CE CASECNAN WATER & ENERGY CO INC, 10-K, 1997-03-28

CE CASECNAN WATER & ENERGY CO INC
10-K, 1997-03-28
ELECTRIC SERVICES

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TABLE OF CONTENTS
PART I 1
ITEM 1. BUSINESS 1
GENERAL 1
EXCHANGE OFFER 1
PROJECT 2
THE EXPANDING PHILIPPINE AGRICULTURE SECTOR AND POWER MARKETS 4
AGRICULTURE 4
POWER 5
TERMS OF THE SECURITIES 5
GENERAL 5
PAYMENT OF PRINCIPAL AND INTEREST 6
PRIORITY OF PAYMENTS 7
DEBT SERVICE RESERVE FUND 7
OPTIONAL REDEMPTION 8
MANDATORY REDEMPTION 8
CHANGE IN CONTROL PUT 8
DISTRIBUTIONS 8
RANKING AND SECURITY FOR THE SECURITIES 9
RATINGS 9
NATURE OF RECOURSE ON THE SECURITIES 9
INCURRENCE OF ADDITIONAL DEBT 9
PRINCIPAL COVENANTS 11
INSURANCE 11
REGULATORY MATTERS 11
EMPLOYEES 11
ITEM 2. PROPERTIES 12
ITEM 3. LEGAL PROCEEDINGS 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
PART II 13
ITEM 5. MARKET FOR COMPANY'S EQUITY AND RELATED STOCKHOLDER
MATTERS 13
ITEM 6. SELECTED FINANCIAL DATA 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 16
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 17
BALANCE SHEETS 18
STATEMENTS OF OPERATIONS 19
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY 20
STATEMENTS OF CASH FLOW 21
NOTES TO FINANCIAL STATEMENTS 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 28
PART III 29
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY 29
ITEM 11. EXECUTIVE COMPENSATION 31
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 31
DESCRIPTION OF CAPITAL STOCK 31
PRINCIPAL HOLDERS 31
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 32
SIGNATURES 33
INDEX TO EXHIBITS 34

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1996
Commission File No. 333-00608

CE CASECNAN WATER AND ENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)

Philippines Not applicable
(State or other (IRS Employer
jurisdiction of incorporation Identification No.)
or organization)

6750 Ayala Avenue, 24th Floor, Not applicable
Makati, Manila, Philippines (Zip Code)
(Address of principal executive offices)

Registrant's telephone number, including area code: (632) 892-0276

Securities registered pursuant to Section 12(b) of the Act: N/A

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

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

Yes X No______

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 Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]

All Common Stock of the Company is held by the original
shareholders. Accordingly there is no market value.

767,162 shares of Common Stock, $0.038 par value, were
outstanding on March 17, 1997.

Documents incorporated by reference: N/A

PART I

Item 1. Business

General

CE Casecnan Water and Energy Company, Inc. ("Company" or "CE
Casecnan") is a privately held Philippine corporation formed in
September of 1994 solely to develop, construct, own and operate
the Casecnan Project, a multi-purpose irrigation and
hydroelectric power facility with a rated capacity of
approximately 150 Megawatts ("MW") located on the island of Luzon
in the Republic of the Philippines (the "Casecnan Project"). The
Company is an indirect subsidiary of CalEnergy Company, Inc.
("CalEnergy") and Peter Kiewit Sons, Inc. ("Kiewit"). Currently
CalEnergy and Kiewit collectively own approximately 70% of the
Company. Each of two minority shareholders of the Company
currently owns approximately 15% of the outstanding capital stock
of the Company. The shares held by the minority shareholders may
be reduced in certain circumstances and such reduction would
result in a corresponding increase in the number of shares of the
Company held by affiliates of CalEnergy and Kiewit.

CalEnergy was formed in 1971 and is engaged in the
exploration for, and development and operation of,
environmentally responsible independent power production
facilities worldwide utilizing geothermal resources or other
energy sources, such as hydroelectric, natural gas, oil and coal.
CalEnergy is an international provider of energy services, with
over 5,000 net MW of electrical generating capacity in operation,
under construction or in development in the United States, the
Philippines, Indonesia and the United Kingdom. CalEnergy is
publicly traded on the New York, London and Pacific stock
exchanges under the symbol "CE", and has a current market
capitalization of approximately $2 billion and had assets of
approximately $5.7 billion as of December 31, 1996. Kiewit is a
large privately held construction, mining and telecommunications
company with hydroelectric, mining and tunneling experience and
1996 revenues of approximately $3 billion and is headquartered in
Omaha, Nebraska. Kiewit beneficially owns approximately 32% of
CalEnergy's common stock through indirect subsidiaries.

The Securities (described herein) are recourse only to the
Company. Neither CalEnergy nor Kiewit have guaranteed directly
or indirectly the payment or performance of any company
obligations.

The Company's principal executive office is located at 6750
Ayala Avenue, 24th Floor, Makati, Metro Manila, Philippines, and
its telephone number is 632 892 0276. The Company's principal
office will be located in Pantabangan in the Province of Nueva
Ecija, Philippines.

Exchange Offer

In June 1996, the Company exchanged (i) $125,000,000
aggregate principal amount of Series A Securities for an equal
principal amount of New Series A Securities, and (ii)
$171,500,000 aggregate principal amount of Series B Securities
for an equal amount of New Series B Securities. The Series A
Securities and Series B Securities are sometimes referred to
herein as the "Old Securities", and the New Series A Securities
and the New Series B Securities are sometimes referred to herein
as the "New Securities". The New Securities are the obligations
of the Company evidencing the same indebtedness as the Old
Securities and will be entitled to the benefits of the Indenture,
which governs both the Old Securities and the New Securities.
The form and terms (including principal amount, interest rate,
maturity and ranking) of the New Securities are the same as the
form and terms of the Old Securities, except that (i) the New
Securities have been registered under the Securities Act and
therefore will not be subject to certain restrictions on transfer
applicable to the Old Securities and will not be entitled to
registration rights, and (ii) the New Securities will not provide
for any increase in the interest rate thereon.

Simultaneously with the offering of the Old Securities the
Company also issued and sold $75,000,000 aggregate principal
amount of LIBOR Plus 3.00% Senior Secured Floating Rate Notes Due
November 15, 2002 ("FRNs") that rank pari passu with and share
the collateral on a pro rata basis with the Old Securities and
the New Securities and are entitled to the benefits of the
Indenture and the Depositary Agreement. The Old Securities, New
Securities, FRNs and Additional Securities are collectively
referred to herein as the "Securities".

Project

The Casecnan Project is located in the central part of the
island of Luzon. It will consist generally of diversion
structures in the Casecnan and Denip Rivers that will divert
water into a tunnel of approximately 23 kilometers (including the
intake adit from the Denip to the Casecnan River), with a
diameter of approximately 6.5 meters. The tunnel will transfer
the water from the Casecnan and Denip Rivers into the Pantabangan
Reservoir for irrigation and hydroelectric use in the Central
Luzon area. An underground hydroelectric powerhouse located at
the end of the water tunnel and before the Pantabangan Reservoir
will house a power plant consisting of approximately 150 MW of
newly installed rated electrical capacity. A tailrace discharge
tunnel of approximately three kilometers will deliver water from
the water tunnel and the new powerhouse to the Pantabangan
Reservoir, providing additional water for irrigation and
increasing the potential electrical generation at two downstream
existing hydroelectric facilities of the Philippine National
Power Corporation ("NPC"), the government-owned and controlled
corporation that is the primary supplier of electricity in the
Philippines.

In early 1994, President Fidel Ramos recognized the need for
an irrigation and hydroelectric project that would provide
increased water flows for irrigation to the rice growing area of
Central Luzon, would be environmentally sound, technically
feasible and economically viable, and would involve no flooding
or relocation of local residents. At that time, he directed the
Philippine Department of Agriculture and NPC to work together
with other interested agencies to develop a combined irrigation
and hydroelectric project. Shortly thereafter, the Philippine
government was approached by the Company with a proposal for a
project to be developed in the Casecnan area on a build-own-
operate-transfer ("BOOT") basis, that is, an arrangement under
which the Company as developer would agree to build, own and
operate the Casecnan Project during an approximately four-year
construction period and a twenty-year cooperation period, after
which ownership and operation of the Project would be transferred
to the Philippine National Irrigation Administration ("NIA") and
NPC at no cost. After conclusion of a public solicitation for
competing proposals, NIA selected the Company as the BOOT
developer and entered into the Project Agreement with the
Company. The Casecnan Project was subsequently designated a high
priority project under Republic Act No. 529 by the National
Economic and Development Authority of the Philippines.

CE Casecnan is developing the Casecnan Project under the
terms of the Project Agreement between CE Casecnan and NIA.
Under the Project Agreement, CE Casecnan will develop, finance
and construct the Casecnan Project over an estimated four-year
construction period, and thereafter own and operate the Casecnan
Project for 20 years (the "Cooperation Period"). During the
Cooperation Period, NIA is obligated to accept all deliveries of
water and energy, and so long as the Casecnan Project is
physically capable of operating and delivering in accordance with
agreed levels set forth in the Project Agreement, NIA will pay CE
Casecnan a guaranteed fee for the delivery of water and a
guaranteed fee for the delivery of electricity, regardless of the
amount of water or electricity actually delivered. In addition,
NIA will pay a fee for all electricity delivered in excess of a
threshold amount up to a specified amount. NIA will sell the
electric energy it purchases to NPC, although NIA's obligations
to CE Casecnan under the Project Agreement are not dependent on
NPC's purchase of the electricity from NIA. All fees to be paid
by NIA to CE Casecnan are payable in U.S. dollars. The
guaranteed fees for the delivery of water and energy are expected
to provide approximately 70% of CE Casecnan's revenues.

The Project Agreement provides for additional compensation
to CE Casecnan upon the occurrence of certain events, including
increases in Philippine taxes and adverse changes in Philippine
law. Upon the occurrence and during the continuance of certain
force majeure events, including those associated with Philippines
political action, NIA may be obligated to buy the Casecnan
Project from CE Casecnan at a buy out price expected to be in
excess of the aggregate principal amount of the outstanding CE
Casecnan debt securities, together with accrued but unpaid
interest. At the end of the Cooperation Period, the Casecnan
Project will be transferred to NIA and NPC for no additional
consideration on an "as is" basis.

The Republic of the Philippines has provided a Performance
Undertaking under which NIA's obligations under the Project
Agreement are guaranteed by the full faith and credit of the
Republic of the Philippines. The Project Agreement and the
Performance Undertaking provide for the resolution of disputes by
binding arbitration in Singapore under international arbitration
rules.

NIA's payment obligations under the Project Agreement are
expected to be the Company's sole source of operating revenues.
Because of the Company's dependence on NIA, any material failure
of NIA to fulfill its obligations under the Project Agreement and
any material failure of the Republic of the Philippines to
fulfill its obligations under the Performance Undertaking would
significantly impair the ability of the Company to meet its
obligations under the Securities.

The Casecnan Project is being constructed on a joint and
several basis by Hanbo Corporation and Hanbo Engineering &
Construction Co. Ltd. (formerly known as You One Engineering &
Construction Co., Ltd., and herein referred to as "HECC"), both
of which are South Korean corporations, pursuant to a fixed-
price, date-certain, turnkey construction contract (the "Turnkey
Construction Contract"). Hanbo Corporation and HECC (sometimes
collectively referred to as the "Contractor") are under common
ownership control. Hanbo Corporation is an international
construction company. HECC, which recently emerged from a court-
administered receivership, is a contractor with over 25 years
experience in tunnel construction, using both the drill-and-blast
and tunnel boring machine ("TBM") methods.

Early in 1997, CE Casecnan was advised that Hanbo
Corporation and Hanbo Steel had each filed to seek court
receivership protection in Korea but that HECC had not filed for
receivership protection and was believed to be solvent. In March
1997, the Company was informed that HECC filed for receivership
protection. CE Casecnan has recently received confirmation from
HECC that it intends to fully perform its obligations under the
Turnkey Construction Contract and complete the Casecnan Project
on schedule and within the budget. However, although HECC is
currently performing the work, no assurances can be given that
HECC will remain able to perform fully its obligations under the
Turnkey Construction Contract.

CE Casecnan is presently reviewing its rights, obligations
and potential remedies in respect of the recent developments
regarding the co-Contractor and the guarantor and is presently
unable to speculate as to the ultimate effect of such
developments on CE Casecnan.

KFB has recently reconfirmed to CE Casecnan that it will
honor its obligations under the Casecnan Project letter of credit
and also has stated its support for the successful completion of
the Casecnan Project and has previously offered to extend a
working capital facility to HECC. However, until a receiver for
HECC is appointed, it is unclear whether such a working capital
facility can be utilized and whether there will be any
constraints imposed on HECC's performance of the work. Moody's
Investors Service recently issued a ratings downgrade of KFB's
senior debt from Baa1 to Baa2.

CE Casecnan financed a portion of the costs of the Casecnan
Project through the issuance of $125,000,000 of its 11.45% Senior
Secured Series A Notes due 2005 and $171,500,000 of its 11.95%
Senior Secured Series B Bonds due 2010 and $75,000,000 of its
Secured Floating Rate Notes due 2002, pursuant to an indenture
dated November 27, 1995, as amended to date (the "Casecnan
Indenture"). Although no default has yet occurred under the
Casecnan Indenture as a result of the announced receivership of
HECC, CE Casecnan will continue to closely monitor the Hanbo
group and KFB developments and project construction status and
develop appropriate contingency plans.

If Contractor materially fails to perform its obligations
under the Turnkey Construction Contract or if KFB were to fail to
honor its obligations under the Casecnan letter of credit, such
actions could have a material adverse effect on the Casecnan
Project and CE Casecnan.

The Casecnan Project will capture and divert excess water in
the Casecnan watershed by means of concrete, in-stream diversion
weirs and transfer that water through a transbasin tunnel to an
existing underutilized water storage reservoir at Pantabangan.
During the water transfer, the elevation differences between the
two watersheds will allow electrical energy to be generated at a
new 150 MW rated capacity power plant, which will be constructed
in a powerhouse cavern located at the end of the water tunnel.
Since the water has been determined to remain suitable for
irrigation throughout the Casecnan Project operations of
capturing, diverting and transferring the water, other than
removing sediments at the diversion structures, no treatment will
be required. Once in the reservoir at Pantabangan, the water
will be under the control of, and for the use of, NIA.

The Casecnan Project's diversion structures will be capable
of storing flows from the Casecnan and Denip Rivers over a number
of hours, and then discharging that stored water through the
transbasin tunnel and new powerhouse during the 12 hours (8:00
a.m. through 8:00 p.m.) coinciding with peak electrical demand
hours. Tunnel flows and water depths behind the diversion
structures will be regulated by in-tunnel valves in front of the
powerhouse turbines controlled by the operators at the powerhouse
control room.

The Company has applied for all material permits required
for the construction of the Project and has obtained or expects
to receive all these permits. The Company also has applied for
or expects at the appropriate time to apply for, and it either
has obtained or expects to receive by the relevant time, all
permits necessary during the course of construction and to
operate the Casecnan Project in accordance with the Project
Agreement. Many permits contain conditions, and are subject to
laws, legal interpretations or policies that could change.

As with any major construction effort, the construction of
the Casecnan Project involves various uncertainties, including
availability of materials and labor, labor relations issues,
possible inclement weather, unforeseen engineering, environmental
or geological issues, and unanticipated difficulties in obtaining
any of the requisite licenses or permits, any of which could give
rise to delays or cost overruns or cause the Casecnan Project to
perform at less than its expected level. In addition, there are
no assurances that the Company will achieve the projected
operational levels or that unexpected events will not interrupt
development of the Casecnan Project or impede in any way the
operations of the Casecnan Project once completed.

The Expanding Philippine Agriculture Sector and Power Markets

Agriculture

The agricultural sector has played an important role in the
sustained growth of the Philippines economy, accounting for
approximately 23% of gross domestic product and employing
approximately 46% of the economically active population in 1994.
The Philippine government has a policy objective to provide
necessary agriculture infrastructure for farmers to increase
productivity of important agricultural crops, such as rice, in
order to attain self-sufficiency and eliminate the need to rely
on imports of rice which consume foreign exchange reserves.

NIA supports agricultural production and rural development
by providing water and irrigation services to the Philippine
agricultural sector. NIA is responsible for the implementation
of irrigation development programs and the operation, maintenance
and administration of all national irrigation systems in the
Philippines. One of NIA's mandates is to provide and facilitate
the procurement and delivery of irrigation water to farmers in
Central Luzon.

The Casecnan watershed is one of the last remaining
substantial sources of water available to provide irrigation
water to Central Luzon, the most significant rice-producing
region in the Philippines. NIA estimates that the Casecnan
Project will divert sufficient water to irrigate the equivalent
of at least 50,000 additional hectares of agricultural land in
the Central Luzon Valley, which could produce an additional
465,000 tons or more of rice per year with a direct annual net
production value to the Philippines of approximately 2.03 billion
pesos (U.S. $80 million). The increased production resulting
from the additional irrigation water is expected to contribute
significantly to the Philippines' goal to become self-sufficient
in rice production.

Power

According to NPC's 1995 Power Development Program (1995-
2005)("PDP"), industrial growth, a rising standard of living, and
an expanding power distribution network have resulted in
increased demand for electrical power in the Philippines by an
average of 6% per year since 1987. NPC has projected that over
the next ten years the need for additional generating capacity in
the Philippines will exceed 14,000 MW.

With NPC projecting that electricity demand will increase
approximately 13% annually between 1996-2000 and approximately
11% annually for 2001-2005, the government of the Philippines has
taken steps to accelerate private power investment in an attempt
to enable supply to keep up with demand. As a result of
government action, many new power projects have come on-line
during the past two years, but capacity shortages are still
anticipated over the next several years. Elimination of power
shortages through increases in production from plans such as the
Casecnan Project should contribute to further industrial growth
and economic stability in the Philippines.

TERMS OF THE SECURITIES
General

The New Securities were issued pursuant to the Exchange
offer which applied to the recapitalization of $296,500,000
aggregate principal amount of the Old Securities. The New
Securities will be obligations of the Company evidencing the same
indebtedness as the Old Securities and will be entitled to the
benefits of the Indenture, which governs both the Old Securities
and the New Securities. The form and terms (including principal
amount, interest rate, maturity and ranking) of the New
Securities are the same as the form and terms of the Old
Securities, except that (i) the New Securities have been
registered under the Securities Act and therefore will not be
subject to certain restrictions on transfer applicable to the Old
Securities and will not be entitled to registration rights, and
(ii) the New Securities will not provide for any increase in the
interest rate thereon.

Simultaneously with the offering of the Old Securities the
Company also issued and sold $75,000,000 aggregate principal
amount of LIBOR Plus 3.00% Senior Secured Floating Rate Notes Due
November 15, 2002 ("FRNs") that rank pari passu with and share
the collateral on a pro rata basis with the Old Security and the
New Securities and are entitled to the benefits of the Indenture
and the Depositary Agreement.

The Securities are direct obligations of the Company,
secured by the Company Collateral.

Payment of Principal and Interest

Interest on the Old Securities and New Securities will be
payable semiannually on each May 15 and November 15 (the "Old
Securities and New Securities Interest Payment Date"), commencing
May 15, 1996, to the registered Holders thereof at the close of
business on the May 1 and November 1, as the case may be,
preceding each Old Securities and New Securities Interest Payment
Date. Holders of Old Securities whose Old Securities are
accepted for exchange will not receive any payment in respect of
accrual and unpaid interest on such Old Securities. The initial
average life of the Series A Securities was 8.84 years, and the
initial average life of the Series B Securities was 11.57 years.

The $125,000,000 principal of the 11.45% New Series A
Securities due November 15, 2005 are payable in semiannual
installments, commencing May 15, 2003, as follows:

Percentage of Principal
Payment Date Amount Payable

May 15, 2003 13.50%
November 15, 2003 13.50%
May 15, 2004 17.00%
November 15, 2004 17.00%
May 15, 2005 19.50%
November 15, 2005 19.50%

The $171,500,000 principal of the 11.95% New Series B
Securities due November 15, 2010 are payable in semiannual
installments, commencing May 15, 2002, as follows:

Percentage of Principal
Payment Date Amount Payable

May 15, 2002 2.50%
November 15, 2002 2.50%
May 15, 2003 2.25%
November 15, 2003 2.25%
May 15, 2004 2.00%
November 15, 2004 2.00%
May 15, 2005 1.75%
November 15, 2005 1.75%
May 15, 2006 10.50%
November 15, 2006 10.50%
May 15, 2007 11.00%
November 15, 2007 11.00%
May 15, 2008 11.00%
November 15, 2008 11.00%
May 15, 2009 4.00%
November 15, 2009 4.00%
May 15, 2010 5.00%
November 15, 2010 5.00%

The FRNs, which were not a part of the Exchange Offer, rank
pari passu with and share the collateral on a pro rata basis with
the Old Securities and the New Securities, and are entitled to
the benefits of the Indenture and the Depositary Agreement. The
FRNs have been issued in the principal amount of $75,000,000,
bear interest from their date of issuance at the rate equal to
LIBOR plus 3.00% per annum, and have final maturity of principal
of November 15, 2002.

The principal of the FRNs will be payable in semiannual
installments, commencing November 15, 2000, as follows:

Percentage of Principal
Payment Date Amount Payable

November 15, 2000 25.00%
May 15, 2001 19.50%
November 15, 2001 20.00%
May 15, 2002 18.00%
November 15, 2002 17.50%

Interest on the FRNs will be payable quarterly on each
February 15, May 15, August 15, and November 15, commencing on
February 15, 1996, to the registered Holders thereof at the close
of business on the preceding February 1, May 1, August 1, and
November 1, as the case may be. After Completion of the Casecnan
Project (as defined in the Turnkey Construction Contract), the
FRNs are subject to optional redemption, in whole or in part, pro
rata, at par plus accrued interest upon 30 days notice, on any
FRN interest payment date.

Priority of Payments

Prior to Completion, all net proceeds of the Securities and
any Liquidated Damages Proceeds will be deposited in the
Construction Fund and disbursed to pay for budgeted construction
or restoration costs, including interest and, if applicable,
principal on the Securities.

After Completion, except as otherwise provided for with
respect to mandatory redemptions and Loss Proceeds, all revenues
received by the Company from the Project will be paid into the
Revenue Fund maintained by the Depositary (other than certain
peso payments required to be used for VAT payments to the
Republic of the Philippines). Amounts paid into the Revenue Fund
shall be distributed in the following order of priority: (a) to
pay Operating and Maintenance Costs; (b) to pay certain
administrative costs of the agents for the Secured Parties under
the Financing Documents; (c) to pay principal of, premium (if
any) and interest on the Securities (including any increased
costs necessary to gross up such payments for certain withholding
taxes and other assessments to charges), and principal and
interest on other Senior Debt, if any; (d) to cause the Debt
Service Reserve Fund to equal the Debt Service Reserve Fund
Required Balance, as defined below; (e) to pay indemnification
expenses and other expenses to the Secured Parties and certain
other costs, and (f) to the Distribution Fund or Distribution
Suspense Fund, as applicable.

Debt Service Reserve Fund

At Completion, the Company will establish a Debt Service
Reserve Fund for the benefit of the Holders of the Securities,
which will be funded in cash from any remaining shareholder
capital contributions in the Capital Contribution Fund or, to the
extent required, from operating revenues as described under
"Priority of Payments" above. Such amounts will be deposited
into the Debt Service Reserve Fund from time to time to the
extent required to cause it to equal the Debt Service Reserve
Fund Required Balance which is intended to approximate the
highest amount of the payments of principal and interest to be
made on the Securities during any semiannual period over the
subsequent three years.

Optional Redemption

On and after the seventh anniversary of the Closing, the Old
Series A Securities and New Series A Securities are subject to
optional redemption, in whole and not in part, at par plus
accrued interest to the Redemption Date.

The Old Series B Securities and New Series B Securities are
subject to optional redemption, at any time, in whole or in part,
pro rata, at par plus accrued interest to the Redemption Date
plus a premium, calculated to "make whole" to comparable U.S.
treasury securities plus 150 basis points.

After completion, the FRN's are subject to optional
redemption, in whole or in part, pro rata at par plus accrued
interest, on any FRN interest payment date.

The Company also has the option to redeem the Securities, in
whole or in part, at par plus accrued interest at any time if, as
a result of any change in Philippine tax law or in the
application or interpretation of Philippine tax law occurring
after the date of issuance of the Securities, the Company is
required to pay certain additional amounts described in the
Indenture.

Mandatory Redemption

The Securities are subject to mandatory redemption, pro
rata, at par plus accrued interest to the Redemption Date, (a)
upon the receipt by the Company of Loss Proceeds that exceed $15
million in respect of certain events of property or casualty loss
or similar events, unless the funds are to be utilized by the
Company for an Approved Restoration Plan; or (b) upon the receipt
by the Company of proceeds realized in connection with a Project
Agreement Buyout.

Change in Control Put

Upon the occurrence of a Change of Control each Holder will
have the right to require the Company to repurchase all or any
part of such Holder's Securities at a purchase price in cash
equal to 101% of the principal amount thereof, plus accrued
interest to the date of repurchase in accordance with the
procedures set forth in the Indenture. There is no assurance
that upon a Change in Control the Company will have sufficient
funds to repurchase the Securities.

Distributions

Prior to Completion, there will be no distributions to the
Company or its shareholders. After Completion, distributions may
be made only from and to the extent of monies on deposit in the
Distribution Fund or Distribution Suspense Fund. Distributions
are subject to the prior satisfaction of the following
conditions:

(a) the amounts contained in the Principal Fund and the
Interest Fund will be equal to or greater than the aggregate
scheduled principal and interest payments next due on the
Securities;

(b) no Default or Event of Default under the Indenture
shall have occurred and be continuing;

(c) the Debt Service Coverage Ratio for the preceding 12-
month period is equal to or greater than 1.35 to 1 as certified
by an officer of the Company;

(d) the projected Debt Service Coverage Ratio of the
Securities for the succeeding 12-month period is equal to or
greater than 1.35 to 1, as certified by an officer of the
Company; and

(e) the Debt Service Reserve Fund has a balance equal to or
greater than the Debt Service Reserve Fund Required Balance.

Ranking and Security for the Securities

The Old Securities and the FRNs were, and the New Securities
and Additional Securities are, Senior Debt of the Company and are
secured by (a) an assignment of all revenues received by the
Company from the Project; (b) a collateral assignment of all
material contracts; (c) a Lien on any accounts and funds on
deposit under the Depositary Agreement; (d) a pledge of
approximately 100% of the capital stock of the Company, subject
to release in certain circumstances relating to accessing
political risk insurance for the benefit of the shareholders; and
(e) a Lien on all other material assets and property interests of
the Company. The Securities will rank pari passu with and will
share the Collateral on a pro rata basis with certain other
Senior Secured Debt, if any (provided that the Debt Service
Reserve Fund shall be collateral solely for the obligations under
the Securities). The proceeds of any political risk insurance
covering the capital investment will not be part of the
collateral for the Securities. While under the Indenture the
Company may incur certain Permitted Debt senior to the
Securities, it has no present intention to do so.

Ratings

Moody's and Standard & Poor's have assigned the Securities
ratings of "Ba2" and "BB", respectively. There is no assurance
that any such credit rating will remain in effect for any given
period of time or that such rating will not be lowered, suspended
or withdrawn entirely by the applicable Rating Agency, if, in
such Rating Agency's judgment, circumstances so warrant.
Recently, Standard & Poor's placed the Securities on CreditWatch
with negative implications. Any such lowering, suspension or
withdrawal of any rating may have a Material Adverse Effect on
the market price or marketability of the Securities.

Nature of Recourse on the Securities

The Company's obligations to make payments of principal or,
premium, if any, and interest on the Old Securities and FRNs
were, and on the New Securities and Additional Securities are,
obligations solely of the Company secured solely by the
Collateral. Neither the shareholders of the Company nor any
Affiliate, including CalEnergy and Kiewit, incorporator,
officer, director or employee thereof or of the Company
guaranteed the payment of the Old Securities, the New Securities
or the FRNs, nor have any obligation with respect to payment of
the Securities or Additional Securities, except to the extent
that affiliates of CalEnergy and Kiewit who are stockholders of
the Company have pledged their capital stock in the Company as
security for the notes and bonds issued by the Company. As a
result, payment of the Company's obligations depends upon the
availability of sufficient revenues from the Company's business
after the payment of operating expenses.

Incurrence of Additional Debt

The Company shall not incur any Debt other than "Permitted
Debt." "Permitted Debt" means:

(a) The Securities;

(b) After Completion, Debt incurred to finance the making
of capital improvements to the Casecnan Project required to
maintain compliance with applicable law or anticipated changes
therein; provided that no such Debt may be incurred unless at the
time of incurrence the Independent Engineer confirms as
reasonable (i) a certification by the Company (containing
customary assumptions and qualifications) that the proposed
capital improvements are reasonably expected to enable the
Casecnan Project to comply with applicable or anticipated legal
requirements and (ii) the calculations of the Company that
demonstrate, after giving effect to the incurrence of such Debt,
the minimum project Debt Service Coverage Ratio (x) for the next
four consecutive fiscal quarters, commencing with the quarter in
which such Debt is incurred, taken as one annual period, and (y)
for each subsequent fiscal year through the Final Maturity Date,
will not be less than 1.3 to 1;

(c) After Completion, Debt incurred to finance the making
of capital improvements to the Casecnan Project not required by
applicable law, so long as after giving effect to the incurrence
of such Debt (i) no Default or Event of Default has occurred and
is continuing, and (ii)(A) the Independent Engineer confirms as
reasonable (I) a certification by the Company (containing
customary assumptions and qualifications) that the proposed
capital improvements are technically feasible and prudent and
(II) the calculations of the Company that demonstrate, after
giving effect to the incurrence of such Debt, (x) the minimum
project Debt Service Coverage Ratio for the next four consecutive
fiscal quarters, commencing with the quarter in which such Debt
is incurred, taken as one annual period, and in every fiscal year
thereafter, will not be less than 1.4 to 1 and (y) the average
projected Debt Service Coverage Ratio for all succeeding fiscal
years until the Final Maturity Date will not be less than 1.7 to
1, or (B) the Rating Agencies confirm that the incurrence of such
Debt will not result in a Rating Downgrade.

(d) After Completion, Working Capital Debt in an aggregate
amount outstanding at any time not to exceed $5 million;

(e) Debt incurred in connection with certain permitted
interest rate and currency hedging arrangements;

(f) Subordinated Debt from Affiliates in an aggregate
amount not to exceed $150 million prior to Completion and $100
million after Completion, which shall be used to finance capital,
operating or other costs with respect to the Project;

(g) Debt incurred for purposes for which Permitted Liens
may be incurred;

(h) Debt contemplated to be incurred pursuant to the
Casecnan Project Documents, including obligations in connection
with any letter of credit in an aggregate amount outstanding at
any time not to exceed $15 million;

(i) Purchase Money Debt and other ordinary course trade
Debt to support operation and maintenance of the Casecnan
Project, in an aggregate amount at any time not to exceed $35
million;

(j) Permitted Refinancing Debt, if, as certified by an
authorized officer of the Company at the time of incurrence,
(A)(i) after giving effect to the incurrence of such Debt, (x)
the minimum projected Debt Service Coverage Ratio for the next
four consecutive fiscal quarters in which such Debt is incurred,
taken as one annual period, and in every fiscal year thereafter,
will not be less than 1.5 to 1, and (y) for each subsequent
fiscal year through the Final Maturity Date, the average project
Debt Service Coverage Ratio will not be less than 2.0 to 1, and
(ii) the final maturity and average life of the Debt incurred
each exceed those of the Debt remaining, (B) each principal
payment equals that of each corresponding principal payment of
the Debt being replaced or (C) the Rating Agencies confirm that
the incurrence of such Debt will not result in a Rating
Downgrade; and

(k) Debt incurred by the Company prior to Completion as
necessary for financing, engineering, construction, completion,
testing and start-up of the Project in accordance with an
Approved Completion Plan in order to achieve Completion ("Pre-
Completion Additional Debt"), provided that (i) the Rating
Agencies confirm that the incurrence of such Debt will not result
in a Rating Downgrade; or (ii)(A) the Independent Engineer has
confirmed (subject to customary assumptions and qualifications)
as reasonable the technical feasibility of the Approved
Completion Plan including a certification that (subject to
customary assumptions and qualifications) the net proceeds of
such Debt and other funds available to the Company (from
Liquidated Damages Proceeds or otherwise) are reasonably expected
to be sufficient to fund the costs of reaching Completion; and
(B) the Company certifies at the time of incurrence (with
customary assumptions and qualifications) that (x) the Approved
Completion Plan is technically feasible and prudent, (y) after
giving effect to the incurrence of such Debt, the minimum
projected Debt Service Coverage Ratio for the four fiscal
quarters commencing with the quarter that commences immediately
after the projected date of commercial operation of the Casecnan
Project, taken as one annual period, and in every fiscal year
thereafter, will not be less than 1.3 to 1, and (z) after giving
effect to incurrence of such Debt, the average projected Debt
Service Coverage Ratio for all succeeding Fiscal Years until the
Final Maturity Date will not be less than 1.5 to 1.

Principal Covenants

Principal covenants under the Indenture require the Company,
subject to certain exceptions and qualifications, (a) not to
incur (i) any Debt except Permitted Debt or (ii) any Lien upon
any of its assets except Permitted Liens; (b) not to enter into
any transaction of merger or consolidation, change its form of
organization, liquidate, wind-up or dissolve itself; (c) not to
enter into non-arm's length transactions or agreements with
Affiliates; (d) not to engage in any business other than as
contemplated by the Indenture; (e) not to enter into certain
change orders under the Turnkey Construction Contract or amend
the Approved Construction Budget and Schedule (or an Approved
Completion Plan), or amend, terminate or otherwise modify any
material Project Document to which it is a party, except as
permitted under the Indenture; (f) not to sell, lease or transfer
any property or assets material to the Casecnan Project except in
the ordinary course of business; (g) to construct the Casecnan
Project in accordance with the Approved Construction Budget and
Schedule; (h) to operate and maintain the Casecnan Project in
accordance with the Approved Operation and Maintenance Budget;
(i) to maintain insurance as required under the Indenture; and
(j) to enter into an interest rate agreement for the FRNs, within
30 days of Closing, at a LIBOR cap of up to 7.5%.

Insurance

The Company maintains insurance with respect to the Casecnan
Project of a type and in such amounts as are generally carried by
companies engaged in similar businesses and owning similar
projects that are financed in a similar manner. These coverages
will include casualty insurance, including flood and earthquake
coverage, business interruption insurance, primary and excess
liability insurance, automobile insurance and workers
compensation insurance. However, the proceeds of such insurance
may not be adequate to cover reduced revenues, increased expenses
or other liabilities arising from the occurrence of catastrophic
events. Moreover, there can be no assurance that such insurance
coverage will be available in the future at commercially
reasonable rates or that the amounts for which the Company will
be insured will cover all losses. Nevertheless, the Company will
not reduce or cancel coverages if the Insurance Consultant
determines it is not reasonable to do so and insurance is
available on commercially reasonable terms.

Regulatory Matters

The Company is subject to a number of Philippine statutory and
regulatory standards and required and desirable approvals,
including those relating to energy and environmental laws. Many
permits and regulatory approvals are required and desirable for
the construction and operation of the Casecnan Project. A number
of these permits and regulatory approvals have not yet been
obtained. Some of the permits and regulatory approvals that have
been obtained contain conditions, and a number of the permits and
approvals not yet obtained may contain conditions when they are
issued. Delay in receipt of or failure to obtain these permits
or approvals or to satisfy any of these conditions could delay
completion of the construction of the Casecnan Project, restrict
the operation of the Casecnan Project, or result in additional
costs or taxes. The adoption of new laws, policies or
regulations, or changes in the interpretation or application of
existing laws, policies and regulations, that modify the present
regulatory environment could have a material adverse effect on
the Company's ability to construct or operate the Casecnan
Project and could trigger the Company's right to sell the Project
to NIA. Upon such sale, the Securities will be subject to
mandatory redemption.

Employees

After Completion, the Casecnan Project is expected to employ
approximately 25 people, consisting of operations, maintenance,
logistics, compliance, and engineering personnel, including some
personnel presently employed by CalEnergy, Kiewit or their
respective Affiliates. At the powerhouse control room, personnel
will monitor, direct and control the operations and maintenance
of the whole Casecnan Project. The control room will be staffed
24 hours per day and will be the contact point for the Casecnan
Project's customers and others. At the diversion structures,
personnel will be responsible to ensure that the trash racks at
the tunnel intakes are kept clean and maintained and that
excessive sediment build-up behind the structure is prevented.

Item 2. Properties

CE Casecnan does not separately own or lease office space but has
arranged for a separate suite at the offices of CalEnergy's
affiliate in Manila.

Item 3. Legal Proceedings

There is no litigation pending or, to the knowledge of the
Company, threatened that, if adversely determined, would have a
material adverse effect on the business, operations, properties
or financial condition of the Company.

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

Not Applicable.

PART II

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

Not Applicable.

Item 6. Selected Financial Data

Dollars in Thousands Except Per Share Amounts

Year Ended December 31,
1996 1995 1994
Total revenue $ 25,611 $ 2,494 $ ---
Expenses 42,852 4,340 ---
Loss before provision for income taxes (17,241) (1,846) ---
Net loss to common stockholders (13,211) (1,200) ---
Net loss per share - primary (17.22) (2.09) ---
Total assets 490,162 501,160 2,349
Total liabilities 380,737 378,524 1,799
Notes and bonds payable 371,500 371,500 ---
Stockholders' equity 109,425 122,636 550

Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations,
Dollars in thousands expect per share amounts

Results of Operations:

The Company is in the construction stage and has not yet
started commercial operations as of December 31, 1996. The
quarter and year ended December 31, 1996 revenue of $5,905 and
$25,611, respectively, consists of interest income from cash
received from bond proceeds and equity contributions. The
quarter and year ended December 31, 1996 interest expense of
$11,439 and $45,746 less amounts capitalized of $1,481 and $3,843
and amortization of bond issue costs of $239 and $949 are related
to the notes and bonds payable issued by the Company in the
fourth quarter of 1995.

Liquidity and Capital Resources:

In November 1995 the Company closed the financing and
commenced construction of the Casecnan Project, a combined
irrigation and 150 net MW hydroelectric power generation project
located in the central part of the island of Luzon in the
Republic of the Philippines.

CE Casecnan which is presently indirectly owned as to
approximately 35% of its equity by CalEnergy and approximately
35% by Kiewit, is developing the Casecnan Project under the terms
of the Project Agreement ("Project Agreement") between CE
Casecnan and the National Irrigation Administration ("NIA").
Under the Project Agreement, CE Casecnan will develop, finance
and construct the Casecnan Project over an estimated four-year
construction period, and thereafter own and operate the Casecnan
Project for 20 years (the "Cooperation Period"). During the
Cooperation Period, NIA is obligated to accept all deliveries of
water and energy, and so long as the Casecnan Project is
physically capable of operating and delivering in accordance with
agreed levels set forth in the Project Agreement, NIA will pay CE
Casecnan a guaranteed fee for the delivery of water and a
guaranteed fee for the delivery of electricity, regardless of the
amount of water or electricity actually delivered. In addition,
NIA will pay a fee for all electricity delivered in excess of a
threshold amount up to a specified amount. NIA will sell the
electric energy it purchases to the Philippine National Power
Corporation ("NPC"), although NIA's obligations to CE Casecnan
under the Project Agreement are not dependent on the purchase of
the electricity from NIA by NPC. All fees to be paid by NIA to
CE Casecnan are payable in U.S. dollars. The guaranteed fees for
the delivery of water and energy are expected to provide
approximately 70% of CE Casecnan's revenues.

The Project Agreement provides for additional compensation to
CE Casecnan upon the occurrence of certain events, including
increases in Philippine taxes and adverse changes in Philippine
law. Upon the occurrence and during the continuance of certain
force majeure events, including those associated with Philippines
political action, NIA may be obligated to buy the Casecnan
Project from CE Casecnan at a buy out price expected to be in
excess of the aggregate principal amount of the outstanding CE
Casecnan debt securities, together with accrued but unpaid
interest. At the end of the Casecnan Cooperation Period, the
Casecnan Project will be transferred to NIA and NPC for no
additional consideration on an "as is" basis.

The Casecnan Project is being constructed on a joint and
several basis by Hanbo Corporation and Hanbo Engineering &
Construction Co. Ltd. (formerly known as You One Engineering &
Construction Co., Ltd., and herein referred to as "HECC"), both
of which are South Korean corporations, pursuant to a fixed-
price, date-certain, Turnkey Construction Contract (the "Turnkey
Construction Contract"). Hanbo Corporation and HECC (sometimes
collectively referred to as the "Contractor") are under common
ownership control. Hanbo Corporation is an international
construction company. HECC, which recently emerged from a court-
administered receivership, is a contractor with over 25 years
experience in tunnel construction, using both the drill-and-blast
and tunnel boring machine ("TBM") methods.

The Contractor's obligations under the Turnkey Construction
Contract are guaranteed by Hanbo Iron & Steel Company, Ltd.
("Hanbo Steel"), a large South Korean steel company. In
addition, the Contractor's obligations under the Turnkey
Construction Contract are secured by an unconditional,
irrevocable standby letter of credit issued by Korea First Bank
("KFB") in the approximate amount of $118,000. The total cost of
the Casecnan Project, including development, construction,
testing and startup, is estimated to be approximately $495,000.
The current capital structure consists of term loans of $371,500
and $123,836 in equity contributions. As of December 31, 1996
the Company has incurred costs of $63,359. Cash, restricted cash
and restricted investments totaled $417,169 at December 31, 1996.

CE Casecnan financed a portion of the costs of the Casecnan
Project through the issuance of $125,000 of its 11.45% Senior
Secured Series A Notes due 2005 and $171,500 of its 11.95% Senior
Secured Series B Bonds due 2010 and $75,000 of its Secured
Floating Rate Notes due 2002, pursuant to an indenture dated
November 27, 1995, as amended to date (the "Casecnan Indenture").
Although no default has occurred under the Casecnan Indenture as
a result of the announced receivership of Hanbo Corporation, CE
Casecnan will continue to closely monitor the Hanbo group and KFB
developments and project construction status and develop
appropriate contingency plans.

If Contractor materially fails to perform its obligations
under the Turnkey Construction Contract and if KFB were to fail
to honor its obligations under the Casecnan letter of credit,
such actions could have a material adverse effect on the Casecnan
Project and CE Casecnan.

The securities are senior debt of the Company and are
secured by a collateral assignment of all revenues received from
the Project, a collateral assignment of all material contracts, a
lien on any accounts and funds on deposit under a Deposit and
Disbursement Agreement, a pledge of 100% of the capital stock of
the Company and a lien on all other material assets and property.
The securities rank pari passu with and will share the collateral
on a pro rata basis with other senior secured debt, if any.

The securities are subject to certain optional and mandatory
redemption schemes as provided for in the offering circular.

The debt covenants contain certain restrictions as to
incurrence of additional indebtedness; merger, consolidation,
dissolution, or any significant change in corporate structure;
non-arm's length transactions or agreements with affiliates;
material change in the Turnkey Construction Contract; and sale,
lease, or transfer of properties material to the Project, among
others.

The financial statements of the Company were prepared in
United States Dollar amounts. Gains or losses from translation
of monetary assets and liabilities in foreign currencies are not
material.
Item 8. Financial Statements and Supplementary Data

Report of Independent Public Accountants

Balance Sheets, December 31, 1996 and 1995

Statements of Operations for the Years Ended
December 31, 1996 and 1995

Statements of Changes in Stockholders' Equity for the Period from
Inception (September 21, 1994) to December 31, 1996

Statements of Cash Flows for the Years Ended December 31, 1996
and 1995 and for the Period from Inception (September 21, 1994)
to December 31, 1996

Notes to Financial Statements

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Stockholders and the Board of Directors
CE Casecnan Water and Energy Company, Inc.

We have audited the accompanying balance sheets of CE Casecnan
Water and Energy Company, Inc. (a company in the development
stage) as of December 31, 1996 and 1995, and the related
statements of operations for the years then ended, changes in
stockholders' equity for the period from date of inception
(September 21, 1994) to December 31, 1996, and cash flows for the
years then ended and for the period from inception (September 21,
1994) to December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of CE Casecnan Water and Energy Company, Inc. as of December 31,
1996 and 1995, and the results of its operations and its cash
flows for the periods then ended, and the period from inception
(September 21, 1994) to December 31, 1996, in conformity with
accounting principles generally accepted in the United States of
America.

SYCIP, GORRES, VELAYO & CO.
An Arthur Andersen Member Firm

6760 Ayala Avenue
Makati City, Philippines
January 16, 1997

CE CASECNAN WATER AND ENERGY COMPANY, INC.

BALANCE SHEETS
(in thousands, except share and per share amounts)
________________________________

December 31, December 31,

1996 1995
ASSETS
Cash $ 32 $ 1,696
Restricted cash and short-term
investments 144,12 2 235,851
Accrued interest and other receivables 4,958 2,820
Restricted investments 273,015 238,465
Bond issue costs, net 12,566 13,342
Development costs 50,793 8,340
Deferred income tax 4,676 646

Total assets $490,162 $501,160

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
Accounts payable and accrued expenses $ 8,803 $ 5,951
Advances from an affiliate 434 1,073
Notes and bonds payable 371,500 371,500

Total liabilities 380,737 378,524

Commitments and contingencies

Stockholders' equity:
Common stock - par value $0.038 per share,
authorized 2,148,000 shares, issued and
outstanding 767,162 shares at December 31,
1996 and December 31, 1995, respectively 29 29
Additional paid in capital 123,807 123,807
Accumulated deficit (14,411) (1,200)

Total stockholders' equity 109,425 122,636

Total liabilities and stockholders'
equity $490,162 $501,160

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

CE CASECNAN WATER AND ENERGY COMPANY, INC.

STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
________________________________

Year Ended Year Ended
December 31, December 31,
1996 1995

Revenues:
Interest and other income $25,611 $ 2,494

Total revenues 25,611 2,494

Costs and expenses:

Interest expense 45,746 4,349
Less interest capitalized (3,843) (84)
Amortization of bond issue costs 949 75

Total cost and expenses 42,852 4,340

Loss before income taxes (17,241) (1,846)

Deferred income tax benefit 4,030 646

Net loss to common stockholders $(13,211) $(1,200)

Net loss per share - primary $ (17.22) $ (2.09)
Average number of common and
common equivalent shares
outstanding 767,162 575,372

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

CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from Inception (September 21,1994)
to December 31, 1996
(in thousands, except share and per share amounts)
________________________________

Outstanding Additional
Common Common Paid-in Accumulated
Shares Stock Capital Deficit Total

Balance, September 21, 1994 - $ - $ - $ - $ -

Issuance of common shares at
$0.038 par value 537,014 20 530 - 550

Balance, December 31, 1994 537,014 20 530 - 550

Additional issuance of
stock (Note 7) 230,148 9 - - 9

Additional paid-in
capital (Note 5) - - 123,277 - 123,277

Net loss - - - (1,200) (1,200)

Balance, December 31, 1995 767,162 29 123,807 (1,200) 122,636

Net loss - - - (13,211) (13,211)

Balance, December 31,1996 767,162 $ 29 $123,807 $(14,411) $109,425

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

CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
________________________________
<TABLE>
<CAPTION>
From Inception
Year Ended Year Ended (September 21, 1994)
December 31, December 31, to December 31,
1996 1995 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(13,211) $(1,200) $ (14,411)
Adjustments to reconcile net cash
flow from operating activities:
Provision for deferred income
tax benefit (4,030) (646) (4,676)
Amortization of bond issue costs 949 75 1,024
Increase in accrued interest and
other receivables (2,138) (2,820) (4,958)
Increase in accounts payable and
accrued expenses 1,828 4,266 6,094

Net cash flows from operating
activities (16,602) (325) (16,927)

Cash flows from investing activities:
Additions to development costs (42,453) (6,541) (50,793)
Decrease (increase) in restricted
cash and short-term investments 91,729 (235,851) (144,122)
Increase in restricted investments (34,550) (238,465) (273,015)
Increase in accounts payable and accrued
expenses related to development activities 1,303 1 ,406 2,709

Net cash flows from investing activities 16,029 (479,451) (465,221)

Cash flows from financing activities:
Issuance of bonds payable - 371,500 371,500
Proceeds from issuance of capital stock - 9 29
Additional paid-in capital - 123,277 123,807
Bond issue costs (173) (13,417) (13,590)
Accrued expense related to financing activities (279) 279 -
Advances from an affiliate (639) (726) 434

Net cash flows from financing activities (1,091) 480,922 482,180

Net increase (decrease) in cash and
cash equivalents (1,664) 1,146 32
Cash and cash equivalents at beginning
of period 1,696 550 -
Cash and cash equivalents at end of period $ 32 $ 1,696 $ 32
Supplemental disclosure of cash flow information
Interest paid during the year
(net of amount capitalized) $40,074 $ - $ 40,074

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

CE CASECNAN WATER AND ENERGY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(in thousands, except share and per share amounts)
________________________________

1. Organization

The Company was registered with the Philippine Securities
and Exchange Commission on September 21, 1994, with a fiscal
year which ends on December 31. Its primary purpose is to
design, develop, construct, erect, assemble, commission,
operate and own a hydroelectric power plant and the related
facilities for conversion into electricity of water provided
by and under contract with the Philippine Government or any
government-owned or controlled corporation.

The Company has a contract with the Philippine Government,
through the National Irrigation Administration (NIA) (a
government-owned and controlled corporation), for the
development and construction of a hydroelectric power plant
and related facilities under a build-own-operate-transfer
agreement, covering a 20-year cooperation period with "take-or-
pay" obligations for water and electricity. At the end of the
20-year cooperation period, the combined irrigation and 150
net MW hydroelectric power generation project (the Casecnan
Project) will be transferred to the Philippine Government at
no cost. The Philippine Government also signed a performance
undertaking which, among others, affirms and guarantees the
obligations of NIA under the contract. Construction of the
Casecnan Project has commenced in 1995 and related costs are
included in the Development Costs account.

The Company is in the development stage and has not yet
started commercial operations as of December 31, 1996.

After the completion of the aforementioned project, the
Company will be owned as follows: 35% by CalEnergy Company,
Inc. (CECI), through its wholly owned subsidiary, CE Casecnan
Ltd.; 35% by Kiewit Energy International (Kiewit); 15% by
LaPrairie Group Contractors (International) Ltd. (LaPrairie);
and 15% by San Lorenzo Ruiz Builders & Developers Group, Inc.
(San Lorenzo Ruiz), subject to adjustment based upon the
economics of the Casecnan Project at commencement of
commercial operations.

2. United States Dollar Financial Statements

The financial statements of the Company were prepared in
United States dollar amounts. Gains or losses resulting from
translation of monetary assets and liabilities in foreign
currencies are not material.

3. Summary of Significant Accounting Policies

Restricted Cash and Short-term Investments
Investments other than restricted cash are primarily
commercial paper and money market securities. Restricted cash
includes similar securities and mortgage-backed securities.

The Company classifies investments and accounts for changes
in their fair value in accordance with Financial Accounting
Standards (FAS) No. 115 "Accounting for Certain Investments in
Debt and Equity Securities." Since the Company has the
positive intent and ability to hold all of its investments to
maturity, these are classified as held to maturity and
recorded at amortized cost. The carrying amount of
investments as of December 31, 1996 approximates their fair
value which is based on quoted market prices as provided by
the financial institution holding the investments.

Bond Issue Costs
Bond issue costs consist of costs incurred in the issuance
of senior secured notes and bonds and are amortized over the
term of the notes and bonds using the effective interest rate
method.

Development Costs
Costs related to the development and construction of the
hydroelectric power plant and related facilities are
capitalized and will be amortized over a period of 20 years
from the start of its commercial operations.

Interest Capitalization
Interest and other financial charges are capitalized as part
of the cost of capital projects. Interest is capitalized to
the extent of incurred construction and development costs.

Foreign Exchange Transactions
The Company prepares its financial statements in United
States dollar amounts. Transactions conducted in foreign
currencies (Philippine pesos) are recorded based on the
prevailing rates of exchange at transaction dates. Monetary
assets and liabilities denominated in foreign currencies
(Philippine pesos) are restated in the financial statements at
the exchange rates prevailing at the balance sheet date.

Income Tax
Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between
financial reporting bases of assets and liabilities and their
related tax bases. Deferred tax assets and liabilities are
measured using the tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. A valuation allowance is
provided for deferred tax assets which is more likely than not
that a tax benefit will not be realized.

Notes and Bonds Payable
The Company classifies in notes and bonds payable and
accounts for changes in their fair value in accordance with
FAS No. 107 "Disclosures about Fair Value of Financial
Instruments". The carrying amount of the Company's notes and
bonds payable is a reasonable estimate of its fair value as
interest rates are variable based on prevailing market rates.

4. Advances from an Affiliate

This account represents noninterest-bearing cash advances
from CE Casecnan Ltd., a stockholder, f
for the construction of the Project.

5. Notes and Bonds Payable

On November 27, 1995, the Company issued US$371,500 worth of
notes and bonds to finance t he
construction of the Project. These consist of US$75,000
Senior Secured Floating Rate Notes (FRNs) due 2002; US$125,000
Senior Secured Series A Notes (Series A Notes) with interest
at 11.45% due 2005; and US$171,500 Senior Secured Series B
Bonds (Series B Bonds) with interest at 11.95% due 2010. For
the year ended December 31, 1996, the notes and bonds had
effective interest rates of 9.29%, 12.12% and 12.56% for FRNs,
Series A Notes and Series B Bonds, respectively, inclusive of
the effect of bond issue cost amortization. Quarterly
interest payments for the FRNs commenced on February 15, 1996,
and semiannual interest payments for Series A Notes and Series
B Bonds commenced on May 15, 1996.

Semiannual installments for principal payments will commence
on November 15, 2000, May 15, 2003 and May 15, 2002 for the
FRNs, Series A Notes and Series B Bonds, respectively. The
repayment schedule is as follows:

Floating Rates Series A Series B
Notes Notes Bonds Total

2000 $18,750 $ --- $ --- $18,750
2001 29,625 --- --- 29,625
2002 26,625 --- 8,575 35,200
2003 --- 33,750 7,718 41,468
2004 --- 42,500 6,860 49,360
2005 --- 48,750 6,002 54,752
2006 --- --- 36,015 36,015
2007 --- --- 37,730 37,730
2008 --- --- 37,730 37,730
2009 --- --- 13,720 13,720
2010 --- --- 17,150 17,150
$75,000 $125,000 $171,500 $371,500

The securities are senior debt of the Company and are
secured by an assignment of all revenues received from the
Project, a collateral assignment of all material contracts, a
lien on any accounts and funds on deposit under a Deposit and
Disbursement Agreement, a pledge of 100% of the capital stock
of the Company and a lien on all other material assets and
property interests of the Company. The securities rank pari
passu with and will share the collateral on a pro rata basis
with other senior secured debt, if any. The securities are
subject to certain optional and mandatory redemption schemes
as provided for in the offering circular.

The debt covenants contain certain restrictions as to
incurrence of additional indebtedness; merger, consolidation,
dissolution, or any significant change in corporate structure;
non-arm's length transactions or agreements with affiliates;
material change in the Turnkey Construction Contract (see Note
8); sale, lease, or transfer of properties material to the
Project, among others.

In connection with the foregoing secured indebtedness, the
Company, on November 27, 1995, entered into a Deposit and
Disbursement Agreement with Chemical Trust Company of
California (Chemical Trust) and Kiewit whereby Chemical Trust
will act as a depositary and a collateral agent. As a
depositary agent, it will hold moneys, instruments and
securities pledged by the Company to the collateral agent.
The terms of this agreement require the establishment of
several funds which include a Capital Contribution Fund. CE
Casecnan Ltd. and Kiewit deposited an aggregate capital
contribution of approximately US$123,300 to the fund which
will be strictly used to fund the construction of the Project
when the proceeds from the Series A Notes and Series B Bonds
have been fully utilized.

6. Income Tax

The Company's deferred tax asset amounting to $4,676 (net of
valuation allowance of $2,004) and $646 as of December 31,
1996 and 1995, respectively, consists mainly of the difference
between the financial reporting basis and the tax reporting
basis for development costs.

7. Capital Stock

On October 26, 1995, the Company issued 230,148 shares to
LaPrairie and San Lorenzo Ruiz out of the Company's
unsubscribed portion of its authorized capital stock.

LaPrairie and San Lorenzo Ruiz initially formed a venture to
pursue the opportunity of developing a water and energy
project in the Casecnan Basin. After securing preliminary
indications of interest from the Philippine Government,
LaPrairie and San Lorenzo Ruiz sought out other shareholders
to form a new entity capable of financing and building the
Project. In consideration of their role in initiating the
Project and delivering the opportunity to the Company and, in
the case of San Lorenzo Ruiz, performing development
assistance, LaPrairie and San Lorenzo Ruiz retained an
ownership interest in the Company.

8. Commitments, Contingencies and Other Matters

In November 1995, the Company closed the financing and
commenced construction of the Casecnan Project, a combined
irrigation and 150 MW hydroelectric power generation project
(the "Casecnan Project") located in the central part of the
island of Luzon in the Republic of the Philippines. The
Casecnan Project will consist generally of diversion
structures in the Casecnan and Denip Rivers that will divert
water into a tunnel of approximately 23 kilometers. The
tunnel will transfer the water from the Casecnan and Denip
Rivers in the Pantabangan Reservoir for irrigation and
hydroelectric use in the Central Luzon area. An underground
power house located at the end of the water tunnel and before
the Pantabangan Reservoir will house a power plant consisting
of approximately 150 MW of newly installed rated electrical
capacity. A tailrace tunnel of approximately three kilometers
will deliver water from the water tunnel and the new
powerhouse to the Pantabangan Reservoir, providing additional
water for irrigation and increasing the potential electrical
generation at two downstream existing hydroelectric facilities
of the National Power Corporation of the Philippines ("NPC").

The Company is developing the Casecnan Project under the
terms of the Project Agreement between the Company and the
National Irrigation Administration ("NIA"). Under the Project
Agreement, the Company will develop, finance and construct the
Casecnan Project over an estimated four-year construction
period, and thereafter own and operate the Casecnan Project
for 20 years (the "Cooperation Period"). During the
Cooperation Period, NIA is obligated to accept all deliveries
of water and energy, and so long as the Casecnan Project is
physically capable of operating and delivering in accordance
with agreed levels set forth in the Project Agreement, NIA
will pay the Company a guaranteed fee for the delivery of
water and a guaranteed fee for the delivery of electricity,
regardless of the amount of water or electricity actually
delivered. In addition, NIA will pay a fee for all
electricity delivered in excess of a threshold amount up to a
specified amount. NIA will sell the electric energy it
purchases to NPC, although NIA's obligations to the Company
under the Project Agreement are not dependent on NPC's
purchase of the electricity from NIA. All fees to be paid by
NIA to the Company are payable in U.S. dollars. The
guaranteed fees for the delivery of water and energy are
expected to provide approximately 70% of the Company's
revenues.

The Project Agreement provides for additional compensation
to the Company upon the occurrence of certain events,
including increases in Philippine taxes and adverse changes in
Philippine law. Upon the occurrence and during the
continuance of certain force majeure events, including those
associated with Philippines political action, NIA may be
obligated to buy the Casecnan Project from the Company at a
buy out price expected to be in excess of the aggregate
principal amount of the outstanding Company debt securities,
together with accrued but unpaid interest. At the end of the
Cooperation Period, the Casecnan Project will be transferred
to NIA and NPC for no additional consideration on an "as is"
basis.

The Republic of the Philippines has provided a Performance
Undertaking under which NIA's obligations under the Project
Agreement are guaranteed by the full faith and credit of the
Republic of the Philippines. The Project Agreement and the
Performance Undertaking provide for the resolution of disputes
by binding arbitration in Singapore under international
arbitration rules.

The Casecnan Project is being constructed on a joint and
several basis by Hanbo Corporation and Hanbo Engineering &
Construction Co. Ltd. (formerly known as You One Engineering &
Construction Co., Ltd., and herein referred to as "HECC"),
both of which are South Korean corporations, pursuant to a
fixed-price, date-certain, turnkey construction contract (the
"Turnkey Construction Contract"). Hanbo Corporation and HECC
(sometimes collectively referred to as the "Contractor") are
under common ownership control. Hanbo Corporation is an
international construction company. HECC, which recently
emerged from a court-administered receivership, is a
contractor with over 25 years experience in tunnel
construction, using both the drill-and-blast and tunnel boring
machine ("TBM") methods.

The Company was recently advised that Hanbo Corporation and
Hanbo Steel had each filed to seek court receivership
protection in Korea. At the present time, all of the
construction work on the Casecnan Project is being performed
by the second contractor which is party to the Turnkey
Construction Contract, HECC. Although HECC, Hanbo Corporation
and Hanbo Steel are under common ownership control, HECC has
not filed for receivership protection and is believed to be
solvent. However, no assurances can be given that HECC will
not file for receivership due to the foregoing developments or
that it will remain solvent and able to perform fully its
obligations under the Turnkey Construction Contract.

The work on the Casecnan Project, which commenced in 1995,
is presently continuing on schedule and within the budget.
The Company is presently reviewing its rights, obligations and
potential remedies in respect of the recent developments
regarding the co-Contractor and the guarantor and is presently
unable to speculate as to the ultimate effect of such
developments on the Company. However, the Company has
recently received confirmation from HECC that it intends to
fully perform its obligations under the Turnkey Construction
Contract and complete the Casecnan Project on schedule and
within the budget. Additionally, it has been reported that
the South Korean government has informed the Philippine
government that the South Korean government will take
appropriate actions to support HECC's completion of the
Casecnan Project.

KFB has recently reconfirmed to the Company that it will
honor its obligations under the Casecnan Project letter of
credit and also has stated its support for the successful
completion of the Casecnan Project. However, Moody's
Investors Service has recently issued a warning for a possible
rating downgrade for Korea First Bank because of the possible
impact of the Hanbo Steel receivership on the substantial
loans KFB previously made to Hanbo Steel. In a related
development, the South Korean government has recently
announced that it would provide some funding to assist Hanbo
Steel's creditor banks (including Korea First Bank) and its
subcontractors.

The Company financed a portion of the costs of the Casecnan
Project through the issuance of $125,000 of its 11.45% Senior
Secured Series A Notes due 2005, $171,500 of its 11.95% Senior
Secured Series B Notes due 2010, and $75,000 of its FRNs
pursuant to an indenture dated November 27, 1995, as amended
to date (the "Casecnan Indenture"). Although no default has
occurred under the Casecnan Indenture as a result of the
announced receivership of Hanbo Corporation, the Company will
continue to closely monitor the Hanbo group and KFB
developments and project construction status and develop
appropriate contingency plans.

If HECC were to materially fail to perform its obligations
under the Turnkey Construction Contract and if KFB were to
fail to honor its obligations under the Casecnan letter of
credit, such actions could have a material adverse effect on
the Casecnan Project and the Company. However, based on the
information presently available to it, the Company does not
presently expect that either such event will occur.

CE Casecnan's ability to make payments on any of its
existing and future obligations is dependent on NIA and the
Republic of the Philippines' performance of their obligations
under the Project Agreement and the Performance Undertaking,
respectively. No shareholders, partners or affiliates of CE
Casecnan, including CECI and Kiewit, and no directors,
officers or employees of CE Casecnan will guarantee or be in
any way liable for payment of CE Casecnan's obligations. As a
result, payment of CE Casecnan's obligations depends upon the
availability of sufficient revenues from CE Casecnan's
business after the payment of operating expenses.

NIA's payments of obligations under the Project Agreement
are expected to be CE Casecnan's sole source of operating
revenues. Because of CE Casecnan's dependence on NIA, any
material failure of NIA to fulfill its obligations under the
Project Agreement and any material failure of the Republic of
the Philippines to fulfill its obligations under the
Performance Undertaking would significantly impair the ability
of CE Casecnan to meet its existing and future obligations.

There were no material outstanding lawsuits as of December
31, 1996.

9. Registration with the Board of Investments (BOI)

The Company is registered with the BOI of the Philippines as
a new operator of a hydroelectric power plant with pioneer
status under the Omnibus Investment Code of 1987 (Executive
Order No. 226). Under the terms of the registration, the
Company is entitled to certain incentives which include an
income tax holiday for a minimum of six years; tax and duty
free importation of capital equipment; tax credits on domestic
capital equipment; and exemption from custom duties and
national internal revenue taxes for the importation and
unrestricted use of the consigned equipment for the
development, construction, start-up, testing and operation of
the power plant. The registration also requires, among
others, the maintenance of a debt-to-equity ratio not
exceeding 75:25 commencing from the start of commercial
operations.

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

Not Applicable
PART III

Item 10. Directors and Executive Officers of the Company

The following table sets forth the names, ages, and
positions of the directors and executive officers of the Company:

NAME AGE POSITION

David L. Sokol 40 Director, Chairman and Chief Executive Officer
Donald M. O'Shei, Jr. 38 Director, Vice Chairman, President
and Chief Operating Officer, Asia
Gregory E. Abel 34 Executive Vice President and Chief
Accounting Officer
Douglas L. Anderson 39 Assistant Vice President
Edward F. Bazemore 60 Vice President - Human Resources
Vincent R. Fesmire 56 Vice President - Construction
James A. Flores 43 Assistant Treasurer
Brian Hankel 34 Treasurer
Scott LaPrairie 39 Director
Steven A. McArthur 39 Director, Senior Vice President and
General Counsel
Ruby S. Nitorreda 33 Director and Assistant Corporate Secretary
Elizabeth B. Opena 27 Director
Jose R. Sandejas 59 Director and Corporate Secretary
Robert S. Silberman 39 Senior Vice President, Strategic Planning
& Implementation
James D. Stallmeyer 39 Vice President and General Counsel, Asia
John G. Sylvia 39 Director, Senior Vice President and
Chief Financial Officer
Russ L. Tenney 43 Director and Vice President, Philippine
Operations
Oscar Violago 52 Director

Each of the nine directors of the Company is elected
annually and holds office until a successor is elected.
Executive officers are chosen from time to time by vote of the
Board of Directors. Pursuant to the terms of the Stockholders
Agreement, CE Casecnan Ltd. is entitled to elect four of the nine
directors, KEIL Casecnan Ltd. is entitled to elect three of the
directors, and each of the minority investors is entitled to
elect one director.

David L. Sokol. In addition to serving as a Director and
Chairman and Chief Executive Officer of the Company, Mr. Sokol
has been a director of CalEnergy since March 1991 and currently
the Chairman and Chief Executive Officer of CalEnergy. Mr. Sokol
also held the title of President of CalEnergy from April 19, 1993
until January 21, 1995. Mr. Sokol was Chairman, President, and
Chief Executive Officer of CalEnergy from February 1991 until
January 1992. Mr. Sokol was the President and Chief Operating
Officer, as well as a director, of JWP, Inc. from January 27,
1992 until October 1, 1992. From November 1990 until February
1991, Mr. Sokol was the President and Chief Executive Officer of
Kiewit Energy, Inc. From 1983 until November of 1990, Mr. Sokol
was the President and Chief Executive Officer of Ogden Projects,
Inc.

Donald M. O'Shei, Jr. In addition to serving as a Director,
Vice Chairman and President and Chief Operating Officer, Asia of
the Company, Mr. O'Shei is President and Chief Operating Officer
of CalEnergy Asia. Mr. O'Shei joined the Company in August 1992.
Prior to 1997, he served as General Manager_Indonesia and Vice
President of CE International Investments, Ltd. for the Company.
From 1991 to 1992, he was employed by Proven Alternatives Capital
Corporation as a Financial Analyst. Prior to 1991, Mr. O'Shei
served in the U.S. Army in the Special Forces, Airborne and
Pathfinder Units.

Gregory E. Abel. In addition to serving as Executive Vice
President and Chief Accounting Officer of the Company, Mr. Abel
is President and Chief Operating Officer of CalEnergy Europe and
Chief Accounting Officer of CalEnergy. Mr. Abel joined CalEnergy
in 1992. Mr. Abel is a Chartered Accountant and from 1984 to
1992 he was employed by Price Waterhouse. As a Manager in the
San Francisco office of Price Waterhouse, he was responsible for
clients in the energy industry.

Douglas L. Anderson. In addition to serving as Assistant
Vice President for the Company, Mr. Anderson is General Counsel,
CalEnergy Americas and Assistant Secretary and Assistant General
Counsel of CalEnergy. Mr. Anderson joined CalEnergy in February
1993. From 1990 to 1993 Mr. Anderson was a business attorney
with Fraser, Stryker, Vaughn, Meusey, Olson, Boyer & Bloch, P.C.
in Omaha and from 1987 through 1989 Mr. Anderson was a principal
in the firm Anderson & Anderson. Prior to that, from 1985 to
1987, he was an attorney for Foster, Swift, Collins & Coey, P.C.
in Lansing, Michigan.

Edward F. Bazemore. In addition to serving as Vice
President - Human Resources for the Company, he also serves in
the same capacity for CalEnergy. Mr. Bazemore joined CalEnergy
in July 1991. Prior to that he was Vice President, Human
Resources from 1989 to 1991 at Ogden Projects, Inc., Director of
Human Resources for Ricoh Corporation and Director of Industrial
Relations for Scripto, Inc.

Vincent R. Fesmire. In addition to serving as Vice
President - Construction for the Company, Mr. Fesmire is Vice
President, Construction and Engineering for CalEnergy. Mr.
Fesmire joined CalEnergy in October 1993. Prior to that Mr.
Fesmire was employed for 19 years at Stone & Webster, an
engineering firm.

James A. Flores. In addition to serving as Assistant
Treasurer for the Company, Mr. Flores is Manager, Project Finance
for CalEnergy. Mr. Flores joined CalEnergy in May 1994. Prior
to that Mr. Flores was employed at Mellon Bank in Pittsburgh, PA
from 1981 to 1994 and Citibank in 1980 and Manufacturers Hanover
Trust from 1977 to 1979.

Brian Hankel. In addition to serving as Treasurer for the
Company, he also serves in that capacity for CalEnergy. Mr.
Hankel joined CalEnergy in February 1992 as a Treasury Analyst
and became Assistant Treasurer in 1996. Prior to joining
CalEnergy, Mr. Hankel was employed at FirsTier Bank.

Scott LaPrairie. In addition to serving as a Director of
the Company, Mr. LaPrairie is President and Chief Executive
Officer of the LaPrairie Group of Companies.

Steven A. McArthur. In addition to serving as a Director,
Senior Vice President and General Counsel of the Company, Mr.
McArthur is a Senior Vice President, General Counsel, and
Secretary of CalEnergy. Mr. McArthur joined CalEnergy in
February of 1991. From 1988 to 1991 he was an attorney in the
Corporate Finance Group at Shearman & Sterling in San Francisco.
From 1984 to 1988, Mr. McArthur was an attorney in the Corporate
Finance Group at Winthrop, Stimson, Putnam & Roberts in New York.

Ruby S. Nitorreda. In addition to serving as a Director and
Assistant Corporate Secretary of the Company, Ms. Nitorreda is an
attorney with the law firm of Quisumbing Torres & Evangelista.

Jose R. Sandejas. In addition to serving as a Director and
Corporate Secretary of the Company, Mr. Sandejas is a partner
with the law firm of Quisumbing Torres & Evangelista.

Robert S. Silberman. In addition to serving as Senior Vice
President, Strategic Planning and Implementation of the Company,
Mr. Silberman is Senior Vice-President - Strategic Planning &
Implementation of CalEnergy. Mr. Silberman has served as
Executive Assistant to the Chairman and Chief Executive Officer
of International Paper, as Director of Project Finance and
Implementation for the Ogden Corporation, and as a Project
Manager in Business Development for Allied-Signal, Inc. He has
also served as the Assistant Secretary of the Army for the United
States Department of Defense.

James D. Stallmeyer. In addition to serving as Vice
President and General Counsel, Asia of the Company, Mr.
Stallmeyer is Assistant General Counsel of CalEnergy and General
Counsel of CalEnergy Asia. Mr. Stallmeyer joined the Company in
1993. Mr. Stallmeyer practiced in the public finance and banking
areas at Chapman and Cutler in Chicago from 1984 to 1987 and in
the corporate finance department from 1989 to 1993. Prior to
that, Mr. Stallmeyer was an attorney in the public finance
department of the Chicago office of Skadden, Arps, Slate, Meagher
& Flom in 1987 and 1988 and was a legal writing instructor at the
University of Illinois College of Law in 1988 and 1989.

John G. Sylvia. In addition to serving as Senior Vice
President and Chief Financial Officer of the Company, Mr. Sylvia
is a Senior Vice President and Chief Financial Officer of
CalEnergy. Mr. Sylvia joined CalEnergy in 1988. From 1985 to
1988, Mr. Sylvia was a Vice President in the San Francisco office
of the Royal Bank of Canada, with responsibility for corporate
and capital markets banking. From 1986 to 1990, Mr. Sylvia
served as an Adjunct Professor of Applied Economics at the
University of San Francisco. From 1982 to 1985, Mr. Sylvia was a
Vice-President with Bank of America National Trust and Savings
Association.

Russ Tenney. In addition to serving as Vice President-
Philippine Operations and Director of the Company, Mr. Tenney is
Vice-President/General Manager, Philippines of CalEnergy and
previously served as a Vice President of Magma Power Company.

Oscar Violago. In addition to serving as a Director of the
Company, Mr. Violago is President of San Lorenzo Ruiz Builders
and Developers Group, Inc. of Metro Manila, the Philippines.

Item 11. EXECUTIVE COMPENSATION

None of the executive officers or directors of the Company
receives compensation from the Company for services as officers
or directors of the Company. All directors are reimbursed for
their expenses in attending board and committee meetings.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Description of Capital Stock

As of December 31, 1996, the authorized capital stock of the
Company consisted of 2,148,000 shares of common stock, par value
1.00 peso per share (the "Common Stock"), of which 767,162 shares
were outstanding. There is no public trading market for the
Common Stock. As of December 31, 1996 there were 13 holders of
record of the Common Stock. Holders of Common Stock are entitled
to one vote per share on any matter coming before the
stockholders for a vote.

The Indenture contains certain restrictions on the payment
of dividends with respect to the Common Stock.

Principal Holders

The following table sets forth information with respect to
the shares of common stock owned of record and beneficially by
all persons who own of record or are know by the Company to own
beneficially more than 5% of the common stock and by all
directors and officers of the Company as a group.

Number Of Percentage Of
Name and Address of Owner Shares Owned* Common Stock Owned

1. CE Casecnan, Ltd.(1) 268,503 35%(2)
a Bermuda corporation
c/o Conyers Dill & Pearman
Clarendon House
P.O. Box 666
Hamilton, Bermuda HM CX

2. Kiewit Energy International (Bermuda) Ltd.(3) 268,502 35%(2)
a Bermuda corporation
c/o Appleby Spurling & Kempe
Cedar House
41 Cedar House HM 179
Hamilton, Bermuda HM EX

3. LaPrairie Group Contractors
(International), Ltd. 115,074 15%(4)
a Barbados corporation
c/o P.O. . Box 690C
Bridgetown, Barbados

4. San Lorenzo Ruiz Builders and
Developers Group, Inc. 115,074 15%(4)
a Philippine corporation
Violago Compound
222 East Rodriguez Avenue
Quezon City, Philippines

*In addition, each director of the Company owns one share in the
Company as required by Philippine law.

(1) CalEnergy wholly owns CE International Investments,
Inc., a Delaware corporation, which wholly owns CE Casecnan,
Ltd., a Bermuda corporation, which is the registered owner of the
shares.

(2) Number of shares owned subject to upward adjustment
based on projected level of financial return to CalEnergy from
the Project calculated at the time of Completion.

(3) Kiewit, through subsidiaries, wholly owns Kiewit Energy
International (Bermuda) Ltd., a Bermuda corporation, which is the
registered owner of the shares.

(4) Number of shares owned subject to downward adjustment
based on projected level of financial return to CalEnergy from
the Project calculated at the time of Completion. Neither of the
minority shareholders will have a major role in the development,
construction or operation of the project.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Not Applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this
report to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Omaha, State of Nebraska, on
March 27, 1997.

CE CASECNAN WATER AND ENERGY COMPANY, INC.

By: /s/ Steven A. McArthur
Steven A. McArthur
Director and Senior Vice President

Pursuant to the requirements of the Securities Exchange Act of
1934, the Company has caused this report to be signed by the
following persons in the capacities and on the dates indicated:

Signature Title Date

David L. Sokol* Chairman of the Board of Directors, March 27,1997
David L. Sokol Chairman and Chief Executive Officer
(Principal Executive Officer)

Donald M. O'Shei Jr.* Director, Vice Chairman and President March 27, 1997
Donald M. O'Shei Jr. and Chief Operating Officer, Asia

John G. Sylvia* Chief Financial Officer (Principal March 27, 1997
John G. Sylvia Financial Officer)

Gregory E. Abel* Chief Accounting Officer (Principal March 27, 1997
Gregory E. Abel Accounting Officer)

Steven A. McArthur Director and Senior Vice President March 27, 1997
Steven A. McArthur

Russ L. Tenney* Director March 27, 1997
Russ L. Tenney

Ruby S. Nitorreda* Director and Assistant Secretary March 27, 1997
Ruby S. Nitorreda

*By: /s/ Steven A. McArthur
Steven A. McArthur
Attorney-in-Fact

INDEX TO EXHIBITS

Exhibit No. Description of Exhibit

3.1 Articles of Incorporation of the Company (incorporated
by reference to Exhibit 3.1 the Company's Registration
Statement on Form S-4, as amended, dated January 25, 1996
("Form S-4").

3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2
the Company's Form S-4).

4.1(a) Trust Indenture, dated as of November 27, 1995,
between Chemical Trust Company of California and
the Company (incorporated by reference to Exhibit 4.1(a)
the Company's Form S-4).

4.1(b) First Supplemental Indenture, dated as of April
10, 1996, between Chemical Trust Company of California
and the Company (incorporated by reference to Exhibit
4.1(b) to the Company's Form S-4).

4.2 Exchange and Registration Rights Agreement, dated as of
November 27, 1995, by and among CS First Boston Corporation,
Bear Stearns & Co. Inc., Lehman Brothers Inc. and the
Company (incorporated by reference to Exhibit 4.2 the
Company's Form S-4).

4.3 Collateral Agency and Intercreditor Agreement, dated as
of November 27, 1995, by and among Chemical Trust Company
of California, Far East Bank & Trust Company and the Company
(incorporated by reference to Exhibit 4.3 the Company's Form S-4).

4.4 Mortgage and Security Agreement, dated as of November
10, 1995, by and among CE Casecnan Ltd., Kiewit Energy
International (Bermuda) Ltd., La Prairie Group
Contractors (International) Ltd., San Lorenzo Ruiz
Builders and Developers Group, Inc., Chemical Trust Company
of California, Far East Bank & Trust Company and the Company
(incorporated by reference to Exhibit 4.4 the Company's Form S-4).

4.6 Deposit and Disbursement Agreement, dated as of
November 27, 1995, by and
among the Company, Chemical Trust Company of
California, Kiewit
Energy Company and the Company (incorporated by
reference to the Company's
Form S-4).

4.7 Consent of NIA, dated as of November 10, 1995, to the
assignment of
the Amended and Restated Casecnan Project Agreement
(incorporated by reference
to Exhibit 4.7 to the Company's Form S-4).

4.8 Consent of the Republic of Philippines, dated November
10, 1995, to the
assignment of the Performance Undertaking and the
Amended and
Restated Casecnan Project Agreement (incorporated by
reference to Exhibit 4.8 to the Company's Form S-4).

4.9 Consent of Hanbo Corporation and You One Engineering
and Construction
Company, Ltd., dated as of November 17, 1995, to the
assignment of
the Engineering, Procurement and Construction Contract
(incorporated by reference
to Exhibit 4.9 to the Company's Form S-4).

4.10 Consent of Hanbo Steel, dated as of November 17, 1995,
to the assignment
of the Guaranty of Engineering, Procurement and
Construction Contract (incorporated
by reference to Exhibit 4.10 to the Company's Form S-4).

4.11 Notification, dated as of November 27, 1995, from the
Company to Korea
First Bank, of the assignment of the Irrevocable Letter
of Credit (incorporated by
reference to Exhibit 4.11 to the Company's Form S-4).

10.1 Amended and Restated Casecnan Project Agreement, dated as of
June 26, 1995, between the National Irrigation
Administration and the Company (incorporated by reference
to Exhibit 10.1 the Company's Form S-4).

10.2 Performance Undertaking, dated as of July 20, 1995,
executed by the
Secretary of Finance on behalf of the Republic of the
Philippines (incorporated by
reference to Exhibit 10.2 to the Company's Form S-4).

10.3 Engineering, Procurement and Construction Contract,
dated as of
October 10, 1995, by and among Hanbo Corporation, You One
Engineering and Construction Company, Ltd. and the Company
(incorporated by reference to Exhibit 10.3 the Company's Form S-4)

10.4 Master Equipment Lease Agreement, dated as of November 1, 1995,
between You One Engineering and Construction Company, Ltd.
and the Company (incorporated by reference to Exhibit 10.4
the Company's Form S-4).

10.5 Sublease Agreement No. 1, dated as of November 1, 1995, between
You One Engineering and Construction Company, Ltd. and the
Company (incorporated by reference to Exhibit 10.5 the
Company's Form S-4).

10.6 Guaranty of Engineering, Procurement and Construction Contract,
dated as of November 13, 1995, by Hanbo Steel
guaranteeing the performance of the obligations of Hanbo
Corporation and You One Engineering and Construction
Company, Ltd. under the
Engineering Procurement and Construction Contract (incorporated
by reference to Exhibit 10.6 to the Company's Form S-4).

10.7 Korea First Bank Irrevocable Letter of Credit issued to the Company
in the aggregate principal amount of
U.S.$117,850,000.00 to support
the obligations of Hanbo Corporation and You One Engineering
and Construction Company, Ltd. under the Engineering, Procurement
and Construction Contract (incorporated by reference to
Exhibit 10.7 to the Company's Form S-4).

24 Power of Attorney

27 Financial Data Schedule

</TABLE>

Exhibit 24
POWER OF ATTORNEY

The undersigned, members of the Board of Directors and
Officers of CE CASECNAN WATER AND ENERGY COMPANY, INC., a
corporation registered in the Republic of the Philippines (the
"Company"), hereby constitute and appoint Steven A. McArthur as
his/her true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for and in his/her
stead, in any and all capacities, to sign on his/her behalf the
Company's Form 10-K Annual Report for the fiscal year ending
December 31, 1996 and to execute any amendments thereto and to
file the same, with all exhibits thereto, and all other documents
in connection therewith, with the United States Securities and
Exchange Commission and applicable stock exchanges, with the full
power and authority to do and perform each and every act and
thing necessary or advisable to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or his/her substitute or
substitutes, may lawfully do or cause to be done by virtue
hereof.

Dated as of March 26, 1997.

________________________________ _______________________________
DAVID L. SOKOL DONALD M. O'SHEI, JR.

________________________________ ________________________________
SCOTT LAPRAIRIE RUSS L. TENNEY

________________________________ ________________________________
ELIZABETH B. OPENA JOSE R. SANDEJAS

________________________________ ________________________________
RUBY NITORREDA OSCAR VIOLAGO

________________________________ ________________________________
JOHN G. SYLVIA GREGORY E. ABEL

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 144,122
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 50,793
<DEPRECIATION> 0
<TOTAL-ASSETS> 490,162
<CURRENT-LIABILITIES> 0
<BONDS> 371,500
0
0
<COMMON> 29
<OTHER-SE> 109,396
<TOTAL-LIABILITY-AND-EQUITY> 490,162
<SALES> 0
<TOTAL-REVENUES> 25,611
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,852
<INCOME-PRETAX> (17,214)
<INCOME-TAX> 4,030
<INCOME-CONTINUING> (13,211)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,211)
<EPS-PRIMARY> (17.22)
<EPS-DILUTED> (17.22)

</TABLE>