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s:\legal\february97\8ksec97.doc
FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 25
1997
CalEnergy Company, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State of other jurisdiction of incorporation)
1-9874 94-2213782
(Commission File Number) (I.R.S. Employer Identification No.)
302 South 36th Street, Omaha, Nebraska 68131
(Address of principal executive offices)
Registrant's telephone number, including area code: (402) 341-
4500
Not Applicable
(Former name or former address, if changed since last report.)
Item 5. Other Events.
(a) Cautionary Statements. In connection with the "safe
harbor" provisions of the Private Securities Litigation Reform
Act of 1995 (the "Reform Act"), CalEnergy Company, Inc. (the
"Company") is hereby filing cautionary statements identifying
important factors that could cause the Company's actual results
to differ materially from those projected in forward-looking
statements of the Company made by or on behalf of the Company,
whether oral or written. The Company wishes to ensure that any
forward-looking statements are accompanied by meaningful
cautionary statements in order to maximize to the fullest extent
possible the protections of the safe harbor established in the
Reform Act. Accordingly, any such statements are qualified in
their entirety by reference to, and are accompanied by, the
following important factors, among others, that could cause the
Company's actual results to differ materially from those
projected in forward-looking statements of the Company made by or
on behalf of the Company.
The Company cautions that the following important factors,
among others (including but not limited to factors mentioned from
time to time in the Company's reports filed with the Securities
and Exchange Commission), could affect the Company's actual
results and could cause the Company's actual consolidated results
to differ materially from those expressed in any forward-looking
statements of the Company made by or on behalf of the Company.
The factors included here are not exhaustive. Further, any
forward-looking statement speaks only as of the date on which
such statement is made, and the Company undertakes no obligation
to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is
made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time and it is not possible for
management to predict all of such factors, nor can it assess the
impact of each such factor on the business or the extent to which
any factor, or combination of factors, may cause actual results
to differ materially from those contained in any forward-looking
statements. Therefore, forward-looking statements should not be
relied upon as a prediction of actual future results.
1. Acquisitions. The Company's recent growth has been
achieved, in part, through strategic acquisitions in the energy
industry which complement and diversify the Company's existing
business. The Company intends to continue to pursue an
aggressive acquisition strategy for the foreseeable future. The
Company's ability to pursue acquisition opportunities
successfully will depend on many factors, including, among
others, the Company's ability to (i) identify suitable
acquisition opportunities, (ii) consummate the acquisition,
including obtaining any necessary financing, and (iii)
successfully integrate acquired businesses. The integration of
acquired businesses entails numerous risks, including, among
others, the risk of diverting management's attention from the day-
to-day operations of the Company, the risk that the acquired
businesses will require substantial capital and financial
investments and the risk that the investments will fail to
perform in accordance with expectations. There can be no
assurance that future acquisition opportunities, if any, can be
consummated on favorable terms or that the Company's integration
efforts will be successful.
2. 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 an aggregate generating
capacity in excess of the generating capacity of those currently
in operation. Development can require the Company to expend
significant sums for preliminary engineering, permitting, fuel
supply, resource exploration, 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 on terms satisfactory to the Company of
engineering, construction, fuel supply and power sales contracts
with other project participants, receipt of required governmental
permits and consents and timely implementation of construction.
Further, there can be no assurance that the Company, which is
substantially leveraged, 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.
3. Uncertainties Related to Doing Business Outside the
United States. The Company has various projects under
construction outside the United States and a number of projects
under award outside the United States. The financing and
development of projects outside the United States entail
significant political and financial risks (including, without
limitation, uncertainties associated with privatization efforts
in the countries involved, currency exchange rate fluctuations,
currency repatriation restrictions, changes in law, 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 is developing
and 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.
Furthermore, the central bank of any such country may have the
authority in certain circumstances to suspend, restrict or
otherwise impose conditions on foreign exchange transactions or
to approve distributions to foreign investors. Although the
Company may structure certain power purchase agreements and other
project revenue agreements to provide for payments to be made in,
or indexed to, United States dollars or a currency freely
convertible into United States dollars, there can be no assurance
that the Company will be able to achieve this structure in all
cases or that a power purchaser or other customer will be able to
obtain sufficient dollars or other hard currency or that
available dollars will be allocated to pay such obligations. In
addition, the Company's investment in Northern Electric plc
("Northern") and any dividends or distributions of earnings in
respect of such investment, may be significantly affected by
fluctuations in the exchange rate between the United States
dollar and the British pound. Although the Company expects to
enter into certain transactions to hedge risks associated with
exchange rate fluctuations, there can be no assurance that such
transactions will be successful in reducing such risks.
4. Leverage. The Company is substantially leveraged. The
Company's substantial level of debt presents the risk that the
Company might not generate sufficient cash to service the
Company's indebtedness or that its leveraged capital structure
could limit its ability to finance future acquisitions, develop
additional projects, compete effectively and operate successfully
under adverse economic conditions.
5. Holding Company Structure. The Company is a holding
company which derives substantially all of its operating income
from its subsidiaries and joint ventures. The Company expects
that its future development efforts will be similarly structured
to involve operating subsidiaries and joint ventures. The
Company is dependent on the earnings and cash flows of, and
dividends from, its subsidiaries and joint ventures to generate
the funds necessary to meet its obligations. The availability of
distributions from such entities is subject to the satisfaction
of various covenants and conditions contained in the applicable
subsidiaries' and joint ventures' financing documents and to
certain utility regulatory restrictions. Furthermore, the
Company is structuring Philippine and Indonesia project financing
arrangements containing, and anticipates that future project
level financing will contain, certain conditions and similar
restrictions on the distribution of cash to the Company. Any
right of the Company to receive any assets of any of its
subsidiaries or other affiliates upon any liquidation or
reorganization of the Company will be effectively subordinated to
the claims of any such subsidiary's or other affiliates'
creditors (including trade creditors and holders of debt issued
by such subsidiary or other affiliate).
6. Northern's Regulatory Environment. Northern's
electricity distribution and supply are subject to extensive
regulation in the United Kingdom.
Pricing Regulation of Distribution. Revenue from
Northern's distribution business is controlled by a
"Distribution Price Control Formula." The Distribution
Price Control Formula determines the maximum average price
per unit of electricity that a regional electricity company
in the United Kingdom may charge. The Distribution Price
Control Formula is subject to review by the Director General
of Electricity Supply (the "Regulator"). At each review the
Regulator can propose adjustments to the Distribution Price
Control Formula. There can be no assurance that any future
price reviews by the Regulator will not have a material
adverse effect on Northern's results of operations.
Competition in Supply. Northern's supply business is
also subject to price control and is being progressively
opened to competition. Northern currently has an exclusive
right, subject to price cap regulation, to supply customers
in its authorized area with a maximum demand of not more
than 100 kW ("Franchise Supply Customers"). The market for
customers with a maximum demand above 1 MW has been open to
competition for suppliers of electricity since privatization
while the market for customers with a maximum demand above
100 kW ("Non-Franchise Supply Customers") became competitive
in April 1994. The final stage of this process is expected
to occur on March 31, 1998, when the exclusive right to
supply Franchise Supply Customers is scheduled to end.
There can be no assurance that competition among suppliers
of electricity will not have a material adverse effect on
the Company's results of operations.
Pool Purchase Price Volatility. Northern's supply
business to Non-Franchise Supply Customers generally
involves entering into fixed price contracts to supply
electricity to its customers. Northern obtains the
electricity to satisfy its obligations under such contracts
primarily by purchases from the wholesale trading market for
electricity in England and Wales (the "Pool"). Because the
price of electricity purchased from the Pool can be
volatile, to the extent that Northern purchases electricity
from the Pool, Northern is exposed to risk arising from
differences between the fixed price at which it sells and
the fluctuating prices at which it purchases electricity,
unless it can effectively hedge such exposure. Northern's
ability to manage such risk at acceptable levels will
depend, in part, on the specifics of the supply contracts
that Northern enters into, Northern's ability to implement
and manage an appropriate hedging strategy and the
development of an adequate market for hedging instruments.
There can be no assurance that this risk will be effectively
mitigated.
Change in Government Policy. The Conservative Party
has held power in the United Kingdom since 1979 and
currently has a one-seat majority over all parties. The
next general election in the United Kingdom must be held no
later than May 1997, and may be called at approximately
three weeks' notice at any time before then. Certain senior
members of the Labour Party, which is the main opposition
party, have recently made statements regarding policies
which a Labour government might introduce, including a
windfall assessment proposed to be levied on privatized
utilities and referring the whole electricity industry to
the competition authorities. There can be no assurance that
the policies of the United Kingdom government, by whichever
party it is controlled, would not cause a material adverse
effect on Northern's results of operations.
7. Exploration, Development and Operation Uncertainties of
Geothermal 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, geothermal power production poses unusual risks of
seismic activity. Accordingly, there can be no assurance that
earthquake, property damage or business interruption insurance
will be adequate to cover all potential losses sustained in the
event of serious seismic disturbances or that such insurance will
be available on commercially reasonable terms. The success of a
geothermal project depends on the quality of the geothermal
resource and operational factors relating to the extraction of
the geothermal fluids involved in such project. The quality of a
geothermal resource is affected by a number of factors, including
the size of the reservoir, the temperature and pressure of the
geothermal fluids in such reservoir, the depth and capacity of
the production and injection wells, and 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 resource 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 operating
levels, thereby requiring substantial capital expenditures.
8. General Operating Uncertainties. The operation of a
power plant involves many risks, including the breakdown or
failure of power generation equipment, pipelines, transmission
lines or other equipment or processes, fuel interruption, and
performance below expected levels of output or efficiency. Each
facility may depend on a single or limited number of entities to
purchase electricity or thermal energy, to supply water, to
supply gas, to transport gas, to dispose of wastes or to wheel
electricity. The failure of any such purchasing utility, steam
host, water or gas supplier, gas transporter, wheeling utility or
other relevant project participant to fulfill its contractual
obligations could have a material adverse impact on the Company.
9. Fuel Supply Operations. The primary fuel source for
certain of the Company's projects is natural gas and a
substantial portion of the operating expenses of such facilities
consists of the costs of obtaining natural gas through gas supply
agreements and transporting that gas to the projects under gas
transportation agreements. Although the Company believes that it
has contracted for natural gas supply and transportation in
sufficient quantities to satisfy the needs of its projects, the
gas suppliers are not required in all cases to provide dedicated
reserves in support of their contractual obligations. If a
supplier were not able to obtain substitute volumes of natural
gas and the transportation services necessary to deliver them at
a price acceptable to it, the failure of that supplier to deliver
natural gas in accordance with its contract could have a material
adverse effect on the cash flows to the Company. In addition,
under certain gas supply contracts the Company is obligated to
pay for a certain minimum quantity of natural gas even if it
cannot utilize it, as could occur as a result of curtailment of
electricity deliveries by a utility purchaser. The Company
intends to manage its requirements for contract volumes under the
gas supply agreements so as to meet the minimum take requirements
through a combination of utilization of nominated volumes in
operations and resales of the remainder of the volumes to third-
party customers, if necessary. Finally, the state, federal and
foreign regulatory authorities that have jurisdiction over
natural gas transportation have the right to modify aspects of
the rates, terms and conditions of those contracts. It is
possible that such a modification could materially increase the
fuel transportation costs of the projects or give the transporter
a right to terminate or suspend or decrease its performance under
its contract.
10. Present Dependence on Large Customer; Contract Risks.
The Company currently relies on long-term power purchase
"Standard Offer No. 4" contracts (each, an "SO4 Agreement") with
a large customer, Southern California Edison Company ("Edison"),
to generate a substantial portion of its operating revenues. Any
material failure by Edison to fulfill its contractual obligations
under such contracts is likely to have a material adverse effect
on the Company's results of operations. Each of the Company's
SO4 Agreements provides for both capacity payments and energy
payments for a term of between 20 and 30 years. During the first
ten years after achieving firm operation, energy payments under
each SO4 Agreement are based on a pre-set schedule. Thereafter,
while the basis for the capacity payment remains the same, the
required energy payment is Edison's then-current published
avoided cost of energy ("Avoided Cost of Energy"), as determined
by the California Public Utility Commission ("CPUC"). Estimates
of Edison'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
Edison at the expiration of the fixed-price periods. Edison's
Avoided Cost of Energy as determined by the CPUC is currently
substantially below the current scheduled energy prices under the
Company's respective SO4 Agreements and is currently expected to
remain so. 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 applicable fixed price
period.
11. Competition and Domestic Deregulation; Industry
Restructuring. 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 to
utilities. In that regard, many utilities often engage in
"competitive bid" solicitations to satisfy new capacity demands.
In the domestic market, competition is expected to increase as
the electric utility industry becomes deregulated. In addition,
recent deregulation and industry restructuring activity may cause
certain utilities or other contract parties to attempt to
renegotiate contracts or otherwise fail to perform their
contractual obligations, which in turn could adversely affect the
Company's results of operations.
12. Impact of Environmental, Energy and Other Regulations.
The Company is subject to a number of environmental and other
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 and existing wells. Such laws and
regulations generally require the Company to obtain and comply
with a wide variety of licenses, permits and other approvals.
The Company also remains subject to a number of complex and
stringent laws and regulations that both public officials and
private individuals may seek to enforce. There can be no
assurance that existing regulations will not be revised or that
new regulations will not be adopted or become applicable to the
Company which could have an adverse impact on its operations.
The implementation of regulatory changes imposing more
comprehensive or stringent requirements on the Company, which
would result in increased compliance costs, could have a material
adverse effect on the Company's 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.
The Public Utility Regulatory Policies Act of 1978, as
amended ("PURPA"), and the Public Utility Holding Company Act of
1935, as amended ("PUHCA"), are two of the laws (including the
regulations thereunder) that affect the Company's operations.
PURPA provides to qualifying facilities ("QFs") certain
exemptions from federal and state laws and regulations, including
organizational, rate and financial regulation. PUHCA regulates
public utility holding companies and their subsidiaries. The
Company is not and will not be subject to regulation as a holding
company under PUHCA as long as the domestic power plants it owns
are QFs under PURPA or are exempted as exempt wholesale
generators ("EWGs"), and so long as its foreign utility
operations are exempted as EWGs or foreign utility companies or
are otherwise exempted under PUHCA. QF status is conditioned on
meeting certain criteria, and would be jeopardized, for example,
by the loss of a steam customer or reduction of steam purchases
below the amount required by PURPA. The Company's four
cogeneration facilities have steam sales agreements with existing
industrial hosts which agreements must be maintained in effect or
replaced in order to maintain QF status. In the event the
Company were unable to avoid the loss of such status for one of
its facilities, such an event could result in termination of a
given project's power sales agreement and a default under the
project subsidiary's project financing agreements.
(b) Casecnan. In November 1995, the Company closed the
financing and commenced construction of the Casecnan Project, a
combined irrigation and 150 net MW hydroelectric power generation
project (the "Casecnan Project") located in the central part of
the island of Luzon in the Republic of the Philippines. The
Casecnan Project will consist generally of diversion structures
in the Casecnan and Denip Rivers that will divert water into a
tunnel of approximately 23 kilometers. The tunnel will transfer
the water from the Casecnan and Denip Rivers in the Pantabangan
Reservoir for irrigation and hydroelectric use in the Central
Luzon area. An underground powerhouse located at the end of the
water tunnel and before the Pantabangan Reservoir will house a
power plant consisting of approximately 150 MW of newly installed
rated electrical capacity. A tailrace tunnel of approximately
three kilometers will deliver water from the water tunnel and the
new powerhouse to the Pantabangan Reservoir, providing additional
water for irrigation and increasing the potential electrical
generation at two downstream existing hydroelectric facilities of
the National Power Corporation of the Philippines ("NPC").
CE Casecnan Water and Energy Company, Inc., a Philippine
corporation ("CE Casecnan") which is presently indirectly owned
as to approximately 35% of its equity by the Company and
approximately 35% indirectly owned by Peter Kiewit Sons' Inc., is
developing the Casecnan Project under the terms of the Project
Agreement between CE Casecnan and the National Irrigation
Administration ("NIA"). Under the Project Agreement, CE Casecnan
will develop, finance and construct the Casecnan Project over an
estimated four-year construction period, and thereafter own and
operate the Casecnan Project for 20 years (the "Cooperation
Period"). During the Cooperation Period, NIA is obligated to
accept all deliveries of water and energy, and so long as the
Casecnan Project is physically capable of operating and
delivering in accordance with agreed levels set forth in the
Project Agreement, NIA will pay CE Casecnan a guaranteed fee for
the delivery of water and a guaranteed fee for the delivery of
electricity, regardless of the amount of water or electricity
actually delivered. In addition, NIA will pay a fee for all
electricity delivered in excess of a threshold amount up to a
specified amount. NIA will sell the electric energy it purchases
to NPC, although NIA's obligations to CE Casecnan under the
Project Agreement are not dependent on NPC's purchase of the
electricity from NIA. All fees to be paid by NIA to CE Casecnan
are payable in U.S. dollars. The guaranteed fees for the
delivery of water and energy are expected to provide
approximately 70% of CE Casecnan's revenues.
The Project Agreement provides for additional compensation
to the CE Casecnan upon the occurrence of certain events,
including increases in Philippine taxes and adverse changes in
Philippine law. Upon the occurrence and during the continuance
of certain force majeure events, including those associated with
Philippines political action, NIA may be obligated to buy the
Casecnan Project from CE Casecnan at a buy out price expected to
be in excess of the aggregate principal amount of the outstanding
CE Casecnan debt securities, together with accrued but unpaid
interest. At the end of the Cooperation Period, the Casecnan
Project will be transferred to NIA and NPC for no additional
consideration on an "as is" basis.
The Republic of the Philippines has provided a Performance
Undertaking under which NIA's obligations under the Project
Agreement are guaranteed by the full faith and credit of the
Republic of the Philippines. The Project Agreement and the
Performance Undertaking provide for the resolution of disputes by
binding arbitration in Singapore under international arbitration
rules.
The Casecnan Project is being constructed on a joint and
several basis by Hanbo Corporation and Hanbo Engineering &
Construction Co. Ltd. (formerly known as You One Engineering &
Construction Co., Ltd., and herein referred to as "HECC"), both
of which are South Korean corporations, pursuant to a fixed-
price, date-certain, turnkey construction contract (the "Turnkey
Construction Contract"). Hanbo Corporation and HECC (sometimes
collectively referred to as the "Contractor") are under common
ownership control. Hanbo Corporation is an international
construction company. HECC, which recently emerged from a court-
administered receivership, is a contractor with over 25 years
experience in tunnel construction, using both the drill-and-blast
and tunnel boring machine ("TBM") methods.
The Contractor's obligations under the Turnkey Construction
Contract are guaranteed by Hanbo Iron & Steel Company, Ltd.
("Hanbo Steel"), a large South Korean steel company. In
addition, the Contractor's obligations under the Turnkey
Construction Contract are secured by an unconditional,
irrevocable standby letter of credit issued by Korea First Bank
("KFB") in the approximate amount of $118 million. The total
cost of the Casecnan Project, including development,
construction, testing and startup, is estimated to be
approximately $495 million.
The Company was recently advised that Hanbo Corporation and
Hanbo Steel had each filed to seek court receivership protection
in Korea. At the present time, all of the construction work on
the Casecnan Project is being performed by the second contractor
which is party to the Turnkey Construction Contract, HECC.
Although HECC, Hanbo Corporation and Hanbo Steel are under common
ownership control, HECC has not filed for receivership protection
and is believed to be solvent. However, no assurances can be
given that HECC will not file for receivership due to the
foregoing developments or that it will remain solvent and able to
perform fully its obligations under the Turnkey Construction
Contract.
The work on the Casecnan Project, which commenced in 1995,
is presently continuing on schedule and within the budget. CE
Casecnan is presently reviewing its rights, obligations and
potential remedies in respect of the recent developments
regarding the co-Contractor and the guarantor and is presently
unable to speculate as to the ultimate effect of such
developments on CE Casecnan. However, CE Casecnan has recently
received confirmation from HECC that it intends to fully perform
its obligations under the Turnkey Construction Contract and
complete the Casecnan Project on schedule and within the budget.
Additionally, it has been reported that the South Korean
government has informed the Philippine government that the South
Korean government will take appropriate actions to support HECC's
completion of the Casecnan Project.
KFB has recently reconfirmed to CE Casecnan that it will
honor its obligations under the Casecnan Project letter of credit
and also has stated its support for the successful completion of
the Casecnan Project. However, Moody's Investors Service has
recently issued a warning for a possible ratings downgrade for
Korea First Bank because of the possible impact of the Hanbo
Steel receivership on the substantial loans KFB previously made
to Hanbo Steel. In a related development, the South Korean
government has recently announced that it would provide some
funding to assist Hanbo Steel's creditor banks (including Korea
First Bank) and its subcontractors.
CE Casecnan financed a portion of the costs of the Casecnan
Project through the issuance of $125,000,000 of its 11.45% Senior
Secured Series A Notes due 2005 and $171,500,000 of its 11.95%
Senior Secured Series B Notes due 2010 pursuant to an indenture
dated November 27, 1995, as amended to date (the "Casecnan
Indenture"). Although no default has occurred under the Casecnan
Indenture as a result of the announced receivership of Hanbo
Corporation, CE Casecnan will continue to closely monitor the
Hanbo group and KFB developments and project construction status
and develop appropriate contingency plans.
If HECC were to materially fail to perform its obligations
under the Turnkey Construction Contract and if KFB were to fail
to honor its obligations under the Casecnan letter of credit,
such actions could have a material adverse effect on the Casecnan
Project and CE Casecnan. However, based on the information
presently available to it, CE Casecnan does not presently expect
that either such event will occur.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CALENERGY COMPANY, INC.
Dated: February 25 1997 By: /s/ Steven A. McArthur
Steven A. McArthur
Senior Vice President
and General Counsel
