UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, ~~2008~~2009

[ ] ~~Transition~~ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of of 1934.

For the transition period from ______ to _______

Commission File No. 001-12995

Commission	Exact name of registrant as specified in its charter;	IRS Employer
File Number	State or other jurisdiction of incorporation or organization	Identification No.

001-12995	CE CASECNAN WATER AND ENERGY COMPANY, INC.	Not Applicable
	24th Floor, 6750 Building, Ayala Avenue
	Makati City, Metro Manila, Philippines

	011 63 2 892-0276

CE CASECNAN WATER AND ENERGY COMPANY, INC.

(Exact name of registrant as specified in its charter)

Philippines		Not Applicable
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
24th Floor, 6750 Building, Ayala Avenue
Makati City, Metro Manila, Philippines		Not Applicable
(Address of principal executive offices)		(Zip Code)
011 63 2 892-0276
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered

11.95% Senior Secured Series B Bonds due November 15, 2010		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No T

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No T

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 T No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  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 the best of registrant’s 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. T

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨* Accelerated filer ¨* Non-accelerated filer T Smaller reporting company ¨*

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No T

All of the shares of common equity of CE Casecnan Water and Energy Company, Inc. are privately held by a limited group of investors. As of January 31, ~~2009~~2010, the number of outstanding shares of $0.038 par value common stock was 767,162.

TABLE OF CONTENTS

PART I
Item 1.	Business	4
Item 1A.	Risk Factors	5
Item 1B.	Unresolved Staff Comments	6
Item 2.	Properties	6
Item 3.	Legal Proceedings	6
Item 4.	Submission of Matters to a Vote of Security Holders	6
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	7
Item 6.	Selected Financial Data	7
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	7
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	11
Item 8.	Financial Statements and Supplementary Data	13
Item 9.	Changes in and Disagreements ~~with~~With Accountants on Accounting and Financial Disclosure	2829
Item 9A(T).	Controls and Procedures	2829
Item 9B.	Other Information	2829
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	29
Item10.	Directors, Executive Officers and Corporate Governance	30
Item 11.	Executive Compensation	3031
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	3031
Item 13.	Certain Relationships and Related Transactions, and Director Independence	3132
Item 14.	Principal Accountant Fees and Services	3132
PART IV
Item 15.	Exhibits and Financial Statement Schedules	3334
Signatures		3435
Exhibit Index		3536

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~~Section 27A ~~Private~~of the Securities Act ~~Litigation~~of ~~Reform~~1933 and Section 21E of the Securities Exchange Act of ~~1995.~~1934, as amended. Forward-looking statements can typically be identified by the use of forward-looking words, such as “may,” “could,” “project,” “believe,” “anticipate,” “expect,” “estimate,” “continue,” “intend,” “potential,” “plan,” “forecast” and similar terms. These statements are based upon the Company’s current intentions, assumptions, expectations and beliefs and are subject to risks, uncertainties and other important factors. Many of these factors are outside the Company’s control and could cause actual results to differ materially from those expressed or implied by the Company’s forward-looking statements. These factors include, among others:

· changes in weather conditions that could affect operating revenue; · general economic, political and business conditions in the Philippines and throughout the world; · changes in governmental, legislative or regulatory requirements affecting the Company or the power generation industry; · availability of qualified personnel; · the impact of new accounting pronouncements or changes in current accounting estimates and assumptions on financial results; and · other business or investment considerations that may be disclosed from time to time in the Company’s filings with the United States Securities and Exchange Commission (“SEC”) or in other publicly disseminated written documents.

~~Further details~~· ofgeneral ~~the~~economic, ~~potential~~political ~~risks~~ and ~~uncertainties~~business ~~affecting~~conditions ~~the Company are described~~ in the ~~Company’s~~Philippines ~~filings~~and ~~with~~throughout the SEC, including Item 1A and other discussions contained in this Form 10-K. 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.world;

·	changes in governmental, legislative or regulatory requirements in the Philippines, including those pertaining to taxes, affecting the Company or the power generation industry;

·	availability of qualified personnel;

·	the impact of new accounting pronouncements or changes in current accounting estimates and assumptions on financial results;

·	other risks or unforeseen events, including litigation, wars, the effects of terrorism, embargoes and other catastrophic events; and

·	other business or investment considerations that may be disclosed from time to time in the Company’s filings with the United States Securities and Exchange Commission (the “SEC”) or in other publicly disseminated written documents.

Further details of the potential risks and uncertainties affecting the Company are described in Item 1A and other discussions contained in this Form 10-K. 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.

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 (“MEHC”) in September 1994 solely to develop, construct, own and operate a combined irrigation and hydroelectric power generation facility ~~(the “Casecnan Project”)~~ with a rated capacity of 150 megawatts (the “MWCasecnan Project”) located on the island of Luzon in the Republic of the Philippines (the “ROP”).

CE Casecnan’s outstanding debt securities are recourse only to the Company. The Company’s owners have 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, Metro Manila, Philippines, and its telephone number is 63 2 892-0276. The Company’s principal operations office is located at Pantabangan in the Province of Nueva Ecija, Philippines.

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 in length. During the water transfer, the elevation differences between the two watersheds allows electricity to be generated by a 150 megawatt (“MW”) capacity power plant, which is located in an underground powerhouse cavern at the end of the water tunnel. A tailrace discharge tunnel then delivers water to the existing water storage reservoir at Pantabangan, providing additional water for irrigation and increasing the potential electrical generation at two downstream hydroelectric facilities owned by 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”), a ROP-owned and controlled corporation.

The Company has a contract with the ROP, through NIA, for the development, construction and operation of a hydroelectric power plant and related facilities under a build-own-operate-transfer agreement, as amended by the Supplemental Agreement dated September 29, 2003 (the “Project Agreement”), covering a 20-year cooperation period (“Cooperation Period”) ~~with~~ending ~~“take-or-pay”~~December ~~obligations~~11, 2021, with obligations for the delivery of water and electricity. At the end of the Cooperation Period, the Casecnan Project will be transferred to ~~NIA~~the ROP at no cost on an “as is” basis. Under the terms of its registration with the Philippine Board of Investments, CE Casecnan was entitled to certain incentives, including an income tax holiday for six years from the start of commercial operations, which expired on December 11, 2007. ~~Thereafter, the~~ The Company’s taxable income ~~became~~ from December 11, 2007 forward is subject to income tax at the current Philippine statutory rate.

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.

CE Casecnan financed a portion of the costs of the Casecnan Project through the issuance of long-term debt. As of January 31, ~~2009~~2010, the outstanding long-term debt was rated BB- with stable outlook by Standard and Poor’s and B1 Ba3 with stable outlook by Moody’s ~~Investor~~Investors Service.

Concentration of Risk

NIA’s obligations under the Project Agreement are guaranteed by the full faith and credit of the ROP (the “Performance Undertaking”). 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 substantially denominated in U.S. dollars and are the Company’s sole source of operating revenue. Because of ~~the~~ 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, including obligations pertaining to its outstanding debt. No shareholders, partners or affiliates of the Company, including MEHC, and no directors, officers or employees of the Company have guaranteed or will 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 revenue from the Company’s business after the payment of operating expenses.

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. The proceeds of such insurance may not be adequate to cover reduced revenue, increased expenses or other liabilities arising from the occurrence of catastrophic events. 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 and Legislative 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 ~~the~~ EPIRA may impact the Company’s ~~future~~ future operations in the Philippines and the Philippine power industry as a whole, the effect of which is not yet known as changes resulting from ~~the~~ EPIRA ~~are~~ are ongoing.

Employees

At December 31, ~~2008~~2009, the Company had 4342 full-time employees.

Item 1A. Risk Factors

~~The Company~~We is are subject to ~~certain~~numerous risks, inincluding, ~~its~~but ~~business~~not ~~operations~~limited ~~which~~to, ~~are described~~those set forth below. Careful consideration of these risks, together with all of the other information included in this ~~annual~~Form ~~report~~10-K and the other public information filed by ~~the Company~~us, should be made before making an investment decision. ~~The risks and uncertainties described below are not the only ones facing the Company.~~ Additional risks and uncertainties not presently known or that are currently deemed immaterial may also impair ~~the Company’s business~~our business operations.

~~The~~We ~~Company~~are is dependent upon a single customer for all of ~~its~~our operating revenue.

NIA’s ~~payment~~ obligations under the Project Agreement are ~~the~~our ~~Company’s~~ sole source of ~~operating~~ operating revenue. Because of ~~the~~our ~~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 materially adversely affect ~~the~~our ~~Company’s~~ financial results.

~~The~~We ~~Company’s assets~~ are subject to ~~significant~~risk ~~operating~~of loss from political and other risks arising from foreign ~~uncertainties~~sovereignty over areas in which we conduct operations.

~~The~~We are ~~Casecnan~~subject ~~Project~~to issignificant apolitical ~~complex infrastructure project~~ and ~~power~~other ~~plant.~~uncertainties, ~~Operation~~including ofexpropriation, ~~the~~nationalization, ~~Casecnan~~renegotiation ~~Project~~or ~~may~~nullification ~~be adversely affected by a variety~~ of ~~operating~~existing ~~uncertainties.~~contracts, ~~For~~imposition ~~example,~~of ~~the~~new ~~breakdown~~federal or ~~failure~~local oftaxes ~~equipment~~ or ~~processes or~~changes ~~the~~in ~~performance~~tax ofrates, currency ~~equipment~~availability atand ~~levels~~exchange ~~below~~restrictions, ~~those~~changing ~~originally~~political ~~demonstrated,~~conditions ~~whether~~and ~~due~~international tomonetary ~~ordinary~~fluctuations. ~~wear~~The ~~and~~government ~~tear,~~of ~~unexpected~~the ~~degradation~~Philippines exercises ora ~~other~~significant ~~events could~~influence ~~increase~~over the ~~cost~~Philippine ofeconomy. ~~operating~~There ~~the~~can ~~Casecnan~~be ~~Project~~no assurance orthat ~~require~~future ~~substantial capital~~developments ~~expenditures,~~in ~~thereby~~the ~~adversely~~Philippines ~~affecting~~will not impair the Casecnan ~~Company~~Project’s ~~financial results~~operations or our revenue.

~~Variability~~Changes in ~~rainfall~~laws, policies, regulations, environmental standards and ~~water~~other ~~flows~~mandates imposed by Philippine authorities have a significant impact on ~~the Company’s operating~~our ~~revenue~~operations.

AWe are ~~significant~~subject ~~portion~~to ofstatutory ~~the~~and ~~Casecnan~~regulatory ~~Project’s~~standards, ~~revenue~~including isthose ~~required~~related to energy and environmental laws. Business licenses and permits must be ~~paid~~renewed byannually ~~NIA~~to ~~without~~continue ~~regard~~operating the Casecnan Project. Delay in receipt or failure to obtain ~~actual~~these ~~water~~permits ~~flows.~~or ~~However,~~to acomply ~~significant~~with ~~component~~applicable ofstandards could restrict ~~revenue,~~operation ~~approximately~~of ~~29%~~the Casecnan Project or result in ~~2008,~~additional ~~consists~~costs or taxes. The adoption of ~~variable~~new ~~energy~~laws, ~~delivery~~policies ~~fees that~~and ~~are~~regulations, ~~dependent~~or ~~upon~~changes ~~water~~in ~~flow~~the ~~volumes.~~interpretation or Noapplication ~~assurance~~of ~~can~~existing belaws, ~~given~~policies and regulations that modify the ~~future~~present ~~rainfall~~regulatory ~~and~~environment ~~water~~could ~~flows~~have ~~will~~a ~~approach~~material ~~historical~~adverse ~~levels~~affect on our ability to operate the Casecnan Project.

~~The~~Our ~~Company’s~~ assets are subject to ~~potentially~~significant ~~catastrophic~~operating ~~geologic, natural or weather-related risks~~uncertainties.

~~Earthquakes,~~The ~~floods,~~Casecnan ~~volcanic~~Project ~~eruptions,~~is ~~fires~~a orcomplex ~~other~~infrastructure ~~similar~~project ~~catastrophic~~and ~~events~~power ~~could cause~~plant. ~~personal injury, loss~~ Operation of ~~life, damage or destruction to~~ the Casecnan Project, ormay ~~suspension~~be ofadversely ~~operations.~~affected ~~Although~~by ~~the~~a ~~Company~~variety ~~maintains~~of ~~insurance~~operating ~~coverage~~uncertainties. ~~(including~~For ~~business~~example, ~~interruption~~the ~~insurance)~~breakdown toor ~~protect~~failure ~~against certain~~ of ~~these~~equipment ~~risks,~~or processes or the ~~proceeds~~performance of ~~such~~equipment ~~insurance~~at ~~may~~levels ~~not~~below bethose ~~adequate~~originally ~~to cover reduced revenue~~demonstrated, ~~increased expenses or other liabilities arising from the~~ ~~occurrence~~whether ofdue ~~any~~to ofordinary ~~the~~wear ~~events~~and ~~described above. Moreover~~tear, ~~there~~unexpected ~~can~~degradation beor noother events ~~assurance~~could ~~that~~increase ~~such~~the ~~insurance~~cost ~~coverage~~of ~~will~~operating ~~be available in~~ the ~~future~~Casecnan ~~at commercially~~Project ~~reasonable rates~~ or ~~that~~require ~~the~~substantial capital ~~amounts~~expenditures, ~~for~~thereby ~~which~~adversely ~~the~~affecting ~~Company~~our isfinancial ~~insured will cover all losses~~results.

~~The~~Variability ~~Company~~in israinfall ~~subject~~and towater ~~risk~~flows ofhas ~~loss~~a ~~from~~significant ~~civil~~impact ~~strife,~~on ~~acts~~our ~~of war and terrorist~~operating ~~activities~~revenue.

~~The~~A ~~Casecnan~~significant ~~Project~~portion isof ~~located~~the inCasecnan aProject’s ~~remote~~revenue ~~region~~is ofrequired ~~the~~to ~~Philippines~~be ~~and~~paid isby ~~therefore~~NIA ~~subject~~without regard to ~~risks~~actual ofwater ~~war,~~flows. ~~civil strife~~However, ~~guerilla~~a ~~activity~~significant ~~and~~component of ~~terrorism.~~revenue, ~~Armed~~approximately ~~groups~~40% ~~opposing~~in ~~the~~2009, ~~Philippine~~consists ~~government~~of ~~have~~variable ~~attempted~~water toand energy ~~exert~~delivery ~~control~~fees ~~over~~that ~~the~~are ~~region~~dependent inupon ~~the~~water ~~past,~~flow ~~and~~volumes. ~~there~~No assurance can be given ~~no assurance~~ that ~~any~~ ~~such~~future ~~attempts~~rainfall inand ~~the~~water ~~future~~flows will ~~not~~approach ~~disrupt the Company’s operations or~~historical ~~impair the Company’s assets~~levels.

~~The~~Our ~~Company~~assets isare subject to ~~risk~~potentially ofcatastrophic ~~loss~~geologic, ~~from~~natural ~~political and other risks arising from~~or ~~foreign~~weather-related ~~sovereignty over areas in which the Company conducts operations~~risks.

~~The~~Earthquakes, ~~Company~~floods, isvolcanic ~~subject~~eruptions, tofires ~~significant~~or ~~political~~other ~~and~~similar ~~other~~catastrophic ~~uncertainties,~~events ~~including~~could ~~expropriation~~cause personal injury, ~~nationalization~~loss of life, ~~renegotiation~~damage or ~~nullification~~destruction ofto ~~existing~~the Casecnan ~~contracts~~Project, ~~imposition~~or suspension of ~~new~~operations. ~~taxes~~Although orwe ~~changes~~maintain ininsurance ~~tax~~coverage (including ~~rates,~~business ~~currency availability~~interruption ~~and~~insurance) ~~exchange~~to ~~restrictions,~~protect ~~changing~~against ~~political~~certain ~~conditions~~of ~~and~~these ~~international~~risks, ~~monetary~~the ~~fluctuations.~~proceeds ~~The~~of ~~government~~such ofinsurance ~~the~~may ~~Philippines~~not ~~exercises~~be adequate to cover reduced arevenue, ~~significant~~increased ~~influence~~expenses ~~over~~or other liabilities arising from the ~~Philippine~~occurrence ~~economy~~of any of the events described above. ~~There~~Moreover, there can be no assurance that ~~future~~such insurance ~~developments~~coverage will be available in the ~~Philippines~~future ~~will~~at ~~not~~commercially ~~impair~~reasonable rates or that the ~~Casecnan Project’s~~amounts ~~operations~~for orwhich ~~the~~we ~~Company’s~~are ~~revenue~~insured will cover all losses.

~~Changes~~We inare ~~laws,~~subject ~~policies,~~to ~~regulations,~~risk ~~environmental~~of ~~standards~~loss ~~and~~from ~~other~~civil ~~mandates imposed~~strife, byacts ~~Philippine~~of ~~authorities~~war ~~have~~and ~~a significant impact on the Company’s~~terrorist ~~operations~~activities.

The ~~Company~~Casecnan Project is ~~subject~~located toin ~~statutory~~a ~~and~~remote ~~regulatory~~region ~~standards,~~of ~~including~~the ~~those related~~Philippines ~~to energy~~ and ~~environmental laws. Business licenses and permits must be~~is ~~renewed~~therefore ~~annually~~subject to ~~continue~~risks ~~operating~~of ~~the~~war, ~~Casecnan~~civil ~~Project.~~strife, ~~Delay~~guerilla inactivity ~~receipt or~~and ~~failure~~terrorism. toArmed ~~obtain~~groups ~~these~~opposing ~~permits~~the orPhilippine togovernment ~~comply~~have ~~with~~attempted ~~applicable standards could~~to ~~restrict~~exert ~~operation~~control ofover the ~~Casecnan~~region ~~Project or result~~ in ~~additional~~the ~~costs or taxes. The adoption of new laws~~past, ~~policies~~ and ~~regulations,~~there orcan ~~changes~~be inno ~~the interpretation~~assurance ~~or application of existing laws, policies and regulations~~ that ~~modify~~any ~~the~~such ~~present~~attempts ~~regulatory~~in ~~environment~~the ~~could~~future ~~have~~will anot ~~material~~disrupt ~~adverse~~our ~~affect on~~operations ~~the~~or ~~Company’s~~impair ~~ability to operate the Casecnan Project~~our assets.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

CE Casecnan’s principal property is a 150 MW hydroelectric power facility located on the island of Luzon in the ROP.

Item 3. Legal Proceedings

None.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Not applicable.

Item 6. Selected Financial Data

The following table sets forth the Company’s selected historical financial data, which should be read in conjunction with the information included in Item 7 of this Form 10-K and with the Company’s historical Financial Statements and the notes thereto included in Item 8 of this Form 10-K. The selected ~~historical~~ historical financial data has been derived from the Company’s audited historical ~~Financial~~ Financial Statements and notes thereto (amounts in thousands).

Years ended December 31,

2008

2007

2006

2005

2004

2009

2008

2007

2006

2005

Statement of Operations Data:

Revenue (1)

~~137~~146,~~638~~912

~~124~~137,~~733~~638

~~148~~124,~~529~~733

~~107~~148,~~000~~529

~~106~~107,~~847~~000

Operating income

~~104~~114,~~202~~157

93104,~~319~~202

~~117~~93,~~433~~319

75117,~~674~~433

7375,~~431~~674

Net income (2)

7393,~~835~~339

7873,~~539~~835

~~100~~78,~~804~~539

52100,~~009~~804

4552,~~302~~009

Electricity produced (Gigawatt-hours) (1)

~~517~~606.35

~~433~~517.63

~~538~~433.56

~~406~~538.5

~~404~~406.5

Water delivered (million cubic meters) (1)

~~909~~1,076.75

~~750~~909.07

~~996~~750.0

~~723~~996.0

~~719~~723.20

As of December 31,

2008

2007

2006

2005

2004

2009

2008

2007

2006

2005

Balance Sheet Data:

Total assets

~~402~~385,~~724~~752

~~410~~402,~~717~~724

~~444~~410,~~970~~717

~~470~~444,~~017~~970

~~477~~470,~~996~~017

Notes payable

~~7,115~~-

397,~~200~~115

5139,~~263~~200

51,263

Long-term debt, including current portion

3017,~~870~~150

6830,~~600~~870

~~106~~68,~~330~~600

~~142~~106,~~345~~330

~~197~~142,~~098~~345

Total shareholders’ equity

~~340~~339,~~556~~001

~~271~~340,~~840~~556

~~193~~271,~~301~~840

~~191~~193,~~997~~301

~~150~~191,~~988~~997

(1) Revenue increased in 2009, 2008 and 2006 due to substantially higher water flows and accompanying water deliveries and electricity generation.

(2) Net income decreased in 2008 due to the expiration of the income tax holiday on December 11, 2007.

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~~that have affected the financial condition and results of operations of the Company during the periods included herein. Explanations include management’s best estimate of the impact of weather and other factors. This discussion should be read in conjunction with Item 6 of this Form 10-K and with the Company’s historical Financial Statements and the notes thereto included in Item 8 of this Form 10-K. The Company’s actual results in the future could differ significantly from the historical results.

Results of Operations

The Casecnan Project is 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. Rainfall has historically been highest from June through December and lowest from January through May. The contractual terms for variable water and energy delivery fees can produce significant variability in revenue between reporting periods.

Prior to December 25, 2008, the water delivery fee was a fixed monthly payment based upon an assumed annual water delivery of 801.9 million cubic meters, prorated to 66.8 million cubic meters per month, multiplied by the water delivery fee rate of $0.07381 per cubic meter. For each contract year starting from December 25, 2003 and ending on December 25, 2008, a water delivery fee credit, or deferred revenue, was computed equal to 801.9 million cubic meters minus the greater of actual water deliveries or 700.0 million cubic meters - the annual minimum water delivery threshold. Accordingly, in recognizing revenue, the water delivery fees will be recorded each month pro rated to 58.3 million cubic meters until the minimum threshold has been reached for the current contract year. The water delivery fee credit at the end of each contract year, if any, was available to be earned in the succeeding contract year through December 25, 2008. All water delivery credits available under the contract were earned by the Company as of December 25, 2008.

~~For~~Prior to December 25, 2008, the water delivery fee was a fixed monthly payment based upon an assumed annual water delivery of 801.9 million cubic meters, prorated to 66.8 million cubic meters per month, multiplied by the water delivery fee rate of $0.07381 per cubic meter. For each contract ~~years~~year starting from December 25, 2003 and ending on December 25, 2008, ~~through~~a water delivery fee credit, or deferred revenue, was computed equal to 801.9 million cubic meters minus the ~~end~~greater of actual water deliveries or 700.0 million cubic meters - the ~~Cooperation~~annual minimum water delivery threshold. ~~Period~~Accordingly, ~~December~~in ~~11,~~recognizing ~~2021~~revenue, ~~guaranteed~~the water delivery fees ~~are~~were recorded each ~~$51~~month pro rated to 58.73 million, ~~calculated~~cubic asmeters until the ~~annual~~ minimum threshold had been reached for the current contract year. The water delivery ~~threshold~~fee credit at ~~multiplied~~the end of each contract year, if any, was available to be earned in the succeeding contract year through December 25, 2008. All water delivery credits available under the contract were earned by $0the Company as of December 25, 2008.~~07381.~~

For contract years from December 25, 2008 through the end of the Cooperation Period, guaranteed water delivery fees are $51.7 million, calculated as the annual minimum water delivery threshold multiplied by $0.07381.

Variable water delivery fees are earned for all water deliveries within the contract year, if any, exceeding the annual minimum water delivery threshold multiplied by $0.07381, until a cumulative 1.324 billion cubic meters of water subject to variable water delivery fees have been delivered.

Guaranteed energy delivery fees are $36.4 million per year, calculated as the assumed annual delivery of 228.0 Gigawatt-hours (“GWh”), prorated to 19.0 GWh per month and multiplied by $0.1596 per kilowatt-hour (“kWh”).

The Company earns variable energy delivery fees in each contract year based upon actual energy delivered in excess of 228.0 GWh, multiplied by the applicable rate, until cumulative energy of 490.0 GWh per year are delivered. Prior to December 25, 2008, the rate was $0.1509 per kWh. Thereafter, the variable energy delivery rate is $0.1132 per kWh for the contract year ending December 25, 2009, escalating at 1% per annum. Energy deliveries between 490.0 GWh and 550.0 GWh within a contract year earn variable energy delivery fees at a rate of 1.3 Philippine pesos (“pesos”) per kWh prior to December 25, 2008 and 1.0 pesos per kWh thereafter, escalating at 1% per annum. Energy deliveries above 550.0 GWh per year are at no cost to NIA. Within each contract year, no variable energy delivery fees are payable until energy in excess of the cumulative 19.0 GWh per month for the contract year to date has been delivered.

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

	2008		2007		2006
	2009		2008		2007
Electricity produced (GWh)		~~517~~606.35		~~433~~517.63		~~538~~433.56
Water delivered (million cubic meters)		~~909~~1,076.75		~~750~~909.07		~~996~~750.0

The Company’'s water and energy ~~delivery~~ fees for the years ended December 31 are as follows (in millions):

	2008		2007			2006
	2009		2008			2007
Water delivery fees	$	5979.26	$	5961.20		$	57.34
Guaranteed energy delivery fees		36.4		36.4			36.4
Energy delivery fees		67.3		76.6			67.3
Variable energy delivery fees		40.2		30.9			41.0
Total water and energy fees	$	146.9	$	137.6		$	124.7
Deferred water delivery fees		1.8		(1.8	)		13.8
Total lease rentals and service contracts revenue	$	137.6	$	124.7		$	148.5

Revenue for ~~2008~~2009 increased $~~12.~~9.3 million to $~~137~~146.69 million compared ~~with~~to ~~2007~~2008. The $18.6 million increase in ~~variable~~water ~~energy~~ delivery fees ~~and~~was ~~recognition~~due ofto ~~deferred~~exceptionally high water ~~delivery~~ ~~fees~~flow in ~~2008~~2009 ~~were~~which ~~due to exceptionally high rainfall that~~ resulted in higher water deliveries ~~and~~compared ~~related~~to 2008. ~~energy~~Despite higher electricity production ~~when~~in ~~compared~~2009 due to the ~~water~~exceptionally ~~flows~~high inwater ~~2007.~~flow, ~~Revenue~~energy ~~for~~delivery ~~2007~~fees ~~decreased~~were $239.83 million ~~to $124.7 million~~lower ~~compared~~than ~~with~~2008 ~~2006.~~due to ~~The~~lower ~~increase~~prices infor ~~water~~variable ~~delivery~~energy ~~fees~~and ~~in 2007~~contractual ~~was~~provisions ~~primarily~~that ~~due~~require energy todeliveries aabove ~~contractual~~550 ~~escalation~~GWh ~~factor.~~within ~~The~~a ~~decrease~~contract ~~in variable~~year ~~energy~~to ~~delivery~~be ~~fees~~at inno ~~2007~~cost ~~was due~~ to ~~lower rainfall and related~~NIA. ~~energy~~Revenue ~~production~~for ~~compared~~2008 ~~with~~increased ~~2006~~$12.9 million ~~Deferred~~to ~~water~~$137.6 million ~~delivery~~compared ~~fees represent the~~to ~~difference~~2007. ~~between~~The ~~the~~increases ~~actual~~in water delivery fees ~~earned~~ and ~~water~~energy delivery fees ~~invoiced~~ ~~pursuant~~in to2008 ~~the Project Agreement. Water delivery fees~~ were ~~deferred in~~ ~~2007~~ due to ~~lower~~higher ~~water~~than ~~flows~~average ~~that did not reach the contractual threshold. Accumulated deferred~~ water ~~delivery~~flow ~~fees~~which inresulted ~~prior years were fully earned~~ in ~~2006~~ ~~due~~higher ~~to high~~ water deliveries and ~~that~~related ~~exceeded~~energy ~~the~~production ~~contractual threshold~~compared to 2007.

Plant operations and other operating expenses for 2009 decreased $0.5 million compared to 2008 due to lower general and administrative costs. Plant operations and other operating expenses for 2008 increased $1.7 million compared with 2007, due primarily to the favorable resolution of a vendor disagreement in 2007 and higher general and administrative costs in 2008. ~~Plant operations and other operating expenses for 2007 were relatively flat compared with 2006.~~

Interest expense ~~decreased~~for in2009 ~~2008~~decreased $85.23 million ~~to $8.6 million~~ compared ~~with 2007~~to 2008 and for 2008 decreased ~~in 2007~~ $48.62 million ~~to $16.8 million~~ compared ~~with 2006~~to 2007, due primarily to lower outstanding debt balances resulting from the scheduled repayment of long-term debt and the repayment of notes payable.

~~Income~~Interest ~~tax~~income ~~expense~~for ~~was~~2009 decreased $281.2 million, ~~$4.6 million~~compared ~~and~~to ~~$2.3 million in~~ 2008, ~~2007~~ and ~~2006,~~for ~~respectively. The increase in income tax expense in~~ 2008 ~~and~~decreased ~~2007 was due to the expiration of the income tax holiday on December 11, 2007~~$0.8 ~~Thereafter,~~million ~~the~~compared ~~Company’s taxable income became subject~~ to ~~income tax at the Philippine statutory rate. Prior to December 11,~~ 2007~~, income~~ ~~tax~~as ~~expense~~a ~~was~~result ~~limited~~of tolower interest ~~income~~rates and ~~other income not subject~~ tolower ~~the~~average ~~income~~cash ~~tax holiday~~balances.

Other, net for 2009 increased $0.6 million compared to 2008 and for 2008 increased $0.6 million compared to 2007 due to higher allocable output value added tax and the impact of foreign currency exchange rates on peso-denominated transactions.

Income tax expense was $23.3 million, $28.2 million and $4.6 million in 2009, 2008 and 2007, respectively. The decrease in income tax in 2009 was due to a reduction in the Philippine statutory income tax rate from 35% to 30% and the Company’s adoption of the optional standard deduction method for calculating income tax liabilities, partially offset by higher taxable income. The increase in income tax expense in 2008 was due to the expiration of the income tax holiday on December 11, 2007. Thereafter, the Company’s taxable income became subject to income tax at the Philippine statutory rate. Prior to December 11, 2007, income tax expense was limited to interest income and other income not subject to the income tax holiday.

Liquidity and Capital Resources

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 obligations under the Project Agreement are substantially denominated in U.S. dollars and are the Company’s sole source of operating revenue. 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, including obligations pertaining to its outstanding debt. No shareholders, partners or affiliates of the Company, including MEHC, and no directors, officers or employees of the Company have guaranteed or will 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 revenue from the Company’s business after the payment of operating expenses.

The Company’s cash and cash equivalents were $4920.41 million and $3149.14 million at December 31, ~~2008~~2009 and ~~2007~~2008, respectively.

~~The Company~~Cash ~~generated~~Flows ~~cash flows~~ from ~~operations of $88.9 million and~~Operating $91.0 million for the years ended December 31, 2008 and 2007, respectively. The lower cash generated in 2008 was due primarily to higher income taxes paid of $24.3 million, partially offset by lower interest payments of $10.7 million and higher variable energy delivery fees of $9.3 million.Activities

~~The~~Net cash ~~Company~~flows ~~used~~from ~~$1.0 million~~operating ~~and received $18.2 million for investing~~ activities for the years ended December 31, ~~2008~~2009 and ~~2007, respectively.~~ ~~Restricted~~2008 ~~cash~~were ~~for debt service obligations and dividends payable decreased by~~ $30101.1 million inand ~~2007~~$88.9 million, ~~primarily~~respectively. asThe ~~a result of the payment of~~increase ~~$25.5 million~~in of2009 ~~dividends~~was ~~and~~mainly ~~accrued~~due ~~interest~~to ~~previously~~higher ~~held~~revenue incollections ~~escrow. Net~~and ~~purchases~~lower ofpayments ~~available-~~for~~-sale~~ income ~~securities~~taxes ~~were~~and ~~$11~~interest.~~3 million in 2007.~~

~~The Company~~Cash ~~used~~Flows $69.6 million and $110.0 million for financing activities for the years ended December 31, 2008 and 2007, respectively. The Company repaid $37.7 million on the balance of its outstanding project financing debt in both 2008 and 2007. In 2008 and 2007, CE Casecnan repaid $32.1 million and $12.1 million, respectively, on the balance of notes payable to CE Casecnan Ltd. (the “Notes”). On February 5, 2009, CE Casecnan repaid the remaining $7.1 million balance of the Notes. In 2007, the Company repaid $38.5 million of advances received from ~~its affiliates and~~Investing ~~released $21.7 million of dividends held in escrow.~~Activities

~~Auction~~Net cash ~~Rate~~flows ~~Securities~~from investing activities for the years ended December 31, 2009 and 2008 were $(15.6) million and $(1.0) million, respectively. In 2009, the Company deposited $5.0 million of declared and unpaid dividends on common stock relating to the disputed 5% ownership interest in the Company into a restricted cash account. Refer to note 9 of Notes to Financial Statements for information regarding the disputed ownership interest. In 2009, the Company made additional payments of $9.6 million to the debt service reserve fund.

~~With~~Cash ~~the liquidity~~Flows ~~issues~~from ~~experienced in global credit and capital markets, the~~Financing $21.4 million par value of auction rate securities held by the Company at December 31, 2008, have experienced multiple failed auctions as the amount of securities submitted for sale has exceeded the amount of purchase orders. The securities are rated Baa1 by Moody’s Investors Service and AA by Standard & Poor’s at December 31, 2008. Although there is no current liquid market for the auction rate securities, the Company believes the underlying creditworthiness of the repayment sources for these securities’ principal and interest has not materially deteriorated. Further, the Company has the intent and ability to hold the auction rate securities for a period of time sufficient to allow for any anticipated recovery in the credit and capital markets that would facilitate the periodic auction and sale of these securities. At December 31, 2008, the Company’s pre-tax temporary impairment of the auction rate securities totaled $7.3 million. If the underlying assets and the guarantors of the auction rate securities experience credit deterioration, the Company may not ultimately realize the par value of the investments held at December 31, 2008.Activities

Net cash flows from financing activities for the years ended December 31, 2009 and 2008 were $(114.8) million and $(69.6) million, respectively. In 2009, the Company paid dividends on common stock of $94.1 million, made $13.7 million of project financing debt scheduled payments and repaid the remaining $7.1 million of notes payable to CE Casecnan Ltd. (the “Notes”). In 2008, the Company made $37.7 million of project financing debt scheduled payments and repaid $32.1 million of the Notes.

Auction Rate Securities

With the liquidity issues experienced in global credit and capital markets, the $21.4 million par value of auction rate securities held by the Company at December 31, 2009 have experienced multiple failed auctions as the amount of securities submitted for sale has exceeded the amount of purchase orders. The securities are rated AA- and A by Standard & Poor’s at December 31, 2009. Although there is no current liquid market for the auction rate securities, the Company believes the underlying creditworthiness of the repayment sources for these securities’ principal and interest has not materially deteriorated. Further, the Company does not intend to sell, nor is it more-likely-than-not that the Company will be required to sell, the auction rate securities before an orderly market develops and they can be sold for a price that approximates par value. Therefore, the Company considers the auction rate securities to be temporarily impaired. At December 31, 2009, the Company’s pre-tax temporary impairment of the auction rate securities totaled $1.8 million. If the underlying assets and the guarantors of the auction rate securities experience credit deterioration, the Company may not ultimately realize the par value of the investments held at December 31, 2009.

Supplemental Real Property Tax

~~On July 1,~~In July 2008, CE Casecnan received a supplemental real property tax ~~assessment~~ assessment totaling $28.6 million from the province of Nueva Ecija and the municipality of Pantabangan for the tax years 2002 through the second quarter of 2008. Subsequent amendments of the supplemental assessment to reflect additional taxable periods in 2008 and 2009 increased the assessment to $32.5 million. CE Casecnan forwarded the assessment to NIA and the Philippine Department of of Finance (“DOF”), ~~who~~which must authorize any payment for real property taxes and are obligated to reimburse the Company pursuant to the Project Agreement. OnIn December ~~19,~~ 2008, pursuant to written authorization from NIA and ~~the~~ DOF, CE CE Casecnan tendered $6.8 million as partial payment of the supplemental assessment and recorded a receivable of an equal amount for the expected full reimbursement to CE Casecnan from NIA. OnThe ~~January~~$6.8 ~~16,~~million partial payment was reimbursed by NIA in July 2009. In January 2009, CE Casecnan filed a protest on the supplemental assessment which the provincial treasurer failed to resolve timely and in May 2009, filed an appeal with the Local Board of Assessment Appeals. In October 2009, pursuant to written authorization from NIA and DOF, CE Casecnan paid, under protest, $5.0 million to the province of Nueva Ecija. A receivable of an equal amount was accrued as of December 31, 2009 to reflect the expected full reimbursement to CE Casecnan from NIA. The $5.0 million payment was reimbursed by NIA in January 2010. Discussions continue among CE Casecnan, NIA, DOF and the province of Nueva Ecija to resolve the supplemental real property tax assessment. No further liability for ~~supplemental~~ supplemental real property tax has been recognized as the Company believes that the claim is without merit.

In March 2009, CE Casecnan received a supplemental real property tax assessment totaling $36.5 million from the province of Nueva Vizcaya for the tax years 2002 to 2009. CE Casecnan forwarded the assessment to NIA and the DOF, which must authorize any payment for real property taxes and are obligated to reimburse the Company pursuant to the Project Agreement. In May 2009, upon instructions from NIA, CE Casecnan filed an appeal of the supplemental assessment with the Local Board of Assessment Appeals. In November 2009, CE Casecnan paid $16.1 million to the province of Nueva Vizcaya pursuant to an interim agreement between CE Casecnan and the province of Nueva Vizcaya which provides for a cessation of collection efforts by the province of Nueva Vizcaya until a final determination of taxable value is rendered. A receivable of an equal amount was accrued as of December 31, 2009 to reflect the expected full reimbursement to CE Casecnan from NIA. Reimbursement from NIA is due in the second quarter of 2010. Discussions continue among CE Casecnan, NIA, DOF and the province of Nueva Vizcaya to resolve the supplemental real property tax assessment. No further liability for supplemental real property tax has been recognized as the Company believes that the claim is without merit.

National Wealth Tax

~~On July 17,~~In July 2008, CE Casecnan received an assessment totaling $4.1 million from the municipality of Alfonso Castaneda for a share of national wealth tax it claims is owed by the Company for the years from 2002 through 2007. CE Casecnan forwarded the assessment to NIA and the DOF, ~~who~~which must authorize any payment for national wealth taxes and are obligated to reimburse the Company pursuant to the Project Agreement. OnIn September ~~24,~~ 2008, CE Casecnan received a temporary restraining order to enjoin the municipality of Alfonso Castaneda from pursuing its collection efforts until the matter can be decided by the court. A pre-trial hearing was held onin December ~~11,~~ 2008. The proceedings were suspended ~~indefinitely~~ to allow the municipality of Alfonso Castaneda to provide other local government units the opportunity to intervene in the case. NoAt the June 2009 hearing, the judge summoned all affected local government units to participate in the hearing and file the necessary motions for leave for intervention and third party complaints. The next hearing date is set for February 24, 2010. No liability for national wealth tax has been recognized as the Company believes that the claim is without merit.

Franchise Tax

In January 2006, CE Casecnan received franchise tax assessments for the years 2001 to 2006 totaling $2.2 million from the ~~Province~~province of Nueva Vizcaya. CE Casecnan believes that franchise tax is imposed on companies which have a secondary or special franchise from the government. CE Casecnan is an independent power producer and does not have a government franchise. ~~The~~ EPIRA provides that independent power generation is not a public utility operation and does not require a franchise. Therefore, the Company has not recognized a ~~liability~~ liability relating to these assessments. In June 2006, CE Casecnan filed appeals of the assessments which are currently pending before the Supreme Court Office of the Court Administrator for reassignment to another court to hear and decide ~~these~~ the cases.

Contractual Obligations

The Company has contractual obligations that may affect its financial condition. Contractual obligations to make future payments arise from long-term debt. ~~and~~The ~~notes~~Company ~~payable.~~expects ~~Material~~to ~~obligations~~make as$18.7 million of ~~December 31~~scheduled payments on its long-term debt, ~~2008~~which ~~are~~matures asin ~~follows~~November 2010, including $17.2 million of ~~(in~~principal ~~thousands):~~and $1.5 million of interest.

	Payments Due by Periods
	Total		2009		2010-2011		2012-2013		2014 andAfter
Contractual Cash Obligations:
Long-term debt	$	30,870	$	13,720	$	17,150	$	-	$	-
Notes payable (1)		7,115		7,115		-		-		-
Interest		7,477		5,940		1,537		-		-
Total contractual cash obligations	$	45,462	$	26,775	$	18,687	$	-	$	-

Critical Accounting Estimates

~~(1)~~Certain accounting Onmeasurements ~~February~~require 5,management ~~2009~~to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized on the Financial Statements based on such estimates involve numerous assumptions subject to varying and potentially significant degrees of judgment and uncertainty. Accordingly, CEthe ~~Casecnan~~amounts ~~repaid~~currently reflected on the Financial Statements will likely change in ~~full~~the future as additional information becomes available. The following critical accounting estimates are impacted significantly by the ~~outstanding~~Company’s ~~principal~~methods, ~~amount~~judgments and assumptions used in the preparation of the ~~Notes~~Financial Statements and ~~related~~should ~~accrued~~be ~~interest~~read in conjunction with the Company’s Summary of Significant Accounting Policies included in Note 2 of Notes to Financial Statements in Item 8 of this Form 10-K.

Critical Accounting Policies

Certain accounting policies require management to make estimates and judgments concerning transactions that will be settled several years in the future. Amounts recognized in the Financial Statements from such estimates are necessarily based on numerous assumptions involving varying and potentially significant degrees of judgment and uncertainty. Accordingly, the amounts currently reflected in the Financial Statements will likely increase or decrease in the future as additional information becomes available. The following critical accounting policies are impacted significantly by judgments, assumptions and estimates used in the preparation of the Financial Statements.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is based on the Company’s assessment of the collectability of payments from NIA. This assessment requires judgment regarding the outcome of disputes, arbitrations and the ability of the customer to pay the amounts owed to the Company.

Auction Rate Securities - Measurement Principles

The Company has investments in auction rate securities that are measured at fair value inon the Financial Statements. With the liquidity issues experienced in global credit and capital markets, the auction rate securities held by the Company have experienced multiple failed auctions as the amount of securities submitted for sale has exceeded the amount of purchase orders. The fair values of the auction rate securities are determined using internally developed discounted cash flow models based on available observable market data and the Company’s judgment about the assumptions, including liquidity and nonperformance risks, which market participants would use in pricing the asset.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

The Company’s Balance Sheets include assets and liabilities ~~whose~~with fair values ~~are~~that are subject to market risks. The Company’s significant market risks are ~~primarily~~ primarily associated with interest rates and credit. The following sections address the significant market risks associated with the Company’s business activities.

Interest Rate Risk

As of December 31, ~~2008~~2009, the Company had fixed-rate long-term debt totaling $3017.92 million with a total fair value of $3117.49 million. Because of their fixed interest rates, these instruments 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~~ $0.61 million if interest rates were to increase by 10% from their levels as of December 31, ~~2008.~~ 2009. Comparatively, as of December 31, ~~2007~~2008, the Company had fixed-rate long-term debt totaling $6830.69 million with a total fair value of $7331.84 million. The fair value of these instruments would have decreased by ~~approximately~~ $0.46 million if interest rates had increased by 10% from their levels at December 31, ~~2007~~2008. 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.

Credit Risk

11With the liquidity issues experienced in global credit and capital markets, the $21.4 million par value of auction rate securities held by the Company at December 31, 2009, have experienced multiple failed auctions as the amount of securities submitted for sale has exceeded the amount of purchase orders. The securities are rated AA- and A by Standard & Poor’s at December 31, 2009. Although there is no current liquid market for the auction rate securities, the Company believes the underlying creditworthiness of the repayment sources for these securities’ principal and interest has not materially deteriorated. Further, the Company does not intend to sell, nor is it more-likely-than-not that the Company will be required to sell, the auction rate securities before an orderly market develops and they can be sold at a price that approximates par value. Therefore, the Company considers the auction rate securities to be temporarily impaired. At December 31, 2009 the Company’s pre-tax temporary impairment of the auction rate securities totaled $1.8 million. If the underlying assets and the guarantors of the auction rate securities experience credit deterioration, the Company may not ultimately realize the par value of the investments held at December 31, 2009.

With the liquidity issues experienced in global credit and capital markets, the $21.4 million par value of auction rate securities held by the Company at December 31, 2008, have experienced multiple failed auctions as the amount of securities submitted for sale has exceeded the amount of purchase orders. The securities are rated Baa1 by Moody’s Investors Service and AA by Standard & Poor’s at December 31, 2008. Although there is no current liquid market for the auction rate securities, the Company believes the underlying creditworthiness of the repayment sources for these securities’ principal and interest has not materially deteriorated. Further, the Company has the intent and ability to hold the auction rate securities for a period of time sufficient to allow for any anticipated recovery in the credit and capital markets that would facilitate the periodic auction and sale of these securities. At December 31, 2008, the Company’s pre-tax temporary impairment of the auction rate securities totaled $7.3 million. If the underlying assets and the guarantors of the auction rate securities experience credit deterioration, the Company may not ultimately realize the par value of the investments held at December 31, 2008. The investments are classified as available-for-sale securities and are recorded in other investments and long-term restricted cash and investments on the Balance Sheets.

Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firms	14
Report of Independent Registered Public Accounting Firm		14
Balance Sheets as of December 31, 2008 and 2007	16
Balance Sheets as of December 31, 2009 and 2008		16
Statements of Operations for the Years Ended December 31, 2008, 2007 and 2006	17
Statements of Operations for the Years Ended December 31, 2009, 2008 and 2007		17
Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2008, 2007 and 2006	18
Statements of Cash Flows for the Years Ended December 31, 2009, 2008 and 2007		18
Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006	19
Statements of Changes In Shareholders’ Equity for the Years Ended December 31, 2009, 2008 and 2007		19
Notes to Financial Statements	20	20

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

CE Casecnan Water and Energy Company, Inc.

~~Makati~~We have ~~City~~audited the accompanying balance sheets of CE Casecnan Water and Energy Company, Inc. ~~Philippines~~(the “Company”) as of December 31, 2009 and 2008, and the related statements of operations, cash flows, and changes in shareholders’ equity for the years then ended. 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 ~~have~~ ~~audited~~conducted ~~the~~our ~~accompanying~~audits ~~balance~~in ~~sheet~~accordance ofwith CEthe ~~Casecnan~~standards ~~Water~~of ~~and~~the ~~Energy~~Public Company, ~~Inc.~~Accounting Oversight Board (~~the~~United ~~“Company”~~States). asThose ofstandards ~~December 31,~~require ~~2008,~~that we plan and perform the ~~related~~audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to ~~operations~~have, ~~changes~~nor inwere ~~shareholders’~~we ~~equity~~engaged to perform, ~~and~~an ~~cash~~audit ~~flows~~of ~~for~~its ~~the~~internal ~~year~~control ~~ended~~over ~~December 31,~~financial ~~2008~~reporting. ~~These~~ Our audits included consideration of internal control over financial ~~statements~~reporting as a basis for designing audit procedures that are appropriate in the ~~responsibility~~circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company'’s ~~management.~~internal ~~Our~~control ~~responsibility~~over isfinancial reporting. toAccordingly, we express anno such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, ~~based~~assessing onthe accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our ~~audit~~audits provide a reasonable basis for our opinion.

~~We conducted~~In our ~~audit in accordance with the standards of the Public Company~~ ~~Accounting~~opinion, ~~Oversight~~such ~~Board~~2009 ~~(United States). Those standards require that we plan~~ and ~~perform~~2008 ~~the~~financial ~~audit~~statements topresent ~~obtain~~fairly, ~~reasonable~~in ~~assurance~~all ~~about~~material respects, ~~whether~~ the financial ~~statements~~ ~~are~~position ~~free~~ of ~~material~~CE ~~misstatement.~~Casecnan ~~The~~Water ~~Company~~and isEnergy ~~not required to have~~Company, ~~nor were we engaged to perform, an audit of its internal control over financial reporting~~Inc. ~~Our audit included consideration of internal control~~ ~~over financial reporting~~ as aof ~~basis~~December 31, ~~for~~2009 ~~designing~~and ~~audit procedures that are appropriate in the circumstances~~2008, ~~but~~and ~~not for~~ the ~~purpose~~results of ~~expressing~~its ~~an opinion~~operations onand ~~the effectiveness of the Company's internal control over financial~~its ~~reporting.~~cash ~~Accordingly,~~flows wefor ~~express no such opinion. An audit also includes examining, on a test basis, evidence supporting~~ the ~~amounts~~years ~~and~~then ~~disclosures~~ended in ~~the~~ ~~financial~~conformity ~~statements,~~with ~~assessing the~~ accounting principles ~~used and~~ ~~significant~~generally ~~estimates~~accepted ~~made~~in ~~by management, as well as evaluating~~ the ~~overall financial~~United ~~statement~~States ~~presentation. We~~of ~~believe that our audit provides a reasonable basis for our opinion~~America.

In our opinion, such 2008 financial statements present fairly, in all material respects, the financial position of CE Casecnan Water and Energy Company, Inc. as of December 31, 2008, and the results of its operations and its cash flows for the year ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

/s/ Manabat Delgado Amper & Co.

Manabat, Delgado, Amper & Co.

~~Deloitte~~Member of &Deloitte Touche Tohmatsu

Makati City, Philippines

February 2723, ~~2009~~2010

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

CE Casecnan Water and Energy Company, Inc.

We have audited the accompanying ~~balance sheet of CE Casecnan Water and Energy Company, Inc. as of December 31, 2007 and the related~~ statements of operations, of changes in shareholders’ equity and of cash flows ~~for~~of ~~each~~CE ofCasecnan ~~the~~Water ~~two~~and ~~years~~Energy ~~in the~~Company, ~~period~~Inc. for the year ended December 31, 2007. These financial statements are the ~~responsibility~~ responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our ~~audits~~audit.

We conducted our ~~audits~~audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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~~audit ~~provide~~provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the ~~financial~~results ~~position~~ of operations and cash flows of CE Casecnan Water and Energy Company, Inc. ~~as of December 31, 2007 and the results of its operations and its cash flows~~ for ~~each of~~ the ~~two~~year ~~years in the period~~ ended December 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

/s/ Isla Lipana & Co.

ISLA LIPANA & CO.

A PricewaterhouseCoopers member firm

Makati City, Philippines

February 27, 2008

CE CASECNAN WATER AND ENERGY COMPANY, INC.

BALANCE SHEETS

(Amounts in thousands, except share data)

	As of December 31,
	2008			2007
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	4920,~~350~~068		$	3149,~~083~~350
Restricted cash and investments		2237,~~881~~447			22,~~414~~881
Trade receivable, net		20,308			20,365
Receivables, net		34,189			20,308
Other current assets		79,~~387~~027			67,~~653~~387
Total current assets		99100,~~926~~731			8099,~~515~~926
Property, plant and equipment, net		~~281~~260,~~485~~579			~~303~~281,~~056~~485
Other investments		1419,~~096~~572			714,~~503~~096
Long-term restricted cash and investments		-			13,906
Deferred income taxes		4,802			6,995
Deferred income taxes		6,995			5,198
Other		68			222
Other		222			539
Total assets	$	385,752		$	402,724
Total assets	$	402,724		$	410,717
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$	1,~~748~~670		$	1,~~995~~748
Dividends payable		1015,~~825~~775			10,825
Accrued interest		~~3,067~~256			73,~~801~~067
Accrued income, property and other taxes		5,817			6,208
Accrued property, income and other taxes		9,098			5,817
Payable to affiliates		2,~~726~~802			2,~~480~~726
Notes payable		~~7,115~~-			397,~~200~~115
Current portion of long-term debt		1317,~~720~~150			3713,~~730~~720
Total current liabilities		4546,~~018~~751			~~106~~45,~~239~~018
Deferred revenue		-			1,768
Long-term debt		-			17,150
Long-term debt		17,150			30,870
Total liabilities		46,751			62,168
Total liabilities		62,168			138,877
Commitments and contingencies (Note 9)
Shareholders’ equity:
Common shares - 2,148,000 shares authorized, one Philippine peso ($0.038) parvalue; 767,162 shares issued and outstanding		29			29
Common shares - 2,148,000 shares authorized, 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		~~221~~216,~~839~~178			~~148~~221,~~004~~839
Accumulated other comprehensive loss, net		(51,~~119~~013	)		-(5,119	)
Total shareholders’ equity		~~340~~339,~~556~~001			~~271~~340,~~840~~556
Total liabilities and shareholders’ equity	$	~~402~~385,~~724~~752		$	~~410~~402,~~717~~724

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

CE CASECNAN WATER AND ENERGY COMPANY, INC.

STATEMENTS OF OPERATIONS

(Amounts in thousands)

Years Ended December 31,

2008

2007

2006

2009

2008

2007

Revenue:

Revenue - Lease rentals and service contracts

146,912

137,638

124,733

Lease rentals and service contracts

137,638

124,733

148,529

Operating expenses:

Depreciation

2221,~~121~~942

2122,~~825~~121

21,~~728~~825

Plant operations and other operating expenses

1110,~~315~~813

911,~~589~~315

9,~~368~~589

Total operating expenses

3332,~~436~~755

3133,~~414~~436

31,~~096~~414

Operating income

~~104~~114,~~202~~157

93104,~~319~~202

~~117~~93,~~433~~319

Other income (expense):

Interest expense

(83,~~639~~283

)

(168,~~784~~639

)

(2116,~~355~~784

)

Interest income

~~2,030~~817

2,~~810~~030

32,~~010~~810

Other, net

4,~~399~~960

34,~~761~~399

3,~~978~~761

Total other income (expense)

(2,~~210~~494

)

(102,~~213~~210

)

(1410,~~367~~213

)

Income before income tax expense

~~101~~116,~~992~~651

83101,~~106~~992

~~103~~83,~~066~~106

Income tax expense

2823,~~157~~312

428,~~567~~157

24,~~262~~567

Net income

7393,~~835~~339

7873,~~539~~835

~~100~~78,~~804~~539

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

CE CASECNAN WATER AND ENERGY COMPANY, INC.

STATEMENTS OF ~~CHANGES~~CASH ~~IN SHAREHOLDERS’ EQUITY~~FLOWS

(Amounts in thousands~~, except shares~~)

										Accumulated
	Years Ended December 31,
				Additional						Other
	2009			2008			2007
	Common			Paid-in			Retained			Comprehensive
Cash flows from operating activities:
	Stock			Capital			Earnings			Loss, net			Total
Net income	$	93,339		$	73,835		$	78,539
Balance, January 1, 2006	$	29		$	123,807		$	68,161		$	-		$	191,997
Adjustments to reconcile net income to net cash flows from operating activities:
Net income		-			-			100,804			-			100,804
Depreciation		21,942			22,121			21,825
Dividends declared		-			-			(99,500	)		-			(99,500	)
Amortization of bond issue costs		154			317			518
Balance, December 31, 2006		29			123,807			69,465			-			193,301
Provision for deferred income taxes		433			397			(103	)
Net income		-			-			78,539			-			78,539
Changes in other operating assets and liabilities:
Balance, December 31, 2007		29			123,807			148,004			-			271,840
Receivables, net		(13,881	)		57			(6,363	)
Net income		-			-			73,835			-			73,835
Other current assets		(1,640	)		(734	)		(645	)
Other comprehensive loss		-			-			-			(5,119	)		(5,119	)
Accounts payable and other accrued liabilities		312			(247	)		371
Balance, December 31, 2008	$	29		$	123,807		$	221,839		$	(5,119	)	$	340,556
Accrued interest		(2,811	)		(4,734	)		(7,525	)
Accrued property, income and other taxes		3,281			(391	)		2,568
Deferred revenue		-			(1,768	)		1,768
Net cash flows from operating activities		101,129			88,853			90,953
Cash flows from investing activities:
Capital expenditures		(1,036	)		(550	)		(678	)
Purchases of available-for-sale securities		-			-			(71,809	)
Proceeds from sale of available-for-sale securities		-			-			60,500
(Increase) decrease in restricted cash and investments		(14,566	)		(467	)		30,145
Net cash flows from investing activities		(15,602	)		(1,017	)		18,158
Cash flows from financing activities:
Increase (decrease) in payable to affiliates		76			246			(38,531	)
Repayment of long-term debt		(13,720	)		(37,730	)		(37,730	)
Repayment of notes payable		(7,115	)		(32,085	)		(12,063	)
Dividends paid		(94,050	)		-			(21,650	)
Net cash flows from financing activities		(114,809	)		(69,569	)		(109,974	)
Net change in cash and cash equivalents		(29,282	)		18,267			(863	)
Cash and cash equivalents at beginning of period		49,350			31,083			31,946
Cash and cash equivalents at end of period	$	20,068		$	49,350		$	31,083
Supplemental disclosure:
Interest paid	$	5,940		$	11,865		$	22,602
Income taxes paid	$	20,359		$	26,555		$	2,264

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

CE CASECNAN WATER AND ENERGY COMPANY, INC.

STATEMENTS OF ~~CASH~~CHANGES ~~FLOWS~~IN SHAREHOLDERS’ EQUITY

(Amounts in thousands)

	Years Ended December 31,
													Accumulated
	2008			2007			2006
							Additional						Other
Cash flows from operating activities:
	Common						Paid-in			Retained			Comprehensive
Net income	$	73,835		$	78,539		$	100,804
	Shares			Stock			Capital			Earnings			Loss, Net			Total
Adjustments to reconcile net income to cash flows from operations:
Balance, January 1, 2007		767		$	29		$	123,807		$	69,465		$	-		$	193,301
Depreciation		22,121			21,825			21,728
Net income		-			-			-			78,539			-			78,539
Amortization of bond issue costs		317			518			688
Balance, December 31, 2007		767			29			123,807			148,004			-			271,840
Provision for deferred income taxes		397			(103	)		-
Net income		-			-						73,835			-			73,835
Changes in other items:
Other comprehensive loss:
Trade receivable, net		57			(6,363	)		12,636
Unrealized losses on marketable securities, net of tax of $(2,194)		-			-			-			-			(5,119	)		(5,119	)
Other current assets		(734	)		(645	)		(792	)
Total comprehensive income																	68,716
Accounts payable and other accrued liabilities		(247	)		371			(1,414	)
Balance, December 31, 2008		767			29			123,807			221,839			(5,119	)		340,556
Accrued interest		(4,734	)		(7,525	)		4,733
Net income		-			-			-			93,339			-			93,339
Accrued income, property and other taxes		(391	)		2,568			210
Other comprehensive income:
Deferred revenue		(1,768	)		1,768			(13,756	)
Unrealized gain on marketable securities, net of tax of $1,643		-			-			-			-			3,833			3,833
Net cash flows from operating activities		88,853			90,953			124,837
Unrecognized amounts on retirement benefits, net of tax of $117		-			-			-			-			273			273
Cash flows from investing activities:
Total comprehensive income																	97,445
Capital expenditures		(550	)		(678	)		(1,880	)
Dividends declared		-			-			-			(99,000	)		-			(99,000	)
Purchases of available-for-sale securities		-			(71,809	)		(169,905	)
Balance, December 31, 2009		767		$	29		$	123,807		$	216,178		$	(1,013	)	$	339,001
Proceeds from sale of available-for-sale securities		-			60,500			159,805
(Increase) decrease in restricted cash and investments		(467	)		30,145			(7,603	)
Net cash flows from investing activities		(1,017	)		18,158			(19,583	)
Cash flows from financing activities:
(Decrease) increase in payable to affiliates		246			(38,531	)		4,965
Repayment of long-term debt		(37,730	)		(37,730	)		(36,015	)
Repayment of notes payable		(32,085	)		(12,063	)		-
Dividends paid		-			(21,650	)		(84,575	)
Net cash flows from financing activities		(69,569	)		(109,974	)		(115,625	)
Net change in cash and cash equivalents		18,267			(863	)		(10,371	)
Cash and cash equivalents at beginning of period		31,083			31,946			42,317
Cash and cash equivalents at end of period	$	49,350		$	31,083		$	31,946
Supplemental disclosure:
Interest paid	$	11,865		$	22,602		$	17,704
Income taxes paid	$	26,555		$	2,264		$	2,440

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

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 (“MEHC”) and was registered with the Philippine Securities and Exchange Commission on September 21, 1994. The Company is 70% owned by CE Casecnan II, Inc., 2015% owned by CE Casecnan Ltd., a Bermuda-registered corporation, which are both ~~indirectly~~indirect wholly owned subsidiaries of MEHC, and 1015% owned by a third party, subject to appeal. MEHC is a consolidated subsidiary of Berkshire Hathaway Inc.

The Company has a contract with the Republic of the Philippines (“ROP”), through the Philippine National Irrigation Administration (“NIA”) (a ROP-owned and controlled corporation), for the development, construction and ~~construction~~operation of a ~~hydroelectric~~ hydroelectric power plant and related facilities under a build-own-operate-transfer agreement, as amended by the Supplemental Agreement dated September 29, 2003 (the “Project Agreement”), covering a 20-year cooperation period (“Cooperation Period”) ending December 11, 2021, with obligations for the delivery of 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 ROP at no cost on an “as is” basis. NIA’s obligations under the Project Agreement are guaranteed by the full faith and credit of the ROP (the “Performance Undertaking”).

Under the terms of its registration with the Philippine Board of Investments, ~~the~~CE ~~Company~~Casecnan was entitled to certain incentives, ~~which~~including ~~include~~ an income tax holiday for six years from the start of commercial operations. ~~The~~which ~~income tax holiday~~ expired on December 11, 2007. The Company’s taxable income from December 11, 2007, forward is subject to income tax at the current Philippine statutory rate. The registration also requires, among other items, the maintenance of a debt-to-equity ratio not exceeding 75:25 during commercial operations.

2. Summary of Significant Accounting Policies

Basis of Presentation

The functional and reporting currency of the Company is the U.S. dollar. Transactions in foreign currencies, principally the Philippine ~~pesos (“pesos”)~~peso, 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 has evaluated subsequent events through February 23, 2010, which is the date the Financial Statements were issued.

The Company’s operations are in one reportable segment, the water delivery and electricity generation ~~business~~industry.

Use of Estimates in Preparation of Financial Statements

The preparation of the Financial Statements in conformity with accounting principles generally accepted ~~accounting~~ ~~principles~~in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. These estimates include, but are not limited to, valuation of certain financial assets and liabilities, long-lived asset recovery, and accounting for contingencies, including ~~environmental, regulatory and income~~ tax matters. ~~Actual~~ Actual results may differ from the estimates used in preparing the Financial Statements.

Fair Value Measurements

As defined under GAAP, fair value is the price that would be received to sell an asset or paid to transfer a liability between market participants in the principal market or in the most advantageous market when no principal market exists. Market participants are assumed to be independent, knowledgeable and able and willing to transact. Nonperformance or credit risk is considered when determining the fair value of liabilities. Considerable judgment may be required in interpreting market data used to develop the estimates of fair value.

Cash Equivalents

Cash equivalents consist of funds invested in commercial paper, money market accounts and in other investments with a maturity of three months or less when purchased. Cash and cash equivalents exclude amounts where availability is restricted by legal requirements, loan agreements or other contractual provisions.

Restricted Cash and Investments and Other Investments

Restricted cash and investments are composed of debt service funds and undistributed dividends that are contractually restricted as to their use and require the maintenance of specific minimum balances. ~~The undistributed dividends and the debt service funds are invested in money-market instruments.~~ Other investments consist of auction rate securities. The auction rate securities are ~~measured at fair value, and~~ classified as available-for-sale securities, and are carried at fair value with ~~unrealized gains~~realized gains and losses, ~~reported~~ as adetermined ~~component~~on ofa ~~accumulated~~specific ~~other~~identification ~~comprehensive~~basis, ~~loss~~ recognized in earnings ~~shareholders’~~and ~~equity.~~unrealized ~~Realized~~ gains and losses ~~and~~recognized in accumulated other~~-than-temporary~~ ~~impairments~~comprehensive ~~are~~loss, ~~included~~net inof ~~other income (expense)~~tax.

If in management’s judgment a decline in the fair value of an available-for-sale investment below cost is other than temporary, the cost of the investment is written down to fair value. Factors considered in judging whether an impairment is other than temporary include: the financial condition, business prospects and creditworthiness of the issuer; the length of time that fair value has been less than cost; the relative amount of the decline; and whether or not the Company anticipates the fair value of the investment to recover prior to the expected time of sale. Impairment losses on equity securities are charged to earnings. With respect to an investment in a debt security, any resulting impairment loss is recognized in earnings if the Company intends to sell or expects to be required to sell the debt security before amortized cost is recovered. If the Company does not expect to ultimately recover the amortized cost basis even if it does not intend to sell the security, the credit loss component is recognized in earnings and any difference between fair value and the amortized cost basis, net of the credit loss, is reflected in other comprehensive income.

Property, Plant and Equipment, Net

Property, plant and equipment is recorded at historical cost (including capitalized interest costs) less accumulated depreciation. Depreciation is computed on the straight-line method based on the 20-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. The cost of major additions and betterments are capitalized, while costs for replacements, maintenance and repairs that do not improve or extend the lives of the respective assets are charged to operations. 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.General

~~Impairment~~Property, plant and equipment is recorded at historical cost. The Company capitalizes all construction related material, direct labor and contract services, as well as indirect construction costs, which include capitalized interest. The cost of major ~~Long~~additions and betterments are capitalized, while costs for replacements, maintenance and repairs that do not improve or extend the lives of the related assets are charged to operating expense as incurred. Depreciation is computed by applying the straight-~~Lived~~line method based on the 20-year Cooperation Period for ~~Assets~~the hydroelectric power facility and office and building structures, and on the estimated useful life of five years for transportation and other equipment. When an asset is sold or otherwise disposed of, its cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recorded in operating expense.

The Company evaluates long-lived assets for impairment, including property, plant and equipment, when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Upon the occurrence of a triggering event, the asset is reviewed to assess whether the estimated undiscounted cash flows expected from the use of the asset plus the residual value from the ultimate disposal exceeds the carrying value of the asset. If the carrying value exceeds the estimated recoverable amounts, the asset is written down to the estimated discounted present value of the expected future cash flows from using the asset. Any resulting impairment loss is reflected in the Statements of Operations.Impairment

The Company evaluates long-lived assets for impairment, including property, plant and equipment, when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Upon the occurrence of a triggering event, the asset is reviewed to assess whether the estimated undiscounted cash flows expected from the use of the asset plus the residual value from the ultimate disposal exceeds the carrying value of the asset. If the carrying value exceeds the estimated recoverable amounts, the asset is written down to the estimated discounted present value of the expected future cash flows from using the asset. Any resulting impairment loss is reflected on the Statements of Operations.

Income Taxes

Deferred tax assets and liabilities are based on differences between the financial statements and tax bases of assets and liabilities using ~~the~~ estimated tax rates expected to be in effect for the year in which the differences are expected to reverse. Changes in deferred income tax assets and liabilities that are associated with components of other comprehensive income are charged or credited directly to other comprehensive income. Other changes in deferred income tax assets and liabilities are included as a component of income tax expense. Valuation allowances are established for certain deferred ~~income~~ tax assets ~~where~~ ~~management~~where ~~has judged that~~ realization is not likely.

Allowance for Doubtful Accounts

The allowance for doubtful accounts is based on the Company’s assessment of the collectability of payments from NIA. This assessment requires judgment regarding the ability of NIA to pay the amounts owed to the Company ~~and~~or the outcome of any pending disputes ~~and arbitrations~~. ~~Based on the Company’s assessment, no provision was required as of December 31, 2008 and 2007.~~ The activity in the Company’s allowance for doubtful accounts for the years ended December 31 was as follows (in thousands):

	2008		2007			2006
	2009		2008			2007
Balance, January 1	$	-	$	~~(637~~-	)	$	(~~654~~637	)
Recoveries		-		~~637~~-			17637
Balance, December 31	$	-	$	-		$	~~(637~~-	)

Revenue

Pursuant to the Project Agreement, the Company invoices on a monthly basis for the delivery of water and electricity. The Project Agreement is treated for accounting purposes as an arrangement that contains both a service contract to operate the plant and an operating lease. Minimum lease payments under the operating lease and service contract are recognized as revenue on a straight-line basis over the lease term. The Company reduces such minimum lease revenues by an amount which is not reasonably assured to be collected due to the uncertain political and economic events in the Philippines. The reduction in the minimum lease revenues is recovered when its collectability becomes reasonably assured. Variable lease payments are earned in each contract year for deliveries of water and electricity which exceed specified minimum thresholds. Water delivery revenues do not include value added taxes.

3. New ~~Accounting~~ Accounting Pronouncements

In ~~September~~April ~~2006~~2009, the Financial Accounting Standards Board (“FASB”) issued ~~Statement~~authoritative ofguidance ~~Financial~~(included in Accounting Standards ~~No. 157,~~Codification ~~“Fair Value Measurements”~~ (“~~SFAS No. 157~~ASC”)~~. SFAS No.~~ Topic ~~157 defines fair value~~320, ~~establishes~~ a“Investments ~~framework~~– ~~for~~Debt ~~measuring fair value~~ and ~~expands~~Equity ~~disclosures about fair value measurements. SFAS No.~~Securities”) ~~157~~that ~~does not impose fair value~~amends ~~measurements~~current onother-than-temporary ~~items~~impairment ~~not~~guidance ~~already accounted~~ for atdebt ~~fair~~securities ~~value; rather it applies, with certain exceptions,~~ to ~~other accounting pronouncements that either~~ require ~~or permit fair value measurements. Under SFAS No. 157, fair value~~ ~~refers to the price that would be received to sell an asset or paid to transfer~~ a ~~liability~~new inother-than-temporary animpairment ~~orderly~~model ~~transaction between market participants in the principal or most advantageous market. The standard clarifies~~ that ~~fair~~shifts ~~value should be based on~~ the ~~assumptions~~focus ~~market~~from ~~participants would use when pricing~~an ~~the~~entity’s ~~asset~~intent orto ~~liability.~~hold ~~In February 2008,~~ the ~~FASB~~debt ~~issued~~security ~~Staff~~until ~~Position (“FSP”)~~recovery ~~No. 157-2,~~to ~~“Effective~~its ~~Date of FASB Statement No. 157”~~intent, ~~which~~or ~~delays~~expected ~~the effective date of SFAS No. 157 for all non-financial assets and liabilities~~requirement, ~~except~~to ~~those~~sell ~~that are recognized or disclosed at fair value in~~ the ~~financial~~ ~~statements~~debt ~~on a recurring basis, until fiscal years beginning after November 15, 2008~~security. In ~~October 2008~~addition, ~~the~~this ~~FASB issued FSP~~guidance ~~No. 157-3,~~expands ~~“Determining~~ the ~~Fair~~already ~~Value~~required ofannual adisclosures ~~Financial~~about ~~Asset When the Market~~other-than-temporary impairment for ~~That~~debt ~~Asset~~and Isequity ~~Not~~securities, ~~Active”~~requires ~~(“FSP~~companies ~~FAS 157-3”),~~to ~~which~~include ~~clarifies the~~these ~~application~~expanded ofdisclosures ~~SFAS No. 157~~ in ainterim ~~market~~financial ~~that~~statements ~~is not active~~ and ~~provides~~addresses whether an ~~example~~other-than-temporary toimpairment ~~illustrate~~should ~~key~~be ~~considerations~~recognized in ~~determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 was effective upon issuance~~earnings, ~~including prior periods for which~~other ~~financial~~comprehensive ~~statements~~income ~~had~~or ~~not~~some ~~been~~combination ~~issued~~thereof. The Company ~~applied~~adopted ~~the~~ this guidance ~~of FSP FAS~~as ~~157-3 when determining the fair value~~ of ~~its auction rate securities. The Company adopted the provisions of SFAS No.~~April ~~157 for assets and liabilities recognized at fair value on a recurring basis effective January~~ 1, ~~2008.~~2009 ~~The~~and ~~partial~~the adoption ~~of SFAS No. 157~~ did not have a ~~material~~ material impact on the Company’s ~~Financial~~financial ~~Statements.~~results ~~Refer~~and todisclosures ~~Note 10~~included ~~for~~within Notes ~~additional~~to ~~discussion~~Financial Statements.

4In April 2009, the FASB issued authoritative guidance (included in ASC Topic 820, “Fair Value Measurements and Disclosures”) that clarifies the determination of fair value when a market is not active and if a transaction is not orderly. ~~Restricted~~ In addition, this guidance amends previous GAAP to require ~~Cash~~disclosures in interim and ~~Investments~~annual periods of the inputs and ~~Other~~valuation techniques ~~Investments~~used to measure fair value and a discussion of changes in valuation techniques and related inputs, if any, during the period and defines “major categories” consistent with those described in previously existing GAAP. The Company adopted this guidance as of April 1, 2009 and the adoption did not have a material impact on the Company’s financial results and disclosures included within Notes to Financial Statements.

Restricted cash and investments consist of the following as of December 31 (in thousands):

	2008		2007
Current:
Dividend set aside account	$	13,279	$	13,054
Debt service reserve fund		9,602		9,360
	$	22,881	$	22,414
Noncurrent - Debt service reserve fund	$	-	$	13,906

The dividend set aside account and the current debt service reserve fund are invested in U.S. government money-market accounts. The non-current debt service reserve fund was invested in auction rate securities that had a remaining weighted average maturity of 26 years and earned interest at 6.1% at December 31, 2007. In 2008, these auction rate securities were transferred from the non-current debt service reserve fund, found in long-term restricted cash and investments on the Balance Sheets, to other investments.

Other investments consist of auction rate securities with a carrying value of $14.1 million and $7.5 million at December 31, 2008 and 2007, respectively. The investments earned interest at 2.51% and 6.1% at December 31, 2008 and 2007, respectively. The investments had remaining weighted average maturities of 22 and 17 years at December 31, 2008 and 2007, respectively. The investments are classified as available-for-sale securities.

~~With the liquidity issues experienced in global credit and capital markets, the $21~~3.~~4 million par value of auction rate securities held by the Company at~~ Restricted ~~December 31,~~Cash ~~2008, have experienced multiple failed auctions as the amount of securities submitted for sale has exceeded the amount of purchase orders. The securities are rated Baa1 by Moody’s Investors Service~~ and AAInvestments by Standard & Poor’s at December 31, 2008. Although there is no current liquid market for the auction rate securities, the Company believes the underlying creditworthiness of the repayment sources for these securities’ principal and ~~interest~~ ~~has~~Other not materially deteriorated. Further, the Company has the intent and ability to hold the auction rate securities for a period of time sufficient to allow for any anticipated recovery in the credit and capital markets that would facilitate the periodic auction and sale of these securities. Therefore, the Company considers the auction rate securities to be temporarily impaired. At December 31, 2008, the Company’s pre-tax temporary impairment of the auction rate securities totaled $7.3 million. If the underlying assets and the guarantors of the auction rate securities experience credit deterioration, the Company may not ultimately realize the par value of the investments held at December 31, 2008. Given the failed auctions, it is uncertain if the auction rate securities will be sold within the next twelve months. Accordingly, the Company’s investments in auction rate securities are classified as non-current on the Balance Sheets.Investments

~~5. Property,~~Restricted ~~Plant~~cash and ~~Equipment,~~investments ~~Net~~consist of the following as of December 31 (in thousands):

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

	2009		2008
Current:
Dividend set aside account	$	18,235	$	13,279
Debt service reserve fund		19,212		9,602
	$	37,447	$	22,881

	2008			2007
Hydroelectric power facility	$	431,666		$	431,382
Office and building structures		1,222			1,199
Transportation and other equipment		2,511			2,350
Total operating assets		435,399			434,931
Accumulated depreciation		(153,914	)		(131,875	)
Property, plant and equipment, net	$	281,485		$	303,056

Restricted cash and investments are invested in money-market accounts holding U.S. government securities.

Other investments consist of auction rate securities with a carrying value of $19.6 million and $14. ~~Long-Term~~1 million at December 31, 2009 and 2008, ~~Debt~~respectively. The auction rate investments earned interest at 2.23% and 2.51% at December 31, 2009 and 2008, respectively. The investments have a remaining weighted average maturity of 21 years and are classified as available-for-sale securities.

CEWith the ~~Casecnan~~liquidity ~~financed~~issues aexperienced ~~portion~~in ofglobal credit and capital markets, the $21.4 million ~~costs~~par value of auction rate securities held by the ~~Casecnan~~Company ~~Project~~at December 31, ~~through~~2009 have experienced multiple failed auctions as the amount ~~issuance~~of securities submitted for sale has exceeded the amount of ~~long-term~~purchase ~~debt~~orders. AtThe securities ~~December~~are rated AA- and A by Standard & Poor’s at December 31, 2009. ~~2008~~Although ~~and~~there ~~2007~~is no current liquid market for the auction rate securities, ~~long-term~~the ~~debt~~Company believes the underlying creditworthiness of the ~~outstanding~~repayment ~~was~~sources ~~$30.9~~for ~~million~~these securities’ principal and ~~$68~~interest has not materially deteriorated.6 ~~million~~Further, ~~respectively.~~the ~~The~~Company ~~annual~~does not intend to sell, nor is it ~~maturities~~more-likely-than-not ofthat the Company’s ~~long-term~~will ~~debt~~be ~~are~~required ~~$13.7~~to ~~million~~sell, inthe ~~2009,~~auction ~~$17.2~~rate ~~million~~securities inbefore ~~2010~~an orderly market develops and $-they ~~thereafter~~can be sold at a price that approximates par value. ~~For~~Therefore, the ~~year~~Company ~~ended~~considers the auction rate securities to be temporarily impaired. At December 31, ~~2008~~2009, the ~~long~~Company’s pre-~~term~~tax ~~debt~~temporary ~~had~~impairment anof ~~effective~~the ~~interest~~auction rate ofsecurities 14totaled $1.~~3%,~~8 million. ~~inclusive~~If the underlying assets and the guarantors of ~~bond~~the auction ~~issue~~rate ~~cost~~securities ~~amortization~~experience credit deterioration, the Company may not ultimately realize the par value of the investments held at December 31, 2009.

4. Property, Plant and Equipment, Net

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

	2009			2008
Hydroelectric power facility	$	432,349		$	431,666
Office and building structures		1,229			1,222
Transportation and other equipment		2,745			2,511
Total operating assets		436,323			435,399
Accumulated depreciation		(175,744	)		(153,914	)
Property, plant and equipment, net	$	260,579		$	281,485

5. Long-Term Debt

CE Casecnan financed a portion of the costs of the Casecnan Project through the issuance of long-term debt. At December 31, 2009 and 2008, long-term debt outstanding was $17.2 million and $30.9 million, respectively. Final payment of the Company’s long-term debt is due November 2010. For the year ended December 31, 2009, the long-term debt had an effective interest rate of 14.8%, inclusive of bond issue cost amortization.

The long-term debt is secured by an assignment of all revenue that will be received from the Casecnan Project, a collateral assignment of all material contracts, 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 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; and sale, lease, or transfer of properties material to the Casecnan Project, among others.

7. Income Taxes

During the years ended December 31, 2008, 2007 and 2006, CE Casecnan incurred $28.2 million, $4.6 million and $2.3 million, respectively, of income taxes. Prior to the December 11, 2007, expiration of the income tax holiday granted to the Company by the Philippine Board of Investments, income taxes were incurred only on interest income earned outside the Philippines and on other income not covered by the income tax holiday. After December 31, 2007, the Company’s taxable income is subject to income tax at the Philippine statutory rate of 35% in 2008 and 30% thereafter. The following table reconciles the Philippine statutory tax rate to the effective tax rate applicable to income before income tax expense for the years ended December 31:

	2008			2007			2006
Philippine statutory rate		35	%		35	%		35	%
Income tax holiday		-			(30	)		(33	)
Optional standard deduction		(7	)		-			-
Effective tax rate		28	%		5	%		2	%

~~The Company’s deferred income tax asset of $7~~6.~~0 million and $5.2 million~~ Income ~~as of December 31, 2008 and 2007, respectively, consists mainly of the difference between the financial reporting basis and the tax reporting basis for development and construction costs.~~Taxes

8During the years ended December 31, 2009, 2008 and 2007, CE Casecnan incurred $23. ~~Related~~3 million, $28.2 million and $4.6 million, respectively, of ~~Party~~income ~~Transactions~~tax expense. Prior to the December 11, 2007, expiration of the income tax holiday granted to the Company by the Philippine Board of Investments, income taxes were incurred only on interest income earned outside the Philippines and on other income not covered by the income tax holiday. The Company’s taxable income from December 11, 2007 forward is subject to income tax at the current Philippine statutory rate.

~~In the~~A ~~normal~~reconciliation ~~course~~ of ~~business,~~ the ~~Company~~Philippine ~~transacts~~statutory ~~with~~income ~~related~~tax ~~parties~~rate ~~on commercial terms comparable~~ to ~~transactions~~the ~~with~~effective income ~~third~~tax ~~parties.~~rate ~~The~~applicable ~~payable~~ to ~~affiliates~~ ~~was~~income ~~$2.7 million~~before ~~and~~income ~~$2.5 million~~tax atexpense ~~December 31, 2008 and 2007, respectively. Costs incurred by the Company in transactions with related parties amounted to $1.8 million, $1.4 million and $3.3 million~~ for the years ended December 31, ~~2008, 2007 and 2006, respectively, and consist primarily of cost allocations.~~follows:

As of December 31, 2008 and 2007, the Company had outstanding $7.1 million and $39.2 million, respectively, of unsecured subordinated notes payable (the “Notes”) to CE Casecnan Ltd., a shareholder. The Notes had a maturity of November 1, 2015, and bore an interest rate consisting of London Interbank Offer Rate plus 5.25%. However, the Notes were redeemable at any time prior to maturity upon demand from CE Casecnan Ltd. Interest expense on the Notes was $1.8 million, $5.3 million and $5.3 million for the years ended December 31, 2008, 2007 and 2006, respectively. As of December 31, 2008, the effective interest rate on the Notes was 7.85%.

	2009			2008			2007

Philippine statutory income tax rate		30	%		35	%		35	%
Income tax holiday		-			-			(30	)
Optional standard deduction		(10	)		(7	)		-
Effective income tax rate		20	%		28	%		5	%

OnThe ~~May 15,~~Company’s ~~2007,~~deferred ~~CE Casecnan Ltd.~~income ~~demanded~~tax ~~payment~~asset of ~~the Notes~~$4.8 million ~~To the~~and ~~extent that the Company does not have available cash from distributions to~~$7.0 million ~~pay~~as ~~such~~of ~~amount in full~~December 31, ~~the~~2009 ~~Company~~and ~~shall be deemed to have satisfied this demand by paying~~2008, ~~to the extent of such available cash~~respectively, ~~first~~consists ~~accrued~~mainly ~~but unpaid interest on the outstanding principal amount~~ of the ~~Notes, and then the~~ ~~outstanding~~difference ~~principal~~between ~~amount of~~ the ~~Notes.~~financial Toreporting ~~the~~basis ~~extent that such available cash is insufficient to pay any accrued interest~~ and~~/or~~ ~~outstanding principal,~~ the ~~Company~~income ~~shall~~tax ~~not~~reporting basis befor ~~deemed~~development ~~in default~~ and ~~such~~construction ~~amounts shall remain outstanding and payable pursuant to the terms of the Notes~~costs. ~~On February 5, 2009, CE Casecnan repaid the outstanding Notes.~~

7. Related Party Transactions

In the normal course of business, the Company transacts with related parties on commercial terms comparable to transactions with third parties. The payable to affiliates was $2.8 million and $2.7 million at December 31, 2009 and 2008, respectively. Costs incurred by the Company in transactions with related parties amounted to $1.8 million for each of the years ended December 31, 2009 and 2008 and $1.4 million for the year ended December 31, 2007, and consist primarily of cost allocations.

As of December 31, 2008, the Company had outstanding $7.1 million of unsecured subordinated notes payable (the “Notes”) to CE Casecnan Ltd., a shareholder. The Notes had a maturity of November 1, 2015, and bore an interest rate consisting of London Interbank Offer Rate (“LIBOR”) plus 5.25%. The Notes were redeemable at any time prior to maturity upon demand from CE Casecnan Ltd. and on February 5, 2009, CE Casecnan repaid the outstanding Notes in full. Interest expense on the Notes was $0.1 million, $1.8 million and $5.3 million for the years ended December 31, 2009, 2008 and 2007, respectively.

8. Employee Benefit Plan

CE Casecnan sponsors a defined benefit pension plan that covers all of its employees. The following table provides certain information relative to CE Casecnan’s defined benefit pension plan (dollars in thousands).

Number of employees covered		41

Net period benefit cost for the year ended December 31, 2009	$	154

Funded status at December 31, 2009:
Plan assets at fair value	$	624
Less – Benefit obligation		450
	$	174

9. Commitments and Contingencies

Shareholder Litigation

In February 2002, pursuant to the share ownership adjustment mechanism in the CE Casecnan shareholder agreement, MEHC’s indirect wholly owned subsidiary, CE Casecnan Ltd., advised the minority shareholder of the Company, LaPrairie Group Contractors (International) Ltd. (“LPG”) that MEHC’s indirect ownership interest in CE Casecnan had increased to 100% effective from commencement of commercial operations. OnIn ~~July 8,~~ 2002, LPG filed a complaint in the Superior Court of the State of California, City and County of San Francisco, against CE Casecnan Ltd. and MEHC. OnLPG’s complaint, as amended, seeks compensatory and punitive damages arising out of CE Casecnan Ltd’s and MEHC’s alleged improper calculation of the proforma financial projections and alleged improper settlement of the NIA arbitration. In January 3, 2006, the Superior Court of the State of California entered a judgment in favor of LPG against CE Casecnan Ltd. Pursuant to the judgment, 15% of the distributions of the Company was deposited into escrow plus interest at 9% per annum. The judgment was appealed, and as a result of the appellate decision, CE Casecnan Ltd. determined that LPG would retain ownership of 10% of the shares of the Company, with the remaining 5% share to be transferred to CE Casecnan Ltd. subject to certain buy-up rights under the shareholder agreement~~, which~~. ~~are~~The ~~also~~issues ~~being~~relating ~~litigated.~~to ~~The~~the exercise ~~remaining~~of ~~issues~~the ~~are~~buy-up ~~fully~~right ~~briefed~~were ~~and pending~~decided ~~before~~by the court. ~~Exercise~~and ofin ~~the~~June 2009, LPG exercised its buy-up rights iswith respect to the remaining 5% ownership interest in a transaction between shareholders ~~and~~that isdid not ~~expected to~~ have any impact on the Company’s results of operations. In October 2009, the court issued a Final Judgment declaring that after the buy up LPG was a 15% shareholder. The Final Judgment was appealed on January 13, 2010 in the Superior Court of the State of California, City and County of San Francisco. On appeal, CE Casecnan, Ltd. will argue that LPG is only entitled to a 10% interest in the project company, and will challenge the computation of the buy-up price for the still-disputed 5% interest.

OnIn July 1, 2005, MEHC and CE Casecnan Ltd. commenced an action ~~against~~ against San Lorenzo Ruiz Builders and Developers Group, Inc. (“San Lorenzo”) in the District Court of Douglas County, Nebraska, seeking a declaratory judgment as to San Lorenzo’s right to repurchase up to 15% of the shares in the Company. In On January ~~30,~~ 2006, San Lorenzo filed a counterclaim against MEHC and CE Casecnan Ltd. seeking declaratory relief that it has effectively exercised its option to purchase up to 15% of the shares of the Company, that it is the rightful owner of such shares and that it is due all dividends paid on such shares. ~~Currently,~~The ~~the~~parties ~~action~~have iscompleted ~~in the~~ discovery ~~phase,~~ and a trial has been set to begin in ~~October~~March ~~2009~~2010. The impact, if any, of this litigation on the Company cannot be determined at this time.

Supplemental Real Property Tax

~~On July 1,~~In July 2008, CE Casecnan received a supplemental real property tax ~~assessment~~ assessment totaling $28.6 million from the province of Nueva Ecija and the municipality of Pantabangan for the tax years 2002 through the second quarter of 2008. Subsequent amendments of the supplemental assessment to reflect additional taxable periods in 2008 and 2009 increased the assessment to $32.5 million. CE Casecnan forwarded the assessment to NIA and the Philippine Department of of Finance (“DOF”), ~~who~~which must authorize any payment for real property taxes and are obligated to reimburse the Company pursuant to the Project Agreement. OnIn December ~~19,~~ 2008, pursuant to written authorization from NIA and ~~the~~ DOF, CE CE Casecnan tendered $6.8 million as partial payment of the supplemental assessment and recorded a receivable of an equal amount for the expected full reimbursement to CE Casecnan from NIA. OnThe ~~January~~$6.8 ~~16,~~million partial payment was reimbursed by NIA in July 2009. In January 2009, CE Casecnan filed a protest on the supplemental assessment which the provincial treasurer failed to resolve timely and in May 2009, filed an appeal with the Local Board of Assessment Appeals. In October 2009, pursuant to written authorization from NIA and DOF, CE Casecnan paid under protest $5.0 million to the province of Nueva Ecija. A receivable of an equal amount was accrued as of December 31, 2009 to reflect the expected full reimbursement to CE Casecnan from NIA. The $5.0 million payment was reimbursed by NIA in January 2010. Discussions continue among CE Casecnan, NIA, DOF and the province of Nueva Ecija to resolve the supplemental real property tax assessment. No further liability for ~~supplemental~~ supplemental real property tax has been recognized as the Company believes that the claim is without merit.

National Wealth Tax

Franchise Tax

In January 2006, CE Casecnan received franchise tax assessments for the years 2001 to 2006 totaling $2.2 million from the ~~Province~~province of Nueva Vizcaya. CE Casecnan believes that franchise tax is imposed on companies which have a secondary or special franchise from the government. CE Casecnan is an independent power producer and does not have a government franchise. The Electric ~~EPIRA~~Power Industry Reform Act of 2001 provides that independent power generation is not a public utility operation and does not require a franchise. Therefore, the Company has not recognized a liability relating to these assessments. In June 2006, CE Casecnan filed appeals of the ~~assessments~~ assessments which are currently pending before the Supreme Court Office of the ~~Court~~ Court Administrator for reassignment to another court to hear and decide the cases.

Concentration of Risk

NIA’s obligations under the Project Agreement are substantially denominated in U.S. Dollars and are the Company’s sole source of operating revenue. 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, including obligations pertaining to its outstanding debt. No shareholders, partners or affiliates of the Company, including MEHC, and no directors, officers or employees of the Company have guaranteed or will 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 revenue from the Company’s business after the payment of operating expenses.

10. Fair Value Measurements

The carrying amounts of the Company’s cash, ~~and~~certain cash equivalents, ~~trade~~ receivables and accounts payable and other accrued liabilities approximate fair value because of the short-term maturity of these instruments. The Company ~~has auction rate securities that are measured at fair value in the Financial Statements. The Company~~ uses a three level hierarchy for determining fair value and a financial asset or liability classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The auction rate securities were valued using internally developed discounted cash flow models based on available observable market data and the Company’s judgment about the assumptions, including liquidity and nonperformance risks, which market participants would use in pricing the asset. As such, the Company considers these securities to be valued using Level 3 inputs. The following table reconciles the beginning and ending balance of the Company’s auction rate securities measured at fair value on a recurring basis for the year ended December 31, 2008 (in thousands):

Beginning balance	$	21,409
Unrealized losses included in other comprehensive loss, net		(7,313	)
Ending balance	$	14,096

The fair value of the Company’s long-term debt has been estimated based upon quoted market prices of similar types of arrangements as supplied by third-party broker dealers. The following table presents the carrying amount and estimated fair value of the Company’s long-term debt, including the current portion, as of December 31 (in thousands):

	2008				2007
	CarryingAmount		Fair Value		CarryingAmount		Fair Value
Long-term debt	$	30,870	$	31,372	$	68,600	$	73,814

11. Comprehensive Income and Components of Accumulated Other Comprehensive Loss, Net

The components of comprehensive income are as follows for the years ended December 31 (in thousands):

	2008			2007		2006
Net income	$	73,835		$	78,539	$	100,804
Other comprehensive loss – unrealized losses on marketable securities, net of tax of $(2,194); $-; and $-		(5,119	)		-		-
Comprehensive income	$	68,716		$	78,539	$	100,804

Accumulated other comprehensive loss, net is included in the Balance Sheets in the shareholders’ equity section, and consists of unrealized losses on marketable securities totaling $5.1 million, net of tax of $2.2 million, as of December 31, 2008.

The Company has investments in money market mutual funds that are accounted for as available-for-sale securities, are stated at fair value and are presented as cash and cash equivalents and restricted cash and investments on the Balance Sheets. The fair value of these securities was $52.0 million and $34.1 million as of December 31, 2009 and 2008, respectively. The fair value is determined by using the quoted market price or net asset value of the identical security in its principal market. As such, the Company considers these securities to be valued using Level 1 inputs.

Additionally, the Company has auction rate securities that are measured at fair value and are presented as other investments on the Balance Sheets. The fair value of the Company’s investments in auction rate securities, where there is no current liquid market, is determined using internally developed discounted cash flow pricing models based on available observable market data and the Company’s judgment about the assumptions, including liquidity and nonperformance risks, which market participants would use when pricing the asset. As such, the Company considers these securities to be valued using Level 3 inputs. The following table reconciles the beginning and ending balances of the Company’s auction rate securities measured at fair value on a recurring basis using significant Level 3 inputs for the years ended December 31(in thousands):

	2009		2008
Beginning balance	$	14,096	$	21,409
Changes in fair value recognized in other comprehensive loss, net		5,476		(7,313	)
Ending balance	$	19,572	$	14,096

The Company’s long-term debt is carried at cost on the Financial Statements. The fair value of the Company’s long-term debt has been estimated based upon quoted market prices. The following table presents the carrying amount and estimated fair value of the Company’s long-term debt as of December 31 (in thousands):

	2009				2008
	Carrying Amount		Fair Value		Carrying Amount		Fair Value

Long-term debt	$	17,150	$	17,893	$	30,870	$	31,372

11. Components of Accumulated Other Comprehensive Loss, Net

Accumulated other comprehensive loss, net consists of the following components as of December 31 (in thousands):

	2009			2008

Unrecognized amounts on retirement benefits, net of tax of $117 and $-	$	273		$	-
Unrealized losses on marketable securities, net of tax of $(551) and $(2,194)		(1,286	)		(5,119	)
Total accumulated other comprehensive loss, net	$	(1,013	)	$	(5,119	)

12. Operating Lease Rentals and Service Income

The following is the minimum lease rentals and service income to be received in the next five years and thereafter on the noncancelable operating lease as of December 31, ~~2008~~2009 (in thousands):

Years Ended December 31,	Amount
2009	$	88,049
2010	$	88,049
2010		88,049
2011		88,049
2012		88,049
2013		88,049
2014 - 2021		704,392
2014		88,049
2015 – 2021		616,343

Total lease rentals and service income received was $~~137~~146.6 9 million, $~~124~~137.7 6 million and $~~148~~124.5 7 million in ~~2008~~2009, ~~2007~~2008 and ~~2006~~2007, respectively, including variable lease rentals and service income of $4959.6 0 million, $3649.7 6 million and $6236.1 7 million, respectively.

13. Unaudited Quarterly Operating Results

	2008
	2009
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
	(In thousands)
Revenue	$	2823,~~894~~499	$	2832,~~757~~433	$	3850,~~685~~609	$	4140,~~302~~371
Operating income		2116,~~273~~036		2024,~~819~~424		3042,~~278~~650		31,~~832~~047
Net income		12,~~861~~606		1319,~~346~~567		1934,~~848~~571		2726,~~780~~595
	2007
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
	(In thousands)
Revenue	$	24,338	$	22,014	$	27,501	$	50,880
Operating income		17,109		14,510		19,468		42,232
Net income		13,674		11,142		16,291		37,432

	2008
	1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
	(In thousands)
Revenue	$	28,894	$	28,757	$	38,685	$	41,302
Operating income		21,273		20,819		30,278		31,832
Net income		12,861		13,346		19,848		27,780

Operating results reflect seasonal variations in rainfall and resulting water delivery and energy production.

2728

Item 9. Changes in and Disagreements ~~with~~With Accountants on Accounting and Financial Disclosure

None.

Item 9A (T). Controls and Procedures

Disclosure Controls and Procedures

At the end of the period covered by this Annual Report on Form 10-K, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the President (principal executive officer) and the Chief Financial Officer (principal financial officer), of 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). Based upon that evaluation, the Company’s management, including the President (principal executive officer) and the Chief Financial Officer (principal financial officer), concluded that the Company’s disclosure controls and procedures ~~are~~were effective into ~~timely~~ensure ~~alerting~~that ~~them~~information required to ~~material~~ ~~information~~be ~~relating~~disclosed toby the Company ~~required~~in tothe bereports ~~included~~that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to management, including the Company’s ~~periodic~~President ~~SEC~~(principal executive ~~filings~~officer) and Chief Financial Officer (principal financial officer), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There has been no change in the Company’s internal control over financial reporting during the quarter ended December 31, ~~2008,~~2009 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in the Securities Exchange Act of 1934 Rule 13a-15(f). Under the supervision and with the participation of the Company’s management, including the President (principal executive officer) and the Chief Financial Officer (principal financial officer), the Company’s management conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, ~~2008,~~2009 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, the Company’s management used the criteria set forth in the framework in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation conducted under the framework in “Internal Control - Integrated Framework,” the Company’s management concluded that the Company’s internal control over financial reporting was effective as of December 31, ~~2008~~2009.

This report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this Annual Report on Form 10-K.

CE Casecnan Water and Energy Company, Inc.

February ~~25,~~ ~~2009~~23, 2010

Item 9B. Other Information

None.

2829

PART III

Item 10. Directors, Executive Officers and Corporate Governance

~~The~~Directors ~~following~~of ~~table~~the ~~sets~~Company ~~forth~~are elected annually and hold office until a successor is elected. Executive officers are chosen from time to time by vote of the ~~names,~~Board ~~ages~~of Directors. Pursuant to the terms of the shareholder agreement, ~~and~~CE ~~positions~~Casecnan Ltd. is entitled to elect seven of the directors, and each minority investor is ~~executive~~entitled ~~officers~~to ofelect ~~the~~one ~~Company~~director. Set forth below is certain information, as of January ~~December~~ 31, ~~2008~~2010, with respect to the current directors and executive officers of the Company:

Douglas L. Anderson	5051	Director and Chairman
Joseph L. Sullivan	5455	Director, President and General Manager
Patrick J. Goodman	4243	Director, Senior Vice President and Chief Financial Officer
P. Eric Connor	6061	Director
Brian K. Hankel	4647	Vice President and Treasurer
Scott LaPrairie	5152	Director
Mitchell L. Pirnie	5051	Vice President and General Counsel
Eulogio Wilfredo G. Sarmago	4748	Director
Trinity S. Gatuz	4243	Director and Vice President
Belinda E. Dugan	40	Director and Corporate Counsel
Ma. Winnie R. Lardizabal	31	Director and Head of Legal and Compliance
Suzy Lyn A. Bayona-Salova	3334	Director and Head of Accounting
Pearl T. Liu	53	Corporate Secretary
Maria Cristina J. Macasaet-Acaban	36	Corporate Secretary

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 Shareholders Agreement, CE Casecnan Ltd. is entitled to elect seven of the directors, and each minority investor is entitled to elect one director.

Douglas L. Anderson. In addition to serving as Director and Chairman for the Company, Mr. Anderson has been Senior Vice President, General Counsel and Corporate Secretary of MEHC since 2001. Mr. Anderson joined MEHC in 1993. Mr. Anderson is also a director of PacifiCorp, an affiliate of the Company.

Joseph L. Sullivan. In addition to serving as Director, President and General Manager for the Company, Mr. Sullivan is President and General Manager for certain affiliates of the Company. From 2002 to 2004, Mr. Sullivan served as Executive Vice President for Operations of Mirant Philippines.

Patrick J. Goodman. In addition to serving as Director, Senior Vice President and Chief Financial Officer for the Company, Mr. Goodman has been Senior Vice President and Chief Financial Officer of MEHC since 1999. Mr. Goodman joined MEHC in 1995. Mr. Goodman is also a director of PacifiCorp.

P. Eric Connor. In addition to serving as a Director of the Company, since 2009, Mr. Connor has been the chairman and chief executive officer of NetJets Transportes Aéreos, SA, an affiliate of the Company. From 2003 to 2009, Mr. Connor served as Senior Vice ~~President~~ President and Chief Procurement Officer of MEHC ~~since 2003~~. From 1999 to 2003, Mr. Connor served as President and Chief Operating Officer of Northern Electric, plc, an affiliate of the Company. ~~Mr. Connor joined MEHC in 1992.~~

Brian K. Hankel. In addition to serving as Vice President and Treasurer for the Company, Mr. Hankel has been Vice President and Treasurer for MEHC since 1997. Mr. Hankel joined MEHC in 1992.

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.

Mitchell L. Pirnie. In addition to serving as Vice President and General Counsel for the Company, Mr. Pirnie also serves as Vice President, General Counsel and Director of CE Generation, LLC, an affiliate of the Company. Mr. Pirnie joined MEHC in 1997.

Eulogio Wilfredo G. Sarmago. In addition to serving as a Director of the Company, Mr. Sarmago has been Plant Manager of the Company since September 2005. Prior to his assignment at CE Casecnan, Mr. Sarmago was plant manager of Visayas Geothermal Power Company, an affiliated company.

Trinity S. Gatuz. In addition to serving as a Director of the Company, Ms. Gatuz has been Vice President for the Company and certain affiliates since 2004. Ms. Gatuz served as Vice President – Finance and Accounting for the Company and certain affiliates since 2001.

Belinda E. Dugan. In addition to serving as a Director of the Company, Ms. Dugan has been Corporate Counsel for the Company since January 1, 2008. Ms. Dugan served as Legal Counsel for the Company and certain affiliates since 2003.30

Ma. Winnie R. Lardizabal. In addition to serving as a Director of the Company, Ms. Lardizabal has been Head of Legal and Compliance for the Company since April 2009. Ms. Lardizabal also serves as director and legal counsel for certain other affiliates of the Company. From 2004 to 2009, Ms. Lardizabal worked as Senior Associate of Puno and Puno Law Offices.

Suzy Lyn A. Bayona-Salova. In addition to serving as a Director of the Company, Ms. Bayona-Salova has served as Head of Accounting since 2008 and as Senior Accountant to the Company and certain affiliates since 2002.

~~Pearl~~Maria T.Cristina ~~Liu~~J. Macasaet-Acaban. In addition to serving as Corporate Secretary for the Company ~~since May 13~~, ~~2005,~~ Ms. ~~Liu heads~~Macasaet-Acaban is a partner in the Corporate and Commercial Practice Group of Quisumbing Torres. Ms. Macasaet-Acaban has been with Quisumbing Torres since 1999.

Audit Committee Matters

During the year ended December 31, ~~2008~~2009, and as of the date of this Annual Report on Form 10-K, the Company’s Board of Directors had no committees, including any audit committee.

Code of Ethics

The Company has adopted a code of ethics that applies to its principal executive officer, its principal financial and accounting officer, or persons acting in such capacities, and certain other covered officers. The code of ethics is incorporated by reference in the exhibits to this Annual Report on Form 10-K.

Item 11. Executive Compensation

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

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Description of Capital Stock

~~As of~~Our ~~December 31, 2008, the~~ authorized capital stock ofconsists ~~the Company consisted~~ of 2,148,000 shares of common stock, par value one Philippine peso ($0.038) per share (the “Common Stock”), of which 767,162 shares ~~were~~are outstanding. There is no public trading market for the Common Stock. As of ~~December~~January 31, ~~2008~~2010, 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 shareholders for a vote. The Trust Indenture contains certain restrictions on the payment of dividends with respect to the Common Stock.

~~The Trust Indenture contains certain restrictions on the payment of dividends with respect to the Common Stock.~~31

Principal Shareholders

The following table sets forth certain information regarding beneficial ownership of ~~the~~our ~~Company’s~~ shares of ~~common~~Common ~~stock~~Stock held by each of ~~the~~our ~~Company’s~~ directors, executive officers and all of our directors and executive officers ~~of the Company~~ as a group as of January 31, ~~2009~~ 2010:

Name and Address of Beneficial Owner	Number of Shares Beneficially Owned*	Number of Shares Beneficially Owned*	~~Percentage of Class~~	Percentage of Class
CE Casecnan II, Inc.	~~537,005~~	537,005	~~70% (1)~~	70% (1)
CE Casecnan Ltd.	~~153,432~~	115,074	~~20% (2) (3)~~	15% (2) (3)
LaPrairie Group Contractors	~~76,716~~	115,074	~~10% (2)~~	15% (2)

(3) Includes rights to 115,000 shares, which rights were purchased from San Lorenzo Ruiz Builders and Developers Group, Inc. (“San Lorenzo”) in 1998. The 115,000 shares are subject to the ownership adjustment mechanism in the Shareholders Agreement. San Lorenzo retained an option to repurchase the 115,000 shares, if any, remaining after such ownership adjustment. Refer to Note 9 of Notes to Financial Statements included in Item 8 of this Form 10-K for additional information regarding shareholder litigation.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Not applicable.

Item 14. Principal Accountant Fees and Services

On September 12, 2008, Isla Lipana & Co. resigned as the independent registered public accounting firm of the Company. On October 2, 2008, the Company’s Board of Directors approved the appointment of Manabat Delgado Amper & Co. (a Deloitte Touche Tohmatsu member firm) as its new independent registered public accounting firm ~~for the year ended December 31, 2008~~.

The following table shows the Company’s fees paid or accrued for audit and audit-related services and fees paid for tax and all other services rendered by Deloitte & Touche, LLP, the member firms of Deloitte Touche Tohmatsu, including Manabat Delgado Amper & Co., and their respective affiliates (collectively, the “Deloitte Entities”) for the year ended December 31, 2009 and for the three-month period ended December 31, 2008, and Isla Lipana & Co., (a PricewaterhouseCoopers member firm) for the nine-month period ended September 30, 2008 ~~and the year ended December 31, 2007~~ (in thousands):

	~~Three-Month~~		~~Nine~~Three-Month		Nine-Month
	Period Ended		Period Ended		Year Ended
	Year Ended		Period Ended		Period Ended
	December 31,		~~September~~December 3031,		~~December~~September 3130,
	2008		2008		2007
	2009		2008		2008
Audit fees (1)	$	~~144~~176	$	23144	$	~~252~~23
Audit-related fees (2)		-		-		-36
Tax fees (3)		-		36-		19-
All other fees		-		-		-
Total aggregate fees billed	$	~~144~~176	$	59144	$	~~271~~59

(1)	Audit fees include fees for the audit of the Company’s financial statements and interim reviews of the Company’s quarterly financial statements, audit services provided in connection with required statutory audits, and comfort letters, consents and other services related to SEC matters.

(2)	Audit-related fees primarily include fees for assurance and related services for any other statutory or regulatory requirements, audits of certain employee benefit plans and consultation on various accounting and reporting matters.

(3)	Tax fees include fees for services relating to tax compliance, tax planning and tax advice. These services include assistance regarding tax compliance, tax return preparation and tax audits.

The audit committee of MEHC reviewed and approved the services rendered by Isla Lipana & Co. in and for the period of their engagement in 2008 and for fiscal 2007 as set forth in the table above and concluded that the non-audit services were compatible with maintaining the principal accountant’s independence.

The audit committee of MEHC reviewed and approved the services rendered by the Deloitte Entities in and for the period of their engagement in 2008 as set forth in the above table and concluded that the non-audit services were compatible with maintaining the principal accountant’s independence. Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by the principal accountant require approval in advance by the audit committee in order to assure that such services do not impair the principal accountant’s independence from the Company. Accordingly, the audit committee has an Audit and Non-Audit Services Pre-Approval Policy (the “Policy”) that sets forth the procedures and the conditions pursuant to which services to be performed by the principal accountant are to be pre-approved. Pursuant to the Policy, certain services described in detail in the Policy may be pre-approved on an annual basis together with pre-approved maximum fee levels for such services. The services eligible for annual pre-approval consist of services that would be included under the categories of Audit Fees, Audit-Related Fees and Tax Fees. If not pre-approved on an annual basis, proposed services must otherwise be separately approved prior to being performed by the principal accountant. In addition, any services that receive annual pre-approval but exceed the pre-approved maximum fee level also will require separate approval by the audit committee prior to being performed. The Policy does not delegate to management the audit committee’s responsibilities to pre-approve services performed by the principal accountant.

The audit committee of MEHC reviewed and approved the services rendered by the Deloitte Entities in and for fiscal 2009 as set forth in the above table and concluded that the non-audit services were compatible with maintaining the principal accountant’s independence. Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by the principal accountant require approval in advance by the audit committee in order to assure that such services do not impair the principal accountant’s independence from the Company. Accordingly, the audit committee of MEHC has an Audit and Non-Audit Services Pre-Approval Policy (the “Policy”) that sets forth the procedures and the conditions pursuant to which services to be performed by the principal accountant are to be pre-approved. Pursuant to the Policy, certain services described in detail in the Policy may be pre-approved on an annual basis together with pre-approved maximum fee levels for such services. The services eligible for annual pre-approval consist of services that would be included under the categories of Audit Fees, Audit-Related Fees and Tax Fees. If not pre-approved on an annual basis, proposed services must otherwise be separately approved prior to being performed by the principal accountant. In addition, any services that receive annual pre-approval but exceed the pre-approved maximum fee level also will require separate approval by the audit committee of MEHC prior to being performed. The Policy does not delegate to management the MEHC audit committee’s responsibilities to pre-approve services performed by the principal accountant.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)	Financial Statements and Schedules
	(i)	Financial Statements
		Financial Statements are included in Item 8 of this Form 10-K.
		Financial Statements are included in Item 8.
	(ii)	Financial Statement Schedules
		Schedules not listed above have been omitted because they are either not applicable, not required or the information required to be set forth therein is included in the financial statements or notes thereto.
		Schedules not listed above have been omitted because they are either not applicable, not required or the information required to be set forth therein is included in the Financial Statements or notes thereto.
(b)	Exhibits
	The exhibits listed on the accompanying Exhibit Index are filed as part of this Annual Report.
(c)	Financial statements required by Regulation S-X, which are excluded from the Annual Report by Rule 14a-3(b).
	Not applicable.

3334

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on this ~~13th~~23rd day of February, ~~2009~~ 2010.

	CE CASECNAN WATER AND ENERGY COMPANY, INC.

	By:	/s/ * Joseph L. Sullivan
		Joseph L. Sullivan
		President and General Manager
		(principal executive officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature	Title	Date
/s/ Joseph L. Sullivan*	Director, President and General Manager	February 2723, ~~2009~~2010
Joseph L. Sullivan	(principal executive officer)
/s/ Patrick J. Goodman*	Director, Senior Vice President and Chief Financial Officer	February 2723, ~~2009~~2010
Patrick J. Goodman	(principal financial and accounting officer)
/s/ Douglas L. Anderson	Director and Chairman	February 2723, ~~2009~~2010
Douglas L. Anderson
/s/ Eulogio Wilfredo G. Sarmago *	Director	February 27, 2009
/s/ Eulogio Wilfredo G. Sarmago*	Director	February 23, 2010
Eulogio Wilfredo G. Sarmago
/s/ Trinity S. Gatuz*	Director and Vice President	February 2723, ~~2009~~2010
Trinity S. Gatuz
/s/ Belinda E. Dugan*	Director and Corporate Counsel	February 27, 2009
/s/ Ma. Winnie R. Lardizabal*	Director and Head of Legal and Compliance	February 23, 2010
Belinda E. Dugan
Ma.Winnie R. Lardizabal
/s/ Suzy Lyn A. Bayona-Salova*	Director and Head of Accounting	February 2723, ~~2009~~2010
Suzy Lyn A. Bayona-Salova
/s/ P. Eric Connor*	Director	February 2723, ~~2009~~2010
P. Eric Connor
Scott LaPrairie	Director	February 2723, ~~2009~~2010
*By: /s/ Douglas L. Anderson	Attorney-in-Fact	February 23, 2010
Douglas L. Anderson
Attorney-in-Fact

EXHIBIT INDEX

Exhibit No.	Description
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 National Irrigation Administration, 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 the 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).
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).
10.8	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 (incorporated by reference to Exhibit 14.1 to the Company’s Form 10-K dated December 31, 2003).
24	Power of Attorney

Exhibit No.	Description
31.1	Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EXHIBIT INDEX

Exhibit No.	Description

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).

4.5	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).

4.6	Consent of National Irrigation Administration, 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).

4.7	Consent of the Republic of the 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).

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).

10.8	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 (incorporated by reference to Exhibit 14.1 to the Company’s Form 10-K dated December 31, 2003).

24.1	Power of Attorney

Exhibit No.	Description

31.1	Principal Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Principal Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Principal Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Principal Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

In addition, each director ~~of the Company~~ owns one share inof ~~the~~Common ~~Company~~Stock as required by Philippine law.

In April 2003, CE Casecnan Ltd., a Bermuda registered corporation assigned shares in CE Casecnan to CE Casecnan II, Inc., a Philippine corporation. CE Casecnan Ltd. and CE Casecnan II, Inc. are indirect, wholly-owned subsidiaries of MEHC.

Refer to Note 9 of Notes to Financial Statements included in Item 8 of this Form 10-K for additional information regarding shareholder litigation.

Includes rights to 115,000 shares, which rights were purchased from San Lorenzo Ruiz Builders and Developers Group, Inc. (“San Lorenzo”) in 1998. The 115,000 shares are subject to the ownership adjustment mechanism in the shareholder agreement. San Lorenzo retained an option to repurchase the 115,000 shares, if any, remaining after such ownership adjustment. Refer to Note 9 of Notes to Financial Statements included in Item 8 of this Form 10-K for additional information regarding shareholder litigation.

Filing Compare · CE CASECNAN WATER & ENERGY CO INC