Exhibit 99.1

Zond-PanAero Windsystem Partners I,
a California Limited Partnership

Unaudited Financial and Business Information
for the fiscal year ended December 31, 2002
(the "Operating Report")

Introductory Note to the Operating Report
-----------------------------------------

Zond-PanAero Windsystem Partners I, a California Limited Partnership (the
"Partnership") is required to file reports under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). As explained in the Current Report on
Form 8-K filed November 14, 2003, the Partnership has not filed certain
quarterly and annual reports required under the Exchange Act, including the
Annual Report on Form 10-K for the year ended December 31, 2002. The Partnership
has not had an auditor since the resignation of Arthur Andersen LLP ("Arthur
Andersen") on February 5, 2002 and, accordingly, has not been able to file
reports on Form 10-Q and Form 10-K that comply with the requirements of the
Exchange Act. Until such time as the Partnership is able to retain an auditor,
it intends to file on Form 8-K unaudited financial and business information on a
quarterly basis. On November 25, 2003, the Partnership filed a Current Report on
Form 8-K containing unaudited financial and business information for the fiscal
year ended December 31, 2001 (the "November 25 Form 8-K"). Unaudited financial
and business information for the fiscal year ended December 31, 2002 is
contained herein. Except as otherwise expressly noted, the unaudited financial
and business information contained herein does not reflect events occurring
after December 31, 2002. However, certain material events that occurred after
December 31, 2002 are described in Part I, Section 5 entitled "SUBSEQUENT
EVENTS" and Note 7 to the Unaudited Financial Statements. The Partnership
intends to file as exhibits to Form 8-K unaudited financial and business
information for the first, second and third quarters of 2003, and for the fiscal
year ended December 31, 2003 as soon as practicable, which the Partnership
expects will be by March 31, 2004.

Due to the Partnership's inability to retain an auditor and file a complete Form
10-K as required under the Exchange Act for the year ended December 31, 2002,
the Partnership is filing this Operating Report on Form 8-K. In preparing this
Operating Report, current management was required to make certain assumptions
and relied on the Partnership's financial statements provided in the November 25
Form 8-K and financial statements previously audited by Arthur Andersen for the
year ended December 31, 2000. This Operating Report has not been reviewed or
audited by an independent public accountant and it should not be relied upon as
a fully compliant periodic report in accordance with the requirements of the
Exchange Act. This Operating Report is subject to further review and potential
adjustment and may not be indicative of the Partnership's financial condition or
operating results.

Enron Wind Systems, LLC ("EWS"), the parent of Zond Windsystems Management LLC,
the general partner of the Partnership (the "General Partner"), filed for
Chapter 11 Bankruptcy on February 20, 2002. Subsequently, on May 10, 2002, EWS
and certain of its affiliated companies (collectively, "Enron Wind") sold their
entire business except certain assets and liabilities to General Electric
Company. EWS retained its indirect equity interests, including the general
partner interest, in the Partnership. As a consequence of these events, the
management of Enron Wind, the General Partner and the Partnership changed. The
information available to compile this Operating Report has been provided on the
basis of information available to current management at this date. It is
therefore possible that there may be events or issues that have not yet been
discovered by the current management providing the information to compile this
Operating Report and that this Operating Report may not fully account for these
events or issues.

Zond-PanAero Windsystem Partners I,
a California Limited Partnership

Unaudited Financial and Business Information
for the fiscal year ended December 31, 2002
(the "Operating Report")

TABLE OF CONTENTS

PART I PAGE

1. Business................................................................1
2. Properties..............................................................4
3. Legal Proceedings.......................................................5
4. Submission of Matters to a Vote of Security Holders.....................5
5. Subsequent Events.......................................................6

PART II

6. Market for Registrant's Common Equity and Related
Stockholder Matters.....................................................7
7. Selected Financial Data (Unaudited).....................................8
8. Management's Discussion and Analysis of
Financial Condition and Results of Operations...........................8
9. Unaudited Financial Statements.........................................10
10. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.................................10

PART III

11. Directors and Executive Officers of the Registrant......................12
12. Executive Compensation..................................................13
13. Security Ownership of Certain Beneficial Owners
and Management .........................................................14
14. Certain Relationships and Related Transactions .........................15

PART IV

15. Exhibits, Unaudited Financial Statement Schedules, and
Reports on Form 8-K....................................................16

PART I

1. BUSINESS
--------

Introduction

Zond-PanAero Windsystem Partners I, a California Limited Partnership (the
"Partnership") was formed on June 29, 1984 to purchase, own and operate a system
of 300 Vestas Energy A/S Model V15 wind turbine electric generators (the
"Turbines"). The electricity generated by the Turbines is sold by the
Partnership to its sole customer, Southern California Edison Company ("SCE").

Each Turbine has a rated capacity of 65 kilowatts, and the Turbines have an
aggregate rated capacity of 19.5 megawatts. The Turbines, together with certain
infrastructural improvements (the "Infrastructural Improvements"), form an
integrated electric power generating facility (the "Windsystem"). The Windsystem
is located in the San Gorgonio Pass area of the San Bernardino Mountains near
Palm Springs, California (the "Operating Site").

The Turbines are interconnected by a system of transformers and power transfer
lines to a substation and SCE's transmission grid. The individual power lines
from each of the Turbines are fed into step-up transformers, which increase the
voltage from 480 volts to 12.5 kilovolts. Additional 12.5 kilovolt power
transfer lines carry electricity to a substation, which steps up the electric
power to 115 kilovolts for delivery to SCE.

The Windsystem, which became operational in November 1984, was constructed by
Mesa Construction Company ("MCC"), a joint venture formed between an affiliate
of Enron Wind Systems, Inc. ("EWSI") and an affiliate of PanAero Corporation
("PanAero"). The Partnership paid MCC a total of $48.9 million, comprised of
$22.4 million in cash and $26.5 million in the form of notes (the "Purchase
Notes"), for the purchase, construction and installation of the Turbines. The
Purchase Notes matured on December 31, 2002. At that time, there was $1.0
million and $5.7 million of principal and interest in arrears, respectively. The
business of the Partnership and the respective rights of its partners, including
the Partnership's limited partners (the "Limited Partners"), are governed by the
First Amended and Restated Certificate and Agreement of Limited Partnership of
Zond-PanAero Windsystem Partners I, a California Limited Partnership, entered
into on November 29, 1984, as amended (the "Partnership Agreement"). The term of
the Partnership expires on December 31, 2005, unless terminated earlier in
accordance with the terms of the Partnership Agreement. The general partner of
the Partnership (the "General Partner") is Zond Windsystems Management LLC
("ZWM"), a California limited liability company wholly-owned by Enron Wind
Systems, LLC ("EWS").

Bankruptcy and Mergers

Commencing on December 2, 2001, and periodically thereafter, Enron Corp.
("Enron") and certain of its subsidiaries filed voluntary petitions for relief
under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code").
On February 20, 2002, Enron Wind Corp. ("EWC") and EWSI each filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code. Additionally, two
California limited liability companies formed on February 19, 2002 for the
purposes of merging with EWC and EWSI in anticipation of the sale of Enron's
wind business also filed voluntary petitions for relief under Chapter 11 of the
Bankruptcy Code.

Page 1

EWC merged with and into one of such limited liability companies on April 19,
2002 and the surviving limited liability company changed its name to Enron Wind
LLC ("EW"). EWSI merged with and into the other limited liability company, also
on April 19, 2002, and Enron Wind Systems, LLC was the surviving limited
liability company.

On April 12, 2002, Zond Windsystem Management Corporation ("ZWMC"), the general
partner of the Partnership at such time, merged with and into a third California
limited liability company, formed on March 12, 2002, and Zond Windsystems
Management LLC was the surviving limited liability company. On May 3, 2002, Zond
Construction Corp. merged with and into a fourth California limited liability
company, formed on March 21, 2002, and the surviving limited liability company
changed its name to Zond Construction LLC ("ZC").

See Part I, "5. SUBSEQUENT EVENTS - Bankruptcy".

Sale to General Electric

On April 10, 2002, Enron, EWC and certain of its subsidiaries, including EWSI,
entered into an Amended and Restated Purchase and Sale Agreement in which such
entities agreed to sell in an asset sale (the "GE Sale") their wind turbine
manufacturing, operation and maintenance and construction businesses to General
Electric Company, acting through its GE power systems business ("GEPS"). The GE
Sale was consummated on May 10, 2002. EW retained the existing wind power
projects including the indirect ownership of the general partnership interest in
the Partnership. However, effective as of the sale, substantially all of the
employees who had been involved in the management of the Partnership transferred
to GEPS.

Following the sale to GEPS, new management was appointed to manage and operate
the Partnership and ZWM's principal executive offices were moved to 1400 Smith
Street, Houston, Texas 77002. Eric D. Gadd was appointed President and Chief
Executive Officer of ZWM on September 26, 2002. ZWM has no directors.

Operation and Maintenance Services

EWS manages the Windsystem pursuant to a windsystem management agreement with
the Partnership executed on July 27, 1988 (the "Management Agreement"). The
Management Agreement terminates by its terms on December 31, 2004. Prior to May
10, 2002, Enron Wind Maintenance LLC, an affiliate of EWS, provided operations
and maintenance services for the Windsystem. On May 10, 2002, in connection with
the GE Sale, EWS contracted with GE Wind Energy, LLC to perform certain
operations and maintenance services relating to the Windsystem for a period of
one year ending on May 10, 2003.

See Part I, "5. SUBSEQUENT EVENTS - Operation and Maintenance Services".

Sale of Electric Power

The Partnership sells the electric power generated by the Turbines to SCE under
a power purchase and sales agreement (the "Power Agreement"). The Power
Agreement was originally entered into between SCE and PanAero in April 1982 and
covers an aggregate of 29.9 megawatts of generating capacity. PanAero assigned
the Power Agreement to Mesa Wind Developers ("Mesa") in July 1984. Mesa
subsequently assigned the portion of the Power Agreement that covers the
aggregate rated capacity of the Turbines (19.5 megawatts) to the Partnership.

Page 2

Such assignment terminates effective December 31, 2004. The remaining 10.4
megawatts of generating capacity available under the Power Agreement was
assigned by Mesa to Zond-PanAero Windsystem Partners II, a California Limited
Partnership ("ZPII"), whose general partner is an affiliate of the General
Partner. Such assignment also terminates effective December 31, 2004.

Under the Power Agreement, SCE is required to purchase all of the electric
output from the Turbines at a rate equal to the greater of either 89% of SCE's
"cost of energy" or a fixed minimum price of $0.102 per kilowatt hour ("kWh").
The Power Agreement provides, however, that if SCE's cost of energy exceeds
$0.20 per kWh, the price per kWh paid by SCE will be limited to $0.20 per kWh
plus 70% of the difference between 89% of its cost of energy and $0.20 per kWh.
Since formation of the Partnership, SCE has paid only the fixed minimum price of
$0.102 per kWh. SCE takes monthly meter readings of the amount of electricity
delivered to SCE under the Power Agreement and makes payments based on such
meter readings.

SCE Dispute

Market conditions in the California energy sector during 2000 and 2001 created a
significant cash flow problem for SCE. At the end of January 2001, SCE advised
the Partnership that SCE would not make payments for power deliveries in
November and December 2000. The Partnership, along with other renewable source
generators, engaged in discussions with SCE seeking payment from SCE for past
due amounts under applicable power agreements entered into with SCE.

The Partnership continued to operate the Windsystem and deliver power to SCE
believing that eventually a solution would be negotiated. SCE continued to
default on its contractual obligations by missing payments due for January,
February, and March 2001 power deliveries.

On March 27, 2001, the California Public Utilities Commission (the "CPUC")
issued an order (the "CPUC Order") obligating SCE to begin payments for power
delivered on a going-forward basis. Following the issuance of the CPUC Order,
SCE initiated discussions with renewable source generators, including the
Partnership, to agree on a payment plan for power delivered on a going-forward
basis. The Partnership agreed with SCE to receive payments twice monthly for
power delivered. Payments for the last five days in March 2001, from the date
the CPUC Order was effective, through the end of 2001 were received from SCE.
The CPUC Order did not address the issue of payments due for the period between
November 1, 2000 and March 26, 2001.

By the end of April 2001, discussions with SCE regarding payment for power
delivered for the period between November 1, 2000 and March 26, 2001 had not
resulted in a solution. The Partnership, along with other renewable source
generators (collectively, the "Power Generators"), assisted by outside counsel,
explored various legal alternatives to enforce the contractual rights of the
turbine owners. With no realistic prospects seemingly imminent for a negotiated
solution, some of the Power Generators, including the Partnership, filed suit
against SCE on May 2, 2001 in Los Angeles Superior Court (the "SCE Litigation").
The suit sought to recover compensation from SCE for power delivered, or at the
option of the plaintiffs, relief from the obligation to deliver power under the
existing contracts with SCE coupled with the right to sell power in the open
market across the SCE transmission grid.

Page 3

In June 2001, SCE sent an offer to renewable source generators to settle the
amounts past due and proposed a structure for payment of the amounts past due.
The offer resulted from lengthy negotiations between SCE and representatives of
independent energy producers, monitored by representatives of the Governor of
California. The offer provided for the payment of all amounts past due with
interest accruing at 7% to the date of payment. On August 22, 2001, Mesa, for
the benefit of the Partnership, entered into a settlement agreement with SCE
that, among other things, set forth the terms for payment of past due amounts to
Mesa, and ultimately the Partnership (the "SCE Payment Agreement").

The SCE Payment Agreement provides that past due amounts be paid in three
installments, 10% of the amount outstanding plus interest on all the past due
amounts to the date of the installment payment to be paid shortly after
execution of the SCE Payment Agreement, another 10% of the amount outstanding to
be paid when the SCE Payment Agreement becomes effective (after CPUC approval
and certain other conditions are satisfied), and the final 80% to be paid when
the California State Legislature approves a plan that restores SCE's credit. SCE
paid the first installment due under the SCE Payment Agreement on August 31,
2001. All remaining amounts outstanding from SCE under the SCE Payment Agreement
were collected from SCE by the end of March 2002.

See Part I, "5. SUBSEQUENT EVENTS - SCE Dispute".

Windsystem Performance

The amount of electricity produced by the Turbines depends upon wind speed,
which is subject to significant seasonal variations in the San Gorgonio Pass
area. Wind speed is generally highest during the summer months and lowest during
the winter months. These seasonal variations result in significant variations
from month to month in the net power production realized by the Turbines, and
therefore result in monthly variations in the amount of electricity sold to SCE.

During 2002, SCE purchased an aggregate of 47.2 million kWh of electricity from
the Partnership for an aggregate purchase price of $4.8 million.

Employees

The Partnership has no employees. EWS manages, operates, and maintains the
Windsystem pursuant to the Management Agreement. The General Partner, utilizing
employees of EWS, attends to the remaining day-to-day activities of the
Partnership.

2. PROPERTIES
----------

The Operating Site is situated on two adjoining parcels of land, consisting of
approximately 440 acres, located in the San Gorgonio Pass area of the San
Bernardino Mountains approximately 16 miles northwest of Palm Springs,
California. The Partnership owns the Turbines, including the supporting towers
and related concrete support pads and controllers. The Partnership uses a
portion of the Operating Site and the Infrastructural Improvements pursuant to a
20-year easement granted by Mesa under the terms of a Wind Park Easement
Agreement dated as of September 7, 1984, as amended (the "Wind Park Easement
Agreement"). The Infrastructural Improvements include roads, fences, the power
transfer system, the substation and maintenance facilities. Mesa has title to
the Infrastructural Improvements, but has granted the Partnership a security
interest in such assets under the Wind Park Easement Agreement. The

Page 4

Infrastructural Improvements are also utilized by ZPII under a similar
arrangement with Mesa.

Mesa has rights to develop wind energy resources at the Operating Site, which
includes the Infrastructural Improvements, under a right-of-way grant (the
"Right-of-Way Grant") from the United States Bureau of Land Management ("BLM").
The Right-of-Way Grant was originally issued to PanAero on January 26, 1983, and
was assigned by PanAero to Mesa in April 1984. The primary term of the
Right-of-Way Grant expired on January 26, 2003. On December 19, 2002, the
Right-of-Way Grant was extended for a ten-year period commencing on January 27,
2003; however, the Wind Park Easement Agreement still expires on December 31,
2004. EWSI, PanAero, and their affiliates have developed and sold additional
wind turbines on the Operating Site to ZPII and Mesa has granted a similar
easement to ZPII. The general partner of ZPII is an affiliate of the General
Partner.

3. LEGAL PROCEEDINGS
-----------------

SCE Dispute

See Part I, "1. BUSINESS - SCE Dispute" for a discussion regarding the SCE
Litigation.

See Part I, "5. SUBSEQUENT EVENTS - SCE Dispute and FERC Investigation".

4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------

No matters were submitted to a vote of the partners of the Partnership during
2002.

Page 5

5. SUBSEQUENT EVENTS
-----------------

Bankruptcy

As of December 19, 2003 neither ZWM nor ZC has filed for bankruptcy.

Operation and Maintenance Services

In April 2003, EWS entered into an agreement with SeaWest Asset Management
Services, LLC to provide certain operation and maintenance services relating to
the Windsystem for a 5-year period ending on May 10, 2008.

SCE Dispute

The Partnership, along with the other Power Generators party to the SCE
Litigation, dismissed the SCE Litigation in August 2003.

Purchase Notes

From January 1, 2003 through December 19, 2003, $0.6 million was paid on the
Purchase Notes, all of which was applied to principal.

As of December 19, 2003, MCC has not exercised its right to foreclose under the
Purchase Notes.

FERC Investigation

In May 2003, the Federal Energy Regulatory Commission (the "FERC"), pursuant to
FERC Docket No. EL03-47-000, began investigating whether the Windsystem and
certain other power projects owned by Enron or its affiliates failed to meet the
ownership criteria for qualifying facility ("QF") status under the Public
Utility Regulatory Policy Act of 1978 ("PURPA").

Under PURPA, and the applicable FERC regulations, a power project is not a QF if
more than 50% of the equity interest in the project is owned by an electric
utility or electric utility holding company. On July 11, 2003, the investigation
of the QF status of the Windsystem by the FERC was set for hearing by the FERC.
On July 22, 2003, the FERC investigation relating to the Windsystem was assigned
to a FERC settlement judge. Representatives of the Partnership and the FERC have
held several settlement meetings, and settlement discussions relating to the
investigation are ongoing.

Recently Issued Accounting Pronouncements

On January 1, 2003, the Partnership adopted Statement of Financial Accounting
Standards ("SFAS") No. 143 "Accounting for Asset Retirement Obligations".
On January 1, 2003, the Partnership also adopted SFAS No. 145, "Rescission of
SFAS No. 4, 44, and 64, Amendment of SFAS No. 13, and Technical Corrections".
These adoptions did not have a material impact on the Partnership's results of
operations or financial condition.

Page 6

elects to change to the fair value method specified in SFAS No. 123. The
adoption of SFAS No.148 had no effect on the financial position, results of
operations, or cash flows of the Partnership.

See Part II, "8. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - Recently Issued Accounting Pronouncements" for
additional information.

Section 16 Filings

On December 18, 2003 Eric D. Gadd filed with the Securities and Exchange
Commission (the "SEC") a Form 3.

PART II

6. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
-------------------------------------------------
STOCKHOLDER MATTERS
-------------------

Market Information

There is no established public trading market for the Partnership's limited
partnership units (the "Units"). The Partnership Agreement includes various
restrictions on the transfer of Units.

Holders

The Partnership's records indicate that at December 31, 2002 there were 885
holders of record of the Partnership's Units.

Cash Distributions

The Partnership makes cash distributions in accordance with the terms of the
Partnership Agreement. Due to less-than-projected operating results, the
Partnership has not distributed any cash during any fiscal year other than 1985,
in which the Partnership distributed an aggregate of approximately $158,000 to
the Limited Partners and $2,000 to the then General Partners. Under the Purchase
Notes, the Partnership cannot make cash distributions to its partners unless
certain cash reserve balances are maintained, no events of default exist, and
certain ratio tests are met. The Partnership did not meet these criteria, and
did not make any cash distributions to its partners, during 2002.

Page 7

7. SELECTED FINANCIAL DATA (UNAUDITED)
------------------------------------

From and after 1987, the Partnership's accounting records have been maintained
on a federal tax accrual basis, consistent with appropriate provisions of the
Internal Revenue Code. Such records have been adjusted to reflect generally
accepted accounting principles for purposes of filings with the SEC.

As of and for the years ended December 31, 2002 and 2001.
(Dollars in thousands, except per Unit values which are in whole dollars)

2002 2001
------------ ------------
Total Revenue $ 4,855 $ 4,453
Net income (loss) 466 (208)

Per unit:
Net income (loss) 392 (175)
Partners' deficit (820) (1,212)

Total assets 6,365 8,875
Current portion of notes
payable to related party 1,008 4,497
Accrued interest to related party 5,718 5,442
Partners' deficit (976) (1,442)

All per Unit values were calculated based on 1,190 Units.

8. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------

Liquidity and Capital Resources

The Partnership continued to experience a lack of liquidity throughout 2002,
primarily due to an ongoing shortfall in revenues from operations in comparison
to the costs and expenses of operations. Accordingly, principal payments on the
Purchase Notes in the aggregate amount of $1.0 million were in arrears, and
interest payments in the amount of $5.7 million, were in arrears at December 31,
2002. The Partnership's failure to make timely payments on the Purchase Notes
gave MCC the right to foreclose against the collateral of its loans as set forth
in the Purchase Notes. As of December 31, 2002, MCC had not exercised its right
to foreclosure under the Purchase Notes. See "Results of Operations for the year
ended December 31, 2002" and Part I, "5. SUBSEQUENT EVENTS - Purchase Notes".

The Partnership's primary source of revenues and liquidity to fund operations of
the Windsystem, repay debt, administer the Partnership, and make distributions
to its partners is the production and sale of electricity from the Windsystem.

Page 8

The Partnership's sole customer is SCE. The price paid by SCE for the
electricity is contractually defined under the Power Agreement.

See Part I, "1. BUSINESS - Sale of Electric Power" for additional information.

As of December 31, 2002, the Partnership had no current or planned commitments
for capital expenditures.

Results of Operations for the Year Ended December 31, 2002 Compared to December
31, 2001.

During 2002, the Partnership's overall reported electricity revenue was $4.8
million, and the Windsystem produced 47.2 million kWh of electricity for sale to
SCE. This was an increase of $0.5 million or 12% in revenue and an increase of
4.9 million kWh of electricity produced or 12% as compared to 2001. These
increases can mainly be attributed to an average of a 13% higher wind level in
2002 as compared to 2001.

Costs and expenses during 2002 were $4.4 million. This was a decrease of $0.3
million or 6%, as compared to 2001. This decrease can mainly be attributed to
the decrease in interest expense of $0.3 million, as compared to 2001. Interest
expense decreased due to lower average principal balances on the Purchase Notes
outstanding in 2002. Maintenance expenses decreased by $0.1 million, as compared
to 2001. Property taxes also decreased by $0.1 million as compared to 2001. This
decrease can be attributed to a one-time property tax assessment related to
prior years that was reflected in 2001 totaling $0.1 million.

Offsetting these decreases were the following increase in costs and expenses.
During 2002 easement fees increased by $0.1 million, as compared to 2001. The
increase in easement fees is directly related to the increase in Gross Operating
Proceeds recorded in 2002. During 2002, Gross Operating Proceeds were $5.3
million, which was an increase of $2.0 million as compared to 2001. See Part
III, "12. EXECUTIVE COMPENSATION - Operating Site Rentals" for additional
information.

Insurance expense increased in 2002 by $0.1 million, as compared to 2001. This
increase can be directly related to market conditions within the Property and
Casualty Insurance industry coupled with adverse experience in prior years.

Overall, the Partnership reported net operating income of $0.5 million for 2002,
an increase of $0.7 million as compared to 2001. During 2002, total partners'
deficit decreased by $0.5 million or 32% to ($1.0) million. Net income per Unit
was $392 for 2002, compared to a net loss per Unit of $175 for 2001.

Recently Issued Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
143 "Accounting for Asset Retirement Obligations". SFAS No. 143 addressed
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. It applies to all legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or the normal operation of a long-lived asset. This statement is effective
for financial statements issued for fiscal years beginning after June 15, 2002.

Page 9

The Partnership does not expect the adoption of this statement to have a
material impact on the results of operations and financial condition of the
Partnership.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure". SFAS No. 148 amends SFAS No. 123 to
provide alternative methods of transition for an entity that voluntarily changes
to the fair value based method of accounting for stock-based employee
compensation. SFAS No. 148 also amends the disclosure provisions of SFAS No. 123
to require disclosure about the effects on reported net income of an entity's
stock-based employee compensation in interim financial statements.

See Part I, "5. SUBSEQUENT EVENTS - Recently Issued Accounting Pronouncements".

9. UNAUDITED FINANCIAL STATEMENTS
------------------------------

The unaudited financial statements of the Partnership for the fiscal year ended
December 31, 2002 filed as part of this Operating Report and listed in response
to Part IV, "15. EXHIBITS, UNAUDITED FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K" hereof, are hereby incorporated by reference.

10. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------

The Partnership's Current Report on Form 8-K, filed with the SEC on February 13,
2002, as amended by Form 8-K/A, filed with the SEC on February 27, 2002,
discloses the following information:

Effective February 5, 2002, Arthur Andersen LLP ("Andersen") resigned as
auditors of the Partnership.

The reports of Andersen on the Partnership's financial statements for the years
ended December 31, 1999 and 2000 did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to the audit scope,
uncertainty or accounting principles. Andersen advised that it had not withdrawn
any of its opinions expressed in their auditor's report for any periods for
which they conducted audits of the Partnership.

The General Partner did not approve the resignation by Andersen.

During the preceding two years and in the subsequent interim periods through
February 5, 2002, there were no disagreements with Andersen on any matters of
accounting principles or practices, financial statement disclosures, or auditing
scope or procedures, which if not resolved to the satisfaction of Andersen would
have caused Andersen to make reference to the matter in their report.

During the preceding two years and in the subsequent interim periods through
February 5, 2002, there were no "reportable events" within the meaning of Item
304(a)(1)(v) of Regulation S-K.

On February 13, 2002, Andersen issued a letter to the SEC acknowledging that it
had read the above statements and was in agreement with such statements.

Page 10

The Partnership has not been able to retain an auditor following the resignation
of Andersen.

Page 11

PART III

11. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------

The Partnership does not have any employees or directors. As of December 31,
2002, the General Partner of the Partnership was ZWM. ZWM is (and prior to
April 19, 2002 ZWMC was) responsible for the management of the Partnership.

Rights and Powers of the General Partner

Under the terms of the Partnership Agreement, the General Partner holds the
exclusive right to manage the business and affairs of the Partnership. The
Limited Partners, Dean Witter Reynolds Inc., as a special limited partner (the
"Special Limited Partner"), and the substituted limited partners are not
entitled to exercise any rights or powers to manage the business and affairs of
the Partnership. The Limited Partners, Special Limited Partner and substituted
limited partners have voting rights only with respect to certain fundamental
changes in the nature and operation of the Partnership, as set forth in the
Partnership Agreement. As of December 31, 2002, ZWM was a California limited
liability company wholly-owned by EWS. As of December 31, 2002, the principal
executive offices of ZWM are located at 1400 Smith Street, Houston, Texas 77002.

Set forth below is certain information regarding the officers and directors of
ZWM, as of December 31, 2002. As of December 31, 2002, ZWM has no directors. EWS
alone determines who will serve as the directors of ZWM.

Name Age Position
---- --- --------

Eric D. Gadd 48 President and Chief Executive Officer

Mr. Gadd has served as President and Chief Executive officer of ZWM since
September 26, 2002, and has served as President and Chief Executive Officer of
EWS since May 11, 2002. Mr. Gadd is responsible for managing and restructuring
global wind business operations.

Prior to his current assignment, Mr. Gadd served as Vice President of Business
Development for Enron's natural gas pipeline affiliate. From 1995 to 2001, he
was involved in business development and commercial management in Enron's
European offices where he developed large gas-fired power generation projects;
acquired and disposed operating business assets; managed power and gas
commercial activities; and expanded operations into retail energy markets and
wholesale base metals markets.

Prior to joining Enron, Mr. Gadd was employed by Baltimore Gas and Electric
Company for twelve years in a variety of commercial assignments in regulated
power generation and natural gas distribution.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Partnership's directors, officers, and persons who own more
than 10% of a registered class of the Partnership's equity securities to file

Page 12

reports of ownership and changes in ownership with the SEC. Based on a review of
the Partnership's records, the current management does not believe that any
person who may have met the filing requirements of Section 16(a) of the Exchange
Act during 2002 filed any Section 16(a) reports with the SEC.

Eric D. Gadd, President and Chief Executive officer of ZWM, did not file with
the SEC a Form 3 in 2002. This form was subsequently filed. See Part I, "5.
SUBSEQUENT EVENTS - Section 16 filings".

Delegation of Management

The Partnership has delegated certain aspects of the operation, management,
maintenance and repair of the Windsystem to EWS pursuant to the Management
Agreement. See Part I, "1. BUSINESS - Operation and Maintenance Services".

12. EXECUTIVE COMPENSATION
----------------------

As the Partnership has no employees, it does not pay executive compensation to
any individual. The General Partner participates in the profits and losses of
the Partnership by virtue of its partnership interests, and EWS receives (and
prior to April 19, 2002 EWSI received) payment under the Management Agreement
for services rendered thereunder. During 2002 officers and members of the board
of directors of the General Partner were not compensated by the Partnership for
their services in those capacities.

Distributions

Following its removal as a general partner of the Partnership in June 1988,
PanAero Management Corporation ("PAMC") became a substituted limited partner of
the Partnership. Under an agreement of Settlement and Mutual Release, dated June
26, 2000, settling all claims in the lawsuit entitled PanAero Management
Corporation et. al. v. Zond System, Inc. et al., Los Angeles Superior Court Case
No. BC 130959 (the "Settlement Agreement"), PAMC transferred its substituted
limited partner interest to ZWMC.

The Partnership makes distributions in accordance with the terms of the
Partnership Agreement. The Partnership did not distribute any amounts during
2002.

Windsystem Management Fees

As compensation for its services under the Management Agreement, EWS receives a
management fee of 2% of the Partnership's gross operating proceeds ("Gross
Operating Proceeds"). Gross Operating Proceeds are defined as all gross receipts
from the sale of electricity generated by the Turbines and all amounts paid in
lieu of receipts from the sale of electricity, including, without limitation,
any proceeds of systems performance or wind resource insurance, casualty loss
and business interruption insurance paid in reimbursement of lost revenues and
warranty payments in reimbursement of lost revenues. Under the Management
Agreement, EWS is also reimbursed for 115% of the maintenance costs, including
labor and material costs that it incurs in the performance of services including
services by third parties. Upon termination of the Management Agreement in
December 2004, EWS will be entitled to receive an incentive fee equal to the
balance of the cash reserve maintained in connection with the Purchase Notes. As
of December 31, 2002, no cash reserve had been established. At its option, EWS

Page 13

also is entitled to receive 10% interest on any funds advanced to or on behalf
of the Partnership. During 2002, the Partnership incurred $0.1 million for
management fees and $0.9 million for cost reimbursement of maintenance and other
operating costs under the Management Agreement.

Operating Site Rentals

Under the Wind Park Easement Agreement, Mesa charges the Partnership rental fees
for use of the Operating Site and Infrastructural Improvements in an amount
equal to the greater of 5% of Gross Operating Proceeds or the Partnership's pro
rata share (with the other producers of electric energy from wind power on the
Operating Site) of the payments due the BLM under the Right-of-Way Grant. For
2002, the Partnership's easement fees were $0.3 million.

Interest on Purchase Notes

MCC earns interest from the Partnership on the principal balance outstanding
under the Purchase Notes at a rate of 11% per annum. During 2002, MCC earned
$0.4 million in interest under the Purchase Notes from the Partnership.

13. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
---------------------------------------------------
MANAGEMENT
----------

Certain Beneficial Owners

To the Partnership's knowledge, no person (including a "group" as that term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) is
the beneficial owner of more than 5% of the Partnership's equity interests.

Ownership of Management

ZWM owns the sole general partner interest in the Partnership. The Partnership's
records indicate that at December 31, 2002 ZWM also owns the substituted limited
partner interest transferred by PAMC as discussed in Part III, "12. EXECUTIVE
COMPENSATION - Distributions" and two Units. The Partnership's records indicate
that at December 31, 2002 EWS had a .0003% substituted limited partner interest
in the Partnership. The Partnership's records indicate that at December 31, 2002
no executive officer or director of ZWM owned any interest in the Partnership.

Changes In Control

In March 1988, ZWMC executed a conditional resignation of its position as a
General Partner, such resignation to become effective upon a material breach of
any of ZWMC's agreements contained in a Letter of Understanding dated March 24,
1988 among ZWMC, EWSI, Dean Witter Reynolds Inc. and certain EWSI affiliates
(the "Letter of Understanding"). It is not clear whether there was a material
breach of any of ZWMC's agreements under the Letter of Understanding; however,
based on a review of the Partnership's books and records, it does not appear
that any affirmative steps have been taken to effectuate a resignation by ZWMC
(or as of April 19, 2002 ZWM) of its position as a General Partner. Furthermore,
even if a material breach of any of ZWMC's agreements under the Letter of
Understanding had occurred, such a breach arguably would not result in ZWMC's

Page 14

(or as of April 19, 2002 ZWM's) resignation as a General Partner because such a
resignation would breach the terms of the Partnership Agreement.

This description of the terms of ZWMC's conditional resignation is qualified in
its entirety by the Letter of Understanding, including its exhibits, a copy of
which was attached as Exhibit 28.1 to the Partnership's Annual Report on Form
10-K for the fiscal year ended December 31, 1989.

14. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------

Purchase Note Financing

The Purchase Notes are currently payable in equal semi-annual installments of
principal and interest over 18 years, commencing in 1984, and accrue interest at
11%. At December 31, 2002, approximately $6.7 million, including $ 5.7 million
of accrued interest, was due to MCC under the Purchase Notes. During 2002, the
Partnership made principal and interest payments to MCC on the Purchase Notes of
$3.5 million and $0.1 million, respectively. See Part II, "8. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Liquidity and Capital Resources" for additional information.

Management of the Windsystem

Under the Management Agreement, EWS is obligated to exercise due diligence in
performing its duties and obligations. EWS's duties and obligations include, but
are not limited to: (1) representing the Partnership in its dealings with SCE,
(2) collecting all revenues from SCE, (3) disbursing funds to cover necessary
operating costs, including without limitation, repairs and maintenance,
easements, property taxes, debt service and insurance, (4) hiring and
supervising operating and maintenance personnel, (5) causing the Turbines to be
maintained in good condition and repair, (6) complying with any orders or
obligations imposed by any governmental agency with jurisdiction, unless the
Partnership instructs to the contrary, (7) investigating all accidents or damage
relating to the ownership, operation or maintenance of the Turbines or
infrastructural facilities, (8) enforcing warranty and insurance claims
associated with the Turbines, the infrastructural facilities and components
thereof, (9) complying with the Right-of-Way Grant operating conditions and
requirements, (10) operating, maintaining and repairing the infrastructural
facilities, (11) maximizing production of electric power, (12) using best
efforts to ensure costs and expenses are reasonable and competitive with those
of unaffiliated third parties, (13) providing quarterly accounting and operating
reports, and (14) performing other services, in its reasonable judgment, that it
may deem necessary.

As compensation for its services under the Management Agreement, EWS receives a
management fee of 2% of the Partnership's Gross Operating Proceeds. Under the
Management Agreement, EWS is entitled to be reimbursed for 115% of the
maintenance costs, including labor and material costs that it incurs in the
performance of services including services by third parties. See Part III, "12.
EXECUTIVE COMPENSATION - Windsystem Management Fees" for additional information.

Wind Park Easement Agreement

The Partnership uses a portion of the Operating Site and the Infrastructural
Improvements pursuant to the Wind Park Easement Agreement. Under the Wind Park
Easement Agreement, Mesa charges the Partnership rental fees in an amount equal
to the greater of 5% of Gross Operating Proceeds or the Partnership's pro rata

Page 15

share (with the other producers of electric energy from wind power on the
Operating Site) of the payments due the BLM under the Right-of-Way Grant.

Effective January 1, 1996, the BLM changed the annual rental payment due under
the Right-of-Way Grant to a flat rent of $79,000. ZPI and ZPII are each charged
a pro rata share of the $79,000 in accordance with the Wind Park Easement
Agreement based on their ratios of aggregated rated capacity of the turbines
installed on the Operating Site. Rental payments may be adjusted by the BLM
annually to reflect any change in the fair rental value of the Operating Site,
which could result in revised easement payments by the Partnership to Mesa.

PART IV

15. EXHIBITS, UNAUDITED FINANCIAL STATEMENT SCHEDULES,
--------------------------------------------------
AND REPORTS ON FORM 8-K
-----------------------

(a).1 Unaudited Financial Statements

Unaudited Balance Sheets at December 31, 2002 and 2001

Unaudited Statements of Operations for the years ended
December 31, 2002 and 2001

Unaudited Statements of Changes in Partners' Capital (Deficit)
for the years ended December 31, 2002 and 2001

Unaudited Statements of Cash Flows for the years ended
December 31, 2002 and 2001

Notes to Unaudited Financial Statements

(a).2 Exhibits

Number Description
- ------ -----------

3.1 First Amended and Restated Certificate and Agreement of
Limited Partnership of Zond-PanAero Windsystem Partners I
(Incorporated by reference from Exhibit A to the Partnership's
Registration Statement on Form 10 dated April 29, 1985).

3.2 First Amendment to First Amended and Restated Certificate
dated as of June 27, 1988 (Incorporated by reference from
Exhibit 3.2 to the Partnership's Annual Report on Form 10-K
(File No. 0-13510) for the fiscal year ended December 31,
1988).

10.1 Wind Park Power Purchase and Sale Agreement between PanAero
and Southern California Edison Company dated April 12, 1982;
Assignment of Wind Park Power Purchase and Sale Agreement
dated July 28, 1984, between PanAero and Mesa; and Partial
Assignment of Wind Park Power Purchase and Sale Agreement

Page 16

effective September 25, 1984, between Mesa and the
Partnership (Incorporated by reference from Exhibit B to the
Partnership's Registration Statement on Form 10 dated
April 29, 1985).

10.2 Right-of-Way Grant (Serial No. CA-11688-A) issued by the
Bureau of Land Management of the United States Department of
the Interior to PanAero and assigned to Mesa (Incorporated by
reference from Exhibit C to the Partnership's Registration
Statement on Form 10 dated April 29, 1985).

10.3 Wind Park Easement Agreement dated as of September 7, 1984,
between Mesa and the Partnership; Amendment to Wind Park
Easement Agreement dated as of November 28, 1984
(Incorporated by reference from Exhibit D to the
Partnership's Registration Statement on Form 10 dated
April 29, 1985).

10.4 Windsystem Management Agreement dated July 27, 1988, between
EWS and the Partnership, and First Amendment to Windsystem
Management Agreement, (Incorporated by reference from Exhibit
10.5 to the Partnership's Annual Report on Form 10-K (File No.
0-13510) for the fiscal year ended December 31, 1988).

10.5 Second Amendment to Windsystem Management Agreement between
EWS and the Partnership (Incorporated by reference from
Exhibit 10.5 to the Partnership's Annual Report on Form 10-K
(File No. 0-13510) for the fiscal year ended December 31,
1989).

10.6 Purchase Note and Security Agreement dated as of November 26,
1984, between MCC and the Partnership (Incorporated by
reference from Exhibit G to the Partnership's Registration
Statement on Form 10 dated April 29, 1985).

10.7 First Amendment to Purchase Note and Security Agreement dated
as of November 7, 1989, between MCC and the Partnership
(Incorporated by reference from Exhibit 10.7 to the
Partnership's Annual Report on Form 10-K (File No. 0-13510)
for the fiscal year ended December 31, 1989).

10.8 Agreement Addressing Renewable Energy Pricing and Payment
Issues dated as of August 22, 2001 between Mesa and SCE
(Incorporated by reference from Exhibit 99.1 to the
Partnership's Current Report on Form 8-K dated November 25,
2003).

(b) Reports on Form 8-K

Current Report on Form 8-K filed with the SEC on February 13, 2002, as
amended by Form 8-K/A, filed with the SEC on February 7, 2002.

Page 17

ZOND-PANAERO WINDSYSTEM PARTNERS I,
A CALIFORNIA LIMITED PARTNERSHIP
UNAUDITED FINANCIAL STATEMENTS

INDEX TO UNAUDITED FINANCIAL STATEMENTS PAGE

Unaudited Balance Sheets at F-1
December 31, 2002 and 2001

Unaudited Statements of Operations for the years ended F-2
December 31, 2002 and 2001

Unaudited Statements of Changes in Partners' Capital (Deficit) for the F-3
years ended December 31, 2002 and 2001

Unaudited Statements of Cash Flows for the years ended F-4
December 31, 2002 and 2001

Notes to Unaudited Financial Statements F-5

Page 18

F-1
ZOND-PANAERO WINDSYSTEM PARTNERS I,
A CALIFORNIA LIMITED PARTNERSHIP
UNAUDITED BALANCE SHEETS
(Dollars in thousands)

December 31, 2002 December 31, 2001
-------------------- --------------------

Assets
Current assets:
Cash and cash equivalents $ 472 $ 83
Accounts receivable 105 1,320
Accounts receivable from related party 813
Other current assets 39 41
------------------- ------------------
Total current assets 1,429 1,444
------------------- ------------------

Noncurrent assets
Buildings 98 98
Property, plant and equipment 49,561 49,561
Less-accumulated depreciation (44,723) (42,228)
------------------- ------------------
Total noncurrent assets 4,936 7,431
------------------- ------------------
Total assets $ 6,365 $ 8,875
=================== ==================

Liabilities and partners' capital (deficit)
Current liabilities:
Accounts payable and accrued expenses $ 68 128
Accounts payable to related party 547 250
Current portion of notes payable
to related party 1,008 4,497
Accrued interest to related party 5,718 5,442
------------------- ------------------
Total current liabilities $ 7,341 $ 10,317
------------------- ------------------

General partner (4) (6)
Limited partners (1.549) (2,011)
Substituted limited partner (Note 1) (4) (6)
Contributed capital 581 581
------------------- ------------------
Total partners' (deficit) (976) (1,442)
------------------- ------------------

Total liabilities and partners' ------------------- ------------------
capital (deficit) $ 6,365 $ 8,875
=================== ==================

See accompanying notes to unaudited financial statements.

Page 19

F-2

ZOND-PANAERO WINDSYSTEM PARTNERS I,
A CALIFORNIA LIMITED PARTNERSHIP
UNAUDITED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per Unit value, which is in whole dollars)

For the year ended For the year ended
December 31, 2002 December 31, 2001
-------------------- --------------------

Revenue:
Sale of electricity $ 4,814 $ 4,317
Other income 41 136
------------------- ------------------
Total revenue 4,855 4,453

Costs and expenses:
Depreciation 2,495 2,497
Interest expense 376 689
Property taxes 72 168
Easement fees to related party 261 170
Management fees to
related party 104 68
Maintenance and other operating costs
to related and other parties 850 958
Insurance costs 222 87
Other operating costs 9 24
------------------- ------------------
Total costs and expenses 4,389 4,661

Net income (loss) $ 466 $ (208)
=================== ==================

Net income (loss) per Unit $ 392 $ (175)
=================== ==================

Number of outstanding Limited
Partner Units 1,190 1,190

See accompanying notes to unaudited financial statements.

Page 20

F-3
ZOND-PANAERO WINDSYSTEM PARTNERS I,
A CALIFORNIA LIMITED PARTNERSHIP
UNAUDITED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Dollars in thousands)

Substituted
Limited Contributed
General Limited Partner Capital
Total Partner Partners (Note 1) (Note 4)
---------- --------- ------------ -------------- --------------

Profit and loss allocation 100.00% 0.50% 99.00% 0.50%
---------- --------- ------------ -------------- ---------------

Balance at December 31, 2000 (1,234) (5) (1,805) (5) 581

Net (loss) (208) (1) (206) (1) -
---------- --------- ------------ -------------- ---------------

Balance at December 31, 2001 (1,442) (6) (2,011) (6) 581

Net income (loss) 466 2 462 2 -
---------- --------- ------------ -------------- ---------------

Balance at December 31, 2002 $ (976) $ (4) $ (1,549) $ (4) $ 581
===========================================================================

See accompanying notes to unaudited financial statements.

Page 21

F-4
ZOND-PANAERO WINDSYSTEM PARTNERS I,
A CALIFORNIA LIMITED PARTNERSHIP
UNAUDITED STATEMENTS OF CASH FLOWS
(Dollars in thousands)

For the year ended For the year ended
December 31, 2002 December 31, 2001
-------------------- --------------------

Cash Flow From Operating Activities:

Net income (loss) 466 (208)

Reconciliation of net loss to net cash
provided by operating activities:

Depreciation 2,495 2,497

Changes in operating assets and liabilities
Accounts receivable 1,215 (1,030)
Amount receivable from related party (813) -
Prepaid insurance and other 2 11
Accounts payable and accrued expenses (60) 102
Amount payable to related party 297 90
Accrued interest payable to related party 276 689
------------------- ------------------
Net cash provided by operating activities 3,878 2,151

Cash flows used in financing activities:

Principal payments on notes payable to related party $ (3,489) $ (2,085)
------------------- ------------------

Net increase in cash and cash equivalents 389 66

Cash and cash equivalents at beginning of year 83 17
------------------- ------------------

Cash and cash equivalents at end of year $ 472 $ 83
=================== ==================

Supplemental disclosure of cash flow information:
Cash paid during the year for interest 99 -

See accompanying notes to unaudited financial statements.

Page 22

F-5

ZOND-PANAERO WINDSYSTEM PARTNERS I,
A CALIFORNIA LIMITED PARTNERSHIP

NOTES TO UNAUDITED FINANCIAL STATEMENTS

NOTE 1 - THE PARTNERSHIP

Introduction

Zond-PanAero Windsystem Partners I, a California Limited Partnership (the
"Partnership"), was formed on June 29, 1984 to purchase, own and operate a
system of 300 Vestas Energy A/S Model V-15 wind turbine electric generators (the
"Turbines"). The Turbines, together with certain infrastructural improvements
(the "Infrastructural Improvements") which are owned by Mesa Wind Developers
("Mesa"), a joint venture between Enron Wind Systems, Inc. ("EWSI") and an
affiliate of PanAero Corporation ("PanAero"), form an integrated electric power
generating facility (the "Windsystem") with a rated capacity of 19.5 megawatts
in the San Gorgonio Pass area of the San Bernardino Mountains near Palm Springs,
California (the "Operating Site"). EWSI is a developer and operator of
commercial wind-powered electric generating facilities and PanAero is a wind
resources development company. On January 3, 1997, EWSI's parent, Zond
Corporation, became a wholly-owned subsidiary of Enron Renewable Energy Corp.,
which is wholly-owned by Enron Corp. ("Enron"). In May 1997, the name of Zond
Corporation was changed to Enron Wind Corp. ("EWC").

The general partner (the "General Partner") of the Partnership is Zond
Windsystems Management LLC ("ZWM"), a California limited liability company
wholly-owned by Enron Wind Systems, LLC ("EWS"). See "Bankruptcy and Mergers"
regarding certain affiliated mergers and name changes affecting ZWM, EWS and
EWC. The business of the Partnership and the respective rights of its partners,
including the Partnership's limited partners (the "Limited Partners"), are
governed by the First Amended and Restated Certificate and Agreement of Limited
Partnership of Zond-PanAero Windsystem Partners I, a California Limited
Partnership, entered into on November 29, 1984, as amended (the "Partnership
Agreement").

The Partnership will terminate on December 31, 2005, unless earlier terminated
in accordance with the provisions of the Partnership Agreement.

The Windsystem, which became operational in November 1984, was constructed by
Mesa Construction Company ("MCC"), a joint venture between an affiliate of EWSI
and an affiliate of PanAero. The Partnership paid MCC a total of $48.9 million
for the purchase, construction and installation of the Turbines, comprised of
$22.4 million in cash and $26.5 million in the form of eighteen-year, 13% notes
payable in equal semi-annual installments of principal and interest totaling
$1.9 million (the "Purchase Notes"). See Notes 3 and 4 below.

Bankruptcy and Mergers

Commencing on December 2, 2001, and periodically thereafter, Enron and certain
of its subsidiaries filed voluntary petitions for relief under Chapter 11 of the

Page 23

United States Bankruptcy Code (the "Bankruptcy Code"). On February 20, 2002, EWC
and EWSI each filed a voluntary petition for relief under Chapter 11 of the
Bankruptcy Code. Additionally, two California limited liability companies formed
on February 19, 2002 for the purposes of merging with EWC and EWSI in
anticipation of the sale of Enron's wind business also filed voluntary petitions
for relief under Chapter 11 of the Bankruptcy Code.

On April 12, 2002, Zond Windsystems Management Corporation ("ZWMC"), the general
partner of the Partnership at such time, merged with and into a third California
limited liability company, formed on March 12, 2002, and Zond Windsystems
Management LLC was the surviving limited liability company. On May 3, 2002, Zond
Construction Corp. merged with and into a fourth California limited liability
company, formed on March 21, 2002, and the surviving limited liability company
changed its name to Zond Construction LLC ("ZC").

Substituted Limited Partner

PanAero Management Corporation ("PAMC"), a California corporation wholly-owned
by PanAero, formerly served as a general partner of the Partnership (together
with ZWMC, the "Former General Partners"). In June 1988, the Partnership
solicited a vote by proxy of the Limited Partners to remove PAMC as a general
partner. Pursuant to that vote, PAMC was converted to a substituted limited
partner. Although the term "Substituted Limited Partner" is defined in the
Partnership Agreement as any individual, partnership, corporation, trust or
other entity admitted to the Partnership as a Limited Partner pursuant to
transfer provisions under the Partnership Agreement, the term substituted
limited partner is used in the Unaudited Balance Sheets at December 31, 2002 and
2001 and the Unaudited Statements of Changes in Partners' Capital (Deficit) for
the year ended December 31, 2002 and 2001 only in reference to the substituted
limited partner interest created by the removal of PAMC as a general partner.
Under an Agreement of Settlement and Mutual Releases (the "Settlement
Agreement") executed on June 26, 2000, PAMC agreed to transfer its substituted
limited partner interest in the Partnership to ZWMC.

Sale to General Electric

Following the sale to GEPS, new management was appointed to manage and operate
the Partnership, and ZWM's principal executive offices were moved to 1400 Smith
Street, Houston, Texas 77002. Eric D. Gadd was appointed President and Chief
Executive Officer of ZWM on September 26, 2002. ZWM has no directors.

Page 24

Operation and Maintenance Services

Substantial Transactions and Operating Agreements

The accompanying unaudited financial statements include substantial transactions
with related parties. These transactions are further described in Notes 3 and 4.

A summary of the major operating agreements entered into by the Partnership,
directly or indirectly, is set forth below:

(1) The Partnership sells the electricity produced by the Turbines to
Southern California Edison Company ("SCE"), pursuant to a power
purchase and sales agreement (the "Power Agreement"). The Power
Agreement was originally entered into between SCE and PanAero in April
1982 and covers an aggregate of 29.9 megawatts of generating capacity.
PanAero assigned the Power Agreement to Mesa in July 1984. Mesa
subsequently assigned the portion of the Power Agreement that covers
the aggregate rated capacity of the Turbines (19.5 megawatts), to the
Partnership until December 31, 2004. The remaining 10.4 megawatts of
generating capacity available under the Power Agreement was assigned by
Mesa to Zond-PanAero Windsystem Partners II, a California Limited
Partnership ("ZPII"), whose general partner is an affiliate of the
General Partner. SCE purchases electricity produced by the Turbines at
a price equal to the greater of 89% of SCE's "Cost of Energy" (as
defined in the Power Agreement) or a fixed minimum price of $.102 per
kilowatt hour ("kWh"), with the limitation that when 89% of SCE's Cost
of Energy exceeds $.20 kWh, the price per kWh paid by SCE will be
limited to $.20 per kWh plus 70% of the difference between 89% of SCE's
Cost of Energy and $.20 per kWh. During 2001, the Partnership earned
$.102 per kWh of electricity delivered to SCE.

(2) Since July 1988, the Partnership has contracted with EWS (or its
predecessor) for the operation and maintenance of the Turbines and the
performance of certain ancillary management services, such as
collection of revenues from SCE and the administration and payment of
all Partnership expenses. Under the provisions of the Management
Agreement, the Partnership pays a management fee of 2% of "Gross
Operating Proceeds", which are defined as all gross receipts from the
sale of electricity generated by the Turbines and all amounts paid in
lieu of receipts from the sale of electricity, including, without
limitation, any proceeds of systems performance or wind resource
insurance, casualty loss and business interruption insurance paid in
reimbursement of lost revenues and warranty payments in reimbursement
of lost revenues. Under the Management Agreement, EWS is entitled to be
reimbursed for 115% of the maintenance costs, including labor and
material costs that it incurs in the performance of services including
services performed by third parties. See Note 4.

Page 25

(3) The Operating Site is situated on two adjoining parcels of land,
consisting of approximately 440 acres, located in the San Gorgonio Pass
area of the San Bernardino Mountains approximately 16 miles northwest
of Palm Springs, California. The Partnership uses the Infrastructural
Improvements and a portion of the Operating Site pursuant to a 20-year
easement granted by Mesa under the terms of a Wind Park Easement
Agreement dated as of September 7, 1984, as amended (the "Wind Park
Easement Agreement"). Mesa has rights to develop wind energy resources
at the Operating Site, which includes the Infrastructural Improvements,
under a right-of-way grant (the "Right-of-Way Grant") from the United
States Bureau of Land Management ("BLM"). The primary term of the
Right-of-Way Grant expired on January 26, 2003. On December 19, 2002,
the Right-of-Way Grant was extended for a ten-year period commencing on
January 27, 2003; however, the Wind Park Easement Agreement still
expires on December 31, 2004.

EWSI, PanAero, and their affiliates have developed and sold additional
wind turbines on the Operating Site to ZPII and Mesa has granted a
similar easement to ZPII.

Under the Wind Park Easement Agreement, Mesa charges the Partnership
rental fees in an amount equal to the greater of 5% of Gross Operating
Proceeds or the Partnership's pro rata share (with the other producers
of electric energy from wind power on the Operating Site) of the
payments due the BLM under the Right-of-Way Grant. Effective January 1,
1996, the BLM changed the annual rental payment due under the
Right-of-Way Grant to a flat rent of $79,000. ZPI and ZPII are each
charged a pro rata share of the $79,000 in accordance with the Wind
Park Easement Agreement based on their ratios of aggregated rated
capacity of the turbines installed on the Operating Site as described
above. Rental payments may be adjusted by the BLM annually to reflect
any change in the fair rental value of the Operating Site, which could
result in revised easement payments by the Partnership to Mesa.

Cash Distributions

The Partnership distributes cash in accordance with the terms of the Partnership
Agreement. Due to less-than-projected operating results, the Partnership has not
distributed any cash to the General Partner, Limited Partners, Dean Witter
Reynolds Inc. as a special limited partner, the Former General Partners or the
substituted limited partners during any fiscal year other than 1985, in which
the Partnership distributed an aggregate of approximately $158,000 to the
Limited Partners and $2,000 to the Former General Partners. Under the Purchase
Notes, the Partnership cannot make cash distributions to its partners unless
certain cash reserve balances are maintained, no events of default exist, and
certain ratio tests are met. The Partnership did not meet these criteria, and
did not make cash distributions to its partners, during 2002.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The Partnership's accounting records are maintained on the basis used for
federal income tax reporting purposes. For purposes of filing with the
Securities and Exchange Commission, the accounting records have been adjusted to
reflect generally accepted accounting principles in the United States ("GAAP").

Page 26

Income Taxes

The Partnership is not subject to federal and state income taxes. Accordingly,
no recognition has been given to income taxes in the accompanying unaudited
financial statements since the income or loss of the Partnership is to be
included in the tax returns of the individual partners. The tax returns of the
Partnership are subject to examination by federal and state taxing authorities.
If such examinations result in adjustments to distributive shares of taxable
income or loss, the tax liability of the partners could be adjusted accordingly.

The tax attributes of the Partnership's net assets flow directly to each
individual partner. Individual partners will have different investment bases
depending upon the timing and prices of acquisition of Partnership units.
Further, each partner's tax accounting, which is partially dependent upon their
individual tax position, may differ from the accounting followed in the
financial statements. Accordingly, there could be significant differences
between each individual partner's tax basis and their proportionate share of the
net assets reported in the financial statements. Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", requires
disclosure by a publicly held partnership of the aggregate difference in the
basis of its net assets for financial and tax reporting purposes. However, the
Partnership does not have access to information about each individual partner's
tax attributes in the Partnership, and the aggregate tax basis cannot be readily
determined. In any event, management does not believe that, in the Partnership's
circumstances, the aggregate difference would be meaningful information.

Cash Equivalents

Cash equivalents are considered to be all highly liquid investments purchased
with an original maturity of three months or less.

Depreciation

The Turbines are recorded at cost and are being depreciated on the straight-line
method over a twenty-year life. Capitalized improvements and the building are
being depreciated on a straight-line method over a fifteen-year life.
Expenditures that materially increase the useful lives of assets are
capitalized, while ordinary maintenance and repairs are charged to operations as
incurred. Replacement of defective parts or expenditures designed to modify
Turbines to improve their productivity are expensed as incurred.

Earnings Per Limited Partner Unit

Earnings per Limited Partner unit are calculated based upon the number of
Limited Partner units outstanding during each year.

Fair Value of Financial Instruments

For each class of financial instruments, including cash and cash equivalents,
accounts receivable, prepaid insurance and other current assets, accounts
payable and accrued expenses, accounts payable to related party and accrued
interest to related party, the carrying amount approximates fair value because
of the short maturity of those instruments.

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The estimated fair value of the Partnership's note payable to related party is
not materially different from its carrying amount. The fair value is based on
discounted present value cash flows using the Partnership's current borrowing
rate.

Estimates

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Electricity Sales

Power generated by the Windsystem is recognized as income upon delivery of power
to SCE at prices as defined in the Power Agreement.

NOTE 3 - PURCHASE NOTES

Under an agreement reached in April 1989, MCC reduced the interest rate on the
Purchase Notes to 11% effective in January 1990. The Partnership secured its
payment obligations under the Purchase Notes by granting MCC security interests
in the Turbines and other intangible collateral including the rights, title and
interests of the Partnership under several of the Partnership's major operating
agreements.

The Partnership's cash flows have been insufficient to pay all scheduled
principal and interest associated with the Purchase Notes. The Purchase Notes
matured on December 31, 2002. At that time, there was $1.0 million and $5.7
million of principal and interest in arrears, respectively. The Partnership's
failure to make timely payments on the Purchase Notes gave MCC the right to
foreclose against the collateral of its loans as defined in the Purchase Notes.

NOTE 4 - AMOUNTS PAYABLE TO RELATED PARTIES, NET

In addition to the Purchase Notes (See Note 3 above) the Partnership had a $0.5
million and $0.1 million payable to Mesa and EWS, respectively. Amounts payable
to Mesa include easement fees and other miscellaneous expenses related to
Windsystem operations. Amounts payable to EWSI include management fees and other
miscellaneous expenses related to Windsystem operations. Such amounts are
unsecured and non-interest bearing.

The Partnership has the following related party transactions and relationships:

(1) Mesa assigned easement rights to a portion of the Operating Site and
granted rights to use the Infrastructural Improvements to the
Partnership under the Wind Park Easement Agreement (See Note 1 above).
The Partnership incurred $0.3 million in easement fees during 2002
pursuant to the Wind Park Easement Agreement.

(2) The Partnership contracted with EWSI to operate and maintain the
Turbines and to perform certain management and administrative services
under the Management Agreement (See Note 1 above). The Partnership
incurred expenses of $0.9 million during 2002 pursuant to the
Management Agreement.

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In 1988, Mesa assigned $581,000 of receivables from the Partnership to each of
its partners, EWSI and an affiliate of PanAero. EWSI subsequently forgave its
$581,000 of receivables from the Partnership. This forgiveness was treated as a
capital contribution in the accompanying financial statements.

NOTE 5 - LITIGATION

SCE Dispute

On March 27, 2001, the California Public Utilities Commission (the "CPUC")
issued an order (the "CPUC Order") obligating SCE to begin payments for power
delivered on a going-forward basis. Following the issuance of the Order, SCE
initiated discussions with renewable source generators, including the
Partnership, to agree on a payment plan for power delivered on a going-forward
basis. The Partnership agreed with SCE to receive payments twice monthly for
power delivered. Payments for the last five days in March 2001, from the date
the CPUC Order was effective, through the end of 2001 were received from SCE.
The CPUC Order did not address the issue of payments due for the period between
November 1, 2000 and March 26, 2001.

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the benefit of the Partnership, entered into a settlement agreement with SCE
that, among other things, set forth the terms for payment of past due amounts to
Mesa, and ultimately the Partnership (the "SCE Payment Agreement").

NOTE 6 - ACCOUNTING PRONOUNCEMENTS

NOTE 7 - SUBSEQUENT EVENTS

Bankruptcy

As of December 19, 2003, neither ZWM nor ZC has filed for bankruptcy.

Operation and Maintenance Services

SCE Dispute

The Partnership, along with the other Power Generators party to the SCE
Litigation, dismissed the SCE Litigation in August 2003.

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Purchase Notes

From January 1, 2003 through December 19, 2003, $0.6 million was paid on the
Purchase Notes, all of which was applied to principal.

As of December 19, 2003, MCC has not exercised its right to foreclose under the
Purchase Notes.

FERC Investigation

Recently Issued Accounting Pronouncements

On January 1, 2003, the Partnership adopted SFAS No. 143 "Accounting for Asset
Retirement Obligations". On January 1, 2003, the Partnership adopted SFAS No.
145, "Rescission of SFAS No. 4, 44, and 64, Amendment of SFAS No. 13, and
Technical Corrections". These adoptions did not have a material impact on the
Partnership's results of operations or financial condition.

The Partnership adopted SFAS No. 148 on January 1, 2003. The Partnership did not
change to the fair value based method of accounting for stock-based employee
compensation. Accordingly, the adoption of SFAS No. 148 would only affect the
Partnership's financial condition or results of operations if the Partnership
elects to change to the fair value method specified in SFAS No. 123. The
adoption of SFAS No. 148 had no effect on the financial position, results of
operations, or cash flows of the Partnership.

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