UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

Annual Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934

For the calendar year ended December 31, 2003
Commission File No. 001-12995

CE CASECNAN WATER AND ENERGY COMPANY, INC.
------------------------------------------
(Exact name of registrant as specified in its charter)

Philippines Not applicable
-------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

24th Floor, 6750 Building, Ayala Avenue
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Makati, Manila, Philippines Not applicable
--------------------------- -------------------
(Address of principal executive offices) (Zip Code)

(632) 892-0276
--------------
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: N/A
Securities registered pursuant to Section 12(g) of the Act: N/A

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to be the
best of each of the registrants' knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined by Rule 12b-2 of the Act). Yes [ ] No [X]

All of the shares of CE Casecnan Water and Energy Company, Inc. are held by a
limited group of private investors. As of January 31, 2004, 767,162 shares of
Common Stock, $0.038 par value, were outstanding.

TABLE OF CONTENTS
-----------------

PART I
Item 1. Business.............................................................3
Item 2. Properties..........................................................13
Item 3. Legal Proceedings...................................................13
Item 4. Submission of Matters to a Vote of Security Holders.................14

PART II

Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.................................................15
Item 6. Selected Financial Data.............................................15
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations...............................................15
Item 7A. Qualitative and Quantitative Disclosures about Market Risk..........23
Item 8. Financial Statements and Supplementary Data.........................24
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures...............................................42
Item 9A. Controls and Procedures.............................................42

PART III

Item 10. Directors and Executive Officers of the Registrant..................43
Item 11. Executive Compensation..............................................44
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters.....................................45
Item 13. Certain Relationships and Related Transactions......................46
Item 14. Principal Accountant Fees and Services..............................46

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....47
Signatures....................................................................48
Exhibit Index.................................................................49

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PART I

ITEM 1. BUSINESS.

GENERAL

CE Casecnan Water and Energy Company, Inc. (the "Company" or "CE Casecnan") is a
privately held Philippine corporation formed indirectly by MidAmerican Energy
Holdings Company ("MidAmerican") in September of 1994 solely to develop,
construct, own and operate the Casecnan Project, a multi-purpose irrigation and
hydroelectric power facility with a rated capacity of approximately 150
Megawatts ("MW") located on the island of Luzon in the Republic of the
Philippines (the "Casecnan Project"). The Casecnan Project commenced commercial
operations on December 11, 2001.

The Securities (described herein) are recourse only to the Company. MidAmerican
has not guaranteed directly or indirectly the payment or performance of any
Company obligations.

The Company's principal executive office is located at 24th Floor, 6750
Building, Ayala Avenue, Makati City, Philippines, and its telephone number is
(632) 892-0276. The Company's principal office is located at Pantabangan in the
Province of Nueva Ecija, Philippines.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements that do not directly or exclusively relate to
historical facts. These statements are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. You can
typically identify forward-looking statements by the use of forward-looking
words, such as "may", "will", "could", "project", "believe", "anticipate",
"expect", "estimate", "continue", "potential", "plan", "forecast" and similar
terms. These statements represent the Company's intentions, plans, expectations
and beliefs and are subject to risks, uncertainties and other factors. Many of
these factors are outside the Company's control and could cause actual results
to differ materially from such forward-looking statements. These factors
include, among others:

o general economic, political and business conditions in the
Philippines;

o governmental, statutory, regulatory or administrative initiatives
affecting the Company or the power generation industry;

o weather effects on sales and revenues;

o general industry trends;

o increased competition in the power generation industry;

o availability of qualified personnel;

o financial or regulatory accounting principles or policies imposed by
the Public Company Accounting Oversight Board, the Financial
Accounting Standards Board ("FASB"), the Securities and Exchange
Commission ("SEC") and similar entities with regulatory oversight; and

o other business or investment considerations that may be disclosed from
time to time in the Company's SEC filings or in other publicly
disseminated written documents.

-3-

The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. The foregoing review of factors should not be construed as
exclusive.

THE CASECNAN PROJECT

The Casecnan Project is located in the central part of the island of Luzon. It
consists generally of diversion structures in the Casecnan and Taan rivers that
capture and divert excess water in the Casecnan watershed by means of concrete,
in-stream diversion weirs and transfer that water through a transbasin tunnel of
approximately 23 kilometers. During the water transfer, the elevation
differences between the two watersheds allow electrical energy to be generated
at an approximately 150 MW rated capacity power plant, which is located in an
underground powerhouse cavern at the end of the transbasin water tunnel. A
tailrace discharge tunnel then delivers water to the existing underutilized
water storage reservoir at Pantabangan, providing additional water for
irrigation and increasing the potential electrical generation at two downstream
existing hydroelectric facilities of the Philippine National Power Corporation
("NPC"), the government-owned and controlled corporation that is the primary
supplier of electricity in the Philippines. Once in the reservoir at
Pantabangan, the water is under the control of the Philippine National
Irrigation Administration ("NIA").

The Casecnan Project was developed on a build-own-operate-transfer ("BOOT")
basis, that is, an arrangement under which the Company agreed to build and
thereafter own and operate the Casecnan Project for a twenty-year cooperation
period (the "Cooperation Period"), after which ownership and operation of the
Project will be transferred to NIA at no cost on an "as-is" basis. After
conclusion of a public solicitation for competing proposals, NIA and the Company
entered into a project agreement in June 1995 (the "Project Agreement") which
set forth the terms of the BOOT arrangement. The Casecnan Project was
subsequently designated a high priority project under Republic Act No. 529 by
the National Economic and Development Authority of the Philippines. The
twenty-year Cooperation Period under the Project Agreement commenced on December
11, 2001, the start of the Project's commercial operations.

Upon the occurrence and during the continuance of certain force majeure events,
including those associated with Philippine political action, NIA may be
obligated to buy the Casecnan Project from CE Casecnan at a buyout price
expected to be in excess of the aggregate principal amount of the outstanding CE
Casecnan debt securities, together with accrued but unpaid interest.

The Republic of the Philippines ("ROP") 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.

NIA's payment obligations under the Project Agreement are the Company's sole
source of operating revenues. Because of the Company's dependence on NIA, any
material failure of NIA to fulfill its obligations under the Project Agreement
and any material failure of the Republic of the Philippines to fulfill its
obligations under the Performance Undertaking would significantly impair the
ability of the Company to meet its obligations under the Securities.

CE Casecnan financed a portion of the costs of the Casecnan Project through the
issuance of $125 million of its 11.45% Senior Secured Series A Notes due 2005
(the "Series A Notes"), $171.5 million of its 11.95% Senior Secured Series B
Bonds due 2010 (the "Series B Bonds") and $75 million of its Senior Secured
Floating Rate Notes due 2002 ("FRNs"), pursuant to an indenture dated November
27, 1995 (as amended to date, the "Trust Indenture"). During 2002, the Company
repaid all amounts due under the FRNs.

-4-

THE CASECNAN PROJECT SUPPLEMENTAL AGREEMENT

Under the terms of the Project Agreement, NIA had the option of timely
reimbursing CE Casecnan directly for certain taxes CE Casecnan paid. If NIA did
not so reimburse CE Casecnan, certain taxes paid by CE Casecnan would result in
an increase in the Water Delivery Fee. The payment of certain other taxes by CE
Casecnan would have resulted automatically in an increase in the Water Delivery
Fee. As of September 30, 2003, CE Casecnan had paid approximately $59.1 million
in taxes, which pursuant to the foregoing provisions had resulted in an increase
in the Water Delivery Fee. NIA had failed to pay the portion of the Water
Delivery Fee each month related to the payment of these taxes by CE Casecnan. As
a result of the non-payment of the tax compensation portion of the Water
Delivery Fees, on August 19, 2002, CE Casecnan filed a Statement of Claim
against NIA pursuant to the Rules of Arbitration of the International Chamber of
Commerce (the "NIA Arbitration"), seeking payment of such portion of the Water
Delivery Fee and enforcement of the relevant provision of the Project Agreement
going forward.

NIA filed its Answer and Counterclaim on March 31, 2003. In its Answer, NIA
asserted, among other things, that most of the taxes which CE Casecnan had
factored into the Water Delivery Fee compensation formula did not fall within
the scope of the relevant section of the Project Agreement, that the
compensation mechanism itself was invalid and unenforceable under Philippine law
and that the Project Agreement was inconsistent with Philippine law. As such,
NIA sought dismissal of CE Casecnan's claims and a declaration from the arbitral
tribunal that the taxes which had been taken into account in the Water Delivery
Fee compensation mechanism were not recoverable thereunder and that, at most,
certain taxes might be directly reimbursed (rather than compensated for through
the Water Delivery Fee) by NIA. NIA also counterclaimed for approximately $7
million which it alleges is due to it as a result of the delayed completion of
the Casecnan Project. On April 23, 2003, NIA filed a Supplemental Counterclaim
in which it asserted that the Project Agreement was contrary to Philippine law
and public policy and by way of relief sought a declaration that the Project
Agreement was void from the beginning or should be cancelled, or alternatively,
an order for reformation of the Project Agreement or any portions or sections
thereof which may be determined to be contrary to such law and or public policy.
On May 23, 2003, CE Casecnan filed its reply to NIA's counterclaims.

On October 15, 2003, the Company closed a transaction settling the NIA
Arbitration. In connection with the settlement, the Company entered into an
agreement (the "Supplemental Agreement") with NIA which, in addition to
providing for the dismissal with prejudice of all claims by CE Casecnan and
counterclaims by NIA in the NIA Arbitration, supplements and amends the Project
Agreement in certain respects as summarized below.

Payment in Cash and Delivery of Note
- ------------------------------------

As part of the settlement, on October 15, 2003, NIA paid to CE Casecnan the sum
of $17.7 million plus Philippine pesos 39.9 million (approximately $0.7 million)
and delivered to CE Casecnan a ROP $97.0 million 8.375% Note due 2013 (the "ROP
Note"). The Company had the option, between January 14, 2004 and February 14,
2004, to put the ROP Note to the ROP, for a price of par plus accrued interest.
Also at closing, the Company paid to the Philippine Bureau of Internal Revenue
("BIR") approximately $24.4 million in respect of Philippine income taxes on the
foregoing consideration and paid to NIA $1.6 million in respect of alleged late
completion of the Casecnan Project.

On January 14, 2004, the Company exercised its option to put the ROP Note to the
ROP and, in accordance with the terms of the put, the Company received $99.2
million (representing the $97.0 million par value plus accrued interest) from
the ROP on January 21, 2004.

-5-

Modifications to Water Delivery Fee
- -----------------------------------

Under the Project Agreement, the Water Delivery Rate increased by $0.00043 per
cubic meter for each $1,000,000 of certain taxes paid by CE Casecnan. The
Supplemental Agreement amends the per cubic meter Water Delivery Fee calculation
by eliminating this increase, such that the per cubic meter Water Delivery Rate
remains at $0.029 per cubic meter, escalated at 7.5% annually from January 1,
1994 through the first five years of the Cooperation Period, extending through
December 25, 2006. In lieu of such increase, the Company will be reimbursed for
certain taxes it pays during the remainder of the Cooperation Period.

Under the Project Agreement, the Water Delivery Fee payable monthly was a fixed
monthly payment based on an average water delivery of 801.9 million cubic meters
per year, pro-rated to approximately 66.8 million cubic meters per month,
multiplied by the per cubic meter rate as described above. Under the
Supplemental Agreement the Water Delivery Fee is equal to the Guaranteed Water
Delivery Fee plus the Variable Delivered Water Delivery Fee minus the Water
Delivery Fee Credit.

Guaranteed Water Delivery Fee. For the sixty-month period from December 25, 2003
through December 25, 2008, the Guaranteed Water Delivery Fee shall equal the
Water Delivery Rate, as described above, multiplied by approximately 66.8
million cubic meters (corresponding to the 801.9 million cubic meters per year).
For each month beginning after December 25, 2008 through the remainder of the
Cooperation Period, the Guaranteed Water Delivery Fee shall equal the Water
Delivery Rate multiplied by approximately 58.3 million cubic meters
(corresponding to 700.0 million cubic meters per year).

Variable Delivered Water Delivery Fee. Variable Delivered Water Delivery Fees
will be earned for months beginning after December 25, 2008. For each month
beginning after December 25, 2008 through the end of the Cooperation Period, the
Variable Delivered Water Delivery Fee shall be payable only from the date when
the cumulative Total Available Water (total delivered water plus the water
volume not delivered to NIA as a result of NIA's failure to accept energy
deliveries at a capacity up to 150 MW) for each contract year exceeds 700.0
million cubic meters. Variable Delivered Water Delivery Fees will be earned up
to an aggregate maximum of 1,324.7 million cubic meters for the period from
December 25, 2008 through the end of the Cooperation Period. No additional
Variable Delivered Water Delivery Fees will be earned over the 1,324.7 million
cubic meter threshold.

Water Delivery Credit. The Water Delivery Credit shall be applicable only for
each of the sixty-months from December 25, 2008 through December 25, 2013 and
shall equal the Water Delivery Rate as of December 25, 2008 multiplied by the
sum of each Annual Water Credit divided by sixty. The Annual Water Credit for
each contract year starting from December 25, 2003 and ending on December 25,
2008 shall equal 801.9 million cubic meters minus the Total Available Water for
each contract year. The Total Available Water in any such year will equal actual
deliveries with a minimum threshold of 700.0 million cubic meters.

Modifications to Excess Energy Delivery Fee
- -------------------------------------------

Under the Project Agreement, the Excess Energy Delivery Fee was a variable
amount based on actual electrical energy delivered in each month in excess of 19
gigawatt-hours ("GWh"), payable at a rate of $0.1509 per kWh. Under the
Supplemental Agreement, the per kWh rate for energy deliveries in excess of 19
GWh per month has been reduced, commencing in 2009, to $0.1132 (escalating at 1%
per annum thereafter), provided that any deliveries of energy in excess of 490
GWh but less than 550 GWh per year are paid for at a rate of 1.3 Philippine
pesos per kWh and deliveries in excess of 550 GWh per year are at no cost to
NIA.

For periods after September 28, 2003, the Supplemental Agreement provides that
if the Casecnan Project is not dispatched up to 150 MW whenever water is
available, NIA will pay for excess energy that could have been generated but was
not as a result of such dispatch constraint.

-6-

Other Provisions of the Supplemental Agreement
- ----------------------------------------------

The Company received an opinion from the Philippine Office of Government
Corporate Counsel as to the due authorization and enforceability of the
Supplemental Agreement. The Company also received written confirmation from the
Private Sector Assets and Liabilities Management Corporation that the issues
with respect to the Casecnan Project that had been raised by the interagency
review of independent power producers in the Philippines or that may have
existed with respect to the Project under certain provisions of the Electric
Power Industry Reform Act of 2001 calling for renegotiation of contracts such as
the Project Agreement have been satisfactorily addressed by the Supplemental
Agreement.

The Guaranteed Energy Delivery Fee, Force Majeure, Buyout and Dispute Resolution
provisions of the Project Agreement, as well as the Performance Undertaking
provided by the ROP, remain unaffected by the Supplemental Agreement and in full
force and effect.

CONCENTRATION OF RISK

NIA's payments of obligations under the Project Agreement are substantially
denominated in U.S. Dollars and are the Company's sole source of operating
revenues. Because of the Company's dependence on NIA, any material failure of
NIA to fulfill its obligations under the Project Agreement and any material
failure of the ROP to fulfill its obligations under the Performance Undertaking
would significantly impair the ability of the Company to meet its existing and
future obligations. No stockholders, partners or affiliates of the Company,
including MidAmerican, and no directors, officers or employees of the Company
will guarantee or be in any way liable for payment of the Company's obligations.
As a result, payment of the Company's obligations depends upon the availability
of sufficient revenues from the Company's business after the payment of
operating expenses.

TERMS OF THE SECURITIES

General
- -------

In November 1995, the Company issued and sold (i) the Series A Notes, (ii) the
Series B Bonds, and (iii) the FRNs. The Series A Notes, Series B Bonds and FRNs
are herein referred to collectively as the "Securities". During 2002, the
Company repaid all amounts due under the FRNs.

The Securities are direct obligations of the Company, secured solely by the
Company's collateral.

Payment of Principal and Interest
- ---------------------------------

Interest on the Series A Notes and the Series B Bonds is payable semiannually
every May 15 and November 15 (the "Securities Interest Payment Date"), which
commenced on May 15, 1996, to the registered Holders thereof at the close of
business on May 1 and November 1, as the case may be, preceding each Securities
Interest Payment Date. The initial average life of the Series A Notes was 8.84
years, and the initial average life of the Series B Bonds was 11.57 years.

The remaining balance of the $125 million principal Series A Notes due November
15, 2005 is payable in semiannual installments as follows:

-7-

PERCENTAGE OF PRINCIPAL
PAYMENT DATE AMOUNT PAYABLE
------------ --------------

May and November 15, 2004 17.00%
May and November 15, 2005 19.50%

The remaining balance of the $171.5 million principal of the Series B Bonds due
November 15, 2010 is payable in semiannual installments as follows:

PERCENTAGE OF PRINCIPAL
PAYMENT DATE AMOUNT PAYABLE
------------ --------------

May and November 15, 2004 2.00%
May and November 15, 2005 1.75%
May and November 15, 2006 10.50%
May and November 15, 2007 11.00%
May and November 15, 2008 11.00%
May and November 15, 2009 4.00%
May and November 15, 2010 5.00%

The $75.0 million principal of the FRNs due November 15, 2002 was payable in
semiannual installments, which commenced on November 15, 2000, and was completed
on November 15, 2002. The FRNs bore interest at LIBOR plus 3.00% per annum.

Priority of Payments
- --------------------

Except as otherwise provided for with respect to mandatory redemptions and loss
proceeds, all revenues received by the Company from the Casecnan Project have
been and will continue to be paid to the Revenue Fund maintained by the
Depositary (other than payments required to be used for VAT payments to the
ROP). Amounts paid to the Revenue Fund have been and will continue to be
distributed in the following order of priority: (a) to pay operating and
maintenance costs; (b) to pay certain administrative costs of the agents for the
Secured Parties under the Financing Documents; (c) to pay principal of, premium
(if any) and interest on the Securities (including any increased costs necessary
to gross up such payments for certain withholding taxes and other assessments
and charges), and principal and interest on other senior debt, if any; (d) to
cause the Debt Service Reserve Fund to equal the Debt Service Reserve Fund
Required Balance, as defined below; (e) to pay indemnification expenses and
other expenses to the Secured Parties and certain other costs, and (f) to the
Distribution Fund or Distribution Suspense Fund, as applicable.

Debt Service Reserve Fund
- -------------------------

The Company established a Debt Service Reserve Fund for the benefit of the
Holders of the Securities, which will be funded in cash from operating revenues,
subject to cash being available, as described under "Priority of Payments"
above. Such amounts will be deposited to the Debt Service Reserve Fund from time
to time to the extent required to cause it to equal the Debt Service Reserve
Fund Required Balance which is intended to approximate the highest amount of the
payments of principal and interest to be made on the Securities during any
semiannual period over the next three years from the last debt service payment.

Optional Redemption
- -------------------

The Series A Notes are subject to optional redemption by the Company, in whole
and not in part, at par plus accrued interest to the Redemption Date.

-8-

The Series B Bonds are subject to optional redemption by the Company, at any
time, in whole or in part, pro rata, at par plus accrued interest to the
redemption date plus a premium, calculated to "make whole" to comparable U.S.
treasury securities plus 150 basis points.

The Company also has the option to redeem the Securities, in whole or in part,
at par plus accrued interest at any time if, as a result of any change in
Philippine tax law or in the application or interpretation of Philippine tax law
occurring after the date of issuance of the Securities, the Company is required
to pay certain additional amounts described in the Trust Indenture.

Mandatory Redemption
- --------------------

The Securities are subject to mandatory redemption, pro rata, at par plus
accrued interest to the redemption date; (a) upon the receipt by the Company of
loss proceeds that exceed $15 million in respect of certain events of property
or casualty loss or similar events, unless the funds are to be utilized by the
Company for an Approved Restoration Plan; or (b) upon the receipt by the Company
of proceeds realized in connection with a Project Agreement Buyout.

Change in Control Put
- ---------------------

When a Change in Control occurs, each Holder will have the right to require the
Company to repurchase all or any part of such Holder's Securities at a cash
purchase price equal to 101% of the principal amount thereof, plus accrued
interest to the date of repurchase in accordance with the procedures set forth
in the Trust Indenture. There is no assurance that upon a Change in Control the
Company will have sufficient funds to repurchase the Securities.

Profit Distributions
- --------------------

Profit distributions may be made only from and to the extent of amounts on
deposit in the Distribution Fund or Distribution Suspense Fund. Distributions
are subject to the prior satisfaction of the following conditions:

(a) The amounts contained in the Principal Fund and the Interest Fund will be
equal to or greater than the aggregate scheduled principal and interest
payments next due on the Securities;

(b) No Default or Event of Default under the Trust Indenture shall have
occurred and be continuing;

(c) The Debt Service Coverage Ratio for the preceding 12-month period is equal
to or greater than 1.35 to 1 as certified by an officer of the Company;

(d) The projected Debt Service Coverage Ratio of the Securities for the
succeeding 12-month period is equal to or greater than 1.35 to 1, as
certified by an officer of the Company; and,

(e) The Debt Service Reserve Fund has a balance equal to or greater than the
Debt Service Reserve Fund Required Balance.

There were no profit distributions to the Company or its stockholders in 2003 or
2002. On January 22, 2004, the Company made a profit distribution of $38.0
million. Due to the dispute with a minority shareholder as described in Item 3.
Legal Proceedings - Stockholder Litigation, 15% or $5.7 million of the
distribution is being held in an unsecured account of the Company.

Ranking and Security for the Securities
- ---------------------------------------

The Securities are senior debt of the Company and are secured by (a) an
assignment of all revenues received by the Company from the Casecnan Project;
(b) a collateral assignment of all material contracts; (c) a lien on any
accounts

-9-

and funds on deposit under the Depositary Agreement; (d) a pledge of
approximately 100% of the capital stock of the Company, subject to release in
certain circumstances relating to accessing political risk insurance for the
benefit of the stockholders; and (e) a lien on all other material assets and
property interests of the Company. The Securities will rank pari passu with and
will share the Collateral on a pro rata basis with certain other senior secured
debt, if any (provided that the Debt Service Reserve Fund shall be held as
collateral solely for the obligations under the Securities). The proceeds of any
political risk insurance covering the capital investment will not be part of the
collateral for the Securities. While under the Trust Indenture the Company may
incur certain permitted debt senior to the Securities, it has no present
intention to do so.

Ratings
- -------

On April 24, 2003, Standard & Poor's Ratings Services ("S&P") lowered its rating
of CE Casecnan to BB from BB+ as a result of S&P's downgrade of debt securities
issued by the ROP. The downgrade of the ROP debt securities by S&P reflected the
country's growing debt burden and fiscal rigidity. On June 13, 2003, S&P
downgraded CE Casecnan's senior secured notes rating to B+ from BB and stated
that the outlook for the rating was negative. On December 12, 2003, S&P affirmed
the rating of B+ and changed the outlook to positive from negative.

On May 8, 2003, Moody's Investors Service ("Moody's") placed the Ba2 senior
secured notes rating of CE Casecnan on review for possible downgrade, noting
NIA's supplemental counterclaim seeking to have the Project Agreement declared
void. Moody's noted that actions by government related agencies and the
resulting instability of contractual arrangements was becoming inconsistent with
their rating approach that attaches significant benefit to offtake arrangements
with those government supported entities. On June 6, 2003, Moody's downgraded CE
Casecnan's senior secured notes rating to B2 from Ba2 and stated that the
outlook for the rating was negative. On November 21, 2003, Moody's affirmed the
rating of B2 and changed the outlook to stable. On January 27, 2004, Moody's
downgraded the long-term debt of the ROP to Ba3 from Ba2.

Nature of Recourse on the Securities
- ------------------------------------

The Company's obligations to make payments of principal, premium, if any, and
interest on the Securities are obligations solely of the Company secured solely
by the collateral. Neither the stockholders of the Company nor any affiliates
(including MidAmerican), incorporators, officers, directors or employees thereof
or of the Company, guaranteed the payment of, or have any obligation with
respect to payment of the Securities, except to the extent that stockholders of
the Company have pledged their stockholdings in the Company as security for the
notes and bonds issued by the Company. As a result, payment of the Company's
obligations depends upon the availability of sufficient revenues from the
Company's business after the payment of operating expenses.

Incurrence of Additional Debt
- -----------------------------

The Company shall not incur any debt other than "Permitted Debt." "Permitted
Debt" means:

(a) The Securities;

(b) Debt incurred to finance the construction of capital improvements to the
Casecnan Project, which are required to ensure compliance with applicable
law or anticipated changes therein; provided that no such debt may be
incurred unless at the time of incurrence of such debt, an independent
engineer confirms the reasonableness of (i) a certification by the Company
(containing customary assumptions and qualifications) that the proposed
capital improvements are reasonably expected to enable the Casecnan Project
to comply with applicable or anticipated legal requirements and (ii) the
calculations of the Company that demonstrate, after giving effect to the
incurrence of such debt, that the minimum project Debt Service Coverage
Ratio (x) for the next four consecutive fiscal quarters, commencing with
the quarter in which such debt is incurred,

-10-

taken as one annual period, and (y) for each subsequent fiscal year through
the final maturity date, will not be less than 1.3 to 1;

(c) Debt incurred to finance the construction of capital improvements to the
Casecnan Project not required by applicable law, so long as after giving
effect to the incurrence of such debt (i) no default or event of default
has occurred and is continuing, and (ii)(A) the independent engineer
confirms the reasonableness of (I) a certification by the Company
(containing customary assumptions and qualifications) that the proposed
capital improvements are technically feasible and prudent and (II) the
calculations of the Company that demonstrate, after giving effect to the
incurrence of such debt, (x) the minimum project Debt Service Coverage
Ratio for the next four consecutive fiscal quarters, commencing with the
quarter in which such debt is incurred, taken as one annual period, and in
every fiscal year thereafter, will not be less than 1.4 to 1 and (y) the
average projected Debt Service Coverage Ratio for all succeeding fiscal
years until the final maturity date will not be less than 1.7 to 1, or (B)
the rating agencies confirm that the incurrence of such debt will not
result in a rating downgrade;

(d) Working capital debt in an aggregate amount outstanding at any time not to
exceed $5 million;

(e) Debt incurred in connection with certain permitted interest rate and
currency hedging arrangements;

(f) Subordinated debt from affiliates in an aggregate amount not to exceed $150
million prior to completion and $100 million after completion, which shall
be used to finance capital, operating or other costs with respect to the
Casecnan Project;

(g) Debt incurred for purposes for which permitted liens may be incurred;

(h) Debt contemplated to be incurred pursuant to the Casecnan Project
documents, including obligations in connection with any letter of credit in
an aggregate amount outstanding at any time not to exceed $15 million;

(i) Purchase money debt and other debts in the ordinary course of business to
support the operation and maintenance of the Casecnan Project, in an
aggregate amount not to exceed $35 million at any time; and

(j) Permitted refinancing debt, if, as certified by an authorized officer of
the Company at the time of incurrence, (A)(i) after giving effect to the
incurrence of such debt, (x) the minimum projected Debt Service Coverage
Ratio for the next four consecutive fiscal quarters in which such debt is
incurred, taken as one annual period, and in every fiscal year thereafter,
will not be less than 1.5 to 1, and (y) for each subsequent fiscal year
through the final maturity date, the average project Debt Service Coverage
Ratio will not be less than 2.0 to 1, and (ii) the final maturity and
average life of the debt incurred each exceed those of the debt remaining,
(B) each principal payment equals that of each corresponding principal
payment of the debt being replaced or (C) the rating agencies confirm that
the incurrence of such debt will not result in a rating downgrade.

Principal Covenants
- -------------------

Principal covenants under the Trust Indenture require the Company, subject to
certain exceptions and qualifications, (a) not to incur (i) any debt except
Permitted Debt or (ii) any lien upon any of its assets except permitted liens;
(b) not to enter into any transaction of merger or consolidation, change its
form of organization, liquidate, wind-up or dissolve itself; (c) not to enter
into non-arm's length transactions or agreements with affiliates; (d) not to
engage in any business other than as contemplated by the Trust Indenture; (e)
not to amend, terminate or otherwise modify any material Project Document to
which it is a party, except as permitted under the Trust Indenture; (f) not to
sell, lease or transfer any property or assets material to the Casecnan Project
except in the ordinary course of business; (g) to operate and maintain the
Casecnan Project in accordance with the Approved Operation and Maintenance
Budget; (h)

-11-

to maintain insurance as required under the Trust Indenture; and (i) to enter
into an interest rate agreement for the Floating Rate Notes, within 30 days of
Closing, at a LIBOR cap of up to 7.5%.

Insurance
- ---------

The Company maintains insurance with respect to the Casecnan Project of a type
and in such amounts as are generally carried by companies engaged in similar
businesses and owning similar projects that are financed in a similar manner.
This coverage includes casualty insurance, including flood and earthquake
coverage, business interruption insurance, primary and excess liability
insurance, automobile insurance and workers compensation insurance. However, the
proceeds of such insurance may not be adequate to cover reduced revenues,
increased expenses or other liabilities arising from the occurrence of
catastrophic events. Moreover, there can be no assurance that such insurance
coverage will be available in the future at commercially reasonable rates or
that the amounts for which the Company is insured will cover all losses.
Nevertheless, the Company will not reduce or cancel the coverage if the
Insurance Consultant determines it is not reasonable to do so and insurance is
available on commercially reasonable terms.

Regulatory Matters
- ------------------

The Philippine Congress has passed the Electric Power Industry Reform Act of
2001 ("EPIRA"), which is aimed at restructuring the Philippine power industry,
privatizing the NPC and introducing a competitive electricity market, among
other initiatives. The implementation of EPIRA may have an impact on the
Company's future operations in the Philippines and the Philippines power
industry as a whole, the effect of which is not yet determinable or estimable.

In connection with an interagency review of approximately 40 independent power
project contracts in the Philippines pursuant to EPIRA, the Casecnan Project
(together with four other unrelated projects) was reportedly identified as
raising legal and financial questions and, with those projects, had been
prioritized for renegotiation. In connection with the settlement of the NIA
Arbitration and as part of the Supplemental Agreement transaction, the Company
received written confirmation from the Private Sector Assets and Liabilities
Management Corporation that the issues with respect to the Casecnan Project that
had been raised by the interagency review of independent power project contracts
in the Philippines or that may have existed with respect to the Casecnan Project
under certain provisions of EPIRA calling for renegotiation of contracts such as
the Project Agreement have been satisfactorily addressed by the Supplemental
Agreement. Company representatives, together with certain current and former
government officials, also were requested to and did appear, during 2002 and the
first half of 2003, before a Philippine Senate committee which had raised
questions and made allegations with respect to the Casecnan Project's tariff
structure and implementation. The Company believes that as a result of the
settlement of the NIA Arbitration and the entering into of the Supplemental
Agreement (see Item 1. Business - The Casecnan Project Supplemental Agreement),
the questions and allegations raised by the Philippine Senate committee have
been addressed, although there can be no assurance the committee does not
schedule additional hearings or that additional inquiries by the Philippine
Congress or any agency of the Philippine government will not be made in the
future.

Employees
- ---------

At December 31, 2003, the Company had 43 full-time employees consisting of
operations, maintenance, logistics, compliance, and engineering personnel. At
the powerhouse control room, personnel monitor, direct and control the
operations and maintenance of the whole Casecnan Project. The control room is
staffed 24 hours per day and is the contact point for the Casecnan Project's
customers and others. At the diversion structures, personnel are responsible to
ensure that the trash racks at the tunnel intakes are kept clean and maintained
and that excessive sediment build-up behind the structure is prevented.

-12-

ITEM 2. PROPERTIES.

CE Casecnan's principal property is the approximately 150 MW hydroelectric power
facility that was completed in December 2001.

ITEM 3. LEGAL PROCEEDINGS.

NIA ARBITRATION

The NIA Arbitration was settled on October 15, 2003. See Item 1. Business - The
Casecnan Project Supplemental Agreement.

CONSTRUCTION CONTRACT ARBITRATION

The Casecnan Project was initially being constructed pursuant to a fixed-price,
date-certain, turnkey construction contract (the "Hanbo Contract") on a joint
and several basis by Hanbo Corporation ("Hanbo") and Hanbo Engineering and
Construction Co., Ltd. ("HECC"), both of which are South Korean corporations. As
of May 7, 1997, the Company terminated the Hanbo Contract due to defaults by
Hanbo and HECC including the insolvency of both companies. On the same date, the
Company entered into a new fixed-price, date certain, turnkey engineering,
procurement and construction contract to complete the construction of the
Casecnan Project (the "Replacement Contract"). The work under the Replacement
Contract was conducted by a consortium consisting of Cooperativa Muratori
Cementisti CMC di Ravenna and Impresa Pizzarotti & C. Spa., (collectively, the
"Contractor"), working together with Siemens A.G., Sulzer Hydro Ltd., Black &
Veatch and Colenco Power Engineering Ltd.

On November 20, 1999, the Replacement Contract was amended to extend the
Guaranteed Substantial Completion Date for the Casecnan Project to March 31,
2001. This amendment was approved by the lenders' independent engineer under the
Trust Indenture.

On February 12, 2001, the Contractor filed a Request for Arbitration with the
ICC seeking schedule relief of up to 153 days through August 31, 2001 resulting
from various alleged force majeure events. In its March 20, 2001 Supplement to
Request for Arbitration, the Contractor also seeks compensation for alleged
additional costs of approximately $4 million it incurred from the claimed force
majeure events to the extent it is unable to recover from its insurer. On April
20, 2001, the Contractor filed a further supplement seeking an additional
compensation for damages of approximately $62 million for the alleged force
majeure event (and geologic conditions) related to the collapse of the surge
shaft. The Contractor has alleged that the circumstances surrounding the placing
of the Casecnan Project into commercial operation in December 2001 amounted to a
repudiation of the Replacement Contract and has filed a claim for unspecified
quantum meruit damages, and has further alleged that the delay liquidated
damages clause which provides for payments of $125,000 per day for each day of
delay in completion of the Casecnan Project for which the Contractor is
responsible is unenforceable. The arbitration is being conducted applying New
York law and pursuant to the rules of the ICC.

Hearings have been held in connection with this arbitration in July 2001,
September 2001, January 2002, March 2002, November 2002, January 2003 and July
2003. As part of those hearings, on June 25, 2001, the arbitration tribunal
temporarily enjoined CE Casecnan from making calls on the demand guaranty posted
by Banca di Roma in support of the Contractor's obligations to CE Casecnan for
delay liquidated damages. As a result of the continuing nature of that
injunction, on April 26, 2002, CE Casecnan and the Contractor mutually agreed
that no demands would be made on the Banca di Roma demand guaranty except
pursuant to an arbitration award. As of December 31, 2003, however, CE Casecnan
has received approximately $6.0 million of liquidated damages from demands made
on the demand guarantees posted by Commerzbank on behalf of the Contractor. The
$6.0 million was recorded as a reduction in construction costs in 2002. On
November 7, 2002, the ICC issued the arbitration tribunal's partial award with
respect to the Contractor's force majeure and geologic conditions claims. The

-13-

arbitration panel awarded the Contractor 18 days of schedule relief in the
aggregate for all of the force majeure events and awarded the Contractor $3.8
million with respect to the cost of the collapsed surge shaft. The $3.8 million
is shown as part of the accrued liquidated damages balance at December 31, 2003
and 2002. All of the Contractor's other claims with respect to force majeure and
geologic conditions were denied.

If the Contractor were to prevail on its claim that the delay liquidated damages
clause is unenforceable, CE Casecnan would not be entitled to collect such delay
damages for the period from March 31, 2001 through December 11, 2001. If the
Contractor were to prevail in its repudiation claim and prove quantum meruit
damages in excess of amounts paid to the Contractor, CE Casecnan could be liable
to make additional payments to the Contractor. CE Casecnan believes all of such
allegations and claims are without merit and is vigorously contesting the
Contractor's claims. CE Casecnan believes that an award will be issued by the
ICC in 2004.

STOCKHOLDER LITIGATION

Pursuant to the share ownership adjustment mechanism in the CE Casecnan
stockholder agreement, which is based upon pro forma financial projections of
the Casecnan Project prepared following commencement of commercial operations,
in February 2002, MidAmerican's indirect wholly owned subsidiary CE Casecnan
Ltd., advised the minority stockholder, LaPrairie Group Contractors
(International) Ltd., ("LPG"), that MidAmerican's indirect ownership interest in
CE Casecnan had increased to 100% effective from commencement of commercial
operations. In April 2002, CE Casecnan Ltd. and LPG entered into a status quo
agreement pursuant to which CE Casecnan Ltd. agreed not to take any action to
exercise control over or transfer LPG's shares in the Company. On July 8, 2002,
LPG filed a complaint in the Superior Court of the State of California, City and
County of San Francisco against, among others, CE Casecnan Ltd. and MidAmerican.
In the complaint, LPG seeks compensatory and punitive damages for alleged
breaches of the stockholder agreement and alleged breaches of fiduciary duties
allegedly owed by CE Casecnan Ltd. and MidAmerican to LPG. The complaint also
seeks injunctive relief against all defendants and a declaratory judgment that
LPG is entitled to maintain a 15% interest in CE Casecnan. On January 21, 2004,
CE Casecnan Ltd., LPG and the Company entered into a second status quo agreement
pursuant to which the parties agreed to set aside certain distributions related
to the shares subject to the LPG dispute and CE Casecnan agreed not to take any
further actions with respect to such distributions without at least 15 days'
prior notice to LPG. Accordingly, 15% of the dividend distribution declared on
January 21, 2004 was set aside in an unsecured account of the Company.

In February 2003, San Lorenzo Ruiz Builders and Developers Group Inc. ("San
Lorenzo"), an original shareholder substantially all of whose shares in the
Company were purchased by MidAmerican in 1998, threatened to initiate legal
action in the Philippines in connection with certain aspects of its option to
repurchase such shares. The Company believes that San Lorenzo has no valid basis
for any claim and, if named as a defendant in any action that may be commenced
by San Lorenzo, will vigorously defend such action.

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

Not Applicable.

-14-

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Not Applicable.

ITEM 6. SELECTED FINANCIAL DATA.

The following table sets forth selected historical financial data, which should
be read in conjunction with the Company's financial statements and the related
notes to those statements included in this annual report and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing in Item 7. of this annual report. The selected financial data as of
and for the five years ended December 31, 2003, has been derived from the
Company's audited historical financial statements.

SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

YEAR ENDED DECEMBER 31,
----------------------------------------------------------
2003 2002 2001(1) 2000 1999
-------- -------- -------- -------- ---------

Total revenue ............................. $129,921 $138,264 $ 8,174 $ - $ -
Operating income (loss) ................... 91,539 93,415 4,252 (451) -
Net income to common stockholders ......... 59,765 44,956 2,867 4,857 699
Net income per share ...................... 77.90 58.60 3.74 6.33 0.91
Total assets .............................. 565,313 541,507 515,192 482,373 522,398
Notes payable ............................. 51,263 51,263 40,763 - -
Long-term debt, including current portion.. 246,458 287,925 323,125 352,750 371,500
Stockholders' equity ...................... 211,686 151,921 106,965 104,098 99,241

(1) Commercial operations commenced on December 11, 2001.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

The following is management's discussion and analysis of certain significant
factors which have affected the financial condition and results of operations of
the Company during the periods included in the accompanying statements of
operations. This discussion should be read in conjunction with "Selected
Financial Data" in Item 6. and the Company's historical financial statements and
the notes to those statements included elsewhere in this report.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make judgments, assumptions and estimates that affect the
amounts reported in the Financial Statements and accompanying notes. Note 2 to
the Financial Statements describes the significant accounting policies and
methods used in the preparation of the financial statements. Estimates are used
for, but not limited to, the accounting for the allowance for doubtful accounts.
Actual results could differ from these estimates. The following critical
accounting policies are impacted significantly by judgments, assumptions and
estimates used in the preparation of the financial statements.

-15-

Allowance for Doubtful Accounts
- -------------------------------

The allowance for doubtful accounts is based on the Company's assessment of the
collectibility of payments from NIA. This assessment requires judgment regarding
the outcome of pending disputes and the ability of the customer to pay the
amounts owed to the Company. Any change in the Company's assessment of the
collectibility of accounts receivable that was not previously provided for could
significantly impact the calculation of such allowance and the results of
operations.

FACTORS AFFECTING THE RESULTS OF OPERATIONS

The Casecnan Project is wholly dependent upon sufficient rainfall to generate
electricity and deliver water. The seasonality of rainfall patterns and the
variability of rainfall from year to year, all of which are outside the control
of the Company, have a material impact on the amounts of electricity generated
and water delivered by the Casecnan Project.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

The following table provides certain operating data of the Casecnan Project for
the years ended December 31, 2003 and 2002:

2003 2002
----- -----

Electricity produced (GWh) ............. 382.2 351.0
Calculated Output (GWh) ................ 13.7 7.5
Water delivered (million cubic meters).. 620.6 551.0
Spilled water .......................... 25.1 12.2

Calculated Output is the energy that could have been delivered in circumstances
where the Project was not dispatched at its full capacity.

For accounting purposes, the Project Agreement with NIA contains both an
operating lease and a service contract, which the Company accounted for pursuant
to provisions of Statement of Financial Accounting Standards, No. 13,
"Accounting for Leases". However, pursuant to the provisions of the Project
Agreement, the Company billed to NIA water and energy delivery fees as follows
(in millions):

2003 2002
------ ------

Water delivery fees.................................. $ 71.5 $ 82.6
Electricity fees..................................... 58.4 55.7
------ ------
Total lease rentals and service contracts revenue.. $129.9 $138.3
====== ======

Lease rental and service contract revenue decreased by $8.4 million to $129.9
million for the year ended December 31, 2003 from $138.3 million for the year
ended December 31, 2002. The decrease in water delivery fees was primarily due
to the elimination of the tax compensation portion of the water delivery fee
pursuant to the NIA settlement on October 15, 2003, partially offset by a 7.5%
increase in the Water Delivery Fee rate as a result of the contractual annual
escalation factor. The increase in electricity fees was due primarily to
increased generation resulting from higher water flows in 2003. Revenues from
water delivery, guaranteed energy and excess energy are 55%, 28% and 17%,
respectively, of the total revenue for the year ended December 31, 2003, and
60%, 26% and 14%, respectively for the year ended December 31, 2002.

-16-

Operating expenses decreased to $38.4 million for the year ended December 31,
2003 from $44.8 million for the year ended December 31, 2002. Included within
operating expenses for the year ended December 31, 2003 are depreciation, plant
operations and doubtful accounts expense of $23.2 million, $13.2 million and
$2.0 million, respectively. Plant operations expense increased by $3.1 million
and doubtful accounts expense decreased by $9.5 million. The increase in plant
operations expense was caused by higher local business taxes, insurance and
legal costs. The decrease in doubtful accounts is primarily attributable to the
NIA Arbitration Settlement. The December 31, 2003 allowance for doubtful
accounts relates to Calculated Output.

Settlement income of $31.9 million resulted from the settlement of the NIA
Arbitration.

Interest expense decreased to $39.8 million for the year ended December 31, 2003
from $42.5 million for the year ended December 31, 2002. The primary reason for
the decrease was the scheduled repayment of debt.

Interest income increased to $1.9 million for the year ended December 31, 2003
from $0.2 million for the year ended December 31, 2002. The primary reason for
the increase was interest earned on the ROP Note issued to the Company in
connection with the NIA Arbitration Settlement.

Tax expense increased to $25.7 million for the year ended December 31, 2003 from
$6.1 million for the year ended December 31, 2002. The increase in 2003 is a
result of $24.4 million in taxes paid on the NIA Arbitration Settlement and
amounts paid to the BIR in settlement of audit assessments for the years 1996 to
1998 and 2000 to 2001. Tax expense in 2002 consisted of a payment to the
Philippine BIR for the settlement of taxes related to interest income for the
years 2001, 2000 and 1999.

RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001

The following table provides certain operating data of the Casecnan Project for
the years ended December 31, 2002 and 2001:

2002 2001
----- ----

Electricity produced (GWh)...................... 351.0 21.6
Calculated Output (GWh) ........................ 7.5 -
Water delivered (million cubic meters).......... 551.0 36.5
Spilled water................................... 12.2 -

2002 2001
------ ----

Water delivery fees ................................ $ 82.6 $4.1
Electricity fees ................................... 55.7 4.1
------ ----
Total lease rentals and service contracts revenue. $138.3 $8.2
====== ====

Lease rental and service contract revenue increased by $130.1 million to $138.3
million for the year ended December 31, 2002 from $8.2 million for the year
ended December 31, 2001. The increase in both sources of revenue is due to a
full year of operations during 2002 as the Casecnan Project began commercial
operations on December 11, 2001. Revenues from water delivery, guaranteed energy
and excess energy generated and delivered

-17-

are 60%, 26% and 14%, respectively, of the total revenue for the year ended
December 31, 2002, and 50%, 26% and 24%, respectively for the year ended
December 31, 2001.

The 2001 figure for electricity produced includes all energy for the year, both
commissioning and cooperation period revenues. The 2001 capacity factor
calculation, however, only includes the 21.6 GWh of energy produced during
December 11-31, 2001, the part of the year in which the plant was in commercial
operation. The 2002 figure for energy produced includes 7.5 GWh of energy for
which the Company was paid pursuant to the terms of the Project Agreement which
provided for payment in respect of energy that could have been delivered in
circumstances where the Project was not dispatched at its full capacity. For the
same reason, the 2002 figure for water delivered includes 12.2 million cubic
meters of water spilled.

Operating expenses increased to $44.8 million for the year ended December 31,
2002 from $3.9 million for the year ended December 31, 2001 due to a full year
of operations during 2002. Included within operating expenses for the year ended
December 31, 2002, are depreciation, plant operations and doubtful accounts
expense of $23.2 million, $10.1 million and $11.5 million, respectively. These
expenses increased from prior year amounts of $1.2 million, $2.2 million and
$0.5 million, respectively.

Interest expense decreased to $42.5 million for the year ended December 31, 2002
from $44.2 million for the year ended December 31, 2001. The primary reason for
the decrease was the scheduled repayment of debt.

In connection with the completion of the Casecnan Project on December 11, 2001,
capitalization of interest expense to the carrying value of the Casecnan Project
ceased. Interest totaling $41.7 million for the year ended December 31, 2001 was
capitalized.

Interest income decreased to $0.2 million for the year ended December 31, 2002
from $1.5 million for the year ended December 31, 2001. The primary reason for
the decrease was the declining cash balances as by the end of 2001 most escrowed
funds had been used for the construction activities.

Tax expense in 2002 of $6.1 million consists of a payment to the BIR for the
settlement of taxes related to interest income for the years 2001, 2000 and
1999.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents were $4.5 million and $0.7 million at
December 31, 2003 and 2002, respectively. At December 31, 2003, the Company also
owned a $97.0 million ROP note which was put to the ROP on January 14, 2004.

The Company generated cash flows from operations of $65.2 million and $36.9
million for the years ended December 31, 2003 and 2002, respectively. The
increase from 2002 was primarily due to increased net income of $14.8 million
and changes in working capital activities of $21.2 million.

The Company used $10.3 million and $11.4 million for investing activities for
the years ended December 31, 2003 and 2002, respectively. Capital expenditures,
the main component of investing activities, were $4.3

-18-

million and $10.3 million for the years ended December 31, 2003 and 2002,
respectively. During 2003, the Company paid a net amount of $6.0 million to the
ROP in connection with the settlement of the NIA Arbitration.

The Company used $51.1 million and $25.9 million for financing activities for
the years ended December 31, 2003 and 2002, respectively. During 2003, the
Company repaid long-term debt of $41.5 million and increased restricted cash
related to debt service obligations by $11.0 million. During 2002, the Company
repaid long-term debt of $35.2 million and issued new notes payable to an
affiliate of $10.5 million.

Under the terms of the Project Agreement between the Company and NIA, the
Company developed, financed and constructed the Casecnan Project over the
construction period. Under the Project Agreement and the Supplemental Agreement
(defined below under NIA Arbitration Settlement), the Company owns and operates
the Casecnan Project for a twenty-year Cooperation Period. During the
Cooperation Period, NIA is obligated to accept certain 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 and the Supplemental Agreement (defined below under NIA Arbitration
Settlement), NIA is obligated to pay the Company a fixed fee for the delivery of
a threshold volume of water and a fixed fee for the delivery of a threshold
amount of electricity. In addition, NIA is obligated to pay a fee for all
electricity delivered in excess of the threshold amount up to a specified amount
and will be obligated to pay a fee for all water delivered in excess of the
threshold amount up to a specified amount beginning after December 25, 2008.

NIA ARBITRATION SETTLEMENT

Payment in Cash and Delivery of Note
- ------------------------------------

Modifications to Water Delivery Fee
- -----------------------------------

-19-

meters per month, multiplied by the per cubic meter rate as described above.
Under the Supplemental Agreement the Water Delivery Fee is equal to the
Guaranteed Water Delivery Fee plus the Variable Delivered Water Delivery Fee
minus the Water Delivery Fee Credit.

Variable Delivered Water Delivery Fee. Variable Delivered Water Delivery Fees
will be earned for months beginning after December 25, 2008. For each month
beginning after December 25, 2008 through the end of the Cooperation Period, the
Variable Delivered Water Delivery Fee shall be payable only from the date when
the cumulative Total Available Water (total delivered water plus the water
volume not delivered to NIA as a result of NIA's failure to accept energy
deliveries at a capacity up to 150 MW) for each contract year exceeds 700.0
million cubic meters. Variable Delivered Water Delivery Fees will be earned up
to an aggregate maximum of 1,324.7 million cubic meters for the period from
December 25, 2008 through the end of the Cooperation Period. No additional
variable water delivery fees will be earned over the 1,324.7 million cubic meter
threshold.

Modifications to Excess Energy Delivery Fee
- -------------------------------------------

Other
- -----

The ROP has provided a Performance Undertaking under which NIA's obligations
under the Project Agreement are guaranteed by the full faith and credit of the
ROP. The Project Agreement and the Performance Undertaking provide for the
resolution of disputes by binding arbitration in Singapore under international
arbitration rules.

NIA's payment obligations under the Project Agreement are the Company's sole
source of operating revenues. Because of the Company's dependence on NIA, any
material failure of NIA to fulfill its obligations under the Project Agreement
and any material failure of the ROP to fulfill its obligations under the
Performance Undertaking would significantly impair the ability of the Company to
meet its obligations under the Securities.

-20-

CONSTRUCTION CONTRACT ARBITRATION

The Casecnan Project was initially being constructed pursuant to a fixed-price,
date-certain, turnkey construction contract (the "Hanbo Contract") on a joint
and several basis by Hanbo Corporation ("Hanbo") and Hanbo Engineering and
Construction Co., Ltd. ("HECC"), both of which are South Korean corporations. As
of May 7, 1997, the Company terminated the Hanbo Contract due to defaults by
Hanbo and HECC including the insolvency of both companies. On the same date, the
Company entered into a new fixed-price, date certain, turnkey engineering,
procurement and construction contract to complete the construction of the
Casecnan Project (the "Replacement Contract"). The work under the Replacement
Contract was conducted by a consortium consisting of Cooperativa Muratori
Cementisti CMC di Ravenna and Impresa Pizzarotti & C. Spa. (collectively, the
"Contractor"), working together with Siemens A.G., Sulzer Hydro Ltd., Black &
Veatch and Colenco Power Engineering Ltd.

-21-

CASECNAN STOCKHOLDER LITIGATION

Pursuant to the share ownership adjustment mechanism in the CE Casecnan
stockholder agreement, which is based upon pro forma financial projections of
the Casecnan Project prepared following commencement of commercial operations,
in February 2002, MidAmerican Energy Holdings Company's ("MidAmerican") indirect
wholly owned subsidiary CE Casecnan Ltd., advised the minority stockholder,
LaPrairie Group Contractors (International) Ltd. ("LPG"), that MidAmerican's
indirect ownership interest in CE Casecnan had increased to 100% effective from
commencement of commercial operations. In April 2002, CE Casecnan Ltd. and LPG
entered into a status quo agreement pursuant to which CE Casecnan Ltd. agreed
not to take any action to exercise control over or transfer LPG's shares in the
Company. On July 8, 2002, LPG filed a complaint in the Superior Court of the
State of California, City and County of San Francisco against, among others, CE
Casecnan Ltd. and MidAmerican. In the complaint, LPG seeks compensatory and
punitive damages for alleged breaches of the stockholder agreement and alleged
breaches of fiduciary duties allegedly owed by CE Casecnan Ltd. and MidAmerican
to LPG. The complaint also seeks injunctive relief against all defendants and a
declaratory judgment that LPG is entitled to maintain a 15% interest in CE
Casecnan. On January 21, 2004, CE Casecnan Ltd., LPG and the Company entered
into a second status quo agreement pursuant to which the parties agreed to set
aside certain distributions related to the shares subject to the LPG dispute and
CE Casecnan agreed not to take any further actions with respect to such
distributions without at least 15 days' prior notice to LPG. Accordingly, 15% of
the dividend distribution declared on January 21, 2004 was set aside in an
unsecured account of the Company.

In February 2003, San Lorenzo Ruiz Builders and Developers Group, Inc. ("San
Lorenzo"), an original shareholder substantially all of whose shares in the
Company were purchased by MidAmerican in 1998, threatened to initiate legal
action in the Philippines in connection with certain aspects of its option to
repurchase such shares. The Company believes that San Lorenzo has no valid basis
for any claim and, if named as a defendant in any action that may be commenced
by San Lorenzo, will vigorously defend such action.

BIR AUDIT

The BIR has audited the Company for all taxes, including income taxes, for the
years 2000 and 2001 and issued letters of authority to audit the tax years 1996
through 1998. In 2003, the Company paid an aggregate of $3.0 million in full and
final settlement of the BIR assessments of deficiency taxes for the years 2000
and 2001 and 1996 through 1998. The Company believes that it is in compliance
with applicable tax laws and regulations with respect to its tax filings.

OBLIGATIONS AND COMMITMENTS

The Company has contractual obligations and commercial commitments that may
affect its financial condition. Contractual obligations to make future payments
arise from long-term debt and notes payable. Material obligations as of December
31, 2003 are as follows (in thousands):

PAYMENTS DUE BY PERIOD
-------------------------------------------------
< 1 2-3 4-5 > 5
TOTAL YEAR YEARS YEARS YEARS
-------- ------- -------- ------- -------

Contractual cash obligations:
Long-term debt ..................... $246,458 $49,360 $ 90,768 $75,460 $30,870
Note payable ....................... 51,263 - 51,263 - -
-------- ------- -------- ------- -------
Total contractual cash obligations $297,721 $49,360 $142,031 $75,460 $30,870
======== ======= ======== ======= =======

-22-

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk
- ------------------

At December 31, 2003, the Company had fixed-rate long-term debt of $246.5
million in principal amount and having a fair value of $255.1 million. These
instruments are fixed-rate and therefore do not expose the Company to the risk
of earnings loss due to changes in market interest rates. However, the fair
value of these instruments would decrease by approximately $9.6 million if
interest rates were to increase by 10% from their levels at December 31, 2003.
In general, such a decrease in fair value would impact earnings and cash flows
only if the Company were to reacquire all or a portion of these instruments
prior to their maturity.

Currency Risk
- -------------

NIA's payments of obligations under the Project Agreement are substantially
denominated in U.S. Dollars and are the Company's sole source of operating
revenues. NIA must obtain U.S. Dollars to fund its payment obligations. Because
of the Company's dependence on NIA, any material failure of NIA to obtain U.S.
Dollars and fulfill its obligations under the Project Agreement and any material
failure of the ROP to fulfill its obligations under the Performance Undertaking
would significantly impair the ability of the Company to meet its existing and
future obligations. No stockholders, partners or affiliates of the Company,
including MidAmerican, and no directors, officers or employees of the Company
will guarantee or be in any way liable for payment of the Company's obligations.
As a result, payment of the Company's obligations depends upon the availability
of sufficient revenues from the Company's business after the payment of
operating expenses.

-23-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Independent Auditors' Report..................................................25

Balance Sheets as of December 31, 2003 And 2002...............................26

Statements of Operations for Each of the Three Years in the Period
Ended December 31, 2003..................................................27

Statements of Changes in Stockholders' Equity for Each of the Three Years
in the Period Ended December 31, 2003....................................28

Statements of Cash Flows for Each of the Three Years in the Period
Ended December 31, 2003..................................................29

Notes To Financial Statements.................................................30

-24-

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of CE Casecnan Water and Energy
Company, Inc.

We have audited the accompanying balance sheets of CE Casecnan Water and Energy
Company, Inc. as of December 31, 2003 and 2002, and the related statements of
income, of changes in stockholders' equity and of cash flows for each of the
three years in the period ended December 31, 2003. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CE Casecnan Water and Energy
Company, Inc. as of December 31, 2003 and 2002, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America.

/s/ Joaquin Cunanan & Co.

JOAQUIN CUNANAN & CO.
A Pricewaterhousecoopers member firm
Makati City, Philippines
February 9, 2004

-25-

CE CASECNAN WATER AND ENERGY COMPANY, INC.
BALANCE SHEETS
(Amounts in thousands of U.S. Dollars, except share data)

AS OF DECEMBER 31,
---------------------
2003 2002
-------- ---------
ASSETS

Current assets:
Cash and cash equivalents ................................. $ 4,513 $ 705
Trade receivable, net (Note 4) ............................ 16,451 51,515
Note receivable (Note 3) .................................. 97,000 -
Accrued interest and other receivables .................... 8,229 7,009
Prepaid insurance and other current assets ................ 4,685 5,562
-------- --------
Total current assets .................................... 130,878 64,791
-------- --------
Restricted cash and investments ............................. 18,121 7,078
Bond issue costs, net ....................................... 3,861 5,218
Property, plant and equipment, net (Note 5) ................. 407,082 453,507
Deferred income tax (Note 7) ................................ 5,371 5,371
Other assets ................................................ - 5,542
-------- --------
TOTAL ASSETS ................................................ $565,313 $541,507
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable .......................................... $ 7,395 $ 3,463
Accrued interest (Notes 6 and 8) .......................... 7,368 6,271
Accrued liquidated damages ................................ 3,800 5,420
Other accrued expenses .................................... 1,702 1,902
Payable to affiliates (Note 8) ............................ 34,739 33,342
Current portion of long-term debt (Note 6) ................ 49,360 41,468
-------- --------
Total current liabilities ............................... 104,364 91,866
-------- --------

Notes payable (Note 8) ...................................... 51,263 51,263
Deferred revenue ............................................ 902 -
Long-term debt, net of current portion (Note 6) ............. 197,098 246,457
-------- --------
Total liabilities ......................................... 353,627 389,586
-------- --------

Commitments and contingencies (Note 9)

Stockholders' equity:
Capital stock
Authorized - 2,148,000 common shares, one Philippine peso
($0.038) par value; 767,162 shares issued and outstanding . 29 29
Additional paid-in capital .................................. 123,807 123,807
Retained earnings ........................................... 87,850 28,085
-------- --------
Total stockholders' equity ................................ 211,686 151,921
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $565,313 $541,507
======== ========

The accompanying notes are an integral part of these financial statements.

-26-

CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF OPERATIONS
(Amounts in thousands of U.S. Dollars, except share data)

YEAR ENDED DECEMBER 31,
-------------------------------------
2003 2002 2001
--------- --------- ---------

REVENUE:
Lease rental and service contract (Notes 1, 4 and 11).... $ 129,921 $ 138,264 $ 8,174
--------- --------- ---------

OPERATING EXPENSES:
Depreciation ............................................ 23,158 23,211 1,249
Plant operations ........................................ 13,180 10,093 2,152
Doubtful accounts expense (Note 4) ...................... 2,044 11,545 521
--------- --------- ---------
Total operating expenses .............................. 38,382 44,849 3,922
--------- --------- ---------
OPERATING INCOME .......................................... 91,539 93,415 4,252
--------- --------- ---------

OTHER INCOME (EXPENSES):
Settlement income (Note 3) .............................. 31,887 - -
Interest expense (Notes 6 and 8) ........................ (39,835) (42,508) (44,162)
Capitalized interest .................................... - - 41,652
Interest income ......................................... 1,949 236 1,450
Other ................................................... (38) (105) -
--------- --------- ---------
Total other expense, net .............................. (6,037) (42,377) (1,060)
--------- --------- ---------

INCOME BEFORE PROVISION FOR INCOME TAX .................... 85,502 51,038 3,192
PROVISION FOR INCOME TAX (Notes 3 and 7) .................. 25,737 6,082 325
--------- --------- ---------
NET INCOME ................................................ $ 59,765 $ 44,956 $ 2,867
========= ========= =========

NET INCOME PER SHARE - BASIC AND DILUTED .................. $ 77.90 $ 58.60 $ 3.74
========= ========= =========
Weighted average number of common shares outstanding ...... 767,162 767,162 767,162
========= ========= =========

The accompanying notes are an integral part of these financial statements.

-27-

CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(U.S. Dollars in thousands)

OUTSTANDING
COMMON COMMON ADDITIONAL RETAINED
SHARES STOCK PAID-IN CAPITAL EARNINGS TOTAL
----------- ------ --------------- -------- --------

BALANCE, JANUARY 1, 2001................ 767,162 $29 $123,807 $(19,738) $104,098
Net income.............................. - - - 2,867 2,867
- -------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2001.............. 767,162 29 123,807 (16,871) 106,965
Net income.............................. - - - 44,956 44,956
- -------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002.............. 767,162 29 123,807 28,085 151,921
Net income.............................. - - - 59,765 59,765
- -------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2003.............. 767,162 $29 $123,807 $87,850 $211,686
=============================================================================================================

The accompanying notes are an integral part of these financial statements.

-28-

CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF CASH FLOWS
(Amounts in thousands of U.S. Dollars)

YEAR ENDED DECEMBER 31,
--------------------------------
2003 2002 2001
-------- -------- --------

Cash flows from operating activities:
Net income .................................................................. $ 59,765 $ 44,956 $ 2,867
Adjustments to reconcile net cash flows from operating activities:
Depreciation .............................................................. 23,158 23,211 1,249
Amortization of bond issue costs .......................................... 1,356 1,494 1,603
Provision for deferred income tax ......................................... - - 325
Gain on settlement of arbitration, net of tax ............................. (7,500) - -
Changes in other items:
Trade receivable, net ................................................... (20,132) (43,503) (8,012)
Accrued interest and other receivables .................................. (1,534) (408) (6,028)
Prepaid insurance and other current assets .............................. 455 (2,277) (3,243)
Other assets ............................................................ 5,542 6,158 (11,700)
Accounts payable ........................................................ 3,932 2,359 (3,137)
Accrued interest ........................................................ 1,097 1,065 (359)
Accrued liquidated damages .............................................. (1,620) 3,800 1,620
Other accrued expenses .................................................. (200) - 1,902
Deferred revenue ........................................................ 902 - -
-------- -------- --------
Net cash flows from operating activities .............................. 65,221 36,855 (22,913)
-------- -------- --------

Cash flows from investing activities:
Additions to property, plant and equipment ................................ (4,335) (10,263) (48,583)
Arbitration settlement .................................................... (5,965) - -
Liquidated damages received ............................................... - - 5,978
Decrease (increase) in restricted:
Cash and short-term investments ......................................... - (1,100) (5,978)
Investments ............................................................. - - 41,945
Change in accounts payable and accrued expenses related to development ... - - 3,281
-------- -------- --------
Net cash flows from investing activities ............................... (10,300) (11,363) (3,357)
-------- -------- --------

Cash flows from financing activities:
Increase (decrease) in payable to affiliates .............................. 1,397 (1,165) 15,507
Increase in restricted cash related to debt service obligations ........... (11,043) - -
Payment of long-term debt ................................................. (41,467) (35,200) (29,625)
Proceeds from notes payable ............................................... - 10,500 40,763
-------- -------- --------
Net cash flows from financing activities ................................ (51,113) (25,865) 26,645
-------- -------- --------

NET CHANGE IN CASH AND CASH EQUIVALENTS ..................................... 3,808 (373) 375
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .............................. 705 1,078 703
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR .................................... $ 4,513 $ 705 $ 1,078
======== ======== ========

Supplemental Disclosure:
Interest paid, net of interest capitalized ................................ $ 36,205 $ 39,949 $ 1,267
======== ======== ========
Income taxes paid ......................................................... $ 24,387 $ 6,080 $ 325
======== ======== ========
Non-cash transaction - ROP note received under NIA Arbitration Settlement . $ 97,000 $ - $ -
======== ======== ========

The accompanying notes are an integral part of these financial statements.

-29-

CE CASECNAN WATER AND ENERGY COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
(In U.S. Dollars, unless indicated otherwise)

1. ORGANIZATION AND OPERATIONS

CE Casecnan Water and Energy Company, Inc. (the "Company" or "CE Casecnan") is a
privately held Philippine corporation formed indirectly by MidAmerican Energy
Holdings Company ("MidAmerican") and was registered with the Philippine
Securities and Exchange Commission on September 21, 1994. The purpose of the
Company is to design, develop, construct, erect, assemble, commission, operate
and own a hydroelectric power plant and the related facilities for conversion
into electricity of water provided by and under contract with the Philippine
Government or any government-owned or controlled corporation.

The Company has a contract with the Philippine Government, through the
Philippine National Irrigation Administration ("NIA") (a government-owned and
controlled corporation), for the development and construction of a hydroelectric
power plant and related facilities under a build-own-operate-transfer agreement
("Project Agreement"), covering a twenty-year cooperation period ("Cooperation
Period") with "take-or-pay" obligations for water and electricity. At the end of
the Cooperation Period, the combined irrigation and 150 megawatt hydroelectric
power generation project (the "Casecnan Project") will be transferred to the
Philippine Government at no cost on an "as is" basis. The Philippine Government
also signed a Performance Undertaking, which, among other things, affirms and
guarantees the obligations of NIA under the contract. Construction of the
Casecnan Project commenced in 1995.

The Company is registered with the Philippine Board of Investments as a new
operator of hydroelectric power plant with pioneer status under the Omnibus
Investments Code of 1987 (Executive Order No. 226). Under the terms of its
registration, the Company is entitled to certain incentives which include an
income tax holiday for a minimum of six years from the start of commercial
operations, tax and duty-free importation of capital equipment, tax credits on
domestic capital equipment, and exemption from customs duties and national
internal revenue taxes for the importation and unrestricted use of the consigned
equipment for the development, construction, start-up, testing and operation of
the power plant. The registration also requires, among other things, the
maintenance of a debt-to-equity ratio not exceeding 75:25 upon commencement of
commercial operations.

The Casecnan Project commenced commercial operations on December 11, 2001. Prior
to this date, the Company was considered to be a development stage enterprise.
Pursuant to the share ownership adjustment mechanism in the CE Casecnan
stockholder agreement, which is based upon pro forma financial projections of
the Casecnan Project prepared following commencement of commercial operations,
in February 2002, MidAmerican's indirect wholly owned subsidiary CE Casecnan
Ltd. advised the minority stockholder, LaPrairie Group Contractors
(International) Ltd., ("LPG"), that MidAmerican's indirect ownership interest in
CE Casecnan had increased to 100% effective from commencement of commercial
operations. In April 2002, CE Casecnan Ltd. and LPG entered into a status quo
agreement pursuant to which CE Casecnan Ltd. agreed not to take any action to
exercise control over or transfer LPG's shares in the Company. On July 8, 2002,
LPG filed a complaint in the Superior Court of the State of California, City and
County of San Francisco against, among others, CE Casecnan Ltd. and MidAmerican.
In the complaint, LPG seeks compensatory and punitive damages for alleged
breaches of the stockholder agreement and alleged breaches of fiduciary duties
allegedly owed by CE Casecnan Ltd. and MidAmerican to LPG. The complaint also
seeks injunctive relief against all defendants and a declaratory judgment that
LPG is entitled to maintain a 15% interest in CE Casecnan.

In April 2003, CE Casecnan Ltd. assigned a 70% stockholding in the Company to CE
Casecnan II, Inc., a Philippine company, in exchange for 100% of the latter's
shares of stock. Consequently, the Company became 70% owned by CE Casecnan II,
Inc.

-30-

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial statements are prepared in accordance with accounting principles
generally accepted in the United States of America. The more significant
accounting policies and practices of the Company are set forth below.

Basis of Presentation
- ---------------------

The functional and reporting currency of the Company is the United States
Dollar. Gains or losses resulting from translation of monetary assets and
liabilities in foreign currencies are not material. Transactions in foreign
currencies (Philippines pesos) are recorded based on the prevailing rates of
exchange at transaction dates. Foreign currency denominated monetary assets and
liabilities are translated at the exchange rate prevailing at the balance sheet
date. The resulting exchange differences from settlements of foreign currency
transactions and translations of monetary assets and liabilities are credited or
charged to operations.

The Company's operations are in one reportable segment, the water and
electricity generation industry.

Reclassifications
- -----------------

Certain amounts in the fiscal 2002 and 2001 financial statements and supporting
note disclosures have been reclassified to conform to the fiscal 2003
presentation. Such reclassification did not impact previously reported net
income or retained earnings.

Use of Estimates
- ----------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America 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 revenue and expenses during
the reporting period. Actual results could differ from those estimates.

Cash Equivalents
- ----------------

Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash with original maturities of three months or
less and that are subject to an insignificant risk of change in value.

Restricted Cash and Investments
- -------------------------------

Restricted cash and investments are composed of debt service funds that are
legally restricted as to their use and require the maintenance of specific
minimum balances. Such cash and investments are primarily in the form of
commercial paper and money market securities.

Since the Company has the positive intent and ability to hold all of its
investments to maturity, these are classified as held to maturity and recorded
at amortized cost. The carrying amount of investments as of December 31, 2003
approximates their fair value, which is based on quoted market prices as
provided by the financial institution holding the investments.

Bond Issue Costs
- ----------------

Bond issue costs consist of costs incurred in the issuance of senior secured
notes and bonds and are deferred and amortized over the term of the notes and
bonds using the effective interest rate method. Amortization of bond issue costs
is capitalized during the construction period and charged to operations, as an
interest expense, upon commercial operations of the Casecnan Project.

-31-

Property, Plant and Equipment, Net
- ----------------------------------

Property, plant and equipment are stated at historical cost (including
capitalized interest costs) less accumulated depreciation. Depreciation is
computed on the straight-line method based on the twenty-year Cooperation Period
for the hydroelectric power plant and office and building structure, and on the
estimated useful life of five years for other equipment. Minor expenditures for
repairs and maintenance are charged to operations as incurred, while significant
renewals and improvements are capitalized. Liquidated damages received relative
to the Casecnan Project construction are recorded as reduction to the cost of
the Project. When an asset is sold or otherwise disposed of, its cost and
related accumulated depreciation are removed from the accounts and the resulting
gain or loss is credited or charged to operations.

Deferred Income Taxes
- ---------------------

Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial reporting bases
of assets and liabilities and their related tax bases. Deferred income tax
assets and liabilities are measured using the tax rate expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. A valuation allowance is provided for deferred income
tax assets if it is more likely than not that a tax benefit will not be
realized.

Allowance for Doubtful Accounts
- -------------------------------

Allowance for doubtful accounts is based on the Company's assessment of the
collectibility of payments from NIA. This assessment requires judgment regarding
the outcome of pending disputes and the ability of the customer to pay the
amounts owed to the Company. Any change in the Company's assessment of the
collectibility of accounts receivable that was not previously provided for could
significantly impact the calculation of such allowance and the results of
operations.

Net Income per Share
- --------------------

Net income per share is based on the weighted average number of common shares
outstanding during the period. As the Company does not have any potential common
shares outstanding such as stock options, warrants or convertible debt, there is
no calculation of diluted earnings per share.

Impairment of Long-Lived Assets
- -------------------------------

Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized whenever evidence exists
that the carrying value is not recoverable.

Revenue
- -------

Pursuant to the Project Agreement, the company bills on a monthly basis for the
delivery of water and electricity. However, for accounting purposes the Project
Agreement is treated as an arrangement that contains both an operating lease and
a service contract to operate the plant. Both the lease rentals and service fees
are recognized straight line over the term of the Project Agreement.

The annual water delivery revenue is recorded on the basis of the contractual
minimum guaranteed water delivery threshold for the respective contract year. If
and when cumulative deliveries within a contract year exceed the minimum
threshold, additional revenue is recognized and calculated as the product of the
water deliveries in excess of the minimum threshold and the applicable unit
price up to the maximum contractually allowed water delivery volume.

-32-

Revenue from electricity consists of guaranteed energy fees with fixed monthly
amounts and is recognized based on the contractually guaranteed energy
deliveries. Actual deliveries of energy less than the fixed, monthly contractual
amounts will not result in any reduction of the guaranteed energy fee. The
variable energy fee is recognized when deliveries of energy exceed the
guaranteed energy in any contract year. The variable energy fee will not be
recognized until all cumulative electrical energy shortfalls in previous months
have been made up. At December 31, 2003, there was no cumulative electrical
energy shortfall. Pursuant to the provisions of the Supplemental Agreement
(defined in Note 3 below) which took effect on October 15, 2003, the Company
defers revenue to the extent that the invoiced unit price exceeds the average
unit price over the remaining term of the contract.

3. NIA SETTLEMENT AGREEMENT

Under the terms of the Project Agreement, NIA had the option of timely
reimbursing CE Casecnan directly for certain taxes CE Casecnan paid. If NIA did
not so reimburse CE Casecnan, certain taxes paid by CE Casecnan would result in
an increase in the Water Delivery Fee. The payment of certain other taxes by CE
Casecnan would have resulted automatically in an increase in the Water Delivery
Fee. As of September 30, 2003, CE Casecnan had paid approximately $59.1 million
in taxes, which pursuant to the foregoing provisions resulted in an increase in
the Water Delivery Fee. NIA had failed to pay the portion of the Water Delivery
Fee each month related to the payment of these taxes by CE Casecnan. As a result
of the non-payment of the tax compensation portion of the Water Delivery Fees,
on August 19, 2002, CE Casecnan filed a Statement of Claim against NIA pursuant
to the Rules of Arbitration of the International Chamber of Commerce (the "NIA
Arbitration"), seeking payment of such portion of the Water Delivery Fee and
enforcement of the relevant provision of the Project Agreement going forward.

NIA filed its Answer and Counterclaim on March 31, 2003. In its Answer, NIA
asserted, among other things, that most of the taxes which CE Casecnan had
factored into the Water Delivery Fee compensation formula did not fall within
the scope of the relevant section of the Project Agreement, that the
compensation mechanism itself was invalid and unenforceable under Philippine law
and that the Project Agreement was inconsistent with Philippine law. As such,
NIA sought dismissal of CE Casecnan's claims and a declaration from the arbitral
tribunal that the taxes which had been taken into account in the Water Delivery
Fee compensation mechanism were not recoverable thereunder and that, at most,
certain taxes might be directly reimbursed (rather than compensated for through
the Water Delivery Fee) by NIA. NIA also counterclaimed for approximately $7
million which it alleges is due to it as a result of the delayed completion of
the Casecnan Project. On April 23, 2003, NIA filed a Supplemental Counterclaim
in which it asserted that the Project Agreement was contrary to Philippine law
and public policy and by way of relief sought a declaration that the Project
Agreement was void from the beginning or should be cancelled, or alternatively,
an order for reformation of the Project Agreement or any portions or sections
thereof which may be determined to be contrary to such law and or public policy.
On May 23, 2003 CE Casecnan filed its reply to NIA's counterclaims.

On October 15, 2003, the Company closed a transaction settling the NIA
Arbitration. As a result of the settlement, the Company recorded $31.9 million
of settlement income and $24.4 million of associated income tax. The settlement
income consisted of $115.4 million of consideration pursuant to the settlement
agreement, less $30.8 million of recoverable taxes previously capitalized during
the construction period, less $8.4 million of taxes paid during operations and
less $44.3 million of net trade receivables and other adjustments pertaining to
the disputed amounts. In connection with the settlement, the Company entered
into an agreement (the "Supplemental Agreement") with NIA which, in addition to
providing for the dismissal with prejudice of all claims by CE Casecnan and
counterclaims by NIA in the NIA Arbitration, supplements and amends the Project
Agreement in certain respects as summarized below.

-33-

Payment in Cash and Delivery of Note
- ------------------------------------

On January 14, 2004, the Company exercised its put option to put the ROP Note to
the ROP and, in accordance with the terms of the put, the Company received $99.2
million (representing the $97.0 million par value plus accrued interest) from
the ROP on January 21, 2004.

Modifications to Water Delivery Fee
- -----------------------------------

-34-

Modifications to Excess Energy Delivery Fee
- -------------------------------------------

Other Provisions of the Supplemental Agreement
- ----------------------------------------------

The Company received an opinion from the Philippine Office of Government
Corporate Counsel as to the due authorization and enforceability of Supplemental
Agreement. The Company also received written confirmation from the Private
Sector Assets and Liabilities Management Corporation that the issues with
respect to the Casecnan Project that had been raised by the interagency review
of independent power producers in the Philippines or that may have existed with
respect to the Project under certain provisions of the Electric Power Industry
Reform Act of 2001 calling for the renegotiation of contracts such as the
Project Agreement have been satisfactorily addressed by the Supplemental
Agreement.

4. TRADE RECEIVABLE, NET

Trade receivable pertains to the receivable due for lease rentals and service
income which was billed pursuant to the provisions of the Project Agreement with
NIA, as follows (in thousands):

DECEMBER 31,
--------------------
2003 2002
-------- --------
Water delivery fee ................ $ 11,988 $ 52,854
Guaranteed energy delivery fee .... 3,676 6,709
Variable energy delivery fee ...... 2,831 4,018
-------- --------
Trade receivable, gross ......... 18,495 63,581
Allowance for doubtful accounts ... (2,044) (12,066)
-------- --------
Trade receivable, net ........... $ 16,451 $ 51,515
======== ========

The allowance for doubtful accounts as of December 31, 2003 represents the
Company's current estimate of the uncollectible portion of the calculated output
revenue recorded subsequent to the Supplemental Agreement through December 31,
2003, while the 2002 allowance represents the Company's estimate of the
uncollectible portion of the unpaid Water Delivery Fees at December 31, 2002. On
October 15, 2003, the Company closed a transaction settling the NIA Arbitration
described in Note 3 above and, accordingly, revised the allowance for doubtful
accounts to reflect the net collectible amounts based upon the Supplemental
Agreement.

-35-

5. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net at December 31 consist of the following (in
thousands):

DECEMBER 31,
------------------------
2003 2002
--------- ----------
Hydroelectric power facility ....... $ 450,174 $ 476,786
Office and building structures ..... 1,090 244
Transportation and other equipment . 640 501
--------- ---------
451,904 477,531
Accumulated depreciation ........... (44,840) (24,460)
--------- ---------
407,064 453,071
Construction in progress ........... 18 436
--------- ---------
Property, plant and equipment, net.. $ 407,082 $ 453,507
========= =========

6. LONG-TERM DEBT

On November 27, 1995, the Company issued $371.5 million of notes and bonds (the
"Securities") to finance the construction of the Casecnan Project. These debts
consisted of $75.0 million Senior Secured Floating Rate Notes ("FRNs") bearing
interest at LIBOR plus 3.00%, which were paid in installments through November
15, 2002; $125.0 million Senior Secured Series A Notes ("Series A Notes") with
interest at 11.45% payable in semiannual installments up to 2005; and $171.5
million Senior Secured Series B Bonds ("Series B Bonds") with interest at 11.95%
payable in semiannual installments up to 2010. For the year ended December 31,
2003, the Series A Notes and Series B Bonds had effective interest rates of
13.13% and 13.57%, respectively, inclusive of bond issue cost amortization. The
effective interest rate for the FRNs fluctuated between 5.59% and 10.72% in 2001
and 5.88% and 6.29% prior to being repaid in 2002.

The repayment schedule is as follows (in thousands):

SERIES A NOTES SERIES B BONDS TOTAL
-------------- -------------- --------

2004 ....... $ 42,500 $ 6,860 $ 49,360
2005 ....... 48,750 6,002 54,752
2006 ....... - 36,016 36,016
2007 ....... - 37,730 37,730
2008 ....... - 37,730 37,730
2009 ....... - 13,720 13,720
2010 ....... - 17,150 17,150
-------- -------- --------
$ 91,250 $155,208 $246,458
======== ======== ========

The Securities are senior debt of the Company and are secured by an assignment
of all revenues that will be received from the Casecnan Project, a collateral
assignment of all material contracts, a lien on any accounts and funds on
deposit under a Deposit and Disbursement Agreement, a pledge of 100% of the
capital stock of the Company and a lien on all other material assets and
property interests of the Company. The Securities rank pari passu with and will
share the collateral on a pro rata basis with other senior secured debt, if any.

The Securities are subject to certain optional and mandatory redemption schemes
as provided for in the Trust Indenture. The Series A Notes are subject to
optional redemption by the Company, in whole and not in part, at par plus
accrued interest to the Redemption Date. The Series B Bonds are subject to
optional redemption by the Company, at any time, in whole or in part, pro rata,
at par plus accrued interest to the redemption date plus a premium, calculated
to "make whole" to comparable U.S. Treasury Securities plus 150 basis points.
The Company also had the option to redeem the securities, in whole or in part,
at par plus accrued interest at any time if, as a result

-36-

of any change in Philippine tax law or in the application or interpretation of
Philippine tax law occurring after the date of issuance of the Securities, the
Company is required to pay certain additional amounts described in the Trust
Indenture. The Securities are subject to mandatory redemption, pro rata, at par
plus accrued interest to the redemption date, (a) upon the receipt by the
Company of loss proceeds that exceed $15 million in respect of certain events of
property or casualty loss or similar events, unless the funds are to be utilized
by the Company for an Approved Restoration Plan; or (b) upon the receipt by the
Company of proceeds realized in connection with a Project Agreement Buyout.

When a Change in Control occurs, each holder of the Securities ("Holder") will
have the right to require the Company to repurchase all or any part of such
Holder's Securities at a cash purchase price equal to 101% of the principal
amount thereof, plus accrued interest to the date of repurchase in accordance
with the procedures set forth in the Trust Indenture. There is no assurance that
upon a Change in Control the Company will have sufficient funds to repurchase
the Securities.

The debt covenants contain certain restrictions as to incurrence of additional
indebtedness; merger, consolidation, dissolution, or any significant change in
corporate structure; non-arm's length transactions or agreements with
affiliates; sale, lease, or transfer of properties material to the Casecnan
Project, among others. In connection with the foregoing secured indebtedness,
the Company, on November 27, 1995, entered into a Deposit and Disbursement
Agreement whereby Chemical Trust Company of California ("Chemical Trust") acts
as a depositary and a collateral agent. As a depositary agent, it will hold
monies, instruments and Securities pledged by the Company to the collateral
agent. The terms of this agreement require the establishment of several funds,
which include a Capital Contribution Fund. Pursuant to this requirement, the
Company's stockholders deposited an aggregate capital contribution of
approximately $123.3 million to the fund, which was strictly used to fund the
construction of the Casecnan Project when the proceeds from the Series A Notes
and Series B Bonds were fully utilized. The contributions are included in the
"Additional paid-in capital" account in the accompanying balance sheets.

7. INCOME TAXES

Tax expense in 2003 of $25.7 million consists primarily of the $24.4 million of
taxes paid in connection with the NIA Arbitration Settlement and the settlement
of the Philippine BIR audits for 1996 to 1998 and 2000 to 2001. Tax expense in
2002 of $6.1 million consisted of a payment to the Philippine BIR for the
settlement of taxes related to interest income for the years 2001, 2000 and
1999. Since commencing commercial operations in December 2001, the Company has
incurred no income tax expense on its results from operations due to the
availment of a six year income tax holiday received from the Philippine Board of
Investments. The Company's deferred income tax asset of $5.4 million as of
December 31, 2003 and 2002 (net of a valuation allowance of $2.4 million)
consists mainly of the difference between the financial reporting basis and the
tax reporting basis for development and construction costs. The valuation
allowance is recognized for the portion of the deferred income tax asset for
which it is more likely than not that the tax benefit will not be realized due
to the income tax holiday.

8. RELATED PARTY TRANSACTIONS

In the normal course of business, the Company transacts with its affiliates in
the form of advances for construction related and operating expenses. The
payable to affiliates was $34.7 million and $33.3 million at December 31, 2003
and 2002, respectively. Costs incurred by the Company in transactions with
related parties amounted to $2.3 million, $1.3 million and $0.5 million in 2003,
2002 and 2001, respectively.

As of December 31, 2003 and 2002, the Company has outstanding $51.3 million of
unsecured subordinated notes payable to CE Casecnan Ltd., an affiliate, due
November 15, 2005. The unsecured notes bear interest at LIBOR plus two (2%)
percent which is payable every May 15 and November 15. Interest expense on the
unsecured notes was $1.7 million, $1.9 million and $0.2 million for the years
ended December 31, 2003, 2002 and 2001,

-37-

respectively. Any overdue payment of principal or interest payable on the notes
shall increase the annual interest by two (2%) percent. At December 31, 2003,
the effective interest rate on the notes was 3.27%. The notes may be prepaid at
any time without premium or penalty but with accrued interest, if any. The
unsecured subordinated notes and any and all payments, whether of principal,
interest or otherwise, are subject in all respects to the terms of the
Subordination Agreement dated November 15, 2001 between CE Casecnan Ltd. and the
Company in favor of the Trustee, the Collateral Agent, the co-collateral agent,
the Depositary, any party that becomes a Permitted Counterparty under an
Interest Rate/Currency Protection Agreement, any party that becomes a working
capital facility agent and any other Person that becomes a secured party under
the Intercreditor Agreement.

9. COMMITMENTS AND CONTINGENCIES

Construction Contract Arbitration
- ---------------------------------

The Casecnan Project was initially being constructed pursuant to a fixed-price,
date-certain, turnkey construction contract (the "Hanbo Contract") on a joint
and several basis by Hanbo Corporation ("Hanbo") and Hanbo Engineering and
Construction Co., Ltd. ("HECC"), both of which are South Korean corporations. As
of May 7, 1997, the Company terminated the Hanbo Contract due to defaults by
Hanbo and HECC including the insolvency of both companies. On the same date, the
Company entered into a new fixed-price, date certain, turnkey engineering,
procurement and construction contract to complete the construction of the
Casecnan Project (the "Replacement Contract"). The work under the Replacement
Contract was conducted by a consortium consisting of Cooperativa Muratori
Cementisti CMC di Ravenna and Impresa Pizzarotti & C. Spa. (collectively, the
"Contractor"), working together with Siemens A.G., Sulzer Hydro Ltd., Black &
Veatch and Colenco Power Engineering Ltd.

On February 12, 2001, the Contractor filed a Request for Arbitration with the
International Chamber of Commerce ("ICC") seeking schedule relief of up to 153
days through August 31, 2001 resulting from various alleged force majeure
events. In its March 20, 2001 Supplement to Request for Arbitration, the
Contractor also seeks compensation for alleged additional costs of approximately
$4 million it incurred from the claimed force majeure events to the extent it is
unable to recover from its insurer. On April 20, 2001, the Contractor filed a
further supplement seeking an additional compensation for damages of
approximately $62 million for the alleged force majeure event (and geologic
conditions) related to the collapse of the surge shaft. The Contractor has
alleged that the circumstances surrounding the placing of the Casecnan Project
into commercial operation in December 2001 amounted to a repudiation of the
Replacement Contract and has filed a claim for unspecified quantum meruit
damages, and has further alleged that the delay liquidated damages clause which
provides for payments of $125,000 per day for each day of delay in completion of
the Casecnan Project for which the Contractor is responsible is unenforceable.
The arbitration is being conducted applying New York law and pursuant to the
rules of the ICC.

-38-

Stockholder Litigation
- ----------------------

Pursuant to the share ownership adjustment mechanism in the CE Casecnan
stockholder agreement, which is based upon pro forma financial projections of
the Casecnan Project prepared following commencement of commercial operations,
in February 2002, MidAmerican Energy Holdings Company's ("MidAmerican") indirect
wholly owned subsidiary CE Casecnan Ltd., advised the minority stockholder,
LaPrairie Group Contractors (International) Ltd. ("LPG"), that MidAmerican's
indirect ownership interest in CE Casecnan had increased to 100% effective from
commencement of commercial operations. In April 2002, CE Casecnan Ltd. and LPG
entered into a status quo agreement pursuant to which CE Casecnan Ltd. agreed
not to take any action to exercise control over or transfer LPG's shares in the
Company. On July 8, 2002, LPG filed a complaint in the Superior Court of the
State of California, City and County of San Francisco against, among others, CE
Casecnan Ltd. and MidAmerican. In the complaint, LPG seeks compensatory and
punitive damages for alleged breaches of the stockholder agreement and alleged
breaches of fiduciary duties allegedly owed by CE Casecnan Ltd. and MidAmerican
to LPG. The complaint also seeks injunctive relief against all defendants and a
declaratory judgment that LPG is entitled to maintain its 15% interest in CE
Casecnan. On January 21, 2004, CE Casecnan Ltd., LPG and the Company entered
into a second status quo agreement pursuant to which the parties agreed to set
aside certain distributions related to the shares subject to the LPG dispute and
CE Casecnan agreed not to take any further actions with respect to such
distributions without at least 15 days' prior notice to LPG. Accordingly, 15% of
the dividend distribution declared on January 21, 2004 was set aside in an
unsecured account of the Company.

Concentration of Risk
- ---------------------

-39-

Regulatory environment
- ----------------------

The Philippine Congress has passed the Electric Power Industry Reform Act of
2001 (EPIRA), which is aimed at restructuring the Philippine power industry,
privatization of the NPC and introduction of a competitive electricity market,
among other initiatives. The implementation of EPIRA may have an impact on the
Company's future operations in the Philippines and the Philippines power
industry as a whole, the effect of which is not yet determinable and estimable.

10. FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, "Disclosures About Fair
Value of Financial Instruments", defines the fair value of financial instruments
as the amount at which the instruments could be exchanged in a current
transaction between willing parties. Although management uses its best judgment
in estimating the fair value of these financial instruments, there are inherent
limitations in any estimation technique. Therefore, the fair value estimates
presented herein are not necessarily indicative of the amounts that the Company
could realize in a current transaction.

The methods and assumptions used to estimate fair value are as follows:

Cash and cash equivalents, trade receivable, note receivable, accounts payable
- ------------------------------------------------------------------------------
and accrued expenses
- --------------------

The carrying amounts reported in the balance sheets approximate fair value due
to the liquidity, the short maturity and nature of such items.

Notes payable
- -------------

The Company has outstanding $51.3 million of unsecured subordinated notes
payable to CE Casecnan Ltd., an affiliate, due November 15, 2005. The unsecured
notes bear interest at LIBOR plus two (2%) percent which is payable every May 15
and November 15. Interest expense on the unsecured notes was $1.7 milion, $1.9
million and $0.2 million for the years ended December 31, 2003, 2002 and 2001,
respectively. At December 31, 2003, the effective interest rate on the notes was
3.27%. It is not practicable to estimate the fair value of the notes payable for
a variety of reasons, including the absence of quoted market prices for the
notes and their subordination provisions to the existing senior debt of the
Company.

Long-term debt
- --------------

The fair value of the Company's long-term debt is estimated based on quoted
market prices of similar types of arrangements. At December 31, 2003, the
Company had fixed-rate long-term debt of $246.5 million in principal amount and
having a fair value of $255.5 million. At December 31, 2002, the Company had
fixed-rate long-term debt of $287.9 million in principal amount and having a
fair value of $288.1 million. These instruments are fixed-rate and, therefore,
do not expose the Company to the risk of earnings loss due to changes in market
interest rates. However, the fair value of these instruments would decrease by
approximately $9.6 million if interest rates were to increase by 10% from their
levels at December 31, 2003. In general, such a decrease in fair value would
impact earnings and cash flows only if the Company were to reacquire all or a
portion of these instruments prior to their maturity.

-40-

11. OPERATING LEASE RENTALS AND SERVICE INCOME

The following is the minimum lease rentals and service income in the next five
years on the noncancelable operating lease as of December 31, 2003:

YEAR ENDED DECEMBER 31 AMOUNT
---------------------- ------

2004...................................... $79,647
2005 ..................................... 82,894
2006...................................... 86,382
2007...................................... 88,052
2008...................................... 88,052

Variable lease rentals and service income included in the profit and loss
accounts amounted to $22.0 million in 2003, $19.3 million in 2002, and $2.0
million in 2001.

12. SUBSEQUENT EVENTS

On January 21, 2004, the Company declared a cash dividend of $38.0 million. Also
on January 21, 2004, CE Casecnan Ltd., LPG and the Company entered into a second
status quo agreement pursuant to which the parties agreed to set aside certain
distributions related to the shares subject to the LPG dispute and CE Casecnan
agreed not to take any further actions with respect to such distributions
without at least 15 days' prior notice to LPG. Accordingly, 15% of the dividend
distribution declared on January 21, 2004 was set aside in an unsecured account
of the Company.

-41-

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.

None

ITEM 9A. CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the participation of
the Company's management, including the respective persons acting as chief
executive officer and chief financial officer, regarding the effectiveness of
the design and operation of the Company's disclosure controls and procedures (as
defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of
1934, as amended) as of December 31, 2003. Based on that evaluation, the
Company's management, including the respective persons acting as chief executive
officer and chief financial officer, concluded that the Company's disclosure
controls and procedures were effective. There have been no significant changes
in the Company's internal controls or in other factors that could significantly
affect internal controls.

-42-

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table sets forth the names, ages, and positions of the directors
and executive officers of the Company:

David L. Sokol 47 Director and Chairman
Gregory E. Abel 41 Vice Chairman
David A. Baldwin 39 Director, President and General Manager
James D. Stallmeyer 46 Vice President
Patrick J. Goodman 37 Director, Senior Vice President and
Chief Financial Officer
Douglas L. Anderson 45 Director, Senior Vice President, General
Counsel and Assistant Secretary
Brian K. Hankel 41 Vice President and Treasurer
Jose Sandejas 67 Director and Corporate Secretary
Jose Jaime Cruz 33 Director and Assistant Corporate
Secretary
Marivic Punzalan-Espiritu 36 Director
Scott LaPrairie 46 Director
Linda Castillo 44 Director

Directors of the Company are elected annually and hold office until a successor
is elected. Executive officers are chosen from time to time by vote of the Board
of Directors. Pursuant to the terms of the Stockholders Agreement, CE Casecnan
Ltd. is entitled to elect seven of the directors, and each minority investor is
entitled to elect one director.

DAVID L. SOKOL. In addition to serving as a Director and Chairman of the
Company, Mr. Sokol has been Chief Executive Officer of MidAmerican since April
19, 1993 and served as President of MidAmerican from April 19, 1993 until
January 21, 1995. Mr. Sokol has been Chairman of the Board of Directors since
May 1994 and a director of MidAmerican since March 1991. Formerly, among other
positions held in the independent power industry, Mr. Sokol served as the
President and Chief Executive Officer of Kiewit Energy Company, which at that
time was a wholly owned subsidiary of PKS, and Ogden Projects, Inc.

GREGORY E. ABEL. In addition to serving as Vice Chairman of the Company, Mr.
Abel is President and Chief Operating Officer of MidAmerican. Mr. Abel joined
MidAmerican in 1992. Mr. Abel is a Chartered Accountant and from 1984 to 1992
employed by Price Waterhouse. As a Manager in the San Francisco office of Price
Waterhouse, he was responsible for clients in the energy industry.

DAVID A. BALDWIN. In addition to serving as Director, President and General
Manager for the Company, Mr. Baldwin is President and General Manager,
Philippines for affiliates of the Company. From December 1996 to June 1997, Mr.
Baldwin served as Vice President, Project Development for Asia Power Ltd. in
Hong Kong. From October 1994 to December 1996, Mr. Baldwin was Project Director
at SouthPac Corporation Ltd. in New Zealand and, prior to that, he held a series
of project management and engineering positions at Shell International in the
Netherlands and New Zealand.

JAMES D. STALLMEYER. In addition to serving as Vice President of the Company,
Mr. Stallmeyer is Commercial Director and General Counsel of Northern Electric.
Mr. Stallmeyer joined affiliates of the Company in 1993. Mr. Stallmeyer
practiced in the public finance and banking areas at Chapman and Cutler in
Chicago from 1984 to 1987 and in the corporate finance department from 1989 to
1993. Prior to that, Mr. Stallmeyer was an attorney in the public finance
department of the Chicago office of Skadden, Arps, Slate, Meagher & Flom in 1987
and 1988 and was a legal writing instructor at the University of Illinois
College of Law in 1988 and 1989.

PATRICK J. GOODMAN. In addition to serving as Director, Senior Vice President
and Chief Financial Officer for the Company, Mr. Goodman is Senior Vice
President and Chief Financial Officer for MidAmerican. Mr.

-43-

Goodman joined MidAmerican in June 1995, and served as in various accounting
positions, including Senior Vice President and Chief Accounting Officer. Prior
to joining MidAmerican, Mr. Goodman was a financial manager for National
Indemnity Company and a senior associate at Coopers & Lybrand.

DOUGLAS L. ANDERSON. In addition to serving as Director, Senior Vice President,
General Counsel and Assistant Secretary for the Company, Mr. Anderson is Senior
Vice President, General Counsel and Corporate Secretary of MidAmerican. Mr.
Anderson joined MidAmerican in February 1993. Prior to that, Mr. Anderson was in
private practice.

BRIAN K. HANKEL. In addition to serving as Vice President and Treasurer for the
Company, Mr. Hankel is Vice President and Treasurer for MidAmerican. Mr. Hankel
joined MidAmerican in February 1992 as a Treasury Analyst and served in that
position to December 1995. Mr. Hankel was appointed Assistant Treasurer in
January 1996 and was appointed Treasurer in January 1997. Prior to joining the
Company, Mr. Hankel was a Money Position Analyst at FirsTier Bank of Lincoln
from 1988 to 1992.

JOSE SANDEJAS. In addition to serving as a Director and Corporate Secretary of
the Company, Mr. Sandejas is a partner with the law firm of Quisumbing Torres.

JOSE JAIME CRUZ. In addition to serving as a Director and Assistant Corporate
Secretary of the Company, Mr. Cruz is an attorney with the law firm of
Quisumbing Torres.

MARIVIC PUNZALAN-ESPIRITU. In addition to serving as a Director of the Company,
Ms. Punzalan-Espiritu is a partner with the law firm of Quisumbing Torres.

SCOTT LAPRAIRIE. In addition to serving as a Director of the Company, Mr.
LaPrairie is President and Chief Executive Officer of the LaPrairie Group of
Companies.

LINDA B. CASTILLO. In addition to serving as a Director of the Company, Ms.
Castillo is corporate counsel for the Company and certain of its affiliates.

ITEM 10. AUDIT COMMITTEE MATTERS

During the fiscal year ended December 31, 2003 and as of the date of this
Report, the Board of Directors had no committees, including any audit committee.
The Company is not an issuer as defined in the Sarbanes-Oxley Act of 2002, it
does not have a class of securities listed on any securities exchange, and it is
not required to have an audit committee. Patrick J. Goodman qualifies as an
"audit committee financial expert". Mr. Goodman is not independent within the
meaning of Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.

CODE OF ETHICS

The Company has adopted a code of ethics that applies to its principal executive
officer, principal financial officer and to its controller. The code of ethics
is filed as an exhibit to this annual report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION.

None of the executive officers or directors of the Company receives compensation
from the Company for services as officers or directors of the Company. All
directors are reimbursed for their expenses in attending board and committee
meetings.

-44-

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

DESCRIPTION OF CAPITAL STOCK

As of December 31, 2003, the authorized capital stock of the Company consisted
of 2,148,000 shares of common stock, par value 1.00 Philippine peso ($0.038) per
share (the "Common Stock"), of which 767,162 shares were outstanding. There is
no public trading market for the Common Stock. As of December 31, 2003 there
were 11 holders of record of the Common Stock. Holders of Common Stock are
entitled to one vote per share on any matter coming before the stockholders for
a vote.

The Trust Indenture contains certain restrictions on the payment of dividends
with respect to the Common Stock.

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to all persons who own
beneficially more than 5% of the common stock and by all directors and officers
of the Company as a group.

NUMBER OF % OF COMMON
NAME AND ADDRESS OF OWNER SHARES OWNED* STOCK OWNED
- ------------------------- ------------- -----------

1. CE Casecnan II, Inc. (1) 537,005 70% (1)

2. CE Casecnan Ltd. 230,148 30% (2) (3)

* In addition, each director of the Company owns one share in the Company as
required by Philippine law.

(1) In April 2003, CE Casecnan Ltd., a Bermuda registered corporation,
transferred shares in CE Casecnan to CE Casecnan II, Inc., a Philippine
corporation, in exchange for 100% of the stock of CE Casecnan II, Inc. CE
Casecnan Ltd. and CE Casecnan II, Inc. are indirectly owned by MidAmerican.

(2) Pursuant to the share ownership adjustment mechanism in the Stockholder
Agreement, which is based upon pro-forma financial projections of the
Casecnan Project at commencement of commercial operations, MidAmerican's
wholly owned indirect subsidiary CE Casecnan Ltd., advised the minority
stockholders that MidAmerican's ownership interest in the Company increased
to 100%. In April 2002, CE Casecnan Ltd. and LPG entered into a status quo
agreement pursuant to which CE Casecnan Ltd. agreed not to take any action
to exercise control over or transfer LPG's shares in the Company.
Accordingly, these shares have not been transferred on the books of the
Company and the above designation reflects the ownership percentages
assuming CE Casecnan Ltd. prevails in the pending stockholder litigation
(see Item 3. Legal Proceedings - Stockholder Litigation). On July 8, 2002,
LPG filed a complaint in the Superior Court of the State of California,
City and County of San Francisco against, among others, CE Casecnan Ltd.
and MidAmerican. In the complaint, LPG seeks compensatory and punitive
damages for alleged breaches of the stockholder agreement and alleged
breaches of fiduciary duties allegedly owed by CE Casecnan Ltd. and
MidAmerican to LPG. The complaint also seeks injunctive relief against all
defendants and a declaratory judgment that LPG is entitled to maintain a
15% interest in CE Casecnan. On January 21, 2004, CE Casecnan Ltd., LPG and
the Company entered into a second status quo agreement pursuant to which
the parties agreed to set aside certain distributions related to the shares
subject to the LPG dispute and CE Casecnan agreed not to take any further
actions with respect to such distributions without at least 15 days' prior
notice to LPG. Accordingly, 15% of the dividend distribution declared on
January 21, 2004 was set aside in an unsecured account of the Company.

-45-

(3) Includes rights to 115,000 shares, which rights were purchased from San
Lorenzo Ruiz Builders and Developers Group, Inc. in 1998. The 115,000
shares are subject to the ownership adjustment mechanism in the
Stockholders Agreement discussed in Note (2). San Lorenzo retained an
option to repurchase the 115,000 shares, if any, remaining after such
ownership adjustment.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Not Applicable.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Aggregate fees accrued by CE Casecnan during the years ended December 31, 2003
and 2002 by its principal accounting firm, Joaquin Cunanan & Co. (A
PricewaterhouseCoopers Member Firm) and their respective affiliates
(collectively, " Joaquin Cunanan & Co."), are set forth below (in thousands).

YEAR ENDED DECEMBER 31,
-----------------------
2003 2002
---- ----
Audit Fees (1) .................... $222 $39
Audit-Related Fees (2) ............ - -
Tax Fees (3) ...................... 388 11
All Other Fees (4) ................ - -
---- ---
Total aggregate fees billed ... $610 $50
---- ---

(1) Includes the aggregate fees for each of the last two fiscal years for
professional services rendered by Joaquin Cunanan & Co. for the audit of
the Company's financial statements and review of financial statements
included in the Company's Form 10-K or services that are normally provided
by Joaquin Cunanan & Co. in connection with statutory and regulatory
filings or engagements for those fiscal years.

(2) Includes the aggregate fees in each of the last two fiscal years for
assurance and related services by Joaquin Cunanan & Co. that are reasonably
related to the performance of the audit or review of the registrant's
financial statements. Services included in this category include audits of
benefit plans, due diligence for possible acquisitions and consultation
pertaining to new and proposed accounting and regulatory rules.

(3) Includes the aggregate fees in each of the last two fiscal years for
professional services rendered by Joaquin Cunanan & Co. for tax compliance,
tax advice, and tax planning.

(4) Includes the aggregate fees in each of the last two fiscal years for
products and services provided by Joaquin Cunanan & Co., other than the
services reported as "Audit Fees", "Audit-Related Fees", or "Tax Fees".

-46-

PART IV

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

(a) Financial Statements and Schedules

(i) Financial Statements

Financial Statements are included in Part II of this Form 10-K.

(ii) Financial Statement Schedules

None.

(b) Reports on Form 8-K

The Company filed the following Current Reports on Form 8-K during the
fourth quarter of 2003:

The Company filed a Current Report on Form 8-K on October 9, 2003 reporting
the execution of an agreement (the "Supplemental Agreement") settling the
International Chamber of Commerce arbitration case initiated by CE Casecnan
in August 2002 to enforce a provision in the Amended and Restated Project
Agreement ("Project Agreement") between CE Casecnan and NIA.

The Company filed a Current Report on Form 8-K on October 15, 2003
disclosing that the closing conditions to the previously reported
Supplemental Agreement settling disputes between the Company and NIA have
been satisfied and the closing occurred on October 15, 2003.

The exhibits listed on the accompanying Exhibit Index are filed as part of
this Annual Report.

(d) Financial statements required by Regulation S-X, which are excluded
from the Annual Report by Rule 14a-3(b).

Not applicable.

-47-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Omaha, State of
Nebraska, on February 9, 2004.

CE CASECNAN WATER AND ENERGY COMPANY, INC.

By: /s/ * David A. Baldwin
--------------------------
David A. Baldwin
President

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has caused this report to be signed by the following persons in the capacities
and on the dates indicated:

Signature Title Date
- --------- ----- ----

/s/ David L. Sokol* Director and Chairman February 9, 2004
- --------------------------- of the Board
David L. Sokol

/s/ David A. Baldwin* Director, President February 9, 2004
- --------------------------- and General Manager
David A. Baldwin (Principal Executive Officer)

/s/ Patrick J. Goodman* Director, Senior Vice President February 9, 2004
- --------------------------- and Chief Financial Officer
Patrick J. Goodman (Principal Financial Officer)

/s/ Douglas L. Anderson Director, Senor Vice President, February 9, 2004
- --------------------------- General Counsel and
Douglas L. Anderson Assistant Secretary

Director February 9, 2004
- ---------------------------
Jose R. Sandejas

Director February 9, 2004
- ---------------------------
Jose Jaime Cruz

Director February 9, 2004
- ---------------------------
Marivic Punzalan-Espiritu

Director February 9, 2004
- ---------------------------
Scott LaPrairie

/s/ Linda B. Castillo* Director February 9, 2004
- ---------------------------
Linda B. Castillo

*By:/s/ Douglas L. Anderson
-----------------------
Douglas L. Anderson
Attorney-in-Fact

-48-

EXHIBIT INDEX
Exhibit No.
- -----------

3.1 Articles of Incorporation of the Company (incorporated by reference to
Exhibit 3.1 the Company's Registration Statement on Form S-4, as
amended, dated January 25, 1996 ("Form S-4")).

3.2 By-laws of the Company (incorporated by reference to Exhibit 3.2 the
Company's Form S-4).

4.1(a) Trust Indenture, dated as of November 27, 1995, between Chemical
Trust Company of California and the Company (incorporated by reference
to Exhibit 4.1(a) the Company's Form S-4).

4.1(b) First Supplemental Indenture, dated as of April 10, 1996, between
Chemical Trust Company of California and the Company (incorporated by
reference to Exhibit 4.1(b) to the Company's Form S-4).

4.2 Exchange and Registration Rights Agreement, dated as of November 27,
1995, by and among CS First Boston Corporation, Bear Stearns & Co.
Inc., Lehman Brothers Inc. and the Company (incorporated by reference
to Exhibit 4.2 the Company's Form S-4).

4.3 Collateral Agency and Intercreditor Agreement, dated as of November
27, 1995, by and among Chemical Trust Company of California, Far East
Bank & Trust Company and the Company (incorporated by reference to
Exhibit 4.3 the Company's Form S-4).

4.4 Mortgage and Security Agreement, dated as of November 10, 1995, by and
among CE Casecnan Ltd., Kiewit Energy International (Bermuda) Ltd., La
Prairie Group Contractors (International) Ltd., San Lorenzo Ruiz
Builders and Developers Group, Inc., Chemical Trust Company of
California, Far East Bank & Trust Company and the Company
(incorporated by reference to Exhibit 4.4 the Company's Form S-4).

4.6 Deposit and Disbursement Agreement, dated as of November 27, 1995, by
and among the Company, Chemical Trust Company of California, Kiewit
Energy Company and the Company (incorporated by reference to the
Company's Form S-4).

4.7 Consent of NIA, dated as of November 10, 1995, to the assignment of
the Amended and Restated Casecnan Project Agreement (incorporated by
reference to Exhibit 4.7 to the Company's Form S-4).

4.8 Consent of the Republic of Philippines, dated November 10, 1995, to
the assignment of the Performance Undertaking and the Amended and
Restated Casecnan Project Agreement (incorporated by reference to
Exhibit 4.8 to the Company's Form S-4).

4.9 Consent of Hanbo Corporation and You One Engineering and Construction
Company, Ltd., dated as of November 17, 1995, to the assignment of the
Engineering, Procurement and Construction Contract (incorporated by
reference to Exhibit 4.9 to the Company's Form S-4).

4.10 Consent of Hanbo Steel, dated as of November 17, 1995, to the
assignment of the Guaranty of Engineering, Procurement and
Construction Contract (incorporated by reference to Exhibit 4.10 to
the Company's Form S-4).

4.11 Notification, dated as of November 27, 1995, from the Company to Korea
FirstBank, of the assignment of the Irrevocable Letter of Credit
(incorporated by reference to Exhibit 4.11 to the Company's Form S-4).

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10.1 Amended and Restated Casecnan Project Agreement, dated as of June 26,
1995, between the National Irrigation Administration and the Company
(incorporated by reference to Exhibit 10.1 the Company's Form S-4).

10.2 Performance Undertaking, dated as of July 20, 1995, executed by the
Secretary of Finance on behalf of the Republic of the Philippines
(incorporated by reference to Exhibit 10.2 to the Company's Form S-4).

10.3 Engineering, Procurement and Construction Contract, dated as of
October 10, 1995, by and among Hanbo Corporation, You One Engineering
and Construction Company, Ltd. and the Company (incorporated by
reference to Exhibit 10.3 the Company's Form S-4)

10.4 Master Equipment Lease Agreement, dated as of November 1, 1995,
between You One Engineering and Construction Company, Ltd. and the
Company (incorporated by reference to Exhibit 10.4 the Company's Form
S-4).

10.5 Sublease Agreement No. 1, dated as of November 1, 1995, between You
One Engineering and Construction Company, Ltd. and the Company
(incorporated by reference to Exhibit 10.5 the Company's Form S-4).

10.6 Guaranty of Engineering, Procurement and Construction Contract, dated
as of November 13, 1995, by Hanbo Steel guaranteeing the performance
of the obligations of Hanbo Corporation and You One Engineering and
Construction Company, Ltd. under the Engineering Procurement and
Construction Contract (incorporated by reference to Exhibit 10.6 to
the Company's Form S-4).

10.7 Korea First Bank Irrevocable Letter of Credit issued to the Company in
the aggregate principal amount of U.S.$117,850,000.00 to support the
obligations of Hanbo Corporation and You One Engineering and
Construction Company, Ltd. under the Engineering, Procurement and
Construction Contract (incorporated by reference to Exhibit 10.7 to
the Company's Form S-4).

10.8 Engineering, Procurement and Construction Contract dated May 7, 1997
between the Company and CP Casecnan - Consortium (incorporated by
reference to Exhibit 10.8 to the Company's Form 10-K dated December
31, 1998).

10.9 Amendment Agreement dated November 20, 1999 between the Company and CP
Casecnan - Consortium (incorporated by reference to Exhibit 10.9 to
the Company's Form 10-K dated December 31, 1999).

10.10 Supplemental Agreement between CE Casecnan Water and Energy Company,
Inc. and the Philippines National Irrigation Administration dated as
of September 29, 2003 (incorporated by reference to Exhibit 99.1 to
the Company's Form 8-K dated October 15, 2003).

14.1 CE Casecnan Water and Energy Company, Inc. Code of Ethics for Chief
Executive Officer, Chief Financial Officer and Chief Accounting
Officer

24 Power of Attorney

31.1 Chief Executive Officer's Certificate Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2 Chief Financial Officer's Certificate Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

32.1 Chief Executive Officer's Certificate Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

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32.2 Chief Financial Officer's Certificate Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

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