CALIFORNIA ENERGY CO INC, S-3, 1995-01-06

CALIFORNIA ENERGY CO INC
S-3, 1995-01-06
STEAM & AIR-CONDITIONING SUPPLY

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Registration No. 33-____________
As filed with the Securities and Exchange Commission on January 6, 1995
===============================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Form S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CALIFORNIA ENERGY COMPANY, INC.
(Exact name of registrant as specified in its charter)

Delaware 94-2213782
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)

10831 Old Mill Road, Omaha, Nebraska 68154
(402) 330-8900
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
----------------
Steven A. McArthur, Esq.
Senior Vice President, General Counsel and Secretary
California Energy Company, Inc.
10831 Old Mill Road, Omaha, Nebraska 68154
(402) 330-8900
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------
with copies to:
Peter J. Hanlon, Esq. Steven L. Williamson, Esq.
Willkie Farr & Gallagher Chadbourne & Parke
One Citicorp Center 30 Rockefeller Plaza
153 East 53rd Street New York, New York 10112
New York, New York 10022 (212) 408-5100
(212) 821-8000
----------------

Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, please check the following box. [ ]
----------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed
Maximum Proposed Maximum Amount of
Title of Each Class of Shares to be Offering Price Aggregate Offering Registration
Securities to be Registered Registered (1) per Share (2) Price (2) Fee
- --------------------------- -------------- -------------- ------------------- -------------
<S> <C> <C> <C> <C>
Common Stock, $0.0675
par value (including attached
Series A Junior Preferred
Share Purchase Rights) (3)... 19,170,000 $15.44 $295,984,800 $102,063.72
</TABLE>
- -------------------------------------------------------------------------------
(1) Includes shares of Common Stock of the Registrant which may be sold
pursuant to the Underwriters' over-allotment option. See "Underwriting."
(2) Estimated pursuant to Rule 457(c) solely for purposes of
calculating the registration fee based upon the average high and low prices
reported on the New York Stock Exchange Consolidated Tape on December 29, 1994.
(3) Prior to the occurrence of certain events, the Series A Junior
Preferred Share Purchase Rights (the "Rights") will not be evidenced separately
from shares of the Common Stock. Upon the occurrence of such events, separate
Rights certificates will be issued representing one Right for each share of
Common Stock held, subject to adjustment pursuant to antidilution provisions.

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

<PAGE>

EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus relating
to a public offering of an aggregate of 16,670,000 Common Shares, $.0675 par
value, of California Energy Company, Inc. One is to be used in connection with
an offering in the United States and Canada (the "U.S. Prospectus"), and the
other is to be used in connection with a concurrent offering outside the United
States and Canada (the "International Prospectus"). The form of the U.S.
Prospectus follows immediately after this Explanatory Note. After such
Prospectus are the alternate pages of the International Prospectus. The U.S.
Prospectus and the International Prospectus are identical except for such
alternate pages. Ten copies of each complete prospectus in the exact form in
which it is to be used after effectiveness will be filed with the Securities
and Exchange Commission pursuant to Rule 424(b).

<PAGE>

Subject to Completion, Dated January 6, 1995

[CECI LOGO]

16,670,000 Shares
California Energy Company, Inc.

COMMON STOCK
($.0675 par value)

----------------

All the 16,670,000 shares of Common Stock (the "Common Stock") of
California Energy Company, Inc. (the "Company") offered hereby are being sold
by the Company. Of the 16,670,000 shares of Common Stock being offered,
11,670,000 shares are initially being offered in the United States and Canada
(the "U.S. Shares") by the U.S. Underwriters (the "U.S. Offering") and
5,000,000 shares are initially being concurrently offered outside the United
States and Canada (the "International Shares" and, together with the U.S.
Shares, the "Shares") by the Managers (the "International Offering" and,
together with the U.S. Offering, the "Offering"). The offering prices and
underwriting discounts and commissions of the U.S. Offering and the
International Offering are identical.

The net proceeds of the Offering, together with borrowings of up to
$500 million under bank credit facilities and general corporate funds of the
Company, will be used to complete the Magma Acquisition (as hereinafter
defined). The closing of the Offering will occur concurrently with, and is
conditioned upon, the closing of the Magma Acquisition pursuant to the All-Cash
Option (as hereinafter defined).

The Common Stock of the Company is listed on the New York Stock
exchange under the symbol "CE." On February , 1995, the last reported sale
price of the Common Stock on the New York Stock Exchange Composite Tape was $
per share.
----------------
See "Investment Considerations" for a discussion of certain factors
that should be considered in connection with an investment in the Shares
offered hereby.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
----------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Company(1)
-------- ------------- -----------
<S> <C> <C> <C>
Per Share .............. $ $ $
Total (2) .............. $ $ $
</TABLE>

(1) Before deducting expenses payable by the Company estimated at $ .

(2) The Company has granted the U.S. Underwriters and the Managers an
option, exercisable by CS First Boston Corporation for 30 days from the date of
the public offering of the shares of Common Stock offered hereby, to purchase a
maximum of 2,500,000 additional shares of Common Stock solely to cover over-
allotments, if any. If the option is exercised in full, the total Price to
Public will be $ , Underwriting Discounts and Commissions will be $
and Proceeds to Company will be $ .
----------------
The U.S. Shares are offered by the several U.S. Underwriters when, as
and if issued by the Company, delivered to and accepted by the U.S.
Underwriters and subject to their right to reject orders in whole or in part.
It is expected that the U.S. Shares will be ready for delivery on or about
February , 1995.

CS First Boston
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette
Securities Corporation
C.J. Lawrence/Deutsche Bank
Securities Corporation
Lehman Brothers

The date of this Prospectus is , 1995.

<PAGE>

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

<PAGE>

GLOBAL MAP DEPICTING LOCATION OF THE COMPANY'S PROJECTS APPEARS ON
THE INSIDE FRONT COVER OF THIS PROSPECTUS.

<PAGE>

IN CONNECTION WITH THE OFFERING, CS FIRST BOSTON CORPORATION ON BEHALF OF THE
U.S. UNDERWRITERS AND THE MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH
STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE
THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE
EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE PACIFIC STOCK EXCHANGE, THE LONDON
STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

DURING THE OFFERING, CERTAIN PERSONS AFFILIATED WITH PERSONS PARTICIPATING IN
THE DISTRIBUTION MAY ENGAGE IN TRANSACTIONS FOR THEIR OWN ACCOUNTS OR FOR THE
ACCOUNTS OF OTHERS IN THE COMMON STOCK PURSUANT TO EXEMPTIONS FROM RULES 10b-6,
10b-7, AND 10b-8 UNDER THE EXCHANGE ACT.

AVAILABLE INFORMATION

California Energy Company, Inc. (the "Company") and Magma Power Company
("Magma") are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, each files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company or Magma 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 the
Company can be inspected at the offices of the New York Stock Exchange Inc.
("NYSE"), 20 Broad Street, New York, New York 10005, on which the shares of
common stock, par value $.0675 per share (the "Common Stock"), are listed, 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. 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.

The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement," which term shall include all
amendments, exhibits and schedules thereto) under the Securities Act of 1933,
as amended (the "Securities Act"), with respect to the shares of Common Stock
(the "Shares") offered pursuant to the Offering. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which have been omitted in accordance with the rules and regulations
of the Commission. For further information with respect to the Company and the
Shares, reference is made to the Registration Statement, including the exhibits
and schedules filed as a part thereof and otherwise incorporated therein.
Statements made in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete. With
respect to each such contract, agreement or other document filed as an exhibit
to the Registration Statement, reference is made to such exhibit for a more
complete description of the matter involved and each such statement shall be
deemed qualified in its entirety by such reference. Copies of the Registration
Statement and the exhibits thereto may be inspected, without charge, at the
offices of the Commission, or obtained at prescribed rates from the Public
Reference Section of the Commission at the address set forth above.

<PAGE>

INCORPORATION OF DOCUMENTS BY REFERENCE

The Company and Magma hereby incorporate by reference into the
Registration Statement of which this Prospectus is a part the following
documents previously filed with the Commission pursuant to the Exchange Act:

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

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

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

4. The Company's description of the Common Stock contained in the
Company's Registration Statement on Form 8-A, dated July 28, 1993, pursuant to
Section 12 of the Exchange Act, including any amendment or report filed for the
purpose of updating such description.

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

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

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

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

The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom this Prospectus is delivered, upon
written or oral request from such person, a copy of any and all of the
documents incorporated by reference in this Prospectus (other than exhibits to
such documents unless such exhibits are specifically incorporated by reference
into the documents that this Prospectus incorporates). Written or oral
requests for such copies should be directed to California Energy Company, Inc.,
10831 Old Mill Road, Omaha, Nebraska 68154, Attention: Secretary (telephone
no. (402) 330-8900).

<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus and in the information
incorporated by reference herein. In this Prospectus, all references to the
"Company" shall mean California Energy Company, Inc. and its subsidiaries, as
it currently exists and, where the context indicates, following the completion
of the Magma Acquisition described herein. References to "Magma" refer to
Magma Power Company and its subsidiaries. Terms used but not defined in this
summary have the meanings ascribed to them elsewhere in this Prospectus.
Unless otherwise indicated, all information in this Prospectus assumes that the
over-allotment option is not exercised.

The Company

California Energy Company, Inc. was founded in 1971 to develop
geothermal power production facilities. The Company 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.

On January 10, 1995, the Company acquired approximately 51% of the
outstanding shares of common stock of Magma Power Company (the "Magma Common
Stock") through a cash tender offer (the "Magma Tender Offer") and will
complete the acquisition (the "Magma Acquisition") by acquiring the
approximately 49% of the outstanding shares of Magma Common Stock not owned by
the Company (the "Remaining Magma Shares") through a second step merger (the
"Merger") which will occur concurrently with the closing of the Offering
pursuant to the All-Cash Option (as defined below). Magma is engaged in
independent geothermal power operations and development activities similar to
those of the Company. Pursuant to the terms of a merger agreement (the "Merger
Agreement"), dated as of December 5, 1994, among the Company, CE Acquisition
Company, Inc. ("CE Sub"), a wholly owned subsidiary of the Company, and Magma,
the Company has the right to acquire the Remaining Magma Shares for either a
combination of cash and shares of Common Stock valued at approximately $39.00
per Magma share or approximately $38.50 per share in cash (the "All-Cash
Option"). The Company intends to acquire the Remaining Magma Shares pursuant
to the All-Cash Option, and the closing of the Offering will occur concurrently
with, and is conditioned upon, the closing of the Merger pursuant to the All-
Cash Option.

Following completion of the Magma Acquisition, the Company will be the
largest independent geothermal power producer in the world (on the basis of
aggregate megawatts ("MW") of electric generating capacity in operation and
under construction). The Company believes it will realize certain benefits
from the Magma Acquisition which will improve the Company's competitive
position, including:

-- Expansion and enhancement of development efforts;
-- Benefits of increased size;
-- Opportunities for operational and administrative cost savings;
and
-- Diversification in sources of revenues and operations.

Subsequent to the Magma Acquisition, the Company will have an aggregate
net ownership interest of 347 MW of electric generating capacity in power
production facilities in the United States having an aggregate net capacity of
553 MW. All of these facilities are managed and operated by the Company and
are principally located in Southern California. In addition to the electricity
sales revenue earned from its net ownership position in such plants, the
Company also receives fee and royalty income from operating such plants and
managing the production from its geothermal reservoir. The Company will have
an aggregate net ownership interest of 409 MW of electric generating capacity
in three geothermal power projects in the Republic of the Philippines

<PAGE>

("Philippines"), having an aggregate net capacity of 500 MW, which projects are
financed and under construction. The Company is also developing eight
additional projects with executed or awarded power sales contracts in the
Philippines, the Republic of Indonesia ("Indonesia") and the United States.
The Company will have a 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.

During the next several years, the Company intends to focus its
development efforts in the international marketplace due to the rapid growth in
power requirements in the developing world and the increasing competition in
the U.S. market. The Company is actively pursuing selected opportunities in
nations where power demand is high and the Company's geothermal resource
development and operating experience, project development expertise and
strategic relationships are expected to provide it with a competitive
advantage. The Company believes that the opportunities to successfully
develop, construct, finance, own and operate international power projects are
increasing as several countries have initiated the privatization of their power
generation capacity and have solicited bids from foreign companies to purchase
existing generating facilities or to develop new capacity. Some of these
countries, such as the Philippines and Indonesia, also have extensive
geothermal resources.

Peter Kiewit Sons', Inc. ("PKS") is an approximate 43% stockholder of
the Company (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 the Company in 1991 (which at that time
represented approximately 25% of the Common Stock on a fully diluted basis), a
new management team has been installed and the Company's net income has
increased from $12.0 million for the 12-month period ended December 31, 1990 to
$34.8 million for the 12-month period ended September 30, 1994. Following the
completion of the Offering, PKS will be an approximate % stockholder of the
Company (on a fully diluted basis).

<PAGE>

The Offering

Common Stock offered by the Company:

U.S. Offering. . . . . . . . 11,670,000 shares
International Offering . . . 5,000,000 shares
-----------------
Total. . . . . . . . . . . 16,670,000 shares

Common Stock outstanding
after the Offering (1) . . 48,899,584 shares

NYSE symbol. . . . . . . . . CE

Use of Proceeds. . . . . . . The net proceeds of the Offering, together with
borrowings of up to $500 million under bank
credit facilities described herein (the "Merger
Facilities") and general corporate funds of the
Company, will be used to complete the Magma
Acquisition. The Company intends to acquire
the Remaining Magma Shares pursuant to the All-
Cash Option and will complete the Offering only
if it elects the All-Cash Option and the Merger
is consummated. See "USE OF PROCEEDS" and "THE
MAGMA ACQUISITION - Financing."
- ---------------

(1) Based on the number of shares of Common Stock outstanding as of
September 30, 1994. Does not include: (i) 9,435,229 shares of Common Stock
reserved for issuance upon the exercise of presently outstanding stock options;
(ii) 4,444,444 shares of Common Stock issuable upon the conversion of the
Company's 5% Convertible Subordinated Debentures due July 31, 2000 (the
"Debentures"); and (iii) 3,393,197 shares of Common Stock issuable upon
conversion of the 1,247 issued and outstanding shares of the Company's Series C
Exchangeable Redeemable Preferred Stock (the "Series C Preferred Stock").

<PAGE>

Summary Pro Forma Unaudited Financial Information

The summary unaudited Pro Forma Financial Information of the Company
set forth in the table below is derived from the Pro Forma Unaudited Condensed
Combined Financial Data found elsewhere in this Prospectus. Such Pro Forma
Financial Information is based on the historical Consolidated Financial
Statements of the Company incorporated in this Prospectus by reference,
adjusted to give effect to the Magma Acquisition and the financing thereof,
including the Offering. The Pro Forma Condensed Combined Statements of
Earnings for the nine months ended September 30, 1994, and for the year ended
December 31, 1993, give effect to the Magma Acquisition as if it had occurred
at the beginning of each of the periods presented pursuant to the All-Cash
Option. The Pro Forma Condensed Combined Balance Sheet as of September 30,
1994, gives effect to the Magma Acquisition as if it had occurred on September
30, 1994. The Pro Forma Financial Information does not purport to represent
what the Company's results of operations or financial position would actually
have been or to project the Company's results of operations or financial
position for any future period.

The Summary Pro Forma Financial Information should be read in
conjunction with the Pro Forma Unaudited Condensed Combined Financial Data and
the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, 1993 September 30, 1994
(In thousands, except per share data)

<S> <C> <C>
Statement of Earnings Data:
Total revenues $306,856 $278,141
Cost and expenses
Plant operations 74,855 65,095
General and administrative and other 24,572 19,518
Royalties 8,274 7,898
Depreciation and amortization 57,607 46,753
Interest expense (net of interest capitalized) 78,015 79,974
-------- --------
Total costs and expenses 243,323 219,238
Income before income taxes 63,533 58,903
Provision for income taxes 15,306 15,897
-------- --------
Income from continuing operations 48,227 43,006
Preferred dividends 4,630 3,711
-------- --------
Income available to common stockholders $ 43,597 $ 39,295
======== ========
Income per common and common equivalent share
Assuming no dilution $ 0.79 $ 0.74
======== ========
Assuming full dilution $ 0.78 $ 0.73
======== ========
Weighted average common shares outstanding 55,152 52,841
======== ========
<CAPTION>
As of
September 30, 1994
(In thousands)
<S> <C>
Balance Sheet Data:
Cash and investments . . . . . . . . . . . $ 130,761
Property and plant, net. . . . . . . . . . 1,257,828
Total assets . . . . . . . . . . . . . . . 2,246,867
Total indebtedness . . . . . . . . . . . . 1,476,857
Redeemable preferred stock . . . . . . . . 62,350
Total stockholders' equity . . . . . . . . 446,327
</TABLE>

<PAGE>

INVESTMENT CONSIDERATIONS

Prospective purchasers of the Shares offered hereby should consider
carefully all of the information contained in this Prospectus, including the
following:

Development Uncertainty. The Company 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. The Company has in development or under
construction projects representing several times the MW's of those currently in
operation. Development can require the Company to expend significant sums for
preliminary engineering, permitting, legal and other expenses in preparation
for competitive bids which the Company 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 and implementation of engineering,
construction, fuel supply and power sales contracts with other project
participants on terms satisfactory to the Company, and receipt of required
governmental permits and consents. Further, there can be no assurance that the
Company, which will continue to be substantially leveraged upon completion of
the Magma Acquisition, 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 the Company 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 the Company's efforts generally, will be successful.

Development Uncertainty Outside the United States. The Company
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 Company currently has three projects under
construction outside the United States representing an aggregate capacity of
500 MW of electric generating capacity of which the Company's net ownership
interest is 409 MW. 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 the Company may not be capable of fully insuring
against. The uncertainty of the legal environment in certain foreign countries
in which the Company may develop or acquire projects could make it more
difficult for the Company to enforce its rights under agreements relating to
such projects. In addition, the laws and regulations of certain countries may
limit the ability of the Company to hold a majority interest in some of the
projects that it may develop or acquire. The Company'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 the Company's existing
power generating systems are built to withstand relatively significant levels
of seismic disturbance and the Company seeks appropriate insurance protection,
geothermal power production poses unusual risks of seismic activity.
Accordingly, there can be no assurance that earthquake, property damage or
business interruption insurance will

<PAGE>

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 the
Company of the quality of geothermal resource, or a decline in such quality,
could have a material adverse effect on the Company'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.

Competition. While the Company will be the largest independent
geothermal power company in the world upon the consummation of the Magma
Acquisition, 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 the Company. 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; Impact of Avoided Cost Pricing;
Contract Risks. The Company 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 the Company's results of operations.

Each SO4 Agreement provides for both capacity payments and energy
payments ranging from a term of 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 Company'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 its Salton Sea Known Geothermal Resource Area Projects
(as hereinafter described), in 1999 for three of its 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.

<PAGE>

Estimates of SCE's future Avoided Cost of Energy vary substantially in
any given year. The Company 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 the Company'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 time period-weighted average to September
1994 selling prices for energy of approximately 10.9 cents
and 10.6 cents per Kwh, for
the Company and Magma, respectively. Thus, the revenues generated by each of
the Company's facilities operating under SO4 Agreements are likely to decline
significantly after the expiration of the fixed-price period.

Leverage. Following completion of the Magma Acquisition, the Company
will continue to be substantially leveraged. As of September 30, 1994, the
Company's total consolidated indebtedness was $775.5 million, its total
consolidated assets were $1,087.1 million and its stockholders' equity was
$179.7 million. At such date, on a pro forma basis, after giving effect to the
completion of the Magma Acquisition and the Offering, the Company's total
consolidated indebtedness would have been $1,476.9 million, its total
consolidated assets would have been $2,246.9 million and its stockholders'
equity would have been $446.3 million. See "CAPITALIZATION" and "PRO FORMA
UNAUDITED CONDENSED COMBINED FINANCIAL DATA."

Benefits of the Magma Acquisition. While the Company believes that
there will be significant benefits from the Magma Acquisition, there can be no
assurance that the Company will be able to achieve any of the anticipated
benefits of the Magma Acquisition.

Impact of Environmental and Other Regulations. The Company 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 the
Company to obtain and comply with a wide variety of licenses, permits and other
approvals. Although the Company 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 the Company,
thereby resulting in increased compliance costs, 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
changing regulatory requirements or local opposition.

Shares of Common Stock Eligible for Future Sale. Pursuant to the
Company's Amended and Restated 1986 Stock Option Plan (the "1986 Plan"), as of
September 30, 1994, the Company had outstanding various options to its
officers, directors and employees for the purchase of 3,371,075 shares of
Common Stock, of which all of the shares of Common Stock issuable upon exercise
of said options have been registered pursuant to registration statements on
Form S-8, and, as and when fully vested, are available for immediate resale.
Also as of September 30, 1994, there were additional options outstanding to
purchase 6,064,154 shares of 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 Common Stock (and any
shares of Common Stock subsequently held by PKS), all options to purchase
shares of Common Stock (and the shares issuable upon the exercise of such
options) and 3,393,197 shares of Common Stock issuable upon conversion of the
1,247 shares of the Company's Series C Preferred Stock, held by PKS (or upon
conversion of the Company's Exchangeable Subordinated Debentures if issued upon
the exchange of the Series C Preferred Stock). In addition, 4,444,444 shares
of Common Stock have been reserved for issuance pursuant to the conversion of
the Debentures. The

<PAGE>

Company cannot predict the effect that possible future sales of any substantial
number of shares of Common Stock could have on the market price of the Common
Stock.

USE OF PROCEEDS

The net proceeds to the Company of the Offering are estimated to be
approximately $ million (approximately $ million if the over-
allotment option is exercised in full). The net proceeds of the Offering,
together with borrowings of up to $500 million under the Merger Facilities
described herein and general corporate funds of the Company, will be used to
purchase the Remaining Magma Shares, to repay certain bank borrowings incurred
in connection with the Magma Tender Offer and to pay fees and expenses related
to the Magma Acquisition. See "THE MAGMA ACQUISITION - Financing."

Pursuant to the terms of the Merger Agreement, the Company has the
right to acquire the Remaining Magma Shares either for a combination of cash
and shares of Common Stock valued at approximately $39.00 per share or pursuant
to the All-Cash Option. The Company intends to acquire the Remaining Magma
Shares pursuant to the All-Cash Option. The closing of the Offering will occur
concurrently with, and is conditioned upon, the closing of the Merger pursuant
to the All-Cash Option.

MARKET PRICES OF THE COMMON STOCK

The Common Stock is listed for quotation on the NYSE under the symbol
"CE." The following table sets forth the high and low last reported sale
prices of the Common Stock on the NYSE Composite Tape 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 Ended December 31, 1995
First Quarter (through January 5) $16.25 $15.38
</TABLE>

On January 5, 1995, the last reported sale price of the Common Stock on
the NYSE Composite Tape was $16.13.

<PAGE>

CAPITALIZATION

The following table sets forth the consolidated capitalizations of the
Company and Magma at September 30, 1994 and as adjusted to reflect borrowings
of up to $500 million under the Merger Facilities, consummation of the Magma
Acquisition and completion of the Offering. The following table should be read
in conjunction with the other pro forma financial information contained in this
Prospectus and the respective consolidated financial statements and notes
thereto of the Company and Magma incorporated by reference herein.
<TABLE>
<CAPTION>
The Pro Forma Pro Forma
Company Magma Adjustments Combined
(In thousands, except per share amounts)

<S> <C> <C> <C> <C>
Indebtedness:
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
--------- -------- --------- ----------
Total indebtedness. . . . . . . . . . . . . . . . 775,534 201,323 500,000 1,476,857
Redeemable preferred stock. . . . . . . . . . . . 62,350 -- -- 62,350

Stockholders' Equity:
Preferred stock -- Series A of no
par value; authorized 2,000 shares. . . . . . . . -- -- -- --
Common Stock of $0.0675 par
value; authorized 60,000 shares;
Issued 32,230 shares--actual; shares
pro forma combined (1). . . . . . . . . . . . . . 2,407 --
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
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
--------- -------- --------- ----------
Total Capitalization. . . . . . . . . . . . . . . $1,017,544 $596,609
========= ======== ========= ==========
</TABLE>

- ---------------

(1) There is pending before the stockholders of the Company a proposal to
increase the number of authorized shares of Common Stock to 80,000,000 shares.
Issued shares (actual and as adjusted) do not include (i) 9,435,229 shares of
Common Stock reserved for issuance upon the exercise of presently outstanding
stock options; (ii) 4,444,444 shares of Common Stock issuable upon the
conversion of the Debentures; and (iii) 3,393,197 shares of Common Stock
issuable upon conversion of the 1,247 issued and outstanding shares of the
Series C Preferred Stock.

See "PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA."

<PAGE>

THE MAGMA ACQUISITION

The Company is acquiring all of the outstanding equity interest in
Magma in a two step transaction according to the terms of the Merger Agreement.
On January 10, 1995, the first step of the transaction was completed when the
Company acquired approximately 51% of the outstanding shares of Magma Common
Stock for $39.00 per share in cash pursuant to the Magma Tender Offer. As a
result of the Magma Tender Offer, CE Sub acquired a controlling interest in
Magma. Pursuant to the Merger Agreement, the Company will, upon the terms and
subject to the conditions thereof, consummate the Merger with Magma, which will
result in Magma's continuing as the surviving corporation and becoming a wholly
owned subsidiary of the Company. The Company has the right, pursuant to the
terms of the Merger Agreement, to acquire the Remaining Magma Shares either for
a combination of cash and shares of Common Stock, valued at approximately
$39.00 per Magma share, or pursuant to the All-Cash Option. The Company
intends to acquire the Remaining Magma Shares pursuant to the All-Cash Option,
and the closing of the Offering will occur concurrently with, and is
conditioned upon, the closing of the All-Cash Option.

Conditions of the Merger

Consummation of the Merger remains subject to certain conditions,
including (i) the approval and adoption of the Merger and the Merger Agreement
by the requisite vote of Magma's stockholders, which approval and adoption can
be effected by the Company without the affirmative action of any other Magma
stockholder; (ii) the approval of the Company's stockholders of the issuance of
Common Stock in order to fund a portion of the consideration for the Merger;
and (iii) 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. The waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, has expired.

Financing

A total of approximately $957 million will be required to complete the
Magma Acquisition. Approximately one-half of such amount will be provided
under the Merger Facilities with Credit Suisse pursuant to which Credit Suisse
will provide, on specified terms and subject to customary conditions, up to
$500 million in secured bank financing. Such funds, together with the net
proceeds of the Offering and general corporate funds of the Company, will be
sufficient to complete the Magma Acquisition.

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 the Company on a non-
recourse basis, and the Company 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 and will be secured by an assignment and pledge by the Company of the
Magma Note and 100% of the capital stock of Magma. The Magma Note will be
secured by a collateral assignment of certain unencumbered assets of Magma.

Interest on loans borrowed under the Merger Facilities will be payable
at spreads of 2.50% above LIBOR (adjusted for reserves) or 1.50% above a base
rate for Term Loan A, and 3.00% above LIBOR (adjusted for reserves) or 2.00%
above a base rate for Term Loan B. The LIBOR spreads are subject to upward
adjustment

<PAGE>

in certain instances. The Company may elect to have loans bear interest based
on either LIBOR or a base rate (as defined in the Merger Facilities).

The Merger Facilities will contain affirmative and negative covenants
customary for similar 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 the Company unless the proceeds are used to pay
down the Merger Facilities; a prohibition on the sale of ownership interests in
Magma; a limitation on the incurrence of additional debt by Magma; a
requirement that the Company deliver each fiscal quarter a certificate as to
the absence of material adverse changes in the Company or Magma which could
reasonably be expected to materially affect the ability of the Company to
service 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 the Company 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 certain debt of the Company 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) capital
investment in the Purchaser in an amount and form satisfactory to Credit Suisse
and (ii) the absence of certain material adverse changes.

<PAGE>

BUSINESS

The Company

Following completion of the Magma Acquisition, the Company will be the
largest independent geothermal power producer in the world. The Company will
have an aggregate net ownership interest of 347 MW of electric generating
capacity in power production facilities in the United States having an
aggregate net capacity of 553 MW. All of these facilities are managed and
operated by the Company and are principally located in Southern California. In
addition to the electricity sales revenue earned from its net ownership
position in such plants, the Company also receives fee and royalty income from
operating such plants and managing the production from its geothermal
reservoir. The Company 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. The Company is also developing eight
additional projects with executed or awarded power sales contracts in the
Philippines, Indonesia and the United States. The Company will have a 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.

Rationale For the Magma Acquisition

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

-- Expansion and Enhancement of Development Efforts

Development of new opportunities, particularly internationally,
is a key component of the Company's strategy. Since 1990, the Company 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, the Company 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, the Company will have available to it technology
of both Companies. The Company owns production technology compatible with the
relatively low mineral content of its wells at its Coso Projects, and Magma
owns technology compatible with the high levels of mineral precipitates

<PAGE>

found in the geothermal resource at the Salton Sea Projects. The Company
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.

-- Benefits of Increased Size

The Company believes that size is an important factor in
determining the success of an independent power producer. This view is based
on the Company's belief that potential customers consider both the price of
power and the provider's capacity to fulfill its obligation as primary factors
in the selection of power suppliers. The expanded size and capabilities of the
combined companies is expected to further enhance the Company's reputation and
credibility with sovereign government and state utility customers and therefore
enhance its ability to successfully compete for new projects. The Company will
have over $2 billion of total assets and an aggregate net ownership interest of
1,691 MW in projects in operation, under construction or in development, which
total 2,642 MW. The Company believes that the combination with Magma will
create the opportunity to reduce the Company's average cost per kWh by
expanding its asset base, without materially expanding its cost structure.
This will allow the Company to be more price competitive with other geothermal
power producers and traditional fossil fuel power plants, which the Company
believes will be its primary competition in the future.

-- Opportunities for Operational and Administrative Cost
Savings

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

-- Diversification in Sources of Revenue and Operations

The combination of the Company's and Magma's operations will
increase the Company's sources of revenue and increase the number of operating
sites (including projects under construction) from eight to 16. The Company
believes that the resulting diversification in sources of revenue and
operations can be expected to reduce the risk profile of the Company, 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.

SCHEMATIC REPRESENTING GEOTHERMAL ENERGY APPEARS HERE.

<PAGE>

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 of 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.

MAP DEPICTING AREAS OF POTENTIAL GEOTHERMAL ACTIVITY APPEARS HERE.

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. 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
come on line 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 by 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, and the terms and conditions of
any such contract may be less favorable than those in prior agreements.

<PAGE>

Large amounts of new electric power are required in developing
countries. The movement toward privatization in some developing countries has
created significant new markets outside the U.S. 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. The Company 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. The Company 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, the Company is focusing on market opportunities in which
it believes it has relative competitive advantages due to its geotechnical and
project management and operating expertise. In addition, the Company 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.

The Company 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, the
Company pursues development opportunities in countries which it believes have
an acceptable risk profile and where the Company'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. The Company has successfully financed and has
under construction three projects representing 409 MW of net ownership in the
Philippines and is currently pursuing a number of other electric power project
opportunities in countries such as the Philippines and Indonesia. These
countries are ideally suited for the Company to develop, finance and operate
power projects successfully because of their excellent population demographics,
extensive geothermal resources and these countries' commitments to develop
private power programs. The Company'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, the Company 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, the Company intends to own a
significant equity interest in, and to operate, the projects it develops or
acquires. In order to compete more effectively internationally, the Company'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. The Company also believes
that it is important in foreign transactions to work with local partners who
are knowledgeable of local culture, political and commercial practices and who
provide a visible local presence and local project representation.

With respect to emerging market projects, the Company'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 the extent possible, the Company attempts to
secure "political risk" insurance from the Overseas Private Insurance Company
("OPIC") or similar multilateral agencies to limit its risk in emerging market
countries. In addition, the Company endeavors to involve the World Bank,
export credit agencies or multilateral funding sources in its international
project financings. The Company believes multilateral lending agencies and
foreign source financing and political risk insurance are available for certain
international private

<PAGE>

power projects, particularly those utilizing indigenous fuel sources in
renewable or otherwise environmentally responsible generating facilities. The
Company believes that the involvement of these institutions will enhance an
international project's position in emerging market countries.

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

The Company has ownership interests of an aggregate of (i) 347 MW in 13
projects in operation representing an aggregate net capacity of 553 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 the
Company's various projects in operation, under construction and in the latter
stages of development pursuant to signed power sales agreements or awarded
mandates.

<PAGE>

INTERNATIONAL PROJECTS
Projects Under Construction

Facility Net Projected
Net Ownership Commercial
Capacity Interest Operation Contract Contract Power
Project (in MW) (in MW) Location Date Expiration(3) Type Purchaser
- ------- --------- ------- -------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Upper Mahiao(1) 119 119 Leyte, 1996 CO+10 Build, PNOC-
Philippines Own, EDC
Transfer (GOP)(2)

Mahanagdong(1) 165 74 Leyte, 1997 CO+10 Build, PNOC-
Philippines Own, EDC
Transfer (GOP)(2)

Malitbog-Phase I and II 216 216 Leyte, 1996-1999 CO+10 Build, PNOC-
Philippines Own, EDC
Transfer (GOP)(2)

Total Under Construction 500 409
=== ===

Projects with Signed Power Sales Contracts/Awarded Development Rights

Patuha(1) 400 140 Central Java, 1997-1999 CO+30 Build, PLN
Indonesia Own, (GOI)
Transfer

Casecnan(6) 140 98 Luzon, 1998 CO+20 Build, NIA(5)
Philippines Own, (GOP)(2)
Transfer

Bali(4)(6) 350 210 Bali, Indonesia 1998-1999 CO+30

Alto Peak 70 70 Leyte, 1997 CO+10 Build, PNOC-
--- --- Philippines Own EDC
Transfer (GOP)(2)

Total Contracted/
Awarded 1,360 706
---- ----
Total International
Projects 1,860 1,115
==== ====
</TABLE>

____________________________
(1)PKS has elected to exercise its ownership option pursuant to its joint
venture agreement with the Company.

(2)Government of the Philippines undertaking guarantees PNOC-EDC and NIA's
obligation.

(3) Commercial Operation (CO).

(4)Geothermal resource development rights have been awarded and the power sales
contract is subject to negotiation.

(5)Philippine National Irrigation Administration.

(6)PKS has not indicted whether it intends to exercise its ownership option
pursuant to its joint venture agreement with the Company.

<PAGE>

DOMESTIC PROJECTS

<TABLE>

<CAPTION>
Projects in Operation

Facility Net
Net Ownership Date of
Capacity Interest Commercial Contract Contract Power
Project (in MW)(7) (in MW) Location Operation Expiration Type Purchaser(8)
- ------- --------- ------- -------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Navy 1 80 37 China Lake, CA 8/1987 8/2011 SO4 SCE
BLM 80 38 China Lake, CA 3/1989 3/2019 SO4 SCE
Navy II 80 40 China Lake, CA 1/1990 1/2010 SO4 SCE
Vulcan 34 17 Imperial Valley, CA 2/1986 2/2016 SO4 SCE
Hoch (Del Ranch) 38 19 Imperial Valley, CA 1/1989 12/2018 SO4 SCE
Elmore 38 19 Imperial Valley, CA 1/1989 12/2018 SO4 SCE
Leathers 38 19 Imperial Valley, CA 1/1990 12/2019 SO4 SCE
Salton Sea I 10 10 Imperial Valley, CA 7/1987 6/2017 Negotiated SCE
Salton Sea II 20 20 Imperial Valley, CA 4/1990 4/2020 SO4 SCE
Salton Sea III 50 50 Imperial Valley, CA 2/1989 2/2019 SO4 SCE
Yuma Cogen 50 50 Yuma, AZ 5/1994 5/2024 Negotiated SDG&E
Roosevelt Hot Springs 25 18 Milford, UT Gathered Steam UP&L
Desert Peak 10 10 Desert Peak, NV 12/1985 12/1995 Negotiated SPCC Power
--- ---
Total in Operation 553 347
--- ---

<CAPTION>
Projects with Signed Power Sales Contracts/Awarded Development Rights

Facility Net Projected
Net Ownership Commercial
Capacity Interest Operation Contract Contract Power
Project (in MW) (in MW) Location Date Expiration Type Purchaser
- ------- --------- ------- -------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
BRPU(2) 163 163 Imperial Valley, CA TBD TBD FSO4 SCE(9)
Fish Lake(10) 36 36 Imperial Valley, CA est. 1996 2015 Negotiated SCE
Newberry 30 30 Bend, OR est. 1998 2047 Negotiated BPA/EWEB
----- ------
Total Contracted/Awarded 229 229
----- ------
Total Domestic Projects 782 576
----- ------
Total Projects 2,642 1,691
----- ------
----- ------
</TABLE>
____________________________
(7)With respect to the Vulcan, Hoch (Del Ranch), Elmore, Leathers, Salton Sea
I, Salton Sea II and Salton Sea III projects, this represents contract
nameplate ratings.

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

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

(10)Combined Fish Lake and Salton Sea Expansion option.

<PAGE>

The following summary project descriptions are qualified in
their entirety by reference to the Company's 1993 10-K and the Magma 1993 10-K
incorporated herein by reference and by the other documents incorporated herein
by reference.

INTERNATIONAL PROJECTS

Projects in Construction

The Philippines. The Company 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 Philippines' 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 infra-
structure 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 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.

The Company 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 the Company's aggregate net ownership interest is
409 MW. The following is a summary description of certain information
concerning these and other projects.

MAP OF THE REPUBLIC OF THE PHILIPPINES WITH PROJECT LOCATIONS APPEARS HERE.

Upper Mahiao. The Company 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 the Company. 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

<PAGE>

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 the ExIm Bank. The Company's equity
contribution to the Upper Mahiao Project is $56 million. The Company 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 "Mahiao EPC Contract"), 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 Mahiao EPC Contract provides liquidated damage protection of up to 30% of
the Mahiao EPC Contract price. Ormat's performance under the Mahiao EPC
Contract is backed by a completion guaranty of Ormat, by letters of credit, and
by a guaranty of Ormat Industries, Ltd., an Israeli corporation and the parent
of Ormat, in each case for the benefit of the project lenders.

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
dollars and paid in Philippine pesos at the then-current exchange rate, except
for the Energy Fee, which will be used to pay peso-denominated expenses. The
convertibility of 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 guaranteed by the
Philippines through a performance undertaking.

The payment of Capacity Fees 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

<PAGE>

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. The Company 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 the Company and 50% by PKS. Up to a 10% financial interest in CE
Luzon may be sold at completion to another industrial 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 proposed capital structure consists of 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. The Company'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, the Company 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 Contract"). The obligations of the EPC
Consortium under the Mahanagdong EPC Contract are supported by a guaranty of
KCG at an aggregate amount equal to approximately 50% of the Mahanagdong EPC
Contract's price. The Mahanagdong EPC Contract 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. The Company 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. All of PNOC-EDC's
obligations under the Mahanagdong ECA are guaranteed by 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 $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 is approximately $70 million.
Magma's equity participation is covered by political risk insurance from OPIC
which is assigned to the benefit of the lenders.

<PAGE>

The Malitbog Project will be constructed by Sumitomo Corporation
pursuant to a fixed-price, date-certain, turnkey supply and construction
contract (the "Malitbog EPC Contract"). The EPC Contract provides that certain
liquidated damages will be paid by Sumitomo for failure to meet the schedule,
including the payment of any liquidated damages or penalties required to be
paid by the Partnership to PNOC-EDC under the Energy Conversion Agreement
(subject to limitations on the total amount of liquidated damages payable by
Sumitomo). The EPC Contract also provides for the payment of certain
liquidated damages on a per unit basis if upon completion of the facility tests
do not demonstrate its ability to operate at a net generating capacity of at
least 222.3 MW. The liquidated damages are capped at 13 1/3% of the total EPC
contract price for each generating unit. 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 EPC Contract.

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. The
Malitbog EPC Contract 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 on or about June 1, 1996, and commercial operation
of unit 2 and unit 3 scheduled to commence on or about June 1, 1997.

The terms of an energy conversion agreement ("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 with the first phase (unit 1) scheduled to start up
by July 1996 and the second phase (units 2 and 3) scheduled to start up by July
1997. The cooperation period is ten years from the completion of unit 3. All
of PNOC-EDC's obligations under the Malitbog ECA are guaranteed by 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, the Company 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 (Cagoyan) watershed in Northern Luzon
to the Pampanga watershed and the Pantabangan Reservoir for irrigation use in
the Central Luzon Valley. The Casecnan Multipurpose Project 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. The Project
Agreement 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 Project will be transferred to NIA at no cost. The
Company anticipates commencing construction in 1995.

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

Alto Peak. Alto Peak is a smaller geothermal project in the same
general area of Leyte as Upper Mahiao, Mahanagdong and Malitbog. 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 the
project. Consequently, Magma has not commenced financing arrangements for the
project.

Indonesia. Indonesia, which has the world's fourth largest population,
has experienced rapid growth in electricity demand. The Company believes that
load growth averaged in excess of 13% from 1980 through 1990, and has exceeded
17% over the past two years. Furthermore, the Company 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

<PAGE>

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 LNG, the government 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.

The Indonesian state-owned utility, has recently been converted to a
limited liability company, P.T. PLN (Persero) ("PLN"), as a first step towards
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 (40% of which 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/BBB- by Moody's Investors Service, Inc. and
Standard & Poor's Corporation. The Company 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 WITH PROJECT LOCATIONS APPEARS HERE.

The following is a summary description of certain information
concerning the Company'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 the Company's efforts
generally, will be successful.

Dieng. On December 2, 1994, a subsidiary of the Company 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 the Company 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 the Company 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 the
Company 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.

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 completion of well testing 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 the Company 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

<PAGE>

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.

The Company 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. The Company
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. The
Company anticipates a consortium consisting of KCG and BHCO will submit a
proposal for the design and construction of the Dieng Project, and that the
Company, 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. The Company 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. The Company is also developing a geothermal power plant with
respect to the Patuha geothermal field in Java, Indonesia (the "Patuha
Project"). The Company has entered into a joint venture (the "Joint Venture
Project") 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 the
Company 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 (the "Patuha JOC") and an energy sales contract (the "Patuha
ESC"), 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. The Company estimates that the total cost will be
approximately $1 billion. The Company 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.

Bali. The Company and PT Panutau 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 and to obtain a power sales
contract from PLN.

The Company 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 the Company will pursue the Bali Project or that it will proceed
or reach commercial operation.

<PAGE>

DOMESTIC PROJECTS

MAP OF THE WESTERN UNITED STATES WITH PROJECTS LOCATIONS APPEARS HERE.

Projects in Operation

The Coso Projects. In 1979, the Company 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, the Company 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.
The Company 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 Projects").

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"). The Company holds ownership interests of approximately 46% in
the Navy I Partnership; approximately 48% in the BLM Partnership, after payout
to the Company and Caithness; and 50% in the Navy II Partnership. The Company
consolidates its respective share of the operating results of the Coso
Partnerships into its financial statements. In addition, the Company
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 the Company and two representatives from the
Company's partners. The Company operates the Coso Projects, for which it
receives fees from the Coso Partnerships.

The Coso Projects sell 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 11.0 cents per kWh in 1994 to 14.6 cents
per kWh in 2000. The
Company'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 Coso 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, and 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, based on a net capacity of 80 MW.

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, and 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, based on a net capacity of 80 MW.

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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, and 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, based on a net capacity of 80 MW.

In December 1992, the Coso Joint Ventures refinanced the existing bank
debt on the Coso Projects 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
"BBB-" by Standard & Poor's Corporation, "Baa3" by Moody's Investors Service,
Inc., 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 the Company. Coso Funding may look solely to each Coso
Partnership's pledged assets for satisfaction of such Coso Partnership's loan.
In addition, the Project 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 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
Parthership," 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 Plant. In the case of the other three Partnership Plants,
Magma owns the geothermal resources and receives royalty payments from the
Hoch, Elmore and Leathers Partnerships. In the first nine months of 1994, such
royalties and the East Mesa and Mammoth royalties 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
Plant into its financial statements. A subsidiary of Magma operates each of
the Salton Sea Plants and the Partnership Plants.

The Salton Sea Projects operated at a combined 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 nameplate capacity 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 of electric
generating capacity, respectively. Under the contract, 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 published
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.

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,

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respectively. The provisions of such SO4 Agreement are substantially the same
as for 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 payment per kWh for the first ten-year period, which
expires on December 31, 1998, is 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
published 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 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 for 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 fixed energy payments 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
published 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 for 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 monthly 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 monthly energy payments are
based on SCE's published Avoided Cost.

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 (Phase I) contract capacity and nameplate is 10 MW. The
Project may add subsequent increments of contract capacity (subject to
notification requirements) the sum of which may not exceed 20 MW (the "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 power purchase
agreement. 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 Contract is not an SO4 Agreement, the energy
payments do not revert to SCE's Avoided Cost.

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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 is 15 MW and the nameplate capacity is 20 MW. 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. 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.
Thereafter, the monthly energy payment will be SCE's Avoided Cost of Energy.

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 nameplate capacity is 50 MW. The SO4 Agreement requires SCE to
make capacity payments, capacity bonus payments and energy payments for the
life of the 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 payment 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.

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

Yuma. During 1992, the Company 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.
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, the Company 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 the Company believes
it would obtain QF status. A natural gas supply and transportation agreement
has been executed with Southwest Gas Corporation. The Yuma Project is
unleveraged other than intercompany debt.

Mammoth Plants. Magma receives royalty revenues from a 10 MW and a 12
MW nameplate capacity 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

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gross electricity sales revenues. The bonus royalty (if any) for each Mammoth
Plant is 50% of the excess of annual gross electricity sales revenues over an
annual revenue standard based on the plants operating at 85% of contract
capacity.

The East Mesa Plant. Magma also receives royalty revenues from a 37 MW
nameplate capacity geothermal power plant (with two units) at East Mesa in
Imperial Valley, California. 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
SO4 payments as royalty income.

Roosevelt Hot Springs. The Company operates and owns an approximately
70% interest in a 25MW 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. The
Company 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. The Company must make certain penalty payments to UP&L if the steam
produced does not meet certain quantity and quality requirements.

Projects in Development

The BRPU Process. Magma is seeking new long-term Final Standard Offer
No. 4 power purchase agreements ("FSO4s") 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
("FLPC"), 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 was a 30-year contract providing for a contract
capacity of 14 MW and a nameplate rating 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 2.5 cents
per
kWh for 30 years (assuming a 90% nameplate capacity factor). The energy
payment thereunder is fixed for the first ten years starting at 10.2 cents
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 is at 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 PPA and (ii) the
Fish Lake, 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 power purchase agreement (the "Amended PPA") in
conjunction with the current power purchase agreement for unit 1.

If approved, the Amended PPA will consolidate the 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.

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Newberry. Under a Bonneville Power Administration ("BPA") geothermal
pilot program, the Company is developing a 30 MW net geothermal project at
Newberry, 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, the Company has agreed to sell
20 MW net to BPA and 10 MW net 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 Project under
certain circumstances. In a public-private development effort, the Company is
responsible for development, permitting, financing, construction and operation
of the project (which will be 100% owned by the Company), 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.

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CERTAIN TAX CONSIDERATIONS

The following is a discussion, based upon present law, of certain U.S.
federal income and estate tax consequences to U.S. Holders and Non-U.S. Holders
of owning and disposing of shares of Common Stock. The term "U.S. Holder"
means a citizen (and, under certain circumstances, a former citizen) or
resident of the United States, a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, or an estate or trust the income of which is subject to
U.S. federal income taxation, regardless of its source, and the term "Non-U.S.
Holder" means any person who is not a U.S. Holder.

This discussion does not deal with all aspects of U.S. federal income
and estate taxation that may be relevant to holders of the shares of Common
Stock and does not deal with tax consequences arising under the laws of any
foreign, state or local jurisdiction. This discussion assumes that each holder
holds the shares of Common Stock as capital assets and that any amounts
received by a Non-U.S. Holder with respect to the shares of Common Stock are
not effectively connected with the conduct by such Non-U.S. Holder of a trade
or business in the United States. Each prospective holder is advised to
consult its own tax adviser with respect to current and possible future tax
consequences of acquiring, holding and disposing of the shares of Common Stock.

U.S. Holders

Disposition of Shares of Common Stock. In general, the U.S. Holder of
the shares of Common Stock will recognize capital gain or loss upon the sale or
other disposition of shares of Common Stock measured by the difference between
the amount realized and the U.S. Holder's tax basis in the shares of Common
Stock. The gain or loss on such disposition of shares of Common Stock will be
long-term capital gain or loss if the shares of Common Stock have been held for
more than one year at the time of such disposition.

Dividends. Distributions on shares of Common Stock will constitute
dividends for U.S. federal income tax purposes to the extent of current or
accumulated earnings and profits of the Company as determined under U.S.
federal income tax principles. Such dividends will be subject to U.S. federal
income taxation in the hands of U.S. Holders of shares of Common Stock under
rules generally applicable to dividends received from U.S. corporations. For
example, such dividends paid to U.S. Holders that are U.S. corporations may
qualify for the 70% dividends-received deduction permitted by Section 243 of
the Internal Revenue Code of 1986 (the "Code"). Individuals, partnerships,
trusts, and certain corporations, including certain foreign corporations, are
not entitled to the dividends-received deduction.

Non-U.S. Holders

Gain on Disposition of Shares of Common Stock. A Non-U.S. Holder will
not be subject to U.S. federal income tax by withholding or otherwise on any
gain realized upon the disposition of shares of Common Stock unless (i) in the
case of a Non-U.S. Holder who is an individual, such Non-U.S. Holder is present
in the U.S. for a period or periods aggregating 183 days or more during the
taxable year of the disposition but is still not a resident of the U.S. and
either (a) the Non-U.S. Holder has a "tax home" (within the meaning of the
Code) in the U.S. (unless such gain is attributable to a fixed place of
business in a foreign country maintained by such individual and has been;
subject to foreign tax of at least 10%) or (b) the gain is attributable to an
office or other fixed place of business maintained by the Non-U.S. Holder in
the U.S., or (ii) the Company is or has been a "United States real property
holding corporation" for U.S. federal income tax purposes at any time within
the shorter of the five-year period ending on the date of such disposition or
such Non-U.S. Holder's holding period, and no treaty exception is applicable,
and either (a) at any point in time during such period the Non-U.S. Holder has
held, directly or indirectly, more than 5% of the Common Stock or (b) the
Common Stock is not "regularly traded" on an established securities market in
the U.S., within the meaning of Temporary Treasury Regulation
Section 1.897-9T(d).
If clause (ii) is applicable, a withholding tax will apply (generally at a rate
of 10% of the gross proceeds of any such sale or other disposition). Any
amount withheld pursuant to these rules will be creditable against such Non-
U.S. Holder's U.S. federal income tax liability and may entitle such Non-U.S.
Holder to a refund upon furnishing the required information to the Internal
Revenue Service.

Dividends. Generally, any distribution on shares of Common Stock to a
Non-U.S. Holder will be subject to U.S. federal income tax withholding at a
rate of 30% of the amount of the distribution, or at a lesser applicable

<PAGE>

treaty rate. Under current Treasury regulations, dividends paid to an address
in a foreign country are presumed to be paid to a resident of such country for
purposes of determining the applicability of a treaty rate unless the Company
has definite knowledge that such presumption is not warranted or an applicable
tax treaty requires some other method for determining a Non-U.S. Holder's
residence.

To the extent, if any, that a distribution to a Non-U.S. Holder is
treated as a tax-free return of capital or as a capital gain (see "U.S. Holders
- -- Dividends" above), the Company nevertheless intends to withhold U.S. federal
income tax at the 30% or lesser applicable treaty rate. In such event, the
Non-U.S. Holder is entitled to apply for a refund of such withheld amounts by
filing Form 1040NR or Form 1120F with the Internal Revenue Service. To the
extent that the distribution is treated as a capital gain, however, it will be
subject to the same rules as applicable to gains realized on the disposition of
Common Stock (see "Gains on Disposition of Shares of Common Stock"), and
therefore a refund may not be granted.

Estate Tax. Shares of Common Stock held at the time of death (or
previously transferred subject to certain retained rights or powers) by an
individual holder, who at such time was not a citizen or resident of the U.S.,
will be subject to U.S. federal estate tax, except as otherwise provided by an
applicable estate tax treaty.

Information Reporting and Backup Withholding

In addition to the withholding rules described above, interest,
dividends, distributions, and payments of proceeds from the disposition by
certain non-corporate holders of shares of Common Stock may be subject to
backup withholding at a rate of 31%. Such a U.S. Holder generally will be
subject to backup withholding at a rate of 31% unless the recipient of such
payment supplies an accurate taxpayer identification number, as well as certain
other information, or otherwise establishes, in the manner prescribed by law,
an exemption from backup withholding. Any amount withheld under backup
withholding is allowable as a credit against the U.S. Holder's federal income
tax, upon furnishing the required information.

Under temporary and proposed U.S. Treasury regulations, backup
withholding will not apply to dividends paid on shares of Common Stock to a
Non-U.S. Holder. Generally, the payor of the dividends may rely on the payee's
address outside the U.S. in determining that such payee is a Non-U.S. Holder.
The Company must report annually to the Internal Revenue Service and to each
Non-U.S. Holder the amounts of dividends paid to, and the tax withheld with
respect to, each Non-U.S. Holder. These information reporting requirements
apply regardless of whether withholding was reduced by an applicable tax
treaty. Copies of these information returns may also be made available under
the provisions of a specific treaty or agreement to the tax authorities in the
country in which the Non-U.S. Holder resides. The payment of the proceeds of
the disposition of shares of Common Stock to or through the U.S. office of a
broker will be subject to information reporting and backup withholding at a
rate of 31% unless the owner certifies its status as a Non-U.S. Holder under
penalties of perjury or otherwise establishes an exemption. The proceeds of
the disposition by a Non-U.S. Holder of shares of Common Stock to or through a
foreign office of a broker will not be subject to backup withholding. However,
if such broker is a U.S. person, a controlled foreign corporation for U.S. tax
purposes, or a foreign person 50% or more of whose gross income from all
sources for a specified three-year period is from activities that are
effectively connected with a U.S. trade or business, information reporting will
apply unless such broker has documentary evidence in its files of the owner's
status as a Non-U.S. Holder and has no actual knowledge to the contrary.

Holders should consult their tax advisors regarding the application of
information reporting and backup withholding in their particular situation and
the availability of an exemption therefrom, and the procedures for obtaining
any such exemption.

<PAGE>

UNDERWRITING

Under the terms and subject to the conditions contained in the
Underwriting Agreement, dated (the "U.S. Underwriting
Agreement"), the Underwriters named below (the "U.S. Underwriters"), for whom
CS First Boston Corporation, Bear, Stearns & Co. Inc., Donaldson, Lufkin &
Jenrette Securities Corporation, C.J. Lawrence/Deutsche Bank Securities
Corporation and Lehman Brothers Inc., are acting as representatives (the
"Representatives"), have severally but not jointly agreed to purchase from the
Company the following respective numbers of U.S. Shares:

Number of
Underwriters Shares
- ------------ ---------
CS First Boston Corporation
Bear, Stearns & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
C.J. Lawrence/Deutsche Bank Securities Corporation
Lehman Brothers Inc. -----------
Total
===========

The U.S. Underwriting Agreement provides that the obligations of the
U.S. Underwriters are subject to certain conditions precedent and that the U.S.
Underwriters will be obligated to purchase all the U.S. Shares if any are
purchased.

The U.S. Underwriting Agreement provides that, in the event of a
default by a U.S. Underwriter, in certain circumstances the purchase
commitments of non-defaulting U.S. Underwriters may be increased or the U.S.
Underwriting Agreement may be terminated.

The Company has entered into a Subscription Agreement (the
"Subscription Agreement") with the Managers of the International Offering (the
"Managers") providing for the concurrent offer and sale of the International
Shares outside the United States. The closing of the U.S. Offering and the
closing of the International Offering are each conditional on the other.

The Company has granted to the U.S. Underwriters and the Managers an
option, exercisable by CS First Boston Corporation, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
additional shares at the public offering price, less the underwriting
discounts and commissions, all as set forth on the cover page of this
Prospectus. The U.S. Underwriters and the Managers may exercise such option
only to cover over-allotments in the sale of the Shares offered hereby. To the
extent that this option to purchase is exercised, each U.S. Underwriter and
each Manager will become obligated, subject to certain conditions, to purchase
approximately the same percentage of additional shares being sold to the U.S.
Underwriters and the Managers as the number of U.S. Shares set forth next to
such U.S. Underwriter's name in the preceding table bears to the total number
of U.S. Shares in such table and as the number set forth next to such Manager's
name in the corresponding table in the Prospectus relating to the International
Offering bears to the total number of International Shares in such table.

The Company has been advised by the Representatives that the U.S.
Underwriters propose to offer the U.S. Shares in the United States and Canada
to the public initially at the public offering price set forth on the cover
page of this Prospectus and, through the Representatives, to certain dealers at
such price less a concession of $ per share, and the U.S. Underwriters
and such dealers may allow a discount of $ per share on sales to certain
other dealers. After the initial public offering, the public offering price
and concession and discount to dealers may be changed by the U.S. Underwriters.

The public offering price, the aggregate underwriting discounts and
commissions per share and per share concession and discount to dealers for the
U.S. Offering and the concurrent International Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and Managers (the
"Intersyndicate Agreement") relating to the Offering, changes in the public
offering price, concession and discount to dealers will be made only upon the

<PAGE>

mutual agreement of CS First Boston Corporation, as representative of the U.S.
Underwriters, and CS First Boston Limited ("CSFBL"), on behalf of the Managers.

Pursuant to the Intersyndicate Agreement, each of the U.S. Underwriters
has agreed that, as part of the distribution of the U.S. Shares and subject to
certain exceptions, it has not offered or sold, and will not offer or sell,
directly or indirectly, any shares of Common Stock or distribute any prospectus
relating to the Common Stock to any person outside the United States or Canada
or to any other dealer who does not so agree. Each of the Managers has agreed
or will agree that, as part of the distribution of the International Shares and
subject to certain exceptions, it has not offered or sold, and will not offer
or sell, directly or indirectly, any shares of Common Stock or distribute any
prospectus relating to the Common Stock in the United States or Canada or to
any other dealer who does not so agree. The foregoing limitations do not apply
to stabilization transactions or to transactions between the U.S. Underwriters
and the Managers pursuant to the Intersyndicate Agreement. As used herein,
"United States" means the United States of America (including the States and
the District of Columbia), its territories, possessions and other areas subject
to its jurisdiction, "Canada" means Canada, its provinces, its territories,
possessions and other areas subject to its jurisdiction, and an offer or sale
shall be in the United States or Canada (i) any individual resident in the
United States or Canada or (ii) any corporation, partnership, pension, profit-
sharing or other trust or other entity (including any such entity acting as an
investment adviser with discretionary authority) whose office most directly
involved with the purchase is located in the United States or Canada.

Pursuant to the Intersyndicate Agreement, sales may be made between the
U.S. Underwriters and the Managers of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the
public offering price, less such amount as may be mutually agreed upon by CS
First Boston Corporation, as representative of the U.S. Underwriters and CSFBL,
on behalf of the Managers, but not exceeding the selling concession applicable
to such shares. To the extent there are sales between the U.S. Underwriters
and the Managers pursuant to the Intersyndicate Agreement, the number of shares
of Common Stock initially available for sale by the U.S. Underwriters or by the
managers may be more or less than the amount appearing on the cover page of the
Prospectus. Neither the U.S. Underwriters nor the Managers are obligated to
purchase from the other any unsold shares of Common Stock.

This Prospectus may be used by underwriters and dealers in connection
with sales of International Shares to persons located in the United States, to
the extent such sales are permitted by the contractual limitations on sales
described above.

The Company and its officers and directors have agreed that they will
not offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any additional shares of its
Common Stock without the prior written consent of CS First Boston Corporation
for a period of 90 days after the date of this Prospectus, except issuances
pursuant to the exercise of employee stock options outstanding on the date
hereof or pursuant to the conversion of the Company's Debentures or its Series
C Preferred Stock.

The Company has agreed to indemnify the U.S. Underwriters and the
Managers against certain liabilities, including civil liabilities under the
Securities Act, or to contribute to payments that the U.S. Underwriters and the
Managers may be required to make in respect thereof.

Each of Bear, Stearns & Co. Inc., Donaldson Lufkin & Jenrette
Securities Corporation and Lehman Brothers Inc. were underwriters of the
Company's $529,640,000 senior discount notes offering in March 1994.

Lehman Brothers Inc. has provided financial advisory services to the
Company in connection with the Magma Acquisition.

Credit Suisse, an affiliate of CS First Boston Corporation, has
provided certain credit facilities and commercial banking services to the
Company and its subsidiaries from time to time and is the agent bank in
connection with the bank borrowings incurred in connection with the Magma
Tender Offer (the "Tender Offer Facility") and the Merger Facilities. Certain
of the net proceeds of this Offering may be deemed to be used to repay some
portion of the bank borrowings incurred in connection with the Magma Tender
Offer. Accordingly, this

<PAGE>

Offering is being made in accordance with the requirements of Section 44(c)(8)
of Article III of the Rules of Fair Practice of the National Association of
Securities Dealers, Inc.

NOTICE TO CANADIAN RESIDENTS

Resale Restrictions

The distribution of the Common Stock in Canada is being made only on a
private placement basis exempt from the requirement that the Company prepare
and file a prospectus with the securities regulatory authorities in each
province where trades of the Common Stock are effected. Accordingly, any
resale of the Common Stock in Canada must be made in accordance with applicable
securities laws which will vary depending on the relevant jurisdiction, and
which may require resales to be made in accordance with available statutory
exemptions or pursuant to a discretionary exemption granted by the applicable
Canadian securities regulatory authority. Purchasers are advised to seek legal
advice prior to any resale of the Common Stock.

Representations of Purchasers

Each purchaser of the Common Stock in Canada who receives a purchase
confirmation will be deemed to represent to the Company and the dealer from
whom such purchase confirmation is received that (i) such purchaser is entitled
under applicable provincial securities laws to purchase such Common Stock
without the benefit of a prospectus qualified under such securities laws, (ii)
where required by law, that such purchaser is purchasing as principal and not
as agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions".

Rights of Action and Enforcement

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or recission or rights of action under
the civil liability provisions of the U.S. federal securities laws.

All of the Company's directors and officers as well as the experts
named herein may be located outside of Canada and, as a result, it may not be
possible for Ontario purchasers to effect service of process within Canada upon
the Company or such persons. All or a substantial portion of the assets of the
Company and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the Company or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
Company or persons outside of Canada.

Notice to British Columbia Residents

A purchaser of the Common Stock to whom the Securities Act (British
Columbia) applies is advised that such purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any Common Stock acquired by such purchaser pursuant to this offering. Such
report must be in the form attached to British Columbia Securities Commission
Blanket Order BOR #88/5, a copy of which may be obtained from the Company.
Only one such report must be filed in respect of Common Stock acquired on the
same date and under the same prospectus exemption.

LEGAL MATTERS

Certain legal matters with respect to the validity of the securities
offered hereby will be passed upon for the Company by Willkie Farr & Gallagher,
One Citicorp Center, 153 East 53rd Street, New York, New York 10022.
Chadbourne & Parke, 30 Rockefeller Plaza, New York, New York 10112, will pass
on certain legal matters for the U.S. Underwriters and the Managers in
connection with the Offering.

<PAGE>

EXPERTS

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

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

<PAGE>

INDEX TO PRO FORMA UNAUDITED CONDENSED COMBINED FINANCIAL DATA

Page
-----
Pro Forma Unaudited Condensed Combined
Balance Sheet of the Company and Magma
As of September 30, 1994. . . . . . . . . . . . . . . . . . . .P-2

Pro Forma Unaudited Condensed Combined Statements
of Earnings of the Company and Magma For the
Year Ended December 31, 1993 and the Nine
Months Ended September 30, 1994 . . . . . . . . . . . . . . . .P-3

Notes to Pro Forma Unaudited Condensed Combined
Financial Data of the company and Magma . . . . . . . . . . . .P-5

P-1

<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 the
Company and Magma as if the acquisition had been effected on September 30, 1994
and the historical statements of income as if the acquisition had been effected
at the beginning of each of the periods presented pursuant to the All-Cash
Option. The acquisition is recorded 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 the estimated fair value and combined with
the recorded values of the assets and liabilities of the Company. This pro
forma combined financial data should be read in conjunction with the financial
data appearing in, and are qualified in their entirety by, the consolidated
financial statements, including the notes thereto, of the Company and Magma,
included in the documents incorporated by reference herein.

The Company 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 condensed
combined financial data reflect, among other things, estimates of fair value
made by the Company based on market quotations and assumptions it believes to
be reasonable. Accordingly, the final pro forma condensed combined amounts may
be different from those set forth herein.

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

The pro forma combined financial data are intended for information
purposes only and 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.

P-2

<PAGE>

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

THE PRO FORMA PRO FORMA
COMPANY MAGMA ADJUSTMENTS COMBINED
---------- ------- ------------- ----------
<S> <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
data are an integral part of these statements.

P-3

<PAGE>

Pro Forma Unaudited Condensed Combined Statements of Earnings
The Company 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
PRO FORMA FORMA
THE ADJUSTMENT PRO FORMA THE ADJUSTMENT PRO FORMA
COMPANY MAGMA 5(D) COMBINED COMPANY MAGMA 5(D) 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 stockholders $38,444 $52,135 $(46,982) $43,597 $27,688 $46,843 $(35,236) $39,295
========= ======== ========= ========= ======== ======== ======= =========

Income per common and
common equivalent 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
data are an integral part of these statements.

P-4

<PAGE>

Notes To Pro Forma Unaudited Condensed Combined Financial Data
Company 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
the Company and Magma. The final adjustments will be based upon the net
proceeds to the Company from the sale of the shares of Common Stock in the
Offering hereby and the fair market value of the assets of Magma at or near the
effective time of the Merger.

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

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

2. 16,666,667 shares of Common Stock will be sold in the Offering at a
price sufficient to provide net proceeds of $16.00 per Share to the Company,
all of which will be used to fund a portion of the purchase price under the
Merger. The Company's treasury stock will be canceled.

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

4. Outstanding Magma options 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 the shares of Common Stock pursuant to the Offering, and
the cancellation of the Company's treasury stock.

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

Cash consideration plus estimated direct costs to
be incurred in consummating the Merger $936,366
Cost of retiring outstanding Magma options 8,500
Cost of 200,000 Magma shares owned by the Company
prior to the Merger 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
========

P-5

<PAGE>

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

Reduce cash on hand $190,699
Proceeds from the Offering 266,667
Increase long-term debt 500,000
--------
Total sources of cash $957,366
========
Payments to Magma common stockholders $923,866
Payments to Magma stock option holders 8,500
Other direct acquisition costs 12,500
Financing costs 12,500
--------
Total uses of cash $957,366
========

D. The pro forma adjustments to the pro forma condensed combined
statements of earnings are as follows:

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. The Company'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 and common share equivalent has
been determined on the basis of weighted average shares which have been
adjusted to include the number of shares of Common Stock sold pursuant to the
Offering.

P-6

<PAGE>

CHART DEPICTING NET OWNERSHIP INTEREST OF THE COMPANY IN PROJECTED
GENERATING CAPACITY APPEARS ON THE INSIDE BACK COVER OF THIS PROSPECTUS.

<PAGE>

No dealer, salesperson or any other individual has been authorized to
give any information or to make any representation not contained in this
Prospectus and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company or by any U.S.
Underwriters. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful to make such offer in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances create any implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in the affairs of the Company since such date.

---------------

TABLE OF CONTENTS
Page
----
Available Information . . . . . . . 2
Incorporation of Documents by
Reference. . . . . . . . . . . . . 3
Prospectus Summary . . . . . . . . . 4
Investment Considerations. . . . . . 8
Use of Proceeds. . . . . . . . . . . 11
Market Prices of the Common Stock. . 11
Capitalization . . . . . . . . . . . 12
The Magma Acquisition. . . . . . . . 13
Business . . . . . . . . . . . . . . 15
Certain Tax Considerations . . . . . 34
Underwriting . . . . . . . . . . . . 36
Legal Matters. . . . . . . . . . . . 38
Experts. . . . . . . . . . . . . . . 39
Index to Pro Forma Unaudited Condensed
Combined Financial Data . . . . . . P-1

[Company Logo]
California Energy Company, Inc.

16,670,000 Shares

Common Stock

($0.0675 par value)

---------------
PROSPECTUS
---------------

CS First Boston

Bear, Stearns & Co. Inc.

Donaldson, Lufkin & Jenrette
Securities Corporation

C.J. Lawrence/Deutsche Bank
Securities Corporation

Lehman Brothers

____________, 1995

<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
- ------------ -----------
Inside front cover of
US Prospectus Global Map depicting location of Company's
Projects

16 Schematic representing Geothermal Energy

17 Map depicting areas of Potential Geothermal
Energy

22 Map of the Republic of the
Philippines with Project locations

26 Map of Indonesia and Neighboring
Countries with Project locations

28 Map of the Western United States
with Project locations

Inside back cover of
US Prospectus Chart depicting net ownership interest of the
Company in Projected Generating Capacity

<PAGE>

[Alternate Page For International Prospectus]

Company Logo
16,670,000 Shares
California Energy Company, Inc.
COMMON STOCK
($0.0675 par value)

All the shares of Common Stock ("Common Stock") of California Energy Company,
Inc. (the "Company") offered hereby are being sold by the Company. Of the
16,670,000 shares of Common Stock being offered, 5,000,000 shares are initially
being offered outside the United States and Canada (the "International Shares")
by the Managers (the "International Offering") and 11,670,000 shares are
initially being concurrently offered in the United States and Canada (the "U.S.
Shares") by the U.S. Underwriters (the "U.S. Offering" and, together with the
International Offering, the "Offering"). The offering price and underwriting
discounts and commissions of the International Offering and the U.S. Offering
are identical.

The net proceeds of the Offering, together with borrowings of up to $500
million under bank credit facilities and general corporate funds of the
Company, will be used to complete the Magma Acquisition (as hereinafter
defined). The closing of the Offering will occur concurrently with, and is
conditioned upon, the closing of the Magma Acquisition pursuant to the All-Cash
Option (as hereinafter defined).

The Common Stock of the Company is listed on the New York Stock Exchange under
the symbol "CE." On February , 1995, the last reported sale price of the
Common Stock on the New York Stock Exchange Composite Tape was $ per
share.

For a discussion of certain factors that should be considered in connection
with an investment in the Shares, see "Investment Considerations".

<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions Company(1)
-------- ------------ -----------
<S> <C> <C> <C>
Per Share $ $ $
Total (2) $ $ $

</TABLE>
- ---------------
(1) Before deduction of expenses payable by the Company estimated at
$____________.

(2) The Company has granted the Managers and the U.S. Underwriters an option,
exercisable by CS First Boston Corporation for 30 days from the
date of this Prospectus to purchase a maximum of ______ additional shares of
Common Stock solely to cover over-allotments of shares. If the option is
exercised in full, the total Price to Public will be $__________. Underwriting
Discounts and Commissions will be $_________ and Proceeds to Company will be
$_________.

The International Shares are offered by the several Managers when, as and if
issued by the Company, delivered to and accepted by the Managers and subject to
their right to reject orders in whole or in part. It is expected that the
International Shares will be ready for delivery on or about February , 1995.

CS First Boston

Bear, Stearns International Limited Donaldson, Lufkin & Jenrette
Deutsche Bank AG Securities Corporation
Lehman Brothers International
Limited

The date of this Prospectus is February __, 1995.

A-1

<PAGE>

[Alternate Page For International Prospectus]

Information contained herein is subject to completion or amendment. This
prospectus shall not constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of these securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
jurisdiction.

<PAGE>

[Alternate Page For International Prospectus]

[GLOBAL MAP DEPICTING LOCATION OF THE COMPANY'S PROJECTS
APPEARS ON THE INSIDE FRONT COVER OF THIS PROSPECTUS]

<PAGE>

[Alternate Page For International Prospectus]

This Prospectus is intended for use only in connection with offers and
sales of the International Shares outside the United States and Canada and is
not to be sent or given to any person within the United States or Canada. For
a description of certain restrictions on the offering and sale of the
International Shares, see "Subscription and Sale."

No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this Prospectus and,
if given or made, such information or representation must not be relied upon as
having been authorized by the Company or any Manager. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create
any implication that the information herein is correct as of any time
subsequent to the date hereof or that there has been no change in the affairs
of the Company since such date.

In this Prospectus, references to "dollars" and "$" are to United
States dollars.

IN CONNECTION WITH THE OFFERING, CS FIRST BOSTON CORPORATION ON BEHALF OF THE
U.S. UNDERWRITERS AND THE MANAGERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH
STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE
THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY
BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, THE PACIFIC STOCK EXCHANGE, THE
LONDON STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

AVAILABLE INFORMATION

California Energy Company, Inc. (the "Company") and Magma Power Company
("Magma") are each subject to the informational requirements of the
SecuritiesExchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, each files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information filed by the Company or
Magma 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 the Company can be inspected at the offices of the New York
Stock Exchange Inc. ("NYSE"), 20 Broad Street, New York, New York 10005, on
which the shares of common stock, par value $.0675 per share (the "Common
Stock"), are listed, 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.
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.

A-2

<PAGE>

[Alternate Page For International Prospectus]

INCORPORATION OF DOCUMENTS BY REFERENCE

The Company and Magma hereby incorporate by reference into this
Prospectus the following documents previously filed with the Commission
pursuant to the Exchange Act:

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

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

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

4. The Company's description of the Common Stock contained in the
Company's Registration Statement on Form 8-A, dated July 28, 1993, pursuant to
Section 12 of the Exchange Act.

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

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

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

A-3

<PAGE>

[Alternate Page For International Prospectus]

TABLE OF CONTENTS

Page
----
Available Information . . . . . . . . . . . . . 2
Incorporation of Documents by Reference. . . . . 3
Prospectus Summary . . . . . . . . . . . . . . . 4
Investment Considerations. . . . . . . . . . . . 8
Use of Proceeds. . . . . . . . . . . . . . . . . 11
Market Prices of the Common Stock. . . . . . . . 11
Capitalization . . . . . . . . . . . . . . . . . 12
The Magma Acquisition. . . . . . . . . . . . . . 13
Business . . . . . . . . . . . . . . . . . . . . 15
Certain Tax Considerations . . . . . . . . . . . 34
Subscription and Sale. . . . . . . . . . . . . . 36
Legal Matters. . . . . . . . . . . . . . . . . . 38
Experts. . . . . . . . . . . . . . . . . . . . . 38
Index to Pro Forma Unaudited Condensed Combined Financial Data P-1

____________________________

A-4

<PAGE>

[Alternate Page For International Prospectus]

SUBSCRIPTION AND SALE

The institutions named below (the "Managers") have, pursuant to a
Subscription Agreement dated , (the "Subscription
Agreement"), severally and not jointly, agreed with the Company to subscribe
and pay for the following respective numbers of International Shares as set
forth opposite their names:

Number of
Manager International Shares
------- --------------------
[S] [C]
CS First Boston Limited. . . . . . . . . . . . . . . .
Bear, Stearns International Limited. . . . . . . . . .
Donaldson, Lufkin & Jenrette Securities Corporation. .
Deutsche Bank AG . . . . . . . . . . . . . . . . . . .
Lehman Brothers International Limited. . . . . . . . .
-------------
Total. . . . . . . . . . . . . . . . . . . . . . . . 5,000,000
=============

The Subscription Agreement provides that the obligations of the
Managers are such that, subject to certain conditions precedent, the Managers
will be obligated to purchase all the International Shares if any are
purchased. The Subscription Agreement provides that, in the event of a default
by a Manager, in certain circumstances the purchase commitments of the non-
defaulting managers may be increased or the Subscription Agreement may be
terminated.

The Company has entered into an Underwriting Agreement (the
"Underwriting Agreement") with the U.S. Underwriters of the U.S. Offering (the
"U.S. Underwriters") providing for the concurrent offer and sale of the U.S.
Shares in the United States and Canada. The closing of the U.S. Offering is a
condition to the closing of the International Offering and vice versa.

The Company has granted to the Managers and the U.S. Underwriters an
option, exercisable by CS First Boston Corporation, expiring at the close of
business on the 30th day after the date of this Prospectus to purchase up to
2,500,000 additional shares at the public offering price, less the underwriting
discounts and commissions, all as set forth on the cover page of this
Prospectus. The Managers and the U.S. Underwriters may exercise such option
only to cover overallotments in the sale of the shares of Common Stock offered
hereby. To the extent that this option to purchase is exercised, each Manager
and each U.S. Underwriter will become obligated, subject to certain conditions,
to purchase approximately the same percentage of additional shares being sold
to the Managers and the U.S. Underwriters as the number of International Shares
set forth next to such Manager's name in the preceding table bears to the total
number of International Shares in such table and as the number set forth next
to such U.S. Underwriter's name in the corresponding table in the Prospectus
relating to the U.S. Offering bears to the total number of U.S. Shares in such
table.

The Company has been advised by CS First Boston Limited, on behalf of
the Managers, that the Managers propose to offer the International Shares
outside the United States and Canada initially at the public offering price set
forth on the cover page of this Prospectus and, through the Managers, to
certain dealers at such price less a commission of $ per share and that
the Managers may reallow a commission of $ per share on sales to certain
other dealers. After the initial public offering, the public offering price
and commission and reallowance may be changed.

A-5

<PAGE>

[Alternate Page For International Prospectus]

The offering price and the aggregate underwriting discounts and
commissions per share and per share commission and re-allowance to dealers for
the International Offerings and the concurrent U.S. Offering will be identical.
Pursuant to an Agreement between the U.S. Underwriters and Managers (the
"Intersyndicate Agreement") relating to the Common Stock Offering, changes in
the offering price, the aggregate underwriting discounts and commissions per
share and per share commission and re-allowance to dealers will be made only
upon the mutual agreement of CS First Boston Limited, on behalf of the
Managers, and CS First Boston Corporation, on behalf of the U.S. Underwriters.

Pursuant to the Intersyndicate Agreement, each of the Managers has
agreed that, as part of the distribution of International Shares and subject to
certain exceptions, it has not offered or sold, and will not offer to sell,
directly or indirectly, any shares of Common Stock or distribute any prospectus
relating to the Common Stock in the United States or Canada or to any other
dealer who does not so agree. Each of the U.S. Underwriters has agreed that,
as part of the distribution of the U.S. Shares an subject to certain
exceptions, it has not offered or sold and will not offer or sell, directly or
indirectly, any shares of Common Stock or distribute any prospectus relating to
the Common Stock to any person outside the United States and Canada or to any
dealer who does not so agree. The foregoing limitations do not apply to
stabilization transactions or to transactions between the Managers and the U.S.
Underwriters pursuant to the Intersyndicate Agreement. As used herein, "United
States" means the United States of America (including the States and the
District of Columbia), its territories, possessions and other areas subject to
its jurisdiction, "Canada" means Canada, its provinces, territories,
possessions and other areas subject to its jurisdiction, and an offer or sale
shall be in the United States or Canada it is made to (i) any individual
resident in the United States or Canada or (ii) any corporation, partnership,
pension, profit-sharing or other trust or other entity (including any such
entity acting as an investment adviser with discretionary authority) whose
office most directly involved with the purchase is located in the United States
or Canada.

Pursuant to the Intersyndicate Agreement, sales may be made between the
Managers and the U.S. Underwriters of such number of shares of Common Stock as
may be mutually agreed upon. The price of any shares so sold will be the
public offering price less such amount agreed upon by CS First Boston Limited,
on behalf of the Managers, and CS First Boston Corporation, as representative
of the U.S. Underwriters, but not exceeding the selling concession applicable
to such shares. To the extent there are sales between the Managers and the
U.S. Underwriters pursuant to the Intersyndicate Agreement, the number of
shares of Common Stock initially available for sale by the Managers or by the
U.S. Underwriters may be more or less than the amount appearing on the cover
page of this Prospectus. Neither the Managers nor the U.S. Underwriters are
obligated to purchase from the other any unsold shares of Common Stock.

Each of the Managers and the U.S. Underwriters severally represents and
agrees that (1) it has not offered or sold, and will not offer or sell, in the
United Kingdom, by means of any document, any shares of Common Stock other than
to persons whose ordinary business it is to buy or sell shares or debentures,
whether as a principal or agent, or in circumstances which do not constitute an
offer to the public within the meaning of the Companies Act 1985, (2) it has
complied and will comply with all applicable provisions of the Financial
Services Act of 1986 with respect to anything done by it in relation to any
shares of Common Stock in, from or otherwise involving the United Kingdom, and
(3) it has only issued or passed on and will only issue or pass on to any
person in the United Kingdom any document received by it in connection with the
issue of any shares of Common Stock if the person is of a kind described in
Article 9(3) of the Financial Services Act 1986 (Investment Advertisements)
(Exemptions) Order 1988 (as amended by Article 6(c) of the Financial Services
Act of 1986 (Investment Advertisements) Order 1992) or is a person to whom the
document may otherwise lawfully be issued or passed on.

The Company and its officers and directors agreed that they will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Securities and Exchange Commission a registration
statement under the Securities Act relating to, any additional shares of its

A-6

<PAGE>

[Alternate Page For International Prospectus]

Common Stock or securities convertible or exchangeable into or exercisable for
any shares of its Common Stock without the prior written consent of CS First
Boston Corporation for a period of 90 days after the date of this Prospectus,
except issuances pursuant to the exercise of employee stock options outstanding
on the date hereof or pursuant to the conversion of the Company's Debentures or
its Series C Preferred Stock.

The Company has agreed to indemnify the Managers and the U.S.
Underwriters against certain liabilities or to contribute to payments that the
Managers and the U.S. Underwriters may be required to make in respect thereof.

A-7

<PAGE>

[Alternate Page For International Prospectus]

CHART DEPICTING NET OWNERSHIP INTEREST OF THE COMPANY IN PROJECTED
GENERATING CAPACITY APPEARS ON THE INSIDE BACK COVER OF THIS PROSPECTUS.

<PAGE>

[Alternate Page For International Prospectus]

[OUTSIDE BACK COVER OF PROSPECTUS]

APPENDIX FOR GRAPHIC AND IMAGE MATERIAL

Page in
Typeset Copy Description
- ------------ -----------
Inside front cover of
International Prospectus Global Map depicting location of Company's
Projects

16 Schematic representing Geothermal Energy

17 Map depicting areas of Potential Geothermal
Energy

22 Map of the Republic of the
Philippines with Project locations

26 Map of Indonesia and Neighboring
Countries with Project locations

28 Map of the Western United States
with Project locations

Inside back cover of
International Prospectus Chart depicting net ownership interest of the
Company in Projected Generating Capacity

<PAGE>

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 14. Other Expenses of Issuance and Distribution.

The following table sets forth the various expenses in connection with
the sale and distribution of the securities being registered which will be paid
solely by the Company. All the amounts shown are estimates, except the
Commission registration fee and the NASD filing fee:

Commission Registration Fee . . . . . . . . . . . $102,063.72
NASD Fees . . . . . . . . . . . . . . . . . . . . 30,098.00
NYSE Listing Fee. . . . . . . . . . . . . . . . . *
Transfer Agent and Registrar Fees and Expenses. . *
Printing and Engraving Expenses . . . . . . . . . *
Legal Fees and Expenses . . . . . . . . . . . . . *
Accounting Fees and Expenses. . . . . . . . . . . *
Blue Sky Fees and Expenses. . . . . . . . . . . . *
Financial Advisory Fee. . . . . . . . . . . . . . *
Miscellaneous Expenses. . . . . . . . . . . . . . *
------
Total. . . . . . . . . . . . . . . . . . . . $ *
======

- ---------------

* To be completed by amendment.

Item 15. Indemnification of Directors and Officers.

Section 145 of the General Corporation Law of the State of Delaware
(the "DGCL") grants each corporation organized thereunder, such as the Company,
the power to indemnify its directors and officers against liabilities for
certain of their acts. Article EIGHTH of the Company's Restated Certificate of
Incorporation and Article V of the Company's By-Laws provide for
indemnification of directors and officers of the Company to the fullest extent
permitted by the DGCL. Article V of the Company's By-Laws further provides
that the Company may enter into contracts providing indemnification to the full
extent authorized or permitted by the DGCL and that the Company may create a
trust fund, grant a security interest and/or use other means to ensure the
payment of such amounts as may become necessary to effect indemnification
pursuant to such contracts or otherwise.

Section 102(b)(7) of the DGCL permits a provision in the certificate of
incorporation of each corporation organized thereunder, such as the Company,
eliminating or limiting, with certain exceptions, the personal liability of a
director to the corporation or its stockholders for monetary damages for
certain breaches of fiduciary duty as a director. Article EIGHTH of the
Company's Restated Certificate of Incorporation eliminates the personal
liability of directors to the full extent permitted by the DGCL.

The foregoing statements are subject to the detailed provisions of
Sections 145 and 102(b)(7) of the DGCL, Article EIGHTH of the Company's
Restated Certificate of Incorporation and Article V of Company's By-Laws.

II-1

<PAGE>

Item 16. Exhibits and Financial Statement Schedules.

A. Exhibits.

Exhibit
No. Description

1.1 [U.S.] Underwriting Agreement, dated as of ___________, 1995,
among the Registrant, CS First Boston, Bear, Stearns & Co., Inc., Donaldson,
Lufkin & Jenrette Securities Corporation, C.J. Lawrence/Deutsche Bank
Securities Corporation and Lehman Brothers Inc.*

2.1 Agreement and Plan of Merger, dated as of December 5, 1994,
among California Energy Company, Inc., CE Acquisition Company, Inc., and Magma
Power Company (incorporated by reference to Exhibit 2.1 of the Registrant's
Registration Statement on Form S-4 filed with the Commission on December 23,
1994, File No. 33-57053).

4.1 Specimen copy of form of Common Stock Certificate (incorporated
by reference to Exhibit 4.1 of the Registrant's 1993 Form 10-K).

4.2 Stockholders Rights Agreement between the Registrant and
Manufacturers Hanover Trust Company of California dated December 1, 1988
(incorporated by reference to Exhibit 1 to the Registrant's Form 8-K dated
December 5, 1988, File No. 1-9874).

4.3 Amendment Number 1 to Stockholders Rights Agreement, dated
February 15, 1991 (incorporated by reference to Exhibit 4.2 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended December 31, 1992).

5.1 Opinion of Willkie Farr & Gallagher regarding the legality of
the Shares offered hereby.*

10.1 Joint Venture Agreement for China Lake Joint Venture between
the Registrant and Caithness Geothermal 1980 Ltd., restated as of January 1,
1984 (incorporated by reference to Exhibit 10.1 to the Registrant's
Registration Statement on Form S-1, 33-7770).

10.2 Amended Joint Venture Agreement for Coso Land Company between
the Registrant and Caithness Geothermal 1980 Ltd., dated as of June 1, 1983
(incorporated by reference to Exhibit 10.3 to the Registrant's Registration
Statement on Form S-1, 33-7770).

10.3 Amended General Partnership Agreement for Coso Finance Partners
between China Lake Operating Company and ESCA I L.P., dated July 13, 1988
(incorporated by reference to Exhibit 10.3 to the Registrant's 1992 Form 10-K).

10.4 First Supplemental Amendment to the Amended and Restated
General Partnership Agreement for Coso Finance Partners between China Lake
Operating Company and ESCA L.P. (Undated) (incorporated by reference to Exhibit
10.4 to the Registrant's 1992 Form 10-K).

10.5 Second Supplemental Amendment to the Amended and Restated
General Partnership Agreement for Coso Finance Partners between China Lake
Operating Company and ESCA L.P. dated as of July 13, 1988 (incorporated by
reference to Exhibit 10.5 to the Registrant's 1992 Form 10-K).

II-2

<PAGE>

10.6 Third Supplemental Amendment to the Amended and Restated
General Partnership Agreement for Coso Finance Partners between China Lake
Operating Company and ESCA L.P. dated as of December 16, 1992 (incorporated by
reference to Exhibit 10.6 to the Registrant's 1992 Form 10-K).

10.7 General Partnership Agreement for Coso Finance Partners II
between China Lake Geothermal Management Company and ESCA L.P. dated July 7,
1987 (incorporated by reference to Exhibit 10.7 to the Registrant's 1992 Form
10-K).

10.8 Restated General Partnership Agreement for Coso Energy
Developers between Coso Hotsprings Intermountain Power Inc. and Caithness Coso
Holdings L.P. dated as of March 31, 1988 (incorporated by reference to Exhibit
10.8 to the Registrant's 1992 Form 10-K).

10.9 First Amendment to the Restated General Partnership Agreement
for Coso Energy Developers between Coso Hotsprings Intermountain Power, Inc.
and Caithness Coso Holdings L.P. dated as of March 31, 1988 (incorporated by
reference to Exhibit 10.9 to the Registrant's 1992 Form 10-K).

10.10 Second Amendment to the Restated General Partnership Agreement
for Coso Energy Developers between Coso Hotsprings Intermountain Power, Inc.
and Caithness Coso Holdings L.P. dated as of December 16, 1992 (incorporated by
reference to Exhibit 10.10 to the Registrant's 1992 Form 10-K).

10.11 Amended and Restated General Partnership Agreement for Coso
Power Developers between Coso Technology Corporation and Caithness Navy II
Group L.P. dated July 31, 1989 (incorporated by reference to Exhibit 10.11 to
the Registrant's 1992 Form 10-K).

10.12 First Amendment to the Amended and Restated General Partnership
Agreement for Coso Power Developers between Coso Technology Corporation and
Caithness Navy II Group L.P. dated as of March 19, 1991 (incorporated by
reference to Exhibit 10.12 to the Registrant's 1992 Form 10-K).

10.13 Second Amendment to the Amended and Restated General
Partnership Agreement for Coso Power Developers between Coso Technology and
Caithness Navy II Group L.P. dated as of December 16, 1992 (incorporated by
reference to Exhibit 10.13 to the Registrant's 1992 Form 10-K).

10.14 Form of Amended and Restated Field Operation and Maintenance
Agreement between Coso Joint Ventures and the Registrant dated as of December
16, 1992 (incorporated by reference to Exhibit 10.14 to the Registrant's 1992
Form 10-K).

10.15 Form of Amended and Restated Project Operation and Maintenance
Agreement between Coso Joint Venture and the Registrant dated as of December
16, 1992 (incorporated by reference to Exhibit 10.15 to the Registrant's 1992
Form 10-K).

10.16 Trust Indenture between Coso Funding Corp. and Bank of America
National Trust and Savings Association dated as of December 16, 1992
(incorporated by reference to Exhibit 10.16 to the Registrant's 1992
Form 10-K).

10.17 Form of Amended and Restated Credit Agreement between Coso
Funding Corp. and Coso Joint Ventures dated as of December 16, 1992
(incorporated by reference to Exhibit 10.17 to the Registrant's 1992
Form 10-K).

10.18 Form of Support Loan Agreement among Coso Joint Ventures dated
December 16, 1992 (incorporated by reference to Exhibit 10.18 to the
Registrant's 1992 Form 10-K).

II-3

<PAGE>

10.19 Form of Project Loan Pledge Agreement between Coso Joint
Ventures and Bank of America National Trust and Savings dated as of December
16, 1992 (incorporated by reference to Exhibit 10.19 to the Registrant's 1992
Form 10-K).

10.20 Power Purchase Contracts between Southern California Edison
Company and:

(a) China Lake Joint Venture, executed June 4, 1984
with a term of 24 years;

(b) China Lake Joint Venture, executed February 1,
1985 with a term of 23 years; and

(incorporated by reference to Exhibit 10.7 to the Registrant's
Registration Statement Form S-1, 33-7770).

10.21 Contract No. N62474-79-C-5382 between the United States of
America and China Lake Joint Venture, restated October 19, 1983 as
"Modification P00004," including modifications through "Modification P00026,"
dated December 16, 1992 (incorporated by reference to Exhibit 10.21 to the
Registrant's 1992 Form 10-K).

10.22 Lease between the BLM and Coso Land Company, effective November
1, 1985 (with Designation of Geothermal Operator) (incorporated by reference to
Exhibit 10.8 to the Registrant's Registration Statement on Form S-1, 33-7770).

10.23 Stock Purchase Agreement between the Registrant and Kiewit
Energy Company dated as of February 18, 1991, as amended as of June 19, 1991
(incorporated by reference to Exhibit 1 to the Registrant's Form 8-K dated
February 26, 1991).

10.24 Amendment No. 2 to Stock Purchase Agreement between Kiewit
Energy Company and the Registrant dated as of January 8, 1992 (incorporated by
reference to Exhibit 10.24 to the Registrant's 1992 Form 10-K).

10.25 Amendment No. 3 to Stock Purchase Agreement between Kiewit
Energy Company and the Registrant dated as of April 2, 1993 (incorporated by
reference to Exhibit 10.25 to the Registrant's 1993 Form 10-K).

10.26 Stockholder's Agreement between the Registrant and Kiewit
Energy Company dated as of February 18, 1991, as amended as of June 19, 1991
and as of November 20, 1991 (incorporated by reference to Exhibit 1 to the
Registrant's Form 8-K dated February 26, 1991, Exhibit 1 to the Registrant's
Form 8-K dated July 18, 1992, and Exhibit 3 to the Registrant's Form 8-K dated
November 21, 1991).

10.27 Amendment No. 3 to Stockholder's Agreement between the
Registrant and Kiewit Energy Company dated as of April 2, 1993 (incorporated by
reference to Exhibit 14 to the Registrant's Form 8-A).

10.28 Amendment No. 4 to Stockholder's Agreement between the
Registrant and Kiewit Energy Company dated as of July 20,1993 (incorporated by
reference to Exhibit 10.28 to the Registrant's 1993 Form 10-K).

II-4

<PAGE>

10.29 Registration Rights Agreement between the Registrant and Kiewit
Energy Company dated as of February 18, 1991, as amended as of June 19, 1991
(incorporated by reference to Exhibit 1 to the Registrant's Form 8-K dated July
18, 1992).

10.30 Registration Rights Agreement between the Registrant and Kiewit
Energy Company dated June 19, 1991, as amended November 20, 1991 (incorporated
by reference to Exhibit 1 to the Registrant's Form 8-K dated July 19, 1991 and
Exhibit 4 to the Registrant's Form 8-K dated November 21, 1991).

10.31 Stock Option Agreement between the Registrant and Kiewit Energy
Company dated as of February 18, 1991, as amended as of June 19, 1991
(incorporated by reference to Exhibit 1 to the Registrant's Form 8-K dated
February 26, 1991, and Exhibit 1 to the Registrant's Form 8-K dated July 18,
1992).

10.32 Stock Option Agreement between the Registrant and Kiewit Energy
Company dated as of June 19, 1991 (incorporated by reference to Exhibit 1 to
the Registrant's Form 8-K dated July 18, 1991).

10.33 Securities Purchase Agreement between the Registrant and Kiewit
Energy Company dated November 20, 1991 (incorporated by reference to Exhibit 2
to the Registrant's Form 8-K dated November 21, 1991).

10.34 Sublease between the Registrant and Kiewit Energy Company dated
March 15, 1991 (incorporated by reference to Exhibit 10.32 to the Registrant's
1992 Form 10-K).

10.35 Amended and Restated 1986 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.33 to the Registrant's 1992 Form 10-
K).

10.36 Form of severance letter between the Registrant and certain
executive officer of the Registrant (incorporated by reference to Exhibit 10.35
to the Registrant's 1992 Form 10-K).

10.37 Indenture between the Registrant and The Chemical Trust Company
of California dated as of June 24, 1993 (incorporated by reference to the
Registrant's Form 8-K dated June 24, 1993, File No. 1-9874).

10.38 Registration Rights Agreement among the Registrant, Lehman
Brothers, Inc. and Alex Brown & Sons Incorporated dated June 24, 1993
(incorporated by reference to the Registrant's Form 8-K dated June 24, 1993,
File No. 1-9874).

10.39 Indenture dated March 24, 1994 between the Registrant and IBJ
Schroder Bank and Trust Company (incorporated by reference to Exhibit 3 to the
Registrant's Form 8-K dated March 28, 1994).

10.40 Employment Agreement between the Registrant and David L. Sokol
dated as of April 2, 1993 (incorporated by reference to Exhibit 10.40 to the
Registrant's 1993 Form 10-K).

10.41 Termination Agreement between the Registrant and Richard R.
Jaros dated as of December 9, 1993 (incorporated by reference to Exhibit 10.41
to the Registrant's 1993 Form 10-K).

10.42 Standard Offer Number 2, Standard Offer for Power Purchase with
a Firm Capacity Qualifying Facility effective June 15, 1990 ("SO2") between San
Diego Gas & Electric Company and Bonneville Pacific Corporation (incorporated
by reference to Exhibit 10.42 to the Registrant's 1993 Form 10-K).

II-5

<PAGE>

10.43 Amendment Number One to the SO2 dated September 25, 1990
(incorporated by reference to Exhibit 10.43 to the Registrant's 1993
Form 10-K).

10.44 Joint Venture Agreement among the Registrant, Kiewit
Diversified Group Inc. and Kiewit Construction Group Inc. dated December 14,
1993 (incorporated by reference to Exhibit 10.44 to the Registrant's 1993
Form 10-K).

10.45 Note Purchase Agreement between the Registrant and Principal
Mutual Life Insurance Company, dated March 15, 1988 (incorporated by reference
to Exhibit 1 to the Registrant's Form 8-K dated April 11, 1988).

10.46 Defeasance Agreement between Principal Mutual Life Insurance
Company and the Registrant, dated March 3, 1994 (incorporated by reference to
Exhibit 4.5 of the Registrant's 1993 Form 10-K).

10.47 Consent and Agreement between Principal Mutual Life Insurance
Company and the Registrant, dated March 24, 1994 (incorporated by reference to
Exhibit 4.6 of the Registrant's 1993 Form 10-K).

10.49 Escrow Deposit Agreement between Bank of America National Trust
and Savings Association and the Registrant, dated March 3, 1994 (incorporated
by reference to Exhibit 4.7 of the Registrant's 1993 Form 10-K).

10.50 Letter, dated October 25, 1994, from Credit Suisse addressed to
the Registrant with respect to borrowings incurred in connection with the Magma
Tender Offer and the Merger Facilities (incorporated by reference to the
Registrant's Current Report on Form 8-K, dated October 21, 1994).

15.1 Awareness Letter for Review Reports of Deloitte & Touche LLP.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Deloitte & Touche LLP.

23.2 Consent of Coopers & Lybrand LLP.

23.3 Consent of Willkie Farr & Gallagher (set forth in their opinion
filed as Exhibit 5.1 to this Registration Statement).*

24.1 Power of Attorney (included on the signature page hereto).

- ---------------
* To be filed by amendment.

II-6

<PAGE>

B. Financial Statement Schedules.

All financial statement schedules required to be filed are incorporated
by reference to the Registrant's 1993 10-K.

Item 17. Undertakings.

(1) The undersigned Registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act, each filing of the
Registrant's and Magma Power Company's annual report pursuant to section 13(a)
or section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the Exchange
Act) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

(3) The undersigned Registrant hereby undertakes that:

(a) For purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.

(b) For the purpose of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.

II-7

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Omaha, State of Nebraska, on January 6, 1995.

CALIFORNIA ENERGY COMPANY, INC.

By: /s/ David L. Sokol
David L. Sokol
President and Chief Executive Officer

Each of the undersigned officers and directors of California Energy
Company, Inc. hereby severally constitutes and appoints each of David L. Sokol
and Steven A. McArthur the attorney-in-fact for the undersigned, in any and all
capacities, each with full power of substitution, to sign any amendments to
this Registration Statement (including post-effective amendments), and to file
the same with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-
fact, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and amount the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each said attorney-in-fact, or
any of them, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

Signature Title Date

/s/ David L. Sokol Chairman of the Board of Directors, January 6, 1995
David L. Sokol President and Chief Executive
Officer (Principal Executive Officer)

/s/ John G. Sylvia Senior Vice President, Chief Financial January 6, 1995
John G. Sylvia Officer and Treasurer (Principal
Financial Officer and Principal
Accounting Officer)

/s/ Edgar D. Aronson Director January 6, 1995
Edgar D. Aronson

/s/ Judith E. Ayres Director January 6, 1995
Judith E. Ayres

/s/ James Q. Crowe Director January 6, 1995
James Q. Crowe

II-8

<PAGE>

/s/ Richard K. Davidson Director January 6, 1995
Richard K. Davidson

/s/ Ben M. Holt Director January 6, 1995
Ben M. Holt

/s/ Richard R. Jaros Director January 6, 1995
Richard R. Jaros

/s/ Everett B. Laybourne Director January 6, 1995
Everett B. Laybourne

/s/ Herbert L. Oakes, Jr. Director January 6, 1995
Herbert L. Oakes, Jr.

/s/ Walter Scott, Jr. Director January 6, 1995
Walter Scott, Jr.

/s/ Barton W. Shackelford Director January 6, 1995
Barton W. Shackelford

/s/ David E. Wit Director January 6, 1995
David E. Wit

II-9

<PAGE>

EXHIBIT INDEX

Exhibit
No. Description

4.1 Specimen copy of form of Common Stock Certificate (incorporated
by reference to Exhibit 4.1 of the Registrant's 1993 Form 10-K).

5.1 Opinion of Willkie Farr & Gallagher regarding the legality of
the Shares offered hereby.*

<PAGE>

10.18 Form of Support Loan Agreement among Coso Joint Ventures dated
December 16, 1992 (incorporated by reference to Exhibit 10.18 to the
Registrant's 1992 Form 10-K).

10.20 Power Purchase Contracts between Southern California Edison
Company and:

<PAGE>

(a) China Lake Joint Venture, executed June 4, 1984
with a term of 24 years;

(b) China Lake Joint Venture, executed February 1,
1985 with a term of 23 years; and

(incorporated by reference to Exhibit 10.7 to the Registrant's
Registration Statement Form S-1, 33-7770).

10.27 Amendment No. 3 to Stockholder's Agreement between the
Registrant and Kiewit Energy Company dated as of April 2, 1993 (incorporated by
reference to Exhibit 14 to the Registrant's Form 8-A).

<PAGE>

10.32 Stock Option Agreement between the Registrant and Kiewit Energy
Company dated as of June 19, 1991 (incorporated by reference to Exhibit 1 to
the Registrant's Form 8-K dated July 18, 1991).

10.34 Sublease between the Registrant and Kiewit Energy Company dated
March 15, 1991 (incorporated by reference to Exhibit 10.32 to the Registrant's
1992 Form 10-K).

10.35 Amended and Restated 1986 Stock Option Plan, as amended
(incorporated by reference to Exhibit 10.33 to the Registrant's 1992
Form 10-K).

10.36 Form of severance letter between the Registrant and certain
executive officer of the Registrant (incorporated by reference to Exhibit 10.35
to the Registrant's 1992 Form 10-K).

10.39 Indenture dated March 24, 1994 between the Registrant and IBJ
Schroder Bank and Trust Company (incorporated by reference to Exhibit 3 to the
Registrant's Form 8-K dated March 28, 1994).

10.40 Employment Agreement between the Registrant and David L. Sokol
dated as of April 2, 1993 (incorporated by reference to Exhibit 10.40 to the
Registrant's 1993 Form 10-K).

10.41 Termination Agreement between the Registrant and Richard R.
Jaros dated as of December 9, 1993 (incorporated by reference to Exhibit 10.41
to the Registrant's 1993 Form 10-K).

10.43 Amendment Number One to the SO2 dated September 25, 1990
(incorporated by reference to Exhibit 10.43 to the Registrant's 1993
Form 10-K).

<PAGE>

10.46 Defeasance Agreement between Principal Mutual Life Insurance
Company and the Registrant, dated March 3, 1994 (incorporated by reference to
Exhibit 4.5 of the Registrant's 1993 Form 10-K).

10.47 Consent and Agreement between Principal Mutual Life Insurance
Company and the Registrant, dated March 24, 1994 (incorporated by reference to
Exhibit 4.6 of the Registrant's 1993 Form 10-K).

15.1 Awareness Letter for Review Reports of Deloitte & Touche LLP.

21.1 Subsidiaries of the Registrant.

23.1 Consent of Deloitte & Touche LLP.

23.2 Consent of Coopers & Lybrand LLP.

23.3 Consent of Willkie Farr & Gallagher (set forth in their opinion
filed as Exhibit 5.1 to this Registration Statement).*

24.1 Power of Attorney (included on the signature page hereto).

- ---------------

* To be filed by amendment.

Exhibit 15.1

California Energy Company, Inc.
Omaha, Nebraska

We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim financial
information of California Energy Company, Inc. for the periods ended March 31,
1994 and 1993, June 30, 1994 and 1993, and September 30, 1994 and 1993, as
indicated in our reports dated April 14, 1994, July 15, 1994, and October 19,
1994, respectively; because we did not perform an audit, we expressed no
opinion on that information.

We are aware that our reports referred to above, which were included in your
Quarterly Reports on Form 10-Q for the quarters ended March 31, 1994, June 30,
1994 and September 30, 1994 are being incorporated by reference in this
Registration Statement on Form S-3.

We are also aware that the aforementioned reports, pursuant to Rule 436(C)
under the Securities Act of 1933, are not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of the Act.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP

Omaha, Nebraska
January 3, 1995

EXHIBIT 21.1

CECI SUBSIDIARIES

Coso Hotsprings Intermountain Power, Inc. (CHIP)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

Coso Energy Developers (CED)
Formed in California
General Partnership: 48% CHIP; 52% Caithness Coso
Holdings, L.P.

China Lake Operating Co. (CLOC)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

Coso Finance Partners (CFP)
Formed in California
General Partnership: 46.3% owned by CLOC;
53.7% ownedby ESCA I, L.P.

Coso Technology Corporation (CTC)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

Coso Power Developers (CPD)
Formed in California
General Partnership: 50% owned by CTC; 50% by
CaithnessNavy II Group, L.P.

Coso Funding Corp. (CFC)
Incorporated in Delaware
General Partnership: Owned 33% by CFP; 35% by CPD; 32% by CED

Coso Transmission Line Partners (CTLP)
Formed in California
General Partnership: Owned 50% by CED; 50% by CPD

China Lake Geothermal Management Company (CLGMC)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

Coso Finance Partners II (CFP II)
Formed in California
General Partnership: Owned 50% by CLGMC, 50% by ESCA II,L.P.

China Lake Plant Services, Inc. (CLPSI)
Incorporated in California
Capital Stock: Owned 100% by CECI

Coso Land Company (CLC)
Formed in California
General Partnership: Owned 50% by CECI; 50% by
CaithnessGeothermal 1980, Ltd.

China Lake Joint Venture (CLJV)
Formed in California
General Partnership: Owned 50% by CECI; 50% by Caithness
Geothermal 1980, Ltd.

Coso Geothermal Company (CGC)
Formed in California
General Partnership: Owned 50% by CLC; 16% by CECI

Coso Hotsprings Overland Power, Inc. (CHOP)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

CE Geothermal, Inc. (CEG)
Incorporated in Delaware
Capital Stock: Owned by 100% by CECI

Western States Geothermal Company (WSG)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

Intermountain Geothermal Company (IGC)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

CE CIS-FSU, Inc. (CCF)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

California Energy Development Corporation (CEDC)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

California Energy Yuma Corporation (CEYC)
Incorporated in Utah
<PAGE>

Capital Stock: Owned 100% by CEDC

Yuma Cogeneration Associates (YCA)
Formed in Utah
General Partnership: Owned 50% by CEDC; 50% By CEYC

Rose Valley Properties, Inc. (RVP)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

The Ben Holt Co. (BHC)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

CBE Engineering Co. (CBC)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

Kennebec Construction, Co. (KCC)
Incorporated in California
Capital Stock: Owned 100% by BHC

The Ben Holt International Co., Inc. (BHIC)
Incorporated in Delaware
Capital Stock: Owned 100% by BHC

CE Exploration Company (CEX)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

CE Newberry, Inc. (CEN)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

CE Humboldt, Inc. (CEH)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

California Energy International Services, Inc. (CEISI)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

American Pacific Finance Company (APFC)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

California Energy General Corporation (CEGC)
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

CE Acquisition Company, Inc.
Incorporated in Delaware
Capital Stock: Owned 100% by CECI

CE International Investments Ltd. (CEII)
Incorporated in Bermuda
Capital Stock: Owned 100% by CECI

CE Mahanagdong Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII

CE Luzon Geothermal Power Company, Inc.
Incorporated in the Philippines
Capital Stock: Owned 50% by CE Mahanagdong Ltd.;
50% by Kiewit Energy International (Bermuda) Ltd; an
industrial company has the right to acquire 10% of the
equity - 5% from CE Mahanagdong Ltd. and 5% from Kiewit
Energy International (Bermuda) Ltd.

CE Philippines Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII

Ormat Cebu Ltd.
Incorporated in Bermuda
Capital Stock: Owned 48% by CEII; 52% by CE Philippines Ltd.

CE Cebu Geothermal Power Company, Inc.
Incorporated in the Philippines
Capital Stock: Owned 52% by Ormat Cebu Ltd.; 48% by CE
Philippines Ltd.

CE Indonesia Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII

Himpurna California Energy Ltd.
Incorporated in Bermuda
Capital Stock: Owned 90% by CE Indonesia Ltd., 10% by
P.T. Himpurna Enersindo Abadi; California Energy International
Ltd. has an option to acquire an interest in P.T. Himpurna or its project
company shares equal to up to 4% of the project company; under the Joint
Operating Contract, Pertamina has certain rights to acquire up to 25% interest
in the Joint Operating Contract, but not under the Energy Sales Contract.

<PAGE>

CE Colombia Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII

Bali Energy Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CE Bali Ltd. (P.T.Pandanwangi
Sekartaji has the right to purchase up to 40% of the equity for this project)

CE Casecnan Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII

CE Latin America Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII

Patuha Power, Ltd.
Incorporated in Bermuda
Capital Stock: Owned 90% by CE Singapore Ltd.; 10% by P.T.
Enersindo Supra Abadi, P.T. Enersindo Supra Abadi has the right to acquire an
additional 20% of the project equity in certain circumstances and for a limited
time; under the Joint Operating Contract, Pertamina has certain rights to
acquire up to a 25% interest in the Joint Operating Contract, but not under the
Energy Sales Agreement.

CE Singapore Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII

California Energy International Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII

CE Casecnan Water and Energy Company, Inc.
Incorporated in the Philippines
Capital Stock: Owned 100% by CE Casecnan Ltd.; LaPrairie Group
Contractors (International) Ltd. and San Lorenzo Ruiz Builders & Developers
Group, Inc. each are entitled to a 15% equity interest

CE Bali Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII

CE Ijen Ltd.
Incorporated in Bermuda
Capital Stock: Owned 100% by CEII

Kiewit Joint Venture Agreement
Nebraska Contractual Joint Venture
Parent has a right to 50% of covered international projects;
Kiewit Diversified Group, Inc. and Kiewit Construction Group, Inc. have a right
to a 50% participation in covered projects

Certain of CECI's subsidiaries recently formed in Bermuda as offshore
holding companies have not yet been fully capitalized, the capitalization of
which taken together would not have a material adverse effect on CECI's results
of operations.

Exhibit 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement of
California Energy Company, Inc. on Form S-3 of the reports of Deloitte & Touche
dated February 24, 1994 (which reports express an unqualified opinion and
include an explanatory paragraph referring to California Energy Company, Inc.'s
adoption effective January 1, 1993, of Statement of Financial Accounting
Standards No. 109, (Accounting for Incomes Taxes), appearing in and
incorporated by reference in the Annual Report on Form 10-K of California
Energy Company, Inc. for the year ended December 31, 1993 and to the reference
to Deloitte & Touche LLP under the heading "Experts' in the Prospectus, which
is part of this Registration Statement.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP

Omaha, Nebraska
January 3, 1995

Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the Registration Statement of
California Energy Company, Inc. on Form S-3 of our report dated March 18, 1994,
on our audits of the consolidated financial statements and consolidated
financial statement schedules of Magma Power Company and subsidiaries as of
December 31, 1993 and 1992 and for each of the three years in the period ended
December 31, 1993, included in the Annual Report on Form 10-K and to the
incorporation by reference of our report dated May 6, 1993 on our audits of the
Statement of Net Assets Acquired as of March 31, 1993 and Historical Summaries
of Gross Revenues and Direct Operating Expenses for each of the three years in
the period ended December 31, 1992 of the Imperial Valley Geothermal Interests
(acquired by Magma Power Company from Union Oil Company of California) included
on Form 8-K/A. We also consent to the reference to our Firm under the caption
"Experts."

/s/ COOPERS & LYBRAND L.L.P.

COOPERS & LYBRAND L.L.P.

San Diego, California
January 5, 1995