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
                                                                           Common Stock                                   Total
                                                                   -----------------------------     Accumulated       Shareholder's
                                                                      Shares           Amount           Deficit          Deficit
                                                                   ------------     ------------     ------------      ------------
<S>                                                                <C>              <C>              <C>               <C>
BALANCE, January 1, 1995 .....................................            1,000     $         10     $(12,785,409)     $(12,785,399)

  Net loss ...................................................             --               --         (2,002,689)       (2,002,689)
                                                                   ------------     ------------     ------------      ------------
BALANCE,  December 31, 1995 ..................................            1,000               10      (14,788,098)      (14,788,088)

  Net loss ...................................................             --               --        (26,091,408)      (26,091,408)
                                                                   ------------     ------------     ------------      ------------
BALANCE,  December 31, 1996 ..................................            1,000               10      (40,879,506)      (40,879,496)

  Net loss ...................................................             --               --        (10,106,884)      (10,106,884)
                                                                   ------------     ------------     ------------      ------------
BALANCE,  December 31, 1997 ..................................            1,000     $         10     $(50,986,390)     $(50,986,380)
                                                                   ============     ============     ============      ============
</TABLE>
          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                         PANDA INTERHOLDING CORPORATION
                                AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
<TABLE>
<CAPTION>
                                                                                    1995                1996               1997
                                                                               -------------       -------------       ------------
<S>                                                                            <C>                 <C>                 <C>
OPERATING ACTIVITIES:
  Net loss .............................................................      $  (2,002,689)      $ (26,091,408)      $(10,106,884)
  Adjustments to reconcile net loss to
    net cash provided by operating activities:
      Loss on early extinguishment of debt .............................               --            21,336,550               --
      Minority interest ................................................          5,047,580           2,405,160               --
      Depreciation .....................................................          4,209,453           5,531,502         11,574,519
      Amortization of debt issuance costs ..............................            554,311             402,770            348,503
      Amortization of partnership formation costs ......................            533,116             533,100               --
      Amortization of loan discount and deferred interest
        interest on capital lease obligation ...........................            124,176             391,491         21,621,411
  Changes in assets and liabilities:
    Accounts receivable ................................................            460,319          (4,202,686)         1,304,454
    Fuel oil, spare parts and supplies .................................            261,516          (4,829,609)         1,649,228
    Other current assets ...............................................             26,484            (152,241)           (92,972)
    Accounts payable and accrued expenses ..............................            (81,728)          4,361,851         (2,114,862)
                                                                               -------------       -------------       ------------
      Net cash provided (used) by operating activities .................          9,132,538            (313,520)        24,183,397
                                                                               -------------       -------------       ------------
INVESTING ACTIVITIES:
  Restricted cash - current ............................................            695,684          (6,905,251)          (576,287)
  Additions to property, plant and equipment ...........................       (122,001,950)        (60,179,401)        (3,498,029)
  Acquisition of minority interest .....................................               --           (34,256,423)              --
  Restricted cash - debt service reserves and escrow deposits ..........           (747,655)         (7,158,576)        (3,245,452)
                                                                               -------------       -------------       ------------
      Net cash provided (used) by investing activities .................       (122,053,921)       (108,499,651)        (7,319,768)
                                                                               -------------       -------------       ------------
FINANCING ACTIVITIES:
  Distributions to minority interest owner .............................         (3,800,279)         (1,152,113)              --
  Advances (to) from parent ............................................        (15,746,235)         47,651,208        (10,377,908)
  Deferred revenue .....................................................               --                  --            8,942,868
  Proceeds from long term debt .........................................        147,541,291         194,152,926               --
  Repayment of long term debt ..........................................        (17,500,000)       (128,415,271)        (5,501,822)
  Repayment of capital lease obligation ................................               --                  --           (7,831,527)
  Debt issuance costs ..................................................           (334,391)         (3,754,888)            (1,037)
                                                                               -------------       -------------       ------------
      Net cash provided (used) by financing activities .................        110,160,386         108,481,862        (14,769,426)
                                                                               -------------       -------------       ------------
Increase (decrease) in cash and cash equivalents .......................         (2,760,997)           (331,309)         2,094,203

Cash and cash equivalents, beginning of period .........................          3,921,093           1,160,096            828,787
                                                                               -------------       -------------       ------------
Cash and cash equivalents, end of period ...............................      $   1,160,096       $     828,787       $  2,922,990
                                                                               =============       =============       ============
SUPPLEMENTAL CASH FLOW INFORMATION:

  Interest paid, net of amounts capitalized ............................      $  11,799,297       $  15,656,801       $ 31,070,774
</TABLE>
          See accompanying notes to consolidated financial statements.

                                     F-7


         PANDA INTERHOLDING CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
      For the Years Ended December 31, 1995, 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  (see Note 5) 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  (see  Note  5).   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  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 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.  Any differences from those estimates are recorded  in
the period in which they are identified.

      Cash  --  Included in cash and cash equivalents are  highly
liquid  investments with original maturities of three  months  or
less.

       Restricted  Cash  -  Current  --  Restricted  cash-current
represents  escrowed  cash which may be  used  to  pay  operating
expenses  and  make debt payments and distributions  to  partners
pursuant to the trust indenture agreements.

      Restricted Cash - Debt Service Reserves and Escrow Deposits
--   Debt service reserves and escrow deposits include cash  held
by the bank to pay debt service and capital improvements pursuant
to the trust indenture agreements.

      Fuel  Oil, Spare Parts and Supplies --  These items include
fuel  oil  stored  on-site and various spare parts  and  supplies
necessary  for  plant maintenance. The items are valued  at  cost
using  the  weighted average method, and are expensed,  as  plant
operating expenses, when used.

      Plant and Equipment --  Electric generating facility assets
are  recorded  at  cost and depreciated using  the  straight-line
method  over the estimated useful lives of the assets,  generally
twenty-five  years. Depreciation of office furniture,  equipment,
and  leasehold  improvements is provided using the  straight-line
method  over the estimated useful lives of the assets,  generally
three  to five years. Costs, including interest on funds borrowed
to  finance  the construction of facilities, related to  projects
under  construction are capitalized as construction in  progress.
Construction  in  progress balances are transferred  to  electric
generating  facilities  when  the  assets  are  ready  for  their
intended use. Capitalized interest was $5,793,296 and $11,055,172
during 1995 and 1996, respectively.   No interest was capitalized
in  1997.  Maintenance and repair costs are charged to expense as
incurred. Other projects currently under development by PEII  may
be  transferred  to  the Company at PEII's historical  cost  when
construction  financing has been obtained or when  the  completed
projects have commenced commercial operations, subject to certain
limitations in the Company's indentures (see Note 6).

     Debt Issuance Costs --  The costs related to the issuance of
debt  are  capitalized and amortized using the effective interest
method over the term of the related debt.

      Partnership  Formation Costs --  The costs related  to  the
formation of Panda-Rosemary were capitalized and amortized over a
five year period ended December 31, 1996.

      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.

      Environmental Matters --  The operations of the Company are
subject to federal, state and local laws and regulations relating
to  protection of the environment. Although the Company  believes
that   its   operations   are  in  compliance   with   applicable
environmental   regulation,  risks  of   additional   costs   and
liabilities  are inherent in cogeneration operations,  and  there
can  be no assurance that significant costs and liabilities  will
not  be incurred by the Company.  Management is not aware of  any
contingent  liabilities  that currently  exist  with  respect  to
environmental matters.

      Environmental  expenditures are expensed or capitalized  as
appropriate.  Expenditures that relate to an  existing  condition
caused by past operations, and which do not contribute to current
or  future  revenue  generation, are  expensed.  Liabilities  are
recorded  if  environmental assessments and/or  remedial  efforts
become probable, and the costs reasonably estimable.

      Revenue Recognition --  Revenue generated from the sale  of
electric  capacity  and energy from the Rosemary  and  Brandywine
projects is recognized based on the amount billed under the power
purchase  agreements.  The revenue generated  from  the  sale  of
electric  capacity  and  energy  from  other  projects  will   be
recognized based on the lesser of the amount billable  under  the
power  purchase agreement or an amount determined by  the  annual
kilowatts  made  available multiplied by  the  estimated  average
revenue  per  kilowatt  over  the  term  of  the  power  purchase
agreement.  Revenue from the sale of steam and chilled  water  is
recognized based on the output delivered at rates specified under
contract terms.

      Income Taxes --  The Company records income taxes according
to   Statement   of  Financial  Accounting  Standards   No.   109
"Accounting for Income Taxes" (SFAS 109) which requires  deferred
tax  liabilities  or assets to be recognized for the  anticipated
future  tax  effects of temporary differences  that  arise  as  a
result  of  the differences in the carrying amounts and  the  tax
bases  of  assets  and  liabilities. SFAS  109  also  requires  a
valuation   allowance  for  deferred  tax   assets   in   certain
circumstances.

      The  Company is included in the consolidated federal income
tax  return  of  PEII.  PEII's policy is to allocate  income  tax
expense or benefits to the Company as if it filed a separate  tax
return.

     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  $870,200, $1,654,000 and $2,480,000 in 1995, 1996 and 1997,
respectively,  and  are  included  in  project  development   and
administrative   expenses   in  the  statement   of   operations.
Management  believes the method used to allocate these  costs  is
reasonable.

      Asset  Impairment  --   In  accordance  with  Statement  of
Financial  Accounting  Standards  No.  121  "Accounting  for  the
Impairment of Long-Lived Assets and for Long-Lived Assets  to  be
Disposed of" (SFAS 121), the Company evaluates the impairment  of
long-lived  assets  if circumstances indicate that  the  carrying
value of those assets may not be recoverable. The Company adopted
SFAS 121 in 1996 and such adoption had no material impact on  its
financial position or results of operations.

      Interest  Cost  -- Total interest cost incurred,  including
capitalized   interest,   was   $17,509,225,   $25,357,817    and
$31,011,459 in 1995, 1996 and 1997, respectively.


3.  ADVANCES (TO) FROM PARENT

     Advances (to) from parent represent cash advances to or from
the  parent,  allocations of general and administrative  expenses
from  the parent, and the excess of liabilities assumed over  the
assets   contributed  on  projects  owned  by  the   parent   and
contributed in connection with the formation of the Company.

      The advances (to) from  parent for the years ended December
31, 1995, 1996 and 1997 consist of the following:

<TABLE>
<S>                                          <C>
Balance, January 1, 1995                     $(16,517,526)
Cash advanced to parent, net                  (16,616,435)
Administrative costs allocated from parent         870,200
                                              ------------

Balance, December 31, 1995                    (32,263,761)
Cash advanced from parent, net                  45,997,208
Administrative costs allocated from parent       1,654,000
                                              ------------
Balance, December 31, 1996                      15,387,447
Cash advanced to parent, net.                 (12,857,908)
Administrative costs allocated from parent       2,480,000
                                              ------------
Balance, December 31, 1997.                     $5,009,539
                                              ============
</TABLE>

     The average balance of advances to parent was $(20,336,000),
$8,438,000   and   $10,198,000  during  1995,  1996   and   1997,
respectively.

4. FUEL OIL, SPARE PARTS AND SUPPLIES

      Fuel  oil,  spare parts and supplies are comprised  of  the
following amounts:

<TABLE>
                                          1996         1997

  <S>                                  <C>           <C>
  Fuel oil                             $3,496,269    $3,232,983
  Spare parts and supplies              4,417,508     3,031,566
            Total                      $7,913,777    $6,264,549
</TABLE>

5. POWER PROJECTS

      Rosemary Project  -- Effective May 5, 1989, PEII  formed  a
wholly-owned  subsidiary, now a wholly-owned  subsidiary  of  the
Company, to develop, construct, and operate the 180 megawatt gas-
fired  Rosemary  cogeneration facility in Roanoke  Rapids,  North
Carolina  ("Rosemary  Project").  Construction  on  the  Rosemary
Project began in September 1989, and commercial operation of  the
facility began on December 27, 1990.

      The  Rosemary Project produces both electricity and  useful
thermal energy in the form of steam. Electric capacity and energy
sales  are  based  on  the terms of the power purchase  agreement
between   Panda-Rosemary  and  Virginia  Electric  Power  Company
("VEPCO")  dated January 24, 1989. The agreement requires  Panda-
Rosemary to provide VEPCO with all the available capacity of  the
Rosemary  Project on an as-needed basis with VEPCO  obligated  to
pay  for  the  power  delivered and dependable  capacity  of  the
facility  at  a  rate  per kilowatt which  decreases  in  certain
periods as defined by the agreement. The term of the agreement is
25  years and  expires December 2015. A financial institution has
provided  a  letter  of  credit  for  approximately  $5   million
guaranteeing   Panda-Rosemary's  performance  under   the   power
purchase agreement. Steam and chilled water are sold to  a  third
party  under  a separate agreement which also has a  term  of  25
years  and expires December 2015. The Rosemary Project is managed
by  PRC,  the  general partner, and was operated by an  unrelated
third  party  through  1996.   Effective  January  1,  1997,  the
Rosemary  Project  is  operated by a  subsidiary  of  PEII.   The
Company  incurred management fees of $1,675,142 to the affiliated
management company for the year ended December 31, 1997.

      On  January  6,  1992,  PRC contributed  substantially  all
project  assets  and liabilities and $216,553 in cash  to  Panda-
Rosemary, in exchange for a 10% combined general partnership  and
limited  partnership interest.  The assets and  liabilities  were
recorded   at  historical  cost,  resulting  in  $19,874,216   in
partners'  deficit  being contributed by  PRC.  An  institutional
investor ("Investor") contributed $30,948,987 in cash in exchange
for  a  90%  limited partnership interest. On July 31, 1996,  the
Company  acquired the Investor's limited partnership interest  in
Panda-Rosemary  for  a  purchase  price  of  approximately  $34.3
million.  As a result of this acquisition, the Company owns  100%
of  Panda-Rosemary.  The acquisition was accounted for using  the
purchase  method of accounting.  The excess of minority  interest
over   the  purchase  price  (approximately  $3.8  million)   was
allocated to plant and equipment.

      Prior  to  July 31, 1996, the Investor received  percentage
allocations of income, expense, and cash flow which would decline
over  time  if certain rate of return requirements were achieved.
For  the  duration  of  the  Investor's participation  in  Panda-
Rosemary, the allocation to the Investor remained at 90%.

      Prior  to  acquiring the Investor's 90% limited partnership
interest  on July 31, 1996, the Company controlled Panda-Rosemary
through  its  general partner interest.  As general partner,  the
Company has exclusive management authority over the operations of
Panda-Rosemary.   Accordingly,  Panda-Rosemary's  statements   of
operations and of cash flows for the year ended December 31, 1995
and  for  the  period January 1, 1996 through July 31,  1996  (in
addition  to  the post-acquisition period) have been consolidated
in  the  accompanying financial statements. The  capital  of  the
Investor  and  Panda-Rosemary's  net  income  allocated  to   the
Investor  are  presented as minority interest in the accompanying
financial statements.

      Brandywine  Project  -- On August 9, 1991, Panda-Brandywine
entered  into  a  power purchase agreement ("PPA")  with  Potomac
Electric  Power  Company ("PEPCO") to build a 230  megawatt  gas-
fired  facility  in Brandywine, Maryland ("Brandywine  Project").
The  Brandywine  Project, constructed by Raytheon  Engineers  and
Constructors,  Inc.  ("Raytheon") under  a  fixed  fee,  turn-key
contract,  was  substantially completed and commenced  commercial
operations in October, 1996.

      The PPA requires Panda-Brandywine to supply PEPCO with  all
available capacity from the facility for the 25-year term of  the
agreement with a guaranteed dispatch level of at least  60  hours
per  week for the first 15 years.  In late 1997, Panda-Brandywine
and  PEPCO reached a tentative agreement for modification of  the
PPA (see Note 8). A construction loan commitment in the amount of
$215 million was provided by General Electric Capital Corporation
("GECC")  in April, 1995. On December 30, 1996 the loan converted
to a capital lease with GECC in the amount of $217.5 million with
a  twenty  year term and two five year renewal options (see  Note
6).   GECC  has committed to provide letters of credit  up  to  a
maximum    of   approximately   $7.3   million   (under   certain
circumstances) guaranteeing Panda-Brandywine's performance  under
the agreement.  `


6. LONG-TERM DEBT AND CAPITAL LEASE OBLIGATION

      Long-term debt and capital lease obligation of the  Company
as of December 31, 1996 and 1997 are summarized as follows:

<TABLE>
                                     1996              1997
<S>                                <C>             <C>
First Mortgage Bonds for
  Rosemary Project                 $110,023,541    $104,521,719
  Less current portion              (5,501,823)     (5,816,974)
                                   ------------    -------------
                                   $104,521,718   $  98,704,745

Capital lease obligation for
 Brandywine Project               $217,488,645     $231,278,528
                                   ============    =============

</TABLE>

     Taxable Revenue Bonds  -- In October 1989, PRC obtained long-
term  financing  for the Rosemary Project in  the  form  of  $116
million  of  taxable revenue bonds ("Tax Bonds")  issued  by  the
Halifax Regional Economic Development Corporation ("Halifax"),  a
nonprofit  corporation organized in North Carolina. In connection
with  the  issuance  of  first mortgage bonds  for  the  Rosemary
Project  in  July 1996 as discussed below, the Company refinanced
the  Tax Bonds and incurred a loss of $13.3 million on the  early
extinguishment of that obligation. The Tax Bonds bore interest at
a fixed rate of 9.25% payable semiannually.

     Term Loan  -- On October 27, 1995, PEII obtained a term loan
in  the  amount  of $20 million from Trust Company  of  the  West
("TCW"). This loan amended and restated the loan agreement  dated
November  8, 1994. In July 1996, in connection with the  offering
of  Series A Bonds by PIC (the Company's parent) as discussed  in
Note  8, approximately $26.4 million of the proceeds was advanced
by  PIC to the Company to retire all of the term loan debt.   The
Company incurred a loss of $8 million on the early extinguishment
of  this  obligation. The loan bore interest at a rate of  13.5%,
payable  at  a  rate  of  11.0%.  The 2.5% interest  not  payable
currently was added to the principal balance of the loan.

      Under  the  loan  agreement, TCW  also  received  1,004,000
warrants  to  purchase shares of PEII stock. A loan  discount  of
$1,241,812  was created as a result of allocating  value  to  the
warrants.   The  carrying  value  of  the  warrants  is  adjusted
annually  to  the redemption price.  Such adjustment,  which  was
allocated to the Company from PEII until the debt was retired  in
July   1996,  was  $153,861  and  $172,924  in  1995  and   1996,
respectively,  and  was  recorded  as  interest  expense  in  the
accompanying statements of operations.

      First  Mortgage  Bonds  --   In July  1996,  Panda-Rosemary
Funding Corporation ("PRFC"), a wholly-owned subsidiary of Panda-
Rosemary,  issued $111,400,000 of first mortgage bonds ("Rosemary
Bonds").  The Rosemary Bonds bear interest at a fixed rate of  8-
5/8%  payable quarterly commencing November 15, 1996.   Scheduled
principal payments are required quarterly commencing November 15,
1996,  and  will continue through maturity on February 15,  2016.
The  Rosemary Bonds are subject to mandatory redemption prior  to
maturity  under  certain  conditions.   The  Rosemary  Bonds  are
unconditionally guaranteed by Panda-Rosemary but are non-recourse
to  the  Company,  and are secured by substantially  all  of  the
assets  of  Panda-Rosemary  as well as  all  of  the  outstanding
capital  stock  of PRC, PRC II and PRFC.  The indenture  contains
certain   covenants,  including  limitations  on   distributions,
additional debt and certain other transactions.

      While amounts are outstanding under the Rosemary Bonds, all
revenues of Panda-Rosemary are paid to a collateral agent.  Funds
held  by  the  collateral agent are included in the  accompanying
consolidated  balance sheets as restricted  cash-current.   On  a
monthly  basis,  the  collateral agent remits  to  Panda-Rosemary
remaining  funds  available  after payment  of  all  expenditures
relating   to  the  Rosemary  project,  including  debt  service,
provided  that  Panda-Rosemary is in  compliance  with  the  debt
covenants.  Additionally, the collateral agent withholds funds to
meet  future  debt  service, maintenance  and  pollution  control
requirements, if required under the indenture.  These amounts are
included  in  the  accompanying consolidated  balance  sheets  as
restricted cash-current and restricted cash-debt service reserves
and escrow deposits.

      Construction Loan and Capital Lease --  On April 10,  1995,
Panda-Brandywine  closed the initial funding of  a  $215  million
construction  loan  commitment with GECC. The  construction  loan
bore an interest rate of the Eurodollar rate plus 2.5%.

      The  Brandywine Project commenced commercial operations  on
October  31, 1996.  The construction loan was converted to  long-
term  non-recourse financing of $217.5 million in the form  of  a
capital  lease  on  December  30,  1996.   To  effect  the  lease
financing, title to the Brandywine Project was transferred  to  a
third  party  trustee  and leased back to Panda-Brandywine.   The
Brandywine facility lease is a net lease with an initial term  of
20  years  and  two five-year renewal options. The minimum  lease
payments through 2000 are less than the interest expense  on  the
capital lease obligation, resulting in increases in the principal
amount  of  the  capital lease obligation.  Amortization  of  the
original principal amount of the capital lease obligation  begins
in  2007.   The  documents governing the lease financing  contain
various affirmative and negative covenants, including limitations
on  the ability of Panda-Brandywine to make distributions to  its
partners.  In  connection with the capital lease financing,  GECC
has  committed to provide letters of credit up to  a  maximum  of
approximately $7.3 million under certain circumstances (see  Note
5).   The  letters of credit have an annual fee of 1.50%  on  any
amounts outstanding.

     The future minimum lease commitments under the capital lease
for the Brandywine Project are as follows:

<TABLE>
          <S>                                    <C>
          1998                                   $   10,419,439
          1999                                       17,584,915
          2000                                       20,489,320
          2001                                       25,613,918
          2002                                       27,770,137
          Thereafter                                473,645,389
                                                   -------------
          Total minimum lease payments              575,523,118
          Amounts representing interest           (344,244,590)
                                                   -------------

          Present value of net minimum payments    $231,278,528
                                                   =============
</TABLE>

      Long-term  Debt Maturities --  The principal maturities  of
long-term  obligations, excluding the capital lease  relating  to
the  Brandywine  Project, for each of the five  years  succeeding
December 31, 1997 and thereafter are as follows:

<TABLE>
          <S>                                       <C>
          1998                                      $ 5,816,974
          1999                                        5,300,189
          2000                                        5,377,835
          2001                                        5,778,318
          2002                                        6,190,275
          Thereafter                                 76,058,128
                                                   $104,521,719
</TABLE>

7. INCOME TAXES

     A provision for income taxes for 1995, 1996 and 1997 has not
been recorded since operating losses were incurred for each year.

      The  Company has approximately $27 million of net operating
loss  carryforwards at December 31, 1997, the benefits  of  which
will be available to the Company when realized by PEII.  The  net
operating loss carryforwards will expire during the years 2007 to
2012.  PEII may become subject to a limitation on the  amount  of
net  operating loss carryforwards which may be used  annually  to
offset  income should certain changes in its ownership  occur  in
the future.  Should PEII become subject to such a limitation, the
amount of tax benefits available to the Company could be reduced.

      Deferred  tax assets of approximately $11 million  and  $17
million  as of December 31, 1996 and 1997, respectively,  consist
primarily  of  interest in partnerships and net operating  losses
and  are offset by a valuation allowance. The deferred tax  asset
for  interest  in partnerships relates to the difference  between
the  tax basis of the assets contributed to the partnership  upon
its  formation  and  the Company's financial reporting  basis  in
those assets.

     SFAS No. 109 requires that a valuation allowance be recorded
against  tax  assets which are not likely to  be  realized.   The
Company's  carryforwards  expire at  specific  future  dates  and
utilization  of  certain  carryforwards is  limited  to  specific
amounts each year. However, due to the uncertain nature of  their
ultimate  realization based upon past performance and  expiration
dates,  the  Company  has established a full valuation  allowance
against  these  carryforward  benefits  and  will  recognize  the
benefits  only  when reassessment demonstrates that  it  is  more
likely than not that such benefits will be realized.  Realization
is  entirely  dependent  upon future  earnings  in  specific  tax
jurisdictions.  While  the need for this valuation  allowance  is
subject to periodic review, if the allowance is reduced, the  tax
benefits  of  the  carryforwards  will  be  recorded  in   future
operations as a reduction of the Company's income tax expense  or
as an income tax benefit.


8. 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, 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  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,
and  (ii) approximately $26.4 million to retire the term loan  as
discussed in Note 6.  See Note 3.

      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.  PEII  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.  In 1997,  this  dispute  was
settled.   The  cost  of the settlement will  be  paid  by  PEII;
accordingly, the cost is not reflected in the Company's financial
statements.    The settlement did not have a material  impact  on
the  consolidated  financial position, results of  operations  or
cash flows of PEII.

       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").  In late
1997,  Panda-Brandywine reached a tentative agreement with  PEPCO
under which the amount of capacity payments will be increased (as
compared  with  the  capacity  payments  originally  anticipated)
during  the  first  ten  years  following  the  commencement   of
commercial  operations,  and will be  reduced  during  the  final
fifteen  years  of the Power Purchase Agreement.   The  agreement
provides  that  PEPCO  will  pay to Panda-Brandywine  within  two
business days following the effective date of the settlement  (as
discussed below) approximately $3.8 million, which represents the
difference between the originally scheduled capacity payments and
the  capacity payments due under the agreement for the first nine
months of 1997.  Capacity payments for the final three months  of
1997  were  made  in  accordance with  the  tentative  agreement.
Additionally,  PEPCO  has agreed to release  certain  amounts  of
capacity  to  Panda-Brandywine for  resale  of  energy  to  other
parties,  and  to  grant  Panda-Brandywine  the  right  to   sell
additional energy to other parties subject to the availability of
the  facility.  The effectiveness of the agreement with PEPCO  is
subject to the consent of the financing parties, including  GECC,
under  the capital lease financing arrangements for the facility.
In  this regard, Panda-Brandywine has commenced discussions  with
GECC  and  the other financing parties concerning such  consents,
and  has  executed  an agreement in principle with  GECC.   Among
other  things, this agreement in principle provides for  (i)  the
reallocation  of  lease payments to GECC in order  to  match  the
revised   capacity  payment  schedule  with   PEPCO,   (ii)   the
reimbursement  to GECC by Panda-Brandywine of certain  fees,  and
(iii)  certain  technical amendments to the applicable  financing
documents.   The  finalization  of  the  tentative  agreement  is
subject  to   several conditions, including but  not  limited  to
written  consents  from  all other financing  parties  and  other
applicable parties, receipt of legal opinions concerning the  tax
and   regulatory  consequences  of  the  transaction,   and   the
preparation  of definitive legal documentation of the transaction
to the satisfaction of all parties involved.

      As discussed in Note 5, 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, based on the advice of counsel, the amount of  ultimate
liability allocable to the Company with respect to these  matters
will  not  have  a  material affect on  the  financial  position,
results of operations or cash flows of the Company.


9. RELATED PARTY TRANSACTIONS

      The  Company purchases insurance coverage through an agency
owned by a major shareholder of PEII who is also a member of  the
board  of  directors of PEII and a relative of  PEII's  chairman.
The  Company believes such coverage is on terms that are no  less
favorable  than  reasonably  available  from  unaffiliated  third
parties.   Total  insurance purchases through  this  agency  were
$298,728,  $754,388 and $1,153,623 for the years  ended  December
31, 1995, 1996 and 1997, respectively.

     The Rosemary Project is operated by an affiliated management
company which is a subsidiary of PEII (see Note 5).


10.  FAIR  VALUE  OF FINANCIAL INSTRUMENTS AND  CONCENTRATION  OF
CREDIT RISK

      The  estimated  fair  values  of  the  Company's  financial
instruments as of December 31, 1996 and 1997 are as follows:

<TABLE>

                                   Carrying Value   Fair Value
<S>                                  <C>            <C>
1996: Long-term debt,
        including current  portion   $110,023,541   $110,023,541
1997: Long-term debt,
        including current  portion    104,521,719    104,521,719

</TABLE>

      The Rosemary Bonds have limited trading. The fair value  of
these bonds is estimated based on a third party quotation.

       The  Company  is  also  a  party  to  letters  of  credit.
Historically,  no claims have been made against  these  financial
instruments and management does not expect any material losses to
result   from   these   off-balance-sheet   instruments   because
performance  is  not usually expected to be required.  Therefore,
management  is  of  the  opinion that the  fair  value  of  these
instruments is zero.

      The  Company's  electric  capacity  and  energy  sales  are
currently under two power sales contracts with two customers. The
failure   of   these  customers  to  fulfill  their   contractual
obligations  could  have  a substantial negative  impact  on  the
Company's revenue. However, the Company does not anticipate  non-
performance by the customers under these contracts.



                           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.

                                   PANDA INTERHOLDING CORPORATION



Date:     March 27, 1998           By:  /s/ Robert W. Carter
                                   Robert W. Carter, Chairman  of
                                   the  Board and Chief Executive
                                   Officer


                        POWER OF ATTORNEY

      KNOW  ALL  PEOPLE  BY  THESE PRESENTS,  that  each  of  the
undersigned   officers  and  directors  of   Panda   Interholding
Corporation.  (the  "Company") hereby  constitutes  and  appoints
Robert W. Carter or Janice Carter or any of them (with full power
to  each  of  them  to  act along), his or her  true  and  lawful
attorney-in-fact and agent, with full power of substitution,  for
him or her and on his or her behalf and in his or her name, place
and  stead, in any and all capacities, to sign, execute, and file
any and all documents relating to the Company's Form 10-K for the
year  ending December 31, 1997, including any and all  amendments
and  supplements hereto, with any regulatory authority,  granting
said  attorneys and each of them; full power and authority to  do
and  perform each and every act and thing requisite and necessary
to  be done in and about the premises in order to effectuate  the
same  as fully to all intents and purposes as he himself, or  she
herself,  might  or  could  do  if  personally  present,   hereby
ratifying  and  confirming  all that said  attorneys-in-fact  and
agents,  or either of them, or their or his or her substitute  or
substitutes, may lawfully do or cause to be done.

Pursuant to the requirements of 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.


Signature                Title                     Date

/s/  Robert W. Carter    Chairman of the Board,    March 27, 1998
Robert W. Carter         Chief Executive Officer
                         and Director (Principal
                         Executive Officer)

/s/  Janice Carter       Executive Vice President, March 27, 1998
Janice Carter            Secretary and Treasurer
                         (Principal Financial
                         and Accounting Officer)




EXHIBIT 12.00

PANDA INTERHOLDING CORPORATION

RATIO OF EARNINGS TO FIXED CHARGES

(Dollars in Thousands)

<TABLE>
<CAPTION>

                                                    Year Ended December 31,
                                         1993      1994      1995      1996       1997
<S>						 <C>        <C>       <C>      <C>        <C>
Income (loss) before minority
 interest and extraordinary items     $ 4,502   $ 5,242   $ 3,045   $ (2,350)  $ (10,107)

Interest expense                       11,066    11,018     11,716     14,303      31,011
Amortization of debt issue costs          502       600        554        403         349
Capitalized interest                       -        803      5,793     11,055          -
						-----------------------------------------------------
  Total fixed charges                  11,568     12,421    18,063     25,761      31,360

Earnings before fixed charges          16,070     16,860    15,315     12,356      21,253

Ratio of earnings to fixed charges       1.39       1.36      0.85       0.48        0.68

Deficiency in coverage of
  fixed charges                                           $(2,748)   $(13,405)   $(10,107)

</TABLE>


EXHIBIT 21.00



       SUBSIDIARIES OF PANDA INTERHOLDING CORPORATION

                                        Jurisdiction of
Name of Entity                            Organization

Panda-Rosemary Corporation                Delaware
PRC II Corporation                        Delaware
Panda-Rosemary, L.P.                      Delaware
Panda-Rosemary Funding Corporation        Delaware
Rosemary Water Company                    Delaware
Panda Brandywine Corporation              Delaware
Panda Energy Corporation                  Delaware
Brandywine Water Company                  Delaware
Panda-Brandywine, L.P.                    Delaware



  27.01             Financial Data Schedule