MAGMA POWER CO /NV/, SC 13E3/A, 1995-02-01

MAGMA POWER CO /NV/
SC 13E3/A, 1995-02-01
COGENERATION SERVICES & SMALL POWER PRODUCERS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 3 to
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)

STEVEN 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) [ss. 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: [ ].

<PAGE>

CALCULATION OF FILING FEE

Transaction Valuation: $443,863,112.00* Amount of Filing Fee: $88,772.62

* The transaction was valued by determining the cost of purchasing 11,528,912
shares of Magma Power Company common stock, par value $0.10 per share
("Shares"), at the estimated price of $38.50. Such estimation was based on
(i) the Agreement and Plan of Merger among Magma, California Energy
Company, Inc. ("CECI") and CE Acquisition Company and (ii) CECI's intent to
elect to pay the merger consideration solely in cash.
Previously paid.

[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.

Amounts Previously Paid:

(a) $80,639.96
(b) $ 4,895.83
(c) $ 3,236.83
----------
$88,772.62

Form, Schedule or Registration Statement No.:

(a) Form S-4 of California Energy Company, Inc. (File No. 33-57053)
(b) Schedule 13E-3 of California Energy Company, Inc.
(File No. 5-33882)
(c) Schedule 14C of Magma Power Company

Filing Party:

(a) California Energy Company, Inc.
(b) California Energy Company, Inc.
(c) Magma Power Company

Date Filed:

(a) December 22, 1994 as amended on January 6, 1995, January 27, 1995
and February 1, 1995
(b) December 22, 1994 as amended on January 6, 1995, January 27, 1995
and February 1, 1995
(c) January 30, 1995

Page 1 of 17 Pages

<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 (the "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") pursuant to an Agreement and Plan of
Merger dated as of December 5, 1994 (the "Merger Agreement"). The Merger is the
second and final step in the acquisition of Magma pursuant to the terms of the
Merger Agreement. The first step was a tender offer pursuant to which CE Sub, on
January 10, 1995, accepted for payment and purchased 12,400,000 shares of common
stock of Magma. The information contained in the Information
Statement/Prospectus of Magma and CECI (the "Information 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 Information Statement filed
concurrently herewith with the Commission in connection with this Rule 13e-3
transaction is incorporated herein by reference in its entirety.

<TABLE>
Item 17. Material To Be Filed As Exhibits
<S> <C>
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 Information Statement filed as
Exhibit (d)(1) hereto.
Exhibit (b)(2) Opinion of Gleacher & Co. Inc. which is
attached as Annex C to the Information Statement filed as
Exhibit (d)(1) hereto.
Exhibit (c)(1) The Merger Agreement
which is attached as Annex A to
the Information Statement filed as
Exhibit (d)(1) hereto.
Exhibit (d)(1) The Information Statement.
Exhibit (e) Not applicable.
Exhibit (f)(1) Not applicable.

</TABLE>

Page 2 of 17 Pages

<PAGE>

CROSS REFERENCE SHEET

Caption in Information Statement/
Schedule 13E-3 Prospectus or Notice of
Item Number Special Meeting
<S> <C>
1. Issuer and Class of
Security Subject to the
Transaction

(a) Notice of Special Meeting of
Stockholders; front cover page
of the Information Statement;
(b) MARKET PRICES OF AND
DIVIDENDS ON CAPITAL STOCK OF
MAGMA AND RELATED STOCKHOLDER
MATTERS; DESCRIPTION OF MAGMA
CAPITAL STOCK
(c)-(d) MARKET PRICES OF AND DIVIDENDS
ON CAPITAL STOCK OF MAGMA AND
RELATED STOCKHOLDER MATTERS;
DESCRIPTION OF MAGMA CAPITAL
STOCK

(e)-(f) Not Applicable

Page 3 of 17 Pages

<PAGE>

2. Identity and Background SUMMARY - Parties to the
Merger; CECI MANAGEMENT
INFORMATION; MAGMA MANAGEMENT
INFORMATION
(a)-(d) SUMMARY - Parties to the
Merger; CECI MANAGEMENT
INFORMATION; MAGMA MANAGEMENT
INFORMATION
(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

Page 4 of 17 Pages

<PAGE>

4. Terms of Transaction
(a) SUMMARY; SPECIAL FACTORS -
Purpose and Structure of the
Merger; SPECIAL FACTORS -
Financing of Merger
Consideration; SPECIAL
FACTORS - Certain Effects of
the Merger: Operations After
the Merger; THE MERGER
AGREEMENT

(b) RISK FACTORS - Conflicts of
Interest
5. Plans or Proposals of the
Issuer or Affiliate
(a)-(e) SPECIAL FACTORS - Purpose and
Structure of the Merger;
SPECIAL FACTORS - Certain
Effects of the Merger:
Operations After the Merger;
THE MERGER AGREEMENT - Terms
of the Merger; THE MERGER
AGREEMENT - Acquisition
Designees; CECI MANAGEMENT
INFORMATION; MAGMA MANAGEMENT
INFORMATION
(f)-(g) SPECIAL FACTORS - Purpose and
Structure of the Merger;
SPECIAL FACTORS - Certain
Effects of the Merger:
Operations After 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
(c) SPECIAL FACTORS - Financing of
Merger Consideration

Page 5 of 17 Pages

<PAGE>

(d) Not Applicable
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 -
Recommendations of the Board
of Directors of Magma and
CECI; Reasons for the Merger;
Fairness of the Offer and the
Merger; SPECIAL FACTORS -
Alternatives to the Offer and
the Merger
(d) SPECIAL FACTORS - Background
of the Merger; SPECIAL FACTORS
- Purpose and Structure of the
Merger; SPECIAL FACTORS -
Certain Effects of the Merger:
Operations After the Merger;
SPECIAL FACTORS - Federal
Income Tax Consequences;
SPECIAL FACTORS - Federal
Securities Law Consequences;
THE MERGER AGREEMENT; RISK
FACTORS; SELECTED HISTORICAL
AND PRO FORMA FINANCIAL
INFORMATION

Page 6 of 17 Pages

<PAGE>

8. Fairness of the
Transaction
(a) SUMMARY; SPECIAL FACTORS -
Recommendations of the Board
of Directors of Magma and
CECI; Reasons for the Merger;
Fairness of the Offer and the
Merger
(b) SPECIAL FACTORS -
Recommendations of the Board
of Directors of Magma and
CECI; Reasons for the Merger;
Fairness of the Offer and the
Merger; SPECIAL FACTORS -
Alternatives to the Offer and
the Merger
(c) SUMMARY - Required Vote;
GENERAL INFORMATION - Required
Vote
(d) SPECIAL FACTORS - Background
of the Merger; SPECIAL FACTORS
- Recommendations of the Board
of Directors of Magma and
CECI; Reasons for the Merger;
Fairness of the Offer and the
Merger
(e) SPECIAL FACTORS -
Recommendations of the Board
of Directors of Magma and
CECI; Reasons for the Merger;
Fairness of the Offer and the
Merger
(f) Not Applicable

Page 7 of 17 Pages

<PAGE>

9. Reports, Opinions,
Appraisals and Certain
Negotiations
(a)-(c) SPECIAL FACTORS -
Background of the
Merger; SPECIAL
FACTORS - Opinion of
Magma's Financial
Advisor; SPECIAL
FACTORS - Opinion of
CECI's Financial
Advisor

10. Interest in Securities of
the Issuer
(a) SELECTED HISTORICAL AND PRO
FORMA FINANCIAL INFORMATION -
Notes to Pro Forma Unaudited
Condensed Combined Financial
Data (Merger Consideration
Consisting of a Combination of
Cash and CECI Common Stock);
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) SUMMARY - Required Vote;
GENERAL INFORMATION - Required
Vote; SPECIAL FACTORS -
Recommendations of the Board
of Directors of Magma and
CECI; Reasons for the Merger;
Fairness of the Offer and the
Merger

Page 8 of 17 Pages

<PAGE>

13. Other Provisions of the
Transaction
(a) Not Applicable
(b) Not Applicable
(c) Not Applicable

14. Financial Statements
(a) MAGMA MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF
OPERATIONS; MAGMA'S
CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO
(b) SELECTED HISTORICAL AND PRO
FORMA FINANCIAL INFORMATION
15. Persons and Assets
Employed, Retained or
Utilized
(a)-(b) Not Applicable

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

Page 9 of 17 Pages

<PAGE>

17. Material to be filed as
Exhibits

(a)(1) Commitment Letter, dated
October 25, 1994, to CECI and
CE Sub from Credit Suisse

(a)(2) The Merger Facility (To be
filed by Amendment when
available)

(b)(1) Opinion of Goldman, Sachs &
Co. which is attached as Annex
B to the Information Statement filed as
Exhibit (d)(1) hereto.

(b)(2) Opinion of the Gleacher & Co.
Inc. which is attached as
Annex C to the Information Statement
filed as Exhibit (d)(1) hereto.

(c)(1) The Merger Agreement which is
attached as Annex A to
the Information Statement filed as
Exhibit (d)(1) hereto.

(d)(1) Information Statement.

(e) Not applicable.

(f) Not applicable.

</TABLE>

Page 10 of 17 Pages

<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" and "Description of Magma Capital Stock" sections 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" and
"Description of Magma Capital Stock" sections 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;" "CECI Management Information" and "Magma Management Information"
sections of Exhibit (d)(1) hereto is incorporated
herein by reference.

(a)-(c) The information set forth in the "Summary --Parties to
the Merger;" "CECI Management Information" and "Magma Management Information"
sections 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.

Page 11 of 17 Pages

<PAGE>

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.

Item 4. Terms of the Transaction.

(a) The information set forth in the "Summary,"
"Special Factors--Purpose and Structure of the Merger," "Special
Factors--Financing of Merger Consideration," "Special Factors--
Certain Effects of the Merger: Operations After the Merger" and
"The Merger Agreement" sections of Exhibit (d)(1) hereto is
incorporated herein by reference.

(b) The information set forth in the "Risk Factors--Conflicts
of Interest" section of Exhibit (d)(1) hereto is incorporated herein by
reference.

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

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

(f)-(g) The information set forth in the "Special
Factors--Purpose and Structure of the Merger," "Special Factors--Certain Effects
of the Merger: Operations After the Merger" sections 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.

Page 12 of 17 Pages

<PAGE>

(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," "Special Factors--Recommendations of the Board of Directors of
Magma and CECI; Reasons for the Merger; Fairness of the Offer and the Merger"
and "Special Factors--Alternatives to the Offer and the Merger" 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--Purpose and Structure of
the Merger," "Special Factors--Certain Effects of the Merger: Operations After
the Merger," "Special Factors--Federal Income Tax Consequences," "Special
Factors--Federal Securities Law Consequences," "The Merger Agreement," "Risk
Factors" and "Selected Historical and Pro Forma Financial Information" sections
of Exhibit (d)(1) hereto is incorporated herein by reference.

Item 8. Fairness of the Transaction.

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

(b) The information set forth in the "Special
Factors--Recommendations of the Board of Directors of Magma and CECI; Reasons
for the Merger; Fairness of the Offer and the Merger" and "Special
Factors--Alternatives to the Offer and 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" and "Special Factors--
Recommendations of the Board of Directors of Magma and CECI;

Page 13 of 17 Pages

<PAGE>

Reasons for the Merger; Fairness of the Offer and the Merger" sections of
Exhibit (d)(1) hereto is incorporated herein by reference.

(e) The information set forth in the "Special
Factors--Recommendations of the Board of Directors of Magma and CECI; Reasons
for the Merger; Fairness of the Offer and the Merger" section 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. CECI has received an
opinion from Gleacher & Co. Inc., attached to Exhibit (d)(1) hereto as Annex C
thereto.

(a)-(c) The information contained in the "Special
Factors--Background of the Merger," "Special Factors--Opinion of Magma's
Financial Advisor" and "Special Factors--Opinion of CECI's Financial Advisor"
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 "Selected Historical and
Pro Forma Financial Information--Notes to Pro Forma Unaudited Condensed Combined
Financial Data (Merger Consideration Consisting of a Combination of Cash and
CECI Common Stock)" and "Security Ownership Of Certain Beneficial Owners And
Management Of Magma" sections 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 the
Merger; Merger Consideration" and "The Merger Agreement" sections of Exhibit
(d)(1) hereto is incorporated herein by reference.

Page 14 of 17 Pages

<PAGE>

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

(a)-(b) The information set forth in the "Summary--Required
Vote," "General Information--Required Vote" and "Special
Factors--Recommendations of the Board of Directors of Magma and CECI; Reasons
for the Merger; Fairness of the Offer and the Merger" sections of Exhibit (d)(1)
hereto is incorporated herein
by reference.

Item 13. Other Provisions of the Transaction.

(a) Not applicable.

(b) Not applicable.

Item 14. Financial Information.

(a) The information set forth in the "Magma Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Magma's Consolidated Financial Statements and Notes Thereto" sections of
Exhibit (d)(1) hereto is incorporated herein by reference.

(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.

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

(a)-(b) Not applicable.

Item 16. Additional Information.

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

Page 15 of 17 Pages

<PAGE>

<TABLE>
<CAPTION>
Item 17. Material to be Filed as Exhibits.
<S> <C>
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 Information Statement
filed as Exhibit (d)(1) hereto.
Exhibit (b)(2) Opinion of the Gleacher & Co. Inc. which
is attached as Annex C to the Information
Statement filed as Exhibit (d)(1) hereto.
Exhibit (c)(1) The Merger Agreement which is attached
as Annex A to the Information Statement filed as
Exhibit (d)(1) hereto.
Exhibit (d)(1) Information Statement.
Exhibit (e) Not applicable.
Exhibit (f) Not applicable.

</TABLE>

Page 16 of 17 Pages

<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: February 1, 1995

CE ACQUISITION COMPANY, INC.

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

MAGMA POWER COMPANY

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

Page 17 of 17 Pages

<PAGE>

EXHIBIT INDEX

Sequentially
Exhibit Numbered
Number Exhibit Page
- --------- --------- ------------
(a)(1) Commitment Letter,
dated October 25,
1994, to CECI and CE
Sub from Credit Suisse

(d)(1) Information Statement

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>

SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the
Securities Exchange Act of 1934

Check the appropriate box:
[ ] Preliminary Information Statement
[X] Definitive Information Statement

MAGMA POWER COMPANY
(Name of Registrant as Specified In Its Charter)

MAGMA POWER COMPANY
(Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):

[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[X] Fee of $3,236.83 computed on table below per Exchange Act Rules
14c-5(g) and 0-11.

1)Title of each class of securities to which transaction applies:
Common stock, par value $0.10 per share, of Magma Power Company ("Magma")
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2)Aggregate number of securities to which transaction applies:
11,528,912
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3)Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
$38.50 per share1
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4)Proposed maximum aggregate value of transaction:
$443,863,112.00
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1 Estimation based on (i) the Agreement and Plan of Merger among Magma,
California Energy Company, Inc. ("CECI") and CE Acquisition Company, Inc.
and (ii) CECI's intent to elect to pay the merger consideration solely in
cash.

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

1) Amounts Previously Paid:
(a) $80,639.96
(b) $ 4,895.83
(c) $ 3,236.83
----------
$88,772.62

2) Form, Schedule or Registration Statement No.:
(a) Form S-4 of California Energy Company, Inc. (File No. 33-57053)
(b) Schedule 13E-3 of California Energy Company, Inc. (File No. 5-33882)
(c) Schedule 14C of Magma Power Company

3) Filing Party:
(a) California Energy Company, Inc.
(b) California Energy Company, Inc.
(c) Magma Power Company

4) Date Filed:
(a) December 22, 1994 as amended on January 6, 1995, January 27, 1995
and February 1, 1995
(b) December 22, 1994 as amended on January 6, 1995, January 27, 1995
and February 1, 1995
(c) January 30, 1995

<PAGE>

<PAGE>
Filed Pursuant to Rule 424(b)(3)
Registration File No.: 33-57053

<PAGE>

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 February 21, 1995, at 10:00 a.m.,
Nebraska time, at the Red Lion Hotel, 1616 Dodge Street, in Omaha, Nebraska.
At this important meeting, Magma stockholders will 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 (representing approximately 51% of
the issued and outstanding Magma common stock) for $39.00 per share in cash.

Upon consummation of the Merger, each share of Magma common stock will be
converted into the right to receive, at CECI's election, either (i) an amount
of cash determined such that the blended consideration paid by CECI in the
Offer and the Merger would be $38.75 per share or (ii) 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 $39.00 per share. If CECI elects the former option,
each share of Magma common stock will be converted in the Merger into cash in
the range of approximately $38.47 per share to $38.49 per share. If CECI
elects the latter option, each share of Magma common stock will be converted
in the Merger into (A) cash in the range of approximately $16.94 per share to
$17.50 per share PLUS (B) between 1.148 and 1.546 shares of CECI common
stock. As a result of a collar provision included in the formula for
determining the precise Merger consideration, the value of the cash and CECI
common stock received by Magma stockholders in the Merger may, pursuant to
the application of the collar, be less than $39.00. The formula for
determining the precise Merger consideration is complicated; for a more
complete discussion of the Merger consideration, see "THE MERGER
AGREEMENT--Terms of The Merger" and "RISK FACTORS--Potential for Fluctuation
of Value of Merger Consideration" in the accompanying Information
Statement/Prospectus.

Goldman, Sachs & Co., Magma's financial advisor, has rendered its opinion,
dated December 5, 1994, to Magma's Board of Directors 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). Goldman, Sachs & Co. was not requested by the Magma Board of
Directors to render, and did not render, a separate opinion as to the
fairness of the consideration to be received by Magma stockholders in the
Merger viewed as a transaction separate from the Offer. The opinion of
Goldman, Sachs & Co. is discussed in the accompanying Information
Statement/Prospectus under the heading "SPECIAL FACTORS--Opinion of Magma's
Financial Advisor."

<PAGE>

in cash, CECI proposed that, at its option, CECI could pay the consideration
all in cash (rather than in cash and CECI common stock) such that the blended
all cash consideration paid in the Offer and the Merger would be $38.75 per
share of Magma common stock.

The Merger Agreement does not by its terms require CECI to elect the form
of consideration it will pay in the Merger at any time prior to the effective
time of the Merger. It is CECI's current intention to pay the Merger
consideration solely in cash, but such intention is subject to change if (i)
the proposed underwriters for the public offering of CECI common stock that
is expected to provide a portion of the all cash consideration (the "Public
Offering") determine that they cannot or will not proceed with such offering
upon terms reasonably satisfactory to CECI or (ii) market conditions would
require the issuance in the Public Offering of a greater number of shares of
CECI common stock in order to fund an all cash Merger than would be required
to be issued if the Merger were consummated with a mixed cash and CECI common
stock consideration. CECI will seek to cause the Public Offering to be priced
so that the closing of the Public Offering (normally five trading days
following pricing) will occur on the date the Magma Special Meeting occurs
and the Merger becomes effective. CECI will determine the form of
consideration to be paid in the Merger at the time the Public Offering is
priced or at the time CECI elects not to proceed with the Public Offering
based on the foregoing considerations.

If CECI elects to pay the Merger consideration in a combination of cash
and CECI common stock, CECI will file with the Securities and Exchange
Commission and mail to Magma's stockholders a supplement to the accompanying
Information Statement/Prospectus disclosing such determination and providing
a toll-free telephone number so that Magma stockholders may call to obtain
the "Average Closing Price" (part of the formula for determining the precise
allocation of cash and CECI common stock to be paid as Merger consideration).
Concurrently with the filing of such supplement, CECI will issue a press
release stating such election. In addition, Magma will, if necessary,
postpone or adjourn the Magma Special Meeting so that the foregoing
supplement is mailed to Magma stockholders at least ten business days prior
to the Magma Special Meeting and the Merger. CECI will disseminate another
supplement at the time the "Average Closing Price" is determined.

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
Magma 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.

The accompanying Information Statement/Prospectus explains in detail the
terms of the Merger and the CECI common stock to be issued, if any. Although
you are not being asked for a proxy and are requested not to send a proxy,
please read the information statement/prospectus carefully.

YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE
BEST INTERESTS OF, MAGMA AND ITS STOCKHOLDERS. THE BOARD UNANIMOUSLY APPROVED
(WITH TWO DIRECTORS ABSENT) THE TERMS OF THE MERGER PURSUANT TO THE MERGER
AGREEMENT.

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,

/s/ David L. Sokol
David L. Sokol
Chairman of the Board
and Chief Executive Officer

<PAGE>

MAGMA POWER COMPANY
4365 Executive Drive
Suite 900
San Diego, California 92121
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
----------------
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
----------------

A Special Meeting of Stockholders of Magma Power Company, a Nevada
corporation ("Magma"), will be held on February 21, 1995, at 10:00 a.m.,
Nebraska time, at the Red Lion Hotel, 1616 Dodge Street, 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 Company, Inc. ("CE Sub"), a wholly owned subsidiary of CECI, a
copy of which is attached as Annex A to the Information
Statement/Prospectus accompanying this Notice, pursuant to which, among
other things, (a) CE Sub will be merged with and into Magma, (b) each
outstanding share of Magma common stock, par value $0.10 per share
("Shares"), will be converted into the right to receive, at CECI's
election, either (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
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). If CECI
elects the former option, each Share will be converted in the Merger into
cash in the range of approximately $38.47 per Share to $38.49 per Share.
If CECI elects the latter option, each Share will be converted in the
Merger into (A) cash in the range of approximately $16.94 per Share to
$17.50 per Share PLUS (B) between 1.148 and 1.546 shares of CECI Common
Stock. As a result of a collar provision included in the formula for
determining the precise Merger consideration, the value of the cash and
CECI Common Stock received by Magma stockholders in the Merger may,
pursuant to the application of the collar, be less than $39.00. The
formula for determining the precise Merger consideration is complicated;
for a complete discussion of the Merger consideration, see "THE MERGER
AGREEMENT--Terms of the Merger" and "RISK FACTORS--Potential for
Fluctuation of Value of Merger Consideration" in the accompanying
Information Statement/Prospectus. 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 "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 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 23, 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 Information Statement/Prospectus.

<PAGE>

CECI proposed that the consideration to be paid in the Offer and the Merger
consist of a combination of cash and shares of CECI Common Stock and that any
increase in the consideration over the consideration offered by CECI
immediately prior to the time Magma and CECI agreed to negotiate a possible
transaction (the "Revised Previous Offer") be paid in additional shares of
CECI Common Stock. Magma proposed that the consideration be paid entirely in
cash. The parties then discussed an increase in the consideration offered in
the Revised Previous Offer--a blended amount of $28.50 in cash and $10.00 in
market value of CECI Common Stock--to a blended amount of $28.50 in cash and
$10.50 in market value of CECI Common Stock. In light of Magma's desire to
have the consideration paid entirely in cash, CECI proposed that, at its
option, CECI could pay the consideration all in cash (rather than in cash and
CECI Common Stock) such that the blended all cash consideration paid in the
Offer and the Merger would be $38.75 per Share.

The Merger Agreement does not by its terms require CECI to elect the form
of consideration it will pay in the Merger at any time prior to the effective
time of the Merger. It is CECI's current intention to pay the Merger
consideration solely in cash, but such intention is subject to change if (i)
the proposed underwriters for the public offering of CECI Common Stock that
is expected to provide a portion of the all cash consideration (the "Public
Offering") determine that they cannot or will not proceed with such offering
upon terms reasonably satisfactory to CECI or (ii) market conditions would
require the issuance in the Public Offering of a greater number of shares of
CECI Common Stock in order to fund an all cash Merger than would be required
to be issued if the Merger were consummated with a mixed cash and CECI Common
Stock consideration. CECI will seek to cause the Public Offering to be priced
so that the closing of the Public Offering (normally five trading days
following pricing) will occur on the date the Magma Special Meeting occurs
and the Merger becomes effective. CECI will determine the form of
consideration to be paid in the Merger at the time the Public Offering is
priced or at the time CECI elects not to proceed with the Public Offering
based on the foregoing considerations.

If CECI elects to pay the Merger consideration in a combination of cash
and CECI Common Stock, CECI will file with the Securities and Exchange
Commission and mail to Magma's stockholders a supplement to the accompanying
Information Statement/Prospectus disclosing such determination and providing
a toll-free telephone number so that Magma stockholders may call to find out
the "Average Closing Price". Concurrently with the filing of such supplement,
CECI will issue a press release stating such election. In addition, Magma
will, if necessary, postpone or adjourn the Magma Special Meeting so that the
foregoing supplement is mailed to Magma stockholders at least ten business
days prior to the Magma Special Meeting and the Merger. CECI will disseminate
another supplement at the time the "Average Closing Price" is determined.

Goldman, Sachs & Co., Magma's financial advisor, has rendered its opinion,
dated December 5, 1994, to Magma's Board of Directors 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). Goldman, Sachs & Co. was not requested by the Magma Board of
Directors to render, and did not render, a separate opinion as to the
fairness of the consideration to be received by Magma stockholders in the
Merger viewed as a transaction separate from the Offer. The opinion of Goldman,
Sachs & Co. is discussed in the accompanying Information Statement/Prospectus
under the heading "SPECIAL FACTORS--Opinion of Magma's Financial Advisor."

ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MAGMA SPECIAL
MEETING.

By Order of the Board of Directors

/s/ David L. Sokol
David L. Sokol
Chairman of the Board,
and Chief Executive Officer

Dated: January 31, 1995

<PAGE>

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

Meeting To Be Held February 21, 1995
----------------
WE ARE NOT ASKING FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
----------------

This Information Statement/Prospectus is furnished to holders of record on
January 23, 1995 (the "Magma Record Date") of common stock, par value $0.10
per share ("Share"), of Magma Power Company, a Nevada corporation ("Magma"),
in connection with the Special Meeting of Stockholders of Magma to be held on
February 21, 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, each outstanding Share
will be converted into the right to receive consideration (the "Merger
Consideration") consisting of, at CECI's election, either (i) an amount of
cash determined such that the blended consideration paid by CECI in the Offer
and the Merger would be $38.75 per Share or (ii) cash and common stock, par
value $0.0675 per share, of CECI ("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
$39.00 per Share. If CECI elects the former option, each Share will be
converted in the Merger into cash in the range of approximately $38.47 per
Share to $38.49 per Share. If CECI elects the latter option, each Share will
be converted in the Merger into (A) cash in the range of approximately $16.94
per Share to $17.50 per Share PLUS (B) between 1.148 and 1.546 shares of CECI
Common Stock. As a result of a collar provision included in the formula for
determining the precise Merger consideration, the value of the cash and CECI
Common Stock received by Magma stockholders in the Merger may be less than
$39.00. The formula for determining the precise Merger consideration is
complicated; for a more complete discussion of the Merger Consideration, see
"THE MERGER AGREEMENT--Terms of The Merger" and "RISK FACTORS--Potential for
Fluctuation of Value of Merger Consideration." (continued on next page)

STOCKHOLDERS OF MAGMA ARE NOT BEING ASKED FOR A PROXY AND ARE REQUESTED
NOT TO SEND MAGMA A PROXY.

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 "RISK FACTORS" AND "SPECIAL FACTORS" FOR A DISCUSSION OF CERTAIN
SIGNIFICANT FACTORS RELATING TO THE MERGER.
----------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN, OR INCORPORATED BY REFERENCE IN, THIS
INFORMATION 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 COMMISSION PURSUANT TO 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 INFORMATION
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. NEITHER THE DELIVERY OF THIS
INFORMATION 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 Information Statement/Prospectus is first being mailed to the
stockholders of Magma on or about February 1, 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 INFORMATION
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

THE DATE OF THIS INFORMATION STATEMENT/PROSPECTUS IS JANUARY 31, 1995.

<PAGE>

continued from previous page

The Merger Agreement does not by its terms require CECI to elect the form
of consideration it will pay in the Merger at any time prior to the effective
time of the Merger. It is CECI's current intention to pay the Merger
Consideration solely in cash, but such intention is subject to change if (i)
the proposed underwriters for the public offering of CECI Common Stock that
is expected to provide a portion of the all cash consideration (the "Public
Offering") determine that they cannot or will not proceed with such offering
upon terms reasonably satisfactory to CECI or (ii) market conditions would
require the issuance in the Public Offering of a greater number of shares of
CECI Common Stock in order to fund an all cash Merger than would be required
to be issued if the Merger were consummated with a mixed cash and CECI Common
Stock consideration. CECI will seek to cause the Public Offering to be priced
so that the closing of the Public Offering (normally five trading days
following pricing) will occur on the date the Magma Special Meeting occurs
and the Merger becomes effective. CECI will determine the form of
consideration to be paid in the Merger at the time the Public Offering is
priced or at the time CECI determines to abandon the Public Offering based on
the foregoing considerations.

If CECI elects to pay the Merger Consideration in a combination of cash
and CECI Common Stock, CECI will file with the Securities and Exchange
Commission and mail to Magma's stockholders a supplement to this Information
Statement/ Prospectus disclosing such determination and providing a toll-free
telephone number so that Magma stockholders may call to find out the "Average
Closing Price". Concurrently with the filing of such supplement, CECI will
issue a press release stating such election. In addition, Magma will, if
necessary, postpone or adjourn the Magma Special Meeting so that the
foregoing supplement is mailed to Magma stockholders at least ten business
days prior to the Magma Special Meeting and the Merger. CECI will disseminate
another supplement at the time the "Average Closing Price" is determined.

Goldman, Sachs & Co., Magma's financial advisor, has rendered its opinion,
dated December 5, 1994, to Magma's Board of Directors 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). Goldman, Sachs & Co. was not requested by the Magma Board of
Directors to render, and did not render, a separate opinion as to the
fairness of the consideration to be received by Magma stockholders in the
Merger viewed as a transaction separate from the Offer. For a more complete
discussion, see "SPECIAL FACTORS--Opinion of Magma's Financial Advisor."

This Information 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, if CECI elects to pay the Merger Consideration
with a combination of cash and CECI Common Stock. On January 6, 1995, CECI
filed with the Securities and Exchange Commission (the "Commission") a
Registration Statement on Form S-3 pursuant to the Securities Act of 1933
(the "Securities Act") for the purpose of registering shares of CECI Common
Stock that may be issued in the Public Offering. On January 30, 1995, the
last reported sales price of CECI Common Stock on the NYSE was $17.75.

<PAGE>

Holders of Shares outstanding at the close of business on 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. As a result of completion
of the Offer pursuant to which CE Sub acquired 12,400,000 Shares
(representing approximately 51% of the issued and outstanding Shares) for
$39.00 per Share in cash, CE Sub owns a sufficient number of Shares to
approve the Merger without the affirmative vote of any other stockholder.
Accordingly, approval and adoption of the Merger Agreement at the Magma
Special Meeting is assured.

<PAGE>

AVAILABLE INFORMATION

CECI has filed with the Commission a Registration Statement on Form S-4
(the "Registration Statement"), of which this Information
Statement/Prospectus is a part, under the Securities Act, with respect to
certain shares of CECI Common Stock. Magma has filed with the Commission a
Schedule 14C Information Statement under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), with respect to the Magma Special Meeting.
CECI and Magma have filed with the Commission a Rule 13E-3 Transaction
Statement (including any amendments thereto, the "Schedule 13E-3") under the
Exchange Act with respect to the Merger. As permitted by the rules and
regulations of the Commission, this Information 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 Information 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, 20 Broad Street, New York, New
York 10005, 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 and at the offices of the London Stock Exchange at
International Stock Exchange, Throgmorton Street, EC2N 1HP, London, England,
on which the shares of CECI Common Stock are listed. 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.

<PAGE>

TABLE OF CONTENTS

PAGE
----
<S> <C>
AVAILABLE INFORMATION ............................................................... 3
SUMMARY ............................................................................. 7
Parties to the Merger ............................................................. 7
Time, Place and Date of Magma Special Meeting; Record Date ........................ 7
Terms of Merger; Merger Consideration ............................................. 8
Risk Factors ...................................................................... 10
Recommendation of the Board of Directors of Magma ................................. 10
Opinions of Financial Advisors .................................................... 10
Required Vote ..................................................................... 11
Conflicts of Interest ............................................................. 11
Stock Exchange Listing ............................................................ 11
Regulatory Approvals .............................................................. 11
Accounting Treatment .............................................................. 11
Dissenters' Rights ................................................................ 11
Comparison of Stockholder Rights .................................................. 12
Certain Federal Income Tax Consequences ........................................... 12
Market Prices of CECI Common Stock ................................................ 12
Market Prices of Magma Common Stock ............................................... 12
CAPITALIZATION OF CECI .............................................................. 14
Merger Consideration Consisting of a Combination of Cash and CECI Common Stock .... 14
Merger Consideration Consisting of All Cash ....................................... 15
COMPARISON OF CERTAIN UNAUDITED DATA ................................................ 16
Merger Consideration Consisting of a Combination of Cash and CECI Common Stock .... 16
Merger Consideration Consisting of All Cash ....................................... 17
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA OF CECI .............. 18
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA OF MAGMA ............. 19
RISK FACTORS ........................................................................ 21
GENERAL INFORMATION ................................................................. 26
Purpose of Special Meetings ....................................................... 26
Record Date; Voting Rights ........................................................ 26
Quorum ............................................................................ 26
Required Vote ..................................................................... 26
SPECIAL FACTORS ..................................................................... 26
Background of the Merger .......................................................... 26
Purpose and Structure of the Merger ............................................... 31
Recommendations of the Board of Directors of Magma and CECI; Reasons for the
Merger; Fairness of the Offer and the Merger .................................... 32
Alternatives to the Offer and the Merger .......................................... 36
Opinion of Magma's Financial Advisor .............................................. 36
Opinion of CECI's Financial Advisor ............................................... 40
Financing of Merger Consideration ................................................. 43
Certain Effects of the Merger: Operations After the Merger ........................ 45
Federal Income Tax Consequences ................................................... 45
Federal Securities Law Consequences ............................................... 47
Accounting Treatment .............................................................. 47
Stock Exchange Listing ............................................................ 47
Dissenters' Rights ................................................................ 47
Expenses of the Transaction ....................................................... 47
THE MERGER AGREEMENT ................................................................ 48
General ........................................................................... 48

<PAGE>

PAGE
------
The Merger ........................................................................ 48
Effective Time .................................................................... 48
Terms of the Merger ............................................................... 48
Acquisition Designees ............................................................. 51
Surrender and Payment ............................................................. 52
Fractional Shares ................................................................. 53
Conditions to Consummation of the Merger .......................................... 53
Representations and Warranties .................................................... 53
Conduct of Business by Magma and CECI Pending the Merger .......................... 53
Indemnification ................................................................... 55
Termination; Fees and Expenses .................................................... 56
Amendment ......................................................................... 56
MARKET PRICES OF AND DIVIDENDS ON CAPITAL STOCK OF CECI AND RELATED STOCKHOLDER
MATTERS ........................................................................... 57
MARKET PRICES OF AND DIVIDENDS ON CAPITAL STOCK OF MAGMA AND RELATED STOCKHOLDER
MATTERS ........................................................................... 58
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION ............................. 58
Selected Historical Consolidated Financial and Operating Data of CECI. ............ 58
Selected Historical Consolidated Financial and Operating Data of Magma. ........... 60
Pro Forma Unaudited Condensed Combined Financial Data ............................. 62
Pro Forma Unaudited Condensed Combined Balance Sheet (Merger Consideration
Consisting of a Combination of Cash and CECI Common Stock) ...................... 63
Pro Forma Unaudited Condensed Combined Statements of Earnings (Merger Consideration
Consisting of a Combination of Cash and CECI Common Stock) ...................... 64
Notes To Pro Forma Unaudited Condensed Combined Financial Data (Merger
Consideration Consisting of a Combination of Cash and CECI Common Stock) ........ 65
Pro Forma Unaudited Condensed Combined Balance Sheet (Merger Consideration
Consisting of All Cash) ......................................................... 67
Pro Forma Unaudited Condensed Combined Statements of Earnings (Merger Consideration
Consisting of All Cash) ......................................................... 68
Notes To Pro Forma Unaudited Condensed Combined Financial Data (Merger
Consideration Consisting of All Cash) ........................................... 69
BUSINESS OF CECI AND MAGMA AND RELATED INFORMATION .................................. 71
General ........................................................................... 71
International Projects ............................................................ 76
Domestic Projects ................................................................. 78
International Projects--Discussion ................................................ 79
Domestic Projects--Discussion ..................................................... 86
Regulatory and Environmental Matters .............................................. 92
Employees ......................................................................... 93
Properties ........................................................................ 93
Legal Proceedings ................................................................. 94
CECI MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ...................................................................... 95
General ........................................................................... 95
Results of Operations Through September 30, 1994 .................................. 95
Results of Operations for Three Years Ended December 31, 1993, 1992, and 1991 ..... 97
Liquidity and Capital Resources Through September 30, 1994 ........................ 100
Liquidity and Capital Resources Through December 31, 1993 ......................... 102
Adoption of Financial Accounting Standard No. 109 ................................. 105
MAGMA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS ...................................................................... 106
Results of Operations: Third Quarter 1994 Compared to Third Quarter 1993 .......... 106
Nine Months Ended September 30, 1994 Compared to Nine Months Ended September 30,
1993 ............................................................................ 107
Results of Operations: 1993 Compared to 1992 ...................................... 108

<PAGE>

PAGE
------
Results of Operations: 1992 Compared to 1991 ...................................... 110
Liquidity and Capital Resources ................................................... 112
Seasonality ....................................................................... 114
Inflation ......................................................................... 114
Future Rates ...................................................................... 114
CECI MANAGEMENT INFORMATION ......................................................... 115
Certain Biographical Information Regarding Officers and Directors of CECI ......... 115
The CECI Board And Its Committees ................................................. 118
CECI Compensation Committee Report ................................................ 119
Summary Compensation Table ........................................................ 121
Option Grants in Last Fiscal Year ................................................. 121
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option Values . 122
Compensation of Directors ......................................................... 122
Description of Amended and Restated 1986 Stock Option Plan ........................ 122
1994 Stock Employee Stock Purchase Plan ........................................... 124
Termination of Employment Arrangements ............................................ 124
Certain Transactions and Relationships ............................................ 124
MAGMA MANAGEMENT INFORMATION ...................................................... 126
Certain Biographical Information Regarding Officers and Directors of Magma ........ 126
The Magma Board Committees ........................................................ 127
Compensation of Directors ......................................................... 128
Family Relationships .............................................................. 128
Summary Compensation Table ........................................................ 128
Option Grant Table ................................................................ 130
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/SAR
Values .......................................................................... 130
Magma Benefit Plans ............................................................... 130
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements .................................................................... 131
Magma Compensation Committee Report on Executive Compensation ..................... 131
Compensation Committee Interlocks and Insider Participation ....................... 133
Certain Relationships and Related Transactions .................................... 133
DESCRIPTION OF CECI CAPITAL STOCK ................................................... 135
CECI Common Stock ................................................................. 135
CECI Preferred Stock .............................................................. 136
DESCRIPTION OF MAGMA CAPITAL STOCK .................................................. 136
The Shares ........................................................................ 136
Magma Preferred Stock ............................................................. 137
COMPARISON OF STOCKHOLDER RIGHTS .................................................... 137
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF CECI ............. 141
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF MAGMA ............ 142
OTHER MATTERS ....................................................................... 144
LEGAL MATTERS ....................................................................... 144
EXPERTS ............................................................................. 144
STOCKHOLDER PROPOSALS ............................................................... 144
INDEX TO FINANCIAL STATEMENTS ....................................................... F-1
LIST OF ANNEXES
Annex A--Agreement and Plan of Merger ............................................. A-1
Annex B--Opinion of Goldman, Sachs & Co. .......................................... B-1
Annex C--Opinion of Gleacher & Co. Inc. ........................................... C-1

</TABLE>

<PAGE>

SUMMARY

The following is a brief summary of the more detailed information
contained in this Information Statement/Prospectus ("Information 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 Information Statement, the Annexes hereto and
other documents referred to in this Information Statement. Terms used but not
defined in this Summary have the meanings ascribed to them elsewhere in this
Information Statement. Cross references in this Summary are to the captions
of sections of this Information Statement.

Stockholders of Magma should read carefully this Information 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. 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.

Magma was incorporated in 1981 under the laws of the State of Nevada. 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.

TIME, PLACE AND DATE OF MAGMA SPECIAL MEETING; RECORD DATE

The Magma Special Meeting will be held at 10:00 a.m., Nebraska time, on
February 21, 1995 at the Red Lion Hotel, 1616 Dodge Street, in Omaha,
Nebraska. Only holders of Shares of record at the close of business on
January 23, 1995, the Magma Record Date, are entitled to vote at the Magma
Special Meeting or any adjournment or postponement thereof.

<PAGE>

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 10, 1995, CE Sub purchased 12,400,000 Shares at a price of
$39.00 per Share in cash. Pursuant to the Merger Agreement, CE Sub and Magma
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 and Shares held in the treasury of Magma) will
be converted into the right to receive, at CECI's election (which election
shall be made no later than five business days prior to the Magma Special
Meeting), (i) an amount of cash determined such that the blended
consideration paid by CECI in the Offer and the Merger would be $38.75 per
Share or (ii) 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 $39.00 per Share.
If CECI elects the former option, each Share will be converted in the Merger
into cash in the range of approximately $38.47 per Share to $38.49 per Share.
If CECI elects the latter option, each share will be converted in the Merger
into (A) cash in the range of approximately $16.94 per Share to $17.50 per
Share PLUS (B) between 1.148 and 1.546 shares of CECI Common Stock. As a
result of a collar provision included in the formula for determining the
precise Merger consideration, the value of the cash and CECI Common Stock
received by Magma stockholders in the Merger may be less than $39.00. The
formula for determining the precise Merger consideration is complicated; for
a more complete discussion of the Merger Consideration, see "THE MERGER
AGREEMENT--Terms of the Merger" and "RISK FACTORS--Potential for Fluctuation
of Value of Merger Consideration."

The alternative forms and amounts of consideration payable by CECI in the
Merger were negotiated by Magma and CECI at arms' length, in consultation
with their respective financial advisors. Each of Magma and CECI viewed the
acquisition of Magma as a single transaction, and the parties negotiated on
the basis of a blended consideration to be received by Magma stockholders in
the Offer and the Merger. As a result of (i) the agreement of the parties
that CECI could, at its option, pay the Merger Consideration entirely in
cash, at a blended value of $38.75 per Share, and (ii) Magma's insistence
that the consideration paid in the Offer be $39.00 per Share, the per share
Merger Consideration payable if CECI elects the all cash alternative will be
in the range of $38.47 to $38.49, which amount is less than the amount per
share in the Offer. In addition, assuming the "Average Closing Price" is
between $14.27 and $18.73, the value of the Merger Consideration will be less
if CECI elects the all cash alternative than if CECI elects to pay the Merger
Consideration in a combination of cash and CECI common stock. The price
differentials between the Offer and the all cash alternative Merger
Consideration and between the all cash alternative and the mixed cash and
stock alternative Merger Consideration resulted from arms' length negotiation
between the parties. The price differential between the Offer and the all
cash alternative Merger Consideration resulted from Magma's insistence that,
although the blended price of such alternative was to be $38.75 per Share,
the Offer price be $39.00 in order to put as much cash as possible into the
hands of Magma stockholders as soon as possible. The price differential
between the all cash alternative and the mixed cash and stock alternative
Merger Consideration resulted from CECI's proposal that the all cash
alternative require payment of a blended value of $38.75 (rather than the
$39.00 that CECI had offered in the context of a cash and stock transaction),
the Magma Board's belief that an all cash transaction would be preferable to
a mixed cash and stock transaction and its recognition that a lower blended
cost for CECI in an all cash transaction would provide an incentive to CECI
to prefer and pursue an all cash transaction. For a further discussion of the
formulation and fairness of the Merger Consideration payable if CECI elects
the all cash alternative, see "THE MERGER AGREEMENT--Terms of the Merger."

<PAGE>

If CECI elects to pay the Merger Consideration in a combination of cash
and CECI Common Stock, CECI will file with the Securities and Exchange
Commission and mail to Magma's stockholders a supplement to this Information
Statement/Prospectus disclosing such determination and providing a toll-free
telephone number so that Magma stockholders may call to obtain the "Average
Closing Price". Concurrently with the filing of such supplement, CECI will
issue a press release stating such election. In addition, Magma will, if
necessary, postpone or adjourn the Magma Special Meeting so that the
foregoing supplement is mailed to Magma stockholders at least ten business
days prior to the Magma Special Meeting and the Merger. CECI will disseminate
another supplement at the time the "Average Closing Price" is determined.

If CECI elects to pay the Merger Consideration with a combination of cash
and CECI Common Stock, CECI estimates that approximately $710,900,000 will be
required to effectuate the Merger, to refinance bank borrowings incurred in
connection with the Offer and to pay related fees and expenses. If CECI
elects to pay the Merger Consideration solely in cash, approximately
$957,400,000 will be required to complete the Merger. Credit Suisse will
provide, on specified terms and subject to customary conditions, up to
$500,000,000 in secured bank financing (the "Merger Facilities"). Such funds,
together with a capital contribution by CECI from CECI's general corporate
funds and, if CECI elects to pay the Merger Consideration solely in cash, the
net proceeds of a public offering of CECI Common Stock will be sufficient to
pay the Merger Consideration, to refinance bank borrowings incurred in
connection with the Offer and to pay related fees and expenses. Specifically,
if CECI elects to pay the Merger Consideration with a combination of cash and
CECI Common Stock, CECI will pay the Merger Consideration, refinance the bank
borrowings and pay related fees and expenses using the following:
approximately $500,000,000 from the Merger Facilities plus approximately
$210,900,000 from general corporate funds. If CECI elects to pay the Merger
Consideration solely in cash, CECI will pay the Merger Consideration,
refinance the bank borrowings and pay related fees and expenses using the
following: approximately $500,000,000 from the Merger Facilities plus
approximately $266,700,000 from the net proceeds of a CECI Common Stock
public offering plus approximately $190,700,000 CECI's general corporate
funds.

As of the date of this Information Statement, CECI does not have
authorized a sufficient number of shares of CECI Common Stock to consummate
the Merger, regardless of whether such shares would be issued in the Public
Offering or as part of the Merger Consideration. In order to permit
consummation of the Merger, CECI has scheduled a special meeting of its
stockholders for February 10, 1995 (the "CECI Meeting"), at which CECI's
stockholders will vote on an amendment to CECI's Amended and Restated
Certificate of Incorporation to increase the number of shares authorized to
be issued by CECI by an amount sufficient to consummate the Merger. CECI's
obligation to consummate the Merger is conditioned upon the adoption of such
amendment. CECI has not determined what steps it will take if such amendment
is not adopted.

Termination. The Merger Agreement provides that it may be terminated
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) the Magma 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) the Magma 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

<PAGE>

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 the Magma 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.

RISK FACTORS

Holders of Shares, in reaching a decision regarding the proposal to
approve and adopt the Merger Agreement (which contains an option on the part
of CECI to pay a portion of the Merger Consideration in shares of CECI Common
Stock), should consider carefully certain factors set forth herein under the
heading "RISK FACTORS." Factors to be considered relating to CECI and Magma
include the following: (i) the potential for fluctuation of value of the
Merger Consideration; (ii) market risk of a mixed cash and CECI Common Stock
Merger Consideration; (iii) partial disadvantage associated with an all cash
Merger Consideration; (iv) election of form of Merger Consideration by CECI;
(v) development uncertainty; (vi) development uncertainty outside the United
States; (vii) exploration, development and operation uncertainties of
geothermal energy resources; (viii) competition; (ix) present dependence on a
large customer; (x) contract risks; expected negative impact of avoided cost
pricing; (xi) substantial leverage; (xii) certain risks of the Merger; (xiii)
impact of environmental and other regulations; (xiv) shares of CECI Common
Stock eligible for future sale; and (xv) conflicts of interest.

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 had also
recommended that all holders of Shares accept the Offer and tender their
Shares pursuant to the Offer. See "SPECIAL FACTORS--Recommendations of the
Board of Directors of Magma and CECI; Reasons for the Merger; Fairness of the
Offer and the Merger."

On December 6, 1994, the CECI Board unanimously ratified the signing of
the Merger Agreement and the transactions contemplated thereby. See "SPECIAL
FACTORS--Recommendations of the Board of Directors of Magma and CECI; Reasons
for the Merger; Fairness of the Offer and the Merger."

OPINIONS OF FINANCIAL ADVISORS

On December 5, 1994, Goldman, Sachs & Co. ("Goldman Sachs") delivered its
oral opinion (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). In this connection, Goldman Sachs opined as to the
aggregate consideration to be received per

<PAGE>

Share by Magma stockholders in both the Offer and the Merger taken as a whole
and as a single transaction. In view of the integrated returns of the Offer
and the Merger, Goldman Sachs was not requested by the Magma Board to render,
and did not render, a separate opinion as to the fairness of the
consideration to be received by Magma stockholders in the Merger viewed as a
transaction separate from the Offer. A copy of the written opinion of Goldman
Sachs, dated December 9, 1994, which sets forth a description of the
assumptions made, matters considered and limits of its review, is attached to
this Information Statement as Annex B. See "SPECIAL FACTORS--Opinion of
Magma's Financial Adviser."

On December 6, 1994, Gleacher & Co. Inc. ("Gleacher") delivered its
written opinion to the CECI Board that the consideration to be paid by CECI
pursuant to 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 assumptions made, matters considered
and limits of its review, is attached to this Information Statement as Annex
C. See "SPECIAL FACTORS--Opinion of CECI's Financial Adviser."

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 12,400,000
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.
Accordingly, approval and adoption of the Merger Agreement at the Magma
Special Meeting is assured.

CONFLICTS OF INTEREST

In considering the recommendation of the Magma Board with respect to the
Offer, 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 "RISK
FACTORS."

STOCK EXCHANGE LISTING

It is a condition to the Merger that the shares of CECI Common Stock to be
issued pursuant to the Merger be authorized for listing on the NYSE.
Application will be made to list the 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 Secretary of State of Nevada and the Secretary
of State of Delaware.

ACCOUNTING TREATMENT

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

DISSENTERS' RIGHTS

Holders of Shares do not have the right to dissent from the Merger. See
"SPECIAL FACTORS--Dissenters' Rights."

<PAGE>

COMPARISON OF STOCKHOLDER RIGHTS

If CECI elects to exercise its option to pay a portion of the Merger
Consideration in shares of CECI Common Stock, the rights of former Magma
stockholders as holders of CECI Common Stock will be governed by CECI's
Amended and Restated Certificate of Incorporation and Bylaws, which differ in
certain material respects from Magma's Articles of Incorporation and Bylaws.
Furthermore, as stockholders of CECI, the rights of the former Magma
stockholders as holders of CECI Common Stock will be governed by the Delaware
General Corporation Law instead of the Nevada General Corporation Law. See
"COMPARISON OF STOCKHOLDER 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 holder's adjusted tax basis in such Shares. See
"SPECIAL FACTORS--Federal Income Tax Consequences."

MARKET PRICES OF CECI COMMON STOCK

CECI Common Stock is listed on the NYSE under the symbol "CE." CECI Common
Stock is also listed on the Pacific Stock Exchange ("PSE") and the London
Stock Exchange ("LSE"). The following table sets forth the quarterly high and
low last reported sales price of the CECI Common Stock, as reported on the
NYSE Composite Tape, based on published financial sources, for the fiscal
quarters indicated.

<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
Fiscal Year Ended December 31, 1993:
First Quarter ....................... $21.50 $16.50
Second Quarter ...................... 20.13 17.25
Third Quarter ....................... 18.38 16.00
Fourth Quarter ...................... 20.13 18.13
Fiscal Year Ended December 31, 1994:
First Quarter ....................... $19.25 $17.13
Second Quarter ...................... 18.13 16.00
Third Quarter ....................... 17.75 16.00
Fourth Quarter ...................... 17.13 15.25
Fiscal Year Ending December 31, 1995:
First Quarter (through January 30) . $17.88 $15.75

</TABLE>

On September 19, 1994, the day CECI issued 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
last reported sale 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 last reported sale price for CECI Common
Stock was $16.50. On January 30, 1995, the last full trading day for which
quotations were available at the time of printing of this Information
Statement, the last reported sale price for CECI Common Stock was $17.75.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE CECI COMMON
STOCK.

MARKET PRICES OF MAGMA COMMON STOCK

The Shares are quoted 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 as reported by the NNM, based on published
financial sources, for the fiscal quarters indicated.

<PAGE>

<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
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 Ended December 31, 1994:
First Quarter ....................... $35.25 $30.75
Second Quarter ...................... 33.25 28.00
Third Quarter ....................... 35.25 26.50
Fourth Quarter ...................... 37.50 34.25
Fiscal Year Ending December 31, 1995:
First Quarter (through January 30) . $38.25 $37.50

</TABLE>

On September 19, 1994, the day CECI issued 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 last reported 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 sale price for Shares was $35.50. On January
30, 1995, the last full trading day for which quotations were available at
the time of printing of this Information Statement, the last reported sale
price for the Shares was $38.13. HOLDERS OF SHARES ARE URGED TO OBTAIN
CURRENT QUOTATIONS FOR THE SHARES.

<PAGE>

CAPITALIZATION OF CECI

MERGER CONSIDERATION CONSISTING OF A COMBINATION OF CASH AND CECI COMMON
STOCK

The following table sets forth the consolidated capitalizations of CECI
and Magma at September 30, 1994 and as adjusted to reflect the purchase by CE
Sub of all the Shares and the issuance as a part of the Merger Consideration
of shares of CECI Common Stock. The following table should be read in
conjunction with the other pro forma financial information contained in this
Information Statement and the consolidated financial statements and notes
thereto of CECI and Magma.

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1994
---------------------------
PRO FORMA PRO FORMA
CECI MAGMA 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;
Outstanding 32,230 shares--actual;
47,529 shares--as adjusted((1)) .......... 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>

(1) There is pending before the stockholders of CECI a proposal to
increase the number of authorized shares of CECI Common Stock to
80,000,000. Outstanding shares (actual and as adjusted) do not include
(i) 9,435,229 shares of CECI Common Stock reserved for issuance upon
the exercise of presently outstanding stock options; (ii) 4,444,444
shares of CECI Common Stock issuable upon the conversion of CECI's 5%
Convertible Subordinated Debentures due July 31, 2000; and (iii)
3,393,197 shares of CECI Common Stock issuable upon conversion of the
1,247 issued and outstanding shares of CECI's Series C Exchangeable
Redeemable Preferred Stock.

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

<PAGE>

MERGER CONSIDERATION CONSISTING OF ALL CASH

The following table sets forth the consolidated capitalizations of CECI
and Magma at September 30, 1994 and as adjusted to reflect the purchase by CE
Sub of all the Shares for cash and the sale to the public of shares of CECI
Common Stock offered pursuant to a separate prospectus filed with the
Commission. The following table should be read in conjunction with the other
pro forma financial information contained in this Information Statement and
the consolidated financial statements and notes thereto of CECI and Magma.

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1994
---------------------------
PRO FORMA PRO FORMA
CECI MAGMA 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; Outstanding
32,230 shares--actual; 48,897 shares--as
adjusted((1)) ............................ 2,407 -- 894 3,301
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 63,492 306,257
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 (128,619) 446,327
$1,017,544 $596,609 $ 371,381 $1,985,534
========= ======== ======== ==========
</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

MERGER CONSIDERATION CONSISTING OF A COMBINATION OF CASH AND CECI COMMON STOCK

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 to reflect the Merger and (iii) on an equivalent pro
forma basis per Share assuming that each Share is converted into cash and
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, and the selected historical and pro forma financial data,
including the notes thereto, appearing elsewhere in this Information
Statement. See "SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION--Pro
Forma Unaudited Condensed Combined Financial Data."

<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CECI MAGMA ADJUSTMENTS 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
</TABLE>

<PAGE>

<TABLE>
<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 stockholders receiving common stock equivalents of CECI as
displayed above will also receive a portion of their consideration in
cash, which can be reinvested.

MERGER CONSIDERATION CONSISTING OF ALL CASH

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, and (ii) on a pro
forma combined basis of CECI to reflect the Merger. 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, and the selected historical and pro forma financial data,
including the notes thereto, appearing elsewhere in this Information
Statement. See "SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION--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 $ (9,535) $306,856
Net income from continuing
operations available to common
shareholders ................... $ 38,444 $ 52,135 $(46,982) $ 43,597
Net income from continuing
operations available to common
shareholders per common share
Assuming no dilution ............ $ 1.00 $ 2.17 $ -- $ 0.79
Assuming full dilution .......... $ 1.00 $ 2.17 $ -- $ 0.78
Weighted average number of
common shares .................. 38,485 24,063 -- 55,152
Dividends per share ............. -- -- -- --

OPERATING DATA:
(Nine Months Ended September 30,
1994)
Total revenue ................... $139,188 $146,104 $ (7,151) $278,141
Net income from continuing
operations available to common
shareholders ................... $ 27,688 $ 46,843 $(35,236) $ 39,295
Net income from continuing
operations available to common
shareholders per common share
Assuming no dilution ........... $ 0.77 $ 1.95 $ -- $ 0.74
Assuming full dilution ......... $ 0.76 $ 1.95 $ -- $ 0.73
Weighted average number of
common shares .................. 36,174 24,017 -- 52,841

<PAGE>

PRO FORMA PRO FORMA
CECI MAGMA ADJUSTMENT COMBINED
------------ ---------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Dividends per share ............. -- -- -- --

BALANCE SHEET DATA:
(September 30, 1994)
Total assets .................... $1,087,064 $630,422 $ 529,381 $2,246,867
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 (128,619) 446,327
Book value per common share .... 5.57 16.44 -- 9.13
</TABLE>

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 NOTES THERETO" and "CECI MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
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 CECI's 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

<PAGE>

NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------- ---------------------
1989 1990 1991 1992 1993 1993 1994
--------- --------- ---------- ---------- ---------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

STATEMENT OF OPERATIONS DATA
(CONTINUED):
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 --
--------- -------- -------- -------- ------- -------- --------
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
</TABLE>

<TABLE>
<CAPTION>
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>
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
<FN>
(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.
</TABLE>

SELECTED HISTORICAL CONSOLIDATED FINANCIAL
AND OPERATING DATA OF MAGMA

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.

<PAGE>

The selected financial data set forth below should be read in conjunction
with "MAGMA'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO" and "MAGMA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS", appearing elsewhere in this Information Statement.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, 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 23.6 (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
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------- SEPTEMBER 30,
1989 1990 1991 1992 1993 1994
-------- -------- -------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
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
<FN>
(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 dilutive 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.

<PAGE>

RISK FACTORS

If CECI elects to pay the Merger Consideration with a combination of cash
and CECI Common Stock, holders of Shares will become stockholders of CECI
and, in such connection, holders of Shares should consider carefully all of
the information contained in this Information Statement, including the
following:

POTENTIAL FOR FLUCTUATION OF VALUE OF MERGER CONSIDERATION. Pursuant to
the Merger Agreement, holders of Shares will only be able to determine the
number of shares of CECI Common Stock they will receive on the fifth business
day prior to the Magma Special Meeting. The stock price of CECI Common Stock
on the fifth business day prior to the Magma Special Meeting may vary
significantly from the price on the date of execution of the Merger
Agreement, the date hereof or the Effective Time. 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. Accordingly, CECI
Common Stock may trade at values which, combined with the Mixed Cash
Component Amount (as hereinafter defined), results in the holders of Shares
receiving an amount lower in value than $39.00. The Collar Provision (as
hereinafter defined) also may have an impact on the value of the Merger
Consideration at the Effective Time. The Collar Provision limits the number
of shares of CECI Common Stock required to be issued in the Merger if the
Average Closing Price (as hereinafter defined) 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.

MARKET RISK OF A MIXED CASH AND CECI COMMON STOCK MERGER CONSIDERATION.
It is CECI's current intention to pay the Merger Consideration solely in
cash, but such intention is subject to change if (i) the proposed
underwriters for the Public Offering determine that they cannot or will not
proceed with such offering upon terms reasonably satisfactory to CECI or (ii)
market conditions would require the issuance in the Public Offering of a
greater number of shares of CECI Common Stock in order to fund an all cash
Merger than would be required to be issued if the Merger were consummated
with a mixed cash and CECI Common Stock consideration. If CECI elects to fund
the Merger using a mixed cash and CECI Common Stock consideration, holders of
Shares would receive shares of CECI Common Stock, the then current public
market for which either CECI or the proposed underwriters for the Public
Offering would have previously determined to be unattractive for the purpose
of funding the Merger on an all cash basis.

PARTIAL DISADVANTAGE ASSOCIATED WITH AN ALL CASH MERGER CONSIDERATION. If
CECI elects to pay the Merger Consideration solely in cash, holders of Shares
would not receive any shares of CECI Common Stock, the public market for
which either or both of CECI or the underwriters for the Public Offering
would have determined to be a more attractive source to fund a portion of the
Merger Consideration. Accordingly, Magma's stockholders (other than those who
reinvest their cash receipts in CECI Common Stock) would no longer be
afforded an opportunity to realize any of the possible future benefits of the
Merger which could have been realized if CECI Common Stock was received in
the Merger.

ELECTION OF FORM OF MERGER CONSIDERATION BY CECI. CECI may elect, in its
sole and absolute discretion, whether to pay the Merger Consideration with a
combination of cash and CECI Common Stock or solely in cash. While CECI will
consider a number of factors in making such election, CECI's interests in
selecting the form of Merger Consideration will be different from, and may be
in opposition to, the interests of holders of Shares.

DEVELOPMENT UNCERTAINTY. CECI is 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. CECI has in development or under
construction projects representing several times the MW's of those currently
in operation. 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 and construction is contingent upon, among
other things, negotiation on terms satisfactory to CECI of engineering,
construction, fuel supply and power sales contracts with other project
participants, receipt of

<PAGE>

required governmental permits and consents and timely implementation of
construction. Further, there can be no assurance that CECI, which will
continue to be substantially leveraged upon completion of the Merger, will
obtain access to the substantial debt and equity capital required to continue
to develop and construct electric power projects or to refinance projects.
The future growth of CECI is dependent, in large part, upon the demand for
significant amounts of additional electrical generating capacity and its
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. Upon completion of the
Merger, CECI will have three projects under construction outside the United
States representing an aggregate net capacity of 500 MW of electric
generating capacity of which CECI's aggregate net ownership interest is 409
MW and a number of projects under award outside the Unites States. The
financing and development of projects outside the United States entail
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 may not be capable of fully insuring
against. The uncertainty of the legal environment in certain foreign
countries in which CECI is developing and may develop or acquire projects
could make it more difficult for CECI to enforce its rights under agreements
relating to such projects. In addition, the laws and regulations of certain
countries may limit the ability of CECI to hold a majority interest in some
of the projects that it may develop or acquire. CECI's international projects
may, in certain cases, be terminated by the applicable foreign governments.

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 geothermal reservoirs 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 existing power
generating systems are built to withstand relatively significant levels of
seismic disturbance and CECI seeks appropriate insurance protection,
geothermal power production poses unusual risks of seismic activity.
Accordingly, there can 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 of the quality of geothermal resource, or a decline in such quality,
could have a material adverse effect on CECI'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 can 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, thereby requiring substantial
capital expenditures.

<PAGE>

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.

PRESENT DEPENDENCE ON LARGE CUSTOMER. CECI currently relies on long-term
power purchase "Standard Offer No. 4" contracts (each, an "SO4 Agreement")
with a single customer, Southern California Edison Company ("SCE"), to
generate substantially all of its operating revenues. Any material failure by
SCE to fulfill its contractual obligations under any of such contracts is
likely to have a material adverse effect on CECI's results of operations.

CONTRACT RISKS; EXPECTED NEGATIVE IMPACT OF AVOIDED COST PRICING. Each
SO4 Agreement provides for both capacity payments and energy payments for a
term of between 20 to 30 years. During the first ten years of the term of
each SO4 Agreement, energy payments are based on a pre-set schedule.
Thereafter, while the basis for the capacity payment remains the same, the
required energy payment is SCE's then-current published avoided cost of
energy ("Avoided Cost of Energy"), as determined by the California Public
Utility Commission ("CPUC"). The initial ten-year period expires in August
1997 for the CECI's Navy I Project, March 1999 for its BLM Project and
January 2000 for its Navy II Project. Such ten-year period expires in 1996
with respect to one of CECI's Salton Sea Known Geothermal Resource Area
Projects (as hereinafter described), in 1999 for three of CECI's Salton Sea
Known Geothermal Resource Area Projects and in 2000 for the remaining two
Salton Sea Known Geothermal Resource Area Projects that operate under SO4
Agreements.

Estimates of SCE's future Avoided Cost of Energy vary substantially in any
given year. CECI cannot predict the likely level of Avoided Cost of Energy
prices under its SO4 Agreements with SCE at the expiration of the fixed-price
periods. SCE's Avoided Cost of Energy as determined by the CPUC is currently
substantially below the current energy prices under CECI's respective SO4
Agreements and is expected to remain so. For example, for September 1994, the
time period-weighted average of SCE's Avoided Cost of Energy was 2.2cents per
kWh, compared to the time period-weighted average September 1994 selling
prices for energy of approximately 10.9cents and 10.6cents per kWh, for CECI
and Magma, respectively. Thus, the revenues generated by each of CECI's
facilities operating under SO4 Agreements are likely to decline significantly
after the expiration of the fixed-price period.

SUBSTANTIAL LEVERAGE. Following completion of the Merger, CECI will
continue to be substantially leveraged. As of September 30, 1994, CECI's
total consolidated indebtedness was $775.5 million, its total consolidated
assets were $1,087.1 million and its total stockholders' equity was $179.7
million. As of such date, on a pro forma basis, after giving effect to the
completion of the Merger, CECI's total consolidated indebtedness was $1,476.9
million, its total consolidated assets were $2,246.9 million and its total
stockholders' equity was $446.3 million. CECI's substantial level of debt
presents the risk that CECI might not generate sufficient cash to service
CECI's indebtedness or that its leveraged capital structure could limit its
ability to finance the acquisition and development of additional projects, to
compete effectively or to operate successfully under adverse economic
conditions. See "BUSINESS OF CECI AND MAGMA AND RELATED INFORMATION--Description of
Projects," "CAPITALIZATION OF CECI" and "SELECTED HISTORICAL AND PRO FORMA
FINANCIAL INFORMATION."

CERTAIN RISKS OF THE MERGER. As a result of the Merger, CECI's total
assets, total liabilities and total resources will each approximately double.
Such rapid expansion could divert the resources and management time of CECI
and will require the integration of Magma's operations with those of CECI.
There can be no assurance that CECI will be successful in managing such
growth or that it will be able to achieve any of the anticipated benefits of
the Merger.

<PAGE>

IMPACT OF ENVIRONMENTAL AND OTHER REGULATIONS. CECI is subject to a number
of environmental laws and regulations affecting many aspects of its present
and future operations, including the disposal of various forms of waste, the
construction or permitting of new facilities and the drilling and operation
of new wells. Such laws and regulations generally require CECI to obtain and
comply with a wide variety of licenses, permits and other approvals. CECI
also remains subject to a varied and complex body of regulations that both
public officials and private individuals may seek to enforce. There can be no
assurance that existing regulations will not be revised or that new
regulations will not be adopted or become applicable to CECI which could have
an adverse impact on its operations. Although CECI does not currently expect
the enactment of changes in applicable environmental laws or regulations
which would have a material adverse effect on its business, the
implementation of regulatory changes imposing more comprehensive or stringent
requirements on CECI, which would result in increased compliance costs and
could have a material adverse effect on its 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 regulatory requirements or
local opposition.

SHARES OF CECI COMMON STOCK ELIGIBLE FOR FUTURE SALE. Pursuant to CECI's
Amended and Restated 1986 Stock Option Plan ("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, all of which 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.
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 PKS. As of September 30, 1994, PKS 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 PKS
including, without limitation, shares of CECI Common Stock purchased in
the Public Offering), all options to purchase 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
the Series C Exchangeable Redeemable Preferred Stock ("Series C Preferred
Stock" or "CECI Preferred Stock") held by PKS (or upon conversion of CECI's
Exchangeable Subordinated Debentures if issued upon the exchange of the
Series C Preferred Stock). In addition, 3,393,197 shares of CECI Common Stock
and 4,444,444 shares of CECI Common Stock have been reserved for issuance
pursuant to the conversion of the 1,247 shares of Series C Preferred Stock
held by PKS and the CECI's Convertible Subordinated Debentures due July 31,
2000, respectively. Sales of substantial amounts of CECI Common Stock or the
availability of CECI Common Stock for sale, could have an adverse impact on
the market price of the CECI Common Stock and on CECI's ability to raise
additional capital through the sale of CECI Common Stock.

CONFLICTS OF INTEREST. 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 change of control
agreements with its officers in November 1993, subject to the following
parameters. While these previously authorized agreements were intended to be
entered into in the Fall of 1994, the execution of each of the agreements was
accelerated in response to CECI's indications of interest in acquiring Magma.

(A) provision for up to two times base and bonus salary;

(B) accelerated vesting of options; and

<PAGE>

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 M. Pankratz,
Chairman of the Board, Ralph W. Boeker, President and Chief Executive
Officer, Jon R. Peele, Executive Vice President, General Counsel and
Secretary, Kenneth Kerr, Senior Vice President--Commercial Development, Trond
Aschehoug, Vice President--North American Operations, and Wallace C.
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,
Steven 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 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 stockholders 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 Magma Board meeting held on September 20, 1994, the
Compensation Committee of Magma authorized a change of the definition of
"Good Reason" in these agreements, the

<PAGE>

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.

GENERAL INFORMATION

This Information Statement is furnished to stockholders of Magma in
connection with the Magma Special Meeting. The Magma Special Meeting will be
held on February 21, 1995, at 10:00 a.m., Nebraska time, at the Red Lion
Hotel, 1616 Dodge Street, in Omaha, Nebraska. This Information Statement is
first being mailed to its respective stockholders on or about February 1,
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

The Magma Board has fixed the close of business on January 23, 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 24,128,912 Shares issued and
outstanding, entitling the holder thereof to one vote. 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.

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

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 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. Accordingly, approval and adoption
of the Merger Agreement at the Magma Special Meeting is assured.

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 September 1991, a number of conversations between CECI's
representatives and persons believed by CECI to be 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 proposed letter of intent contemplated a consensual merger of
Magma with and into CECI. Pursuant to the proposed

<PAGE>

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. After its receipt of the proposed letter of intent,
Magma advised CECI 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
then 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.

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. Such contact was made as a result of
Mr. Sokol's continuing belief that a combination of the two companies would
provide substantial operational benefits such as those more fully discussed
under the heading "BUSINESS OF CECI AND MAGMA AND RELATED
INFORMATION--General--Reasons for the Merger." Mr. Sokol's belief was based
on his experience and knowledge of the industry and not on the basis of any
study or report as to the benefits of the possible combination. Prior to
contacting Mr. Boeker, Mr. Sokol did not discuss such combination with any
member of the CECI Board nor with CECI's financial advisors. At the time,
CECI was not seeking merger partners in general and, while it had discussed a
possible merger with Magma in the past, it had not yet determined to seek a
combination with Magma. Mr. Boeker responded favorably to Mr. Sokol's
proposal to meet by agreeing to a meeting on August 11, 1994.

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 due to
the desire of Magma's management to dedicate its full attention to the
pending financing of Magma's Malitbog project in the Philippines.

In response to Magma's cancellation of the scheduled August 11 meeting, 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
was not expected to occur until November 1994 and

<PAGE>

suggested that they would not be interested in meeting with Mr. Sokol until
that time. 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, in light
of their belief that their attention was more appropriately devoted to
completion of Magma's Malitbog project, they would agree to meet only after
the Malitbog closing. Mr. Sokol concluded the call by reiterating CECI's need
to act upon certain of its strategic alternatives on a prompt basis.

On September 18, 1994, CECI retained Gleacher to serve as financial
advisor to CECI in connection with the possible acquisition of Magma by CECI.
The scope of Gleacher's engagement included providing advice and assistance
with respect to defining transaction objectives, structuring and planning the
transaction, performing valuation analysis, negotiating the transaction and
performing due diligence. In addition, Gleacher was retained in order to
advise on arranging debt financing for the possible acquisition of Magma.

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"). The form and amount of consideration offered to Magma pursuant to
the Initial Proposal was determined in consultation with Gleacher and was
based on CECI's internal review of publicly available information of and
relating to Magma. 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
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 22, 1994, Magma announced its retention of Goldman, Sachs &
Co. ("Goldman Sachs") as its financial advisor in connection with the Initial
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 a letter to Messrs. Pankratz and Boeker and copies of a draft merger
agreement.

At a meeting held on October 2 and 3, 1994, the Magma Board considered
Magma's business, financial condition and prospects, the terms and conditions
of the Initial Proposal, and CECI's business, financial condition and
prospects. Magma's management made detailed presentations regarding Magma's
business plan and the various strategic initiatives which Magma had
undertaken both in the United States and overseas. 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

<PAGE>

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 informed CECI's
financial advisors that Magma was not for sale and that the value placed on
Magma by the Initial Proposal did not reflect the intrinsic value of Magma,
which view was based on the presentations and discussions at Magma's Board
meeting held on October 2 through October 3. Magma's financial advisor did
not discuss or suggest any price which it believed reflected Magma's
intrinsic value.

Following 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"). The Previous Offer sought approximately 51% of the
outstanding Shares rather than 100% of the Shares because (i) CECI intended
the Previous Offer as a step toward implementing the Initial Proposal and
(ii) CECI and CE Sub determined that an exchange offer for 100% of the
Shares, which could not be made until effectiveness of a registration
statement under the Securities Act, would be less desirable from a timing
perspective than a cash tender offer which could be accepted in as little as
twenty business days. CECI and CE Sub intended that following completion of
the Previous Offer, it would complete the Initial Proposal by way of a merger
of an affiliate of CECI into Magma in which all Shares not owned by CECI and
its affiliates would be converted into the right to receive cash and CECI
Common Stock having a combined cash and market value of $35 per Share. The
per Share amount of cash and CECI Common Stock to be distributed in such
merger was to be determined such that the blended purchase price for all
Shares acquired by CECI and its affiliates in the Previous Offer and such
merger would be $25 in cash and $10 in market value of CECI Common Stock,
subject to a collar provision that CECI intended to negotiate with Magma.

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 reached at its October 10, 1994 meeting
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"). The
form and amount of consideration offered to Magma pursuant to the Revised
Previous Offer was determined in consultation with Gleacher and was based on
CECI's internal review of publicly available information of and relating to
Magma and based on CECI's belief that the increased consideration was both
prudent and would allow a transaction to occur. On October 31, 1994, CECI
learned that the Magma Board had resolved at its meeting of that date to
recommend that its stockholders reject the Revised Previous Offer. In making
this recommendation, the Magma Board took into account inquiries received
from various third parties expressing interest in pursuing a possible
business combination with Magma, the terms of the Revised Previous Offer,
which the Magma Board viewed as highly conditional, the opinion of Goldman
Sachs that the consideration provided for in the Revised Previous Offer was
inadequate, the Magma Board's understanding of CECI's business and financial
condition, including the degree of CECI's leverage, CECI's existing projects,
CECI's geothermal resources and CECI's announced future projects. With
respect to the inquiries received from third parties, while Magma permitted
extensive due diligence to be conducted by certain parties which signed
confidentiality agreements and held initial meetings with several other
parties, no

<PAGE>

specific offers were made and no dollar amounts for Magma were discussed. In
rendering its opinion on October 28, Goldman Sachs reviewed the following
topics with the Magma Board: (A) an overview of the Revised Previous Offer;
(B) a summary of certain financial information regarding Magma; (C) trading
histories of the Shares as well as shares of CECI Common Stock; (D) a
comparison of market trading prices as well as certain other financial
statistics of several companies within the independent power production
industry (the "Industry"); (E) a summary of recent acquisition transactions
within the Industry; (F) a summary of certain publicly available information
concerning CECI and its business; (G) the application of certain valuation
methodologies and analyses, including a discount cash flow analysis, based
upon certain assumptions stated therein, to Magma; (H) an analysis of the pro
forma impact of a possible transaction with CECI; (I) analyses of selected
financial and strategic alternatives; and (J) analyses of the pro forma
impact of possible transactions with certain potential acquirors.

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 Revised 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. The meeting was arranged between
CECI and Magma because their respective financial advisors advised that it
would be in the parties' respective best interests to discuss the possibility
of a negotiated transaction at a higher consideration and because Dow
indicated it would consider supporting a negotiated transaction at a higher
consideration. In addition, Magma resumed the negotiations because a large
number of Magma stockholders had requested the call of the Requested Special
Meeting and because Magma believed that such negotiations would be the final
opportunity to achieve the highest possible offer from CECI and the best
available transaction for Magma.

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 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.

The principal participants in the meetings held on December 3 through the
morning of December 5, 1994, were: Messrs. Sokol and McArthur, and John G.
Sylvia, Senior Vice President, Chief Financial Officer and Treasurer, of
CECI; Messrs. Boeker, Pankratz and Peele from Magma; representatives of
Gleacher and Willkie Farr & Gallagher on behalf of CECI; and representatives
of Goldman Sachs and Shearman & Sterling on behalf of Magma. The material
issues discussed by the parties were the form and amount of the consideration
to be paid in a transaction, the structure of a transaction, covenants
relating to conduct of the respective businesses pending completion of a
transaction, reciprocal termination fees, a "no shop" provision, a
"standstill" provision in case the transaction failed to close due to any
action by CECI, and the ability of CECI to secure the financing necessary to
complete a transaction. Representatives of Credit Suisse and its counsel,
Chadbourne & Parke, assisted in the discussions relating to the ability of
CECI to finance a transaction.

Representatives of CECI and Magma each sought to structure the transaction
in two steps, the first as a tender offer to obtain control of Magma and the
second as a merger to permit the acquisition of the entire remaining equity
interest in Magma. CECI sought this transaction structure in order to obtain
operating control of Magma at the earliest possible time, and Magma sought
this structure in order to

<PAGE>

enable Magma stockholders to receive a portion of the transaction
consideration at the earliest possible time. The form and amount of the
consideration was determined by the parties in consultation with their
respective financial advisors and was based on the form of the consideration
that had been offered by CECI pursuant to the Revised Previous Offer.
Representatives of CECI proposed that the transaction consideration be a
combination of cash and CECI Common Stock and that any increase in such
consideration be paid in additional shares of CECI Common Stock.
Representatives of Magma proposed that the transaction consideration be paid
entirely in cash. The parties then discussed an increase in the consideration
from a blended amount of $28.50 in cash and $10.00 in market value of CECI
Common Stock, as contemplated by the Revised Previous Offer, to a blended
amount of $28.50 in cash and $10.50 in market value of CECI Common Stock. In
light of Magma's desire to have the consideration paid entirely in cash, CECI
proposed that, at its option, CECI could pay the consideration all in cash
(rather than in cash and CECI Common Stock) such that the blended all cash
consideration paid in the Offer and the Merger would be $38.75 per Share. As
a result of (i) the agreement of the parties that CECI could, at its option,
pay the Merger Consideration entirely in cash, at a blended value of $38.75
per Share, and (ii) Magma's insistence that the consideration paid in the
Offer be $39.00 per Share, the per share Merger Consideration payable if CECI
elects the all cash alternative will be in the range of $38.47 to $38.49,
which amount is less than the amount per share in the Offer. Accordingly, the
parties did not discuss the fact that the amount to be paid in the Merger
would be less than the value of the Revised Previous Offer less than the cash
amount in the Offer and less than the value of the Merger Consideration if it
were paid with a combination of cash and CECI Common Stock. In light of the
fact that the Merger Agreement was negotiated on an arms length basis prior
to the time CECI became an affiliate of Magma, Magma did not appoint a
special committee composed of directors who are not employees of Magma, did
not retain an unaffiliated representative to act solely on behalf of
unaffiliated stockholders of Magma for the purposes of negotiating the terms
of the Merger Agreement and did not voluntarily accord Magma stockholders
appraisal rights.

On January 10, 1995, CECI consummated the Offer and purchased 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. At such time, the size of the Magma Board was
reduced to eight directors. 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--Recommendations
of the Board of Directors of Magma and CECI; 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.

<PAGE>

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.

RECOMMENDATIONS OF THE BOARD OF DIRECTORS OF MAGMA AND CECI; REASONS FOR THE
MERGER; FAIRNESS OF THE OFFER AND THE MERGER

Magma. The Magma Board held separate meetings on December 4 and 5, 1994.
At the December 5, 1994 meeting, the Magma Board unanimously approved (with
two directors absent) the Merger Agreement and the transactions contemplated
thereby and determined that the Offer and the Merger were fair to, and in the
best interests of, the stockholders of Magma. The two directors absent were
William R. Knee and John D. Roach, each of whom was travelling and therefore
unable to attend, or participate in, the December 5, 1994 Magma Board
meeting. The Magma Board recommended that all holders of Shares accept the
Offer and tender their Shares pursuant to the Offer. 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. In the course of
reaching its decision to approve the Merger Agreement, Magma's Board
consulted with its financial advisors as to the legal terms of the
transaction and the obligations of Magma's Board in its consideration of the
Merger Agreement.

In reaching its determinations and recommendations with respect to the
Merger Agreement and the transactions contemplated thereby, the Magma Board
took into account the following factors, which constitute all material
factors considered by the Magma Board at its December 4 and 5, 1994 board
meetings:

(i) The improvement to the financial terms of the Revised Previous
Offer. Specifically, the Magma Board considered the increase in the blended
average per Share consideration offered from $28.50 in cash and $10.00 in
CECI Common Stock to, at the option of CECI, either $28.50 in cash and
$10.50 in CECI Common Stock or $38.75 in cash. In this regard, the Magma
Board also considered that a two-step transaction had been negotiated such
that the Magma stockholders would receive a portion of the transaction
consideration at the earliest possible time as well as the possibility that
Magma stockholders might receive all cash as Merger Consideration. The
Magma Board did not specifically consider the $.50 increase in the mixed
cash and CECI Common Stock consideration in relation to the all cash
option, but focused instead on the full blended consideration to be paid in
each alternative and, in this regard, considered the fact that because the
blended value of the all cash alternative was less than the nominal value
of the mixed consideration alternative, CECI would have an incentive to
select the all cash option.

(ii) The improvement to the terms and conditions of the Revised Previous
Offer such as the entitlement of Magma to receive a fee of $8,000,000 if
CECI failed to complete the Offer and had not delivered a commitment letter
or definitive loan documentation reflecting the financing necessary to
consummate the Offer and the Merger which generally contained a provision
for the prompt amendment of the financing commitment to (a) eliminate the
due diligence condition and (b) provide a definition of "material adverse
effect" that substantially conforms with such definitions contained in the
Merger Agreement with respect to CECI and Magma.

(iii) The Magma Board's familiarity with the financial condition and
future prospects of Magma including the prospects of Magma were it to
remain independent. The Magma Board considered Magma's potential for
development of new opportunities, the risk that such opportunities might
not materialize, the fact that Magma would be required to substantially
increase its borrowings and to seek new infusions of capital in order to
benefit from such opportunities, and the increased risk associated with
financing and developing any such opportunity. The Magma Board believed
that its familiarity with the foregoing, in conjunction with the other
factors discussed in paragraphs (i) through (xii), supported its
recommendation.

(iv) 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) delivered to the Magma Board at the December 5, 1994
meeting that, as of December 5, 1994, the consideration to be received

<PAGE>

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.

(v) 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.

(vi) 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.

(vii) The provision of the Merger Agreement prohibiting the solicitation
by Magma of other proposals and the termination provisions of the 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
AGREEMENT"). 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.

(viii) The Collar Provision which protects, within certain limits, the
value of CECI Common Stock to be received by the Magma stockholders in the
Merger, but which might cause the value of the cash and CECI Common Stock
received by Magma stockholders to be less than $39.00.

(ix) The fact that if the Offer and the Merger were consummated and if
CECI were to elect to pay the Merger Consideration solely with cash,
Magma's stockholders would no longer be offered an opportunity to
participate in future growth prospects of the combined companies. However,
the Magma Board believed that the premium being offered in the Offer and
the Merger fairly compensates for that loss of opportunity and noted that
there was still a possibility, if CECI were to elect to pay the Merger
Consideration with a combination of CECI Common Stock and cash, that the
Merger Consideration could include CECI Common Stock.

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

(xi) The Magma Board viewed the acquisition of Magma as a single
transaction, and considered the fact that the parties negotiated on the
basis of a blended consideration to be received by Magma stockholders in
the Offer and the Merger. The Magma Board considered that as a result of
(i) the agreement of the parties that CECI could, at its option, pay the
Merger Consideration entirely in cash, at a blended value of $38.75 per
Share, and (ii) Magma's insistence that the consideration paid in the Offer
be $39.00 per Share, the per share Merger Consideration payable if CECI
elects the all cash alternative will be in the range of $38.47 to $38.49,
which amount is less than the amount per share in the Offer. The Magma
Board also considered that, assuming the Average Closing Price is between
$14.27 and $18.73, the value of the Merger Consideration will be less if
CECI elects the all cash alternative than if CECI elects to pay the Merger
Consideration in a combination of cash and CECI Common Stock.

(xii) Certain risks associated with the Offer and the Merger, as set
forth under "RISK FACTORS."

<PAGE>

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. During its evaluation, the Magma Board recognized that the price
differentials between the Offer and the all cash alternative Merger
Consideration and between the all cash alternative and the mixed cash and
CECI Common Stock alternative resulted from arms' length negotiation between
the parties. The Magma Board viewed the acquisition of Magma as a single
transaction and, accordingly, only sought an opinion from Goldman Sachs on
the Offer and the Merger taken as a unitary transaction. In light of the fact
that (i) the Merger Agreement was negotiated on an arms' length basis prior
to the time CECI became an affiliate of Magma and (ii) all of Magma's
stockholders prior to consummation of the Offer would be entitled to the
foregoing benefits and detriments, Magma did not appoint a special committee
composed of directors who are not employees of Magma, did not retain an
unaffiliated representative to act solely on behalf of unaffiliated
stockholders of Magma for the purposes of negotiating the terms of the Merger
Agreement and did not voluntarily accord Magma stockholders appraisal rights.
The Magma Board did not consider the lack of appraisal rights by Magma
stockholders and did not consider the liquidation value of Magma during the
course of their consideration of the Offer and the Merger. The presentation
of Goldman Sachs was strongly favorable to the Magma Board's determination
and while the Magma Board did not take any specific action with respect to
the presentation, in making its favorable determination regarding the Offer
and the Merger, the Magma Board adopted the overall analyses and conclusions
of the presentation.

Each of the foregoing factors was viewed positively by Magma's Board, and
the Magma Board neither identified nor discussed any other material negative
factor in connection with its deliberations with respect to the Merger
Agreement. 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. However, as a general matter, the Magma Board believed that
factors discussed in paragraphs (i) through (xi) supported its decision to
approve the Offer and the Merger and outweighed the risks and detriments
associated therewith referred to in paragraphs (i), (iii), (v), (viii), (ix),
(xi) and (xii). 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.

CECI. On September 19, 1994, CECI's Board approved a proposal to acquire
the outstanding Shares for $35.00 per Share for consideration consisting of
cash and CECI Common Stock, and authorized certain officers of CECI to
negotiate modifications to the foregoing proposal (including the final price
and form of the consideration) in consultation with members of the Executive
Committee of CECI. On December 6, 1994, CECI's Board unanimously ratified and
approved the Merger Agreement and the transactions contemplated thereby.

In the course of reaching its decision to ratify and approve the Merger
Agreement, CECI's Board consulted with its financial advisors regarding the
financial aspects and fairness of the Merger, and with its legal advisors
regarding the legal terms of the transaction and the obligations of CECI's
Board in its consideration of the Merger Agreement. CECI's Board concluded
that the Merger will further CECI's objectives in part because of its belief
that Magma is an excellent strategic fit and that the acquisition will create
significant benefits, including: (i) expansion and enhancement of development
efforts, (ii) benefits of increased size, (iii) opportunities for operational
and administrative cost savings, and (iv) diversification in sources of
revenue and operations. For a further discussion of these factors, see
"BUSINESS OF CECI AND MAGMA AND RELATED INFORMATION--General--Reasons For the
Merger."

In reaching its determinations and recommendations with respect to the
Merger Agreement and the transactions contemplated thereby, CECI's Board took
into account numerous factors, including, among other things, in addition to
the foregoing, the following:

(i) CECI's knowledge and review of the business, operations, properties,
assets, financial condition and operating results of each of CECI and
Magma. CECI's Board found that these factors supported their determinations
and recommendations because, as a result of its favorable view of Magma,
the

<PAGE>

Board believed CECI would realize benefits that would improve CECI's
competitive position, including expansion and enhancement of development
efforts, the benefits of increased size, opportunities for operational and
administrative cost savings and diversification in sources of revenues and
operations;

(ii) the terms and conditions of the Merger Agreement, which were the
product of arms' length negotiations, including the amount and form of the
consideration. CECI's Board found that these factors supported their
determinations and recommendations because (a) the terms of the Merger
Agreement were generally evenhanded, (b) the pricing structure gave CECI
the option of alternative forms of consideration and through the Collar
Provision limited the number of shares of CECI Common Stock required to be
issued in the Merger, (c) the two-tier structure contemplated by the Merger
Agreement allowed CECI to obtain control of Magma at the earliest possible
time, thereby laying the groundwork for realizing the benefits of the
transaction sooner rather than later and (d) the Merger Agreement
(including the tender offer conditions) gave CECI adequate protection in
the form of representations and warranties as to the business and
operations of Magma;

(iii) the Gleacher Report and the Gleacher Opinion delivered to CECI's
Board (as discussed more fully below) that the Consideration to be paid by
CECI pursuant to the Offer and the Merger is fair to CECI from a financial
point of view. CECI's Board found that these factors supported their
determinations and recommendations because the Gleacher Report and the
Gleacher Opinion spoke directly to the fairness of the transaction to CECI,
the Board felt comfortable with the scope of work performed by Gleacher and
the Board believed that Gleacher had done a competent and professional job;

(iv) the fact that the effect of the Merger would be accretive on a pro
forma per share basis. CECI's Board found that this factor supported their
determinations and recommendations because it indicated a reasonable
likelihood that earnings per share of CECI Common Stock would increase as a
result of the transaction; and

(v) current industry, economic and market conditions. CECI's Board found
that these factors supported their determinations and recommendations
because (a) the development of new opportunities, particularly
internationally, is a key component of CECI's strategy, (b) the
international power production market is characterized by numerous strong
and capable competitors and (c) based on CECI's belief that potential
customers consider both the price of power and the provider's capacity to
fulfill its obligations as primary factors in the selection of power
suppliers, CECI believes that increased size is an important factor in
determining the success of an independent power producer competing in the
global power market.

CECI's Board considered each of the factors listed above during the course
of its deliberations and negotiations prior to entering into the Merger
Agreement. Each of the foregoing factors, which constitute all material
factors considered by CECI's Board, was viewed positively by CECI's Board,
and CECI's Board neither identified nor discussed any material negative
factor in connection with its deliberations with respect to the Merger
Agreement. CECI's Board evaluated the factors listed above in light of their
knowledge of the business and operations of Magma and their business
judgement. In view of the wide variety of factors considered in connection
with the evaluation of the Offer and the Merger, CECI's 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 determinations.

In considering the Merger Agreement, CECI's Board identified no
significant disadvantages to the combining of the businesses of CECI and
Magma. CECI's Board considered the synergies expected to result from such a
combination and determined that the economic value of such synergies was not
a material determinant in establishing CECI's Board's belief that the Merger
Consideration represents a fair value for the Shares. CECI's Board considered
the possibility that the synergies predicted by CECI's management may
ultimately fail to occur but determined that such an occurrence would not be
material to CECI's Board's approval of the payment in the Merger of the
premium to market price and book value represented by the Merger
Consideration. CECI's Board gave significant weight to CECI's pro forma
analysis, which indicates CECI's belief that, among other things, on a
consolidated basis, consummation of the Offer and the Merger will be
accretive to per share earnings and will not materially increase CECI's debt
to equity ratio.

<PAGE>

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 the Magma 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, and 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. 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.

General. In the course of preparing their respective opinions, Gleacher
and Goldman Sachs conducted the analyses described above, several of which
resulted in quantifiable per Share values in excess of $38.75. Gleacher's
second discounted cash flow analysis (which took into account substantially
all of Magma's future development projects) resulted in values in excess of
$50 per Share, and its trading valuation analysis resulted in a per Share
valuation range of $39 to $54. Goldman Sachs' discounted cash flow analysis
resulted in a per Share valuation range of $24 to $52. Notwithstanding such
values, the CECI Board and the Magma Board believe the transaction is fair
because such boards believe, and have been so cautioned by their respective
financial advisors, that the individual analyses undertaken by the financial
advisors cannot be viewed in isolation from the entirety of the analyses
performed by them and because, in the case of the discounted cash flow
analyses, such analyses produced significantly lower per Share values than
available to the holders of Shares in the Offer and the Merger.

ALTERNATIVES TO THE OFFER AND THE MERGER

Magma. The Magma Board considered the following alternatives to the Offer
and the Merger: (i) pursuing its long-term business plan and remaining an
independent entity, (ii) entering into a plan of recapitalization, pursuant
to which Magma would either buy Shares from the Magma stockholders or
distribute a cash dividend to the Magma stockholders, and (iii) entering into
a strategic alliance or combination with other partners. The Magma Board
determined not to pursue alternatives (i) and (ii) because it believed that
the Offer and the Merger provided greater value to Magma's stockholders and
because the Magma Board believed that, in light of the need for additional
borrowings to fund future development projects, borrowings to accomplish a
Share buyback or special dividend would not be in Magma's long-term best
interest. The Magma Board determined that while pursuit of Magma's long-term
business plan could possibly produce a greater long-term value for the Magma
stockholders than the Initial Proposal, the Previous Offer and the Revised
Previous Offer, no assurances to that effect could be given, and in light of
the firm present offer from CECI, the Magma stockholders' interests were best
served by consummation of the Offer and the Merger. The Magma Board rejected
alternative (iii) because, despite the public announcement of the Previous
Offer, there was an absence of firm proposals by potential acquirors and the
Magma Board believed that reasonably likely alternatives were unlikely to
provide value to Magma's stockholders greater than the values provided to
them in the Offer and the Merger.

CECI. In light of its belief regarding the excellent strategic fit of
Magma with CECI and the significant benefits expected to be gained as a
result of the Merger, the CECI Board considered no alternatives to the
acquisition of Magma.

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

<PAGE>

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 "THE MERGER AGREEMENT--Terms of the Merger").
In this connection, Goldman Sachs opined as to the aggregate consideration to
be received per Share by Magma stockholders in both the Offer and the Merger
taken as a whole and as a single transaction. In view of the integrated
returns of the Offer and the Merger, Goldman Sachs was not requested by the
Magma Board to render, and did not render, a separate opinion as to the
fairness of the consideration to be received by Magma stockholders in the
Merger viewed as a transaction separate from the Offer. 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 TAKEN BY GOLDMAN SACHS,
IS ATTACHED TO THIS INFORMATION STATEMENT 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. 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. Goldman Sachs was not requested to, and did
not, perform a stand-alone liquidation analysis of Magma, and there can be no
assurance that such an analysis would not have resulted in a higher or lower
value than the Consideration.

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

<PAGE>

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 Initial
Proposal 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 Initial
Proposal 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 Initial
Proposal, Goldman Sachs accumulated a long position of 60,100 Shares.

The following is a summary of the material financial analyses utilized by
Goldman Sachs in connection with providing its opinion to the Magma Board on
December 5, 1994.

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. During the period commencing on December 2, 1993 and ending on
December 2, 1994, the intra-day high was $38 per Share. Goldman Sachs noted
that the Consideration was at a price above such intra-day high. Goldman
Sachs reviewed the volume of Shares which traded during the specified period
to determine the weighted average price of Shares during the period reviewed.
Goldman Sachs determined that the average weighted price for a Share during
the trailing one year period was $33.44 and during the trailing three year
period was $32.59 and noted that the Consideration was higher than such
weighted average prices.

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, specifically The AES Corporation, Destec Energy, Inc., KENETECH
Corporation and Sithe Energies, Inc. (collectively, excluding Magma and CECI,
the "Selected Companies"). Based upon the closing market price for the Shares
on December 2, 1994 ($35.50), such analysis indicated that, for the Selected
Companies, the median values of the estimated 1994 and estimated 1995
price/earnings ratios were 24.9x and 12.3x, as compared to corresponding
values of 18.1x and 15.3x for CECI and 14.5x and 13.4x for Magma. Based upon
a Consideration of $38.75 per Share, the price/earnings ratio for Magma had
an estimated value of 15.6x in 1994 and 14.4x in 1995. Based upon a
Consideration of $39.00 per Share, the price/earnings ratio for Magma had an
estimated value of 15.7x in 1994 and 14.4x in 1995. The estimated
price/earnings ratios for 1994 and 1995 for each of CECI and Magma were
within the range of the price/earnings ratios for the same period for the
Selected Companies, and, as such, indicated that the valuations for both
Magma and CECI were not inconsistent with the valuations of the Selected
Companies. Accordingly, in the case of Magma, the fact that Magma's estimated
price/earnings ratios for 1994 and 1995, based upon a Consideration of either
$38.75 or $39.00, were within the range of estimated price/earnings ratios
for the same period for the Selected Companies was indicative that the Shares
at the Consideration prices were not under-valued vis-a-vis the Selected
Companies, and, in the case of CECI, the estimated price/earnings ratios for
1994 and 1995 based on the then CECI Common Stock price were within the range
of appropriate values for purposes of serving as consideration in the Merger.

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

<PAGE>

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. Goldman Sachs conducted its discounted cash flow analysis
using a bottom-up approach which is based upon the net present value of the
cash flow generated by each of the individual projects for the life of each
such project. Such analysis indicated that assuming discount rates ranging
from 9% to 13% for domestic projects and 11% to 19% for international
projects, the net after-tax present value of Magma's future cash flows (plus
net cash of approximately $107 million) ranged from $577 million to $1,250
million, or from $24 to $52 per Share. The Consideration on a per Share basis
was within the range (and at approximately the midpoint of the range)
indicated by the discounted cash flow analysis.

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 option to pay the All Cash Component
Amount (as hereinafter defined) was not exercised by CECI in the Merger.
Further, in conducting its analysis with respect to information provided by
Magma and CECI's managements for their respective companies, Goldman Sachs
also assumed that synergies from the Merger aggregated in the amount of $5
million. The foregoing analysis indicated that the estimated earnings per
share for the pro forma combined entity would be accretive to earnings per
share for the CECI Common Stock in the range of 2% to 11% in 1995 and 13% to
22% in 1996, depending on the market price of CECI Common Stock at the time
of consummation of the Merger. 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 analysis
indicated that the estimated earnings per share for the pro forma combined
entity would be accretive to earnings per share for the CECI Common Stock by
1% in 1995 and 11% in 1996.

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 option to pay
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. Goldman Sachs noted that the
selected transactions analysis did not provide any consistent indication of
value and, accordingly, did not rely upon this analysis.

Other Analysis. 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, which did not indicate a likelihood of an alternative transaction
achieving a greater value for Magma stockholders than the Consideration being
offered by CECI.

General. In addition to the foregoing analyses, Goldman Sachs considered
the effect of the Collar Provision, which was negotiated between Magma and
CECI and was but one of many factors used by Goldman Sachs in delivering its
opinion. In this connection, Goldman Sachs noted that the Collar Provision
provided certainty as to the Merger Consideration as long as CECI Common
Stock traded within the boundaries of the collar prior to consummation of the
Merger, and was symmetrical in the sense that Magma stockholders could
receive either greater or lesser value if CECI Common Stock traded outside
the boundaries of the collar prior to consummation of the Merger.

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.

<PAGE>

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 the Magma Board as to the fairness of
the Consideration to the holders of Shares (other than CECI and its
affiliates), 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.

OPINION OF CECI'S FINANCIAL ADVISOR

On December 6, 1994, Gleacher delivered its written opinion to the CECI
Board (the "Gleacher Opinion") to the effect that, as of December 6, 1994,
and based upon the assumptions made, matters considered and limits of the
review, as set forth in the Gleacher Opinion, the Consideration (as defined
below) to be paid by CECI pursuant to the Offer and the Merger is fair to
CECI from a financial point of view. For purposes of the Gleacher Opinion,
the term "Consideration" means the consideration paid by CECI pursuant to the
Offer together with, at CECI's option, either (i) $39.00 per Share in a
combination of cash and a number of shares of CECI Common Stock to be
determined in accordance with the Merger Agreement, or (ii) $38.50 per Share
in cash, in either case to be paid by CECI pursuant to the Merger Agreement.
In arriving at the Gleacher Opinion, Gleacher considered the effect of the
Collar Provision on the consideration to be paid in the Merger and noted that
if the Average Closing Price exceeds the high point of the collar, CECI could
elect to pay the Merger Consideration entirely in cash. Gleacher also noted
that if the Average Closing Price falls below the low point of the collar,
CECI could elect to pay the Merger Consideration with a combination of cash
and CECI Common Stock and CECI would be protected by the collar in that the
collar limits the number of shares of CECI Common Stock that CECI would be
obligated to issue.

A COPY OF THE GLEACHER OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE,
MATTERS CONSIDERED AND THE LIMITS OF THE REVIEW BY GLEACHER, IS ATTACHED TO
THIS INFORMATION STATEMENT AS ANNEX C. THE GLEACHER OPINION IS DIRECTED ONLY
TO THE FAIRNESS OF THE CONSIDERATION TO BE PAID BY CECI FROM A FINANCIAL
POINT OF VIEW. THE SUMMARY OF THE GLEACHER OPINION SET FORTH IN THE
INFORMATION STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF SUCH OPINION.

In arriving at its opinion, Gleacher, among other things, (i) reviewed the
audited financial statements and public Commission filings for the three most
recent fiscal years and interim periods to date of Magma and CECI (the "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 Gleacher 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; (viii) assumed without independent investigation that
no material contingent liability exists with respect to Magma or CECI which
is not disclosed in the SEC Reports; (ix) reviewed the Merger Agreement and
related transaction documentation; and (x) reviewed certain other financial
studies, performed such other analyses and took into account certain other
matters as deemed appropriate.

Gleacher relied upon the accuracy and completeness of all information
supplied or otherwise made available to it by CECI, and did not independently
verify such information or make or obtain an independent evaluation or
appraisal of the assets of CECI or Magma. With respect to the Projections,

<PAGE>

Gleacher assumed without independent investigation that the Projections were
reasonably prepared by CECI, and were generated on bases reflecting the best
currently available estimates and judgments of CECI's management as to the
expected future financial performance of CECI or Magma, as the case may be.
The Gleacher Opinion was based upon prevailing market conditions and other
circumstances and conditions as they existed as of the date of the Gleacher
Opinion.

In arriving at the Gleacher Opinion and making its presentation to the
CECI Board at the meeting held on December 6, 1994, Gleacher considered and
discussed certain financial analyses and other factors. In connection with
its presentation, Gleacher provided the CECI Board with a summary of
valuation results obtained by using several different valuation methods as
well as other materials concerning Magma (the "Gleacher Report"), the
material portions of which are summarized below.

Purchase Price Multiples. Gleacher compared the Consideration to be paid
by CECI assuming that the All Cash Component Amount was exercised by CECI to
the price per Share as of the close of business the day before the Offer
commenced (resulting in an implied premium to Magma stockholders of
approximately 41%) and the average closing price per Share during the
six-month period before the Offer commenced (resulting in an implied premium
to Magma stockholders of approximately 30%). Gleacher then compared such
premiums to premiums paid in recent public merger and acquisition
transactions generally and concluded that the premium being paid by CECI is
at the low end of the range of the premiums paid in such recent public merger
and acquisition transactions. Gleacher used its experience and knowledge of
the markets and the premiums being paid in recent public merger and
acquisition transactions generally over the last few years to arrive at its
conclusion. Gleacher did not perform an analysis of premiums in comparable
acquisitions because, it is the belief of Gleacher, there are no acquisitions
of comparable public companies to Magma in terms of its line of business and,
as a result, Gleacher gave little weight to the results of this analysis in
rendering the Gleacher Opinion. Gleacher also calculated the value of such
Consideration as a multiple of (i) Magma's trailing twelve-month earnings
before interest and taxes (10.5x), (ii) net income (14.6x), (iii) book value
(2.4x) and (iv) projected net income for 1994 (15.5x) and for 1995 (14.4x).
Gleacher then compared such multiples to CECI's current trading multiples,
and noted that CECI's trading multiples in general were higher. Gleacher
calculated CECI's trading value at December 5, 1994 as a multiple of (i)
CECI's twelve-month earnings before interest and taxes (8.6x), (ii) net
income (16.5x), (iii) book value (2.8x) and (iv) projected net income for
1994 (17.4x) and for 1995 (14.6x). Gleacher further noted that the
Consideration to be paid by CECI should not have an adverse impact in general
on CECI's trading multiples.

Discounted Cash Flow Analysis. Gleacher performed two discounted cash flow
analyses of Magma. The first, which was derived from publicly available
information, was based upon estimates of financial performance as prepared by
CECI for each of Magma's power projects in operation and for a limited number
of projects in development but under signed contracts or awards. For this
analysis, no value was accorded to any future development efforts by Magma,
and as a result did not necessarily reflect Magma's potential future
financial performance. The second analysis was based upon estimates of
financial performance as prepared by Magma and as provided to CECI and
Gleacher for each of Magma's power projects including (a) certain projects
under development and (b) benefits of a specific technology expected to be
implemented, including certain planned operational enhancements. Using these
projections, Gleacher discounted to the present (i) the projected stream of
proportionate cash flows through year 2012 and (ii) the projected terminal
value of Magma at such year based upon a multiple of projected after-tax cash
flows. After-tax cash flows were calculated as projected earnings adjusted
for all non-cash items, less capital expenditures and principal payments on
debt obligations. Gleacher applied discount rates in the first analysis of
10%, 12% and 15% and an after-tax cash flow multiple of 14x to Magma's
after-tax cash flows. Using this valuation method for the first analysis, the
implied values per Share were approximately equal to $30. In the second
discounted cash flow analysis, Gleacher applied a 12% discount rate. For this
analysis, value was accorded to substantially all of Magma's future
development projects. By including such future development projects in the
analysis, this analysis resulted in an implied value per Share of in excess
of $50. Gleacher then compared the results obtained from the second
discounted cash flow analysis to the Consideration to be paid by CECI.
Because the first discounted cash flow analysis was based solely on publicly
available information, and the second discounted cash flow analysis was based
on

<PAGE>

both information provided by Magma and the results of additional due
diligence conducted on Magma, Gleacher's presentation to CECI's Board
indicated that it discounted the results of the first analysis and gave
substantially more weight to the second discounted cash flow analysis. The
discount rates and after-tax cash flow multiple used by Gleacher in its
analyses were based upon discussions with the management of CECI and
Gleacher's judgments as to the manner in which companies in the Comparable
Group (as defined below) are valued. The "Comparable Group" included CECI,
The AES Corporation, Destec Energy, Inc. and Sithe Energies, Inc.

Trading Valuation. Gleacher reviewed and compared certain actual and
estimated financial and operating results and stock market performance of
Magma and the Comparable Group. Gleacher applied trading multiples of the
Comparable Group to Magma's financial performance. These trading multiples
consisted of (i) trailing twelve-month revenues of 4x to 5x, (ii) earnings
before interest, taxes, depreciation and amortization of 6.5x to 7.5x, (iii)
earnings before interest and taxes of 9x to 10x, (iv) net income of 14x to
16x and (v) projected net income for 1994 of 13x to 15x and for 1995 of 12x
to 14x. Gleacher then derived a range of values for the Shares. Gleacher then
added control premiums of 25% and 50% to the calculated range for the Shares.
The control premium range was determined by Gleacher based upon its
experience and knowledge of premiums generally paid to acquire control of a
company. Gleacher then calculated the implied values per Share, which ranged
from approximately $39 to $54. Gleacher then noted that the Consideration to
be paid by CECI was at the low end of such range.

Pro Forma Analyses. Gleacher analyzed the pro forma impact of the Merger
on earnings per share of Common Stock for periods following consummation of
the Merger, and compared such amounts to projected earnings per share on a
stand-alone basis for CECI based on CECI's base operating plan. In conducting
its pro forma analyses, Gleacher assumed the following: CECI achieves
synergies and cost savings in 1995 and thereafter resulting from the Merger
of approximately $10 million, the All Cash Component Amount is exercised by
CECI, interest rate on borrowings of 9%, opportunity cost of CECI's cash of
5% and CECI sells approximately 14,800,000 shares of CECI Common Stock at
$16.50 per share based on the then current market price. The foregoing
assumptions were all of the assumptions used by Gleacher in performing the
pro forma analyses. Gleacher estimated that the Merger could result in a
percentage increase in the earnings per share for the CECI Common Stock of
approximately (i) 1% in 1995, 10% in 1996 and 22% in 1997, based upon, with
respect to Magma, publicly available information and estimates of financial
performance as prepared by CECI for each of Magma's power projects in
operation and for a limited number of projects in development but under
signed contracts or awards, and approximately (ii) 2% in 1995, 25% in 1996
and 26% in 1997, based upon, with respect to Magma, estimates of financial
performance as prepared by Magma for each of Magma's power projects,
including the results of additional due diligence conducted on Magma. Because
both pro forma analyses produced percentage increases in earnings per share
for the CECI Common Stock, Gleacher did not place more weight on either set
of results.

Stock Trading Analysis. Gleacher reviewed and analyzed historical trading
prices and volumes for the Shares during the 30-month period preceding the
Offer. The trading prices per Share over such period ranged from $20.00 to
$39.25 and the weekly trading volumes for the Shares ranged from 49,100 to
4,919,700. Gleacher then compared such historical trading prices to the
Consideration to be paid by CECI. This comparison indicated that the
Consideration to be paid by CECI is approximately equal to the high point of
the trading value per Share during such 30-month period.

In arriving at the Gleacher Opinion and in presenting the Gleacher Report,
Gleacher decided to perform a purchase price multiples analysis, a discounted
cash flow analysis, a trading valuation analysis and pro forma analyses, the
material portions of which are summarized above, based on industry practice
and its experience in merger and acquisition transactions. Gleacher concluded
that the results of such analyses, when considered as a whole, support the
Gleacher Opinion. Gleacher believes that its analyses must be considered as a
whole and that selecting portions of its analyses and of the factors
considered by it, without considering all such factors and analyses, or
quantifying the value assigned to any particular analysis performed, could
create a misleading view of the process underlying its analyses set forth in
the Gleacher Opinion and the Gleacher Report. The matters considered by
Gleacher in arriving at the Gleacher Opinion that, as of the date of such
opinion, the Consideration to be paid by CECI pursuant to

<PAGE>

the Offer and the Merger is fair to CECI from a financial point of view, are
based on numerous macroeconomic, operating and financial assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond CECI's control. Any estimates
incorporated in the analyses performed by Gleacher are not necessarily
indicative of actual past or future results or values, which may be
significantly more or less favorable than such estimates. Estimated values do
not purport to be appraisals and do not necessarily reflect the prices at
which businesses or companies may be acquired in the future, and such
estimates are inherently subject to uncertainty. Arriving at a fairness
opinion is a complex process not necessarily susceptible to partial or
summary description. No public company utilized as a comparison is identical
to Magma. Accordingly, an analysis of publicly traded comparable companies is
not mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the public trading
value of the comparable companies or company to which they are being
compared.

Gleacher is a recognized investment banking firm routinely engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions 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.

Pursuant to the terms of a letter agreement dated September 18, 1994,
between CECI and Gleacher (the "Gleacher Engagement Letter"), CECI paid
Gleacher a fee of $250,000 and has agreed to pay Gleacher (i) 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 the $250,000 previously
paid to Gleacher by CECI and (ii) 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, which is estimated to be
$1,250,000, assuming the full amount of the Merger Facilities is drawn down
by CECI.

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 reasonable 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.

FINANCING OF MERGER CONSIDERATION

If CECI elects to pay the Merger Consideration with a combination of cash
and CECI Common Stock, CECI estimates that approximately $710,900,000 in cash
will be required to effectuate the Merger, to refinance bank borrowings
incurred in connection with the Offer and to pay related fees and expenses.
If CECI elects to pay the Merger Consideration solely in cash, approximately
$957,400,000 will be required. Credit Suisse will provide, on specified terms
and subject to customary conditions, up to $500,000,000 in secured bank
financing (the "Merger Facilities"). Such funds, together with a capital
contribution by CECI from CECI's general corporate funds and, if CECI elects
to pay the Merger Consideration solely in cash, the net proceeds of a CECI
Common Stock public offering, will be sufficient to pay the Merger
Consideration, to refinance bank borrowings incurred in connection with the
Offer and to pay related fees and expenses. Specifically, if CECI elects to
pay the Merger Consideration with a combination of cash and CECI Common
Stock, CECI will pay the Merger Consideration, refinance the bank borrowings
and pay related fees and expenses using the following: approximately
$500,000,000 from the Merger Facilities plus approximately $210,900,000 from
general corporate funds. If CECI elects to pay the Merger Consideration
solely in cash, CECI will pay the Merger Consideration, refinance the bank

<PAGE>

borrowings and pay related fees and expenses using the following:
approximately $500,000,000 from the Merger Facilities plus approximately
$266,700,000 from the net proceeds of a CECI Common Stock public offering
plus approximately $190,700,000 from CECI's general corporate funds.

CECI has received a fully underwritten financing commitment letter from
Credit Suisse (the "Commitment Letter") which states that Credit Suisse will
provide to CE Sub, on specified terms and subject to customary conditions (i)
a facility of up to $250,000,000 to capitalize CE Sub for the purpose of
financing the Offer (the "Tender Facility"), which facility has been fully
utilized in connection with consummation of the Offer, and (ii) the Merger
Facilities for, among other things, refinancing the Tender Facility and
effectuating the Merger.

On January 10, 1995, in connection with the purchase of Shares pursuant to
the Offer, CECI borrowed approximately $250 million under the Tender Facility
on a limited-recourse basis (recourse as to interest only and certain fees)
and loaned the proceeds of such borrowing to CE Sub in exchange for a secured
term note of CE Sub (the "CE Sub Note"). The economic terms of CE Sub Note
mirror those of the Tender Facility.

The Tender Facility is a 12-month term loan extendible for up to three
years by the mutual consent of CECI and Credit Suisse. Borrowings under the
Tender Facility are secured by an assignment and pledge of CE Sub Note, which
in turn is secured by an assignment and pledge of the 12,400,000 Shares
purchased by CE Sub pursuant to the Offer and an additional 200,000 Shares
contributed by CECI to the capital of CE Sub. Interest on borrowings under
the Tender Facility is payable at spreads of 2.50% above LIBOR (adjusted for
reserves) or 1.25% above Base Rate.

The Tender Facility contains affirmative and negative covenants customary
for similar credit facilities. Such covenants include: a negative pledge of
all stock and unencumbered assets of CE Sub and its subsidiaries; a
limitation on guaranties by CECI and CE Sub; a limitation on mergers and
sales of assets by CECI and its subsidiaries; a limitation on investments in
other persons by CECI and its subsidiaries; a prohibition on dividends and
other payments by CECI and its subsidiaries to CECI unless the proceeds are
used to pay down the Tender Facility in amounts to be agreed upon; a
prohibition on the sale of ownership interests in CE Sub and its
subsidiaries; a prohibition on the incurrence of additional debt by CE Sub
and its subsidiaries; a requirement that CECI deliver each month a
certificate as to the absence of material adverse changes in (i) CECI and its
subsidiaries, taken as a whole, and (ii) CE Sub and its subsidiaries, taken
as a whole, which in either case could reasonably be expected to materially
affect the ability of CECI to service the Tender Facility or the ability of
the lenders to realize on the collateral for the Tender Facility; and a
restriction on a change in the nature of the business of CECI and its
subsidiaries, except as contemplated by the Merger Agreement.

The Tender Facility also contains financial covenants and customary events
of default, including events of default based on: a permanent injunction
prohibiting the Merger; breaches of covenants; cross defaults with respect to
debt of CECI, Magma and their subsidiaries; bankruptcy and similar events;
the failure to pay one or more final judgments aggregating more than a
specified threshold; the failure to make a payment with respect to the Tender
Facility when due; and the failure of the pledge agreement with respect to
the Shares and CE Sub Note to be in full force and effect.

The Merger Facilities will be comprised of (i) a six year term loan ("Term
Loan A") in a principal amount of up to the difference between $500 million
and the principal amount of Term Loan B (as defined below), expected to be
amortized in semi-annual payments, and (ii) an eight year term loan ("Term
Loan B") in a principal amount to be not less than $150 million, expected to
be amortized in semi-annual payments in the seventh and eighth years of such
Term Loan. Loans under the Merger Facilities will be made to CECI on a
non-recourse basis, and CECI will lend the proceeds of such loans to Magma in
exchange for a secured term note of Magma (the "Magma Note"). The loans under
the Merger Facilities are to be amortized from internally generated funds of
Magma. Loans under the Merger Facilities will be secured by an assignment and
pledge by CECI of the Magma Notes and 100% of the capital stock of Magma. The
Magma Note will be secured by an assignment of certain unencumbered assets of
Magma.

Interest on loans under the Merger Facilities will be payable at spreads
of 2.50% above LIBOR (adjusted for reserves) or 1.50% above the Base Rate for
Term Loan A, and 3.00% above LIBOR

<PAGE>

(adjusted for reserves) or 2.00% above the Base Rate for Term Loan B. The
LIBOR spreads are subject to upward adjustment in certain instances. CECI may
elect to have loans bear interest based on either LIBOR or the Base Rate (as
defined in the Merger Facilities).

The Merger Facilities will contain affirmative and negative covenants
customary for similar non-recourse credit facilities. Such covenants will
include a negative pledge of all stock and unencumbered assets of Magma; a
limitation on guaranties by Magma; a limitation on mergers and sales of
assets by Magma; a limitation on investments in other persons by Magma; a
prohibition on dividends and other payments by Magma to CECI unless the
proceeds are used to pay down the Merger Facilities; a prohibition on the
sale of ownership interests in Magma; a prohibition on the incurrence of
additional debt by Magma; a requirement that CECI deliver each fiscal quarter
a certificate as to the absence of material adverse changes in CECI or Magma
which could reasonably be expected to materially affect the ability of CECI
to repay the Merger Facilities or the ability of the lenders to realize on
the collateral for the Merger Facilities; and a restriction on a change in
the nature of the business of CECI and Magma.

The Merger Facilities will also contain financial covenants and customary
events of default, including events of default based on breaches of certain
representations, warranties and covenants; cross defaults with respect to
debt of CECI and Magma; bankruptcy and similar events; the failure to pay one
or more final judgments aggregating more than a specified threshold to be
agreed upon; the failure to make a payment with respect to the Merger
Facilities when due; and the failure of the pledge agreement with respect to
the capital stock of Magma and the Magma Note to be in full force and effect.

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

CECI has agreed to pay certain fees to Credit Suisse with respect to the
Merger Facilities and Tender 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 the Shares.
Upon consummation of the Merger, the Shares will cease to be quoted on the
NNM, the registration of the Shares under the Exchange Act will be terminated
and will no longer constitute "margin securities" under the rules of the
Board of Governors of the Federal Reserve System.

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. If CECI elects to pay the Merger Consideration with a
combination of cash and CECI Common Stock, upon completion 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.

Except for the Merger and except as otherwise described in this
Information 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 summarizes the material federal income tax consequences to
stockholders of Magma as a result 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.

<PAGE>

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. EACH STOCKHOLDER SHOULD CONSULT HIS
INDIVIDUAL TAX ADVISOR CONCERNING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER
UNDER HIS PARTICULAR CIRCUMSTANCES, 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 and Shares
held in the treasury of Magma) will be converted in the Merger into the right
to receive, at CECI's election (which election shall be made no later than
five business days prior to the Magma Special Meeting), either (i) all cash
such that the blended consideration paid by CECI in the Offer and the Merger
would be $38.75 per Share or (ii) 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 (if any) 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 (if any)
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 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 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.

<PAGE>

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 pursuant to 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 do not have the right to dissent from the Merger,
pursuant to Section 78.482 of the Nevada General Corporation Law ("NGCL"),
which provides that holders of securities of Nevada corporations have 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 was, at the record date fixed
to determine the holders entitled to vote on the merger or plan of exchange,
listed on a national securities exchange or held by at least 2,000
stockholders of record, unless the articles of incorporation of the
corporation provide otherwise or if, in the merger, the holders will receive
consideration other than cash, shares of the surviving corporation or shares
of another corporation which are listed on a national securities exchange.
Since the Shares are listed on the NNM, and holders thereof will receive in
the Merger cash and/or shares of CECI Common Stock, which are listed on the
NYSE, the holders of Shares will not be entitled to any dissenters' rights.

The NGCL does not provide any other material rights to holders of Shares
with respect to the Merger but Nevada's common law generally provides
remedies to stockholders for breaches of fiduciary duties by corporate
directors. Such remedies, which generally lie within the discretion of the
court before which an action is brought, could be applicable to the Merger if
it were determined by the court that the Magma Board breached its fiduciary
duties to the holders of Shares. In light of the Magma Board's view as to the
fairness of the Offer and the Merger, see "SPECIAL FACTORS--Recommendations
of the Board of Directors of Magma and CECI; Reasons for the Merger; Fairness
of the Offer and the Merger," Magma and CECI will vigorously defend against
any challenge relating to the Merger.

EXPENSES OF THE TRANSACTION

It is estimated that when the Merger is consummated expenses incurred by
CECI and Magma in connection with the Offer and the Merger will be
approximately as follows:

<PAGE>

</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Financial advisory fees and expenses ................... $ 8,250,000
Commission filing fees ................................. 275,000
Legal fees and expenses ................................ 6,000,000
Accounting fees and expenses ........................... 240,000
Printing and engraving expenses ........................ 300,000
Proxy solicitation, distribution and Paying Agent fees 250,000
Blue Sky fees .......................................... 2,000
Miscellaneous .......................................... 203,000
------------
Total ................................................. $15,520,000
============
</TABLE>

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 Information 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, omits provisions that have been rendered inapplicable as a result
of the consummation of the Offer 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.

THE MERGER

General. The purpose of the Merger is to acquire all Shares not
beneficially owned by CECI 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 become 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 State of Nevada and the Secretary of State of Delaware. 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 and Shares held in the treasury of Magma) will be converted into the
right to receive, at CECI's election (which election shall be made no later
than five business days prior to the Magma Special Meeting), either (i) the
All Cash Component Amount, net in cash, without interest thereon or (ii) both
(A) the Mixed Cash Component Amount, net in cash, without

<PAGE>

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 (the All Cash
Component Amount or (ii)(A) and (ii)(B), collectively, as applicable, being
the "Merger Consideration"). If CECI elects the former option, each Share
will be converted in the Merger into cash in the range of approximately
$38.47 per Share to $38.49 per Share. If CECI elects the latter option, each
Share will be converted in the Merger into (A) cash in the range of
approximately $16.94 per Share to $17.50 per Share PLUS (B) between 1.148 and
1.546 shares of CECI Common Stock. As a result of the Collar Provision
included in the formula for determining the precise Merger Consideration, the
value of the cash and CECI Common Stock received by Magma stockholders in the
Merger may be less than $39.00. 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 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" 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
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 Common Stock on the 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 established so that (i) if CECI elects to pay the Merger
Consideration with a combination of cash and CECI Common Stock, 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, and (ii) if CECI elects to pay only cash consideration
in the Merger, the blended consideration paid by CECI in the Offer and the
Merger would be $38.75 per Share. 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. It is CECI's current
intention to pay the Merger Consideration solely in cash, but such intention
is subject to change if (i) the proposed underwriters for the public offering
determine that they cannot or will not proceed with such offering upon terms
reasonably satisfactory to the CECI or (ii) market conditions would require
the issuance of a greater number of shares of CECI Common Stock in order to
fund an all cash Merger than would be required to be issued in a Merger with
a mixed cash and CECI Common Stock consideration. The total maximum cash
amount to be paid by CECI for Shares in the Merger will be approximately
equal to $440.3 million.

As noted above, at CECI's option, each Share to be converted in the Merger
can be converted into the right to receive either the amounts of cash and
CECI Common Stock set forth in columns B and C, respectively, assuming the
Average Closing Prices set forth in column A, or the cash amounts set forth
in column F. For purposes of the calculations set forth below, it has been
assumed that the number of Shares outstanding at the Effective Time will be
equal to 24,043,000 (the number of Shares outstanding as of September 30,
1994). In addition, it has been assumed that the number of Shares owned by
CECI and any of its affiliates immediately prior to the Effective Time will
be equal to 12,600,000, 12,400,000 of which were acquired pursuant to the
Offer.

<PAGE>

<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F)
ALL CASH MERGER
CASH AND STOCK MERGER CONSIDERATION CONSIDERATION
----------------------------------------------------- ---------------
ASSUMED NUMBER OF
AVERAGE MIXED CASH SHARES OF VALUE OF ALL CASH
CLOSING COMPONENT COMMON COMMON TOTAL COMPONENT
PRICE AMOUNT STOCK STOCK CONSIDERATION AMOUNT
- ------------- ----------- ----------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
$14.00 (1) $16.94 1.546 $21.64 $38.58 $38.47
15.00 16.94 1.471 22.06 39.00 38.47
16.00 16.94 1.379 22.06 39.00 38.47
17.00 16.94 1.298 22.06 39.00 38.47
18.00 16.94 1.226 22.06 39.00 38.47
19.00 (1) 16.94 1.178 22.38 39.32 38.47
20.00 (1) 16.94 1.178 23.56 40.50 38.47
</TABLE>

(1) The Collar Provision applies.

The foregoing table is based on the number of Shares outstanding as of
September 30, 1994. If, prior to the Effective Time, the maximum number of
Shares (582,478) are issued in respect of outstanding options and deferred
stock awards, (i) the All Cash Component Amount in all cases would be $38.49,
(ii) the Mixed Cash Component Amount in all cases would be $17.50, and (iii)
the "Number of Shares of Common Stock", the "Value of Common Stock" and the
"Total Consideration" would be, respectively, for the following Assumed
Average Closing Prices: for an Assumed Average Closing Price of $14.00,
1.507, $21.09 and $38.59; for an Assumed Average Closing Price of $15.00,
1.433, $21.50 and $39.00; for an Assumed Average Closing Price of $16.00,
1.344, $21.50 and $39.00; for an Assumed Average Closing Price of $17.00,
1.265, $21.50 and $39.00; for an Assumed Average Closing Price of $18.00,
1.195, $21.50 and $39.00; for an Assumed Average Closing Price of $19.00,
1.148, $21.81 and $39.31; and for an Assumed Average Closing Price of $20.00,
1.148, $22.96 and $40.46.

The alternative forms and amounts of consideration payable by CECI in the
Merger were negotiated by Magma and CECI at arms' length, in consultation
with their respective financial advisors. Each of Magma and CECI viewed the
acquisition of Magma as a single transaction, and the parties negotiated on
the basis of a blended consideration to be received by Magma stockholders in
the Offer and the Merger. CECI proposed that the consideration to be paid in
the Offer and the Merger consist of a combination of cash and shares of CECI
Common Stock and that any increase in the consideration over the
consideration offered by the Revised Previous Offer be paid in additional
shares of CECI Common Stock. Magma proposed that the consideration be paid
entirely in cash. The parties then discussed an increase in the consideration
offered in the Revised Previous Offer--a blended amount of $28.50 in cash and
$10.00 in market value of CECI Common Stock--to a blended amount of $28.50 in
cash and $10.50 in market value of CECI Common Stock. In light of Magma's
desire to have the consideration paid entirely in cash, CECI proposed that,
at its option, CECI could pay the consideration all in cash (rather than in
cash and CECI Common Stock) such that the blended all cash consideration paid
in the Offer and the Merger would be $38.75 per Share. The price differential
between the Offer and the all cash alternative Merger Consideration resulted
from Magma's insistence that, although the blended price of such alternative
was to be $38.75 per Share, the Offer price be $39.00 in order to put as much
cash as possible into the hands of Magma stockholders as soon as possible.
The price differential between the all cash alternative and the mixed cash
and stock alternative Merger Consideration resulted from CECI's proposal that
the all cash alternative require payment of a blended value of $38.75 (rather
than the $39.00 that CECI had offered in the context of a cash and stock
transaction), the Magma Board's belief that an all cash transaction would be
preferable to a mixed cash and stock transaction and its recognition that a
lower blended cost for CECI in an all cash transaction would provide an
incentive to CECI to prefer and pursue an all cash transaction.

<PAGE>

underwriters for the Public Offering determine that they cannot or will not
proceed with such offering upon terms reasonably satisfactory to CECI or (ii)
market conditions would require the issuance in the Public Offering of a
greater number of shares of CECI Common Stock in order to fund an all cash
Merger than would be required to be issued if the Merger were consummated
with a mixed cash and CECI Common Stock consideration. CECI will seek to
cause the Public Offering to be priced so that the closing of the Public
Offering (normally five trading days following pricing) will occur on the
date the Magma Special Meeting occurs and the Merger becomes effective. CECI
will determine the form of consideration to be paid in the Merger at the time
the Public Offering is priced or at the time CECI elects not to proceed with
the Public Offering based on the foregoing considerations.

If CECI elects to pay the Merger consideration in a combination of cash
and CECI Common Stock, CECI will file with the Securities and Exchange
Commission and mail to Magma's stockholders a supplement to this Information
Statement disclosing such determination and providing a toll-free telephone
number so that Magma stockholders may call to obtain the Average Closing
Price (part of the formula for determining the precise allocation of cash and
CECI Common Stock to be paid as Merger Consideration). Concurrently with the
filing of such supplement, CECI will issue a press release stating such
election. In addition, Magma will, if necessary, postpone or adjourn the
Magma Special Meeting so that the foregoing supplement is mailed to Magma
stockholders at least ten business days prior to the Magma Special Meeting
and the Merger. CECI will disseminate another supplement at the time the
Average Closing Price is determined.

Magma 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 or, if CECI has elected the All Cash Component Amount, $38.75, over
the exercise price per Share previously applicable to such option. Each
unvested share of deferred stock under Magma's 1994 Equity Participation Plan
(as defined in the Merger Agreement) or as otherwise described in the Magma
Disclosure Schedule (as defined in the Merger Agreement) 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 or, if CECI has
elected the All Cash Component Amount, $38.75. The treatment of the Magma
stock options in the Merger was determined subsequent to the determination of
the Merger Consideration. The parties agreed on this treatment because they
believed such treatment, which provides for the payment in cash of the
"spread" on the options, is customary in transactions similar to the Merger.

Board Representation. Pursuant to the Merger Agreement, on January 10,
1995, CECI obtained majority representation on the Magma Board of Directors
(the "Magma Board"). The Magma Board currently consists of six designees of
CECI (the "Acquisition Designees") and Messrs. Boeker and Pankratz, who were
directors of Magma at the time the Merger Agreement was executed. Prior to
the Effective Time, any amendment of the Merger Agreement or Articles of
Incorporation or Bylaws, 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 the Magma 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 the CECI Board.

ACQUISITION DESIGNEES

The following are the Acquisition Designees:

<PAGE>

David L. Sokol, 38, Chairman of the Board of Directors and Chief Executive
Officer, has served as Chief Executive Officer of CECI since April 19, 1993
and as Chairman of the Board of Directors since May 5, 1994, has been a
director of CECI since March 1991 and served as President from April 1993
until January 1995. 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 the
Purchaser 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, the largest stockholder of CECI and a wholly owned subsidiary of
PKS. 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 of 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/or 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

<PAGE>

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.

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

If CECI elects to pay the Merger Consideration with a combination of cash
and CECI Common Stock, 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 remains subject to certain conditions,
including (i) approval and adoption of the Merger and the Merger Agreement by
the requisite vote of Magma's stockholders, (ii) approval of the issuance of
CECI Common Stock in order to effectuate the Merger by the requisite vote of
CECI's stockholders, (iii) 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, (iv) 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 (v) 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

<PAGE>

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
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,

<PAGE>

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 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

<PAGE>

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

Termination. The Merger Agreement provides that it may be terminated
before the Effective Time in the following circumstances: (a) by mutual
consent of the CECI Board and 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) the Magma 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) the Magma 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 the Magma 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.

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

<PAGE>

the interests of such stockholders or reduce the amount or change the type of
consideration into which each 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.

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

CECI Common Stock is listed on the NYSE under the symbol "CE." CECI Common
Stock is also listed on the PSE and the LSE. The following table sets forth
the quarterly high and low last reported sales price per share of CECI Common
Stock, as reported on the NYSE Composite Tape, based on published financial
sources, for the fiscal quarters indicated.

<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
Fiscal Year Ended December 31, 1993:
First Quarter ..................................... $21.50 $16.50
Second Quarter .................................... 20.13 17.25
Third Quarter ..................................... 18.38 16.00
Fourth Quarter .................................... 20.13 18.13
Fiscal Year Ended December 31, 1994:
First Quarter ..................................... $19.25 $17.13
Second Quarter .................................... 18.13 16.00
Third Quarter ..................................... 17.75 16.00
Fourth Quarter .................................... 17.13 15.25
Fiscal Year Ending December 31, 1995:
First Quarter (through January 30) ................. $17.88 $15.75
</TABLE>

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 last reported sale 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 last reported sale price for CECI
Common Stock was $16.50. On January 30, 1995, the last full trading day for
which quotations were available at the time of printing of this Information
Statement, the last reported sale price for CECI Common Stock was $17.75.
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT QUOTATIONS FOR THE CECI COMMON
STOCK.

As of March 21, 1994, there were approximately 1,408 holders of record of
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 under the symbol "MGMA." The following
table sets forth the quarterly high and low last reported sales prices of
Shares, as reported by the NNM, based on published financial sources, for the
fiscal quarters indicated.

<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
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 Ended December 31, 1994:
First Quarter ...................................... $35.25 $30.75
Second Quarter ..................................... 33.25 28.00
Third Quarter ...................................... 35.25 26.50
Fourth Quarter ..................................... 37.50 34.25
Fiscal Year Ending December 31, 1995:
First Quarter (through January 30) .................. $38.25 $37.50
</TABLE>

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 last reported 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 sale price for Shares was
$35.50. On January 30, 1995, the last full trading day for which quotations
were available at the time of printing of this Information Statement, the
last reported sale price for Shares was $38.13. STOCKHOLDERS ARE URGED TO
OBTAIN CURRENT QUOTATIONS FOR THE SHARES.

As of October 10, 1994, there were approximately 2,238 holders of record
of 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.

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 NOTES THERETO," "SELECTED HISTORICAL
CONSOLIDATED FINANCIAL AND OPERATING DATA OF CECI" and "CECI MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
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.

<PAGE>

<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 --
--------- --------- ---------- ---------- ---------- --------- ----------
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
</TABLE>

<PAGE>

<TABLE>
<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 $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.

(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.

SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA OF MAGMA

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 Magma's 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 "MAGMA'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO," "SELECTED
HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA OF MAGMA" and "MAGMA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."

<PAGE>

<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:
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
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER
DECEMBER 31, 30,
------------------------------------------------------------- -----------
1989 1990 1991 1992 1993 1994
------------- ---------- ---------- ---------- ---------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
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
THERETO INCLUDED HEREIN.

<PAGE>

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 HISTORICAL
CONSOLIDATED FINANCIAL DATA OF MAGMA" and the consolidated financial
statements, including the notes thereto, of CECI and Magma, included herein.

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
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
(MERGER CONSIDERATION CONSISTING OF A COMBINATION OF CASH AND CECI COMMON STOCK)
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
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
(MERGER CONSIDERATION CONSISTING OF A COMBINATION OF CASH AND CECI COMMON STOCK)
CECI AND MAGMA
FOR THE YEAR ENDED DECEMBER 31, 1993 AND THE NINE MONTHS
ENDED SEPTEMBER 30, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)

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
stockholders ............. $ 38,444 $ 52,135 $(47,745) $ 42,834 $ 27,688 $ 46,843 $(35,808) $ 38,723
========== ========== ============ ========== ========== ========== ============ ===========
Income per common and
common equivalent 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
(MERGER CONSIDERATION CONSISTING OF A COMBINATION OF CASH AND CECI COMMON STOCK)
CECI AND MAGMA
(TABLES IN THOUSANDS)

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 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 Shares will be acquired and that
the fair value of the CECI 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. 23,843,000 Shares outstanding as of September 30, 1994 will be
purchased for $39.00 per 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 CECI Common Stock (see "Merger Consideration").

3. The Magma 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 CECI Common Stock.

B. The adjustments which have been made to the net assets of Magma and
CECI to give effect to the Merger follow:

<TABLE>
<CAPTION>
<S> <C> <C>
Assumed value of the Common Stock and cash
consideration plus estimated direct costs to
be incurred in consummating the Merger ....... $ 942,377
Cost of retiring outstanding Magma options .... 8,500
Cost of 200,000 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
===========
</TABLE>

<PAGE>

NOTES TO PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA
(MERGER CONSIDERATION CONSISTING OF A COMBINATION OF CASH AND
CECI COMMON STOCK) (CONTINUED)
CECI AND MAGMA
(TABLES IN THOUSANDS)

C. The 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:

<TABLE>
<CAPTION>
<S> <C>
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
==========
</TABLE>

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 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 CECI Common Stock to be exchanged
for the outstanding 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 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 Shares are acquired by CECI
and (2) the market value of CECI 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>

PRO FORMA UNAUDITED CONDENSED COMBINED BALANCE SHEET
(MERGER CONSIDERATION CONSISTING OF ALL CASH)
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 $(190,699)(5C) $ 130,761
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 (5B) 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 (5B) 81,313
Deferred charges and other assets .......... 29,968 24,480 6,948 (5B,5C) 61,396
Goodwill ................................... -- 8,999 313,132 (5B) 322,131
------------ ---------- -------------- ------------
Total Assets .............................. $1,087,064 $630,422 $ 529,381 $2,246,867
============ ========== ============== ============
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 (5B) 205,150
Other long term liabilities ................ -- 12,354 500,000 (5C) 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
STOCKHOLDERS' EQUITY
Preferred stock ............................
Common Stock ............................... 2,407 2,401 (1,507)(5A) 3,301
Additional paid in capital ................. 100,000 142,765 63,492 (5A) 306,257
Unrealized gain from marketable securities . -- (677) 677 (5A) --
Retained earnings .......................... 136,769 250,797 (250,797)(5A) 136,769
Treasury stock ............................. (59,516) -- 59,516 (5A) --
------------ ---------- -------------- ------------
Total stockholders' equity ................ 179,660 395,286 (128,619) 446,327
------------ ---------- -------------- ------------
Total liabilities and stockholders' equity $1,087,064 $630,422 $ 529,381 $2,246,867
============ ========== ============== ============
</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
(MERGER CONSIDERATION CONSISTING OF ALL CASH)
CECI AND MAGMA
FOR THE YEAR ENDED DECEMBER 31, 1993 AND THE NINE MONTHS ENDED SEPTEMBER 30,
1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993 NINE MONTHS ENDED SEPTEMBER 30, 1994
------------------------------------------------ -------------------------------------------------
PRO FORMA PRO FORMA
ADJUSTMENT PRO FORMA ADJUSTMENT PRO FORMA
CECI MAGMA (5D) COMBINED CECI MAGMA (5D) 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 (9,535) 11,854 21,980 3,866 (7,151) 18,695
Management services -- 5,432 -- 5,432 -- 3,090 -- 3,090
---------- ---------- ------------ ---------- ---------- ---------- ------------ -----------
Total Revenue ....... 149,253 167,138 (9,535) 306,856 139,188 146,104 (7,151) 278,141
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 18,103 57,607 15,439 17,737 13,577 46,753
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 63,103 243,323 93,722 78,189 47,327 219,238
---------- ---------- ------------ ---------- ---------- ---------- ------------ -----------
Income before income
taxes. ............. 61,258 74,913 (72,638) 63,533 45,466 67,915 (54,478) 58,903
Provision for income
taxes. ............. 18,184 22,778 (25,656) 15,306 14,067 21,072 (19,242) 15,897
---------- ---------- ------------ ---------- ---------- ---------- ------------ -----------
Income from
continuing
operations ......... 43,074 52,135 (46,982) 48,227 31,399 46,843 (35,236) 43,006
Preferred dividends 4,630 -- -- 4,630 3,711 -- -- 3,711
---------- ---------- ------------ ---------- ---------- ---------- ------------ -----------
Income available to
common stock-
holders ............ $ 38,444 $ 52,135 $(46,982) $ 43,597 $ 27,688 $ 46,843 $(35,236) $ 39,295
========== ========== ============ ========== ========== ========== ============ ===========
Income per common
and common equiva-
lent share:
Assuming no
dilution .......... $1.00 $2.17 $0.79 $0.77 $1.95 $0.74
========== ========== ========== ========== ========== ===========
Assuming full
dilution .......... $1.00 $2.17 $0.78 $0.76 $1.95 $0.73
========== ========== ========== ========== ========== ===========
Weighted average
common shares
outstanding ........ 38,485 24,063 55,152 36,174 24,017 52,841
========== ========== ========== ========== ========== ===========
</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
(MERGER CONSIDERATION CONSISTING OF ALL CASH)
CECI AND MAGMA
(TABLES IN THOUSANDS)

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 upon the net proceeds to CECI from
the sale of its Common Stock contemplated by this Information Statement and
the fair market value of the assets of Magma at or near the Effective Time.

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. 16,666,667 shares of CECI Common Stock will be sold at a price sufficient
to provide net proceeds of $16.00 per share to CECI, all of which will be
used to fund a portion of the cost of the Merger. The CECI treasury stock
will be canceled.

3. 23,843,000 Shares outstanding as of September 30, 1994 will be purchased
for cash in an amount of $483,600,000 as to 12,400,000 Shares and cash in an
amount of $440,266,000 as to 11,443,000 Shares.

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

5. 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, the
sale of CECI Common Stock, and the cancellation of CECI treasury stock.

B. The adjustments which have been made to the net assets of Magma and
CECI to give effect to the Merger follow:

<TABLE>
<S> <C> <C>
Cash consideration plus estimated direct
costs to be incurred in consummating the
Proposed Merger ......................... $ 936,366
Cost of retiring outstanding Magma
options ................................. 8,500
Cost of 200,000 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 ............ 564,131
Allocated to:
Property and plant ...................... (340,000)
Power purchase contracts ................ (60,000)
Deferred income taxes on allocated costs 158,000
-----------
Goodwill ................................ $ 322,131
===========
</TABLE>

<PAGE>

NOTES TO PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA
(MERGER CONSIDERATION CONSISTING OF ALL CASH)
CECI AND MAGMA (CONTINUED)
(TABLES IN THOUSANDS)

C. The 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:

<TABLE>
<S> <C> <C>
Reduce cash on hand ........................ $190,699
Net proceeds from sale of CECI Common Stock 266,667
Increase long-term debt .................... 500,000
----------
$957,366
==========
Represents:
Payments to Magma common stockholders .... $923,866
Payments to Magma stock option holders ... 8,500
Other direct acquisition costs ............ 12,500
Finance costs ............................. 12,500
----------
$957,366
==========
</TABLE>

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.

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 CECI Common Stock to be sold.

<PAGE>

BUSINESS OF CECI AND MAGMA
AND RELATED INFORMATION
GENERAL

CECI

CECI was founded in 1971 to develop geothermal power production
facilities. CECI is primarily engaged in the exploration for, and development
and operation of, environmentally responsible independent power production
facilities worldwide utilizing geothermal resources or other energy sources,
such as hydroelectric, natural gas, oil and coal.

Following completion of the Merger, CECI will be the largest independent
geothermal power producer in the world (on the basis of CECI's estimate of
the aggregate MW of electric generating capacity in operation and under
construction). CECI will have an aggregate net ownership interest of 354 MW
of electric generating capacity in power production facilities in the United
States having an aggregate net capacity of 571 MW. All of these facilities
will be managed and operated by CECI and are principally located in Southern
California. In addition to the electricity sales revenue earned from its net
ownership position in such facilities, CECI receives significant fee and
royalty income from operating such plants and managing the production from
the geothermal resources for such facilities. CECI will have an aggregate net
ownership interest of 409 MW of electric generating capacity in three
geothermal power projects in the Philippines, having an aggregate net
capacity of 500 MW, which projects are financed and under construction. CECI
is also developing eight additional projects with executed or awarded power
sales contracts in the Philippines, Indonesia and the United States. CECI
will have an approximate net ownership interest of 935 MW in these
development projects representing an aggregate net capacity of 1,589 MW of
additional potential electric generating capacity.

PKS is an approximate 44% stockholder of CECI (on a fully diluted basis).
PKS is a large employee-owned construction, mining and telecommunications
company with approximately $2.2 billion in revenues in 1993. PKS is one of
the largest construction companies in North America and has been in the
construction business since 1884. Since the initial PKS investment in CECI in
1991 (which at that time represented approximately 25% of the CECI Common
Stock on a fully diluted basis), a new management team has been installed and
CECI's net income has increased from $12.0 million for the 12-month period
ended December 31, 1990 to $29.4 million for the nine-month period ended
September 30, 1994.

REASONS FOR THE MERGER

CECI believes that Magma is an excellent strategic fit and that the
acquisition of Magma will create significant benefits, including:

O EXPANSION AND ENHANCEMENT OF DEVELOPMENT EFFORTS

Development of new opportunities, particularly internationally, is a key
component of CECI's strategy. Since 1990, CECI and Magma have each pursued
international development opportunities primarily in Southeast Asia. By
pursuing additional development opportunities rather than competing with
Magma for the same opportunities, CECI expects to expand its development
efforts to cover additional projects and thereby more effectively capitalize
on the numerous opportunities in the growing international independent power
market.

Furthermore, CECI will have available to it technology of both companies.
CECI owns production technology compatible with the relatively low mineral
content of its wells at the Coso Project, and Magma owns technology
compatible with the high levels of mineral precipitates found in the
geothermal resource at the Salton Sea Projects. CECI expects that access to
these technologies will enable it to compete for new power development
projects from geothermal reservoirs encompassing a wide range of geothermal
resource characteristics.

<PAGE>

O BENEFITS OF INCREASED SIZE

CECI believes that size is an important factor in determining the success
of an independent power producer. This view is based on CECI's belief that
potential customers consider both the price of power and the provider's
capacity to fulfill its obligations as primary factors in the selection of
power suppliers. The expanded size and capabilities of the combined companies
is expected to further enhance CECI's reputation and credibility with
sovereign governments and state utility customers and therefore enhance its
ability to successfully compete for new projects. Following the Merger, CECI
will have over $2 billion of total assets and an aggregate net ownership
interest of 1,698 MW in projects in operation, under construction or in
development, which projects have an aggregate net generating capacity of
2,770 MW. CECI also believes that the combination with Magma will create the
opportunity to reduce CECI's average cost per kWh by expanding its asset
base, without materially expanding its cost structure. This will allow CECI
to be more price competitive with other geothermal power producers and
traditional fossil fuel power plants, which CECI believes will be its primary
competition in the future.

O OPPORTUNITIES FOR OPERATIONAL AND ADMINISTRATIVE COST SAVINGS

Based in part on its experience in restructuring the operations of CECI
since 1991, management of CECI believes that it can achieve meaningful cost
savings upon the combination of Magma and CECI. Through the implementation of
CECI's existing organizational structure, management policies and cost
controls, CECI presently expects that the cost of duplicate functions will be
substantially eliminated and that the productivity of its combined operating
and administrative staff will be significantly increased.

O DIVERSIFICATION IN SOURCES OF REVENUE AND OPERATIONS

The combination of CECI's and Magma's operations will increase CECI's
sources of revenue and increase the number of operating sites (including
projects under construction) from eight to 16. CECI believes that the
resulting diversification in sources of revenue and operations can be
expected to reduce the risk profile of CECI, thereby enhancing its overall
credit position and improving its access to capital in relation to
competitors with more concentrated sources of revenue and operations.

GEOTHERMAL ENERGY

Geothermal energy is a clean, renewable and generally sustainable energy
source that releases significantly lower levels of emissions than result from
energy generation based on the burning of fossil fuels. Geothermal energy is
derived from the natural heat of the earth when water comes sufficiently
close to hot molten rock to heat the water to temperatures of 400 degrees
Fahrenheit or more. The heated water then ascends naturally toward the
surface of the earth where it can be extracted by drilling geothermal wells.
The energy necessary to operate a geothermal power plant is typically
obtained from several such wells which are drilled using established
technology similar to that employed in the oil and gas industry.

<PAGE>

GEOTHERMAL ENERGY

#############################################################################

IMAGE OF GEOTHERMAL ENERGY PRODUCTION PROCESS OMITTED
(SEE NARRATIVE DESCRIPTION BELOW OR IN "APPENDIX FOR GRAPHICS AND IMAGES".)
#############################################################################

Geothermal production wells are normally located within approximately one
to two miles of the power plant as geothermal fluids cannot be transported
economically over longer distances. From the well heads, the heated fluid
flows through pipelines to a series of separators where it is separated into
water, brine and steam. The steam is passed through a turbine which drives a
generator to generate electricity. Once the steam has passed through the
turbine, it is then cooled and condensed back into water which, along with
any brine, is returned to the geothermal reservoir via injection wells.
Geothermal plants in the United States are eligible to be qualifying
facilities ("QFs") under the Public Utility Regulatory Policies Act of 1978
("PURPA"), which provides for certain beneficial Federal regulatory
treatment. The geothermal reservoir is a renewable source of energy if
natural ground water sources and re-injection of extracted geothermal fluids
are adequate over the long term to replenish the geothermal reservoir after
the withdrawal of geothermal fluids.

The generation of electric power from geothermal resources has certain
advantages when compared to other methods of electric power generation.
Geothermal energy facilities generate significantly less emissions than
fossil fuel power plants. Geothermal energy facilities typically have higher
capital costs but tend to have significantly lower variable costs than fossil
fuel-based power plants. The utilization of geothermal power is preferred by
certain governments so as to minimize the import, or maximize the export, of
hydrocarbons. Geothermal power facilities also enjoy certain tax benefits in
the United States.

GEOTHERMAL RESOURCE--"RING OF FIRE"

Geothermal energy is most prevalent where the different sections or plates
of the Earth's crust meet. Productive geothermal resources are found
throughout the Pacific Rim (the so-called "Ring of Fire"), including the
western United States, Latin America, Hawaii, Indonesia, the Philippines,
Malaysia and New Zealand. These areas are experiencing high rates of
population growth and increased demand for new electric generating capacity.

<PAGE>

AREAS OF POTENTIAL GEOTHERMAL ACTIVITY

#############################################################################

IMAGE OF GLOBAL MAP OMITTED
(SEE NARRATIVE DESCRIPTION BELOW OR IN "APPENDIX FOR GRAPHICS AND IMAGES".)
#############################################################################

THE GLOBAL POWER MARKET

The opportunity for independent power generation has expanded from a
United States market consisting of cogeneration and small power production
projects to a global competitive market for power generation. Many foreign
countries have initiated restructuring policies after the advent of the
independent power market in the United States.

In the United States, the independent power industry expanded rapidly in
the 1980's, facilitated by the enactment of PURPA. PURPA was enacted to
encourage the production of electricity by non-utility companies as well as
to lessen reliance on imported fuels. According to the Utility Data
Institute, independent power producers were responsible for about 30,000 MW,
or 50%, of the U.S. electric generation capacity which has been placed in
service since 1988.

As the size of the United States independent power market has increased,
available domestic power capacity and competition in the industry have also
significantly increased. Over the past decade, obtaining a power sales
contract from a U.S. utility has generally become increasingly difficult,
expensive and competitive. Many states now require power sales contracts to
be awarded through competitive bidding, which both increases the cost of
obtaining such contracts and decreases the chances of obtaining such
contracts as bids significantly outnumber awards in most competitive
solicitations. The federal Energy Policy Act of 1992 is expected to further
increase domestic competition. As a result of this increased competition, it
may be difficult to obtain a power sales agreement for a proposed project in
the United States, and the terms and conditions of any such contract may be
less favorable than those in prior agreements.

Large amounts of new electric power generating capacity are required in
developing countries. The movement toward privatization in some developing
countries has created significant new markets outside the United States. In
1990, the World Bank estimated that developing countries will need
approximately 380,000 MW of new power generating capacity through the end of
the decade. The need for such rapid expansion has caused many countries to
select private power development as their only practical alternative and to
restructure their legislative and regulatory systems to facilitate such
development. CECI believes that this significant need for power has created
strong local support for private power projects in many foreign countries and
increased the availability of attractive long-term power contracts.

<PAGE>

CECI intends to take advantage of opportunities in these new markets and to
develop, construct and acquire power generation projects outside the United
States.

STRATEGY

Domestically, CECI is focusing on market opportunities in which it
believes it has relative competitive advantages due to its geotechnical,
project management and operating expertise. In addition, CECI expects to
continue diversification into other environmentally responsible sources of
energy primarily through selected acquisitions of partially developed or
existing power generating projects and contracts.

CECI presently believes that the international independent power market
holds the majority of new opportunities for financially attractive private
power development in the next several years, in large part because the demand
for new generating capacity is growing more rapidly in emerging nations than
in the United States. In developing its international strategy, CECI pursues
development opportunities in countries which it believes have an acceptable
risk profile and where CECI's geothermal resource development and operating
experience, project development expertise or strategic relationship with PKS
or local partners are expected to provide it with a competitive advantage.
Subsequent to the Merger, CECI will have financed and have under construction
three projects representing an aggregate of 409 MW of net ownership of
electric generating capacity in the Philippines. In addition, CECI is
currently pursuing a number of other electric power project opportunities in
countries including the Philippines and Indonesia. These countries are
ideally suited for CECI to develop, finance and operate power projects
successfully because of their excellent population demographics, extensive
geothermal resources and stated commitments to the development of private
power programs. CECI's development efforts include both so-called
"greenfield" development as well as the acquisition of or participation in
the joint venture development of projects which are under development or
already operating. In greenfield development, CECI attempts to negotiate
power sales contracts for new generation capacity or engages in competitive
bids in response to government agency or utility requests for proposals for
new capacity.

In pursuing its international strategy, CECI intends to own a significant
equity interest in, and to operate, the projects it develops or acquires. In
order to compete more effectively internationally, CECI's strategy is to
attempt to diversify its project portfolio, extend its future equity funding
capacity through joint ventures and utilize fixed-price, turnkey construction
contracts with contractors experienced in the construction of power plants or
other infrastructure facilities. CECI also believes that it is important in
foreign transactions to work with local partners who are knowledgeable
concerning local culture, politics and commercial practices and who provide a
visible local presence and local project representation.

With respect to emerging market projects, CECI's policy is to attempt to
minimize currency risks, including the devaluation of local currencies versus
the U.S. dollar, as well as the risk of availability of hard currency
convertibility. To date, all of CECI's executed power contracts contain
provisions which index CECI's returns to U.S. dollars or provide for the
payment of capacity payments in U.S. dollars. To the extent possible, CECI
attempts to secure "political risk" insurance from the Overseas Private
Insurance Corporation ("OPIC") or similar multilateral agencies to limit its
risk in emerging market countries. In addition, CECI endeavors to involve the
World Bank, export credit agencies or multilateral funding sources in its
international project financings. CECI believes multilateral lending agencies
and foreign source financing and political risk insurance are available for
certain international private power projects, particularly those utilizing
indigenous fuel sources in renewable or otherwise environmentally responsible
generating facilities. CECI believes that the involvement of these
institutions will enhance an international project's position in emerging
market countries.

CECI has an international joint venture agreement with PKS which CECI
believes enhances CECI's capabilities in foreign power markets. The joint
venture agreement is limited to international activities and provides that if
both CECI and PKS agree to participate in a project, they will share all
development costs equally. Each of CECI and PKS will provide 50% of the
equity required for financing a project developed by the joint venture and
CECI will operate and manage such project. The agreement creates a joint
development structure under which, on a project by project basis, CECI will
be the development manager, managing partner and/or project operator, an
equal equity participant with PKS and a preferred

<PAGE>

participant in the construction consortium and PKS will be an equal equity
participant and the preferred turnkey construction contractor. The joint
venture agreement may be terminated by either party on 15 days written
notice, provided that such termination cannot affect the pre-existing
contractual obligations of either party.

In order to augment its technical capabilities, in 1993 CECI acquired The
Ben Holt Co. ("BHCO"), a California based engineering firm with over 25 years
of geothermal experience, specializing in feasibility studies, process
design, detailed engineering, procurement, construction and operation of
geothermal power plants, gathering systems and related facilities.

THE PROJECTS

Upon completion of the Merger, CECI will have net ownership interests of
an aggregate of (i) 354 MW in 13 projects in operation representing an
aggregate net capacity of 571 MW of electric generating capacity, (ii) 409 MW
in three projects under construction representing an aggregate net capacity
of 500 MW of electric generating capacity and (iii) 935 MW in eight projects
in development stages with signed power sale agreements or under award
representing an aggregate net capacity of 1,589 MW of electric generating
capacity. The following table sets out CECI's various projects in operation,
under construction and in the latter stages of development pursuant to signed
power sales agreements or awarded mandates, in each case subsequent to the
Merger.

INTERNATIONAL PROJECTS

PROJECTS UNDER CONSTRUCTION

<TABLE>
<CAPTION>
FACILITY FACILITY NET PROJECTED
GROSS NET OWNERSHIP COMMERCIAL
CAPACITY CAPACITY INTEREST OPERATION CONTRACT CONTRACT POWER
PROJECT (IN MW)(1) (IN MW)(2) (IN MW) LOCATION DATE EXPIRATION(3) TYPE PURCHASER(4)
- ------------------------ ---------- ---------- ----------- ------------- ------------ ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Upper Mahiao ............ 128 119 119 Leyte, the 1996 CO+10 Build, PNOC-EDC
Philippines Own, (GOP)(5)
Transfer
Mahanagdong(6) .......... 180 165 74 Leyte, the 1997 CO+10 Build, PNOC-EDC
Philippines Own, (GOP)(5)
Transfer
Malitbog-Phase I and II 231 216 216 Leyte, the 1996-1997 CO+10 Build, PNOC-EDC
---------- ---------- -----------
Philippines Own, (GOP)(5)
Transfer
Total Under Construction 539 500 409
---------- ---------- -----------
</TABLE>

<PAGE>

PROJECTS WITH SIGNED POWER SALES CONTRACTS OR AWARDED DEVELOPMENT RIGHTS

<TABLE>
<CAPTION>
FACILITY
FACILITY NET NET PROJECTED
NET CAPACITY OWNERSHIP COMMERCIAL
CAPACITY (IN MW) INTEREST OPERATION CONTRACT CONTRACT POWER
PROJECT (IN MW)(7) (2)(7) (IN MW)(7) LOCATION DATE EXPIRATION TYPE PURCHASER(4)
- ------- ---------- -------- ---------- ---------- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Dieng(6) .................... 400 400 188 Central Java, 1997-1999 CO+30 Build, PLN (GOI)
Indonesia Own,
Transfer
Patuha(6) ................... 400 400 140 Western Java, 1997-1999 CO+30 Build, PLN (GOI)
Indonesia Own,
Transfer
Casecnan(8) ................. 140 140 98 Luzon, the 1998 CO+20 Build, NIA(GOP)(5)
Philippines Own,
Transfer
Bali(8)(9) .................. 350 350 210 Bali, Indonesia 1998-1999 CO+30 Build, PLN (GOI)
Own,
Transfer
Alto Peak ................... 70 70 70 Leyte, the 1997 CO+10 Build, PNOC-EDC
---------- ---------- ----------- Own (GOP)(5)
Philippines Transfer

Total Contracted/Awarded ... 1,360 1,360 706
---------- ---------- -----------
Total International Projects 1,899 1,860 1,115
========== ========== ===========
<FN>
(1) Actual MW may vary depending on operating and reservoir conditions and
plant design. Facility Gross Capacity (in MW) for projects under
construction represents gross electric output of the facility prior to
subtraction of the parasitic load. Parasitic load is electrical output
used by the facility and not made available for sale to utilities or
other outside purchasers. Facility Gross Capacity (in MW) does not
necessarily reflect electric output available for sale to utilities or
other purchasers.

(2) Facility Net Capacity (in MW) represents Facility Gross Capacity (in
MW) less parasitic load.

(3) Commercial Operation (CO).

(4) Philippine National Oil Company--Energy Development Company
(PNOC-EDC); Government of the Philippines (GOP); P.T. PLN (Persero)
(PLN); Government of Indonesia (GOI) and Philippine National Irrigation
Administration (NIA).

(5) Government of the Philippines undertaking supports PNOC-EDC's and
NIA's respective obligations.

(6) Actual MW may vary depending on operating and reservoir conditions and
final plant design. Facility Gross Capacity (in MW) for awarded
projects equals maximum sales amount. Significant contingencies exist
in respect of awards, including, without limitation, the need to obtain
financing, permits and licenses, and the completion of construction.

(7) PKS has elected to exercise its ownership option pursuant to its joint
venture agreement with CECI.

(8) PKS has not indicated whether it intends to exercise its ownership
option pursuant to its joint venture agreement with CECI and such net
ownership interest remains subject to the PKS option. The Casecnan
Project is a combined hydroelectric and irrigation project and will
also sell water to NIA.

(9) Geothermal resource development rights have been awarded and the power
sales contract is subject to negotiation.
</TABLE>

<PAGE>

<PAGE>
DOMESTIC PROJECTS
PROJECTS IN OPERATION
<TABLE>
<CAPTION>
FACILITY
FACILITY NET NET
GROSS CAPACITY OWNERSHIP DATE OF
CAPACITY (IN INTEREST COMMERCIAL CONTRACT CONTRACT POWER
PROJECT (IN MW)(1) MW)(2)(3) (IN MW) LOCATION OPERATION EXPIRATION TYPE PURCHASER(5)
- -------- ---------- ---------- ----------- -------- ---------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Navy I ............... 96 88 41 China Lake, CA 8/1987 8/2011 SO4 SCE
BLM .................. 96 88 42 China Lake, CA 3/1989 3/2019 SO4 SCE
Navy II .............. 96 88 44 China Lake, CA 1/1990 1/2010 SO4 SCE
Vulcan ............... 41 34 17 Imperial Valley, 2/1986 2/2016 SO4 SCE
CA
Hoch (Del Ranch) .... 46 38 19 Imperial Valley, 1/1989 12/2018 SO4 SCE
CA
Elmore ............... 46 38 19 Imperial Valley, 1/1989 12/2018 SO4 SCE
CA
Leathers ............. 46 38 19 Imperial Valley, 1/1990 12/2019 SO4 SCE
CA
Salton Sea I ......... 11 8 8 Imperial Valley, 7/1987 6/2017 Negotiated SCE
CA
Salton Sea II ........ 20 18 18 Imperial Valley, 4/1990 4/2020 SO4 SCE
CA
Salton Sea III ....... 54 50 50 Imperial Valley, 2/1989 2/2019 SO4 SCE
CA
Yuma ................. 55 50 50 Yuma, AZ 5/1994 5/2024 Negotiated SDG&E
Roosevelt Hot Springs 25 23 17 Milford, UT 5/1984 1/2021 Gathered UP&L
Steam
Desert Peak .......... 10 10 10 Desert Peak, NV 12/1985 12/1995 Negotiated SPPC
---------- ---------- -----------
Total in Operation .. 642 571 354
---------- ---------- -----------
</TABLE>
PROJECTS WITH SIGNED POWER SALES CONTRACTS OR AWARDED DEVELOPMENT RIGHTS
<TABLE>
<CAPTION>
FACILITY FACILITY NET PROJECTED
GROSS NET OWNERSHIP COMMERCIAL
CAPACITY CAPACITY INTEREST OPERATION CONTRACT CONTRACT POWER
PROJECT (IN MW)(5) (IN MW)(2) (IN MW) LOCATION DATE EXPIRATION(3) TYPE PURCHASER(4)
- ------- ---------- ---------- ----------- ---------------- ------------ ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BRPU(7) ......... 163 163 163 Imperial Valley, TBD TBD FSO4 SCE
CA
Fish Lake(8) .... 36 36 36 Imperial Valley, 1996 CO+30 Negotiated SCE
CA
Newberry ........ 30 30 30 Bend, OR 1997 CO+50 Negotiated BPA/EWEB
---------- ---------- -----------
Total Contracted/
Awarded......... 229 229 229
---------- ---------- -----------
Total Domestic
Projects ....... 871 800 583
---------- ---------- -----------
Total Projects .. 2,770 2,660 1,698
========== ========== ===========
<FN>
- ---------------
(1) In addition to the electricity sales revenue earned from its net
ownership position in such facilities, CECI receives significant fee
and royalty income from operating such plants and managing the
production from the geothermal resource for such facilities.

(2) Actual MW may vary depending on operating and reservoir conditions and
plant design. Facility Gross Capacity (in MW) for projects in operation
represents gross electric output of the facility prior to subtraction
of the parasitic load. Parasitic load is electrical output used by the
facility and not made available for sale to utilities or other outside
purchasers. Facility Gross Capacity (in MW) does not necessarily
reflect electric output available for sale to utilities or other
purchasers.

(3) Facility Net Capacity (in MW) represents Facility Gross Capacity (in
MW) less parasitic load.

(4) With respect to the Vulcan, Hoch (Del Ranch), Elmore, Leathers,
Salton Sea II and Salton Sea III Projects, this represents contract
nameplate.

(5) Southern California Edison Company (SCE); San Diego Gas & Electric
Company (SDG&E); Utah Power & Light Company (UP&L); Sierra Pacific
Power Company (SPPC); Bonneville Power Authority (BPA); and Eugene
Water and Electric Board (EWEB).

(6) Actual MW may vary depending on operating and reservoir conditions and
final plant design. Facility Gross Capacity (in MW) for awarded
78

<PAGE>

projects equals maximum sales amount. Significant contingencies exist
in respect of awards, including, without limitation, the need to obtain
financing, permits and licenses, and the completion of construction.

(7) SCE is contesting the BRPU award; accordingly, no power sales contract
is currently signed.

(8) Combined Fish Lake and Salton Sea Expansion.
</TABLE>

<PAGE>

INTERNATIONAL PROJECTS--DISCUSSION

PROJECTS IN CONSTRUCTION

THE PHILIPPINES. CECI believes that increasing industrialization, a rising
standard of living and an expanding power distribution network has
significantly increased demand for electrical power in the Philippines.
According to the 1993 Power Development Program of the National Power
Corporation of the Philippines ("NAPOCOR"), demand for electricity exceeds
supply. NAPOCOR has also reported that its ability to sustain desired levels
of electric production from existing facilities has been limited due to
frequent breakdowns in many of its older electric generating plants. As a
result, the Philippines has experienced severe power outages, with Manila
suffering significant daily brownouts during much of 1993 and periodic
brownouts during 1994. Although the occurrence of brownouts has been recently
reduced, NAPOCOR has said that it still anticipates significant energy
shortages in the future.

In 1993, the Philippine Congress, pursuant to Republic Act 7648, granted
President Ramos emergency powers to remedy the Philippine energy crisis,
including authority to (i) exempt power projects from public bidding
requirements, (ii) increase power rates and (iii) reorganize NAPOCOR. Until
1987, NAPOCOR had a monopoly on power generation and transmission in the
Philippines. In 1987, then President Aquino issued Executive Order No. 215,
which granted private companies the right to develop certain power generation
projects, such as those using indigenous energy sources on a
"build-operate-transfer" or "build-transfer" basis. In 1990, the Philippine
Congress enacted Republic Act No. 6957, which authorized private development
of priority infrastructure projects on a "build-operate-transfer" and a
"build-transfer" basis. In addition, under that Act, such power projects were
made eligible for certain tax benefits, including exemption from Philippine
national income taxes for at least six years and exemption from, or
reimbursement for, customs duties and value added taxes on capital equipment
to be incorporated into such projects. In 1994, certain amendments to
Republic Act No. 6957 were approved by the Philippine Congress and signed
into law (R.A. 7718). Among other things, such amendments provide for the
financing of "unsolicited proposals" on a "build-operate-transfer" basis.

In an effort to remedy the shortfall of electricity, the Philippines,
NAPOCOR and the Philippine National Oil Company--Energy Development Company
("PNOC-EDC") continue to jointly solicit bids for private power projects.
Among private power projects selected through this solicitation process were
the Upper Mahiao (the "Upper Mahiao Project"), Mahanagdong (the "Mahanagdong
Project"), Malitbog (the "Malitbog Project") and Alto Peak (the "Alto Peak
Project") geothermal power projects, as described below. Geothermal power has
been identified as a preferred alternative by the Philippine Government due
to the domestic availability and the minimal environmental effects of
geothermal power in comparison to other forms of power production. PNOC-EDC,
which is responsible for developing the Philippines' domestic energy sources,
has been successful in the exploration and development of geothermal
resources.

CECI and Magma have financed and commenced construction of the Upper
Mahiao, Mahanagdong and Malitbog Projects, which have an aggregate net
capacity of 500 MW, of which CECI's aggregate net ownership interest is 409
MW subsequent to the Merger.

<PAGE>

MAP OF THE PHILIPPINES

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Upper Mahiao. CECI has closed the financing and commenced construction of
the Upper Mahiao Project, a 128 gross MW geothermal project to be located in
the Greater Tongonan area of the island of Leyte in the Philippines. The
Upper Mahiao Project will be built, owned and operated by CE Cebu Geothermal
Power Company, Inc. ("CE Cebu"), a Philippine corporation that is
approximately 100% indirectly owned by CECI. It will sell 100% of its
capacity on a "take-or-pay" basis (described below) to PNOC-EDC, which will
in turn sell the power to NAPOCOR for distribution to the island of Cebu,
located about 40 miles west of Leyte.

The Upper Mahiao Project will have a total project cost of approximately
$218 million, including interest during construction, project contingency
costs and a debt service reserve fund. A consortium of international banks
has committed to provide approximately $162 million in a project-financed
construction loan, supported by political risk insurance from the
Export-Import Bank of the United States ("ExIm Bank"). The largest portion of
the term loan for the project will also be provided by ExIm Bank. CECI's
equity contribution to the Upper Mahiao Project is $56 million. Subject to
the pledge of the project company's stock to the lenders, CECI has arranged
for political risk insurance of its equity investment through OPIC. The
financing is collateralized by all the assets of the project.

The Upper Mahiao Project is being constructed by Ormat, Inc. ("Ormat") and
its affiliates pursuant to supply and construction contracts (collectively,
the "Upper Mahiao EPC"), which, taken together, provide for the construction
of the plant on a fixed-price, date-certain, turnkey basis. Ormat is an
international manufacturer and construction contractor that builds binary
geothermal turbines. It has provided its equipment to several geothermal
power projects throughout the United States, the Philippines and
internationally. The Upper Mahiao EPC Contract provides liquidated damage
protection of up to 30% of the Upper Mahiao EPC price. Ormat's performance
under the Upper Mahiao EPC is backed by a completion guaranty of Ormat, by
letters of credit, and by a limited guaranty of Ormat Industries, Ltd., an
Israeli corporation and the parent of Ormat, in each case for the benefit of
the project lenders.

<PAGE>

Under the terms of an energy conversion agreement, executed on September
6, 1993 (the "Upper Mahiao ECA"), CE Cebu will build, own and operate the
Upper Mahiao Project during the approximately two-year construction period
and the ten-year cooperation period, after which ownership will be
transferred to PNOC-EDC at no cost.

The Upper Mahiao Project will be located on land provided by PNOC-EDC at
no cost. It will take geothermal steam and fluid, also provided by PNOC-EDC
at no cost, and convert its thermal energy into electrical energy to be sold
to PNOC-EDC on a "take-or-pay" basis. Specifically, PNOC-EDC will be
obligated to pay for the electric capacity that is nominated each year by CE
Cebu, irrespective of whether PNOC-EDC is willing or able to accept delivery
of such capacity. PNOC-EDC will pay to CE Cebu a fee (the "Capacity Fee")
based on the plant capacity nominated to PNOC-EDC in any year (which, at the
plant's design capacity, is approximately 95% of total contract revenues) and
a fee (the "Energy Fee") based on the electricity actually delivered to
PNOC-EDC (approximately 5% of total contract revenues). The Capacity Fee
serves to recover the capital costs of the project, to recover fixed
operating costs and to cover return on investment. The Energy Fee is designed
to cover all variable operating and maintenance costs of the power plant.
Payments under the Upper Mahiao ECA will be denominated in U.S. dollars, or
computed in U.S. dollars and paid in Philippine pesos at the then-current
exchange rate, except for the Energy Fee, which will be used to pay
Philippine peso-denominated expenses. The convertibility of Philippine peso
receipts into U.S. dollars is insured by OPIC. Significant portions of the
Capacity Fee and Energy Fee will be indexed to U.S. and Philippine inflation
rates, respectively. PNOC-EDC's payment requirements, and its other
obligations under the Upper Mahiao ECA, are supported by the Government of
the Philippines through a performance undertaking.

The payment of the Capacity Fee is not excused if PNOC-EDC fails to
deliver or remove the steam or fluids or fails to provide the transmission
facilities, even if its failure was caused by a force majeure event. In
addition, PNOC-EDC must continue to make Capacity Fee payments if there is a
force majeure event (e.g., war, nationalization, etc.) that affects the
operation of the Upper Mahiao Project and that is within the reasonable
control of PNOC-EDC or the government of the Philippines or any agency or
authority thereof. If CE Cebu fails to meet certain construction milestones
or the power plant fails to achieve 70% of its design capacity by the date
that is 120 days after the scheduled completion date (as that date may be
extended for force majeure and other reasons under the Upper Mahiao ECA), the
Upper Mahiao Project may, under certain circumstances, be deemed "abandoned,"
in which case the Upper Mahiao Project must be transferred to PNOC-EDC at no
cost, subject to any liens existing thereon.

PNOC-EDC is obligated to purchase CE Cebu's interest in the facility under
certain circumstances, including (i) extended outages resulting from the
failure of PNOC-EDC to provide the required geothermal fluid, (ii) certain
material changes in policies or laws which adversely affect CE Cebu's
interest in the project, (iii) transmission failure, (iv) failure of PNOC-EDC
to make timely payments of amounts due under the Upper Mahiao ECA, (v)
privatization of PNOC-EDC or NAPOCOR, and (vi) certain other events. Prior to
completion of the Upper Mahiao Project, the buy-out price will be equal to
all costs incurred through the date of the buy-out, including all Upper
Mahiao Project debt, plus an additional rate of return on equity of ten
percent per annum. In a post-completion buy-out, the price will be the net
present value (at a discount rate based on the last published Commercial
Interest Reference Rate of the Organization for Economic Cooperation and
Development) of the total remaining amount of Capacity Fees over the
remaining term of the Upper Mahiao ECA.

Mahanagdong. CECI has also closed the financing and commenced construction
of the Mahanagdong Project, a 180 gross MW geothermal project, which will
also be located on the island of Leyte. The Mahanagdong Project will be
built, owned and operated by CE Luzon Geothermal Power Company, Inc. ("CE
Luzon"), a Philippine corporation that during construction is indirectly
owned 50% by CECI and 50% by PKS. Up to a 10% financial interest in CE Luzon
may be sold at completion to another industrial company at the option of such
company. The Mahanagdong Project will sell 100% of its capacity on a similar
basis as described above for the Upper Mahiao Project to PNOC-EDC, which will
in turn sell the power to NAPOCOR for distribution to the island of Luzon.

Mahanagdong has a total project cost of approximately $320 million,
including interest during construction, project contingency costs and a debt
service reserve fund. The capital structure consists of

<PAGE>

a project financing construction and term loan of approximately $240 million
provided by OPIC, ExIm Bank and a consortium of international banks, and
approximately $80 million in equity contributions. Political risk insurance
from ExIm Bank has been obtained for the commercial lenders. CECI's equity
investment for the Mahanagdong Project will be approximately $40 million.
Subject to the pledge of the project company's stock to the lenders, CECI has
arranged for political risk insurance on its equity investment through OPIC.
The financing is collateralized by all the assets of the project.

The Mahanagdong Project is being constructed by a consortium (the "EPC
Consortium") of Kiewit Construction Group, Inc. ("KCG") and BHCO pursuant to
fixed-price, date-certain, turnkey supply and construction contracts
(collectively, the "Mahanagdong EPC"). The obligations of the EPC Consortium
under the Mahanagdong EPC are supported by a guaranty of KCG at an aggregate
amount equal to approximately 50% of the Mahanagdong EPC price. The
Mahanagdong EPC provides for maximum liability for liquidated damages of up
to $100.5 million and total liability of up to $201 million. KCG, a wholly
owned subsidiary of PKS, is the lead member of the EPC Consortium, with an
80% interest. KCG performs construction services for a wide range of public
and private customers in the U.S. and internationally. Construction projects
undertaken by KCG during 1993 included transportation projects, including
highways, bridges, airports and railroads, power facilities, buildings and
sewer and waste disposal systems, and water supply systems, utility
facilities, dams and reservoirs. KCG accounts for 80% of PKS's revenues,
contributing $1.7 billion in revenues in 1993. KCG has an extensive
background in power plant construction.

BHCO will provide design and engineering services for the EPC Consortium,
holding a 20% interest. CECI has provided a guaranty of BHCO's obligations
under the Mahanagdong EPC Contract.

The terms of an energy conversion agreement (the "Mahanagdong ECA"),
executed on September 18, 1993, are substantially similar to those of the
Upper Mahiao ECA. The Mahanagdong ECA provides for an approximately
three-year construction period and a ten-year cooperation period. At the end
of the cooperation period, the facility will be transferred to PNOC-EDC at no
cost. All of PNOC-EDC's obligations under the Mahanagdong ECA are supported
by the Government of the Philippines through a performance undertaking. The
capacity fees are expected to be approximately 97% of total revenues at the
design capacity levels and the energy fees are expected to be approximately
3% of such total revenues.

Malitbog. In December 1994, Magma closed the financing and commenced
construction of the Malitbog Project, a 231 gross MW geothermal project,
which will also be located on the island of Leyte. The Malitbog Project will
be built, owned and operated by Visayas Geothermal Power Company ("VGPC"), a
Philippine general partnership that is wholly owned, indirectly, by Magma.
VGPC will sell 100% of its capacity on substantially the same basis as
described above for the Upper Mahiao Project to PNOC-EDC, which will in turn
sell the power to NAPOCOR.

The Malitbog Project has a total project cost of approximately $280
million, including interest during construction and project contingency
costs. A consortium of international banks and OPIC have provided a total of
$210 million of construction and term loan facilities, the $135 million
international bank portion of which is supported by political risk insurance
from OPIC. Magma's equity contribution to VGPC was $70 million. Magma's
equity participation is covered by political risk insurance from OPIC.

The Malitbog Project will be constructed by Sumitomo Corporation
("Sumitomo") pursuant to a fixed-price, date-certain, turnkey supply and
construction contract (the "Malitbog EPC"). The Malitbog EPC provides that
certain liquidated damages will be paid by Sumitomo for failure to meet
certain scheduled performance test dates, including the payment of any
liquidated damages or penalties required to be paid by VGPC to PNOC-EDC under
an energy conversion agreement (subject to limitations on the total amount of
liquidated damages payable by Sumitomo). The Malitbog EPC also provides for
the payment of certain liquidated damages on a per unit basis if upon
completion of the facility, tests do not demonstrate such unit's ability to
operate at a net generating capacity of at least 74.1 MW. The liquidated
damages for each generating unit are capped at 13 1/3% of the total Malitbog
EPC. Pursuant to a reimbursement undertaking, Magma has agreed to reimburse
Sumitomo for draws, if any, by PNOC-EDC on the construction bond provided by
Sumitomo on behalf of Magma in excess of the liquidated damage amounts
provided in the Malitbog EPC.

<PAGE>

Sumitomo is one of the principal trading and investment companies in
Japan, and has built power plants around the world, often on a turnkey basis.
As of October 20, 1994, Sumitomo had a credit rating of "Aa3" from Moody's
Investors Service, Inc. ("Moody's"). The Malitbog EPC requires Sumitomo to
provide engineering, procurement, construction, start-up and testing services
with respect to the facility.

Construction of the facility has begun, with commercial operation of unit
1 scheduled to commence in July 1996, and commercial operation of unit 2 and
unit 3 scheduled to commence in July 1997.

The terms of the "Malitbog ECA", executed on September 10, 1993, are
substantially similar to those of the Upper Mahiao ECA. The Malitbog ECA
provides for a two-phase construction period, of three identical 77 gross MW
units. The cooperation period is ten years from the completion of unit 3. At
the end of the cooperation period, the facility will be transferred to
PNOC-EDC at no cost. All of PNOC-EDC's obligations under the Malitbog ECA are
supported by the Government of the Philippines through a performance
undertaking. The capacity fees are 100% of total revenues and there is no
energy fee.

PROJECTS IN DEVELOPMENT

Casecnan. In November 1994, CECI signed a "Project Agreement" with the
Philippine National Irrigation Administration ("NIA") to develop an estimated
$320 million combined irrigation and hydroelectric power generation project
(the "Casecnan Multipurpose Project"). Such Project will deliver excess water
from the Casecnan and Denip (Cagayan) watershed in Northern Luzon to the
Pampanga watershed and the Pantabangan Reservoir for irrigation use in the
Central Luzon Valley. The Casecnan Multipurpose Project, which has satisfied
the requirements for an unsolicited proposal under the amended BOT law, will
also provide 140 MW of net electric generation capacity to the Luzon grid.

The project agreement is structured as a build, operate and transfer
agreement under which NIA will supply the water for the Project and provides
for a 20-year cooperation period with significant "take-or-pay" obligations
for water and electricity. At the end of the 20-year cooperation period, the
Casecnan Multipurpose Project will be transferred to NIA at no cost. CECI
anticipates commencing construction in 1995.

Completion of such Project remains subject to a number of significant
uncertainties, including arranging financing, obtaining certain required
permits and licenses and completing construction, none of which can be
assured.

Alto Peak. The Alto Peak Project is a smaller geothermal project in the
same general area of Leyte as the Upper Mahiao, Mahanagdong and Malitbog
Projects. Magma and PNOC-EDC have executed a 70 MW net Energy Conversion
Agreement, dated May 7, 1994. The general terms and conditions are similar to
the Malitbog ECA. However, the plant design has not been initiated as
PNOC-EDC has not finalized the steam conditions (pressure, composition and
ph), as PNOC-EDC is still drilling and testing the geothermal wells that will
supply steam to such project. Consequently, Magma has not commenced financing
arrangements for the Alto Peak Project.

Indonesia. Indonesia, which has the world's fourth largest population, has
experienced rapid growth in electricity demand. CECI believes that load
growth has exceeded 13% since 1980. Furthermore, CECI believes that rapid
expansion in industrial growth has created a backlog of unconnected
industrial users in excess of 4,000 MW. In its sixth five-year plan, the
Indonesian government has called for the addition of 12,000 MW of additional
generating capacity by 1999. The long range plan calls for an additional
15,000 MW to be added by the year 2004. The plans call for approximately 75%
of this capacity to be added by independent power producers. Although
Indonesia is a member of OPEC and is also the world's largest exporter of
liquified natural gas, the Government of Indonesia has announced that it
wishes to maintain sufficient amounts of oil for export, which will require a
shift to coal fired generation and the use of other energy sources, such as
geothermal.

It is estimated that Indonesia has sufficient geothermal steam potential
to generate 16,000 MW, centered in the Java and Sumatra areas (the two most
populous of the 13,000 islands in Indonesia). To date, less than 150 MW of
geothermal facilities have been commissioned, as the Government of Indonesia
was not encouraging the development of geothermal energy.

<PAGE>

The Indonesian state-owned utility has recently been converted to a
limited liability company, P.T. PLN (Persero) ("PLN"), as a first step toward
the privatization of its two largest generating subsidiaries. The main
objective of Indonesia's electric energy policy has been to secure a
continuity of supply at reasonable rates for households (more than 50% of
which have been reported to have no power) and to minimize the utilization of
hydrocarbons. Rural electrification will remain an important component of the
energy policy as PLN is targeting the addition of 2 million customers a year.

Indonesia is rated "Baa3" by Moody's and "BBB-" by Standard & Poor's
Ratings Group ("S&P"). CECI believes that Indonesia represents an attractive
development opportunity, as it combines growing power needs with ample
geothermal resources and creditworthy contract parties.

MAP OF INDONESIA AND NEIGHBORING COUNTRIES

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The following is a summary description of certain information concerning
CECI's projects in Indonesia. Since these projects are still in development,
however, there can be no assurance that this information will not change
materially over time. In addition, there can be no assurance that development
efforts on any particular project, or CECI's efforts generally, will be
successful.

Dieng. On December 2, 1994, a subsidiary of CECI executed a joint
operation contract (the "Dieng JOC") for the development of the geothermal
steam field and geothermal power facilities at the Dieng geothermal field,
located in Central Java (the "Dieng Project") with Perusahaan Pertambangan
Minyak Dan Gas Bumi Negara ("Pertamina"), the Indonesian national oil
company, and executed a "take-or-pay" energy sales contract (the "Dieng ESC")
with both Pertamina and PLN, the Indonesian national electric utility.

A subsidiary of CECI has entered into a joint development agreement with
P.T. Himpurna Enersindo Abadi ("P.T. HEA"), its Indonesian partner, which is
a subsidiary of Himpurna, an association of Indonesian military veterans,
whereby CECI and P.T. HEA have agreed to work together on an exclusive basis
to develop the Dieng Project (the "Dieng Joint Venture"). The Dieng Joint
Venture is structured with subsidiaries of CECI having a minimum 47%
interest, subsidiaries of PKS having the option to take a 47% interest and
P.T. HEA having a 6% interest in the Dieng Project.

<PAGE>

Pursuant to the Dieng JOC and ESC, Pertamina will grant to the Dieng Joint
Venture the geothermal field and the wells and other facilities presently
located thereon and the Dieng Joint Venture will build, own and operate power
production units with an aggregate capacity of up to 400 MW. The Dieng Joint
Venture will accept the field operation responsibility for developing and
supplying the geothermal steam and fluids required to operate the plants. The
Dieng JOC is structured as a build own transfer agreement and will expire
(subject to extension by mutual agreement) on the date which is the later of
(i) 42 years following effectiveness of the Dieng JOC and (ii) 30 years
following the date of commencement of commercial generation of the final unit
completed. Upon the expiration of the proposed Dieng JOC, all facilities will
be transferred to Pertamina at no cost. The Dieng Joint Venture is required
to pay Pertamina a production allowance equal to three percent of the Dieng
Joint Venture's net operating income from the Dieng Project, plus a further
amount based upon the negotiated value of existing Pertamina geothermal
production facilities that CECI expects will be made available by Pertamina.

Pursuant to the Dieng ESC, PLN agreed to purchase and pay for all of the
Project's capacity and energy output on a "take or pay" basis regardless of
PLN's ability to accept such energy made available from the Dieng Project for
a term equal to that of the Dieng JOC. The price paid for electricity
includes a base energy price per kWh multiplied by the number of kWhs the
plants deliver or are "capable of delivering," whichever is greater. Energy
price payments are also subject to adjustment for inflation. PLN will also
pay a capacity payment based on plant capacity. All such payments are payable
in U.S. dollars.

CECI presently intends to begin well testing by the second quarter of 1995
and to commence construction of an initial 55 MW unit in the 4th quarter of
1995, and then to proceed on a modular basis with construction of three
additional units to follow shortly thereafter, resulting in an aggregate
first phase net capacity at this site of 220 MW. CECI estimates that the
total project cost of these units will be approximately $450 million. The
next phase is expected to expand the total capacity to 400 MW. The cost of
the full Dieng Project is estimated to approximate $1 billion. CECI
anticipates a consortium consisting of KCG and BHCO will submit a proposal
for the design and construction of the Dieng Project, and that CECI, through
a subsidiary, will be responsible for operating and managing the Dieng
Project.

The Dieng field has been explored domestically for over 20 years and BHCO
has been active in the area for more than five years. Pertamina has drilled a
total of 27 wells to date. CECI has a significant amount of data, which it
believes to be reliable as to the production capacity of the field. However,
a number of significant steps, both financial and operational, must be
completed before the Dieng Project can proceed further. These steps, none of
which can be assured, include obtaining required regulatory permits and
approvals, completing the well testing, entering into a construction
agreement and other project contracts, and arranging financing.

Patuha. CECI is also developing a geothermal power plant with respect to
the Patuha geothermal field in Java, Indonesia (the "Patuha Project"). CECI
has entered into a joint venture (the "Patuha Joint Venture") for Patuha with
P.T. Enerindo Supra Abadi ("P.T. ESA"), an Indonesian company. P.T. ESA is an
affiliate of the Bukaka Group, which has extensive experience in general
construction, fabrication and electrical transmission construction in
Indonesia. In exchange for project development services, P.T. ESA will
receive a 10% equity interest in the Patuha Project with an option to acquire
an additional 20% interest for cash upon the satisfaction of certain
conditions. Subject to the exercise of that option, subsidiaries of CECI will
have a 45% interest and subsidiaries of PKS will have the option to take a
45% interest in the Patuha Project.

On December 2, 1994, the Patuha Joint Venture executed both a joint
operation contract and an energy sales contract, each of which currently
contains terms substantially similar to those described above for the Dieng
Project. The Patuha Joint Venture intends to proceed on a modular basis
similar to the Dieng Project, with an aggregate capacity of up to 400 MW.
CECI estimates that the total cost will be approximately $1 billion. CECI
presently intends to begin well testing and further exploration in the fourth
quarter of 1995 with construction of the first unit expected to begin by
1996.

The Patuha Project remains subject to a number of significant
uncertainties, as described above in connection with the Dieng Project, and
there can be no assurance that the Patuha Project will proceed or reach
commercial operation.

<PAGE>

Bali. CECI and PT Panutan Group, an Indonesian consortium of energy, oil,
gas and mining companies, have formed a joint venture to pursue the
development of geothermal resources in Bali (the "Bali Project") and to
obtain a power sales contract from PLN.

CECI presently intends to develop the Bali Project and other possible
projects in Indonesia using a structure similar to that contemplated for the
Dieng Project.

The Bali Project remains subject to a number of significant uncertainties,
as described above for the Dieng Project, and there can be no assurance that
CECI will pursue the Bali Project or that it will proceed or reach commercial
operation.

DOMESTIC PROJECTS--DISCUSSION

MAP OF THE WESTERN UNITED STATES

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PROJECTS IN OPERATION

The Coso Project. In 1979, CECI entered into a 30-year contract (the "Navy
Contract") with the United States Department of the Navy (the "Navy") to
develop geothermal power facilities located on approximately 5,000 acres of
the Naval Air Weapons Station at China Lake, California (150 miles northeast
of Los Angeles). In 1985, CECI entered into a 30-year lease (the "BLM Lease")
with the United States Bureau of Land Management ("BLM") for approximately
19,000 acres of land adjacent to the land covered by the Navy Contract. The
Navy Contract and the BLM Lease provide for certain royalty payments as a
percentage of gross revenue and certain other formulas. CECI formed three
joint ventures (the "Coso Joint Ventures") with one primary joint venture
partner, Caithness Corporation ("Caithness"), to develop and construct the
three facilities which comprise the Navy I project (the "Navy I Project"),
the BLM project (the "BLM Project") and the Navy II project (the "Navy II
Project") (collectively the "Coso Project").

The Coso Joint Ventures are as follows: (i) Coso Finance Partners, which
owns the Navy I Project (the "Navy I Partnership"), (ii) Coso Energy
Developers, which owns the BLM Project (the "BLM Partnership") and (iii) Coso
Power Developers, which owns the Navy II Project (the "Navy II Partnership"
and, together with the Navy I Partnership and the BLM Partnership, the "Coso
Partnerships"). CECI holds ownership interests of approximately 46% in the
Navy I Partnership; approximately 48% in the BLM Partnership, after payout to
CECI and Caithness; and 50% in the Navy II Partnership. CECI consolidates its
respective share of the operating results of the Coso Partnerships into its
financial statements. In addition, CECI indirectly holds rights to certain
cash flows from its partners in the BLM Project, and, to a lesser extent, the
Navy I Project and Navy II Project. Each of the Coso Joint Ventures is
managed by a management committee which consists of two representatives from
CECI and two representatives from CECI's partners. CECI operates the Coso
Project, for which it receives fees from the Coso Partnerships.

The Coso Project sells all electricity generated by the respective plants
pursuant to three long-term SO4 Agreements between the Navy I Partnership,
the BLM Partnership, and the Navy II Partnership, respectively, and SCE.
These SO4 Agreements provide for capacity payments, capacity bonus payments
and energy payments. SCE makes fixed annual capacity payments to the Coso
Partnerships, and to the extent that capacity factors exceed certain
benchmarks is required to make capacity bonus payments. The price for
capacity and capacity bonus payments is fixed for the life of the SO4
Agreements. Energy is sold at increasing fixed rates for the first ten years
of each contract and thereafter at SCE's Avoided Cost of Energy. The fixed
price periods of the SO4 Agreements extend until August 1997, March 1999 and
January 2000 for each of the Navy I, BLM and Navy II Partnerships,
respectively, at rates ranging from 11.0cents per kWh in 1994 to 14.6cents
per kWh in 2000. CECI's share of the revenues received by the Coso
Partnerships for 1993 and the first nine months of 1994 was $92.9 million and
$78.9 million, respectively.

The physical facilities used for geothermal energy production are
substantially the same at the Navy I, BLM and Navy II Projects.

The Navy I Project. The geothermal resource for the Navy I Project
currently is produced from approximately 32 wells. The Navy I Project
consists of three turbine generators, each with approximately 32 MW of
electrical generating capacity. The Navy I Project has an aggregate gross
electrical generating capacity of approximately 96 MW. Based on an assumed
capacity of 80 MW, the Navy I Project operated at an average operating
capacity factor of 99.8% in 1992, 111.2% in 1993 and 114.6% in the first nine
months of 1994.

The BLM Project. The BLM Project's geothermal resource currently is
produced from approximately 20 wells. The BLM Project consists of three
turbine generators. Two of these turbine generators are located at the BLM
East site in a dual flash system, each with a nameplate capacity of 29 MW;
and one is located at the BLM West site in a single flash system, with a
nameplate capacity of 29 MW. The BLM Project has an aggregate gross
electrical generating capacity of approximately 96 MW. Based on an assumed
capacity of 80 MW, the BLM Project operated at an average operating capacity
factor of 87.2% in 1992, 98.1% in 1993, and 98.5% in the first nine months of
1994.

<PAGE>

The Navy II Project. The geothermal resource for the Navy II Project
currently is produced from approximately 25 wells. The Navy II Project
consists of three individual turbine generators, each with approximately 32
MW of electrical generating capacity. The Navy II Project has an aggregate
gross electrical capacity of approximately 96 MW. Based on an assumed
capacity of 80 MW, the Navy II Project operated at an average operating
capacity factor of 98.1% in 1992, 102.6% in 1993, and 103.5% in the first
nine months of 1994.

In December 1992, the Coso Joint Ventures refinanced the existing bank
debt on the Coso Project with the proceeds of the sale of approximately $560
million in non-recourse senior secured notes (the "Notes") in a private
placement pursuant to Rule 144A under the Securities Act. The Notes were
issued by Coso Funding Corp. ("Coso Funding"), a corporation owned by the
Coso Joint Ventures and formed exclusively for the purpose of issuing the
Notes. Coso Funding lent the Coso Joint Ventures substantially all of the net
proceeds of the sale of the Notes. At the time of their issuance, the Notes
were rated "Baa3" by Moody's, "BBB-" by S&P and "BBB" by Duff & Phelps Credit
Rating Co., all investment grade ratings. The outstanding balance of the
Notes on September 30, 1994 was $483.5 million with a remaining average life
of 3.5 years, and the average interest rate on the Notes for the nine months
ending on the same date was 8.07%. The obligations of each Coso Partnership
under the loans from Coso Funding are non-recourse to CECI. Coso Funding may
look solely to each Coso Partnership's pledged assets for satisfaction of
such Coso Partnership's loan. In addition, the loans are cross-collateralized
by certain support loans only to the extent of the other Coso Joint Ventures'
available cash flow and, under certain circumstances, the debt service
reserve funds, and not as to other assets.

Salton Sea Known Geothermal Resource Area Projects. Magma acquired three
geothermal power plants which comprise the Salton Sea I project (the "Salton
Sea I Project"), the Salton Sea II project (the "Salton Sea II Project") and
the Salton Sea III project (the "Salton Sea III Project") (collectively, the
"Salton Sea Projects") and all related wellfield, land and other related
assets in March 1993 from Union Oil Company of California. Each of the
Vulcan, Hoch (Del Ranch), Elmore and Leathers projects (the "Vulcan Project,"
the "Hoch (Del Ranch) Project," the "Elmore Project" and the "Leathers
Project," respectively, and collectively, the "Partnership Projects") is
owned by an equal partnership (the "Vulcan Partnership," the "Del Ranch
Partnership," the "Elmore Partnership" and the "Leathers Partnership,"
respectively, and collectively, the "Partnerships") between Magma and a
subsidiary of Mission Energy, a wholly owned subsidiary of SCE. In the case
of the Vulcan Project, the Vulcan Partnership owns certain geothermal
resources supplying the Vulcan Project plant. In the case of the other three
Partnership Project plants, Magma owns the geothermal resources and receives
royalty payments from the Del Ranch, Elmore and Leathers Partnerships. In the
first nine months of 1994, such royalties together with royalties from the
East Mesa Plant and Mammoth Plants (as defined below) totaled $15.1 million.
Magma's share of the aggregate electricity revenues received by the Salton
Sea Projects and the Partnerships for the first nine months of 1994 was
$124.1 million. In each case, a subsidiary of Magma is the managing general
partner, and Magma consolidates one-half of the operating results of each
Partnership Project plant into its financial statements. A subsidiary of
Magma operates each of the Salton Sea Project plants and the Partnership
Project plants.

The Salton Sea Projects operated at a combined contract nameplate capacity
factor (excluding scheduled maintenance hours) of 94.1% in the nine months
ended December 31, 1993 and 90.8% in the first nine months of 1994. The
Partnership Projects operated at a combined contract nameplate factor of
100.7% in 1993 and 105.0% in the first nine months in 1994.

Vulcan. The Vulcan Project sells electricity to SCE under a 30-year SO4
Agreement that commenced on February 10, 1986. The Vulcan Project has a
contract capacity and contract nameplate of 29.5 MW and 34 MW, respectively.
Under the SO4 Agreement, SCE is obligated to pay the Vulcan Project a
capacity payment, a capacity bonus payment and an energy payment.

The price for contract capacity payments is fixed for the life of such SO4
Agreement. The as-available capacity price is based on a payment schedule as
approved by the CPUC from time to time. The contract energy payment increases
each year for the first ten years, which period expires on February 9, 1996.
Thereafter, the energy payments will be based on SCE's Avoided Cost of
Energy. The energy payment per kWh is 10.9 cents for 1994, 11.8 cents for 1995
and 12.6 cents for 1996. The Vulcan Project is unleveraged.

<PAGE>

Hoch (Del Ranch). The Hoch (Del Ranch) Project sells electricity to SCE
under a 30-year SO4 Agreement that commenced on January 1, 1989. The contract
capacity and contract nameplate are 34 MW and 38 MW, respectively. The
provisions of such SO4 Agreement are substantially the same as the SO4
Agreement with respect to the Vulcan Project.

The price for contract capacity payment is fixed for the life of the SO4
Agreement. The energy payments per kWh for the first ten-year period, which
expires on December 31, 1998, are fixed at rates ranging from 10.9 cents for
1994 to 14.6 cents for 1998. Thereafter, the energy payments will be based on
SCE's Avoided Cost of Energy.

The Del Ranch Partnership entered into a $66 million secured credit
facility with commercial banks in March 1988. The final maturity date of the
term loans is September 15, 2001. The secured credit agreement was amended to
allow for the issuance of commercial paper and medium-term notes supported by
a letter of credit as an alternative to borrowing directly from the banks.

Elmore. The Elmore Project sells electricity to SCE under a 30-year SO4
Agreement that commenced on January 1, 1989. The contract capacity and
contract nameplate are 34 MW and 38 MW, respectively. The provisions of such
SO4 Agreement are substantially the same as the SO4 Agreement with respect to
the Vulcan Project.

The price for contract capacity payments is fixed for the life of the SO4
Agreement. The energy payments per kWh for the first ten-year period, which
expires on December 31, 1998, are fixed at rates ranging from 10.9 cents in
1994 to 14.6 cents in 1998. Thereafter, the energy payments will be based on
SCE's Avoided Cost of Energy.

The Elmore Partnership entered into a $66 million secured credit facility
with commercial banks in March 1988. The final maturity date of the term
loans is September 15, 2001. The secured credit agreement was amended and
restated on April 18, 1990 to allow for the issuance of commercial paper and
medium-term notes supported by a letter of credit as an alternative to
borrowing directly from the banks.

Leathers. The Leathers Project sells electricity to SCE pursuant to a
30-year SO4 Agreement that commenced on January 1, 1990. The contract
capacity and contract nameplate are 34 MW and 38 MW, respectively. The
provisions of such SO4 Agreement are substantially the same as the SO4
Agreement with respect to the Vulcan Project.

The price for contract capacity payments is fixed for the life of the SO4
Agreement. The energy payments per kWh for the first ten-year period, which
expires on December 31, 1999, are fixed at rates ranging from 10.9 cents in
1994 to 15.6 cents in 1999. Thereafter, the energy payments are based on SCE's
Avoided Cost of Energy.

The Leathers Partnership entered into an $82 million secured credit
facility with commercial banks in March 1988. The final maturity date of the
term loans is September 15, 2002. The secured credit agreement was amended to
allow for the issuance of commercial paper and medium-term notes supported by
a letter of credit as an alternative to borrowing directly from the banks.

Salton Sea I Project. The Salton Sea I Project sells electricity to SCE
pursuant to a 30-year negotiated power purchase agreement, as amended (the
"Salton Sea I PPA"), which provides for capacity and energy payments. The
initial contract capacity and contract nameplate are each 10 MW. The Salton
Sea I Project may add subsequent increments of contract capacity (subject to
notification requirements) the sum of which may not exceed 20 MW (the "Salton
Sea I Project Expansion"). See "--Projects in Development--Fish Lake/Salton
Sea I Expansion."

The capacity payment is based on the firm capacity price which is
currently $123.61/kW-year. The contract capacity payment adjusts quarterly
based on a basket of energy indices for the term of the Salton Sea I PPA. The
energy payment is calculated using a Base Price (defined as the initial value
of the energy payment (4.701 cents per kWh for the second quarter of 1992)),
which is subject to quarterly adjustments based on a basket of indices. The
time period weighted average energy payment for Unit 1 was 4.8 cents per kWh
during 1993. As the Salton Sea I PPA is not an SO4 Agreement, the energy
payments do not revert to SCE's Avoided Cost of Energy.

<PAGE>

Salton Sea II Project. The Salton Sea II Project sells electricity to SCE
pursuant to a 30-year modified SO4 Agreement that commenced on April 15,
1990. The contract capacity and contract nameplate are 15 MW and 18 MW,
respectively. The contract requires SCE to make capacity payments, capacity
bonus payments and energy payments. The price for contract capacity and
contract capacity bonus payments is fixed for the life of the modified SO4
Agreement. The energy payments for the first ten-year period, which period
expires on April 4, 2000, are levelized at a time period weighted average of
10.6 cents per kWh. Thereafter, the monthly energy payments will be SCE's
Avoided Cost of Energy. For the period April 1, 1994 through March 31, 2004,
SCE is entitled to receive, at no cost, 5% of all energy delivered in excess
of 80% of contract capacity.

Salton Sea III Project. The Salton Sea III Project sells electricity to
SCE pursuant to a 30-year modified SO4 Agreement. The contract capacity is
47.5 MW and the contract nameplate is 50 MW. The SO4 Agreement requires SCE
to make capacity payments, capacity bonus payments and energy payments for
the life of the SO4 Agreement. The price for contract capacity payments is
fixed. The energy payments for the first ten-year period, which period
expires on February 13, 1999, are levelized at a time period weighted average
of 9.8 cents per kWh. Thereafter, the monthly energy payments will be SCE's
Avoided Cost of Energy.

The partnerships that own the Salton Sea Projects (the "Salton Sea
Partnerships") are parties to a secured credit facility with commercial
banks. The agreement provides for a $130 million term loan broken into two
tranches, (i) tranche A (covers Units 1 and 2) in the original principal
amount of $37 million with a final maturity date of March 15, 2000 and (ii)
tranche B (covers Unit 3) in the original principal amount of $93 million
with a final maturity date of January 31, 1999. In addition, the agreement
provides for a renewable working capital loan in the aggregate principal
amount of $5 million with an initial maturity date of February 27, 1995.

Yuma. During 1992, CECI acquired a development stage 50 MW natural
gas-fired cogeneration project in Yuma, Arizona (the "Yuma Project"). The
Yuma Project is designed to be a QF under PURPA and to provide 50 MW of
electricity to San Diego Gas & Electric Company ("SDG&E") under an existing
30-year power purchase contract. The electricity is sold at SDG&E's Avoided
Cost of Energy. The power is wheeled to SDG&E over transmission lines
constructed and owned by Arizona Public Service Company ("APS"). An agreement
for interconnection and a firm transmission service agreement have been
executed between APS and the Yuma Project entity and have been accepted for
filing by the Federal Energy Regulatory Commission ("FERC").

The Yuma Project commenced commercial operation in May 1994. The project
entity has executed steam sales contracts with an adjacent industrial entity
to act as its thermal host in order to maintain its status as a QF, which is
a requirement of its SDG&E contract. Since the industrial entity has the
right under its contract to terminate the agreement upon one year's notice if
a change in its technology eliminates its need for steam, and in any case to
terminate the agreement at any time upon three years notice, there can be no
assurance that the Yuma Project will maintain its status as a QF. However, if
the industrial entity terminates the agreement, CECI anticipates that it will
be able to locate an alternative thermal host in order to maintain its status
as a QF or build a greenhouse at the site for which CECI believes it would
obtain QF status. A natural gas supply and transportation agreement has been
executed with Southwest Gas Corporation terminable under certain
circumstances by CECI and Southwest Gas Corporation. The Yuma Project is
unleveraged other than intercompany debt.

Roosevelt Hot Springs. CECI operates and owns an approximately 70%
interest in a 25 MW geothermal steam field which supplies geothermal steam to
a power plant owned by Utah Power & Light Company ("UP&L") located on the
Roosevelt Hot Springs property under a 30-year steam sales contract. CECI
obtained approximately $20.3 million of cash under a pre-sale agreement with
UP&L whereby UP&L paid in advance for the steam produced by the steam field.
CECI must make certain penalty payments to UP&L if the steam produced does
not meet certain quantity and quality requirements.

Desert Peak. CECI is the owner and operator of a 10 MW geothermal plant at
Desert Peak, Nevada that is currently selling electricity to Sierra Pacific
Power Company under a power sales contract that expires December 31, 1995 and
that may be extended on a year-to-year basis as agreed by the parties. The

<PAGE>

price for electricity under this contract is 6.3 cents per kWh, comprising an
energy payment of 1.8cents per kWh (which is adjustable pursuant to an
inflation-based index) and a capacity payment of 4.5 cents per kWh. CECI is
currently negotiating the terms of an extension to this contract.

Mammoth Plants. Magma receives royalty revenues from a 10 MW and a 12 MW
contract nameplate geothermal power plant (the "First Mammoth Plant" and the
"Second Mammoth Plant", respectively, and referred to herein, collectively,
as the "Mammoth Plants") at Mammoth Lakes, California. Electricity from the
Mammoth Plants is sold to SCE under two long-term power purchase agreements.
The First Mammoth Plant and the Second Mammoth Plant began commercial
operation in 1985 and 1991, respectively. Magma leases both property and
geothermal resources to support the Mammoth Plants in return for certain base
royalty and bonus royalty payments. For the First Mammoth Plant and the
Second Mammoth Plant, the base royalty is 12.5% and 12%, respectively, of
gross electricity sales revenues. The bonus royalty for the Mammoth Plants is
50% of the excess of annual gross electricity sales revenues over an annual
revenue standard based on the Mammoth Plants operating at 85% of contract
capacity.

The East Mesa Plant. Magma also receives royalty revenues from a 37 MW
contract nameplate geothermal power plant (with two units) at East Mesa in
Imperial Valley, California (the "East Mesa Plant"). Electricity from the
plant is sold to SCE pursuant to two SO4 Agreements formerly held by Magma,
and Magma is entitled to receive a senior payment of 4% of gross electricity
sales revenues and a junior payment of 10% of gross electricity sales
revenues. To date, such junior payment has not been received. Since 1992,
Magma recognized the accrued junior payments as royalty income.

PROJECTS IN DEVELOPMENT

The BRPU Process. Magma is seeking new long-term final standard offer no.
4 power purchase agreements in southern California through the bidding
process adopted by the CPUC under its 1992 Biennial Resource Plan Update
("BRPU"). In its 1992 BRPU, the CPUC cited the need for an additional 9,600
MW of power production through 1999 among California's three investor-owned
utilities, SCE, SDG&E and Pacific Gas and Electric Company (collectively, the
"IOUs"). Of this amount, 275 MW was set aside for bidding by independent
power producers (such as Magma) utilizing renewable resources. Pursuant to an
order of the CPUC dated June 22, 1994 (confirmed on December 21, 1994), Magma
was awarded 163 MW for sale to SCE and SDG&E, with in-service dates in 1997
and 1998. However, the IOUs may continue to challenge the order and there can
be no assurance that power sales contracts will be executed or that any such
projects will be completed.

Fish Lake/Salton Sea I Expansion. The Salton Sea I Project has an option
to supply an additional 20 MW of power to SCE under the Salton Sea I PPA.
Magma, through its wholly owned subsidiary, Fish Lake Power Company, acquired
in 1992 a modified ISO4 power purchase agreement (the "Fish Lake ISO4") to
supply electric power to SCE from a 16 MW geothermal power plant proposed to
be built at Fish Lake in Esmeralda County, Nevada (the "Fish Lake Project").

The Fish Lake ISO4 is a 30-year contract providing for a contract capacity
of 14 MW and a contract nameplate of 16 MW. The contract capacity payment
under the Fish Lake ISO4 is levelized in the contract for the full 30-year
term of the contract at $180 per kilowatt year. The capacity portion (plus
bonus capacity) of such revenues is levelized at approximately 2.5cents per
kWh for 30 years (assuming a 90% nameplate capacity factor). The energy
payment thereunder is fixed for the first ten years starting at 10.2cents per
kWh in 1996 and escalates at an average annual rate of 3.9%. For years 11
through 15, such energy payment is set at SCE's Avoided Cost of Energy, plus
an additional specified amount which decreases each year. For the last 15
years of the Fish Lake ISO4, the energy payment will be based on SCE's
Avoided Cost of Energy.

On November 29, 1994, SCE filed an application with the CPUC seeking
approval for the proposed restructuring of (i) the Salton Sea I PPA and (ii)
the Fish Lake ISO4, whereby the Fish Lake Project would not be developed at
its present site in Nevada's Fish Lake Valley and instead would be developed
under an amended and restated 30-year power purchase agreement (the "Amended
PPA") in conjunction with the Salton Sea I PPA.

<PAGE>

If approved, the Amended PPA will consolidate the Salton Sea I Project
Expansion with the Fish Lake Project. The Amended PPA also would reduce the
price for contract capacity payments to $158/kW-year and would alter the
energy payment schedule to commence in 1996 at 8.8 cents per kWh.

Newberry. Under a Bonneville Power Administration ("BPA") geothermal pilot
program, CECI is developing a 30 MW net geothermal project within the
Newberry known geothermal resource area of Deschutes County, Oregon (the
"Newberry Project"). Pursuant to two power sales contracts executed in
September 1994, after the final environmental impact statement for the
Newberry Project was issued, CECI has agreed to sell 20 MW to BPA and 10 MW
to Eugene Water and Electric Board ("EWEB") from the Newberry Project. In
addition, BPA and EWEB together have an option to purchase up to an
additional 100 MW of production from the Newberry Project under certain
circumstances. In a public-private development effort, CECI is responsible
for development, permitting, financing, construction and operation of the
project (which will be 100% owned by CECI), while EWEB will cooperate in the
development efforts by providing assistance with government and community
affairs and sharing in the development costs (up to 30%). The Newberry
Project is currently expected to commence commercial operation in 1997. The
power sales contracts provide that under certain circumstances the contracts
may be utilized at an alternative location. Completion of the Newberry
Project is subject to a number of significant uncertainties and cannot be
assured.

REGULATORY AND ENVIRONMENTAL MATTERS

Environmental Regulation. The projects of CECI and Magma are subject to
environmental laws and regulations at the federal, state and local levels in
connection with the development, ownership and operation of the projects.
These environmental laws and regulations generally require that a wide
variety of permits and other approvals be obtained for the construction and
operation of an energy-producing facility and that the facility then operate
in compliance with such permits and approvals. Failure to operate the
facility in compliance with applicable laws, permits and approvals can result
in the levy of fines or curtailment of operations by regulatory agencies.

Management of the Coso Joint Ventures believes that the Coso Joint
Ventures are in compliance in all material respects with all applicable
environmental regulatory requirements and that maintaining compliance with
current governmental requirements will not require a material increase in
capital expenditures or materially affect its financial condition or results
of operations. Likewise, management of each of CECI and Magma believes that
the other projects of CECI and Magma are in compliance with all applicable
environmental regulatory requirements. It is possible, however, that future
developments, such as more stringent requirements of environmental laws and
enforcement policies thereunder, could affect the costs of and the manner in
which the Coso Joint Ventures or the other projects of CECI and Magma conduct
their businesses.

Federal Energy Regulations. The principal federal regulatory legislation
relating to CECI's geothermal energy activities is PURPA. PURPA and
associated state legislation have conferred certain benefits on the
independent power production industry. In particular, PURPA exempts certain
electricity producers ("Qualifying Facilities") from federal and state
regulation as a public utility. PURPA also requires utilities, such as SCE,
to purchase electricity from qualifying facilities at the particular
utility's avoided cost.

Each of CECI's domestic projects meets the requirements promulgated under
PURPA to be Qualifying Facilities. Qualifying Facility status under PURPA
provides two primary benefits. First, regulations under PURPA exempt
qualifying facilities from the Public Utility Holding Company Act of 1935
("PUHCA"), most provisions of the Federal Power Act (the "FPA") and state
laws concerning rates of electric utilities, and financial and organizational
regulations of electric utilities. Second, FERC's regulations promulgated
under PURPA require that (1) electric utilities purchase electricity
generated by Qualifying Facilities, the construction of which commenced on or
after November 9, 1978, at a price based on the purchasing utility's full
avoided cost; (2) the electric utility sell back-up, interruptable,
maintenance and supplemental power to the Qualifying Facility on a
non-discriminatory basis; and (3) the electric utility interconnect with the
Qualifying Facility in its service territory.

<PAGE>

CECI's projects remain subject, among other things, to FERC approvals and
permits for power development, and to federal, state and local laws and
regulations regarding environmental compliance, leasing, siting, licensing,
construction, and operational and other matters relating to the exploration,
development and operation of its geothermal properties.

In 1992, Congress enacted comprehensive new energy policy legislation in
its passage of the Energy Policy Act. This new law is designed to, among
other things, foster competition in energy production and provide independent
power producers with competitive access to the transmission grid. To achieve
these goals, the Energy Policy Act amended PUHCA to create a new class of
generating facility called Exempt Wholesale Generators ("EWGs"). EWGs are
generally exempt from public utility regulation under PUHCA. The Energy
Policy Act also provides new authority to FERC to mandate that owners of
transmission lines provide wheeling access at just and reasonable rates.
Previously limited, wheeling rights enhance the ability of independent power
producers to negotiate transmission access and encourages development of
facilities whose most feasible siting lies outside the purchasing utility's
service area or which, like many geothermal sites, are remotely located.

Permits and Approvals. CECI has obtained certain permits, approvals and
certificates necessary for the current exploration, development and operation
of its projects. Similar permits, approvals and certificates will be required
for any future expansion of the Coso Project and for any development of
CECI's other geothermal properties or for other power project development by
CECI. Such compliance is costly and time consuming, and may in certain
instances be dependent upon factors beyond CECI's control.

CECI believes that its operating power facilities are currently in
material compliance with all applicable federal, state and local laws and
regulations. No assurance can be given, however, that in the future all
necessary permits, approvals, variances and certificates will be obtained and
all applicable statutes and regulations will be complied with, nor can
assurance be given that additional and more stringent laws, taxes or
regulations will not be established in the future which may restrict CECI's
current operations or delay the development of new geothermal properties, or
which may otherwise have an adverse impact on CECI.

EMPLOYEES

As of December 31, 1993, CECI employed approximately 249 people, of which
approximately 160 people were employed at the Navy I, Navy II and BLM
Projects, collectively. The Coso Joint Ventures do not hire or retain any
employees. All employees necessary to the operation of the Coso Project are
provided by CECI under certain plant and field operations and maintenance
agreements.

As of February 28, 1994, Magma employed 340 persons on a regular,
full-time basis, 31 at Magma's headquarters in San Diego, California, and 309
at MOC in California's Imperial Valley.

Each of CECI and Magma believes it has a good relationship with its
employees.

PROPERTIES

CECI's most significant physical properties are its four operating power
facilities and its related real property interests. CECI also maintains an
inventory of more than 400,000 acres of geothermal property leases and owns a
70% interest in a geothermal steam field. An affiliate of CECI owns the
approximately 42 acre site in Yuma, Arizona where the 50 MW gas fired
cogeneration facility is being constructed.

CECI owns a one-story office building in Omaha, Nebraska, which houses its
principal executive offices. CECI also leases office space in Ridgecrest,
California, which houses the operating offices for the Coso Project and in
Singapore and Manila, which house offices for CECI's international activities
in the region.

Magma holds geothermal leasehold and fee interests covering approximately
198,208 acres on a gross acreage basis, after giving effect to the 1993
Unocal Acquisition and the 1993 Freeport McMoRan Acquisition. See "Business
of Magma." Such amount includes approximately 21,034 acres of developed

<PAGE>

(i.e., actively utilized in the production of geothermal energy) leasehold
and fee interests, and approximately 178,174 acres of undeveloped (i.e.,
non-producing) geothermal leasehold and fee interests. Certain of the
producing acreage is owned by Magma and is leased to Mammoth-Pacific as owner
and operator of the Mammoth Plants, and Magma, as lessor, receives royalties
from the revenues earned by such power plants. See "Business of
Magma--Royalty Plants." The remainder of Magma's producing geothermal acreage
is located in the SSKGRA and is utilized in the production of geothermal
power at the SSKGRA Plants. Magma, as lessee, pays certain royalties and
other fees to the property owners from the revenue generated by the SSKGRA
Plants.

Terms of Geothermal Leases. Lessors are generally paid a monthly or annual
rental payment during the term of the lease unless and until the acreage goes
into production, in which case the rental typically stops and the (generally
higher) royalty payments begin. Leases of federal property, such as those at
Fish Lake, Nevada are transacted with the Department of Interior, Bureau of
Land Management, pursuant to the Geothermal Steam Act and the regulations
promulgated thereunder (the "Regulations"), and are for a primary term of 10
years, extendible for an additional five years if drilling is commenced
within the primary term and is diligently pursued for two successive
five-year periods upon certain conditions set forth in the Regulations. A
secondary term of up to 40 years is available so long as geothermal resources
from the property are being produced or used in commercial quantities. Leases
of federal lands provide for a modest yearly rental based on the acreage
covered by the lease, a requirement of diligent exploration, a royalty of not
less than 10% nor more than 15% of the value of geothermal resources sold or
utilized and a royalty of up to 5% of the value of byproducts derived from
the production of geothermal resources, and certain other obligations of the
lessee as provided in the Regulations. Leases of state lands may vary in
form. California, lease provisions and royalty amounts are determined from
time to time by the State Lands Commission. Leases of private lands vary
considerably, since their terms and provisions are the product of
negotiations with the landowners. Generally, the private leases held by Magma
provide for a primary term of five to 10 years, which is extendible for an
additional period of time if certain conditions (such as the drilling of a
well) have been satisfied.

Development Royalties and Payments. In connection with the development of
any new geothermal power plants at the SSKGRA, Magma is obligated to pay
royalties and/or one-time lump-sum payments to certain third parties.

Headquarters. Magma's executive and administrative offices are currently
located in San Diego, California. A total of approximately 19,000 square feet
are leased in a modern office building. Magma also has a right of first
negotiation on an additional 19,000 square feet in the same building. The
lease expires in 2002.

LEGAL PROCEEDINGS

Neither CECI nor Magma is a party to any material legal proceedings.

<PAGE>

CECI MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

GENERAL

For purposes of consistency in financial presentation, dollars and shares
are stated in thousands except per share data and the Plants comprising the
Coso Project (including the Navy I, Navy II and BLM Plants) capacity factors
are based upon a capacity amount of 88 gross MW ("GMW"), 80 net MW ("NMW")
for each plant. The Navy I and Navy II Plants each consist of a set of three
turbines located at a plant site. The BLM Plant consists of two turbines at
one site ("BLM East") and one turbine at another site ("BLM West"). In April
1990, CECI completed a retrofit of the two turbines at BLM East and in July
1990 completed associated retrofitting of the cooling towers to increase the
aggregate installed capacity of the BLM Plant to 88 GMW/80 NMW, effective
July 2, 1990. Each plant possesses an operating margin which periodically
allows for production in excess of the amount listed above. However, through
1990, the Navy I, Navy II and BLM Plant capacity amounts were restricted by
the then existing PURPA 80 NMW cap. With the lifting of the PURPA 80 NMW cap
in 1991, utilization of this operating margin can, at times, produce plant
capacity factors in excess of 100%. Utilization of this operating margin is
based upon a variety of factors and can be expected to vary throughout the
year under normal operating conditions.

RESULTS OF OPERATIONS THROUGH SEPTEMBER 30, 1994

Sales of electricity and steam increased to $49,498 in the third quarter
of 1994 from $41,433 in the third quarter of 1993, a 19.5% increase. This
improvement was primarily due to an increase in the Coso Project's electric
kilowatt hour sales to 580.4 million kWh from 578.2 million kWh and an
increased price per kWh in accordance with the S04 Agreements. The remaining
increases are a result of the Yuma project commencing operations in late May
of 1994. For the nine months ended September 30, sales of electricity and
steam increased to $117,208 in 1994 from $101,046 in 1993, a 16.0% increase.
Similarly, the increase was due to an increase in the Coso Project's electric
kilowatt hour sales to 1,659.4 million kWh from 1,610.4 million kWh, the
aforementioned increased price per kWh, and the commencement of the Yuma
project.

The following operating data represent the aggregate installed capacity
and electricity production of the Coso Project:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30 NINE MONTHS ENDED SEPTEMBER 30
---------------------------- --------------------------------
1994 1993 1994 1993
------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Overall installed capacity factor 109.5% 109.1% 105.5% 102.4%
kWh produced ..................... 580,400,000 578,200,000 1,659,400,000 1,610,400,000
Installed capacity NMW (average) 240 240 240 240
</TABLE>

The Navy I plant installed capacity factor was 115.5% in the third quarter
of 1994 compared to 115.1% in the third quarter of 1993. For the nine months
ended September 30, the Navy I plant installed capacity factor was 114.6% in
1994 compared to 109.0% for the same period in 1993. Several successful well
workovers and the addition of a new well contributed to the improved
performance. The Navy II plant installed capacity factor was 113.2% in the
third quarter of 1994 compared to 106.3% in the third quarter of 1993. For
the nine months ended September 30, the Navy II plant installed capacity
factor was 103.5% in 1994 compared to 100.4% for the same period in 1993.
Navy II output benefitted from gathering system improvements completed in
June of 1993. The BLM plant installed capacity factor was 99.8% in the third
quarter of 1994 compared to 106.0% in the third quarter of 1993. For the nine
months ended September 30, the BLM plant installed capacity factor was 98.5%
in 1994 compared to 97.8% for the same period in 1993.

As a result of the successful performance of the BLM H2S abatement system,
which was installed in 1992, the Navy I and Navy II Joint Ventures obtained
authority to construct ("ATC") permits for the installation of similar H2S
abatement systems in an effort to enhance operational efficiency and improve

<PAGE>

long term reservoir management. Such abatement systems are expected to have
an aggregate Coso Project capital cost of approximately $11,948, $10,845 of
which has been incurred through September 30, 1994. Completion of
construction and testing of the Navy I and Navy II abatement systems is
currently expected to occur by year end of 1994. In conjunction with the ATC,
the Great Basin Unified Air Pollution Control District agreed to provide an
eighteen month variance to Navy I which allows venting of a portion of Navy
I's non-condensable gas while the abatement system is constructed and tested.

The Coso Project's average electricity prices per kWh in 1994, 1993, and
1992, were comprised of (in cents):

<TABLE>
<CAPTION>
CAPACITY
THREE MONTHS ENDED ENERGY AND BONUS TOTAL
- ------------------- -------- ----------- --------
<S> <C> <C> <C>
September 30, 1994 ...... 11.10 4.22 15.32
June 30, 1994 ........... 10.91 1.94 12.85
March 31, 1994 .......... 10.85 .70 11.55
September 30, 1993 ...... 10.20 4.24 14.44
June 30, 1993 ........... 10.16 1.94 12.10
March 31, 1993 .......... 10.01 .74 10.75
Average Fiscal 1993 ..... 10.11 1.93* 12.04*
Average Fiscal 1992 ..... 9.23 2.10* 11.33*
</TABLE>
- ---------------
* Represents annualized price per kWh. Typically, the capacity price is
significantly higher in the months June through September.

The Yuma plant commenced commercial operation in late May pursuant to its
power purchase agreement and operated at 99.6% of its 50 net MW plant
capacity in the third quarter of 1994.

Roosevelt Hot Springs steam field supplied 100% of customer power plant
steam requirements in the third quarter and for the nine months ended
September 30, 1994. CECI has an approximate 70% interest in the Roosevelt Hot
Springs field.

The Desert Peak power plant operated at 101.1% of its nine net megawatt
capacity in the third quarter of 1994. For the nine months ended September
30, 1994, the Desert Peak plant capacity factor was 105.5%.

Interest and other income increased in the third quarter of 1994 to $9,026
from $4,824 for the same period in 1993. For the nine months ended September
30, interest and other income increased to $21,980 in 1994 from $12,294 for
the same period in 1993. The increase primarily reflects interest income on
higher average cash balances from the issuance of the Senior Discount Notes.

CECI's expenses as a percentage of sales of electricity and steam were as
follows:

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER ENDED SEPTEMBER
30 30
---------------- ----------------
<S> <C> <C> <C> <C>
1994 1993 1994 1993
------- ------- ------- -------
Plant operations (net of CECI's operator fees) 17.5% 11.5% 17.3% 15.4%
General and administration .................... 6.5% 5.7% 8.1% 8.5%
Royalties ..................................... 7.1% 7.3% 6.7% 6.5%
Depreciation and amortization ................. 11.4% 10.5% 13.2% 12.9%
Interest (less amounts capitalized) ........... 31.4% 15.7% 31.5% 17.0%
------- ------- ------- -------
73.9% 50.7% 76.8% 60.3%
</TABLE>

Plant operations increased to $9,846 in the third quarter of 1994 from
$5,878 in the third quarter of 1993, a 67.5% increase. For the nine months
ended September 30, plant operations increased to $23,887 in 1994 from
$18,898 in 1993, a 26.4% increase. While plant operating costs at Coso
actually declined, the above increases were due to the inclusion of the plant
operating costs of the Yuma cogeneration plant which started operations in
May 1994.

<PAGE>

General and administration costs increased to $3,216 in the third quarter
of 1994 from $2,359 in the third quarter of 1993, a 36.3% increase. For the
nine months ended September 30, general and administration costs increased to
$9,536 in 1994 from $8,596 in 1993, a 10.9% increase. The increases are a
result of the increased project construction activity associated with two
projects aggregating 300 MW in the Philippines, as well as increased project
development activity associated with overseas efforts.

Royalty costs increased to $3,504 in the third quarter of 1994 from $3,004
in the third quarter of 1993, a 16.6% increase. For the nine months ended
September 30, royalties increased to $7,898 in 1994 from $6,525 in 1993, a
21.0% increase. The increases were due to the increase in sales of
electricity and an increase in the effective royalty rate at BLM.

Depreciation and amortization increased to $5,639 in the third quarter of
1994 from $4,344 in the third quarter of 1993, a 29.8% increase. For the nine
months ended September 30, depreciation and amortization increased to $15,439
in 1994 from $13,044 in 1993, an 18.4% increase. The increase was due
primarily to capital expenditures at the Coso Project and the depreciation of
the Yuma plant.

Interest expense before amounts capitalized increased to $17,653 in the
third quarter of 1994 from $8,184 in the third quarter of 1993, a 115.7%
increase. For the nine months ended September 30, interest expense increased
to $44,480 in 1994 from $20,993 in 1993, a 111.9% increase. The increase was
primarily due to the original issue discount amortization expense on the
Senior Discount Notes issued in March 1994 and interest expense on the
Convertible Subordinated Debentures which were issued in June 1993, offset in
part by the defeasance of the Senior Notes in March 1994.

The provision for income taxes decreased to $6,340 in the third quarter of
1994 from $7,493 in the third quarter of 1993, a 15.4% decrease. For the nine
months ended September 30, the provision for income taxes decreased to
$14,067 in 1994 from $14,295 in 1993, a 1.6% decrease. The decreases are due
to a lower income before tax attributable to higher interest costs as
previously discussed.

CECI's effective tax rate continues to be less than the expected statutory
tax rate primarily due to the percentage depletion deduction and energy tax
credits generated in the current year.

Income before extraordinary item and the cumulative effect of a change in
accounting principle decreased to $14,413 in the third quarter of 1994 from
$16,677 in the third quarter of 1993, a 13.6% decrease. Net income
attributable to common shares in the third quarter of 1994 decreased to
$13,138 or 38 cents per share from $15,498 or 41 cents per share in the third
quarter of 1993, a 15.2% decrease. Net income excluding the effect of the
Senior Discount Notes was approximately $16,487 or 47 cents per share for the
third quarter of 1994. For the nine months ended September 30, income before
extraordinary item and the cumulative effect of a change in accounting
principle decreased to $31,399 or 77 cents per share from $34,811 or 81 cents
per share, a 9.8% decrease. Net income attributable to common shares for the
nine months ended September 30 decreased to $25,681 or 71 cents per share
from $35,482 or 92 cents per share, a 27.6% decrease. Net income excluding
the effect of the Senior Discount Notes was approximately $34,602 or 95 cents
per share for the nine months ended September 30, 1994.

RESULTS OF OPERATIONS FOR THREE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991

Sales of electricity and steam increased to $132,059 in the year ended
December 31, 1993 from $117,342 in the year ended December 31, 1992, a 12.5%
increase. This improvement was primarily due to a 9.1% increase in the Coso
Project's electric kWh sales to 2,186.7 million kWh from 2,004.0 million kWh,
and an increased price per kWh in accordance with the SO4 Agreements. The
increase in Coso Project kWh sales was primarily due to the completion of new
production wells. The increase in sales of electricity and steam in 1992 to
$117,342 from $106,184 in 1991 was primarily due to increasing kWh sales by
6.0% to 2,004.0 million kWh from 1,890.4 million kWh, largely as a result of
the drilling of additional production wells, and the aforementioned increase
in price per kWh pursuant to the SO4 Agreements.

<PAGE>

The following operating data includes the full capacity and electricity
production of the Coso Project only:

<TABLE>
<CAPTION>
1993 1992 1991
--------------- --------------- ---------------
<S> <C> <C> <C>
Overall capacity factor ......... 104.0% 95.1% 89.9%
kWh produced .................... 2,186,700,000 2,004,000,000 1,890,402,000
Installed capacity NMW (average) 240 240 240
</TABLE>

The overall Coso plant capacity factor was 108.8% in the fourth quarter of
1993 compared to 109.1%, 100.9% and 97.1% for the third, second and first
quarters of 1993, respectively. The Navy I Plant capacity factor was 111.2%
in 1993, compared to 99.8% and 98.5% in 1992 and 1991, respectively. The Navy
II Plant capacity factor was 102.6% in 1993, compared to 98.1% and 99.9% in
1992 and 1991, respectively. The BLM Plant capacity factor was 98.1% in 1993,
compared to 87.2% and 71.4% in 1992 and 1991, respectively. The BLM Plant,
Navy I Plant and the Navy II Plant were overhauled in conjunction with
scheduled warranty inspections in 1993, 1992 and 1991, respectively,
resulting in a temporary reduction of the plant capacity factor of 3% in the
specified year.

Electric sale price per kWh for the Coso Project varies seasonally in
accordance with the rate schedule included in the SO4 Agreements. The price
consists of an energy payment based on the annualized contracted rate of
10.11 cents per kWh in 1993, 9.23 cents per kWh in 1992, and 8.58 cents per
kWh in 1991, and constant annual capacity payments, of which CECI's share was
$5,400 to $5,800 per annum for each of the three power plants. Capacity
payments are significantly higher in the months of June through September.
Bonus payments are received monthly, of which CECI's share was approximately
$1,000 per annum for each of the three power plants.

The Coso Project's average electricity prices per kWh in 1993, 1992 and
1991 were comprised of (in cents):

<TABLE>
<CAPTION>
ENERGY CAPACITY & BONUS TOTAL
-------- ---------------- -------
<S> <C> <C> <C>
Average fiscal 1993 ..... 10.11 1.93 12.04
Average fiscal 1992 ..... 9.23 2.10 11.33
Average fiscal 1991 ..... 8.58 2.24 10.82
</TABLE>

The Desert Peak and Roosevelt Hot Springs facilities ran at or near
capacity levels for each of the past three years.

Steam sales from the Roosevelt Hot Springs field, which was acquired in
January 1991, remained relatively unchanged at $2,198, $2,255, and $2,077 in
1993, 1992, and 1991, respectively. Electricity sales from Desert Peak were
$5,177, $5,347 and $3,976 for the years 1993, 1992, and 1991, respectively.
Desert Peak was acquired in March 1991 and, accordingly, reflects only nine
months sales in 1991.

Interest and other income increased in 1993 to $17,194 from $10,187 in
1992 and from $9,379 in 1991. The increase reflects higher average cash
balances, interest income on notes receivable from the Coso Joint Ventures
and interest income on CECI's share of the cash reserves established in the
refinancing of the Coso Project debt in December 1992.

CECI's cost per kWh* was as follows (in cents):

<TABLE>
<CAPTION>
1993 1992 1991
------ ------ ------
<S> <C> <C> <C>
Plant operations (net of CECI's operator fees) 1.64 1.65 1.77
General and administration .................... 1.03 1.04 1.11
Royalties ..................................... .65 .61 .49
Depreciation and amortization ................. 1.39 1.33 1.31
Interest, less amounts capitalized ............ 1.82 1.17 2.16
------ ------ ------
Total ...................................... 6.53 5.80 6.84
====== ====== ======
<FN>
* Cost per kWh includes electrical production from the Desert Peak
facility and the electrical production equivalent of CECI's share of
geothermal steam produced at the Roosevelt Hot Springs field, acquired in
March and January 1991, respectively.
</TABLE>

<PAGE>

CECI's expenses* as a percentage of sales of electricity and steam were as
follows:

<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Plant operations (net of CECI's operator fees) 15.8% 17.7% 18.8%
General and administration .................... 10.0 11.1 11.7
Royalties ..................................... 6.3 6.6 5.2
Depreciation and amortization ................. 13.5 14.3 13.9
Interest, less amounts capitalized ............ 17.7 12.7 23.0
------- ------- -------
Total ...................................... 63.3% 62.4% 72.6%
======= ======= =======
<FN>
* Expenses as a percentage of electricity sales and steam sales include
electricity sales from the Desert Peak facility and steam sales from the
Roosevelt Hot Springs field, acquired in March and January 1991,
respectively.
</TABLE>

CECI's expenses, excluding interest, increased as a general result of the
greater electricity production of the Coso Project. However, in 1993, plant
operations and general and administration costs per kWh decreased from 1992.
In 1992, CECI's total expenses, excluding interest, were proportionally less
than the increase in electricity production of the Coso Project.

The cost of plant operations increased to $25,362 in 1993 from $24,440 in
1992, an increase of 3.8%. The cost of plant operations increased to $24,440
in 1992 from $23,525 in 1991, an increase of 3.9%. General and administration
costs remained relatively unchanged at $13,158 in 1993 compared to $13,033 in
1992. General and administration costs increased to $13,033 in 1992 from
$12,476 in 1991, a 4.5% increase. However, for 1993 and 1992 both plant
operations and general and administration costs per kWh continued to decrease
due to a proportionally greater increase in electrical production than plant
operations and general administration costs. Plant cost per kWh decreased to
1.64 cents in 1993 from 1.65 cents in 1992 and 1.77 cents in 1991. General
and administration cost per kWh decreased to 1.03 cents in 1993 from 1.04
cents in 1992 and 1.11 cents in 1991.

Royalty costs increased to $8,274 in 1993 from $7,710 in 1992, an increase
of 7.3%. Royalty costs increased to $7,710 in 1992 from $5,505 in 1991, an
increase of 40.1%, due to higher electrical sales and a contractually
scheduled increase in the 1992 royalty rate for the second and third turbines
of the Navy I Plant. Overall, the royalty cost per kWh increased to 0.65
cents in 1993 from 0.61 cents in 1992 and 0.49 cents in 1991.

Depreciation and amortization expense increased to $17,812 in 1993 from
$16,754 and $14,752 in 1992 and 1991, respectively, a 6.3% increase from 1992
to 1993, and a 13.6% increase from 1991 to 1992. Depreciation and
amortization expense for 1993 was 1.39 cents per kWh compared to 1.33 cents
in 1992 and 1.31 cents per kWh in 1991. The increase in 1993 was due to
additional capitalized costs associated with the settlement of litigation
involving Mission Power Engineering Company ("MPE") and the Mission Power
Group, as well as additional wells and gathering systems. The increase in per
kWh cost in 1992 was due largely to the costs of an increased number of
production and injection wells.

Interest expense, less amounts capitalized, increased to $23,389 in 1993
from $14,860 in 1992, an increase of 57.4%, or 1.82 cents per kWh in 1993,
compared to 1.17 cents in 1992. Net interest expense decreased to $14,860 in
1992 from $24,439, or 2.16 cents per kWh in 1991. Net interest expense in
1993 increased due primarily to CECI's higher weighted average interest rate,
higher levels of indebtedness associated with the Coso Project and the
issuance of convertible subordinated debentures in June 1993. The short-term
variable rate debt on the Coso Project was refinanced in 1992 with
longer-term fixed rate debt. The weighted average interest rate on the Coso
Project debt was 7.9%, 5.4% and 8.5% in 1993, 1992, and 1991, respectively.
Net interest expense decreased in 1992 from 1991 as a result of low interest
rates associated with the Coso Project's then variable rate debt.

The provision for income taxes increased to $18,184 in 1993 from $11,922
and $8,284 in 1992 and 1991, respectively. The effective tax rate was 29.7%,
23.5% and 23.8% in 1993, 1992, and 1991. The increase in the 1993 effective
tax rate was a result of adopting Financial Accounting Standard No. 109 ("FAS
109").

<PAGE>

Income before the provision for income taxes increased 21% to $61,258 in
1993 from $50,732 in 1992. Net income after a cumulative effect of a change
in accounting principle was $47,174 and net income available to common
shareholders was $42,544 or $1.11 per common share for the year ended
December 31, 1993. This compares to net income of $33,819 after an
extraordinary item and net income available to common shareholders of $29,544
or $.79 per common share for the year ended December 31, 1992. Net income
before cumulative effect of a change in accounting principle for the year
ended December 31, 1993 was $43,074 or $1.00 per common share versus net
income before an extraordinary item of $38,810 or $.92 per common share in
1992. In 1991, income before the provision for income taxes was $34,866 and
net income available to common shareholders was $26,582, or $.75 per share.

Earnings per share were favorably impacted in 1992 by CECI's repurchase of
CECI Common Stock during 1992 at an average price of approximately $12.00 per
share. CECI purchased CECI Common Stock to be held as treasury stock, which
was reissued upon the exercise of options and warrants.

LIQUIDITY AND CAPITAL RESOURCES THROUGH SEPTEMBER 30, 1994

CECI's cash and investments were $316,349 at September 30, 1994 as
compared to $127,756 at December 31, 1993. In addition, CECI's share of Coso
Project retained cash and investments in project control accounts at
September 30, 1994 and December 31, 1993 was $27,088 and $14,943,
respectively. Distributions out of the project control account are made
monthly to CECI for operation and maintenance and capital costs and
semiannually to each Coso Joint Venture partner for profit sharing under a
prescribed calculation subject to mutual agreements by the partners. In
addition, CECI recorded separately restricted cash and short-term investments
of $127,380 and $48,105 at September 30, 1994 and December 31, 1993,
respectively. The restricted balances were comprised primarily of amounts
deposited in restricted accounts from which CECI will source its equity
contribution requirements relating to the Upper Mahiao and Mahanagdong
projects and of its proportionate share of Coso Project cash reserves for a
debt service reserve fund. The Coso Project established these reserves in
conjunction with the refinancing of its previous bank debt.

In March 1994, CECI issued $400,000 of 10 1/4% Senior Discount Notes which
accrete to an aggregate principal amount of $529,640 at maturity in 2004. The
original issue discount (the difference between $400,000 and $529,640) will
be amortized from issue date through January 15, 1997, during which time no
cash interest will be paid on the Senior Discount Notes. Commencing July 15,
1997, cash interest on the Senior Discount Notes will be payable semiannually
on January 15 and July 15 of each year. The Senior Discount Notes are
redeemable at any time on or after January 15, 1999. The redemption prices
commencing in the twelve month period beginning January 15, 1999 (expressed
in percentages of the principal amount) are 105.125%, 103.417%, 101.708%, and
100% for 1999, 2000, 2001, and 2002, respectively, plus accrued interest
through the redemption date in each case. The Senior Discount Notes are
unsecured senior obligations of CECI.

CECI's Senior Notes in the principal amount of $35,730 which were due in
March 1995, together with the fixed 12% interest due thereon, were defeased
in the first quarter of 1994 in conjunction with the issuance of the Senior
Discount Notes. The 1994 contingent interest component of these Senior Notes,
calculated by reference to CECI's share of available cash flow from the Coso
Project, remains undefeased and outstanding through the end of the
calculation period, December 31, 1994.

In June of 1993, CECI issued $100,000 principal amount of 5% Convertible
Subordinated Debentures ("Debentures") due July 31, 2000. The Debentures are
convertible into shares of CECI Common Stock at any time prior to redemption
or maturity at a conversion price of $22.50 per share, subject to adjustment
in certain circumstances. Interest on the Debentures is payable semiannually
in arrears on July 31 and January 31 of each year, and commenced on July 31,
1993. The Debentures may be redeemed for cash at any time on or after July
31, 1996 at the option of CECI. The redemption prices commencing in the
twelve month period beginning July 31, 1996 (expressed in percentages of the
principal amount) are 102%, 101%, 100% and 100% for 1996, 1997, 1998 and
1999, respectively. The Debentures are unsecured general obligations of CECI
and subordinated to all senior indebtedness of CECI.

100

<PAGE>

In December 1992, CECI entered into an agreement with Community Energy
Alternatives Incorporated ("CEA") to purchase CEA's interest in the Coso
Project for $9,800. The terms of the agreement granted CECI's Coso Project
Joint Venture Partner an option to purchase the CEA interest for a price
which provided CECI with a 17% per annum return for the period CECI owned the
CEA interest. In April 1994, the Coso Project Joint Venture Partner purchased
the CEA interest from CECI for the defined price.

In May 1994, pursuant to a special antidilution provision of the 1991
Stock Purchase Agreement between CECI and Kiewit Energy Company, CECI
increased Kiewit Energy Company's existing option (granted in 1991) to
purchase 3 million shares at $12 per share by an additional 289,163 shares as
a final adjustment under such provision.

Proceeds from options for shares of common and treasury stock exercised in
the nine months ended September 30, 1994 aggregated approximately $677.

As of September 30, 1994 CECI has repurchased 3,420 shares of CECI Common
Stock at a cost of $59,516. This repurchase provides shares for issuance
under CECI's employee stock option and share purchase plans and other
outstanding convertible securities. The shares may also be used for any
future convertible securities or employee benefit plans.

CECI is 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, field development, 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 receipt of
required governmental permits and consents. Further, there can be no
assurance that CECI will obtain access to the substantial debt and equity
capital required to develop and construct electric power projects or to
refinance projects for which CECI has provided initial construction
financing. 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.

CECI believes 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 entail 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 or material impairment of value to the
project being developed, which CECI may not be fully capable of insuring
against. The uncertainty of the legal environment in certain foreign
countries in which CECI may develop or acquire projects could make it more
difficult for CECI to enforce its rights under agreements relating to such
projects. In addition, the laws and regulations of certain countries may
limit the ability of CECI to hold a majority interest in some of the projects
that it may develop or acquire. CECI's international projects may, in certain
cases, be terminated by a government.

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political risk insurance on the equity investment by CECI in this project.
The Upper Mahiao project has begun construction, and is expected to be in
service by July of 1996. The project is structured as a ten year
Build-Own-Transfer ("BOT"), in which CECI's subsidiary CE Cebu Geothermal
Power Company, Inc., the project company, will be responsible for
implementing construction of the geothermal power plant and, as owner, for
providing operations and maintenance during the ten year BOT period. The
electricity generated by the Upper Mahiao geothermal power plant will be sold
to the Philippine National Oil Company -Energy Development Corporation
("PNOC-EDC"), which is also responsible for supplying the facility with the
geothermal steam. After a ten year cooperation period, and the recovery by
CECI of its capital investment plus incremental return, the plant will be
transferred to PNOC-EDC at no cost. Ormat Inc. of Sparks, Nevada is the
turnkey contractor for the project.

In 1993 CECI and PNOC-EDC signed an Energy Conversion agreement for a 180
GMW project at the Mahanagdong geothermal site with a target completion date
of July 1997. As with the Upper Mahiao project, the Mahanagdong project is
structured as a ten year Build-Own-Transfer ("BOT"), in which CECI will be
responsible for implementing construction of the geothermal power plant and,
as owner, for providing operations and maintenance for the ten year BOT
period. The electricity generated by the geothermal power plant will be sold
to PNOC-EDC, which is also responsible for supplying the facility with the
geothermal steam. After a ten year cooperation period, and the recovery by
CECI of its capital investment plus incremental return, the plant will be
transferred to PNOC-EDC at no cost.

The Mahanagdong project will be built, owned and operated by CE Luzon
Geothermal Power Company, a Philippine corporation, that is expected to be
owned post completion as follows: 45% by CECI, 45% by Kiewit, and up to 10%
by another industrial company. The turnkey contractor consortium consists of
Kiewit Construction Group, Inc. (with an 80% interest) and The Ben Holt Co.,
Inc., a wholly owned subsidiary of CECI (with a 20% interest).

In August 1994, CECI completed the financing on the Mahanagdong project
with a total project cost of approximately $320 million. The capital
structure consists of a term loan of $240 million and approximately $80
million in equity contributions. The construction debt financing facility
will be provided by OPIC and a consortium of commercial lenders led by Bank
of America NT&SA. The debt provided by the commercial lenders will be insured
against political risks by Ex-Im Bank. Ten-year term debt financing will be
provided by Ex-Im Bank (which will replace the construction debt) and by
OPIC.

The Mahanagdong project has commenced construction and, as of September
30, 1994, CECI's proportionate share of draws on the construction loan
totalled $443, equity investments made by a subsidiary of CECI totalled
$3,899, and CECI has invested $6,711.

The Yuma Cogeneration Associates ("YCA") 50 MW cogeneration power plant
commenced commercial operation pursuant to its power purchase agreement with
San Diego Gas & Electric ("SDG&E") at the end of May 1994. In June 1994 SDG&E
filed a complaint in U.S. District Court seeking to be released from its
power purchase agreement with YCA. In September 1994 SDG&E dismissed its case
against CECI without payment by either party. YCA, a wholly owned subsidiary
of CECI, received all outstanding amounts due from SDG&E.

LIQUIDITY AND CAPITAL RESOURCES THROUGH DECEMBER 31, 1993

CECI's cash and investments were $127,756 at December 31, 1993, as
compared to $54,671 at December 31, 1992. In addition, the Coso Project
retained cash and investments on project control accounts, of which CECI's
share was $14,943 and $8,848 at December 31, 1993 and 1992, respectively.
Distributions out of the project control accounts are made monthly to CECI
for operation and maintenance and capital costs and semiannually to each Coso
Joint Venture partner for profit sharing under a prescribed calculation
subject to mutual agreement by the partners. In addition to these liquid
instruments, CECI recorded separately restricted cash of $48,105 and $62,514
at December 31, 1993 and 1992, respectively. The restricted cash balance in
1993 was comprised primarily of CECI's proportionate share of Coso Project
cash reserves for debt reserve funds and in 1992 included a contingency
reserve fund, both of which were established in conjunction with the Coso
Project's refinancing of its previous bank debt.

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Accounts receivable normally represents two months of revenues, and
fluctuates with both production and price per kWh.

The balance due from/to the Coso Joint Ventures relates to operations,
maintenance, and management fees for managing the Coso Project. This amount
fluctuates based on the timing of billings and incurrence of costs.

In December 1992, CECI refinanced the existing bank debt of the Coso
Project (see Note 5 of the Notes to the Consolidated Financial Statements).
Coso Funding Corp. ("Funding Corp."), a single-purpose corporation, was
formed to issue $560,245 of notes for its own account and as an agent acting
on behalf of Navy I, BLM and Navy II Plants. The proceeds were used in part
to replace the outstanding Coso Project bank indebtedness and to provide
funding within the Coso Project for certain reserves. As of December 31, 1993
and 1992 CECI's proportionate share of the Coso Project loan was $246,880 and
$263,604, respectively.

The Funding Corp. notes have remaining terms of up to eight years and
different fixed interest rates for each tranche. The underlying project loans
have identical terms as the Coso Project loans and are also non-recourse to
CECI.

In connection with the Coso Project refinancing, CECI purchased Community
Energy Alternatives Incorporated's ("CEA") interest in the Coso Project at
the close of the Coso Project refinancing (see Note 5 to the Notes to the
Consolidated Financial Statements).

On June 9, 1993, MPE and the Mission Power Group, subsidiaries of SCE
Corp., and the Coso Joint Ventures reached a final settlement of all of their
outstanding disputes and claims relating to the construction of the Coso
Project. As a result of the various payments and releases involved in such
settlement, the Coso Joint Ventures agreed to make a net payment of $20,000
to MPE from the cash reserves of the Coso Project contingency fund and MPE
agreed to release its mechanics' liens on the Coso Projects. After making the
$20,000 payment, the remaining balance of the Coso Project contingency fund
(approximately $49,300) was used to increase the Coso Project debt reserve
fund from approximately $43,000 to its maximum fully-funded requirement of
$67,900. The remaining $24,400 balance of the contingency fund was retained
within the Coso Project for future capital expenditures and for Coso Project
debt service payments. Since the Coso Project debt service reserve is fully
funded in advance, Coso Project cash flows otherwise intended to fund the
Coso Project debt service reserve funds, subject to satisfaction of certain
covenants and conditions contained in the Coso Joint Ventures' refinancing
documents, are available for distribution to CECI in its proportionate share.

On May 3, 1993, the transmission line dispute was settled and the
transmission line deposit of approximately $7,700 was released to CECI.

In June of 1993, CECI issued $100,000 principal amount of 5% convertible
subordinated debentures (the "Convertible Subordinated Debentures"), due July
31, 2000. The Convertible Subordinated Debentures are convertible into shares
of CECI Common Stock at any time prior to redemption or maturity at a
conversion price of $22.50 per share, subject to adjustment in certain
circumstances. Interest on the Convertible Subordinated Debentures is payable
semiannually in arrears on July 31 and January 31 each year, commencing on
July 31, 1993. The Convertible Subordinated Debentures are redeemable for
cash at any time on or after July 31, 1996 at a redemption price of
(expressed in percentages of the principal amount) 102%, 101%, 100% and 100%
in 1996, 1997, 1998 and 1999, respectively. The Convertible Subordinated
Debentures are unsecured general obligations of CECI and subordinated to all
existing and future senior indebtedness of CECI.

The Senior Notes, of which $35,730 aggregate principal amount are
currently outstanding, mature in March 1995 and bear interest at the rate of
12% per annum, plus contingent interest calculated by reference to CECI's
share of the cash flow from the Coso Project through December 31, 1994.
Simultaneous with the closing of a proposed offering of Senior Discount Notes
(see Note 16 of Notes to the Consolidated Financial Statements), CECI intends
to use approximately $39,000 to defease and provide for the repayment of the
entire aggregate principal amount of Senior Notes outstanding. The

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Senior Notes prohibit the payment of cash dividends unless CECI has a net
worth of at least $50,000 after payment of such dividends, and dividends do
not exceed 50% of accumulated net income subsequent to December 31, 1987. The
Senior Notes also place restrictions on capital expenditures not related to
the Coso Project.

Proceeds and benefits from warrants and options for shares of CECI Common
Stock exercised in 1993 and 1992 aggregated approximately $1,400 and $8,065,
respectively. In addition, in September 1993, CECI acquired the Ben Holt Co.
("BHC"), a thirty person engineering firm, for a combination of cash and CECI
Common Stock. In connection with this transaction, 87 common shares were
issued having an aggregate market value of $1,557.

CECI repurchased 157 shares of CECI Common Stock during 1993 for the
aggregate amount of $2,897. CECI purchased common stock to be held as
treasury stock in anticipation of their reissue upon the exercise of options.
CECI repurchased 565 shares of CECI Common Stock during 1992 at an aggregate
amount of $4,887. The shares were reissued during 1992 upon the exercise of
stock options.

On October 13, 1992, CECI repurchased, and cancelled, certain warrants
exercisable for 1,025 shares of unregistered common stock at $2.04 per share,
for a purchase price of $9.16 per share, or approximately $9,389 in the
aggregate. Kiewit Energy Company ("Kiewit Energy") simultaneously purchased
and exercised other warrants to purchase 600 shares of unregistered common
stock at $2.04 per share, providing CECI with proceeds of $1,200. On October
27, 1992, CECI repurchased and cancelled warrants exercisable for 250 shares
of unregistered common stock at $2.04 per share, for a purchase price of
$9.316 per share, or $2,329 in the aggregate.

On November 15, 1992, CECI called CECI's Series B convertible preferred
stock, no par value (the "Series B preferred stock"), for conversion into
common stock. Each share of Series B preferred stock was converted into two
shares of CECI Common Stock and, accordingly, CECI issued 954.9 shares of
common stock.

In 1991, CECI and Kiewit Energy signed a stock purchase agreement and
related agreements (see Note 12 to the consolidated financial statement). In
addition, in 1991 CECI issued 1,000 shares of its Series C redeemable
preferred stock to Kiewit Energy for $50,000 per share.

On March 31, 1993, CECI acquired leases from Unocal on 26,000 acres of
geothermal properties at the Glass Mountain site in Northern California which
includes three successful production wells.

CECI is actively engaged in the acquisition of, and is seeking to develop,
construct, own and operate power projects utilizing geothermal and other
technologies, both domestically and internationally, the completion of any of
which is subject to substantial risk. CECI is currently pursuing a number of
international power project opportunities in countries where private power
generation programs have been initiated, including the Philippines and
Indonesia. 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 financeable.
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 receipt of required
governmental permits and consents. Further, there can be no assurance that
CECI will obtain access to the substantial debt and equity capital required
for the acquisition or development and construction of electric power
projects. To the extent CECI engages in international development efforts,
the financing and development of projects 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 or that CECI may not be fully capable
of insuring against. There can be no assurance that development efforts on
any particular project, or CECI's acquisition or development efforts
generally, will be successful.

In particular, CECI is developing a number of international projects, for
which it may have significant capital requirements. In 1994, CECI intends to
incur capital expenditures in excess of $40,000 for

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international project development. In addition to its international projects,
CECI plans to incur domestic geothermal capital expenditures in the
approximate aggregate amount of $30,000 in 1994. CECI's planned capital
spending includes, among other things, its share of recurring Coso Project
capital expenditures, as well as development of the Newberry Project in the
Pacific Northwest.

CECI is constructing the Yuma Project, a 50 MW natural gas fired
cogeneration project in Yuma, Arizona. Engineering and equipment procurement
commenced in 1993. Capital expenditures of $10,000 are anticipated through
the completion of the Yuma Project by midyear 1994. The capital expenditures
will be funded from existing cash balances and CECI's operating cash flows.

Inflation has not had a substantial impact on CECI's operating revenues
and costs. The Coso Project's energy payments for electricity will continue
to be based upon scheduled rate increases through the initial ten-year period
of each SO4 Agreement. Prior to the Coso Project refinancing, the project
loans relating to the Coso Project were generally for periods up to twelve
months at LIBOR plus a specified margin. Accordingly, the interest rates on
the loans varied and over the operating period resulted in fluctuating
interest payments. The refinanced Coso Project debt has fixed interest rates.

ADOPTION OF FINANCIAL ACCOUNTING STANDARD NO. 109

On January 1, 1993, CECI adopted FAS 109. The adoption of FAS 109 changes
CECI's method of accounting for income taxes from the deferred method as
required by Accounting Principles Board No. 11 to an asset and liability
approach. Under FAS 109, the net excess deferred tax liability as of January
1, 1993 was determined to be $4,100. This amount is reflected in 1993 income
as the cumulative effect of a change in accounting principle. It primarily
represents the recognition of CECI's tax credit carryforwards as a deferred
tax asset. There was no cash impact to CECI upon the required adoption of FAS
109. Under FAS 109, the effective tax rate utilized increased at the time of
adoption as a result of the tax credit carryforwards being recognized as an
asset and unavailable to reduce the current period's effective tax rate for
computing CECI's provision for income taxes. The effective tax rate continues
to be less than the statutory rate primarily due to the depletion deduction
and the generation of energy credits in 1993. The significant components of
the deferred tax liability are the temporary differences between the
financial reporting bases and income tax bases of the power plant and the
well and resource development costs, and in addition, the offsetting benefits
of operating loss carryforwards and investment and geothermal energy tax
credit and alternative minimum tax carryforwards.

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MAGMA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS: THIRD QUARTER 1994 COMPARED TO THIRD QUARTER 1993

Revenues. Total revenues for the third quarter of 1994 were up $1,568,000
or 3% to $58,883,000 as compared to $57,315,000 for the same period last
year. This increase was made up primarily of increases in the sales of
electricity, interest income and other income.

Sales of Electricity. Revenues from the sale of electricity increased
$918,000 in the third quarter of 1994 to $50,592,000. The revenue gain was
due to a 7.9% increase in the payments for "energy" under the ISO4 contracts
of the four Magma Partnership Plants. The "energy" payments under the ISO4
contracts of two of the three Salton Sea Plants are "levelized" during their
Initial Terms. The third Salton Sea Plant does not have an ISO4 contract.
Under its "negotiated contract," the energy and capacity payments adjust
quarterly pursuant to a basket of price indices. The "capacity" payments
received by all plants were essentially unchanged during the period.

During the third quarter of 1994 and 1993, the combined "contract" and
"nameplate" capacity factors of the Magma Partnership Plants are shown in the
table below:

<TABLE>
<CAPTION>
THIRD QUARTER
----------------------
1994 1993
---------- -----------
<S> <C> <C>
Total Kilowatt Hours produced
(kWh amounts in 000s) .............. 352,564 349,201
Contract Capacity Factor(l).......... 121.4% 120.3%
Nameplate Capacity Factor(l)......... 107.9% 106.9%
</TABLE>

During the third quarter of 1994, the "contract" and "nameplate" capacity
factors of the three Salton Sea Plants combined are as shown in the table
below:

<TABLE>
<CAPTION>
THIRD QUARTER
----------------------
1994 1993
---------- ----------
<S> <C> <C>
Total Kilowatt Hours produced
(kWh amounts in 000s) ........... 162,059 167,603
Contract Capacity Factor(1)....... 101.2% 104.7%
Nameplate Capacity Factor(1)...... 92.2% 95.1%
<FN>
(1) Does not exclude scheduled maintenance hours. Calculation is based on a
92-day (2,208 hours) third quarter.
</TABLE>

Interest and Other Income. Interest and other income increased $494,000, a
55% increase compared to interest and other income for the same period of the
prior year, reflecting the higher cash balances available for investment and
the higher short-term interest rate environment. Cash available for
investment during the same period of the prior year was lower due to the use
of cash in connection with the acquisition of the Salton Sea Plants from
Unocal.

Costs and Expenses. In the third quarter of 1994, total costs and expenses
were $25,744,000 compared to costs and expenses for the same period in 1993
of $26,532,000. This 3% decrease in total costs and expenses was composed
primarily of decreases in plant operating costs and depreciation of
$1,681,000 and $499,000, respectively, and increases of $818,000 in general
and administrative expense and $577,000 in interest expense.

The decrease in plant operating costs reflects the realization of certain
efficiencies by integrating the operations of the Magma Partnership and
Salton Sea Plants and the favorable results of Magma's ongoing efforts to
reduce operating costs.

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The $818,000 increase in general and administrative costs reflects Magma's
continued devotion of more of its resources towards expansion of business
development activities by increasing staff and support services to facilitate
the planned growth of Magma.

The $577,000 increase in interest expense reflects the effect of higher
borrowing costs due to higher market interest rates. Currently, approximately
84% of Magma's consolidated debt is floating rate debt.

Net Income. Net income was 12% higher at $22,849,000 in the third quarter
of 1994 as compared to $20,453,000 in the corresponding period of the prior
year. The increase in net income reflects the increase in electricity
revenues and interest income and the decrease in total costs and expenses.

NINE MONTHS ENDED SEPTEMBER 30, 1994 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1993

Revenues. Total revenues for the first nine months of 1994 were up
$21,323,000 or 17% to $146,104,000 as compared to $124,781,000 for the same
period of the prior year. This increase was made up primarily of an increase
in the sales of electricity.

Sales of Electricity. Revenues from the sale of electricity increased
$20,767,000 in the first nine months of 1994 to $124,086,000 primarily due to
the inclusion of the revenues of the Salton Sea Plants for the full nine
months of 1994. The Salton Sea Plants contributed $15,311,000 of this revenue
gain. The balance of the revenue gain of $5,456,000 was produced by the four
Magma Partnership Plants by way of a 1% increase in the megawatt hours
delivered and an increase in the price paid for "energy" under their ISO4s
with SEC. The annual time period weighted average price of "energy" under the
Magma Partnership Plants ISO4s increased 7.9% in 1994 to 10.9 cents per kWh.
The energy payments under the ISO4 contracts of two of the Salton Sea Plants
are "levelized" during their Initial Terms. The third Salton Sea Plant does
not have an ISO4 contract. Under its "negotiated" contract, both the energy
and capacity payments adjust quarterly based on a basket of price indices.
The "capacity" payments received by all plants were essentially unchanged
during the first nine months of 1994 compared to 1993.

The combined "contract" and "nameplate" capacity factors of the Magma
Partnership Plants are shown in the table below:

<TABLE>
<CAPTION>
FIRST NINE MONTHS FISCAL YEAR
----------------------- -------------
1994 1993 1993
----------- ---------- -------------
<S> <C> <C> <C>
Total Kilowatt Hours produced
(kWh amounts in 000s) ....... 1,017,707 968,941 1,305,700
Contract Capacity Factor(1)... 118.1% 112.5% 113.3%
Nameplate Capacity Factor(1).. 105.0% 99.9% 100.7%
<FN>

(1) Does not exclude scheduled maintenance hours. Calculation is based on a
273 day (6,552 hour) nine month period in 1994 and 1993.

</TABLE>

The combined "contract" and "nameplate" capacity factors of the three
Salton Sea Plants during the period are shown in the table below:

<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED DECEMBER ENDED DECEMBER
31, 1994 31, 1993
-------------- --------------
<S> <C> <C>
Total Kilowatt Hours produced
(kWh amounts in 000s) ....... 474,704 495,800
Contract Capacity Factor(1)... 99.9% 103.6%
Nameplate Capacity Factor(1).. 90.8% 94.1%
<FN>

(1) Does not exclude scheduled maintenance hours. Calculation is based on a
273-day (6,552 hour) nine month period in 1994 and a nine month period
(6,600 hours) ended December 31, 1993.

</TABLE>

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Interest and Other Income. Interest and other income increased $231,000, a
6% increase compared to interest income for the same period of the prior
year, primarily due to higher investment earnings, reflecting the higher cash
balances available for investment and the higher short-term interest rate
environment.

Costs and Expenses. In the first nine months of 1994, total costs and
expenses increased $11,365,000, a 17% increase, compared to costs for the
same period in 1993. This increase was composed primarily of a $4,586,000
increase in plant operating costs, a $2,288,000 increase in depreciation, a
$2,131,000 increase in general and administrative expense, and a $2,381,000
increase in interest expense. The increase in plant operating costs and
depreciation primarily reflects the cost of operating the Salton Sea Plants
for nine months in 1994 compared to six months in 1993.

The $2,131,000 increase in general and administrative costs reflects
Magma's continued devotion of more of its resources towards expansion of
business development activities by increasing staff and support services to
facilitate the planned growth of Magma.

The $2,381,000 increase in interest expense over the corresponding period
of 1994 reflects the increased cost of borrowings to finance the acquisition
of the Salton Sea Plants. Interest expense related to the Magma Partnership
Plants declined as a result of lower partnership weighted-average borrowings
during the first nine months of 1994 as compared to the same period of the
prior year.

Provision for Income Taxes. Magma's effective tax rate in the first nine
months of 1994 was 31 percent which was comparable to the rate in the same
period of the prior year.

Net Income. Net income was 19% higher at $46,843,000 for the first nine
months of 1994 as compared to $39,469,000 in the corresponding period of the
prior year. The increase in net income reflects the addition of the earnings
of the Salton Sea Plants for nine months in 1994 compared to six months in
1993 as well as the higher ISO4 electricity revenues received by the
Partnership Plants.

RESULTS OF OPERATIONS: 1993 COMPARED TO 1992

Revenues. Magma's operating revenues (total revenues excluding interest
and other income) in 1993 increased $62,630,000 to $162,943,000. This
increase was made up of an increase in the sales of electricity, an increase
in royalties received from the Vulcan, Hoch, Elmore and Leathers plants (the
"Partnership Plants") and an increase in management services fees earned for
providing services to the Partnership Plants and a decrease in royalties
received from third-party owned and operated geothermal power plants.

Sales of Electricity. Revenues from the sale of electricity in 1993
increased $65,646,000 to $137,882,000 primarily due to the inclusion of the
revenues of the three power plants (the "Salton Sea Plants") acquired from
Union Oil Company of California ("Unocal"), as of March 31, 1993. The Salton
Sea Plants contributed $60,158,000 of the electricity revenue gain. The
balance of $5,488,000 was produced by the Partnership Plants and was due to
both an increase in the price paid for energy under their Interim Standard
Offer No. 4 ("ISO4") long-term power purchase contracts with Southern
California Edison Company ("SCE") and an increase in the number of megawatt
hours produced. The annual time period weighted average price of energy under
the Partnership Plants' ISO4s increased 8.6% in 1993 to 10.1cents per
kilowatt hour ("kWh"). The number of megawatt hours produced by these plants
increased 2.6% in 1993.

In addition to the energy payments, the Partnership Plants receive the
following separate payments for capacity based on the contract capacities
specified in their respective ISO4s: Vulcan--$158 per kilowatt year,
Hoch--$198 per kilowatt year, Elmore--$198 per kilowatt year and
Leathers--$187 per kilowatt year. Unlike the energy payments which escalate
each year for the first ten years pursuant to schedules attached to the ISO4s
and then convert to SCE's then published avoided cost of energy, the capacity
payments are fixed for the full 30-year term of the ISO4s. The contract
capacities specified in the ISO4s for the Vulcan, Hoch, Elmore and Leathers
plants are 29,500, 34,000, 34,000 and 34,000 kilowatts, respectively.

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The ISO4s for the Vulcan, Hoch, Elmore and Leathers plants also specify a
nameplate rating. The specified nameplate ratings for these plants are
34,000, 38,000, 38,000 and 38,000 kilowatts, respectively.

The Partnership Plants are 50% owned by Magma and the newly acquired
Salton Sea Plants are 100% owned by Magma. Two of the Salton Sea Plants have
an ISO4 with SCE and the third has a non-standard offer long-term power
purchase contract (a "Negotiated Contract") with SCE. Each of the Salton Sea
Plants earns an energy payment. For the 10 MW, Salton Sea Plant I, the energy
payment under its Negotiated Contract averaged 4.8cents per kWh in the nine
months ended December 31, 1993. This energy payment adjusts quarterly based
on a basket of indices for the 30-year term of its power purchase agreement
with SCE. For the 20 MW, Salton Sea Plant 2, and the 49.8 MW, Salton Sea
Plant 3, the energy payments under their ISO4 contracts are levelized for the
first ten years at a time period weighted average of 10.6cents and 9.8cents
per kWh, respectively. The first ten years expires in 1999 for Salton Sea
Plant 3 and in 2000 for Salton Sea Plant 2.

Each of the Salton Sea Plants also receives the following capacity
payments based on the contract capacity specified in its power purchase
agreements with SCE: Salton Sea Plant 1--$123.61 per kilowatt year, Salton
Sea Plant 2--$187.00 per kilowatt year and Salton Sea Plant 3--$175.00 per
kilowatt year. The contract capacities specified in the power purchase
agreements for the Salton Sea Plants are 10,000, 15,000 and 47,500 kilowatts,
respectively. The capacity payments for Salton Sea Plants 2 and 3 are fixed
for the full 30-year term of their ISO4s, while the capacity payment for
Salton Sea Plant 1 adjusts quarterly based on a basket of indices for the
full 30-year term of its Negotiated Contract.

The power purchase agreements for the Salton Sea Plants also specify a
nameplate rating. The specified nameplate ratings of these plants are 10,000,
20,000 and 49,800 kilowatts, respectively.

Royalties. Magma's royalty revenues from the Partnership Plants increased
in 1993, while royalties received from third-party plants decreased. The
decrease in third-party royalties was due to the one-time recognition in 1992
of $7,900,000 of earned but unpaid Jr. SO4 payments from the GEO East Mesa
plant. Since 1989, Magma has received Sr. SO4 payments from the East Mesa
plant on a current basis. However, Jr. SO4 payments have gone unpaid pending
conversion of the plant's construction loan to permanent financing. Due to
the strong operating and financial performance and cash flow of the East Mesa
plant, Magma recognized as royalty income in 1992 the $7,900,000 of Jr. SO4
payments which had accrued since the East Mesa plant's start-up. In 1993
Magma recognized as royalty income $3,190,000 of accrued Jr. SO4 payments
from the East Mesa plant. Although no Jr. SO4 payments have been received by
Magma, loan conversion is expected during the first half of 1994 at which
time substantially all of the accrued Jr. SO4 payments are expected to be
received.

Royalties from the Partnership Plants, the major source of Magma's royalty
income, increased $1,225,000 or 10.5% in 1993 to $12,877,000. The increase
resulted from the increased energy revenues in 1993.

Management Services. Revenues received for management services increased
$284,000 in 1993, due to an increase in the incentive fees received from the
Hoch, Elmore and Leathers plants for operating the facilities above certain
predetermined targets and an increase in the administrative fees received
from the four Partnership Plants, reflecting the higher electricity revenues
received by these plants in 1993.

Interest and Other Income. Interest and other income decreased $4,458,000,
or 52%, in 1993 to $4,195,000 due to lower investment earnings, reflecting
the lower short-term interest rate environment and the reduction in Magma's
cash and marketable securities due to the purchase, in March of 1993, of the
Unocal geothermal properties and assets.

Costs and Expenses.. Total costs and expenses increased $32,926,000 in
1993, a 56% increase primarily due to the acquisition of the Salton Sea
Plants from Unocal. This increase was composed primarily of a $16,235,000
increase in plant operating costs, a $9,765,000 increase in depreciation, a
$4,460,000 increase in general and administrative expense and a $2,795,000
increase in interest expense.

Plant Operating Costs and Depreciation. The increase in plant operating
costs and depreciation primarily reflects the additional cost of operating
and maintaining the Salton Sea Plants acquired from

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Unocal. Of the $16,235,000 increase in plant operating costs in 1993,
$16,191,000 was attributable to the nine months operation of the newly
acquired Salton Sea Plants. Similarly, of the $9,765,000 increase in
depreciation, $8,156,000 related to the Salton Sea Plants.

Controllable operating costs for the Partnership Plants (total costs less
depreciation, interest, management fees and royalties) increased by less than
1% over the prior year and, on a per kilowatt hour basis, have decreased in
1993 to 4.3cents per kWh from 4.4cents per kWh in 1992. Magma has established
a goal of significantly reducing controllable operating costs over the next
five years for its plants at the Salton Sea by applying newly developed
material and process technologies and the further realization of the
efficiencies gained through its acquisition of the Salton Sea Plants from
Unocal. The goal is to reduce these costs to less than 3.0cents per kWh over
the next five years.

General and Administrative. General and administrative costs increased
from $6,483,000 in 1992 to $10,943,000 in 1993, an increase of $4,460,000.
Magma continued to devote more resources to expansion of business development
activities by increasing staff and related costs, which is directed toward
development of international geothermal power projects, and support services
to facilitate the planned growth of Magma.

Interest Incurred. Interest expense increased by $2,795,000, in 1993 to
$9,626,000, reflecting the cost of the $140,000,000 one-year term loan
("Bridge Loan") incurred in the acquisition of the Unocal geothermal assets.
Interest expense related to the Partnership Plants actually declined in 1993
as a result of a lower level of partnership debt and lower market interest
rates. Excluding the Bridge Loan, Magma's weighted average interest rate of
5.6% during 1993 compared favorably with the corresponding rate of 6.7% in
1992.

Interest expense in 1994 is expected to be higher than in 1993 reflecting
principally the replacing of the Bridge Loan on February 28, 1994 with a
non-recourse $130,000,000 six-year term loan. The term loan is a "project
level loan," that is, a loan arranged by Magma's subsidiaries owning the
Salton Sea Plants and secured by their assets with no recourse to Magma.
Magma believes that through non-recourse project level debt, typically more
expensive than corporate level recourse loans, it retains more flexibility in
financing future growth.

Provision for Income Taxes. In 1992 Magma adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
SFAS 109 changed the manner in which Magma accounted for the tax benefit of
certain items such as operating loss and tax credit carryforwards. The
cumulative effect of this change increased net income approximately
$17,833,000 or $.77 per share in 1992, and is reported separately in the
consolidated statement of operations. As a result of this change Magma's
effective tax rate increased in 1993, and will increase in future years as
well, over what it would have been but for the change, since the future tax
benefit of operating loss and tax credit carryforwards was recognized in 1992
in the cumulative effect adjustment.

Magma's tax provision in 1993, as a percentage of earnings before tax,
increased to 30.4% from the 1992 rate of 26.8% due to higher operating
profits in 1993 as a result of the earnings contribution of the newly
acquired Salton Sea Plants and recognition of the 1% increase in the Federal
statutory corporate tax rate in the current tax provision and the
corresponding adjustment to recognize the effect of the rate increase on the
deferred tax liability. Magma's 1994 provision for income taxes is expected
to be approximately 32%.

Net Income. Magma's 1992 net income of $54,191,000 included a positive
adjustment of $17,833,000 to reflect the cumulative effect of adopting SFAS
No. 109. Before the cumulative effect of the accounting change, 1992's net
income was $36,358,000. Magma's 1993 net income increased by $15,777,000 or
43% to $52,135,000 from 1992's net income before the cumulative effect of the
accounting change. The 1993 increase in net income reflects the addition of
the earnings of the Salton Sea Plants acquired from Unocal, as well as the
higher ISO4 electricity revenues received by the Partnership Plants.

RESULTS OF OPERATIONS: 1992 COMPARED TO 1991

Revenues. Magma's operating revenues increased $16,178,000 in 1992 to
$100,313,000 from $84,135,000 in 1991. This increase was made up of an
increase in the sales of electricity, an increase in

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royalties received from the Partnership Plants and third-party owned and
operated geothermal power plants and an increase in management services fees
earned for providing services to the Partnership Plants.

Sales of Electricity. Revenues from the sale of electricity increased
$6,221,000 in 1992 to $72,236,000 due primarily to an increase in the price
for energy under the ISO4s and a 4.4% increase in kilowatts delivered to SCE.
The average price for energy under the ISO4s increased 8.1% in 1992 to
9.3cents per kWh.

Royalties. Magma's royalty revenues increased $9,318,000 in 1992 to
$22,929,000, $1,050,000 of the increase resulted from the increased energy
revenues of the Partnership Plants in 1992. The remainder of the increase or
$8,268,000 came as the result of higher royalty income recognized from
third-party owned and operated plants of which $7,900,000 was due to the
recognition of accrued royalties ("Jr. SO4 payments") from the GEO East Mesa
geothermal power plant. Since 1989, Magma has received the senior portion of
the royalties ("Sr. SO4 payments") from the East Mesa plant on a current
basis, however, the Jr. SO4 payments have gone unpaid pending conversion of
the plant's construction loan to permanent financing. Due to the strong
performance and cash flow of the East Mesa plant in 1992 and the expected
conversion of the plant's construction loan, Magma elected to recognize the
accrued Jr. SO4 payments as royalty income.

Management Services. Revenues received for management services provided to
the Partnership Plants increased $639,000 in 1992, due primarily to a
$402,000 increase in the incentive fees received from the Hoch, Elmore and
Leathers plants for operating the facilities above certain predetermined
targets, and a $216,000 increase in the fees received from the Partnership
Plants by Magma's wholly-owned subsidiary, Desert Valley Company, for
disposal of drilling muds and cuttings and silica cake at its monofill, a
single purpose landfill owned and operated by Desert Valley.

Interest and Other Income. Interest and other income decreased $2,103,000
in 1992 to $8,653,000. In spite of higher cash balances available for
investment, interest and other income decreased compared to the prior year
reflecting the lower short-term interest rate environment.

Costs and Expenses. Total costs and expenses in 1992 increased $5,612,000,
a 10.5% increase, over 1991. This increase was comprised primarily of a
$5,905,000 increase in plant operating costs, including depreciation and
amortization, a $549,000 increase in general and administrative expense,
offset by a $1,696,000 decrease in interest expense.

Plant Operating Costs. The increase in plant operating costs reflected the
increased costs in 1992 of processing geothermal fluids and collecting and
disposing of geothermal solids and maintaining the well field and geothermal
reservoir supporting the Partnership Plants.

General and Administrative. General and administrative costs increased
from $5,934,000 in 1991 to $6,483,000 in 1992, an increase of $549,000. Magma
continues to direct more financial resources to business development and
governmental relations.

Interest Incurred. Interest expense declined as a result of lower
partnership weighted average borrowings during 1992 and the effect of lower
borrowing costs, because of lower market interest rates. Magma's weighted
average interest rate of 6.7% during 1992 compares favorably with the
corresponding rate of 8.0% in the prior year.

Provision for Income Taxes. In 1992 Magma adopted SFAS 109. Prior to 1992,
the provision for income taxes was based on income and expenses included in
the accompanying consolidated statement of operations. Under SFAS 109,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and the tax basis of the assets and
liabilities using enacted tax rates in effect for the year in which
differences are expected to reverse. SFAS 109 changed the manner in which
Magma accounted for the tax benefit of certain items such as operating loss
and tax credit carryforwards. Accordingly, the cumulative effect of this
change in accounting for income taxes, adopted as of the beginning of 1992,
increased net income approximately $17,833,000 or $.77 per share, and is
reported separately in the consolidated statement of operations. The
financial statements for 1991 have not been restated to reflect SFAS 109.

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Magma's tax provision, as a percentage of earnings before tax, was higher
in 1992 as a result of the adoption of SFAS 109. The effect of applying SFAS
109 in 1992 was to decrease net income before the cumulative effect of
adopting SFAS 109 by approximately $2,821,000 or $.12 per share. Magma's 1992
effective tax rate was 26.8% following the adoption of SFAS 109 rather than
21.1% under the previous accounting treatment. Magma's effective tax rate
will continue to be significantly higher in the future, since the tax benefit
of operating loss and tax credit carryforwards, which could have been
expected to reduce future tax provisions, has been recognized in 1992 in the
cumulative effect adjustment.

Net Income. Net income increased $20,250,000 in 1992 to $54,191,000. Of
this increase $17,833,000 is attributable to the cumulative effect of
adopting SFAS No. 109. In addition, higher net income reflects higher
revenues from the sale of electricity, Magma's core business, higher royalty
income from third-party owned and operated royalty plants including the
recognition of $7,900,000 in accrued Jr. SO4 payments from the GEO East Mesa
geothermal power plants and lower interest expense incurred on partnership
non-recourse debt. The higher revenues and lower interest expense were
offset, in part, by lower interest and other income, higher plant operating
costs and a higher tax provision than would have been recorded under the
previous accounting standard. The lower interest income and interest expense
reflects the generally lower market rates of interest.

Acquisition and New Project Costs. Magma purchased, on March 31, 1993, all
of Unocal's geothermal interests in the Imperial Valley of California,
including three operating geothermal power plants, 40,600 acres of geothermal
leases and an option to develop and sell an additional 20MWs of geothermal
power to SCE. The total cost of the acquisition was $248,200,000 (subject to
certain post-closing adjustments) which included $6,686,000 for certain
current assets and liabilities assumed by Magma, $3,489,000 of interest
incurred on the unpaid purchase price from January 1, 1993 through the
closing date, advisory fees and transaction costs of $3,400,000, and a
$10,000,000 reserve for future capital expenditures for certain improvements
to the assets. The total purchase price was paid utilizing both cash and the
proceeds from a $140,000,000 Bridge Loan. The acquired assets contributed to
Magma's revenues and earnings as of April 1, 1993.

In addition, in separate transactions, Magma purchased from Unocal for an
additional $1,000,000 interest in approximately 12,000 acres of geothermal
leases in central California near Mammoth, California (the "Long Valley
Leases") and its interest in approximately 58,300 acres of geothermal leases
in Nevada. Simultaneously, Magma sold a two-thirds interest in the Long
Valley Leases to two independent power developers.

On March 11, 1992 Magma acquired a 30-year modified ISO4 Power Purchase
Agreement to sell 14MWs of capacity and 16MWs of energy to SCE using
geothermal resources from leases at Fish Lake, Nevada. Magma is currently
engaged in exploratory and well field development activities, which are
preparatory to constructing a power plant. Three wells have been drilled,
which could be used as production wells for the future plant.

LIQUIDITY AND CAPITAL RESOURCES

Operations and development activities have been financed with working
capital, the sale of common stock for cash and services, secured and
unsecured, loans and non-recourse loans from commercial banks.

Magma has geothermal projects in the development stage, both domestic and
international, which it intends to finance with a combination of
Magma-supplied equity and non-recourse project debt. These development stage
projects will require significant equity contributions from Magma during the
next five years. Magma believes that its cash reserves, augmented by cash
flow from its current operations, will be sufficient to fund these equity
contributions.

Magma financed the Unocal acquisition with its own cash and with the
proceeds from the $140,000,000 Bridge Loan. On February 28, 1994 the Bridge
Loan was repaid, utilizing both Magma cash and the proceeds from a
non-recourse project level six-year term loan of $130,000,000 collateralized
by substantially all of the assets and power purchase contracts of the three
Salton Sea Plants acquired from

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Unocal (the "$130,000,000 Term Loan"). In addition, a $5,000,000 working
capital line of credit has been provided to the subsidiaries owning the
plants by two of the banks participating in the $130,000,000 Term Loan. No
loans against the working capital line of credit have been made.

Magma's cash and marketable securities at December 31, 1993 totalled
$73,022,000 of which $50,103,000 was available for general corporate uses.
The remainder of $22,919,000 is Magma's share of cash and marketable
securities of the four partnerships which own the four Partnership Plans
operated by Magma. These funds are earmarked for the working capital needs of
each of the partnerships. Restrictions in the secured credit agreements for
the Hoch, Elmore and Leathers plants and the $130,000,000 Term Loan for the
Salton Sea Plants place limits on distributions of cash by the partnerships
to Magma.

In addition, at December 31, 1993, Magma had non-current investments
totalling $47,642,000 consisting of $32,302,000 in securities with maturities
greater than one year, which are liquid, and $15,340,000 of other
investments, which are not liquid.

At December 31, 1993, long-term obligations were $189,209,000, a
$103,375,000 increase over year-end 1992. The increase reflects the
replacement on February 28, 1994 of the $140,000,000 one-year Bridge Loan,
with the six-year $130,000,000 Term Loan. The increase in long-term
obligations was partially offset by a reduction of $9,028,000 in Magma's
pro-rata share of partnership debt for the Hoch, Elmore and Leathers plants.
Partnership debt is non-recourse to Magma.

Magma has an unused and available line of credit with Morgan Guaranty
Trust Company of New York of $25,000,000.

Cash and marketable securities at September 30, 1994 totaled $74,198,000
of which $48,720,000 was available for general corporate use. The remainder
of $25,478,000 is Magma's share of the cash and marketable securities of the
"Magma Partnerships," the four separate partnerships which are jointly owned
by Magma and Mission Energy Company and which own the Partnership Plants, and
the cash and marketable securities of the Salton Sea Partnerships, the 100%
owned Magma partnerships which own the three Salton Sea plants acquired from
Unocal (the "Salton Sea Plants"). Certain portions of these funds are
earmarked for the working capital needs of the plants. In addition, the
secured credit agreements for the Hoch, Elmore and Leathers Partnership
Plants and the Term Loan for the Salton Sea Plants place limits on
distributions of cash.

Non-current investments at September 30, 1994, totaled $41,245,000
consisting of $29,676,000 in marketable securities with maturities greater
than one year which are liquid and $11,569,000 of other investments, which
are not liquid.

At September 30, 1994, loans payable (including amounts currently due)
were $188,969,000, a $37,039,000 decrease over year end 1993. The decrease
reflects the $10,000,000 debt reduction that occurred on February 28, 1994
when the $140,000,000 Bridge Loan was replaced with the $130,000,000 Term
Loan and a $9,992,000 reduction in Magma's pro-rata share of Magma
Partnership debt, a $15,692,000 reduction in Salton Sea Partnership debt, and
a $1,355,000 reduction in other debt. The Magma Partnerships debt and the
$130,000,000 Term Loan are both non-recourse to Magma Power Company and its
subsidiaries. The ratio of debt to debt-plus-equity at September 30, 1994
(inclusive of non-recourse debt) was 34 percent compared to 40 percent at
December 31, 1993. Magma has an unused and available line of credit with
Morgan Guaranty Trust Company of $25,000,000 at September 30, 1994.

Six of the seven geothermal power plants operated by Magma sell
electricity to SCE under Interim Standard Offer No. 4 "ISO4" long-term power
purchase contracts. Each ISO4 contract provides for both capacity payments
and energy payments. The capacity payments remain constant throughout the
life of each ISO4 contract. During each of the first 10 years of operation
(the "Initial Term"), the energy payments are fixed pursuant to the terms of
the ISO4 contract. Thereafter, the energy payments are SCE's then-current
published avoided cost of energy. In 1994 the time period weighted average
price for energy for the six plants combined is approximately 10.6 cents per
kWh. For September 1994, SCE's avoided cost of energy was 2.2 cents per kWh.
Estimates of SCE's future avoided cost of energy vary substantially, but it
is expected to remain substantially below such contract energy prices. Thus,
the revenues generated by each of Magma's six plants operating under ISO4
contracts are likely to decline significantly after their

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respective initial terms expire. Such decline could have a material adverse
effect on Magma's results of operation. The initial terms expire in 1996 as
to 34 megawatts of nameplate generation, in 1999 for 126 megawatts of
nameplate generation and in 2000 for the remaining 58 megawatts of nameplate
generation under ISO4 contracts.

The seventh and smallest plant (approximately 10 megawatts) sells
electricity to SCE under a negotiated power purchase contract (the
"Negotiated Contract"). The energy payment under the Negotiated Contract was
4.8 cents per kWh in the third quarter of 1994. The capacity payment was
approximately 1.7 cents per kWh in the third quarter of 1994. Both the energy
and capacity payments adjust quarterly based on a basket of indices for the
30-year term of the Negotiated Contract.

Magma's strategy is to mitigate the adverse impact of potentially lower
revenues in the future from its six plants with ISO4 contracts by
aggressively seeking out and developing new power generation projects in both
the United States and abroad, seeking out additional strategic acquisitions,
and continuing to find new ways to significantly reduce plant operating costs
for its existing as well as any new plants. The competition for new power
purchase contracts is intense, however, and any contracts Magma is able to
secure in the future, whether in the United States or abroad, are likely to
be on terms and conditions that are substantially less favorable than those
provided in Magma's current ISO4 contracts.

Other than as described herein and as subject to the ISO4 contract terms
regarding payments for energy after its initial ten-year term (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Future Rates") Magma is not aware of any trends or known demands,
events or uncertainties that would result in or that are reasonably likely to
result in a material change in Magma's liquidity or capital resources, other
than the development activities mentioned above.

SEASONALITY

The ISO4 contracts held by Magma reflect a seasonal variation in rates for
both energy and capacity. The ISO4 rates are higher in the summer months
(i.e., June through September) to correspond with SCE's peak system load and
are lower in the winter months. Similarly, the rates are higher during peak
hours than they are during the off-peak hours (night time, weekends and
holidays). Consequently, Magma strives to operate its geothermal power plants
at the highest possible output during the peak months and peak hours to take
advantage of the higher rates, and to conduct maintenance during non-peak
months and the off-peak hours (especially during the eight winter off-peak
months). Thus, Magma's monthly revenues from the sale of electricity are
generally higher from June through September of each year.

INFLATION

During the period that Magma has been engaged in business, general
inflation has not had a substantial impact on Magma's operating revenues and
costs. However, if Magma were to construct a new geothermal power plant at
the Salton Sea of the same size and using the same technology as its existing
plants, the capital cost of such plant would be significantly higher than
that of any of the existing Salton Sea plants. Also, any general increase in
interest rates will increase the interest expense of the Hoch, Elmore and
Leathers plants and the Salton Sea Plants.

FUTURE RATES

Each of the Partnership Plants sells electricity to SCE under ISO4
contracts. For the first ten years the price paid for energy under these
ISO4s is fixed and escalates at an average rate of 7.5% per year. The price
paid for capacity (including bonus capacity), on the other hand, is fixed for
the entire 30-year term of the ISO4s at approximately 2.5cents per kWh
(assuming a 90% nameplate capacity factor). In 1994, the time period weighted
average of the energy payments for each of the Partnership Plants is
10.9cents per kWh, which along with the fixed capacity payments results in a
total time period weighted average price for electricity of approximately
13.4cents per kWh.

Two of the Salton Sea Plants sell electricity to SCE pursuant to ISO4
contracts under which the capacity payments (including bonus capacity) are
fixed for the full 30-year term of the ISO4s at

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approximately 2.4 cents per kWh (assuming a 90% nameplate capacity factor).
During the first 10 years of these two ISO4s, the energy payments are fixed
(and do not escalate) at a time period weighted average of 9.8 cents per kWh
for the 49.8MW Salton Sea Plant 3 and 10.6 cents per kWh for the 20MW Salton
Sea Plant 2, which along with their fixed capacity payments results in a
total time period weighted average price of electricity of approximately
12.2 cents and 13 cents per kWh, respectively.

Starting in 1996 for the Vulcan plant, 1999 for the Hoch, Elmore and
Salton Sea Plant 3 and 2000 for the Leathers and the Salton Sea Plant 2, the
price for energy under the ISO4 contracts for these plants will automatically
convert to the SCE's then-current published avoided cost of energy. As a
result, the price paid by SCE for a kWh of electricity under these ISO4s will
be composed of the capacity payments per kWh described above and an energy
payment based on SCE's avoided cost of energy. In 1993, SCE's time period
weighted average avoided energy cost was 3.2 cents per kWh. Thus, revenues
generated by these plants are likely to decline significantly which may have
a material adverse effect on Magma's results of operations.

The remaining acquired plant (Salton Sea Plant 1) sells electricity to SCE
pursuant to a negotiated contract under which both the capacity and the
energy portions of the revenues adjust quarterly based on a basket of
indices. In 1993, the time period weighted average energy payment was
4.8 cents per kWh, which along with the capacity payment of approximately
1.7 cents per kWh (assuming a 90% nameplate capacity factor) results in a
total payment of approximately 6.5 cents per kWh.

CECI MANAGEMENT INFORMATION

CERTAIN BIOGRAPHICAL INFORMATION REGARDING OFFICERS AND DIRECTORS OF CECI

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- ----- -----------------------------------------------------------
<S> <C> <C>
David L. Sokol 38 Chief Executive Officer, Chairman of the Board of
Directors, Director
Thomas R. Mason 50 President and Chief Operating Officer
Steven A. McArthur 36 Senior Vice President, General Counsel and Secretary
Donald M. O'Shei, Sr. 60 Senior Vice President, Asia Division
John G. Sylvia 35 Senior Vice President, Chief Financial Officer and
Treasurer
Gregory E. Abel 32 Vice President, Chief Accounting Officer and Controller
Edward F. Bazemore 57 Vice President, Human Resources
David W. Cox 38 Vice President, Legislative and Regulatory Affairs
Vincent B. Fesmire 53 Vice President, Development and Implementation
David P. Maystrick 43 Vice President, Construction
Dale R. Schuster 42 Vice President, Administration
Edgar D. Aronson 59 Director
Judith E. Ayres 49 Director
James Q. Crowe 44 Director
Richard K. Davidson 52 Director
Ben Holt 80 Director
Richard R. Jaros 42 Director
Everett B. Laybourne 82 Director
Herbert L. Oakes, Jr. 47 Director
Walter Scott, Jr. 62 Director
Barton W. Shackelford 73 Director
David E. Wit 32 Director
</TABLE>

David L. Sokol, 38, Chairman of the Board of Directors and Chief Executive
Officer. Mr. Sokol has served as Chief Executive Officer of CECI since April
19, 1993 and as Chairman of the Board of Directors since May 5, 1994, has
been a director of CECI since March 1991 and served as President from April
1993 until January 1995. Formerly, Mr. Sokol was Chairman, President and
Chief Executive Officer of CECI

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from February 1991 until January 1992. Mr. Sokol has served as Chairman,
President and Chief Executive Officer of the Purchaser 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, the largest stockholder of CECI
and a wholly owned subsidiary of PKS. From 1983 to November 1990, Mr. Sokol
was the President and Chief Executive Officer of Ogden Projects, Inc.

Thomas R. Mason, 50, President and Chief Operating Officer, Mr. Mason
joined CECI in March 1991. From October 1989 to March 1991, Mr. Mason was
Vice President and General Manager of Kiewit Energy Company. From 1991 to
1993 he was Senior Vice President, Mr. Mason acted as a consultant in the
energy field from June 1988 to October 1989. Prior to that, Mr. Mason was
Director of Marketing for Energy Factors, Inc., a non-utility developer of
power facilities.

Steven A. McArthur, 36, Senior Vice President, General Counsel and
Secretary. Mr. McArthur joined CECI in February 1991. Mr. McArthur has served
as a director, Senior Vice President, General Counsel and Secretary of the
Purchaser since its formation on September 22, 1994. From 1988 to 1991 he was
an attorney in the Corporate Finance Group at Shearman & Sterling in San
Francisco. From 1984 to 1988 he was an attorney in the Corporate Finance
Group at Winthrop, Stimson, Putnam & Roberts in New York.

Donald M. O'Shei, Sr., 60, Senior Vice President, Asia Division and
President, CE International, Ltd. General O'Shei was in charge of engineering
and operations for CECI from October 1988 until October 1991. He rejoined
CECI as a Vice President in August 1992. Previously he was President and
Chief Executive Officer of AWD Technologies, Inc., a hazardous waste
remediation firm, and President and General Manager of its predecessor
company, Atkinson-Woodward Clyde. He was a brigadier general in the U.S. Army
prior to joining the Guy F. Atkinson Co. in 1982 as Director of Corporate
Planning and Development.

John G. Sylvia, 35, Senior Vice President, Chief Financial Officer and
Treasurer. Mr. Sylvia joined CECI in 1988. Mr. Sylvia has served as a
director, Senior Vice President, Chief Financial Officer and Treasurer of the
Purchaser since its formation on September 22, 1994. From 1985 to 1988, Mr.
Sylvia was a Vice President in the San Francisco office of the Royal Bank of
Canada, with responsibility for corporate and capital markets banking. From
1986 to 1990, Mr. Sylvia served as an Adjunct Professor of Applied Economics
at the University of San Francisco. From 1982 to 1985, Mr. Sylvia was a Vice
President with Bank of America.

Gregory E. Abel, 32, Vice President, Chief Accounting Officer and
Controller. Mr. Abel joined CECI in 1992. Mr. Abel is a Chartered Accountant
and from 1984 to 1992 he was employed by Price Waterhouse. As a Manager in
the San Francisco office of Price Waterhouse, he was responsible for clients
in the energy industry.

Edward F. Bazemore, 57, Vice President, Human Resources. Mr. Bazemore
joined CECI in July 1991. From 1989 to 1991, he was Vice President, Human
Resources, at Ogden Projects, Inc. in New Jersey. Prior to that, Mr. Bazemore
was Director of Human Resources for Ricoh Corporation, also in New Jersey.
Previously, he was Director of Industrial Relations for Scripto, Inc. in
Atlanta, Georgia.

David W. Cox, 38, Vice President, Legislative and Regulatory Affairs. Mr.
Cox joined CECI in 1990. From 1987 to 1990 Mr. Cox was a Vice President with
Bank of America N.T. & S.A. in the Consumer Technology and Finance Group.
From 1984 to 1987, Mr. Cox held a variety of management positions at First
Interstate Bank.

Vincent B. Fesmire, 53, Vice President, Development and Implementation.
Mr. Fesmire joined CECI in October 1993. Prior to joining CECI, Mr. Fesmire
was employed for 19 years with Stone & Webster, an engineering firm, serving
in various management level capacities with an expertise in geothermal design
engineering.

David P. Maystrick, 43, Vice President, Construction. Mr. Maystrick joined
CECI in April 1994. From 1978 to 1994, Mr. Maystrick was employed as Senior
Project Manager with HDR Engineering, Inc. and

116

<PAGE>

was responsible for implementing and monitoring several full service
contracts to design, to construct, and to operate electric and steam
generating facilities. From 1974 to 1977, Mr. Maystrick was a design engineer
of fossil fuel and nuclear power plants at Gibbs & Hill, Inc.

Dale R. Schuster, 42, Vice President, Administration. Mr. Schuster joined
CECI in July 1994. From 1991 until joining CECI, he was Senior Vice President
and General Manager of AutoInfo, Inc., a software development and information
systems company, and prior to that, Vice President and General Manager of
ValCom, Inc.

Edgar D. Aronson, 59. Mr. Aronson 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 of 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.

Judith E. Ayres, 49. Ms. Ayres has been a director of CECI since July
1990. Since 1989 Ms. Ayres has been Principal of The Environmental Group, an
environmental consulting firm in San Francisco, California. From 1988 to
1989, Ms. Ayres was a Vice President/Principal of William D. Ruckelshaus
Associates, an environmental consulting firm. From 1983 to 1988 Ms. Ayres was
the Regional Administrator of Region 9 (Arizona, California, Hawaii, Nevada
and the Western Pacific Islands) of the United States Environmental
Protection Agency.

James Q. Crowe, 44. Mr. Crowe has been a director of CECI since March
1991. Mr. Crowe is Chairman and Chief Executive Officer of MFS Communications
Company, Inc., a publicly traded company in which PKS holds a majority
ownership interest. Prior to assuming his current position in 1991, Mr. Crowe
was President of Kiewit Industrial Company, a subsidiary of PKS. Before
joining Kiewit Industrial Company in 1986, Mr. Crowe was Group Vice
President, Power Group at Morrison-Knudsen Corporation. Mr. Crowe is a
director of C-TEC Corporation, a publicly traded company in which PKS holds a
majority ownership interest.

Richard K. Davidson, 52. Mr. Davidson 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. Mr. Holt 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 CECI
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 CECI. Mr. Holt is
a beneficial owner of 3,763 Shares, representing less than 1% of the
outstanding Shares.

Richard R. Jaros, 42. Mr. Jaros has been a 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.

Everett B. Laybourne, 82. Mr. Laybourne has been a director of CECI since
May 1988. For many years he served as counsel for a number of major
publicly-held corporations. He also presently serves as a Vice President and
Trustee of The Ralph M. Parsons Foundation and as National Board Chairman of
WAIF, Inc. From 1969 to 1988, Mr. Laybourne was senior partner in the law
firm of MacDonald, Halsted & Laybourne in Los Angeles, California, whose
successor firm was Baker & McKenzie to which he acted for five years in an of
counsel capacity. He continues in the practice of law in Los Angeles.

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<PAGE>

Herbert L. Oakes, Jr., 47. Mr. Oakes has been a director of CECI since
October 1987. In 1982, Mr. Oakes founded and became President of H.L. Oakes &
Co., Inc., a corporate advisor and dealer in securities. From 1988 to the
present, Mr. Oakes has served as a Managing Director of Oakes, Fitzwilliams,
Co., Limited, a member of the Securities and Futures Authority Limited and
The London Stock Exchange. Mr. Oakes is a director of Shared Technologies,
Inc., Harcor Energy Inc. and New World Power Corporation.

Walter Scott, Jr., 62. Mr. Scott 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.

Barton W. Shackelford, 73. Mr. Shackelford has been a director of CECI
since June 1986. Mr. Shackelford served as President and a director of
Pacific Gas & Electric Company from 1979 until his retirement in 1985. He is
a director of Harding Associates, Inc.

David E. Wit, 32. Mr. Wit has been a director of CECI since April 1987. He
is co-founder and Co-Chief Executive Officer of Logicat, Inc., a software
development/publishing firm. Prior to working at Logicat, Inc. Mr. Wit worked
at E.M. Warburg, Pincus & Company, where he analyzed seed-stage financing and
technology investments.

THE CECI BOARD AND ITS COMMITTEES

The CECI Board of Directors currently consists of twelve members.
Immediately following the Merger, the CECI Board of Directors will consist of
two additional directors designated by Magma pursuant to the terms of the
Merger Agreement.

The CECI Board has an Audit Committee, a Compensation Committee, an
Environmental Committee, an Executive Committee, a Nominating Committee, and
a Stock Option Committee.

Audit Committee. The Audit Committee (Messrs. Aronson, Brush, Shackelford
and Wit) is empowered to recommend to the CECI Board independent public
accounting firms for selection as auditors of CECI; to make recommendations
to the Board on auditing matters; to examine and make recommendations
concerning the scope of audits; and to review the terms of transactions
between CECI and related entities. The Audit committee met four times during
1993.

Compensation Committee. The Compensation Committee (Messrs. Brush, Crowe,
Laybourne, Shackelford and Wit) is authorized to make recommendations to the
Board with respect to executive salaries and bonuses and directors'
compensation. The Compensation Committee met once during 1993.

Compensation Committee Interlocks and Insider Participation. Mr. Brush
served as President, Vice Chairman and Chief Operating Officer of CECI during
portions of January and February 1991. Mr. Crowe is the Chairman and Chief
Executive Officer of MFS Communications Company, Inc. Mr. Crowe serves on the
Board of CECI as a nominee of Kiewit Energy Company ("Kiewit Energy") under
an agreement entered into in connection with Kiewit Energy's investment in
CECI in early 1991. Mr. Crowe also owns Peter Kiewit & Sons' Inc. ("Kiewit")
stock. Kiewit Energy is a wholly owned subsidiary of Kiewit. Mr. Laybourne
was of counsel to the Los Angeles office of the law firm Baker & McKenzie
until August 1993. CECI paid Baker & McKenzie a total of approximately
$615,000 in legal fees in 1993. CECI believes that the fees of Baker &
McKenzie are comparable to fees that would be payable for similar work
performed by unaffiliated third parties. Messrs. Shackelford and Wit have not
been employees of CECI or otherwise participated in activities constituting
compensation committee interlocks or insider participation requiring
disclosure under this caption.

Environmental Committee. The Environmental Committee (Mr. Aronson, Ms.
Ayres, Mr. Brush, Mr. Jaros, and Adm. Murphy) addresses issues and provides
advice concerning environmental regulations and compliance. The Environmental
Committee met three times during 1993.

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<PAGE>

Executive Committee. The Executive Committee (Messrs. Davidson, Jaros,
Scott, Shackelford and Sokol) was established to act for the Board in between
regularly scheduled Board meetings. The Executive Committee met once during
1993.

Nominating Committee. The Nominating Committee (Ms. Ayres and Messrs.
Brush, Jaros, Oakes and Sokol) was established to provide the CECI Board with
advice regarding potential nominees to the CECI Board. The Nominating
Committee did not meet during 1993.

Stock Option Committee. The Stock Option Committee (Messrs. Laybourne and
Shackelford) was established to provide disinterested administration of
CECI's Amended and Restated 1986 Stock Option Plan ("Employee Option Plan")
pursuant to the requirements of the SEC's Rule 16b-3. The Stock Option
Committee acted by written consent four times during 1993.

CECI COMPENSATION COMMITTEE REPORT

CECI's executive compensation is determined by the CECI Compensation
Committee of the CECI Board. The Compensation Committee usually meets once a
year in December, at which time salaries with respect to the next fiscal
year, and bonuses with respect to the nearly completed year are determined,
as well as making recommendations to the Stock Option Committee for stock
option grants as long-term incentive compensation.

The CECI Compensation Committee believes that compensation of CECI's key
executives should be sufficient to attract and retain highly qualified and
productive personnel and also to provide meaningful incentives for enhanced
productivity and superior performance. It is the policy of CECI that the
three components of CECI's total compensation package (salary, bonus and
stock options) will be considered in the aggregate in determining the amount
of any one component. CECI seeks to reward achievement of long and short-term
individual performance goals, viewed in the context of both individual power
project and company performance. However, given the unique nature of each
independent development project (particularly considering the context of the
different legal, regulatory, financial, accounting, tax, political and
cultural systems, issues and structures found in various countries in which
CECI develops projects internationally) and the resulting flexible adaptation
required in the duties and tasks performed by CECI's key executives, the CECI
Compensation Committee's criteria for assessing executive performance in any
year is inherently subjective and not subject to specific enumeration of
factors, relative weighting or formulae calculations. CECI did not
specifically use any companies in the same industry as a basis for comparison
when establishing executive compensation.

During 1994, CECI's executive compensation included a base salary, a cash
bonus and long-term incentive compensation in the form of stock options
awarded by the Stock Option Committee under CECI's Employee Option Plan, all
dependent on subjective evaluations of performance as noted above. The cash
bonus compensation of executives is designed to compensate executives for the
CECI Compensation Committee's assessment of superior performance and
meritorious and diligent individual efforts, and such assessments usually
relate to individual and unique projects and, in part also recognize the
individual executive's level of commitment (demonstrated by subjective
factors) to CECI's long-term success. The long term incentive option grants
recommended by the Committee and implemented by the Stock Option Committee
are intended to align the interests of employees and stockholders and thereby
to motivate executives as equity owners to contribute at superior levels in
the future and to allow them to share in increased value developed for CECI
stockholders generally.

CECI's Chairman and Chief Executive Officer, David Sokol, has an existing
employment agreement with CECI which provides for a base salary of $350,000
per annum and a minimum annual bonus of $75,000. The employment contract also
provides for the payment of two years base salary and minimum bonus in the
event of termination without cause.

At its December 1994 meeting, the Compensation Committee determined to
increase Mr. Sokol's base salary to $400,000 per annum and to award Mr. Sokol
a cash bonus of $550,000 in order to reflect Mr. Sokol's superior performance
and significant accomplishments during the year. In addition, at the December
1994 meeting other executives received salary increases, cash bonuses and
recommendations for stock option grants commensurate with the CECI
Compensation Committee's subjective assessment of their relative individual
performance.

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<PAGE>

In reviewing Mr. Sokol's compensation, the CECI Compensation Committee
subjectively considered Mr. Sokol's significant contribution to the
management of CECI during the year, including the favorable settlement of
outstanding litigation involving CECI's Yuma Project, the issuance of CECI's
10-1/4% Senior Notes due 2004 (providing CECI with $400 million in proceeds
to fund international projects and acquisitions), CECI's successfully closing
financing and commencing construction on two Philippine geothermal projects
aggregating 300 MW, CECI's successfully signing definitive power sales
contracts for one new Philippine power project (the 140 MW Casecnan combined
hydroelectric and irrigation project) and two Indonesian geothermal projects
aggregating 800 MW (the Dieng Project and Patuha Project), CECI's other
promising project development activities and the record electrical production
levels at the Coso Project. Mr. Sokol contributed significantly to CECI's
current success and the CECI Compensation Committee believes his overall
compensation was wholly justified and moreover, expressly approved of by
Kiewit Energy, CECI's largest stockholder (which holds approximately 44% of
CECI's outstanding voting stock, on a fully-diluted basis).

COMPENSATION COMMITTEE
RICHARD JAROS
EVERETT LAYBOURNE
BARTON SHACKELFORD
DAVID WIT

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<PAGE>

SUMMARY COMPENSATION TABLE

The following table sets forth the compensation of CECI's five most highly
compensated executive officers who were employed as of the last day in 1994.
Information is provided regarding these individuals for the last three fiscal
years during which they were executive officers of CECI, if applicable.

<TABLE>
<CAPTION>
ALL OTHER
OTHER ANNUAL SECURITIES COMPENSATION
NAME AND YEAR ENDED SALARY COMPENSATION UNDERLYING (401(K) PLAN
PRINCIPAL POSITIONS DECEMBER 31, ($) BONUS ($) ($) OPTIONS (#) CONTRIBUTIONS)($)
- --------------------------- -------------- --------- --------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
David L. Sokol (1) 1994 350,000 612,482 N/A 0 3,472
Chairman and 1993 246,794 350,000 1,000,000 2,800
Chief Executive Officer 1992 27,083 4,167 0 0
Thomas R. Mason 1994 169,359 100,949 N/A 75,000 3,472
President and Chief 1993 164,359 30,000 5,000 3,398
Operating Officer 1992 155,447 50,000 25,000 3,318
Steven A. McArthur 1994 156,538 119,915 N/A 110,000 3,472
Senior Vice President, 1993 156,538 70,000 10,000 3,398
General Counsel and 1992 150,000 40,000 20,000 3,215
Secretary
Donald M. O'Shei, Sr. (2) 1994 160,000 111,852 N/A 75,000 3,472
Senior Vice President, Asia 1993 160,000 50,000 5,000 3,398
1992 105,102 40,000 20,000 1,500
John G. Sylvia 1994 138,782 112,670 N/A 100,000 3,472
Senior Vice President, 1993 130,449 45,000 10,000 2,216
Chief Financial Officer 1992 125,000 40,000 15,000 1,451
and Treasurer
<FN>
(1) Mr. Sokol's compensation for 1992 is through January 8, 1992, the date
of his termination of employment. Mr. Sokol rejoined CECI on April 19,
1993.

(2) Mr. O'Shei left the employment of CECI in September of 1991 and
rejoined CECI in August of 1992. From September 1991 to August 1992 Mr.
O'Shei performed consulting services to CECI. Accordingly, the 1992
salary includes payments for such consulting as well as salary.
</TABLE>

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth options granted to each of the named
executive officers of CECI during 1994:

<TABLE>
<CAPTION>
POTENTIAL REALIZED VALUE
AT ASSUMED ANNUAL RATES
OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM (1)
------------------- ------------------------
% OF TOTAL
OPTIONS GRANTED EXERCISE
DATE OF GRANT AND TO EMPLOYEES IN PRICE EXPIRATION
NAME OPTIONS GRANTED FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- --------------------- ------------------- --------------- ---------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
David L. Sokol -- -- -- -- -- --
Thomas R. Mason 05/12/94- 75,000((2)) 8.8% 16.625 05/11/2004 784,153 1,987,198
Steven A. McArthur 05/12/94-110,000((3)) 12.9% 16.625 05/11/2004 1,150,091 2,914,557
Donald M. O'Shei, Sr. 05/12/94- 75,000((4)) 8.8% 16.625 05/11/2004 784,153 1,987,198
John G. Sylvia 05/12/94-100,000((5)) 11.7% 16.625 05/11/2004 1,045,537 2,649,597
<FN>
(1) As required by the Commission, potential values stated are based on
the prescribed assumption that the CECI Common Stock will appreciate in
value from the date of grant to the end of the option term

121

<PAGE>

(ten years from the date of grant) at annualized rates of 5% and 10%
(total appreciation of 63% and 159%), respectively, and therefore are
not intended to forecast possible future appreciation, if any, in the
price of the CECI. The total of all stock options granted to employees,
including executive officers, during fiscal 1993 was approximately
3.59% of total shares outstanding during the year. Accordingly, the
potential value of such options for all optionees under the prescribed
assumptions is approximately 3.59% of the potential realizable value of
all shareholders for the same period under the same assumptions. As an
alternative to the assumed potential realizable values stated above,
Commission rules would permit stating the present value of such options
at the date of grant. Methods of computing present value suggested by
different authorities can produce significantly different results.
Moreover, since stock options granted by CECI are not transferable,
there are no objective criteria by which any computation of present
value can be verified. Consequently, the CECI's management does not
believe there is a reliable method of computing the present value of
such stock options and that all assumptions as to annualized
appreciation rates are inherently speculative.

(2) 18,780 shares exercisable immediately and 937 shares exercisable per
month commencing on May 1, 1994

(3) 27,500 shares exercisable immediately and 1375 shares exercisable per
month commencing on May 1, 1994

(4) 18,780 shares exercisable immediately and 937 shares exercisable per
month commencing on May 1, 1994

(5) 25,000 shares exercisable immediately and 1250 shares exercisable per
month commencing on May 1, 1994
</TABLE>

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES

The following table sets forth the option exercises and the value of
in-the-money unexercised options held by each of the named executive officers
of CECI at December 31, 1994, calculated as being equal to the difference
between the exercise price of the options and the closing price of the CECI
Common Stock on the NYSE of $15.625 per share on December 31, 1994.

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES ACQUIRED VALUE OPTIONS HELD AT FY END IN-THE-MONEY OPTIONS AT FY END
NAME ON EXERCISE REALIZED
- ---- -------------- -------- ------------------------------- -------------------------------
EXERCISABLE($) UNEXERCISABLE($) EXERCISABLE($) UNEXERCISABLE($)
-------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
David L. Sokol -- -- 464,983 535,017 -- --
Thomas R. Mason -- -- 85,169 79,831 90,284 35,966
Steven A. McArthur -- -- 109,364 90,636 124,534 1,716
Donald M. O'Shei, Sr. -- -- 68,462 61,100 242,589 11,856
John G. Sylvia -- -- 94,712 84,032 412,648 3,432
</TABLE>

COMPENSATION OF DIRECTORS

For 1994, directors who were not employees of CECI were paid an annual
retainer fee of $15,000 and a fee of $500 per day for attendance at CECI
Board and committee meetings. Directors who are employees of CECI will not
receive such fees. All directors are reimbursed for their expenses incurred
in attending CECI Board meetings.

DESCRIPTION OF AMENDED AND RESTATED 1986 STOCK OPTION PLAN

The Employee Option Plan permits the issuance of CECI Common Stock
pursuant to grants of incentive stock options ("ISOs") and non-qualified
stock options ("NSOs") to selected employees, including officers and
directors of CECI, designated by the Compensation Committee. Under the
Employee Option Plan, NSOs may also be granted to non-employee directors,
independent contractors or consultants to CECI.

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<PAGE>

The Employee Option Plan is administered by a committee of disinterested
directors appointed by the CECI Board. Members of the committee are not
eligible for the discretionary grant of options under the Employee Option
Plan, but instead receive an automatic annual grant of an NSO to purchase 100
shares of CECI Common Stock at a price equal to 100% of the fair market value
of the CECI Common Stock on the date the NSO is granted.

The exercise price of ISOs granted under the Employee Option Plan may not
be less than 100% of, and the exercise price of NSOs granted under the
Employee Option Plan may not be less than 85% of, the fair market value of
the CECI Common Stock on the date of the grant. The exercise price of any ISO
granted to any holder of more than 10% of the CECI Common Stock and the CECI
Preferred Stock must be at least equal to 110% of fair market value on the
grant date. Options granted under the Employee Option Plan may have terms of
up to ten years and are exercisable in one or more installments as determined
by the CECI Board. Some or all shares of CECI Common Stock may be purchased
upon exercise of options under the Employee Option Plan only after such
shares have become fully exercisable and nonforfeitable under the vesting
provisions of the option agreement and other terms and conditions of the
Employee Option Plan.

CECI Common Stock acquired pursuant to the exercise of an option can be
paid for in cash, or subject to approval by the Committee, any one or a
combination of the following methods: (i) by surrendering shares of CECI
Common Stock to CECI, if the individual is a former employee of CECI and has
owned the shares to be surrendered for at least six months, (ii) by directing
CECI to withhold a number of shares of CECI Common Stock from the option if
the individual is a former employee and has held the option for at least six
months, or (iii) by a promissory note.

Outstanding options will become immediately vested and exercisable upon
the occurrence of any of the following events (unless the agreement governing
the event provides for the assumption of outstanding options): (i) approval
by the CECI Board of a dissolution of CECI or a merger or consolidation of
CECI where CECI is not the surviving corporation, (ii) the sale of all or
substantially all of the assets of CECI, or (iii) a change in control of more
than 50% of the outstanding shares of all classes of stock of CECI.

All of the options granted to date under the existing Employee Option Plan
have a term of not more than ten years. The existing Employee Option Plan
terminates April 3, 1996.

The following table sets forth information with respect to all options to
purchase CECI Common Stock which were granted to certain executive officers,
all current executive officers as a group, all current directors who are not
executive officers as a group, and all current employees as a group, during
the last fiscal year.

AMENDED AND RESTATED 1986 OPTION PLAN

<TABLE>
<CAPTION>
NUMBER OF
DOLLAR SHARES
VALUE UNDERLYING
($)(1) OPTIONS(2)
-------- ------------
<S> <C> <C>
David L. Sokol .............................. N/A --
Thomas R. Mason ............................. N/A 75,000
Steven A. McArthur .......................... N/A 110,000
Donald M. O'Shei, Sr. ....................... N/A 75,000
John G. Sylvia .............................. N/A 100,000
All current executive officers, as a group
(5 persons) ................................ N/A 360,000
All current directors who are not executive
officers, as a group (11 persons) .......... N/A 80,000
All current employees as a group (other than
current executive officers, persons) ...... N/A 492,500
<FN>
(1) The benefits on amounts that will be received by the participants under
the Employee Option Plan cannot be calculated, as they are dependent upon
the increase in the market price of CECI's Common Stock.

(2) The number of shares of Common Stock underlying the options listed in
this table are redundant of the number of shares underlying options set
forth on previous tables.
</TABLE>

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<PAGE>

1994 STOCK EMPLOYEE STOCK PURCHASE PLAN

The Employee Stock Purchase Plan is intended to qualify as an employee
stock purchase plan as defined in Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"), and each eligible employee's right to purchase
shares under the Employee Stock Purchase Plan is taxed in accordance with
Sections 421 and 423 of the Code and the regulations issued thereunder.

The following summary of the effect of federal income taxation upon the
employee and CECI with respect to participants in the Employee Stock Purchase
Plan does not purport to be complete and reference is made to the applicable
provisions of the Code.

1. If the provisions of Section 423 are met, the employee will not realize
taxable income either at the time of election to participate in the Employee
Stock Purchase Plan or at the time the employee purchases shares pursuant to
the Plan.

2. If the employee disposes of shares of CECI Common Stock after the later
of two years after the election to participate or one year from the date of
receipt of the stock pursuant to the election, then upon such disposition the
employee will recognize as ordinary income an amount equal to the lesser of:
(a) the excess of the fair market value of the shares of CECI Common Stock on
the date of disposition over the amount the employee paid for the shares
under the Employee Stock Purchase Plan; or (b) the excess of the fair market
value of the shares at the time of election to participate over the purchase
price under the Employee Stock Purchase Plan price. The employee will also
recognize a long-term capital gain or loss in an amount equal to the
difference between (i) the amount realized upon the sale of the CECI Common
Stock and (ii) the sum of the amount the employee paid for the shares plus
the amount, if any, taxed to the employee as ordinary income under (a) or (b)
above.

3. If the employee disposes of shares of CECI Common Stock before the
later of two years after the election to participate or one year from the
date of receipt of the stock pursuant to the Employee Stock Purchase Plan,
then upon this disposition the employee will recognize as ordinary income an
amount equal to the excess of the fair market value of the shares of CECI
Common Stock on the date of receipt of the stock over the amount the employee
paid for the shares. The employee will also recognize a capital gain or loss
in an amount equal to the difference between (i) the amount realized upon the
sale of the shares of CECI Common Stock and (ii) the sum of the amount the
employee paid for the shares plus the amount, if any, taxed to the employee
as ordinary income. If the employee holds the shares for more than one year,
this gain or loss will be a long-term capital gain or loss.

4. Generally, CECI will not receive any deduction for federal income tax
purposes with respect to the opportunity to purchase shares or the shares of
CECI Common Stock issued under the Employee Stock Purchase Plan. If, however,
the employee disposes of stock acquired under the Employee Stock Purchase
Plan before the later of two years after the employee's election to
participate or one year from the date of the transfer of the stock to the
employee, CECI will be entitled to a deduction in an amount equal to the
amount which is considered ordinary income to the employee.

The benefits or amounts that will be received by the participants under
the Employee Stock Purchase Plan cannot be presently calculated, as they are
dependent on each individual's decision regarding the amount of stock to be
purchased and on the price at which the stock is purchased under the Employee
Stock Purchase Plan.

TERMINATION OF EMPLOYMENT ARRANGEMENTS

Under the terms of his employment contract, Mr. Sokol is entitled to
receive two times his base salary and minimum bonus in the event of the
termination of his employment by CECI other than for cause. If Mr. Sokol were
terminated without cause, the $850,000 would be currently payable.

CERTAIN TRANSACTIONS AND RELATIONSHIPS

Stock Purchase and Related Agreements. CECI and Kiewit Energy are parties
to a stock purchase agreement and related agreements, dated as of February
18, 1991, pursuant to which Kiewit Energy

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<PAGE>

purchased 4,000,000 shares of CECI Common Stock at $7.25 per share and
received options to buy 3,000,000 shares of CECI Common Stock at a price of
$9.00 per share exercisable over three years, and an additional 3,000,000
shares of CECI Common Stock at a price of $12.00 per share exercisable over
five years (subject to customary adjustments).

In connection with such stock purchase, CECI and Kiewit Energy also
entered into certain other agreements pursuant to which, among other things,
(i) Kiewit Energy and its affiliates agreed, subject to certain conditions,
not to acquire more than 34% of the outstanding CECI Common Stock (the
"Standstill Percentage") for a five-year period, (ii) Kiewit Energy became
entitled to nominate at least three of CECI's directors, (ii) Kiewit Energy
agreed that Kiewit and its affiliates would present to CECI any opportunity
to acquire, develop, operate or own a geothermal resource or geothermal power
plant, and (iv) CECI and Kiewit Energy agreed to use their best efforts to
negotiate and execute a definitive joint venture agreement relating to the
development of certain geothermal properties in Nevada and Utah Messrs.
Crowe, Jaros and Scott are the current CECI Board nominees of Kiewit Energy.

On June 19, 1991, the CECI Board approved a number of amendments to the
stock purchase agreement and the related agreements. Pursuant to such
amendments, CECI reacquired from Kiewit Energy the rights to develop the
Nevada and Utah properties, and Kiewit Energy agreed to exercise options to
acquire 1,500,000 shares of CECI Common Stock at $9.00 per share, providing
CECI with $13.5 million in cash. CECI also extended the term of the $9.00 and
$12.00 options to seven years, modified certain of the other terms of these
options, granted to Kiewit Energy an option to acquire an additional
1,000,000 shares of the outstanding CECI Common Stock at a price of $11.625
per share exercisable over ten years (the closing price for the shares on the
American Stock Exchange on June 18, 1991), and increased the Standstill
Percentage from 34% to 49%.

CECI entered into a joint venture agreement with two subsidiaries of
Kiewit, Kiewit Diversified Group, Inc. and Kiewit Construction Group, Inc.,
on December 14, 1993. The agreement provides a framework for the joint
development of power projects located in the Philippines, Indonesia and
certain other countries.

Commencing in 1991, Gilbert Industrial Corporation ("Gilbert"), a
wholly-owned subsidiary of Kiewit, constructed modifications to the
geothermal power production facility owned by a partnership in which CECI
holds a 48% interest. Through the year ended December 31, 1993, CECI's
portion of amounts paid by the partnership to Gilbert under this contract was
approximately $3.6 million.

CECI believes that the terms of the construction contracts described above
are comparable to terms that would be obtained in similar transactions with
unaffiliated third parties.

Mr. Scott, a director of CECI, is also the Chairman and President of
Kiewit and owns Kiewit stock. Mr. Crowe, a director of CECI, is the Chairman
and President of MFS Communications Company, Inc., a subsidiary of Kiewit and
owns Kiewit's common stock. Mr. Jaros, the Chairman and a director of CECI,
is an officer and director of Kiewit and also owns Kiewit's common stock. Mr.
Holt, a director of CECI, provides consulting and other services to CECI for
an annual fee of $75,000 pursuant to the terms of a consulting agreement
which expires in 1998. CECI believes the terms of this agreement are
comparable to those in similar transactions with unaffiliated third parties.

CECI retained the law firm of Baker & McKenzie in 1993. Everett B.
Laybourne, a director, was of counsel to the Los Angeles office of Baker &
McKenzie until August 1993. CECI paid to Baker & McKenzie a total of
approximately $615,636 in legal fees in 1993. CECI believes that the fees
payable to Baker & McKenzie are comparable to fees that would be payable in
similar transactions with unaffiliated third parties.

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MAGMA MANAGEMENT INFORMATION

CERTAIN BIOGRAPHICAL INFORMATION REGARDING OFFICERS AND DIRECTORS OF MAGMA

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- ------ --------------------------------------------------------------------

<S> <C> <C>
David L. Sokol 38 Chief Executive Officer, Chairman of the Board of Directors, Director
Thomas R. Mason 50 President and Chief Operating Officer
Steven A. McArthur 36 Senior Vice President, General Counsel and Secretary
Donald M. O'Shei, Sr. 60 Senior Vice President, Asia Division
John G. Sylvia 35 Senior Vice President, Chief Financial Officer and Treasurer
Gregory E. Abel 32 Vice President, Chief Accounting Officer and Controller
Edward F. Bazemore 57 Vice President, Human Resources
David W. Cox 38 Vice President, Legislative and Regulatory Affairs
Vincent B. Fesmire 53 Vice President, Development and Implementation
David P. Maystrick 43 Vice President, Construction
Dale R. Schuster 42 Vice President, Administration
Edgar D. Aronson 59 Director
Ralph W. Boeker 61 Director
Richard K. Davidson 52 Director
Ben Holt 80 Director
Richard R. Jaros 42 Director
Paul M. Pankratz 62 Director
Walter Scott, Jr. 62 Director

</TABLE>

The directors and officers of Magma listed below (except for Messrs.
Boeker and Pankratz) were all elected to their positions on January 10, 1995.

David L. Sokol. See "CECI Management Information--Certain Biographical
Information Regarding Officers and Directors of CECI."

Edgar D. Aronson. See "CECI Management Information--Certain Biographical
Information Regarding Officers and Directors of CECI."

Richard K. Davidson. See "CECI Management Information--Certain
Biographical Information Regarding Officers and Directors of CECI."

Ben Holt. See "CECI Management Information--Certain Biographical
Information Regarding Officers and Directors of CECI."

Richard R. Jaros. See "CECI Management Information--Certain Biographical
Information Regarding Officers and Directors of CECI."

Thomas R. Mason. See "CECI Management Information--Certain Biographical
Information Regarding Officers and Directors of CECI."

Walter Scott, Jr. See "CECI Management Information--Certain Biographical
Information Regarding Officers and Directors of CECI."

Ralph W. Boeker, 61. Mr. Boeker has been a director of Magma since March
1, 1993. He served as President and director of Magma from March 1, 1993
until January 10, 1995. Mr. Boeker was the CEO

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<PAGE>

of Magma from January 11, 1994 until January 10, 1995. Mr. Boeker retired
from Dow as of March 1, 1993, where he had been employed since 1959, most
recently as Group Vice President for Chemicals, Performance Products and
Hydrocarbons and as a member of the Operating Board of Dow Chemical U.S.A.,
an operating unit of Dow, and the Dow Management Committee.

Paul M. Pankratz, 62, was elected Chairman of the Magma Board, President
and Chief Executive Officer effective February 1, 1992, and relinquished to
Mr. Boeker the titles of President in March 1993 and CEO in January 1994. Mr.
Pankratz remained Chairman of the Magma Board until January 10, 1995. He
joined Magma upon retirement from Dow, where he had been employed in various
capacities since 1957, most recently as Vice President, Corporate Products
Department. He has served as a director of Magma since 1984.

THE MAGMA BOARD COMMITTEES

The six regularly constituted committees of the Magma Board are: (1) the
Audit Committee, which is comprised of Messrs. Kesseler, Petersen and Roach;
(2) the Compensation Committee which is comprised of Messrs. Kesseler,
Pankratz, Roach, and Shepard (with Messrs. Roach and Shepard comprising an
Option sub-Committee of the Compensation Committee); (3) the Environmental,
Health and Safety Committee, which is comprised of Messrs. Hinrichs, Pankratz
and Knee; (4) the Executive Committee, which is comprised of Messrs. Boeker
and Pankratz; (5) the Finance Committee, which is comprised of Messrs.
Boeker, Coleman, Reinhard and Simpson; and (6) the Nomination Committee,
which is comprised of Messrs. Boeker and Pankratz.

The Audit Committee monitors Magma's basic accounting policies, reviews
Magma's audit and management reports, reviews Magma's systems for internal
control, monitors compliance with Magma's code of conduct and the Foreign
Corrupt Practices Act, and makes recommendations regarding the appointment of
independent auditors. The Compensation Committee establishes salaries and
other compensation for directors, executive officers and management level
officers of Magma. The Compensation Committee also reviews all employee
compensation programs including approval of merit budgets, establishment of
short and long-term incentive plans, benefits, and compliance with 1934 Act
reporting of Executive Compensation in Magma's proxy. The Option
sub-committee of the Compensation Committee administers the stock incentive
programs of Magma with full power for all grants and awards under the 1987
Stock Option Plan and under the 1994 Equity Participation Plan. The
Environmental, Health and Safety Committee oversees the environmental
compliance and other environmental, health and safety policies and programs
of Magma. The Executive Committee has broad discretionary authority to make
all executive decisions which are not expressly reserved to the Magma Board
by resolution or otherwise. The Finance Committee, established in April 1994,
oversees the financial affairs of Magma and makes recommendations to the
Magma Board as to financial policies formulated by management of Magma. The
Nomination Committee recommends nominees for election as directors, officers
and members of committees, and also from time to time makes recommendations
concerning enlarging or reducing the size of the Magma Board.

As of December 31, 1993, the six regularly constituted committees of the
Magma Board were: (1) the Audit Committee, which was comprised of Messrs.
Kesseler and Petersen; (2) the Compensation Committee, which was comprised of
Messrs. Kesseler, Petersen and Shepard; (3) the Environmental, Health and
Safety Committee, which was comprised of Messrs. Knee and Hinrichs; (4) the
Executive Committee, which was comprised of Messrs. Boeker and Pankratz; (5)
the Nomination Committee which was comprised of Messrs. Boeker and Pankratz;
and (6) the Stock Option Committee, which was comprised of Messrs. Petersen
and Shepard.

During 1993 (a) the Magma Board met nine times (including regularly
scheduled, special and telephonic meetings); (b) the Audit Committee met
three times; (c) the Compensation Committee met four times; (d) the
Environmental, Health and Safety Committee met three times; (e) the Executive
Committee took action once by unanimous written consent; (f) the Nomination
Committee took action once by unanimous written consent; (g) the Stock Option
Committee met four times; and (h) a Special Independent Committee met twice.
Each incumbent director who was a director during 1993 attended more than 75%
of the Magma Board meetings and meetings of standing committees of which he
was a member.

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<PAGE>

COMPENSATION OF DIRECTORS

Directors of Magma may be reimbursed for necessary expenses incurred in
connection with their attendance at Magma Board and committee meetings. Each
"outside" director receives a $15,000 annual fee, $1,500 for each Magma Board
meeting he attends, and $750 for each committee meeting he attends (if such
committee meeting is not held the same day as a Magma Board meeting). The
members of the Magma Board deemed to be "outside" directors for this purpose
(since they are neither employed by Magma nor affiliated with a major
stockholder of Magma) are currently Messrs. Coleman, Petersen, Roach and
Simpson.

On December 3, 1993, concurrent with Mr. Arnold L. Johnson's resignation
from the Magma Board, Magma accelerated the remaining payments he otherwise
would have received in 1994 under the agreement Mr. Johnson and Magma entered
into in connection with Mr. Johnson's resignation as an officer of Magma in
June 1991 (the "June 1991 Agreement"). Such accelerated payment to satisfy
Magma's obligations to Mr. Johnson under the June 1991 Agreement amounted to
approximately $1,164,000, which included a cash payment for Mr. Johnson's
supplemental benefit plan accounts. Mr. Shepard receives an annual payment of
$15,000 for serving as a shareholder relations consultant to Magma.

FAMILY RELATIONSHIPS

There are no family relationships between any director, executive officer
or person nominated or chosen to become a director or executive officer and
any other director, executive officer or person nominated or chosen to become
a director or executive officer of Magma.

SUMMARY COMPENSATION TABLE

The following table presents information about compensation awarded over
Magma's last three fiscal years to Mr. Pankratz and Magma's other four most
highly compensated executive officers as of December 31, 1994.

<TABLE>
<CAPTION>
ANNUAL LONG-TERM COMPENSATION
COMPENSATION AWARDS
------------------ --------------------------
OTHER ANNUAL RESTRICTED ALL OTHER
COMPENSATION STOCK AWARD OPTIONS/ COMPENSATION
NAME AND PRINCIPLE POSITION YEAR SALARY ($) BONUS (1)($) ($)(2) ($)(2) SARS (#)(4) ($)(5)
- ----------------------------- ------ ---------- ------------ -------------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul M. Pankratz (6)(7) ..... 1994 $263,250 $251,250 -- -- 0 52,622
Chairman of the Board of 1993 263,250 389,688 -- -- 48,000 69,226
Directors 1992 229,166 301,250(8) -- -- 66,000(9) 44,217
Ralph W. Boeker (6)(10) ..... 1994 299,037 276,375 -- -- 0 58,348
President and Chief Executive 1993 206,731 289,688 -- 167,500(11) 65,000 453,309(12)
Officer 1992 N/A N/A N/A N/A N/A N/A
Kenneth J. Kerr (13) ......... 1994 174,000 100,500 -- 333,000(14) 0 N/A
Senior Vice President 1993 N/A N/A N/A N/A N/A N/A
1992 N/A N/A N/A N/A N/A N/A
Jon R. Peele ................. 1994 172,817 108,875 -- -- 0 30,172
Executive Vice President, 1993 153,346 125,531 -- N/A 7,500 31,760
Corporate Secetary, General
Counsel 1992 145,000 87,750 -- -- 30,000 26,305
Trond Aschehoug (15) ......... 1994 152,462 83,750 -- 266,400(16) 0 25,752
Vice President & Director of 1993 139,356 86,906 -- 65,625(17) 0 17,554
North American Operations 1992 N/A N/A N/A N/A N/A N/A
</TABLE>

(Footnotes appear on the following page)

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<PAGE>

FOOTNOTES TO SUMMARY COMPENSATION TABLE

(1) Cash bonuses are paid to executive officers of Magma based upon their
individual contribution to Magma and Magma's overall financial
performance. Bonuses for 1994 were paid in December 1994 for 1994
performance.

(2) Excludes the value of perquisites and other personal benefits. The
incremental cost to Magma of providing such perquisites and other
personal benefits did not, during 1994, exceed the lesser of $50,000
or 10% of annual salary and bonus for the respective individuals named
in the Summary Compensation Table.

(3) Magma Deferred Stock is subject to vesting based on continuing
employment, and the holder of such Deferred Stock is not entitled to
vote or receive dividends until such Deferred Stock is vested. The
grant date value shown may overstate the value of Deferred Stock
because it does not take into account the negative effect of the lack
of transferability, vesting restrictions and potential loss of the
Deferred Stock upon termination of employment.

(4) There are currently no SARs outstanding.

(5) Represents amounts allocated by Magma for the accounts of the named
individuals to Magma Benefit Plans (as defined below) in 1994 as
follows:

<TABLE>
<CAPTION>
EMPLOYEE
RETIREMENT EMPLOYEES' EXECUTIVE
NAME SAVINGS PLAN PENSION PLAN SUPPLEMENTAL PLAN
- ----------------- -------------- -------------- -----------------
<S> <C> <C> <C>
Paul M. Pankratz $6,000 $9,000 $37,622
Ralph W. Boeker . 6,000 9,000 43,348
Kenneth J. Kerr . N/A N/A N/A
Jon R. Peele ..... 6,000 9,000 15,172
Trond Aschehoug . 6,000 9,000 10,752
</TABLE>

(6) Prior to January 11, 1994, Mr. Pankratz served as Chairman and CEO
and Mr. Boeker served in the capacity of President.

(7) Mr. Pankratz joined Magma as of February 1, 1992.

(8) Includes fair market value on the grant date ($98,750) of 5,000
Shares granted to Mr. Pankratz, without restrictions, in conjunction
with his initial employment by Magma and annual bonus of $202,500 for
Mr. Pankratz's contribution to Magma and Magma's financial
performance.

(9) Includes 30,000 options granted to Mr. Pankratz in conjunction with
his initial employment by Magma.

(10) Mr. Boeker joined the firm on March 1, 1993.

(11) Represents the value on the grant date of 5,000 shares of Deferred
Stock granted in conjunction with Mr. Boeker's initial employment by
Magma on March 1, 1993. As of December 31, 1994 Mr. Boeker held 3,000
shares of Deferred Stock which vest 1,000 shares on each of March 1,
1995, 1996 and 1997.

(12) Includes $404,858 associated with Mr. Boeker's relocation to Southern
California from Midland, Michigan.

(13) Mr. Kerr began serving in the capacity of an executive officer of
Magma during 1994. Includes amounts paid to The Dow Chemical Company
for Mr. Kerr as a "leased employee" serving in the capacity of an
executive officer.

(14) Represents the value on the grant date of 9,000 shares of Deferred
Stock. As of December 31, 1994 Mr. Kerr held 10,000 shares of Deferred
Stock which vest 1,000 shares on each of June 1, 1995 and 1996 and
9,000 on November 15, 2003.

(15) Includes amounts paid to The Dow Chemical Company for Mr. Achehoug as
a "leased employee" from Dow. Mr. Aschehoug became an employee of
Magma on July 1, 1993.

(16) Represents the value on the grant date of 7,200 shares of Deferred
Stock. As of December 31, 1994 Mr. Aschehoug held 8,600 shares of
Deferred Stock which vest 700 shares on each of July 1, 1995 and 1996
and 7,200 on November 15, 2003.

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<PAGE>

(17) Represents the value of 2,100 shares of Deferred Stock granted to Mr.
Aschehoug in conjunction with his employment on July 1, 1993.

OPTION GRANT TABLE

No stock options were granted to the above named executive officers during
fiscal 1994.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES

The following table summarized for each of the named executive officers
the number of Shares received upon exercise of stock options, if any, during
1994, the aggregate dollar value realized upon exercise, the total number of
Shares with respect to which unexercised options were held as of December 31,
1994, if any, and the aggregated dollar value of in-the-money, unexercised
options held as of December 31, 1994.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED
OPTIONS/SARS AT VALUE OF UNEXERCISED
SHARES FY-END (1) IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON VALUE EXERCISABLE AT FY-END ($)(1)
NAME EXERCISE(1) REALIZED($) UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
- ----------------- ------------- ----------- --------------- --------------------------
<S> <C> <C> <C> <C>
Paul M. Pankratz 0 $ 0 114,000/0 $ 1,450,620/$0
Ralph W. Boeker . 0 0 45,000/20,000 243,400/188,600
Kenneth J. Kerr . 0 0 5,000/10,000 32,550/65,100
Jon R. Peele ..... 10,000 154,500 27,500/10,000 244,050/188,250
Trond Aschehoug . 0 0 6,000/3,000 116,640/58,320
</TABLE>

(1) There are currently no SARs outstanding.

(2) These potential values have not been and may never be, realized. The
underlying options have not been, and may never be, exercised; actual
gains, if any, on exercise will depend on the value of Common Stock on
the date of exercise, if any.

MAGMA BENEFIT PLANS

Employee Retirement Savings Plan. Magma provides a Retirement Savings Plan
(the "401(k)Plan") pursuant to Section 401(k) of the Internal Revenue Code of
1986 (the "Code"). The 401(k) Plan became effective April 1, 1988, and covers
all of Magma's employees. Under the 401(k) Plan, Magma is obligated to
contribute 1% of each participating employee's eligible compensation and to
match 50% of the first 6% of the employee's contributions. In addition, Magma
may also make discretionary contributions. In fiscal year 1994, Magma made no
such discretionary contributions.

Employees' Pension Plan. The Magma Power Company Pension Plan (the
"Pension Plan") covers all of Magma's full-time regular employees who have
completed one year of service with Magma. The Pension Plan was effective as
of January 1, 1990. It is a qualified plan pursuant to Section 401(a) of the
Code. Under the Pension Plan, Magma is obligated to contribute an amount
equal to 6% of the eligible compensation of each of the participants in the
Pension Plan.

Executive Supplemental Plan. Magma maintains a Special Supplemental
Retirement Plan covering a select group of management and upper level
employees. The Supplemental Plan is an unfunded nonqualified plan under
Section 401(a) of the Code. It is designed to receive certain allocations of
funds that could not be contributed to the participants' 401(k) Plan or
Pension Plan accounts under current tax law limitations. Additionally, under
the Supplemental Plan, participating employees may defer income, and Magma
may also allocate amounts such as discretionary contributions.

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<PAGE>

1987 Stock Option Plan. The Magma Power Company 1987 Stock Option Plan
(which is a Rule 16b-3 Plan) provides that options to purchase an aggregate
of 1,000,000 Shares may be granted to salaried employees and consultants of
Magma and its subsidiaries, as selected by the Stock Option Committee of the
Magma Board (the "Option Committee"). The purchase price which must be paid
for stock in exercise of an option granted under the 1987 Stock Option Plan
will be fixed by the Option Committee when the option is granted, but such
price may not be less than 90% of the fair market value of the stock on the
grant date and must be at least 100% of such fair market value for any option
intended to be an "incentive stock option" under federal tax law.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

On January 20, 1992, Magma entered into an agreement with Paul M. Pankratz
in connection with his initial employment with Magma. This agreement provides
for the payment of one year's base salary and the immediate vesting of all
previously unvested stock options held by Mr. Pankratz in the event that Mr.
Pankratz' employment with Magma should be terminated without cause after a
change-in-control. This agreement is scheduled to terminate January 31, 1995.

In November 1993 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 in to "change in control" agreements with key
executives. The Compensation Committee authorized Magma to enter into
agreements subject to the following parameters:

(i) provision for up to two times base and bonus salary;

(ii) accelerated vesting of options; and

(iii) continuation of health and insurance benefits.

Each of the items referred to in (i) through (iii) 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 change in control agreements with
each of its six current executive officers (Paul Pankratz, Chairman of the
Magma 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").

MAGMA COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

As members of the Magma Compensation Committee, it is our duty to oversee
Magma's overall compensation programs to ensure compliance with Magma's
compensation philosophy, to evaluate the performance of the Chief Executive
Officer (CEO), review the performance of the executive management group,
establish the compensation level of the CEO, review compensation levels for
the executive management group, and consider related matters.

The compensation programs of Magma are designed to align executive
officers' compensation with the strategic goals and performance of Magma. The
Compensation Committee strives to develop and administer programs that will:

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o Attract and retain key executive officers critical to the long-term
success of Magma;

o Provide salary and total compensation levels for executive officers
which are competitive with the median salary and compensation levels for
Magma's competitors;

o Motivate executive officers to enhance long-term stockholder value in
Magma; and

o Integrate Magma's compensation programs with its strategic planning and
measurement processes.

The compensation philosophy of Magma, which is endorsed by the Magma
Compensation Committee, is to provide salary and total compensation levels
comparable to the median of Magma's compensation peer group, specifically,
those publicly traded independent power producers and growth companies
similar to Magma. This peer group includes substantially all of the members
of the Industry Peer Group reflected in the 1993 Proxy Performance graph plus
an additional group of publicly traded technology growth companies with
annual revenues, growth history, and other performance and business
characteristics similar to Magma but which may not directly compete with
Magma in its independent power business. The compensation philosophy also
calls for a substantial portion of the annual compensation of each executive
officer to relate to, and be contingent upon the performance of Magma and the
individual contribution of such executive officer to such performance. As a
result, much of an executive officer's compensation is "at risk" with annual
incentive bonus compensation amounting to a significant portion of total cash
compensation.

The Compensation Committee retained in 1993 the services of an outside
executive compensation consulting firm to assist in the performance of its
various duties. The results of the consulting firm's study disclosed that
Magma's executive compensation levels, base salary, annual and long-term
incentives, were below the median of its peer group. As such, the Committee
approved a program to bring compensation levels in line with its philosophy
over a two-year period. The Committee takes into account Magma's performance
as well as the competitiveness of Magma's compensation levels to the
comparable levels paid by Magma's compensation peer group.

The base salary and target bonus for Magma's newly appointed Chief
Executive Officer, Mr. Ralph W. Boeker, were based principally on his rights
under his offer of employment as President of Magma as detailed in the letter
dated January 20, 1993 (the "January 20, 1993 Letter"). On January 11, 1994,
the Compensation Committee recommended to the Magma Board of Directors, and
the Magma Board of Directors approved, that Mr. Boeker's base annual salary
be increased to $300,000 concurrent with his appointment as Magma's Chief
Executive Officer. This increase was based on the compensation survey data
provided by Magma's executive compensation consulting firm and is in line
with Magma's compensation philosophy to compensate at the median level of its
peer group. The January 20, 1993 Letter also provided for (i) the grant by
the Stock Option Committee to Mr. Boeker of 30,000 options under Magma's 1987
Stock Option Plan with an exercise price of 90% of the fair market value of
the Common Stock on the grant date and with three years vesting and (ii) the
grant of 5,000 shares of restricted Common Stock vesting 1,000 shares on date
of hire and 1,000 shares per year on the succeeding four anniversaries of the
date of hire. The terms of the January 20, 1993 Letter were designed to
provide Mr. Boeker with total compensation levels comparable to the median of
Magma's compensation peer group.

The base salary and target bonus for Magma's former Chief Executive
Officer and current Chairman of the Magma Board of Directors, Mr. Paul M.
Pankratz, were unchanged from the levels reported last year.

Under Magma's annual management incentive bonus plan, bonuses are based
one-half on the individual's performance and one-half on the performance of
Magma, with target bonuses of approximately 35% to 50% of total cash
compensation, except in extraordinary circumstances. Magma's performance for
purposes of compensation decisions is measured under the annual incentive
bonus plan against goals established for a given fiscal year by the
Compensation Committee. The 1993 goals consisted of performance objectives
for both the individuals and Magma. Company performance was measured by
actual 1993 income before taxes (net income plus provision for taxes)
compared to targeted 1993 income before taxes ("IBT"). In 1993 Magma
materially exceeded the targeted IBT goal and in 1992, Magma

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<PAGE>

substantially met the targeted IBT objective. The Committee evaluated
individual performance, so that, on average, together with the over
achievement on Company performance, total 1993 annual incentive bonuses
represented approximately 43% of total cash compensation for the executive
officers. In assessing the individual performances of Messrs. Pankratz and
Boeker, the Committee was influenced by (a) the successful integration of the
acquired geothermal assets from Union Oil of California into Magma's
operation, (b) the successful consummation of an energy conversion agreement
with the Philippine National Oil Company for a 231 MW(gross) geothermal
generating facility on the island of Leyte, and (c) Magma's record results in
1993 with net income up 51% and revenues 53% greater than the previous year.

In addition to the annual incentive bonus plan, Magma's 1987 Stock Option
Plan is an integral part of Magma's long-term compensation program. Such
long-term compensation is designed to encourage and create ownership and
retention of Magma's stock by key employees and to provide incentives to
increase the profits and long-term profitable growth of Magma. This program
is designed to align the long range interests of key employees with those of
the stockholders. The 1987 Stock Option Plan is administered by the Option
Sub-Committee of the Compensation Committee. In November of 1993, under the
1987 Stock Option Plan, Mr. Boeker was granted by the Option Sub-Committee a
performance award of 35,000 options, and Mr. Pankratz was granted by the
Option Sub-Committee a performance award of 48,000 options, all at an
exercise price of 90% of the fair market value of the Common Stock on the
grant date. Such options were based on an evaluation of these executives'
performance and their contributions to Magma, their options granted
previously, and the long-term compensation and total compensation levels
provided to Magma's compensation peer group. Such options fully vest one year
after the grant date. In addition, Jon R. Peele received 7,500 options fully
vested after one year from the date of grant. These option grants were
structured to provide these executive officers with total compensation levels
comparable to the median of Magma's compensation peer group.

Roger L. Kesseler, Chairman
Bent Petersen
James D. Shepard

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of the Compensation Committee during 1993 were Mr. Kesseler,
Mr. Petersen and Mr. Shepard. As of the Record Date, the members of the
Compensation Committee are Messrs. Kesseler, Pankratz, Roach and Shepard,
with Messrs. Roach and Shepard serving as members of the Option
Sub-Committee. Mr. Shepard is a former Vice President and Treasurer of Magma.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Dow Services. Under two technical services agreements between Magma and
Dow, Dow agreed to furnish certain technical and other services in connection
with the operation of Magma's geothermal power plants. Magma, in turn, agreed
to pay for such services in cash payments or through the issuance of
previously authorized but unissued shares of Common Stock. In 1993, Magma
entered into a new agreement with Dow (the "1993 Technical Services
Agreement") which amends, restates and supersedes the prior technical
services agreements. Under the 1993 Technical Services Agreement, Dow has
agreed to provide technical services for Magma's geothermal power plants
until January 1, 2000. Magma, in turn, has agreed to make payments for such
technical services in the amounts of $575,000 for 1993 and $550,000 for 1994
and thereafter in annual amounts reduced by $50,000 each year to $300,000 for
1999. Such annual payments entitle Magma each year to receive technical
services from Dow equivalent in value to such year's payment, invoiced at
Dow's internal interdepartmental charge rates. Magma may obtain additional
technical services from Dow (if available), invoiced and paid for by Magma at
such scheduled rates. Magma is also entitled to receive from Dow technical
services for additional power plants by increasing the annual payments to Dow
by $50,000 for each such plant, subject to certain limitations. Payments
under the 1993 Technical Services Agreement are to be made exclusively in
cash --there is no provision for payment in Shares. In 1993, Magma paid Dow
$575,000 under the 1993 Technical Services Agreement. In addition, in March
1994 Magma signed a five-year agreement (the "1994 Engineering and
Construction Management Services Agreement") with Dow Engineering Company
("DEC"). Under the Agreement,

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DEC will provide engineering, procurement and construction management
services to Magma, including process engineering, project design, procurement
and construction management services for Magma's existing and future
geothermal power projects in North America. Magma believes that the 1993
Technical Services Agreement and the 1994 Engineering and Construction
Management Services Agreement are on terms at least as favorable to Magma as
would be available from an unaffiliated third party.

Dow Options. In October 1993 Magma acquired at a discount Dow's option to
purchase for an exercise price of $21 per share two million shares of Magma
Common Stock. Magma purchased the options for 857,143 shares of newly issued
and unregistered shares of its stock (the "Dow Shares"). The closing price of
Magma's common stock on the date the acquisition was consummated was $38.50
per share. J.P. Morgan Securities Inc. was retained by an independent
committee of Magma's Board of Directors to assist in valuing the option.
Under the Option Surrender Agreement, Dow agreed not to sell the newly issued
shares before September 30, 1994 (the "Lock-up"). The purposes for this
acquisition included lessening the magnitude of the overhang caused by the
two million shares subject to the option. The newly issued shares did not
materially impact Magma's 1993 earnings per share calculations since the
option shares were already reflected in the number of shares used in
calculating primary earnings per share.

On July 26, 1994, Magma agreed to release Dow from the Lock-up in
consideration of Dow's agreement to (i) sell the Dow Shares in a single block
transaction in a private placement outside of the Nasdaq National Market,
(ii) cause the purchaser of the Dow Shares to agree in writing to refrain
from reselling the Dow Shares until after September 29, 1994 and (iii) give
Magma the opportunity to review the final form of any Dow public disclosure
regarding this matter at least three business days prior to public release or
filing.

On September 12, 1994, Dow sold 857,143 shares of Common Stock to Garantia
Banking Limited, a Bahamian corporation ("Garantia"), for $24,214,289.75. On
September 12, 1994, Dow acquired an option (the "Option") to purchase 857,143
shares of Common Stock from Garantia for an exercise price of $24,214,289.75.
The Option was acquired in consideration of $150,000. According to a filing
by Dow with the SEC, the purpose of this transaction was to match Dow's book
and tax basis for the Dow Shares. On September 30, 1994, Dow exercised the
Option in full and reacquired the 857,143 shares from Garantia for
$24,214,289.75.

Following these transactions, Dow holds over 5 million Shares,
approximately 4 million of which are currently held in escrow for
exchangeable notes.

1993 Stock Offering. Pursuant to a registration rights agreement, Dow
requested that Magma facilitate a registered public offering by Dow of
certain of its Shares. Accordingly, Magma filed, and in June 1993 the
Commission declared effective, a registration statement covering the sale by
Dow of 3,635,000 Shares and the sale by J. P. Morgan & Co. Incorporated of
365,000 shares of Company Common Stock. Pursuant to the registration rights
agreement, Magma paid the first $100,000 of its accounting, printing, legal
and other expenses of the offering, and the two selling shareholders paid the
remainder of such expenses.

1991 Stock Offering. In April 1991, Magma registered 4,000,005 Shares (the
"Registered Shares") owned by Dow. The Registered Shares were placed in
escrow by Dow for delivery upon exchange of the Notes. The Notes are
exchangeable at any time into shares of Common Stock at an exchange rate of
26,667 shares per $1,000 principal amount of the Notes. Dow retains the right
to vote the shares placed in escrow. A registration statement covering the
Registered Shares (the "Registration Statement") was filed by Magma on behalf
of Dow pursuant to existing registration rights agreements between Magma and
Dow. Magma has agreed to keep the Registration Statement current until the
earlier of (i) the maturity of the Notes in 2001 or (ii) the date on which
all of the Notes have been exchanged or redeemed. Magma and Dow have agreed
to indemnify each other against certain liabilities, including liabilities
under the 1933 Act in connection with the Registration Statement and another
registration statement concurrently filed by Dow in connection with its
issuance of the Notes.

Aschehoug Home Purchase. In September 1994, Magma sold a residential home
to Mr. Aschehoug and his wife (the "Aschehougs") for $250,000. The purchase
price of $250,000 was determined by an

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independent appraisal of the property. The Aschehougs financed the purchase
with a 90-day note (the "Note") from Magma in the amount of $200,000 bearing
interest at a rate of 6.49% per annum. In November 1994, the Aschehougs
refinanced the Note and paid Magma in full.

Kerr Relocation Loan. In July 1993, Magma made an interest-free employee
relocation loan (the "Loan") to Mr. Kerr and his wife (the "Kerrs") in the
amount of $100,000 for the purpose of financing the purchase of a new
residence. The Loan is secured by a deed of trust granted by the Kerrs to
Magma relating to their new residence. Mr. Kerr is obligated to make annual
reduction payments on the Loan in an amount equal to one-half the annual cash
bonus paid to him for services rendered in the preceding fiscal year, less
any taxable portion thereof. Currently, $77,000 remains outstanding under the
Loan and the final balance is due and payable in full on July 16, 1998.

Halliburton Services. Halliburton Energy Services ("Halliburton Energy")
provides Magma Operating Company, a subsidiary of Magma, with various
maintenance services for Magma's well fields. Mr. Coleman is the Executive
Vice President and General Counsel of Halliburton Company, the parent of
Halliburton Energy. While the terms by which Halliburton Energy provides
services are currently determined on a case-by-case basis, Magma Operating
Company is considering negotiating a long term maintenance service agreement
with Halliburton Energy. For the nine-month period ended September 30, 1994
and for fiscal 1993, Magma Operating Company made payments to Halliburton
Energy of approximately $225,000 and $700,000, respectively.

DESCRIPTION OF CECI CAPITAL STOCK

CECI COMMON STOCK

As of September 30, 1994, there were 32,229,584 shares of CECI Common
Stock outstanding (not including shares issuable pursuant to outstanding
stock options and upon conversion of all outstanding shares of CECI Preferred
Stock). The holders of CECI Common Stock are entitled to one vote for each
share held of record on all matters submitted to a vote of stockholders.
Holders of the CECI Common Stock and holders of the CECI Preferred Stock vote
together as a single class on all matters other than certain matters
affecting the class of CECI Preferred Stockholders or upon the occurrence of
any default in the payment of any required dividends to the CECI Preferred
Stockholders. Subject to preferences that may be applicable to any
outstanding CECI Preferred Stock, holders of CECI Common Stock are entitled
to receive ratably such dividends as may be declared by CECI's Board of
Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of CECI, holders of CECI Common Stock
are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preference of any outstanding CECI Preferred
Stock. Subject to certain exceptions, Kiewit Energy has the right to purchase
its pro rata share of any securities convertible into CECI Common Stock or
any other equity securities offered or sold by CECI at a price less than the
greater of the current market price of the CECI Common Stock or the exercise
price of certain options granted to Kiewit Energy. No other holders of CECI
Common Stock have preemptive rights and holders of CECI Common Stock have no
rights to convert their CECI Common Stock into any other securities. The
outstanding shares of CECI Common Stock are, and the CECI Common Stock to be
issued upon conversion of the Debentures will be, fully paid and
nonassessable.

As of September 30, 1994, CECI had outstanding $100,000,000 principal
amount of 5% Convertible Subordinated Debentures due July 31, 2000 (the
"Convertible Debentures"). The Convertible Debentures are convertible into
shares of CECI Common Stock at any time at or prior to maturity at a
conversion price of $22.50 per share, subject to adjustment in certain
events, including (i) dividends (and other distributions) payable in CECI
Common Stock on any class of capital stock of CECI, (ii) subdivisions,
combinations and reclassifications of CECI Common Stock, (iii) the issuance
to all holders of CECI Common Stock of rights or warrants entitling them to
subscribe for or purchase CECI Common Stock at less than the then current
market price and (iv) distributions to all holders of CECI Common Stock of
evidence of indebtedness of CECI or assets (including shares of its capital
stock (other than CECI Common Stock) and other securities, but excluding
those rights, warrants, dividends and distributions referred to in clauses
(i) and (iii) above, subdivisions of shares referred to in clause (ii) above

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and dividends and distributions paid in cash out of funds legally available
for distribution to stockholders under the laws of CECI's state of
incorporation). In addition to the foregoing adjustments, CECI will be
permitted to make such reductions in the conversion price as it considers to
be advisable in order that any event treated for federal income tax purposes
as a dividend of stock or stock rights will not be taxable to the holders of
the CECI Common Stock.

On December 1, 1988, CECI distributed a dividend of one Preferred Share
Purchase Right (a "CECI Right") for each outstanding share of CECI Common
Stock. The CECI Rights are not exercisable until ten days after a person or
group acquires, or has the right to acquire, beneficial ownership of 20% or
more of CECI Common Stock or announces a tender or purchase offer for 30% or
more of CECI Common Stock. Each CECI Right entitles the holder to purchase
one one-hundredth of a share of Series A Junior Preferred Stock, no par value
(the "Series A Preferred Stock"), for $52.00. The CECI Rights may be redeemed
by CECI's Board of Directors up to ten days after an event triggering the
distribution of certificates for the CECI Rights. The CECI Rights Plan
pursuant to which such CECI Rights were issued was amended in February 1991
so that Kiewit Energy's purchase of CECI Common Stock would not trigger the
exercise of such Rights. The CECI Rights will expire, unless previously
redeemed or exercised, on November 30, 1998. The CECI Rights are
automatically attached to, and trade with, each share of CECI Common Stock.

CECI PREFERRED STOCK

The CECI Board has the authority to issue 1,534,009 shares of CECI
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend
rates, conversion rights, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting any
series or the designation of such series, without any further action by the
stockholders. The issuance of additional shares of CECI Preferred Stock may
have the effect of delaying, deferring or preventing a change in control of
CECI without further action by the stockholders. The issuance of additional
shares of CECI Preferred Stock with voting and conversion rights may
adversely affect the voting power of the holders of CECI Common Stock,
including the loss of voting control to others. CECI has no present plans to
issue any additional shares of CECI Preferred Stock. As of September 30,
1994, 1,247 shares of CECI Preferred Stock were outstanding.

The CECI Preferred Stock has a dividend rate of 8.125%, commencing March
15, 1992 through the conversion date or December 15, 2003. The dividends,
which are cumulative, are currently payable quarterly in kind through March
15, 1995 and in cash on subsequent dividend dates.

DESCRIPTION OF MAGMA CAPITAL STOCK

The authorized capital stock of Magma includes 30,000,000 Shares and
1,000,000 shares of preferred stock, par value $.10 per share (the "Magma
Preferred Stock"). As of September 30, 1994, there were 24,042,915 Shares
issued and outstanding and no shares of Magma Preferred Stock issued or
outstanding.

THE SHARES

The holders of Shares are entitled to one vote per share for the election
of the directors of Magma and for all other matters to be voted upon by the
stockholders of Magma. The holders of Shares have no cumulative voting
rights.

The holders of Shares are entitled to share ratably in such dividends and
other distributions as may be declared by Magma's Board of Directors and paid
by Magma out of funds legally available therefor (subject to prior rights of
Magma Preferred Stock, if any). In the event of any liquidation, dissolution
or winding up of Magma, holders of Shares are entitled to share ratably in
the assets available for distribution to such stockholders after the payment
of all prior claims.

Holders of Shares have no redemption, preemptive or subscription rights,
nor do they have any conversion privileges.

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MAGMA PREFERRED STOCK

The authorized capital stock of Magma includes 1,000,000 shares of Magma
Preferred Stock, par value $.10 per share, none of which is issued or
outstanding. Magma's Board is authorized to issue, from time to time by
resolution and generally without further action by the stockholders of Magma,
shares of Magma Preferred Stock in one or more series and to determine,
subject to the provisions of Nevada law, the voting powers, designations,
preferences, limitations, restrictions and relative rights (including rights,
if any, with respect to dividends, conversion privileges, redemption, sinking
funds and liquidation) of such series of Magma Preferred Stock.

COMPARISON OF STOCKHOLDER RIGHTS

Upon consummation of the Merger and assuming CECI elects to pay the Merger
Consideration with a combination of cash and CECI Common Stock, 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 is a comparison of the material provisions 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. 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 eight directors and is 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

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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. Magma's Articles of Incorporation
provide that a director or officer of Magma shall not be personally liable to
Magma or its stockholders for damages for breach of fiduciary duty as a
director or an officer, but do not eliminate or limit the liability of a
director or an officer for (a) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law or (b) the unlawful payment
of distributions.

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 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 with regard to
the transactions contemplated by the Merger Agreement.

The NGCL also contains provisions restricting the ability of a corporation
to engage in any combination with an interested stockholder (i) unless three
years have elapsed since the time such interested stockholder becomes such
and the combination complies with certain fair price specifications or (ii)
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.

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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, certain provisions of its Articles of
Incorporation that concern directors. Magma's Bylaws provide that the
affirmative vote of a majority of 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 share 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 that
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 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

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dissenters' rights with respect to a merger or consolidation by a
corporation, the shares of which are either listed on a national securities
exchange or held by at least 2,000 stockholders of record if stockholders
receive shares of the surviving corporation or of a listed or widely-held (at
least 2,000 stockholders) corporation ("widely-held stock"); however, both
the DGCL and NGCL have certain exceptions to such rule and the principal
difference between such exceptions is that under the NGCL holders do not have
appraisal rights if they receive cash, either exclusively or in addition to
surviving corporation stock or widely-held stock.

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.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT OF CECI

The following table sets forth certain information with respect to all
stockholders known by CECI to beneficially own more than 5% of either the
CECI Common Stock or the Series C Preferred Stock and certain information
with respect to the beneficial ownership of each director and the five most
highly compensated executive officers of CECI (and all directors and
executive officers of CECI, as a group) of CECI Common Stock. All information
is as of September 30, 1994, unless otherwise indicated.

<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME (AND ADDRESS IF REQUIRED) BENEFICIALLY PERCENTAGE
OF BENEFICIAL OWNER OWNED(1) CLASS (1)
- ----------------------------------- -------------- ------------
<S> <C> <C>
SERIES C PREFERRED STOCK:
Kiewit Energy Company 1000 Kiewit
Plaza Omaha, Nebraska 68131 ...... 1,247 100%

CECI COMMON STOCK:
Kiewit Energy Company(2) ........... 18,154,272 43.84%
Merrill Lynch & Co. Inc.(3) ....... 2,249,210 6.98%
The Equitable Companies, Inc.(4) .. 2,027,182 6.29%
Forstmann-Leff Associates, Inc. (5) 1,829,235 5.68%
Neuberger & Berman ................. 1,668,475 5.18%
Edgar D. Aronson ................... 47,000 .15%
Judith E. Ayres .................... 60,000 .19%
Harvey F. Brush .................... -0- -0-
James Q. Crowe ..................... 10,000 .03%
Richard K. Davidson ................ 40,000 .12%
Ben Holt ........................... 124,365 .39%
Richard R. Jaros ................... 309,179 .95%
Everett B. Laybourne ............... 27,790 .09%
Daniel J. Murphy ................... 30,000 .09%
Herbert L. Oakes, Jr.(6) ........... 66,355 .21%
Walter Scott, Jr. .................. 10,000 .03%
Barton W. Shackelford .............. 12,860 .04%
David E. Wit(7) .................... 47,875 .15%
David L. Sokol ..................... 459,509 1.41%
Thomas R. Mason .................... 92,440 .29%
Steven A. McArthur ................. 111,703 .35%
Donald M. O'Shei, Sr. .............. 68,137 .21%
John G. Sylvia ..................... 101,055 .31%
All directors and executive
officers as a group (18 persons) . 1,618,268 4.81%
<FN>
(1) Includes shares of CECI Common Stock which the listed beneficial owner
is deemed to have the right to acquire beneficial ownership under Rule
13d-3(d) under the Exchange Act, including, among other things, shares
of CECI Common Stock which the listed beneficial owner has the right to
acquire within 60 days.

(2) Includes the 7,436,112 shares of CECI Common Stock Kiewit Energy held
on October 29, 1992, the date of Amendment No. 6 to their Schedule 13D,
options to purchase an additional 5,789,163 shares of CECI Common Stock
and 3,393,197 shares of CECI Common Stock into which the 1,247 shares
of Series C Preferred Stock held by Kiewit Energy are convertible, and
1,535,800 shares purchased in the open market.

141

<PAGE>

(3) According to a Schedule 13G filed by such parties in February 1994,
includes shares of CECI Common Stock registered in the names of Merrill
Lynch & Co., Inc., Merrill Lynch Group, Inc., Princeton Services, Inc.
and Merrill Asset Management, L.P.

(4) According to a Schedule 13G filed by such parties in February 1994,
includes shares of CECI Common Stock registered in the names of The
Equitable Companies Incorporated, Axa Assurances L.A.R.D. Mutuelle, Axa
Assurances Vie Mutuelle, Alpha Assurances L.A.R.D. Mutuelle, Alpha
Assurances Vie Mutuelle, Uni Europe Assurance Mutuelle and Axa.

(5) According to a Schedule 13G filed by such parties in February 1994,
includes shares of CECI Common Stock registered in the name of
Forstmann-Leff Associates Inc., FLA Asset Management, Inc. and Stamford
Advisors Corp.

(6) Includes 9,093 shares registered in the name of H.L. Oakes & Co.,
Inc., a company of which Mr. Oakes is a director and of which his wife
is a principal stockholder, 4,746 shares owned by Mr. Oakes' wife and
4,996 shares registered to H.L. Oakes, trustee for Harrison Oakes, Mr.
Oakes' minor son. Mr. Oakes disclaims beneficial ownership of all of
those shares.

(7) Includes 3,748 shares of CECI Common Stock held jointly with his
spouse.
</TABLE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF MAGMA

The following table sets forth certain information with respect to all
stockholders known by Magma to beneficially own more than 5% of the Shares
and certain information with respect to the beneficial ownership of each
director and the five most highly compensated executive officers of Magma
(and all directors and executive officers of Magma, as a group) of Shares.
All information is as of October 1, 1994, unless otherwise indicated.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME (AND ADDRESS IF REQUIRED) BENEFICIALLY OWNED PERCENTAGE
OF BENEFICIAL OWNER(1) (2) CLASS (3)
- ------------------------------------------------- -------------------- ------------
<S> <C> <C>
The Dow Chemical Company ......................... 5,032,430(4) 21.0%
2030 Dow Center Midland, MI 48674
B.C. McCabe Foundation ........................... 2,752,641(5) 11.5%
7624 S. Painter Ave., Suite A
Whittier, CA 90602-2313
Firstar Investment Research & Management Company 1,975,500 8.2%
777 E. Wisconsin Avenue Milwaukee, WI 53202
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.

142

<PAGE>

(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 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. Dieckmann's 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 referred to in Note 17 above. The number of
outstanding Shares for this purpose is 24,272,812.

143

<PAGE>

OTHER MATTERS

It is not expected that any other matters other than those described in
this Information Statement will be brought before the Magma Special Meeting.

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 annual consolidated financial statements of CECI and subsidiaries
included in this Information Statement have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report (which report expresses
an unqualified opinion and includes 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 included herein, and have been so included in reliance upon
the report of such firm given upon their authority as experts in accounting
and auditing.

With respect to the unaudited interim financial information for the period
ended September 30, 1994 of CECI and subsidiaries, which is included herein,
Deloitte & Touche LLP have applied limited procedures in accordance with
professional standards for a review of such information. However, as stated
in their report included herein, they did not audit and they do not express
an opinion on that interim financial information. Accordingly, the degree of
reliance on their report 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 report on the unaudited interim financial information
because that report is not a "report" or a "part" of a registration statement
prepared or certified by an accountant within the meaning of Sections 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, included in
this Information Statement have been included 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 proposal which a Magma stockholder intended to present at the Magma
1995 Annual Meeting of Stockholders (if the Merger has not been consummated
prior to the date the meeting is to be held) must have been received by Magma
no later than January 11, 1995 in order to be considered for inclusion, if
appropriate, in Magma's proxy statement relating to such meeting. Any such
proposal should have been directed to the Secretary, Magma Power Company,
4365 Executive Drive, Suite 900, San Diego, California 92121.

144

<PAGE>

INDEX TO FINANCIAL STATEMENTS

CECI'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO

<TABLE>
<CAPTION>
<S> <C>
Financial Statements for Period Ending December 31, 1993
INDEPENDENT AUDITORS' REPORT .................................. F-2
CONSOLIDATED BALANCE SHEETS ................................... F-3
CONSOLIDATED STATEMENTS OF OPERATIONS ......................... F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY ............... F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS ......................... F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .................... F-7

Financial Statements for Period Ending September 30, 1994
INDEPENDENT ACCOUNTANTS' REPORT ............................... F-26
CONSOLIDATED BALANCE SHEETS ................................... F-27
CONSOLIDATED STATEMENTS OF OPERATIONS ......................... F-28
CONSOLIDATED STATEMENTS OF CASH FLOWS ......................... F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .................... F-30

MAGMA'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO .... F-36

Financial Statements for Period Ending December 31, 1993
REPORT OF INDEPENDENT ACCOUNTANTS ............................. F-36
CONSOLIDATED BALANCE SHEETS ................................... F-37
CONSOLIDATED STATEMENTS OF OPERATIONS ......................... F-38
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY ... F-39
CONSOLIDATED STATEMENTS OF CASH FLOWS ......................... F-40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .................... F-41

Financial Statements for Period Ending September 30, 1994
CONSOLIDATED BALANCE SHEETS ................................... F-49
CONSOLIDATED STATEMENTS OF OPERATIONS ......................... F-50
CONSOLIDATED STATEMENTS OF CASH FLOWS ......................... F-51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS .................... F-52

IMPERIAL VALLEY GEOTHERMAL INTERESTS (ACQUIRED BY MAGMA)
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS ............................. F-53
STATEMENT OF NET ASSETS ACQUIRED .............................. F-54
HISTORICAL SUMMARIES OF GROSS REVENUES AND DIRECT OPERATING
EXPENSES ..................................................... F-55
NOTES TO THE STATEMENT OF NET ASSETS ACQUIRED ................. F-56
</TABLE>

F-1

<PAGE>

CECI'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO

FINANCIAL STATEMENTS FOR PERIOD ENDING
DECEMBER 31, 1993

Independent Auditors' Report

Board of Directors and Shareholders
California Energy Company, Inc.
Omaha, Nebraska

We have audited the accompanying consolidated balance sheets of California
Energy Company, Inc. and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of operations, stockholders' equity and
cash flows for each of the three years in the period ended December 31, 1993.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of California Energy Company, Inc.
and subsidiaries at December 31, 1993 and 1992 and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles.

As discussed in Note 8, the consolidated financial statements give effect to
the Company's adoption, effective January 1, 1993, of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes."

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP
Omaha, Nebraska
February 24, 1994

F-2

<PAGE>

CONSOLIDATED BALANCE SHEETS
(As of December 31, 1993 and December 31, 1992)
(Dollars and shares in thousands, except per share amounts)

<TABLE>
<CAPTION>
ASSETS 1993 1992
---------- ----------
<S> <C> <C>
Cash and investments ....................................... $127,756 $ 54,671
Joint venture cash and investments (Note 5) ................ 14,943 8,848
Restricted cash (Notes 4 and 5) ............................ 48,105 62,514
Accounts receivable ........................................ 21,658 16,172
Transmission line deposit (Note 13) ........................ -- 7,684
Due from Joint Ventures .................................... 1,394 --
Geothermal power plant and development costs, net
(Notes 4 and 5) .............................................. 458,974 389,646
Equipment, net of accumulated depreciation of $4,773 and
$3,996 ...................................................... 4,540 4,312
Notes receivable--Joint Ventures (Note 13) ................. 11,280 9,997
Deferred charges and other assets .......................... 27,334 26,706
---------- ----------
Total assets ............................................ $715,984 $580,550
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable .............................................. $ 607 $ 3,146
Other accrued liabilities .................................. 19,866 18,111
Income taxes payable (Note 8) .............................. 4,000 --
Project finance loans (Note 5) ............................. 246,880 263,604
Due to Joint Ventures ...................................... -- 469
Senior notes (Note 6) ...................................... 35,730 35,730
Convertible subordinated debentures (Note 7) ............... 100,000 --
Deferred income taxes ...................................... 18,310 15,212
---------- ----------
Total liabilities ........................................ 425,393 336,272
Deferred income (Note 4) .................................... 20,288 21,164
Commitments and contingencies (Notes 3, 6, 9, 13 and 16)
Redeemable preferred stock (Note 10) ......................... 58,800 54,350
Stockholders' equity (Notes 11 and 12):
Preferred stock--authorized 2,000 shares, no par value (Note
10) ......................................................... -- --
Common stock--authorized 60,000 shares, par value $0.0675
per share, issued and outstanding 35,446 and 35,258 shares. 2,404 2,380
Additional paid in capital ................................. 100,965 97,977
Retained earnings .......................................... 111,031 68,407
Treasury stock--157 common shares at cost .................. (2,897) --
---------- ----------
Total stockholders' equity ............................... 211,503 168,764
---------- ----------
Total liabilities and stockholders' equity .............. $715,984 $580,550
========== ==========
</TABLE>

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

F-3

<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Sales of electricity and steam .................... $132,059 $117,342 $106,184
Interest and other income ......................... 17,194 10,187 9,379
---------- ---------- ----------
Total revenues ................................. 149,253 127,529 115,563
---------- ---------- ----------
Cost and expenses:
Plant operations .................................. 25,362 24,440 23,525
General and administration ........................ 13,158 13,033 12,476
Royalties ......................................... 8,274 7,710 5,505
Depreciation and amortization ..................... 17,812 16,754 14,752
Interest .......................................... 30,205 20,459 29,814
Less interest capitalized ......................... (6,816) (5,599) (5,375)
---------- ---------- ----------
Total expenses ................................. 87,995 76,797 80,697
---------- ---------- ----------

Income before provision for income taxes .......... 61,258 50,732 34,866
Provision for income taxes (Note 8) ................ 18,184 11,922 8,284
---------- ---------- ----------
Income before change in accounting principle and
extraordinary item ................................ 43,074 38,810 26,582
Cumulative effect of change in accounting principle
(Note 8) .......................................... 4,100 -- --
Extraordinary item (Note 15) ....................... -- (4,991) --
---------- ---------- ----------
Net income ......................................... 47,174 33,819 26,582
Preferred dividends ................................ 4,630 4,275 --
---------- ---------- ----------
Net income available to common stockholders ....... $ 42,544 $ 29,544 $ 26,582
========== ========== ==========
Income per share before change in accounting
principle and extraordinary item .................. $ 1.00 $ 0.92 $ 0.75
Cumulative effect of change in accounting principle
(Note 8) .......................................... 0.11 -- --
Extraordinary item (Note 15) ....................... -- (0.13) --
---------- ---------- ----------
Net income per share ............................... $ 1.11 $ 0.79 $ 0.75
========== ========== ==========
Average number of shares outstanding ............... 38,485 37,495 35,471
========== ========== ==========
</TABLE>

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

F-4

<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(For the three years ended December 31, 1993)
(Dollars and shares in thousands)

<TABLE>
<CAPTION>
ADDITIONAL
OUTSTANDING COMMON PAID-IN RETAINED TREASURY
COMMON SHARES STOCK CAPITAL EARNINGS STOCK TOTAL
------------- -------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance January 1, 1991 ....... 23,218 $1,567 $ 39,353 $14,168 $ -- $ 55,088
Exercise of stock options ... 2,329 157 14,959 -- -- 15,116
Sale and private placement of
common stock (Note 12) .... 6,505 439 43,237 -- -- 43,676
Exercise of warrants ........ 660 45 2,897 -- -- 2,942
Issue costs of sale of
preferred stock ........... -- -- (276) -- -- (276)
Net income .................. -- -- -- 26,582 -- 6,582
------------- -------- ------------ ---------- ---------- ----------

Balance December 31, 1991 ..... 32,712 2,208 100,170 40,750 -- 143,128
Exercise of stock options ... 1,544 67 2,764 -- -- 2,831
Exercise of warrants ........ 612 41 1,206 -- -- 1,247
Issue costs on stock ........ -- -- (96) -- -- (96)
Purchases/issuances of
treasury stock for exercise
of options and warrants,
net of proceeds of $797 ... (565) -- (4,090) -- -- (4,090)
Preferred stock dividends,
series B & C, including
cash distributions of $134 -- -- -- (6,162) -- (6,162)
Retirement of warrants ...... -- -- (11,716) -- -- (11,716)
Tax benefit from stock plan . -- -- 3,420 -- -- 3,420
Net income before preferred
dividends ................. -- -- -- 33,819 -- 33,819
Conversion of preferred stock
to common stock ........... 955 64 6,319 -- -- 6,383
------------- -------- ------------ ---------- ---------- ----------

Balance December 31, 1992 ... 35,258 2,380 97,977 68,407 -- 168,764
Exercise of stock options ... 258 18 937 -- -- 955
Issuance of stock for
purchase of The Ben Holt
Co. ....................... 87 6 1,551 -- -- 1,557
Purchase of treasury stock .. (157) -- -- -- (2,897) (2,897)
Preferred stock dividends,
Series C, including cash
distributions of $100 ..... -- -- -- (4,550) -- (4,550)
Tax benefit from stock plan . -- -- 500 -- -- 500
Net income before preferred
dividends ................. -- -- -- 47,174 -- 47,174
------------ -------- ----------- ---------- ---------- ----------
Balance December 31, 1993 ... 35,446 $2,404 $100,965 $111,031 $(2,897) $ 211,503
============ ======== =========== ========== ========== ==========
</TABLE>

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

F-5

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
(For the three years ended December 31, 1993)
(Dollars in thousands)

<TABLE>
<CAPTION>
1993 1992 1991
---------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income .................................................... $ 47,174 $ 33,819 $ 26,582
Adjustments to reconcile net cash flow from operating
activities:
Depreciation and amortization ................................. 17,812 16,754 14,752
Amortization of deferred financing costs ...................... 1,013 967 1,054
Expense of previously deferred financing costs ................ -- 3,895 --
Provision for deferred income taxes ........................... 3,098 3,645 5,889
Other ......................................................... -- -- (639)
Changes in other items:
Accounts receivable .......................................... (5,486) 1,279 (3,701)
Accounts payable and other accrued liabilities ............... (784) (7,082) (10,890)
Deferred income .............................................. (876) (851) (589)
Income tax payable ........................................... 4,000 (1,202) 713
Other assets ................................................. (177) 814 (2,157)
---------- ----------- ----------
Net cash flows from operating activities ...................... 65,774 52,038 31,014
---------- ----------- ----------

Cash flows from investing activities:
Capital expenditures relating to power plants ............... (10,295) (6,711) (112)
Well and resource development expenditures for existing
projects .................................................. (16,565) (19,203) (20,564)
Acquisition of equipment .................................... (1,104) (1,093) (773)
Acquisition of Nevada and Utah properties ................... -- -- (43,062)
Pacific Northwest, Nevada, and Utah exploration costs ....... (19,060) (4,145) (3,866)
Yuma--construction in progress .............................. (40,167) (1,294) --
Transmission line deposit ................................... 7,684 (118) (1,404)
Decrease (increase) in restricted cash ...................... 14,409 9,882 (2,217)
Decrease (increase) in other investments .................... 941 (14,503) --
---------- ----------- ----------
Net cash flows from investing activities .................... (64,157) (37,185) (71,998)
---------- ----------- ----------

Cash flows from financing activities:
Proceeds from sale of common, treasury and preferred stocks
and exercise of warrants and options ...................... 2,912 8,065 111,458
Repayment of project finance loans .......................... -- (17,098) (10,100)
Repayment of project loans .................................. (16,724) (6,277) --
Retirement of project finance loans ......................... -- (204,210) --
Payment of other senior notes ............................... -- -- (6,000)
Proceeds from refinancing ................................... -- 269,881 2,400
Proceeds from issue of convertible subordinated debentures .. 100,000 -- --
Increase in restricted cash related to the refinancing ...... -- (65,670) --
Net change in short-term bank loan .......................... -- -- (15,000)
Deferred charges relating to debt financing ................. (2,582) (2,937) (58)
Decrease (increase) in amounts due from Joint Ventures ...... (3,146) 6,198 (6,180)
Purchase of warrants ........................................ -- (11,716) --
Proceeds from pre-sale of steam ............................. -- -- 20,317
Purchase of treasury stock .................................. (2,897) (4,887) --
---------- ----------- ----------
Net cash flows from financing activities .................... 77,563 (28,651) 96,837
---------- ----------- ----------

Net increase (decrease) in cash and investments ............. 79,180 (13,798) 55,853
Cash and investments at beginning of period ................... 63,519 77,317 21,464
Cash and investments at end of period ......................... $142,699 $ 63,519 $ 77,317
========== =========== ==========
Interest paid (net of amounts capitalized) .................... $ 20,136 $ 19,237 $ 24,435
========== =========== ==========
Income taxes paid ............................................. $ 6,819 $ 4,129 $ 1,682
========== =========== ==========
</TABLE>

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

F-6

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

1. BUSINESS

CECI was formed in 1971. It is primarily engaged in the exploration for
and development of geothermal resources and conversion of such resources into
electrical power and steam for sale to electric utilities, and the
development of other environmentally responsible forms of power generation.

CECI has organized several partnerships and joint ventures (herein
referred to as Coso Joint Ventures) in order to develop geothermal energy at
the China Lake Naval Air Weapons Station, Coso Hot Springs, China Lake,
California. Collectively, the projects undertaken by these Coso Joint
Ventures are referred to as the Coso Project. CECI is the operator and holds
interests between 46.4% and 50% in the Coso Joint Ventures after payout.
Payout is achieved when a Coso Joint Venture has returned the initial capital
to the Coso Joint Venturers. In addition, CECI is exploring geothermal
resources in Northern California, Washington and Oregon (collectively, the
Pacific Northwest). In January 1991, CECI acquired a power plant and an
interest in steam fields in Nevada and Utah (see Note 4--Nevada and Utah
Properties). In 1992, CECI entered into the natural gas-fired electrical
generation market through the purchase of a development opportunity in Yuma,
Arizona. Commercial operation of the Yuma project will commence in 1994. In
1993, CECI started developing a number of international power project
opportunities where private power generating programs have been initiated,
including the Philippines and Indonesia.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include the accounts of CECI, its
wholly-owned subsidiaries, and its proportionate share of the Coso Joint
Ventures in which it has invested. All significant inter-enterprise
transactions and accounts have been eliminated.

INVESTMENTS AND RESTRICTED CASH. Investments other than restricted cash
are primarily commercial paper and money market securities. The restricted
cash balance includes such securities and mortgage backed securities, and is
mainly composed of the Coso Joint Ventures' debt service reserve funds. The
debt service reserve funds are legally restricted to their use and require
the maintenance of specific minimum balances. The carrying amount of the
investments approximates the fair value based on quoted market prices as
provided by the financial institution which holds the investments.

WELL, RESOURCE DEVELOPMENT AND EXPLORATION COSTS. CECI follows the full
cost method of accounting for costs incurred in connection with the
exploration and development of geothermal resources. All such costs, which
include dry hole costs and the cost of drilling and equipping production
wells, as well as directly attributable administrative and interest costs,
are capitalized and amortized over their estimated useful lives when
production commences. The estimated useful lives of production wells are ten
years each; exploration costs and development costs, other than production
wells, are generally amortized over the weighted average remaining term of
CECI's power and steam purchase contracts. For purposes of current period
visibility and disclosure, all such costs are identified in the Consolidated
Statements of Cash Flows as they are incurred.

DEFERRED WELL AND REWORK COSTS. Well rework costs are deferred and
amortized over the estimated period between reworks. These deferred costs of
$1,305 and $1,592 at December 31, 1993 and 1992, respectively, are included
in other assets. Currently, both production and injection well reworks are
amortized over twelve months.

FIXED ASSETS AND DEPRECIATION. The cost of major additions and betterments
are capitalized, while replacements, maintenance, and repairs that do not
improve or extend the lives of the respective assets are expensed.

Depreciation of the operating power plants is computed on the
straight-line method over the estimated useful lives resulting in a composite
rate of depreciation of approximately 2.67% per annum.

F-7

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

Depreciation of furniture, fixtures and equipment, which are recorded at
cost, is computed on the straight-line method over the estimated useful lives
of the related assets, which range from three to ten years.

CAPITALIZATION OF INTEREST AND DEFERRED FINANCING COSTS. Prior to the
commencement of operations, interest is capitalized on the costs of the
plants and geothermal resource development to the extent incurred.
Capitalized interest and other deferred charges are amortized over the lives
of the related assets.

Deferred financing costs are amortized over the term of the related
financing. Loan fees are amortized using the implicit interest method; other
deferred financing costs are amortized using the straight-line method.
Accumulated amortization at December 31, 1993 and 1992 was approximately
$1,954 and $950, respectively.

REVENUE RECOGNITION. Revenues are recorded based upon service rendered and
electricity and steam delivered to the end of the month.

MANAGEMENT FEE AND INTEREST REVENUE RECOGNITION. CECI charges the Coso
Joint Ventures management fees, operator fees and interest on outstanding
advances. Recognition of fees and interest relating to power plants and
resource development of the Coso Joint Ventures in which CECI has invested is
deferred until each Coso Joint Venture commences operations. Revenue
previously deferred is amortized over the lives of the related assets of the
Coso Joint Ventures as each Coso Joint Venture becomes operational.

DEFERRED INCOME TAXES. On January 1, 1993, CECI adopted Statement of
Financial Accounting Standard No. 109 (FAS 109), "Accounting for Income
Taxes." The adoption of FAS 109 changes CECI's method of accounting for
income taxes from the deferred method as required by Accounting Principles
Board Opinion No. 11 to an asset and liability approach.

NET INCOME PER COMMON SHARE. Earnings per common share are based on the
weighted average number of common and dilutive common equivalent shares
outstanding during the period computed using the treasury stock method.

CASH FLOWS. The statement of cash flows classifies changes in cash
according to operating, investing, or financing activities. Investing
activities include capital expenditures incurred in connection with the power
plants, wells, resource development and exploration costs. CECI considers all
investment instruments purchased with a maturity of three months or less to
be cash equivalents. Restricted cash is not considered a cash equivalent.

RECLASSIFICATION. Certain amounts in the fiscal 1992 and 1991 financial
statements and supporting footnote disclosures have been reclassified to
conform to the fiscal 1993 presentation. Such reclassification did not impact
previously reported net income or retained earnings.

3. INTEREST RATE SWAP AGREEMENTS

In January 1993, the Coso Joint Ventures entered into five year deposit
interest rate swap agreements which effectively convert a notional deposit,
CECI's portion of the balance is $20,300 (restricted cash and investments),
from a variable rate to a fixed rate. CECI's proportion of the deposit amount
accretes annually to a maximum amount of approximately $29,300 in 1996. Under
the agreements, which mature on January 11, 1998, the Coso Joint Ventures
make semiannual payments to the counter party at variable rates based on
LIBOR, reset and compounded every three months, and in return receive
payments based on a fixed rate of 6.34%. The effective LIBOR rate ranged from
3.25% to 3.375% during 1993 and was 3.375% at December 31, 1993. The counter
party to this agreement is a large multinational financial institution.
CECI's proportionate share of the carrying amount, representing accrued
interest receivable, and the fair value of the swap agreements are $277 and
$1,281, respectively. The fair value is based on quoted market prices
provided by the counter party to the swap.

F-8

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

In September 1993, CECI entered into a three year deposit interest rate
swap agreement, which effectively converts a notional deposit balance of
$75,000 from a variable rate to a fixed rate. CECI makes semiannual payments
to the counter party at effectively the LIBOR rate, reset every six months,
and in return receives payments based on a fixed rate of 4.87%. The counter
party to this agreement is the same counter party to the Coso Joint Ventures.
The carrying amount is $286, representing accrued interest receivable. The
fair value of the interest rate swap is currently negative in the amount of
$642, which is based on quoted market prices provided by the counter party to
the swap and assumes CECI closes out the swap agreement prior to the stated
maturity.

4. PROPERTIES AND PLANTS

Properties and plants comprise the following at December 31:

<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Project costs
Power plants ................................. $246,219 $235,924
Well and resource development ................ 161,137 144,595
---------- ----------
Total operating facilities .................. 407,356 380,519
Less accumulated depreciation and amortization (67,813) (51,054)
---------- ----------
Net operating facilities ..................... 339,543 329,465
Wells and resource development in progress .. 939 916
---------- ----------
Total project costs ........................... 340,482 330,381
Pacific Northwest geothermal exploration costs 41,539 25,882
Nevada and Utah properties .................... 35,492 32,089
Yuma--construction in progress ................ 41,461 1,294
---------- ----------
Total ....................................... $458,974 $389,646
========== ==========
</TABLE>

OPERATING FACILITIES. The Coso operating facilities comprise CECI's
proportionate share of the assets of three of its Joint Ventures: Coso
Finance Partners (Navy I Joint Venture), Coso Energy Developers (BLM Joint
Venture), and Coso Power Developers (Navy II Joint Venture). With respect to
the Coso Project, distributions from its project accounts are made
semiannually to each Coso Joint Venture partner for profit sharing under a
prescribed calculation subject to mutual agreement by the partners and
compliance with the Coso Joint Ventures' financing documents. As of December
31, 1993, payout had only been reached on Units 2 and 3 of the Navy I power
plant.

i. NAVY I PLANT. The Navy I plant consists of three turbines, of which
one unit commenced delivery of firm power in August 1987, and the second
and third units in December 1988. The 80 NMW power plant is located on
land owned by and leased from the U.S. Navy through December 2009, with a
10-year extension at the option of the Navy. Under terms of the Navy I
Joint Venture, profits and losses were allocated approximately 49% before
payout of units 2 and 3 and approximately 46.4% thereafter to CECI.

ii. BLM PLANT. The BLM plant consists of two turbines at one site (BLM
East), which commenced delivery of firm power in March and May 1989,
respectively, and one turbine at another site (BLM West) which commenced
delivery of firm power in August 1989. The BLM plant is situated on lands
leased from the U.S. Bureau of Land Management under a geothermal lease
agreement that extends until October 31, 2035. The lease may be extended
to 2075 at the option of the BLM. Under the terms of the BLM Joint Venture
agreement, CECI's share of profits and losses before and after payout is
approximately 45% and 48%, respectively. During 1990, CECI upgraded the
cooling tower and turbines to increase the plant's capacity to 80 NMW from
the initial level of 70 NMW.

F-9

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

iii. NAVY II PLANT. The Navy II plant consists of three turbines, of
which two units commenced delivery of firm power in January 1990, and the
third in February 1990, respectively. The 80 NMW power plant is on the
southern portion of the Navy lands. Under terms of the Joint Venture, all
profits, losses and capital contributions for Navy II are divided equally
by the two partners.

SIGNIFICANT CUSTOMER. All of CECI's sales of electricity from the Coso
Project, which comprise approximately 94% of 1993 electricity and steam
revenues, are to Southern California Edison (SCE) and are under long-term
power purchase contracts. Under the terms of these contracts, SCE pays firm
prices for the energy portion of the contract. The energy payment escalates
pursuant to the contracts at an average rate of approximately 7.0% per year
for the delivery of electricity for ten years, commencing with the initial
delivery of electricity at firm power; thereafter, the energy payment adjusts
to the actual avoided energy cost experienced by SCE at that time. The
capacity payment, which initially represented approximately 25% of CECI's
revenue, remains fixed during the entire period of the contract. In addition,
CECI is eligible for bonus payments based on the amount by which the actual
output exceeds the contract capacity of each power plant. Bonus payments
aggregated $3,050, $3,257 and $2,635 in the years ended December 31, 1993,
1992 and 1991.

CECI has three contracts for terms of 24, 30 and 20 years, expiring in
2011, 2019 and 2010, respectively. Delivery of electricity by the Navy I
Joint Venture, the BLM Joint Venture and the Navy II Joint Venture commenced
under those contracts in 1987, 1989 and 1990, respectively.

See Note 13 for a description of litigation involving SCE.

ROYALTIES. Royalties comprise the following for the years ended:

<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Navy I, Unit 1 ....... $1,556 $2,014 $1,787
Navy I, Units 2 and 3 2,924 2,628 1,160
BLM .................. 1,868 1,268 1,033
Navy II .............. 1,717 1,509 1,486
Other ................ 209 291 39
-------- -------- --------
Total .............. $8,274 $7,710 $5,505
======== ======== ========
</TABLE>

The amount of royalties paid by CECI to the U.S. Navy to develop
geothermal energy for Navy I, Unit 1 on the lands owned by the Navy comprises
(i) a fee payable during the term of the contract based on the difference
between the amounts paid by the Navy to SCE for specified quantities of
electricity and the price as determined under the contract (which currently
approximates 65% of that paid by the Navy to SCE), and (ii) $11,600 payable
in December 2009. The $11,600 payment is secured by funds placed on deposit
monthly, which funds, plus accrued interest, will aggregate $11,600. The
monthly deposit is currently $23. As of December 31, 1993, the balance of
funds deposited approximated $1,283, which amount is included in restricted
cash and accrued liabilities.

Units 2 and 3 of Navy I and the Navy II power plants are on Navy lands, on
which the Navy receives a royalty based on electric sales revenue at the
initial rate of 4% escalating to 22% by the end of the contract in December
2019. The BLM is paid a royalty of 10% of the value of steam produced by the
geothermal resource supplying the BLM plant.

PACIFIC NORTHWEST GEOTHERMAL EXPLORATION COSTS. In the Pacific Northwest,
CECI has acquired leasehold rights and has performed certain geological
evaluations to determine the resource potential of the underlying properties.
Recovery of those costs is ultimately dependent upon CECI's ability to prove
geothermal reserves and sell geothermal steam, or to obtain financing, build
power plants, gain access to high voltage transmission lines, and sell the
resultant electricity at favorable prices, or sell its leaseholds. In the
opinion of management, CECI will be able to realize its exploration costs
through the generation of electricity for sale.

F-10

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

NEVADA AND UTAH PROPERTIES. On May 3, 1990, CECI entered into a
definitive purchase agreement with a subsidiary of Chevron Corporation
(Chevron) for the acquisition of certain geothermal operations, including
interests in approximately 83,750 acres of geothermal properties in Nevada
and Utah, for an aggregate purchase price of approximately $51,100. These
property interests consist largely of leasehold interests, including
properties leased from the BLM and from private landowners.

The property acquired from Chevron includes a 9 MW power plant at Desert
Peak, Nevada ("Desert Peak"), and a 70% interest in a steam field at
Roosevelt Hot Springs, Utah ("Roosevelt Hot Springs"). The facility at Desert
Peak is currently selling electricity to Sierra Pacific Power Company under a
contract that runs through 1995 and then may be extended on a year-to-year
basis as agreed by the parties. The price for electricity under this contract
is 6.5 cents per kWH, comprising an energy payment of 2.0 cents per kWH
(which is adjustable pursuant to an inflation based index) and a capacity
payment of 4.5 cents per kWH. The Roosevelt Hot Springs site has a contract
to sell steam to a 25 MW power plant owned by Utah Power and Light Company
(UP&L) and to dispose of the brine that is a by-product of the electricity
production process.

As part of the Nevada and Utah properties acquisition, CECI acquired
leasehold interests in an aggregate of approximately 20,000 acres at the
Roosevelt Hot Springs site in Utah and approximately 63,750 acres at four
sites in Nevada. The Roosevelt Hot Springs and Desert Peak properties have
been the subject of exploration and testing by Chevron and its predecessors.
Based on these tests and reports of independent engineering companies, CECI
believes that there are significant geothermal resources available for
commercial development at these sites. Other tests conducted by Chevron and
its predecessors indicate that commercially viable amounts of geothermal
resources may underlie the other Chevron properties.

CECI financed the acquisition of Roosevelt Hot Springs through an equity
offering, a $20,317 pre-sale of steam from the Roosevelt Hot Springs field to
the utility-owned power plant located at the site, and seller financing. The
acquisition of Roosevelt Hot Springs and certain of the Nevada properties
closed on January 22, 1991 for an aggregate amount of approximately $35,000.
The remainder of the transaction closed on March 28, 1991 and was financed
with seller financing and the proceeds of the sale of common stock to Kiewit
Energy Company (Kiewit Energy); see Note 12.

5. PROJECT LOANS

Project loans, which are non-recourse to CECI, comprise the following at
December 31:

<TABLE>
<CAPTION>
1993 1992
---------- ---------
<S> <C> <C>
Project loans with fixed interest rates (weighted
average interest rates of 8.04% and 7.88% at December
31, 1993 and 1992, respectively) with scheduled
repayments through December 2001 ....................... $246,880 $263,604
========== =========
</TABLE>

The project loans are from Coso Funding Corp. ("Funding Corp."). Funding
Corp. is a single-purpose corporation formed to issue notes for its own
account and as an agent acting on behalf of Navy I, BLM, and Navy II Joint
Ventures, collectively the "Coso Joint Ventures." Pursuant to separate credit
agreements executed between Funding Corp. and each Coso Joint Venture on
December 16, 1992, the proceeds from Funding Corp.'s note offering were
loaned to the Coso Joint Ventures. The proceeds of $560,245 were used by the
Coso Joint Ventures to (i) purchase and retire project finance debt comprised
of the term loans and construction loans in the amount of $424,500, (ii) fund
contingency funds in the amount of $68,400, (iii) fund debt service reserve
funds in the amount of $40,000, and (iv) finance $27,345 of capital
expenditures and transaction costs. The contingency fund and debt service
reserve fund were required by the project loan agreements.

F-11

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

The contingency fund represented the approximate maximum amount, if any,
which could theoretically have been payable by the Coso Joint Ventures to
third parties to discharge all liens of record and other contract claims
encumbering the Coso Joint Ventures' plant at the time of the project loans
(See Note 13). The contingency fund was established in order to obtain
investment-grade ratings to facilitate the offer and sale of the notes by
Funding Corp., and such establishment did not reflect the Coso Joint
Ventures' view as to the merits or likely disposition of such litigation or
other contingencies. On June 9, 1993, MPE and the Mission Power Group,
subsidiaries of SCE Corp., and the Coso Joint Ventures reached a final
settlement of all of their outstanding disputes and claims relating to the
construction of the Coso Project. As a result of the various payments and
releases involved in such settlement, the Coso Joint Ventures agreed to make
a net payment of $20,000 to MPE from the cash reserves of the Coso Project
contingency fund and MPE agreed to release its mechanics' liens on the Coso
Project. After making the $20,000 payment, the remaining balance of the Coso
Project contingency fund (approximately $49,300) was used to increase the
Coso Project debt reserve fund from approximately $43,000 to its maximum
fully-funded requirement of $67,900. The remaining $24,400 balance of
contingency fund was retained within the Coso Project for future capital
expenditures and for Coso Project debt service payments. Since the Coso
Project debt service reserve is fully funded in advance, Coso Project cash
flows otherwise intended to fund the Coso Project debt service reserve fund,
subject to satisfaction of certain covenants and conditions contained in the
Coso Joint Ventures' refinancing documents, may be available for distribution
to CECI in its proportionate share.

The loans are collateralized by, among other things, the power plants,
geothermal resource, debt service reserve funds, contingency funds, pledge of
contracts, and an assignment of all such Coso Joint Ventures' revenues which
will be applied against the payment of obligations of each Coso Joint
Venture, including the project loans. Each Coso Joint Venture's assets will
secure only its own project loan, and will not be cross-collateralized with
assets pledged under other Coso Joint Venture's credit agreements. The
project loans are non-recourse to any partner in the Coso Joint Ventures and
Funding Corp. shall solely look to such Coso Joint Venture's pledged assets
for satisfaction of such project loans. However, the loans are
cross-collateralized by the available cash flow of each Coso Joint Venture.
Each Coso Joint Venture after satisfying a series of its own obligations has
agreed to advance support loans (to the extent of available cash flow and,
under certain conditions, its debt service reserve funds) in the event
revenues from the supporting Coso Joint Ventures are insufficient to meet
scheduled principal and interest on their separate project loans.

The annual repayments of the project loans for the years beginning January
1, 1994 and thereafter are as follows:

<TABLE>
<CAPTION>
YEAR AMOUNT
- ------------ ----------
<S> <C>
1994 $ 27,599
1995 32,109
1996 38,826
1997 41,729
1998 38,912
Thereafter 67,705
----------
Total $ 246,880
==========
</TABLE>

Based on quoted market rates of the Funding Corp. notes, the fair value of
the project loan was approximately $260,276 at December 31, 1993.

In connection with the aforementioned refinancing, CECI entered into an
agreement with Community Energy Alternatives Incorporated ("CEA") for CECI to
purchase at the close of the Coso Project refinancing CEA's interest in the
Coso Project. Until the close of the Coso Project refinancing, CEA had

F-12

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

been a partner in a partnership structure organized by CECI's Joint Venture
Partner in the BLM project. CECI purchased the CEA interest under certain
terms and conditions which are designed to provide CECI with a 17% per annum
return on the CEA interest purchase price of $9,800. CECI's 17% per annum
return is secured in part by a pledge and assignment to CECI of certain cash
flows to be received by CECI's Coso Project Joint Venture Partner (and
certain affiliates) from Coso Project distributions. CECI has granted its
Coso Project Joint Venture Partner the right to purchase the CEA interest for
a price which will provide CECI a 17% per annum return for the duration CECI
owns the CEA interest.

6. SENIOR NOTES

The Senior Notes are due in March 1995, and bear interest at the rate of
12% per annum, plus 10% of CECI's share of the cash flow from the Coso
Project, commencing July 1, 1989 and terminating December 31, 1994. The
Senior Notes prohibit the payment of cash dividends unless CECI has a net
worth of at least $50,000 after payment of such dividends, and dividends do
not exceed 50% of accumulated net income subsequent to December 31, 1987. The
Senior Notes also place restrictions on capital expenditures not related to
the Coso Project. The fair value of the Senior Notes approximates the
carrying value.

7. CONVERTIBLE SUBORDINATED DEBENTURES

In June of 1993, CECI issued $100,000 principal amount of 5% convertible
subordinated debentures (debentures) due July 31, 2000. The debentures are
convertible into shares of CECI's common stock at any time prior to
redemption or maturity at a conversion price of $22.50 per share, subject to
adjustment in certain circumstances. Interest on the debentures is payable
semiannually in arrears on July 31 and January 31 of each year, commencing on
July 31, 1993. The debentures are redeemable for cash at any time on or after
July 31, 1996 at the option of CECI. The redemption prices commencing in the
twelve month period beginning July 31, 1996 (expressed in percentages of the
principal amount) are 102%, 101%, 100% and 100% in 1996, 1997, 1998 and 1999,
respectively. The debentures are unsecured general obligations of CECI and
subordinated to all existing and future senior indebtedness of CECI. The fair
value of the debentures as of December 31, 1993 was approximately $103,250,
which is based on quoted market rates.

8. INCOME TAXES

On January 1, 1993, CECI adopted Statement of Financial Accounting
Standard No. 109 (FAS 109), "Accounting for Income Taxes." The adoption of
FAS 109 changes CECI's method of accounting for income taxes from the
deferred method as required by Accounting Principles Board Opinion No. 11 to
an asset and liability approach. Under FAS 109, the net excess deferred tax
liability as of January 1, 1993 was determined to be $4,100. This amount is
reflected in 1993 income as the cumulative effect of a change in accounting
principle. It primarily represents the recognition of CECI's tax credit
carryforwards as a deferred tax asset. There was no cash impact to CECI upon
the required adoption of FAS 109. Under FAS 109, the effective tax rate
increased to approximately 30% from 23.5% in 1992. This increase was due to
CECI's tax credit carryforward being recognized as an asset and unavailable
to reduce the current period's effective tax rate for computing CECI's
provision for income taxes.

F-13

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

Provision for income tax was comprised of the following at December 31:

<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
Currently payable:
State ....................................... $ 3,300 $ 2,300 $2,134
Federal ..................................... 7,686 4,444 261
--------- --------- --------
10,986 6,744 2,395
Deferred:
State ....................................... 385 1,607 929
Federal ..................................... 6,813 2,038 4,960
--------- --------- --------
7,198 3,645 5,889
--------- --------- --------
Total after benefit of extraordinary item ... 18,184 10,389 8,284
Tax benefit attributable to extraordinary -- 1,533 --
item ........................................
--------- --------- --------
Total before benefit of extraordinary item $18,184 $11,922 $8,284
========= ========= ========
</TABLE>

The deferred expense is primarily temporary differences associated with
depreciation and amortization of certain assets.

A reconciliation of the federal statutory tax rate to the effective tax rate
applicable to income before provision for income taxes follows:

<TABLE>
<CAPTION>
1993 1992 1991
-------- --------- ---------
<S> <C> <C> <C>
Federal statutory rate .......................... 35.00% 34.00% 34.00%
Percentage depletion in excess of cost depletion (6.70) (6.81) (6.89)
Investment and energy tax credits ............... (4.62) (10.52) (10.93)
State taxes, net of federal tax effect ......... 3.90 5.83 6.32
Cumulative effect of change in federal tax rate 1.90 -- --
Other ........................................... .20 1.00 1.26
-------- --------- ---------
29.68% 23.50% 23.76%
======== ========= =========
</TABLE>

Deferred tax liabilities (assets) are comprised of the following at December
31:

<TABLE>
<CAPTION>
1993
----------
<S> <C>
Depreciation and amortization, net ............... $111,117
Other ............................................ 1,733
----------
112,850
Deferred income .................................. (2,415)
Loss carryforwards ............................... (39,529)
Energy and investment tax credits (40,106)
Alternative minimum tax credits ................. (12,018)
Other ............................................ (472)
----------
(94,540)
----------
Net deferred taxes ............................... $ 18,310
==========
</TABLE>

In 1992, the significant components of the deferred tax liability were timing
differences in the computation of depreciation and amortization of the power
plants and exploration and development costs for financial reporting purposes
versus income tax purposes.

F-14

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

As of December 31, 1993, CECI has an unused net operating loss (NOL)
carryover of approximately $113,000 for regular federal tax return purposes
which expires primarily between 2001 and 2007. In addition, CECI has unused
investment and geothermal energy tax credit carryforwards of approximately
$40,106 expiring between 2002 and 2008. CECI also has approximately $12,018
of alternative minimum tax credit carryforwards which have no expiration
date.

9. COMMITMENTS

CECI's former office space lease, which requires annual rental of $660
through April 1994, has been partially sublet at annual rentals of $261 and
remaining future rental costs were previously provided for in a restructuring
charge. CECI also leases an aircraft under a lease that expires on August 1,
1995, at an annual rental of approximately $464. The aircraft has been
subleased at an annual rental of approximately $300. Rental expense for the
aircraft, vehicles, geothermal leases, and other equipment leases for the
years ended December 31, 1993, 1992 and 1991 was approximately $1,143, $1,018
and $986, respectively.

Total projected lease commitments (net of sublease contracts) at December
31, 1993, are as follows:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31 AMOUNT
- ------------- --------
<S> <C>
1994 ........ $318
1995 ........ 186
1996 ........ 8
--------
Total ....... $512
========
</TABLE>

10. PREFERRED STOCK

SERIES A. On December 1, 1988, CECI distributed a dividend of one
preferred share purchase right (right) for each outstanding share of common
stock. The rights are not exercisable until ten days after a person or group
acquires, or has the right to acquire, beneficial ownership of 20% or more of
CECI's common stock or announces a tender or exchange offer for 30% or more
of CECI's common stock. Each right entitles the holder to purchase one
one-hundredth of a share of Series A junior preferred stock for $52. The
rights may be redeemed by the Board of Directors up to ten days after an
event triggering the distribution of certificates for the rights. The rights
plan was amended in February 1991 so that the agreement with Kiewit Energy
(see Note 12) would not trigger the exercise of the rights. The rights will
expire, unless previously redeemed or exercised, on November 30, 1998. The
rights are automatically attached to, and trade with, each share of common
stock.

SERIES B. On November 15, 1990, CECI sold 357.5 shares of convertible
preferred stock, Series B at $14 per share. Each share of the convertible
preferred stock was convertible into two shares of common stock, and had a
dividend rate of 15% through November 15, 1992, 10% from November 16, 1992 to
November 15, 1994 and 5% from November 16, 1994 to November 15, 1996. The
dividends were payable semiannually in convertible preferred stock, Series B.

On November 15, 1992, CECI called the preferred stock for conversion into
common stock. Each Series B preferred stock was converted into two shares of
common stock; accordingly, CECI issued 954.9 shares of common stock.

SERIES C. On November 19, 1991, CECI sold one thousand shares of
convertible preferred stock, Series C at $50,000 per share to Kiewit Energy,
in a private placement. Each share of the Series C preferred stock is
convertible at any time at $18.375 per common share into 2,721 shares of
common stock subject to customary adjustments. The Series C preferred stock
has a dividend rate of 8.125%, commencing March 15, 1992 through conversion
date on December 15, 2003. The dividends, which are cumulative, are payable
quarterly in convertible preferred stock, Series C, through March 15, 1995
and in cash on subsequent dividend dates.

F-15

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

CECI is obligated to redeem 20% of the outstanding preferred stock,
Series C each December 15, commencing 1999 through 2003 at a price per share
equal to $50,000, plus accrued and unpaid dividends.

At any time after December 15, 1994, upon 20 days written notice, CECI may
redeem all, or any portion consisting of at least $5,000, of the preferred
stock, Series C then outstanding, provided that the CECI's common stock has
traded at or above 150% of the then effective conversion price, for any 20
trading days out of 30 consecutive trading days ending not more than five
trading days prior to notice of redemption.

CECI may also exchange the preferred stock, Series C, in whole or part on
any dividend date commencing December 15, 1994, for 9.5% Convertible
Subordinated Debentures of CECI due 2003.

Each share of preferred stock, Series C shall be entitled to the number of
votes equal to $50,000 per share divided by the then effective conversion
price. If cash dividends are in arrears six consecutive quarters, Kiewit
Energy shall have the exclusive right, voting separately as a class, to elect
two directors of CECI.

No cash dividends shall be paid or declared on CECI's common stock unless
all accumulated dividends on the Series C preferred stock have been paid.

11. STOCK OPTIONS AND WARRANTS

CECI has issued various stock options and warrants. As of December 31,
1993, a total of 8,953 shares are reserved for stock options, of which 8,514
shares have been granted and remain outstanding at prices of $3.00 to $19.00
per share.

CECI has stock option plans under which shares were reserved for grant as
incentive or non-qualified stock options, as determined by the Board of
Directors. As of December 31, 1993, the total options granted for the
non-1986 plan and the 1986 plan are 5,778 and 6,354, respectively. The plans
allow options to be granted at 85% of their fair market value at the date of
grant. Generally, options are issued at 100% of fair market value at the date
of grant. Options granted under the 1986 Plan become exercisable over a
period of three to five years and expire if not exercised within ten years
from the date of grant or, in some instances, a lesser term. Prior to the
1986 Plan, CECI granted 256 options at fair market value at date of grant
which had terms of ten years and were exercisable at date of grant. In
addition, CECI had issued approximately 138 options to consultants on terms
similar to those issued under the 1986 Plan. The non-1986 Plan options are
primarily options granted to Kiewit Energy; see Note 12.

F-16

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

Transactions in Stock Options.

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------
SHARES AVAILABLE
FOR GRANT UNDER OPTION PRICE
1986 OPTION PLAN SHARES PER SHARE TOTAL
---------------- ---------- -------------- ----------
<S> <C> <C> <C> <C>
Balance, December 31, 1991 ..... 72 3,361 $ 3.00 -$13.096 $ 12,658
Options granted ................. (368) 8,268 * $ 8.063-$14.875 89,193
Options terminated .............. 304 (331) $ 3.00 -$ 9.708 (3,065)
Options exercised ............... -- (2,328)* $ 3.00 -$ 9.00 (15,116)
Additional shares reserved under
1986 Option Plan ............... 1,230 -- -- --
---------------- ---------- -------------- ----------
Balance, December 31, 1991 ..... 1,238 8,970 * $ 3.00-$14.875 83,670
Options granted ................. (551) 751 $11.90-$15.938 11,262
Options terminated .............. 129 (780) $ 3.00-$11.625 (7,839)
Options exercised ............... -- (1,544) $ 3.00-$11.625 (7,072)
---------------- ---------- -------------- ----------
Balance, December 31, 1992 ..... 816 7,397 * $ 3.00-$15.938 80,021
Options granted ................. (1,396) 1,396 $17.75-$19.00 26,209
Options terminated .............. 19 (20) $ 3.00-$14.875 (114)
Options exercised ............... -- (259) $ 3.00-$14.875 (1,185)
Additional shares reserved under
1986 Option Plan ............... 1,000 -- -- --
---------------- ---------- -------------- ----------
Balance, December 31, 1993 ..... 439 8,514 * $ 3.00-$19.00 $104,931
================ ========== ============== ==========
Options which became exercisable
during: Year ended December 31,
1993 ........................... 592 $ 3.00-$19.00 $ 10,180
Year ended December 31, 1992 .. 333 $ 3.00-$15.938 $ 3,693
Year ended December 31, 1991 .. 7,767 * $ 3.00-$14.88 $ 79,890
Options exercisable at: December
31, 1993 ....................... 7,026 * $ 3.00-$19.00 $ 78,644
December 31, 1992 .............. 6,708 * $ 3.00-$15.9375 $ 69,739
December 31, 1991 .............. 8,070 * $ 3.00-$14.88 $ 73,481
</TABLE>

- ---------------
* Includes Kiewit Energy options. See Note 12.

F-17

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

Warrants. CECI has granted warrants in connection with various financing
activities to purchase shares of common stock as follows:

<TABLE>
<CAPTION>
WARRANTS OUTSTANDING
-----------------------------------
WARRANT PRICE
SHARES PER SHARE TOTAL
--------- ------------- ---------
<S> <C> <C> <C>
Balance, January 1, 1991 2,549 $2.04-$6.67 $ 6,804
Warrants exercised ....... (660) $2.04-$6.67 (2,951)
--------- ------------- ---------
Balance, December 31,
1991 .................... 1,889 $2.04 3,853
Warrants exercised ....... (612) $2.04 (1,247)
Warrants repurchased .... (1,277) $2.04 (2,606)
--------- ------------- ---------
Balance, December 31,
1992 .................... -- $ -- $ --
========= ============= =========
</TABLE>

On October 27, 1992, CECI repurchased, and cancelled, certain warrants
exercisable for 250 shares of unregistered common stock at $2.04 per share,
for a purchase price of $9.316 per share or $2,329 in aggregate.

12. COMMON STOCK SALES AND RELATED OPTIONS

In January 1991, CECI sold 2,505 shares of unregistered common stock at
$6.75 per share for an aggregate total of $16,909. The funds were used to
repay a portion of the seller financing related to CECI's acquisition of
Chevron's interest in Roosevelt Hot Springs, Utah.

CECI and Kiewit Energy signed a Stock Purchase Agreement and related
agreements, dated as of February 18, 1991. Kiewit Energy is a subsidiary of
Peter Kiewit Sons', Inc. of Omaha, Nebraska, a large construction and mining
company with diversified operations. Under the terms of the agreements,
Kiewit Energy purchased 4,000 shares of common stock at $7.25 per share and
received options to buy 3,000 shares at a price of $9 per share exercisable
over three years and an additional 3,000 shares at a price of $12 per share
exercisable over five years (subject to customary adjustments).

In connection with this initial stock purchase, CECI and Kiewit Energy
also entered into certain other agreements pursuant to which (i) Kiewit
Energy and its affiliates agreed not to acquire more than 34% of the
outstanding common stock (the Standstill Percentage) for a five-year period,
(ii) Kiewit Energy became entitled to nominate at least three of CECI's
directors, and (iii) CECI and Kiewit Energy agreed to use their best efforts
to negotiate and execute a joint venture agreement relating to the
development of certain geothermal properties in Nevada and Utah.

On June 19, 1991, the board approved a number of amendments to the stock
purchase agreement and the related agreements. Pursuant to those amendments,
CECI reacquired from Kiewit Energy the rights to develop the Nevada and Utah
properties, and Kiewit Energy agreed to exercise options to acquire 1,500
shares of common stock at $9.00 per share, providing CECI with $13,500 in
cash. CECI also extended the term of the $9.00 and $12.00 options to seven
years; modified certain of the other terms of these options; granted to
Kiewit Energy an option to acquire an additional 1,000 shares of the
outstanding common stock at $11.625 per share (closing price for the shares
on the American Stock Exchange on June 18, 1991) for a ten year term; and
increased the Standstill Percentage from 34% to 49%.

On November 19, 1991, the Board approved the issuance by CECI to Kiewit
Energy of one thousand shares of Series C Preferred Stock for $50,000 per
share, as described in Note 10 above. In connection with

F-18

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

the sale of the Series C Preferred Stock to Kiewit Energy, the Standstill
Agreement was amended so that the 49% Standstill Percentage restriction would
apply to voting stock rather than just common stock.

13. LITIGATION

SETTLEMENT OF CONTRACTOR CLAIMS. In June 1990, Mission Power Engineering
Company (MPE), a subsidiary of SCECorp. and the general contractor for eight
of the nine facilities at the Coso Project recorded mechanics' liens (the
Liens) against two of the Coso Projects and filed suit to pursue claims for
amounts allegedly due from the Coso Joint Ventures in connection with the
turnkey contracts for the design and construction on eight of the units. In
July 1990, MPE, the Joint Venture Partners and CECI agreed to enter
settlement discussions during which period the suit was suspended. In January
1991, MPE terminated settlement discussions and refiled its suit in the
amount of approximately $70,900 in contract claims. The Coso Joint Ventures
counterclaimed on January 10, 1991, for performance and equipment related and
other damages arising under the turnkey contracts.

On June 9, 1993, MPE and the Mission Power Group, subsidiaries of SCECorp,
and the Coso Joint Ventures and CECI announced that the companies had reached
a final settlement of all of their outstanding disputes relating to the
construction of and the filing of mechanics' liens against the Coso Project.

Under the settlement agreement, MPE agreed to dismiss with prejudice its
$70,900 breach of contract suit against the Coso Joint Ventures and the Coso
Joint Ventures agreed to dismiss with prejudice their counterclaims against
MPE and related parties. As a result of the various payments and releases
involved in such settlement, the Coso Joint Ventures agreed to make a net
payment of $20,000 to MPE from the cash reserves of the Coso Project
Contingency Fund and MPE agreed to release its mechanics' liens on the Coso
Project.

Settlement of Transmission Line Disputes. In September 1990, the
California Public Utilities Commission (CPUC) issued a decision which would
fix at approximately $10,500 the Coso Joint Ventures' maximum exposure for
the cost of the construction of a new 220 kV electric transmission line
(Line) on the SCE transmission system. The Coso Joint Ventures appealed the
decision of the CPUC to the Federal district court and intended to petition
the CPUC to reconsider its decision on the grounds that such line is not
necessary. In a related proceeding involving the cost allocation for existing
and ancillary interconnection facilities, the CPUC ruled that the Coso Joint
Ventures' share would be approximately $7,000. The Coso Joint Ventures appeal
of such decision to the California Supreme Court was denied in February 1993.
In addition, SCE alleged certain line losses that SCE deemed applicable to
the existing 115 kV line utilized by two of the Coso Joint Ventures and
deducted amounts from revenues payable under the power purchase contracts.
The Coso Joint Ventures dispute SCE's allegations, methodology and alleged
ability to deduct amounts under the interconnection contracts and filed a
complaint alleging breach of contract in the California State Court.

On May 3, 1993, SCE and the Coso Joint Ventures agreed to settle the
transmission line loss contract dispute and certain related interconnection
disputes involving the Coso Project under a separate agreement whereby, among
other things, the parties made certain cash payments to each other and agreed
to certain interconnection cost and historical line loss allocations and to
the release to the Coso Joint Ventures of certain funds previously deducted
from project revenues and held in escrow. The parties also agreed to jointly
pursue appropriate rate treatment by the CPUC of certain SCE financed
interconnection costs, including the one remaining cost allocation issue
between them in the amount of $5,900. As a result of the various payments,
allocations and releases involved in such partial settlement, SCE released
$15,500 of Coso Project funds (CECI's share was approximately $7,800) held in
escrow in respect of interconnection costs (transmission line deposit) and
the Partners of Coso Joint Ventures posted an irrevocable letter of credit to
support their contingent obligation of $5,900 on the cost allocation matter
to be jointly pursued with SCE at the CPUC.

F-19

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

Settlement of Antitrust Lawsuit. On January 31, 1991, CECI filed an
antitrust lawsuit in San Francisco Federal Court against SCECorp., its
subsidiaries (MPE, Mission Power Group and SCE), Kidder-Peabody & Co., and
others alleging violations of the federal antitrust laws, unfair competition
and tortious interference. This lawsuit was settled in conjunction with the
transmission line disputes.

Settlement with Joint Venture Partner. CECI has served as managing
partner, project manager and field operator for the Coso Project since its
inception. It has been plant operator for the facilities since August 1988.
In April 1990, CECI's principal Coso Joint Venture partner (the J.V. Partner)
served CECI and certain of CECI's subsidiaries with a demand for arbitration
arising out of disagreements concerning primarily the operating budgets and
the allocation to the Joint Ventures of certain expenses incurred by CECI.

On March 19, 1991, CECI and its J.V. Partner executed a settlement
agreement which resolved all their outstanding disputes. The terms of the
settlement provide that if the Coso Project performs at capacity level in the
future so that certain formula-based contingencies related to the
productivity of the power plants are satisfied in any of the following eight
years, then, out of the excess cash flow generated from such performance
levels, up to $1.4 million may be paid in each such year to the J.V. Partner
by CECI. During 1992, CECI purchased the J.V. Partner's contingent payment
for $5,000, which will be amortized over the remaining seven years of the
agreement.

In return for the original settlement, the J.V. Partner agreed to the
conversion of all prior advances made by CECI on behalf of the partnership
into a Coso Joint Venture note payable to CECI due on or before March 19,
1999. The note bore interest at an adjustable rate tied to LIBOR and was
subordinated to the prior payment in full of all the senior bank debt on the
project as well as to the foregoing contingent payments to the J.V. Partner.
On December 16, 1992 the Coso Joint Ventures paid $5,133 of their note
payable plus accrued interest to CECI. A new promissory note was then signed
on December 16, 1992 for the remaining principal balance. This note bears a
fixed interest rate of 12.5% and is payable on or before March 19, 2002. This
note continues to be subordinated to the senior project loan on the project.
The fair value of this note approximates the carrying value.

14. RELATED PARTY TRANSACTIONS

CECI charged and recognized a management fee and interest on advances to
its Coso Joint Ventures, which aggregated approximately $5,354, $4,246 and
$5,664 in the years ended December 31, 1993, 1992 and 1991.

15. EXTRAORDINARY ITEM

The refinancing of the Coso Joint Ventures' project financing debt in 1992
resulted in an extraordinary item in the amount of $4,991, after the tax
effect of $1,533. The extraordinary item represents the unamortized portion
of the deferred financing costs and related repayment costs associated with
the original Coso Joint Ventures' project financing debt.

16. SUBSEQUENT EVENT

CECI is currently in the process of arranging a proposed offering of
$400,000 Senior Discount Notes (the "Notes"). The interest rate will be
between approximately 9% and 10%, with cash interest payment commencing in
1997. The Notes will be senior unsecured obligations of CECI. CECI intends to
use the proceeds from the offering to: (i) fund equity commitments in, and
the construction costs of, geothermal power projects presently planned in the
Philippines and Indonesia, (ii) to fund equity investments in, and loans to,
other potential international and domestic private power projects and related
facilities, (iii) for corporate or project acquisitions permitted under the
indenture, and (iv) for general corporate purposes.

F-20

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

17. QUARTERLY FINANCIAL DATA (Unaudited)

Following is a summary of CECI's quarterly results of operations for the
years ended December 31, 1993 and 1992:

<TABLE>
<CAPTION>
THREE MONTHS ENDED*
------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1993 1993 1993 1993
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue:
Sales of electricity and steam ............. $27,617 $31,996 $41,433 $31,013
Other income ............................... 3,544 3,926 4,824 4,900
----------- ---------- ----------- ----------
Total revenue ............................. 31,161 35,922 46,257 35,913
Total costs and expenses .................... 20,314 21,833 22,087 23,761
----------- ---------- ----------- ----------
Income before provision for income taxes and
change in accounting principle ............. 10,847 14,089 24,170 12,152
Provision for income taxes .................. 3,363 3,439 7,493 3,889
----------- ---------- ----------- ----------
Net income before change in accounting
principle .................................. 7,484 10,650 16,677 8,263
Cumulative effect of change in accounting
principle .................................. 4,100 -- -- --
----------- ---------- ----------- ----------
Net income .................................. 11,584 10,650 16,677 8,263
Preferred dividends ......................... 1,107 1,143 1,179 1,201
----------- ---------- ----------- ----------
Net income attributable to common shares ... $10,477 $ 9,507 $15,498 $ 7,062
=========== ========== =========== ==========
Net income per share before change in
accounting principle ....................... $ .16 $ .25 $ .41 $ .18
Cumulative effect of change in accounting
principle .................................. .11 -- -- --
----------- ---------- ----------- ----------
Net income per share ........................ $ .27 $ .25 $ .41 $ .18
=========== ========== =========== ==========
<CAPTION>
THREE MONTHS ENDED*
------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1992 1992 1992 1992
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Revenue:
Sales of electricity and steam ............... $24,147 $28,173 $37,977 $27,045
Other income ................................. 1,995 2,609 3,160 2,423
----------- ---------- ----------- ----------
Total revenue ............................... 26,142 30,782 41,137 29,468
Total costs and expenses ...................... 18,541 18,779 20,583 18,894
----------- ---------- ----------- ----------
Income before provision for income taxes and
extraordinary item ........................... 7,601 12,003 20,554 10,574
Provision for income taxes .................... 1,806 2,852 4,884 2,380
----------- ---------- ----------- ----------
Net income before extraordinary item ......... 5,795 9,151 15,670 8,194
Extraordinary item ............................ -- -- -- (4,991)
----------- ---------- ----------- ----------
Net income .................................... 5,795 9,151 15,670 3,203
Preferred dividends ........................... 1,020 1,056 1,089 1,110
----------- ---------- ----------- ----------
Net income attributable to common shares ..... $ 4,775 $ 8,095 $ 14,581 $ 2,093
=========== ========== =========== ==========
Net income per share before extraordinary item $ .13 $ .22 $ .39 $ .19
Extraordinary item ............................ -- -- -- (.13)
----------- ---------- ----------- ----------
Net income per share .......................... $ .13 $ .22 $ .39 $ .06
=========== ========== =========== ==========
</TABLE>
- ---------------
* CECI's operations are seasonal in nature with a disproportionate
percentage of income earned in the second and third quarters.

F-21

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(For the three years ended December 31, 1993)
(Dollars and shares in thousands, except per share amounts)

18. SUMMARIZED CECI (PARENT ONLY) FINANCIAL STATEMENTS

CECI (PARENT ONLY) BALANCE SHEETS
As of December 31, 1993 and 1992
(Dollars and shares in thousands, except per share amounts)

<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Assets

Cash and Investments ................................. $126,824 $ 53,321
Restricted cash ...................................... 13,535 634
Development projects in progress ..................... 44,272 21,428
Investment in and advances to subsidiaries and joint
ventures ............................................ 215,660 168,949
Equipment, net of accumulated depreciation .......... 2,587 1,575
Notes receivable--joint ventures ..................... 21,558 19,098
Deferred charges and other assets .................... 16,458 17,214
---------- ----------
Total assets ...................................... $440,894 $282,219
========== ==========

Liabilities and Stockholders Equity

Liabilities:
Accounts payable .................................. $ 86 $ 937
Other accrued liabilities ......................... 10,550 5,061
Income taxes payable .............................. 4,000 --
Senior notes ...................................... 35,730 35,730
Convertible subordinated debenture ................ 100,000 --
Deferred income taxes ............................. 18,310 15,212
---------- ----------
Total liabilities ............................... 168,676 56,940
---------- ----------

Deferred income relating to joint ventures .......... 1,915 2,165

Redeemable preferred stock .......................... 58,800 54,350
Stockholders' equity:
Preferred stock--authorized 2,000 shares no par
value ........................................... -- --
Common stock--authorized 60,000 shares par value
$0.0675 per share; issued and outstanding 35,446
and 35,258 shares ............................... 2,404 2,380
Additional paid-in capital ........................ 100,965 97,977
Retained earnings ................................. 111,031 68,407
Treasury stock, 157 common shares at cost ......... (2,897) --
---------- ----------
Total stockholders' equity ...................... 211,503 168,764
---------- ----------
Total liabilities and stockholders' equity ...... $440,894 $282,219
========== ==========
</TABLE>

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

F-22

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CECI (PARENT ONLY) STATEMENTS OF OPERATIONS
For the three years ended December 31, 1993
(Dollars in thousands)

<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Equity in earnings of subsidiary companies and
joint ventures before extraordinary items ....... $61,412 $53,685 $38,364
Interest and other income ......................... 8,756 4,557 4,923
--------- --------- ---------
Total revenues .................................. 70,168 58,242 43,287
--------- --------- ---------

Expenses:
General and administration ........................ 6,564 6,796 5,585
Interest, net of capitalized interest ............. 2,346 714 2,836
--------- --------- ---------
Total expenses .................................. 8,910 7,510 8,421
--------- --------- ---------

Income before provision for income taxes ............ 61,258 50,732 34,866
Provision for income taxes .......................... 18,184 11,922 8,284
--------- --------- ---------

Income before change in accounting principle and
extraordinary item ................................ 43,074 38,810 26,582

Cumulative effect of change in accounting principle 4,100 -- --
Equity in extraordinary item of joint ventures
(Less applicable income taxes of $1,533) .......... -- (4,991) --
--------- --------- ---------

Net income .......................................... 47,174 33,819 26,582
Preferred dividends ................................. 4,630 4,275 --
--------- --------- ---------

Net income available to common stockholders ........ $42,544 $29,544 $26,582
========= ========= =========
</TABLE>

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

F-23

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CECI (PARENT ONLY) STATEMENTS OF CASH FLOWS
For the three years ended December 31, 1993
(Dollars in thousands)

<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities ................. $ 45,671 $ 22,597 $ 631
---------- ---------- ----------

Cash flows from investing activities:
Increase in development projects in progress ....... (22,844) (4,218) (3,458)
Decrease (increase) in advances to and investments
in subsidiaries and joint ventures ............... (36,812) 12,155 (41,162)
Other .............................................. (9,945) (15,711) 251
---------- ---------- ----------

Cash flows from investing activities ................. (69,601) (7,774) (44,369)
---------- ---------- ----------

Cash flows from financing activities: ................
Proceeds from sale of common, treasury and preferred
stocks, and exercise of warrants and stock options 2,912 8,065 111,458
Payment of senior notes ............................ -- -- (6,000)
Purchase of treasury stock ......................... (2,897) (4,887) --
Net change in short-term bank loan ................. -- -- (15,000)
Proceeds from issue of subordinated debentures ..... 100,000 -- --
Purchase of warrants ............................... -- (11,716) --
Deferred charges relating to debt financing ........ (2,582) -- --
---------- ---------- ----------

Cash flows from financing activities ................. 97,433 (8,538) 90,458
---------- ---------- ----------

Net increase in cash and investments ................. 73,503 6,285 46,720
Cash and investments at beginning of period ......... 53,321 47,036 316
---------- ---------- ----------

Cash investments at end of period .................... $126,824 $ 53,321 $ 47,036
========== ========== ==========

Interest paid (net of amounts capitalized) .......... $ (897) $ 464 $ 3,342
========== ========== ==========

Income taxes paid .................................... $ 6,819 $ 4,129 $ 1,682
========== ========== ==========
</TABLE>

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

F-24

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

CECI (PARENT ONLY)
SUPPLEMENTAL NOTES TO FINANCIAL STATEMENTS
(Dollars in thousands)

RELATED PARTY TRANSACTIONS

The Company bills the Coso Project partnership and joint ventures for
management, professional and operational services. Billings for the years
ended December 31, 1993, 1992 and 1991 were $18,285, $19,629 and $18,316,
respectively. Dividends received from subsidiaries for the years ended
December 31, 1993, 1992 and 1991 were $49,053, $33,524 and $18,935,
respectively.

RECLASSIFICATION

Certain amounts in the fiscal 1992 and 1991 financial statements have been
reclassified to conform to the fiscal 1993 presentation. Such
reclassifications do not impact previously reported net income or retained
earnings.

F-25

<PAGE>

FINANCIAL STATEMENTS FOR PERIOD ENDING
SEPTEMBER 30, 1994

Independent Accountant's Report

Board of Directors and Stockholders
California Energy Company, Inc.
Omaha, Nebraska

We have reviewed the accompanying consolidated balance sheet of California
Energy Company, Inc. and subsidiaries as of September 30, 1994, and the
related consolidated statements of operations for the three-month and
nine-month periods ended September 30, 1994 and 1993, and the related
consolidated statements of cash flows for the nine-month periods ended
September 30, 1994 and 1993. These financial statements are the
responsibility of the Company's management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of California Energy Company, Inc.
and subsidiaries as of December 31, 1993, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year
then ended (not presented herein); and in our report dated February 24, 1994,
we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
consolidated balance sheet as of December 31, 1993 is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which
it has been derived.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP

Omaha, Nebraska
October 19, 1994

F-26

<PAGE>

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
--------------- --------------
(UNAUDITED)
<S> <C> <C>
Assets:

Cash and short-term investments ........................... $ 316,349 $127,756
Joint venture cash and short-term investments ............. 27,088 14,943
Restricted cash and short-term investments ................ 127,380 48,105
Accounts receivable ....................................... 33,901 21,658
Due from joint ventures ................................... 1,639 1,394
Properties and plants, net (Note 3) ....................... 522,268 458,974
Equipment, net of depreciation ............................ 4,699 4,540
Notes receivable--joint ventures .......................... 12,255 11,280
Other investments ......................................... 11,517 10,445
Deferred charges and other assets ......................... 29,968 16,889
--------------- --------------
Total assets ........................................... $1,087,064 $715,984
=============== ==============
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable .......................................... $ 1,021 $ 607
Other accrued liabilities ................................. 23,357 19,866
Income taxes payable ...................................... 587 4,000
Construction loans ........................................ 21,079 --
Project loans ............................................. 233,080 246,880
Senior Notes (Note 8) ..................................... -- 35,730
Senior Discount Notes (Note 4) ............................ 421,375 --
Convertible Subordinated Debentures ....................... 100,000 100,000
Deferred income taxes ..................................... 24,774 18,310
--------------- --------------
Total liabilities ...................................... 825,273 425,393
--------------- --------------
Deferred income ............................................ 19,781 20,288
Redeemable preferred stock ................................. 62,350 58,800
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock--authorized 2,000 shares, no par value
Common stock--authorized 60,000 shares, par value $0.0675
per share, issued and outstanding 32,230 and 35,446
shares at September 30, 1994 and December 31, 1993,
respectively ........................................... 2,407 2,404
Additional paid in capital ............................... 100,000 100,965
Retained earnings ........................................ 136,769 111,031
Treasury stock--3,420 and 157 common shares, at September
30, 1994 and December 31, 1993, respectively, at cost .. (59,516) (2,897)
--------------- --------------
Total stockholders' equity ............................ 179,660 211,503
--------------- --------------
Total liabilities and stockholders' equity ............ $1,087,064 $715,984
=============== ==============
</TABLE>

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

F-27

<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993 1994 1993
--------- --------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Sales of electricity and steam ................. $49,498 $41,433 $117,208 $101,046
Interest and other income ...................... 9,026 4,824 21,980 12,294
--------- --------- ---------- ----------
Total revenues .............................. 58,524 46,257 139,188 113,340
--------- --------- ---------- ----------
Cost and expenses:
Plant operations ............................... 9,846 5,878 23,887 18,898
General and administration ..................... 3,216 2,359 9,536 8,596
Royalties ...................................... 3,504 3,004 7,898 6,525
Depreciation and amortization .................. 5,639 4,344 15,439 13,044
Interest expense ............................... 17,653 8,184 44,480 20,993
Less interest capitalized ...................... (2,087) (1,682) (7,518) (3,822)
--------- --------- ---------- ----------
Total costs and expenses .................... 37,771 22,087 93,722 64,234
--------- --------- ---------- ----------
Income before income taxes ...................... 20,753 24,170 45,466 49,106
Provision for income taxes ...................... 6,340 7,493 14,067 14,295
--------- --------- ---------- ----------
Income before extraordinary item and change in
accounting principle ........................... 14,413 16,677 31,399 34,811
Extraordinary item (less applicable income taxes
of $945) (Note 8) .............................. -- -- (2,007 ) --
Cumulative effect of change in accounting
principle ...................................... -- -- -- 4,100
--------- --------- ---------- ----------
Net income ...................................... 14,413 16,677 29,392 38,911
Preferred dividends (paid in kind)* ............. 1,275 1,179 3,711 3,429
--------- --------- ---------- ----------
Net income attributable to common stockholders . $13,138 $15,498 $ 25,681 $ 35,482
========= ========= ========== ==========
Income per share before extraordinary item and
change in accounting principle ................. $ 0.38 $ 0.41 $ 0.77 $ 0.81
Extraordinary item (Note 8) ..................... -- -- (0.06) --
Cumulative effect of change in accounting
principle ...................................... -- -- -- 0.11
--------- --------- ---------- ----------
Net income per share assuming no dilution ...... $ 0.38 $ 0.41 $ 0.71 $ 0.92
========= ========= ========== ==========
Net income per share assuming full dilution
(Note 7) ....................................... $ 0.36 $ 0.41 $ 0.70 $ 0.92
========= ========= ========== ==========
Average number of common and common equivalent
shares outstanding assuming no dilution ....... 34,831 38,180 36,174 38,436
========= ========= ========== ==========
</TABLE>
- ---------------
* Reflects dividends on CECI's Series C Redeemable Convertible Preferred
Stock, which are payable in kind.

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

F-28

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1994 1993
----------- ----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income ...................................................... $ 29,392 $ 38,911
Adjustments to reconcile net cash flow from operating
activities:
Depreciation and amortization ................................ 15,439 13,044
Amortization of original issue discount ...................... 21,375 --
Amortization of deferred financing costs ..................... 1,421 714
Provision for deferred income taxes .......................... 6,464 1,848
Changes in other items:
Accounts receivable .......................................... (12,243) (12,638)
Accounts payable and accrued liabilities ..................... 3,905 (4,906)
Deferred income .............................................. (507) (657)
Income tax payable ........................................... (3,413) 1,444
Other ........................................................ -- (3)
----------- ----------
Net cash flows from operating activities ..................... 61,833 37,757
----------- ----------
Cash flows from investing activities:
Capital expenditures relating to existing power plants ....... (10,739) (9,401)
Well and resource development expenditures for existing ...... (8,508) (13,270)
projects acquisitions of equipment............................ (411) (1,116)
Yuma plant ................................................... (5,611) (25,530)
Foreign projects--construction in progress and development ... (46,841) --
Pacific Northwest, Nevada and Utah developments .............. (6,782) (14,933)
Transmission line deposit .................................... -- 7,684
Decrease (increase) in restricted cash ....................... (79,275) 12,892
Increase in other investments and assets ..................... (4,371) (2,327)
----------- ----------
Net cash flows from investing activities ..................... (162,538) (46,001)
----------- ----------
Cash flows from financing activities:
Proceeds and net benefits from sale of common, treasury, and
preferred stock and exercise of options .................... 677 2,303
Deferred financing costs--Senior Discount Notes .............. (11,201) --
Proceeds from issue of Senior Discount Notes ................. 400,000 --
Defeasance of Senior Notes ................................... (35,730) --
Repayment of project loans ................................... (13,800) (8,362)
Deferred financing costs--Convertible Subordinated Debentures -- (2,500)
Proceeds from issue of Convertible Subordinated Debentures ... -- 100,000
Proceeds from construction loan .............................. 21,079 --
Increase in amounts due from joint ventures .................. (1,220) (2,139)
Purchase of treasury stock ................................... (58,362) --
----------- ----------
Net cash flows from financing activities ..................... 301,443 89,302
----------- ----------
Net increase in cash and cash equivalents ........................ 200,738 81,058
Cash and cash equivalents at beginning of period ................. 142,699 63,519
----------- ----------
Cash and cash equivalents at end of period ....................... $ 343,437 $144,577
=========== ==========
Supplemental disclosures:
Interest paid, net of amounts capitalized ........................ $ 14,494 $ 14,881
----------- ----------
Income taxes paid ................................................ $ 5,070 $ 1,410
=========== ==========
</TABLE>

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

F-29

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share and per kWh data)

1. GENERAL

In the opinion of management of California Energy Company, Inc. (the
"Company"), the accompanying unaudited consolidated financial statements
contain all adjustments (consisting only of normal recurring accruals)
necessary to present fairly the financial position as of September 30, 1994
and the results of operations for the three and nine months ended September
30, 1994 and 1993, and cash flows for the nine months ended September 30,
1994 and 1993.

The consolidated financial statements include the accounts of CECI and its
wholly owned subsidiaries, and its proportionate share of the accounts of the
partnerships and joint ventures in which it has invested.

The results of operations for the three and nine months ended September
30, 1994 and 1993 are not necessarily indicative of the results to be
expected for the full year.

Certain amounts in the 1993 financial statements and supporting footnote
disclosures have been reclassified to conform to the 1994 presentation. Such
reclassification did not impact previously reported net income or retained
earnings.

2. OTHER FOOTNOTE INFORMATION

Reference is made to CECI's most recently issued annual report that
included information necessary or useful to the understanding of CECI's
business and financial statement presentations. In particular, CECI's
significant accounting policies and practices were presented as Note 2 to the
consolidated financial statements included in that report.

3. PROPERTIES AND PLANTS

Properties and Plants comprise the following:

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Project costs:
Power plants and gathering systems .. $304,030 $246,219
Wells and resource development ...... 171,802 162,776
-------------- --------------
475,832 408,995
Less accumulated depreciation
and amortization .................... (85,010) (69,823)
-------------- --------------
Net facilities ....................... 390,822 339,172
Resource development in progress .... 421 939
-------------- --------------
Total project costs .................. 391,243 340,111
-------------- --------------
Yuma plant--construction in progress -- 41,461
Upper Mahiao plant--construction in
progress ............................ 34,584 --
Manhanagdong--construction in
progress ............................ 11,053 --
Other foreign project development ... 1,204 --
Pacific Northwest costs .............. 45,922 41,910
Nevada and Utah properties cost ..... 38,262 35,492
-------------- --------------
Total ............................. $522,268 $458,974
============== ==============
</TABLE>

In June 1994, amounts recorded as "Yuma plant--construction in progress" were
transferred to "Power plants and gathering systems."

F-30

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands, except per share and per kWh data)

4. SENIOR DISCOUNT NOTES

5. COMMITMENTS AND CONTINGENCIES

In April 1994, CECI closed the financing for the 128 GMW Upper Mahiao
geothermal power project located in the Philippines. The total project cost
for the facility is approximately $218,000. CECI will supply approximately
$56,000 of equity and project debt financing will constitute the balance of
approximately $162,000. A syndicate of international commercial banks is
providing the construction financings. The Export-Import Bank of the U.S.
("Ex-Im Bank") is providing political risk insurance to the commercial banks
on the construction loan and will provide the preponderance of project term
financing upon satisfaction of conditions associated with commercial
operation. As of September 30, 1994, draws on the construction loan totalled
$20,636, equity investments made by a subsidiary of CECI totalled $12,712,
and CECI has invested $1,236. The Overseas Private Investment Corporation
("OPIC") is providing political risk insurance on the equity investment by
CECI in this project. The Upper Mahiao project has begun construction, and is
expected to be in service by July of 1996. The project is structured as a ten
year Build-Own-Transfer ("BOT"), in which CECI's subsidiary CE Cebu
Geothermal Power Company, Inc., the project company, will be responsible for
implementing construction of the geothermal power plant and, as owner, for
providing operations and maintenance during the ten year BOT period. The
electricity generated by the Upper Mahiao geothermal power plant will be sold
to the Philippine National Oil Company -Energy Development Corporation
("PNOC-EDC"), which is also responsible for supplying the facility with the
geothermal steam. After a ten year cooperation period, and the recovery by
CECI of its capital investment plus incremental return, the plant will be
transferred to PNOC-EDC at no cost. Ormat Inc. of Sparks, Nevada is the
turnkey contractor for the project.

The Mahanagdong project will be built, owned and operated by CE Luzon
Geothermal Power Company, a Philippine corporation, that is expected to be
owned post completion as follows: 45% by CECI, 45% by Kiewit, and up to 10%
by another industrial company. The turnkey contractor consortium consists of
Kiewit Construction Group, Inc. (with an 80% interest) and The Ben Holt Co.,
a wholly owned subsidiary of CECI (with a 20% interest).

F-31

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands, except per share and per kWh data)

provided by the commercial lenders will be insured against political risks by
the Ex-Im Bank. Ten-year term debt financing will be provided by Ex-Im Bank
(which will replace the construction debt) and by OPIC. The Mahanagdong
project has commenced construction and as of September 30, 1994, CECI's
proportionate share of draws on the construction loan totalled $443, equity
investments made by a subsidiary of CECI totalled $3,899, and CECI has
invested $6,711.

CECI has made an offer (the "Offer to Purchase") to acquire all of the
outstanding shares of Magma Power Company ("Magma") for $38.50 per share,
comprised of $28.50 in cash and $10.00 in market value of CECI's common
stock. As the first step in implementing its proposal to acquire all Magma
shares, CE Acquisition Company, Inc. (the "Purchaser"), a wholly owned
subsidiary of CECI, commenced a cash tender offer (the "Offer") to purchase
12,400 shares, or approximately 51% of the common stock of Magma Power
Company, at a price of $38.50 net per share to be followed by a second step
merger for a combination of cash and CECI common stock, which when completed
would result in an aggregate blended consideration of $28.50 in cash and
$10.00 in market value of CECI's common stock for each share of Magma
purchased by CECI. The Offer currently is set to expire on December 2, 1994.
Magma's Board of Directors (the "Board") has recommended that their
shareholders not accept CECI's $38.50 per share Offer.

In order to facilitate consummation of its acquisition offer, CECI is
soliciting requests to call a special meeting of Magma stockholders and has
established November 7, 1994 as the record date for its solicitation period
which will also expire on December 2, 1994. CECI has stated that it intends
to withdraw its $38.50 per share acquisition proposal if it has not signed a
merger agreement with Magma or received a sufficient number of requests from
Magma stockholders to call a special meeting by December 2, 1994. The special
meeting will provide Magma stockholders the opportunity to consider and vote
on CECI's special meeting proposals which, if approved, would result in
certain bylaw amendments that would facilitate CECI's proposal and the
election of four Company nominees to Magma's Board, who would be committed to
removing any impediments to shareholders being able to freely choose whether
to accept the Offer and approve the proposed merger, thereby ensuring that
the Offer and proposed merger get a full and fair hearing. CECI also intends
to call a special meeting of its shareholders to approve the issuance of
CECI's stock in connection with the transaction. Kiewit, CECI's largest
shareholder, which beneficially owns approximately 43.8% of the common
shares, has already approved the proposed transaction.

CECI anticipates that a substantial portion of the cash required to
purchase Magma shares and rights pursuant to the Offer and the proposed
merger will be provided through a secured bank credit facility. CECI has
received a fully underwritten financing commitment letter which states that
the lender will provide up to $500,000 in secured bank financing in
connection with the Offer and the proposed 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 Offer and proposed merger and
related expenses.

The commitment letter contemplates (i) a facility of up to $250,000 to
capitalize CECI for the purpose of financing the Offer and (ii) facilities of
up to $500,000 for, among other things, refinancing the tender facility and
effectuating the proposed merger.

The term of the tender facility will be 12 months, extendible for a term
of up to three years from the initial funding at the mutual consent of CECI
and the lender. The tender facility will be a margin loan collateralized by
the shares purchased pursuant to the Offer.

The merger facility 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 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. The
merger facilities are to be amortized from internally generated funds and
will be secured by an assignment and pledge of Magma stock and all
unencumbered assets of Magma.

F-32

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands, except per share and per kWh data)

The lender's commitment to provide the facilities is subject to certain
customary conditions, including without limitation (a) a capital investment
by CECI in an amount and form satisfactory to the lender, (b) the absence of
certain material adverse changes and (c) the lender's satisfaction with its
due diligence with respect to CECI and Magma.

The definitive documentation relating to the facilities will contain
representations, warranties, covenants, events of default and conditions
customary for transactions of this size and type.

On October 3, 1994, Magma filed a complaint entitled Magma Power Company
v. California Energy Company, Inc., Case No. CV-N-94-06160, against CECI in
the Second Judicial District Court of the State of Nevada in and for the
County of Washoe. The complaint seeks a declaratory judgment that (i) Magma's
Board properly discharged its fiduciary obligations in adopting a poison pill
and amendments to its bylaws and, accordingly, such documents were valid and
binding, and (ii) Nevada General Corporation Law ("NGCL") Sections 78.411
through 78.444 (the "Merger Moratorium Statute") is valid and not in
violation of the Commerce Clause and Supremacy Clause of the United States
Constitution. CECI subsequently removed this action to the United States
District Court for the District of Nevada.

On October 17, 1994, CECI filed its answer and counterclaims in response
to Magma's complaint. The counterclaims name the Purchaser as an additional
counterclaim plaintiff and Magma's directors as counterclaim defendants in
addition to Magma. CECI's counterclaims seek primarily: (i) a declaratory
judgment that certain actions taken by Magma, including the amendment to
Magma's bylaws purporting to preclude Magma's stockholders from taking action
by written consent, and implementation of its poison pill, are void and ultra
vires, and constitute a breach of fiduciary duty by Magma's Board; (ii) an
injunction requiring Magma's Board to rescind the amendment to Magma's bylaws
which purports to eliminate the power of stockholders to act by written
consent, the "golden parachute" severance agreements granted to 15 members of
Magma's management and the indemnification agreements granted to each member
of Magma's Board; (iii) an injunction enjoining the operation of the poison
pill and directing Magma's Board to redeem the poison pill rights; (iv) a
declaratory judgment that the Merger Moratorium Statute is unconstitutional
under the Supremacy Clause and the Commerce Clause of the United States
Constitution; (v) an injunction requiring Magma to correct all false and
misleading statements in its Schedule 14D-9 and the amendments thereto.

On October 17, 1994, Magma filed an amended complaint, which in addition
to the relief requested in its original complaint, seeks (i) declaratory and
injunctive relief with respect to certain purportedly false and misleading
disclosures in CECI's and the Purchaser's Schedule 14D-1 and the Offer to
Purchase therein; and (ii) declaratory and injunctive relief with respect to
certain allegedly false and misleading statements made in CECI's preliminary
Request Solicitation Statement filed with the Commission pursuant to Section
14(a) of the Exchange Act on October 13, 1994.

On October 19, 1994, CECI and the Purchaser filed their answer to Magma's
amended complaint and amended their counterclaims which, in addition to the
relief requested in the original counterclaims, seek an injunction requiring
Magma to correct additional false and misleading statements reflected in an
amendment to its Schedule 14D-9 and in other statements made by Magma.

On October 25, 1994, CECI and the Purchaser filed their second amended
counterclaims which, in addition to the relief requested in the original and
amended counterclaims, seek an injunction requiring Magma to refrain from (i)
taking actions to damage its international development projects, including
the Karaha project, or (ii) taking other actions designed to waste corporate
assets and block the Offer and the proposed merger.

On November 3, 1994, CECI and the Purchaser filed their third amended
counterclaims which, among other things, seek a ruling that the Control Share
Statute does not apply to the Offer.

CECI intends to take any action necessary to have attempted impediments to
the Offer and the proposed merger set aside.

F-33

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands, except per share and per kWh data)

On October 14, 1994, Ben Holt, a stockholder of Magma, and a director of
CECI, filed a complaint entitled Ben Holt v. Magma Power Company, Case No.
CV94-06432, against Magma in the Second Judicial District Court for the State
of Nevada in and for the County of Washoe (the "Court"), alleging, among
other things, that Magma has infringed the plaintiff's right as a stockholder
by denying his statutory right under the NGCL to demand access to Magma's
stockholder list and certain related material necessary to communicate with
Magma's stockholders. The plaintiff sought an order directing Magma to comply
with the demand for the stockholder list and related information necessary to
communicate with stockholders.

On October 25, 1994, the Court issued an order directing Magma forthwith
and without delay to turn over to Mr. Holt a complete record or list of
Magma's stockholders together with certain other information concerning
stockholders of Magma requested by Mr. Holt in his demand letter to Magma.
The Court ruled expressly that Mr. Holt satisfied the requirements of the
NGCL governing requests for stockholder information in that he had been a
stockholder of Magma for more than six months as of the time of his demand,
and had complied with Magma's request for an affidavit concerning his
request; that Mr. Holt's purpose for requesting stockholder information of
Magma, which was to facilitate CECI's request for a special meeting of
stockholders of Magma and otherwise to communicate with the other
stockholders of Magma concerning CECI's proposal to acquire Magma through the
Offer and the proposed merger was a proper purpose for which to request
stockholder information; and that the public interest is served by granting
Mr. Holt's request for stockholder information.

6. INCOME TAXES

On January 1, 1993, CECI adopted Statement of Financial Accounting
Standard No. 109 ("FAS 109"), Accounting for Income Taxes. The adoption of
FAS 109 changed CECI's method of accounting for income taxes from the
deferred method as required by Accounting Principles Board No. 11 to an asset
and liability approach. Under FAS 109, the net excess deferred tax liability
as of January 1, 1993 was determined to be $4,100. This amount was reflected
in 1993 income as the cumulative effect of a change in accounting principle.
It primarily represented the recognition of CECI's tax credit carryforwards
as a deferred tax asset. There was no cash impact to CECI upon the required
adoption of FAS 109. Under FAS 109, the effective tax rate has increased due
to CECI's tax credit carryforwards being recognized as an asset upon the
adoption of FAS 109 and unavailable to reduce the current period's effective
tax rate for computing CECI's provision for income taxes.

CECI's effective tax rate continues to be less than the statutory rate
primarily due to the depletion deduction and the generation of energy tax
credits in 1994. The significant components of the deferred tax liability are
the temporary differences between the financial reporting basis and income
tax basis of the power plant and the well and resource development costs, and
in addition, the offsetting benefits of operating loss carryforwards and
investment and geothermal energy tax credits. The income tax provision for
the nine months ended September 30, 1994, is approximately 54% current tax
expense and 46% deferred tax expense.

F-34

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars in thousands, except per share and per kWh data)

7. EARNINGS PER SHARE

Fully diluted earnings per share assumes the conversion of the Convertible
Subordinated Debentures into common shares at a conversion price of
$22.50/share. The conversion has become dilutive because of the significant
repurchase by CECI of CECI's common stock which has materially reduced the
number of shares outstanding and thereby increased the relative effect of the
conversion.

8. EXTRAORDINARY ITEM

In conjunction with CECI's Senior Discount Note offering (See Note 4), the
12% Senior Notes were defeased. This resulted in an extraordinary item in the
amount of $2,007, after the income tax effect of $945. The extraordinary item
represents the amount necessary to defease the interest payments and the
unamortized portion of the deferred financing costs on the $35,730 Senior
Notes. The 1994 contingent interest component of these Senior Notes,
calculated by reference to CECI's share of available cash flow from the Coso
Project, remains undefeased and outstanding through the end of the
calculation period, December 31, 1994.

F-35

<PAGE>

MAGMA'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO

FINANCIAL STATEMENTS FOR PERIOD ENDING
DECEMBER 31, 1993

Report of Independent Accountants

To the Shareholders and Board of Directors of Magma Power Company

We have audited the accompanying consolidated balance sheets of Magma
Power Company and Subsidiaries (the "Company") at December 31, 1993 and 1992,
and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. The financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Magma Power
Company and Subsidiaries at December 31, 1993 and 1992, and the consolidated
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1993 in conformity with generally accepted
accounting principles.

/s/ Coopers & Lybrand

Coopers & Lybrand
San Diego, California
March 18, 1994

F-36

<PAGE>

CONSOLIDATED BALANCE SHEETS
(As of December 31, 1993 and 1992)
(Dollars in thousands)

<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Assets
Current Assets
Cash ......................................................... $ 18,017 $ 2,106
Marketable securities ........................................ 32,086 37,501
Partnership cash and marketable securities ................... 22,919 20,724
Accounts receivable:
Trade ....................................................... 18,199 11,258
Other ....................................................... 14,073 12,681
Prepaid expenses and other assets ............................. 11,922 8,955
---------- ----------
Total Current Assets ...................................... 117,216 93,225
---------- ----------
Land .......................................................... 6,225 5,677
Property, plant and equipment, net of accumulated depreciation
of $53,166 and $36,932, respectively ......................... 265,215 113,922
Exploration and development costs, net of accumulated
amortization of $13,682 and $10,445, respectively ........... 107,069 52,001
Acquisition and new project costs ............................. 13,721 26,291
Other investments ............................................. 47,642 79,469
Power purchase contracts, net of accumulated amortization of
$946 and $88, respectively. .................................. 22,185 853
Other assets and deferred charges ............................. 22,762 16,083
Goodwill, net of accumulated amortization of $2,122 and
$1,757, respectively ......................................... 9,276 9,129
---------- ----------
Total ..................................................... $611,311 $396,650
========== ==========
Liabilities and Shareholders' Equity
Current Liabilities
Trade accounts payable ...................................... $ 7,235 $ 4,635
Accrued and other liabilities ............................... 3,463 3,774
Current portion of loans payable ............................ 36,799 10,292
---------- ----------
Total Current Liabilities ................................. 47,497 18,701
---------- ----------
Loans payable ................................................ 189,209 85,834
Deferred income taxes ........................................ 11,387 8,350
Other long-term liabilities .................................. 11,300 1,505
---------- ----------
Total Non-Current Liabilities ............................. 211,896 95,689
---------- ----------
Commitments and contingencies
Shareholders' Equity
Preferred stock, $.10 par value, 1,000,000 shares authorized,
none issued and outstanding ................................. -- --
Common stock, $.10 par value, 30,000,00 shares authorized,
issued and outstanding 23,989,763 and 22,980,647 shares
respectively ................................................ 2,399 2,298
Additional paid-in capital ................................... 144,996 128,154
Unrealized gains from marketable securities .................. 583 --
Retained earnings ............................................ 203,940 151,808
---------- ----------
Total Shareholders' Equity ................................ 351,918 282,260
---------- ----------
Total ..................................................... $611,311 $396,650
========== ==========

</TABLE>

The accompanying notes are an integral part of these statements.

F-37

<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
(For the Three Years Ended December 31, 1993, 1992 and 1991)
(Dollars in thousands, except per share data)

YEAR ENDED DECEMBER 31, 1993 1992 1991
----------- --------- ---------
<S> <C> <C> <C>
Revenues
Sales of electricity ............................. $137,882 $ 72,236 $66,015
Royalties ........................................ 19,629 22,929 13,611
Interest and other income ........................ 4,195 8,653 10,756
Management services .............................. 5,432 5,148 4,509
----------- --------- ---------
167,138 108,966 94,891
----------- --------- ---------
Costs and Expenses
Plant operating costs ............................ 49,493 33,258 27,353
Depreciation and amortization .................... 21,692 11,927 11,673
Other non-plant costs ............................ 471 800 200
General and administrative ....................... 10,943 6,483 5,934
Interest incurred ................................ 9,626 6,831 8,527
----------- --------- ---------
92,225 59,299 53,687
----------- --------- ---------
Income from operations ............................. 74,913 49,667 41,204
Provision for income taxes ....................... 22,778 13,309 7,263
----------- --------- ---------
Income before cumulative effect of accounting
change ........................................... 52,135 36,358 33,941
Cumulative effect to January 1, 1992 of change in
accounting for income taxes ...................... -- 17,833 --
----------- --------- ---------
Net income ..................................... $ 52,135 $ 54,191 $33,941
=========== ========= =========
Income before cumulative effect of accounting
change per Common Share
Assuming no dilution ............................. $ 2.17 $ 1.59 $ 1.44
----------- --------- ---------
Assuming full dilution ........................... $ 2.17 $ 1.52 $ 1.44
----------- --------- ---------
Cumulative effect of accounting change per Common
Share
Assuming no dilution ............................. $ -- $ .77 $ --
----------- --------- ---------
Assuming full dilution ........................... $ -- $ .75 $ --
----------- --------- ---------
Income per Common Share
Assuming no dilution ............................. $ 2.17 $ 2.36 $ 1.44
----------- --------- ---------
Assuming full dilution ........................... $ 2.17 $ 2.27 $ 1.44
----------- --------- ---------
Average Common Shares Outstanding
Assuming no dilution ............................. 24,063 22,936 23,611
----------- --------- ---------
Assuming full dilution ........................... 24,072 23,847 23,611
----------- --------- ---------
</TABLE>

The accompanying notes are an integral part of these statements.

F-38

<PAGE>

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(For the Three Years Ended December 31, 1993, 1992 and 1991)
(Dollars in thousands)

<TABLE>
<CAPTION>
UNREALIZED
COMMON STOCK ADDITIONAL GAINS FROM TOTAL
------------------ PAID-IN MARKETABLE RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL SECURITIES EARNINGS EQUITY
-------- -------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990 .... 22,902 $2,290 $ 126,660 $-- $ 63,676 $192,626
Other equity transactions, net 25 3 302 -- -- 305
Net income, 1991 ............... -- -- -- -- 33,941 33,941
-------- -------- ------------ ------------ ---------- ---------------
Balance, December 31, 1991 .... 22,927 2,293 126,962 -- 97,617 226,872
Other equity transactions, net 54 5 1,192 -- -- 1,197
Net income, 1992 ............... -- -- -- -- 54,191 54,191
-------- -------- ------------ ------------ ---------- ---------------
Balance, December 31, 1992 .... 22,981 2,298 128,154 -- 151,808 282,260
Purchase of Dow stock option
through issuance of shares ... 857 86 (86) -- -- --
Tax effect of Dow option
purchase ...................... -- -- 13,581 -- -- 13,581
Unrealized gains from
marketable securities ......... -- -- -- 583 -- 583
Other equity transactions, net 152 15 3,347 -- (3) 3,359
Net income, 1993 ............... -- -- -- -- 52,135 52,135
-------- -------- ------------ ------------ ---------- ---------------
Balance, December 31, 1993 .... 23,990 $2,399 $ 144,996 $583 $203,940 $351,918
======== ======== ============ ============ ========== ===============
</TABLE>

The accompanying notes are an integral part of these statements.

F-39

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
(For the Three Years Ended December 31, 1993, 1992 and 1991)
(Dollars in thousands)

<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income .................................... $ 52,135 $ 54,191 $ 33,941
----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ................ 21,692 11,927 11,673
Gain from the disposition of investments ..... (771) (1,280) (832)
Realization of transmission line credits ..... 2,538 1,444 1,260
Other, net ................................... (227) (76) (237)
Cumulative effect of adoption of SFAS 109 .... -- (17,833) --

Changes in components of working capital:

Accounts receivable ......................... (8,333) (8,529) 373
Partnership cash and marketable securities .. (2,195) (1,233) 1,293
Prepaid expenses and other assets ........... (2,253) 585 (2,565)
Accounts payable and accrued liabilities .... 2,845 501 1,101
Accrued interest payable .................... 719 (395) 4
Income taxes payable ........................ 7,605 (301) 439
Deferred taxes from operations .............. 7,485 6,684 (842)
----------- ----------- -----------
Total adjustments ......................... 29,105 (8,506) 11,667
----------- ----------- -----------
Net cash provided by operating activities ..... 81,240 45,685 45,608
----------- ----------- -----------
Cash Flows From Investing Activities
Proceeds from the sale of investments ......... 223,479 150,271 180,113
Purchase of investments ....................... (184,784) (160,949) (193,767)
Capital expenditures .......................... (8,434) (12,043) (15,711)
Power plant acquisition costs . ............... (215,081) (22,527) --
New project development costs . ............... (12,345) (3,749) --
Other, net .................................... 1,893 (667) 43
----------- ----------- -----------
Net cash used in investing activities ..... (195,272) (49,664) (29,322)
----------- ----------- -----------
Cash Flows From Financing Activities
Borrowing from banks .......................... 140,000 -- --
Proceeds from the issuance of common stock .... -- 691 --
Repayment of loans payable .................... (10,081) (9,501) (5,669)
Commercial paper discounts and prepaid interest 359 1,353 --
Other, net .................................... (335) 841 (181)
----------- ----------- -----------
Net cash provided by (used) in financing
activities ................................ 129,943 (6,616) (5,850)
----------- ----------- -----------
Net (decrease) in cash ........................ 15,911 (10,595) 10,436
Cash at beginning of year ..................... 2,106 12,701 2,265
----------- ----------- -----------
Cash at end of year ........................... $ 18,017 $ 2,106 $ 12,701
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-40

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars and shares in thousands, except per share amount)

1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

BASIS OF CONSOLIDATION. The consolidated financial statements present the
assets, liabilities, revenues, costs and expenses of Magma Power Company (the
"Company") and its 100% owned subsidiaries and partnerships, Imperial Magma,
Vulcan Power Company ("Vulcan"), Magma Operating Company ("MOC"), Desert
Valley Company ("Desert Valley"), Fish Lake Power Company ("FLPC"), Magma
Land I ("MLI"), Salton Sea Power Company, Salton Sea Brine Processing, L.P.,
Salton Sea Power Generation, L.P., Peak Power Corporation ("Peak Power") and
its pro-rata 50% share of the accounts of Del Ranch, L.P., Elmore, L.P.,
Leathers, L.P., Vulcan/BN Geothermal Power Company and Magma/GEO '83 Joint
Venture.

All significant intercompany transactions and accounts have been
eliminated.

REVENUE RECOGNITION. Sales of electricity represents Magma's pro-rata 50%
share of the revenue accrued by Del Ranch, L.P., Elmore, L.P., Leathers,
L.P., and Vulcan/BN Geothermal Power Company (the "Partnerships") and its
100% owned interest in Salton Sea Power Generation, L.P., from sales to
Southern California Edison Company ("SCE"). SCE is a subsidiary of SCEcorp.
SCEcorp is the parent corporation of Mission Energy Company which, through
its subsidiaries, owns 50% of the Partnerships. Royalties, management service
fees and rental income contractually payable to Magma by the Partnerships are
recorded on an accrual basis, net of Magma's pro-rata 50% share of the
corresponding partnership expense. Royalties earned from providing geothermal
resources to power plants operated by other geothermal power producers are
recorded on an accrual basis.

PROPERTY, PLANT AND EQUIPMENT. Land is carried at cost. Buildings and
equipment are carried at cost less accumulated depreciation. Exploration and
development costs are carried at cost less accumulated amortization. Such
capitalized costs include all costs of acquiring geothermal leases, recurring
lease rents, geological and geophysical studies and drilling and equipping
wells. These costs are not amortized until they can be directly associated
with energy production. Exploration and development costs associated with
abandoned wells and properties are amortized over the estimated remaining
life of the resource.

Depreciation and amortization are computed using the straight-line method
over the asset's useful life.

Useful lives are as follows:

Plant, plant equipment and buildings ... 20 years
Office furniture and equipment .......... 5-10 years
Maintenance and other equipment ........ 7-10 years
Exploration and development costs ...... 20 years*

- ---------------
* Life of related plant facility.

When property, plant and equipment is sold or abandoned, the cost and
related accumulated depreciation/amortization are removed from the accounts
and the resulting gain or loss is recognized currently.

DEFERRED WELL REWORK COSTS. Magma defers all rework costs and amortizes
them over the estimated period between reworks. Production wells are
amortized using a units of production method while injection wells are
amortized on a straight-line basis over 18 months. Deferred well rework costs
of $5,181,000 in 1993 and $3,010,000 in 1992 are included in prepaid expenses
and other current assets.

POWER PURCHASE CONTRACTS. Power purchase contracts are carried at cost
less accumulated amortization. Contract costs are amortized on a
straight-line basis over the shorter of the remaining contract life or 20
years. The amortization begins at the date of acquisition, for contracts in
service, or the date of firm operations. Amortization expense amounted to
$858,000 in 1993 and $25,000 in 1992 and 1991.

F-41

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars and shares in thousands, except per share amount)

GOODWILL. In a merger which was effective March 11, 1988, Magma Power
Company became successor in interest to all of the assets and obligations of
Magma Energy. The excess of the value of stock issued over the fair market
value of the assets acquired was recorded as goodwill and is being amortized
on the straight-line method over a period of thirty years. Amortization
expense amounted to $365,000 in 1993, 1992 and 1991.

MARKETABLE SECURITIES, INTEREST-BEARING DEPOSITS AND OTHER INVESTMENTS.
Marketable securities and interest-bearing deposits are classified as
"available-for-sale" and are carried at their fair value. Realized gains and
losses are determined using the specific identification method and are
included in other income. Gross unrealized holding gains or losses are
excluded from earnings and reported, net of related tax effect, as a separate
component of Shareholders' Equity. Other investments are carried at cost
which approximates market value.

RETIREMENT PLANS. Magma maintains two defined contribution plans covering
all eligible employees. Contributions to the plans are funded annually.

INCOME PER COMMON SHARE. The calculation of primary earnings per common
share is based on the weighted average number of outstanding common shares.
In computing primary earnings per common share, adjustment has been made for
common shares issuable for warrants and shares under option. Fully diluted
earnings per share reflects the dilutive effect of stock options and warrants
at the end of the reporting period.

CONSOLIDATED STATEMENT OF CASH FLOWS. For purposes of the Statements of
Cash Flows, Magma considers bank and money market deposits as cash.
Partnership cash and marketable securities are not considered cash
equivalents as these assets are segregated for exclusive use of the
Partnerships and restrictions in the Partnership Secured Credit Agreements
place limits on distributions of partnership cash to the partners.

Interest paid was $8,407,000 in 1993, $5,514,000 during 1992 and
$8,153,000 during 1991.

RECLASSIFICATION. Magma has reclassified the presentation of certain prior
year information to conform with the current presentation format.

2. GEOTHERMAL POWER PARTNERSHIPS

The Vulcan partnership was formed in 1985 with equal ownership between
Vulcan Power Company, a 100% owned subsidiary of Magma Power Company and BN
Geothermal, Inc., a wholly owned subsidiary of Mission Energy Company.

Similarly, the Del Ranch, Elmore and Leathers partnerships were formed in
1988 with equal ownership between Magma Power Company and Mission Energy
Company.

In March 1993 Magma formed Salton Sea Brine Processing L.P. to hold the
well field and brine processing equipment acquired from Union Oil Company of
California ("Unocal"). Ownership of Salton Sea Brine Processing, L.P. is 99%
Salton Sea Power Company and 1% Magma Power Company. Magma also formed Salton
Sea Power Generation L.P. to hold the power generating assets acquired from
Desert Power Company and Earth Energy Inc., both wholly owned subsidiaries of
Unocal. Ownership of Salton Sea Power Generation, L.P. is 99% Salton Sea
Brine Processing, L.P. and 1% Magma Power Company.

3. MARKETABLE SECURITIES AND OTHER INVESTMENTS

Effective December 31, 1993, Magma adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). As of December 31, 1993 all debt and equity
securities have been classified as available-for-sale and are carried at fair
value. Gross unrealized holding gains of $836,000 were recorded, net of tax
effect, as of December 31, 1993.

F-42

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars and shares in thousands, except per share amount)

As of December 31, marketable securities and other investments consisted
of the following:

<TABLE>
<CAPTION>
MARKETABLE
SECURITIES
(MATURING MATURITIES OF
WITHIN ONE OTHER OTHER
YEAR) INVESTMENTS INVESTMENTS
------------ ------------- -------------
<S> <C> <C> <C>
1993
Debt and equity securities
Commercial paper ....................... $ 4,986 $ --
Auction rate preferred stock ........... 23,100
U.S. treasuries and agencies ........... 4,000 12,986 2-5 years
U.S. treasuries and agencies ........... 5,084 6-10 years
Corporate medium-term notes ............ 7,093 2-5 years
Corporate medium-term notes ............ 4,139 6-10 years
Municipal tax exempts .................. 3,000 2-5 years
Other investments
Low income housing limited partnerships 8,333
Other .................................. 7,007
------------ -------------
Total ................................ $32,086 $47,642
============ =============
1992
Auction rate preferred stock ............ $33,000 $ --
U.S. treasuries and agencies ............ 17,572
Corporate medium-term notes ............. 4,501 43,409
Low income housing limited partnerships 8,202
Municipal tax exempts ................... 3,000
Other ................................... 7,286
------------ -------------
Total ................................ $37,501 $79,469
============ =============
</TABLE>

In 1992, marketable securities and other investments are carried at cost,
which approximates market value.

4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment at December 31 consisted of the following
(dollars in thousands):

<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Plant and equipment ............... $297,013 $138,361
Maintenance equipment ............. 8,914 6,069
Buildings ......................... 5,631 2,364
Office furniture and equipment ... 3,390 2,047
Other equipment ................... 3,433 2,013
---------- ----------
318,381 150,854
Less accumulated depreciation .... 53,166 36,932
---------- ----------
Property, plant and equipment, net $265,215 $113,922
========== ==========
</TABLE>

5. ACQUISITION AND NEW PROJECT COSTS

On December 15, 1992, Magma signed a definitive agreement with Unocal to
purchase all of Unocal's geothermal interests in the Imperial Valley of
California including three operating geothermal power plants (the "Salton Sea
Plants") and 40,600 acres of geothermal leases, its Long Valley geothermal
leases, consisting of approximately 12,000 acres near Mammoth, California and
its 58,300 acres of geothermal leases in Nevada. On March 31, 1993 Magma
consummated its acquisition of the Imperial Valley geothermal interest. Total
cost includes (i) payments to Unocal consisting of the purchase price of $224
million, working capital of $7.3 million and an interest charge of $3.5
million and (ii) advisory fees and

F-43

<PAGE>

<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars and shares in thousands, except per share amount)

transaction costs totaling $3.4 million and a provision for $10 million of
capital improvements. The total cost of the acquisition is allocated as
follows:
<TABLE>
<CAPTION>
<S> <C>
Land ............................. $ 388
Property, plant and equipment ... 164,366
Exploration and development costs 53,676
Power purchase contracts ......... 22,217
Transmission line credits ........ 6,254
Other ............................ 1,278
---------
Total ......................... $248,179
=========
</TABLE>
In addition to the initial acquisition price, Magma will make payments to
Unocal contingent on future development of new power generating capacity. The
Salton Sea Plants consist of a 10 MW unit, which started firm operation in
1982, a 20 MW unit, which started firm operation in 1990 and a 50 MW unit,
which started firm operation in 1989. All three plants deliver electricity to
Southern California Edison Company under 30 year power purchase contracts.
The contract for the 10 MW unit is a negotiated contract while the contracts
for the 20 MW and 50 MW units are ISO4's with levelized energy payments.

On March 11, 1992 Magma acquired a 30 year modified ISO4 contract to
supply SCE with 16 MWs of geothermal power from Fish Lake, Nevada. Magma is
currently engaged in exploratory and well field development activities, which
are preparatory to constructing a power plant.

Acquisition and new project costs as of December 31, 1993 and 1992 were as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Deposit paid Unocal toward asset acquisition price $-- $22,400
Other Unocal asset acquisition costs .............. -- 127
Fish Lake development costs ....................... 13,721 3,764
--------- ---------
Total .......................................... $13,721 $26,291
========= =========
</TABLE>
6. ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other current liabilities at December 31 consisted of the
following (dollars in thousands):

<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Payroll .. $1,187 $1,554
Interest . 1,602 883
Other ..... 674 1,337
-------- --------
Total . $3,463 $3,774
======== ========
</TABLE>

7. LOANS PAYABLE

At December 31, loans payable consisted of the following (dollars in
thousands):
<TABLE>
<CAPTION>
1993 1992
---------- ---------
<S> <C> <C>
Pro rata portion of partnership non-recourse
debt ........................................... $ 75,149 $84,177
Bridge loan ..................................... 140,000 --
Other loans ..................................... 10,859 11,949
---------- ---------
226,008 96,126
Less amounts due within one year ................ 36,799 10,292
---------- ---------
Loans payable due after one year ................ $189,209 $85,834
========== =========
</TABLE>

Loans payable at December 31, 1993 and 1992 included Magma's pro-rata
share of the debt of the Del Ranch, Elmore, and Leathers partnerships and is
non-recourse to Magma Power Company and

F-44

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars and shares in thousands, except per share amount)

subsidiaries, however, it is collateralized by substantially all of the
assets of these partnerships. A Secured Credit Agreement with a group of
international banks, with Morgan Guaranty Trust Company ("Morgan") as the
agent bank provides for direct bank loans at specified premiums over a choice
of either the bank's prime rate, the London Interbank Offered Rate ("LIBOR")
or the CD Base rate. As an alternative, each partnership may elect to issue
commercial paper and medium-term notes supported by letters of credit issued
by Fuji Bank, Limited, which are secured, in turn, by the project debt
facility with Magma.

The partnerships had no direct bank borrowings at December 31, 1993 and
1992. The weighted average interest rate of the commercial paper and
medium-term notes outstanding at December 31, was 5.5% in 1993 and 6.2% in
1992. During 1993 and 1992 Magma's pro-rata share of the partnership weighted
average borrowings was $77,616,000 and $85,926,000, with a weighted average
interest rate of 5.6% and 6.7% for the corresponding periods.

The loans of each partnership are reduced by 25 semi-annual principal
payments in March and September of each year. The last principal payment is
scheduled for September 15, 2001 for the Del Ranch and Elmore loans and
September 15, 2002 for the Leathers loan.

On March 19, 1993 Magma entered into a one-year $140,000,000 term loan
("Bridge Loan") with a group of commercial banks. Proceeds of the loan were
used to finance the acquisition of the Imperial Valley geothermal interests.
Interest on the loan accrues at LIBOR plus .675%.

On February 28, 1994 Magma replaced the Bridge Loan with a $130,000,000
non-recourse project level debt which is collateralized by substantially all
of the assets of the newly acquired Salton Sea Plants. A secured credit
agreement with a group of international banks, with Credit Suisse as the
agent bank, provides for direct loans at LIBOR plus 1.25%.

The loans are reduced by 12 semi-annual principal payments in March and
September of each year. The last principal payment is scheduled for March 15,
2000.

Other loans consist of a 10-year $4,000,000 tax exempt debt financing
guaranteed by Magma Power Company on behalf of Desert Valley, and installment
obligations representing scheduled capital contributions for investments in
low income housing limited partnerships. The tax exempt bonds issued in
October, 1990 have a coupon interest rate of 7.625% and a sinking fund
requirement in the seventh through tenth years. The installment obligations
are non-interest bearing and are payable through the year 2000 in varying
amounts totalling $6,467,000.

Magma's pro rata portion of annual maturities of loans payable for the
five years beginning January 1, 1994 are as follows (dollars in thousands):

<TABLE>
<CAPTION>
PRO RATA PORTION
OF PARTNERSHIP
SALTON SEA PLANTS DEBT OTHER TOTAL
----------------- ---------------- --------- ---------
<S> <C> <C> <C> <C>
1994 ........ $ 25,692 $ 9,724 $ 1,383 $ 36,799
1995 ........ 25,072 10,718 1,388 37,178
1996 ........ 24,846 12,830 1,393 39,069
1997 ........ 26,108 13,348 2,211 41,667
1998 ........ 25,552 13,348 2,061 40,961
Thereafter . 12,730 15,181 2,423 30,334
----------------- ---------------- --------- ---------
Total .... $140,000 $75,149 $10,859 $226,008
================= ================ ========= =========
</TABLE>

In addition, Magma Power Company has an unused and available $25,000,000
line of credit with Morgan and since February 28, 1994, a $5,000,000 working
line of credit with two of the banks participating in the Bridge Loan
replacement.

8. SHAREHOLDERS' EQUITY

In 1987 and 1993, Magma entered into technical, engineering and management
agreements with The Dow Chemical Company ("Dow"), a significant shareholder
of Magma Power Company. Magma agreed

F-45

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars and shares in thousands, except per share amount)

to pay for those services either with shares of Magma Power Company common
stock valued at the then market price or cash. Dow services totalling
$575,000 in 1993, $799,000 in 1992 and $1,222,000 in 1991 were charged to the
partnership and paid in cash.

The 1987 Agreement granted Dow an option for 2,000,000 shares of Magma
Power Company common stock at option prices that started at $17.00 per share,
a negotiated price that exceeded the then current market price, and which
escalated over a four year period commencing one year after operation of the
Hoch (formerly Del Ranch) plant to a maximum exercise price of $21.00 in
1993. On October 12, 1993 Magma purchased the option by issuing 857,143 newly
issued and unregistered shares. The number of shares issued was based on the
difference between the exercise price of $21.00 per share and the market
price on October 12, 1993 discounted $1.00 to $37.50. Shareholders' equity
has been increased by $13,581,000 representing the tax effect of the shares
purchased.

Reserved common stock at December 31 is as follows:

<TABLE>
<CAPTION>
1993 1992
--------- -----------
<S> <C> <C>
Dow options ........................ -- 2,000,000
Stock Option Plan .................. 655,331 796,390
Deferred Stock and Incentive Awards 19,925 10,800
--------- -----------
Total ........................... 675,256 2,807,190
========= ===========
</TABLE>

9. INCENTIVE STOCK OPTION PLAN

On September 25, 1987, the shareholders of Magma approved the Magma Power
Company Stock Option Plan of 1987 (the "Plan"). Under the Plan, options to
purchase an aggregate of 1,000,000 shares of common stock, $0.10 par value,
of Magma may be granted to salaried employees and consultants of Magma and
its subsidiaries, as selected by the Board of Directors or its compensation
committee (the "Committee"). The number of shares available under the Plan is
subject to adjustment in certain circumstances, including reorganizations,
recapitalizations, stock splits, reverse stock splits, and stock dividends.

The option price granted under the Plan will be established by the Board
of Directors or the Committee, when the option is granted. Such price may not
be less than 90% of the fair market value of the stock on the date the option
is granted. The options have a term of ten years and will become exercisable
in accordance with a vesting schedule starting one year from the date of the
grant.

Options outstanding have been granted to officers and employees to
purchase common stock at prices ranging from $9.25 to $32.50 per share.
Option transactions for the years ended December 31 are as follows:

<TABLE>
<CAPTION>
1993 1992
----------- ----------
<S> <C> <C>
Options outstanding, beginning of year ........................... 475,034 302,561
Options granted .................................................. 92,175 220,300
Options exercised (Exercise price $9.25 to $32.50) ............... (141,059) (47,827)
----------- ----------
Options outstanding, end of year of which 215,849 were
exercisable at December 31, 1993 ................................ 426,150 475,034
=========== ==========
</TABLE>

At December 31, 1993 and 1992, respectively, 229,181 and 321,356 shares of
common stock were available for future option grants.

10. PROVISION FOR INCOME TAXES

Magma provides for taxes on income in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Under SFAS 109, deferred tax assets and liabilities are determined
based on the difference between the financial statement and the tax basis of
the assets and liabilities using enacted tax rates in effect for the year in
which the differences are

F-46

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars and shares in thousands, except per share amount)

expected to reverse. The cumulative effect of the adoption of SFAS 109 as of
January 1, 1992 increased net income by $17,833,000 or $.77 per share, and is
reported separately in the consolidated statement of operations. Financial
statements for 1991 were not restated to reflect SFAS 109.

The provision consisted of the following (dollars in thousands):

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
--------- ---------- ---------
<S> <C> <C> <C>
1993
Federal ................ $10,787 $ 6,861 $17,648
State ................... 3,913 1,217 5,130
--------- ---------- ---------
Total ............... $14,700 $ 8,078 $22,778
========= ========== =========
1992
Federal ................ $ 4,972 $ 4,783 $ 9,755
State ................... 1,908 1,646 3,554
--------- ---------- ---------
Total ............... $ 6,880 $ 6,429 $13,309
========= ========== =========
1991
Federal ................ $ 6,082 $(2,514) $ 3,568
State ................... 2,633 1,062 3,695
--------- ---------- ---------
Total ............... $ 8,715 $(1,452) $ 7,263
========= ========== =========
</TABLE>

Amounts paid to federal and state authorities for income tax purposes
amounted to $7,707,000 in 1993, $7,244,000 in 1992 and $7,665,000 in 1991.

Deferred tax liabilities and assets for 1993 and 1992 as calculated in
accordance with SFAS 109 consists of the following (dollars in thousands):

<TABLE>
<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
Deferred Liabilities:
Depreciation ................. $17,727 $13,953
Intangible drilling costs ... 22,832 18,724
Other ........................ 270 1,872
--------- ---------
Gross deferred tax liabilities 40,829 34,549
--------- ---------
Deferred Assets:
Tax credits .................. 26,318 23,075
Other ........................ 3,124 3,124
--------- ---------
Total deferred tax assets .... 29,442 26,199
--------- ---------
Net deferred tax liability ... $11,387 $ 8,350
========= =========
</TABLE>

Magma realized a tax benefit of $13,581,000 from the purchase of Dow's
option to acquire Magma Power Company common stock. This benefit resulted in
a decrease in current income taxes payable of $8,880,000, an increase in
deferred tax liabilities of $93,000 and an increase in deferred tax assets of
$4,794,000.

The deferred portion of the provision for income taxes for 1991 as
calculated in accordance with Accounting Principles Board Statement No. 11,
"Accounting for Income Taxes," consisted of the following (dollars in
thousands):

<TABLE>
<CAPTION>
1991
---------
<S> <C>
Depreciation .......................................... $ 1,195
Intangible drilling costs ............................. (71)
Difference between regular and alternative minimum tax (2,463)
Other ................................................. (113)
---------
$(1,452)
=========
</TABLE>

F-47

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(Dollars and shares in thousands, except per share amount)

Major differences between the statutory rate and the effective rate for
the years ended December 31 consisted of the following (dollars in
thousands):

<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ----------
<S> <C> <C> <C>
Taxes at federal statutory rate (35% in 1993 and 34% for 1992
and 1991) ...................................................... $26,220 $16,887 $14,009
State taxes ..................................................... 3,592 2,242 2,417
Amortization of goodwill ........................................ 127 123 123
Percentage depletion ............................................ (2,692) (1,321) (1,292)
Investment tax credit ........................................... (520) -- (6,956)
Lease investments ............................................... (4,268) (2,887) --
Capital gains ................................................... -- (1,815) (585)
Other ........................................................... 319 80 (453)
--------- --------- ----------
Provision for income taxes ................................... $22,778 $13,309 $ 7,263
========= ========= ==========
Effective tax rate .............................................. 30.4% 26.8% 17.6%
========= ========= ==========
</TABLE>

11. COMMITMENTS AND CONTINGENCIES

Magma and its subsidiary, Desert Valley Company, have issued irrevocable
letters of credit totalling $300,000 and $6,759,000, respectively, which
guarantee repayment of tax-exempt bond financing, contingent environmental
liabilities and obligations for site clean-up upon cessation of operations.

12. QUARTERLY STATISTICS (Unaudited) (dollars in thousands, except per share
data)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH YEAR
----------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
1993
Total revenues ............................... $22,458 $45,008 $57,315 $42,357 $167,138
Income from operations ....................... 7,826 19,348 30,783 16,956 74,913
Net income ................................... 5,477 13,539 20,453 12,666 52,135
Income per common share:
Assuming no dilution ........................ $ .23 $ .56 $ .85 $ .53 $ 2.17
Assuming full dilution ...................... .23 .56 .85 .53 2.17

1992
Total revenues ............................... $21,545 $24,174 $31,580 $31,667 $108,966
Income from operations ....................... 7,424 9,312 16,344 16,587 49,667
Income before cumulative effect of accounting
change(b) ................................... 5,434 6,816 11,966 12,142 36,358
Net income ................................... 23,267 (a) 6,816 11,966 12,142 54,191
Income per common share:
Assuming no dilution ........................ $ 1.01(a) $ .30 $ .52 $ .53 $ 2.36
Assuming full dilution ...................... 1.01(a) .30 .52 .51 2.27
</TABLE>

- ---------------
(a) First quarter results were restated to include the cumulative effect
of change in accounting for income taxes as of January 1, 1992 of
$17,833,000 or $0.77 per common share assuming no dilution and $0.75
per common share assuming full dilution due to Magma's adoption of SFAS
109.

(b) Quarterly results have been restated to reflect adoption of SFAS 109.

F-48

<PAGE>

FINANCIAL STATEMENTS FOR PERIOD ENDING
SEPTEMBER 30, 1994

The consolidated balance sheets of Magma and its subsidiaries as of
September 30, 1994 and December 31, 1993, the consolidated statements of
operations for the nine months ended September 30, 1994 and 1993, and cash
flows for the nine months ended September 30, 1994 and 1993, and the notes
thereto, are set forth below.

The unaudited interim financial statements reflect all adjustments
(consisting of normal recurring accruals) which, in the opinion of
management, are considered necessary for a fair presentation of the results
of the periods covered.

CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
--------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets
Cash .......................................................... $ 5,111 $ 18,017
Marketable securities ......................................... 43,609 32,086
Partnership cash and marketable securities .................... 25,478 22,919
Accounts receivable
Trade ........................................................ 34,192 18,199
Other ........................................................ 20,012 14,073
Prepaid expenses and other assets ............................. 10,423 11,922
--------------- --------------
Total Current Assets ....................................... 138,825 117,216
--------------- --------------
Land ........................................................... 6,361 6,225
Property plant and equipment, net of accumulated depreciation of
$64,828 and $53,166, respectively ............................ 256,561 265,215
Exploration and development costs, net of accumulated
amortization of $18,490 and $13,682, respectively ............ 104,271 107,069
Acquisition and new project costs .............................. 28,367 13,721
Other investments .............................................. 41,245 47,642
Power purchase contracts, net of accumulated amortization of
$1,818 and $946, respectively ................................ 21,313 22,185
Other assets and deferred charges .............................. 24,480 22,762
Goodwill, net of accumulated amortization of $2,419 and $2,122,
respectively ................................................. 8,999 9,276
--------------- --------------
Total ...................................................... $630,422 $611,311
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Trade accounts payable ........................................ $ 7,832 $ 7,235
Accrued and other liabilities ................................. 3,605 3,463
Current portion of loans payable .............................. 37,010 36,799
--------------- --------------
Total Current Liabilities .................................. 48,447 47,497
--------------- --------------
Loans payable .................................................. 151,959 189,209
Deferred income taxes .......................................... 22,376 11,387
Other long-term liabilities .................................... 12,354 11,300
--------------- --------------
Total Non-Current Liabilities .............................. 186,689 211,896
--------------- --------------
Shareholders' Equity Preferred stock, $.10 par value, 1,000,000
shares authorized, none issued and outstanding ............... -- --
Common stock, $.10 par value, 30,000,000 shares authorized,
issued and outstanding 24,042,915 and 23,989,763 shares,
respectively ................................................. 2,401 2,399
Additional paid-in capital ..................................... 142,765 144,996
Unrealized gains (losses) from marketable securities ........... (677) 583
--------------- --------------
Retained earnings .............................................. 250,797 203,940
--------------- --------------
Total Shareholders' Equity ................................. 395,286 351,918
--------------- --------------
Total ...................................................... $630,422 $611,311
=============== ==============
</TABLE>

The accompanying notes are an integral part of these statements.

F-49

<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)

<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- ----------------------
1994 1993 1994 1993
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Sales of electricity ............ $50,592 $49,674 $124,086 $103,319
Royalties ....................... 5,628 5,569 15,062 14,885
Interest and other income ...... 1,400 906 3,866 3,635
Management services ............. 1,263 1,166 3,090 2,942
--------- --------- ---------- ----------
Total ........................ 58,883 57,315 146,104 124,781
--------- --------- ---------- ----------
Costs and Expenses
Plant operating costs ........... 12,723 14,404 41,208 36,622
Depreciation and amortization .. 5,875 6,374 17,737 15,449
Other non-plant costs ........... 115 118 380 401
General and administrative ..... 3,730 2,912 9,602 7,471
Interest incurred ............... 3,301 2,724 9,262 6,881
--------- --------- ---------- ----------
25,744 26,532 78,189 66,824
--------- --------- ---------- ----------
Income from operations .......... 33,139 30,783 67,915 57,957
Provision for income taxes ..... 10,290 10,330 21,072 18,488
--------- --------- ---------- ----------
Net income ...................... $22,849 $20,453 $ 46,843 $ 39,469
========= ========= ========== ==========
Income per Common Share
Assuming no dilution ............ $ 0.95 $ 0.85 $ 1.95 $ 1.64
========= ========= ========== ==========
Average Common Shares Outstanding
Assuming no dilution ............ 24,029 24,096 24,017 24,037
========= ========= ========== ==========
</TABLE>

The accompanying notes are an integral part of these statements.

F-50

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
(Dollars in thousands)
(Unaudited)

<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
------------------------
1994 1993
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities
Net income ......................................................... $ 46,843 $ 39,469
----------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization ..................................... 17,737 15,449
Transmission credits realized ..................................... 2,209 1,803
Other, net ........................................................ 1,848 (809)
Changes in components of working capital:
Accounts receivable ............................................... (21,931) (25,326)
Partnership cash and marketable securities ........................ (2,559) 6,373
Prepaid expenses and other assets ................................. 87 (2,246)
Accounts payable and accrued liabilities .......................... 4,776 6,688
Accrued interest payable .......................................... (1,102) 167
Income taxes payable .............................................. (2,934) 8,646
Deferred taxes from operations .................................... 12,645 2,920
----------- -----------
Total adjustments .................................................. 10,776 13,665
----------- -----------
Net cash provided by operating activities .......................... 57,619 53,134
----------- -----------
Cash Flows From Investing Activities
Proceeds from the sale of investments .............................. 205,686 195,545
Purchase of investments ............................................ (216,060) (148,655)
Capital expenditures ............................................... (8,854) (5,718)
Power plant acquisition costs ...................................... -- (215,718)
New project development costs ...................................... (11,909) (11,932)
Other, net ......................................................... (1,198) 1,166
----------- -----------
Net cash used in investing activities .............................. (32,335) (185,312)
----------- -----------
Cash Flows From Financing Activities
Repayment of loans payable ......................................... (166,101) (10,070)
Borrowing from banks ............................................... 130,000 140,000
Loan fees .......................................................... (3,225) --
Proceeds from the issuance of common stock ......................... 816 2,519
Other, net ......................................................... 320 (278)
----------- -----------
Net cash provided (used) by financing activities ................... (38,190) 132,171
----------- -----------
Net increase (decrease) in cash .................................... (12,906) (7)
Cash at beginning of period ........................................ 18,017 2,106
----------- -----------
Cash at end of period .............................................. $ 5,111 $ 2,099
=========== ===========
</TABLE>

The accompanying notes are an integral part of these statements.

F-51

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation--The consolidated financial statements present the
assets, liabilities, revenues, costs and expenses of Magma, its 100%-owned
subsidiaries and its proportionate share of partnerships in which Magma has
invested.

All significant intercompany transactions and accounts have been
eliminated.

2. LOANS PAYABLE

Loans payable consisted of the following (dollars in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1994 1993
--------------- --------------
<S> <C> <C>
Pro rata share of partnership non-recourse
debt ......................................... $ 65,157 $ 75,149
Bridge loan ................................... -- 140,000
Salton Sea debt ............................... 114,308 --
Other loans ................................... 9,504 10,859
--------------- --------------
188,969 226,008
Less amounts due within one year .............. 37,010 36,799
--------------- --------------
Loans payable due after one year .............. $151,959 $189,209
=============== ==============
</TABLE>

Loans payable at September 30, 1994 and December 31, 1993 included Magma's
pro-rata share of the debt of the Del Ranch, L.P., Elmore, L.P., and
Leathers, L.P. partnerships. The partnership loans are non-recourse to Magma
and subsidiaries, however, it is collateralized by substantially all of the
assets of these partnerships.

On March 19, 1993, Magma entered into a $140 million unsecured one-year
term loan ("Bridge Loan") with a group of commercial banks. Proceeds from the
loan were used to finance the acquisition of the Salton Sea Plants from
Unocal. On February 28, 1994, Magma replaced the Bridge Loan with a
$130,000,000 non-recourse project level loan which is collateralized by
substantially all of the assets and power purchase contracts of the newly
acquired Salton Sea Plants. Under the secured credit agreement for this loan,
a group of international banks loaned to Salton Sea Power Generating, L.P.
and Salton Sea Brine Processing, L.P. (the "Salton Sea Partnerships"), which
own the Salton Sea Plants, $130,000,000 in the form of a six (6) year loan at
interest rates of 1.25% over LIBOR, secured by substantially all of the
assets of the Salton Sea Partnerships. Restrictions in the secured credit
agreement place limits on distribution of cash from the Salton Sea Plants to
Magma.

3. DEFERRED INCOME TAXES

Deferred income taxes as of September 30, 1994 and December 31, 1993
represent estimated income taxes payable in the future years as determined in
accordance with SFAS 109 "Accounting for Income Taxes".

4. NET INCOME PER COMMON SHARE

The calculation of primary earnings per common share is based on the
weighted average number of outstanding common shares. In computing primary
earnings per common share, adjustment has been made for common shares
issuable for shares under option.

F-52

<PAGE>

IMPERIAL VALLEY GEOTHERMAL INTERESTS
(ACQUIRED BY MAGMA) FINANCIAL STATEMENTS

Report of Independent Accountants

To the Board of Directors of
Magma Power Company:

We have audited the accompanying Statement of Net Assets Acquired as of March
31, 1993 and Historical Summaries of Gross Revenues and Direct Operating
Expenses for each of the three years in the period ended December 31, 1992
(collectively, the "Statements") of the Imperial Valley Geothermal Interests
(acquired by Magma Power Company from Union Oil Company of California
["Unocal"]). The Statement of Net Assets Acquired is the responsibility of
Magma Power Company's management. The Historical Summaries of Gross Revenues
and Direct Operating Expenses are the responsibility of Unocal's management.
Our responsibility is to express an opinion on the Statements based on our
audits.

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

The accompanying Statements were prepared for inclusion in the Form 8-K of
Magma Power Company on the basis of presentation as described in Note 1, and
are not intended to be a complete presentation of the Imperial Valley
Geothermal Interests' assets, liabilities, revenues and expenses.

In our opinion, the Statements referred to above present fairly, in all
material respects, the net assets acquired as of March 31, 1993 and the 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 on
the basis of presentation as described in Note 1, in conformity with
generally accepted accounting principles.

/s/ Coopers & Lybrand

San Diego, California
May 6, 1993

F-53

<PAGE>

IMPERIAL VALLEY GEOTHERMAL INTERESTS
(ACQUIRED BY MAGMA POWER COMPANY)

STATEMENT OF NET ASSETS ACQUIRED
MARCH 31, 1993
(In Thousands)

<TABLE>
<CAPTION>
<S> <C>
Prepaid expenses ..................$ 1,629
Land .............................. 388
Property, plant and equipment .... 178,050
Exploration and development costs 39,378
Power purchase agreements ......... 22,217
Royalty--free use of technology .. 900
Transmission line credits ......... 5,003
---------
Net assets acquired ............. $247,565
=========
</TABLE>

The accompanying notes are an integral part of these statements.

F-54

<PAGE>

IMPERIAL VALLEY GEOTHERMAL INTERESTS
(ACQUIRED BY MAGMA POWER COMPANY)

HISTORICAL SUMMARIES OF GROSS REVENUES AND
DIRECT OPERATING EXPENSES
(In Thousands)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1990 1991 1992
--------- --------- ---------
<S> <C> <C> <C>
Gross Revenues:
Sales of electricity ................................. $62,997 $73,442 $72,271
Other revenue ........................................ 22 20 --
--------- --------- ---------
Total gross revenues ............................... 63,019 73,462 72,271
--------- --------- ---------
Direct operating expenses:
Plant operating costs ................................ 20,815 23,126 21,693
District office charges .............................. 4,123 4,389 3,868
Exploration operations ............................... 901 985 975
Rentals in lieu of drilling .......................... 1,115 1,036 661
--------- --------- ---------
26,954 29,536 27,197
--------- --------- ---------
Excess of gross revenues over direct operating
expenses ........................................... $36,065 $43,926 $45,074
========= ========= =========
</TABLE>

The accompanying notes are an integral part of these statements.

F-55

<PAGE>

IMPERIAL VALLEY GEOTHERMAL INTERESTS
(ACQUIRED BY MAGMA POWER COMPANY)

NOTES TO THE STATEMENT OF NET ASSETS ACQUIRED AND
HISTORICAL SUMMARIES OF GROSS REVENUES AND
DIRECT OPERATING EXPENSES
(In Thousands)

1. BASIS OF PRESENTATION:

On March 31, 1993 ("Acquisition Date"), Magma Power Company ("Magma")
acquired certain geothermal and other related assets located in the Imperial
Valley of California (the "Imperial Valley Geothermal Interests") from Union
Oil Company of California ("Unocal"). Magma has accounted for the acquisition
under the purchase method, and, accordingly, the purchase price allocation in
the accompanying Statement of Net Assets Acquired is based on the estimated
fair values of the assets purchased as of the Acquisition Date. Such
allocation has been based on certain estimates which may be revised at a
later date. The Statement of Net Assets Acquired is not intended to be a
complete presentation of the assets and liabilities of the Imperial Valley
Geothermal Interests.

The consideration to Unocal and related liabilities assumed in determining
Magma's total cost of acquisition includes $224,000,000 consisting of
$22,400,000 paid on December 31, 1992 ("Initiation Date" of the transaction)
and a $201,600,000 note payable due to Unocal on March 31, 1993 for
geothermal and other related assets; certain current assets and liabilities
assumed by Magma as of the Initiation Date ("Adjusted Assets"), and an
estimate of the net of revenues and certain expenditures ("Adjustment
Account") relating to the operations of the Imperial Valley Geothermal
Interests from the Initiation Date to the Acquisition Date pursuant to the
Sale and Purchase Agreement ("Purchase Agreement") between Magma and Unocal;
interest cost incurred during the acquisition period from the Initiation Date
to the Acquisition Date paid to Unocal pursuant to the Purchase Agreement; an
estimate of acquisition costs; and an estimate of capital expenditures for
necessary improvements to the assets. These costs are summarized as follows:

<TABLE>
<CAPTION>
<S> <C>
Acquisition cost of geothermal
and other related assets ............... $224,000,000
Adjusted Assets ......................... 6,686,000
Estimated Adjustment Account ............ 590,000
Interest cost during acquisition period 3,489,000
Estimated acquisition costs ............. 2,800,000
Estimated capital improvements .......... 10,000,000
--------------
Total cost of acquisition ............... $247,565,000
==============
</TABLE>

Excluded from the Statement of Net Assets Acquired are certain contingent
payments of $100,000 per installed megawatt and revenue interests of one
percent on the gross revenues generated on the first 150 megawatts of new
plant capacity should Magma construct new geothermal electrical generating
facilities, as defined in the Purchase Agreement.

F-56

<PAGE>

IMPERIAL VALLEY GEOTHERMAL INTERESTS
(ACQUIRED BY MAGMA POWER COMPANY)

NOTES TO THE STATEMENT OF NET ASSETS ACQUIRED AND
HISTORICAL SUMMARIES OF GROSS REVENUES AND
DIRECT OPERATING EXPENSES--(CONTINUED)

1. BASIS OF PRESENTATION, CONTINUED:

The accompanying Historical Summaries of Gross Revenues and Direct
Operating Expenses ("Historical Summaries") include only the gross revenues
and direct operating expenses attributable to the production and sale of
geothermal energy from the Imperial Valley Geothermal Interests on Unocal's
basis of accounting. Prior to the acquisition, the Imperial Valley Geothermal
Interests were included in the consolidated financial statements of Unocal
and were not accounted for as a separate entity. Sales of electricity in the
accompanying Historical Summaries represent revenue accrued from Unocal's
sales to Southern California Edison Company. The Historical Summaries do not
include certain significant expenses that were incurred in connection with
the operations of the Imperial Valley Geothermal Interests and that were
recorded in the Unocal financial statements. Those expenses were either not
included because the information was not obtainable as Unocal did not
allocate such expenses to individual properties, or the basis of such amounts
may be significantly different as operated by Magma. Items excluded are
depreciation, depletion and amortization, transmission charges offset by
credits from the Imperial Irrigation District, interest expense which may
have been incurred for any debt directly or indirectly associated with the
assets, allocated income taxes, accounting, legal, marketing and other
general and administrative costs. The Historical Summaries also exclude any
allocation of the total acquisition costs resulting from the purchase of the
Imperial Valley Geothermal Interest by Magma as reflected in the accompanying
Statement of Net Assets Acquired.

2. RELATED PARTIES:

Included in plant operating costs in the accompanying Historical Summaries
are certain technical support costs paid to a division of Unocal. Technical
support costs do not exceed $1,600,000 in any respective year.

F-57

<PAGE>

CALIFORNIA ENERGY COMPANY, INC.
AND
MAGMA POWER COMPANY
ANNEXES TO THE INFORMATION STATEMENT/PROSPECTUS

Annex A --Agreement and Plan of Merger

Annex B --Opinion of Goldman, Sachs & Co.

Annex C --Opinion of Gleacher & Co. Inc.

<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

<TABLE>
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ARTICLE I
THE TENDER OFFER
SECTION 1.01. The Offer ............................................................ A-1
SECTION 1.02. Company Action ....................................................... A-2
SECTION 1.03. Directors ............................................................ A-3

ARTICLE II
THE MERGER
SECTION 2.01. The Merger ........................................................... A-4
SECTION 2.02. Effective Time ....................................................... A-4
SECTION 2.03. Effect of the Merger ................................................. A-4
SECTION 2.04. Subsequent Actions ................................................... A-4
SECTION 2.05. Certificate of Incorporation; Bylaws; Directors and Officers ........ A-4
SECTION 2.06. Merger Consideration ................................................. A-5
SECTION 2.07. Dissenting Company Common Stock ...................................... A-5
SECTION 2.08. Surrender of Company Common Stock; Stock Transfer Books ............. A-6
SECTION 2.09. No Fractional Shares ................................................. A-6
SECTION 2.10. Stock Options; Deferred Stock ........................................ A-7
SECTION 2.11. Dividends; Transfer Taxes ............................................ A-7
SECTION 2.12. Stockholders' Meetings ............................................... A-7
SECTION 2.13. Board Nominees; Assistance in Consummation of the Merger ............ A-8

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
SECTION 3.01. Corporate Organization; Subsidiaries ................................. A-8
SECTION 3.02. Certificate of Incorporation and Bylaws .............................. A-9
SECTION 3.03. Capitalization ....................................................... A-9
SECTION 3.04. Authority Relative to this Agreement ................................. A-9
SECTION 3.05. No Conflict; Required Filings and Consents ........................... A-10
SECTION 3.06. SEC Filings; Financial Statements .................................... A-10
SECTION 3.07. Absence of Certain Changes or Events ................................. A-11
SECTION 3.08. Title to Property .................................................... A-11
SECTION 3.09. Litigation ........................................................... A-11
SECTION 3.10. Financing Arrangements ............................................... A-11
SECTION 3.11. No Prior Activities .................................................. A-11
SECTION 3.12. Brokers .............................................................. A-11
SECTION 3.13. Information in Disclosure Documents; Registration Statement; Etc. ... A-12
SECTION 3.14. Conduct of Business .................................................. A-12
SECTION 3.15. Environment .......................................................... A-12
SECTION 3.16. Energy Regulatory Status ............................................. A-12
SECTION 3.17. Employee Benefit Plans; Labor Matters ................................ A-13
SECTION 3.18. Insurance ............................................................ A-14
SECTION 3.19. Taxes ................................................................ A-14
SECTION 3.20. Trademarks, Licenses, Patents and Copyrights ......................... A-15
SECTION 3.21. Related Party Transactions ........................................... A-15
SECTION 3.22. Status of Development and Construction Projects ...................... A-15
SECTION 3.23. Status of Operating Projects ......................................... A-15
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Organization; Subsidiaries ................................. A-16
SECTION 4.02. Articles of Incorporation and Bylaws ................................. A-16
SECTION 4.03. Capitalization ....................................................... A-16
SECTION 4.04. Authority Relative to this Agreement ................................. A-17
SECTION 4.05. No Conflict; Required Filings and Consents ........................... A-17
SECTION 4.06. SEC Filings; Financial Statements .................................... A-18
SECTION 4.07. Absence of Certain Changes or Events ................................. A-18
SECTION 4.08. Title to Property .................................................... A-19
SECTION 4.09. Litigation ........................................................... A-19
SECTION 4.10. Information in Disclosure Documents .................................. A-19
SECTION 4.11. Fairness Opinion ..................................................... A-20
SECTION 4.12. Brokers .............................................................. A-20
SECTION 4.13. Takeover Provisions Inapplicable; Rights Agreement Amendment ........ A-20
SECTION 4.14. Conduct of Business .................................................. A-20
SECTION 4.15. Environment .......................................................... A-20
SECTION 4.16. Energy Regulatory Status ............................................. A-20
SECTION 4.17. Employee Benefit Plans; Labor Matters ................................ A-21
SECTION 4.18. Insurance ............................................................ A-22
SECTION 4.19. Taxes ................................................................ A-22
SECTION 4.20. Trademarks, Licenses, Patents and Copyrights ......................... A-23
SECTION 4.21. Related Party Transactions ........................................... A-23
SECTION 4.22. Status of Development and Construction Projects ...................... A-23
SECTION 4.23. Status of Operating Projects ......................................... A-23

ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Acquisition Proposals ................................................ A-24
SECTION 5.02. Conduct of Business by the Parties Pending the Merger ................ A-24
SECTION 5.03. No Shopping .......................................................... A-26

ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement/Proxy Statement ............................... A-27
SECTION 6.02. Stock Exchange Listing ............................................... A-27
SECTION 6.03. Additional Agreements ................................................ A-27
SECTION 6.04. Notification of Certain Matters ...................................... A-27
SECTION 6.05. Access to Information ................................................ A-27
SECTION 6.06. Public Announcements ................................................. A-28
SECTION 6.07. Best Efforts; Cooperation ............................................ A-28
SECTION 6.08. Agreement to Defend and Indemnify .................................... A-28
SECTION 6.09. Disposition of Litigation ............................................ A-29
SECTION 6.10. Employee Benefits .................................................... A-29
SECTION 6.11. Certain Action of Parent and Merger Sub .............................. A-30
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ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.01. Conditions to Obligation of Each Party to Effect the Merger ......... A-30
SECTION 7.02. Additional Conditions to Obligations of the Company .................. A-30
SECTION 7.03. Additional Conditions to Obligations of Parent and Merger Sub ....... A-31

ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination .......................................................... A-31
SECTION 8.02. Effect of Termination ................................................ A-32
SECTION 8.03. Agreement Termination Fee ............................................ A-32
SECTION 8.04. Offer Fee ............................................................ A-32

ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and Agreements .......... A-33
SECTION 9.02. Notices .............................................................. A-33
SECTION 9.03. Expenses ............................................................. A-34
SECTION 9.04. Certain Definitions .................................................. A-34
SECTION 9.05. Headings ............................................................. A-34
SECTION 9.06. Severability ......................................................... A-34
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries ....................... A-34
SECTION 9.08. Waiver ............................................................... A-34
SECTION 9.09. Amendment ............................................................ A-34
SECTION 9.10. Assignment ........................................................... A-34
SECTION 9.11. Governing Law ........................................................ A-35
SECTION 9.12. Counterparts ......................................................... A-35
Annex I ............................................................................ I-1
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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;

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.

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(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 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 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

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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 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 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").

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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.

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; Bylaws; 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 Bylaws of Merger Sub, as in effect immediately before the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as permitted by law, the Articles of Incorporation of the
Surviving Corporation and such Bylaws.

(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 Bylaws of Merger Sub.

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

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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 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 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

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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 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.

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

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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.

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

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changes and effects relating to Parent or Merger 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 Bylaws. Parent has
heretofore furnished to the Company a complete and correct copy of Parent's
and Merger Sub's Certificates of Incorporation and Bylaws, each as amended to
the date hereof. Such Certificates of Incorporation and Bylaws 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 Bylaws 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 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

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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 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 Bylaws 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 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,

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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;

(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.

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.

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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 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 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

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"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 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

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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.

(c) Except as set forth in Schedule 3.17, neither Parent nor any Parent
Subsidiary is a party to any collective 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 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.

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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 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

(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

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(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 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 representations 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 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

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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 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.

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(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.

(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;

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(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

(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, 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 toany 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.

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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 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 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.

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(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
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 Benefit Plan subject to
Section 412 of the Code has incurred any "accumulated funding

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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 (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

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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 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;

(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;

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(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 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);

(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,

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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
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;

(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;

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(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 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

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of 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 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

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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.

(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 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

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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 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
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:

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(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 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.

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

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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 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

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(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 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 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;

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(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.

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.

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with a copy to:

Shearman & Sterling
555 California Street
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
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.

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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.

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

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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 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;

I-1

<PAGE>

(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 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-2

<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 provides 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 $0.0675 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 60,100 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

B-2

<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 relied 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.

B-3

<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;

<PAGE>

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

C-2

<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

C-3

<PAGE>

APPENDIX FOR GRAPHIC AND IMAGE MATERIAL

Graphics or images which cannot be reproduced in the ASCII format
required for EDGAR have been omitted from the pages of the preceding document as
listed below. Pursuant to Rule 304 of Regulation S-T, the substantive
information contained in these graphics or images is conveyed in tabular and/or
narrative form:

Page in
Typeset Copy Description
- ------------ -----------

73 Schematic representing production of Geothermal
Energy

74 Global Map depicting areas of Potential
Geothermal Energy

80 Map of the Republic of the
Philippines with Project locations

84 Map of Indonesia and Neighboring
Countries with Project locations

86 Map of the Western United States
with Project locations