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

FORM 10-Q
 
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2004

Commission File No. 001-12995

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

Philippines
  
Not Applicable
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
     
24th Floor, 6750 Building, Ayala Avenue
Makati, 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: N/A
Securities registered pursuant to Section 12(g) of the Act: N/A

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

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

As of September 30, 2004, number of outstanding shares of common stock was 767,162.


TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1.
Financial Statements
3
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
10
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
14
Item 4.
Controls and Procedures
14

PART II - OTHER INFORMATION

Item 1.
Legal Proceedings
15
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
15
Item 3.
Defaults Upon Senior Securities
15
Item 4.
Submission of Matters to a Vote of Security Holders
15
Item 5.
Other Information
15
Item 6.
Exhibits
15

Signatures

16

Exhibit Index
 17


2

 
PART I - FINANCIAL INFORMATION


Item 1. Financial Statements.



Report of Independent Registered Public Accounting Firm


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

We have reviewed the accompanying balance sheet of CE Casecnan Water and Energy Company, Inc. (the "Company") as of September 30, 2004, and the related statements of operations for each of the three-month and nine-month periods ended September 30, 2004 and 2003 and of cash flows for each of the nine-month periods ended September 30, 2004 and 2003. These interim financial statements are the responsibility of the Company's management.

We conducted our review in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical review procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying interim financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

We previously audited in accordance with standards of the Public Company Accounting Oversight Board (United States), the balance sheet as of December 31, 2003, and the related statements of operations, changes in stockholders’ equity and of cash flows for the year then ended (not presented herein), and in our report dated February 9, 2004, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of December 31, 2003, is fairly stated in all material respects in relation to the balance sheet from which it has been derived.

/s/ Joaquin Cunanan & Co.

JOAQUIN CUNANAN & CO.
A PricewaterhouseCoopers Member Firm
Makati City, Philippines
October 26, 2004
 
3

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

   
As of
  
   
September 30,
  
December 31,
  
   
2004
  
2003
  
   
(Unaudited)
      
           
ASSETS
  
Current assets:
              
Cash and cash equivalents
  
$
48,152
  
$
4,513
  
      Trade receivable, net
   
23,929
    
16,451
  
Note receivable (Note 2)
    
-
    
97,000
  
Accrued interest and other receivables
    
3,156
    
8,229
  
Prepaid insurance and other current assets
    
4,252
    
4,685
  
Total current assets
    
79,489
    
130,878
  
Restricted cash and investments
    
52,514
    
18,121
  
Bond issue costs, net
    
2,974
    
3,861
  
Property, plant and equipment, net (Note 5)
    
368,199
    
407,082
  
Deferred income tax
    
5,371
    
5,371
  
Total assets
  
$
508,547
  
$
565,313
  
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
              
Accounts payable
  
$
8,633
  
$
7,395
  
Accrued interest
   
14,862
    
7,368
  
Dividends payable (Notes 5 and 7)
    
12,750
    
-
  
Accrued liquidated damages (Note 5)
    
-
    
3,800
  
Other accrued expenses
    
295
    
1,702
  
Payable to affiliates (Note 3)
    
34,781
    
34,739
  
Current portion of long-term debt
    
52,056
    
49,360
  
Total current liabilities
    
123,377
    
104,364
  
               
Notes payable (Note 3)
    
51,263
    
51,263
  
Deferred revenue (Note 4)
    
4,680
    
902
  
Long-term debt, net of current portion
    
169,721
    
197,098
  
Total liabilities
    
349,041
    
353,627
  
               
Commitments and contingencies (Note 5)
              
               
Stockholders’ equity:
              
Capital stock - authorized 2,148,000 common shares, one Philippine peso
              
($0.038) par value; 767,162 shares issued and outstanding
    
29
    
29
  
Additional paid-in capital
    
123,807
    
123,807
  
Retained earnings (Notes 6 and 7)
    
35,670
    
87,850
  
Total stockholders’ equity
    
159,506
    
211,686
  
Total liabilities and stockholders’ equity
  
$
508,547
  
$
565,313
  

The accompanying notes are an integral part of these financial statements.
 
4
 
CE CASECNAN WATER AND ENERGY COMPANY, INC.
STATEMENTS OF OPERATIONS
(Amounts in thousands of U.S. Dollars)

   
Three Months
  
Nine Months
  
   
Ended September 30,
  
Ended September 30,
  
   
2004
  
2003
  
2004
  
2003
  
       
(Unaudited)
      
Revenue:
                  
Lease rental and service contract
  
$
38,016
  
$
48,176
  
$
77,443
  
$
112,894
  
Operating expenses:
                          
Depreciation
    
5,306
    
6,059
    
16,579
    
17,477
  
Plant operations and other operating expenses
    
2,264
    
4,598
    
6,637
    
11,947
  
Doubtful accounts expense
    
-
    
1,366
    
-
    
7,778
  
Total operating expenses
    
7,570
    
12,023
    
23,216
    
37,202
  
                           
Operating income
    
30,446
    
36,153
    
54,227
    
75,692
  
                           
Other income (expense):
                          
Interest expense
    
(7,292
)
  
(10,215
)
  
(22,476
)
  
(31,146
)
Interest income
    
311
    
52
    
1,152
    
170
  
Other
    
(5
)
  
43
    
(83
)
  
63
  
Total other expense, net
    
(6,986
)
  
(10,120
)
  
(21,407
)
  
(30,913
)
                           
Net income
  
$
23,460
  
$
26,033
  
$
32,820
  
$