MAGMA POWER CO /NV/, SC 13E3, 1994-12-23

MAGMA POWER CO /NV/
SC 13E3, 1994-12-23
COGENERATION SERVICES & SMALL POWER PRODUCERS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 13E-3

Rule 13e-3 Transaction Statement

(Pursuant to Section 13(e) of the
Securities and Exchange Act of 1934)

MAGMA POWER COMPANY
(Name of the Issuer)

CALIFORNIA ENERGY COMPANY, INC.
(Name of Person Filing Statement)

Common Stock, $0.10 par value
(Title of Class of Securities)

559194105
(CUSIP Number of Class of Securities)

STEPHEN A. McARTHUR, ESQ.
c/o California Energy Company, Inc.
10831 Old Mill Road
Omaha, Nebraska 68154
(402) 330-8000
(Name, Address and Telephone Number of Persons
Authorized to Receive Notice and Communications
on Behalf of Person Filing Statement)

This statement is filed in connection with (check the
appropriate box):

a. [X] The filing of solicitation materials or an information
statement subject to Regulation 14A [17 CFR 240.14a-1
to 240.14a-103], Regulation 14C [17 CFR 240.14c-1 to
240.14c-101] or Rule 13e-3(c) [Section 240.13e(c)] under the
Securities Exchange Act of 1934.

b. [X] The filing of a registration statement under the
Securities Act of 1933.

c. [ ] A tender offer.

d. [ ] None of the above.

Check the following box if the soliciting materials or in-
formation statement referred to in checking box (a) are
preliminary copies: [X].

<PAGE>

Calculation of Filing Fee

Transaction Valuation: $427,678,948.10* Amount of Filing Fee: $4,895.83

* The transaction was valued by determining the cost of purchasing
11,442,915 shares of Magma Power Company common stock, par value $0.10
per share ("Shares"), at the average of the high and low prices for the
Shares ($37.375) reported on the NASDAQ National Market System on
December 20, 1994.

[X] Check box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

Amount Paid: $80,639.96

Form or Registration No.: Registration Statement on Form S-4 being filed
simultaneously herewith

Filing Party: California Energy Company, Inc.

Date Filed: December 22, 1994

<PAGE>

Items 1 through 15

This Rule 13e-3 Transaction Statement is being filed by
California Energy Company, Inc., a Delaware corporation ("CECI"), in
connection with a merger between CE Acquisition Company, Inc., a Delaware
corporation and wholly owned subsidiary of CECI ("CE Sub"), and Magma Power
Company, a Nevada corporation ("Magma"). Although CECI is not an affiliate
of Magma at this time, this Rule 13e-3 Transaction Statement is being filed
by CECI in anticipation of, and Exhibit (d)(1) hereto contemplates, the
completion of a tender offer by CE Sub (the "Offer") pursuant to which CECI
will become an affiliate of Magma. The information contained in the
Registration Statement on Form S-4 (the "Registration Statement") filed
concurrently herewith with the Securities and Exchange Commission (the
"Commission") in connection with such transaction, a copy of which is
annexed hereto as Exhibit (d)(1), is incorporated herein by reference in
answer to Items 1 through 15 of this Rule 13e-3 Transaction Statement as
set forth in the Cross Reference Sheet on the following pages. Capitalized
terms used but not defined herein shall have the respective meanings
ascribed to them in such Registration Statement.

Item 16. Additional Information

The information contained in the Registration Statement filed
concurrently herewith with the Commission in connection with this Rule 13e-
3 transaction is incorporated herein by reference in its entirety.

Item 17. Material To Be Filed As Exhibits

Exhibit (a)(1) Commitment Letter, dated October 25, 1994, to
CECI and CE Sub from Credit Suisse.
Exhibit (a)(2) The Merger Facility (To be filed by Amendment
when available).
Exhibit (b)(1) Opinion of Goldman, Sachs & Co. which is
attached as Annex B to the Registration
Statement filed as Exhibit (d)(1)hereto.
Exhibit (b)(2) Opinion of Gleacher & Co. Inc. which is
attached as Annex C to the Registration
Statement filed as Exhibit (d)(1) hereto.
Exhibit (c)(1) The Merger Agreement which is attached as Annex
A to the Registration Statement filed as
Exhibit (d)(1) hereto.
Exhibit (d)(1) Registration Statement.
Exhibit (e)(1) Statement of appraisal rights set forth in the
"Special Factors--Dissenters' Rights" section
and Annex D to the Registration Statement filed
as Exhibit (d)(1) hereto.
Exhibit (f)(1) Not applicable.

<PAGE>

CROSS REFERENCE SHEET

Caption in Proxy Statement/
Schedule 13E-3 Prospectus or Notice of
Item Number Special Meeting
- ------------------------------ ---------------------------

1. Issuer and Class of
Security Subject to the
Transaction

(a) Notice of Special Meeting of
Stockholders; front cover page
of Registration Statement

(b) Front cover page of
Registration Statement;
MARKET PRICES OF AND DIVIDENDS
ON CAPITAL STOCK OF MAGMA AND
RELATED STOCKHOLDER MATTERS

(c)-(d) MARKET PRICES OF AND DIVIDENDS
ON CAPITAL STOCK OF MAGMA AND
RELATED STOCKHOLDER MATTERS

(e)-(f) Not Applicable

<PAGE>

Caption in Proxy Statement/
Schedule 13E-3 Prospectus or Notice of
Item Number Special Meeting
- ------------------------------ ---------------------------

2. Identity and Background
SUMMARY - Parties to the
Merger

(e)-(f) To the best of the knowledge
of CECI, during the past five
years, no executive officer,
director or controlling person
of CECI or Magma (i) has been
convicted in a criminal
proceeding (excluding traffic
violations or similar
misdemeanors) or (ii) has been
a party to a civil proceeding
of a judicial or
administrative body of
competent jurisdiction and as
a result of such proceeding
was or is subject to a
judgment, decree or final
order enjoining further
violations of, or prohibiting
activities subject to, federal
or state securities laws or
finding any violation with
respect to such laws.

3. Past Contracts,
Transactions or
Negotiations

(a)(1) Not Applicable

(a)(2)-(b) SPECIAL FACTORS -
Background of the Merger

4.Terms of Transaction

(a) SUMMARY; THE MERGER AGREEMENT

(b) Not Applicable

<PAGE>

Caption in Proxy Statement/
Schedule 13E-3 Prospectus or Notice of
Item Number Special Meeting
- ------------------------------ ---------------------------

5. Plans or Proposals of the
Issuer or Affiliate

(a)-(e) SPECIAL FACTORS - Certain
Effects of the Merger;
Operations After the Merger;
THE MERGER AGREEMENT - Terms
of the Merger; THE MERGER
AGREEMENT - Acquisition
Designees

(f) SPECIAL FACTORS - Certain
Effects of the Merger;
Operations After the Merger

(g) SPECIAL FACTORS - Purposes and
Structure of the Merger

6. Source and Amounts of
Funds or Other
Consideration

(a) SPECIAL FACTORS - Financing of
Merger Consideration

(b) SPECIAL FACTORS - Expenses of
the Transaction

(d) Not Applicable

<PAGE>

Caption in Proxy Statement/
Schedule 13E-3 Prospectus or Notice of
Item Number Special Meeting
- ------------------------------ ---------------------------

7. Purpose(s), Alternatives,
Reasons and Effects

(a)-(c) SPECIAL FACTORS - Background
of the Merger; SPECIAL FACTORS
- Purpose and Structure of the
Merger; SPECIAL FACTORS -
Recommendation of the Board of
Directors of Magma; Reasons
for the Merger

(d) SPECIAL FACTORS - Background
of the Merger; SPECIAL FACTORS
- Purpose and Structure of the
Merger; SPECIAL FACTORS -
Certain Federal Income Tax
Consequences

<PAGE>

Caption in Proxy Statement/
Schedule 13E-3 Prospectus or Notice of
Item Number Special Meeting
- ------------------------------ ---------------------------

8. Fairness of the
Transaction

(a) SUMMARY; SPECIAL FACTORS -
Recommendation of the Board of
Directors of Magma; Reasons
for the Merger

(b) SPECIAL FACTORS - Opinions of
Financial Advisors; SPECIAL
FACTORS - Recommendation of
the Board of Directors of
Magma; Reasons for the Merger

(d) SPECIAL FACTORS - Background
of the Merger; SPECIAL FACTORS -
Recommendation of Board of
Directors of Magma; Reasons
for the Merger

(e) SPECIAL FACTORS - Recommendation
of the Board of Directors of
Magma; Reasons for the Merger

(f) Not Applicable

9. Reports, Opinions,
Appraisals and Certain
Negotiations

(a)-(c) SPECIAL FACTORS - Background
of the Merger; SPECIAL FACTORS
- Opinions of Financial
Advisors

<PAGE>

Caption in Proxy Statement/
Schedule 13E-3 Prospectus or Notice of
Item Number Special Meeting
- ------------------------------ ---------------------------

10. Interest in Securities of
the Issuer

(a) SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT OF MAGMA

(b) Not Applicable

11. Contracts, Arrangements or SUMMARY - Terms of the Merger;
Understandings with Merger Consideration; THE
Respect to the Issuer's MERGER AGREEMENT
Securities

12. Present Intention and
Recommendation of Certain
Persons with Regard to the
Transaction

(a)-(b) SPECIAL FACTORS -
Recommendation of the Board of
Directors of Magma; Reasons
for the Merger

13. Other Provisions of the
Transaction

(a) SUMMARY - Dissenters' Rights;
SPECIAL FACTORS - Dissenters'
Rights

(b) Not Applicable

14. Financial Statements

(a)-(b) SELECTED HISTORICAL AND PRO
FORMA FINANCIAL INFORMATION

15. Persons and Assets
Employed, Retained or
Utilized

(a)-(b) GENERAL INFORMATION -
Solicitation of Proxies

<PAGE>

Caption in Proxy Statement/
Schedule 13E-3 Prospectus or Notice of
Item Number Special Meeting
- ------------------------------ ---------------------------

16. Additional Information The information set forth in
the Registration Statement is
incorporated herein by
reference

17. Material to be filed as
Exhibits Not Applicable.

<PAGE>

Item 1. Issuer and Class of Security Subject to the
Transaction.

(a) The information set forth in the "Notice of
Special Meeting of Stockholders" section and the front cover page
of Exhibit (d)(1) hereto is incorporated herein by reference.

(b) The information set forth on the front cover page
and in the "Market Prices of and Dividends on Capital Stock of
Magma and Related Stockholder Matters" section of Exhibit (d)(1)
hereto is incorporated herein by reference.

(c)-(d) The information set forth in the "Market
Prices of and Dividends on Capital Stock of Magma and Related
Stockholder Matters" section of Exhibit (d)(1) hereto is
incorporated herein by reference.

(e)-(f) Not applicable.

Item 2. Identity and Background.

The information set forth in the "Summary--Parties to
the Merger" section of Exhibit (d)(1) hereto is incorporated
herein by reference.

(e)-(f) To the best of the knowledge of CECI, during
the past 5 years, no executive officer, director or controlling
person of CECI or Magma (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or (ii)
has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final
order enjoining further violations of, or prohibiting activities
subject to, federal or state securities laws or finding any
violation with respect to such laws.

Item 3. Past Contracts, Transactions or Negotiations.

(a)(1) Not applicable.

(a)(2)-(b) The information set forth in the
"Special Factors--Background of the Merger" section of Exhibit
(d)(1) hereto is incorporated herein by reference.

<PAGE>

Item 4. Terms of the Transaction.

(a) The information set forth in the "Summary" and
"The Merger Agreement" sections of Exhibit (d)(1) hereto is
incorporated herein by reference.

(b) Not applicable.

Item 5. Plans or Proposals of the Issuer or Affiliate.

(a)-(e) The information set forth in the "Special
Factors--Certain Effects of the Merger; Operations After the
Merger," "The Merger Agreement--Terms of the Merger Agreement"
and "The Merger Agreement--Acquisition Designees" sections of
Exhibit (d)(1) hereto is incorporated herein by reference.

(f) The information set forth in the "Special Factors
- -- Certain Effects of the Merger; Operations After the Merger"
section of Exhibit (d)(1) hereto is incorporated herein by
reference.

(g) The information set forth in the "Special Factors
- -- Purposes and Structure of the Merger" section of
Exhibit (d)(1) hereto is incorporated herein by reference.

Item 6. Source and Amounts of Funds or Other Consideration.

(a) The information set forth in the "Special
Factors--Financing of Merger Consideration," section of Exhibit
(d)(1) hereto is incorporated herein by reference.

(b) The information set forth in the "Special
Factors--Expenses of the Transaction" section of Exhibit (d)(1)
is incorporated herein by reference.

(c) The information set forth in the "Special
Factors--Financing of Merger Consideration" section of Exhibit
(d)(1) hereto is incorporated herein by reference.

(d) Not applicable.

Item 7. Purpose(s), Alternatives, Reasons and Effects.

(a)-(c) The information set forth in the "Special
Factors--Background of the Merger," "Special Factors--Purpose and
Structure of the Merger" and "Special Factors--Recommendation of
the Board of Directors of Magma; Reasons for the Merger" sections
of Exhibit (d)(1) hereto is incorporated herein by reference.

<PAGE>

(d) The information set forth in the "Special
Factors--Background of the Merger," "Special Factors--Purpose and
Structure of the Merger" and "Special Factors--Certain Federal
Income Tax Consequences" sections of Exhibit (d)(1) hereto is
incorporated herein by reference.

Item 8. Fairness of the Transaction.

The information set forth in the "Summary" and "Special
Factors--Recommendation of the Board of Directors of Magma;
Reasons for the Merger" sections of Exhibit (d)(1) hereto is
incorporated herein by reference.

(b) The information set forth in the "Special
Factors--Opinions of Financial Advisors" and "Special Factors--
Recommendation of the Board of Directors of Magma; Reasons for
the Merger" sections of Exhibit (d)(1) hereto is incorporated
herein by reference.

(c) The information set forth in the "Summary--
Required Vote" and "General Information--Required Vote" sections
of Exhibit (d)(1) hereto is incorporated herein by reference.

(d) The information set forth in the "Special
Factors--Background of the Merger," "Special Factors--Opinions of
Financial Advisors" and "Special Factors--Recommendation of the
Board of Directors of Magma; Reasons for the Merger" sections of
Exhibit (d)(1) hereto is incorporated herein by reference.

(e) The information set forth in the "Special
Factors--Opinions of Financial Advisors" and the "Special
Factors--Recommendation of the Board of Directors of Magma;
Reasons for the Merger" sections of Exhibit (d)(1) hereto is
incorporated herein by reference.

(f) Not applicable.

Item 9. Reports, Opinions, Appraisals and Certain Negotiations.

Magma has received an opinion from Goldman, Sachs & Co.
Inc., attached to Exhibit (d)(1) hereto as Annex B thereto, as to
the fairness from a financial point of view of the consideration
to be received per share of Magma Common Stock by stockholders of
Magma pursuant to the Offer and the Merger. CECI has received an
opinion from Gleacher & Co. Inc., attached to Exhibit (d)(1)
hereto as Annex C thereto, as to the fairness from a financial
point of view of the consideration to be paid by CECI pursuant to
the Offer and the Merger.

<PAGE>

(a)-(c) The information contained in the "Special
Factors--Background of the Merger" and "Special Factors--Opinions
of Financial Advisors" sections of Exhibit (d)(1) hereto is
incorporated herein by reference.

Item 10. Interest in Securities of the Issuer.

(a) The information set forth in the "Security
Ownership Of Certain Beneficial Owners And Management Of Magma"
section of Exhibit (d)(1) hereto is incorporated herein by
reference.

(b) Not applicable.

Item 11. Contracts, Arrangements or Understandings with Respect
to the Issuer's Securities.

The information set forth in the "Summary--Terms of
Merger; Merger Consideration" and "The Merger Agreement" sections
of Exhibit (d)(1) hereto is incorporated herein by reference.

Item 12. Present Intention and Recommendation of Certain Persons
with Regard to the Transaction.

(a)-(b) The information set forth in the "Special
Factors--Recommendation of the Board of Directors of Magma;
Reasons for the Merger" section of Exhibit (d)(1) hereto is
incorporated herein by reference.

Item 13. Other Provisions of the Transaction.

(a) The information set forth in the "Summary--
Dissenters' Rights" and "Special Factors--Dissenters' Rights"
sections and Annex D of Exhibit (d)(1) hereto is incorporated
herein by reference.

(b) Not applicable.

Item 14. Financial Information.

(a)-(b) The information set forth in the "Selected
Historical and Pro Forma Financial Information" section of
Exhibit (d)(1) hereto is incorporated herein by reference.

<PAGE>

Item 15. Persons and Assets Employed, Retained or Utilized.

The information set forth in the "General Information--
Solicitation of Proxies" section of Exhibit (d)(1) hereto is
incorporated herein by reference.

Item 16. Additional Information.

The information set forth in Exhibit (d)(1) hereto is
incorporated herein by reference.

Item 17. Material to be Filed as Exhibits.

Exhibit (a)(1) Commitment Letter, dated October 25,
1994, to CECI and CE Sub from Credit
Suisse.
Exhibit (a)(2) The Merger Facility (To be filed by
Amendment when available).
Exhibit (b)(1) Opinion of Goldman, Sachs & Co. which is
attached as Annex B to the Registration
Statement filed as Exhibit (d)(1)
hereto.
Exhibit (b)(2) Opinion of the Gleacher & Co. Inc. which
is attached as Annex C to the
Registration Statement filed as Exhibit
(d)(1) hereto.
Exhibit (c)(1) The Merger Agreement which is attached
as Annex A to the Registration Statement
filed as Exhibit (d)(1) hereto.
Exhibit (d)(1) Registration Statement.
Exhibit (e)(1) Statement of appraisal rights set forth
in the "Special Factors--Dissenters'
Rights" section and Annex D to the
Registration Statement filed as Exhibit
(d)(1) hereto.
Exhibit (f)(1) Not applicable.

<PAGE>

SIGNATURE

After due inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.

Dated: December 22, 1994

CALIFORNIA ENERGY COMPANY, INC.

By: /s/ Steven A. McArthur
Name: Steven A. McArthur
Title: Senior Vice President,
General Counsel and
Secretary

MAGMA POWER COMPANY

By:/s/ Ralph W. Boeker
----------------------------
Name: Ralph W. Boeker
Title: President and CEO

EXHIBIT (a)(1)

[Letterhead of Credit Suisse]

Credit Suisse
Tower 49
12 East 49th Street
New York, New York

October 25, 1994

Mr. John G. Sylvia
Senior Vice President and
Chief Financial Officer
California Energy Company, Inc.
10831 Old Mill Road
Omaha, Nebraska 68155

Dear Mr. Sylvia:

You have advised Credit Suisse (the "Bank") that CE Acquisition
Company, Inc., a newly formed Delaware corporation ("Newco") and a subsidiary
of California Energy Company, Inc. ("CECI"), has offered to acquire through a
tender offer (the "Tender Offer") 51% of the outstanding shares of common stock
of Magma Power Company, a Nevada corporation ("Magma") and will enter into a
merger with Magma (the "Merger").

Pursuant to your request, we are pleased to inform you that we
hereby commit (i) to underwrite the financing of the Tender Offer in the
principal amount of up to $250,000,000 (the "Tender Facility") and (ii) to
underwrite the financing of the Merger in the principal amount of up to
$500,000,000 (the "Merger Facility"), in each case on the terms and conditions
described in the attached term sheets (the "Term Sheets"). This commitment is
subject to (i) the preparation, execution and delivery of mutually acceptable
loan and security documentation incorporating substantially the terms and
conditions outlined in the Term Sheets, (ii) the absence of a material adverse
change in the financial condition or operations of CECI or Magma and (iii) the
Bank's satisfaction with its due diligence with respect to CECI and Magma.

<PAGE>

It is understood that, as provided in the Term Sheets, the Bank
will act as Agent for the Tender Facility and the Merger Facility, with the
right to syndicate the Tender Facility and Merger Facility to additional
lending institutions.

CECI and Newco acknowledge their joint and several obligation
to pay fees and expenses as described in the Term Sheets and as otherwise
agreed to by the Bank, Newco and CECI.

CECI and Newco each jointly and severally hereby agrees to
indemnify and hold harmless the Bank and each other lending institution that
may participate in the Tender Facility or the Merger Facility, their respective
affiliates and each of their respective directors, officers, employees, agents
and advisors (each, an "Indemnified Party"), from and against any and all
claims, damages, liabilities (including for securities liabilities), losses and
expenses, including without limitation, fees, expenses and disbursements of
counsel, which may be incurred by or asserted against an Indemnified Party in
connection with the Bank's commitment or participation in the transactions
contemplated hereby, this letter, the Tender Facility, the Merger Facility, the
Tender Offer, the Merger or any related matter or any investigation, litigation
or proceeding in connection therewith and whether or not the Tender Offer, the
Merger or the financing herein contemplated is consummated, except to the
extent such claim, damage, loss, liability or expenses is found in a final non-
appealable judgment by a court of competent jurisdiction to have resulted from
such Indemnified Party's own gross negligence or willful misconduct.

In further consideration of the commitment of the Bank
hereunder, and recognizing that in connection herewith the Bank is incurring
out-of-pocket costs and expenses, CECI and Newco each jointly and severally
agrees to reimburse the Bank for all out-of-pocket costs and expenses
(including fees and disbursements of outside counsel for the Bank), incurred or
sustained by the Bank in connection with the transactions contemplated hereby
whether or not such transactions occur and whether incurred before or after the
execution by CECI and Newco of this letter.

Please evidence your acceptance of the Term Sheets and the
other matters referred to herein by signing in the space provided below and
returning a copy of this letter to us on or before October 25, 1994, the date
on which the

<PAGE>

Bank's commitment set forth above (if not accepted prior thereto) will expire.

Very truly yours,

CREDIT SUISSE

By: /s/ Scott E. Zoellner
Name: Scott E. Zoellner
Title: Associate

By: /s/ Peter R. Nardin
Name: Peter R. Nardin
Title: Member of Senior
Management

Accepted this 25th day
of October, 1994

CALIFORNIA ENERGY COMPANY, INC.

By: /s/ John G. Sylvia
Name: John G. Sylvia
Title: Senior Vice President and
Chief Financial Officer

CE ACQUISITION COMPANY, INC.

By: /s/ John G. Sylvia
Name: John G. Sylvia
Title: Senior Vice President and
Chief Financial Officer

<PAGE>

<TABLE>

CONFIDENTIAL

California Energy Company

SUMMARY OF TERMS AND CONDITIONS
UP TO $250,000,000 TENDER OFFER FACILITY

<S> <C>
Borrower: California Energy Company on a non-recourse basis in form satisfactory to the Agent.

Agent/Arranger/
Underwriter: Credit Suisse

Lenders: The Agent and any other financial institutions to which the facility may be syndicated by
the Agent.

Facility: Up to a $250,000,000 12-month tender offer facility (the "Facility") subject to
Regulation U and renewable/extendable for a term of up to three-years from initial
funding at the mutual consent of both the Borrower and Lenders.

Use of Proceeds: The Borrower proposes to capitalize CE Acquisition Company, Inc., a wholly-owned
subsidiary ("Newco"), for the purpose of tendering for 51% of the stock of Magma
Power Company (the "Target"). A condition of the tender will be the execution and
delivery of a definitive merger agreement between Newco and the Target (the "Merger
Agreement Condition"), although that condition may be waived by the Borrower as
contemplated in the Offer to Purchase of the Borrower and Newco dated October 6,
1994, as it may be amended, (the "Offer to Purchase") under the caption "The Merger
Agreement Condition." No material amendment to the Offer to Purchase shall be
effective for purposes of this term sheet without the prior written consent of the Bank.
If the Merger Agreement Condition is not waived, the form of the merger agreement
shall be satisfactory to the Agent. Funds provided by the Facility will be advanced by
the Borrower to Newco to purchase a secured note of Newco (the "Newco Secured
Tender Note"). The proceeds from the sale of the Newco Secured Tender Note will be
used, together with the Borrower's capital investment in Newco and other available
moneys which will be in an amount and form satisfactory to the Agent, to purchase the
tendered stock of the Target, and to pay related fees and costs of the transaction. The
economic terms of the Newco Secured Tender Note will mirror the terms of the Facility.

Borrowing Options: Adjusted LIBOR and Base Rate.

<PAGE>

CONFIDENTIAL

California Energy Company

"Adjusted LIBOR" means the average (rounded upward to the next higher 1/16 of 1%)
of the rates offered to the reference Lenders in the London interbank market for deposits
in an amount and maturity corresponding to the interest period for the advance. LIBOR
will be adjusted for reserves and other regulatory requirements, as appropriate.

"Base Rate" means the higher of the Agent's prime rate or the federal funds rate +
0.50% per annum.

Applicable
Interest Margins: LIBOR + 2.50%
Base Rate + 1.25%

Computation of
Interest: Interest on Base Rate loan segments will be payable quarterly in arrears and calculated
on the basis of the actual number of days elapsed over a 365/366 day year.

Interest on LIBOR loan segments will be payable in arrears (i) at the end of each
applicable interest period and (ii) in the case of any interest period longer than three
months, every three months during such period. Interest on LIBOR loan segments will
be calculated on the basis of the actual number of days elapsed over a 360 day year.

Default Rate: All applicable margins will be increased by 2.00% per annum and all loan segments shall
be maintained as Base Rate loan segments effective in the case of LIBOR loan segments
at the end of each then existing period.

Scheduled
Amortization: The Facility will not be subject to a scheduled amortization prior to its maturity.

Mandatory
Prepayments: Subject to mandatory prepayment as a whole in connection with (i) any sale of any of the
ownership interest of the Target by Newco; (ii) a permanent injunction of the merger
between Newco and the Target; and (iii) the closing of the merger between Newco and
the Target. Subject to mandatory prepayment in part in an amount equal to the proceeds
of any dividends, loans, advances or other distributions from Target to Newco or from
Newco to Borrower.

Optional
Prepayments: Optional prepayments will be permitted at any time in excess of a threshold amount
without premium or penalty other than payment of applicable "breakage" costs on LIBOR
loan segments. Required notice to the Agent will be (i) one Business Day prior to the
date of prepayment of any Base Rate loan segment and (ii) three Business Days prior to
the date of prepayment of any LIBOR loan segment.

<PAGE>

CONFIDENTIAL

California Energy Company

Application of
Prepayments: All principal reductions shall be permanent. Prepayments will be applied first to Base
Rate loan segments and then to LIBOR loan segments. The prepayment of LIBOR loan
segments will be subject to the payment of "breakage" costs if the date of prepayment
is not the last day of an interest period unless, at the option of the Borrower, the
prepayment amount is escrowed with the Agent and invested in United States Treasury
Securities to the last day of the applicable interest period.

Security: The Facility will be secured by an assignment and a pledge of the Newco Secured Tender
Note, including the Target stock pledged as security thereunder in form satisfactory to
Agent. Payments on the collateral will be paid directly to the Agent, as collateral agent
for the Lenders. The Borrower will provide for the payment of interest on the Facility
in a manner satisfactory to the Agent. The Facility will be non-recourse to the Borrower,
and the Lenders will agree to make an appropriate election under Section 1111(b) of the
Bankruptcy Code to continue such non-recourse status in any proceeding involving
Borrower as Debtor under the Bankruptcy Code.

Representations and
Warranties at
Closing: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, the following:

1. Corporate organization, existence and power.

2. Corporate and government authorization, no contravention, legality, validity,
binding effect and enforceability of all documentation related to this transaction.

3. The financial information of the Borrower, Newco and their material subsidiaries
(to the best knowledge of Borrower based upon information available to it in the
case of Target and its subsidiaries).

4. No material adverse change in the Borrower, Newco and their material subsidiaries
(to the best knowledge of Borrower based upon information available to it in the
case of Target and its subsidiaries).

5. No material litigation (other than litigation to which Target is a party and which
is described in the Target's Form 10-K for the year ended December 31, 1993 and
as described in Section 15 of the Offer to Purchase (the "Magma Litigation")).

6. Absence of default(s) or Event of Default(s).

<PAGE>

CONFIDENTIAL

California Energy Company

7. Compliance with ERISA (to the best knowledge of Borrower based upon
information available to it in the case of Target and its subsidiaries).

8. Regulatory approvals, consents, filings and compliance with laws.

9. Existence, incorporation etc. of subsidiaries.

10. Environmental compliance.

11. Not an investment company.

12. Full disclosure.

13. Payment of taxes.

14. Adequate insurance.

Conditions Precedent
to Closing: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, a capital investment in Newco in an amount and form
satisfactory to the Agent, provision for an adequate level of working capital, provisions
effective at the Merger, to insure Alto Peak and Malitbog equity commitments and
ownership interest in Alto Peak and Malitbog satisfactory to Agent, no waiver of Tender
Offer Conditions that are deemed material by Agent (other than the Merger Agreement
Condition as contemplated by the Offer to Purchase) without the prior written consent of
the Bank, receipt of appropriate certificates and legal opinions, accuracy of
representations and warranties, absence of defaults and material litigation (excluding the
Magma Litigation), evidence of authority, receipt of required governmental approvals,
consents and filings of all persons, compliance with laws (including without limitation,
environmental, labor and ERISA), absence of material adverse change in the Borrower,
Newco, the Target and their respective subsidiaries, satisfactory due diligence by the
Agent customary with tender offer facilities and payment of fees.

Covenants: Those customarily found in a credit facility of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, covenants regarding compliance with laws (including
ERISA), payment of taxes, maintenance of insurance, preservation of corporate existence,
visitation rights, keeping of books, maintenance of properties, use of proceeds, margin
stock, transactions with affiliates, notice of defaults, delivery of unaudited (quarterly) and
audited (annual) financial statements of the Borrower, Newco and its significant
subsidiaries, monthly delivery of an officer's certificate, in form and substance
reasonably satisfactory to the Agent, certifying the absence of (i) a material adverse

<PAGE>

CONFIDENTIAL

California Energy Company

change in the financial condition or operations of the Borrower and its subsidiaries, taken
as a whole, or (ii) a material adverse change in the financial condition or operations of
Newco and its subsidiaries, taken as a whole (and, in either case, which could reasonably
be expected to materially impact the ability of the Borrower to service the Facility or the
ability of the Agent on behalf of the Lenders to realize upon the collateral securing the
Facility), and other customary financial reporting requirements as any Lender may
reasonably requests; and without limitation, the following restrictions and limitations
(subject to such baskets and exceptions as the parties may agree):

1. Negative pledge of all stock and unencumbered assets of Newco and its
subsidiaries.

2. Limitation on guaranties by Newco and Borrower.

3. Limitation on mergers and sales of assets.

4. Limitation on investment in other persons.

5. Prohibition on restricted payments.

6. Maintenance of ownership of Newco and all subsidiaries.

7. Prohibition on incurrence of additional debt at Newco and its subsidiaries.

8. Limitation on dividends from Newco to Borrower unless the proceeds are used to
pay down the Facility in amounts to be agreed upon.

9. Limitation on the up-streaming of any assets or funds from Newco and its
subsidiaries to the Borrower unless the proceeds are used to pay down the Facility
in amounts to be agreed upon.

10. Restrictions on change in nature of business, except as contemplated by the Merger.

Appropriate language modifications will be made to cover situations where Borrower is
unable to control the Target; provided that in all events the Lenders shall receive the
protections intended to be received from these covenants.

Financial Covenants: Those customarily found in a Regulation U credit facility of similar nature or as may be
appropriate for this transaction.

<PAGE>

CONFIDENTIAL

California Energy Company

Merger Agreement Condition; breach of representation or warranty in any material
respect; default in any covenant or financial covenant; material cross default; bankruptcy;
insolvency; change of control (except under circumstances mutually satisfactory to the
parties); certain ERISA defaults; the failure to pay one or more final judgments
aggregating more than a specified threshold to be mutually agreed; failure to make a
payment in connection with the Facility when due; and pledge agreement shall cease to
be in full force and effect or the Borrower shall so assert.

Cost and Yield
Protection: Standard provisions for illegality, inability to determine rate, indemnification for
breakage of LIBOR funding and increased costs or reduced return, including those arising
from reserve requirements, taxes and capital requirements; provided that increased costs
may be applied retroactively for a maximum of 90 days preceding written notice to the
Borrower and will not be more, in the case of any participant, than the applicable
fronting Lender would have been entitled to claim.

Assignments and
Participations: Lenders will have a right (i) to sell assignments in amounts of at least $5 million with the
consent of the Borrower and the Agent, which consent shall not be unreasonably
withheld, provided that the consent of the Borrower will not be required for assignments
among Lenders or by a Lender to any of its affiliates or to the Federal Reserve Bank, and
(ii) to sell participations in all or a part of their loans or commitments with the
transferability of voting rights limited to principal, rate, fees and term. The Borrower
shall not be responsible for the costs and expenses of syndication of the Facility except
as provided under "Expenses" below.

Waivers
and Amendments: With the exception of decreases in interest rates or fees, increases in commitment
amounts, extension of maturities and times for payment, changes in funding and yield
protections and indemnities, changes in sharing provisions among Lenders, changes in
several nature of the obligations of the Lenders, changes in the percentage of the Lenders
necessary to act, assignment by the Borrower of rights or obligations under any of the
documentation for the Facility and release of the pledged collateral (which shall require
consent of all the Lenders), amendments to and waivers of provisions of the loan
documents shall be made or given by Lenders holding a majority of commitments under
the Facility.

Increased Costs/
Changed
Circumstances: The Agreement will contain customary provisions protecting the Lenders in the event of
unavailability of funding, illegality, capital adequacy requirements, increased costs, and
funding losses and shall provide for all payments to be made free and clear of taxes.

<PAGE>

CONFIDENTIAL

California Energy Company

Indemnification: The Borrower will indemnify the Agent and the Lenders against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements relating to the transactions and the enforcement of the Agent's and/or
Lenders' rights and remedies with respect to the loan documents, or the Borrower's use
of loan proceeds or the commitments, in each case including but not limited to attorneys'
fees and settlement costs whether or not the transaction contemplated herein is
consummated.

Expenses: The Borrower will pay all legal and other out-of-pocket expenses of the Agent related to
this transaction pursuant to a schedule to be agreed to by the parties and any subsequent
amendments or waivers; provided, however, that the Borrower shall not be liable for any
such expenses incurred in connection with the syndication of the Facility except for any
such expenses in connection with the syndication by the Agent of the Facility to any
entity that becomes a lender on the closing of the Facility or within 90 days thereafter.

Governing Law: The State of New York.

<PAGE>

CONFIDENTIAL
California Energy Company

SUMMARY OF TERMS AND CONDITIONS
UP TO $500,000,000 IN MERGER FACILITIES

Borrower: California Energy Company on a non-recourse basis in form satisfactory to the Agent

Agent/Arranger/
Underwriter: Credit Suisse

Lenders: The Agent and any other financial institutions to be arranged by the Agent.

Facilities: Up to $500,000,000 in credit facilities (the "Facilities") composed of:

(i) Up to a 6-year amortizing term loan ("Term Loan A") in an expected amount of
up to $500,000,000 less the amount of the Term Loan B and

(ii) Up to an 8-year amortizing term loan ("Term Loan B") in an expected amount not
to be less than $150,000,000.

Use of Proceeds: The Borrower proposes to capitalize CE Acquisition Company, Inc., a wholly-owned
subsidiary ("Newco", which term shall also include the surviving corporation in the
Merger (as defined below)), for the purpose of tendering for 51% of the stock of Magma
Power Company (the "Target") and entering into a merger with the Target (the
"Merger"). Funds provided by the Facilities will be advanced by the Borrower to Newco
to purchase a secured term note of Newco (the "Newco Secured Term Note"). The
proceeds from the sale of the Newco Secured Term Note will be used, together with the
Borrower's capital investment in Newco, which will be in an amount and form
satisfactory to the Agent, adequate provision of working capital and other available
moneys, to fund the merger consideration payable in connection with the Merger, to
refinance the Borrower's Tender Offer Facility by repaying its earlier advance to Newco
to purchase the tendered stock of the Target evidenced by the Newco Secured Tender
Note, to repay or acquire certain existing debt of the Target and to pay related fees and
costs of the transaction. The economic terms of the Newco Secured Term Note will
mirror the terms of the Facilities. Upon consummation of the Merger, the Target shall
expressly assume the obligations of Newco under the Newco Secured Term Note.

<PAGE>

CONFIDENTIAL

California Energy Company

Borrowing Options: Adjusted LIBOR and Base Rate.

"Base Rate" means the higher of the Agent's prime rate or the federal funds rate +
0.50% per annum.

Applicable
Interest Margins: Term Loan A: LIBOR + 2.50%
Base Rate + 1.50%

Term Loan B: LIBOR + 3.00%
Base Rate + 2.00%
Computation of
Interest: Interest on Base Rate loan segments will be payable quarterly in arrears and calculated
on the basis of the actual number of days elapsed over a 365/366 day year.

Total annual amortization in accordance with the following table, with payments to be
made semi-annually (the amount and timing of actual semi-annual payments to be
determined after review of cash flows):

<PAGE>

CONFIDENTIAL

California Energy Company

Term Loan A Term Loan B

Scheduled Annual Annual
Amortization: Year Amortization Year Amortization

1 $20,000,000 1 $0
2 $30,000,000 2 $0
3 $50,000,000 3 $0
4 $75,000,000 4 $0
5 $80,000,000 5 $0
6 $95,000,000 6 $0
------------
7 $75,000,000
Total $350,000,000 8 $75,000,000
------------
Total $150,000,000

Mandatory
Prepayments: From the excess cash flow and capital transactions of Newco, including without limitation
cash proceeds of asset sales and refinancing, on terms to be mutually agreed. Also from
any other monies received from Newco other than through the Newco Secured Term
Note except as mutually agreed to by the parties.

Application of
Prepayments: Mandatory prepayments will be applied pro rata to each remaining mandatory
amortization payment under the Facilities. All principal reductions shall be permanent.
Prepayments will be applied first to Base Rate loan segments and then to LIBOR loan
segments. The prepayment of LIBOR loan segments will be subject to the payment of
"breakage" costs if the date of prepayment is not the last day of an interest period unless,
at the option of the Borrower, the prepayment amount is escrowed with the Agent and
invested in United States Treasury Securities to the last day of the applicable interest
period. Optional prepayments will be applied in a manner to be agreed.

Security: The Facilities will be secured by an assignment and pledge of the stock of Target and all
other unencumbered assets of Target and its subsidiaries securing the Newco Secured
Term Note. The Facilities will be non-recourse to the Borrower and the Lenders will

<PAGE>

CONFIDENTIAL

California Energy Company

agree to make an appropriate election under Section 1111(b) of the Bankruptcy Code to
continue such non-recourse status in any proceeding involving the Borrower as Debtor
under the Bankruptcy Code.

Representations and
Warranties: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, the following:

1. Corporate organization, existence and power including the merger of Newco and
the Target and all related transactions.

2. Corporate and government authorization, no contravention, legality, validity,
binding effect and enforceability of all documentation related to this transaction.

3. The financial information of the Borrower, Newco and their material subsidiaries.

4. No material adverse change in the Borrower, Newco and their material subsidiaries.

5. No material litigation (other than litigation to which the Target is a party and which
is described in the Target's Form 10-K for the year ended December 31, 1993 and
as described in the Offer to Purchase (the "Offer to Purchase") of the Borrower
and Newco dated October 6, 1994, as it may be amended (the "Magma
Litigation")). No material amendments to the Offer to Purchase shall be effective
for purposes of this term sheet without the prior written consent of the Bank.

6. Absence of default(s) or Event of Default(s).

7. Compliance with ERISA.

8. Regulatory approvals, consents, filings and compliance with laws.

9. Existence, incorporation etc. of subsidiaries.

10. Environmental compliance.

11. Not an investment company.

12. Full disclosure.

13. Payment of taxes.

<PAGE>

CONFIDENTIAL

California Energy Company

14. Adequate insurance.

Conditions Precedent
to Closing: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, a capital investment in Newco in an amount and form
satisfactory to the Agent, provision for an adequate level of working capital, provisions
to insure Alto Peak and Malitbog equity commitments and ownership interest in Alto
Peak and Malitbog satisfactory to the Agent, receipt of appropriate certificates and legal
opinions, accuracy of representations and warranties, absence of defaults and material
litigation (excluding the Magma Litigation), evidence of authority, receipt of required
governmental approvals, consents and filings of all persons, consummation of the merger
pursuant to a definitive merger agreement between Newco and the Target satisfactory to
Agent, compliance with laws (including without limitation, environmental, labor and
ERISA), absence of material adverse change in the Borrower, Newco, the Target and
their respective subsidiaries (in each case, taken as a whole), satisfactory due diligence
by the Agent and payment of fees.

Covenants: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and its subsidiaries, as applicable,
including, without limitation, covenants regarding compliance with laws (including
ERISA), payment of taxes, maintenance of insurance, preservation of corporate existence,
visitation rights, keeping of books, maintenance of properties, use of proceeds, margin
stock, transactions with affiliates, notice of defaults, delivery of the unaudited (quarterly)
and audited (annual) financial statements of the Borrower, Newco and its significant
subsidiaries, quarterly delivery with financial statements of an officer's certificate, in
form and substance reasonably satisfactory to the Agent, certifying the absence of (i) a
material adverse change in the financial condition or operations of the Borrower and its
subsidiaries, taken as a whole, or (ii) a material adverse change in the financial condition
or operations of Newco and its subsidiaries, taken as a whole (and, in either case, which
could reasonably be expected to materially impact the ability of Borrower to service the
Facilities or the ability of the Agent on behalf of the Lenders to realize upon the
collateral securing the Facilities), and other customary financial reporting requirements
as any Lender may reasonably request; and without limitation, the following restrictions
and limitations (subject to such baskets and exceptions as the parties may agree):

1. Negative pledge of all stock and unencumbered assets of Newco and its
subsidiaries.

2. Limitation on guaranties by Newco and its subsidiaries.

<PAGE>

CONFIDENTIAL

California Energy Company

3. Limitation on mergers and sales of assets by Newco and its subsidiaries.

4. Limitation on investment in other persons by Newco and its subsidiaries.

5. Prohibition on restricted payments by Newco and its subsidiaries.

6. Maintenance of ownership of Newco and all subsidiaries.

7. Prohibition on incurrence of additional debt at Newco and its subsidiaries.

8. Limitation on dividends on Newco stock to Borrower unless proceeds used to pay
down the Facilities in amounts to be agreed upon.

9. Limitation on the up-streaming of any assets or funds from Newco and its
subsidiaries to the Borrower unless the proceeds are used to pay down the Facilities
in amounts to be agreed upon.

10. Restrictions on change in nature of business.

11. Limitation on amendments to the merger agreement.

Financial Covenants: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to Newco and, as applicable, its subsidiaries including,
without limitation, the following:

1. Minimum interest coverage ratio.

2. Maximum leverage ratio.

3. Minimum operating cash flow.

Events of Default: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, breach of representation or warranty in any material
respect; default in any covenant or financial covenant; permanent injunction of the
Merger; material cross default with respect to Newco and its subsidiaries; payment
default under any other agreement to which the Borrower is a party involving
indebtedness in excess of $50,000,000, or other default under any such agreement
resulting in acceleration which is not rescinded within 30 days; bankruptcy; insolvency;
change of control (except under circumstances mutually satisfactory to the parties);
certain ERISA defaults (which in the case of the Borrower shall only include such

<PAGE>

CONFIDENTIAL

California Energy Company

defaults as the Agent determines to materially adversely affect the collateral for the
Facilities); the failure to pay one or more final judgments aggregating more than a
specified threshold to be mutually agreed; failure to make a payment in connection with
the Facilities when due; pledge agreement shall cease to be in full force and effect or the
Borrower shall so assert.

Waivers
and Amendments: With the exception of decreases in interest rates or fees, increases in commitment
amounts, extension of maturities and times for payment, changes in funding and yield
protections and indemnities, changes in sharing provisions among Lenders, changes in
several nature of the obligations of the Lenders, changes in the percentage of the Lenders
necessary to act, assignment by the Borrower of rights or obligations under any of the
documentation for the Facilities and release of the pledged collateral (which shall require
consent of all the Lenders), amendments to and waivers of provisions of the loan
documents shall be made or given by Lenders holding a majority of commitments under
the Facilities.

<PAGE>

CONFIDENTIAL

California Energy Company

Indemnification: The Borrower will indemnify the Agent and the Lenders against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements relating to the enforcement of the Agent's and/or Lenders' rights and
remedies with respect to the loan documents, or the Borrower's use of loan proceeds or
the commitments, in each case including but not limited to attorneys' fees and settlement
costs whether or not the transaction contemplated herein is consummated.

Expenses: The Borrower will pay all legal and other out-of-pocket expenses of the Agent related to
this transaction pursuant to a schedule to be agreed to by the parties and any subsequent
amendments or waivers; provided, however, that the Borrower shall not be liable for any
such expenses incurred in connection with the syndication of the Facilities except for any
such expenses in connection with the syndication by the Agent of the Facilities to any
entity that becomes a lender on the closing of the Facilities or within 90 days thereafter.

Governing Law: The State of New York.
</TABLE>

As filed with the Securities and Exchange Commission on December 22, 1994
Registration No. 33-

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

CALIFORNIA ENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
Delaware 4911 94-2213782
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)

</TABLE>
10831 Old Mill Road, Omaha, Nebraska 68154 (402) 330-8900

(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

STEVEN A. McARTHUR, ESQ.
Senior Vice President, General Counsel
and Secretary
California Energy Company, Inc.
10831 Old Mill Road
Omaha, Nebraska 68154
(402) 330-8900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

Copy to:
PETER J. HANLON, ESQ.
MICHAEL A. SCHWARTZ, ESQ.
Willkie Farr & Gallagher
153 East 53rd Street
New York, NY 10022-4669
(212) 821-8000

Approximate date of commencement of proposed sale to the public:

As soon as practicable after this Registration Statement becomes effective and
all other conditions to the merger (the "Merger") of a wholly owned subsidiary
of the Registrant with and into Magma Power Company ("Magma") pursuant to the
Merger Agreement described in the enclosed Proxy Statement/Prospectus have been
satisfied or waived (but in no event earlier than the 20th business day
following the date on which the enclosed Proxy Statement/Prospectus has been
sent or given to stockholders of Magma).

If the securities being registered on this Form are to be offered in connection
with the formation of a holding
company and there is compliance with General Instruction G,
check the following box. [ ]

CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
maximum maximum
Amount offering aggregate Amount of
Title of each class of securities to be price per offering registration
to be registered registered (1) share price(2) fee(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.0675 par value
per share (including preferred Not Not
stock purchase rights)(3)....... 17,700,000 applicable applicable $80,639.96
</TABLE>
- ---------------

(1) Represents the estimated maximum number of shares of common
stock of the Registrant issuable to holders of shares of Common Stock, par
value $0.10 per share, of Magma of the Registrant (the "Shares") in the Merger.

(2) Estimated pursuant to Rule 457(c) and (f)(1) and (3) of the
Securities Act of 1933, as amended, and solely for purposes of calculating the
registration fee in accordance with Rule 457(f). The registration fee was
computed on the basis of (i) the market value of 11,442,915 Shares
($427,678,948.10) to be exchanged in connection with the Merger (the market
value of these Shares was calculated using the average of the high and low
prices per Share on the Nasdaq National Market on December 20, 1994) and (ii)
payment by the Registrant in the Merger of $193,823,077.50 in cash. The
resulting value of the securities to be received by the Registrant is
$233,855,870.60.

(3) Prior to the occurrence of certain events, the preferred stock
<PAGE>

purchase rights will not be evidenced separately from the Common Stock.

________________
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
- -------------------------------------------------------------------------------

<PAGE>

CALIFORNIA ENERGY COMPANY, INC.

Cross-Reference Sheet Showing Locations in the Proxy Statement/
Prospectus of the Responses to the Items of Form S-4

(Pursuant to Item 501 of Regulation S-K)
<TABLE>
<CAPTION>
Form S-4
Item Number and Caption Location in Prospectus
<S> <C>
A. Information About the Transaction

1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus Forepart of the Registration Statement;
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus . . . . . . . . . . . . . . Inside Front and Outside Back Cover Pages of Prospectus

3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information. . . . . . . . . Outside and Inside Front Cover Page of Prospectus;
Summary; Certain Investment Considerations; Selected
Historical and Pro Forma Financial Information

4. Terms of the Transaction . . . . . . Summary; Certain Investment Considerations; Special
Factors; The Merger
Agreement

5. Pro Forma Financial Information. . . Summary; Selected Historical and Pro Forma Financial Data
Information
6. Material Contacts with the Company Being
Acquired . . . . . . . . . . . . . . . Summary; Certain Investment Considerations; Special
Factors
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters Not Applicable

8. Interests of Named Experts and Counsel Legal Matters; Experts
9. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities . . . . Not Applicable

B. Information About the Registrant

10. Information with Respect to S-3 Registrants Summary; Certain Investment Considerations; Selected
Historical and Pro Forma Financial Information
11. Incorporation of Certain Information by
Reference. . . . . . . . . . . . . . . Incorporation of Documents By Reference
12. Information with Respect to S-2 or S-3
Registrants. . . . . . . . . . . . . . Not Applicable
13. Incorporation of Certain Information by
Reference. . . . . . . . . . . . . . . Not Applicable
14. Information with Respect to Registrants Other Than
S-3 or S-2 Registrants . . . . . . . . Not Applicable

C. Information About the Company Being Acquired

15. Information with Respect to S-3 Companies Summary; Certain Investment Considerations; Selected
Historical and Pro Forma Financial Information
16. Information with Respect to S-2 or S-3 Companies Not Applicable
17. Information with Respect to Companies Other Than
S-3 or S-2 Companies . . . . . . . . . Not Applicable

D. Voting and Management Information

18. Information if Proxies, Consents or Authorizations
are to be Solicited. . . . . . . . . . Summary; General Information; Special Factors
19. Information if Proxies, Consents or Authorizations
are not to be Solicited or in an Exchange Offer Not Applicable
</TABLE>

<PAGE>

As filed with the Securities and Exchange Commission on December 22, 1994

PRELIMINARY PROXY MATERIALS

MAGMA POWER COMPANY
4365 Executive Drive
Suite 900
San Diego, California 92121

Dear Fellow Stockholders:

You are cordially invited to attend the Special Meeting of Stockholders
of Magma Power Company ("Magma") to be held on January __, 1995, at ____a.m.,
Nebraska time, at [ ] in Omaha, Nebraska. At this
important meeting, you will be asked to consider and vote upon a proposal to
approve the Agreement and Plan of Merger, dated as of December 5, 1994 (the
"Merger Agreement"), among Magma, California Energy Company, Inc. ("CECI") and
CE Acquisition Company, Inc., a wholly owned subsidiary of CECI ("CE Sub"),
pursuant to which CE Sub will be merged with and into Magma (the "Merger").

As you know, the Merger is the second and final step in the acquisition
of Magma by CECI pursuant to the terms of the Merger Agreement. The first step
was a tender offer (the "Offer") by CE Sub pursuant to which CE Sub acquired
12,400,000 shares of Magma common stock for $39.00 per share in cash
(representing approximately 51% of the issued and outstanding Magma common
stock).

Upon consummation of the Merger, each share of Magma common stock will
be converted into the right to receive cash and CECI common stock having an
aggregate market value, based on an average closing price for the CECI common
stock and subject to a collar provision in the case of CECI common stock, equal
to $39 per share. The precise amount of cash and number of shares of CECI
common stock will be determined such that the consideration paid by CE Sub in
both the Offer and the Merger for each share of Magma common stock will
consist, on a blended basis, of $28.50 per share in cash and $10.50 per share
in market value of CECI common stock, based on the average closing price of
CECI common stock and subject to a collar provision. The "average closing
price" means the average closing price of CECI common stock during the 15
consecutive trading days ending on the fifth business day prior to the
effective time of the Merger. The "collar provision" provides that if the
average closing price exceeds $18.73, the average closing price will be deemed
to be $18.73, and if the average closing price is less than $14.27, the average
closing price will be deemed to be $14.27. Goldman, Sachs & Co., Magma's
financial advisor, has rendered its opinion, dated December 5, 1994, that the
consideration to be received by the holders of Magma common stock in the Offer
and the Merger, taken as a unitary transaction, is fair to the holders of Magma
common stock receiving such consideration (other than CECI and its affiliates).

As a result of completion of the Offer and the purchase of shares of
Magma common stock pursuant thereto, CE Sub owns and has the right to vote at
the Special Meeting sufficient shares to approve the Merger Agreement without
the affirmative vote of any other stockholder, thereby assuring the approval of
the Merger Agreement.

YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE
BEST INTERESTS OF, MAGMA AND ITS STOCKHOLDERS. THE BOARD, BY UNANIMOUS VOTE OF
THOSE PRESENT, HAS APPROVED THE TERMS OF THE MERGER PURSUANT TO THE MERGER
AGREEMENT AND RECOMMENDS THAT YOU VOTE TO APPROVE AND ADOPT THE MERGER
AGREEMENT.

Please sign, date and return your proxy card as soon as possible,
whether or not you plan to attend. This will not prevent you from voting your
shares in person if you subsequently choose to attend.

As soon as practicable after the effectiveness of the Merger, we will
send you instructions for surrendering Magma share certificates and a letter of
transmittal to be used for this purpose. You should not submit your share
certificates for exchange until you have received such instructions and the
letter of transmittal.

Sincerely,

Chairman of the Board

<PAGE>

PRELIMINARY PROXY MATERIALS

MAGMA POWER COMPANY
4365 Executive Drive
Suite 900
San Diego, California 92121
----------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
---------------------------

A Special Meeting of Stockholders of Magma Power Company, a Nevada
corporation ("Magma"), will be held on January __, 1995, at ____a.m., Nebraska
time, at [ ] in Omaha,
Nebraska, for the following purposes:

1. To consider and vote upon a proposal to approve and adopt
an Agreement and Plan of Merger, dated as of December 5, 1994 (the "Merger
Agreement"), among Magma, California Energy Company, Inc. ("CECI") and CE
Acquisition Corporation ("CE Sub"), a wholly owned subsidiary of CECI, a copy
of which is attached as Annex A to the Proxy Statement/Prospectus accompanying
this Notice, pursuant to which, among other things, (i) CE Sub will be merged
with and into Magma, (ii) each outstanding share of Magma common stock, par
value $0.10 per share, will be converted into the right to receive (A) the
Mixed Cash Component Amount (as defined below), net in cash, without interest
thereon, and (B) the number of fully paid and nonassessable shares of common
stock, par value $0.0675 per share, of CECI ("CECI Common Stock") equal to the
quotient of (I) $39.00 less (II) the Mixed Cash Component Amount divided by the
Average Closing Price (as defined below). The "Mixed Cash Component Amount"
shall mean an amount equal to the quotient of (A) (x) $28.50 multiplied by the
number of shares outstanding at the Effective Time (as defined in the Merger
Agreement) less (y) $39.00 multiplied by the number of shares owned by CECI and
any of its affiliates immediately prior to the Effective Time, divided by (B)
the number of shares outstanding at the Effective Time (other than Shares owned
by CECI and any of its affiliates). The "Average Closing Price" shall mean the
average closing price of CECI Common Stock on the New York Stock Exchange
during the 15 consecutive trading days ending on the fifth business day prior
to the Effective Time; provided, however, that if such average closing price
exceeds $18.73, the Average Closing Price shall be deemed to be $18.73, and if
such average closing price is less than $14.27, the Average Closing Price shall
be deemed to be $14.27.

2. To transact such other business as may properly come before
the meeting or any adjournments or postponements thereof.

The Board of Directors has fixed the close of business on January __,
1995 as the record date for the determination of the holders of Magma's common
stock entitled to notice of, and to vote at, the meeting. Your attention is
directed to the accompanying Proxy Statement/Prospectus.

<PAGE>

ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING.
TO ENSURE YOUR REPRESENTATION AT THE MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER
ATTENDING THE MEETING MAY VOTE IN PERSON EVEN IF THAT STOCKHOLDER HAS RETURNED
A PROXY.

By Order of the Board of Directors

Secretary

Dated: January __, 1995

<PAGE>

SUBJECT TO COMPLETION, DECEMBER 22, 1994
PRELIMINARY PROXY MATERIALS

PROXY STATEMENT/PROSPECTUS
------------------
PROSPECTUS
for
CALIFORNIA ENERGY COMPANY, INC.
-----------------
PROXY STATEMENT
for
MAGMA POWER COMPANY
Special Meeting of Stockholders

Meeting To Be Held February __, 1995
------------------
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Board of Directors of Magma Power Company, a
Nevada corporation ("Magma"), for use at a Special Meeting of Stockholders of
Magma to be held on January __, 1995, and at any and all adjournments or
postponements thereof (the "Magma Special Meeting"). At the Magma Special
Meeting, the stockholders of Magma will consider and vote upon the approval and
adoption of the Agreement and Plan of Merger, dated as of December 5, 1994 (the
"Merger Agreement"), among Magma, California Energy Company, Inc., a Delaware
corporation ("CECI"), and CE Acquisition Company, Inc., a wholly owned
subsidiary of CECI and a Delaware corporation ("CE Sub"). If the Merger
Agreement is approved and the Merger is consummated, (i) each outstanding share
of Magma common stock, par value $0.10 per share ("Shares"), will be converted
into the right to receive (A) the Mixed Cash Component Amount (as defined
below), net in cash, without interest thereon, and (B) the number of fully paid
and nonassessable shares of common stock, par value $0.0675 per share, of CECI
("CECI Common Stock") equal to the quotient of (I) $39.00 less (II) the Mixed
Cash Component Amount divided by the Average Closing Price (as defined below)
((A) and (B), collectively, as applicable, being the "Merger Consideration").
The "Mixed Cash Component Amount" shall mean an amount equal to the quotient of
(A) (x) $28.50 multiplied by the number of Shares outstanding at the Effective
Time (as defined below) less (y) $39.00 multiplied by the number of Shares
owned by CECI and any of its affiliates immediately prior to the Effective
Time, divided by (B) the number of Shares outstanding at the Effective Time
(other than Shares owned by CECI and any of its affiliates). The "Average
Closing Price" shall mean the average closing price of CECI Common Stock on the
New York Stock Exchange ("NYSE") during the 15 consecutive trading days ending
on the fifth business day prior to the Effective Time; provided, however, that,
for purposes of the calculation, if such average closing price exceeds $18.73,
the Average Closing Price shall be deemed to be $18.73, and if such average
closing price is less than $14.27, the Average Closing Price shall be deemed to
be $14.27 (such proviso being referred to herein as the "Collar Provision").

The foregoing formula for determining the consideration to be paid in
the Merger was determined so that the consideration paid by CECI in the tender
offer (the "Offer") by CE Sub pursuant to which CE Sub acquired 12,400,000
Shares for $39.00 per Share in cash (representing approximately 51% of the
issued and outstanding Shares) and the Merger will consist, on a blended basis,
of $28.50 per Share in cash and $10.50 per Share in market value of CECI Common
Stock, based on the Average Closing Price and subject to the Collar Provision.
The consideration to be paid in the Offer, including the terms of the Collar
Provision, was negotiated on an arms' length basis between CECI and Magma. The
purpose of the Collar Provision is to limit the number of shares of CECI Common
Stock required to be issued in the Merger if the Average Closing Price is less
than $14.27 and to establish a minimum number of shares of CECI Common Stock
required to be issued in the Merger if the Average Closing Price exceeds
$18.73.

This Proxy Statement/Prospectus constitutes the Prospectus of CECI with
respect to up to 17,700,000 shares of CECI Common Stock to be issued in
connection with the Merger. On January __, 1995, the last reported sales price
of CECI Common Stock on the NYSE was $_____.

Holders of Shares outstanding at the close of business on January __,
1995 (the "Magma Record Date") are entitled to notice of, and to vote at, the
Magma Special Meeting, but Shares can be voted at the meeting only if the
record holder is present or represented by proxy.

Approval and adoption of the Merger Agreement at the Magma Special
Meeting requires the affirmative vote of the holders of a majority of the
outstanding Shares entitled to vote thereon. For purposes of determining
whether the Merger Agreement has received the required number of votes for
approval, abstentions will be included in the vote totals with the result that
an abstention has the same effect as a negative vote. In instances where
nominee recordholders, such as brokers, are prohibited from exercising
discretionary authority for the beneficial owners who have not returned a
proxy, those Shares will not be included in the vote totals and, therefore,
will have no effect on the vote. As a result of completion of the Offer
pursuant to which CE Sub acquired 12,400,00 Shares for $39.00 per Share in cash
(representing approximately 51% of the issued and outstanding Shares), CE Sub
owns a sufficient number of Shares to approve the Merger without the
affirmative vote of any other stockholder.

All proxies that are properly executed and returned will be voted in
accordance with the instructions noted thereon. ANY PROXY NOT SPECIFYING THE
CONTRARY WILL BE VOTED IN FAVOR OF THE MERGER AGREEMENT. Any proxy may be
revoked at any time before it is voted by giving written notice of such
revocation to, or by filing a later dated proxy with, the Secretary of Magma.
In addition, any proxy may be voided by attending the Magma Special Meeting and
voting in person.
<PAGE>

All information contained herein with respect to Magma has been
provided by Magma. All information contained herein with respect to CECI and
CE Sub has been provided by CECI.
_________________________________

SEE "CERTAIN INVESTMENT CONSIDERATIONS" AND "SPECIAL FACTORS" FOR A
DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED BEFORE VOTING.
_________________________________

No person has been authorized to give any information or to make any
representation not contained in, or incorporated by reference in, this Proxy
Statement/Prospectus, and, if given or made, such information or representation
should not be relied upon as having been authorized. Under the rules and
regulations of the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), the
proposal to approve the Merger Agreement constitutes an offer of CECI Common
Stock to the holders of Shares. The delivery of this Proxy
Statement/Prospectus does not constitute an offer to sell, or the solicitation
of an offer to purchase, the securities offered hereby or a solicitation of a
proxy in any jurisdiction where such offer or solicitation would be unlawful.
Neither the delivery of this Proxy Statement/Prospectus nor the issuance of any
securities hereunder shall under any circumstances create any implication that
there has been no change in the information regarding Magma or CECI set forth
herein since the date hereof or incorporated by reference since the date
hereof.

This Proxy Statement/Prospectus and the related form of proxy for Magma
is first being mailed to the respective stockholders of Magma on or about
January __, 1995.

NEITHER THIS TRANSACTION NOR THESE SECURITIES HAVE BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION. NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS PASSED UPON THE FAIRNESS OR MERITS OF THIS
TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.

The date of this Proxy Statement/Prospectus is January , 1995.

<PAGE>

AVAILABLE INFORMATION

CECI has filed with the Commission a Registration Statement on Form S-4
(the "Registration Statement"), of which this Proxy Statement/Prospectus is a
part, under the Securities Act, with respect to the CECI Common Stock. CECI
and Magma have filed with the Commission a Rule 13e-3 Transaction Statement
(including any amendments thereto, the "Schedule 13E-3") under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), with respect to the
Merger. As permitted by the rules and regulations of the Commission, this
Proxy Statement/Prospectus omits certain information contained in the
Registration Statement and the Schedule 13E-3. For such information reference
is made to the Registration Statement and the exhibits thereto and the Schedule
13E-3 and the exhibits thereto. Each summary in this Proxy
Statement/Prospectus of information included in the Registration Statement and
the Schedule 13E-3 or any exhibits thereto is qualified in its entirety by
reference to such information or exhibit. Magma and CECI are subject to the
informational requirements of the Exchange Act, and in accordance therewith
each files reports, proxy statements and other information with the Commission.
The Registration Statement and the Schedule 13E-3, as well as reports, proxy
statements and other information filed by Magma and CECI with the Commission
pursuant to the informational requirements of the Exchange Act, may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the following Regional Offices of the Commission: Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661;
and New York Regional Office, 14th Floor, Seven World Trade Center, New York,
New York 10048. Copies of such materials can be obtained at prescribed rates
from the Public Reference Section of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, material filed by
CECI can be inspected at the offices of the New York Stock Exchange, 11 Wall
Street, New York, New York 10005, on which the shares of CECI Common Stock are
listed at 20 Broad Street, New York, New York 10005, and at the offices of the
Pacific Stock Exchange at 301 Pine Street, San Francisco, California 94104 and
233 South Beaudry Avenue, Los Angeles, California 90012. Material filed by
Magma can be inspected at the offices of the National Association of Securities
Dealers, Inc. 1735 K Street, N.W., Washington, D.C. 20006.

INCORPORATION OF DOCUMENTS BY REFERENCE

Magma and CECI hereby incorporate into this Proxy Statement/Prospectus
by reference the following documents previously filed with the Commission
pursuant to the Exchange Act:

1. CECI's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 (the "CECI 1993 10-K").

2. CECI's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1994, June 30, 1994 and September 30, 1994.

3. CECI's Current Reports on Form 8-K dated March 7, 1994, March 28, 1994,
April 11, 1994, May 6, 1994, June 8, 1994, August 15, 1994, September 22, 1994,
September 30, 1994, October 6, 1994, October 26, 1994, November 22, 1994 and
December 9, 1994.

4. CECI's description of CECI Common Stock contained in CECI's
Registration Statement on Form 8-A pursuant to Section 12 of the Exchange Act,
including any amendment or report filed for the purpose of updating such
description.

5. Magma's Annual Report on Form 10-K for the fiscal year ended December
31, 1993 (the "Magma 1993 10-K").

6. Magma's Quarterly Report on Form 10-Q for the quarters ended March 31,
1994, June 30, 1994 and September 30, 1994.

7. Magma's Current Reports on Form 8-K dated October __, 1994 and December
9, 1994.

In addition, all reports and other documents filed by Magma and CECI
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent
to the date hereof and prior to the Magma Special Meeting shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of
filing of such reports and documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Proxy Statement/Prospectus to
the extent that a statement contained herein, or in any other subsequently
filed document that also is incorporated or deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement/Prospectus.

THIS PROXY STATEMENT/PROSPECTUS FORMS PART OF A REGISTRATION STATEMENT
REGISTERING ONLY THE CECI COMMON STOCK OFFERED HEREBY.

This Proxy Statement/Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. The documents relating
to CECI and Magma (other than exhibits to such documents unless such exhibits
are specifically incorporated by reference herein) are available without charge
upon written or oral request from any person, including any beneficial owner,
to whom this Proxy Statement/Prospectus is delivered, to, in the case of
documents relating to Magma, Magma Power Company, 4365 Executive Drive, Suite
900, San Diego, California 92121, Attention: Secretary (telephone no. (619)
622-7800), or, in the case of documents relating to CECI, California Energy
Company, Inc., 10831 Old Mill Road, Omaha, Nebraska 68154, Attention: Secretary
<PAGE>

(telephone no. (402) 330-8900). In order to ensure timely delivery of the
documents, any request should be made by January __, 1995.

<PAGE>

TABLE OF CONTENTS

Page

AVAILABLE INFORMATION. . . . . . . . . . . . . . . . . . . . . . . 4

INCORPORATION OF DOCUMENTS BY REFERENCE. . . . . . . . . . . . . . 4

SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Parties to the Merger. . . . . . . . . . . . . . . . . . . 8
Time, Place and Date of Magma Special Meeting; Record Date 9
Terms of Merger; Merger Consideration. . . . . . . . . . . 9
Certain Investment Considerations. . . . . . . . . . . . . 12
Recommendation of the Board of Directors of Magma. . . . . 12
Opinions of Financial Advisors . . . . . . . . . . . . . . 12
Required Vote. . . . . . . . . . . . . . . . . . . . . . . 12
Interests of Certain Persons in the Merger . . . . . . . . 12
Stock Exchange Listing . . . . . . . . . . . . . . . . . . 13
Regulatory Approvals . . . . . . . . . . . . . . . . . . . 13
Accounting Treatment . . . . . . . . . . . . . . . . . . . 13
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . 13
Market Prices of CECI Common Stock . . . . . . . . . . . . 13
Market Prices of Magma Common Stock. . . . . . . . . . . . 15

CAPITALIZATION OF CECI . . . . . . . . . . . . . . . . . . . . . . 17

COMPARISON OF CERTAIN UNAUDITED DATA . . . . . . . . . . . . . . . 18

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND
OPERATING DATA OF CECI . . . . . . . . . . . . . . . . . . . . . . 20

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA OF
MAGMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

CERTAIN INVESTMENT CONSIDERATIONS. . . . . . . . . . . . . . . . . 24
Investment Considerations Relating to CECI and Magma . . . 24
Investment Considerations Relating to CECI . . . . . . . . 26
Investment Considerations Relating to Magma. . . . . . . . 27

GENERAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . 29
Purpose of Special Meetings. . . . . . . . . . . . . . . . 29
Record Date; Voting Rights; Proxies. . . . . . . . . . . . 29
Solicitation of Proxies. . . . . . . . . . . . . . . . . . 29
Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Required Vote. . . . . . . . . . . . . . . . . . . . . . . 30

SPECIAL FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . 30
Background of the Merger . . . . . . . . . . . . . . . . . 30
Recommendation of the Board of Directors of Magma; Reasons
for the Merger; Fairness of the Offer and the Merger . . 33
Opinions of Financial Advisors . . . . . . . . . . . . . . 35
Financing of Merger Consideration. . . . . . . . . . . . . 39
Certain Effects of the Merger: Operations After the Merger 40
Federal Securities Law Consequences. . . . . . . . . . . . 41
Accounting Treatment . . . . . . . . . . . . . . . . . . . 42
Stock Exchange Listing . . . . . . . . . . . . . . . . . . 42
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . 42

THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 44
General. . . . . . . . . . . . . . . . . . . . . . . . . . 44
The Merger . . . . . . . . . . . . . . . . . . . . . . . . 44
Effective Time . . . . . . . . . . . . . . . . . . . . . . 44
Terms of the Merger. . . . . . . . . . . . . . . . . . . . 45
Acquisition Designees. . . . . . . . . . . . . . . . . . . 46
Surrender and Payment. . . . . . . . . . . . . . . . . . . 47
Fractional Shares. . . . . . . . . . . . . . . . . . . . . 47
Conditions to Consummation of the Merger . . . . . . . . . 47
Representations and Warranties . . . . . . . . . . . . . . 48
Conduct of Business by Magma and CECI Pending the Merger . 48
Indemnification. . . . . . . . . . . . . . . . . . . . . . 50
Termination; Fees and Expenses . . . . . . . . . . . . . . 50
Amendment. . . . . . . . . . . . . . . . . . . . . . . . . 52

MARKET PRICES OF AND DIVIDENDS ON CAPITAL STOCK OF CECI. . . . . . 53

MARKET PRICES OF AND DIVIDENDS ON CAPITAL STOCK OF MAGMA . . . . . 55

SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION. . . . . . 57
Selected Historical Consolidated Financial and Operating
Data of CECI . . . . . . . . . . . . . . . . . . . . . . 57
Selected Historical Consolidated Financial and Operating
Data of Magma . . . . . . . . . . . . . . . . . . . . . . 59
Pro Forma Unaudited Condensed Combined Financial Data. . . 61
Pro Forma Unaudited Condensed Combined Balance Sheet. . . 62
Pro Forma Unaudited Condensed Combined Statements of
Earnings . . . . . . . . . . . . . . . . . . . . . . . 63
Notes To Pro Forma Unaudited Condensed Combined
Financial Data . . . . . . . . . . . . . . . . . . . . 64

COMPARISON OF STOCKHOLDER RIGHTS . . . . . . . . . . . . . . . . . 67

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OF MAGMA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

OTHER MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 72
<PAGE>

LEGAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 72

EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

STOCKHOLDER PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . 73

Annex A - Agreement and Plan of Merger . . . . . . . . . . . . . . 74
Annex B - Opinion of Goldman, Sachs & Co.. . . . . . . . . . . . . 74
Annex C - Opinion of Gleacher & Co. Inc. . . . . . . . . . . . . . 74
Annex D - Statutory Provisions of NGCL Regarding Dissenters'
Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

<PAGE>

SUMMARY

The following is a brief summary of the more detailed information
contained in this Proxy Statement/Prospectus ("Proxy Statement") with respect
to the Merger Agreement attached hereto as Annex A and the transactions
contemplated thereby. This Summary is not intended to be complete and is
qualified in its entirety by the more detailed information contained elsewhere
in this Proxy Statement, the Annexes hereto and other documents referred to in
this Proxy Statement. Terms used but not defined in this Summary have the
meanings ascribed to them elsewhere in this Proxy Statement. Cross references
in this Summary are to the captions of sections of this Proxy Statement.

Stockholders of Magma should read carefully this Proxy Statement and
the Annexes hereto in their entirety.

Parties to the Merger

CECI and CE Sub. CECI, together with its subsidiaries, is primarily
engaged in the exploration for and development of geothermal resources and the
development, ownership 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. CECI was an
early participant in the domestic independent power market and is now one of
the largest geothermal power producers in the United States. CECI is also
actively pursuing opportunities in the international independent power market.
For the year ended December 31, 1993 and the nine months ended September 30,
1994, CECI had revenues of $149.3 million and $139.2 million, respectively, and
net income of $47.2 million and $29.4 million, respectively. As of September
30, 1994, CECI had cash and short-term investments of $316.3 million.

Kiewit Energy Company ("Kiewit Energy"), a wholly owned subsidiary of
Peter Kiewit Sons', Inc. ("PKS"), is an approximate 43% stockholder (on a
fully-diluted basis) in CECI. PKS, a Delaware corporation, is a large
employee-owned company which had approximately $2.2 billion in revenues in 1993
from its interests in construction, mining, energy and telecommunications. PKS
is one of the largest construction companies in North America and has been in
the construction business since 1884. PKS is a joint venture participant in a
number of CECI's international private power projects.

The principal executive offices of CECI and CE Sub are located at 10831
Old Mill Road, Omaha, Nebraska 68154 and their telephone number is (402) 330-
8900. CE Sub is a wholly owned subsidiary of CECI and has not conducted any
business except in connection with the Offer. CECI and CE Sub were
incorporated in 1971 and 1994, respectively, under the laws of the State of
Delaware. The principal executive offices of PKS are located at 1000 Kiewit
Plaza, Omaha, Nebraska 68131, and its telephone number is (402) 342-2052. PKS
was incorporated in 1941 under the laws of the State of Delaware.

Magma. Magma is principally engaged in the generation of electricity
from geothermal resources, and in the acquisition of, exploration for and
development of geothermal resources. The principal executive office of Magma
is located at 4365 Executive Drive, Suite 900, San Diego, California 92121 and
its telephone number is (619) 622-7800. For the year ended December 31, 1993
and the nine months ended September 30, 1994, Magma had revenues of $167.1
million and $146.1 million, respectively, and net income of $52.1 million and
$46.8 million, respectively.

Time, Place and Date of Magma Special Meeting; Record Date

The Magma Special Meeting. The Magma Special Meeting will be held at
a.m., Nebraska time, on January __, 1995 at _____________________________ in
Omaha, Nebraska. Only holders of Shares of record at the close of business on
January __, 1994, the Magma Record Date, are entitled to vote at the Magma
Special Meeting or any adjournment or postponement thereof.

Terms of Merger; Merger Consideration

The following description of the Merger Agreement does not purport to
be complete and is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached hereto as Annex A and incorporated
herein by reference. Stockholders of Magma are urged to read the Merger
Agreement in its entirety.

General. CECI, CE Sub and Magma have entered into the Merger
Agreement, providing for, among other things, the Offer and the Merger.
Pursuant to the Offer, on January __, 1995, CECI completed its purchase of
12,400,000 Shares at a price of $39 per Share in cash. Pursuant to the Merger
Agreement, CE Sub will, as soon as practicable following consummation of the
Offer, consummate the Merger.

Merger Consideration. Upon the effectiveness of the Merger, each
outstanding Share (other than Shares held by CECI, CE Sub or any other direct
or indirect subsidiary of CECI, Shares held in the treasury of Magma and Shares
held by stockholders who properly exercise dissenters' rights under the Nevada
General Corporation Law (the "NGCL")) will be converted into the right to
receive (A) the Mixed Cash Component Amount, net in cash, without interest
thereon, and (B) the number of fully paid and nonassessable shares of CECI
Common Stock equal to the quotient of (I) $39.00 less (II) the Mixed Cash
Component Amount divided by the Average Closing Price ((A) and (B),
collectively, as applicable, being the "Merger Consideration").

The foregoing formula for determining the consideration to be paid in
the Merger was determined so that the consideration paid by CECI in the Offer
and the Merger will consist, on a blended basis, of $28.50 per Share in cash
and $10.50 per Share in market value of CECI Common Stock, based on the Average
<PAGE>

Closing Price and subject to the Collar Provision. The consideration to be
paid in the Offer and the Merger, including the terms of the Collar Provision,
was negotiated on an arms' length basis between CECI and Magma. The purpose of
the Collar Provision is to limit the number of shares of CECI Common Stock
required to be issued in the Merger if the Average Closing Price is less than
$14.27 and to establish a minimum number of shares of CECI Common Stock
required to be issued in the Merger if the Average Closing Price exceeds
$18.73.

CECI estimates that approximately an additional $202.3 million will be
required to effectuate the Merger. CE Sub will obtain such funds through
borrowings from commercial banks and other financial institutions, and through
a capital contribution by CECI from CECI's general corporate funds, which at
September 30, 1994 aggregated $316.3 million. CECI anticipates that
approximately one-half of the cash required to purchase Shares pursuant to the
Offer and the Merger will be provided through a secured bank credit facility on
terms and conditions to be determined.

Termination. The Merger Agreement provides that it may be terminated
at any time before the Effective Time in the following circumstances: (a) by
mutual consent of the Board of Directors of CECI (the "CECI Board") and the
Board of Directors of Magma (the "Magma Board"); or (b) by Magma or CECI if the
Effective Time shall not have occurred on or prior to September 30, 1995; or
(c) by either CECI or Magma if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action (which order,
decree or ruling the parties hereto shall use their best efforts to lift), in
each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement and such order, decree,
ruling or other action shall have become final and nonappealable; or (d) by
CECI if (i) Magma's Board withdraws, modifies or changes its recommendation of
the Merger Agreement or any of the transactions contemplated thereby or shall
have resolved to do any of the foregoing or (ii) Magma's Board recommends to
the holders of Shares any proposal with respect to a merger, consolidation,
share exchange or similar transaction involving Magma or any of its
subsidiaries, other than the transactions contemplated by the Merger Agreement;
or (e) by CECI if, without Magma's consent, any person has acquired beneficial
ownership or the right to acquire beneficial ownership of or any "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) has been formed which beneficially owns, or has the
right to acquire beneficial ownership of, more than 10% of the Shares; or (f)
by Magma or CECI if (i) a corporation, partnership, person or other entity or
group shall have made a bona fide offer that Magma's Board determines in its
good faith judgment and in the exercise of its fiduciary duties, after
consultation with and based upon the advice of its financial and legal
advisors, is more favorable to Magma's stockholders than the Offer and the
Merger or any person (including, without limitation, Magma or any affiliate
thereof), other than CECI or any affiliate of CECI, shall have become the
beneficial owner of more than 50% of the then outstanding Shares; or (g) by
either CECI or Magma if the other party shall have breached the Merger
Agreement in any material respect and such breach continues for a period of ten
days after the receipt of notice of the breach from the nonbreaching party.

Termination Fee For CECI. The Merger Agreement provides that if it is
terminated pursuant to clauses (d) or (f) or terminated by CECI pursuant to
clause (g) of the preceding paragraph, Magma will be required to pay CECI a
termination fee of $8,000,000 plus CECI's actual documented out-of-pocket
expenses incurred since September 13, 1994 in connection with the Merger
Agreement and the transactions contemplated thereby, including, without
limitation, legal and professional fees and expenses.

Termination Fee For Magma. The Merger Agreement provides that if by
December 19, 1994, CECI has not delivered to Magma either a revised Commitment
Letter (as defined below) or definitive loan documentation reflecting the
financing contemplated by such Commitment Letter which, in each case, (i) does
not contain any due diligence conditions regarding CECI and Magma and its
subsidiaries and (ii) has a definition of "material adverse effect" and/or
"material adverse change" that substantially conforms in all material respects
with the definition of Material Adverse Effect (other than as provided in
subclause (i) of the definition provided below) contained in the Merger
Agreement with respect to CECI and Magma, then CECI will be required to pay
Magma a termination fee of $8,000,000 if (i) the Offer expires or is terminated
without CE Sub having accepted for payment the Shares tendered pursuant
thereto, or (ii) the Merger Agreement is terminated by either CECI or Magma
because the Offer has not been consummated by February 28, 1995 ((i) and (ii)
collectively, the "Offer Termination Events"); provided, however, that the
$8,000,000 termination fee will not be required to be paid if failure to
consummate the Offer results from one or more of the following: (i) a Material
Adverse Effect with respect to Magma shall exist or shall have occurred and be
continuing on or prior to the relevant Offer Termination Event; (ii) Magma
shall have materially breached the Merger Agreement and CECI shall have
terminated the Merger Agreement pursuant to clause (h) of the paragraph
entitled "Termination" above; or (iii) generally accepted accounting principles
would require a restatement of Magma's audited financial statements contained
in the Company SEC Reports (as defined in the Merger Agreement).

property or asset of CECI or any CECI subsidiary is bound, (ii) a failure to
receive any contract for which CECI or any CECI subsidiary has submitted or
will submit a competitive bid, (iii) the loss of any contract or arrangement
(whether by revocation, lapse or invalidity) with respect to a project that
CECI or a CECI subsidiary has under development, other than any such loss
resulting from a breach by CECI of the representations and warranties set forth
in Section 3.22 or 3.23 of the Merger Agreement (relating to the status of
CECI's development and construction projects and its operating projects), (iv)
a failure to close any public or private financing of any project in which CECI
or any CECI subsidiary owns a direct or indirect interest or (v) the
termination of the employment of any employee, officer, director or consultant
of CECI or any CECI subsidiary.

When used in connection with Magma or any of its subsidiaries, the term
"Material Adverse Effect" means any change or effect, when taken together with
all other adverse changes and effects relating to Magma and its subsidiaries,
that is or is reasonably likely to be materially adverse to the business,
operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) of Magma
and the subsidiaries taken as a whole; provided, however, that the occurrence
of any or all of the following shall not constitute a Material Adverse Effect:
(i) any change in any law applicable to Magma or any subsidiary or by which any
property or asset of Magma or any subsidiary is bound, (ii) a failure to
receive any contract or award for which Magma or any subsidiary has submitted
or will submit a competitive bid, (iii) the loss of any contract or arrangement
(whether by revocation, lapse or invalidity) with respect to a project that
Magma or any subsidiary has under development, other than any such loss related
to the Malitbog project or the Fish Lake project and other than any such loss
resulting from a breach by Magma of the representations and warranties set
forth in Sections 4.22 and 4.23 of the Merger Agreement (relating to the status
of Magma's development and construction projects and its operating projects),
(iv) an unfavorable ruling by the California Public Utilities Commission
("CPUC") with respect to Magma's California plants under the pending Biennial
Resource Plan Update ("BRPU"), (v) a loss of, or unfavorable ruling in, Magma's
pending litigation against Southern California Edison Company ("SCE"), but only
insofar as such litigation seeks to increase the energy price payable for
deliveries over nameplate capacity and not insofar as any unfavorable ruling
affects the validity or enforceability of any contract subject thereto or the
enforceability of any material term thereof, (vi) a failure to close any public
or private financing of any project in which Magma or any subsidiary owns a
direct or indirect interest (other than as a result of a loss with respect to
the Malitbog project or the Fish Lake project or as a result of a breach by
Magma of the representations and warranties set forth in Section 4.22 or 4.23
of the Merger Agreement (relating to the status of Magma's development and
construction projects and its operating projects)), or (vii) the termination of
the employment of any employee, officer, director or consultant of Magma or any
Magma subsidiary.

Certain Investment Considerations

Holders of Shares, in reaching a decision regarding the proposal to
approve and adopt the Merger Agreement, should consider carefully certain
factors set forth herein under the heading "Certain Investment Considerations."
Factors to be considered relating to CECI and Magma include the following: (i)
the potential for fluctuation of value of the Merger Consideration, (ii) the
effects of combining the companies and the accompanying high leverage, (iii)
the existence of a controlling stockholder, (iv) development uncertainty, (v)
competition, (vi) the impact of environmental regulations, (vii) exploration,
development and operation uncertainties of geothermal energy resources, and
(viii) antitrust issues.

The following additional factors relating to CECI also should be
considered by the holders of Shares: (i) the present dependence on large
customers, and (ii) the shares of CECI Common Stock eligible for future sale.

The following additional factors relating to Magma also should be
considered by the holders of Shares: (i) interests of certain persons in the
Merger, (ii) contract risks, and (iii) reliance by Magma on a single customer,
reservoir and transmission line.

Recommendation of the Board of Directors of Magma

On December 5, 1994, the Magma Board unanimously approved (with two
directors absent) the Merger Agreement and the transactions contemplated
thereby and determined that each of the Offer and the Merger is fair to, and in
the best interests of, the stockholders of Magma. The Magma Board recommended
that all holders of Shares accept the Offer and tender their Shares pursuant to
the Offer.

Opinions of Financial Advisors

On December 7, 1994, Gleacher & Co. Inc. ("Gleacher") delivered a
written opinion, dated December 6, 1994, to the CECI Board that, as of December
5, 1994, the consideration to be paid by CECI in the Offer and the Merger is
fair to CECI from a financial point of view. A copy of the written opinion of
Gleacher, dated December 6, 1994, which sets forth a description of the
<PAGE>

assumptions made, matters considered and limits of its review, is attached to
this Proxy Statement as Annex C.

Required Vote

An affirmative vote approving and adopting the Merger Agreement at the
Magma Special Meeting by the holders of a majority of the outstanding Shares
entitled to vote thereon is required to consummate the Merger. As a result of
the completion of the Offer pursuant to which CE Sub acquired 12,400,00 Shares
for $39.00 per Share in cash (representing approximately 51% of the issued and
outstanding Shares), CE Sub owns a sufficient number of Shares to approve the
Merger without the affirmative vote of any other stockholder.

Interests of Certain Persons in the Merger

In considering the recommendation of the Magma Board with respect to
the Merger Agreement and the transactions contemplated thereby, stockholders
should be aware that certain members of Magma's management and the Magma Board
have certain interests in the Merger that are in addition to the interests of
Magma stockholders generally. See "SPECIAL FACTORS -- Investment
Considerations Relations to Magma -- Interests of Certain Persons in the
Merger."

Stock Exchange Listing

It is a condition to the Merger that the shares of CECI Common Stock to
be issued in connection with the Merger be authorized for listing on the NYSE.
Application will be made to list CECI Common Stock to be issued pursuant to the
Merger on such exchange.

Regulatory Approvals

CECI, CE Sub and Magma know of no federal or state regulatory
requirements that must be complied with or approvals that must be obtained in
order to consummate the Merger, other than the filing of the Certificate of
Merger or the Merger Agreement with the Secretaries of State of Delaware and
Nevada.

Accounting Treatment

The Merger will be accounted for under the purchase method of
accounting.

Dissenters' Rights

Holders of Shares have the right to dissent from the Merger and,
subject to certain conditions, receive payment of the "fair value" of their
Shares, as provided in Sections 471 through 502 of the NGCL. Fair value shall
be determined as of the day before the Merger, excluding any appreciation or
depreciation in anticipation of the Merger. In order to perfect dissenters'
rights, a stockholder (i) must deliver to Magma, before the vote on the Merger
is taken, written notice of his intent to demand payment for his Shares if the
Merger is effectuated; (ii) must not vote his Shares in favor of the Merger;
and (iii) within a specified number of days after receipt from Magma of a
notice to dissenters that the Merger was effectuated, must demand payment,
certify when he acquired beneficial ownership of his Shares and deposit his
Share certificates in the manner set forth in the notice. Within 30 days of
receipt of payment or offered payment, a dissenting stockholder may notify
Magma in writing of his own estimate of the fair value of his Shares and the
amount of interest due, and demand payment of his estimate, less any previous
payment. If a demand for payment remains unsettled, Magma must commence a
proceeding within 60 days of receipt of the demand and petition the court to
determine the fair value of the shares and accrued interest. See "SPECIAL
FACTORS--Dissenters' Rights."

Certain Federal Income Tax Consequences

The conversion of Shares into the Merger Consideration will be a
taxable transaction for federal income tax purposes and may also be taxable
under applicable state, local and other tax laws. For federal income tax
purposes, a holder of Shares will generally recognize gain or loss upon the
Merger in an amount equal to the difference between the fair market value of
the Merger Consideration and the holders adjusted tax basis in such Shares.
See "SPECIAL FACTORS--Federal Income Tax Consequences."

Market Prices of CECI Common Stock

CECI Common Stock is listed for quotation on the NYSE under the symbol
"CE." The following table sets forth the quarterly high and low last reported
sales price of the CECI Common Stock for the fiscal quarters indicated.

High Low
Fiscal Year Ended
December 31, 1991:
First Quarter $14.00 $7.00
Second Quarter 15.00 10.88
Third Quarter 16.00 12.38
Fourth Quarter 16.63 13.75
Fiscal Year Ended
December 31, 1992:
First Quarter 16.25 11.63
Second Quarter 13.25 11.50
Third Quarter 13.00 11.38
Fourth Quarter 17.38 11.88
<PAGE>

Fiscal Year Ended
December 31, 1993:
First Quarter 21.75 16.38
Second Quarter 20.25 16.88
Third Quarter 18.50 15.75
Fourth Quarter 20.25 17.88
Fiscal Year Ending
December 31, 1994:
First Quarter 19.50 16.75
Second Quarter 18.13 15.75
Third Quarter 17.75 15.75
Fourth Quarter
(through
December 19) 17.13 15.38
Fiscal Year Ending December 31, 1995:
First Quarter (through January __)

On September 19, 1994, the day of CECI's issuance of its press release
announcing the transmission of a letter to Magma containing a proposal to
acquire Magma in a transaction in which stockholders would receive cash and
shares of CECI Common Stock having a combined cash and market value of $35 per
share, the reported closing price for CECI Common Stock was $16.875. On
December 2, 1994, the last full trading day prior to the announcement that the
Merger Agreement had been executed, the closing stock price for CECI Common
Stock was $16.50. On January __, 1995, the last full trading day for which
quotations were available at the time of printing of this Proxy Statement, the
closing stock price for CECI Common Stock was ____. STOCKHOLDERS ARE URGED TO
OBTAIN CURRENT QUOTATIONS FOR THE CECI COMMON STOCK.

Market Prices of Magma Common Stock

The Shares are listed for quotation on the Nasdaq National Market
("NNM") under the symbol "MGMA." The following table sets forth the quarterly
high and low last reported sales price of Shares for the fiscal quarters
indicated.

High Low
Fiscal Year Ended
December 31, 1991:
First Quarter $33.50 $22.50
Second Quarter 34.25 28.50
Third Quarter 30.00 22.75
Fourth Quarter 27.50 23.25
Fiscal Year Ended
December 31, 1992:
First Quarter 27.25 21.00
Second Quarter 25.75 19.25
Third Quarter 24.75 19.75
Fourth Quarter 32.25 19.75
Fiscal Year Ended
December 31, 1993:
First Quarter 40.00 30.75
Second Quarter 41.50 30.75
Third Quarter 39.00 29.75
Fourth Quarter 40.50 30.00
Fiscal Year Ending
December 31, 1994:
First Quarter 35.25 30.75
Second Quarter 33.25 28.00
Third Quarter 35.25 26.50
Fourth Quarter
(through
December 19) 37.50 34.25
Fiscal Year Ending December 31, 1995:
First Quarter (through January __)

On September 19, 1994, the day of CECI's issuance of its press release
announcing the transmission of a letter to Magma containing a proposal to
acquire Magma in a transaction in which holders of Shares would receive cash
and shares of CECI Common Stock having a combined cash and market value of $35
per Share, the reported closing sale price on the NNM was $27.50. On December
2, 1994, the last full trading day prior to the announcement that the Merger
Agreement had been executed, the last reported sales price for Shares was
$35.50. On January __, 1995, the last full trading day for which quotations
were available at the time of printing of this Proxy Statement, the last
reported sales price for the Shares was ____. HOLDERS OF SHARES ARE URGED TO
OBTAIN CURRENT QUOTATIONS FOR THE SHARES.

<PAGE>

CAPITALIZATION OF CECI

The following table sets forth (i) the consolidated capitalization of
CECI as of September 30, 1994 and (ii) the consolidated pro forma
capitalization of CECI as adjusted to reflect the purchase by CE Sub of all the
Shares and the issuance by CECI of shares of CECI Common Stock offered pursuant
to a prospectus to be filed with the Commission. The following table should be
read in conjunction with the other pro forma financial information contained in
this Proxy Statement and the consolidated financial statements and notes
thereto of CECI incorporated by reference herein and the consolidated financial
statements and notes thereto of Magma which are not included herein.

<TABLE>
<CAPTION>
At September 30, 1994
CECI Magma Pro Forma Pro Forma
Adjustments Combined
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Debt:
Construction loans. . . . . $ 21,079 $ - $ -- $ 21,079
Project loans . 233,080 188,969 -- 422,049
Senior discount notes 421,375 -- -- 421,375
Convertible subordinated debenture 100,000 -- -- 100,000
Other long term liabilities -- 12,354 500,000 512,354
--------------- ---------- ------------ ----------
775,534 201,323 500,000 1,476,857
Redeemable preferred stock 62,350 -- -- 62,350

Stockholders' Equity:
CECI preferred stock -- Series A of no
par value; authorized 2,000 shares -- -- -- --
CECI Common Stock of $0.0675 par
value; authorized 60,000 shares; Issued
32,230 shares--actual; 47,529
shares--as adjusted 2,407 -- 802 3,209
Magma common stock of $0.10 par value;
authorized 30,000 shares;
24,043 issued -- 2,401 (2,401) --
Additional paid in capital 100,000 142,765 49,350 292,115
Unrealized gain from marketable securities -- (677) 677 --
Retained earnings 136,769 250,797 (250,797) 136,769
Less treasury stock - 3,420 shares
at cost (59,516) -- 59,516 --
Total stockholders' equity 179,660 395,286 (142,853) 432,093
---------- -------- --------- ----------
$1,017,544 $596,609 $357,147 $1,971,300
========== ======== ========= ==========
</TABLE>

The accompanying notes to the pro forma unaudited condensed combined financial
data are an integral part of these statements.

<PAGE>

COMPARISON OF CERTAIN UNAUDITED DATA

The following table contains certain unaudited comparative data related
to common stockholders' equity, cash dividends declared, and revenues and
earnings (i) on a historical basis for CECI and Magma, (ii) on a pro forma
combined basis of CECI and (iii) on an equivalent pro forma basis per Share
assuming that each Share is converted into 1.337 shares of CECI Common Stock.
Such information is based upon the acquisition of Magma being accounted for
under the purchase method of accounting. The information shown below should be
read in conjunction with the consolidated historical financial statements and
notes thereto of CECI and Magma, which are incorporated by reference herein,
and the selected historical and pro forma financial data, including the notes
thereto, appearing elsewhere in this Proxy Statement. See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" and "PRO FORMA UNAUDITED CONDENSED COMBINED
FINANCIAL DATA."

<TABLE>
<CAPTION>
Pro Forma Pro Forma
CECI Magma Adjustment Combined
(In thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating Data:
(Year Ended December 31, 1993)
Total revenue $ 149,253 $167,138 $ (10,547) $ 305,844
Net income from continuing
operations available to
common shareholders $ 38,444 $ 52,135 $ (47,745) $ 42,834
Net income from continuing
operations available to
common shareholders per
common share
Assuming no dilution $ 1.00 $2.17 $ -- $ 0.80
Assuming full dilution $ 1.00 $2.17 $ -- $ 0.79
Weighted average number of
common shares 38,485 24,063 -- 53,784
Dividends per share -- -- -- --

Operating Data:
(Nine Months Ended
September 30, 1994)
Total revenue $ 139,188 $146,104 $ (7,910) $ 277,382
Net income from continuing
operations available to
common shareholders $ 27,688 $ 46,843 $ (35,808) $ 38,723
Net income from continuing
operations available to
common shareholders
per common share
Assuming no dilution $ 0.77 $1.95 $ -- $ 0.75
Assuming full dilution $ 0.76 $1.95 $ -- $ 0.73
Weighted average number of
common shares 36,174 24,017 -- 51,473
Dividends per share -- -- -- --

Balance Sheet Data:
(September 30, 1994)
Total assets $1,087,064 $630,422 $ 515,147 $ 2,232,633
Total indebtedness 775,534 201,323 500,000 1,476,857
Redeemable preferred stock 62,350 -- -- 62,350
Common stockholders' equity 179,660 395,286 (142,853) 432,093
Book value per common share 5.57 16.44 -- 9.09

<PAGE>

<CAPTION>
Year Ended Nine Months Ended
December 31, 1993 September 30, 1994
<S> <C> <C>
Pro Forma Combined Equivalent
Per Share Data:(1)
Earnings per equivalent share
from continuing operations
Assuming no dilution $1.07 $1.00
Assuming full dilution $1.06 $0.98
Dividends per equivalent share -- --
Book value per equivalent share
at September 30, 1994 $12.15
</TABLE>

- ---------------
(1) Magma shareholders receiving common stock equivalents of the Company as
displayed above will also receive a portion of their consideration in cash,
which can be reinvested.

<PAGE>

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND
OPERATING DATA OF CECI

The following table sets forth selected historical consolidated
financial and operating data, which should be read in conjunction with CECI's
consolidated financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
CECI incorporated by reference to CECI's Annual Report on Form 10-K for the
year ended December 31, 1993 and to CECI's Quarterly Report on Form 10-Q for
the quarters ended September 30, 1993 and 1994. The unaudited consolidated
financial statements of CECI as of and for the nine months ended September 30,
1993 and 1994 reflect all adjustments necessary, in the opinion of management,
(consisting only of normal recurring adjustments) for a fair presentation of
such financial data. The selected consolidated data as of and for each of the
five years in the period ended December 31, 1993 have been derived from the
audited historical consolidated financial statements of CECI.

<TABLE>
<CAPTION>
Nine Months
Ended
Year Ended December 31, September 30,
1989 1990 1991 1992 1993 1993 1994
------------------------------------ -------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:

Sales of electricity $43,010 $89,026 $104,155$115,087$129,861$99,398 $115,357
Sales of steam -- -- 2,029 2,255 2,198 1,648 1,851
Interest and other income 5,386 7,787 9,379 10,187 17,194 12,294 21,980
------ ------ ------- ------- ------- -------
Total revenue 48,396 96,813 115,563 127,529 149,253 113,340 139,188
Plant operations, general and
administrative and royalties 13,615 37,412 41,506 45,183 46,794 34,019 41,321
Income before depreciation,
amortization, interest,
income taxes, extraordinary item
and cumulative effect of change
in accounting principle (1) 34,781 59,401 74,057 82,346 102,459 79,321 97,867
Depreciation and amortization 6,605 13,372 14,752 16,754 17,812 13,044 15,439
Interest expense, net of
capitalized interest 15,125 30,464 24,439 14,860 23,389 17,171 36,962
Provision for income taxes 2,715 3,522 8,284 11,922 18,184 14,295 14,067
Income before extraordinary item
and cumulative effect of change
in accounting principle (1) 10,336 12,043 26,582 38,810 43,074 34,811 31,399
Extraordinary
item-refinancing (2) -- -- -- (4,991) -- -- (2,007)
Cumulative effect of change in
accounting principle (3) -- -- -- -- 4,100 4,100 --
Net income (1) 10,336 12,043 26,582 33,819 47,174 38,911 29,392
Preferred dividends (paid
in kind) -- -- -- 4,275 4,630 3,429 3,711
Net income available to common
stockholders 10,336 12,043 26,582 29,544 42,544 35,482 25,681
Income per share before
extraordinary item and
cumulative effect of change
in accounting principle (1)
Assuming no dilution 0.38 0.44 0.75 0.92 1.00 0.81 0.77
Assuming full dilution (4) 0.38 0.44 0.75 0.92 1.00 0.81 0.76
Extraordinary item per share (2) -- -- -- (0.13) -- -- (0.06)
Cumulative effect of change in
accounting principle per
share (3) $ -- $ -- $ -- $ -- $0.11 $0.11 $ --

<PAGE>

Nine Months
Ended
Year Ended December 31, September 30,
1989 1990 1991 1992 1993 1993 1994
------------------------------------ --------------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Net income per share
Assuming no dilution 0.38 0.44 0.75 0.79 1.11 0.92 0.71
Assuming full dilution (4) 0.38 0.44 0.75 0.79 1.11 0.92 0.70
Weighted average shares
outstanding (5) 27,019 27,254 35,471 37,495 38,485 38,436 36,174
Capital expenditures 124,749 32,514 68,377 32,446 87,191 64,250 78,892

December 31, September 30,
------------------------------------------------------------------------ --------------------
1989 1990 1991 1992 1993 1993 1994
Balance Sheet Data:
Property-power
plant, net $302,514 $321,303 $373,948 $389,646 $458,974 $440,527 $522,268
Total assets 349,282 393,853 517,994 580,550 715,984 710,659 1,087,064
Total debt 260,120 270,738 257,038 299,334 382,610 390,972 775,534
Preferred stock -- 4,705 54,705 54,350 58,800 57,650 62,350
Stockholders' equity 42,163 55,088 143,128 168,764 211,503 206,675 179,660
</TABLE>
______________
(1) The Navy I Plant commenced operation prior to 1989 and the BLM and Navy II
Plants commenced commercial operation in February 1989 and January 1990,
respectively. The Desert Peak, Nevada facility and the Roosevelt Hot
Springs, Utah steam field were acquired in March and January 1991,
respectively.
(2) The refinancing of CECI's three largest domestic projects located at the
Naval Air Weapons Station at China Lake, California (collectively, the
"Coso Project") resulted in an extraordinary item in 1992 in the amount of
$5.0 million, after the tax effect of $1.5 million. The defeasance of the
Senior Notes resulted in an extraordinary item in 1994 in the amount of
$2.0 million, after the tax effect of $1.0 million.
(3) On January 1, 1993, CECI adopted Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes" ("SFAS 109"), which
resulted in a cumulative adjustment to net income of $4.1 million in 1993.
(4) Fully diluted earnings per share reflects the dilutive effect of
convertible subordinated debentures as if they were converted at the
beginning of the reporting period.
(5) The number of shares outstanding is calculated by using the treasury stock
method.

<PAGE>

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA OF MAGMA

The following information concerning Magma is excerpted from Magma's
Annual Report on Form 10-K for the year ended December 31, 1993 and Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994.

The selected financial data set forth below with respect to Magma's
statements of operations for each of the five years in the period ended
December 31, 1993 and the balance sheets of Magma as of December 31, 1989
through 1993 are derived from the consolidated financial statements of Magma
that have been audited by Coopers & Lybrand, independent certified public
accountants. The selected financial data set forth below with respect to
Magma's statements of operations for the nine-month period ended September 30,
1994 and 1993 and, with respect to the balance sheet of Magma as of September
30, 1994, have been derived from the unaudited consolidated financial
statements of Magma, which, in the opinion of management, reflect all
adjustments necessary (consisting only of normal recurring adjustments) for a
fair presentation of such financial data.

The selected financial data set forth below should be read in
conjunction with the consolidated financial statements and related notes and
other financial information included in Magma's Annual Report on Form 10-K for
the year ended December 31, 1993 and Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994 incorporated herein by reference.

<TABLE>

Nine Months
Year Ended December 31, Ended September 30,
1989 1990 1991 1992 1993 1993 1994
(In thousands, except per share data and percentages)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenues $63,103 $ 85,599 $94,891 $108,966 $167,138 $124,781 $146,104
Operating revenues(1) 56,743 76,893 84,135 100,313 162,943 121,146 142,238
Income from operations 26,892 36,694 41,204 49,667 74,913 57,957 67,915
Income before
cumulative effect of
accounting change 22,295 30,166 33,941 36,358 52,135 39,469 46,843

Cumulative effect of
change in accounting
for income taxes -- -- -- 17,833(2) -- -- --
Net income. . 22,295 30,166 33,941 54,191 52,135 39,469 46,843
Return on revenues 35.3% 35.2% 35.8% 33.4%(3) 31.2% 31.6% 32.1%
Capital expenditures $43,762 $ 7,054 $15,711 $ 12,043 $ 8,434 $ 5,718 $ 8,854
Return on average
stockholders' equity 16.1% 17.6% 16.2% 14.3%(3) 16.4% 13.0% 12.5%
Weighted average
shares outstanding. . 21,999 22,898 23,611 22,936 24,063 24,037 24,017
Income before
cumulative effect
of accounting change
per common share
Assuming no dilution $1.01 $1.32 $1.44 $1.59 $2.17 $1.64 $ 1.95
Assuming full
dilution(4) 0.96 1.32 1.44 1.52 2.17 1.64 1.95
Income per common
share
Assuming no dilution 1.01 1.32 1.44 2.36(2) 2.17 1.64 1.95
Assuming full
dilution(4) 0.96 1.32 1.44 2.27(2) 2.17 1.64 1.95

September
December 31, 30,
1989 1990 1991 1992 1993 1994
(In thousands)
Balance Sheet Data:
Property, plant and
equipment, net . $124,062(5) $120,125 $118,541 $113,922 $265,215 $256,561
Exploration and
development
costs, net . . . 46,681 44,782 48,644 52,001 107,069 104,271
Total assets 282,624 325,131 353,788 396,650 611,311 630,422
Long-term
obligations(6) 98,212 99,297 89,808 87,339 200,509 164,313
Total debt(7) 100,517 102,842 97,541 96,126 226,008 188,969
Stockholders' equity 150,142 192,626 226,872 282,260 351,918 395,286

</TABLE>
_______________

(1) Excludes interest and other income.
(2) The cumulative effect of Magma's adoption of SFAS 109 increased net income
by $17,833, or $.77 per share. See Note 11, Provision for Income Taxes,
accompanying the consolidated financial statements for the year ended
December 31, 1992 for Magma incorporated by reference in its Annual Report
on Form 10-K for the year ended December 31, 1993.
(3) Excludes the impact of cumulative effect of change in accounting for
income taxes.
(4) Fully diluted earnings per share reflects the dilative effect of stock
options and warrants at the end of the reporting period.
<PAGE>

(5) Projects in progress reclassified to appropriate asset classification.
(6) Consists of the noncurrent portion of long-term loans payable and other
long-term liabilities.
(7) Represents loans payable, including the current portion of long-term loans
payable.

<PAGE>

CERTAIN INVESTMENT CONSIDERATIONS

Holders of Shares should consider carefully all of the information
contained in this Proxy Statement, including the following:

Investment Considerations Relating to CECI and Magma

Potential for Fluctuation of Value of Merger Consideration. The
relative stock price of CECI Common Stock at the Effective Time may vary
significantly from the price as of the date of execution of the Merger
Agreement, the date hereof or the date on which the Merger Consideration is
determined. CECI Common Stock may trade at values which, combined with the
Mixed Cash Component Amount, results in the holders of Shares receiving an
amount lower in value than $39.00. These variances may be due to changes in
the business, operations and prospects of CECI or Magma, general market and
economic conditions, and other factors. Pursuant to the Merger Agreement, the
Merger Consideration adjusts based upon certain changes in the price of CECI
Common Stock. Thus, the holders of Shares will not be able to determine the
number of shares of CECI Common Stock they will receive pursuant to the Merger
Consideration until five days prior to the Effective Time. The Collar
Provision also may have an impact on the value of the Merger Consideration.
The Collar Provision limits the number of shares of CECI Common Stock required
to be issued in the Merger if the Average Closing Price is less than $14.27.
Thus, if the Average Closing Price falls below $14.27, holders of Shares would
receive an aggregate of CECI Common Stock and cash with a value of less than
$39.00.

Controlling Stockholder. As a result of completion of the Offer and
the purchase of Shares pursuant thereto, CE Sub owns approximately 51% of the
Shares and has designated a majority of the members of Magma's Board. As such,
CECI and CE Sub control the direction and future operations of Magma.

Combining the Companies; High Leverage. If the Merger is consummated,
CECI, on a pro forma basis, will be substantially more leveraged than CECI or
Magma immediately prior to the Merger. In addition, in order to finance the
Offer, the Merger and certain fees and expenses related thereto, Merger, CECI
has incurred indebtedness of approximately $500 million.

Development Uncertainty. CECI and Magma are actively seeking to
develop, construct, own and operate new power projects utilizing geothermal and
other technologies, both domestically and internationally, the completion of
any of which is subject to substantial risk. Development can require CECI to
expend significant sums for preliminary engineering, permitting, legal and
other expenses in preparation for competitive bids which CECI may not win or
before it can be determined whether a project is feasible, economically
attractive or capable of being financed. Successful development is contingent
upon, among other things, negotiation of construction, fuel supply and power
sales contracts with other project participants on terms satisfactory to CECI
and Magma, and receipt of required governmental permits and consents. Further,
there can be no assurance that CECI (which is highly leveraged) and Magma will
obtain access to the substantial debt and equity capital required to develop
and construct electric power projects or to refinance projects. CECI's future
growth is dependent, in large part, upon the demand for significant amounts of
additional electrical generating capacity and CECI's ability to obtain
contracts to supply portions of this capacity. There can be no assurance that
development efforts on any particular project, or CECI's efforts generally,
will be successful.

Development Uncertainty Outside the United States. CECI and Magma
believe that the international independent power market holds the majority of
new opportunities for financially attractive private power development in the
next several years. The financing and development of projects outside the
United States entails significant political and financial risks (including,
without limitation, uncertainties associated with first time privatization
efforts in the countries involved, currency exchange rate fluctuations,
currency repatriation restrictions, political instability, civil unrest and
expropriation) and other structuring issues that have the potential to cause
substantial delays in respect of or material impairment of the value of the
project being developed, which CECI and Magma may not be fully capable of
insuring against. The uncertainty of the legal environment in certain foreign
countries in which CECI and Magma may develop or acquire projects could make it
more difficult for CECI and Magma to enforce their respective rights under
agreements relating to such projects. In addition, the laws and regulations of
certain countries may limit the ability of CECI and Magma to hold a majority
interest in some of the projects that it may develop or acquire. CECI's and
Magma's international projects may, in certain cases, be terminated by the
applicable foreign governments.

Competition. The international power production market is
characterized by numerous strong and capable competitors, many of which have
more extensive and more diversified developmental or operating experience
(including international experience) and greater financial resources than CECI.
Many of these competitors also compete in the domestic market. Further, in
recent years, the domestic power production industry has been characterized by
strong and increasing competition with respect to the industry's efforts to
obtain new power sales agreements, which has contributed to a reduction in
prices offered by utilities. In this regard, many utilities often engage in
"competitive bid" solicitations to satisfy new capacity demands. In the
domestic market, the Energy Policy Act of 1992 is expected to increase
competition.

Impact of Environmental Regulations. CECI and Magma are subject to a
number of environmental laws and regulations potentially affecting many aspects
of their present and future operations, including, without limitation, the
disposal of various forms of waste, the construction or permitting of new
<PAGE>

facilities and the drilling and operation of new wells. Such laws and
regulations generally require CECI and Magma to obtain and comply with a wide
variety of licenses, permits and other approvals. Although CECI and Magma do
not currently expect the enactment of changes in applicable environmental laws
or regulations which would have a material adverse effect on their businesses,
the implementation of regulatory changes imposing more comprehensive or
stringent requirements on CECI and Magma, thereby resulting in increased
compliance costs could have a material adverse effect on their respective
results of operations. In addition, regulatory compliance for the construction
of new facilities is a costly and time consuming process and intricate and
rapidly changing environmental regulations may require major expenditures for
permitting and create the risk of expensive delays or material impairment of
project value if projects cannot function as planned due to changing regulatory
requirements or local opposition.

Exploration, Development and Operation Uncertainties of Geothermal
Energy Resources. Geothermal exploration, development and operations are
subject to uncertainties similar to those typically associated with oil and gas
exploration and development, including dry holes and uncontrolled releases.
Because of the geological complexities of geothermal reservoirs, the geographic
area and sustainable output of a geothermal reservoir can only be estimated and
cannot be definitively established. There is, accordingly, a risk of an
unexpected decline in the capacity of geothermal wells, and a risk of
geothermal reservoirs not being sufficient for sustained generation of the
electrical power capacity desired. In addition, while CECI's and Magma's
existing power generating systems are built to withstand relatively significant
levels of seismic disturbance and CECI and Magma seek appropriate insurance
protection, geothermal power production poses unusual risks of seismic
activity, there can be no assurance that earthquake, property damage or
business interruption insurance will be adequate to cover all potential losses
sustained in the event of serious seismic disturbances or that such insurance
will be available on commercially reasonable terms.

The success of a geothermal project depends on the quality of the
geothermal resource and operational factors relating to the extraction of the
geothermal fluids involved in such project. The quality of a geothermal
resource is affected by a number of factors, including the size of the
reservoir, the temperature and pressure of the geothermal fluids in such
reservoir, the depth and capacity of the production and injection wells, the
amount of dissolved solids and noncondensible gases contained in such
geothermal fluids, and the permeability of the subsurface rock formations
containing such geothermal resource, including the presence, extent and
location of fractures in such rocks. The quality of a geothermal resource may
decline as a result of a number of factors, including the intrusion of lower-
temperature fluid into the producing zone. An incorrect estimate by CECI or
Magma of the quality of a geothermal resource, or a decline in such quality,
could have a material adverse effect on CECI's or Magma's results of
operations.

In addition, both the cost of operations and the operating performance
of geothermal power plants may be adversely affected by a variety of operating
factors. Production and injection wells require frequent maintenance or
replacement. Corrosion caused by high-temperature and high-salinity geothermal
fluids may compel the replacement or repair of certain equipment, vessels or
pipelines. New production and injection wells may be required for the
maintenance of current operating levels. Equipment failures and transmission
outages may cause or lead to unscheduled plant shutdowns, thereby reducing
output and increasing expenses.

Antitrust. Pursuant to the requirements of the Hart Scott Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), on October 6,
1994, CECI filed a Notification and Report Form for review under the HSR Act
with the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division"). The waiting period under the
HSR Act with respect to such filing in connection with the Previous Offer (as
defined below) was terminated on October 20, 1994. As a result of such
termination, no waiting period is required in connection with the Merger. CECI
and Magma do not believe that any additional filings are required with respect
to the Merger. Notwithstanding that the HSR Act waiting periods have expired,
the FTC, the Antitrust Division or state authorities could take such action
under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking divestiture of substantial assets of CECI or Magma.
Consummation of the Merger is conditioned upon, among other things, the absence
of any temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition. CECI and Magma do not believe that consummation of
the Merger will result in a violation of any applicable antitrust laws.
However, there can be no assurance that a challenge to the Merger on antitrust
grounds will not be made or, if such a challenge is made, of the result.

Investment Considerations Relating to CECI

Present Dependence on Large Customer; Impact of Avoided Cost Pricing.
The Coso Project depends on a long-term power purchase "Standard Offer No. 4"
contract (each, an "SO4 Agreement") with a single utility customer, SCE. The
revenues under these SO4 Agreements collectively constitute CECI's primary
source of revenues. Under the SO4 Agreements, SCE pays a fixed price which
escalates at an average annual rate of approximately 7.0% per year for the
remainder of the initial ten-year period under each SO4 Agreement, which period
continues until August 1997 for the Navy I Project, March 1999 for the BLM
Project and January 2000 for the Navy II Project. After the fixed price period
expires, while the basis for the capacity and capacity bonus payments under the
SO4 Agreements remains the same, the energy payments adjusts to SCE's then
prevailing "Avoided Cost," as determined by the CPUC, which at present is
substantially lower than the current energy payments under the SO4 Agreements.
CECI cannot predict the likely level of Avoided Cost energy prices at the
<PAGE>

expiration of the fixed price period.

Shares of CECI Common Stock Eligible for Future Sale. Pursuant to
CECI's Amended and Restated 1986 Stock Option Plan (the "1986 Plan"), as of
September 30, 1994, CECI had outstanding various options to its officers,
directors and employees for the purchase of 3,371,075 shares of CECI Common
Stock, of which all of the shares of CECI Common Stock issuable upon exercise
of said options have been registered pursuant to registration statements on
Form S-8, and, as and when fully vested, are available for immediate resale.
Also as of September 30, 1994, there were additional options outstanding to
purchase 6,064,154 shares of CECI Common Stock, 5,789,163 of which were granted
to Kiewit Energy. As of September 30, 1994, Kiewit Energy has demand and
piggyback registration rights with respect to approximately 8,971,912 shares of
CECI Common Stock (and any shares of CECI Common Stock subsequently held by
Kiewit Energy), options to purchase 6,064,154 shares of CECI Common Stock (and
the shares issuable upon the exercise of such options), and 3,393,197 shares of
CECI Common Stock issuable upon conversion of the 1,247 shares of Series C
Preferred Stock held by Kiewit Energy (or upon conversion of the Exchangeable
Subordinated Debentures if issued upon the exchange of the Series C Preferred
Stock). In addition, 4,444,444 share of CECI Common Stock have been reserved
for issuance pursuant to the 5% Convertible Subordinated debentures due July
31, 2000. CECI cannot predict the effect that possible future sales of any
substantial number of shares of CECI Common Stock could have on the market
price of the CECI Common Stock.

Investment Considerations Relating to Magma

Interests of Certain Persons in the Merger. In considering the
recommendation of the Magma Board with respect to the Merger Agreement and the
transactions contemplated thereby, holders of Shares should be aware that
certain members of Magma's management and the Magma Board have certain
interests in the Merger that are in addition to the interests of Magma
stockholders generally. The Magma Board was aware of these interests when it
considered and approved the Merger and the Merger Agreement.

In November 1993, the Compensation Committee of the Magma Board (the
"Compensation Committee") determined that, in order to attract and retain key
executives of Magma, from time to time it would be in Magma's best interests to
enter into "change in control" agreements with key executives. The
Compensation Committee authorized Magma to enter into such agreements, subject
to the following parameters:

(A) provision for up to two times base and bonus salary;
(B) accelerated vesting of options; and
(C) continuation of health and insurance benefits.

Each of the items referred to in (A) through (C) would be triggered by
a Change in Control (as defined below) of Magma followed by termination of the
relevant officer's employment by Magma within a specified period, other than
for cause, disability or retirement.

On September 15, 1994, Magma entered into such change in control
agreements with each of its six current executive officers (Paul Pankratz,
Chairman of the Board, Ralph Boeker, President and Chief Executive Officer, Jon
Peele, Executive Vice President, General Counsel and Secretary, Ken Kerr,
Senior Vice President--Commercial Development, Trond Aschehoug, Vice
President--North American Operations, and Wallace Dieckmann, Vice President and
Chief Financial Officer) ("Agreement I") and with nine other officers (Tom
Hinrichs, Vice President--Government Affairs, David Olsen, Vice President--
Marketing, Jim Runchey, Vice President--Human Resources and Administration,
Russ Tenney, Vice President--Asian Operations, Steve Jaye, Vice President--
Legal Affairs, Mark Robinson, Vice President--Business Development, Paul Zapf,
Corporate Controller, Joe Asiala, Director--Resource Development and
Management, and Jim Turner, Director--Engineering and Technology) ("Agreement
II").

The agreements provide for certain severance payments to those officers
in the event of the termination of their employment following a Change in
Control of Magma, consistent with the enabling resolutions passed by the
Compensation Committee in the fall of 1993. Each agreement has a term expiring
on December 31, 1997, renewable at the end of such term if mutually agreed to
by the officer and Magma.

Agreement I provides that if the officer's employment is terminated by
Magma for any reason other than for Cause, Disability or Retirement (as such
terms are defined in Agreement I) or by the officer for Good Reason (as such
term is defined in Agreement I) within two years following a Change of Control
(as defined below), (i) Magma will pay the officer, within 30 days of the date
of termination, a cash payment (the "Severance Payment") equal to 200% of the
sum (the "Sum") of (A) the officer's base salary for the twelve months
immediately preceding the Change in Control and (B) the officer's entire
targeted bonus payable under Magma's Management Incentive Bonus Plan or other
executive bonus plan then in effect and (ii) all Magma deferred shares or
similar Magma securities and all options to purchase Magma securities then held
by the officer shall immediately vest. Magma will continue to provide the
officer and his or her dependents group life and health insurance benefits
substantially the same as those in effect prior to the Change of Control,
increased to the extent that such benefits are increased following the Change
of Control, for 24 months following the officer's date of termination. In the
event that any payments or benefits under the agreement would not be deductible
(in whole or in part) by Magma as a result of the application of Section 280G
of the Internal Revenue Code of 1986, as amended (the "Code"), the Severance
Payment will be reduced until no portion of the Severance Payment and benefits
is not deductible as a result of Section 280G of the Code.

Agreement II provides the same level of payments and benefits as
<PAGE>

provided in Agreement I except that the Severance Payment shall equal 100% of
the applicable Sum and that health insurance benefits shall be provided for 12
months following a Change of Control.

A "Change of Control" shall be deemed to have occurred (i) in the event
of the acquisition by any person, together with its affiliates, of beneficial
ownership of capital stock of Magma possessing 30% or more of the combined
voting power of the Shares, (ii) if within any two-year period, the majority of
the members of the Magma Board were to be comprised of individuals other than
those who were members at the beginning of such period, unless the members
elected during such period were approved by a majority of the Magma Board in
office immediately prior to the beginning of such period, (iii) if all or
substantially all of Magma's assets are sold as an entirety to any person or
related group of persons or (iv) if Magma is merged with or into another
corporation or another corporation is merged into Magma with the effect that
immediately after such transaction the shareholders of Magma immediately prior
to such transaction hold less than a majority in interest of the total voting
power entitled to vote in the election of directors, managers or trustees of
the entity surviving such transaction.

At a regular scheduled Board of Directors meeting held on September 20,
1994, the Compensation Committee authorized a change of the definition of "Good
Reason" in these agreements, the effect of which would allow a covered
executive to resign for "Good Reason" if, after a Change of Control, the
executive were required to relocate more than 50 miles from his then current
place of employment.

Contract Risks. Six of the seven existing geothermal power plants
operated by Magma sell their electricity to SCE under separate SO4 Agreements.
Each SO4 Agreement provides for both capacity payments and energy payments for
a 30-year term. During the first ten years of the term of each SO4 Agreement,
energy payments are based on a pre-set schedule. Thereafter, with respect to
each of the six SO4 Agreements, the required energy payment is SCE's then-
current published avoided cost of energy. For May 1993, the time period-
weighted average of such avoided cost of energy for SCE was 3.6 cents
per kilowatt
hour ("kwh"), compared to Magma's time period-weighted average 1993 selling
price for energy of approximately 10.1 cents per kwh.
Such 10-year period expires
in 1996 with respect to one of Magma's plants, in 1999 for three of its plants
and in 2000 for the remaining two plants under SO4 Agreements. Estimates of
SCE's avoided cost of energy in 1999 vary substantially. Such avoided cost of
energy is currently substantially below the contract energy price and is
expected to remain so. Thus, the revenues generated by each of Magma's six
plants operating under SO4 Agreements are likely to decline significantly after
the tenth anniversary of their respective firm operation dates. Such decline
could have a material adverse effect on Magma's results or operations. SO4
Agreements, or similar contracts to sell electricity, are no longer being
awarded in California. The CPUC is in the final stages of adopting a new long-
term power purchase contract, or the Final Standard Offer No. 4 contract. Any
power purchase contract Magma is able to secure in the future, however, is
likely to be on terms and conditions that are significantly less favorable than
those provided in Magma's current SO4 Agreements.

Reliance on Single Customer, Reservoir and Transmission Line. Magma
relies on agreements with SCE to generate substantially all of its operating
revenues. Any material failure of SCE to fulfill its contractual obligations
under any of such contracts could have a material adverse effect on Magma's
results of operations. Magma's Salton Sea plants are also dependent on a
single reservoir and a single transmission line for the generation and delivery
of geothermal power.

<PAGE>

GENERAL INFORMATION

This Proxy Statement/Prospectus is furnished to stockholders of Magma
in connection with the solicitation of proxies by and on behalf of the Board of
Directors of Magma for use at the Magma Special Meeting. The Magma Special
Meeting will be held on January __, 1995, at ____a.m., Nebraska time, at
_____________________________________________ in Omaha, Nebraska. This Proxy
Statement and the related form of proxy for Magma is first being mailed to its
respective stockholders on or about January __, 1995.

Purpose of Special Meetings

The stockholders of Magma will be asked to consider and vote upon the
Merger Agreement at the Magma Special Meeting. The Magma Special Meeting also
will be held for the purpose of transacting such other business, if any, as may
be incidental to the conduct of such meeting as may properly come before it.

Record Date; Voting Rights; Proxies

The Magma Board of Directors has fixed the close of business on January
__, 1995 as the Magma Record Date for determining holders entitled to notice of
and to vote at the Magma Special Meeting.

As of the Magma Record Date, there were ____ Shares issued and
outstanding, entitling the holder thereof to one vote. All Shares represented
by properly executed proxies will, unless such proxies have been previously
revoked, be voted in accordance with the instructions indicated in such
proxies. If no instructions are indicated, such Shares will be voted in favor
of the Merger and in the discretion of the proxy holder as to any other matter
which may be incidental to the Magma Special Meeting as may properly come
before such meeting. Neither Magma nor CECI knows of any matters other than as
described in the Notice of Special Meeting that are to come before the Magma
Special Meeting. If any other matter or matters are properly presented for
action at the Magma Special Meeting, the persons named in the enclosed form of
proxy and acting thereunder will have the discretion to vote on such matters in
accordance with their best judgment, unless such authorization is withheld. A
stockholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice thereof to the Secretary of Magma, by signing
and returning a later dated proxy, or by voting in person at the Magma Special
Meeting; however, mere attendance at the Magma Special Meeting will not itself
have the effect of revoking the proxy.

Solicitation of Proxies

The cost of solicitation of proxies for the Magma Special Meeting will
be borne by Magma and brokerage houses, fiduciaries, nominees and others will
be reimbursed for their out-of-pocket expenses in forwarding proxy materials to
beneficial owners of stock held in their names. MacKenzie Partners, Inc. has
been engaged to act as a proxy solicitor for the Magma Special Meeting and will
receive a fee of $_______, plus expenses. In addition to the use of the mails,
proxies may be solicited by the directors and officers of CECI and Magma by
personal interview, telephone or telegram. Such directors and officers will
not receive additional compensation for such solicitation but may be reimbursed
for out-of-pocket expenses incurred in connection therewith.

Quorum

The presence in person or by properly executed proxy of holders of a
majority of the votes entitled to be cast at the Magma Special Meeting is
necessary to constitute a quorum at the Magma Special Meeting. As a result of
the completion of the Offer and the purchase of Shares pursuant thereto, CE Sub
owns a sufficient number of Shares to constitute a quorum at the Magma Special
Meeting.

Required Vote

As a result of the completion of the Offer and the purchase of Shares
pursuant thereto, CE Sub owns a sufficient number of Shares to approve the
Merger without the affirmative vote of any other stockholder.

SPECIAL FACTORS

Background of the Merger

In May 1991, representatives of CECI and Magma entered into discussions
and meetings to explore the possibility of combining the companies, and the two
companies exchanged certain information concerning their respective businesses
for the purpose of considering such a business combination or other acquisition
transaction. At the end of May 1991, the discussions were terminated as a
result of the inability of the parties to reach agreement concerning price and
certain other terms.

In August 1991, Magma's representatives contacted CECI for the purpose
of again exploring the possibility of combining the companies. In September
1991, a number of conversations between CECI's and Magma's representatives were
held regarding a possible merger of Magma with and into CECI. Based upon those
conversations, on September 26, 1991, after receiving the approval of CECI's
Executive Committee, CECI transmitted a proposed letter of intent to Magma. The
<PAGE>

proposed letter of intent contemplated a consensual merger of Magma with and
into CECI. Pursuant to the proposed merger, each outstanding Share would have
been exchanged for approximately two shares of CECI Common Stock in a
transaction accounted for on a pooling of interests basis. Such a transaction
would have represented a value of $30.25 for each Share (approximately a 20%
premium to the then-prevailing market price) based upon the then current market
values of the respective companies' common stocks.

Upon its receipt of the proposed letter of intent, Magma indicated to
CECI that the proposal would be considered and, after certain discussions by
representatives of the parties in the intervening days, on October 2, 1991,
Magma advised CECI that the Magma Board had considered CECI's proposal and that
Magma had no interest in pursuing the proposed pooling of interests combination
transaction.

In August 1993, David L. Sokol, the Chairman, Chief Executive Officer
and President of CECI, contacted Paul M. Pankratz, then Chairman and Chief
Executive Officer of Magma in order to propose a meeting to discuss various
matters of mutual interest. At a meeting in San Diego in September 1993, Mr.
Sokol and Steven A. McArthur, Senior Vice President, General Counsel and
Secretary of CECI, and Mr. Pankratz, Ralph W. Boeker, President of Magma, and
Jon R. Peele, Executive Vice President and General Counsel of Magma, discussed
principally the possibility of joint venturing or other cooperation in respect
of certain pending power development projects in the Philippines and the
possible sharing of legal costs and information in respect of certain domestic
regulatory proceedings in which the companies had a common interest. During the
course of those discussions, Mr. Sokol suggested to Magma's management that
such potential cost savings were illustrative of certain of the synergies that
a combination of the companies could achieve. However, no agreements or
understandings were reached between CECI and Magma as a result of these
discussions. In addition, at that meeting CECI suggested to Magma that it
consider utilizing PKS as Magma's general contractor in respect of Magma's
pending projects in the Philippines. Magma's management agreed to meet with PKS
regarding its possible role as a contractor in the Philippines. The meeting
between Magma and PKS was held in the fall of 1993, but no agreements or
understandings were reached with PKS and no further discussions were held in
respect of such matters.

In January 1994, Mr. Sokol again contacted Mr. Pankratz by telephone in
an effort to resume the foregoing discussions and, at Mr. Pankratz's
suggestion, Mr. Sokol was asked to contact Mr. Boeker, the President and
recently appointed Chief Executive Officer of Magma, to discuss these matters
further. In an April 1994 telephone conversation between Mr. Sokol and Mr.
Boeker, the possibility of cooperation with respect to international joint
ventures between the companies and other possible synergies between the
companies were again generally discussed, but no agreements or understandings
were reached. At Mr. Boeker's suggestion, it was tentatively agreed that they
would resume their discussions in July 1994.

On or about June 20, 1994, Mr. Sokol contacted Mr. Boeker and proposed
a meeting between members of management of the two companies to discuss the
possible combination of CECI and Magma.

On August 9, 1994, Mr. Sokol was advised that Mr. Boeker had declined a
scheduled August 11 meeting, and that Magma's decision to cancel was
principally due to the desire of Magma's management to dedicate their full
attention to the pending financing of Magma's Malitbog project in the
Philippines. Accordingly, Mr. Boeker suggested that he would schedule a meeting
with Mr. Sokol toward the end of September 1994, which is when Magma expected
to close the financing.

On September 15, 1994, Mr. Sokol contacted a member of the Magma Board,
in an effort to determine whether Magma had a serious interest in discussing a
negotiated combination of the companies within a time frame that would
recognize CECI's desire to make certain decisions regarding the strategic
direction it wished to pursue in the changing global marketplace. The director
stated that he was aware of certain of the past discussions between the
companies, but would ask Magma 's management to respond directly to Mr. Sokol's
inquiry.

Later that same day, Messrs. Pankratz and Boeker called Mr. Sokol and
advised him that the closing of the financing for Magma's Malitbog project had
been delayed and was expected to occur on or about November 18, 1994 and
suggested that they would be available to meet with Mr. Sokol shortly after the
closing of such financing. Mr. Sokol stated that CECI was considering a number
of strategic alternatives, including a possible combination with Magma, and
that CECI's strategic planning had reached a stage where a prompt decision
concerning entering into negotiations regarding any possible combination with
Magma was required. Mr. Sokol further stated his belief that it was unnecessary
to wait until after the closing of the Malitbog financing because CECI was
prepared to negotiate in good faith on a basis that would value Magma as though
such financing had closed. Messrs. Boeker and Pankratz reiterated that they
would agree to meet only after the Malitbog closing and Mr. Sokol concluded the
call by reiterating CECI's need to act upon certain of its strategic
alternatives on a prompt basis.

On September 19, 1994, Mr. Sokol wrote to Messrs. Pankratz and Boeker
proposing to acquire all outstanding Shares for $35 per Share comprised of
$25.00 in cash and $10.00 in market value of CECI Common Stock (the "Initial
Proposal"). On September 20, 1994, Mr. Pankratz responded that the Magma Board
would consider the proposal and respond after completion of its evaluation.

During the week of September 19, 1994, representatives of CECI
contacted management of The Dow Chemical Company ("Dow"), the beneficial owner
of approximately 21% of the Shares, to determine Dow's reaction to CECI's
proposal of September 19, 1994. The CECI representatives were told Dow was
<PAGE>

evaluating such proposal. During the week of September 26, 1994, CECI's
financial representatives contacted management of Dow to inquire as to the
circumstances surrounding a recent sale by Dow of 857,143 Shares for $28.25 per
Share and an associated option agreement to acquire such Shares at the same
price, which Dow had reported in filings with the Commission, and in particular
whether any impediments existed to Dow's ability to freely dispose of such
Shares and whether any structural changes to CECI's merger proposal would be
helpful in this regard. Dow reported that it was considering such issues in the
context of CECI's proposal.

On September 28, 1994, after telephone discussions between CECI's
financial advisors and Magma's financial advisors regarding CECI's request to
arrange a meeting between the parties, Messrs. Sokol and McArthur, together
with representatives from CECI's financial advisors, met with representatives
from Magma's financial advisor in order to introduce CECI and to further
elaborate and answer questions with respect to the details of CECI's proposal.
CECI provided the representatives from Magma's financial advisors with copies
of a draft merger agreement for review by the Magma Board.

On October 3, 1994, Magma's financial advisors informed CECI's
financial advisors that the Magma Board had authorized Magma to enter into a
"poison pill" Rights Plan (the "Rights Agreement") at its Board meeting which
concluded on such date, but that the Magma Board had also authorized Magma's
financial advisors to meet with CECI's financial advisors as soon as possible
and, accordingly, a meeting was scheduled for the morning of October 4, 1994.
CECI subsequently learned through press reports that Magma had amended its
Bylaws to require that stockholder action occur only at a regular or special
meeting of stockholders rather than by way of a written consent solicitation
and that Magma also had filed a complaint against CECI seeking a declaratory
judgment that (i) the Magma Board had properly discharged its fiduciary duties
in adopting the Rights Agreement and an amendment to Magma's Bylaws and,
accordingly, such agreement and amendment were valid and binding, and (ii) the
Merger Moratorium Statute (as defined below) is valid and not in violation of
the Commerce Clause and Supremacy Clause of the United States Constitution.

On October 4, 1994, at the meeting between CECI's financial advisors
and Magma's financial advisors, Magma's financial advisors summarized the
actions taken at the Magma Board meeting held on October 2, 1994 and October 3,
1994, and indicated that although the Magma Board had not rejected CECI's
proposal, the Magma Board would prefer that CECI withdraw its merger proposal.
Magma's financial advisors then indicated that the Magma Board believed that
CECI's proposed price was too low and referenced Magma's future opportunities
but declined to provide any specific information or financial analysis
indicating what price the Magma Board would consider favorably with respect to
a sale of Magma or as to why CECI's proposed price did not correctly value
Magma's businesses.

In light of the defensive actions taken by Magma, on October 6, 1994 CE
Sub commenced a cash tender offer for 12,400,000 Shares at $35 per Share (the
"Previous Offer").

On October 11, 1994, Magma filed with the Commission a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Previous Schedule
14D-9") pursuant to the Exchange Act, which included the recommendation of the
Magma Board that Magma's stockholders reject the Previous Offer.

On October 13, 1994, CECI announced the filing of a preliminary proxy
statement with the Commission pursuant to the Exchange Act in order to solicit
written requests from Magma's stockholders for the call of a Special Meeting of
Magma's stockholders (the "Requested Special Meeting"). The purpose of the
Requested Special Meeting was to provide Magma's stockholders the opportunity
to consider and vote on CECI's proposals which, if approved, would help
facilitate consummation of the Previous Offer.

On October 21, 1994, CE Sub increased the price per Share to be paid in
the Previous Offer to $38.50 per Share (the "Revised Previous Offer"). On
October 31, 1994, CECI learned that the Magma Board had again recommended that
its stockholders reject the Previous Offer.

On November 1, 1994, CECI announced that it had put its best offer on
the table and that it intended to withdraw its acquisition proposal if it had
not signed a merger agreement with Magma or received sufficient written
requests to call the Requested Special Meeting by December 2, 1994. Throughout
November 1994, CECI solicited written consents for the call of the Requested
Special Meeting, which solicitation was actively opposed by Magma.

As of the close of business on December 2, 1994, CECI had neither
entered into a merger agreement with Magma nor received sufficient written
requests to call the Requested Special Meeting. Consequently, CECI announced by
press release, and Mr. Sokol placed telephone calls to Messrs. Pankratz and
Boeker and to a representative of Dow to advise them, that CECI had withdrawn
its acquisition proposal and had terminated the Previous Offer. As a result of
these telephone conversations, and follow up telephone conversations among the
parties and their advisors, CECI and Magma arranged to meet the following day
in New York to explore the possibility of a negotiated acquisition of Magma by
CECI.

From December 3, 1994 through the morning of December 5, 1994,
representatives of CECI and Magma, together with their legal and financial
advisors, met to negotiate the terms of a proposed acquisition of Magma by
CECI. The Magma's Board met to consider and approve the Merger Agreement and
the transactions contemplated thereby on December 4 and 5, 1994. Following
continued negotiations regarding the definitive agreements, the Merger
Agreement was signed on the morning of December 5, 1994.

On January __, 1995, CECI consummated the Offer and purchased
<PAGE>

12,400,000 Shares pursuant thereto. Pursuant to the Merger Agreement, nine
members of the 11 member Magma Board resigned and six nominees of CECI and CE
Sub were elected to fill such vacancies. Accordingly, as of the date hereof,
CECI and CE Sub have designated a majority of the Magma Board.

Purpose and Structure of the Merger

CECI and CE Sub's purpose for entering into the Merger Agreement and
consummating the Offer and the Merger is to acquire the entire equity interest
in Magma because CECI believes that combining the businesses of CECI and Magma
will provide an excellent strategic fit due to synergies and other benefits
which will result from combining the operations of Magma and CECI pursuant to
the Merger Agreement and will strengthen the combined companies' competitive
position in the increasingly challenging business environment and global
markets in which they operate. See "SPECIAL FACTORS--Recommendation of the
Board of Directors of Magma; Reasons for the Merger; Fairness of the Offer and
the Merger." The Merger is structured as a merger because it ensures that CECI
will acquire beneficial ownership of 100% of the equity of Magma in a single
transaction. CECI's acquisition of the Shares owned by the holders of the
Shares other than CECI and its subsidiaries will enable CECI to realize the
benefits and bear the risks of complete ownership of Magma including the
opportunity to (i) facilitate inter-company activity between Magma and CECI,
(ii) permit combinations of management and other resources of CECI and Magma,
including, among other things, the consolidation and rationalization of Magma's
business and operating structure with a view to improving operations and
reducing expenses of Magma and CECI (see "--Certain Effects of the Merger;
Operations After the Merger"), (iii) enable Magma's management (or any
successors thereto) to devote itself to building long-term values for Magma
without concern that such efforts may adversely affect short-term results and
the market price of the Shares, and (iv) eliminate the need for Magma to comply
with the reporting requirements of the Exchange Act, to maintain separately
audited financial statements and to maintain its current listing on the NNM.
In addition, CECI believes that if Magma were to continue to have public
stockholders, Magma would require more management time and attention than it
would as a wholly owned subsidiary of CECI.

The Merger will be effected by causing CE Sub to merge with and into
Magma. As a result, Magma will be the corporation surviving the Merger and
will become a wholly owned subsidiary of CECI after the Effective Time.

Recommendation of the Board of Directors of Magma; Reasons for the Merger;
Fairness of the Offer and the Merger

MAGMA. On December 5, 1994, the Magma Board unanimously approved (with
two directors absent) the Merger Agreement and the transactions contemplated
thereby and determined that each of the Offer and the Merger is fair to, and in
the best interests of, the stockholders of Magma. The Magma Board recommended
that all holders of Shares accept the Offer and tender their Shares pursuant to
the Offer.

In reaching its determinations and recommendations with respect to the
Merger Agreement and the transactions contemplated thereby, the Magma Board
took into account numerous factors discussed at its December 4 and 5, 1994
board meetings, including, among other things, the following:

(i) The improvement to the terms and conditions of the
Revised Previous Offer, including, without limitation, (A) the increase in the
blended average per Share consideration offered from a $28.50 in cash and
$10.00 in CECI Stock to, at the option of CECI, either $28.50 in cash and
$10.50 in CECI Common Stock of $38.75 in cash and (B) the reduction in the
number and scope of conditions precedent to the Offer;

(ii) The Magma Board's familiarity with the financial
condition and future prospects of Magma including the prospects of Magma were
it to remain independent;

(iii) The presentation of Goldman Sachs at the December 4 and
5, 1994 meetings and the oral opinion of Goldman Sachs (which was subsequently
confirmed in writing) to the Magma Board that, as of December 5, 1994, the
consideration to be received by the holders of the Shares in the Offer and the
Merger, taken as a unitary transaction, was fair to the holders of Shares
receiving such consideration (other than CECI and its affiliates). The full
text of the written opinion, dated December 9, 1994, which confirms the
December 5th oral opinion of Goldman Sachs and sets forth the assumptions made,
the matters considered and the limitations on the review undertaken by Goldman
Sachs, is attached as Annex B hereto and is incorporated herein by reference.
Such opinion should be read carefully in its entirety by holders of Shares in
conjunction with the foregoing matters.

(iv) The Magma Board's belief that the reasonably likely
alternatives were unlikely to provide values to the stockholders of Magma
superior to the Offer, which belief was based on, among other things, the
report of management and Goldman Sachs with respect to the status of the
contacts and discussions that had been undertaken based upon the Magma Board's
resolution on October 28, 1994 to explore all alternatives available to further
the best interests of Magma's stockholders;

(v) The provision of the Merger Agreement permitting Magma
to terminate the Merger Agreement if any person shall have a bona fide offer
that the Magma Board determines in its good faith judgment and in the exercise
of its fiduciary duties is more favorable to Magma's stockholders than the
Merger;

(vi) The provision of the Merger Agreement prohibiting the
solicitation by Magma of other proposals and the termination provisions of the
<PAGE>

Merger Agreement providing that CECI and CECI Sub could be entitled to receive
a fee of $8,000,000, as well as reimbursement of all out-of-pocket fees and
expenses actually incurred by them or on their behalf in connection with the
Previous Offer, the Offer, the Merger and the transactions contemplated by the
Merger Agreement under certain circumstances (see "THE MERGER -- Termination
Fee for CECI"). After consulting with its legal and financial advisors, among
other things, the Magma Board concluded that, in view of the other provisions
of the Merger Agreement and the Magma Board's view with respect to possible
alternatives, it was in the best interests of the Magma stockholders to accept
these provisions in order to induce CECI to execute the Merger Agreement;

(vii) The provisions of the Merger Agreement providing that
Magma would be entitled to receive a fee of $8,000,000 under certain
circumstances (see "THE MERGER -- Termination Fee for Magma"); and

(viii) The Magma Board's confidence that the highest offer had
been received from CECI.

The Magma Board considered each of the factors listed above during the
course of its deliberations and negotiations prior to entering into the Merger
Agreement. The Magma Board evaluated the factors listed above in light of
their knowledge of the business and operations of Magma and their business
judgment. In view of the wide variety of factors considered in connection with
the evaluation of the Offer and the Merger, the Magma Board did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in making their determination.

The Magma Board approved the Merger as part of its recommendations to
the stockholders of Magma that they tender their shares to CECI pursuant to the
Offer. Since the terms of the Merger were disclosed to the Magma stockholders
at the time they made their decision to tender their Shares, Magma's
unaffiliated stockholders in effect selected the Merger by virtue of tendering
into the Offer.

CECI. CECI believes the consideration paid in the Offer and the
Merger, taken together, is fair to the stockholders of Magma. CECI's belief is
based upon the fact that the terms of the Offer and the Merger Agreement were
the product of arm's length negotiations between CECI, Magma and their
respective financial and legal advisors and were approved by Magma's Board at a
time when neither CECI nor its affiliates was a member of the Magma Board; that
the Magma Board received a fairness opinion from Goldman Sachs; that a
substantial majority of the holders of Shares executed requests for the call of
the Requested Special Meeting; that the Magma Board believed that the
reasonably likely alternatives to the Offer and the Merger were unlikely to
provide values to the stockholders of Magma superior to the Offer; and that
appraisal rights are available to dissenting Magma stockholders who comply with
the prescribed statutory procedures. While the Merger does not require the
approval of a majority of the unaffiliated stockholders of Magma, CECI believes
that the Merger is procedurally fair to the stockholders of Magma for the
reasons set forth above. In addition, as the terms of the Merger were
disclosed to the stockholders of Magma at the time they made their decision to
tender their Shares pursuant to the Offer, Magma's unaffiliated stockholders in
effect selected the Merger by virtue of tendering into the Offer.

Opinions of Financial Advisors

Fairness Opinion of Magma's Financial Advisor. The Magma Board
retained Goldman Sachs as Magma's exclusive financial advisor in connection
with the Initial Proposal and the ensuing related events, including the Offer
and the Merger. Goldman Sachs is an internationally recognized investment
banking firm and is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. The Magma Board selected Goldman Sachs to act as Magma's
exclusive financial advisor based on Goldman Sachs' familiarity with Magma and
Goldman Sachs' substantial experience in mergers and acquisitions and in
securities valuation generally. No limitations were imposed by the Magma Board
upon Goldman Sachs with respect to the investigations made or procedures
followed by Goldman Sachs in rendering its opinion.

On December 5, 1994, Goldman Sachs delivered its oral opinion (which
was subsequently confirmed in writing) to the Magma Board that, as of December
5, 1994, the Consideration (as defined below) to be received by the holders of
the Shares in the Offer and the Merger, taken as a unitary transaction, was
fair to the holders of Shares receiving such Consideration (other than CECI and
its affiliates). For purposes of Goldman Sachs' opinion, the term
"Consideration" means the consideration to be received by the holders of Shares
in the Offer and the Merger, taken as a unitary transaction (regardless of the
payment option chosen by CECI with respect to the Merger as discussed under the
caption "Terms of Merger; Merger Consideration"). THE FULL TEXT OF THE WRITTEN
OPINION, DATED DECEMBER 9, 1994, WHICH CONFIRMS GOLDMAN SACHS' DECEMBER 5, 1994
ORAL OPINION AND SETS FORTH THE ASSUMPTIONS MADE, THE MATTERS CONSIDERED AND
THE LIMITATIONS ON THE REVIEW UNDERTAKEN BY GOLDMAN SACHS, IS ATTACHED TO THIS
PROXY STATEMENT/PROSPECTUS AS ANNEX B AND IS INCORPORATED HEREIN BY REFERENCE.
HOLDERS OF SHARES ARE URGED TO AND SHOULD READ SUCH OPINION IN ITS ENTIRETY.

In connection with its opinion, Goldman Sachs reviewed, among other
things, the Merger Agreement; Annual Reports to Stockholders and Annual Reports
on Form 10-K of Magma and CECI for the five years ended December 31, 1993;
certain interim reports to stockholders and Quarterly Reports on Form 10-Q of
Magma and CECI; certain other communications from Magma and CECI to their
respective stockholders; certain internal financial analyses and forecasts for
Magma prepared by the management of Magma; and certain internal financial
analyses and forecasts for Magma and CECI prepared by the management of CECI.
<PAGE>

Goldman Sachs also held discussions with members of the senior managements of
each of Magma and CECI regarding the past and current business operations,
financial condition and future prospects of their respective companies and as
combined in the contemplated Merger. Goldman Sachs reviewed the reported price
and trading activity for both the Shares and the CECI Common Stock, compared
certain financial and stock market information for Magma and CECI,
respectively, with similar information for certain other companies the
securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the independent power production
industry specifically and in other industries generally and considered such
other information, held such other discussions and performed such other studies
and analyses as it considered appropriate.

Goldman Sachs relied without independent verification upon the accuracy
and completeness of all of the financial and other information reviewed by it
for purposes of its opinion. In addition, Goldman Sachs did not make an
independent evaluation or appraisal of the assets and liabilities of Magma or
CECI or any of their respective subsidiaries and was not furnished with any
such evaluation or appraisal.

The terms of the engagement of Goldman Sachs by Magma are set forth in
a letter agreement dated September 26, 1994 between Goldman Sachs and Magma
(the "Goldman Engagement Letter"). Pursuant to the terms of the Goldman
Engagement Letter, Magma has agreed to pay Goldman Sachs (a) an initial fee of
$850,000, (b) a transaction fee in the event of any transaction in which at
least 50% of the outstanding Shares are acquired, or all or substantially all
of the assets of Magma are transferred, equal to 0.4% of the aggregate value of
such transaction up to $35.00 per share, plus 1.666% of the aggregate value of
such transaction in excess of $35.00 per share up to $38.00 per share, plus
2.5% of the aggregate value of such transaction in excess of $38.00 per share
and (c) a financial advisory fee to the extent no transaction of the type
described in clause (b) above has been consummated equal to 0.4% of the market
value of Magma's outstanding shares as determined on September 20, 1994,
payable in four equal installments due December 31, 1994, March 31, 1995, June
30, 1995 and September 30, 1995, so long as Magma is independent as of any date
such payment is due; provided, however, that such financial advisory fee shall
equal (i) $850,000 in the event that Magma rejected the Previous Offer by
October 10, 1994, and CECI subsequently withdraws such proposal on or before
the end of the fifth business day following the date of such rejection or (ii)
$1,700,000 in the event that Magma rejected the Previous Offer by October 10,
1994, and CECI subsequently withdraws such proposal after the fifth business
day following such rejection but on or before the end of the fifteenth business
day following such rejection. The fees paid pursuant to clauses (a) and (c)
above shall be creditable against any fees payable pursuant to clause (b)
above.

Magma has also agreed to reimburse Goldman Sachs for its out-of-pocket
expenses, including all fees and disbursements of counsel, and to indemnify
Goldman Sachs and certain related persons against certain liabilities in
connection with its engagement, including certain liabilities under the federal
securities laws. Goldman Sachs provides a full range of financial, advisory
and brokerage services and in the course of its normal trading activities may
from time to time effect transactions and hold positions in the securities or
options on securities of Magma and/or CECI for its own account and for the
accounts of its customers. In the course of its trading activities prior to
its retention by Magma in connection with the Previous Offer, Goldman Sachs
accumulated a long position of 60,100 Shares.

The following is a summary of certain financial analyses utilized by
Goldman Sachs in connection with providing its opinion to the Magma Board on
December 5, 1994 and does not purport to be a complete description of the
analyses performed by Goldman Sachs.

Financial Statement Analysis. Goldman Sachs reviewed and analyzed
selected historical and forecasted income statement, historical balance sheet
and historical cash flow information for each of Magma and CECI.

Stock Trading Analysis. Goldman Sachs reviewed and analyzed the
historical trading prices and volumes for the common stock of Magma and of CECI
during the trailing five and three year periods, respectively, for trading
prices and volumes. In addition, Goldman Sachs compared such trading prices to
the Standard & Poor's 400 Index and an index of selected companies within the
independent power production industry (including The AES Corporation, Destec
Energy, Inc., KENETECH Corporation and Sithe Energies, Inc.) for the period
commencing January 1994.

Selected Company Analysis. Goldman Sachs reviewed and compared certain
actual and estimated financial, operating and stock market information of
Magma, CECI and selected companies in the independent power production industry
including The AES Corporation, Destec Energy, Inc., KENETECH Corporation and
Sithe Energies, Inc.

Discounted Cash Flow Analysis. Goldman Sachs estimated the net present
value of Magma as a going concern based on estimates of future project cash
flows and the likelihood of successful project development where appropriate,
all as provided by Magma management. Goldman Sachs performed a variety of
sensitivity analyses on such cash flow information based upon a variety of
factors, including utility avoided costs and discount rates.

Pro Forma Analyses. Goldman Sachs reviewed certain forecasted
financial information prepared by the respective managements of Magma and CECI
for their respective companies as well as certain pro forma financial
information for the combined entity prepared by CECI management. Goldman
Sachs' pro forma analysis was based primarily on the foregoing information. In
conducting its analysis, Goldman Sachs assumed that the All Cash Component
Amount was not exercised by CECI in the Merger. Further, in conducting its
<PAGE>

analysis with respect to information provided by Magma and CECI managements'
for their respective companies, Goldman Sachs also assumed that synergies from
the Merger aggregated in the amount of $5 million. In addition, Goldman Sachs
evaluated the pro forma information for the combined entity as provided by CECI
management (including certain other assumptions made therein). The foregoing
analyses indicated that earnings per share for the pro forma combined entity
would be higher as compared with forecasted earnings per share for CECI as a
stand alone entity.

Goldman Sachs also reviewed the value of the Consideration to be
received by the holders of the Shares on a per Share basis assuming (i) that
all outstanding Shares were tendered in the Offer, (ii) that the All Cash
Component Amount was not exercised by CECI in the Merger, and (iii) a range of
market prices for CECI Common Stock between $10 per share to $20 per share.
The foregoing analysis indicated that the value of the Consideration had a
range between $35.86 per Share (if CECI Common Stock traded at $10 per share)
and $39.71 per Share (if CECI Common Stock traded at $20 per share).

Selected Transactions Analysis. Goldman Sachs reviewed and analyzed
certain information relating to selected transactions within the independent
power production industry since January 1, 1988.

Other Analyses. Goldman Sachs reviewed selected investment research
reports on, and earnings estimates for, CECI and Magma and analyzed available
information regarding the ownership of Magma shares and CECI Common Stock.
Goldman Sachs also considered the status of discussions with certain third
parties which may have had a potential interest in entering into a business
combination transaction or a strategic alliance with Magma.

General. As described above, certain of the analyses performed by
Goldman Sachs relied on estimates of future financial performance provided by
the managements of CECI and Magma, including certain financial forecasts for
the pro forma combined entity resulting from the Merger prepared by the
management of CECI and, in the Discounted Cash Flow Analysis, estimates
regarding the likelihood of successful project development as provided by Magma
management relating to Magma's IPP projects.

The foregoing summary does not purport to be a complete description of
the analyses performed by Goldman Sachs. The preparation of a fairness opinion
is a complex process and is not necessarily susceptible to partial analysis or
summary description. Selecting portions of the analyses or of the summary set
forth above, without considering the analysis as a whole, could create an
incomplete view of the processes underlying Goldman Sachs' opinion. In
arriving at its fairness determination, Goldman Sachs considered the results of
all such analyses. The analyses were prepared solely for purposes of Goldman
Sachs' providing its opinion to Magma's Board of Directors as to the fairness
of the Consideration to the holders of Magma Shares, and do not purport to be
appraisals or necessarily reflect the prices at which Magma or its securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly
more or less favorable than suggested by such analyses.

Fairness Opinion of CECI's Financial Advisor. Gleacher is a recognized
investment banking firm routinely engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate
and other purposes. The CECI Board selected Gleacher to act as CECI's
exclusive financial advisor based on Gleacher's familiarity with CECI and
Gleacher's substantial experience in mergers and acquisitions and in securities
valuation generally. No limitations were imposed by the CECI Board upon
Gleacher with respect to the investigations made or procedures followed by
Gleacher in rendering its opinion.

On December 7, 1994, Gleacher delivered a written opinion, dated
December 6, 1994, to the CECI Board (the "Gleacher Opinion") which states that,
as of December 5, 1994, the consideration to be paid by CECI in the Offer and
the Merger, is fair to CECI from a financial point of view.

Pursuant to the terms of a letter agreement, dated September 18, 1994,
between CECI and Gleacher (the "Gleacher Engagement Letter"), CECI shall pay
Gleacher (i) a fee of $250,000 payable upon the public announcement of an offer
by CECI to acquire at least 50.1% of the Shares; (ii) an additional fee of
$500,000 payable 45 calendar days after the commencement of a tender or
exchange offer by CECI, assuming such offer is outstanding at such time; (iii)
a fee of $4,000,000 payable upon the completion of the direct or indirect
acquisition by CECI, either alone or in partnership with another entity, by
merger, acquisition of securities, or otherwise, of 50.1% or more of the equity
securities of Magma, which fee shall be offset by any fees payable pursuant to
clauses (i) and (ii) above; and (iv) a fee equal to 0.25% of the principal
amount of debt directly arranged by Gleacher and Lehman Brothers in connection
with the proposed transaction.

In addition to any fees payable to Gleacher pursuant to the terms of
the Gleacher Engagement Letter, CECI shall reimburse Gleacher for all
reasonable travel and other out-of-pocket expenses incurred by Gleacher
thereunder, including all reasonable fees and disbursements of Gleacher's legal
counsel and any other professional advisors.

In connection with the matters described in the Gleacher Engagement
Letter, CECI and Gleacher entered into a separate letter agreement, dated
September 18, 1994, providing for the indemnification, contribution, and
reimbursement of Gleacher and certain other entities and individuals for a
period of six years from the date of termination of Gleacher's engagement
pursuant to the terms of the Gleacher Engagement Letter.

<PAGE>

THE FULL TEXT OF THE WRITTEN OPINION, DATED DECEMBER 6, 1994, WHICH
SETS FORTH THE ASSUMPTIONS MADE, THE MATTERS CONSIDERED AND THE LIMITATIONS ON
THE REVIEW UNDERTAKEN BY GLEACHER, IS ATTACHED TO THE PROXY STATEMENT AS ANNEX
C AND IS INCORPORATED HEREIN BY REFERENCE. HOLDERS OF SHARES ARE URGED TO AND
SHOULD READ SUCH OPINION IN ITS ENTIRETY.

In connection with the Gleacher Opinion, Gleacher, among other things,
(i) reviewed the audited and unaudited financial statements and public
Commission filings for the three most recent fiscal years and interim periods
to date of Magma and CECI (the "Commission Filings"); (ii) on an operating and
trading basis, compared financial information relating to Magma's businesses
with published financial information concerning certain companies whose
businesses deemed to be reasonably similar, in whole or in part, to those of
Magma; (iii) analyzed the market prices and trading characteristics of the
Shares and the CECI Common Stock for recent periods to date; (iv) conducted
discussions with members of senior management of CECI concerning its businesses
and prospects; (v) reviewed certain financial forecasts for Magma and CECI, and
projections of expected cost savings in a business combination (together, the
"Projections"), in each case as prepared by CECI; (vi) based on the
Projections, performed a discounted cash flow analysis of Magma including the
expected cost savings arising from a business combination; (vii) based on the
Projections, analyzed the pro forma financial effects to CECI of the proposed
business combination; assumed without independent investigation that no
material contingent liability exists with respect to Magma or CECI which is not
disclosed in the SEC Reports; (viii) reviewed the Merger Agreement and related
transaction documentation; and (ix) reviewed certain other financial studies,
performed such other analyses and took into account certain other matters as
deemed appropriate.

The terms of the Gleacher Engagement Letter provide that in advising
the Company in connection with its engagement thereunder, Gleacher (i) may use
and rely on non-public data, material and other information furnished to
Gleacher by CECI and (ii) may reasonably rely upon such information without
independent verification.

The foregoing summary does not purport to be a complete description of
the analyses performed by Gleacher. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analysis or
summary description. Selecting portions of the analyses or of the summary set
forth above, without considering the analysis or the opinion as a whole, could
create an incomplete view of the processes underlying the Gleacher Opinion. In
arriving at the fairness determination set forth in such opinion, Gleacher
considered the results of all such analyses. The analyses were prepared solely
for Gleacher to provide its opinion to the CECI Board as to the fairness of the
Consideration to CECI, from a financial point of view, and do not purport to be
appraisals or necessarily reflect the prices at which Magma or its securities
actually may be sold. Analyses based upon forecasts of future results are not
necessarily indicative of actual future results, which may be significantly
more or less favorable than suggested by such analyses.

Financing of Merger Consideration

CECI estimates that approximately $202.3 million will be required to
effectuate the Merger. CECI will obtain such funds through borrowings from
commercial banks and other financial institutions, and through a capital
contribution by CECI from CECI's general corporate funds, which at September
30, 1994 aggregated $316.3 million.

CECI anticipates that approximately one-half of the cash required to
purchase Shares pursuant to the Offer and the Merger will be provided through a
secured bank credit facility on terms and conditions to be determined. CECI has
received a fully underwritten financing commitment letter from Credit Suisse
(the "Commitment Letter") which states that Credit Suisse will provide, on
specified terms and subject to customary conditions, up to $500,000,000 in
secured bank financing in connection with the Offer and the Merger. Such funds,
together with a portion of CECI's general corporate funds, will be sufficient
to pay the cash portion of the consideration for the Merger and related
expenses.

The Commitment Letter contemplates (i) a facility of up to $250,000,000
to capitalize CECI for the purpose of financing the Offer (the "Tender
Facility") and (ii) facilities of up to $500,000,000 for, among other things,
refinancing the Tender Facility and effectuating the Merger (the "Merger
Facilities").

The Merger Facilities will be composed of (i) up to a 6-year amortizing
term loan ("Term Loan A") in an expected amount of up to $500,000,000 less the
amount of Term Loan B (as defined below) and (ii) up to an 8-year amortizing
term loan ("Term Loan B") in an expected amount not to be less than
$150,000,000. The Merger Facilities are to be amortized from internally
generated funds of Magma and will be secured by an assignment and pledge of the
stock of Magma and all unencumbered assets of Magma.

Interest on loans borrowed under the Facilities will be payable at
spreads of 2.50% above LIBOR (adjusted for reserves) or 1.25% above Base Rate
for loans under the Tender Facility, 2.50% above LIBOR (adjusted for reserves)
or 1.50% above Base Rate for Term Loan A, and 3.00% above LIBOR (adjusted for
reserves) or 2.00% above Base Rate for Term Loan B. CECI may elect to incur
loans at either LIBOR or Base Rate.

Credit Suisse's commitment to provide the Merger Facilities is subject
to certain customary conditions, including without limitation (a) a capital
investment in CECI in an amount and form satisfactory to Credit Suisse and (b)
the absence of certain material adverse changes.

The definitive documentation relating to the Merger Facilities will
<PAGE>

contain representations, warranties, covenants, events of default and
conditions customary for transactions of this size and type.

CECI has agreed to pay certain fees to Credit Suisse with respect to
the Merger Facilities which, in the aggregate, are not material to the
transactions described herein.

Certain Effects of the Merger: Operations After the Merger

As a result of the Merger there will be no public market for Shares.
Upon consummation of the Merger, Shares will cease to be quoted on the NNM, the
registration of Shares under the Exchange Act will be terminated and such stock
will no longer constitute "margin securities" under the rules of the Board of
Governors of the Federal Reserve System.

As a result of consummation of the Merger, the existing stockholders of
Magma will receive CECI Common Stock representing approximately 32.2% of the
CECI Common Stock then outstanding and will share to such extent in CECI's
earnings and assets with the existing stockholders of CECI. Following
completion of the Merger, CECI will own the entire equity interest in Magma and
will thereby have a 100% interest in Magma's net assets and earnings.

Except for the Merger and except as otherwise described in this Proxy
Statement, CECI has no present plans or proposals which relate to or would
result in (i) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation involving Magma or any of its subsidiaries, (ii)
a sale or transfer of a material amount of assets of Magma or any of its
subsidiaries, (iii) any material change in the present dividend rate or policy
or indebtedness or capitalization of Magma or (iv) any other material change in
Magma's corporate structure or business. See "--Financing of Merger
Consideration."

Federal Income Tax Consequences

The following summary is a general discussion of the material federal
income tax consequences to stockholders of Magma of the Merger. The discussion
is based upon the Internal Revenue Code of 1986, as amended (the "Code"),
applicable Treasury regulations thereunder, administrative procedures, rulings
and decisions in effect on the date hereof, all of which are subject to change
(possibly with retroactive effect) by legislation, administrative action or
judicial decision. No ruling has or will be requested from the Internal Revenue
Service (the "Service") regarding the anticipated tax consequences described
herein. The discussion set forth below does not discuss all aspects of federal
income taxation that may be relevant to a particular stockholder in light of
his personal investment circumstances or to certain types of stockholders
subject to special treatment under the federal income tax laws (for example,
tax-exempt organizations, foreign corporations and individuals who have
received Shares as compensation or who are not citizens or residents of the
United States) and does not discuss any aspect of state, local or foreign
taxation. The discussion is limited to those stockholders who hold the Shares
as capital assets (generally, property held for investment) within the meaning
of Section 1221 of the Code. Stockholders should consult their individual tax
advisors concerning the specific tax consequences of the Merger, including the
application and effect of state, local, foreign and other tax laws.

Tax Effects of the Merger. Each outstanding Share (other than Shares
held by CECI, CE Sub or any other direct or indirect subsidiary of CECI, Shares
held in the treasury of Magma and Shares held by stockholders who properly
exercise dissenters' rights under the NGCL) will be converted in the Merger
into the right to receive a combination of cash and CECI Common Stock such that
the consideration paid by CECI in the Offer and the Merger would consist, on a
blended basis, of $28.50 per Share in cash and $10.50 per Share in market value
of CECI Common Stock, based on the Average Closing Price and subject to the
Collar Provision. The Merger will be a taxable transaction for federal income
tax purposes. A stockholder exchanging Shares for cash and CECI Common Stock
pursuant to the Merger will recognize gain or loss in the Merger equal to the
difference between (i) the sum of the cash and the fair market value of the
CECI Common Stock received in the Merger and (ii) the holder's adjusted tax
basis for the Shares exchanged pursuant to the Merger. Gain or loss will be
calculated separately for each block of Shares exchanged. A holder's tax basis
in the CECI Common Stock received pursuant to the Merger will equal the fair
market value of such CECI Common Stock as of the Effective Time, and the
holder's holding period for such CECI Common Stock will commence as of the
Effective Time. For tax purposes, the fair market value of the CECI Common
Stock will be determined as of the Effective Time and, whether or not the
Collar Provision is applicable, may differ from the Average Closing Price used
for purposes of determining the number of Shares to be issued in the Merger.

Gain or loss recognized by an exchanging stockholder in the Merger will
be capital gain or loss if the Shares at the Effective Time are held as capital
assets. Such capital gain or loss will be classified as a long-term capital
gain or loss to the extent that the exchanged Shares have a holding period of
more than one year at the Effective Time. Long-term capital gains recognized
by an exchanging individual stockholder will be subject to tax at a maximum
marginal federal rate of 28%. Short-term capital gains or non-capital gains
recognized by an exchanging individual stockholder will be subject to tax at a
maximum marginal federal rate of 39.6%. Net gains recognized by an exchanging
corporate stockholder will be subject to tax at a maximum marginal federal rate
of 35%.

Backup Withholding. To prevent "backup withholding" of federal income
tax on payments of cash to a stockholder of Magma who exchanges Shares for cash
in the Merger, a stockholder of Magma must, unless an exception applies under
the applicable law and regulations, provide the payor of such cash with such
stockholder's correct taxpayer identification number ("TIN") on a Substitute
Form W-9 and certify under penalties of perjury that such number is correct and
<PAGE>

that such stockholder is not subject to backup withholding. A Substitute Form
W-9 is included in the Letter of Transmittal. If the correct TIN and
certifications are not provided, a $50 penalty may be imposed on a stockholder
of Magma by the Service, and cash received by such stockholder in exchange for
Shares in the Merger may be subject to backup withholding at the rate of 31%.
Amounts paid as backup withholding do not constitute an additional tax and
would be allowable as a credit against the stockholder's federal income tax
liability.

The discussion above is included for general information only. It does
not address the state, local or foreign tax aspects of the Merger. In
addition, it does not discuss the federal income tax considerations that may be
relevant to certain persons, including holders of options, and may not apply to
certain holders subject to special tax rules. The discussion is based upon
current law. Legislative, judicial or administrative changes may be
forthcoming that could affect this discussion. EACH STOCKHOLDER SHOULD CONSULT
HIS OR HER OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE
MERGER TO HIM OR HER, INCLUDING THE APPLICATION AND EFFECT OF FEDERAL, STATE,
LOCAL AND FOREIGN TAX LAWS.

Federal Securities Law Consequences

All CECI Common Stock issued in connection with the Merger will be
freely transferable, except that any CECI Common Stock received by persons who
are deemed to be "affiliates" (as such term is defined under the Securities
Act) of Magma prior to the Merger may be sold by them only in transactions
permitted by the resale provisions of Rule 145 promulgated under the Securities
Act (or Rule 144 if such persons are or become affiliates of CECI) or as
otherwise permitted under the Securities Act. Persons who may be deemed to be
affiliates of Magma or CECI generally include individuals or entities that
control, are controlled by, or are under common control with, such party and
may include certain officers and directors of such party as well as principal
stockholders of such party.

Accounting Treatment

The Merger will be accounted for under the purchase method of
accounting.

Stock Exchange Listing

It is a condition to the Merger that the shares of CECI Common Stock to
be issued in connection with the Merger be authorized for listing on the NYSE,
subject to official notice of issuance.

Dissenters' Rights

Stockholders of CECI are not entitled to appraisal rights under Section
262 of the Delaware General Corporation Law (the "DGCL") in connection with the
Merger.

Holders of Shares will have the right to dissent with respect to the
Merger and, subject to certain conditions, receive a cash payment equal to the
"fair value" of their shares, as provided in Sections 78.471 through 78.502 of
the NGCL. Fair value shall be determined as of the day before the Merger,
excluding any appreciation or depreciation in anticipation of the Merger.

In order to perfect dissenters' rights, any stockholder of Magma as of
the Magma Record Date must deliver a written notice indicating the
stockholder's intent to demand payment for his shares if the Merger is
effectuated (the "Intent Notice") either to (i) the principal executive offices
of Magma at 4365 Executive Drive, Suite 900, San Diego, California 92121,
Attention: President, or (ii) Magma's transfer agent, Chemical Trust Company of
California, 300 South Grand Avenue, 4th Floor, Los Angeles, California 90071.
The Intent Notice must be delivered before the vote on the Merger is taken at
the Magma Special Meeting. Further, the stockholder asserting dissenters'
rights must not vote in favor of the Merger. An abstention will be sufficient
to meet this requirement. A vote against the Merger will not by itself satisfy
the requirement to deliver an Intent Notice to Magma.

A stockholder, such as a broker, bank or nominee, who is the holder of
record of Shares beneficially owned by more than one other person may assert
dissenters' rights for fewer than all of the shares registered in his name
(e.g., on behalf of only one of the beneficial owners) only if he dissents with
respect to all of the shares held by any given beneficial owner. Further, he
must notify Magma in writing of the name and address of each person on whose
behalf he asserts dissenters' rights. Therefore, persons who are beneficial
owners of Shares whose shares are held of record by another person may instruct
the recordholder to submit an Intent Notice and follow the procedure outlined
above. Alternatively, such persons may assert dissenters' rights directly by
submitting an Intent Notice according to the procedure set forth in the
foregoing paragraph and, in addition, by submitting to Magma at either of the
addresses set forth in the foregoing paragraph with or prior to submission of
the Intent Notice the record stockholder's written consent to dissent. A
beneficial stockholder must assert dissenters' rights with respect to all
shares of which he is the beneficial stockholder or over which he has the power
to direct the vote.

If the Merger is authorized at the Magma Special Meeting, then, no
later than 10 days after the consummation of the Merger, Magma must send a
written dissenters' notice (the "Dissenters' Notice") to all stockholders who
properly delivered an Intent Notice to Magma (i) stating where the demand for
payment must be sent and where and when share certificates must be deposited;
(ii) supplying a form for demanding payment that requires that the person
asserting dissenters' rights certify whether or not he acquired beneficial
ownership of the shares before , 1994, the date of the first
<PAGE>

announcement to the news media of the terms of the proposed Merger; and (iii)
setting a date by which Magma must receive the demand for payment (which date
may not be less than 30 or more than 60 days after the date the notice is
delivered). A stockholder receiving the Dissenters' Notice must deposit his
certificates and deliver the proper form for demanding payment in the manner
and by the date specified in order to perfect dissenter's rights.

Except as otherwise provided below, within 30 days after receipt of a
proper demand for payment according to the procedure to be set forth in the
Dissenters' Notice, Magma must pay each dissenter the amount Magma estimates to
be the fair value of the dissenter's shares, plus accrued interest from the
effective date of the Merger until the date of payment at the rate specified
under the NGCL. Within 30 days of payment from Magma, a dissenter may notify
Magma in writing of his own estimate of the fair value of his shares and the
amount of interest due, and demand payment of his estimate, less the previous
payment.

Magma may elect to withhold payment from a dissenter unless the
dissenter was a beneficial owner of Shares before , 1994.
If Magma elects to withhold payment from such dissenters, it must estimate the
fair value of the shares plus accrued interest from the effective date of the
Merger until the date of payment at the rate specified under the NGCL and must
offer to pay this amount to each such dissenter who agrees to accept the amount
in full satisfaction of his demand. Within 30 days of the offer of payment,
such dissenter may notify Magma in writing of his own estimate of the fair
value of his shares and the amount of interest due, and demand payment of his
estimate rather than the amount offered.

If a dissenter properly notifies Magma of his own estimate of fair
value as set forth in the two foregoing paragraphs, and if the demand for
payment remains unsettled, Magma must commence a proceeding within 60 days
after receiving the demand for payment in the district court of Washoe County,
Nevada, and petition the court to determine the fair value of the shares and
accrued interest. Magma must make all dissenters whose demands remain
unsettled parties to the proceeding. The costs of the proceeding will be
assessed against Magma, unless the court finds that dissenters acted
arbitrarily, vexatiously or not in good faith in demanding payment, in which
case the court may assess costs against some or all of the dissenters in
amounts the court finds equitable. The court may also assess the fees and
expenses of counsel and experts for the respective parties, in amounts the
court finds equitable, (a) against Magma if the court finds that Magma did not
substantially comply with the requirements of Sections 78.491 through 78.499 of
the NGCL, or (b) against either Magma or a dissenter, if the court finds that
the party against whom the fees and expenses are assessed acted arbitrarily,
vexatiously or not in good faith with respect to the dissenter's rights
provisions of the NGCL.

Shares outstanding immediately prior to the Effective Time and held by
a holder who has not voted in favor of the Merger or consented thereto in
writing and who has delivered an Intent Notice, in accordance with the NGCL,
shall not be converted into a right to receive shares of CECI Common Stock, but
shall become the right to receive the consideration as may be determined to be
due to such dissenting stockholder pursuant to the NGCL, unless and until such
holder fails to perfect or withdraws or otherwise loses his right to dissent.
If after the Effective Time such holder fails to perfect or withdraws or loses
his right to dissent, such Shares shall be treated as if they had been
converted as of the Effective Time into a right to receive shares of CECI
Common Stock. Magma will not, except with the prior written consent of CECI
(which consent shall not be unreasonably withheld), make any payment with
respect to, or settle or offer to settle, any such demands.

The foregoing is a summary of the rights of dissenting stockholders,
does not purport to be a complete statement thereof and is qualified in its
entirety by reference to the applicable statutory provisions of the NGCL which
are set forth in Annex D hereto.

Expenses of the Transaction

It is estimated that when the Merger is consummated expenses incurred
in connection with the Offer and the Merger will be approximately as follows
(in thousands):

Financial advisory fees and expenses $______
Commission filing fees ______
Legal fees and expenses ______
Accounting fees ______
Printing costs ______
Proxy solicitation, distribution and Paying Agent fees ______
Blue Sky fees ______
Miscellaneous ______
Total

All costs and expenses incurred in connection with the Merger Agreement
and the transactions contemplated thereby will be paid by the party incurring
such expenses, except that expenses incurred in connection with printing,
filing and mailing this Proxy Statement and all Commission and other regulatory
filing fees in connection therewith will be shared equally by CECI and Magma.

THE MERGER AGREEMENT

General

The following description of the Merger Agreement does not purport to
be complete and is qualified in its entirety by reference to the Merger
<PAGE>

Agreement, a copy of which is attached hereto as Annex A and incorporated
herein by reference. Stockholders of Magma are urged to read the Merger
Agreement in its entirety.

The Merger

General. The purpose of the Merger is to acquire all Shares not
beneficially owned by Magma following consummation of the Offer. Pursuant to
the Merger Agreement, CECI, CE Sub and Magma have agreed to effectuate the
Merger in accordance with the provisions of the Merger Agreement as promptly as
practicable following consummation of the Offer. Following is a description of
the material terms of the Merger Agreement. The Merger Agreement provides that
as promptly as practicable after the satisfaction or waiver of the conditions
described below (the "Effective Time"), CE Sub will be merged with and into
Magma, with Magma continuing as the surviving corporation following the Merger
(the "Surviving Corporation"). As a result of the Merger, Magma will become a
wholly owned subsidiary of CECI. In addition, the directors of CE Sub
immediately prior to the Effective Time will become the initial directors of
the Surviving Corporation, and the officers of Magma immediately before the
Effective Time will be the initial officers of the Surviving Corporation, in
each case until their successors are duly elected or appointed and qualified.

Effective Time

Following the adoption of the Merger Agreement and subject to
satisfaction or waiver of certain terms and conditions contained in the Merger
Agreement, the Merger will become effective on such date as the Merger
Agreement and the officers' certificates of each of Magma, CECI and CE Sub, are
duly filed with the Secretary of the State of Nevada. The filing of the Merger
Agreement and the officers' certificates shall be made as promptly as
practicable after all conditions contemplated by the Merger Agreement have been
satisfied or waived.

Terms of the Merger

The Merger Consideration. In the Merger, each outstanding Share (other
than Shares held by CECI, CE Sub or any other direct or indirect subsidiary of
CECI, Shares held in the treasury of Magma and Shares held by stockholders who
properly exercise dissenters' rights under the NGCL) will be converted into the
right to receive, (A) the Mixed Cash Component Amount, net in cash, without
interest thereon, and (B) the number of fully paid and nonassessable shares of
CECI Common Stock equal to the quotient of (I) $39.00 less (II) the Mixed Cash
Component Amount divided by the Average Closing Price.

Pursuant to the Merger Agreement, CECI also had the option of choosing
the following as the Merger Consideration: the amount equal to the quotient of
(A) (x) $38.75 multiplied by the number of Shares outstanding at the Effective
Time less (y) $39.00 multiplied by the number of Shares owned by CECI and any
of its affiliates immediately prior to the Effective Time, divided by (B) the
number of Shares outstanding at the Effective Time (other than Shares owned by
CECI and any of its affiliates) (the "All Cash Component Amount").

The foregoing formula for determining the consideration to be paid in
the Merger was determined so that the consideration paid by CECI in the Offer
and the Merger would consist, on a blended basis, of $28.50 per Share in cash
and $10.50 per Share in market value of CECI Common Stock, based on the Average
Closing Price and subject to the Collar Provision. The consideration to be
paid in the Offer and the Merger, including the terms of the Collar Provision,
was negotiated on an arms' length basis between CECI and Magma. The purpose of
the Collar Provision is to limit the number of shares of CECI Common Stock
required to be issued in the Merger if the Average Closing Price is less than
$14.27 and to establish a minimum number of shares of CECI Common Stock
required to be issued in the Merger if the Average Closing Price exceeds
$18.73.

Stock Options. Each option outstanding immediately prior to the
Effective Time under the Magma Stock Option Plans (as defined in the Merger
Agreement), whether or not then exercisable, shall be cancelled by Magma and,
in exchange therefor, each holder of any such option shall be entitled to
receive from Magma at the Effective Time, or as soon as practicable thereafter,
an amount in cash equal to the product of (x) the number of Shares previously
subject to such option and (y) the excess, if any, of $39.00 over the exercise
price per Share previously applicable to such option. Each unvested share of
deferred stock outstanding immediately prior to the Effective Time (each, a
"Deferred Share") shall be cancelled by Magma and each holder of a cancelled
Deferred Share shall be entitled to receive at the Effective Time or as soon as
practicable thereafter from Magma an amount in cash equal to $39.00.

Board Representation. The Merger Agreement provides that, subsequent to
consummation of the Offer, CE Sub will be entitled to that percentage of the
number of seats on Magma's Board (rounded to the nearest whole seat) as
reflects the percentage of the outstanding Shares then owned by CE Sub, but in
no event less than a majority of the entire Board of Directors of Magma
(regardless of vacancies). CE Acquisition has informed Magma that it currently
intends to choose the designees (the "Acquisition Designees") it has the right
to designate to Magma's Board pursuant to the Merger Agreement from the
individuals listed below under the caption "Acquisition Designees." In order
to provide CE Sub with such representation on Magma's Board, Magma may be
required to increase the size of Magma's Board or to secure the resignation of
one or more directors; provided, however, that such resignations will not cause
the number of Disinterested Directors (as defined below) to be less than two.
Following the election or appointment of the Acquisition Designees and prior to
the Effective Time, any amendment of the Merger Agreement or Articles of
Incorporation or Bylaws, any termination of the Merger Agreement by Magma, any
extension by Magma of the time for the performance of any of the obligations or
other acts of CECI or CE Sub, or waiver of any of Magma's rights under the
<PAGE>

Merger Agreement, and any other consent or action of Magma's Board under the
Merger Agreement will require the concurrence of a majority (which shall be at
least two) of the directors of Magma then in office who are not designees of
CECI or CE Sub ("Disinterested Directors").

CECI has agreed to use its best efforts to nominate and cause up to two
nominees of Magma to be elected or appointed as members of CECI's Board of
Directors.

Acquisition Designees

CE Sub has selected the following Acquisition Designees:

David L. Sokol, 38, has served as President and Chief Executive Officer
of CECI since April 19, 1993, as Chairman of the Board of Directors since May
5, 1994 and has been a director of California Energy since March 1991. He has
served as Chairman of the Board of Directors, President and Chief Executive
Officer of CE Sub since its organization. Formerly, Mr. Sokol was Chairman,
President, and Chief Executive Officer of CECI from February 1991 until January
1992. Mr. Sokol has served as Chairman, President and Chief Executive Officer
of CE Sub since its formation on September 22, 1994. Mr. Sokol was the
President and Chief Operating Officer of, and a director of, JWP, Inc., from
January 27, 1992 to October 1, 1992. From November 1990 until February 1991,
Mr. Sokol was the President and Chief Executive Officer of Kiewit Energy
Company. From 1983 to November 1990, Mr. Sokol was the President and Chief
Executive Officer of Ogden Projects, Inc.

Edgar D. Aronson, 59, has been a director of CECI since April 1983.
Mr. Aronson founded EDACO Inc., a private venture capital company, in 1981, and
has been President of EDACO since that time. Prior to that, Mr. Aronson was
Chairman, Dillon, Read International from 1979 to 1981 and a General Partner in
charge of the International Department at Salomon Brothers Inc from 1973 to
1979.

Richard K. Davidson, 52, was appointed a director of CECI in March
1993. Mr. Davidson has been Chairman and Chief Executive Officer of Union
Pacific Railroad since 1991. From 1989 to 1991 he was Executive Vice President
- - Operations of Union Pacific Railroad, and from 1986 to 1989 he was Vice
President - Operations of Union Pacific Railroad. Mr. Davidson is also a
director of FirsTier Financial, Inc., Chicago & Northwestern Holdings
Corporation and Missouri Pacific Railroad Company.

Ben Holt, 80, has been a director of CECI since September 1993. Mr.
Holt is the founder, and was Chairman and Chief Executive Officer, of The Ben
Holt Co., an engineering firm located in Pasadena, California, which California
Energy acquired in September 1993. Mr. Holt retired as Chairman and CEO of The
Ben Holt Co. in December 1993 and is currently a consultant to California
Energy. Mr. Holt is a beneficial owner of 3,763 Shares, representing less than
1% of the outstanding Shares.

Richard R. Jaros, 42, has been director of CECI since March 1991. Mr.
Jaros served as Chairman of the Board from April 19, 1993 to May 5, 1994 and
served as President and Chief Operating Officer of CECI from January 8, 1992 to
April 19, 1993. From 1990 until January 8, 1992, Mr. Jaros served as a Vice
President of PKS and is currently an Executive Vice President and a director of
PKS. Mr. Jaros serves as a director of MFS Communications Company, Inc. and C-
TEC Corporation, both of which are publicly traded companies in which PKS holds
a majority ownership interest. From 1986 to 1990, Mr. Jaros served as a Vice
President for Mergers and Acquisitions for Kiewit Holdings, a subsidiary of
PKS.

Walter Scott, Jr., 62, has been a director of CECI since June 1991.
Mr. Scott was the Chairman and Chief Executive Officer of CECI from January 8,
1992 until April 19, 1993. Mr. Scott is Chairman and President of PKS, a
position he has held since 1979. Mr. Scott is a director of Berkshire
Hathaway, Inc., Burlington Resources, Inc., ConAgra, Inc., FirsTier Financial,
Inc., and Valmont Industries, Inc. Mr. Scott also serves as a director of MFS
Communications Company, Inc. and C-TEC Corporation, both publicly traded
companies in which PKS holds a majority ownership interest.

Surrender and Payment

The Merger Agreement provides that before the Effective Time, Magma
will appoint a bank or trust company to act as the exchange agent for the
holders of Shares (the "Exchange Agent") to receive the funds and securities
necessary to make the payments of the Merger Consideration. Each holder of a
certificate representing any Shares canceled upon the Merger may thereafter
surrender such certificate to the Exchange Agent to effect the surrender of
such certificate on such holder's behalf for a period ending one year after the
Effective Time. Promptly after the Effective Time, CECI shall cause the
distribution to holders of record of Shares as of the Effective Time of
appropriate materials to facilitate such surrender, including a letter of
transmittal.

STOCKHOLDERS OF MAGMA SHOULD NOT SEND CERTIFICATES
REPRESENTING THEIR SHARES TO MAGMA OR TO THE EXCHANGE
AGENT PRIOR TO RECEIPT OF THE LETTER OF TRANSMITTAL

If payment of the Merger Consideration in respect of canceled Shares is
to be made to a person other than the person in whose name a surrendered
certificate or instrument is registered, it shall be a condition to such
payment that the certificate or instrument so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that the person
requesting such payment shall have paid any transfer and other taxes required
by reason of such payment in a name other than that of the registered holder of
the certificate or instrument surrendered or shall have established to the
<PAGE>

satisfaction of the Surviving Corporation that such tax either has been paid or
is not payable.

At the close of business on the day of the Effective Time, the stock
transfer books of Magma shall be closed and there shall not be any further
registration or transfer of Shares thereafter on the records of Magma. If,
after the Effective Time, certificates for Shares are presented to the
Surviving Corporation, they shall be canceled and exchanged (without interest)
for the Merger Consideration.

Fractional Shares

Fractional shares of CECI Common Stock shall not be issued in
connection with the Merger. In lieu of any such fractional share, each holder
of Shares who would otherwise have been entitled to a fraction of a share of
CECI Common Stock upon surrender of certificates for exchange shall be paid
cash (without interest) in an amount equal to such holder's proportionate
interest in the net proceeds from the sale or sales in the open market of the
aggregate fractional CECI Common Stock issued pursuant to the Merger Agreement.
As soon as practicable following the Effective Time, the Exchange Agent shall
determine the excess of (i) the number of full shares of CECI Common Stock
delivered to the Exchange Agent by CECI over (ii) the aggregate number of full
shares of CECI Common Stock to be distributed to holders of Shares ("Excess
Shares"), and the Exchange Agent, as agent for the former holders of Shares,
shall sell the Excess Shares at the prevailing prices on the NYSE. The sale of
the Excess Shares by the Exchange Agent shall be executed on NYSE in round lots
to the extent practicable. The Exchange Agent shall deduct from the proceeds
of the sale of the Excess Shares all commissions, transfer taxes and other
reasonable out-of-pocket transaction costs, including the expenses and
compensation of the Exchange Agent incurred in connection with such sale of
Excess Shares.

Conditions to Consummation of the Merger

Consummation of the Merger is subject to certain conditions, including
(i) the purchase of Shares pursuant to the Offer, (ii) approval and adoption of
the Merger and the Merger Agreement by the requisite vote of Magma's
stockholders, (iii) approval of the issuance of CECI Common Stock in order to
effectuate the Merger by the requisite vote of CECI's stockholders, (iv) the
CECI Common Stock issuable to Magma's stockholders in the Merger having been
authorized for listing on the NYSE upon official notice of issuance, (v) the
registration statement to be filed with the Commission by CECI on Form S-4
under the Securities Act for the purpose of registering the shares of CECI
Common Stock to be issued in the Merger shall have become effective in
accordance with the provisions of the Securities Act and no stop order
suspending such effectiveness shall have been issued by the Commission and
remain in effect, and (vi) that there shall not be in effect (a) any judgment,
decree or order issued by any Federal, state or local court of competent
jurisdiction, or (b) any statute, rule or regulation enacted or promulgated by
any Federal, state, local or legislative, administrative or regulatory body of
competent jurisdiction, that in either of cases (a) or (b) prohibits the
consummation of the Merger or makes such consummation illegal.

Representations and Warranties

The Merger Agreement contains customary representations and warranties
of the parties thereto, including representations by each of Magma and CECI as
to the absence of certain changes or events concerning its business, compliance
with law, approval of the Offer and the Merger by Magma for purposes of certain
Nevada antitakeover statutes, energy regulatory status, environment, employee
benefit plans, insurance, taxes, related party transactions, the status of
development and construction projects and the status of operating projects.

Conduct of Business by Magma and CECI Pending the Merger

Magma has agreed that, prior to the Effective Time, unless CECI shall
otherwise consent in writing and except as is otherwise permitted by the Merger
Agreement, the businesses of Magma and its subsidiaries shall be conducted only
in, and Magma and its subsidiaries shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
Magma will use its best efforts to preserve substantially intact its business
organization, to keep available the services of its present officers, employees
and consultants and to preserve its present relationships with customers,
suppliers and other persons with which it or any of its subsidiaries has
significant business relations. Except as contemplated by the Merger Agreement,
Magma has agreed that neither it nor any of its subsidiaries will, prior to the
Effective Time, directly or indirectly, do any of the following without the
prior written consent of CECI: (a) (i) issue, sell, pledge, dispose of,
encumber, authorize, or propose the issuance, sale, pledge, disposition,
encumbrance or authorization of any Shares or shares of its subsidiaries'
capital stock of any class, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of its or its subsidiaries'
capital stock, or any other ownership interest (except with respect to Shares
previously reserved for issuance as disclosed in Section 4.03 of the Merger
Agreement); (ii) amend or propose to amend its articles of incorporation or
bylaws or equivalent organizational documents; (iii) split, combine or
reclassify any of its outstanding common stock, or declare, set aside or pay
any dividend or distribution payable in cash, stock, property or otherwise with
respect to the common stock; (iv) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any shares of its capital stock,
except in the performance of its obligations under existing employee plans; or
(v) authorize or propose or enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this section (a);
(b) (i) acquire (by merger, consolidation, or acquisition of stock, partnership
interests or assets) any corporation, partnership or other business
organization or division thereof or any other interests in operating
<PAGE>

properties; (ii) except in the ordinary course of business and in a manner
consistent with past practices, sell, pledge, lease, transfer, dispose of, or
encumber or authorize or propose the sale, pledge, lease, transfer, disposition
or encumbrance of any of its or its subsidiaries' assets (including intangible
assets); (iii) create, incur, assume or guarantee any indebtedness or other
similar obligation, or enter into any contract or agreement, except in the
ordinary course of business and consistent with past practice; (iv) enter into
any new line of business or make any bid or enter into any commitment in
respect of any new or proposed projects; (v) prepay or refinance any part of
the principal or interest of any existing indebtedness before the due date
thereof; (vi) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations
of any other person or entity, except for endorsements in the ordinary course
of business in connection with the deposit of items for collection; (vii) make
any loans, advances or capital contributions to or investments in any person or
entity; (viii) waive, release, grant or transfer any rights of value or modify
or change in any material respect any existing license, material lease or
commitment; (ix) make or commit to or guarantee any single capital expenditure
or obligation which is not consistent with past practice and currently
budgeted; or (x) enter into or amend any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this section (b);
(c) take any action other than in the ordinary course of business and in a
manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to the grant of any severance or
termination pay (otherwise than pursuant to policies of Magma or any of its
subsidiaries in effect on November 30, 1994) or with respect to any increase of
benefits payable under its severance or termination pay policies in effect on
November 30, 1994; (d) make any payments (except in the ordinary course of
business and in amounts and in a manner consistent with past practice) under
any of its employee plans to any of its or its subsidiaries' employees,
independent contractors or consultants, enter into any new employee plan, any
new employment or consulting agreement, grant or establish any new awards under
such plan or agreement, or adopt or otherwise amend any of the foregoing; (e)
take any action except in the ordinary course of business and in a manner
consistent with past practice (none of which actions shall be unreasonable or
unusual) with respect to accounting policies or procedures (including without
limitation its procedures with respect to the payment of accounts payable); (f)
before the purchase of Shares pursuant to the Offer and other than pursuant to
the Merger Agreement, take any action to cause the shares of its common stock
to cease to be listed on the NNM; (g) cause or permit any of their current
insurance (or reinsurance) policies to be cancelled or terminated or any of the
coverage thereunder to lapse, unless forthwith upon notice of such termination,
cancellation or lapse, Magma or such subsidiary used its best efforts to obtain
commercially reasonable replacement policies from the same or comparable
insurers providing coverage which is the same as or comparable to that provided
under the cancelled, terminated or lapsed policies; (h) enter into any
agreement or transaction with any affiliate of Magma upon terms and conditions
less favorable to Magma or such affiliate than could be obtained on an arm's
length basis, except for agreements or transactions in the ordinary course of
business and consistent with past practice; (i) settle any material pending
litigation; or (j) enter into any oral or written agreement, contract,
commitment, arrangement or understanding with respect to any of the foregoing.

Notwithstanding the foregoing: (i) Magma may close the financing of its
Malitbog project without the prior consent of CECI provided that CECI has been
given the opportunity to review the relevant financing documents and Magma has
given CECI at least two days prior notice of the anticipated closing date; (ii)
Magma may make and commit to ordinary course budgeted operational capital and
other expenditures relating to projects in operation or construction without
the consent of CECI; (iii) Magma may make planned capital and operational
expenditures with respect to its Malitbog project, without the consent of CECI;
(iv) Magma will not make any capital or other expenditures in excess of
$500,000 in the aggregate with respect to its Nevada Power Pumped Storage
contract, its Alto Peak contract and any other contract related to a
development project without prior consultation with CECI and CECI's consent;
(v) Magma may honor all existing contractual obligations relating to projects
in operation or construction without the consent of CECI; and (vi) Magma will
not incur any additional indebtedness (secured or unsecured) or make new
project or capital commitments in excess of $1,000,000 without prior
consultation with CECI and CECI's consent.

CECI has agreed that, prior to the Effective Time, unless Magma shall
otherwise consent in writing, and except as is otherwise permitted by the
Merger Agreement, neither CECI nor any of the CE Subsidiaries shall, directly
or indirectly, do any of the following: (a) (i) issue or sell, or propose the
issuance or sale of, any shares of its or its subsidiaries' capital stock of
any class, or any options, warrants, convertible securities or other rights of
any kind to acquire any shares of its or its subsidiaries' capital stock, or
any other ownership interest (except with respect to CECI Common Stock
previously reserved for issuance as disclosed in Section 3.03 of the Merger
Agreement) if (A) the proceeds of any such issuance or sale ("Proceeds") exceed
$50,000,000 and (B) such proceeds are not applied, if necessary, so as to allow
CECI to exercise its option to pay cash in the Merger such that the blended
average per Share consideration paid in the Offer and the Merger equals $38.75;
(ii) split, combine or reclassify any of its outstanding common stock, or
declare, set aside or pay any dividend or distribution payable in cash, stock,
property or otherwise with respect to the common stock; (iii) redeem, purchase
or otherwise acquire or offer to redeem, purchase or otherwise acquire any
shares of its capital stock, except in the performance of its obligations under
existing employee plans or pursuant to a repurchase program under Rule 10b-18
promulgated under the Exchange Act; or (iv) authorize or propose or enter into
any contract, agreement, commitment or arrangement with respect to any of the
matters set forth in this section (a); (b) in the case of CECI, merge or
consolidate with or into another person or engage in a recapitalization or
other similar extraordinary business transaction; (c) make any material change
in accounting policies, other than as required by generally accepted accounting
<PAGE>

principles; or (d) enter into any oral or written agreement, contract,
commitment, arrangement or understanding with respect to any of the foregoing.

Indemnification

If any action, suit, proceeding or investigation relating hereto or to
the transactions contemplated by the Merger Agreement is commenced, whether
before or after the Effective Time, the parties hereto agree to cooperate and
use their best efforts to defend against and respond thereto. Magma shall, to
the fullest extent permitted under applicable law and regardless of whether the
Merger becomes effective, indemnify and hold harmless, and after the Effective
Time, the Surviving Corporation and CECI shall, to the fullest extent permitted
under applicable law, indemnify and hold harmless, each director, officer,
employee, fiduciary and agent of Magma or any subsidiary and their respective
subsidiaries and controlled affiliates, including, without limitation, officers
and directors serving as such on the date hereof (collectively, the
"Indemnified Parties"), from and against any costs or expenses (including
attorneys' fees), judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to any of the
transactions contemplated by the Merger Agreement, including without
limitation, liabilities arising under the Securities Act or the Exchange Act in
connection with the Merger. CECI shall cause the Surviving Corporation to
continue in effect the indemnification provisions currently provided (or
provisions that are no less favorable to the Indemnified Parties than those
currently provided) by the Articles of Incorporation, Bylaws or any written
indemnification agreement of Magma for a period of not less than six years
following the Effective Time.

CECI shall cause to be maintained in effect for not less than three
years after the Effective Time the current policies of directors' and officers'
liability insurance maintained by Magma and its Subsidiaries with respect to
matters occurring prior to the Effective Time; provided, however, CECI may
substitute therefor its current policies or other policies of at least the same
coverage containing terms and conditions which are no less advantageous to the
Indemnified Parties; provided, however, that in no event shall CECI be required
to expend more than an amount equal to 125% of current annual premiums paid by
Magma for such insurance.

If CECI, the Surviving Corporation or any of either of their successors
or assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in each such case, proper provision shall be made so
that the successors and assigns of CECI or Surviving Corporation assume the
indemnification obligations.

Termination; Fees and Expenses

not contain any due diligence conditions regarding CECI and Magma and its
subsidiaries and (ii) has a definition of "material adverse effect" and/or
"material adverse change" that substantially conforms in all material respects
with the definition of Material Adverse Effect (other than as provided in
subclause (i) of the definition provided below) contained in the Merger
Agreement with respect to CECI and Magma, then CECI will be required to pay
Magma a termination fee of $8,000,000 if (i) the Offer expires or is terminated
without CE Sub having accepted for payment the Shares tendered pursuant
thereto, or (ii) the Merger Agreement is terminated by either CECI or Magma
because the Offer has not been consummated by February 28, 1995 ((i) and (ii)
collectively, the "Offer Termination Events"); provided, however, that the
$8,000,000 termination fee will not be required to be paid if failure to
consummate the Offer results from one or more of the following: (i) a Material
Adverse Effect with respect to Magma shall exist or shall have occurred and be
continuing on or prior to the relevant Offer Termination Event; (ii) Magma
shall have materially breached the Merger Agreement and CECI shall have
terminated the Merger Agreement pursuant to clause (h) of the paragraph
entitled "Termination" above; or (iii) generally accepted accounting principles
would require a restatement of Magma's audited financial statements contained
in the Company SEC Reports (as defined in the Merger Agreement).

When used in connection with CECI and CE Sub, the term "Material
Adverse Effect" means any change or effect, when taken together with all other
adverse changes and effects relating to CECI or CE Sub, which are not
individually or in the aggregate deemed to have a Material Adverse Effect, that
is or is reasonably likely to be materially adverse to the business,
operations, properties, condition (financial or otherwise), assets or
liabilities (including, without limitation, contingent liabilities) of CECI and
its subsidiaries taken as a whole; provided, however, that the occurrence of
any or all of the following shall not constitute a Material Adverse Effect: (i)
any change in any law applicable to CECI or any CECI subsidiary or by which any
property or asset of CECI or any CECI subsidiary is bound, (ii) a failure to
receive any contract for which CECI or any CECI subsidiary has submitted or
will submit a competitive bid, (iii) the loss of any contract or arrangement
(whether by revocation, lapse or invalidity) with respect to a project that
CECI or a CECI subsidiary has under development, other than any such loss
resulting from a breach by CECI of the representations and warranties set forth
in Section 3.22 or 3.23 of the Merger Agreement (relating to the status of
CECI's development and construction projects and its operating projects), (iv)
a failure to close any public or private financing of any project in which CECI
or any CECI subsidiary owns a direct or indirect interest or (v) the
termination of the employment of any employee, officer, director or consultant
of CECI or any CECI subsidiary.

Amendment

The Merger Agreement provides that it may be amended by the parties
thereto at any time before the Effective Time by an instrument in writing
signed by the parties. However, after approval of the Merger by Magma's
stockholders, no amendment may be made which would materially adversely affect
the interests of such stockholders or reduce the amount or change the type of
consideration into which each Magma Share will be converted upon consummation
of the Merger. Following the election or appointment of the Acquisition
Designees and prior to the Effective Time, any amendment of the Merger
Agreement or Articles of Incorporation or Bylaws, any termination of the Merger
Agreement by Magma, any extension by Magma of the time for the performance of
any of the obligations or other acts of CECI or CE Sub, or waiver of any of
Magma's rights under the Merger Agreement, and any other consent or action of
Magma's Board under the Merger Agreement will require the concurrence of a
majority (which shall be at least two) of the Disinterested Directors.

<PAGE>

MARKET PRICES OF AND DIVIDENDS ON
CAPITAL STOCK OF CECI
AND RELATED STOCKHOLDER MATTERS

CECI Common Stock is listed for quotation on the NYSE under the symbol
"CE." The following table sets forth the quarterly high and low last reported
sales price per share of CECI Common Stock, and the amount of cash dividends
paid per share of CECI Common Stock, for the fiscal quarters indicated.

High Low Dividends
Fiscal Year Ended December 31, 1991:
First Quarter $14.00 $ 7.00 -0-
Second Quarter 15.00 10.88 -0-
Third Quarter 16.00 12.38 -0-
Fourth Quarter 16.63 13.75 -0-
Fiscal Year Ended December 31, 1992:
First Quarter 16.25 11.63 -0-
Second Quarter 13.25 11.50 -0-
Third Quarter 13.00 11.38 -0-
Fourth Quarter 17.38 11.88 -0-
Fiscal Year Ended December 31, 1993:
First Quarter 21.75 16.38 -0-
Second Quarter 20.25 16.88 -0-
Third Quarter 18.50 15.75 -0-
Fourth Quarter 20.25 17.88 -0-
Fiscal Year Ending December 31, 1994:
First Quarter 19.50 16.75 -0-
Second Quarter 18.13 15.75 -0-
Third Quarter 17.75 15.75 -0-
Fourth Quarter (through December 19) 17.13 15.38 -0-
Fiscal Year Ending December 31, 1995:
First Quarter (through January __) -0-

On September 19, 1994, the day of CECI's issuance of its press release
announcing the transmission of a letter to Magma containing a proposal to
acquire Magma in a transaction in which stockholders would receive cash and
shares of CECI Common Stock having a combined cash and market value of $35 per
share, the reported closing price for CECI Common Stock was $16.875. On
December 2, 1994, the last full trading day prior to the announcement that the
Merger Agreement had been executed, the closing stock price for CECI Common
Stock was $16.50. On January , 1995, the last full trading day for which
quotations were available at the time of printing of this Proxy/Prospectus
Statement, the closing stock price for CECI Common Stock was ____.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE CECI COMMON STOCK.

The present policy of CECI is to retain earnings to provide sufficient
funds for the operation and expansion of CECI's business. Accordingly, CECI
has not paid, and does not have any present plan to pay, cash dividends on CECI
Common Stock. In January of 1990 and January of 1991, CECI paid a 4% stock
dividend to the holders of CECI Common Stock. CECI did not pay such a dividend
in 1992, and has no plans to pay any such dividend in the future.

The agreements relating to the Senior Notes issued by CECI prohibit the
payment of dividends unless CECI satisfies various covenants and conditions.
The Certificate of Designation with respect to the Series C Preferred Stock
prohibits cash dividend payments with respect to CECI Common Stock unless all
accumulated dividends on the Series C Preferred Stock have been paid.

CECI's ability to pay dividends is dependent upon receipt of dividends
or other distributions from CECI's subsidiaries and the partnerships and joint
ventures in which CECI has interests. The availability of distributions from
the Coso Project is subject to the satisfaction of various covenants and
conditions contained in the Coso Joint Ventures' refinancing documents and CECI
anticipates that future project level financings will contain certain
conditions and similar restrictions on the distribution of cash flow to CECI.

<PAGE>

MARKET PRICES OF AND DIVIDENDS ON
CAPITAL STOCK OF MAGMA
AND RELATED STOCKHOLDER MATTERS

The Shares are quoted on the NNM. The following table sets forth, for
the periods indicated, the reported high and low sales prices per Share, and
the amount of cash dividends paid per Share for each such period.

High Low Dividends
Fiscal Year Ended December 31, 1991:
First Quarter $33.50 $22.50 -0-
Second Quarter 34.25 28.50 -0-
Third Quarter 30.00 22.75 -0-
Fourth Quarter 27.50 23.25 -0-
Fiscal Year Ended December 31, 1992:
First Quarter 27.25 21.00 -0-
Second Quarter 25.75 19.25 -0-
Third Quarter 24.75 19.75 -0-
Fourth Quarter 32.25 19.75 -0-

Fiscal Year Ended December 31, 1993:
First Quarter 40.00 30.75 -0-
Second Quarter 41.50 30.75 -0-
Third Quarter 39.00 29.75 -0-
Fourth Quarter 40.50 30.00 -0-

Fiscal Year Ending December 31, 1994:
First Quarter 35.25 30.75 -0-
Second Quarter 33.25 28.00 -0-
Third Quarter 35.25 26.50 -0-
Fourth Quarter (through December 19) 37.50 34.25 -0-

Fiscal Year Ending December 31, 1995:
First Quarter (through January __) -0-

On September 19, 1994, the day of CECI's issuance of its press release
announcing the transmission of a letter to Magma containing a proposal to
acquire Magma in a transaction in which stockholders would receive cash and
shares of CECI Common Stock having a combined cash and market value of $35 per
share, the reported closing price on the NNM was $27.50. On December 2, 1994,
the last full trading day prior to the announcement that the Merger Agreement
had been executed, the last reported sales price for Shares was $35.50. On
January , 1995, the last full trading day for which quotations were available
at the time of printing of this Proxy/Prospectus Statement, the last reported
sales price for Shares was ____. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
QUOTATIONS FOR THE SHARES.

Magma's policy has been to retain earnings to provide sufficient funds
for the operation and expansion of its business. Accordingly, Magma has not
paid, and has no present plan to pay, dividends on the Shares. In addition,
pursuant to the Merger Agreement, Magma has agreed not to declare or pay, and
has not declared or paid, any dividends, prior to consummation of the Merger.

<PAGE>

SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

Selected Historical Consolidated Financial and Operating Data of CECI

The following table sets forth selected historical consolidated
financial and operating data, which should be read in conjunction with CECI's
consolidated financial statements and related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" of
CECI incorporated by reference to CECI's Annual Report on Form 10-K for the
year ended December 31, 1993 and to CECI's Quarterly Report on Form 10-Q for
the quarters ended September 30, 1993 and 1994 are incorporated herein by
reference. The unaudited consolidated financial statements of CECI as of and
for the nine months ended September 30, 1993 and 1994 reflect all adjustments
necessary, in the opinion of management, (consisting only of normal recurring
adjustments) for a fair presentation of such financial data. The selected
consolidated data as of and for each of the five years in the period ended
December 31, 1993 have been derived from the audited historical consolidated
financial statements of CECI.
<TABLE>
<CAPTION>

Nine Months
Year Ended December 31, Ended September 30,

1989 1990 1991 1992 1993 1993 1994
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Sales of electricity $43,010 $89,026 $104,155 $115,087 $129,861 $99,398 $115,357
Sales of steam -- -- 2,029 2,255 2,198 1,648 1,851
Interest and other income 5,386 7,787 9,379 10,187 17,194 12,294 21,980
Total revenue 48,396 96,813 115,563 127,529 149,253 113,340 139,188
Plant operations, general and
administrative and royalties 13,615 37,412 41,506 45,183 46,794 34,019 41,321
Income before depreciation,
amortization, interest, income
taxes, extraordinary item and
cumulative effect of change
in accounting principle (1) 34,781 59,401 74,057 82,346 102,459 79,321 97,867
Depreciation and amortization 6,605 13,372 14,752 16,754 17,812 13,044 15,439
Interest expense, net of capitalized
interest 15,125 30,464 24,439 14,860 23,389 17,171 36,962
Provision for income taxes 2,715 3,522 8,284 11,922 18,184 14,295 14,067
Income before extraordinary item
and cumulative effect of change
in accounting principle (1) 10,336 12,043 26,582 38,810 43,074 34,811 31,399
Extraordinary item-refinancing (2) -- -- -- (4,991) -- -- (2,007)
Cumulative effect of change in
accounting principle (3) -- -- -- -- 4,100 4,100 --
Net income (1) 10,336 12,043 26,582 33,819 47,174 38,911 29,392
Preferred dividends (paid in kind) -- -- -- 4,275 4,630 3,429 3,711
Net income available to common
stockholders 10,336 12,043 26,582 29,544 42,544 35,482 25,681
Income per share before
extraordinary item and cumulative
effect of change in accounting
principle (1)
Assuming no dilution 0.38 0.44 0.75 0.92 1.00 0.81 0.77
Assuming full dilution (4) 0.38 0.44 0.75 0.92 1.00 0.81 0.76
Extraordinary item per share (2) -- -- -- (0.13) -- -- (0.06)
Cumulative effect of change in
accounting principle per share (3) $ -- $ -- $ -- $ -- $ .11 $ .11 $ --
Net income per share
Assuming no dilution 0.38 0.44 0.75 0.79 1.11 0.92 0.71
Assuming full dilution (4) 0.38 0.44 0.75 0.79 1.11 0.92 0.70
Weighted average shares
outstanding (5) 27,019 27,254 35,471 37,495 38,485 38,436 36,174
Capital expenditures 124,749 32,514 68,377 32,446 87,191 64,250 78,892

<CAPTION>
December 31, September 30,
1989 1990 1991 1992 1993 1993 1994
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Property-power plant, net $302,514 $321,303 $373,948 $389,646 $458,974 $440,527 $522,268
Total assets 349,282 393,853 517,994 580,550 715,984 710,659 1,087,064
Total debt 260,120 270,738 257,038 299,334 382,610 390,972 775,534
Preferred stock -- 4,705 54,705 54,350 58,800 57,650 62,350
Stockholders' equity 42,163 55,088 143,128 168,764 211,503 206,675 179,660

</TABLE>

______________
(1) The Navy I Plant commenced operation prior to 1989 and the BLM and Navy II
Plants commenced commercial operation in February 1989 and January 1990,
respectively. The Desert Peak, Nevada facility and the Roosevelt Hot
Springs, Utah steam field were acquired in March and January 1991,
respectively.
(2) The refinancing of CECI's three largest domestic projects located at the
Naval Air Weapons Station at China Lake, California (collectively, the
"Coso Project") resulted in an extraordinary item in 1992 in the amount of
<PAGE>

$5.0 million, after the tax effect of $1.5 million. The defeasance of the
Senior Notes resulted in an extraordinary item in 1994 in the amount of
$2.0 million, after the tax effect of $1.0 million.
(3) On January 1, 1993, CECI adopted Statement of Financial Accounting
Standard No. 109, "Accounting for Income Taxes" ("SFAS 109"), which
resulted in a cumulative adjustment to net income of $4.1 million in 1993.
(4) Fully diluted earnings per share reflects the dilutive effect of
convertible subordinated debentures as if they were converted at the
beginning of the reporting period.
(5) The number of shares outstanding is calculated by using the treasury stock
method.

<PAGE>

Selected Historical Consolidated Financial and Operating Data of Magma

The following information concerning Magma is excerpted from Magma's Annual
Report on Form 10-K for the year ended December 31, 1993 and Quarterly Report
on Form 10-Q for the quarter ended September 30, 1994.

The selected financial data set forth below with respect to Magma's statements
of operations for each of the five years in the period ended December 31, 1993
and the balance sheets of Magma as of December 31, 1989 through 1993 are
derived from the consolidated financial statements of Magma that have been
audited by Coopers & Lybrand, independent certified public accountants. The
selected financial data set forth below with respect to Magma's statements of
operations for the nine-month period ended September 30, 1994 and 1993 and,
with respect to the balance sheet of Magma as of September 30, 1994, have been
derived from the unaudited consolidated financial statements of Magma, which,
in the opinion of management, reflect all adjustments necessary (consisting
only of normal recurring adjustments) for a fair presentation of such financial
data.

The selected financial data set forth below should be read in conjunction with
the consolidated financial statements and related notes and other financial
information included in Magma's Annual Report on Form 10-K for the year ended
December 31, 1993 and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 incorporated herein by reference.

Nine Months
Year Ended December 31, Ended September 30,
1989 1990 1991 1992 1993 1993 1994
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenues $63,103 $ 85,599 $94,891 $108,966 $167,138 $124,781 $146,104
Operating revenues(1) 56,743 76,893 84,135 100,313 162,943 121,146 142,238
Income from operations 26,892 36,694 41,204 49,667 74,913 57,957 67,915
Income before cumulative
effect of accounting change 22,295 30,166 33,941 36,358 52,135 39,469 46,843
Cumulative effect of change
in accounting for income taxes -- -- -- 17,833(2) -- -- --
Net income 22,295 30,166 33,941 54,191 52,135 39,469 46,843
Return on revenues 35.3% 35.2% 35.8% 33.4%(3) 31.2% 31.6% 32.1%
Capital expenditures $43,762 $ 7,054 $15,711 $ 12,043 $ 8,434 $ 5,718 $ 8,854
Return on averagestockholders'
equity 16.1% 17.6% 16.2% 14.3%(3) 16.4% 13.0% 12.5%
Weighted average shares
outstanding 21,999 22,898 23,611 22,936 24,063 24,037 24,017
Income before cumulative effect
of accounting change per
common share
Assuming no dilution $1.01 $1.32 $1.44 $1.59 $2.17 $1.64 $ 1.95
Assuming full dilution(4) 0.96 1.32 1.44 1.52 2.17 1.64 1.95
Income per common share
Assuming no dilution 1.01 1.32 1.44 2.36(2) 2.17 1.64 1.95
Assuming full dilution(4) 0.96 1.32 1.44 2.27(2) 2.17 1.64 1.95

<CAPTION>
September
December 31, 30,
1989 1990 1991 1992 1993 1994
(In thousands)
Balance Sheet Data:
Property, plant and
equipment, net . $124,062(5) $120,125 $118,541 $113,922 $265,215 $256,561
Exploration and development
costs, net . . . 46,681 44,782 48,644 52,001 107,069 104,271
Total assets 282,624 325,131 353,788 396,650 611,311 630,422
Long-term obligations(6) 98,212 99,297 89,808 87,339 200,509 164,313
Total debt(7) 100,517 102,842 97,541 96,126 226,008 188,969
Stockholders' equity 150,142 192,626 226,872 282,260 351,918 395,286
</TABLE>

_______________
(1) Excludes interest and other income.
(2) The cumulative effect of Magma's adoption of SFAS 109 increased net income
by $17,833, or $.77 per share. See Note 11, Provision for Income Taxes,
accompanying the consolidated financial statements for the year ended
December 31, 1992 for Magma incorporated by reference in its Annual Report
on Form 10-K for the year ended December 31, 1993.
(3) Excludes the impact of cumulative effect of change in accounting for
income taxes.
(4) Fully diluted earnings per share reflects the dilative effect of stock
options and warrants at the end of the reporting period.
(5) Projects in progress reclassified to appropriate asset classification.
(6) Consists of the noncurrent portion of long-term loans payable and other
long-term liabilities.
(7) Represents loans payable, including the current portion of long-term loans
payable.

The above information should be read in conjunction with CECI's and
Magma's historical and pro forma combined financial statements and notes
<PAGE>

thereto, either incorporated by reference or included herein. See "Pro Forma
Unaudited Condensed Combined Financial Data."

Pro Forma Unaudited Condensed Combined Financial Data

The following Pro Forma Unaudited Condensed Combined Balance Sheet as
of September 30, 1994 and the Pro Forma Unaudited Condensed Combined Statements
of Earnings for the year ended December 31, 1993 and the nine months ended
September 30, 1994 combine the historical consolidated balance sheets of CECI
and Magma as if the acquisition had been effective on September 30, 1994, and
the historical statements of income as if the acquisition had been effective at
the beginning of the period. The acquisition is reflected under the purchase
method of accounting, after giving effect to the pro forma adjustments and
assumptions described in the accompanying notes. Under this method of
accounting, which is in accordance with generally accepted accounting
principles, assets and liabilities of Magma are adjusted to their estimated
fair value, and combined with the recorded values of the assets and liabilities
of CECI. This pro forma combined financial data should be read in conjunction
with the financial data appearing under "SELECTED HISTORICAL CONSOLIDATED
FINANCIAL AND OPERATING DATA OF CECI," "SELECTED CONSOLIDATED FINANCIAL DATA OF
MAGMA" and the consolidated financial statements, including the notes thereto,
of CECI and Magma, incorporated herein by reference to their respective Annual
Reports on Form 10-K for the year ended December 31, 1993 and Quarterly Reports
on Form 10-Q for the quarter ended September 30, 1994 and CECI's Current
Reports on Form 8-K dated March 7, 1994, March 28, 1994, April 18, 1994, May 6,
1994, June 9, 1994, August 16, 1994, September 22, 1994, September 30, 1994,
October 6, 1994, October 26, 1994, November 22, 1994 and December 9, 1994.

CECI has not completed reviewing Magma's records in order to make its
determination of the fair value of Magma's assets and liabilities. The fair
value adjustments reflected in the accompanying pro forma combined financial
data reflect, among other things, estimates of fair value made by CECI based on
market quotations and assumptions it believes to be reasonable.

It should be noted, however, that the actual fair values will be
determined on the basis of the financial condition of Magma at the time the
Magma Shares are purchased.

The pro forma data do not reflect operating efficiencies and cost
reductions which CECI anticipates are achievable. The savings would be largely
attributable to the economies of scale obtained through the combination of
CECI's operations with Magma's operations, and the resulting decrease in
employment and occupancy costs, as well as general overhead expenses.

The pro forma combined financial data are not intended to present the
results that would have actually occurred if the acquisition had been in effect
on the assumed dates and for the assumed periods, and are not necessarily
indicative of the results that may be obtained in the future.

<PAGE>

Pro Forma Unaudited Condensed Combined Balance Sheet
CECI and Magma
As of September 30, 1994
(In thousands)
<TABLE>

<CAPTION>
Pro Forma Pro Forma
CECI Magma Adjustments Combined
<S> <C> <C> <C> <C>
Assets
Cash and short term investments $316,349 $ 5,111 $(210,944)(4C) $110,516
Marketable securities. . . . . -- 43,609 -- 43,609
Joint venture cash and short
term investments 27,088 25,478 -- 52,566
Restricted cash and short term
investments 127,380 -- -- 127,380
Accounts receivable-trade and
other 33,901 54,204 -- 88,105
Prepaid expenses and other assets -- 10,423 -- 10,423
Due from joint ventures. . . . 1,639 -- -- 1,639
Property and plant, net. . . . 522,268 395,560 340,000(4B) 1,257,828
Equipment, net . . . . . . . . 4,699 -- -- 4,699
Notes receivable-joint venture 12,255 -- -- 12,255
Other investments. . . . . . . 11,517 41,245 -- 52,762
Power purchase contracts . . . -- 21,313 60,000(4B) 81,313
Deferred charges and other assets 29,968 24,480 6,948(4B,4C) 61,396
Goodwill . . . . . . . . . . . -- 8,999 319,143(4B) 328,142
---------- -------- ------------ -----------
Total Assets. . . . . . . . .$1,087,064 $630,422 $515,147 $2,232,633
---------- -------- ------------ -----------
---------- -------- ------------ -----------

Liabilities and Stockholders' Equity

Liabilities
Accounts payable . . . . . . . $ 1,021 $ 7,832 $ -- $ 8,853
Other accrued liabilities. . . 23,357 3,605 -- 26,962
Income taxes payable . . . . . 587 -- -- 587
Construction loans . . . . . . 21,079 -- -- 21,079
Project loans. . . . . . . . . 233,080 188,969 -- 422,049
Senior discount notes. . . . . 421,375 -- -- 421,375
Convertible subordinated
debenture 100,000 -- -- 100,000
Deferred income taxes. . . . . 24,774 22,376 $158,000(4B) 205,150
Other long term liabilities. . -- 12,354 500,000(4C) 512,354
---------- -------- ------------ -----------
Total liabilities . . . . . . 825,273 235,136 658,000 1,718,409

Deferred income. . . . . . . . 19,781 -- -- 19,781
Redeemable preferred stock . . 62,350 -- -- 62,350
Commitments and contingencies. -- -- -- --

Stockholders' Equity
Preferred stock
Common Stock . . . . . . . . . 2,407 2,401 (1,599)(4A) 3,209
Additional paid in capital . . 100,000 142,765 49,350 (4A) 292,115
Unrealized gain from
marketable securities -- (677) 677(4A) --
Retained earnings. . . . . . . 136,769 250,797 (250,797)(4A) 136,769
Treasury stock . . . . . . . . (59,516) -- 59,516 (4A) --
---------- -------- ------------ -----------

Total stockholders' equity. . 179,660 395,286 (142,853) 432,093
---------- -------- ------------ -----------
Total liabilities and
stockholders'equity $1,087,064 $630,422 $515,147 $2,232,633
---------- -------- ------------ -----------
---------- -------- ------------ -----------
</TABLE>

The accompanying notes to the pro forma unaudited condensed combined
financial statements are an integral part of these statements.

<PAGE>

Pro Forma Unaudited Condensed Combined Statements of Earnings
CECI and Magma
For the Year Ended December 31, 1993 and the Nine Months Ended September 30,
1994
(In thousands, except per share data)

Year Ended December 31, 1993 Nine Months Ended September 30, 1994

Pro Forma Pro Pro Forma
Adjustment Forma Adjustment Pro Forma
CECI Magma (4D) Combined CECI Magma (4D) Combined

<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Sales of electricity
and steam . $132,059 $137,882 $-- $269,941 $117,208 $124,086 $-- $241,294
Royalties -- 19,629 -- 19,629 -- 15,062 -- 15,062
Interest and other
income. . . 17,194 4,195 (10,547) 10,842 21,980 3,866 (7,910) 17,936
Management
services. . -- 5,432 -- 5,432 -- 3,090 -- 3,090
--------- -------- --------- -------- -------- ------- ------- -------

Total Revenue 149,253 167,138 (10,547) 305,844 139,188 146,104 (7,910) 277,382
Costs and Expenses
Plant operations 25,362 49,493 -- 74,855 23,887 41,208 -- 65,095
General and
administrative 13,158 10,943 -- 24,101 9,536 9,602 -- 19,138
Royalties 8,274 -- -- 8,274 7,898 -- -- 7,898
Depreciation and
amortization 17,812 21,692 18,254 57,758 15,439 17,737 13,690 46,866
Other non--plant
costs . . . -- 471 -- 471 -- 380 -- 380
Interest expense 30,205 9,626 45,000 84,831 44,480 9,262 33,750 87,492
Less interest
capitalized (6,816) -- -- (6,816) (7,518) -- -- (7,518)
--------- -------- --------- -------- -------- ------- ------- -------
Total costs and
expenses. . 87,995 92,225 63,254 243,474 93,722 78,189 47,440 219,351
--------- -------- --------- -------- -------- ------- ------- -------
Income before
income taxes 61,258 74,913 (73,801) 62,370 45,466 67,915 (55,350) 58,031
Provision for
income taxes 18,184 22,778 (26,056) 14,906 14,067 21,072 (19,542) 15,597
--------- -------- --------- -------- -------- ------- ------- -------
Income from
continuing operations 43,074 52,135 (47,745) 47,464 31,399 46,843 (35,808) 42,434
Preferred dividends 4,630 -- -- 4,630 3,711 -- -- 3,711
--------- -------- --------- -------- -------- ------- ------- -------
Income available to
common stock-
holders . . $38,444 $52,135 $(47,745) $42,834 $27,688 $46,843 $(35,808) $38,723
--------- -------- --------- -------- -------- ------- ------- -------
--------- -------- --------- -------- -------- ------- ------- -------
Income per
common and common equiva-
lent share
Assuming no dilution $1.00 $2.17 $0.80 $0.77 $1.95 $0.75
--------- -------- -------- -------- ------- -------
--------- -------- -------- -------- ------- -------
Assuming full dilution $1.00 $2.17 $0.79 $0.76 $1.95 $0.73
--------- -------- -------- -------- ------- -------
--------- -------- -------- -------- ------- -------
Weighted average
common shares
outstanding 38,485 24,063 53,784 36,174 24,017 51,473
--------- -------- -------- -------- ------- -------
--------- -------- -------- -------- ------- -------
</TABLE>

The accompanying notes to the pro forma unaudited condensed combined financial
statements are an integral part of these statements.

<PAGE>

Notes To Pro Forma Unaudited Condensed Combined Financial Data
CECI and Magma
(In thousands, except per share data)

The Merger will be accounted for as a purchase. The resulting
adjustments are based on the historical consolidated financial statements of
CECI and Magma. The final adjustments will be based on the fair value of CECI's
Common Stock and the fair value of the assets and liabilities of Magma at or
near the closing. For purposes of the pro forma combined financial statements,
it is assumed that one hundred percent of the Magma Shares will be acquired and
that the fair value of the Common Stock will be $16.50 (the mid-point of the
"Average Closing Price" range limits stipulated in the Agreement and Plan of
Merger).

The pro forma unaudited condensed combined financial statements are
based on the following assumptions:

1. The Merger occurred as of September 30, 1994 for balance sheet purposes
and at the beginning of the periods presented for statement of earnings
purposes.

2. 24,043,000 Magma Shares outstanding, net of 200,000 shares owned by
CECI, will be purchased for $39.00 per Magma Share consisting of a package of,
on a blended basis, approximately $28.50 per share in cash and approximately
$10.50 in market value per share of Common Stock of CECI (see "Merger
Consideration").

3. The options outstanding will be retired for approximately $8,500,000 in
cash.

4. The pro forma adjustments to reflect the effect of the transaction are
as follows:

A. The adjustments reflect the elimination of Magma's equity accounts
and the issuance of Common Stock.
B. The adjustments which have been made to the net assets of Magma and
CECI to give effect to the Merger follow:

Assumed value of the
Common Stock and cash consideration
plus estimated direct costs to be
incurred in consummating the Proposed
Merger. . . . . . . . . . . . . . . . . $942,377
Cost of retiring outstanding
Magma options . . . . . . . . . . . . . 8,500
Cost of Magma shares presently owned
by CECI . . . . . . . . . . . . . . . . 5,552
Net assets of Magma. . . . . . . . . . . . $395,286
Adjustment to eliminate goodwill
of Magma. . . . . . . . . . . . . . . . (8,999) 386,287
Excess of purchase price over carrying
value of net assets acquired. . . . . . 570,142
Allocated to:
Property and plant. . . . . . . . . . . (340,000)
Power purchase contracts. . . . . . . . (60,000)
Deferred income taxes on
allocated costs . . . . . . . . . . . 158,000
Goodwill . . . . . . . . . . . . . . . . . $328,142

C. The additional cash which CECI will be required to pay in order to
effect the Merger has been provided for in the pro forma adjustments as
follows:

Reduce cash on hand . . . . . . . . . . . . $210,944
Increase long-term debt . . . . . . . . . . 500,000
$710,944
Represents:
Payments to Magma common stockholders. . . . $677,444
Payments to Magma stock option holders . . . 8,500
Other direct acquisition costs . . . . . . . 12,500
Finance costs. . . . . . . . . . . . . . . . 12,500
$710,944

D. The pro forma adjustments to the pro forma combined statements of
earnings include the following:

i. Record amortization of the excess of purchase price over net assets
acquired over a 40-year period, eliminate the amortization of goodwill from the
historical operating results of Magma and provide depreciation expense on costs
allocated to property and plant. CECI's policy is to provide depreciation and
amortization expense beginning upon the commencement of energy production over
the estimated remaining useful life of plant and equipment or the contract
period for costs applicable to power sales and development contracts. Costs of
$150 million have been allocated to power sales and development contracts and
plant for which energy production is not expected to commence until 1996 or
later. Accordingly, revenues, period operating costs and amortization of
future costs to be incurred in the completion of such facilities together with
amortization of this allocation of acquisition costs are not included in the
pro forma combined statements of earnings.

ii. Increase interest expense relating to amortization of deferred
financing costs over ten years and cash used to finance the merger, utilizing
an 8.75 percent annual interest rate assumption applied to additional
<PAGE>

borrowings and a 5 percent annual interest rate assumption applicable to the
reduction of cash on hand.

iii. Change income tax expense as a result of pro forma adjustments
which affect taxable income.

The pro forma income per common share has been determined on the
basis of weighted average outstanding shares which have been adjusted to
include the number of shares of Common Stock to be exchanged for the
outstanding Magma Shares.

5. The pro forma combined income from continuing operations available to
common shareholders per share for the year ended December 31, 1993, and nine
months ended September 30, 1994, would be $0.82 and $0.78, respectively, based
upon the assumption that (1) 100% of the Magma Shares are acquired by CECI and
(2) the market value of CECI Common Stock issued to the present shareholders of
Magma is $18.73 per share. The pro forma combined book value per share at
September 30, 1994, would be $9.45 under the same assumptions.

6. The pro forma combined income from continuing operations available to
common shareholders per share for the year ended December 31, 1993, and nine
months ended September 30, 1994, would be $0.76 and $0.72, respectively, based
upon the assumption that (1) 100% of the Magma Shares are acquired by CECI and
(2) the market value of Company Common Stock issued to the present shareholders
of Magma is $14.27 per share. The pro forma combined book value per share at
September 30, 1994, would be $8.66 under the same assumptions.

<PAGE>

COMPARISON OF STOCKHOLDER RIGHTS

Upon consummation of the Merger, the stockholders of Magma will become
stockholders of CECI and their rights will be governed by CECI's Certificate of
Incorporation and Bylaws, which differ in certain material respects from
Magma's Articles of Incorporation and Bylaws. As stockholders of CECI, the
rights of former Magma stockholders will be governed by the DGCL instead of by
the NGCL. Delaware is the jurisdiction of incorporation of CECI and Nevada is
the jurisdiction of incorporation of Magma.

The following comparison of the DGCL and CECI's Certificate of
Incorporation and Bylaws, on the one hand, and the NGCL and Magma's Articles of
Incorporation and Bylaws, on the other, is not intended to be complete and is
qualified in its entirety by reference to CECI's Certificate of Incorporation
and Bylaws and Magma's Articles of Incorporation and Bylaws. Copies of CECI's
Certificate of Incorporation and Bylaws are available for inspection at the
offices of CECI and copies will be sent to the holders of Magma Common Stock or
CECI Common Stock upon request. Copies of Magma's Articles of Incorporation
and Bylaws are available for inspection at the principal executive offices of
Magma and copies will be sent to holders of Magma Common Stock upon request.

Directors. Both the DGCL and the NGCL provide that a corporation's
board of directors shall consist of at least one member and that the number of
directors may be fixed in either the corporation's certificate of incorporation
or articles of incorporation, as the case may be, or in the bylaws. CECI's
Bylaws provide that the CECI Board shall consist of 13 directors and shall be
classified into three classes of directors each serving three-year terms.
Magma's Articles of Incorporation provide that the number of directors
constituting the Magma Board will be fixed from time to time by resolution of
Magma's Board or Magma's stockholders, and that the number of directors may not
be less than three nor more than 15. Magma's Board currently consists of
eleven directors and in also classified into three classes of directors each
serving three-year terms.

Removal of Directors; Filling Vacancies on the Board of Directors.
Under the DGCL, any director of a classified board of directors may be removed
only for cause by the holders of a majority of the shares entitled to vote at
an election of directors. Under the NGCL, any director may be removed from
office upon the vote of stockholders representing not less than two-thirds of
the voting power of the issued and outstanding stock entitled. Although CECI's
Certificate of Incorporation is silent as to the filling of vacancies on the
CECI Board, its Bylaws provide that any director or the entire CECI Board may
be removed only for cause by the holders of not less than two-thirds of shares
entitled to vote at an election of directors. Magma's Articles of
Incorporation and Bylaws are silent as to the removal of directors.

Both the DGCL and the NGCL generally provide that all vacancies on the
board of directors, including vacancies caused by an increase in the number of
authorized directors, may be filled by a majority of the remaining directors
even if they are less than a quorum. Both CECI's and Magma's Bylaws follow
this language and further provide that any such elected director shall hold
office for a term expiring at the annual meeting at which the term of the class
to which he has been elected expires.

Limitation on Directors' Liability. Both the DGCL and the NGCL permit
a corporation to include a provision in its certificate or articles of
incorporation eliminating or limiting the personal liability of a director for
damages for breach of the director's fiduciary duty subject to certain
limitations. CECI's Certificate of Incorporation provides that a director will
not be personally liable to CECI or its stockholders for monetary damages for
breach of fiduciary duty as a director, although it does not eliminate the
liability of the director for breaches of the duty of loyalty, acts or
omissions not in good faith or involving intentional misconduct or knowing
violations of law, the unlawful repurchase or redemption of stock or payment of
unlawful dividends or any transaction from which a director derives an improper
personal benefit. As permitted under the NGCL, Magma's Articles of
Incorporation contain a similar provision.

Indemnification. Both the DGCL and the NGCL permit a corporation to
indemnify officers, directors, employees and agents for actions taken in good
faith and in a manner they reasonably believed to be in, or not opposed to, the
best interests of the corporation, and with respect to any criminal action,
which they had no reasonable cause to believe was unlawful. Both states' laws
provide that a corporation may advance expenses of defense (upon receipt of a
written undertaking to reimburse the corporation if indemnification is not
appropriate) and must reimburse a successful defendant for expenses, including
attorney's fees, actually and reasonably incurred, and both states permit a
corporation to purchase and maintain liability insurance for its directors and
officers. Both the DGCL and the NGCL provide that indemnification may not be
made for any claim, issue or matter as to which a person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the corporation, unless and only to the extent a court determines
that the person is entitled to indemnify for such expenses as the court deems
proper. Both CECI's Bylaws and Magma's Bylaws provide indemnification to the
fullest extent permitted by applicable law.

Restrictions on Business Combinations/Corporate Control. The DGCL
contains provisions restricting the ability of a corporation to engage in
business combinations with an interested stockholder. Under the DGCL, except
under certain circumstances, a corporation is not permitted to engage in a
business combination with any interested stockholder for a three-year period
following the date such stockholder became an interested stockholder. The DGCL
defines an interested stockholder, generally, as a person who owns 15% or more
of the outstanding shares of such corporation's voting stock. Kiewit Energy
would be considered an interested stockholder. However, because Kiewit Energy
<PAGE>

has been an interested stockholder for more than three years, the moratorium on
a business combination involving Kiewit Energy does not apply.

Certain provisions of the NGCL disallow the exercise of voting rights
with respect to "control shares" of an "issuing corporation" held by an
"acquiring person," unless such voting rights are conferred by a majority vote
of the disinterested stockholders or if, prior to the acquiring person's
acquisition of the control shares, the articles of incorporation or bylaws of
the issuing corporation state that such provisions of the NGCL do not apply to
the issuing corporation. Magma's Bylaws contain such a statement.

The NGCL also contains provisions restricting the ability of a
corporation to engage in any combination with an interested stockholder unless
the combination complies with certain fair price specifications or unless the
board of directors of the corporation approved of the interested stockholder's
acquisition of shares. The NGCL defines an interested stockholder, generally,
as a person who owns 10% or more of the outstanding shares of such
corporation's voting stock. CECI would be considered an interested stockholder
of Magma under the NGCL. However, because the Magma Board approved the
acquisition of the Shares by CECI, the provisions of the NGCL restricting a
combination involving CECI do not apply.

Stockholder Action by Written Consent: Special Meetings. Under the
DGCL and the NGCL, unless otherwise provided in the Certificate of
Incorporation or Articles of Incorporation, as the case may be, stockholders
may take action without a meeting, without prior notice and without a vote,
upon the written consent of stockholders having not less than the minimum
number of votes that would be necessary to authorize the proposed action at a
meeting at which all shares entitled to vote were present and voted. CECI's
Certificate of Incorporation provides that any action that may be taken or is
required to be taken at any annual or special meeting of stockholders, may not
be taken without a meeting. Magma's Bylaws have a similar provision.

CECI's Bylaws provide that special meetings of stockholders may be
called by the CECI Board or the President. Magma's Bylaws provide that special
meetings of the stockholders may be called by the President or Secretary of
Magma and must be called by the President or Secretary at the request, in
writing, of a majority of Magma's Board or stockholders owning at least a
majority of Magma's shares issued and outstanding and entitled to vote.

Amendment or Repeal of the Certificate of Incorporation and Bylaws.
Under the DGCL and the NGCL, unless the Certificate of Incorporation or
Articles of Incorporation, as the case may be, or Bylaws otherwise provide,
amendments to the Certificate of Incorporation or Articles of Incorporation
generally require the approval of the holders of a majority of the outstanding
stock entitled to vote thereon, and if such amendments would increase or
decrease the number of authorized shares of any class or series or the par
value of such shares or would adversely affect the shares of such class or
series, the holders of the outstanding shares of a class shall be entitled to
vote as a class to approve the amendment. CECI's Certificate of Incorporation
requires the affirmative vote of the holders of at least two-thirds of the
voting power of all shares of CECI entitled to vote generally in the election
of directors, voting together as a single class to amend its Certificate of
Incorporation. CECI's Bylaws provide that CECI's Board may amend its Bylaws by
a majority vote and that CECI stockholders may amend its Bylaws by an
affirmative vote of at least two-thirds of the voting power of all shares of
CECI entitled to vote, except when stockholders are required to vote by class,
in which event two-thirds of the voting power of that class shall be required.

Magma's Articles of Incorporation provide that Magma reserves the right
to amend, alter, change or repeal any provision contained in the Articles of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders in the Articles of Incorporation are subject
to such reservation. Magma's Articles of Incorporation provide that the
affirmative vote of the holders of at least 75% of the outstanding shares of
common stock shall be required to amend, alter, change, repeal, or adopt any
provision inconsistent with, the provisions of its Articles of Incorporation
that concern the election of directors. Magma's Bylaws provide that the
affirmative vote of a majority the outstanding capital stock entitled to vote
thereon or a majority of the entire Magma Board shall be required to amend its
Bylaws.

Cumulative Voting. Under both the DGCL and the NGCL, cumulative voting
of stock applies only when so provided in the Certificate of Incorporation or
the Articles of Incorporation, as the case may be, of a corporation. Neither
CECI's Certificate of Incorporation nor Magma's Articles of Incorporation
provide for cumulative voting rights in the election of directors.

Stockholder Vote for Mergers. Except with respect to certain mergers
between parent and subsidiary corporations, under both the DGCL and the NGCL, a
merger generally requires the affirmative vote of a majority of the outstanding
shares entitled to vote thereon. Under the DGCL and the NGCL, holders of stock
which is not by its terms entitled to vote on such a transaction are entitled
to notice of the meeting at which the proposed transaction is considered.
Neither the DGCL nor the NGCL requires a stockholder vote of the surviving
corporation in a merger, however, if (a) the merger agreement does not amend
the existing certificate of incorporation, (b) each outstanding or treasury
shares of the surviving corporation before the merger is unchanged after the
merger, and (c) the number of shares to be issued by the surviving corporation
in a merger does not exceed 20% of the shares outstanding immediately prior to
such issuance.

Dissenters' Rights in Mergers. Both the DGCL and the NGCL provide the
stockholders have the right, in some circumstances, to dissent from certain
corporate reorganizations and to instead demand payment of the fair cash value
of their shares. Unless a corporation's certificate of incorporation provides
<PAGE>

otherwise, the DGCL does not provide for such dissenters' rights of appraisal
with respect to (a) a sale-of-assets reorganization, (b) a merger or
consolidation by a corporation, the shares of which are either listed on a
national securities exchange or widely-held (by more than 2,000 stockholders),
if stockholders receive shares of the surviving corporation or of such a listed
or widely-held corporation; or (c) stockholders of a corporation surviving a
merger if no vote of the stockholders of the surviving corporation is required
to approve the merger. Like the DGCL, the NGCL generally does not provide for
dissenters' rights if no vote of the stockholders of the surviving corporation
is required. Further, dissenters' rights are not available under the NGCL for
shares registered on a securities exchange on the record date for the meeting
at which the reorganization is considered by the stockholders.

Dividends. Under both the DGCL and the NGCL, corporations may pay
dividends out of surplus, or if no surplus exists, out of net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF MAGMA

The following table sets forth, as of October 1, 1994, the name and
address, the total number of shares (if any) of Shares beneficially owned (as
defined in Rule 13d-3 under the 1934 Act) and the percentage of the outstanding
Shares so owned (i) by each person who is known to Magma to own beneficially 5%
or more of the outstanding Shares, (ii) by each director and nominee to the
Board, (iii) by Magma's Chief Executive Officer and each of its executive
officers and (iv) by all directors and executive officers as a group. As of
December __, 1994, CECI and its affiliates owned 200,000 Shares which represent
less than 1% of the Shares outstanding.

AMOUNT AND NATURE OF
NAME & ADDRESS OF BENEFICIAL OWNERS(1) BENEFICIAL OWNERSHIP (2) PERCENTAGE OF CLASS (3)
<S> <C> <C>
The Dow Chemical Company
2030 Dow Center
Midland, MI 48674 5,032,430(4) 21.0%

B.C. McCabe Foundation
7624 S. Painter Ave., Suite A
Whittier, CA 90602-2313 2,752,641(5) 11.5%

Firstar Investment Research &
Management Company
777 E. Wisconsin Avenue
Milwaukee, WI 53202 1,975,500 8.2%

James D. Shepard. . . . . . . 221,134(6) *

Paul M. Pankratz 114,100(7) *

Ralph W. Boeker 50,000(8) *

Jon R. Peele 32,000(9) *

Wallace C. Dieckmann 19,859(10) *

Thomas C. Hinrichs 17,618(11) *

Kenneth J. Kerr 16,000(12) *

Trond Aschehoug 15,450(13) *

Louis A. Simpson 10,819(14) *

John D. Roach 2,250(15) *

Lester L. Coleman 819(16) *

Roger L. Kesseler 200 *

Directors and executive officers
as a group (15 persons). . . . . 500,249(17) 2.1%(18)
</TABLE>
_______________

* Represents less than one percent.

(1) Except as otherwise indicated, the address of each of the persons named
below is c/o Magma Power Company, 4365 Executive Drive, Suite 900, San Diego,
California 92121.

(2) For purposes of this table, a person is deemed to have "beneficial
ownership" of (i) any security which such person has the right to acquire
within 60 days after October 1, 1994, (ii) any security which is held by such
person's spouse or other immediate family member sharing such person's
household, (iii) securities held in certain trusts, partnerships and other
legal entities affiliated with such person, and (iv) individual retirement
accounts of such person. Beneficial ownership has been disclaimed by certain
of the named persons with respect to certain of such shareholdings. The
amounts set forth under this column exclude shares held for the benefit of the
named person in the Magma 401(k) Plan. All information with respect to the
beneficial ownership of the shares referred to in this table is based upon
<PAGE>

filings made by the respective beneficial owners,with the Commission or
information provided to Magma by such beneficial owners.

(3) Unless otherwise noted, the number of Shares outstanding for this
purpose is 24,014,714.

(4) Includes 4,000,005 shares which were placed in escrow, pursuant to an
escrow agreement dated April 1, 1991 between The Dow Chemical Company, a
Delaware corporation ("Dow"), and Morgan Guaranty Trust Company of New York, as
Escrow Agent, for delivery upon exchanges of $150,000,000 aggregate principal
amount of 5 3/4% Subordinated Exchangeable Notes Due 2001 of Dow (the "Notes").
The Notes are exchangeable at any time into Shares at an exchange rate of
26.6667 Shares per $1,000 principal amount of Notes. Dow retains the right to
vote the shares placed in escrow.

(5) Does not includes Shares held by Mr. Shepard, a director of Magma, who
is a co-trustee of the B.C. McCabe Foundation.

(6) Does not include shares owned by the B. C. McCabe Foundation for which
Mr. Shepard is a co-trustee, and with regard to which beneficial ownership is
disclaimed.

(7) Includes Mr. Pankratz's options to purchase 114,000 Shares.

(8) Includes 3,000 shares of deferred stock which are subject to vesting
requirements based on continuing employment, and which the holder is not
entitled to vote or receive dividends on until vested. Also includes Mr.
Boeker's options to purchase 45,000 Shares.

(9) Includes 4,500 shares of deferred stock subject to vesting requirements
based on continuing employment, and which the holder is not entitled to vote or
receive dividends on until vested. Also includes Mr. Peele's options to
purchase 27,500 Shares.

(10) Includes 6,000 shares of deferred stock subject to vesting requirements
based on continuing employment, and which the holder is not entitled to vote or
receive dividends on until vested. Also includes Mr. Hinrichs' options to
purchase 5,750 Shares.

(11) Includes 6,000 shares of deferred stock subject to vesting requirements
based on continuing employment, and which the holder is not entitled to vote or
receive dividends on until vested. Also includes Mr. Hinrichs' options to
purchase 5,750 Shares.

(12) Includes 10,000 shares of deferred stock subject to vesting
requirements based on continuing employment. The holder of such deferred stock
is not entitled to vote such shares or receive dividends until vested. Also
includes Mr. Kerr's options to purchase 5,000 Shares.

(13) Includes 8,600 shares of deferred stock which are subject to vesting
requirements based on continuing employment, and which the holder is not
entitled to vote or receive dividends on until vested. Also includes Mr.
Aschehoug's options to purchase 6,000 Shares.

(14) Includes Mr. Simpson's options to purchase 819 Shares.

(15) Includes Mr. Roach's options to purchase 1,250 Shares.

(16) Includes Mr. Coleman's options to purchase 819 Shares.

(17) Includes 38,100 shares of deferred stock held by all directors and
officers as a group. Also includes options to purchase 219,998 Shares held by
all directors and executive officers as a group. Does not include Shares held
by Dow, which is the employer of directors Knee, Kesseler and Reinhard.

(18) Includes the 38,100 shares of deferred stock and the options to
purchase 219,998 shares of Common Stock referred to in Note 17 above. The
number of outstanding Shares for this purpose is 24,272,812.

OTHER MATTERS

It is not expected that any matters other than those described in this
Proxy Statement will be brought before the Magma Special Meeting. However, if
any other matters are presented, it is the intention of the persons named in
the Magma proxy to vote the proxy in accordance with their best judgment.

LEGAL MATTERS

Certain legal matters with respect to the validity of the securities
offered hereby will be passed upon for CECI by Willkie Farr & Gallagher, One
Citicorp Center, 153 East 53rd Street, New York, New York 10022.

EXPERTS

The financial statements and the related financial statement schedules
of CECI and subsidiaries incorporated in this Proxy Statement by reference to
the CECI 1993 10-K have been audited by Deloitte & Touche, independent
auditors, as stated in their reports (which reports express an unqualified
opinion and include an explanatory paragraph referring to California Energy
Company, Inc.'s adoption effective January 1, 1993, of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes") which are
incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
<PAGE>

accounting and auditing.

With respect to the unaudited interim financial information for the
periods ended March 31, 1993 and 1994, June 30, 1993 and 1994, and September
30, 1993 and 1994, which is incorporated herein by reference, Deloitte & Touche
LLP have applied limited procedures in accordance with professional standards
for a review of such information. However, as stated in their reports included
in CECI's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994,
June 30, 1994 and September 30, 1994 and incorporated by reference herein, they
did not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature of the review
procedures applied. Deloitte & Touche LLP are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 for their reports on the
unaudited interim financial information because those reports are not "reports"
or a "part" of a registration statement prepared or certified by an accountant
within the meaning of Section 7 and 11 of the Act.

The consolidated balance sheets of Magma and subsidiaries as of
December 31, 1993 and 1992 and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1993 and the Statement of Net
Assets Acquired as of March 31, 1993 and the Historical Summaries of Gross
Revenues and Direct Operating Expenses for each of the three years in the
period ended December 31, 1992 of the Imperial Valley Geothermal Interests,
incorporated by reference in this Proxy Statement have been incorporated herein
in reliance on the reports of Coopers & Lybrand, independent accountants, given
on the authority of that firm as experts in accounting and auditing.

STOCKHOLDER PROPOSALS

Any Magma stockholder who wishes to submit a proposal for presentation
to Magma's 1995 Annual Meeting of Stockholders (if the Merger has not been
consummated prior to the date the meeting is to be held) must submit the
proposal to Magma Power Company, 4365 Executive Drive, Suite 900, San Diego,
California, 92121, Attention: Secretary, not later than January 11, 1995 for
inclusion, if appropriate, in Magma's proxy statement and form of proxy
relating to its 1995 Annual Meeting.

<PAGE>

CALIFORNIA ENERGY COMPANY, INC.
AND
MAGMA POWER COMPANY

Annexes to the Proxy Statement/Prospectus

Annex A - Agreement and Plan of Merger

Annex B - Opinion of Goldman, Sachs & Co.

Annex C - Opinion of Gleacher & Co. Inc.

Annex D - Statutory Provisions of NGCL Regarding Dissenters' Rights

<PAGE>

ANNEX A

CALIFORNIA ENERGY COMPANY, INC.,

CE ACQUISITION COMPANY, INC.

and

MAGMA POWER COMPANY

AGREEMENT AND PLAN OF MERGER

Dated as of December 5, 1994

<PAGE>

TABLE OF CONTENTS

SECTION PAGE
- ------- ----

ARTICLE I
THE TENDER OFFER

SECTION 1.01. The Offer. . . . . . . . . . . . . . . . . 2
SECTION 1.02. Company Action . . . . . . . . . . . . . . 3
SECTION 1.03. Directors. . . . . . . . . . . . . . . . . 4

ARTICLE II
THE MERGER

SECTION 2.01. The Merger . . . . . . . . . . . . . . . . 5
SECTION 2.02. Effective Time . . . . . . . . . . . . . . 5
SECTION 2.03. Effect of the Merger . . . . . . . . . . . 6
SECTION 2.04. Subsequent Actions . . . . . . . . . . . . 6
SECTION 2.05. Certificate of Incorporation; By-Laws;
Directors and Officers . . . . . . . . . . 6
SECTION 2.06. Merger Consideration . . . . . . . . . . . 7
SECTION 2.07. Dissenting Company Common Stock. . . . . . 8
SECTION 2.08. Surrender of Company Common Stock; Stock
Transfer Books . . . . . . . . . . . . . . 8
SECTION 2.09. No Fractional Shares . . . . . . . . . . . 10
SECTION 2.10. Stock Options; Deferred Stock. . . . . . . 10
SECTION 2.11. Dividends; Transfer Taxes. . . . . . . . . 11
SECTION 2.12. Stockholders' Meetings . . . . . . . . . . 11
SECTION 2.13. Board Nominees; Assistance in
Consummation of the Merger . . . . . . . . 12

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB

SECTION 3.01. Corporate Organization; Subsidiaries . . . 12
SECTION 3.02. Certificate of Incorporation and
By-Laws. . . . . . . . . . . . . . . . . . 13
SECTION 3.03. Capitalization . . . . . . . . . . . . . . 13
SECTION 3.04. Authority Relative to this Agreement . . . 14
SECTION 3.05. No Conflict; Required Filings and
Consents . . . . . . . . . . . . . . . . . 14
SECTION 3.06. SEC Filings; Financial Statements. . . . . 15
SECTION 3.08. Title to Property. . . . . . . . . . . . . 17
SECTION 3.09. Litigation . . . . . . . . . . . . . . . . 17
SECTION 3.10. Financing Arrangements . . . . . . . . . . 17
SECTION 3.11. No Prior Activities. . . . . . . . . . . . 17
SECTION 3.12. Brokers. . . . . . . . . . . . . . . . . . 17
SECTION 3.13. Information in Disclosure Documents;
Registration Statement; Etc. . . . . . . . 17
SECTION 3.14. Conduct of Business. . . . . . . . . . . . 18

<PAGE>

SECTION PAGE
- ------- ----

SECTION 3.15. Environment. . . . . . . . . . . . . . . . 18
SECTION 3.16. Energy Regulatory Status . . . . . . . . . 19
SECTION 3.17. Employee Benefit Plans; Labor Matters. . . 19
SECTION 3.18. Insurance. . . . . . . . . . . . . . . . . 21
SECTION 3.19. Taxes. . . . . . . . . . . . . . . . . . . 21
SECTION 3.20. Trademarks, Licenses, Patents and
Copyrights . . . . . . . . . . . . . . . . 22
SECTION 3.21. Related Party Transactions . . . . . . . . 22
SECTION 3.22. Status of Development and Construction
Projects . . . . . . . . . . . . . . . . . 23
SECTION 3.23. Status of Operating Projects . . . . . . . 23

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

SECTION 4.01. Corporate Organization; Subsidiaries . . . 24
SECTION 4.02. Articles of Incorporation and Bylaws . . . 25
SECTION 4.03. Capitalization . . . . . . . . . . . . . . 25
SECTION 4.04. Authority Relative to this Agreement . . . 26
SECTION 4.05. No Conflict; Required Filings and
Consents . . . . . . . . . . . . . . . . . 26
SECTION 4.06. SEC Filings; Financial Statements. . . . . 27
SECTION 4.07. Absence of Certain Changes or Events . . . 28
SECTION 4.08. Title to Property. . . . . . . . . . . . . 29
SECTION 4.09. Litigation . . . . . . . . . . . . . . . . 29
SECTION 4.10. Information in Disclosure Documents. . . . 30
SECTION 4.11. Fairness Opinion . . . . . . . . . . . . . 30
SECTION 4.12. Brokers. . . . . . . . . . . . . . . . . . 30
SECTION 4.13. Takeover Provisions Inapplicable; Rights
Agreement Amendment. . . . . . . . . . . . 30
SECTION 4.14. Conduct of Business. . . . . . . . . . . . 31
SECTION 4.15. Environment. . . . . . . . . . . . . . . . 31
SECTION 4.16. Energy Regulatory Status . . . . . . . . . 31
SECTION 4.17. Employee Benefit Plans; Labor Matters. . . 32
SECTION 4.18. Insurance. . . . . . . . . . . . . . . . . 34
SECTION 4.19. Taxes. . . . . . . . . . . . . . . . . . . 34
SECTION 4.20. Trademarks, Licenses, Patents and
Copyrights . . . . . . . . . . . . . . . . 35
SECTION 4.21. Related Party Transactions . . . . . . . . 35
SECTION 4.22. Status of Development and Construction
Projects . . . . . . . . . . . . . . . . . 35
SECTION 4.23. Status of Operating Projects . . . . . . . 36

ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER

SECTION 5.01. Acquisition Proposals. . . . . . . . . . . 36

<PAGE>

SECTION PAGE
- ------- ----

SECTION 5.02. Conduct of Business by the Parties
Pending the Merger . . . . . . . . . . . . 37
SECTION 5.03. No Shopping. . . . . . . . . . . . . . . . 40

ARTICLE VI
ADDITIONAL AGREEMENTS

SECTION 6.01. Registration Statement/Proxy Statement . . 41
SECTION 6.02. Stock Exchange Listing . . . . . . . . . . 42
SECTION 6.03. Additional Agreements. . . . . . . . . . . 42
SECTION 6.04. Notification of Certain Matters. . . . . . 42
SECTION 6.05. Access to Information. . . . . . . . . . . 42
SECTION 6.06. Public Announcements . . . . . . . . . . . 43
SECTION 6.07. Best Efforts; Cooperation. . . . . . . . . 43
SECTION 6.08. Agreement to Defend and Indemnify. . . . . 43
SECTION 6.09. Disposition of Litigation. . . . . . . . . 44
SECTION 6.10. Employee Benefits. . . . . . . . . . . . . 45
SECTION 6.11. Certain Action of Parent and Merger Sub. . 46

ARTICLE VII
CONDITIONS OF MERGER

SECTION 7.01. Conditions to Obligation of Each Party
to Effect the Merger . . . . . . . . . . . 46
SECTION 7.02. Additional Conditions to Obligations of
the Company. . . . . . . . . . . . . . . . 47
SECTION 7.03. Additional Conditions to Obligations of
Parent and Merger Sub. . . . . . . . . . . 47

ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER

SECTION 8.01. Termination. . . . . . . . . . . . . . . . 48
SECTION 8.02. Effect of Termination. . . . . . . . . . . 49
SECTION 8.03. Agreement Termination Fee. . . . . . . . . 49
SECTION 8.04. Offer Fee. . . . . . . . . . . . . . . . . 50

ARTICLE IX
GENERAL PROVISIONS

SECTION 9.01. Non-Survival of Representations,
Warranties and Agreements. . . . . . . . . 51
SECTION 9.02. Notices. . . . . . . . . . . . . . . . . . 51
SECTION 9.03. Expenses . . . . . . . . . . . . . . . . . 52
SECTION 9.04. Certain Definitions. . . . . . . . . . . . 52
SECTION 9.05. Headings . . . . . . . . . . . . . . . . . 52

iii

<PAGE>

SECTION PAGE
- ------- ----

SECTION 9.06. Severability . . . . . . . . . . . . . . . 52
SECTION 9.07. Entire Agreement; No Third-Party
Beneficiaries. . . . . . . . . . . . . . . 52
SECTION 9.08. Waiver . . . . . . . . . . . . . . . . . . 53
SECTION 9.09. Amendment. . . . . . . . . . . . . . . . . 53
SECTION 9.10. Assignment . . . . . . . . . . . . . . . . 53
SECTION 9.12. Counterparts . . . . . . . . . . . . . . . 53

Annex I

<PAGE>

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of December 5,
1994 (this "Agreement"), among CALIFORNIA ENERGY COMPANY, INC., a
Delaware corporation ("Parent"), CE ACQUISITION COMPANY, INC., a
Delaware corporation and a wholly owned subsidiary of Parent
("Merger Sub"), and MAGMA POWER COMPANY, a Nevada corporation
(the "Company").

W I T N E S S E T H:

WHEREAS, the Boards of Directors of Parent, Merger Sub
and the Company have each approved the acquisition of the Company
by Parent upon the terms and subject to the conditions set forth
in this Agreement;

WHEREAS, in furtherance thereof, it is proposed that
Merger Sub will make a cash tender offer (the "Offer") to acquire
12,400,000 shares of the issued and outstanding common stock,
$0.10 par value, of the Company, including the associated
Preferred Stock purchase rights (the "Rights") issued pursuant to
the Rights Agreement dated October 6, 1994 between the Company
and Chemical Trust Company of California, as Rights Agent (the
"Rights Agreement") (the "Company Common Stock"; all issued and
outstanding shares of Company Common Stock and the associated
Rights being hereinafter collectively referred to as the
"Shares") for $39.00 per Share, or such higher price as may be
paid in the Offer (the "Per Share Cash Amount"), net to the
seller in cash, subject to (i) there being validly tendered and
not withdrawn before the expiration of the Offer that number of
Shares which, together with Shares beneficially owned by Merger
Sub, represents at least a majority of the Shares outstanding on
a fully diluted basis (the "Minimum Tender Condition") and (ii)
Merger Sub having obtained sufficient financing to enable it to
consummate the Offer (the "Financing Condition");

WHEREAS, also in furtherance of such acquisition, the
Boards of Directors of the Company and Merger Sub have each
approved the merger (the "Merger") of Merger Sub with and into
the Company following completion of the Offer in accordance with
the General Corporation Law of the State of Delaware ("Delaware
Law") and the General Corporation Law of the State of Nevada
("Nevada Law") and upon the terms and subject to the conditions
set forth in this Agreement; and

WHEREAS, the Board of Directors of the Company has
resolved to recommend acceptance of the Offer and the Merger to
the holders of Shares and has determined that the consideration
to be paid for each Share in the Offer and the Merger is fair to
the holders of such Shares;

<PAGE>

NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Merger Sub and the
Company hereby agree as follows:

ARTICLE I
THE TENDER OFFER

SECTION 1.01. The Offer. (a) Provided that this
Agreement shall not have been terminated in accordance with
Section 8.01 hereof and none of the events set forth in Annex I
hereto shall have occurred or be existing, Parent shall cause
Merger Sub to, and Merger Sub shall, commence the Offer as
promptly as practicable, but in no event later than five business
days after the date hereof. The obligation of Parent to accept
for payment any Shares tendered shall be subject to the
satisfaction of the conditions set forth in Annex I, including
the Minimum Tender Condition. Parent expressly reserves the
right to waive any such condition, to increase the price per
Share payable in the Offer, or to make any other changes in the
terms and conditions of the Offer (provided that no change may be
made that decreases the price per Share payable in the Offer or
that imposes additional conditions to the Offer from those set
forth in Annex I hereto). Merger Sub covenants and agrees that,
subject to the terms and conditions of this Agreement, unless the
Company otherwise consents in writing, Merger Sub will accept for
payment and pay for Shares as soon as it is permitted to do so
under applicable law. The Per Share Cash Amount shall be net to
the seller in cash, subject to reduction only for any applicable
Federal back-up withholding or stock transfer taxes payable by
the seller. The Company agrees that no Shares held by the
Company or any of its subsidiaries (as hereinafter defined) will
be tendered pursuant to the Offer.

(b) The Offer shall be made by means of an offer to
purchase (the "Offer to Purchase") having the conditions and
provisions set forth in Annex I hereto. As soon as practicable
on the date the Offer is commenced, Parent and Merger Sub shall
file with the Securities and Exchange Commission (the "SEC") a
Tender Offer Statement on Schedule 14D-1 (together with all
amendments and supplements thereto, the "Schedule 14D-1") with
respect to the Offer. The Schedule 14D-1 will comply in all
material respects with the provisions of, and satisfy in all
material respects the requirements of, such Schedule 14D-1 and
all applicable Federal securities laws and will contain
(including as an exhibit) or incorporate by reference the Offer
to Purchase (or portions thereof) and forms of the related letter
of transmittal (which documents, together with any supplements or
amendments thereto, and any other SEC schedule or form that is
filed in connection with the Offer and related transactions, are

<PAGE>

referred to collectively herein as the "Offer Documents"). Each
of Parent, Merger Sub and the Company represents and warrants
that the information provided and to be provided by it and/or by
its auditors, attorneys, financial advisors or other consultants
or advisors specifically for use in the Schedule 14D-1 and the
Offer Documents on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders
shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
Each of Parent, Merger Sub and the Company agrees promptly to
correct any information provided by it for use in the Schedule
14D-1 or the Offer Documents if and to the extent that it shall
have become false or misleading in any material respect and to
supplement the information provided by it specifically for use in
the Schedule 14D-1 or the Offer Documents to include any
information that shall become necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading, and Parent and Merger Sub further
agree to take all steps necessary to cause the Schedule 14D-1, as
so corrected or supplemented, to be filed with the SEC and the
Offer Documents, as so corrected or supplemented, to be
disseminated to holders of Shares, in each case as and to the
extent required by applicable Federal securities laws. The
Company and its counsel shall be given the right to review and
comment on the Schedule 14D-1 before filing with the SEC.

SECTION 1.02. Company Action. (a) The Company hereby
approves of and consents to the Offer and represents and warrants
that the Board of Directors of the Company, at a meeting duly
called and held on December 5, 1994, at which a majority of the
Directors were present, duly approved and adopted this Agreement
and the transactions contemplated hereby, including the Offer and
the Merger, recommended that the stockholders of the Company
accept the Offer and tender their Shares pursuant to the Offer,
and determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, are fair
to and in the best interests of the stockholders of the Company.
The Company further represents that Goldman, Sachs & Co.
("Goldman Sachs") has rendered to the Board of Directors of the
Company its opinion as of December 5, 1994, to the effect that
the consideration to be received by the stockholders of the
Company pursuant to the Offer and the Merger is fair to such
stockholders (other than Parent and its affiliates).

(b) The Company hereby agrees to file with the SEC, as
promptly as practicable after the filing by Parent and Merger Sub
of the Schedule 14D-1 with respect to the Offer, a Tender Offer
Solicitation/Recommendation Statement on Schedule 14D-9 (together

<PAGE>

with any amendments or supplements thereto, the "Schedule 14D-9")
that will comply in all material respects with the provisions of
all applicable Federal securities laws. The Company agrees to
mail such Schedule 14D-9 to the stockholders of the Company
promptly after the commencement of the Offer. The Schedule 14D-9
and the Offer Documents shall contain the recommendations of the
Board of Directors of the Company described in Section 1.02(a)
hereof. The Schedule 14D-9, on the date filed with the SEC and
on the date first published, sent or given to the Company's
stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except
that no representation is made by the Company with respect to
written information supplied by Parent or Merger Sub specifically
for inclusion in the Schedule 14D-9. The Company agrees promptly
to correct the Schedule 14D-9 if and to the extent that it shall
become false or misleading in any material respect, and each of
Parent and Merger Sub, with respect to written information
supplied by it specifically for use in the Schedule 14D-9, shall
promptly notify the Company of any required corrections of such
information and cooperate with the Company with respect to
correcting such information and to supplement the information
contained in the Schedule 14D-9 to include any information that
shall become necessary in order to make the statements therein,
in light of the circumstances under which they were made, not
misleading, and the Company shall take all steps necessary to
cause the Schedule 14D-9 as so corrected to be filed with the SEC
and disseminated to the Company's stockholders to the extent
required by applicable Federal securities laws. Parent and
Merger Sub, and their counsel, shall be given an opportunity to
review and comment on the Schedule 14D-9 before filing with the
SEC.

(c) In connection with the Offer, the Company shall
promptly upon execution of this Agreement furnish Parent and
Merger Sub with mailing labels containing the names and addresses
of all record holders of Shares and security position listings of
Shares held in stock depositories, each as of a recent date, and
shall promptly furnish Parent and Merger Sub with such additional
information, including updated lists of stockholders, mailing
labels and security position listings, and such other information
and assistance as Parent and Merger Sub or their agents may
reasonably request for the purpose of communicating the Offer to
the record and beneficial holders of Shares.

SECTION 1.03. Directors. (a) Promptly upon the
purchase by Merger Sub of a majority of the outstanding Shares
pursuant to the Offer, and from time to time thereafter as Shares
are acquired by Merger Sub, Merger Sub shall be entitled, subject

<PAGE>

to compliance with Section 14(f) of the Securities Exchange Act
of 1934 (the "Exchange Act"), to designate such number of
directors, rounded to the nearest whole number (any number ending
with .5 being rounded to the next highest whole number), on the
Board of Directors of the Company as will give Merger Sub
representation on the Board of Directors equal to that number of
directors which equals the product of the total number of
directors on the Board of Directors (giving effect to the
directors appointed or elected pursuant to this sentence and
including current directors serving as officers of the Company)
multiplied by the percentage that the aggregate number of Shares
beneficially owned by Merger Sub or any affiliate of Merger Sub
(including for purposes of this Section 1.03 such Shares as are
accepted for payment pursuant to the Offer, but excluding Shares
held by the Company or any of its affiliates) bears to the number
of Shares outstanding, but in no event less than a majority of
the entire Board of Directors of the Company (regardless of
vacancies). At such times, the Company will also cause (i) each
committee of the Board of Directors, (ii) if requested by Merger
Sub, the board of directors of each of the Company's Subsidiaries
(as defined below) and (iii) if requested by Merger Sub, each
committee of such board to include persons designated by Merger
Sub constituting the same percentage of each such committee or
board as Merger Sub's designees are of the Board of Directors.
The Company shall, upon request by Merger Sub, promptly increase
the size of the Board of Directors or exercise its best efforts
to secure the resignations of such number of directors as is
necessary to enable Merger Sub designees to be elected to the
Board of Directors and shall cause Merger Sub's designees to be
so elected; provided, however, that such resignations shall not
cause the number of Disinterested Directors (as defined below) to
be less than two. Subject to applicable law, the Company shall
promptly take all action necessary pursuant to Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 1.03 and shall
include in the Schedule 14D-9 mailed to stockholders promptly
after the commencement of the Offer (or an amendment thereof or
an information statement pursuant to Rule 14f-1 if Merger Sub has
not theretofore designated directors) such information with
respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 in order to fulfill
its obligations under this Section 1.03. Parent and Merger Sub
will supply the Company and be solely responsible for any
information with respect to itself and its nominees, officers,
directors and affiliates required by Section 14(f) and Rule
14f-1.

(b) Following the election or appointment of Parent's
designees pursuant to this Section 1.03 and prior to the
Effective Time, any amendment of this Agreement or the Restated

<PAGE>

Articles of Incorporation or Restated Bylaws of the Company, any
termination of this Agreement by the Company, any extension by
the Company of the time for the performance of any of the
obligations or other acts of Parent or Merger Sub or waiver of
any of the Company's rights hereunder, and any other consent or
action by the Board of Directors hereunder, will require the
concurrence of a majority (which shall be at least two) of the
directors of the Company then in office who are not designees of
Parent or Merger Sub (the "Disinterested Directors").

ARTICLE II
THE MERGER

SECTION 2.01. The Merger. At the Effective Time and
subject to and upon the terms and conditions of this Agreement,
Delaware Law and Nevada Law, Merger Sub shall be merged with and
into the Company, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving
corporation. The Company as the surviving corporation after the
Merger hereinafter sometimes is referred to as the "Surviving
Corporation".

SECTION 2.02. Effective Time. As promptly as
practicable after the satisfaction or waiver of the conditions
set forth in Article VII, the parties hereto shall cause the
Merger to be consummated by filing this Agreement or a
Certificate of Merger with the Secretary of State of the State of
Delaware and the Secretary of State of the State of Nevada, in
such form as required by, and executed in accordance with the
relevant provisions of, Delaware Law and Nevada Law, respectively
(the time of such later filing being the "Effective Time").
Prior to such filings, a closing shall be held at the offices of
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd
Street, New York, New York 10022, or such other place as the
parties shall agree, for the purpose of confirming the
satisfaction or waiver of the conditions set forth in Article
VII.

SECTION 2.03. Effect of the Merger. At the Effective
Time, the effect of the Merger shall be as provided in the
applicable provisions of Delaware Law and Nevada Law. Without
limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers
and franchises of the Company and Merger Sub shall vest in the
Surviving Corporation, and all debts, liabilities and duties of
the Company and Merger Sub shall become the debts, liabilities
and duties of the Surviving Corporation.

<PAGE>

SECTION 2.04. Subsequent Actions. If, at any time
after the Effective Time, the Surviving Corporation shall
consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or
otherwise in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or assets
of either of the Company or Merger Sub acquired or to be acquired
by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of
either the Company or Merger Sub, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name and on
behalf of each of such corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest,
perfect or confirm any and all right, title and interest in, to
and under such rights, properties or assets of the Surviving
Corporation or otherwise to carry out this Agreement.

SECTION 2.05. Certificate of Incorporation; By-Laws;
Directors and Officers. (a) Unless otherwise determined by
Parent before the Effective Time, at the Effective Time the
Certificate of Incorporation of Merger Sub, as in effect
immediately before the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter
amended as permitted by law and such Articles of Incorporation;
provided, however, that Article One of the Articles of
Incorporation of the Surviving Corporation shall be amended to
read as follows: "FIRST: The name of the corporation is Magma
Power Company".

(b) The By-Laws of Merger Sub, as in effect
immediately before the Effective Time, shall be the By-Laws of
the Surviving Corporation until thereafter amended as permitted
by law, the Articles of Incorporation of the Surviving
Corporation and such By-Laws.

(c) The directors of Merger Sub immediately before the
Effective Time will be the initial directors of the Surviving
Corporation, and the officers of the Company immediately before
the Effective Time will be the initial officers of the Surviving
Corporation, in each case until their successors are elected or
appointed and qualified. If, at the Effective Time, a vacancy
shall exist on the Board of Directors or in any office of the
Surviving Corporation, such vacancy may thereafter be filled in
the manner provided by law or the By-laws of Merger Sub.

SECTION 2.06. Merger Consideration. At the Effective
Time, by virtue of the Merger and without any action on the part

<PAGE>

of Merger Sub, the Company or the holder of any of the following
securities:

(a) All Shares which are held by the Company or any
subsidiary of the Company, and any Shares owned by Parent, Merger
Sub or any other subsidiary of Parent, shall cease to be
outstanding, shall be canceled and retired without payment of any
consideration therefor and shall cease to exist.

(b) Subject to Section 2.09, each remaining
outstanding Share shall be converted in the Merger into the right
to receive that amount of cash and that number of shares of
common stock, par value $0.0675 per share, of Parent (the "Parent
Common Stock") equal to, at the option of Parent, (i) the All
Cash Component Amount (as defined below), net in cash, without
interest thereon, or (ii) both (A) the Mixed Cash Component
Amount (as defined below), net in cash, without interest thereon,
and (B) the number of fully paid and nonassessable shares of
Parent Common Stock equal to the quotient of (I) $39.00 less (II)
the Mixed Cash Component Amount divided by the Average Closing
Price (as defined below) (the All Cash Component Amount or
(ii)(A) and (ii)(B), collectively, as applicable, being the
"Merger Consideration"). The "Mixed Cash Component Amount" shall
mean an amount equal to the quotient of (A) (x) $28.50 multiplied
by the number of Shares outstanding at the Effective Time less
(y) $39.00 multiplied by the number of Shares owned by Parent and
any of its affiliates immediately prior to the Effective Time,
divided by (B) the number of Shares outstanding at the Effective
Time (other than Shares owned by Parent and any of its
affiliates). The "All Cash Component Amount" shall mean an
amount equal to the quotient of (A) (x) $38.75 multiplied by the
number of Shares outstanding at the Effective Time less (y)
$39.00 multiplied by the number of Shares owned by Parent and any
of its affiliates immediately prior to the Effective Time,
divided by (B) the number of Shares outstanding at the Effective
Time (other than Shares owned by Parent and any of its
affiliates). The "Average Closing Price" shall mean the average
closing price of Parent Common Stock on the New York Stock
Exchange (the "NYSE") during the 15 consecutive trading days
ending on the fifth business day prior to the Effective Time;
provided, however, that if such average closing price exceeds
$18.73, the Average Closing Price shall be $18.73, and if such
average closing price is less than $14.27, the Average Closing
Price shall be $14.27.

(c) All Shares to be converted into the right to
receive the Merger Consideration pursuant to this Section 2.06
shall cease to be outstanding, shall be canceled and retired and
shall cease to exist, and each holder of a certificate
representing any such Shares shall thereafter cease to have any

<PAGE>

rights with respect to such shares, except the right to receive
for each of the Shares, upon the surrender of such certificate in
accordance with Section 2.08, the Merger Consideration and cash
in lieu of fractional shares of Parent Common Stock as
contemplated by Section 2.09.

(d) Each issued and outstanding share of capital stock
of Merger Sub shall be converted into and become one fully paid
and nonassessable share of common stock, $.01 par value, of the
Surviving Corporation.

SECTION 2.07. Dissenting Company Common Stock. (a)
Notwithstanding any provision of this Agreement to the contrary,
any Shares held by a holder who has demanded and perfected his
demand for appraisal of his shares of Company Common Stock in
accordance with Nevada Law and as of the Effective Time has
neither effectively withdrawn nor lost his right to such
appraisal ("Dissenting Shares") shall not be converted into or
represent a right to receive the Merger Consideration pursuant to
Section 2.06(b), but the holder thereof shall be entitled to only
such rights as are granted by Nevada Law.

(b) Notwithstanding the provisions of subsection (a)
of this Section 2.07, if any holder of shares of Company Common
Stock who demands appraisal of his shares under Nevada Law shall
effectively withdraw or lose (through failure to perfect or
otherwise) his right to appraisal, then, as of the Effective Time
or the occurrence of such event, whichever later occurs, such
holder's shares of Company Common Stock shall automatically be
converted into and represent only the right to receive the Merger
Consideration as provided in Section 2.06(b), without interest
thereon, upon surrender of the certificate or certificates
representing such shares of Company Common Stock.

(c) The Company shall give Parent (i) prompt notice of
any written demands for appraisal or payment of the fair value of
any Company Common Stock, withdrawals of such demands, and any
other instruments served pursuant to Nevada Law received by the
Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under Nevada
Law. The Company shall not voluntarily make any payment with
respect to any demands for appraisal and shall not, except with
the prior written consent of Parent, settle or offer to settle
any such demands.

SECTION 2.08. Surrender of Company Common Stock; Stock
Transfer Books. (a) Before the Effective Time, the Company and
Parent shall designate a bank or trust company to act as agent
for the holders of Company Common Stock (the "Exchange Agent") to
receive the funds and securities necessary to make the payments

<PAGE>

contemplated by Section 2.06. Such funds shall be invested by
the Exchange Agent as directed by the Surviving Corporation,
provided that such investments shall be in obligations of or
guaranteed by the United States of America or of any agency
thereof and backed by the full faith and credit of the United
States of America, in commercial paper obligations rated A-1 or
P-1 or better by Moody's Investors Services, Inc. or Standard &
Poor's Corporation, respectively, or in deposit accounts,
certificates of deposit or banker's acceptances of, repurchase or
reverse repurchase agreements with, or Eurodollar time deposits
purchased from, commercial banks with capital, surplus and
undivided profits aggregating in excess of $200 million (based on
the most recent financial statements of such bank which are then
publicly available at the SEC or otherwise).

(b) Each holder of a certificate or certificates
representing any outstanding shares of Company Common Stock
("Certificates") canceled upon the Merger pursuant to Section
2.06(b) may thereafter surrender such Certificate or Certificates
to the Exchange Agent, as agent for such holder, to effect the
surrender of such Certificate or Certificates on such holder's
behalf for a period ending one year after the Effective Time.

Any portion of the Merger Consideration which remains
unclaimed by the former stockholders of the Company for one year
after the Effective Time shall be delivered to Parent, upon
demand of Parent. Parent agrees that promptly after the
Effective Time it shall cause the distribution to holders of
record of Company Common Stock as of the Effective Time
appropriate materials to facilitate such surrender, including (i)
a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use
in effecting the surrender of the Certificates for payment
therefor. Upon surrender of Certificates for cancellation to the
Exchange Agent, together with such letter of transmittal duly
executed and any other required documents, the holder of such
Certificates shall be entitled to receive for each of the shares
of Company Common Stock represented by such Certificates the
Merger Consideration and the Certificates so surrendered shall
forthwith be canceled. Until so surrendered, Certificates shall
represent solely the right to receive the Merger Consideration
and any cash in lieu of fractional shares of Parent Common Stock
as contemplated by Section 2.09 with respect to each of the
shares contemplated thereby.

(c) If payment of the Merger Consideration in respect
of canceled Shares is to be made to a person other than the
person in whose name a surrendered Certificate or instrument is

<PAGE>

registered, it shall be a condition to such payment that the
Certificate or instrument so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and
that the person requesting such payment shall have paid any
transfer and other taxes required by reason of such payment in a
name other than that of the registered holder of the Certificate
or instrument surrendered or shall have established to the
satisfaction of the Surviving Corporation that such tax either
has been paid or is not payable.

(d) At the close of business on the day of the
Effective Time, the stock transfer books of the Company shall be
closed and there shall not be any further registration of
transfers of Shares thereafter on the records of the Company.
If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for
the Merger Consideration as provided in Section 2.06(b). No
interest shall accrue or be paid on any cash payable upon the
surrender of a Certificate or Certificates which immediately
before the Effective Time represented outstanding shares of
Company Common Stock.

SECTION 2.09. No Fractional Shares. No Certificates
or scrip representing less than one share of Parent Common Stock
shall be issued upon the surrender for exchange of Certificates
representing shares of Company Common Stock pursuant to Section
2.06(b). In lieu of any such fractional share, each holder of
Shares who would otherwise have been entitled to a fraction of a
share of Parent Common Stock upon surrender of Certificates for
exchange pursuant to Section 2.06(b) shall be paid upon such
surrender cash (without interest) in an amount equal to such
holder's proportionate interest in the net proceeds from the sale
or sales in the open market by the Exchange Agent, on behalf of
all such holders, of the aggregate fractional Parent Common Stock
issued pursuant to this Section 2.09. As soon as practicable
following the Effective Time the Exchange Agent shall determine
the excess of (i) the number of full shares of Parent Common
Stock delivered to the Exchange Agent by Parent over (ii) the
aggregate number of full shares of Parent Common Stock to be
distributed to holders of Company Common Stock (such excess being
herein called the "Excess Shares"), and the Exchange Agent, as
agent for the former holders of Company Common Stock, shall sell
the Excess Shares at the prevailing prices on the NYSE. The sale
of the Excess Shares by the Exchange Agent shall be executed on
the NYSE and shall be executed in round lots to the extent
practicable. The Exchange Agent shall deduct from the proceeds
of the sale of the Excess Shares all commissions, transfer taxes
and other reasonable out-of-pocket transaction costs, including
any expenses of the Exchange Agent, incurred in connection with
such sale of Excess Shares. Until the net proceeds of such sale

<PAGE>

have been distributed to the former stockholders of the Company,
the Exchange Agent will hold such proceeds in trust for such
former stockholders. As soon as practicable after the
determination of the amount of cash to be paid to former
stockholders of the Company in lieu of any fractional interests,
the Exchange Agent shall make available in accordance with this
Agreement such amounts to such former stockholders.

SECTION 2.10. Stock Options; Deferred Stock.
Immediately prior to the Effective Time, (a) each unexpired and
unexercised option to purchase Shares (each, a "Company Option"),
under the Company's 1987 Stock Option Plan and 1994 Equity
Participation Plan (collectively, the "Company Stock Option
Plans"), whether or not then exercisable, shall be cancelled by
the Company, and each holder of a cancelled Company Option shall
be entitled to receive at the Effective Time or as soon as
practicable thereafter from the Company in consideration for the
cancellation of such Company Option an amount in cash equal to
the product of (i) the number of Shares previously subject to
such Company Option and (ii) the excess, if any, of the Per Share
Cash Amount or, if the election contemplated by Section
2.06(b)(i) has been made by Parent, $38.75, over the exercise
price per Share previously subject to such Company Option, and
(b) each outstanding unvested share of deferred stock under the
Company's 1994 Equity Participation Plan or otherwise identified
on Schedule 4.03 (each, a "Deferred Share") shall be cancelled by
the Company, and each holder of a cancelled Deferred Share shall
be entitled to receive at the Effective Time or as soon as
practicable thereafter from the Company in consideration for the
cancellation of such Deferred Share an amount in cash equal to
the Per Share Cash Amount or, if the election contemplated by
Section 2.06(b)(i) has been made by Parent, $38.75.

SECTION 2.11. Dividends; Transfer Taxes. No dividends
or other distributions that are declared or made on Parent Common
Stock will be paid to persons entitled to receive certificates
representing Parent Common Stock pursuant to this Agreement until
such persons surrender their Certificates representing Company
Common Stock. Upon such surrender, there shall be paid to the
person in whose name the certificates representing such Parent
Common Stock shall be issued any dividends or other distributions
that shall have become payable with respect to such Parent Common
Stock in respect of a record date after the Effective Time. In
no event shall the person entitled to receive such dividends be
entitled to receive interest on such dividends. Neither the
Exchange Agent nor any party hereto shall be liable to a holder
of Shares for any shares of Parent Common Stock or dividends
thereon delivered to a public official pursuant to any applicable
escheat laws.

<PAGE>

SECTION 2.12. Stockholders' Meetings. (a) The
Company shall take all action necessary, in accordance with
applicable law and its Articles of Incorporation and Bylaws, to
convene a special meeting of the holders of Shares (the "Company
Meeting") as promptly as practicable after consummation of the
Offer for the purpose of considering and taking action upon this
Agreement and the Merger. The stockholder vote required for
approval of the Merger will be no greater than that set forth in
Nevada Law. The Board of Directors of the Company will recommend
that holders of Shares vote in favor of and approve the Merger.
The Company will use its best efforts to solicit from
stockholders of the Company proxies in favor of the Merger and
will take all other action necessary or, in the reasonable
opinion of Parent, advisable to secure any vote of stockholders
required by Nevada Law to effect the Merger. At the Company
Meeting, all of the Shares then owned by Parent, Merger Sub, or
any other subsidiary of Parent, or with respect to which Parent,
Merger Sub, or any other subsidiary of Parent holds the power to
direct the voting, will be voted in favor of approval of the
Merger and adoption of this Agreement.

(b) Parent shall take all action necessary, unless
Parent has elected the All Cash Component under
Section 2.06(b)(i), in accordance with applicable law and its
Certificate of Incorporation and Bylaws, to convene a special
meeting of the holders of Parent Common Stock (the "Parent
Meeting") as promptly as practicable after consummation of the
Offer for the purpose of considering and taking action to (i)
authorize the issuance of Parent Common Stock pursuant to the
Merger under the applicable guidelines of the NYSE (the "Parent
Share Proposal") and (ii) authorize the increase of the
authorized Parent Common Stock from 60,000,000 shares to no more
than 80,000,000 shares or such greater number of shares as shall
be required to issue the Parent Common Stock in the Merger. The
Board of Directors of Parent will (i) recommend that holders of
Parent Common Stock vote in favor of and approve the Parent Share
Proposal at the Parent Meeting and (ii) recommend that holders of
Parent Common Stock vote in favor of and approve an amendment to
its Certificate of Incorporation increasing the authorized Parent
Common Stock from 60,000,000 shares to no more than 80,000,000
shares or such greater number of shares as shall be required to
issue the Parent Common Stock in the Merger (the "Charter
Amendment"). Parent will use its reasonable best efforts to
solicit from stockholders of Parent proxies in favor of the
Parent Share Proposal and the Charter Amendment and will take all
other action necessary or, in the reasonable opinion of the
Company, advisable to secure any vote of stockholders required by
Delaware Law to effect the Merger.

<PAGE>

SECTION 2.13. Board Nominees; Assistance in
Consummation of the Merger. (a) Parent will nominate and use
its best efforts to cause up to two nominees of the Company
designated in writing to Parent prior to the closing of the
Merger to be elected or appointed as members of the Board of
Directors of Parent.

(b) Each of Parent, Merger Sub and the Company shall
provide all reasonable assistance to, and shall cooperate with,
each other to bring about the consummation of the Offer and the
Merger as soon as possible in accordance with the terms and
conditions of this Agreement. Parent shall cause Merger Sub to
perform all of its obligations in connection with this Agreement.

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB

Except as set forth on the Parent Disclosure Schedule
previously delivered by Parent to the Company (the "Parent
Disclosure Schedule"), Parent and Merger Sub hereby jointly and
severally represent and warrant to the Company as follows:

SECTION 3.01. Corporate Organization; Subsidiaries.
Each of Parent and the Parent Subsidiaries (as defined below) is
a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation
and has the requisite corporate power and authority and any
necessary governmental authority to own, operate or lease the
properties that it purports to own, operate or lease and to carry
on its business as it is now being conducted, and is duly
qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its
activities makes such qualification necessary, except for such
failure which, when taken together with all other such failures,
would not have a Material Adverse Effect (as defined below) on
Parent and Merger Sub. The term "Parent Subsidiary" means any
corporation, partnership, joint venture or other legal entity of
which Parent (either alone or through or together with any other
Parent Subsidiary) owns, directly or indirectly, 50% or more of
the stock or other equity interests, or owns, directly or
indirectly, interests such that the holders are generally
entitled to vote for the election of 50% of the board of
directors or other governing body, of such corporation,
partnership, joint venture or other legal entity. When used in
connection with Parent and Merger Sub, the term "Material Adverse
Effect" means any change or effect, when taken together with all
other adverse changes and effects relating to Parent or Merger

<PAGE>

Sub, which are not individually or in the aggregate deemed to
have a Material Adverse Effect, that is or is reasonably likely
to be materially adverse to the business, operations, properties,
condition (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities) of Parent
and the Parent Subsidiaries taken as a whole; provided, however,
that the occurrence of any or all of the following shall not
constitute a Material Adverse Effect: (i) any change in any law
applicable to Parent or any Parent Subsidiary or by which any
property or asset of Parent or any Parent Subsidiary is bound,
(ii) a failure to receive any contract for which Parent or any
Parent Subsidiary has submitted or will submit a competitive bid,
(iii) the loss of any contract or arrangement (whether by
revocation, lapse or invalidity) with respect to a project that
Parent or a Parent Subsidiary has under development other than
any such loss resulting from a breach by Parent of the
representations and warranties set forth in Section 3.22 or 3.23
hereof, (iv) a failure to close any public or private financing
of any project in which Parent or any Parent Subsidiary owns a
direct or indirect interest or (v) the termination of the
employment of any employee, officer, director or consultant of
Parent or any Parent Subsidiary.

SECTION 3.02. Certificate of Incorporation and
By-Laws. Parent has heretofore furnished to the Company a
complete and correct copy of Parent's and Merger Sub's
Certificates of Incorporation and By-Laws, each as amended to the
date hereof. Such Certificates of Incorporation and By-Laws are
in full force and effect. Neither Parent nor Merger Sub is in
violation of any of the provisions of its Certificate of
Incorporation or By-laws or equivalent organizational documents.

SECTION 3.03. Capitalization. As of the date hereof,
the authorized capital stock of Parent consists of 60,000,000
shares of Parent Common Stock and 1,000,000 shares of preferred
stock ("Parent Preferred Stock"). As of September 30, 1994, (i)
35,649,278 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued, fully paid and
nonassessable and 3,816,686 shares of Parent Common Stock held in
treasury, (ii) 1,247 shares of Series C Redeemable Preferred
Stock of Parent were outstanding and 3,529,252 shares of Parent
Common Stock reserved for issuance upon conversion of such shares
of Series C Redeemable Preferred Stock, (iii) there were
3,541,166 shares of Parent Common Stock reserved for issuance
pursuant to options granted under Parent's 1986 Stock Option Plan
(the "Parent Stock Option Plan"), (iv) there were 6,064,154
shares of Parent Common Stock reserved for issuance under options
other than those granted under the Parent Stock Option Plan, and
(v) 4,444,444 shares of Parent Common Stock reserved for issuance
pursuant to the 5% Convertible Subordinated Debentures due July

<PAGE>

31, 2000 of Parent . There has been no material change in the
capitalization of Parent since September 30, 1994. All of the
outstanding shares of Parent Common Stock have been duly
authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights or other similar
obligations. Except as set forth in this Section 3.03 or on
Schedule 3.03, there are not, as of the date hereof, any
outstanding or authorized subscriptions, options, warrants,
convertible securities, calls, rights, commitments to issue or
any other agreements of any character relating to the issued or
unissued capital stock or other securities of Parent to which
Parent is party or by which Parent is bound obligating Parent to
issue, deliver, or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of Parent or obligating
Parent to grant, extend or enter into any subscription, option,
warrant, call, right, commitment or other such agreement. All
the outstanding capital stock or partnership or other equity
interest of each of the Parent Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable and, except as
disclosed on Schedule 3.01, is owned by Parent or a Parent
Subsidiary free and clear of any liens, security interests,
pledges, agreements, claims, charges or encumbrances of any
nature whatsoever. There are no existing options, calls or
commitments of any character relating to the issued or unissued
capital stock or other securities of any Parent Subsidiary.
Except for the Parent Subsidiaries and except as previously
disclosed in the Parent SEC Reports (as defined below), Parent
does not directly or indirectly own a 50% or greater equity
interest in any other corporation, partnership, joint venture or
other business association or entity.

SECTION 3.04. Authority Relative to this Agreement.
The execution and delivery of this Agreement by Parent and Merger
Sub and the consummation by Parent and Merger Sub of the
transactions contemplated hereby (the "Transactions") have been
duly authorized by all necessary corporate action on the part of
Parent and Merger Sub and by Parent as the sole stockholder of
Merger Sub, and no other corporate proceeding is necessary for
the execution and delivery of this Agreement by Parent or Merger
Sub, the performance by Parent or Merger Sub of their obligations
hereunder and the consummation by Parent or Merger Sub of the
transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and Merger Sub and constitutes a
legal, valid and binding obligation of each, enforceable against
each of them in accordance with its terms.

SECTION 3.05. No Conflict; Required Filings and
Consents. (a) The execution and delivery of this Agreement by
Parent and Merger Sub do not, and the performance of this
Agreement by Parent and Merger Sub will not, (i) conflict with or

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violate any law, regulation, court order, judgment or decree
applicable to Parent or any Parent Subsidiary or by which any of
their property is bound or affected, (ii) violate or conflict
with either the Certificate of Incorporation or By-Laws of either
Parent or any Parent Subsidiary, or (iii) result in any breach of
or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others
any rights of termination or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or
assets of Parent or any Parent Subsidiary pursuant to, any
contract, instrument, permit, license or franchise to which
Parent or any Parent Subsidiary is a party or by which Parent or
any Parent Subsidiary or any of their property is bound or
affected, except in the case of (i) or (iii) for conflicts,
violations, breaches or defaults that, in the aggregate, would
not have a Material Adverse Effect.

(b) Except for applicable requirements, if any, of the
Securities Act of 1933, as amended (the "Securities Act"), the
Exchange Act, "blue sky" laws of various states, the New York
Stock Exchange, Inc. and filing and recordation of appropriate
merger documents as required by Delaware Law and Nevada Law,
neither Parent nor Merger Sub is required to submit any notice,
report or other filing with any governmental authority, domestic
or foreign, in connection with the execution, delivery or
performance of this Agreement or the consummation of the
transactions contemplated hereby. Except as aforesaid, no
waiver, consent, approval or authorization of any governmental or
regulatory authority, domestic or foreign, is required to be
obtained or made by either Parent or Merger Sub in connection
with its execution, delivery or performance of this Agreement.

SECTION 3.06. SEC Filings; Financial Statements. (a)
Parent has filed all forms, reports and documents required to be
filed with the SEC since January 1, 1992, and has heretofore
delivered (or made available) to the Company, in the form filed
with the SEC, its (i) Annual Reports on Form 10-K for the fiscal
years ended December 31, 1993 and December 31, 1992,
respectively, (ii) all proxy statements relating to the Company's
meetings of stockholders (whether annual or special) held since
January 1, 1992, and (iii) all other reports or registration
statements (including Quarterly Reports on Form 10-Q) filed by
Parent with the SEC since January 1, 1992 (collectively, the
"Parent SEC Reports"). The Parent SEC Reports (i) were prepared
in all material respects in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and
(ii) did not at the time they were filed contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under that

<PAGE>

they were made, not misleading. No Parent Subsidiary is required
to file any statements or reports with the SEC pursuant to
Sections 13(a) or 15(d) of the Exchange Act.

(b) The consolidated financial statements contained in
the Parent SEC Reports have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated
in the notes thereto) and fairly present the consolidated
financial position of Parent and the Parent Subsidiaries as at
the respective dates thereof and the consolidated results of
operations and changes in financial position of Parent and the
Parent Subsidiaries for the periods indicated, except that the
unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are
not expected to be material in amount.

(c) Except as reflected or reserved against in the
consolidated financial statements contained in the Parent SEC
Reports, and except as set forth on Schedule 3.06, Parent and the
Parent Subsidiaries have no liabilities of any nature (whether
accrued, absolute, contingent or otherwise) that in the aggregate
could have a Material Adverse Effect or any bonds, debentures,
notes, letters of credit or other indebtedness (including
guarantees) for any amount greater than $1,000,000. Since
September 30, 1994, neither Parent nor any of the Parent
Subsidiaries has incurred any liabilities material to Parent and
the Parent Subsidiaries taken as a whole, except (i) liabilities
incurred in the ordinary course of business and consistent with
past practice, (ii) liabilities incurred in connection with or as
a result of the Offer or the Merger or (iii) liabilities
disclosed on Schedule 3.06.

SECTION 3.07. Absence of Certain Changes or Events.
Since September 30, 1994, except as contemplated in this
Agreement or as specifically disclosed in the Parent SEC Reports
or the Tender Offer Statement on Schedule 14D-1 that was
originally filed by Parent and Merger Sub with the SEC on October
6, 1994 (as amended to the date hereof) (the "Previous 14D-1") or
as appears on Schedule 3.07, there has not been:

(a) any Material Adverse Effect;

(b) any redemption or other acquisition of Parent
Common Stock by Parent or any of the Parent Subsidiaries
(other than pursuant to a plan of repurchase under
Rule 10b-18 of the Exchange Act) or any declaration or
payment of any dividend or other distribution in cash, stock
or property with respect to Parent Common Stock;

<PAGE>

(c) any entry into any material commitment or
transaction (including, without limitation, any borrowing or
capital expenditure) other than in the ordinary course of
business or as contemplated by this Agreement; or

(d) any change by Parent in accounting principles or
methods except insofar as such change may have been required
by a change in generally accepted accounting principles and
disclosed in the Parent SEC Reports.

Since September 30, 1994, except as disclosed on Schedule 3.07,
the Previous 14D-1 or in the Parent SEC Reports, Parent and the
Parent Subsidiaries have conducted their business only in the
ordinary course and in a manner consistent with past practice and
have not made any material change in the conduct of the business
or operations of Parent and the Parent Subsidiaries taken as a
whole.

SECTION 3.08. Title to Property. Parent and the
Parent Subsidiaries have good and marketable title, or valid
leasehold rights in the case of leased property, to all real
property and all personal property purported to be owned or
leased by them, except where the failure to have such title or
rights would not have a Material Adverse Effect.

SECTION 3.09. Litigation. Except as disclosed in the
Parent SEC Reports, the Previous 14D-1, or as disclosed on
Schedule 3.09, there are no claims, actions, suits, proceedings
or investigations pending or, to the best knowledge of Parent,
threatened against Parent or any of the Parent Subsidiaries, or
any properties or rights of Parent or any of the Parent
Subsidiaries, before any court, administrative, governmental or
regulatory authority or body, domestic or foreign, which are
reasonably likely, in the aggregate, to have a Material Adverse
Effect or would, and are reasonably likely to, prevent or delay
the performance of this Agreement. As of the date hereof,
neither Parent nor any of the Parent Subsidiaries nor any of
their property is subject to any order, judgment, injunction or
decree having a Material Adverse Effect.

SECTION 3.10. Financing Arrangements. Parent and
Merger Sub have obtained a commitment letter from Credit Suisse
with respect to the financing for the Offer and the Merger (the
"Commitment Letter"). The Commitment Letter is in full force and
effect on the date of this Agreement, and Parent and Merger Sub
know of no reason why the financing contemplated by the
Commitment Letter will not be consummated in accordance with its
terms.

<PAGE>

SECTION 3.11. No Prior Activities. Except for
obligations or liabilities incurred in connection with its
incorporation or organization or the negotiation and consummation
of this Agreement and the transactions contemplated hereby
(including any financing), Merger Sub has not incurred any
obligations or liabilities, and has not engaged in any business
or activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person or entity.

SECTION 3.12. Brokers. No broker, finder or
investment banker (other than Gleacher & Co. Inc. ("Gleacher")
and Lehman Brothers Inc. ("Lehman Brothers")) is entitled to any
brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Parent or Merger Sub.

SECTION 3.13. Information in Disclosure Documents;
Registration Statement; Etc. None of the information supplied by
Parent or Merger Sub for inclusion in (i) the Registration
Statement to be filed with the SEC by Parent on Form S-4 under
the Securities Act for the purpose of registering the shares of
Parent Common Stock to be issued in the Merger (the "Registration
Statement") and (ii) the joint prospectus/proxy statement of the
Company and Parent (the "Proxy Statement") required to be mailed
to the stockholders of the Company and Parent in connection with
the Merger will, in the case of the Proxy Statement or any
amendments or supplements thereto, at the time of the mailing of
the Proxy Statement and any amendments or supplements thereto,
and at the time of the Parent Meeting to be held in connection
with the Merger, or, in the case of the Registration Statement,
at the time it becomes effective and at the Effective Time,
contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The
Registration Statement will comply as to form in all material
respects with the provisions of the Securities Act, and the rules
and regulations promulgated thereunder. The Proxy Statement will
comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.

SECTION 3.14. Conduct of Business. Except as
disclosed in Schedule 3.14 hereto, the business of Parent and
each of the Parent Subsidiaries is not being conducted in default
or violation of any term, condition or provision of (i) its
respective Articles of Incorporation or Bylaws or similar
organizational documents, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease or other instrument or
agreement of any kind to which Parent or any of the Parent
Subsidiaries is now a party or by which Parent or any of the

<PAGE>

Parent Subsidiaries or any of their respective properties or
assets may be bound, or (iii) any Federal, state, local or
foreign statute, law, ordinance, rule, regulation, judgment,
decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to Parent
or any of the Parent Subsidiaries, except, with respect to the
foregoing clauses (ii) and (iii), defaults or violations that
would not, individually or in the aggregate, have a Material
Adverse Effect.

SECTION 3.15. Environment. (a) As used herein, the
term "Environmental Laws" means all Federal, state, local or
foreign laws relating to pollution or protection of human health
or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws relating to emissions,
discharges, releases or threatened releases of chemicals,
pollutants, contaminants, or industrial, toxic or hazardous
substances or wastes into the environment, or otherwise relating
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of chemicals,
pollutants, contaminants, or industrial, toxic or hazardous
substances or wastes, as well as all authorizations, codes,
decrees, demands or demand letters, injunctions, judgments,
licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.

(b) Except as disclosed on Schedule 3.15 hereto, to
the knowledge of Parent there are, with respect to Parent or any
of the Parent Subsidiaries, or any real property currently or
formerly owned, leased, or otherwise used by Parent or any of the
Parent Subsidiaries, no past or present violations of
Environmental Laws, releases of any material into the
environment, actions, activities, circumstances, conditions,
events, incidents, or contractual obligations which may give rise
to any common law or other legal liability, including, without
limitation, liability under the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980 ("CERCLA") or
similar state or local laws, which liabilities, either
individually or in the aggregate, would have a Material Adverse
Effect.

SECTION 3.16. Energy Regulatory Status. (a) Each of
the operational electric generation facilities ("Plants") owned
in whole or part, directly or indirectly by: (i) Parent, or (ii)
any legal entity in which Parent directly or indirectly owns more
than 50% of the voting stock or other equity interest, including
any partnership in which Parent has an interest, is a "qualifying
small power production facility" ("Small Power QF"), as such term
is defined in the Federal Power Act, as amended ("FPA"), and the

<PAGE>

regulations thereunder, and has continuously been in compliance
with the requirements for being a Small Power QF since it
commenced sales of electricity.

(b) The owner of each of the Plants under development
by Parent or any Parent Subsidiary and located in the United
States will, no later than the date operations commence, either
qualify as a "qualifying small power producer" or an "exempt
wholesale generator" ("EWOG"), as such terms are defined in FPA,
the regulations under the FPA, and the Public Utility Holding
Company Act of 1935, as amended ("PUHCA").

(c) The owner of each of the Plants under development
by Parent or any Parent Subsidiary and located outside the United
States will, no later than the date operations commence, either
qualify as an EWOG or a "foreign utility company", as such term
is defined under PUHCA and the regulations thereunder.

(d) Neither Parent nor any "affiliate" of Parent is a
"public utility company" or a "public utility holding company",
as such terms are defined in PUHCA and the regulations
thereunder, a "public utility" as defined in the FPA and the
regulations thereunder, or subject to regulations by any state
public utilities commission or similar state regulatory body.

(e) Each of the Plants obtained any necessary
certificates or permits from state regulatory authorities for
construction of each of the operational Plants and associated
transmission equipment owned by the owners of such Plant, and
each other entity constructing, owning or operating any of the
foregoing has obtained each required certificate or permit.

SECTION 3.17. Employee Benefit Plans; Labor Matters.
(a) With respect to each U.S. or foreign employee benefit plan,
program, arrangement and contract (including, without limitation,
any "employee benefit plan", as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
("ERISA")) and any executive compensation arrangement, whether or
not funded, maintained or contributed to by Parent or any Parent
Subsidiary, or with respect to which Parent or any Parent
Subsidiary could incur liability under Section 4069, 4212(c) or
4204 of ERISA, as well as any employee benefit plan that is
subject to Section 412 of the Code or Title IV of ERISA and which
is maintained or contributed to by any other trade or business
(whether or not incorporated) which is treated as a single
employer with Parent under Section 414(b), (c), (m) or (o) of the
Code (each such trade or business being referred to herein as a
"Code Affiliate") (the "Parent Benefit Plans"), Parent has made
available to the Company a true and correct copy of (i) the most
recent annual report (Form 5500) filed with the Internal Revenue

<PAGE>

Service (the "IRS"), (ii) such Parent Benefit Plan, (iii) each
trust agreement relating to such Parent Benefit Plan, (iv) the
most recent summary plan description for each Parent Benefit Plan
for which a summary plan description is required, (v) the most
recent actuarial report or valuation relating to a Parent Benefit
Plan subject to Title IV of ERISA, if any, (vi) the most recent
determination letter, if any, issued by the IRS with respect to
any Parent Benefit Plan qualified under Section 401(a) of the
Code and (vii) the most recent annual and periodic accounting of
related plan assets, if any.

(b) With respect to the Parent Benefit Plans, no event
has occurred and, to the knowledge of Parent, there exists no
condition or set of circumstances, in connection with which
Parent or any Parent Subsidiary could be subject to any liability
under the terms of such Parent Benefit Plans, ERISA, the Code or
any other applicable Law which would have a Material Adverse
Effect. No claim has been asserted or, to the knowledge of
Parent, threatened, by the IRS, the Department of Labor or any
participant of a Parent Benefit Plan that Parent or any Parent
Subsidiary has, with respect to any Parent Benefit Plan, engaged
in or been a party to any "prohibited transaction," as such term
is defined in Section 4975 of the Code and Section 406 of ERISA,
which would result in the imposition of either a penalty assessed
pursuant to Section 502(i) of ERISA or a tax imposed by section
4975 of the Code, in each case applicable to Parent, any Parent
Subsidiary or any Parent Benefit Plan. Each Parent Benefit Plan
intended to qualify under Section 401(a) of the Code does so
qualify, and the trusts created thereunder are exempt from tax
under Section 501(a) of the Code, and each such Parent Benefit
Plan will be amended in the manner required by the Code by
December 31, 1994, and has been or will be submitted to the IRS
on or prior to March 31, 1995 for a determination letter
confirming that such Parent Benefit Plan meets the currently
applicable requirements for qualification and exemption from
taxation under Section 401(a) and 501(a) of the Code. No Parent
Benefit Plan has plan assets invested in any insurance company
which is or has been in insolvency proceedings within the last 3
years. No Parent Benefit Plan subject to Section 412 of the Code
has incurred any "accumulated funding deficiency" (as defined in
ERISA), whether or not waived. Neither Parent nor any of the
Parent Subsidiaries or Code Affiliates has at any time since 1987
maintained or contributed to any Parent Benefit Plan, including
without limitation any "multiemployer plan" (as defined in
Section 3(37) of ERISA), which (i) is a "defined benefit plan"
(as defined in Section 414(j) of the Code) or (ii) is subject to
Title IV of ERISA.

<PAGE>

bargaining or other labor union contract applicable to persons
employed by Parent or any Parent Subsidiary, no collective
bargaining agreement is being negotiated by Parent or any Parent
Subsidiary and neither Parent nor any Parent Subsidiary knows of
any activities or proceedings of any labor union to organize any
of their respective employees. As of the date hereof, (i) Parent
and all of the Parent Subsidiaries are in compliance in all
material respects with all applicable laws relating to employment
and employment practices, wages, hours, and terms and conditions
of employment, (ii) there are no material charges with respect to
or relating to Parent or any of the Parent Subsidiaries pending
before the Equal Employment Opportunity Commission or any state,
local or foreign agency responsible for the prevention of
unlawful employment practices, and (iii) there is no labor
dispute, strike or work stoppage against Parent or any Parent
Subsidiary pending or, to Parent's knowledge, threatened which
may interfere with the respective business activities of Parent
or the Parent Subsidiaries, except where such non-compliance,
charge, dispute, strike or work stoppage would not have a
Material Adverse Effect. As of the date hereof, to the knowledge
of Parent, none of Parent or any Parent Subsidiary, or their
respective representatives or employees, has committed any unfair
labor practices in connection with the operation of the
respective businesses of Parent or the Parent Subsidiaries, and
there is no charge or complaint against Parent or the Parent
Subsidiaries by the National Labor Relations Board or any
comparable state agency pending or threatened in writing, except
where such unfair labor practice, charge or complaint would not
have a Material Adverse Effect.

SECTION 3.18. Insurance. The insurance policies in
force at the date hereof, with respect to the assets, properties
or operations of each of Parent and the Parent Subsidiaries are
set forth on Schedule 3.18 and are in full force and effect with
reputable insurers in such amounts and insure against such losses
and risks (including product liability) as are customary to
protect the properties and business of each of Parent and Parent
Subsidiaries.

SECTION 3.19. Taxes. (a) Except as set forth in
Schedule 3.19, and except as would not, either individually or in
the aggregate, have a Material Adverse Effect, (i) Parent and
each of the Parent Subsidiaries have timely filed with the
appropriate governmental authorities all Tax Returns (as defined
below) required to be filed by or with respect to the Company and
each of the Subsidiaries or their respective operations or
assets, and such Tax Returns are true, correct and complete in
all material respects and (ii) all Taxes (as defined below) shown
to be due on such Tax Returns, all Taxes required to be paid on
an estimated or installment basis, and all Taxes required to be

<PAGE>

withheld with respect to the Parent or any of the Parent
Subsidiaries or their respective operations or assets have been
timely paid or, if applicable, withheld and paid to the
appropriate taxing authority in the manner provided by law,
except in each case for such Taxes which are not material in the
aggregate.

(b) Neither Parent nor any of the Parent Subsidiaries
has filed a consent to the application of Section 341(f) of the
Code.

(c) No indebtedness of the Parent or any of the Parent
Subsidiaries is "corporate acquisition indebtedness" within the
meaning of Section 279(b) of the Code.

(d) For purposes of this Agreement, "Taxes" means all
taxes, charges, fees, levies or other assessments imposed by any
United States Federal, state, or local taxing authority or by any
foreign taxing authority, including, but not limited to, income,
gross receipts, excise, property, sales, use transfer, payroll,
license, ad valorem, value added, withholding, social security,
license, ad valorem, value added, withholding, social security,
national insurance (or other similar contributions or payments),
franchises, estimated, severance, stamp, and other taxes
(including any interest, fines, penalties or additions
attributable to or imposed on or with respect to any such taxes,
charges, fees, levies or other assessments).

(e) For purposes of this Agreement, "Tax Return" means
any return, report, information return or other document
(including any related or supporting information and, where
applicable, profit and loss accounts and balance sheets) with
respect to Taxes.

SECTION 3.20. Trademarks, Licenses, Patents and
Copyrights. Except as set forth on Schedule 3.20, Parent or the
Parent Subsidiaries own or possess adequate licenses or other
valid rights to use all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights and proprietary
information used or held for use in connection with, and material
to, its business as currently being conducted and are unaware of
any assertions or claims challenging the validity of any of the
foregoing which are reasonably likely to have a Material Adverse
Effect; and, to the best knowledge of Parent, the conduct of
Parent's business as now conducted or proposed to be conducted
does not and will not conflict with any patents, patent rights,
licenses, trademarks, trademark rights, trade names, trade name
rights or copyrights of others known to the Parent or the Parent
Subsidiaries in any way reasonably likely to have a Material
Adverse Effect. No material infringement of any proprietary

<PAGE>

right owned by or licensed by or to Parent or any of the Parent
Subsidiaries is known to Parent or any Parent Subsidiary which is
reasonably likely to have a Material Adverse Effect.

SECTION 3.21. Related Party Transactions. Except as
is set forth in the Parent SEC Reports and the Previous 14D-1, to
the knowledge of Parent, Schedule 3.21 sets forth the material
transactions since September 1, 1994 between Parent and the
Parent Subsidiaries on the one hand, and (i) an officer or
director of Parent or any of the Parent Subsidiaries, (ii) a
record or beneficial owner of five percent (5%) or more of the
Parent Common Stock, or (iii) an affiliate of any such officer,
director or beneficial owner, on the other hand, other than
payment of compensation for services rendered to the Parent and
the Parent Subsidiaries in the ordinary course of business.

SECTION 3.22. Status of Development and Construction
Projects. To Parent's knowledge, except as specifically
disclosed on Schedule 3.22, the following statements, as
applicable, are true and correct as of the date hereof, with
respect to each of the following development and construction
projects: Upper Mahiao 120 MW and Mahanagdong 180 MW:

(i) There is no pending or threatened revocation
or loss of such project award, whether as a result of
government action or otherwise;

(ii) The executed power sales contract and
construction contract for such project is in full force
and effect and there is no oral or written threat to
its validity, whether as a result of government action
or otherwise;

(iii) For any project with an executed construction
contract, the estimated total capital cost for
construction of such project (without well-field
development expenses), including any existing or
expected change orders, is set forth on Schedule 3.22;

(iv) The joint venture or partnership or similar
agreements with local partners or contractors are in
full force and effect and the Parent's percentage
equity ownership pursuant to such contracts are as set
forth on Schedule 3.22, and there is no threat of loss
or invalidity to such contracts, whether as a result of
consummating this transaction or otherwise;

(v) The status of the financing and political
risk insurance arrangements for each such project is
set forth on Schedule 3.22; and

<PAGE>

(vi) Parent has not taken any actions which
violate the Foreign Corrupt Practices Act ("FCPA") and
is not aware of any actions taken by foreign Parent
Subsidiaries or local partners which if taken by a U.S.
company would constitute a violation of the FCPA.

SECTION 3.23. Status of Operating Projects. To
Parent's knowledge, as of the date hereof, with respect to each
operating project, except as set forth on Schedule 3.23:

(i) Parent is not aware of any event or
occurrence which would create a material impairment to
the operating performance or a material increase in
operating expenses or material non-compliance with
regulatory or contractual requirements;

(ii) Parent and any of the Parent Subsidiaries or
joint ventures has not changed in any material adverse
respect such project's operating, maintenance reserves
or procedures; and

(iii) Parent is not aware of any events which, with
lapse of time or otherwise could reasonably be expected
to result in a material impairment to the project's
operating performance or a material increase in
operating expenses or material non-compliance with
regulatory or contractual requirements.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth on the Company Disclosure Schedule
previously delivered by the Company to Parent (the "Company
Disclosure Schedule"), the Company hereby represents and warrants
to Parent and Merger Sub as follows:

SECTION 4.01. Corporate Organization; Subsidiaries.
Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite
corporate power and authority and any material necessary
governmental authority to own, operate or lease the properties
that it purports to own, operate or lease and to carry on its
business as it is now being conducted, and is duly qualified as a
foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such
qualification necessary, except for such failure which, when
taken together with all other such failures, would not have a

<PAGE>

Material Adverse Effect (as defined below) on the Company. The
term "Subsidiary" means any corporation, partnership, joint
venture or other legal entity of which the Company or, if the
context requires, the Surviving Corporation (either alone or
through or together with any other Subsidiary) owns, directly or
indirectly, 50% or more of the stock or other equity interests,
or owns, directly or indirectly, interests such that the holders
are generally entitled to vote for the election of 50% of the
board of directors or other governing body, of such corporation,
partnership, joint venture or other legal entity. When used in
connection with the Company or any of its Subsidiaries, the term
"Material Adverse Effect" means any change or effect, when taken
together with all other adverse changes and effects relating to
the Company and its Subsidiaries, that is or is reasonably likely
to be materially adverse to the business, operations, properties,
condition (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities) of the
Company and the Subsidiaries taken as a whole; provided, however,
that the occurrence of any or all of the following shall not
constitute a Material Adverse Effect: (i) any change in any law
applicable to the Company or any Subsidiary or by which any
property or asset of the Company or any Subsidiary is bound,
(ii) a failure to receive any contract or award for which the
Company or any Subsidiary has submitted or will submit a
competitive bid, (iii) the loss of any contract or arrangement
(whether by revocation, lapse or invalidity) with respect to a
project that the Company or any Subsidiary has under development,
other than any such loss related to the Malitbog project or Fish
Lake project and other than any such loss resulting from a breach
by the Company of the representations and warranties set forth in
Sections 4.22 and 4.23 hereof, (iv) an unfavorable ruling by the
California Public Utilities Commission with respect to the
Company's California plants under the pending Biennial Resource
Plan Update, (v) a loss of, or unfavorable ruling in, the
Company's pending litigation against Southern California Edison
Company, but only insofar as such litigation seeks to increase
the energy price payable for deliveries over nameplate capacity
and not insofar as any unfavorable ruling affects the validity or
enforceability of any contract subject thereto or the
enforceability of any material term thereof, (vi) a failure to
close any public or private financing of any project in which the
Company or any Subsidiary owns a direct or indirect interest
(other than as a result of a loss with respect to the Malitbog
project or the Fish Lake project or as a result of a breach by
the Company of the representation and warranties set forth in
Section 4.22 or 4.23 hereof), or (vii) the termination of the
employment of any employee, officer, director or consultant of
the Company or any Subsidiary. A true and complete list of all
the Subsidiaries, together with the jurisdiction of incorporation

<PAGE>

or formation of each Subsidiary is set forth in Schedule 4.01
hereto.

SECTION 4.02. Articles of Incorporation and Bylaws.
The Company has heretofore furnished to Parent a complete and
correct copy of the Articles of Incorporation and Bylaws or
equivalent organizational documents, each as amended to the date
hereof, of the Company, and the Company has made available to
Parent such documents with respect to all Subsidiaries. Such
Articles of Incorporation, Bylaws and equivalent organizational
documents are in full force and effect. Neither the Company nor
any Subsidiary is in violation of any of the provisions of its
Articles of Incorporation or Bylaws or equivalent organizational
documents.

SECTION 4.03. Capitalization. As of the date hereof,
the authorized capital stock of the Company consists of
30,000,000 shares of Company Common Stock and 1,000,000 shares of
preferred stock ("Company Preferred Stock"). As of September 30,
1994, 24,042,915 shares of Company Common Stock were issued and
outstanding, all of which were validly issued, fully paid and
nonassessable, and no shares of Company Preferred Stock were
outstanding. As of December 1, 1994, there were 582,478 shares
of Company Common Stock reserved for issuance pursuant to options
and deferred stock awards granted under the Stock Option Plans or
otherwise identified on Schedule 4.03, and there were 996,943
shares of Company Common Stock reserved for future issuance under
the Stock Option Plans. There have been no material changes in
the capitalization of the Company since September 30, 1994.
Schedule 4.03 separately identifies as of December 1, 1994 the
option holders, the number of shares subject to each option held,
the exercise prices, vesting schedules and expiration dates of
the outstanding options granted under the Stock Option Plans.
All of the outstanding shares of Company Common Stock have been
duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights or other similar
obligations. Except as set forth in this Section 4.03 or on
Schedule 4.03, there are not, as of the date hereof, any
outstanding or authorized subscriptions, options, warrants,
convertible securities, calls, rights, commitments to issue or
any other agreements of any character relating to the issued or
unissued capital stock or other securities of the Company to
which the Company is party or by which the Company is bound
obligating the Company to issue, deliver, or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of
the Company or obligating the Company to grant, extend or enter
into any subscription, option, warrant, call, right, commitment
or other such agreement. All the outstanding capital stock or
partnership or other equity interest of each of the Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable

<PAGE>

and, except as disclosed on Schedule 4.01, is owned by the
Company or a Subsidiary free and clear of any liens, security
interests, pledges, agreements, claims, charges or encumbrances
of any nature whatsoever. There are no existing options, calls
or commitments of any character relating to the issued or
unissued capital stock or other securities of any Subsidiary.
Except for the Subsidiaries and except as previously disclosed to
Parent on the Disclosure Schedule and in the Company SEC Reports
(as defined below), the Company does not directly or indirectly
own a 50% or greater equity interest in any other corporation,
partnership, joint venture or other business association or
entity.

SECTION 4.04. Authority Relative to this Agreement.
The Company has the necessary corporate power and authority to
enter into this Agreement and, subject to obtaining any necessary
stockholder approval of the Merger, to carry out its obligations
hereunder. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject to the
approval of the Merger by the Company's stockholders in
accordance with Nevada Law. This Agreement has been duly executed
and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against it in
accordance with its terms.

SECTION 4.05. No Conflict; Required Filings and
Consents. (a) The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement by the
Company will not, (i) conflict with or violate any law,
regulation, court order, judgment or decree applicable to the
Company or any of the Subsidiaries or by which its or any of
their property is bound or affected, (ii) violate or conflict
with the Certificate of Incorporation or Bylaws or equivalent
organizational documents of the Company or any Subsidiary, or
(iii) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination or
cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or
any of the Subsidiaries pursuant to, any contract, instrument,
permit, license or franchise to which the Company or any of the
Subsidiaries is a party or by which the Company or any of the
Subsidiaries or its or any of their property is bound or
affected, except as set forth on Schedule 4.05 and except in the
case of (i) or (iii) for conflicts, violations, breaches or
defaults which, in the aggregate, would not have a Material
Adverse Effect.

<PAGE>

(b) Except for applicable requirements, if any, of the
Exchange Act and filing and recordation of appropriate merger or
other documents as required by Nevada Law, and except for any
notice, filings, authorizations, consents or approvals which are
required because of the regulatory status of the Company or any
of its Subsidiaries or facts specifically applicable to them, and
except as set forth on Schedule 4.05, the Company is not required
to submit any notice, report or other filing with any
governmental authority, domestic or foreign, in connection with
the execution, delivery or performance of this Agreement. Except
as aforesaid, no waiver, consent, approval or authorization of
any governmental or regulatory authority, domestic or foreign, is
required to be obtained or made by the Company in connection with
its execution, delivery or performance of this Agreement.

SECTION 4.06. SEC Filings; Financial Statements. (a)
The Company has filed all forms, reports and documents required
to be filed with the SEC since January 1, 1992, and has
heretofore delivered (or made available) to Parent, in the form
filed with the SEC, its (i) Annual Reports on Form 10-K for the
fiscal years ended December 31, 1993 and December 31, 1992,
respectively, (ii) all proxy statements relating to the Company's
meetings of stockholders (whether annual or special) held since
January 1, 1992, and (iii) all other reports or registration
statements (including Quarterly Reports on Form 10-Q) filed by
the Company with the SEC since January 1, 1992 (collectively, the
"Company SEC Reports"). The Company SEC Reports (i) were
prepared in all material respects in accordance with the
requirements of the Securities Act, or the Exchange Act, as the
case may be and (ii) did not at the time they were filed contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in the light of the circumstances
under which they were made, not misleading. No Subsidiary is
required to file any statements or reports with the SEC pursuant
to Sections 13(a) or 15(d) of the Exchange Act.

(b) The consolidated financial statements contained in
the Company SEC Reports have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated
in the notes thereto) and fairly present the consolidated
financial position of the Company and its Subsidiaries as at the
respective dates thereof and the consolidated results of
operations and changes in financial position of the Company and
its Subsidiaries for the periods indicated, except that the
unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are
not expected to be material in amount.

<PAGE>

(c) Except as reflected or reserved against in the
consolidated financial statements contained in the Company SEC
Reports, and except as set forth on Schedule 4.06, the Company
and its Subsidiaries have no liabilities of any nature (whether
accrued, absolute, contingent or otherwise) which in the
aggregate could have a Material Adverse Effect or any bonds,
debentures, notes, letters of credit or other indebtedness
(including guarantees) for any amount greater than $1,000,000.
Since September 30, 1994, neither the Company nor any of the
Subsidiaries has incurred any liabilities material to the Company
and the Subsidiaries taken as a whole, except (i) liabilities
incurred in the ordinary course of business and consistent with
past practice, (ii) liabilities incurred in connection with or as
a result of the Offer or the Merger or (iii) liabilities
disclosed on Schedule 4.06.

SECTION 4.07. Absence of Certain Changes or Events.
Since September 30, 1994, except as contemplated in this
Agreement or as specifically disclosed in the Company SEC Reports
or the Tender Offer Solicitation/Recommendation Statement on
Schedule 14D-9 that was originally filed by the Company with the
SEC on October 11, 1994 with respect to Parent's previous tender
offer (as amended to the date hereof) (the "Previous 14D-9"), or
as appears on Schedule 4.07, there has not been:

(a) any Material Adverse Effect;

(b) any redemption or other acquisition of Company
Common Stock by the Company or any of the Subsidiaries or
any declaration or payment of any dividend or other
distribution in cash, stock or property with respect to
Company Common Stock;

(d) any transfer of, or rights granted under, any
material leases, licenses, agreements, patents, trademarks,
trade names or copyrights other than those transferred or
granted in the ordinary course of business and consistent
with past practice;

(e) any mortgage, pledge, security interest or
imposition of lien or other encumbrance on any asset of the
Company or any of the Subsidiaries that when viewed in the
aggregate with all such other encumbrances is material to
the business, financial condition or operations of the
Company and the Subsidiaries taken as a whole; or

<PAGE>

(f) any change by the Company in accounting principles
or methods except insofar as such change may have been
required by a change in generally accepted accounting
principles and disclosed in the Company SEC Reports.

Since September 30, 1994, except as disclosed on Schedule 4.07,
in the Company SEC Reports or the Previous 14D-9, the Company and
its Subsidiaries have conducted their business only in the
ordinary course and in a manner consistent with past practice and
have not made any material change in the conduct of the business
or operations of the Company and its Subsidiaries taken as a
whole. Without limiting the generality of the foregoing, the
Company has not, since such date, except for the contracts
referred to in the Company SEC Reports or as disclosed on
Schedule 4.07 or in the Previous 14D-9, made any changes in
executive compensation levels (other than increases in the
ordinary course of business and consistent with past practice) or
in the manner in which other employees of the Company or the
Subsidiaries are compensated, paid or agreed to pay any pension,
retirement allowance or other employee benefit not required or
permitted by the terms of any plan, agreement or arrangement
existing on such date to any director, officer or employee,
whether past or present, or committed itself to any collective
bargaining agreement (except for renewals of existing collective
bargaining agreements) or to any additional pension,
profit-sharing, bonus, incentive, deferred compensation, stock
purchase, stock option, stock appreciation right, group
insurance, severance pay, retirement or other employee benefit
plan, agreement or arrangement, or to any employment or
consulting agreement with or for the benefit of any person, or to
amend any of such plans or any of such agreements in existence on
such date.

SECTION 4.08. Title to Property. The Company and its
Subsidiaries have good and marketable title, or valid leasehold
rights in the case of leased property, to all real property and
all personal property purported to be owned or leased by them,
except where the failure to have such title or right would not
have a Material Adverse Effect. There are no material
mechanics', materialmen's, laborers', employees', suppliers' or
other liens arising by operation of law on any of the Company's
properties.

SECTION 4.09. Litigation. Except as disclosed in the
Company SEC Reports, the Previous 14D-9 or as disclosed on
Schedule 4.09, there are no claims, actions, suits, proceedings
or investigations pending or, to the best knowledge of the
Company, threatened against the Company or any of its
Subsidiaries, or any properties or rights of the Company or any
of its Subsidiaries, before any court, administrative,

<PAGE>

governmental or regulatory authority or body, domestic or
foreign, which are reasonably likely, in the aggregate, to have a
Material Adverse Effect or would, and are reasonably likely to,
prevent or delay the performance of this Agreement. As of the
date hereof, neither the Company nor any of its Subsidiaries nor
any of their property is subject to any order, judgment,
injunction or decree, having a Material Adverse Effect.

SECTION 4.10. Information in Disclosure Documents.
None of the information with respect to the Company or its
Subsidiaries to be included or incorporated by reference in the
Proxy Statement or the Registration Statement will, in the case
of the Proxy Statement or any amendments or supplements thereto,
at the time of the mailing of the Proxy Statement and any
amendments or supplements thereto, and at the time of the Company
Meeting to be held in connection with the Merger, or, in the case
of the Registration Statement, at the time it becomes effective
and at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.

SECTION 4.11. Fairness Opinion. The Company has
received the opinion of Goldman Sachs, to the effect that the
consideration to be received by the Company's stockholders
pursuant to the Offer and the Merger is fair to the stockholders
of the Company (other than Parent and its affiliates).

SECTION 4.12. Brokers. No broker, finder or
investment banker (other than Goldman Sachs) is entitled to any
brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company. The Company
has heretofore furnished to Parent true and complete information
concerning the financial arrangements between the Company and
Goldman Sachs, pursuant to which such firm would be entitled to
any payment as a result of the transactions contemplated
hereunder.

SECTION 4.13. Takeover Provisions Inapplicable; Rights
Agreement Amendment. (a) As of the date hereof and at all times
on or prior to the Effective Time, Sections 78.378 through
78.3793, inclusive, and Sections 78.411 through 78.444,
inclusive, of Nevada Law are, and shall be, inapplicable to the
Offer, the Merger and the transactions contemplated by this
Agreement including, without limitation, the pledge of the shares
of Company Common Stock acquired in the Offer to the lending

<PAGE>

institutions providing the financing for the Offer, and the
transfer of such shares upon the exercise of remedies under the
applicable agreements. The Company has heretofore delivered to
Parent a complete and correct copy of the resolutions of the
Board of Directors of the Company to the effect that such
sections of Nevada Law are, and shall be, inapplicable to the
Offer, the Merger and the transactions contemplated by this
Agreement.

(b) The Board of Directors of the Company has taken
all necessary action with respect to the Rights Agreement, such
that none of the execution or delivery of this Agreement, the
purchase of Shares pursuant to the Offer, the exchange of the
Shares for the shares of Parent Common Stock and cash in
accordance with this Agreement or any transaction contemplated by
this agreement will cause (A) the rights (the "Rights") issued
pursuant to the Rights Agreement to become exercisable under the
Rights Agreement, (B) Parent, Merger Sub and any of their
associates or affiliates (as such terms are defined in the Rights
Agreement) to be deemed an "Acquiring Person" (as defined in the
Rights Agreement), or (C) the "Stock Acquisition Date" or
"Distribution Date" (as such terms are defined in the Rights
Agreement) to occur upon any such event.

SECTION 4.14. Conduct of Business. Except as
disclosed in Schedule 4.14 hereto, the business of the Company
and each of the Subsidiaries is not being conducted in default or
violation of any term, condition or provision of (i) its
respective Articles of Incorporation or Bylaws or similar
organizational documents, or (ii) any note, bond, mortgage,
indenture, contract, agreement, lease or other instrument or
agreement of any kind to which the Company or any of the
Subsidiaries is now a party or by which the Company or any of the
Subsidiaries or any of their respective properties or assets may
be bound, or (iii) any Federal, state, local or foreign statute,
law, ordinance, rule, regulation, judgment, decree, order,
concession, grant, franchise, permit or license or other
governmental authorization or approval applicable to the Company
or any of the Subsidiaries, except, with respect to the foregoing
clauses (ii) and (iii), defaults or violations that would not,
individually or in the aggregate, have a Material Adverse Effect.

SECTION 4.15. Environment. Except as disclosed on
Schedule 4.15 hereto, to the knowledge of the Company, there are,
with respect to the Company or any of its Subsidiaries, or any
real property currently or formerly owned, leased, or otherwise
used by the Company or any of its Subsidiaries, no past or
present violations of Environmental Laws, releases of any
material into the environment, actions, activities,
circumstances, conditions, events, incidents, or contractual

<PAGE>

obligations which may give rise to any common law or other legal
liability, including, without limitation, liability under CERCLA
or similar state or local laws, which liabilities, either
individually or in the aggregate, would have a Material Adverse
Effect.

SECTION 4.16. Energy Regulatory Status. (a) Each of
the Plants owned in whole or part, directly or indirectly by: (i)
the Company or (ii) any legal entity in which the Company
directly or indirectly owns 50% or greater of the voting stock or
other equity interest, including any partnership in which the
Company has an interest, is a Small Power QF, as such term is
defined in the FPA, and the regulations thereunder, and has
continuously been in compliance with the requirements for being a
Small Power QF since it commenced sales of electricity.

(b) The owner of each of the Plants under development
by the Company or any Subsidiary and located in the United States
will, no later than the date operations commence, either qualify
as a "qualifying small power producer" or an EWOG, as such terms
are defined in the FPA, the regulations under the FPA, and the
PUHCA.

(c) The owner of each of the Plants under development
by the Company or any Subsidiary and located outside the United
States will, no later than the date operations commence, either
qualify as an EWOG or a "foreign utility company", as such term
is defined under PUHCA and the regulations thereunder.

(d) Neither the Company nor any "affiliate" of the
Company is a "public utility company" or a "public utility
holding company", as such terms are defined in PUHCA and the
regulations thereunder, a "public utility" as defined in the FPA
and the regulations thereunder, or subject to regulations by any
state public utilities commission or similar state regulatory
body.

(e) Each of the Plants obtained any necessary
certificates or permits from state regulatory authorities for
construction of each of the operational Plants and associated
transmission equipment owned by the owners of the Plant, and each
other entity constructing, owning or operating any of the
foregoing has obtained each required certificate or permit.

SECTION 4.17. Employee Benefit Plans; Labor Matters.
(a) With respect to each U.S. or foreign employee benefit plan,
program, arrangement and contract (including, without limitation,
any "employee benefit plan", as defined in Section 3(3) of ERISA)
and any executive compensation arrangement, whether or not
funded, maintained or contributed to by the Company or any of its

<PAGE>

Subsidiaries, or with respect to which the Company or any of its
Subsidiaries could incur liability under Section 4069, 4212(c) or
4204 of ERISA, as well as any employee benefit plan that is
subject to Section 412 of the Code or Title IV of ERISA and which
is maintained or contributed to by any other trade or business
(whether or not incorporated) which is treated as a single
employer with the Company under Section 414(b), (c), (m) or (o)
of the Code (each such trade or business being referred to herein
as a "Code Affiliate") (the "Company Benefit Plans"), the Company
has made available to Parent a true and correct copy of (i) the
most recent annual report (Form 5500) filed with the IRS,
(ii) such Company Benefit Plan, (iii) each trust agreement
relating to such Company Benefit Plan, (iv) the most recent
summary plan description for each Company Benefit Plan for which
a summary plan description is required, (v) the most recent
actuarial report or valuation relating to a Company Benefit Plan
subject to Title IV of ERISA, if any, (vi) the most recent
determination letter, if any, issued by the IRS with respect to
any Company Benefit Plan qualified under Section 401(a) of the
Code and (vii) the most recent annual and periodic accounting of
related plan assets, if any.

(b) With respect to the Company Benefit Plans, no
event has occurred and, to the knowledge of the Company, there
exists no condition or set of circumstances in connection with
which the Company or any of its Subsidiaries could be subject to
any liability under the terms of such Company Benefit Plans,
ERISA, the Code or any other applicable Law which would have a
Material Adverse Effect. No claim has been asserted, or, to the
knowledge of the Company, threatened by the IRS, the Department
of Labor or any participant of a Company Benefit Plan that the
Company or any of the Subsidiaries has, with respect to any
Company Benefit Plan, engaged in or been a party to any
"prohibited transaction", as such term is defined in Section 4975
of the Code and Section 406 of ERISA, which could result in the
imposition of either a penalty assessed pursuant to Section 502
of ERISA or a tax imposed by Section 4975 of the Code, in each
case applicable to the Company, any Subsidiary or any Company
Benefit Plan. Each Company Benefit Plan intended to qualify
under Section 401(a) of the Code does so qualify, and the trusts
created thereunder are exempt from tax under Section 501(a) of
the Code, and each such Company Benefit Plan will be amended in
the manner required by the Code by December 31, 1994, and has
been or will be submitted to the IRS on or prior to March 31,
1995 for a determination letter confirming that such Company
Benefit Plan meets the currently applicable requirements for
qualification and exemption from taxation under Sections 401(a)
and 501(a) of the Code. No Company Benefit Plan has plan assets
invested in any insurance company which is or has been in
insolvency proceedings within the last 3 years. No Company

<PAGE>

Benefit Plan subject to Section 412 of the Code has incurred any
"accumulated funding deficiency" (as defined in ERISA), whether
or not waived. Neither the Company nor any of its Subsidiaries
or Code Affiliates has at any time since 1987 maintained or
contributed to any Company Benefit Plan, including without
limitation any "multiemployer plan" (as defined in Section 3(37)
of ERISA), which (i) is a "defined benefit plan", (as defined in
Section 414(j) of the Code) or (ii) is subject to Title IV of
ERISA.

(c) Except as set forth in Schedule 4.17, (i) neither
the Company nor any of its Subsidiaries is a party to any
collective bargaining or other labor union contract applicable to
persons employed by the Company or its Subsidiaries, (ii) no
collective bargaining agreement is being negotiated by the
Company or any of its Subsidiaries and (iii) neither the Company
nor any of its Subsidiaries knows of any activities or
proceedings of any labor union to organize any of their
respective employees. As of the date hereof, the Company and all
of its Subsidiaries are in compliance in all material respects
with all applicable laws relating to employment and employment
practices, wages, hours, and terms and conditions of employment,
there are no material charges with respect to or relating to the
Company or any of its Subsidiaries pending before the Equal
Employment Opportunity Commission or any state, local or foreign
agency responsible for the prevention of unlawful employment
practices, and there is no labor dispute, strike or work stoppage
against the Company or any of its Subsidiaries pending or, to the
Company's knowledge, threatened which may interfere with the
respective business activities of the Company or its
Subsidiaries, except where such noncompliance, charge, dispute,
strike or work stoppage would not have a Material Adverse Effect.
As of the date hereof, to the knowledge of the Company, none of
the Company or any of its Subsidiaries, or their respective
representatives or employees, has committed any unfair labor
practices in connection with the operation of the respective
businesses of the Company or its Subsidiaries, and there is no
charge or complaint against the Company or its Subsidiaries by
the National Labor Relations Board or any comparable state agency
pending or threatened in writing, except where such unfair labor
practice, charge or complaint would not have a Material Adverse
Effect.

(d) The Company has made available to Parent
(i) copies of all employment agreements with officers of the
Company and its Subsidiaries; (ii) copies of all severance
agreements, programs and policies of the Company with or relating
to its employees; and (iii) copies of all plans, programs,
agreements and other arrangements of the Company with or relating
to its employees which contain change in control provisions

<PAGE>

(which plans, programs, agreements and arrangements are set forth
in Schedule 4.17 or have been disclosed in the Company SEC
Reports or the Previous 14D-9).

(e) Except as provided in Schedule 4.17 or as
otherwise required by Law, no Company Benefit Plan provides
retiree medical or retiree life insurance benefits to any person.

SECTION 4.18. Insurance. The insurance policies in
force at the date hereof, with respect to the assets, properties
or operations of each of the Company and the Subsidiaries are set
forth on Schedule 4.18 and are in full force and effect with
reputable insurers in such amounts and insure against such losses
and risks (including product liability) as are customary to
protect the properties and businesses of each of the Company and
the Subsidiaries.

SECTION 4.19. Taxes. (a) Except as set forth in
Schedule 4.19, and except as would not, either individually or in
the aggregate, have a Material Adverse Effect, (i) the Company
and each of the Subsidiaries have timely filed with the
appropriate governmental authorities all Tax Returns (as defined
below) required to be filed by or with respect to the Company and
each of the Subsidiaries or their respective operations or
assets, and such Tax Returns are true, correct and complete in
all material respects and (ii) all Taxes shown to be due on such
Tax Returns and all Taxes required to be withheld with respect to
the Company or any of the Subsidiaries or their respective
operations or assets have been timely paid or, if applicable,
withheld and paid to the appropriate taxing authority in the
manner provided by law, except in each case for such Taxes which
are not material in the aggregate.

(b) Neither the Company nor any of the Subsidiaries
has filed a consent to the application of Section 341(f) of the
Code.

(c) Except as set forth on Schedule 4.19, no property
of either of the Company or any of the Subsidiaries is "tax
exempt use property" within the meaning of Section 168(h) of the
Code or property that either of the Company or any of the
Subsidiaries will be required to treat as being owned by another
person pursuant to Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended, in effect immediately before the enactment
of the Tax Reform Act of 1986.

SECTION 4.20. Trademarks, Licenses, Patents and
Copyrights. Except as set forth on Schedule 4.20, the Company or
the Subsidiaries own or possess adequate licenses or other valid
rights to use all patents, patent rights, trademarks, trademark

<PAGE>

rights, trade names, trade name rights and proprietary
information used or held for use in connection with, and material
to, its business as currently being conducted and are unaware of
any assertions or claims challenging the validity of any of the
foregoing which are reasonably likely to have a Material Adverse
Effect; and, to the best knowledge of the Company, the conduct of
the Company's business as now conducted or proposed to be
conducted does not and will not conflict with any patents, patent
rights, licenses, trademarks, trademark rights, trade names,
trade name rights or copyrights of others known to the Company or
the Subsidiaries in any way reasonably likely to have a Material
Adverse Effect. No material infringement of any proprietary
right owned by or licensed by or to the Company or any of the
Subsidiaries is known to the Company or any Subsidiary which is
reasonably likely to have a Material Adverse Effect.

SECTION 4.21. Related Party Transactions. Except as
is set forth in the Company SEC Reports or in the Previous 14D-9,
to the Company's knowledge, Schedule 4.21 sets forth the material
transaction since September 1, 1994 between the Company and its
Subsidiaries, on the one hand, and (i) an officer or director of
the Company or any of its Subsidiaries, (ii) a record or
beneficial owner of five percent (5%) or more of Company Common
Stock, or (iii) an affiliate of any such officer, director or
beneficial owner, on the other hand, other than payment of
compensation for services rendered to the Company and its
Subsidiaries in the ordinary course of business.

SECTION 4.22. Status of Development and Construction
Projects. To the Company's knowledge, except as specifically
disclosed on Schedule 4.22, the following statements, as
applicable, are true and correct as of the date hereof with
respect to each of the following development and construction
projects: (Malitbog 231 MW, Alto Peak 70 MW, Fish Lake 16 MW and
20MW Salton Sea Unit 1 expansion):

(i) There is no pending or threatened revocation
or loss of such project award, whether as a result of
government action or otherwise;

(iii) For any project with an executed construction
contract, the estimated total capital cost for
construction of such project (without well-field

<PAGE>

development expenses), including any existing or
expected change orders is set forth on Schedule 4.22;
(iv) The joint venture or partnership or similar
agreements with local partners or contractors are in
full force and effect, and the Company's percentage
equity ownership pursuant to such contracts is as set
forth on Schedule 4.22, and there is no threat of loss
or invalidity to such contracts, whether as a result of
consummating this transaction or otherwise;

(v) The status of the financing and political
risk insurance arrangements for each such project is
set forth on Schedule 4.22; and

(vi) The Company has not taken any actions which
violate the FCPA and is not aware of any actions taken
by foreign Subsidiaries or local partners which if
taken by a U.S. company would constitute a violation of
the FCPA.

SECTION 4.23. Status of Operating Projects. With
respect to each operating project, except as set forth on
Schedule 4.23:

(i) The Company is not aware of any event or
occurrence which would create a material impairment to
the operating performance or a material increase in
operating expenses or material non-compliance with
regulatory or contractual requirements;

(ii) The Company and any of its Subsidiaries or
joint ventures have not changed in any material adverse
respect such project's operating, maintenance reserves
or procedures; and

(iii) The Company is not aware of any events which,
with lapse of time or otherwise, could reasonably be
expected to result in a material impairment to the
project's operating performance or a material increase
in operating expenses or material non-compliance with
regulatory or contractual requirements.

ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER

SECTION 5.01. Acquisition Proposals. The Company will
notify Parent immediately if any inquiries or proposals are
received by, any information is requested from, or any
negotiations or discussions are sought to be initiated or

<PAGE>

continued with the Company, in each case in connection with any
acquisition, business combination or purchase of all or any
significant portion of the assets of, or any equity interest in,
the Company or any Subsidiary. The Company shall provide a copy
of any such written inquiries or proposals to Parent immediately
after receipt thereof and thereafter keep Parent and Merger Sub
promptly advised of any development with respect thereto.

SECTION 5.02. Conduct of Business by the Parties
Pending the Merger. (I) The Company covenants and agrees that,
between the date of this Agreement and the Effective Time, unless
Parent shall otherwise consent in writing and except as is
otherwise permitted hereby, the businesses of the Company and its
Subsidiaries shall be conducted only in, and the Company and its
Subsidiaries shall not take any action except in, the ordinary
course of business and in a manner consistent with past practice;
and the Company will use its best efforts to preserve
substantially intact its business organization, to keep available
the services of its present officers, employees and consultants
and to preserve its present relationships with customers,
suppliers and other persons with which it or any of its
subsidiaries has significant business relations. By way of
amplification and not limitation, except as contemplated by this
Agreement, neither the Company nor any of its Subsidiaries shall,
between the date of this Agreement and the Effective Time,
directly or indirectly, do any of the following without the prior
written consent of Parent:

(a) (i) issue, sell, pledge, dispose of, encumber,
authorize, or propose the issuance, sale, pledge,
disposition, encumbrance or authorization of any shares of
its or its subsidiaries' capital stock of any class, or any
options, warrants, convertible securities or other rights of
any kind to acquire any shares of its or its subsidiaries'
capital stock, or any other ownership interest (except with
respect to Company Common Stock previously reserved for
issuance as disclosed in Section 4.03 hereof); (ii) amend or
propose to amend its articles of incorporation or bylaws or
equivalent organizational documents; (iii) split, combine or
reclassify any of its outstanding common stock, or declare,
set aside or pay any dividend or distribution payable in
cash, stock, property or otherwise with respect to the
common stock; (iv) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any shares of
its capital stock, except in the performance of its
obligations under existing employee plans; or (v) authorize
or propose or enter into any contract, agreement, commitment
or arrangement with respect to any of the matters set forth
in this Section 5.02(I)(a);

<PAGE>

(b) (i) acquire (by merger, consolidation, or
acquisition of stock, partnership interests or assets) any
corporation, partnership or other business organization or
division thereof or any other interests in operating
properties; (ii) except in the ordinary course of business
and in a manner consistent with past practices, and except
as set forth on Schedule 5.02(I)(b), sell, pledge, lease,
transfer, dispose of, or encumber or authorize or propose
the sale, pledge, lease, transfer disposition or encumbrance
of any of its or its Subsidiaries' assets (including
intangible assets); (iii) create, incur, assume or guarantee
any indebtedness or other similar obligation, or enter into
any contract or agreement, except in the ordinary course of
business and consistent with past practice, and except as
set forth on Schedule 5.02(I)(b); (iv) enter into any new
line of business or make any bid or enter into any
commitment in respect of any new or proposed projects; (v)
prepay or refinance any part of the principal or interest of
any existing indebtedness before the due date thereof; (vi)
assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise)
for the obligations of any other person or entity, except
for endorsements in the ordinary course of business in
connection with the deposit of items for collection; (vii)
make any loans, advances or capital contributions to or
investments in any person or entity; (viii) waive, release,
grant or transfer any rights of value or modify or change in
any material respect any existing license, material lease or
commitment; (ix) make or commit to or guarantee any single
capital expenditure or obligations which are not consistent
with past practice and currently budgeted; or (x) enter into
or amend any contract, agreement, commitment or arrangement
with respect to any of the matters set forth in this Section
5.02(I)(b);

(c) take any action other than in the ordinary course
of business and in a manner consistent with past practice
(none of which actions shall be unreasonable or unusual)
with respect to the grant of any severance or termination
pay (otherwise than pursuant to policies of the Company or
any of its Subsidiaries in effect on November 30, 1994) or
with respect to any increase of benefits payable under its
severance or termination pay policies in effect on November
30, 1994;

(d) make any payments (except in the ordinary course
of business and in amounts and in a manner consistent with
past practice) under any of its employee plans to any of its
or its subsidiaries' employees, independent contractors or
consultants, enter into any new employee plan, any new

<PAGE>

employment or consulting agreement, grant or establish any
new awards under such plan or agreement, or adopt or
otherwise amend any of the foregoing;

(e) take any action except in the ordinary course of
business and in a manner consistent with past practice (none
of which actions shall be unreasonable or unusual) with
respect to accounting policies or procedures (including
without limitation its procedures with respect to the
payment of accounts payable);

(f) before the purchase of Company Common Stock
pursuant to the Offer and other than pursuant to this
Agreement, take any action to cause the shares of its common
stock to cease to be listed on the Nasdaq National Market;

(g) cause or permit any of their current insurance (or
reinsurance) policies to be cancelled or terminated or any
of the coverage thereunder to lapse, unless forthwith upon
notice of such termination, cancellation or lapse, the
Company or such Subsidiary used its best efforts to obtain
commercially reasonable replacement policies from the same
or comparable insurers providing coverage which is the same
as or comparable to that provided under the cancelled,
terminated or lapsed policies;

(h) enter into any agreement or transaction with any
affiliate of the Company upon terms and conditions less
favorable to the Company or such affiliate than could be
obtained on an arm's length basis, except for agreements or
transactions in the ordinary course of business and
consistent with past practice;

(i) settle any material pending litigation; or

(j) enter into any oral or written agreement,
contract, commitment, arrangement or understanding with
respect to any of the foregoing.

Notwithstanding any other term or provision of this Section
5.02(I):

(i) the Company may close the financing of its
Maltibog project without the prior consent of Parent
provided that Parent has been given the opportunity to
review the relevant financing documents and Company has
given Parent at least two days' prior notice of the
anticipated closing date;

<PAGE>

(ii) the Company may make and commit to ordinary
course budgeted operational capital and other
expenditures relating to projects in operation or
construction without the consent of Parent;

(iii) the Company may make planned capital and
operational expenditures with respect to its Maltibog
project, without the consent of Parent;

(iv) the Company will not make any capital or
other expenditures in excess of $500,000 in the
aggregate with respect to its Nevada Power Pumped
Storage contract, its Alto Peak contract and any other
contract related to a development project without prior
consultation with Parent and Parent's consent;

(v) the Company may honor all existing
contractual obligations relating to projects in
operation or construction without the consent of
Parent; and

(vi) the Company will not incur any additional
indebtedness (secured or unsecured) or make new project
or capital commitments in excess of $1,000,000 without
prior consultation with Parent and Parent's consent.

(II) Parent covenants and agrees that, between the
date of this Agreement and the Effective Time (unless the
election contemplated by Section 2.06(b)(i) has been made),
unless the Company shall otherwise consent in writing and except
as is otherwise permitted hereby, neither Parent nor any of the
Parent Subsidiaries shall, directly or indirectly, do any of the
following:

(a) (i) issue or sell, or propose the issuance or
sale of, any shares of its or its subsidiaries' capital
stock of any class, or any options, warrants, convertible
securities or other rights of any kind to acquire any shares
of its or its subsidiaries' capital stock, or any other
ownership interest (except with respect to Parent Common
Stock previously reserved for issuance as disclosed in
Section 3.03 hereof) if (A) the proceeds of any such
issuance or sale ("Proceeds") exceed $50,000,000, and (B)
such Proceeds are not applied, if necessary, so as to allow
Parent to exercise the election contemplated by Section
2.06(b)(i); (ii) split, combine or reclassify any of its
outstanding common stock, or declare, set aside or pay any
dividend or distribution payable in cash, stock, property or
otherwise with respect to the common stock; (iii) redeem,
purchase or otherwise acquire or offer to redeem, purchase

<PAGE>

or otherwise acquire any shares of its capital stock, except
in the performance of its obligations under existing
employee plans or pursuant to a repurchase program under
Rule 10b-18 promulgated under the Exchange Act; or (iv)
authorize or propose or enter into any contract, agreement,
commitment or arrangement with respect to any of the matters
set forth in this Section 5.02(II)(a);

(b) in the case of Parent, merge or consolidate with
or into another person or engage in a recapitalization or
other similar extraordinary business transaction;

(c) make any material change in accounting policies,
other than as required by generally accepted accounting
principles; or

(d) enter into any oral or written agreement,
contract, commitment, arrangement or understanding with
respect to any of the foregoing.

SECTION 5.03. No Shopping. The Company and its
Subsidiaries will not, directly or indirectly, through any
officer, director, agent, financial adviser or otherwise,
solicit, initiate or encourage submission of proposals or offers
from any person relating to any Competing Transaction (as defined
below), or participate in any negotiations regarding, or furnish
to any other person any information (except for information which
has been previously publicly disseminated by the Company in the
ordinary course of business) with respect to, or otherwise
cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other
person to do or seek any of the foregoing. Notwithstanding the
foregoing, the parties hereby agree that the Board of Directors
of the Company may (i) review and act upon (which actions may
include, without limitation, providing confidential information,
negotiating a transaction and entering into an agreement for a
transaction) an unsolicited proposal by any other person relating
to any of the transactions referred to in the preceding sentence,
if the Board of Directors determines in good faith, after
consultation with and based upon the advice of its financial and
legal advisors, that failing to review and act upon such proposal
would constitute a breach of fiduciary duty and (ii) comply with
Rule 14e-2 promulgated under the Exchange Act with regard to a
tender or exchange offer, and such review, conduct or compliance
will not violate this Section 5.03. For purposes of this
Agreement, "Competing Transaction" shall mean any of the
following involving the Company or any Subsidiary: (i) any
merger, consolidation, share exchange, business combination, or
other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 50% or more of

<PAGE>

the assets of the Company and the Subsidiaries, taken as a whole,
in a single transaction or series of transactions; (iii) any
tender offer or exchange offer for 50% or more of the Shares or
the filing of a registration statement under the Securities Act
in connection therewith; (iv) any person having acquired
beneficial ownership or the right to acquire beneficial ownership
of, or any "group" (as such term is defined under Section 13(d)
of the Exchange Act and the rules and regulations promulgated
thereunder) having been formed which beneficially owns or has the
right to acquire beneficial ownership of, 50% or more of the
Shares; or (v) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage
in any of the foregoing.

ARTICLE VI
ADDITIONAL AGREEMENTS

SECTION 6.01. Registration Statement/Proxy Statement.
(a) As promptly as practicable after the consummation of the
Offer, the Company and Parent shall prepare and file with the SEC
preliminary proxy materials which shall constitute the
preliminary Proxy Statement and a preliminary prospectus with
respect to the Parent Common Stock to be issued in connection
with the Merger. As promptly as practicable after comments are
received from the SEC with respect to such preliminary materials
and after the furnishing by the Company and Parent of all
information required to be contained therein, the Company shall
file with the SEC the definitive Proxy Statement and Parent shall
file with the SEC the Registration Statement (which shall include
the definitive Proxy Statement), and Parent and the Company shall
use their best efforts to cause the Registration Statement to
become effective and to mail the definitive Proxy Statement to
their respective stockholders as soon thereafter as practicable.

(b) Parent and the Company shall make all necessary
filings with respect to the Merger and the Parent Share Proposal
under the Securities Act and the Exchange Act and the rules and
regulations thereunder, under applicable blue sky or similar
securities laws and the New York Stock Exchange, Inc. and shall
use all reasonable efforts to obtain required approvals and
clearances with respect thereto.

SECTION 6.02. Stock Exchange Listing. Parent shall
use its best efforts to list on the NYSE, upon official notice of
issuance, the Parent Common Stock to be issued pursuant to the
Merger.

SECTION 6.03. Additional Agreements. The Company,
Parent and Merger Sub will each comply in all material respects

<PAGE>

with all applicable laws and with all applicable rules and
regulations of any governmental authority in connection with its
respective execution, delivery and performance of this Agreement
and the transactions contemplated hereby. Each of the parties
hereto agrees to use all reasonable efforts to obtain in a timely
manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and to use all
reasonable efforts to take, or cause to be taken, all other
actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective
as promptly as practicable the transactions contemplated by this
Agreement.

SECTION 6.04. Notification of Certain Matters. The
Company shall give prompt notice to Parent, and Parent shall give
prompt notice to the Company, of (i) the occurrence or
non-occurrence of any event whose occurrence or non-occurrence
would be likely to cause any representation or warranty contained
in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time
and (ii) any material failure of the Company, Parent or Merger
Sub, as the case may be, or any officer, director, employee or
agent thereof, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder;
provided, however, that the delivery of any notice pursuant to
this Section 6.04 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.

SECTION 6.05. Access to Information. (a) From the
date hereof to the Effective Time, each of Parent and the Company
shall, and shall cause their respective subsidiaries, officers,
directors, employees, auditors, attorneys and agents to, afford
the officers, employees, auditors, attorneys and agents of the
other party (the "Respective Representatives") complete access at
all reasonable times and on reasonable notice to its officers,
employees, agents, accountants, properties, offices and other
facilities and to all books and records, and shall furnish such
Respective Representatives with all financial, operating and
other data and information and all information relating to the
regulatory status of its Plants (whether held by it, a
subsidiary, or agents thereof) as the other party, through its
officers, employees, agents or accountants, may reasonably
request.

(b) All information obtained by Parent or the Company
pursuant to this Section 6.05 shall be kept confidential in
accordance with the confidentiality agreements dated December 4,
1994 between Parent and the Company.

<PAGE>

(c) In the event of the termination of this Agreement,
each of Parent and the Company shall, and shall cause its
affiliates to, return promptly every document furnished to them
by the other party or its Respective Representatives in
connection with the transactions contemplated hereby and any
copies thereof which may have been made, and shall cause its
Respective Representatives to whom such documents were furnished
promptly to return such documents and any copies thereof any of
them may have made, other than documents filed with the
Commission or otherwise publicly available.

SECTION 6.06. Public Announcements. Parent and the
Company shall consult with each other before issuing any press
release or otherwise making any public statements with respect to
the Merger and shall not issue any such press release or make any
such public statement before such consultation, except as may be
required by law.

SECTION 6.07. Best Efforts; Cooperation. Upon the
terms and subject to the conditions hereof, each of the parties
hereto agrees to use its best efforts to take or cause to be
taken all actions and to do or cause to be done all things
necessary, proper or advisable to consummate the transactions
contemplated by this Agreement and shall use its best efforts to
obtain all necessary waivers, consents and approvals, and to
effect all necessary filings under the Exchange Act. The parties
shall cooperate in responding to inquiries from, and making
presentations to, regulatory authorities.

SECTION 6.08. Agreement to Defend and Indemnify. (a)
If any action, suit, proceeding or investigation relating hereto
or to the transactions contemplated hereby is commenced, whether
before or after the Effective Time, the parties hereto agree to
cooperate and use their best efforts to defend against and
respond thereto. It is understood and agreed that, subject to
the limitations, if any, on indemnification contained in
applicable law, the Company shall, to the fullest extent
permitted under applicable law and regardless of whether the
Merger becomes effective, indemnify and hold harmless, and after
the Effective Time, the Surviving Corporation and Parent shall,
to the fullest extent permitted under applicable law, indemnify
and hold harmless, each director, officer, employee, fiduciary
and agent of the Company or any Subsidiary and their respective
subsidiaries and controlled affiliates, including, without
limitation, officers and directors serving as such on the date
hereof (collectively, the "Indemnified Parties"), from and
against any costs or expenses (including attorneys' fees),
judgments, fines, losses, claims, damages, liabilities and
amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation arising out of or pertaining to

<PAGE>

any of the transactions contemplated hereby, including without
limitation liabilities arising under the Securities Act or the
Exchange Act in connection with the Merger. Parent shall cause
the Surviving Corporation to continue in effect the
indemnification provisions currently provided (or provisions that
are no less favorable to the Indemnified Parties than those
currently provided) by the Articles of Incorporation, Bylaws or
any written indemnification agreement of the Company for a period
of not less than six years following the Effective Time. This
Section shall survive the consummation of the Merger. This
covenant shall survive any termination of this Agreement pursuant
to Section 8.01 hereof. Notwithstanding Section 9.07 hereof,
this Section is intended to be for the benefit of and to grant
third party rights to Indemnified Parties whether or not parties
to this Agreement, and each of the Indemnified Parties shall be
entitled to enforce the covenants contained herein.

(b) Parent shall cause to be maintained in effect for
not less than three years after the Effective Time the current
policies of directors' and officers' liability insurance
maintained by the Company and its Subsidiaries with respect to
matters occurring prior to the Effective Time; provided, however,
that Parent may substitute therefor its current policies or other
policies of at least the same coverage containing terms and
conditions which are no less advantageous to the Indemnified
Parties; provided, however, that in no event shall Parent be
required to expend pursuant to this Section 6.08(b) more than an
amount equal to 125% of current annual premiums paid by the
Company for such insurance.

(c) If Parent, the Surviving Corporation or any of
either of their successors or assigns (i) consolidates with or
merges into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger
or (ii) transfers all or substantially all of its properties and
assets to any person, then and in each such case, proper
provision shall be made so that the successors and assigns of
Parent or Surviving Corporation assume the obligations set forth
in this Section 6.08.

SECTION 6.09. Disposition of Litigation. (a) The
parties agree to file jointly a stipulation of dismissal without
prejudice, or take other reasonable steps necessary to terminate
without prejudice, the action entitled Magma Power Company, et
al. v. California Energy Company, Inc., et al., Case No. CV-N-94-
00719-DWH pending in the United States District Court for the
District of Nevada, including any and all claims and
counterclaims asserted against the Company, its directors, its
officers, Parent and Merger Sub, with each party bearing its own
costs and attorneys' fees. The Company agrees that it will not

<PAGE>

settle any litigation currently pending, or commenced after the
date hereof, against the Company or any of its directors by any
stockholder of the Company relating to the Offer or this
Agreement, without the prior written consent of Parent.

(b) The Company will not voluntarily cooperate with
any third party that has sought or may hereafter seek to restrain
or prohibit or otherwise oppose the Offer or the Merger and will
cooperate with Parent and Merger Sub to resist any such effort to
restrain or prohibit or otherwise oppose the Offer or the Merger,
unless failing to so cooperate with such third party or
cooperating with Parent or Merger Sub, as the case may be, would
constitute a breach of fiduciary duty of the Board of Directors
of the Company or otherwise violate any applicable law or rules.

SECTION 6.10. Employee Benefits. (a) Parent shall
cause the Surviving Corporation and its Subsidiaries to (x) honor
all employment, change in control, deferred compensation,
pension, retirement and severance agreements in effect on the
date hereof between the Company or one of its Subsidiaries and
any employee of the Company or one of its Subsidiaries, or
maintained for the benefit of any employee of the Company or one
of its Subsidiaries, all of which have been made available to
Parent, and (y) honor all bonus determinations for the fiscal
year ending December 31, 1994 made by the Company or any of its
Subsidiaries prior to the date hereof with respect to the bonus
plans and arrangements of the Company and its Subsidiaries.

(b) For a period of one year commencing on the
Effective Time, Parent shall cause the Surviving Corporation to
provide active employees of the Company and its Subsidiaries with
benefits (including, without limitation, welfare benefits) that
are no less favorable, taken as a whole, than the benefits
provided under the Company Benefit Plans (other than equity-based
plans and bonus plans) as in effect immediately prior to the
Effective Time. To the extent that service is relevant for
eligibility, vesting or benefit calculations or allowances
(including, without limitation, entitlements to vacation and sick
days) under any plan or arrangement maintained in order to
provide the benefits described in the preceding sentence, such
plan or arrangement shall credit employees for service on or
prior to the Effective Time with the Company or any of its
Subsidiaries.

(c) Parent shall as promptly as practicable after the
Effective Time cause the Surviving Corporation to (or the Company
may prior to the Effective Time) amend each demand note made in
favor of the Company by an employee of the Company or one of its
Subsidiaries (each of which has been made available to Parent) to
provide that (x) such demand note will not be repayable on demand

<PAGE>

from the Company and (y) upon the involuntary termination without
cause of the employment of such employee, all sums owed under
such demand note shall be payable in equal quarterly installments
over a period of not less than 36 months.

(d) With respect to each employee of the Company
(other than employees of the Company which are parties to a
"change in control" or "severance" agreements referred to in the
Previous 14D-9) who is, within the one year period following the
closing of the Offering, either (i) terminated without cause or
(ii) terminated as a result of a reduction in force, Parent shall
cause the Surviving Corporation to make the following payments:

(1) if, upon the effective date of such
employee's termination, such employee has less than one
year's service with the Company, a payment equal to
three months base salary plus an amount equal to one-
fourth of the prior years targeted bonus for such
employee, payable in twelve equal installments over the
twelve months following such termination; or

(2) if, upon the effective date of such
employee's termination, such employee has one year or
more of service with the company, a payment equal to
six months base salary plus an amount equal to one-
fourth of the prior years targeted bonus for each such
employee, payable in twelve equal installments over the
twelve months following such termination.

For the purposes of subclauses (1) and (2), if an
employee was not eligible for a bonus in the referenced prior
year, then the targeted bonus for the current year shall be used.
An employee shall not be eligible for the payments specified in
subclauses (1) or (2) if such employee's termination relates to a
reduction in force referred to subclause (ii) above and such
employee has been offered a comparable position (in terms of
compensation) by Parent at any location; provided however, that
no such amounts referenced in (1) and (2) will be payable if, in
the good faith determination of the Company, the employee's job
performance did not merit continued employment or offer of
relocation to a comparable position. An employee may not receive
the severance payments contemplated by this Section 6.10(d) and
also receive any severance payments under the Company's severance
policy covered by Sections 6.10(a) and (b) and identified on a
schedule hereto.

SECTION 6.11. Certain Action of Parent and Merger Sub.
Promptly following the execution of this Agreement, Parent and
Merger Sub shall suspend their solicitation of requests for the
call of a special meeting of the Company's stockholders and their

<PAGE>

solicitation of proxies to elect nominees to the Company's Board
of Directors.

ARTICLE VII
CONDITIONS OF MERGER

SECTION 7.01. Conditions to Obligation of Each Party
to Effect the Merger. The respective obligations of each party to
effect the Merger shall be subject to the following conditions:

(a) Offer. Parent shall have made, or caused to be
made, the Offer and shall have purchased, or caused to be
purchased, Shares pursuant to the Offer;

(b) Company Stockholder Approval. This Agreement and
the transactions contemplated hereby shall have been approved and
adopted by the requisite vote of the holders of the Company
Common Stock.

(c) Parent Stockholder Approval. The Parent Share
Proposal shall have been approved by the requisite vote of the
holders of Parent Common Stock.

(d) Stock Exchange Listing. The Parent Common Stock
issuable in the Merger shall have been authorized for listing on
the NYSE upon official notice of issuance.

(e) Effectiveness of Registration Statement. The
Registration Statement shall have become effective in accordance
with the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall
have been issued by the Commission and remain in effect.

(f) No Prohibition. There shall not be in effect (i)
any judgment decree or order issued by any Federal, state or
local court of competent jurisdiction, or (ii) any statute, rule
or regulation enacted or promulgated by any Federal, state, local
or legislative, administrative or regulatory body of competent
jurisdiction, that in either of cases (i) or (ii) prohibits the
consummation of the Merger or makes such consummation illegal.

<PAGE>

SECTION 7.02. Additional Conditions to Obligations of
the Company. The obligation of the Company to effect the Merger
is also subject to the fulfillment of the following conditions:

(a) Representations and Warranties. The
representations and warranties of Parent and Merger Sub
contained in this Agreement shall be true and correct in all
material respects on the date hereof and shall also be true
and correct in all material respects on and as of the
Effective Time, except for changes contemplated by this
Agreement, with the same force and effect as if made on and
as of the Effective Time, except to the extent that the
failure of such representations and warranties to be so true
and correct, individually and in the aggregate, does not
have a Material Adverse Effect; provided, however, that any
inaccuracy of a representation or warranty, on the date
hereof or at the Effective Time, shall not result in the
non-satisfaction of this Section 7.02(a) unless any such
inaccuracy or inaccuracies, either (i) individually or in
the aggregate, constitute facts or circumstances having a
Material Adverse Effect (it being understood that such facts
or circumstances shall be deemed to be so constituted if the
particular representation or warranty which is inaccurate
contains a Material Adverse Effect standard) or (ii) are
clearly intentional misrepresentations; and

(b) Agreements, Conditions and Covenants. Parent and
Merger Sub shall have performed or complied in all material
respects with all agreements, conditions and covenants
required by this Agreement to be performed or complied with
by them on or before the Effective Time.

SECTION 7.03. Additional Conditions to Obligations of
Parent and Merger Sub. The obligations of Parent and Merger Sub
to effect the Merger are also subject to the following
conditions:

(a) Representations and Warranties. The
representations and warranties of the Company contained in
this Agreement shall be true and correct in all material
respects on the date hereof and shall also be true and
correct in all material respects on and as of the Effective
Time, except for changes contemplated by this Agreement,
with the same force and effect as if made on and as of the
Effective Time, except to the extent that the failure of
such representations and warranties to be so true and
correct, individually and in the aggregate, does to have a
Material Adverse Effect; provided, however that any
inaccuracy of a representation or warranty, on the date
hereof or at the Effective Time, shall not result in the

<PAGE>

non-satisfaction of this Section 7.03(a) unless any such
inaccuracy or inaccuracies, either (i) individually or in
the aggregate, constitute facts or circumstances having a
Material Adverse Effect (it being understood that such facts
or circumstances shall be deemed to be so constituted if the
particular representation or warranty which is inaccurate
contains a Material Adverse Effect standard) or (ii) are
clearly intentional misrepresentations; and

(b) Agreements; Conditions and Covenants. The Company
shall have performed or complied in all material respects
with all agreements, conditions and covenants required by
this Agreement to be performed or complied with by it on or
before the Effective Time.

(c) Funding. Parent and/or Merger Sub shall have
received the proceeds of the financing contemplated by
Section 3.10 hereof.

ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER

SECTION 8.01. Termination. This Agreement may be
terminated at any time before the Effective Time:

(a) By mutual consent of the Boards of Directors of
Parent and the Company; or

(b) By the Company or Parent if the Offer shall not
have been consummated by February 28, 1995; or

(d) By either Parent or the Company if a court of
competent jurisdiction or governmental, regulatory or
administrative agency or commission shall have issued an order,
decree or ruling or taken any other action (which order, decree
or ruling the parties hereto shall use their best efforts to
lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall
have become final and nonappealable; or

(e) By Parent if (i) the Board of Directors of the
Company withdraws, modifies or changes its recommendation of this
Agreement or any of the transactions contemplated by this
Agreement or shall have resolved to do any of the foregoing, or
(ii) the Board of Directors of the Company recommends to the

<PAGE>

holders of Shares any proposal with respect to a merger,
consolidation, share exchange or similar transaction involving
the Company or any of its Subsidiaries, other than the
transactions contemplated by this Agreement; or

(f) By Parent if, without the Company's consent, any
person has acquired beneficial ownership or the right to acquire
beneficial ownership of or any "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) has been formed which beneficially owns,
or has the right to acquire "beneficial ownership" (as defined in
the Rights Agreement) of, more than 10% of the Shares; or

(g) By the Company or Parent if (i) a corporation,
partnership, person or other entity or group shall have made a
bona fide offer that the Board of Directors of the Company
determines in its good faith judgment and in the exercise of its
fiduciary duties, after consultation with and based upon the
advice of its financial and legal advisors, is more favorable to
the Company's stockholders than the Offer and the Merger or (ii)
any person (including, without limitation, the Company or any
affiliate thereof), other than Parent or any affiliate of Parent,
shall have become the beneficial owner of more than 50% of the
then outstanding Shares; or

(h) By either Parent or the Company if the other party
shall have breached this Agreement hereunder in any material
respect and such breach continues for a period of ten days after
the receipt of notice of the breach from the nonbreaching party.

SECTION 8.02. Effect of Termination. In the event of
termination of this Agreement as provided in Section 8.01 hereof,
this Agreement shall forthwith become void and there shall be no
liability on the part of Parent, Merger Sub or the Company,
except (i) as set forth in Sections 8.03, 8.04 and 9.01 hereof,
and (ii) nothing herein shall relieve any party from liability
for any willful breach hereof.

SECTION 8.03. Agreement Termination Fee. (a) If this
Agreement is terminated pursuant to Section 8.01(e) or (g) or
terminated by Parent pursuant to Section 8.01(h), the Company
shall pay Parent a fee of $8,000,000 plus Parent's actual
documented out-of-pocket expenses incurred since September 13,
1994 in connection with this Agreement and the transactions
contemplated hereby (including the previous offer referred to in
the Previous 14D-9), including, without limitation legal and
professional fees and expenses.

(b) Any payment required to be made pursuant to
Section 8.03(a) shall be made not later than one business day

<PAGE>

after termination of this Agreement and shall be made by wire
transfer of immediately available funds to an account designated
by Parent.

SECTION 8.04. Offer Fee. (a) If, by December 19,
1994, Parent has not delivered to the Company either a revised
Commitment Letter or definitive loan documentation reflecting the
financing contemplated by such Commitment Letter which, in each
case (i) do not contain any due diligence conditions regarding
Parent and the Company and its Subsidiaries and (ii) have a
definition of "material adverse effect" and/or "material adverse
change" that substantially conforms in all material respects with
the definition of Material Adverse Effect (other than as provided
in subclause (i) thereof) contained herein with respect to Parent
and the Company, then Parent shall owe the Company a fee of
$8,000,000 payable in accordance with and to the extent provided
in subsection (b) below.

(b) The $8,000,000 fee referred to in Section 8.04(a)
shall be paid by Parent to the Company only upon (i) termination
or expiration of the Offer without Merger Sub having accepted for
payment the shares tendered pursuant thereto or (ii) termination
of this Agreement pursuant to Section 8.01(b) (collectively, the
"Offer Termination Events") unless failure to close the Offer
results from one or more of the following:

(i) A Material Adverse Effect with
respect to the Company shall exist or shall have
occurred and be continuing on or prior to the
relevant Offer Termination Event;

(ii) The Company shall have materially
breached this Agreement and Parent shall have
terminated this Agreement under Section 8.01(h),
in each case on or prior to the relevant Offer
Termination Event; or

(iii) Generally accepted accounting principles
would require a restatement of the Company's audited
financial statements contained in the Company SEC
Reports.

(c) Any payment required to be made pursuant to
Section 8.04 shall be made not later than one business day after
the occurrence of an Offer Termination Event and shall be made by
wire transfer of immediately available funds to an account
designated by the Company.

<PAGE>

ARTICLE IX
GENERAL PROVISIONS

SECTION 9.01. Non-Survival of Representations,
Warranties and Agreements. The representations, warranties and
agreements in this Agreement shall
terminate at the Effective Time or the termination of this
Agreement pursuant to Section
8.01, as the case may be, except that the agreements set forth in
Article I and Section 6.08
shall survive the Effective Time indefinitely and those set forth
in Sections 6.05(b), 6.05(c), 6.10 and 9.03 shall survive
termination indefinitely.

SECTION 9.02. Notices. All notices and other
communications given or made pursuant hereto shall be in writing
and shall be deemed to have been duly given or made as of the
date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice,
except that notices of changes of address shall be effective upon
receipt):

(a) if to Parent or Merger Sub

California Energy Company, Inc.
10831 Old Mill Road
Omaha, Nebraska 68154
Attention: Steven A. McArthur, Esq.

with a copy to:

Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Peter J. Hanlon, Esq.

(b) if to the Company:

Magma Power Company
4365 Executive Drive, Suite 900
San Diego, California 92121
Attention: Jon R. Peele, Esq.

with a copy to:

Shearman & Sterling
555 California Street

<PAGE>

San Francisco, California 94104
Attention: Michael J. Kennedy, Esq.

SECTION 9.03. Expenses. Except as is provided in
Section 8.03 hereof, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and
expenses.

SECTION 9.04. Certain Definitions. For purposes of
this Agreement, the term: (a) "affiliate" of a person means a
person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, the first mentioned person;

(b) "control" (including the terms "controlled by" and
"under common control with") means the possession, direct or
indirect, of the power to direct or cause the direction of the
management and policies of a person, whether through the
ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise; and

SECTION 9.05. Headings. The headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.

SECTION 9.06. Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected
in any manner adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of
being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner to the
end that transactions contemplated hereby are fulfilled to the
maximum extent possible.

SECTION 9.07. Entire Agreement; No Third-Party
Beneficiaries. This Agreement constitutes the entire agreement
and supersedes any and all other prior agreements and
undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof and, except as

<PAGE>

otherwise expressly provided herein and for the provisions of
Sections 2.10, 6.05 and 6.10 hereof, is not intended to confer
upon any other person any rights or remedies hereunder.

SECTION 9.08. Waiver. At any time before the
Effective Time, any party hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be
valid only as against such party and only if set forth in an
instrument in writing signed by such party.

SECTION 9.09. Amendment. This Agreement may be
amended by the parties hereto by action taken by Parent and
Merger Sub, and by action taken by or on behalf of the Company's
Board of Directors at any time before the Effective Time,
provided, however, that, after approval of the Merger by the
stockholders of the Company, no amendment may be made which would
materially adversely impact the interests of the Company's
stockholders or reduce the amount or change the type of
consideration into which each Share will be converted upon
consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.

SECTION 9.10. Assignment. This Agreement shall not be
assigned by operation of law or otherwise, except that Parent and
Merger Sub may assign all or any of their rights hereunder to any
affiliate of Parent provided that no such assignment shall
relieve the assigning party of its obligations hereunder.

SECTION 9.11. Governing Law. This Agreement shall be
governed by, and construed in accordance with, the internal laws
of the State of Delaware.

SECTION 9.12. Counterparts. This Agreement may be
executed in one or more counterparts and by facsimile, and by the
different parties hereto in separate counterparts, each of which
when executed shall be deemed to be an original but all of which
shall constitute one and the same agreement.

<PAGE>

IN WITNESS WHEREOF, Parent, Merger Sub and the Company
have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly
authorized.

CALIFORNIA ENERGY COMPANY, INC.

By: /s/ David L. Sokol
Name: David L. Sokol
Title: Chairman, President
and Chief Executive
Officer

CE ACQUISITION COMPANY, INC.

By: /s/ David L. Sokol
Name: David L. Sokol
Title: Chairman, President
and Chief Executive
Officer

MAGMA POWER COMPANY

By: /s/ Ralph W. Boeker
Name: Ralph W. Boeker
Title: President and Chief
Executive Officer

<PAGE>

ANNEX I
Conditions to the Offer

Notwithstanding any other provision of the Offer, Merger Sub
shall not be required to accept for payment or pay for, or may
delay the acceptance for payment of or payment for, tendered
Shares, or may, in the sole discretion of Merger Sub, terminate
or amend the Offer as to any Shares not then paid for if (i) at
the Expiration Date the Minimum Tender Condition or the Financing
Condition shall not have been satisfied or waived, or (ii) on or
after December 9, 1994, and at or before the acceptance for
payment for any of such Shares, any of the following events shall
occur:

(a) there shall be instituted or pending any action or
proceeding by any government or governmental authority or agency,
domestic or foreign, or by any other person, domestic or foreign,
before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, to delay or
otherwise directly or indirectly to restrain or prohibit the
making of the Offer, the acceptance for payment of or payment for
some of or all the Shares by Merger Sub or any other affiliate of
Parent, the consummation by Merger Sub of the Merger or seeking
to obtain material damages, (ii) seeking to prohibit the
ownership or operation by Merger Sub of all or any material
portion of the business or assets of the Company and its
subsidiaries or of Merger Sub, or to compel Merger Sub to dispose
of or hold separately all or any material portion of the business
or assets of Merger Sub or the Company or any of its subsidiaries
or seeking to impose any material limitation on the ability of
Merger Sub or any other affiliates of Parent to conduct their
business or own such assets, (iii) seeking to impose or confirm
limitations on the ability of Merger Sub or any other affiliates
of Parent effectively to exercise full rights of ownership of the
Shares, including, without limitation, the right to vote any
Shares acquired by any such person on all matters properly
presented to the Company's stockholders, (iv) seeking to require
divestiture by Merger Sub or any other affiliates of Parent of
any Shares, or (v) seeking any material diminution in the
benefits expected to be derived by Merger Sub or any other
affiliates of Parent as a result of the transactions contemplated
by the Offer or the Merger;

(b) there shall be any action taken, or any statute,
rule, regulation, interpretation, judgment, order or injunction
enacted, enforced, promulgated, amended, issued or deemed
applicable (i) to Merger Sub or (ii) to the Offer or the Merger
by any court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, other than
the routine application of the waiting period provisions of the
HSR Act to the Offer or to the Merger, which might, directly or

I-1

<PAGE>

indirectly, result in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;

(c) it shall have been publicly disclosed or
Merger Sub shall have otherwise learned that (i) any person,
entity (including the Company or any of its subsidiaries) or
"group" (within the meaning of Section 13(d)(3) of the Exchange
Act) shall have acquired beneficial ownership of more than 20% of
any class or series of capital stock of the Company (including
the Shares), through the acquisition of stock, the formation of a
group or otherwise, or shall have been granted any right, option
or warrant, conditional or otherwise, to acquire beneficial
ownership of more than 20% or any class or series of capital
stock of the Company (including the Shares) other than
acquisitions for bona fide arbitrage purposes only and except as
disclosed in a Schedule 13D or 13G on file with the SEC on
December 5, 1994 or (ii) any such person, entity or group which
before December 5, 1994, had filed such a Schedule with the SEC
has acquired or proposes to acquire, through the acquisition of
stock, the formation of a group or otherwise, beneficial
ownership of an additional 5% or more of any class or series of
capital stock of the Company (including the Shares), or shall
have been granted any right, option or warrant, conditional or
otherwise, to acquire beneficial ownership of an additional 5% or
more of any class or series of capital stock of the Company
(including the Shares); provided, however, that if such person or
group acquired the shares without the Company's consent and the
Company has not taken any action under its Rights Plan to exempt
such acquisition from the terms thereof, then the foregoing
condition shall be inapplicable;

(d) the Company shall have failed to comply with in
any material respect any of its obligations under the Agreement
or any representation or warranty of the Company in such
Agreement shall not be true and correct in any material respect
and such failure to comply or be true and correct shall have a
Material Adverse Effect;

(e) a Material Adverse Effect with respect to the
Company shall have occurred;

(f) this Agreement shall have been terminated in
accordance with its terms; or

(g) the Company's Board of Directors shall have
withdrawn, modified or amended in any unfavorable respect its
recommendation of the Offer or shall have resolved to do so or
shall have entered into an agreement with a third party with
respect to a Competing Transaction;

which, in the good faith judgment of Parent and Merger Sub with
respect to each and every matter referred to above and regardless

I-2

<PAGE>

of the circumstances (including any action or inaction by Parent
or Merger Sub) giving rise to any such condition, makes it
inadvisable to proceed with the Offer or with such acceptance for
payment or payment.

The foregoing conditions are for the sole benefit of
Parent and Merger Sub and may be asserted by Parent or Merger Sub
or may be waived by Parent or Merger Sub in whole or in part at
any time and from time to time in its sole discretion.

I-3

<PAGE>

ANNEX B

[GOLDMAN, SACHS & CO. LETTERHEAD]

December 9, 1994

The Board of Directors
Magma Power Company
4365 Executive Drive
Suite 900
San Diego, CA 92121

Gentlemen:

You have requested that we confirm our oral opinion as to the
fairness to the holders (other than California Energy Company,
Inc. ("California Energy") and its affiliates) of the outstanding
shares of Common Stock, par value $0.10 per share (the "Shares"),
of Magma Power Company (the "Company") of the Cash Consideration
and the Merger Consideration (as defined below) proposed to be
paid by CE Acquisition Company, Inc. ("Purchasor"), a wholly
owned subsidiary of California Energy, and California Energy in
the Offer and the Merger (as defined below) pursuant to the
Agreement and Plan of Merger dated as of December 5, 1994 among
California Energy, Purchaser and the Company (the "Merger
Agreement").

The Merger Agreement provides for a tender offer for 12,400,000
Shares (the "Offer") pursuant to which Purchaser will pay $39.00
per Share in cash for each Share accepted (the "Cash
Consideration"). The Merger Agreement further provide that
following completion of the Offer, Purchaser will be merged with
and into the Company (the "Merger") and each outstanding Share
(other than Shares already owned by California Energy or
Purchaser) will be converted into the right to receive, at the
option of California Energy:

(I) an amount in cash equal to the quotient of (A) $38.75
multiplied by the number of Shares outstanding at the
effective time of the Merger (the "Effective Time"), less
$39.00 multiplied by the number of Shares owned by
California Energy and its affiliates immediately prior to
the Effective Time, divided by (B) the number of Shares
outstanding at the Effective Time (other than Shares owned
by California Energy and its affiliates) (the "All Cash
Component Amount"); or

<PAGE>

Magma Power Company
December 9, 1994
Page 2

(II) both (A) an amount in cash equal to the quotient of
$28.50 multiplied by the number of Shares outstanding at the
Effective Time, less $39.00 multiplied by the number of
Shares owned by California Energy and its affiliates
immediately prior to the Effective Time, divided by the
number of Shares outstanding at the Effective Time (other
than Shares owned by California Energy and its affiliates)
(such amount, the "Mixed Cash Component Amount"), and (B)
the number of shares of Common Stock, par value $0.0676 per
share (the "California Energy Common Stock") of California
Energy equal to the quotient of (I) $39.00 less (II) the
Mixed Cash Component Amount, divided by the average closing
price (the "Average Closing Price") of California Energy
Common Stock on the New York Stock Exchange during the 15
consecutive trading days ending the fifth business day prior
to the Effective Time, provided, however, that if such
average closing price exceeds $18.73, the Average Closing
Price will be $18.73, and if such average closing price is
less than $14.27, the Average Closing Price will be $14.27.

The consideration to be received by the holders of Shares in the
Merger, under either the All Cash Component Amount or (II)(A) and
(II(B), collectively, as applicable, is referred to herein as the
"Merger Consideration". The Cash Consideration and the Merger
Consideration are collectively referred to herein as the
"Consideration".

Goldman, Sachs & Co., as part of its investment banking business,
is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other
purposes. We are familiar with the Company having acted as its
financial advisor in connection with, and having participated in
certain of the negotiations leading to the Merger Agreement. In
the course of the trading activities of Goldman, Sachs & Co.
prior to our retention in connection with the matter, the Firm
accumulated a long position of 69,100 Shares.

In connection with this opinion, we have reviewed, among other
things, the Merger Agreement; Annual Reports to Stockholders and
Annual Reports on Form 10-K of the Company and California Energy
for the five years ended December 31, 1993; certain interim

<PAGE>

Magma Power Company
December 9, 1994
Page 3

reports to stockholders and Quarterly Reports on Form 10-Q of the
Company and California Energy; certain other communications from
the Company and California Energy to their respective
stockholders; certain internal financial analyses and forecasts
for the Company prepared by the management of the Company; and
certain internal financial analyses and forecasts for the Company
and California Energy prepared by the management of California
Energy. We also have held discussions with members of the senior
managements of each of the Company and California Energy
regarding the past and current business operations, financial
condition and future condition and future prospects of their
respective companies and as combined in the contemplated Merger.
We have reviewed the reported price and trading activity for both
the Shares and the California Energy Common Stock, compared
certain financial and stock market information for the Company
and California Energy, respectively, with similar information for
certain other companies the securities of which are publicly
traded, reviewed the financial terms of certain recent business
combinations in the independent power production industry
specifically and in other industries generally and considered
such other information, held such other discussions and performed
such other studies and analyses as we considered appropriate.

We have rolled without independent verification upon the accuracy
and completeness of all of the financial information and other
information reviewed by us for purposes of this opinion. In
addition, we have not made an independent evaluation or appraisal
of the assets and liabilities of either the Company or California
Energy or any of their subsidiaries and we have not been
furnished with any such evaluation or appraisal.

Based upon and subject to the foregoing and such other matters as
we considered relevant, we confirm our oral opinion that, as of
December 5, 1994, the Cash Consideration and the Merger
Consideration to be received by the holders of Shares in the
Offer and the Merger, taken as a unitary transaction, are fair to
the holders of Shares receiving such Consideration (other than
California Energy and its affiliates).

Very truly yours,

/s/ Goldman Sachs & Co.

GOLDMAN, SACHS & CO.

<PAGE>

ANNEX C

[GLEACHER & CO. INC. LETTERHEAD]

December 6, 1994

Board of Directors
California Energy Company, Inc.
10831 Old Mill Road
Omaha, NE 68154

Dear Ladies and Gentlemen:

California Energy Company, Inc., a Delaware corporation (the
"Company" or "CECI"), CE Acquisition Company, Inc., a Delaware
corporation and a wholly owned subsidiary of CECI ("Merger Sub"),
and Magma Power Company, a Nevada corporation ("Magma"), propose
to enter into an agreement (the "Agreement") pursuant to which
Merger Sub will make a tender offer (the "Offer") for at least a
majority of Magma's outstanding common stock, $0.10 par value per
share (the "Shares"), for $39.00 per share, net to the seller in
cash (the "Offer Consideration"). The Agreement also provides
that, following consummation of the Offer, Merger Sub will be
merged with and into Magma in a transaction (the "Merger") in
which each remaining Share will be converted into the right to
receive, at the Company's option, either (i) $39.00 per share in
a combination of cash and a number of shares of CECI's common
stock to be determined in accordance with the Agreement, or (ii)
$38.50 per Share in cash (the "Merger Consideration" and together
with the Offer Consideration, the "Consideration").

You have asked for our opinion as to whether the Consideration to
be paid by the Company pursuant to the Offer and the Merger is
fair to the Company from a financial point of view.

In arriving at the opinion set forth below, we have, among other
things:

(i) reviewed the audited and unaudited financial statements
and public Securities Exchange Commission filings for
the three most recent fiscal years and interim periods
to date of Magma and the Company ("SEC Reports");

(ii) on an operating and trading basis, compared financial
information relating to Magma's businesses with
published financial information concerning certain
companies whose businesses we deemed to be reasonably
similiar, in whole or in part, to those of Magma;

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California Energy Company, Inc.
December 6, 1994
Page 2

(iii) analyzed the market prices and trading characteristics
of the Shares and the Company's common stock for recent
periods to date;

(iv) conducted discussions with members of senior management
of the Company concerning its businesses and prospects;

(v) reviewed certain financial forecasts for Magma and the
Company, and projections of expected cost savings in a
business combination (together, the "Projections"), in
each case as prepared by the Company;

(vi) based on the Projections, performed a discounted cash
flow analysis of Magma including the expected cost
savings arising from a business combination;

(vii) based on the Projections, analyzed the pro forma
financial effects to the Company of the proposed
business combination;

(viii) assumed without independent investigation that no
material contingent liability exists with respect to
Magma or the Company which is not disclosed in the SEC
Reports;

(ix) reviewed the definitive merger agreement and related
transaction documentation; and

(x) reviewed such other financial studies and performed
such other analyses and took into account such other
matters as we deemed appropriate.

It should be noted that our opinion necessarily is based upon
prevailing market conditions and other circumstances and
conditions existing at the present time. In preparing our
opinion, we have relied upon the accuracy and completeness of all
information supplied or otherwise made available to us by the
Company, and we have not independently verified such information
or made or obtained an independent evaluation or appraisal of the
assets of the Company or Magma. With respect to the Projections,
we have assumed without independent investigation that the
Projections have been reasonably prepared by the Company, and
have been generated on bases reflecting the best currently
available estimates and judgment of the Company's management as

<PAGE>

California Energy Company, Inc.
December 6, 1994
Page 3

to the expected future financial performance of the Company or
Magma, as the case may be.

We are acting as financial advisor to the Company in connection
with the Offer and the Merger and will receive a fee for our
services.

Based on our analysis of the foregoing, and on our assessment of
the general economic environment, and assuming no material change
therein, we are of the opinion that the Consideration to be paid
by the Company pursuant to the Offer and the Merger is fair to
the Company from a financial point of view.

Very truly yours,

GLEACHER & CO. INC.

By: /s/ James Goodwin
James Goodwin
Managing Director

<PAGE>

ANNEX D

DISSENTERS' RIGHTS

78.481 STOCKHOLDER'S RIGHT TO DISSENT AND OBTAIN PAYMENT:
CONDITIONS; CHALLENGE OF ACTION.-1. Except as otherwise provided
in NRS 78.482, a stockholder is entitled to dissent from, and
obtain payment of the fair value of his shares in the event of,
any of the following corporate actions:

(a) Consummation of a plan of merger to which the
corporation is a party:

(1) If approval by the stockholders is required
for the merger by section 11 of this act or the
articles of incorporation and the stockholder is
entitled to vote on the merger; or

(2) If the corporation is a subsidiary and is
merged with its parent under NRS 78.457.

(b) Consummation of a plan of exchange to which the
corporation whose shares will be acquired, if the
stockholder is entitled to vote on the plan.

(c) Any corporate action taken pursuant to a vote of
the stockholders to the extent that the articles of
incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting
stockholders are entitled to dissent and obtain payment
for their shares.

2. A stockholder who is entitled to dissent and obtain
payment under NRS 78.471 to 78.502 may not challenge the
corporate action creating his entitlement unless the action is
unlawful or fraudulent with respect to the stockholder or the
corporation.

78.482 RIGHT TO DISSENT WITH RESPECT TO PLAN OF MERGER OR
SHARE EXCHANGE.- There is no right of dissent with respect to a
plan of merger or exchange in favor of holders of shares of any
class or series which, at the record date fixed to determine the
stockholders entitled to receive notice of and to vote at the
meeting at which the plan of merger or exchange is to be acted
on, were either listed on a national securities exchange or held
by at least 2,000 stockholders of record, unless in either case:

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1. The articles of incorporation of the corporation
issuing the shares provide otherwise; or

2. The holders of the class or series are required under
the plan of merger or exchange to accept for such shares anything
except:

(a) Cash, shares or shares and cash in lieu of
fractional shares of:

(1) The surviving or acquiring corporation;
or

(2) Any other corporation which, at the
effective date of the plan of merger or exchange,
were either listed on a national securities
exchange or held of record by at least 2,000
stockholders of record; or

(b) A combination of cash and shares of the kind
described in subparagraphs (1) and (2) of
paragraph (a).

78.483 ASSERTING DISSENTER'S RIGHTS.-1. A stockholder of
record may assert dissenter's rights as to fewer than all of the
shares registered in his name only if he dissents with respect to
all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on
whose behalf he asserts dissenter's rights. The rights of a
partial dissenter under this subsection are determined as if the
shares as to which he dissents and his other shares were
registered in the names of different stockholders.

2. A beneficial stockholder may assert dissenter's rights
as to shares held on his behalf only if:

(a) He submits to the corporation the written
consent of the stockholder of record to the dissent not
later than the time the beneficial stockholder asserts
dissenter's rights; and

(b) He does so with respect to all shares of which he
is the beneficial stockholder or over which he has power to
direct the vote.

78.491 DISSENTERS' RIGHTS: NOTICE OF STOCKHOLDERS'
MEETING; PROPOSED CORPORATE ACTION TO CREATE RIGHTS.-1. If the
proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, the notice of the
meeting must state that stockholders are or may be entitled to

D-2

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assert dissenters' rights under NRS 78.471 to 78.502, inclusive,
and be accompanied by a copy of those sections.

2. If the corporate action creating dissenters' rights is
taken without a vote of the stockholders, the corporation shall
notify in writing all stockholders entitled to assert dissenters'
rights that the action was taken and send them the dissenter's
notice described in NRS 78.493.

78.492 DISSENTERS' RIGHTS: NOTICE OF STOCKHOLDER'S MEETING;
WRITTEN NOTICE OF INTENT TO DEMAND PAYMENT OF SHARES.-1. If the
proposed corporate action creating dissenters' rights is
submitted to a vote at a stockholders' meeting, a stockholder who
wishes to assert dissenter's rights:

(a) Must deliver to the corporation, before the vote
is taken, written notice of his intent to demand payment for his
shares if the proposed action is effectuated; and

(b) Must not vote his shares in favor of the proposed
action.

2. A stockholder who does not satisfy the requirements of
subsection 1 is not entitled to payment for his shares under this
chapter.

78.493 DISSENTERS' NOTICE: STOCKHOLDERS WHO SATISFIED
REQUIREMENTS TO ASSERT RIGHTS.-1. If the proposed corporate
action creating dissenters' rights is authorized at a
stockholders' meeting, the corporation shall deliver a written
dissenter's notice to all stockholders who satisfied the
requirements to assert those rights.

2. The dissenter's notice must be sent no later than 10
days after the effectuation of the corporate action, and must:

(a) State where the demand for payment must be sent
and where and when certificates for certificated shares must
be deposited;

(b) Inform the holders of uncertificated shares as to
what extent the transfer of the shares will be restricted
after the demand for payment is received;

(c) Supply a form for demanding payment that includes
the date of the first announcement to the news media or to
the stockholders of the terms of the proposed corporate
action requires that the person asserting dissenter's rights
certify whether or not he acquired beneficial ownership of
the shares before that date;

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(d) Set a date by which the corporation must receive
the demand for payment, which may not be less than 30 nor
more than 60 days after the date the notice is delivered;
and

(e) Be accompanied by a copy of NRS 78.471 to 78.502,
inclusive.

78.494 DISSENTERS' NOTICE: DEMAND PAYMENT; DEPOSIT OF
DISSENTER'S CERTIFICATES.-1. A stockholder to whom a dissenter's
notice was sent must:

(a) Demand payment;

(b) Certify whether he acquired beneficial ownership
of the shares before the date required to be set forth in
the dissenter's notice for this certification; and

2. The stockholder who demands payment and deposits his
certificates retains all other rights of a stockholder until
those rights are canceled or modified by the taking of the
proposed corporate action.

3. The stockholder who does not demand payment or deposit
his certificates where required, each by the date set forth in
the dissenter's notice, is not entitled to payment for his shares
under NRS 78.471 to 78.502, inclusive.

78.496 RESTRICTION ON TRANSFER OF UNCERTIFICATED SHARES.-1.
The corporation may restrict the transfer of uncertificated
shares from the date the demand for their payment is received.

2. The person for whom dissenter's rights are asserted as
to uncertificated rights retains all other rights of a
stockholder until those rights are canceled or modified by the
taking of the proposed corporate action.

78.497 PAYMENT TO DISSENTER AFTER RECEIPT OF DEMAND FOR
PAYMENT OF AMOUNT ESTIMATED TO BE FAIR VALUE OF SHARES.-1. Except
as otherwise provided in NRS 78.498, within 30 days after receipt
of a demand for payment, the corporation shall pay each dissenter
who complied with NRS 78.494 the amount the corporation estimates
to be the fair value of his shares, plus accrued interest. The
obligation of the corporation under this subsection may be
enforced by the district court:

D-4

<PAGE>

(a) Of the county where the corporation's registered
office is located; or

(b) At the election of any dissenter residing or
having its registered office in Nevada, of the county where
the dissenter resides or has its registered office. The
court shall dispose of the complaint promptly.

2. The payment must be accompanied by:

(a) The corporation's balance sheet as of the end of a
fiscal year ending not more than 16 months before the date
of payment, a statement of income for that year, a statement
of changes in the stockholders' equity for that year, and
the latest available interim financial statements, if any;

(b) A statement of the corporation's estimate of the
fair value of the shares;

(d) A statement of the dissenter's rights to demand
payment under NRS 78.499; and

(e) A copy of NRS 78.471 TO 78.502, inclusive.

78.498 ELECTION BY CORPORATION TO WITHHOLD PAYMENT FROM A
DISSENTER.-1. A corporation may elect to withhold payment from a
dissenter unless he was the beneficial owner of the shares before
the date set forth in the dissenter's notice as the date of the
first announcement to the news media or to the stockholders of
the terms of the proposed corporate action.

2. To the extent the corporation elects to withhold
payment, after taking the proposed corporate action, it shall
estimate the fair value of the shares, plus accrued interest, and
shall offer to pay this amount to each dissenter who agrees to
accept it in full satisfaction of his demand. The corporation
shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was
calculated, and a statement of the dissenters' right to demand
payment pursuant to NRS 78.499.

78.499 WRITTEN NOTIFICATION OF DISSENTER TO CORPORATION OF
DISSENTER'S ESTIMATE OF FAIR VALUE OF HIS SHARES; WAIVER OF RIGHT
TO DEMAND PAYMENT.-1. A dissenter may notify the corporation in
writing of his own estimate of the fair value of his shares and
the amount of interest due, and demand payment of his estimate,
less any payment pursuant to NRS 78.497, or reject the
corporation's offer pursuant to NRS 78.498 and demand payment of

D-5

<PAGE>

the fair value of his shares and interest due, if he believes
that the amount paid pursuant to NRS 78.497 or offered pursuant
to NRS 78.498 is less than the fair value of his shares or that
the interest due is incorrectly calculated.

2. A dissenter waives his right to demand payment pursuant
to this section unless he notifies the corporation of his demand
in writing within 30 days after the corporation made or offered
payment for his shares.

78.501 DEMAND FOR PAYMENT; PROCEEDING; VENUE; PARTIES TO
PROCEEDING; JUDGMENT.-1. If a demand for payment remains
unsettled, the corporation shall commence a proceeding within 60
days after receiving the demand and petition the court to
determine the fair value of the shares and accrued interest. If
the corporation does not commence the proceeding within the 60-
day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.

2. A corporation shall commence the proceeding in the
district court of the county where a corporation's registered
office is located, if the corporation is a foreign corporation
without a resident agent in the state, it shall commence the
proceeding in the county where the registered office of the
domestic corporation merged with or whose shares were acquired by
the foreign corporation was located.

3. The corporation shall make all dissenters, whether or
not residents of Nevada, whose demands remain unsettled, parties
to the proceeding as in an action against their shares. All
parties must be served with a copy of the petition. Nonresidents
may be served by registered or certified mail or by publication
as provided by law.

4. The jurisdiction of the court in which the proceeding
is commenced under subsection 2 is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value.
The appraisers have the powers described in the order appointing
them, or any amendment thereto. The dissenters are entitled to
the same discovery rights as parties in other civil proceedings.

5. Each dissenter who is made a party to the proceeding is
entitled to a judgment:

(a) For the amount, if any, by which the court finds
the fair value of his shares, plus interest, exceeds
the amount paid by the corporation; or

D-6

<PAGE>

(b) For the fair value, plus accrued interest, of his
after-acquired shares for which the corporation elected to
withhold payment pursuant to NRS 78.498.

78.502 PROCEEDING TO DETERMINE FAIR VALUE; ASSESSMENT OF
COSTS, FEES AND EXPENSES; EXCEPTIONS.-1. The court in a
proceeding to determine fair value shall determine all of the
costs of the proceeding, including the reasonable compensation
and expenses of any appraisers appointed by the court. The court
shall assess the costs against the corporation, except that the
court may assess costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds
the dissenters acted arbitrarily, vexatiously or not in good
faith in demanding payment.

2. The court may also assess the fees and expenses of the
counsel and experts for the respective parties, in amounts the
court finds equitable:

(a) Against the corporation and in favor of all
dissenters if the court finds the corporation did not
substantially comply with the requirements if NRS 78.491 to
78.499, inclusive; or

(b) Against either the corporation or a dissenter in
favor of any other party, if the court finds that the party
against whom the fees and expenses are assessed acted
arbitrarily, vexatiously or not in good faith with respect
to the rights provided by NRS 78.471 to 78.502, inclusive.

3. If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the corporation, the court may award to
those counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefited.

4. In a proceeding commenced pursuant to subsection 1 of
NRS 78.497, the court may assess the costs against the
corporation, except that the court may assess costs against all
or some of the dissenters who are parties to the proceeding, in
amounts the court finds equitable, to the extent the court finds
that such parties did not act in good faith in instituting the
proceeding.

5. This section does not preclude any party in a
proceeding commenced pursuant to NRS 78.501 or subsection 1 of
NRS 78.497 from applying the provisions of N.R.C.P. 68 or NRS
17.115.

D-7

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers.

Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") grants each corporation organized thereunder, such as CECI, the
power to indemnify its directors and officers against liabilities for certain
of their acts. Article EIGHTH of CECI's Restated Certificate of Incorporation
and Article V of CECI's By-Laws provide for indemnification of directors and
officers of CECI to the fullest extent permitted by the DGCL. Article V of
CECI's By-Laws further provides that CECI may enter into contracts providing
indemnification to the full extent authorized or permitted by the DGCL and that
CECI may create a trust fund, grant a security interest and/or use other means
to ensure the payment of such amounts as may become necessary to effect
indemnification pursuant to such contracts or otherwise.

Section 102(b)(7) of the DGCL permits a provision in the certificate
of incorporation of each corporation organized thereunder, such as CECI,
eliminating or limiting, with certain exceptions, the personal liability of a
director to the corporation or its stockholders for monetary damages for
certain breaches of fiduciary duty as a director. Article EIGHTH of CECI's
Restated Certificate of Incorporation eliminates the personal liability of
directors to the full extent permitted by the DGCL.

The foregoing statements are subject to the detailed provisions of
Sections 145 and 102(b)(7) of the DGCL, Article EIGHTH of CECI's Restated
Certificate of Incorporation and Article V of CECI's By-Laws.

Item 21. Exhibits and Financial Statement Schedules.

A. Exhibits.

Exhibit
No. Description

<PAGE>

2.1 Agreement and Plan of Merger, dated as of December 5, 1994, among
California Energy Company, Inc., CE Acquisition Company, Inc., and
Magma Power Company includes Annex A to the Registration Statement.

4.1 Specimen copy of form of Common Stock Certificate (incorporated by
reference to Exhibit 4.1 of the Registrant's 1993 Form 10-K).

4.2 Stockholders Rights Agreement between the Registrant and Manufacturers
Hanover Trust Company of California dated December 1, 1988
(incorporated by reference to Exhibit 1 to the Registrant's Form 8-K
dated December 5, 1988, File No. 1-9874).

4.3 Amendment Number 1 to Stockholder Rights Agreement, dated February 15,
1991 (incorporated by reference to Exhibit 4.2 to the Registrant's 1992
Form 10-K).

5.0 Opinion of Willkie Farr & Gallagher.*

15.1 Awareness Letter for Review Reports of Deloitte & Touche LLP.

23.1 Consent of Deloitte & Touche LLP.

23.2 Consent of Coopers & Lybrand LLP.

23.3 Consent of Willkie Farr & Gallagher (set forth in their opinion filed
as Exhibit 5.0 to this Registration Statement).*

B. Financial Statement Schedules.

All financial statement schedules required to be filed are incorporated
by reference to the annual report on Form 10K for the year ended December 31,
1993.

______________________
* To be filed by amendment.

<PAGE>

Item 22. Undertakings.

(1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.

(2) The undersigned registrant undertakes that every prospectus (i)
that is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of section 10(a)(3) of the Securities Act and
is used in connection with an offering of securities subject to Rule 415 of the
Securities Act, will be filed as part of an amendment to the registration
statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act, each such post-
effective amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.

(4) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired therein, that was not the subject of and included in the
registration statement when it became effective.

(5) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(6) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Omaha
State of Nebraska, on December 22, 1994.

CALIFORNIA ENERGY COMPANY, INC.

By: /s/David L. Sokol
David L. Sokol
President and
Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date

/s/ David L. Sokol
- -----------------
David L. Sokol Chairman of the Board of December 22, 1994
Directors, President,
Chief Executive Officer
and Director
(Principal Executive Officer)

- -----------------
John G. Sylvia Senior Vice President, December 22, 1994
Chief Financial Officer
and Treasurer (Principal
Financial Officer and
Principal Accounting
Officer)

<PAGE>

Signature Title Date

/s/ Edgar D. Aronson
- ----------------- Director December 22, 1994
Edgar D. Aronson

/s/ Judith E. Ayres
- ----------------- Director December 22, 1994
Judith E. Ayres

/s/ James Q. Crowe
- ----------------- Director December 22, 1994
James Q. Crowe

/s/ Richard K. Davidson
- ----------------- Director December 22, 1994
Richard K. Davidson

/s/ Ben M. Holt
- ----------------- Director December 22, 1994
Ben M. Holt

/s/ Richard R. Jaros
- ----------------- Director December 22, 1994
Richard R. Jaros

/s/ Everett B. Laybourne
- ----------------- Director December 22, 1994
Everett B. Laybourne

/s/ Herbert L. Oakes, Jr.
- ----------------- Director December 22, 1994
Herbert L. Oakes, Jr.

/s/ Walter Scott, Jr.
- ----------------- Director December 22, 1994
Walter Scott, Jr.

- ----------------- Director December 22, 1994
Barton W. Shackelford

/s/ David E. Wit
- ----------------- Director December 22, 1994
David E. Wit

<PAGE>

Form of Proxy [Front]
MAGMA POWER COMPANY, INC.
SPECIAL MEETING OF STOCKHOLDERS

The undersigned hereby appoints _________________, _______________ and
________________ and each of them proxies for the undersigned with full power
of substitution, to vote all shares of common stock of Magma Power Company
("Magma") which the undersigned is entitled to vote at the Special Meeting of
Stockholders of Magma to be held on January __, 1995, and any adjournments or
postponements thereof, hereby revoking all prior proxies on the matters set
forth below as follows:

I. APPROVAL AND ADOPTION OF AGREEMENT AND PLAN OF MERGER. Approval and
adoption of the Agreement and Plan of Merger, dated as of December 9, 1994 (the
"Merger Agreement"), among Magma, California Energy Company, Inc. ("CECI") and
CE Acquisition Company, Inc., a wholly owned subsidiary of CECI, as described
in the Proxy Statement/Prospectus.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

II. TRANSACTION OF OTHER BUSINESS. Transaction of such other business as may
properly come before the meeting or any adjournments or postponements.

Form of Proxy [Back]

THE SUBMISSION OF THIS PROXY IF PROPERLY EXECUTED REVOKES ALL PRIOR
PROXIES.

SHARES WILL BE VOTED AS DIRECTED EXCEPT THAT IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSAL I. THE UNDERSIGNED HEREBY
ACKNOWLEDGES RECEIPT OF THE PROXY STATEMENT/PROSPECTUS DATED JANUARY , 1995.

Dated: _________________________, 1995

Signature: ___________________________

Signature
(if held jointly): ______________________

Title: _______________________________
Please sign exactly as your name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as an attorney,
executor, administrator, trustee or guardian,
give full title as such. If a corporation, sign
in full corporate name by president or other
authorized officer. If a partnership, sign in
partnership name by authorized person.

PLEASE MARK, DATE, SIGN, AND MAIL PROMPTLY IN THE POSTAGE-PAID ENVELOPE
ENCLOSED.

<PAGE>

EXHIBIT INDEX

Sequentially
Exhibit Numbered
Number Exhibit Page

15.1 Awareness Letter for Review Reports of Deloitte & Touche L.L.P.

23.1 Consent of Deloitte & Touche L.L.P.

23.2 Consent of Coopers & Lybrand L.L.P.

<PAGE>

Exhibit 15.1

California Energy Company, Inc.
Omaha, Nebraska

We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of California Energy Company, Inc. for the periods ended March 31,
1994 and 1993, June 30, 1994 and 1993, and September 30, 1994 and 1993, as
indicated in our reports dated April 14, 1994, July 15, 1994, and October 19,
1994, respectively; because we did not perform an audit, we expressed no
opinion on that information.

We are aware that our reports referred to above, which were included in your
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994, June 30,
1994 and September 30, 1994 are being incorporated by reference in this
Registration Statement on Form S-4.

We also are aware that the aforementioned reports, pursuant to Rule 436(C)
under the Securities Act of 1933, are not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
December 21, 1994

Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement of
California Energy Company, Inc. on Form S-4 of the reports of Deloitte & Touche
dated February 24, 1994 (which reports express an unqualified opinion and
include an explanatory paragraph referring to California Energy Company, Inc.'s
adoption effective January 1, 1993, of Statement of Financial Accounting
Standards No.109, Accounting for Income Taxes), appearing in and incorporated
by reference in the Annual Report on Form 10-K of California Energy Company,
Inc. for the year ended December 31, 1993 and to the reference to Deloitte &
Touche LLP under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.

/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP

Omaha, Nebraska
December 21, 1994

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Exhibit 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in the Registration Statement of
California Energy Company, Inc. on Form S-4 of our report dated March 18, 1994,
on our audits of the consolidated financial statements and consolidated
financial statement schedules of Magma Power Company and subsidiaries as of
December 31, 1993 and 1992 and for the years ended December 31, 1993, 1992 and
1991 included in the Annual Report on Form 10-K and to the incorporation by
reference of our report dated May 6, 1993 on our audits of the Statement of Net
Assets Acquired as of March 31, 1993 and Historical Summaries of Gross Revenues
and Direct Operating Expenses included on Form 8-K for each of the three years
in the period ended December 31, 1992 of the Imperial Valley Geothermal
Interests (acquired by Magma Power Company from Union Oil Company of
California). We also consent to the reference to our Firm under the caption
"Experts".

/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.

San Diego, California
December 22, 1994