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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-K

|    |  |                                                                                     
|--- |  | ------------------------------------------------------------------------------------
|[X] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

OR

|     |  |                                                                                         
|---- |  | ----------------------------------------------------------------------------------------
|[  ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________________ to _____________________________

Commission file number (Under the Securities Act of 1933) 33-37977

MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP




(Exact name of registrant as specified in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|MICHIGAN                                                       |  | 38-2726166                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)
|                                                               |  |                                     
|100 PROGRESS PLACE, MIDLAND, MICHIGAN                          |  | 48640                               
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip Code)                          
|                                                               |  |                                     
|Registrants telephone number, including area code             |  | (989) 839-6000                      

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

NONE

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

NONE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to 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. [X]

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





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TABLE OF CONTENTS



|                                                  |                                                                                                        |                              |  |  |  |  |  | 
|------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ---------------------------- |  |  |  |  |  | 
|PART I                                           
|                                                  | Item 1. BUSINESS                                                                                      
|                                                  |                                                                                                        | A. General                  
|                                                  |                                                                                                        | B. The Facility             
|                                                  |                                                                                                        | C. Major Issues Facing MCV  
|                                                  |                                                                                                        | D. Contracts                
|                                                  |                                                                                                        | E. Employees                
|                                                  |                                                                                                        | F. Regulation               
|                                                  |                                                                                                        | G. Environmental Matters    
|                                                  |                                                                                                        | H. Overall Lease Transaction
|                                                  | Item 2. PROPERTIES                                                                                    
|                                                  | Item 3. LEGAL PROCEEDINGS                                                                             
|                                                  | Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                           
|PART II                                          
|                                                  | Item 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                         
|                                                  | Item 6. SELECTED FINANCIAL DATA                                                                       
|                                                  | Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
|                                                  | Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                   
|                                                  | Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                   
|                                                  | Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE          
|                                                  | Item 9A. CONTROLS AND PROCEDURES                                                                      
|PART III                                         
|                                                  | Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                           
|                                                  | Item 11. EXECUTIVE COMPENSATION                                                                       
|                                                  | Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                               
|                                                  | Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                               
|                                                  | Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                       
|PART IV                                          
|                                                  | Item 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K                              
|SIGNATURES                                       
|EXHIBIT INDEX                                    
|Maintenance Services and Parts Agreement 01/22/03
|Maintenance Services and Parts Agreement 03/21/03
|MCV Senior Management Incentive Plan             
|President & Chief Executive Officer Certification
|CFO, VP and Controller Certification             
|President & Chief Executive Officer Certification
|CFO, VP and Controller Certification             



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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP

ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

TABLE OF CONTENTS

|           |  |                                                                                       |  |                              |      |  |      | 
|---------- |  | ------------------------------------------------------------------------------------- |  | ---------------------------- | ---- |  | ---- | 
|           |  |                                                                                       |  |                              |      |  | Page | 
|           |  |                                                                                       |  |                              |      |  |      | 
|PART I     |  |                                                                                       |  |                              |      | 
|Item 1.    |  | Business                                                                              |  |                              | 1    | 
|           |  |                                                                                       |  | A. General                   |      |  | 1    | 
|           |  |                                                                                       |  | B. The Facility              |      |  | 1    | 
|           |  |                                                                                       |  | C. Major Issues Facing MCV   |      |  | 2    | 
|           |  |                                                                                       |  | D. Contracts                 |      |  | 2    | 
|           |  |                                                                                       |  | E. Employees                 |      |  | 11   | 
|           |  |                                                                                       |  | F. Regulation                |      |  | 11   | 
|           |  |                                                                                       |  | G. Environmental Matters     |      |  | 15   | 
|           |  |                                                                                       |  | H. Overall Lease Transaction |      |  | 16   | 
|Item 2.    |  | Properties                                                                            |  |                              | 18   | 
|Item 3.    |  | Legal Proceedings                                                                     |  |                              | 19   | 
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                   |  |                              | 19   | 
|PART II   
|Item 5.    |  | Market for Registrants Common Equity and Related Stockholder Matters                 |  |                              | 20   | 
|Item 6.    |  | Selected Financial Data                                                               |  |                              | 20   | 
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results
of Operations |  |                              | 20   | 
|Item 7A.   |  | Quantitative and Qualitative Disclosures about Market Risk                            |  |                              | 30   | 
|Item 8.    |  | Financial Statements and Supplementary Data                                           |  |                              | 31   | 
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure  |  |                              | 31   | 
|Item 9A.   |  | Controls and Procedures                                                               |  |                              | 31   | 
|PART III  
|Item 10.   |  | Directors and Executive Officers of the Registrant                                    |  |                              | 32   | 
|Item 11.   |  | Executive Compensation                                                                |  |                              | 34   | 
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management                        |  |                              | 36   | 
|Item 13.   |  | Certain Relationships and Related Transactions                                        |  |                              | 36   | 
|Item 14.   |  | Principal Accountant Fees and Services                                                |  |                              | 37   | 
|PART IV   
|Item 15.   |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                       |  |                              | 38   | 
|Signatures |  |                                                                                       |  |                              | F-25 | 





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PART I




Item 1. BUSINESS









|A. |  | General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | In January 1987, Midland Cogeneration Venture Limited Partnership (MCV)
was formed as a limited partnership to convert a portion of an uncompleted
Consumers Energy Company (Consumers) nuclear power plant into a natural
gas-fired, combined-cycle, cogeneration facility located in Midland County,
Michigan (the Facility). The Facility commenced commercial operation in
1990 (the Commercial Operation Date) and is capable of generating
approximately 1500 megawatts (MW) of electricity and approximately 1.5
million pounds of process steam per hour. The Facility is dependent upon
natural gas for its fuel supply.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | The Facility is a cogeneration facility, meaning that it sequentially
produces electricity and useful thermal energy (steam) through an
integrated system using a single fuel source. The Facility has been
certified by the Federal Energy Regulatory Commission (FERC) as a
qualifying cogeneration facility (QF) under the Public Utility Regulatory
Policies Act of 1978, as amended (PURPA). As a QF, the Facility is
exempt from various provisions of the Federal Power Act, as amended (the
FPA), the Public Utility Holding Company Act of 1935, as amended (the
1935 Act), certain state laws regarding rate, financial and
organizational regulation, and is entitled to sell electric capacity and
related energy to a public utility (such as Consumers) at such utilitys
incremental cost of alternative electric energy, otherwise known as
avoided cost. A utilitys incremental cost of alternative electric
energy means, with respect to electric energy purchased from a QF, the
cost to the electric utility of the electric energy (determined, at the
option of the QF, at either the time of delivery or at the time the
obligation is incurred) which, but for the purchase from such QF, such
utility would generate or purchase from another source.
|  
|B. |  | The Facility                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | MCVs principal business is the operation of the Facility and the sale of
electric capacity and related energy (principally to Consumers),
electricity and steam to The Dow Chemical Company (Dow) and steam to Dow
Corning Corporation (DCC) produced at the Facility. The Facility is
located on an approximately 1200-acre site that is leased from Consumers
(the Site).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   |  | The Facility consists of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       



| |  |  | 12 gas turbine generators (GTGs);                                                                             
| | - |  | ----------------------------------------------------------------------------------------------------------------
|
| |  |  | 12 heat recovery steam generators (HRSGs) which create steam
using heat from the GTG exhaust;                 
|
| |  |  | A steam turbine (the Unit 1 Steam Turbine) capable of producing
electricity from steam generated by the HRSGs;
|
| |  |  | A second steam turbine (the Unit 2 Steam Turbine) which serves
as a backup to the Unit 1 Steam Turbine;       
|
| |  |  | A back-pressure steam turbine;                                                                                  
|
| |  |  | Pollution control assets;                                                                                       
|
| |  |  | A 25-mile gas pipeline connecting interstate and intrastate gas pipeline systems to the Facility;               
|
| |  |  | Pipelines to deliver steam to Dow and DCC; and                                                                  
|
| |  |  | Various associated equipment and improvements.                                                                  

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| |  | Electricity is produced by the 12 GTGs, and the steam is produced by the 12
HRSGs using the heat from the GTG exhaust. The Unit 1 Steam Turbine is
designed to produce electricity using the steam generated by the HRSGs and
process steam that is provided to Dow and DCC. Improvements to the
Facility have increased the net electrical generating capacity from
approximately 1370 MW to 1500 MW. MCV purchases demineralized water from
Dow. Electricity is sold by MCV to Consumers and other parties through an
interconnect and to Dow through dedicated transmission lines.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------






|C. |  | Major Issues Facing MCV                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | MCV faces several major issues crucial to its future success. These
issues, briefly summarized here, are discussed more fully in the sections
cross referenced below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | Electric Industry Restructuring.At both the state and federal level,
efforts continue to restructure the electric industry. In 1997 and 1998,
the Michigan Public Service Commission (MPSC) entered a series of orders,
permitting customers to choose their power provider over a four-year
phase-in period which started in 1999 (Restructuring Orders) (these
orders are further described in Item 1, Section F, Regulation  Michigan
Electric Industry Restructuring Proceedings). In addition, Michigan
enacted restructuring legislation in June 2000. A significant issue to MCV
is the potential for future regulatory denial of recovery by Consumers from
its customers of above market costs Consumers pays MCV under the parties
Power Purchase Agreement (PPA). Over 90% of MCVs revenues come from
sales pursuant to the PPA. To date, restructuring has not negatively
impacted MCV, but if restructuring results in denying Consumers recovery
of above-market PPA costs, MCVs cash flows may be negatively impacted,
especially after 2007. See Item 1, Section F, Regulation  Michigan
Electric Industry Restructuring Proceedings and Federal Electric Industry
Restructuring, Item 7, Managements Discussion and Analysis of Financial
Condition and Results of Operations (MD&A)  Outlook  Michigan
Electric Industry Restructuring Proceedings and Federal Electric Industry
Restructuring, and Notes to Consolidated Financial Statements, Note 1,
The Partnership and Associated Risks.
|  
|   |  | Energy Rate and Cost of Production. Since January 1992, MCV has
experienced an overall reduction in the energy charges it is paid for
electricity under the PPA, primarily due to declining coal costs at
Consumers generating plants. In addition, MCVs costs associated with
production of electricity have continued to rise. These circumstances have
negatively affected MCVs cash flow. While MCV has the majority of its
expected natural gas needs under contract for the next several years,
sustained periods of high market gas prices could adversely affect MCVs
earnings and cash flow. See Item 1, Section F, Regulation  MPSC and
Other Proceedings Relating to Capacity and Energy Charges, Item 1, Section
D, Contracts  Gas Supply Agreements, Item 1, Section H, Overall Lease
Transaction, and Item 7, MD&A  Liquidity and Financial Resources. In
addition, MCV has credit exposure to suppliers who have entered into fixed
price natural gas contracts with MCV. To the extent that the
aforementioned suppliers fail to deliver natural gas under their fixed
price contracts which are not backed by credit support requirements, and
the cost to replace such gas is in excess of the contract rate, MCV could
experience higher natural gas prices in the future. See Item 1, Section D,
Contracts  Credit Support Requirements for MCVs Gas Arrangements.                                                                                                                              






|D. |  | Contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | MCVs material contracts are the PPA, which provides for the sale to
Consumers of electric capacity and related energy; the Steam and Electric
Purchase Agreement with Dow (SEPA), which provides for the sale of steam
and electricity to Dow; the Steam Purchase Agreement with DCC (SPA),
which provides for the sale of steam to DCC; gas supply, storage and
transportation contracts with a number of companies; an agreement covering
gas turbine inspection services and spare parts with Alstom Power Inc.
(Alstom); and an agreement covering steam turbine inspection services and
parts with General Electric Company (GE). On December 31, 2002, MCV
entered into an agreement covering gas turbine inspection services and
spare parts with General Electric International, Inc. (GEII). This
agreement will replace the similar agreement with Alstom. MCVs interests
in all the foregoing contracts, except the SPA and the GEII agreement, have
been assigned to the Owner Trustees, which in turn subassigned such
contracts to MCV and granted a security interest in such contracts to the
Note Trustees. See Item 1, Section H, Overall Lease Transaction. The

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| |  | following is intended to summarize briefly certain provisions of such
contracts and is qualified in its entirety by reference thereto.                                                                                                                                                                                                                                                                                                                                                            
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Power Purchase Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Under the PPA, Consumers contracted to purchase specified amounts (the
Contract Capacity) of the Facilitys electric capacity until March 15,
2025 and thereafter subject to yearly extensions that are automatic in the
absence of a termination notice from either party. Contract Capacity is
1240 MW/hour.                                                                                                                                                                                  
|
| |  | In allocating the available electrical output of the Facility, MCV must
first satisfy Dows requirements under the SEPA before supplying power to
Consumers.                                                                                                                                                                                                                                                                                                                                      
|
| |  | Consumers has the right of first refusal to purchase any available electric
capacity and related energy produced by the Facility in excess of Contract
Capacity if MCV is willing to sell the same for a period of six months or
longer. MCV is entitled to sell excess electric capacity and related energy
to other electric utilities or third parties, and Consumers is required, if
requested by such utilities or MCV, to transmit electrical energy for them
subject to certain conditions.
|
| |  | Capacity charges are payable for available Contract Capacity, whether or
not electricity is dispatched. The capacity charges for on-peak and
off-peak power average 4.15 cents per available kilowatt hour (kWh);
however, until September 15, 2007, the capacity charge may be reduced by
Consumers to a level of no less than an average of 3.77 cents per kWh.                                                                                                                               
|
| |  | Energy charges are based on costs incurred by Consumers at certain of its
coal-fired plants (i.e., those coal plants wholly or partially owned by
Consumers having a net demonstrated capacity of at least 100 MW, available
for generating electrical energy for not less than 5500 hours during the
most recent year and having a capacity factor of at least 40% when
connected to Consumers system and generating electrical energy).                                                        



| |  |  | Fixed Energy Charges. Like the capacity charges, fixed energy
charges are payable for available kWhs of Contract Capacity. Fixed
energy charges are adjusted each year based on a fuel inventory
charge, administrative and general expenses and one-half of operation
and maintenance expenses (excluding fuel) incurred at these plants
during either the immediately preceding calendar year or the calendar
year preceding that year depending on when the adjustment is being
made. In 1995, an arbitrator ruled that, under the PPA, Consumers
had the right to withhold that portion of fixed energy charges
payable on the basis of energy available but not delivered since it
was not permitted by the MPSC to collect such charges from its
electric customers. See Item 1, Section F, Regulation  MPSC and
Other Proceedings Relating to Capacity and Energy Charges.
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Variable Energy Charges. Variable energy charges are payable for
energy actually delivered. Variable energy charges are determined
monthly and are equal to one-half of operation and maintenance
expenses incurred at these plants, as calculated annually, and the
actual cost of coal burned at these plants as determined monthly
based on a rolling twelve-month average (with a two-month lag) and
converted to an overall cost per kWh.                                                                                                                                                                                                                                                                                                                                                                                                                                      



| |  | The PPA permits Consumers, under certain conditions, to reduce the capacity
and energy charges payable to MCV and/or to receive refunds of capacity and
energy charges paid to MCV if the MPSC does not permit Consumers to recover
from its customers the capacity and energy charges specified in the PPA
(the regulatory-out provision). Until September 15, 2007, however, the
capacity charge may not be reduced below an average capacity rate of 3.77
cents per kWh for the available Contract Capacity notwithstanding the
regulatory-out provision. Consumers and MCV are required to support and
defend the terms of the PPA. See Item 1, Section F, Regulation  MPSC
and Other Proceedings Relating to Capacity and Energy Charges.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Under the PPA, MCV must provide assurances that it has adequate gas
supplies under contract to generate at least 60% of the maximum annual
output of Contract Capacity. Annually, MCV must provide at Consumers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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| |  | request continuing annual assurances of such capability for each succeeding
five-year period. MCV believes it has adequate gas supplies under contract
to satisfy its current PPA fuel assurance requirements. If MCV is unable
to provide these continuing assurances, Consumers is entitled to withhold
in a separate escrow fund a portion of capacity charges until these
assurances are provided. The portion of such capacity charges is a function
of the percentage of unmet fuel needs and an increasing factor based on the
number of consecutive months that capacity charges have been withheld.
Assuming a 3.77 cents per kWh capacity charge, the maximum capacity
charges, which could be withheld and escrowed under this provision, are as
follows:
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              |  |                  |        | 
|----------------------------- |  | ---------------- | ------ | 
|                              |  | Maximum Possible
|Consecutive Months That       |  | Reduction in    
|MCV Fails to Provide          |  | Capacity Charge 
|Adequate Continuing Assurance |  | (cents/kWh)     
|                              |  |                 
|1-12                          |  |                  | .1885  | 
|13-24                         |  |                  | .5655  | 
|25-36                         |  |                  | 1.5080 | 
|37 and thereafter             |  |                  | 2.6390 | 



| |  | The PPA does not make any provision for the use of escrowed funds, except
that the PPA provides that interest earned, if any, on the escrowed funds
is to be divided equally between MCV and Consumers. After withholding
capacity charges for 48 months without fuel assurances being provided,
Consumers may terminate the PPA. In the event of termination, MCV must pay
an early termination charge.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | If any party is rendered unable by force majeureto carry out its
obligations under the PPA, these obligations are suspended during the
period of force majeure. Force majeureincludes all natural calamities;
war; curtailments, orders, regulations or restrictions imposed by
governmental authority; and all other causes beyond the reasonable control
of the affected party, but specifically does not include shortages of fuel
and supplies (unless caused by calamity or unusual world events applicable
to other major industrial users as well as MCV), mechanical breakdowns,
labor strikes or explosions or fires (unless caused by criminal acts).                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Consumers schedules all deliveries of electricity from the Facility to its
system and is obligated to do so in a manner consistent with the safe and
prudent operation of the Facility. As long as the annual availability of
Contract Capacity equals or exceeds 75% of Contract Capacity, Consumers
must purchase sufficient electrical energy from the Facility to achieve at
least a 60% capacity factor on an annual basis. This purchase obligation
decreases, based on a prescribed formula, if annual availability falls
below 75% of Contract Capacity. Annual PPA availability has exceeded 98.5%
since 1997.                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Consumers must purchase a specified minimum amount of electrical energy at
all times, except during emergencies on its system. MCV determines a
minimum level of generation designed to assure that the Facility operates
in a stable manner and that MCV meets its obligations to supply steam and
electricity to Dow, but MCV cannot specify a minimum generating level which
exceeds 350 MW. Outages, other than forced outages, are to be scheduled to
accommodate Consumers requirements to the extent MCV deems practicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | MCV is obligated to have the Facility inspected at least once each year by
a consulting engineer selected by it from a list of engineering firms
approved by Consumers. The annual inspection includes, at a minimum, all
equipment, structures, operating procedures and maintenance practices
necessary for the generation and delivery of energy to Consumers. Upon
completion of an annual inspection, the consulting engineer must promptly
issue a written report. Any recommendations in this report regarding
equipment, structure and maintenance practices, which have been approved by
MCVs management, must be implemented within a specified period of time.
In its April 2003 report, Cummins & Barnard, Inc., the consulting engineer,
found no specific issues that MCV should take under advisement or act upon.
With regard to the most recent inspection, MCV expects to receive the
report by the end of April 2004 and does not anticipate any substantial
problems or requirements for plant modifications.

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| |  | In 1997, Consumers informed MCV of several other potential payment issues it
would pursue, pursuant to the regulatory out and other provisions of the
PPA. These issues related to Consumers special contract customers, pricing
of the energy delivered during off-peak ramp hours (when MCV adjusts its
output to match Consumers dispatch) and energy delivered in the band width
(energy delivered above dispatch, within certain limits). In addition,
Consumers notified MCV that it did not believe that MCV could use the
approximately 15 MW of generating capacity and energy attributable to the
back pressure turbine, which was placed into service in July 1997, towards
available Contract Capacity or electric deliveries under the PPA. Consumers
had also indicated that they would take a similar position on the
incremental energy and capacity resulting from MCVs installation of 11NM
upgrade packages on the GTGs (collectively the Disputed Issues). MCV and
Consumers entered into a settlement agreement (Settlement Agreement),
effective January 1, 1999, which resolves (for the various time periods
specified in the Settlement Agreement) all of the previously Disputed Issues
under the PPA and includes definitive obligations for Consumers to make
energy payments calculated in accordance with the PPA, irrespective of any
MPSC or the reviewing courts decision which may affect those issues or
payments. The Settlement Agreement also provides that, notwithstanding
modifications to the Facility increasing its capacity, in billing Consumers
for capacity charges (at the rates set forth in the PPA) availability would
be capped at 98.5% of the 1240 MW (98.5% cap) on a calendar-year basis for
the term of the PPA irrespective of any MPSC or the reviewing courts
decision, which may affect this issue or payment. Provided, however, that
if Consumers transfers (subject to MCVs prior consent) its rights of up to
1240 MW of capacity and associated energy under the PPA to a third party for
an extended period of time, the 98.5% cap will not apply except that the
98.5% cap is, in any event, reinstated on September 15, 2007.
Notwithstanding the Settlement Agreement, after September 15, 2007, an issue
could exist as to whether or not Consumers can exercise the regulatory out
provision to reduce capacity payments to MCV based upon the availability
caps of 88.7% of the 1240 MW (both on and off peak) of contract capacity as
provided for in the 915 MW Settlement and the 325 MW Settlement. See Item
1, Section F, Regulation  MPSC and Other Proceedings Relating to Capacity
and Energy Charges. The Settlement Agreement has not materially affected
MCVs earnings and cash flows.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | MCV currently delivers its electric power to purchasers through transmission
lines owned and operated by Trans-Elect, Inc. (Trans-Elect). Such lines
were previously owned by Consumers. MCV and Consumers previously entered
into the Facilities Agreement which provides for transmission service of
excess capacity and energy available at the Facility. The sale of the
transmission facilities to Trans-Elect does not change, in any respect, the
contractual relationship and obligations of Consumers under the Facilities
Agreement. Trans-Elect is serving as Consumers agent to perform Consumers
obligations under the Facilities Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Steam and Electric Power Agreement; Related Dow Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | SEPA. Pursuant to the SEPA, Dow has agreed to purchase steam from the
Facility for an initial term of 25 years from the Commercial Operation Date
and to purchase electricity from the Facility for 15 years (any electricity
to be purchased thereafter at Dows option, although MCV remains obligated
to make certain amounts of electricity available for an additional 10
years). The SEPA is subject to automatic extensions for up to 10 additional
years after its 25-year term in the absence of a three-year notice of
termination from either party.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | In any year, MCV is not obligated to deliver more than 691,900 pounds of
steam per hour and 60 MW of electricity on an annual average basis except
as Dow may increase its entitlement as discussed below. Dow has agreed to
take as much steam as is necessary for the Facility to retain its QF status
under the FERC regulations in effect on November 1, 1986 (which regulations
have not been revised in relevant part in any material respect). However,
Dows obligation with respect to minimum annual steam purchases is an
average of 440,000 pounds per hour (less amounts supplied by certain
standby facilities owned by Dow and less 50% of amounts purchased by any
other steam customers of MCV) and is binding only for the initial 25-year
term of the SEPA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Dow may increase its steam or electricity entitlement to 110% of the steam
or electricity delivered in the previous 12-month period, plus any steam or
electricity required by any addition to or modification of the Dow plant,
provided that any increase above an annual average of 1,000,000 pounds of
steam per hour or 75 MW of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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| |  | electricity requires MCVs consent. MCV, however, may be required, on an
instantaneous basis, to deliver steam at a rate of up to 135% of the
maximum annual average hourly quantity of steam or to deliver power at a
rate up to 20 MW greater than the applicable annual average. In 1997, Dow
increased its electric entitlement to 67.75 MW/hr; no such increase has
since been requested.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Under the SEPA, there is a base charge for steam and electricity which is
subject to adjustment each quarter based on changes in MCVs fuel costs,
producer price for capital equipment and certain compensation per hour
indices. Dow also has the option under the SEPA and subsequent amendments,
to provide the gas necessary to generate Dows take of steam and
electricity (toll). Under the provisions of the SEPA, Dow receives a
billing credit of 5/8 of its steam and electric charges in exchange for Dow
purchasing the natural gas for MCV.                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | In order to assure reliable steam for the Dow plant, Dow owns and maintains
standby facilities, which are not part of the Facility (the Standby
Facilities). The SEPA amendment also provided that Dow would retire
certain of the Standby Facilities located on the MCV site and reduce the
annual standby fees payable to Dow to $350,000 per year. This fee is
subject to the same indexing adjustments each quarter as the base steam
charge. In addition, the fee charged by Dow for each use of the Standby
Facilities, necessitated when MCV fails to deliver steam under the SEPA is
$150,000.                                                                                                                                                                                                                                                                                                                                                         
|
| |  | The terms of the SEPA provide that Dow may terminate the SEPA if one or
more contract outages occur for a cumulative period greater than 24 hours
in any year, provided that a single outage of more than 24 consecutive
hours but less than 72 consecutive hours will not give rise to a right of
termination unless another such contract outage has occurred within the
previous 60 months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | A contract outage generally occurs when MCV fails to deliver minimum
operation steam (i.e., an hourly flow rate of at least 75% of the then
current rate), or fails to meet pressure specifications after having failed
to deliver steam for 15 consecutive minutes, or fails to meet pressure and
quantity specifications after having failed to deliver steam for seven
consecutive days, except in each case as a result of scheduled maintenance
outages, outages forced at Dows request or resulting from Dows failure to
provide demineralized water or waste water treatment services or outages
caused by an event of force majeurelasting no more than two years. Steam
provided to Dow from the Standby Facilities is treated as steam delivered
by MCV for this purpose. For such a contract outage to occur, more than
ten of the Facilitys GTGs would have to be out of service at the same time
that Dows Standby Facilities are unavailable.
|
| |  | The SEPA and various backup agreements among MCV, Consumers and Dow contain
various provisions designed to assure a continuous supply of steam and
electricity to Dow in the event the SEPA is terminated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Dow Facilities and Demineralized Water. Dow owns the electrical
transmission lines, which carry electricity from the Facility to the Dow
plant. Dow also owns certain steam and demineralized water lines which are
used in the operation of the Facility, and which have been leased by Dow to
MCV. Dow has contracted to provide MCV sufficient demineralized water to
meet the Facilitys requirements until 30 months after MCVs obligation to
supply steam to Dow ceases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Steam Purchase Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | In 1995, MCV entered into the SPA with DCC which provides that MCV
construct, own and operate a steam line and appurtenant equipment to serve
steam to DCCs Midland plant. DCC has agreed to purchase steam from MCV
for an initial term of fifteen years with automatic year-to-year renewals
thereafter. The steam MCV provides DCC must meet operational and content
specifications. The provision of steam to DCC is subject to Dows first
preference to the steam under the SEPA. MCV began supplying steam to DCC
in July 1996. The parties have certain termination rights after the
declared in service date but may be subject to penalties or damages for
such termination.                                                                                                                                                                                                                                                                          

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| |  | Gas Supply Arrangements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Facility is wholly dependent upon natural gas for its fuel supply and a
substantial portion of the Facilitys operating expenses consist of the
costs of natural gas. MCV recognizes that its existing gas contracts are
not sufficient to satisfy the anticipated gas needs over the term of the
PPA, and, as such, no assurance can be given as to the availability or
price of natural gas after the expiration of the existing gas contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | MCV has a portfolio of long term natural gas purchase contracts (contracts
that provide for gas purchases for a term of greater than one year), having
remaining terms of 1 to 10 years, with U.S. and Canadian suppliers for an
annual average maximum supply of natural gas for 2004 of 227,561 MMBtu/day.
As of January 1, 2004, no single gas contract accounts for more than 16.1%
of MCVs portfolio, though, El Paso Corporation (El Paso) and its
subsidiaries now account for 38.1% of MCVs portfolio. Gas contracts with
U.S. suppliers provide for a 2004 annual average purchase of 149,423
MMBtu/day, while gas contracts with Canadian suppliers provide for the
purchase of 78,138 MMBtu/day. In addition to purchasing natural gas under
long term contracts, MCV also purchases gas under short term (spot)
agreements for a term of less than one year. During 2003, MCVs gas
purchases were supplied 88% from long term gas contracts and 12% from spot
gas contracts.

MCV Gas Under Contract
Annual Average For Each Year
Maximum Daily Quantity (MMBtu/Day)

|     |  |             |        |               |  |                |         |       |  |  |         |  |  |  |         | 
|---- |  | ----------- | ------ | ------------- |  | -------------- | ------- | ----- |  |  | ------- |  |  |  | ------- | 
|Year |  | Fixed Price |        | Indexed Price |  | Floating Price |         | Total
|     |  |             |        |               |  |                |         |      
|2004 |  |             | 67,923 |               |  |                | 110,638 |       |  |  | 49,000  |  |  |  | 227,561 | 
|2005 |  |             | 80,000 |               |  |                | 61,695  |       |  |  | 96,836  |  |  |  | 238,531 | 
|2006 |  |             | 74,164 |               |  |                | 59,156  |       |  |  | 105,345 |  |  |  | 238,665 | 
|2007 |  |             | 54,329 |               |  |                | 16,000  |       |  |  | 141,367 |  |  |  | 211,696 | 
|2008 |  |             | 46,000 |               |  |                | 7,500   |       |  |  | 122,000 |  |  |  | 175,500 | 
|2009 |  |             | 36,000 |               |  |                | 7,500   |       |  |  | 120,329 |  |  |  | 163,829 | 
|2010 |  |             | 36,000 |               |  |                | 7,500   |       |  |  | 94,151  |  |  |  | 137,651 | 
|2011 |  |             | 36,000 |               |  |                | 4,863   |       |  |  | 47,000  |  |  |  | 87,863  | 
|2012 |  |             | 32,667 |               |  |                | 2,667   |       |  |  | 43,500  |  |  |  | 78,834  | 
|2013 |  |             |       |               |  |                |        |       |  |  | 3,395   |  |  |  | 3,395   | 



| |  | The pricing for the above contracted volumes are defined as follows:
| |  | --------------------------------------------------------------------

|                          |  |                                                                                                                                                                                                                                      
|------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Fixed Price               |  | Individual contracts utilize either a fixed price through life of contract or a
fixed price with fixed escalator.                                                                                                                    
|                          |  |                                                                                                                                                                                                                                      
|Indexed Price             |  | Individual contracts utilize either a fixed price with an escalator tied to the
energy index based on Consumers charges under the PPA or an amount based on a combination of
a fixed with escalator and fixed with energy escalator.
|                          |  |                                                                                                                                                                                                                                      
|Floating Price
Mercantile |  | A price tied to (1) the Henry Hub gas contract on the New York
Exchange for the month gas is purchased or (2) the Alberta, Canada price as published in the
Canadian Gas Price Reporter.                                             



| |  | Current U.S. Long Term Gas Contracts. The U.S. long term gas contracts
provide for either a dedication of reserves, corporate guarantee or
warranty of deliverability. Under a dedication of reserves, specific
reserves
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  | are dedicated to fulfill the suppliers obligations and under a corporate
guarantee, reserves are not dedicated but generally MCV is indemnified for
the cost of purchasing supplies elsewhere if the gas is not delivered as
warranted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Some of the U.S. long term gas contracts contain take-or-pay provisions
obligating MCV to purchase at least a specified percentage (generally 75%
to 100%) of the minimum daily quantity (MDQ) to which MCV is entitled
under the contract, unless such failure is due to force majeure, failure of
the gas to meet quality standards or, in some cases, failure of the
supplier to deliver the quantity nominated by MCV. If, over the course of
a contract year, MCV has a take deficiency, it must make a deficiency
payment that is based, in most cases, on the product of the take deficiency
and either all or some percentage of the contract price. In addition,
under some of the U.S. long term gas contracts, the producer may terminate
the contract if, for reasons other than force majeure, MCV fails to
purchase a specified percentage of the MDQ (generally between 50 and 100%)
within a specified period (generally 120 days). Some U.S. long term gas
contracts allow a make-up period ranging from one to five years to make
up the deficiency.
|
| |  | Most U.S. long term gas contracts provide that MCV has the right to
terminate upon 20 days written notice if the supplier, for any reason
other than force majeure, fails to provide a specific percentage of the
requested volumes of gas for a period of at least 120 consecutive days.
MCV may terminate two other U.S. long term gas contracts upon 30 days
written notice if the producer, for any reason, including force majeure,
fails to deliver 500 Mcf/day for a period of four consecutive months.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Current Canadian Long Term Gas Contracts. All Canadian long term gas
contracts (Canadian contracts) warrant the delivery of quantities
requested by MCV up to the MDQ, subject to force majeure,and in one case,
a 2% tolerance is allowed. Subject to MCVs obligation to mitigate,
Canadian suppliers have agreed to indemnify MCV for the Facilitys
replacement gas costs, excluding indirect or consequential damages or loss
of profit, for any breach of this supply warranty. One producer may be
relieved of its supply warranty under certain circumstances if its ratio of
remaining reserves to annual production is ten.                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Prices under most of the Canadian contracts are based on reference prices
indexed to Consumers energy charges under the PPA, subject in some
instances to floor prices below which the reference price cannot fall, and
are denominated in U.S. dollars. All the Canadian contracts provide for
deliveries at the international border near Emerson, Manitoba.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | In addition to an amount per MMBtu based on the quantity of gas actually
delivered (the Commodity Charge), under most of the Canadian contracts
MCV is required to pay a monthly charge whether or not MCV buys any natural
gas (the Demand Charge) to each Canadian supplier. This Demand Charge
covers the transportation charges incurred by the Canadian suppliers to
have transportation capacity for the MDQ available to the U.S.-Canada
border. To the extent that MCV takes less than 100% of the MDQ from its
Canadian contracts, gas costs per unit taken by MCV increase because Demand
Charges are being paid for the quantity of gas not being taken. Two
contracts provide discounts to the Commodity Charge where monthly takes are
in excess of 85% of MDQ.                                                                                                                                                                                                                                                                                            
|
| |  | The Canadian contracts establish minimum annual takes under the contracts
that range from 75% to 100% of the stated MDQ. Generally, under the
contracts that require less than 100% takes, MCV is contractually required
to make a deficiency payment, which could range from a partial percentage
to a full percentage of the Commodity Charge multiplied by the deficiency
take; however, some contracts provide MCV the opportunity to reduce such
deficiency payment by taking gas in excess of the MDQ during the following
year. Generally, under the contracts that require 100% daily takes, MCV is
required to pay the supplier for any unexcused deficiencies, which amount
is calculated as the sum of (i) the daily deficiency multiplied by the
positive price differential between market and contract prices and (ii) the
Demand Charge accessed by transporter.                                                                                                                                                                                             
|
| |  | Under most of the Canadian contracts, if a Canadian supplier under delivers
to MCV in any month, subject to certain force majeureprovisions, the
contract price is reduced by a proportionate share of the Canadian and U.S.
transporters Demand Charges. Further, if a Canadian supplier fails, for
reasons other than force majeure, to deliver 90% of quantities requested up
to the MDQ over any 120 consecutive day period then, in most cases                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| |  | following a cure period, MCV can reduce the MDQ or, under certain
circumstances, terminate the agreement. If the MDQ is reduced, MCV can
request the Canadian supplier to assign to it, to the extent permitted, the
quantity of firm transportation capacity on Canadian transporters that
corresponds to the reduction in MDQ. One of the Canadian suppliers may
terminate its contract if MCV fails to take specified percentages of the
MDQ.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Gas Transportation and Storage Arrangements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | The location of the Facility permits gas to be transported over a number of
U.S. interstate pipelines. MCV has signed long term transportation
contracts with four of these pipelines: ANR Pipeline Company (ANR);
Panhandle Eastern Pipe Line Company (Panhandle); Trunkline Gas Company
(Trunkline); and Great Lakes Gas Transmission Company (Great Lakes).
ANR and Great Lakes are affiliates of El Paso. Panhandle and Trunkline
were previously owned by CMS Energy Corporation (CMS Energy), the parent
company of Consumers. On June 11, 2003, CMS Energy closed on the sale of
Panhandle and Trunkline to Southern Union Pipeline. No change in rates or
services under MCVs contracts with these companies occurred as a result of
this sale. In addition, certain of the gas suppliers arrange with
pipelines for the gathering and transportation of gas from their supply
sources to the interconnection points with the major interstate pipelines
with which MCV has contracts.
|
| |  | MCV originally entered into long term transportation arrangements with two
connecting pipelines which link the Facility and its own pipeline to these
interstate pipelines: Michigan Gas Storage Company (a subsidiary of
Consumers) and Consumers. In November 2002, Consumers combined the
operations of Michigan Gas Storage Company and Consumers. As a result of
this combination, MCVs service is now provided under one agreement. No
change in rates or service occurred under the consolidation of these
service agreements. Michigan gas produced by suppliers is currently
transported to Consumers pipeline system by the supplier under contracts
the suppliers have with MichCon Gathering Company (previously Michigan
Consolidated Gas Company) (MichCon), on the MichCon pipeline system in
northern Michigan.                                                                                                                                                                      
|
| |  | The remaining terms of MCVs agreements with the U.S. transporters range
from less than 1 to 21 years. The transportation rates of ANR, Panhandle,
Trunkline and Great Lakes are subject to FERC regulation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | The suppliers under the Canadian contracts are themselves responsible for
arranging transportation within Canada, and are responsible for paying the
transportation rates charged by the Canadian transporters, which are then,
in most cases, reimbursed by MCV. All suppliers have been allocated firm
transportation capacity on the relevant pipelines. Great Lakes transports
Canadian gas from the U.S.-Canada border to Michigan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | MCV has also entered into a gas storage agreement with Consumers for the
underground storage of eight billion cubic feet of gas in exchange for
delivery to Consumers of 1.75% of the gas placed in storage (for fuel) and
the payment by MCV to Consumers of an annual storage service charge of
32.04 cents per Dth times the eight billion cubic feet of storage service
provided. Consumers is obligated to provide deliveries from storage up to
a rate of 120,000 Mcf/day, subject to certain restrictions relating to
levels of storage gas maintained in inventory by MCV. This storage
capability allows MCV to meet fluctuating daily operating requirements and
to take advantage of opportunities to make spot purchases during periods of
the year when gas prices are favorable.                                                                                                                                                                                                           
|
| |  | Credit Support Requirements for MCVs Gas Arrangements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Many of MCVs gas supply contracts have credit support requirements that
can be triggered by changes in the financial condition of MCV or the gas
supplier, price changes in the forward gas market or the quantity of gas
purchases. As of December 31, 2003, MCV was not supplying any credit
support in the form of cash or letters of credit for any gas supply
agreements. MCV was holding on December 31, 2003, letters of credit
totaling $116.6 million from two gas suppliers as collateral support for
specific MCV long term gas agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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| |  | A number of MCVs gas supply agreements have parent guarantees that are
supplied by the corporate parents of the entity that is a party to the MCV
gas contract. The MCV Partners guarantee none of MCVs gas supply
agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | MCV hedges gas with NYMEX contracts that have both initial and variation
margin requirements. As of December 31, 2003, MCV held 3,559 NYMEX
contracts and had provided $20.9 million in margin requirements to support
the acquisition of the aforementioned NYMEX contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | MCV also hedges gas with NYMEX commodity swaps and Alberta Energy Company
(AECO) basis swaps. As of December 31, 2003, MCV had positions totaling
6.4 bcf of NYMEX commodity swaps and .9 bcf of AECO basis swaps in place.
These contracts have credit support requirements that can be triggered by
changes in the financial condition of MCV or the counterparty and price
changes in the forward gas market. As of December 31, 2003, MCV was not
supplying any credit support in the form of cash or letters of credit for
these swap arrangements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | In addition, MCV also has credit support requirements in connection with
its gas transportation contracts. The present tariff provisions in MCVs
gas transportation contracts provide that credit support can be required
based on the credit worthiness of the holder of the contract. As of
December 31, 2003, MCV had not been required to provide any credit support
for its gas transportation contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Gas Turbine Service Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Under a service agreement between MCV and Alstom, as amended, (the Service
Agreement), Alstom sold MCV spare parts for the GTGs and provides
qualified service personnel and supporting staff to assist MCV to perform
scheduled inspections on the GTGs, and to repair the GTGs at MCVs request.
The Service Agreement, commenced on January 1, 1990, and was set to expire upon
the earlier of the completion of the sixth series of major GTG inspections
or December 31, 2009. Alstom did not assure any level of performance by
the GTGs in the Service Agreement but warrants all repairs made by it
pursuant to the Service Agreement.                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | The Service Agreement is terminable (i) if either Alstom or MCV fails to
perform the duties outlined under the Service Agreement, at the option of
the other party; (ii) at MCVs option, if MCV is unable to operate the
Facility for 60 consecutive days due to force majeureor at MCVs option
for convenience. Upon cessation of the force majeure, the Service
Agreement may be reinstated by either party upon 60 days notice, together
with a remobilization fee. Upon termination of the Service Agreement
(except for nonperformance by Alstom), MCV must pay a cancellation payment
as discussed below.                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | MCV and Alstom amended the Service Agreement effective December 31, 1993
under which Alstom provides hot gas path parts for MCVs twelve gas
turbines through the fourth series of major GTG inspections, which were
completed in 2002. In January 1998, MCV and Alstom amended the length of
the Service Agreement to extend through the sixth series of major GTG
inspections, which were expected to be completed by year-end 2008, for a
lump sum fixed price covering the entire term of the amended Service
Agreement of $266.5 million (in 1993 dollars, which is adjusted based on
exchange rates and Swiss inflation indices), payable on the basis of
operating hours as they occur over the same period. The amendment is
severable and may be terminated separately from the Service Agreement. If
the Service Agreement, as amended, is terminated without cause, MCV must
pay a cancellation payment of approximately $5.8 million. MCV terminated the Service Agreement, as amended, in February 2004, for cause.
|
| |  | MCV signed a new maintenance service and parts agreement with GEII,
effective December 31, 2002 (GEII Agreement). GEII will provide
maintenance services and hot gas path parts for MCVs twelve GTGs under
terms and conditions similar to the MCV/Alstom Service Agreement, as
described above. The GEII Agreement will cover four rounds of major GTG
inspections, which are expected to be completed by the year 2015, at a
savings to MCV as compared to the Service Agreement with Alstom. The GEII
Agreement is expected to replace the current Alstom Service Agreement
commencing July 1, 2004. The GEII Agreement can be terminated by either
party for cause or convenience. Should termination for convenience occur,
a buy out amount will be paid by the terminating party with payments
ranging from approximately $19.0 million to $.9 million, based upon the
number of operating hours utilized since commencement of the GEII
Agreement.                                                                  

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| |  | Steam Turbine Service Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | MCV entered into a nine year Steam Turbine Maintenance Agreement with GE
effective January 1, 1995, which is designed to improve unit reliability,
increase availability and minimize unanticipated maintenance costs.
Effective February 1, 2004, MCV and GE amended this contract to extend its
term through August 31, 2007. MCV is to make monthly payments over the life
of the contract totaling $22.3 million (subject to escalation based on
defined indices). The parties have certain termination rights without
incurring penalties or damages for such termination. Upon termination, MCV
is only liable for payment of services rendered or parts provided prior to
termination.
|
| |  | Gas Turbine Generator Compressor Blade Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | MCV entered into an agreement with MTS Machinery Tools & Services AG
(MTS), in January 2002. Under this agreement MTS redesigned and will
manufacture and install new design compressor blades for MCVs GTGs, which
is expected to increase the overall electrical capacity and efficiency of
each GTG. MCV has purchased three sets of such blades and has the option
to purchase an additional nine sets. The first set of new compressor
blades was installed in the second quarter of 2003, for approximately $4.2
million. At this time, an additional two sets have been ordered at a cost
of $4.1 million.                                                                        






|E. |  | Employees                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | As of March 1, 2004, MCV had 128 employees. Fifty-three of MCVs employees
are members of the Utility Workers Union of America, AFL-CIO Local 564 (the
Union), and are subject to the terms of a collective bargaining agreement
between MCV and the Union. MCV and the Union signed a five-year agreement
effective March 1, 2004, with a wage reopener in each of the last two
years. MCV believes that its relationship with its employees is good.






|F. |  | Regulation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
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|   |  | Introduction                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | MCV and the Facility are not subject to most state and federal public
utility laws and regulations. The following is a discussion of the
principal regulatory proceedings and issues which could have an impact on
MCV and/or the Facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | QF Certification                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | In order to be a QF under PURPA and to maintain this status, not more than
50% of the equity interest in a facility may be owned by electric
utilities or their affiliates. In addition, certain operating and
efficiency standards must be maintained on a calendar-year basis. In the
case of a topping-cycle generating plant such as the Facility, the
applicable operating standard requires that the portion of total energy
output that is put to some useful purpose other than facilitating the
production of power (the Thermal Percentage) be at least 5%. In
addition, the plant must achieve and maintain an average PURPA efficiency
standard (the sum of the useful power output plus one-half of the useful
thermal energy output, divided by the energy input) of at least 45% (the
Efficiency Percentage). However, if the plant maintains a Thermal
Percentage of 15% or higher, the required Efficiency Percentage is reduced
to 42.5%. Since 1990, the required Thermal and Efficiency Percentages have
been achieved. During 2003, a Thermal Percentage of 21.0% and an
Efficiency Percentage of 47.4% were achieved.
|  
|   |  | The Facilitys QF certification by FERC became effective when portions of
the Facility were first synchronized to Consumers system in June 1989. As
the operator of a QF, MCV (and the Facility) are exempt from various
provisions of the FPA and the 1935 Act and from certain state laws and
regulations respecting rate, financial and organizational regulation of
public utilities. On January 31 and March 1, 1990, FERC recertified the
Facility as a QF in the context of an ownership structure in which MCV owns
the Facility and in the context of                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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| |  | a leveraged lease transaction in which the Facility is owned by Owner
Trustees on behalf of institutional investors. In 1997, 1998, 2000, 2001
and 2003, MCV filed Notices of Self-Recertification with the FERC to
reflect changes in the configuration and equipment of the Facility, and
changes in MCV Partnership ownership (which changes did not result in a
change in the percentage of utility ownership). See Item 7, MD&A 
Outlook  Maintaining QF Status.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
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| |  | MPSC and Other Proceedings Relating to Capacity and Energy Charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Background. The PPA contains a regulatory out provision which permits
Consumers, under certain conditions, to reduce the capacity and/or energy
charges payable to MCV and/or to receive refunds of capacity and/or energy
charges paid to MCV under the PPA if the MPSC does not permit Consumers to
recover from its customers the capacity and energy charges specified in the
PPA. Until September 15, 2007, however, the PPA further provides that
Consumers may not reduce the average capacity charge below 3.77 cents per
kWh notwithstanding the MPSCs failure to approve either the amount of
capacity Consumers has agreed to purchase from MCV under the PPA or the
capacity charge specified in the PPA for such purchase.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Energy charges payable by Consumers under the PPA are separate and distinct
from the capacity charge in that no 17-1/2 year protection against the
exercise of the regulatory out provision for energy charges is provided
for in the PPA. Although prior approval of energy charges is not required
or provided for under Michigan law, the MPSC has asserted the authority to
disallow Consumers recovery of a portion of such energy charges paid to
MCV. Any disallowance by the MPSC of Consumers ability to pass energy
charges through to its customers could, pursuant to the regulatory out
provision of the PPA, result in a reduction or refund of the fixed and
variable portions of the energy charge under the PPA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | MPSC and Other Proceedings. In September 1987, in order to obtain a 17-1/2
year rate protection provided under Michigan law, known as Act 81, MCV
requested MPSC approval of the capacity rate provided for in the PPA.
During the pendency of this matter, Consumers, MPSC staff and others
negotiated a revised settlement proposal, which was submitted to the MPSC
for approval (Revised Settlement Proposal).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | In a 1993 order (the 915 MW Settlement), the MPSC approved with
modifications the Revised Settlement Proposal. Generally, the 915 MW
Settlement approved cost recovery of Consumers from its rate payers of 915
MW of MCV capacity subject to certain availability caps associated with
on-peak and off-peak periods of time each day (beginning on January 1,
1998, the availability caps were 88.7% of 915 MW both on and off peak)
and recovery of energy payments based on coal proxy prices (the formula in
the PPA). However, instead of capacity and fixed energy payments being
based on availability as provided in the PPA, the 915 MW Settlement
provided for recovery of such payments on an energy delivered basis. The
MPSC did not order that the PPA be modified to conform with the cost
recovery approved in the 915 MW Settlement. However, the MPSC found that
since the capacity charges approved for recovery under the Revised
Settlement Proposal would not be reflected in the PPA, approval for the
purposes of Act 81 could not be extended to those capacity charges. The
MPSC did indicate in its order, however, that its 915 MW Settlement would
be implemented for rate-making purposes in 1993 and subsequent years.
Opponents to the Revised Settlement Proposal unsuccessfully filed appeals
of the 915 MW Settlement which is now final.
|
| |  | In connection with a dispute between MCV and Consumers regarding the
payment of certain fixed energy charges which stemmed from the Revised
Settlement Proposal, on December 10, 1993, Consumers made a written
irrevocable offer of relief (Offer of Relief) to MCV. The Offer of
Relief was for the purpose of facilitating the sale of Senior Secured Lease
Obligation Bonds, issued in connection with the financing of the Overall
Lease Transaction (See Item 1, Section H, Overall Lease Transaction) and
held by Consumers. Pursuant to the Offer of Relief, which was rendered
final and irrevocable on December 28, 1993, Consumers committed to pay MCV
the fixed energy charges on all energy delivered by MCV from the block of
Contract Capacity above 915 MW. Consumers did not commit to pay MCV for
fixed energy charges on energy delivered above the caps established in
the 915 MW Settlement up to 915 MW. This unilateral commitment, which
became effective as of January 1, 1993, to pay fixed energy charges on
delivered energy from the block of Contract Capacity above 915 MW will
expire on September 15, 2007.                                                                                                                                                                                                                                   

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| |  | In 1993, Consumers exercised its rights under the PPA to obtain a
determination through arbitration proceedings of whether Consumers could
exercise the regulatory out provision of the PPA in view of Consumers
acceptance of the 915 MW Settlement. In a Final Order issued in 1995, the
arbitrator ruled that Consumers may withhold the fixed energy charges for
available but undelivered energy, as well as for energy delivered between
the caps contained in the 915 MW Settlement and 915 MW.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
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|
| |  | In 1995, Consumers and the MPSC staff asked the MPSC to approve a
settlement agreement (325 MW Settlement) which proposed approving
recovery by Consumers from its ratepayers of an additional 325 MW of
capacity purchased from MCV beginning January 1, 1996 through the term of
the PPA. The costs recovered for this 325 MW of MCV Contract Capacity was
essentially the same as the 915 MW Settlement already approved by the MPSC
after a phase in of the capacity rate between 1996 and 2004 including the
same availability caps as the 915 MW Settlement. On November 14, 1996,
the MPSC approved, with modifications not material to MCV, the 325 MW
Settlement effective January 1, 1996 (325 MW Settlement).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | In 1997, Consumers informed MCV of several other potential payment issues
it would pursue, pursuant to the regulatory out and other provisions of
the PPA. These issues related to Consumers special contract customers,
pricing of the energy delivered during off-peak ramp hours (when MCV
adjusts its output to match Consumers dispatch) and energy delivered in
the band width (energy delivered above dispatch, within certain limits). In
addition, Consumers notified MCV that it did not believe that MCV could use
the approximately 15 MW of generating capacity and energy attributable to
the back pressure turbine, which was placed into service in July 1997,
towards available Contract Capacity or electric deliveries under the PPA.
Consumers had also indicated that they would take a similar position on the
incremental energy and capacity resulting from MCVs installation of 11NM
upgrade packages on the GTGs (collectively the Disputed Issues). MCV and
Consumers entered into a settlement agreement (Settlement Agreement),
effective January 1, 1999, which resolves (for the various time periods
specified in the Settlement Agreement) all of the previously Disputed
Issues under the PPA and includes definitive obligations for Consumers to
make energy payments calculated in accordance with the PPA, irrespective of
any MPSC or the reviewing courts decision which may affect those issues or
payments. The Settlement Agreement also provides that, notwithstanding
modifications to the Facility increasing its capacity, in billing Consumers
for capacity charges (at the rates set forth in the PPA) availability would
be capped at 98.5% of the 1240 MW (98.5% cap) on a calendar-year basis
for the term of the PPA irrespective of any MPSC or the reviewing courts
decision, which may affect this issue or payment; provided, however, that
if Consumers transfers (subject to MCVs prior consent) its rights of up to
1240 MW of capacity and associated energy under the PPA to a third party
for an extended period of time, the 98.5% cap will not apply except that
the 98.5% cap is, in any event, reinstated on September 15, 2007.
Notwithstanding the Settlement Agreement, after September 15, 2007, an
issue could exist as to whether or not Consumers can exercise the
regulatory out provision to reduce capacity payments to MCV based upon
the availability caps of 88.7% of the 1240 MW (both on and off peak) of
contract capacity as provided for in the 915 MW Settlement and the 325 MW
Settlement. The Settlement Agreement has not materially affected MCVs
earnings and cash flows.
|
| |  | In July 2000, in response to rapidly escalating natural gas prices and
since Consumers electric rates were frozen, MCV entered into transactions
with Consumers whereby Consumers agreed to reduce MCVs dispatch level and
MCV agreed to share with Consumers the savings realized by not having to
generate electricity (Dispatch Mitigation). On January 1, 2004, Dispatch
Mitigation ceased and Consumers began dispatching MCV pursuant to the 915
MW Settlement and the 325 MW Settlement availability caps provision
(i.e., minimum dispatch of 1100 MW on- and off-peak (Forced Dispatch)).
On February 12, 2004, MCV and Consumers entered into a Resource
Conservation Agreement (RCA) which, among other things, provides that
Consumers will economically dispatch MCV, if certain conditions are met.
Such dispatch is expected to reduce electric production from what would
have occurred under the Forced Dispatch, as well as decrease gas
consumption by MCV. The RCA provides that Consumers has a right of first
refusal to purchase, at market prices, the gas conserved under the RCA.
The RCA further provides for the parties to enter into another agreement
implementing the terms of the RCA including the sharing of savings realized
by not having to generate electricity. The RCA is subject to MPSC approval
and MCV and Consumers must accept the terms of the MPSC order as a
condition precedent to the RCA becoming effective. The MPSC has not yet
acted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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| |  | upon Consumers application for approval of the RCA. MCV cannot predict
the outcome of the MPSC proceedings necessary to effectuate the RCA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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| |  | Michigan Electric Industry Restructuring Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | The MPSC issued orders in 1997 and 1998 (collectively the Restructuring
Orders). The Restructuring Orders provide for a transition to a
competitive regime whereby electric retail customers would be able to choose
their power supplier and pay negotiated or market-based rates for such power
supply. The Restructuring Orders also mandated that utilities wheel
third-party power to the utilities customers. An issue involved in
restructuring, which could significantly impact MCV, is stranded cost
recovery. The Restructuring Orders allow recovery by utilities (including
Consumers) of net stranded costs, which include capacity charges from QFs,
including MCV, previously approved by the MPSC, incurred during the
regulated era that will be above market prices during the new competitive
regime. However, it appears that stranded cost recovery of above-market
capacity charges in power purchase contracts (including MCVs PPA) is
limited to customers who chose an alternative power supplier and are only
paid for the period 1998 through 2007 (MCVs PPA expires in 2025).
Customers who chose to remain power supply customers of Consumers will
continue to pay capacity charges as part of rates charged by Consumers,
subject to MPSC rate regulation. The Restructuring Orders do not otherwise
specifically address the recovery of PPA capacity charges after 2007. MCV,
as well as others, filed appeals in state and federal courts challenging the
Restructuring Orders. The Michigan Court of Appeals found that the
Restructuring Orders do not unequivocally disallow recovery of PPA charges
(capacity and energy) by Consumers and, therefore, MCVs issues were not
ripe for appellate review and no actual controversy regarding recovery of
costs could occur until 2008, at the earliest. This order is now final.
|
| |  | In June 2000, the State of Michigan enacted legislation which, among other
things, states that the Restructuring Orders (being voluntarily implemented
by Consumers) are in compliance with the legislation and enforceable by the
MPSC. The legislation provides that the rights of parties to existing
contracts between utilities (like Consumers) and QFs (like MCV), including
the rights to have the PPA charges recovered from customers of the
utilities, are not abrogated or diminished, and permitted utilities to
securitize certain stranded (transition) costs including PPA charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | In MCVs federal court challenge to the Restructuring Orders, the U.S.
District Court granted summary judgment to MCV declaring, among other
things, that the Restructuring Orders are preempted by federal law to the
extent they prohibit Consumers from recovering from its customers any charge
for avoided costs (or stranded costs) to be paid to MCV under PURPA
pursuant to the PPA. In June 2001, the United States Court of Appeals
(Appellate Court) vacated the U.S. District Courts summary judgment and
ordered the case dismissed based upon a finding that no actual case or
controversy existed for adjudication between the parties. The Appellate
Court determined that the parties dispute is hypothetical at this point in
time and the QFs (including MCV) claims are premised on speculation about
how an order might be interpreted in the year 2007 or beyond by a future
MPSC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Federal Electric Industry Restructuring                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | FERC has jurisdiction over wholesale energy sales and is moving towards
market based pricing of electricity as opposed to traditional cost-based
pricing. In April 1996, FERC issued Order No. 888 requiring all utilities
that FERC regulates to file uniform transmission tariffs providing for,
among other things, non-discriminatory open access to all wholesale
buyers and sellers, including the transmission owner, on terms and
conditions established by FERC. Order No. 888 also requires utilities to
functionally unbundle transmission and separate transmission personnel
from those responsible for marketing generation. In December 1999, FERC
issued a final rule, Order No. 2000, designed to encourage all owners and
operators of interstate electric transmission lines to join regional
transmission organizations. In July 2001, FERC issued a Notice of Proposed
Rulemaking to establish a standard market design (SMD) in order to remedy
remaining undue discrimination in transmission and wholesale energy
markets. The SMD requires all FERC jurisdictional transmission providers
to transfer control of their transmission facilities to an independent
transmission provider who will provide transmission service under a
standardized tariff and administer market based wholesale energy markets
for day-ahead and real-time sales. The SMD proposal has drawn strong
criticism,                                                                                                                                                                                                                                                                                                                                                                                                                                              

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| |  | the effect of which has been delaying the issuance of a final SMD rule. In
addition, federal energy legislation is proposed from time to time with
various provisions which could impact MCV. The SMD and/or federal
legislation could impact MCV in selling electricity in the wholesale
market. MCV management cannot predict the outcome of the SMD or the impact
the SMD or federal legislation may have on MCVs business, if any, at this
time.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Other Regulatory Issues                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | MCV has been granted a permanent exemption from the Power Plant and
Industrial Fuel Use Act of 1978, as amended, relating to the use of natural
gas as its primary energy source. This exemption permits MCV to consume
gas without restriction as to hours of operation or the capacity of the
Facility to consume an alternate fuel.                                                                                                               
|
| |  | The Canadian long term gas contracts require permits from both Canadian and
U.S. authorities. All of the suppliers have received approval from
Canadian provincial authorities to lift and remove sufficient gas volumes
to meet MCVs current contract requirements and from the National Energy
Board (NEB) to export these volumes. The U.S. long term gas contracts
are not subject to regulatory approvals.                                   






|G. |  | Environmental Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|   |  | MCV has obtained all material federal, state and local environmental
permits necessary to construct and operate the Facility. MCV believes that
the Facility complies in all material respects with all applicable federal,
state and local environmental regulations and laws. There is no litigation
or, to the knowledge of MCV, any administrative proceeding or investigation
pending or threatened with respect to environmental issues at the Facility.
It is possible that applicable environmental laws and regulations may
change, making compliance more costly, time consuming and difficult. Any
such changes, however, are likely to apply to similarly situated power
plants and not only to the Facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | Environmental Indemnity Agreements. CMS Energy has executed environmental
indemnity agreements in favor of the Senior Bond Trustee, the Subordinated
Bond Trustee, the Tax-Exempt Trustee (all as defined in Overall Lease
Transaction), MCV and the holders, from time to time, of the Bonds.
Pursuant to these indemnity agreements, CMS Energy has agreed to indemnify
these parties and certain related parties against all expense, damage and
liability incurred by them, which is caused by certain classes of
environmental matters to the extent these occurred at the Site before June
15, 1990 (with certain exceptions). These matters include (i) the presence
of any environmentally hazardous materials at the Site, (ii) any
environmentally hazardous activity at the Site and (iii) any event which is
a violation of environmental laws affecting the Site (including amendments
and supplements to such laws whenever enacted except, in the case of such
enactments after June 15, 1990, to the extent they would require
installation or modification of equipment). CMS Energy has entered into a
similar environmental indemnity agreement for the benefit of the Owner
Trustee (in its individual and trust capacities), the Owner Participants
(as defined in Overall Lease Transaction) and certain related parties.
In the agreement in favor of MCV, payments by CMS Energy are subject to a
deductible of $20,000 per occurrence and $240,000 in the aggregate. The
agreement in favor of MCV terminates when all the Senior Bonds (as defined
in Overall Lease Transaction) have been paid in full and all the holders
of the Bonds (as defined in Overall Lease Transaction) have been paid all
amounts owed under the general indemnity in the Participation Agreements,
except that such indemnity shall not terminate with respect to certain
rights arising prior to such final payment.
|  
|   |  | MCV has also executed an environmental indemnification agreement in favor
of CMS Energy under which it has agreed to indemnify CMS Energy in
connection with (i) any violation of the environmental laws by MCV with
respect to the Site after June 5, 1988, (ii) the release or disposal of any
hazardous materials at, on or to the Site after June 5, 1988 (unless caused
by CMS Energy or resulting from hazardous materials at or on the Site prior
to June 5, 1988), and (iii) any hazardous activities at the Site after June
5, 1988, provided that CMS Energy may satisfy these obligations only from
amounts that are otherwise available for distribution to Partners under the
Participation Agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

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|H. |  | Overall Lease Transaction                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|   |  | General                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | Permanent financing for the Facility has been provided through five
separate but contemporaneous sale and leaseback transactions (the Overall
Lease Transaction), pursuant to which MCV sold undivided interests in all
of the fixed assets comprising the Facility to the Owner Trustee under five
separate owner trusts (the Owner Trusts) established for the benefit of
certain institutional investors (Owner Participants). U.S. Bank National
Association (formerly known as State Street Bank and Trust Company) serves
as Owner Trustee under each of the Owner Trusts (in each such capacity, an
Owner Trustee and, collectively, the Owner Trustees). Each Owner
Trustee leases its undivided interest in the Facility to MCV under one of
five separate leases, each having a 25-year base term (the Basic Lease
Term) commencing in 1990.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | Each purchase of an undivided interest in the Facility by an Owner Trustee
and the lease of such undivided interest back to MCV constitutes a separate
transaction (each, a Lease Transaction). The undivided interests are in
varying undivided interest percentages ranging from approximately 4.4% to
75.5%. Each Lease Transaction was effected through separate, but
substantially identical, documents relating to a particular undivided
interest, including a Trust Agreement pursuant to which the Owner
Participant established the Owner Trust with the Owner Trustee and
authorized the Owner Trustee to hold title to its undivided interest on its
behalf and lease the same to MCV (each a Trust Agreement), a
Participation Agreement pursuant to which MCV, the Owner Participant, the
Owner Trustee and the various other parties to such Lease Transaction
agreed to the terms and conditions thereof (each, a Participation
Agreement), a Lease Agreement pursuant to which the Owner Trustee leases
the undivided interest to MCV (each, a Lease) and two separate Trust
Indentures pursuant to which the Owner Trustee issued Senior Notes (as
defined in this Item 1, Section I, Overall Lease Transaction  The Lease
Funding) (each, a Senior Note Indenture) and Subordinated Notes (as
defined in this Item 1, Section I, Overall Lease Transaction  The Lease
Funding) (each, a Subordinated Note Indenture and, together with the
Senior Note Indentures, the Note Indentures). The Bank of New York
(formerly known as United States Trust Company) and Wachovia Bank National
Association (formerly known as First Union National Bank) are note trustees
under the Senior Note Indenture and the Subordinated Note Indenture,
respectively (the Note Trustees). There is a single Collateral Agency
and Intercreditor Agreement (the Intercreditor Agreement), executed by
the Owner Trustees, MCV, the Note Trustees, the Working Capital Lender (as
defined below) and U.S. Bank National Association as collateral Agent (the
Collateral Agent), which provides for the creation and maintenance of
certain reserves, the deposit of all revenues generated by the operation of
the Facility, the payment of operating expenses, and the distribution of
remaining revenues according to the priorities set forth therein to or for
the account of the Working Capital Lender, the Note Trustees, the Owner
Trustees, MCV and the affiliates of certain Partners. MCV currently has
arranged for a $50 million annual working capital line (the Working
Capital Facility) with a syndicate of banks (the Working Capital
Lender). As security for its obligation to repay advances made under the
Working Capital Facility, MCV has granted to the Working Capital Lender a
first priority security interest in certain receivables earned by MCV
through the sale of electricity, electric generating capacity, natural gas,
or steam to third parties, including Dow, Consumers and DCC (the Earned
Receivables) and in MCVs natural gas inventory (the Natural Gas
Inventory). Payments due under the Working Capital Facility are direct
obligations of MCV and will in general have a priority in payment over
payments under the Leases (and thus on the Notes (see Item H, Overall
Lease Transaction  The Lease Funding) and the Bonds).
|  
|   |  | Statement of Financial Accounting Standards (SFAS) No. 98, which applies
to sale and leaseback transactions entered into after June 30, 1988,
specifies the accounting required by generally accepted accounting
principles (GAAP) for a seller-lessees sale and simultaneous leaseback
transaction involving real estate, including real estate with equipment.
In accordance with SFAS No. 98, the Overall Lease Transaction must be
accounted for as a financing obligation and not a sale, since MCV has the
option to purchase the undivided interests in the Facility at the end of
the Basic Lease Term, which expires on July 23, 2015, and has other forms
of continuing involvement with the Facility throughout the Basic Lease
Term. The Lease obligation is recorded as long term debt, at the present
value of future minimum Lease payments. There was no change to property,
plant and equipment, on the Consolidated Balance Sheet, as the transaction
was                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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| |  | accounted for as a financing arrangement for financial reporting purposes.
Certain Lease transaction expenses of MCV are recorded as deferred
financing costs and amortized using the interest method over the term of
the Lease. On an ongoing basis, the monthly accrual for the semi-annual
Lease payments is divided between interest and principal components using
the effective interest method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Lease Funding                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Each Owner Trustee financed the purchase of its undivided interest in the
Facility through a combination of equity invested by its related Owner
Participant ($556,320,000 in the aggregate) and debt incurred through the
issuance of nonrecourse notes by the Owner Trustee under the related Note
Indentures, consisting of senior secured notes ($1,200,000,000 in the
aggregate) (the Senior Notes) and subordinated secured notes
($567,180,000 in the aggregate) (the Subordinated Notes, and together
with the Senior Notes, the Notes). In order to facilitate the sale of
this debt (other than the debt evidenced by the Subordinated Notes pledged
to secure the Tax-Exempt Bonds) (as defined below), two funding
corporations were established. Midland Funding Corporation I was
established for the purpose of issuing various series of senior bonds (the
Senior Bonds), each series secured by a pledge of the corresponding
series of Senior Notes issued by the five Owner Trustees. Midland Funding
Corporation II was established for the purpose of issuing various series of
subordinated bonds (the Subordinated Bonds and, together with the Senior
Bonds, the Bonds), each series secured by a pledge of the corresponding
series of the Subordinated Notes issued by the five Owner Trustees. These
pledged Subordinated Notes are secured proportionally with the Subordinated
Notes pledged to secure the Tax-Exempt Bonds issued by the Tax-Exempt
Issuer (as defined below). The use of the funding corporations facilitated
the sale of debt by permitting the offer and sale of three series of Senior
Bonds and two series of Subordinated Bonds, each secured equally and
ratably by the corresponding series of Notes issued by each of the five
Owner Trusts, thus eliminating the need to offer a greater number of
separate series of Notes to the investor. In addition, the use of a
corporate obligor facilitated compliance with certain investment laws by
certain institutional purchasers of the Senior and Subordinated Bonds. The
aggregate principal amount, maturity date, interest rate, redemption
provisions and other material terms of each series of the Bonds were
identical to those of the Notes pledged as security therefore. As of
February 28, 2004, there remains outstanding approximately $556.3 million
of equity invested by the Owner Participants and $544.9 million of
Subordinated Bonds. The Senior Bonds were retired in July 2002.
|
| |  | The Economic Development Corporation of the County of Midland (the
Tax-Exempt Issuer) issued certain series of tax-exempt bonds (the
Tax-Exempt Bonds), which were issued under and secured by a tax-exempt
collateral trust indenture. The proceeds from the issuance and sale of the
Tax-Exempt Bonds were used to finance certain pollution control assets
constituting a portion of the Facility. Each series of Tax-Exempt Bonds is
secured solely by a corresponding series of Subordinated Notes issued by
the Owner Trustees, which are secured by a junior security interest in the
undivided interests of the Owner Trustees in the Facility and certain of
their rights under and to the related Leases, including rents thereunder
and the Lease Collateral, including (subject to the rights of the Working
Capital Lender, which include a prior security interest in certain of MCVs
receivables and natural gas inventory securing the Working Capital
Facility) the revenues and other payments received thereunder. The
Subordinated Notes securing the Tax-Exempt Bonds and the Subordinated Notes
issued by the Owner Trustees to secure the Subordinated Bonds are secured
by junior security interests in a shared collateral pool. On June 15,
2000, MCV refinanced the Tax-Exempt Bonds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Security and Sources of Payment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | The sole sources of payment for the Subordinated Bonds were certain pledged
Subordinated Notes issued by each of the five Owner Trustees and pledged
under the Subordinated Bond Indenture. The pledged Subordinated Notes of
each Owner Trustee are nonrecourse obligations of such Owner Trustee
payable solely from the rental payments made by MCV under its related Lease
and the other security therefore. The Subordinated Notes were secured by a
junior (now senior) security interest in such Owner Trustees undivided
interest in the Facility and certain of its rights under and to the related
Lease, including rents and the Lease collateral, including (subject to the
rights of the Working Capital Lender) the revenues and other payments
received thereunder. The Subordinated Notes are secured on a proportional
basis with the Subordinated Notes pledged to secure the Tax-Exempt Bonds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| |  | Additional Subordinated Notes may be issued (i) to refinance any series of
Subordinated Notes, and (ii) to pay certain costs of modifying the
Facility. Any Subordinated Notes will rank proportionally with all
Subordinated Notes then outstanding. The aggregate principal amount of
Subordinated Bonds that may be issued is unlimited, provided that at no
time may the aggregate principal amount of Subordinated Bonds exceed the
aggregate principal amount of Subordinated Notes, respectively, then
outstanding. The future issuance of additional Subordinated Bonds (other
than for refinancing purposes) would create additional claims against the
security for the Note Indentures and the amounts available to repay amounts
in respect of the Bonds currently outstanding in the event of foreclosure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The rental payments under the Leases are established to provide funds
sufficient to service the debt issued by the Owner Trustees and to provide
the Owner Participants with a return on their equity investment. MCV is
unconditionally obligated to make rental payments under the Leases in
amounts sufficient to provide for scheduled payments of the principal of,
premium, if any, and interest on the Notes, which amounts, in turn, are
equal to scheduled payments of principal of, premium, if any, and interest
on the Bonds. MCV has pledged to each Owner Trustee an undivided interest
percentage of all revenues to be derived from the operation of the
Facility, together with its rights with respect to the PPA, the SEPA, and
various other contracts of MCV relating to the Facility (the Lease
Collateral) to secure its rental obligations under the Leases. Neither
the Bonds nor the Notes are direct obligations of, or guaranteed by, MCV
nor do any Partners of MCV have any liability under the terms of the Notes,
the Bonds or the Leases. Neither the Partners nor the Partner affiliates
have any obligations under the Leases, and the obligations of MCV under the
Leases and the other documents related to the Overall Lease Transaction are
nonrecourse to the Partners and the Partner affiliates.
|
| |  | Any default or foreclosure with respect to the undivided interest of an
Owner Trustee relates solely to such undivided interest. There is no
cross-collateralization among Owner Trustees and the Subordinated Bond
trustee as holder of the Subordinated Notes. The Leases, however, contain
identical events of default including an event of default related to a
failure by MCV to pay principal of or interest on any indebtedness for
borrowed money or other financing obligations (including lease obligations)
with respect to an amount greater than $10 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Pursuant to the Intercreditor Agreement, a reserve account has been created
for the benefit of the holders of the Notes, which had been initially
funded with $90 million in cash (the Reserve Account). The Intercreditor
Agreement sets forth circumstances under which amounts in the Reserve
Account are to be maintained at not less than $40 million, will be adjusted
to equal the lesser of $137 million or the debt portion of basic rent under
the Leases payable on the next succeeding basic rent payment date, and
limited circumstances under which no more than $10 million contained
therein may be withdrawn therefrom to provide working capital. As of
December 31, 2003, MCV had funds of $137.3 million in the Reserve Account.
Excess funds in the Reserve Account are periodically transferred to MCV.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             




Item 2. PROPERTIES

MCV leases the Facility from the Owner Trustees pursuant to the Leases. For a
description of the Facility, see Item 1, Section B, The Facility. For a
description of the financing arrangements in connection with the lease of the
Facility to MCV, including a description of the liens on the Facility, see
Item 1, Section H, Overall Lease Transaction.

The Facility is located on the Site, previously the location of Consumers
abandoned Midland Nuclear Generating Plant in Midland County, Michigan. The
Site contains approximately 1,200 acres, including an 880-acre cooling pond.
By a lease dated as of December 29, 1987, Consumers, as fee simple owner,
leased the land on which the Facility is located to MCV, CMS Midland and MDC
(the Original Lease), which was amended and restated in its entirety in
1988. By five separate instruments, each dated as of June 1, 1990, Consumers
and MCV created undivided interests in the amended Original Lease and amended
and restated the lease to reflect the creation of such interests (the Original
Lease as so amended and restated is referred to as the Ground Lease). In
connection with the Overall Lease Transaction, MCV assigned to each Owner
Trustee an undivided interest in the Ground Lease

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equal to such Owner Trustees undivided interest percentage. Each Owner
Trustee in turn subleased its undivided interest back to MCV pursuant to
separate subleases of the Site.

In addition to leasing the Site, the Ground Lease assigns to MCV appurtenant
easement rights for a gas pipeline in Midland and Isabella Counties, Michigan
and easements in the City of Midland for a railroad spur track and a water
pipeline. The Ground Lease terminates on December 31, 2035, with two renewal
terms of five years each and with additional renewal terms of two years each.
The annual rental under each of the Ground Leases is equal to the undivided
interest percentage of $600,000 per annum through the two five-year renewal
terms; thereafter, it is fair market rental. The Ground Leases are fully net
leases.




Item 3. LEGAL PROCEEDINGS

Property Taxes

In 1997, MCV filed a property tax appeal against the City of Midland at the
Michigan Tax Tribunal contesting MCVs 1997 property taxes. Subsequently, MCV
filed appeals contesting its property taxes for tax years 1998 through 2003 at
the Michigan Tax Tribunal. A trial was held for tax years 1997  2000. The
appeals for tax years 2001-2003 are being held in abeyance. On January 23,
2004, the Michigan Tax Tribunal issued its decision in MCVs tax appeal
against the City of Midland for tax years 1997 through 2000. MCV management
has estimated that the decision will result in a refund to MCV for the tax
years 1997 through 2000 of approximately $29 million in taxes plus $7 million
of interest. The decision is subject to reconsideration at the Tribunal and
may be appealed to the Michigan Appellate Court and Michigan Supreme Court.
The City of Midland has filed a motion for reconsideration at the Michigan Tax
Tribunal, asking the Tribunal to make certain technical corrections, as well
as substantive changes to the decision. MCV has opposed this motion. MCV
management cannot predict the outcome of these further legal proceedings. MCV
has not recognized any of the above stated refunds (net of approximately $15.5
million of deferred expenses) in earnings at this time.

NOx Allowances

The United States Environmental Protection Agency (US EPA) has conditionally
approved the State of Michigans  State Implementation Plan (SIP), which
includes an interstate, NOx budget and allowance trading program administered
by the US EPA. Each NOx allowance permits a source to emit one ton of NOx
during the seasonal control period (May 1 through September 30). NOx
allowances may be bought or sold and unused allowances may be banked for
future use, with certain limitations. MCV estimates that it will have excess
NOx allowances to sell under this program. The current value of the excess
2004 NOx allowances range from approximately $3.0 million to $4.2 million.
Consumers has given notice to MCV that it believes the ownership of the NOx
allowances under this program belong, at least in part, to Consumers. MCV has
initiated the dispute resolution process pursuant to the PPA to resolve this
issue. MCV management cannot predict the outcome of this issue.

Other than as discussed in Item 1, Section F, Regulation, there are no other
pending legal proceedings to which MCV is a party and to which any of its
property is subject, that are material in relation to MCVs consolidated
financial statements.




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

Not applicable.

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PART II




Item 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Not applicable.




Item 6. SELECTED FINANCIAL DATA

|                              |                                                                                                           |                                              |   |           |           |      |   |                        |           |      |   |           |           |  |   |           |           |  |   |           |           | 
|----------------------------- | --------------------------------------------------------------------------------------------------------- | -------------------------------------------- | - | --------- | --------- | ---- | - | ---------------------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- |  | - | --------- | --------- | 
|                              |                                                                                                           |                                              |   |           |           |      |   | (Dollars in Thousands) |           |      |   |          
|Years Ended December 31,      |                                                                                                           | 2003                                         |   | 2002      |           | 2001 |   | 2000                   |           | 1999
|                              |                                                                                                           |                                              |   |           |           |      |   |                        |           |     
|STATEMENT OF OPERATIONS DATA: |                                                                                                           |                                              |   |           |           |      |   |                        |           |      |   |           |           |  |   |           |           |  |   |          
|                              | Operating Revenues                                                                                        |                                              | $ | 584,412   |           |      | $ | 596,819                |           |      | $ | 610,813   |           |  | $ | 604,547   |           |  | $ | 617,352   |          
|                              | Operating Income                                                                                          |                                              |   | 167,938   |           |      |   | 188,124                |           |      |   | 157,835   |           |  |   | 212,813   |           |  |   | 215,884   |          
|                              | Net Income Before
Cumulative Effect of
Accounting Change                                                  |                                              |   | 59,791    |           |      |   | 73,896                 |           |      |   | 48,264    |           |  |   | 90,121    |           |  |   | 80,069    |          
|                              | Cumulative Effect of Change
in Method of Accounting for
Derivative Option Contracts
(to April 1, 2002)(1) |                                              |   |          |           |      |   | 58,131                 |           |      |   |          |           |  |   |          |           |  |   |          |          
|                              | Net Income                                                                                                |                                              |   | 59,791    |           |      |   | 132,027                |           |      |   | 48,264    |           |  |   | 90,121    |           |  |   | 80,069    |          
|BALANCE SHEET DATA:(2)        |                                                                                                           |                                              |   |           |           |      |   |                        |           |      |   |           |           |  |   |           |           |  |   |          
|                              | Total Assets                                                                                              |                                              |   | 2,069,650 |           |      |   | 2,098,073              |           |      |   | 2,117,047 |           |  |   | 2,274,956 |           |  |   | 2,299,212 |          
|                              | Capitalization                                                                                            |                                              |   |           |           |      |   |                        |           |      |   |           |           |  |   |           |           |  |   |           |          
|                              |                                                                                                           | Partners Equity                             |   |           | 799,076   |      |   |                        | 734,310   |      |   |           | 551,712   |  |   |           | 527,738   |  |   |           | 437,617   | 
|                              |                                                                                                           | Long term Debt, Excluding
Current Maturities |   |           | 1,018,645 |      |   |                        | 1,153,221 |      |   |           | 1,243,060 |  |   |           | 1,429,233 |  |   |           | 1,584,865 | 



|(1) Effective April 1, 2002, the FASB issued guidance regarding natural gas
commodity contracts that combine an option component and a forward
component. This guidance requires either that the entire contract be
accounted for as a derivative or the components of the contract be
separated into two discrete contracts. As of April 1, 2002, MCV had nine
long term gas contracts that each contain both an option and forward
component. As such, they are no longer accounted for under the normal
purchases and sales exception and MCV began mark-to-market accounting of
these nine contracts through earnings. Based on the natural gas prices,
at the beginning of April 2002, MCV recorded a $58.1 million gain for the
cumulative effect of this accounting change. Subsequent gains and losses
were recorded as operating costs.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(2) Balance sheet data consists of the balances at December 31.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 




Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

Results of Operations

Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995. This Annual Report on Form 10-K contains certain forward-looking
statements as defined by the Private Securities Litigation Reform Act of 1995
(the Act), including without limitation, discussion as to expectations,
beliefs, plans, objectives and future financial performance, or assumptions
underlying or concerning matters discussed reflecting MCVs current
expectations of the manner in which the various factors discussed therein may
affect its business in the future. Any matters that are not historical facts
are forward-looking and, accordingly, involve estimates, assumptions, and
uncertainties that could cause actual results or outcomes to differ materially
from those expressed in the forward-looking statements. Accordingly, this
Safe Harbor Statement contains additional information about such factors

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relating to the forward-looking statements. There is no assurance, however,
that MCVs expectations will be realized or that unexpected events will not
have an adverse impact on MCVs business.

Some important factors that could cause actual results or outcomes to differ
materially from those discussed in the forward-looking statements include
governmental policies, legislation and other regulatory actions (including
those of the Michigan Legislature, Congress, Federal Energy Regulatory
Commission and the Michigan Public Service Commission) with respect to cost
recovery under the PPA, industry restructuring or deregulation, operation of
plant facilities including natural gas pipeline and storage facilities,
Consumers ability to perform its obligations under the PPA and present or
prospective wholesale and retail competition, among other factors. The
business and profitability of MCV is also influenced by other factors such as
pricing and transportation of natural gas, changes in accounting standards
(such as accounting for derivative instruments and hedging activities) and
environmental legislation/regulation. All such factors are difficult to
predict, contain uncertainties which may materially affect actual results, and
are beyond the control of MCV.

Overview

For the year ended December 31, 2003, MCV recorded net income of $59.8 million,
which includes a $5.0 million mark-to-market loss. The mark-to-market loss is
the result of long term gas contracts that began being marked-to-market on
April 1, 2002, as required by SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. MCVs net income for the year ended
December 31, 2002 was $132.0 million, which includes the April 1, 2002 change
in method of accounting. The cumulative effect of this accounting change as of
April 1, 2002 increased earnings by approximately $58.1 million and the
additional quarterly mark-to-market gain recorded as of December 31, 2002
resulted in an additional earnings increase of $21.9 million. The earnings
decrease for the year of 2003 compared to 2002 of $72.2 million is the result
of the $85.0 million decrease in the long term gas contract mark-to-market
value and lower energy rates under the PPA with Consumers. This earnings
decrease is partially offset by lower net natural gas prices, lower interest
expense on MCVs financing obligation and higher electric and steam energy
rates under the SEPA with Dow.

For the year ended December 31, 2002, MCV recorded net income of $132.0
million, which includes the April 1, 2002 change in method of accounting for
long term gas derivative option contracts. Certain natural gas contracts that
contain optionality are now being marked-to-market through earnings, as
required by SFAS No. 133. The cumulative effect of this accounting change as of
April 1, 2002 increased earnings by approximately $58.1 million and additional
quarterly mark-to-market adjustments as of December 31, 2002 resulted in an
additional net earnings increase of $21.9 million. The earnings increase for
the year 2002 compared to 2001 of $83.7 million, is the result of the $80.0
million increase due to the mark-to-market gain on the long term gas contracts.
Also contributing to this earnings increase is lower fuel usage and two 2001
one-time charges. In December 2001, MCV expensed $8.2 million in relating to
the prepayment of gas costs under a long term contract with an affiliate of
Enron Corporation, which was subsequently terminated and expensed $6.7 million
in development costs. Other factors contributing to the earnings increase were
lower interest expense on MCVs financing arrangements and higher electric
rates under the PPA, partially offset by higher natural gas prices under MCVs
long term gas contracts, lower interest income on MCVs invested cash reserves
and lower revenues from energy sales outside of the PPA.

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Operating Revenues

The following represents significant operating revenue statistics for the years
ended December 31 (dollars in thousands except average rates):

|                   |                                                 |   |         |           |      |   |         |           |   |   |         |           |  
|------------------ | ----------------------------------------------- | - | ------- | --------- | ---- | - | ------- | --------- | - | - | ------- | --------- | -
|                   |                                                 |   | 2003    |           | 2002 |   | 2001   
|                   |                                                 |   |         |           |      |   |        
|Operating Revenues |                                                 | $ | 584,412 |           |      | $ | 596,819 |           |   | $ | 610,813 |          
|Capacity Revenue   |                                                 | $ | 404,681 |           |      | $ | 404,713 |           |   | $ | 409,633 |          
|                   | PPA Contract Capacity (MW)                      |   |         | 1,240     |      |   |         | 1,240     |   |   |         | 1,240     |  
|                   | Billed PPA Availability                         |   |         | 98.5      | %    |   |         | 98.5      | % |   |         | 98.5      | %
|Electric Revenue   |                                                 | $ | 162,093 |           |      | $ | 177,569 |           |   | $ | 184,707 |          
|                   | PPA Delivery as Percentage of Contract Capacity |   |         | 62.8      | %    |   |         | 70.9      | % |   |         | 75.0      | %
|                   | PPA, SEPA and Other Electric Deliveries (MWh)   |   |         | 7,348,969 |      |   |         | 8,275,229 |   |   |         | 8,811,950 |  
|                   | Average PPA Variable Energy Rate ($ / MWh)      |   | $       | 15.71     |      |   | $       | 15.94     |   |   | $       | 15.62     |  
|                   | Average PPA Fixed Energy Rate ($ / MWh)         |   | $       | 3.67      |      |   | $       | 3.89      |   |   | $       | 3.75      |  
|Steam Revenue      |                                                 | $ | 17,638  |           |      | $ | 14,537  |           |   | $ | 16,473  |          
|                   | Steam Deliveries (Mlbs)                         |   |         | 5,634,390 |      |   |         | 5,455,050 |   |   |         | 5,693,240 |  

For the year ended December 31, 2003, MCVs operating revenues decreased $12.4
million from 2002. This decrease is due primarily to a lower electric dispatch
with Consumers resulting from an increase in the electric dispatch reduction
transactions and due to lower energy rates under the PPA. This decrease was
partially offset by higher energy rates under the SEPA with Dow, resulting from
Dows election to cease natural gas tolling.

For the year ended December 31, 2002, MCVs operating revenues decreased $14.0
million from 2001. This decrease is due primarily to a lower electric dispatch
under the PPA with Consumers, lower capacity and energy revenues under summer
electric option agreements with Consumers and other third parties, and lower
energy rates under the SEPA, due to Dows election to cease tolling of gas.
This decrease was partially offset by an increase in the electric energy rates
under the PPA.

Operating Expenses

The table below reconciles MCVs fuel costs, as reported in the Consolidated
Statement of Operations, to the non-GAAP fuel costs reported below. The
non-GAAP fuel costs are a better representation of MCVs actual natural gas
cost of production utilized at the Facility. The table reconciles non-GAAP
fuel costs for the years ended December 31, (dollars in thousands):

|                                                  |  |      |         |      |  |      |         |  |  |   |         | 
|------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                                  |  | 2003 |         | 2002 |  | 2001
|                                                  |  |      |         |      |  |     
|Fuel costs (Consolidated Statement of Operations) |  | $    | 254,988 |      |  | $    | 255,142 |  |  | $ | 288,167 | 
|Less: Mark-to-market (MTM) value in fuel costs  |  |      | (5,012  | )    |  |      | 21,839  |  |  |   |        | 
|                                                  |  |      |         |      |  |      |         |  |  |   |         | 
|Non-GAAP fuel costs excluding MTM value           |  | $    | 249,976 |      |  | $    | 276,981 |  |  | $ | 288,167 | 
|                                                  |  |      |         |      |  |      |         |  |  |   |         | 

For the year ended December 31, 2003, MCVs operating expenses were $416.5
million, which includes $255.0 million of fuel costs, including a $5.0 million
mark-to-market loss on certain natural gas contracts which contain optionality.
During this period, MCV purchased approximately 69.5 Bcf of natural gas, and a
net 3.0 Bcf was used for transportation fuel and as a net change to gas in
storage. During this same period, MCV consumed 66.5 Bcf. The average commodity
cost of fuel for the year 2003 was $3.09 per MMBtu, which includes the effects
of the disposition of excess gas supplies not required for generation. For the
year ended December 31, 2002, MCVs

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operating expenses were $408.7 million,
which includes $255.1 million of fuel costs, including a $21.9 million mark-
to-market net gain on the natural gas contracts which contain optionality.
During this period, MCV purchased approximately 74.6 Bcf of natural gas, and a
net 2.3 Bcf was used for transportation fuel and as a net change to gas in
storage. During this same period, MCV consumed 74.3 Bcf of which 2.0 Bcf of
this total was gas provided by Dow. The average commodity cost of fuel for the
year 2002 was $3.23 per MMBtu, which includes the effects of the disposition of
excess gas supplies not required for generation. Fuel costs for the year 2003
compared to 2002 decreased by $27.0 million, excluding the effects of the
quarterly mark-to-market adjustments for both periods. This fuel cost decrease
was due to lower natural gas costs resulting from increased electric dispatch
reduction transactions entered into with Consumers, lower long-term natural gas
prices due to the commencement of several new contracts with favorable pricing
terms and lower natural gas hedged prices of market priced gas. This decrease
was partially offset by a higher gas usage resulting from Dows election to
cease tolling gas.

For the year ended December 31, 2002, MCVs operating expenses decreased $44.3
million from the year 2001, which includes a $33.0 million decrease in fuel
costs. This fuel cost decrease includes a $21.9 million mark-to-market net gain
on the natural gas contracts which contain optionality. Fuel costs for the year
2002 compared to 2001 decreased by $11.1 million, excluding the $21.9 million
mark-to-market net gain. This fuel cost decrease was primarily due to a lower
natural gas usage resulting from a reduction in the electric dispatch under the
PPA and from Dows election to toll gas; and lower costs associated with the
electric dispatch reduction transaction entered into with Consumers. Also
contributing to this decrease was a 2001 one-time expense for an $8.2 million
provision made relating to the prepayment of gas costs under a long term
contract with an affiliate of Enron. Partially offsetting this decrease are
higher natural gas prices under MCVs long term gas contracts.

For the year ended December 31, 2003, operating expenses other than fuel costs
increased $7.9 million from 2002, primarily resulting from increased property
tax expense due to higher 2003 millage rates, a provision for an option payment
with Alstom for two gas turbines and higher compensation cost payments under
the senior management bonus plan. All other expenses incurred in these periods
were considered normal expenditures to achieve the recorded operating revenues.

For the year ended December 31, 2002, operating expenses other than fuel costs
decreased $11.3 million from the year 2001, primarily resulting from the 2001
expensing of $6.7 million of development costs and lower depreciation expense.
All other expenses incurred in these periods were normal expenditures to
achieve the recorded operating revenues.

Other Income (Expense)

For the year ended December 31, 2003 compared to 2002, interest expense
decreased $6.5 million due to a lower outstanding principal balance on MCVs
financing obligation.

For the year ended December 31, 2002, interest and other income decreased $11.2
million compared to 2001, primarily resulting from lower interest rates on
MCVs invested cash and a lower average invested balance. The decrease in
interest expense for the year ended December 31, 2002 compared to 2001 of $6.5
million is due to a lower outstanding principal balance on MCVs financing
obligation.

Cumulative Effect of Accounting Change:

Effective April 1, 2002, the FASB issued guidance regarding natural gas
commodity contracts that combine an option component and a forward component.
This guidance requires either that the entire contract be accounted for as a
derivative or the components of the contract be separated into two discrete
contracts. At April 1, 2002, MCV had nine long term gas contracts that each
contain both an option and forward component. As such, they are no longer
accounted for under the normal purchases and sales exception and MCV began
mark-to-market accounting of these nine contracts through earnings. Based on
the natural gas prices, at the beginning of April 2002, MCV recorded a $58.1
million gain for the cumulative effect of this accounting change. During the
fourth quarter of 2002, MCV removed the option component from three of the nine
long term gas contracts discussed above, which should reduce some of the
earnings volatility. MCV expects the remaining six contracts to cause future
earnings volatility,

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since changes to this mark-to-market gain will be recorded on a quarterly basis
during the remaining life of the gas contracts, which approximates four years.

Liquidity and Capital Resources

For the years ended December 31, 2003 and 2002, net cash generated by MCVs
operations was $141.5 million and $227.9 million, respectively. Included in
MCVs net cash generated as of December 31, 2003 is $4.5 million of cash
collateral paid to MCV, based upon the net amount of exposure on MCVs long
term natural gas contracts with counterparties. This collateral balance will
vary with changes in market prices, credit provisions and various other
factors. MCVs cash and cash equivalents have a normal cycle of collecting
revenues less operating expenses prior to making the semiannual payments under
the financing obligation due in January and July for the next twelve years.
During the years ended December 31, 2003 and 2002, MCV paid financing
obligation requirements of $208.9 million and $304.1 million, respectively, as
required under the Overall Lease Transaction.

MCV also has a $50 million working capital line (Working Capital Facility),
which was renewed through a syndication in August 2003, to provide temporary
financing, as necessary, for operations. The Working Capital Facility has been
collateralized by MCVs natural gas inventory and earned receivables. At any
given time, borrowings and letters of credit are limited by the amount of the
borrowing base, defined as 90% of earned receivables and 50% of natural gas
inventory, capped at $15 million. The borrowing base varies over the month as

receivables are earned, billed and collected and as natural gas inventory
balances are built and depleted. In addition, earned receivables borrowing
base can be affected by Consumers credit rating. The Working Capital Facility
term currently expires on August 28, 2004. MCV did not utilize the Working
Capital Facility during the year 2003. As of December 31, 2003, MCV had no
outstanding borrowings or letters of credit. MCV believes that amounts
available to it under the Working Capital Facility along with available cash
reserves will be sufficient to meet any working capital shortfalls that might
occur.

In the near term, MCV expects to fund current operating expenses, capital
expenditures and financing obligations primarily through cash flows from
operations. Due to uneven scheduled financing obligation payments (high summer
payment, low winter payment), MCV anticipates that it will be drawing on its
cash reserves to fund temporary cash flow shortfalls to the extent available
for such purposes. These cash flow shortfalls are anticipated to be
replenished unless Forced Dispatch continues for an extended period of time.
See Item 7, MD&A  Outlook Energy Rates and Cost of Production. As of
December 31, 2003, there were approximately $313.4 million of cash reserves of
which $137.3 million had been reserved for the debt portion of the financing
obligation.

Disclosure about Contractual Obligations

MCV has assumed various financial obligations and commitments in the normal
course of its business. These obligations are considered to represent expected
cash payments that MCV is required to make under its existing contractual
arrangements. As of December 31, 2003, MCV has the following contractual
financial obligations and commitments:

|                                       |  |                                      |         |          |  |             |       |            |  |            |       |           |  |   |       |  |  |   |         | 
|-------------------------------------- |  | ------------------------------------ | ------- | -------- |  | ----------- | ----- | ---------- |  | ---------- | ----- | --------- |  | - | ----- |  |  | - | ------- | 
|                                       |  | Payments Due by Period (In Millions)
|                                       |  |                                     
|                                       |  |                                      |         |          |  | Less Than   |       | One to     |  | Three to   |       | More Than
|Contractual Obligations                |  | Total                                |         | One Year |  | Three Years |       | Five Years |  | Five Years
|                                       |  |                                      |         |          |  |             |       |            |  |           
|Long term Debt(1)                      |  | $                                    | 1,764.1 |          |  | $           | 242.8 |            |  | $          | 330.4 |           |  | $ | 301.8 |  |  | $ | 889.1   | 
|                                       |  |                                      |         |          |  |             |       |            |  |            |       |           |  |   |       |  |  |   |         | 
|Unconditional Purchase
Obligations (2) |  | $                                    | 2,722.6 |          |  | $           | 305.7 |            |  | $          | 747.9 |           |  | $ | 668.7 |  |  | $ | 1,000.3 | 
|Other Long term Obligations (3)        |  |                                      | 223.4   |          |  |             | 13.7  |            |  |            | 30.9  |           |  |   | 25.0  |  |  |   | 153.8   | 
|                                       |  |                                      |         |          |  |             |       |            |  |            |       |           |  |   |       |  |  |   |         | 
|Total Contractual Cash Obligations     |  | $                                    | 2,946.0 |          |  | $           | 319.4 |            |  | $          | 778.8 |           |  | $ | 693.7 |  |  | $ | 1,154.1 | 
|                                       |  |                                      |         |          |  |             |       |            |  |            |       |           |  |   |       |  |  |   |         | 

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|                         |  |                                            |      |          |  |             |      |            |  |            |   |           |  |   |   |  |  |   |   | 
|------------------------ |  | ------------------------------------------ | ---- | -------- |  | ----------- | ---- | ---------- |  | ---------- | - | --------- |  | - | - |  |  | - | - | 
|                         |  | Amount of Commitment Expiration Per Period
|                         |  |                                           
|                         |  |                                            |      |          |  | Less Than   |      | One to     |  | Three to   |   | More Than
|Commercial Commitments   |  | Total                                      |      | One Year |  | Three Years |      | Five Years |  | Five Years
|                         |  |                                            |      |          |  |             |      |            |  |           
|Working Capital Facility |  | $                                          | 50.0 |          |  | $           | 50.0 |            |  | $          |  |           |  | $ |  |  |  | $ |  | 
|                         |  |                                            |      |          |  |             |      |            |  |            |   |           |  |   |   |  |  |   |   | 



|(1) |  | Represents expected cash payments, including interest.                                                                                                                                      
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Represents estimated minimum commitments under current long term natural
gas contracts, natural gas transportation reservation charges, GTG
compressor parts and the ground lease agreement.
|   
|(3) |  | Represents the cost of current Facility maintenance service agreements
and spare parts.                                                                                                     

New Accounting Standards

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This SFAS amends SFAS No. 133
for decisions made (1) as part of the Derivative Implementations Group process
that effectively required amendments to SFAS No. 133, (2) for other Financial
Accounting Standards Board projects dealing with financial instruments and (3)
for implementation issues raised in relation to the application of this
definition of a derivative. The changes in this SFAS No. 149 improve financial
reporting by requiring that contracts with comparable characteristics be
accounted for similarly, which will result in more consistent reporting of
contracts as either derivatives or hybrid instruments. This standard is
effective for contracts entered into or modified after June 30, 2003, with some
exceptions. MCV has adopted this standard and does not expect the application
to materially affect its financial position or results of operations.

On December 8, 2003, President Bush signed into law the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (the Act). The Act expanded
Medicare to include, for the first time, coverage for prescription drugs. At
this time, because of various uncertainties related to this legislation and the
appropriate accounting methodology, MCV has elected to defer financial
recognition of this legislation until the FASB issues final accounting
guidance. When issued, that final guidance could require MCV to change
previously reported information. This deferral election is permitted under
SFAS 106-1, Employers Accounting for Postretirement Benefits Other Than
Pensions.

Off-Balance Sheet Arrangements

As part of MCVs ongoing business, MCV does not participate in transactions
that generate relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or
special purpose entities (SPEs), which would have been established for the
purpose of facilitating off-balance sheet arrangements or other contractually
narrow or limited purposes. As of December 31, 2003, MCV was not involved in
any unconsolidated SPE transactions.

Outlook

Results of operations are largely dependent on successfully maintaining
availability of the Facility at or near Contract Capacity levels, the
availability of natural gas and the level of energy rates paid to MCV relative
to the cost of fuel used for generation.

Operating Outlook.During 2003, approximately 69% of PPA revenues were
capacity payments under the PPA, which were billed on availability, subject to
an annual availability cap of 98.5% pursuant to a settlement agreement between
MCV and Consumers. Actual PPA availability was 99.4% for 2003, 98.8% for 2002
and 99.5% for 2001. Availability will depend on the level of scheduled and
unscheduled maintenance outages, and on the sustained level of output from each
of the GTGs and the steam turbines. MCV expects long term PPA availability to
meet or exceed the capped level of 98.5%, though prolonged equipment outages
could materially reduce the level of availability.

Natural Gas.The Facility is wholly dependent upon natural gas for its fuel
supply and a substantial portion of the Facilitys operating expenses consist
of the costs of natural gas. While MCV continues to pursue the acquisition of
a

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portion of its expected fuel supply requirements in future years, MCV
recognizes that its existing long term gas
contracts are not sufficient to satisfy the anticipated gas needs over the term
of the PPA and, as such, no assurance can be given as to the availability or
price of natural gas after the expiration of its existing fixed price gas
contracts or for gas that may be required by the Facility in excess of the gas
that MCV has under contract.

Energy Rates and Cost of Production.Under the PPA, energy charges are based
on the costs associated with fuel inventory, operations and maintenance, and
administrative and general expenses associated with certain of Consumers coal
plants. However, MCVs costs of producing electricity are tied, in large part,
to the cost of natural gas. To the extent that the costs associated with
production of electricity with natural gas rise faster than the energy charge
payments, which are based largely on Consumers coal plant operation and
maintenance costs, MCVs financial performance would be negatively affected.
In addition, the extent to which the Facility is dispatched by Consumers can
exacerbate the divergence between variable revenues and costs of production.
The divergence between variable revenues and costs will become greater if the
energy charge (based largely on the cost of coal) declines or escalates more
slowly than the spot market or contract prices under which MCV purchases fuel.
Currently, MCV continues to purchase the majority of its natural gas
requirements under long term fixed price gas contracts, with a smaller portion
of gas purchased under long term market priced contracts and on the spot
market. MCV maintains a hedging program to mitigate risk associated with
volatile market prices in the gas market. MCV has entered into natural gas
purchase and hedging arrangements with respect to approximately 58% of its 2004
expected gas needs not provided for under its long term fixed price gas
contracts. MCV expects that its purchase and hedging arrangements will
mitigate the effects of rises in natural gas prices in future years, although
high gas prices for an extended period of time could adversely affect operating
results.

In March 1998, Consumers began economically dispatching the Facility by
scheduling energy deliveries on an economic basis relative to the cost of
other energy resources available to Consumers, resulting in an average
dispatch (without dispatch reduction transactions) of approximately 79% from
April 1998 through December 2003. Previously, the Facility was being
dispatched on an uneconomic basis (relative to the cost of other energy
resources) under the terms of the 915 MW Settlement and the 325 MW Settlement
     , averaging approximately 90% annual dispatch. In July 2000, in response to
rapidly escalating natural gas prices and since Consumers electric rates were
frozen, MCV entered into transactions with Consumers whereby Consumers agreed
to reduce MCVs dispatch level and MCV agreed to share with Consumers the
savings realized by not having to generate electricity (Dispatch
Mitigation). On January 1, 2004, Dispatch Mitigation ceased and Consumers
began dispatching MCV pursuant to the 915 MW Settlement and the 325 MW
Settlement availability caps provision (i.e., minimum dispatch of 1100 MW
on- and off-peak (Forced Dispatch)). On February 12, 2004, MCV and
Consumers entered into a Resource Conservation Agreement (RCA) which, among
other things, provides that Consumers will economically dispatch MCV, if
certain conditions are met. Such dispatch is expected to reduce electric
production from what would have occurred under the Forced Dispatch, as well as
decrease gas consumption by MCV. The RCA provides that Consumers has a right
of first refusal to purchase, at market prices, the gas conserved under the
RCA. The RCA further provides for the parties to enter into another agreement
implementing the terms of the RCA including the sharing of savings realized by
not having to generate electricity. The RCA is subject to MPSC approval and
MCV and Consumers must accept the terms of the MPSC order as a condition
precedent to the RCA becoming effective. The MPSC has not yet acted upon
Consumers application for approval of the RCA. MCV cannot predict the
outcome of the MPSC proceedings necessary to effectuate the RCA. This Forced
Dispatch could negatively affect MCVs financial performance by approximately
$32 million per year, based upon projected spot gas prices of approximately
$5.02/MMBtu.

Capacity and Energy Payments Under the PPA.The PPA permits Consumers, under
certain conditions, to reduce the capacity and energy charges payable to MCV
and/or to receive refunds of capacity and energy charges paid to MCV if the
MPSC does not permit Consumers to recover from its customers the capacity and
energy charges specified in the PPA (the regulatory-out provision). Until
September 15, 2007, the capacity charge may not be reduced below an average
capacity rate of 3.77 cents per kWh for the available Contract Capacity
notwithstanding the regulatory-out provision. MCV and Consumers entered into
a settlement agreement, effective January 1, 1999 (Settlement Agreement),
which resolves all of the previously disputed issues under the PPA and includes
definitive obligations for Consumers to make energy payments calculated in
accordance with the PPA, irrespective of any MPSC or the reviewing courts
decision which may affect those issues or payments. The Settlement Agreement
also provides that, notwithstanding modifications to the Facility increasing
its capacity, in billing Consumers for capacity

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charges (at the rates set forth
in the PPA) availability would be capped at 98.5% of the 1240 MW (98.5% cap)
on a calendar-year basis for the term of the PPA irrespective of any MPSC or the
reviewing courts decision, which may affect this issue or payment. If
Consumers transfers (subject to MCVs prior consent) its rights of up to 1240
MW of capacity and associated energy under the PPA to a third party for an
extended period of time, the 98.5% cap will not apply except that the 98.5% cap
is, in any event, reinstated on September 15, 2007. Notwithstanding the
Settlement Agreement, after September 15, 2007, an issue could exist as to
whether or not Consumers can exercise the regulatory out provision to reduce
capacity payments to MCV based upon the availability caps of 88.7% of the
1240 MW (both on and off peak) of contract capacity as provided for in the 915
MW Settlement and the 325 MW Settlement. Consumers and MCV are required to
support and defend the terms of the PPA.

Michigan Electric Industry Restructuring.The MPSC issued orders in 1997 and
1998 (collectively the Restructuring Orders). The Restructuring Orders
provide for a transition to a competitive regime whereby electric retail
customers would be able to choose their power supplier and pay negotiated or
market-based rates for such power supply. The Restructuring Orders also
mandated that utilities wheel third-party power to the utilities customers.
An issue involved in restructuring, which could significantly impact MCV, is
stranded cost recovery. The Restructuring Orders allow recovery by utilities
(including Consumers) of net stranded costs, which include capacity charges
from QFs, including MCV, previously approved by the MPSC, incurred during the
regulated era that will be above market prices during the new competitive
regime. However, it appears that stranded cost recovery of above-market
capacity charges in power purchase contracts (including MCVs PPA) is limited
to customers who chose an alternative power supplier and are only paid for the
period 1998 through 2007 (MCVs PPA expires in 2025). Customers who chose to
remain power supply customers of Consumers will continue to pay capacity
charges as part of rates charged by Consumers, subject to MPSC rate regulation.
The Restructuring Orders do not otherwise specifically address the recovery of
PPA capacity charges after 2007. MCV, as well as others, filed appeals in
state and federal courts challenging the Restructuring Orders. The Michigan
Court of Appeals found that the Restructuring Orders do not unequivocally
disallow recovery of PPA charges (capacity and energy) by Consumers and,
therefore, MCVs issues were not ripe for appellate review and no actual
controversy regarding recovery of costs could occur until 2008, at the
earliest. This order is now final.

In June 2000, the State of Michigan enacted legislation which, among other
things, states that the Restructuring Orders (being voluntarily implemented by
Consumers) are in compliance with the legislation and enforceable by the MPSC.
The legislation provides that the rights of parties to existing contracts
between utilities (like Consumers) and QFs (like MCV), including the rights to
have the PPA charges recovered from customers of the utilities, are not
abrogated or diminished, and permits utilities to securitize certain stranded
costs including PPA charges.

In MCVs federal court challenge to the Restructuring Orders, the U.S. District
Court granted summary judgment to MCV declaring, among other things, that the
Restructuring Orders are preempted by federal law to the extent they prohibit
Consumers from recovering from its customers any charge for avoided costs (or
stranded costs) to be paid to MCV under PURPA pursuant to the PPA. In June
2001, the United States Court of Appeals (Appellate Court) vacated the U.S.
District Courts summary judgment and ordered the case dismissed based upon a
finding that no actual case or controversy existed for adjudication between the
parties. The Appellate Court determined that the parties dispute is
hypothetical at this time and the QFs (including MCV) claims are premised on
speculation about how an order might be interpreted in the year 2007 or beyond
by the MPSC.

Federal Electric Industry Restructuring. FERC has jurisdiction over wholesale
energy sales and is moving towards market based pricing of electricity as
opposed to traditional cost-based pricing. In April 1996, FERC issued Order
No. 888 requiring all utilities that FERC regulates to file uniform
transmission tariffs providing for, among other things, non-discriminatory
open access to all wholesale buyers and sellers, including the transmission
owner, on terms and conditions established by FERC. Order No. 888 also
requires utilities to functionally unbundle transmission and separate
transmission personnel from those responsible for marketing generation. In
December 1999, FERC issued a final rule, Order No. 2000, designed to encourage
all owners and operators of interstate electric transmission lines to join
regional transmission organizations. In July 2001, FERC issued a Notice of
Proposed Rulemaking to establish a standard market design (SMD) in order to
remedy remaining undue discrimination in transmission and wholesale energy
markets. The SMD requires all FERC jurisdictional transmission providers to
transfer control of their transmission facilities to an independent
transmission provider who will provide transmission service under a
standardized tariff and administer market based wholesale energy markets for
day-ahead and

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real-time sales. The SMD proposal has drawn strong criticism,
the effect of which has been delaying the issuance of
a final SMD rule. In addition, federal energy legislation is proposed from
time to time with various provisions which could impact MCV. The SMD and/or
federal legislation could impact MCV in selling electricity in the wholesale
market. MCV management cannot predict the outcome of the SMD or the impact the
SMD or federal legislation may have on MCVs business, if any, at this time.

Maintaining QF Status.In the case of a topping-cycle generating plant such as
the Facility, to maintain QF Status the applicable operating standard requires
that the portion of total energy output that is put to some useful purpose
other than facilitating the production of power (the Thermal Percentage) be
at least 5%. In addition, the plant must achieve and maintain an average PURPA
efficiency standard (the sum of the useful power output plus one-half of the
useful thermal energy output, divided by the energy input (the Efficiency
Percentage)) of at least 45%. However, if the plant maintains a Thermal
Percentage of 15% or higher, the required Efficiency Percentage is reduced to
42.5%. The tests are applied on a calendar year basis. The Facility has
achieved the applicable Efficiency Percentage of 42.5% in each year since
commercial operation, and in the years 1995 through 2003 the Facility achieved
an Efficiency Percentage in excess of 45%.

MCV believes that the Facility will be able to maintain QF status and be
capable of achieving a 45% PURPA Efficiency Percentage on a long term basis.
In addition, MCV believes annual steam sales will be sufficient to allow the
Facility to exceed the 15% Thermal Percentage. However, no assurance can be
given that factors outside MCVs control will not cause the Facility to fail to
satisfy the annual PURPA qualification requirements and thus lose its QF
status. During 2003, the Facility achieved an Efficiency Percentage of 47.4%
and a Thermal Percentage of 21.0%.

The loss of QF status could, among other things, cause the Facility to lose its
right under PURPA to sell power to Consumers at Consumers avoided cost and
subject the Facility to additional federal and state regulatory requirements,
including the Federal Power Act, as amended (under which FERC has authority to
establish rates for electricity, which may be different than existing
contractual rates). If the Facility were to lose its QF status, the Partners
of MCV, the Owner Participants, the Owner Trustees and their respective parent
companies could become subject to regulation under the Public Utility Holding
Company Act of 1935 (under which, among other things, the Securities and
Exchange Commission has authority to order divestiture of assets under certain
circumstances). The loss of QF status would not, however, entitle Consumers to
terminate the PPA. Under the PPA, Consumers is obligated to continue
purchasing power from MCV at FERC-approved rates (provided that the
FERC-approved rates do not exceed the existing contractual rates) and MCV, not
Consumers, is entitled to terminate the PPA (which MCV has covenanted not to do
under the Participation Agreements). There can be no assurance that
FERC-approved rates would be the same as the rates currently in effect under
the PPA. If the FERC-approved rates are materially less than the rates under
the PPA, MCV may not have sufficient revenue to make financing obligation
payments under the Overall Lease Transaction. The loss of QF status would
constitute an Event of Default under the Lease (and a corresponding Event of
Default under the Indenture) unless, among other requirements, FERC approves
(or accepts for filing) rates under the PPA or other contracts of MCV for the
sale of electricity sufficient to meet certain target coverage ratios (as
defined in Item 1, Section H, Overall Lease Transaction.)

Critical Accounting Policies

In preparing MCVs financial statements in accordance with accounting
principles generally accepted in the United States, management must make a
number of estimates and assumptions related to the reporting of assets,
liabilities, revenues and expenses. The following areas represent those that
management believes are particularly important to the financial statements and
that require the use of significant estimates and assumptions.

Electric Industry Restructuring.As stated in Item 7, MD&A  Outlook, at
both the state and federal level, efforts continue to restructure the electric
industry. To date, restructuring has not negatively impacted MCV, but if
restructuring results in denying Consumers recovery of above-market PPA costs,
MCVs cash flows may be negatively impacted, especially in the period after
2007. Over 90% of MCVs revenues come from sales pursuant to the PPA. MCV
continues to monitor and participate in these matters as appropriate, and to
evaluate potential impacts on both cash flows and recoverability of the
carrying value of property, plant and equipment. Any future adjustment to
property, plant and equipment, if required, would result in a one-time negative
earnings impact. At

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this time, MCV management cannot predict the outcome of
these matters or the magnitude of any possible adjustment.

Natural Gas Contracts.Effective January 1, 2001, MCV adopted SFAS No. 133,
which establishes accounting and reporting standards requiring that every
derivative instrument be recorded on the balance sheet as either an asset or
liability measured at its fair value. SFAS No. 133 requires that changes in
the derivatives fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges in
some cases allows a derivatives gains and losses to offset related results on
the hedged item in the income statement or permits recognition of the hedge
results in other comprehensive income, and requires that a company formally
document, designate, and assess the effectiveness of transactions that receive
hedge accounting.

MCV management believes that MCVs current long term natural gas contracts that
do not contain volume optionality qualify under SFAS No. 133 for the normal
purchases and sales exception. These long term gas contracts are not being
marked-to-market with gains or losses recorded in earnings. Should significant
changes in the level of Facility operational dispatch or purchases of long term
gas occur, MCV would be required to re-evaluate its accounting treatment for
these long term gas contracts. This re-evaluation may result in recording
mark-to-market activity on some contracts, which could add to earnings
volatility.

The FASB issued Derivative Implementation Group (DIG) Issue C-16, which
became effective April 1, 2002, regarding natural gas commodity contracts that
combine an option component and a forward component. This guidance requires
either that the entire contract be accounted for as a derivative or the
components of the contract be separated into two discrete contracts. Under the
first alternative, the entire contract considered together would not qualify
for the normal purchases and sales exception under the revised guidance. Under
the second alternative, the newly established forward contract could qualify
for the normal purchases and sales exception, while the option contract would
be treated as a derivative under SFAS No. 133 with changes in fair value
recorded through earnings. At April 1, 2002, MCV had nine long term gas
contracts that contained both an option and forward component. As such, they
were no longer accounted for under the normal purchases and sales exception and
MCV began mark-to-market accounting of these nine contracts through earnings.
During the fourth quarter of 2002, MCV removed the option component from three
of the nine long term gas contracts discussed above, which should reduce some
of the earnings volatility. MCV expects future earnings volatility on the six
remaining long term gas contracts that contain volume optionality, since
changes to this mark-to-market gain will be recorded on a quarterly basis
during the remaining life of approximately four years for these gas contracts.
Based on the natural gas prices, at the beginning of April 2002, MCV recorded a
$58.1 million gain for the cumulative effect of this accounting change. Since
April 2002, MCV has recorded an additional mark-to-market gain of $16.9 million
for these gas contracts for a cumulative mark-to-market gain through December
31, 2003 of $75.0 million, which will reverse over the remaining life of these
contracts, ranging from 2004 to 2007.

Property Tax Appeals. MCV currently accrues property taxes on the basis of
the taxable value as assessed by the taxing authorities. In 1997, MCV filed a
property tax appeal against the City of Midland at the Michigan Tax Tribunal
contesting MCVs 1997 property taxes. Subsequently, MCV filed appeals
contesting its property taxes for tax years 1998 through 2003 at the Michigan
Tax Tribunal. A trial was held for tax years 1997  2000 and for the appeals
for tax years 20012003 are being held in abeyance. On January 23, 2004, the
Michigan Tax Tribunal issued its decision in MCVs tax appeal against the City
of Midland for tax years 1997 through 2000. MCV management has estimated that
the decision will result in a refund to MCV for the tax years 1997 through
2000 of approximately $29 million in taxes plus $7 million of interest. The
decision is subject to reconsideration at the Tribunal and may be appealed to
the Michigan Appellate Court and Michigan Supreme Court. The City of Midland
has filed a motion for reconsideration at the Michigan Tax Tribunal, asking
the Tribunal to make certain technical corrections, as well as substantive
changes to the decision. MCV has opposed this motion. MCV management cannot
predict the outcome of these further legal proceedings. MCV has not
recognized any of the above stated refunds (net of approximately $15.5 million
of deferred expenses) in earnings at this time.

See Item 8, Financial
Statements and Supplementary Data  Note 1 to the
Consolidated Financial Statements for a further discussion of associated risks
and contingencies.

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Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to MCVs operations result primarily from changes in
commodity prices, interest rates and foreign exchange rates. To address these
risks, MCV enters into various hedging transactions as described herein. MCV
does not use financial instruments for trading purposes and does not use
leveraged instruments. Fair values included herein have been determined based
on quoted market prices. The information presented below should be read in
conjunction with Item 15, Notes to Consolidated Financial Statements  Note 2,
Significant Accounting Policies and Note 6, Long Term Debt.

Interest Rate Risk.In 1990, MCV obtained permanent financing for the Facility
by entering into sale and leaseback agreements (Overall Lease Transaction)
with a lessor group, related to substantially all of MCVs fixed assets. In
accordance with SFAS No. 98, Accounting For Leases, the sale and leaseback
transaction has been accounted for as a financing arrangement. The financing
arrangement, entered into for a basic term of 25 years, maturing in 2015, has
an effective interest rate of approximately 9.4%, payable in semi-annual
installments of principal and interest. Due to the unique nature of the
negotiated financing obligation it is unnecessary to estimate the fair value of
the Owner Participants underlying debt and equity instruments supporting this
financing obligation, since SFAS No. 107 Disclosure about Fair Value of
Financial Instruments does not require fair value accounting for the lease
obligation.

To manage the effects of interest rate volatility on interest income while
maximizing return on permitted investments, MCV has established an interest
rate hedging program. The carrying amounts of MCVs short-term investments
approximate fair value because of the short term maturity of these instruments.
MCVs short-term investments, which are made up of investment securities held
to maturity and as of December 31, 2003, have original maturity dates of
approximately one year or less.

For MCVs financing obligations, the table below presents principal cash flows
and the related interest rate by expected maturity dates. The interest rate
reflects the fixed effective rate of interest of the financing arrangement:

|                                        |                    |   |                      |     |            |   |       |     |      |   |       |     |            |   |       |     |   |   |       |     |   |   |       |     |   |   |         |     |   |  |     |  | 
|--------------------------------------- | ------------------ | - | -------------------- | --- | ---------- | - | ----- | --- | ---- | - | ----- | --- | ---------- | - | ----- | --- | - | - | ----- | --- | - | - | ----- | --- | - | - | ------- | --- | - |  | --- |  | 
|                                        |                    |   | Expected Maturity In |     | Fair Value
|                                        |                    |   |                      |     |           
|                                        |                    |   | 2004                 |     | 2005       |   | 2006  |     | 2007 |   | 2008  |     | Thereafter |   | Total |     |  
|                                        |                    |   |                      |     |            |   |       |     |      |   |       |     |            |   |       |     |  
|Debt:                                   |                    |   |                      |     |            |   |       |     |      |   |       |     |            |   |       |     |   |   |       |     |   |   |       |     |   |   |         |     |   |  |     | 
|Long term Debt Fixed
Rate (in millions) |                    | $ | 242.8                |     |            | $ | 174.4 |     |      | $ | 156.0 |     |            | $ | 150.9 |     |   | $ | 150.9 |     |   | $ | 889.1 |     |   | $ | 1,764.1 |     |   |  | N/A | 
|                                        | Avg. Interest Rate |   |                      | 9.4 | %          |   |       | 9.4 | %    |   |       | 9.4 | %          |   |       | 9.4 | % |   |       | 9.4 | % |   |       | 9.4 | % |   |         | 9.4 | % |  |     |  | 

Commodity Risk.MCV enters into natural gas futures and option contracts in
order to hedge against unfavorable changes in the market price of natural gas
in future months when gas is expected to be needed. These financial instruments
are being utilized principally to secure anticipated natural gas requirements
necessary for projected electric sales and to lock in sales prices of natural
gas previously obtained in order to optimize MCVs existing gas supply, storage
and transportation arrangements.

The following table provides information about MCVs futures and option
contracts that are sensitive to changes in natural gas prices; these futures
and option contracts have maturity dates ranging from February 2004 to December
2007. The table presents the carrying amounts and fair values at December 31,
2003:

|                                           |  |                                |       |            |  |   |       | 
|------------------------------------------ |  | ------------------------------ | ----- | ---------- |  | - | ----- | 
|                                           |  | Expected Maturity in 2004/2007 |       | Fair Value
|                                           |  |                                |       |           
|Futures Contracts:                         |  |                                |       |            |  |   |       | 
|Contract Volumes (10,000 MMBtu) Long/Buy   |  |                                | 3,684 |            |  |   |      | 
|Contract Volumes (10,000 MMBtu) Sell/Short |  |                                | 1,250 |            |  |   |      | 
|Weighted Average Price Long (per MMBtu)    |  | $                              | 4.357 |            |  | $ | 5.170 | 
|Weighted Average Price Short (per MMBtu)   |  | $                              | 6.561 |            |  | $ | 6.150 | 
|Contract Amount ($US in Millions)          |  | $                              | 152.3 |            |  | $ | 182.8 | 

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|                                               |  |                                |       |            |  |   |       | 
|---------------------------------------------- |  | ------------------------------ | ----- | ---------- |  | - | ----- | 
|                                               |  | Expected Maturity in 2006/2007 |       | Fair Value
|                                               |  |                                |       |           
|NYMEX Commodity Swap Contracts:                |  |                                |       |            |  |   |       | 
|Contract Volumes (10,000 MMBtu) Long/Buy       |  |                                | 638   |            |  |   |      | 
|Weighted Average Price Long (per 10,000
MMBtu) |  | $                              | 4.668 |            |  | $ | 4.674 | 
|Contract Amount ($US in Millions)              |  | $                              | 29.8  |            |  | $ | 29.8  | 

|                                               |  |                           |       |            |  |    |       |  
|---------------------------------------------- |  | ------------------------- | ----- | ---------- |  | -- | ----- | -
|                                               |  | Expected Maturity in 2004 |       | Fair Value
|                                               |  |                           |       |           
|Canadian (AECO) Basis Swap Contracts:          |  |                           |       |            |  |    |       |  
|Contract Volumes (10,000 MMBtu) Long/Buy       |  |                           | 91    |            |  |    |      |  
|Weighted Average Price Long (per 10,000
MMBtu) |  | ($                        | 0.740 | )          |  | ($ | 0.948 | )
|Contract Amount ($US in Millions)              |  | ($                        | 0.7   | )          |  | ($ | 0.9   | )




Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Report of Independent Auditors and Financial Statements are set forth on
pages F-2 to F-23 of this Annual Report on Form 10-K and are hereby
incorporated by reference herein.




Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

In June 2002, MCVs Management Committee, upon the recommendation of the Audit
Subcommittee of MCV, voted to discontinue using Arthur Andersen, LLP to audit
MCVs financial statements for the year ending December 31, 2002. MCV
previously retained Arthur Andersen, LLP to review their financial statements
for the quarter ended March 31, 2002. In June 2002, the Management Committee
engaged PricewaterhouseCoopers, LLP to audit its financial statements for the
year ending December 31, 2002. During 1999, 2000 and 2001 there were no
disagreements or reportable events as described in Items 304(a)(1)(iv) and
(v) of Regulation S-K between MCV and Arthur Andersen, LLP. During 2003 and
2002, there were no disagreements or reportable events as described in Items
304(a)(1)(iv) and (v) of Regulation S-K between MCV and PricewaterhouseCoopers
LLP.




Item 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

MCVs management, including the President and Chief Executive Officer, and the
Chief Financial Officer, Vice President and Controller, carried out an
evaluation of the effectiveness of MCVs disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended) as of the end of the period covered by this report. Based on
such review of MCVs disclosure controls and procedures, the President and
Chief Executive Officer, and the Chief Financial Officer, Vice President and
Controller; have concluded that MCVs disclosure controls and procedures were
effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting that
occurred during the last fiscal quarter covered by this report that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

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PART III




Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Set forth below is information with respect to those individuals who serve as
executive officers of MCV as well as those individuals who serve as members of
its Management Committee, with their ages in parenthesis. The executive
officers of MCV are each appointed by the Management Committee and serve until
his or her successor is duly chosen or until his or her death, ineligibility to
serve, resignation or removal by the Management Committee. Members of the
Management Committee are each appointed by a General Partner and serve until
his or her successor is appointed by the appropriate General Partner. Members
of the Management Committee receive no compensation from MCV for serving on the
Management Committee. For a discussion of the relationships between members of
the Management Committee, Executive Officers and the Partners, the ownership
interests of each of the general and limited partners of MCV, and the voting
percentages of each of the members of the Management Committee, see Item 12,
Security Ownership of Certain Beneficial Owners and Management and Item 13,
Certain Relationships and Related Transactions.

|                     |  |      |  |                                                                     
|-------------------- |  | ---- |  | --------------------------------------------------------------------
|Management Committee |  |      |  |                                                                     
|                     |  |      |  |                                                                     
|John J. ORourke     |  | (49) |  | Management Committee Chairman                                       
|                     |  |      |  |                                                                     
|David W. Joos        |  | (50) |  | Management Committee Member                                         
|                     |  |      |  |                                                                     
|Executive Officers   |  |      |  |                                                                     
|                     |  |      |  |                                                                     
|James M. Kevra       |  | (55) |  | President and Chief Executive Officer                               
|                     |  |      |  |                                                                     
|Bruce C. Grant       |  | (57) |  | Vice President of Human Resources, Communications and Public Affairs
|                     |  |      |  |                                                                     
|Barbara E. Lawson    |  | (45) |  | Treasurer and Manager of Internal Audit                             
|                     |  |      |  |                                                                     
|James A. Mooney      |  | (64) |  | Vice President of Engineering, Operations and
Construction          
|                     |  |      |  |                                                                     
|Gary B. Pasek        |  | (48) |  | Vice President, General Counsel and Secretary                       
|                     |  |      |  |                                                                     
|James M. Rajewski    |  | (56) |  | Chief Financial Officer, Vice President and Controller              
|                     |  |      |  |                                                                     
|LeRoy W. Smith       |  | (62) |  | Vice President of Energy Supply and Marketing                       

John J. ORourke has served as a member of the Management Committee since March
2001 and was elected as Chairman of the Management Committee in June 2002. Mr.
ORourke has served as Vice President and Managing Director for El Paso
Merchant Energy North America Company since May 2000. Prior to becoming Vice
President and Managing Director for El Paso Merchant Energy North America
Company, Mr. ORourke has held several other senior management positions in the
energy business over the past 20 years with FPL Energy and Ebasco Services,
Inc.

David W. Joos has served as a member of the Management Committee since June
2002. Mr. Joos is President, Chief Operating Officer and a member of the Board
of Directors of CMS Energy Corporation, a position he was elected to in 2001.
Previously he was Executive Vice President and Chief Operating
Officer 
Electric of CMS Energy since December 2002 and President and Chief Executive
Officer  Electric of Consumers Energy since 1997.

James M. Kevra has served as President and Chief Executive Officer of MCV since
July 1995.

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Bruce C. Grant has served as Vice President of Human Resources, Communications
and Public Affairs of MCV since February 1998. From May 1988 to February 1998
he served as the Director of Human Resources and Communications of MCV.

Barbara E. Lawson was appointed by the Management Committee in May 2002, to the
position of Treasurer and Manager of Internal Audit of MCV. Ms. Lawson has
held various financial positions at MCV since May 1988, including her previous
position as Manager of Internal Audit.

James A. Mooney has served as Vice President of Engineering, Operations and
Construction of MCV since October 1987.

Gary B. Pasek has served as General Counsel and Secretary of MCV since May 1995
and was elected Vice President in February 1998.

James M. Rajewski was appointed by the Management Committee in May 2002 to the
position of Chief Financial Officer, Vice President and Controller of MCV. He
had served as Vice President and Controller of MCV since January 1988.

LeRoy W. Smith has served as Vice President of Energy Supply and Marketing of
MCV since October 1998. From July 1988 to September 1998, he served as Vice
President of Gas Supply of MCV.

Audit Subcommittee Financial Expert

MCVs Management Committee has established an audit subcommittee for the
purpose of overseeing the accounting and financial reporting processes of the
MCV and audits of the financial statements of the MCV. The audit
subcommittees members consist solely of representatives from each of MCVs
three Partners. MCV believes that the experience, education and ethics of the
subcommittee members qualify them to oversee the accounting and financial
reporting process and audits of the financial statements of MCV. The MCVs
Management Committee has determined Ronald C. Edmonds of The Dow Chemical
Company (a limited partner of the MCV Partnership), a member of the audit
subcommittee, to be the audit subcommittee financial expert, based upon his
education and work experience. Mr. Edmonds is currently the Global Accounting
Director of The Dow Chemical Company and has held this position since 2001.
Prior to serving as Global Accounting Director, he has held various other
positions with Dow, serving as leader of the Global Procurement Service Center,
Global Payables Manager, Controller for Payables Accounting and Latin American
Audit Manager. Mr. Edmonds is a Certified Public Accountant (CPA) and a
member of the American Institute of CPAs, Michigan Association of CPAs and
the Financial Executives International. Because the MCV does not have a class
of securities listed on any national securities exchange or in an automated
inter-dealer quotation system, the Securities and Exchange Commissions (SEC)
independence requirements for audit subcommittee members do not apply to the
MCV. The SEC rules do require that the MCV disclose whether its audit
subcommittee financial expert is independent, using a definition for audit
subcommittee member independence of a national securities exchange or a
national securities association that has been approved by the SEC. Using the
definition for audit subcommittee member independence set forth in the New York
Stock Exchanges Listed Company Manual, Mr. Edmonds is not independent because
of his status as an accounting officer of Dow, which has a material
relationship with MCV.

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Code Of Ethics

MCV has adopted a Code of Conduct and Ethics (Code), in compliance with
applicable rules of the SEC requirements, that applies to its principal
executive officer, principal financial officer, principal accounting officer or
controller, and persons performing similar functions. This Code also extends to
others within MCV that have an active role in the development of MCVs
financial data. A copy of the Code is available, without charge, upon written
request to:

|                                                
|------------------------------------------------
|Midland Cogeneration Venture Limited Partnership
|Attn: Chief Financial Officer                   
|100 Progress Place                              
|Midland, MI 48640                               




Item 11. EXECUTIVE COMPENSATION

Compensation

The following table sets forth certain compensation data with respect to the
chief executive officer and four other most highly compensated executive
officers of MCV for each of the three years ended December 31, 2003, 2002 and
2001.

Summary Compensation Table

|                              |  |      |      |            |  |                     |                  |  |  |  |         |  |  |           |        |    
|----------------------------- |  | ---- | ---- | ---------- |  | ------------------- | ---------------- |  |  |  | ------- |  |  | --------- | ------ | ---
|                              |  |      |      |            |  | Annual Compensation
|                              |  |      |      |            |  |                    
|Name and                      |  |      |      |            |  |                     |                  |  |  |  |         |  |  | All Other
|Principal Position            |  | Year |      | Salary ($) |  | Bonus ($)(a)        | Compensation ($)
|                              |  |      |      |            |  |                     |                 
|James M. Kevra                |  |      | 2003 |            |  |                     | 279,766          |  |  |  | 171,692 |  |  |           | 54,484 | (b)
|President and                 |  |      | 2002 |            |  |                     | 277,480          |  |  |  | 215,984 |  |  |           | 54,297 |    
|Chief Executive Officer       |  |      | 2001 |            |  |                     | 268,293          |  |  |  |        |  |  |           | 52,923 |    
|James A. Mooney               |  |      | 2003 |            |  |                     | 209,406          |  |  |  | 90,979  |  |  |           | 43,088 | (c)
|Vice President of             |  |      | 2002 |            |  |                     | 203,204          |  |  |  | 81,906  |  |  |           | 42,214 |    
|Engineering, Operations       |  |      | 2001 |            |  |                     | 197,233          |  |  |  |        |  |  |           | 41,326 |    
|and Construction              |  |      |      |            |  |                     |                  |  |  |  |         |  |  |           |        |    
|LeRoy W. Smith                |  |      | 2003 |            |  |                     | 184,866          |  |  |  | 80,761  |  |  |           | 29,985 | (d)
|Vice President of Energy      |  |      | 2002 |            |  |                     | 178,400          |  |  |  | 100,505 |  |  |           | 29,217 |    
|Supply and Marketing          |  |      | 2001 |            |  |                     | 172,655          |  |  |  |        |  |  |           | 28,362 |    
|Gary B. Pasek                 |  |      | 2003 |            |  |                     | 183,239          |  |  |  | 135,665 |  |  |           | 27,377 | (e)
|Vice President                |  |      | 2002 |            |  |                     | 177,621          |  |  |  | 102,201 |  |  |           | 26,609 |    
|General Counsel & Secretary   |  |      | 2001 |            |  |                     | 172,142          |  |  |  |        |  |  |           | 25,788 |    
|James M. Rajewski             |  |      | 2003 |            |  |                     | 152,600          |  |  |  | 67,556  |  |  |           | 22,738 | (f)
|Chief Financial Officer,      |  |      | 2002 |            |  |                     | 144,024          |  |  |  | 82,874  |  |  |           | 21,531 |    
|Vice President and Controller |  |      |      |            |  |                     |                  |  |  |  |         |  |  |           |        |    



---

|(a) |  | For years 2003 and 2002, the amounts represent bonuses accrued. For 2001,
no bonuses were awarded under the Senior Management bonus plan.                                 
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | Includes company contributions of $10,000 to the 401(k) Savings Plan,
$18,000 to the Defined Contribution Retirement Plan and $26,484 to the
Supplemental Retirement Plan.

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|(c) |  | Includes company contributions of $10,000 to the 401(k) Savings Plan,
$18,000 to the Defined Contribution Retirement Plan and $15,088 to the
Supplemental Retirement Plan.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(d) |  | Includes company contributions of $9,126 to the 401(k) Savings Plan,
$18,000 to the Defined Contribution Retirement Plan and $2,859 to the
Supplemental Retirement Plan.  
|   
|(e) |  | Includes company contributions of $9,126 to the 401(k) Savings Plan,
$18,000 to the Defined Contribution Retirement Plan and $251 to the
Supplemental Retirement Plan.    
|   
|(f) |  | Includes company contributions of $7,579 to the 401(k) Savings Plan and
$15,159 to the Defined Contribution Retirement Plan.                                              

Compensation Committee Interlocks and Insider Participation

The members of the Management Committee also serve as members of MCVs
Compensation Committee. Members of the Compensation Committee are each
appointed by a General Partner and serve until his or her successor is
appointed by the appropriate General Partner. No member of the Compensation
Committee was or is an officer or employee of MCV. Members of the Compensation
Committee receive no compensation from MCV.

Mr. ORourke was elected as Chairman of the Compensation Committee in June
2002. He has served since March 2001 as a member of MCVs Compensation
Committee. He also serves as Vice President and Managing Director for El Paso
Merchant Energy North America Company. El Paso Midland, Inc. and affiliates of
El Paso have engaged in numerous transactions in the ordinary course of
business to provide services or products to MCV. In 2003, El Paso affiliates
engaged in transactions with MCV, which included the sale of natural gas, sale
of natural gas transportation and various natural gas marketing services that
amounted in aggregate to approximately $71.7 million. In December 2002, MCV
and an El Paso affiliate entered into a master netting agreement, covering the
natural gas purchase agreements, in which collateral in the form of cash or a
letter or credit can be required of either party based on such partys credit
ratings and on the mark-to-market values of the natural gas purchase
agreements. As of December 31, 2003, El Paso had provided to MCV letters of
credit under the master netting agreement in the amount of $99.5 million.

Mr. Joos commenced in June 2002 as a member of MCVs Compensation Committee.
He also serves as President, Chief Operating Officer and a member of the Board
of Directors of CMS Energy Corporation. CMS Energy and its affiliates have the
following direct and indirect interests in MCV and the Facility. CMS Midland
Holdings Company has an ownership interest in one of the Owner Trusts,
representing indirectly a 35% equity interest in the Facility; CMS Midland Inc.
has a 49% general partnership interest in MCV; and Consumers has contractual
obligations under the PPA to purchase electric capacity and related energy from
MCV, has contractual obligations under various backup agreements among MCV,
Consumers and Dow to assure a continuous supply of steam and electricity to Dow
in the event the SEPA is terminated, has contractual obligations to enter into
transmission service agreements with other utilities for MCVs benefit, and has
leased undivided interests in the Site to the Owner Trustees (as MCVs
assignees) pursuant to the Ground Lease. In 2003, Consumers purchased electric
capacity and related energy from the Facility that aggregated approximately
$513.8 million. In addition, CMS Energy affiliates have engaged in numerous
transactions in the ordinary course of business to provide services or products
to MCV. In 2003, CMS Energy affiliates engaged in transactions with MCV which
included the sale of natural gas, the sale of natural gas transportation, the
sale of natural gas storage and the purchase of natural gas that amounted in
aggregate to approximately $23.7 million. This level of transactions decreased
substantially from the 2002 level as a result of the sale of the Panhandle and
Trunkline transportation services to Southern Union Pipeline and due to the
sale of CMS Marketing Services and Tradings (a subsidiary of Consumers)
natural gas contracts to Sempra Energy Trading, the wholesale commodity trading
unit of Sempra Energy. As of February 1, 2003, Consumers or its subsidiaries
no longer hold any natural gas contracts with MCV.

For further detailed discussions of MCVs contracts and leases with Partners,
see Item 1, Section E, Contracts, Item 2, Properties and Item 8, Financial
Statements and Supplementary Data  Note 7 to the Consolidated Financial
Statements.

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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following information is given with respect to the Partners of MCV, its
Management Committee members and all Management Committee members and officers
as a group.

Security Ownership of Certain Beneficial Owners

|                                                                                    |                                    |                              |                              |                      |   |          |       |                                           |         |                |       |                     |      |  
|----------------------------------------------------------------------------------- | ---------------------------------- | ---------------------------- | ---------------------------- | -------------------- | - | -------- | ----- | ----------------------------------------- | ------- | -------------- | ----- | ------------------- | ---- | -
|                                                                                    |                                    |                              |                              |                      |   |          |       | Amount and Nature of Beneficial Ownership
|                                                                                    |                                    |                              |                              |                      |   |          |       |                                          
|                                                                                    |                                    |                              |                              |                      |   |          |       |                                           |         |                |       | Approximate Percent
|                                                                                    |                                    |                              |                              |                      |   |          |       | Approximate Percent                       |         | of Partnership
|Name and Address of Beneficial Owner                                                |                                    | Title of Class               |                              | of Voting Rights (a) |   | Interest
|                                                                                    |                                    |                              |                              |                      |   |         
|El Paso Corporation
El Paso Building
1001 Louisiana Street
Houston, TX 77002        |                                    |                              |                              |                      |   |          |       |                                           |         |                |       |                    
|                                                                                    | Source Midland Limited Partnership |                              | General Partnership Interest |                      |   | 24.2     | %     |                                           |         | 18.1           | %    
|                                                                                    | El Paso Midland, Inc.              |                              | General Partnership Interest |                      |   | 14.6     | %     |                                           |         | 10.9           | %    
|                                                                                    | MEI Limited Partnership            |                              | General Partnership Interest |                      |   | 12.2     | %     |                                           |         | 9.1            | %    
|                                                                                    |                                    | Limited Partnership Interest |                              |                      |  |          |       |                                           | 0.9     | %             
|                                                                                    | Micogen Limited Partnership        |                              | Limited Partnership Interest |                      |   |         |       |                                           |         | 4.5            | %    
|                                                                                    |                                    |                              |                              |                      |   |          |       |                                           |         |                |       |                    
|                                                                                    |                                    | Total El Paso Ownership      |                              |                      |   |          |       |                                           | 51.0    | %              |       |                     | 43.5 | %
|CMS Energy Company
212 West Michigan Avenue
Jackson, MI 49201                       |                                    |                              |                              |                      |   |          |       |                                           |         |                |       |                    
|                                                                                    | CMS Midland, Inc.                  |                              | General Partnership Interest |                      |   | 49.0     | %     |                                           |         | 49.0           | %    
|The Dow Chemical Company
2030 Dow Center
Midland, MI 48674                          |                                    | Limited Partnership Interest |                              |                      |  |          |       |                                           | 7.5     | %             
|Alanna Corporation
c/o MCV Limited Partnership
100 Progress Place
Midland, MI 48640 |                                    | Limited Partnership Interest |                              |                      |  |          |       |                                           | 0.00001 | %             
|                                                                                    |                                    |                              |                              |                      |   |          |       |                                           |         |                |       |                    
|                                                                                    |                                    |                              |                              |                      |   |          | 100.0 | %                                         |         |                | 100.0 | %                  



|(a) |  | Each partner has sole voting and investment power with respect to its
general partnership interest. Limited partners have no voting rights,
except to certain specified acts of the Management Committee. MCV is a
limited partnership wholly owned by its Partners. Beneficial interests in
the partnership are not available to any persons other than the Partners.
Accordingly, none of the members of the Management Committee and none of
the executive officers of MCV has any beneficial ownership in MCV.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Item 11, Executive Compensation  Compensation Committee Interlocks and
Insider Participation.

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Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees

The aggregate of all fees billed to MCV by its independent auditor,
Pricewaterhouse Coopers, LLP (PwC), were $191,000 during fiscal year 2003 and
$190,033 for 2002, for the portion of 2002 that PwC served as MCVs independent
auditor. Prior to June 2002, at which time PwC was engaged as MCVs independent
auditor, Arthur Andersen, LLP (AA) served as MCVs independent auditor and
billed fees of $31,000 during the first half of 2002. See Part II, Item 9 -
Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure. All fees billed to MCV for both periods were for audit fees.
These audit fees were for professional services rendered by the principal
accountant for the audit of MCVs annual financial statements and review of
financials statements included in MCVs Form 10-Q, as well as services that are
normally provided in connection with statutory and regulatory filings or
engagements. During fiscal year 2003 and 2002, MCV was not billed by PwC or AA
for any fees for services considered audit-related fees, tax services for tax
compliance, tax advice or tax planning or any other fees, other than those
described above.

Audit Subcommittee Pre-Approval Policies and Procedures

All services provided by MCVs independent auditors, PwC, are subject to
pre-approval by MCVs audit subcommittee. The audit subcommittee charter does
provide the delegation of pre-approval for some minor services to MCVs
management in the event that there is a need for such approval prior to the
next full audit subcommittee meeting. However, a full report of any such
interim approvals must be given at the next audit subcommittee meeting.

-37-



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PART IV




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



|(a) |  | The following documents are filed as part of this report:
|--- |  | ---------------------------------------------------------



| | 1. |  | Financial statements.                                                                                                                                      
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |    |  | The following consolidated financial statements are as of December 31, 2003
and 2002 or for each of the three years ended December 31, 2003, 2002 and
2001:

|                                                                      |  |      |     | 
|--------------------------------------------------------------------- |  | ---- | --- | 
|                                                                      |  | Page
|                                                                      |  |     
|Index to Consolidated Financial Statements and Supplemental Schedules |  |      | F-1 | 
|Report of Independent Auditors  PricewaterhouseCoopers LLP           |  |      | F-2 | 
|Report of Independent Public Accountants  Arthur Andersen LLP        |  |      | F-3 | 
|Consolidated Balance Sheets                                           |  |      | F-4 | 
|Consolidated Statements of Operations                                 |  |      | F-5 | 
|Consolidated Statements of Partners Equity                           |  |      | F-6 | 
|Consolidated Statements of Cash Flows                                 |  |      | F-7 | 
|Notes to Consolidated Financial Statements                            |  |      | F-8 | 



| | 2. |  | All schedules are omitted because they are inapplicable, not
required or the information is included in the financial statements or
notes thereto.
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------
|
| | 3. |  | The Exhibits that are filed or incorporated by reference as part of
this report are listed in the Exhibit Index filed herewith.                   



|(b) |  | Reports on Form 8-K.                                                                                             
|--- |  | -----------------------------------------------------------------------------------------------------------------
|   
|    |  | Current report dated January 23, 2004 containing Item 5, Other Events
reporting on MCVs Property Tax judgment.

-38-



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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                  |  |                  |     | 
|------------------------------------------------------------------------------------------------- |  | ---------------- | --- | 
|                                                                                                  |  | Page Reference  
|                                                                                                  |  | in Annual Report
|                                                                                                  |  | on Form 10-K    
|                                                                                                  |  |                 
|Report of Independent Auditors  PricewaterhouseCoopers LLP                                       |  |                  | F-2 | 
|Report of Independent Public Accountants  Arthur Andersen, LLP                                   |  |                  | F-3 | 
|Consolidated Balance Sheets as of December 31, 2003 and 2002                                      |  |                  | F-4 | 
|Consolidated Statements of Operations for the Years Ended December 31, 2003, 2002, and 2001       |  |                  | F-5 | 
|Consolidated Statements of Partners Equity for the Years Ended December 31, 2003, 2002, and 2001 |  |                  | F-6 | 
|Consolidated Statements of Cash Flows for the Years Ended December 31, 2003, 2002, and 2001       |  |                  | F-7 | 
|Notes to Consolidated Financial Statements                                                        |  |                  | F-8 | 

F-1



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Report of Independent Auditors

To the Partners and the Management Committee of
Midland Cogeneration Venture Limited Partnership:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, partners equity and cash flows present
fairly, in all material respects, the financial position of the Midland
Cogeneration Limited Partnership (a Michigan limited partnership) and its
subsidiaries (MCV) at December 31, 2003 and 2002, and the results of their
operations and their cash flows for the each of the two years ended December
31, 2003 and 2002 in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of MCVs management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. The
financial statements of MCV for the year ended December 31, 2001, were audited
by other independent accountants who have ceased operations. Those independent
accountants expressed an unqualified opinion on those financial statements in
their report dated January 18, 2002.

As explained in Note 2 to the financial statements, effective April 1, 2002,
Midland Cogeneration Venture Limited Partnership changed its method of
accounting for derivative and hedging activities in accordance with Derivative
Implementation Group (DIG) Issue C-16.

Detroit, Michigan
February 18, 2004

F-2



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THE FOLLOWING REPORT IS A COPY OF A PREVIOUSLY ISSUED REPORT BY ARTHUR
ANDERSEN LLP (ANDERSEN). THIS REPORT HAS NOT BEEN REISSUED BY ANDERSEN, AND
ANDERSEN DID NOT CONSENT TO THE INCLUSION OF THIS REPORT INTO THIS FORM 10-K.
THE FOOTNOTE SHOWN BELOW WAS NOT PART OF ANDERSENS REPORT.

ARTHUR ANDERSEN LLP

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners and the Management Committee of the
Midland Cogeneration Venture Limited Partnership:

We have audited the accompanying consolidated balance sheets of the MIDLAND
COGENERATION VENTURE LIMITED PARTNERSHIP (a Michigan limited partnership) and
subsidiaries (MCV) as of December 31, 2001 and 2000*, and the related
consolidated statements of operations, partners equity and cash flows for each
of the three years in the period ended December 31, 2001*. These financial
statements are the responsibility of MCVs management. Our responsibility is
to express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Midland
Cogeneration Venture Limited Partnership and subsidiaries as of December 31,
2001 and 2000*, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001*, in
conformity with accounting principles generally accepted in the United States.

As explained in Note 2 to the financial statements, effective January 1, 2001,
Midland Cogeneration Venture Limited Partnership changed its method of
accounting related to derivatives and hedging activities.

Arthur Andersen LLP



| |  | Detroit, Michigan
January 18, 2002
| |  | ----------------------------------

*The MCVs consolidated balance sheets as of December 31, 2001 and 2000 and the
consolidated statements of operations, partners equity and cash flows for the
years ended December 31, 1999 and 2000 are not included in this Annual Report
on Form 10-K.

F-3



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31,
(In Thousands)

|                                       |                                                                                                |                                     |           |           |           |      |           |           |           | 
|-------------------------------------- | ---------------------------------------------------------------------------------------------- | ----------------------------------- | --------- | --------- | --------- | ---- | --------- | --------- | --------- | 
|                                       |                                                                                                |                                     |           | 2003      |           | 2002
|                                       |                                                                                                |                                     |           |           |           |     
|ASSETS                                 |                                                                                                |                                     |           |           |           |      |           |          
|CURRENT ASSETS:                        |                                                                                                |                                     |           |           |           |      |           |          
|                                       | Cash and cash equivalents                                                                      |                                     | $         | 173,651   |           |      | $         | 160,425   |          
|                                       | Accounts and notes receivable  related parties                                                |                                     |           | 43,805    |           |      |           | 48,448    |          
|                                       | Accounts receivable                                                                            |                                     |           | 38,333    |           |      |           | 32,479    |          
|                                       | Gas inventory                                                                                  |                                     |           | 20,298    |           |      |           | 19,566    |          
|                                       | Unamortized property taxes                                                                     |                                     |           | 17,672    |           |      |           | 18,355    |          
|                                       | Derivative assets                                                                              |                                     |           | 86,825    |           |      |           | 73,819    |          
|                                       | Broker margin accounts and prepaid expenses                                                    |                                     |           | 8,101     |           |      |           | 5,165     |          
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|                                       |                                                                                                | Total current assets                |           |           | 388,685   |      |           |           | 358,257   | 
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|PROPERTY, PLANT AND EQUIPMENT          |                                                                                                |                                     |           |           |           |      |           |          
|                                       | Property, plant and equipment                                                                  |                                     |           | 2,463,931 |           |      |           | 2,449,148 |          
|                                       | Pipeline                                                                                       |                                     |           | 21,432    |           |      |           | 21,432    |          
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|                                       |                                                                                                | Total property, plant and equipment |           |           | 2,485,363 |      |           |           | 2,470,580 | 
|                                       | Accumulated depreciation                                                                       |                                     |           | (991,556  | )         |      |           | (920,614  | )        
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|                                       |                                                                                                | Net property, plant and equipment   |           |           | 1,493,807 |      |           |           | 1,549,966 | 
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|OTHER ASSETS:                          |                                                                                                |                                     |           |           |           |      |           |          
|                                       | Restricted investment securities held-to-maturity                                              |                                     |           | 139,755   |           |      |           | 138,701   |          
|                                       | Derivative assets non-current                                                                  |                                     |           | 18,100    |           |      |           | 31,037    |          
|                                       | Deferred financing costs, net of accumulated amortization
of $17,285 and $15,930, respectively |                                     |           | 7,680     |           |      |           | 9,035     |          
|                                       | Prepaid gas costs, materials and supplies                                                      |                                     |           | 21,623    |           |      |           | 11,077    |          
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|                                       |                                                                                                | Total other assets                  |           |           | 187,158   |      |           |           | 189,850   | 
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|TOTAL ASSETS                           |                                                                                                | $                                   | 2,069,650 |           |           | $    | 2,098,073 |          
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|LIABILITIES AND PARTNERS EQUITY       |                                                                                                |                                     |           |           |           |      |           |          
|CURRENT LIABILITIES:                   |                                                                                                |                                     |           |           |           |      |           |          
|                                       | Accounts payable and accrued liabilities                                                       |                                     | $         | 57,368    |           |      | $         | 58,080    |          
|                                       | Gas supplier funds on deposit                                                                  |                                     |           | 4,517     |           |      |           |          |          
|                                       | Interest payable                                                                               |                                     |           | 53,009    |           |      |           | 56,386    |          
|                                       | Current portion of long-term debt                                                              |                                     |           | 134,576   |           |      |           | 93,928    |          
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|                                       |                                                                                                | Total current liabilities           |           |           | 249,470   |      |           |           | 208,394   | 
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|NON-CURRENT LIABILITIES:               |                                                                                                |                                     |           |           |           |      |           |          
|                                       | Long-term debt                                                                                 |                                     |           | 1,018,645 |           |      |           | 1,153,221 |          
|                                       | Other                                                                                          |                                     |           | 2,459     |           |      |           | 2,148     |          
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|                                       |                                                                                                | Total non-current liabilities       |           |           | 1,021,104 |      |           |           | 1,155,369 | 
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|COMMITMENTS AND CONTINGENCIES          |                                                                                                |                                     |           |           |           |      |           |          
|TOTAL LIABILITIES                      |                                                                                                |                                     | 1,270,574 |           |           |      | 1,363,763 |          
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|PARTNERS EQUITY                       |                                                                                                |                                     | 799,076   |           |           |      | 734,310   |          
|                                       |                                                                                                |                                     |           |           |           |      |           |          
|TOTAL LIABILITIES AND PARTNERS EQUITY |                                                                                                | $                                   | 2,069,650 |           |           | $    | 2,098,073 |          
|                                       |                                                                                                |                                     |           |           |           |      |           |          

The accompanying notes are an integral part of these statements.

F-4



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31,
(In Thousands)

|                                                                                                                |                                     |                                   |         |          |          |      |         |          |          |   |         |          |          |  
|--------------------------------------------------------------------------------------------------------------- | ----------------------------------- | --------------------------------- | ------- | -------- | -------- | ---- | ------- | -------- | -------- | - | ------- | -------- | -------- | -
|                                                                                                                |                                     |                                   |         | 2003     |          | 2002 |         | 2001    
|                                                                                                                |                                     |                                   |         |          |          |      |         |         
|OPERATING REVENUES:                                                                                             |                                     |                                   |         |          |          |      |         |          |          |   |         |         
|                                                                                                                | Capacity                            |                                   | $       | 404,681  |          |      | $       | 404,713  |          |   | $       | 409,633  |         
|                                                                                                                | Electric                            |                                   |         | 162,093  |          |      |         | 177,569  |          |   |         | 184,707  |         
|                                                                                                                | Steam                               |                                   |         | 17,638   |          |      |         | 14,537   |          |   |         | 16,473   |         
|                                                                                                                |                                     |                                   |         |          |          |      |         |          |          |   |         |         
|                                                                                                                |                                     | Total operating revenues          |         |          | 584,412  |      |         |          | 596,819  |   |         |          | 610,813  |  
|                                                                                                                |                                     |                                   |         |          |          |      |         |          |          |   |         |         
|OPERATING EXPENSES:                                                                                             |                                     |                                   |         |          |          |      |         |          |          |   |         |         
|                                                                                                                | Fuel costs                          |                                   |         | 254,988  |          |      |         | 255,142  |          |   |         | 288,167  |         
|                                                                                                                | Depreciation                        |                                   |         | 89,437   |          |      |         | 88,963   |          |   |         | 92,176   |         
|                                                                                                                | Operations                          |                                   |         | 16,943   |          |      |         | 16,642   |          |   |         | 16,082   |         
|                                                                                                                | Maintenance                         |                                   |         | 15,107   |          |      |         | 12,666   |          |   |         | 13,739   |         
|                                                                                                                | Property and single business taxes  |                                   |         | 30,040   |          |      |         | 27,087   |          |   |         | 26,410   |         
|                                                                                                                | Administrative, selling and general |                                   |         | 9,959    |          |      |         | 8,195    |          |   |         | 16,404   |         
|                                                                                                                |                                     |                                   |         |          |          |      |         |          |          |   |         |         
|                                                                                                                |                                     | Total operating expenses          |         |          | 416,474  |      |         |          | 408,695  |   |         |          | 452,978  |  
|                                                                                                                |                                     |                                   |         |          |          |      |         |          |          |   |         |         
|OPERATING INCOME                                                                                                |                                     |                                   | 167,938 |          |          |      | 188,124 |          |          |   | 157,835 |         
|                                                                                                                |                                     |                                   |         |          |          |      |         |          |          |   |         |         
|OTHER INCOME (EXPENSE):                                                                                         |                                     |                                   |         |          |          |      |         |          |          |   |         |         
|                                                                                                                | Interest and other income           |                                   |         | 5,100    |          |      |         | 5,555    |          |   |         | 16,725   |         
|                                                                                                                | Interest expense                    |                                   |         | (113,247 | )        |      |         | (119,783 | )        |   |         | (126,296 | )       
|                                                                                                                |                                     |                                   |         |          |          |      |         |          |          |   |         |         
|                                                                                                                |                                     | Total other income (expense), net |         |          | (108,147 | )    |         |          | (114,228 | ) |         |          | (109,571 | )
|                                                                                                                |                                     |                                   |         |          |          |      |         |          |          |   |         |         
|NET INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE                                                        |                                     |                                   | 59,791  |          |          |      | 73,896  |          |          |   | 48,264  |         
|Cumulative effect of change in method of
accounting for derivative option contracts
(to April 1, 2002) (Note 2) |                                     |                                   |        |          |          |      | 58,131  |          |          |   |        |         
|                                                                                                                |                                     |                                   |         |          |          |      |         |          |          |   |         |         
|NET INCOME                                                                                                      |                                     | $                                 | 59,791  |          |          | $    | 132,027 |          |          | $ | 48,264  |         
|                                                                                                                |                                     |                                   |         |          |          |      |         |          |          |   |         |         

The accompanying notes are an integral part of these statements.

F-5



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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS EQUITY FOR THE YEARS ENDED DECEMBER 31,
(In Thousands)

|                           |                            |                                                                 |         |          |         |          |         |        |        |   |         |         |         |  
|-------------------------- | -------------------------- | --------------------------------------------------------------- | ------- | -------- | ------- | -------- | ------- | ------ | ------ | - | ------- | ------- | ------- | -
|                           |                            |                                                                 |         | General  |         | Limited  |         |        |        |  
|                           |                            |                                                                 |         | Partners |         | Partners |         | Total 
|                           |                            |                                                                 |         |          |         |          |         |       
|BALANCE, DECEMBER 31, 2000 |                            | $                                                               | 448,100 |          |         | $        | 79,638  |        |        | $ | 527,738 |        
|Comprehensive Income       |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|                           | Net Income                 |                                                                 |         | 42,020   |         |          |         | 6,244  |        |   |         | 48,264  |        
|                           | Other Comprehensive Income |                                                                 |         |          |         |          |         |        |        |   |         |         |        
|                           |                            | Cumulative effect of accounting change                          |         |          | 13,688  |          |         |        | 2,034  |   |         |         | 15,722  |  
|                           |                            | Unrealized loss on hedging activities                           |         |          | (42,444 | )        |         |        | (6,307 | ) |         |         | (48,751 | )
|                           |                            | Reclassification adjustments recognized
in net income above     |         |          | 7,608   |          |         |        | 1,131  |   |         |         | 8,739   |  
|                           |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|                           |                            | Total other comprehensive income                                |         |          | (21,148 | )        |         |        | (3,142 | ) |         |         | (24,290 | )
|                           |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|                           | Total Comprehensive Income |                                                                 |         | 20,872   |         |          |         | 3,102  |        |   |         | 23,974  |        
|                           |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|BALANCE, DECEMBER 31, 2001 |                            | $                                                               | 468,972 |          |         | $        | 82,740  |        |        | $ | 551,712 |        
|Comprehensive Income       |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|                           | Net Income                 |                                                                 |         | 114,947  |         |          |         | 17,080 |        |   |         | 132,027 |        
|                           | Other Comprehensive Income |                                                                 |         |          |         |          |         |        |        |   |         |         |        
|                           |                            | Unrealized gain on hedging activities
since beginning of period |         |          | 33,311  |          |         |        | 4,950  |   |         |         | 38,261  |  
|                           |                            | Reclassification adjustments recognized
in net income above     |         |          | 10,717  |          |         |        | 1,593  |   |         |         | 12,310  |  
|                           |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|                           |                            | Total other comprehensive income                                |         |          | 44,028  |          |         |        | 6,543  |   |         |         | 50,571  |  
|                           |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|                           | Total Comprehensive Income |                                                                 |         | 158,975  |         |          |         | 23,623 |        |   |         | 182,598 |        
|                           |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|BALANCE, DECEMBER 31, 2002 |                            | $                                                               | 627,947 |          |         | $        | 106,363 |        |        | $ | 734,310 |        
|Comprehensive Income       |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|                           | Net Income                 |                                                                 |         | 52,056   |         |          |         | 7,735  |        |   |         | 59,791  |        
|                           | Other Comprehensive Income |                                                                 |         |          |         |          |         |        |        |   |         |         |        
|                           |                            | Unrealized gain on hedging activities
since beginning of period |         |          | 34,484  |          |         |        | 5,125  |   |         |         | 39,609  |  
|                           |                            | Reclassification adjustments recognized
in net income above     |         |          | (30,153 | )        |         |        | (4,481 | ) |         |         | (34,634 | )
|                           |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|                           |                            | Total other comprehensive income                                |         |          | 4,331   |          |         |        | 644    |   |         |         | 4,975   |  
|                           |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|                           | Total Comprehensive Income |                                                                 |         | 56,387   |         |          |         | 8,379  |        |   |         | 64,766  |        
|                           |                            |                                                                 |         |          |         |          |         |        |        |   |         |        
|BALANCE, DECEMBER 31, 2003 |                            | $                                                               | 684,334 |          |         | $        | 114,742 |        |        | $ | 799,076 |        
|                           |                            |                                                                 |         |          |         |          |         |        |        |   |         |        

The accompanying notes are an integral part of these statements.

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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
(In Thousands)

|                                                     |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |          |          |  
|---------------------------------------------------- | -------------------------------------------------------------------------------- | ----------------------------------------- | ------- | -------- | ------- | ---- | ------- | -------- | -------- | - | ------- | -------- | -------- | -
|                                                     |                                                                                  |                                           |         | 2003     |         | 2002 |         | 2001    
|                                                     |                                                                                  |                                           |         |          |         |      |         |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |         
|                                                     | Net income                                                                       |                                           | $       | 59,791   |         |      | $       | 132,027  |          |   | $       | 48,264   |         
|                                                     | Adjustments to reconcile net income to net cash provided by
operating activities |                                           |         |          |         |      |         |          |          |   |         |          |         
|                                                     | Depreciation and amortization                                                    |                                           |         | 90,792   |         |      |         | 90,430   |          |   |         | 93,835   |         
|                                                     | Cumulative effect of change in accounting principle                              |                                           |         |         |         |      |         | (58,131  | )        |   |         |         |         
|                                                     | (Increase) decrease in accounts receivable                                       |                                           |         | (1,211   | )       |      |         | 48,343   |          |   |         | 55,127   |         
|                                                     | (Increase) decrease in gas inventory                                             |                                           |         | (732     | )       |      |         | 133      |          |   |         | (5,225   | )       
|                                                     | (Increase) decrease in unamortized property taxes                                |                                           |         | 683      |         |      |         | (1,730   | )        |   |         | (415     | )       
|                                                     | (Increase) decrease in broker margin accounts and prepaid expenses               |                                           |         | (4,778   | )       |      |         | 31,049   |          |   |         | (26,587  | )       
|                                                     | (Increase) decrease in derivative assets                                         |                                           |         | 4,906    |         |      |         | (20,444  | )        |   |         |         |         
|                                                     | (Increase) decrease in prepaid gas costs, materials and supplies                 |                                           |         | (8,704   | )       |      |         | 1,376    |          |   |         | 8,414    |         
|                                                     | Increase (decrease) in accounts payable and accrued liabilities                  |                                           |         | (712     | )       |      |         | 8,774    |          |   |         | (43,704  | )       
|                                                     | Increase in gas supplier funds on deposit                                        |                                           |         | 4,517    |         |      |         |         |          |   |         |         |         
|                                                     | Decrease in interest payable                                                     |                                           |         | (3,377   | )       |      |         | (3,948   | )        |   |         | (7,082   | )       
|                                                     | Increase (decrease) in other non-current liabilities                             |                                           |         | 311      |         |      |         | (24      | )        |   |         | 245      |         
|                                                     |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |          |         
|                                                     |                                                                                  | Net cash provided by operating activities |         |          | 141,486 |      |         |          | 227,855  |   |         |          | 122,872  |  
|                                                     |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |          |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |         
|                                                     | Plant modifications and purchases of plant equipment                             |                                           |         | (33,278  | )       |      |         | (29,529  | )        |   |         | (30,530  | )       
|                                                     | Maturity of restricted investment securities held-to-maturity                    |                                           |         | 601,225  |         |      |         | 377,192  |          |   |         | 538,327  |         
|                                                     | Purchase of restricted investment securities held-to-maturity                    |                                           |         | (602,279 | )       |      |         | (374,426 | )        |   |         | (539,918 | )       
|                                                     |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |          |         
|                                                     |                                                                                  | Net cash used in investing activities     |         |          | (34,332 | )    |         |          | (26,763  | ) |         |          | (32,121  | )
|                                                     |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |         
|                                                     | Repayment of financing obligation                                                |                                           |         | (93,928  | )       |      |         | (182,084 | )        |   |         | (155,632 | )       
|                                                     |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |          |         
|                                                     |                                                                                  | Net cash used in financing activities     |         |          | (93,928 | )    |         |          | (182,084 | ) |         |          | (155,632 | )
|                                                     |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |         
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                                  |                                           | 13,226  |          |         |      | 19,008  |          |          |   | (64,881 | )       
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     |                                                                                  |                                           | 160,425 |          |         |      | 141,417 |          |          |   | 206,298 |         
|                                                     |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |         
|CASH AND EQUIVALENTS AT END OF PERIOD                |                                                                                  | $                                         | 173,651 |          |         | $    | 160,425 |          |          | $ | 141,417 |         
|                                                     |                                                                                  |                                           |         |          |         |      |         |          |          |   |         |         

The accompanying notes are an integral part of these statements.

F-7



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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|(1) |  | THE PARTNERSHIP AND ASSOCIATED RISKS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | MCV was organized to construct, own and operate a combined-cycle, gas-fired
cogeneration facility (the Facility) located in Midland, Michigan. MCV
was formed on January 27, 1987, and the Facility began commercial operation
in 1990.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | In 1992, MCV acquired the outstanding common stock of PVCO Corp., a
previously inactive company. MCV and PVCO Corp. entered into a partnership
agreement to form MCV Gas Acquisition General Partnership (MCV GAGP) for
the purpose of buying and selling natural gas on the spot market and other
transactions involving natural gas activities. Currently, MCV GAGP is not
actively engaged in any business activity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | The Facility has a net electrical generating capacity of approximately 1500
MW and approximately 1.5 million pounds of process steam capacity per hour.
MCV has entered into three principal energy sales agreements. MCV has
contracted to (i) supply up to 1240 MW of electric capacity (Contract
Capacity) to Consumers Energy Company (Consumers) under the Power
Purchase Agreement (PPA), for resale to its customers through 2025, (ii)
supply electricity and steam to The Dow Chemical Company (Dow) under the
Steam and Electric Power Agreement (SEPA) through 2015 and (iii) supply
steam to Dow Corning Corporation (DCC) under the Steam Purchase Agreement
(SPA) through 2011. From time to time, MCV enters into other sales
agreements for the sale of excess capacity and/or energy available above
MCVs internal use and obligations under the PPA, SEPA and SPA. Results of
operations are primarily dependent on successfully operating the Facility at
or near contractual capacity levels and on Consumers ability to perform its
obligations under the PPA. Sales pursuant to the PPA have historically
accounted for over 90% of MCVs revenues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | The PPA permits Consumers, under certain conditions, to reduce the capacity
and energy charges payable to MCV and/or to receive refunds of capacity and
energy charges paid to MCV if the Michigan Public Service Commission
(MPSC) does not permit Consumers to recover from its customers the
capacity and energy charges specified in the PPA (the regulatory-out
provision). Until September 15, 2007, however, the capacity charge may not
be reduced below an average capacity rate of 3.77 cents per kilowatt-hour
for the available Contract Capacity notwithstanding the regulatory-out
provision. Consumers and MCV are required to support and defend the terms
of the PPA.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |  | The Facility is a qualifying cogeneration facility (QF) originally
certified by the Federal Energy Regulatory Commission (FERC) under the
Public Utility Regulatory Policies Act of 1978, as amended (PURPA). In
order to maintain QF status, certain operating and efficiency standards must
be maintained on a calendar-year basis and certain ownership limitations
must be met. In the case of a topping-cycle generating plant such as the
Facility, the applicable operating standard requires that the portion of
total energy output that is put to some useful purpose other than
facilitating the production of power (the Thermal Percentage) be at least
5%. In addition, the Facility must achieve a PURPA efficiency standard (the
sum of the useful power output plus one-half of the useful thermal energy
output, divided by the energy input (the Efficiency Percentage)) of at
least 45%. If the Facility maintains a Thermal Percentage of 15% or higher,
the required Efficiency Percentage is reduced to 42.5%. Since 1990, the
Facility has achieved the applicable Thermal and Efficiency Percentages.
For the twelve months ended December 31, 2003, the Facility achieved a
Thermal Percentage of 21.0% and an Efficiency Percentage of 47.4%. The loss
of QF status could, among other things, cause the Facility to lose its
rights under PURPA to sell power to Consumers at Consumers avoided cost
and subject the Facility to additional federal and state regulatory
requirements. MCV believes that the Facility will meet the required Thermal
Percentage and the corresponding Efficiency Percentage in 2003 and beyond,
as well as the PURPA ownership limitations.
|   
|    |  | The Facility is wholly dependent upon natural gas for its fuel supply and a
substantial portion of the Facilitys operating expenses consist of the
costs of natural gas. MCV recognizes that its existing gas contracts are
not sufficient to satisfy the anticipated gas needs over the term of the PPA
and, as such, no assurance can be given
as to the availability or price of natural gas after the expiration of the
existing gas contracts. In addition, to the extent that the costs
associated with production of electricity rise faster than the energy charge
payments, MCVs financial performance will be negatively affected. The
extent of such impact will depend upon the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

F-8



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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|    |  | amount of the average energy charge payable under the PPA, which is based
upon costs incurred at Consumers coal-fired plants and upon the amount of
energy scheduled by Consumers for delivery under the PPA. However, given
the unpredictability of these factors, the overall economic impact upon MCV
of changes in energy charges payable under the PPA and in future fuel costs
under new or existing contracts cannot accurately be predicted.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | At both the state and federal level, efforts continue to restructure the
electric industry. A significant issue to MCV is the potential for future
regulatory denial of recovery by Consumers from its customers of above
market PPA costs Consumers pays MCV. At the state level, the MPSC entered a
series of orders from June 1997 through February 1998 (collectively the
Restructuring Orders), mandating that utilities wheel third-party power
to the utilities customers, thus permitting customers to choose their power
provider. MCV, as well as others, filed an appeal in the Michigan Court of
Appeals to protect against denial of recovery by Consumers of PPA charges.
The Michigan Court of Appeals found that the Restructuring Orders do not
unequivocally disallow such recovery by Consumers and, therefore, MCVs
issues were not ripe for appellate review and no actual controversy
regarding recovery of costs could occur until 2008, at the earliest. In
June 2000, the State of Michigan enacted legislation which, among other
things, states that the Restructuring Orders (being voluntarily implemented
by Consumers) are in compliance with the legislation and enforceable by the
MPSC. The legislation provides that the rights of parties to existing
contracts between utilities (like Consumers) and QFs (like MCV), including
the rights to have the PPA charges recovered from customers of the
utilities, are not abrogated or diminished, and permits utilities to
securitize certain stranded costs, including PPA charges.
|   
|    |  | In 1999, the U.S. District Court granted summary judgment to MCV declaring
that the Restructuring Orders are preempted by federal law to the extent
they prohibit Consumers from recovering from its customers any charge for
avoided costs (or stranded costs) to be paid to MCV under PURPA pursuant
to the PPA. In 2001, the United States Court of Appeals (Appellate Court)
vacated the U.S. District Courts 1999 summary judgment and ordered the case
dismissed based upon a finding that no actual case or controversy existed
for adjudication between the parties. The Appellate Court determined that
the parties dispute is hypothetical at this time and the QFs (including
MCV) claims are premised on speculation about how an order might be
interpreted by the MPSC, in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | MCV continues to monitor and participate in these industry restructuring
matters as appropriate, and to evaluate potential impacts on both cash flows
and recoverability of the carrying value of property, plant and equipment.
MCV management cannot, at this time, predict the impact or outcome of these
matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(2) |  | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Following is a discussion of MCVs significant accounting
policies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | Principles of Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | The consolidated financial statements include the accounts of MCV and its
wholly owned subsidiaries. All material transactions and balances among
entities, which comprise MCV, have been eliminated in the consolidated
financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | MCV recognizes revenue for the sale of variable energy and fixed energy when
delivered. Capacity and other installment revenues are recognized based on
plant availability or other contractual arrangements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

F-9



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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



| |  | Fuel Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | MCVs fuel costs are those costs associated with securing natural gas,
transportation and storage services necessary to generate electricity and
steam from the Facility. These costs are recognized in the income statement
based upon actual volumes burned to produce the delivered energy. In
addition, MCV engages in certain cost mitigation activities to offset the
fixed charges MCV incurs for these activities. The gains or losses resulting
from these activities have resulted in net gains of approximately $7.7
million, $3.9 million and $5.5 million for the years ended 2003, 2002 and
2001, respectively. These net gains are reflected as a component of fuel
costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | In July 2000, in response to rapidly escalating natural gas prices and
since Consumers electric rates were frozen, MCV entered into transactions
with Consumers whereby Consumers agreed to reduce MCVs dispatch level and
MCV agreed to share with Consumers the savings realized by not having to
generate electricity (Dispatch Mitigation). For the years ended 2003,
2002 and 2001, MCV estimates that Dispatch Mitigation resulted in net
savings of approximately $13.0 million, $2.5 million and $7.6 million,
respectively, a portion of which will be realized in reduced maintenance
expenditures in future years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Subsequently, on January 1, 2004, Dispatch Mitigation ceased and Consumers
began dispatching MCV pursuant to the 915 MW Settlement and the 325 MW
Settlement availability caps provision (i.e., minimum dispatch of 1100 MW
on- and off-peak (Forced Dispatch)). On February 12, 2004, MCV and
Consumers entered into a Resource Conservation Agreement (RCA) which,
among other things, provides that Consumers will economically dispatch MCV,
if certain conditions are met. Such dispatch is expected to reduce
electric production from what would have occurred under the Forced
Dispatch, as well as decrease gas consumption by MCV. The RCA provides
that Consumers has a right of first refusal to purchase, at market prices,
the gas conserved under the RCA. The RCA further provides for the parties
to enter into another agreement implementing the terms of the RCA including
the sharing of savings realized by not having to generate electricity. The
RCA is subject to MPSC approval and MCV and Consumers must accept the terms
of the MPSC order as a condition precedent to the RCA becoming effective.
The MPSC has not yet acted upon Consumers application for approval of the
RCA. MCV cannot predict the outcome of the MPSC proceedings necessary to
effectuate the RCA.
|
| |  | Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | MCVs inventory of natural gas is stated at the lower of cost or market, and
valued using the last-in, first-out (LIFO) method. Inventory includes the
costs of purchased gas, variable transportation and storage. The amount of
reserve to reduce inventories from first-in, first-out (FIFO) basis to the
LIFO basis at December 31, 2003 and 2002, was $8.4 million and $7.4 million,
respectively. Inventory cost, determined on a FIFO basis, approximates
current replacement cost.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Materials and Supplies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Materials and supplies are stated at the lower of cost or market using the
weighted average cost method. The majority of MCVs materials and supplies
are considered replacement parts for MCVs Facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Depreciation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Original plant, equipment and pipeline were valued at cost for the
constructed assets and at the asset transfer price for purchased and
contributed assets, and are depreciated using the straight-line method over
an estimated useful life of 35 years, which is the term of the PPA, except
for the hot gas path components of the GTGs which are primarily being
depreciated over a 25-year life. Plant construction and additions, since
commercial
operations in 1990, are depreciated using the straight-line method over the
remaining life of the plant which currently is 22 years. Major renewals and
replacements, which extend the useful life of plant and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-10



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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



| |  | are capitalized, while maintenance and repairs are expensed when incurred.
Major equipment overhauls are capitalized and amortized to the next
equipment overhaul. Personal property is depreciated using the
straight-line method over an estimated useful life of 5 to 15 years. The
cost of assets and related accumulated depreciation are removed from the
accounts when sold or retired, and any resulting gain or loss reflected in
operating income.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Federal Income Tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | MCV is not subject to Federal or State income taxes. Partnership earnings
are taxed directly to each individual partner.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Statement of Cash Flows                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | All liquid investments purchased with a maturity of three months or less at
time of purchase are considered to be current cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | The carrying amounts of cash and cash equivalents and short-term investments
approximate fair value because of the short maturity of these instruments.
MCVs short-term investments, which are made up of investment securities
held-to-maturity, as of December 31, 2003 and December 31, 2002 have
original maturity dates of approximately one year or less. The unique
nature of the negotiated financing obligation discussed in Note 6 makes it
unnecessary to estimate the fair value of the Owner Participants underlying
debt and equity instruments supporting such financing obligation, since SFAS
No. 107 Disclosures about Fair Value of Financial Instruments does not
require fair value accounting for the lease obligation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Accounting for Derivative Instruments and Hedging Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Effective January 1, 2001, MCV adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities which was issued in June 1998
and then amended by SFAS No. 137, Accounting for Derivative Instruments and
Hedging Activities  Deferral of the Effective Date of SFAS No. 133, SFAS
No. 138 Accounting for Certain Derivative Instruments and Certain Hedging
Activities  An amendment of FASB Statement No. 133 and SFAS No. 149
Amendment of Statement 133 on Derivative Instruments and Hedging Activity
(collectively referred to as SFAS No. 133). SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative
instrument be recorded on the balance sheet as either an asset or liability
measured at its fair value. SFAS No. 133 requires that changes in a
derivatives fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
in some cases allows a derivatives gains and losses to offset related
results on the hedged item in the income statement or permits recognition of
the hedge results in other comprehensive income, and requires that a company
formally document, designate and assess the effectiveness of transactions
that receive hedge accounting.



| |  |  | Electric Sales Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | MCV believes that its electric sales agreements currently do not qualify
as derivatives under SFAS No. 133, due to the lack of an active energy
market (as defined by SFAS No. 133) in the State of Michigan and the
transportation cost to deliver the power under the contracts to the
closest active energy market at the Cinergy hub in Ohio and as such does
not record the fair value of these contracts on its balance sheet. If an
active energy market emerges, MCV intends to apply the normal purchase,
normal sales exception under SFAS No. 133 to its electric sales
agreements, to the extent such exception is applicable.
|
| |  |  | Forward Foreign Exchange Contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  |  | An amended service agreement was entered into between MCV and Alstom
Power Company (Alstom) (the Amended Service Agreement), under which
Alstom will provide hot gas path parts for MCVs twelve                                                                                                                                                                                                                                                                                                                                                                                                                                      

F-11



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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



| |  |  | gas turbines. The payments due to Alstom under the Amended Service
Agreement are adjusted annually based on the U.S. dollar to Swiss franc
currency exchange rate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | To manage this currency exchange rate risk and hedge against adverse
currency fluctuations impacting the payments under the Amended Service
Agreement, MCV maintained a foreign currency hedging program whereby MCV
periodically entered into forward purchase contracts for Swiss francs.
Under SFAS No. 133, the forward foreign currency exchange contracts
qualified as fair value hedges, since they hedged the identifiable
foreign currency commitment of the Amended Service Agreement. As of
December 31, 2003, MCV did not have any such transactions outstanding and
does not anticipate any future transactions since the Alstom Agreement is
expected to be terminated in the near future. As of December 31, 2002,
MCV had a forward purchase contract involving Swiss francs in the
notional amount of $5.0 million. This hedge was considered highly
effective, therefore, there was no material gain or loss recognized in
earnings during the twelve months ended December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | Natural Gas Supply Contracts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | MCV management believes that its long-term natural gas contracts which do
not contain volume optionality qualify under SFAS No. 133 for the normal
purchases and normal sales exception. Therefore, these contracts are
currently not recognized at fair value on the balance sheet.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  |  | The FASB issued DIG Issue C-16, which became effective April 1, 2002,
regarding natural gas commodity contracts that combine an option
component and a forward component. This guidance requires either that
the entire contract be accounted for as a derivative or the components of
the contract be separated into two discrete contracts. Under the first
alternative, the entire contract considered together would not qualify
for the normal purchases and sales exception under the revised guidance.
Under the second alternative, the newly established forward contract
could qualify for the normal purchases and sales exception, while the
option contract would be treated as a derivative under SFAS No. 133 with
changes in fair value recorded through earnings. At April 1, 2002, MCV
had nine long-term gas contracts that contained both an option and
forward component. As such, they were no longer accounted for under the
normal purchases and sales exception and MCV began mark-to-market
accounting of these nine contracts through earnings. Based on the natural
gas prices, at the beginning of April 2002, MCV recorded a $58.1 million
gain for the cumulative effect of this accounting change. During the
fourth quarter of 2002, MCV removed the option component from three of
the nine long-term gas contracts, which should reduce some of the
earnings volatility. Since April 2002, MCV has recorded an additional
mark-to-market gain of $16.9 million for these gas contracts for a
cumulative mark-to-market gain through December 31, 2003 of $75.0
million, which will reverse over the remaining life of these gas
contracts, ranging from 2004 to 2007.
|
| |  |  | For the twelve months ended December 31, 2003, MCV recorded in Fuel
costs a $5.0 million net mark-to-market loss in earnings associated with
these contracts. In addition, as of December 31, 2003 and December 31,
2002, MCV recorded Derivative assets in Current Assets in the amount of
$56.9 million and $48.9 million, respectively, and for the same periods
recorded Derivative assets in Other Assets in the amount of $18.1
million and $31.0 million, respectively, representing the mark-to-market
gain on these long-term natural gas contracts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Natural Gas Supply Futures and Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | To manage market risks associated with the volatility of natural gas
prices, MCV maintains a gas hedging program. MCV enters into natural gas
futures and option contracts in order to hedge against unfavorable
changes in the market price of natural gas in future months when gas is
expected to be needed. These financial instruments are being utilized
principally to secure anticipated natural gas requirements necessary for
projected electric and steam sales, and to lock in sales prices of
natural gas previously obtained in order to optimize MCVs existing gas
supply, storage and transportation arrangements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | These financial instruments are derivatives under SFAS No. 133 and the
contracts that are utilized to secure the anticipated natural gas
requirements necessary for projected electric and steam sales qualify as
cash flow                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



| |  |  | hedges under SFAS No. 133, since they hedge the price risk associated
with the cost of natural gas. MCV also engages in cost mitigation
activities to offset the fixed charges MCV incurs in operating the
Facility. These cost mitigation activities include the use of futures
and options contracts to purchase and/or sell natural gas to maximize the
use of the transportation and storage contracts when it is determined
that they will not be needed for Facility operation. Although these cost
mitigation activities do serve to offset the fixed monthly charges, these
cost mitigation activities are not considered a normal course of business
for MCV and do not qualify as hedges under SFAS No. 133. Therefore, the
resulting mark-to-market gains and losses from cost mitigation activities
are flowed through MCVs earnings.                                                                                                                                                                                                                                                                                                 
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Cash is deposited with the broker in a margin account at the time futures
or options contracts are initiated. The change in market value of these
contracts requires adjustment of the margin account balances. The margin
account balance as of December 31, 2003 and December 31, 2002 was
recorded as a current asset in Broker margin accounts and prepaid
expenses, in the amount of $4.1 million and $.8 million, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | For the twelve months ended December 31, 2003, MCV has recognized in
other comprehensive income, an unrealized $5.0 million increase on the
futures contracts, which are hedges of forecasted purchases for plant use
of market priced gas. This resulted in a net $31.3 million gain in other
comprehensive income as of December 31, 2003. This balance represents
natural gas futures and options with maturities ranging from January 2004
to December 2007, of which $21.8 million of this gain is expected to be
reclassified into earnings within the next twelve months. MCV also has
recorded, as of December 31, 2003, a $29.9 million current derivative
asset in Derivative assets, representing the mark-to-market gain on
natural gas futures for anticipated projected electric and steam sales
accounted for as hedges. In addition, for the twelve months ended
December 31, 2003, MCV has recorded a net $35.0 million gain in earnings
included in fuel costs from hedging activities related to MCV natural gas
requirements for Facility operations and a net $1.0 million gain in
earnings from cost mitigation activities.
|
| |  |  | For the twelve months ended December 31, 2002, MCV recognized an
unrealized $50.6 million increase in other comprehensive income on the
futures contracts, which are hedges of forecasted purchases for plant use
of market priced gas, resulting in a $26.3 million gain balance in other
comprehensive income as of December 31, 2002. As of December 31, 2002,
MCV had recorded a $24.9 million current derivative asset in Derivative
assets. For the twelve months ended December 31, 2002, MCV had recorded
a net $12.2 million loss in earnings from hedging activities related to
MCV natural gas requirements for Facility operations and a net $.4
million gain in earnings from cost mitigation activities.                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | Interest Rate Swaps                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  |  | To manage the effects of interest rate volatility on interest income
while maximizing return on permitted investments, MCV established an
interest rate hedging program. The notional amounts of the hedges are
tied directly to MCVs anticipated cash investments, without physically
exchanging the underlying notional amounts. Cash is deposited with the
broker in a margin account at the time the interest rate swap
transactions are initiated. The change in market value of these
contracts may require further adjustment of the margin account balance.
The margin account balance at December 31, 2002, of
approximately $25,000, which was recorded as a current asset in Broker margin accounts
and prepaid expenses, was returned to MCV during the month of January
2003 since MCV currently does not have any outstanding interest rate swap
transactions.                                                                                                                                                                                                                                                                    
|
| |  |  | As of December 31, 2002, MCV had one interest rate swap, with a notional
amount of $20.0 million with a period of performance that extended to
December 1, 2002, which did not qualify as a hedge under SFAS No. 133.
The gains and losses on this swap were recorded currently in earnings.
For the twelve months ended December 31, 2002, MCV recorded an immaterial
loss in earnings.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-13



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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



| |  |  | Reclassification                                                                                                    
| |  |  | --------------------------------------------------------------------------------------------------------------------
|
| |  |  | Certain prior period amounts have been reclassified to conform to the
current year financial statement presentation.



|    |  | New Accounting Standards                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. This SFAS amends SFAS No.
133 for decisions made (1) as part of the Derivative Implementations Group
process that effectively required amendments to SFAS No. 133, (2) for other
Financial Accounting Standards Board projects dealing with financial
instruments and (3) for implementation issues raised in relation to the
application of this definition of a derivative. The changes in this SFAS
No. 149 improve financial reporting by requiring that contracts with
comparable characteristics be accounted for similarly, which will result in
more consistent reporting of contracts as either derivatives or hybrid
instruments. This standard is effective for contracts entered into or
modified after June 30, 2003, with some exceptions. MCV has adopted this
standard and does not expect the application to materially affect its
financial position or results of operations.
|   
|(3) |  | RESTRICTED INVESTMENT SECURITIES HELD-TO-MATURITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | Non-current restricted investment securities held-to-maturity have carrying
amounts that approximate fair value because of the short maturity of these
instruments and consist of the following at December 31 (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                                                                               |  |      |         |      |  |   |         | 
|------------------------------------------------------------------------------ |  | ---- | ------- | ---- |  | - | ------- | 
|                                                                               |  | 2003 |         | 2002
|                                                                               |  |      |         |     
|Funds restricted for rental payments
pursuant to the Overall Lease
Transaction |  | $    | 137,296 |      |  | $ | 136,554 | 
|Funds restricted for management
non-qualified plans                            |  |      | 2,459   |      |  |   | 2,147   | 
|                                                                               |  |      |         |      |  |   |         | 
|Total                                                                          |  | $    | 139,755 |      |  | $ | 138,701 | 
|                                                                               |  |      |         |      |  |   |         | 



|(4) |  | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES                                                        
|--- |  | ------------------------------------------------------------------------------------------------
|   
|    |  | Accounts payable and accrued liabilities consist of the following at
December 31 (in thousands):

|                                   |                 |   |        |        |      |   |        |        | 
|---------------------------------- | --------------- | - | ------ | ------ | ---- | - | ------ | ------ | 
|                                   |                 |   | 2003   |        | 2002
|                                   |                 |   |        |        |     
|Accounts payable                   |                 |   |        |        |      |   |        |       
|                                   | Related parties |   | $      | 7,386  |      |   | $      | 12,224 | 
|                                   | Trade creditors |   |        | 34,786 |      |   |        | 27,935 | 
|Property and single business taxes |                 |   | 12,548 |        |      |   | 14,842 |       
|Other                              |                 |   | 2,648  |        |      |   | 3,079  |       
|                                   |                 |   |        |        |      |   |        |       
|Total                              |                 | $ | 57,368 |        |      | $ | 58,080 |       
|                                   |                 |   |        |        |      |   |        |       



|(5) |  | GAS SUPPLIER FUNDS ON DEPOSIT                                                                                                                                                                                                                                                                                                                
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Pursuant to individual gas contract terms with counterparties, deposit
amounts may be required by one party to
the other based upon the net amount of exposure.  The net amount of exposure will vary with
changes in market prices, credit provisions and various other factors.  Collateral paid or
received will be posted by one party to

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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|    |  | the other based upon the net amount of exposure. The net amount of exposure
will vary with changes in market prices, credit provisions and various other
factors. Collateral paid or received will be posted by one party to the
other based on the net amount of the exposure. Interest is earned on funds
on deposit. As of December 31, 2003 MCV was not supplying any credit
support in the form of cash or letters of credit. As of December 31, 2003
MCV was holding $4.5 million of cash on deposit and letters of credit
totaling $116.6 million from two gas suppliers as collateral support.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(6) |  | LONG-TERM DEBT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|    |  | Long-term debt consists of the following at December 31 (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

|                                                                                                                                                            |  |      |           |      |  |   |           |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | - | --------- | -
|                                                                                                                                                            |  | 2003 |           | 2002
|                                                                                                                                                            |  |      |           |     
|Financing obligation, maturing through
2015, payable in semi-annual installments
of principal and interest, collateralized
by property, plant and equipment |  | $    | 1,153,221 |      |  | $ | 1,247,149 |  
|Less current portion                                                                                                                                        |  |      | (134,576  | )    |  |   | (93,928   | )
|                                                                                                                                                            |  |      |           |      |  |   |           |  
|Total long-term debt                                                                                                                                        |  | $    | 1,018,645 |      |  | $ | 1,153,221 |  
|                                                                                                                                                            |  |      |           |      |  |   |           |  



| |  | Financing Obligation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In June 1990, MCV obtained permanent financing for the Facility by entering
into sale and leaseback agreements (Overall Lease Transaction) with a
lessor group, related to substantially all of MCVs fixed assets. Proceeds
of the financing were used to retire borrowings outstanding under existing
loan commitments, make a capital distribution to the Partners and retire a
portion of notes issued by MCV to MEC Development Corporation (MDC) in
connection with the transfer of certain assets by MDC to MCV. In
accordance with SFAS No. 98, Accounting For Leases, the sale and
leaseback transaction has been accounted for as a financing arrangement.                                                                                                                                                                                                               
|
| |  | The financing obligation utilizes the effective interest rate method, which
is based on the minimum lease payments required through the end of the
basic lease term of 2015 and managements estimate of additional
anticipated obligations after the end of the basic lease term. The
effective interest rate during the remainder of the basic lease term is
approximately 9.4%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Under the terms of the Overall Lease Transaction, MCV sold undivided
interests in all of the fixed assets of the Facility for approximately $2.3
billion, to five separate owner trusts (Owner Trusts) established for the
benefit of certain institutional investors (Owner Participants). U.S.
Bank National Association (formerly known as State Street Bank and Trust
Company) serves as owner trustee (Owner Trustee) under each of the Owner
Trusts, and leases undivided interests in the Facility on behalf of the
Owner Trusts to MCV for an initial term of 25 years. CMS Midland Holdings
Company (CMS Holdings), currently a wholly owned subsidiary of Consumers,
acquired a 35% indirect equity interest in the Facility through its
purchase of an interest in one of the Owner Trusts.                                                                           
|
| |  | The Overall Lease Transaction requires MCV to achieve certain rent coverage
ratios and other financial tests prior to a distribution to the Partners.
Generally, these financial tests become more restrictive with the passage
of time. Further, MCV is restricted to making permitted investments and
incurring permitted
indebtedness as specified in the Overall Lease Transaction. The Overall
Lease Transaction also requires filing of certain periodic operating and
financial reports, notification to the lessors of events constituting a
material adverse change, significant litigation or governmental
investigation, and change in status as a qualifying facility under FERC
proceedings or court decisions, among others. Notification and approval is
required for plant modification, new business activities, and other
significant changes, as defined. In addition,

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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



| |  | MCV has agreed to indemnify various parties to the sale and leaseback
transaction against any expenses or environmental claims asserted, or
certain federal and state taxes imposed on the Facility, as defined in the
Overall Lease Transaction.                                                                                                                                                                                                                                                                               
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Under the terms of the Overall Lease Transaction and refinancing of the
tax-exempt bonds, approximately $25.0 million of transaction costs were a
liability of MCV and have been recorded as a deferred cost. Financing
costs incurred with the issuance of debt are deferred and amortized using
the interest method over the remaining portion of the 25-year lease term.
Deferred financing costs of approximately $1.4 million, $1.5 million and
$1.7 million were amortized in the years 2003, 2002 and 2001, respectively.
|
| |  | Interest and fees incurred related to long-term debt arrangements during
2003, 2002 and 2001 were $111.9 million, $118.3 million and $124.6 million,
respectively.                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Interest and fees paid during 2003, 2002 and 2001 were $115.4 million,
$122.1 million and $131.7 million, respectively.                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Minimum payments due under these long-term debt arrangements over the next
five years are (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                       

|     |  |           |         |          |  |       |         |  |  |   |         | 
|---- |  | --------- | ------- | -------- |  | ----- | ------- |  |  | - | ------- | 
|     |  | Principal |         | Interest |  | Total
|     |  |           |         |          |  |      
|2004 |  | $         | 134,576 |          |  | $     | 108,233 |  |  | $ | 242,809 | 
|2005 |  |           | 76,547  |          |  |       | 97,836  |  |  |   | 174,383 | 
|2006 |  |           | 63,459  |          |  |       | 92,515  |  |  |   | 155,974 | 
|2007 |  |           | 62,916  |          |  |       | 87,988  |  |  |   | 150,904 | 
|2008 |  |           | 67,753  |          |  |       | 83,163  |  |  |   | 150,916 | 
|     |  |           |         |          |  |       |         |  |  |   |         | 
|     |  | $         | 405,251 |          |  | $     | 469,735 |  |  | $ | 874,986 | 
|     |  |           |         |          |  |       |         |  |  |   |         | 



| |  | Revolving Credit Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | MCV has also entered into a working capital line (Working Capital
Facility), which expires August 29, 2004. Under the terms of the existing
agreement, MCV can borrow up to the $50 million commitment, in the form of
short-term borrowings or letters of credit collateralized by MCVs natural
gas inventory and earned receivables. At any given time, borrowings and
letters of credit are limited by the amount of the borrowing base, defined
as 90% of earned receivables and 50% of natural gas inventory, capped at
$15 million. During 2003, MCV did not utilize the Working Capital
Facility. At December 31, 2003, MCV had no outstanding borrowings or
letters of credit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Intercreditor Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | MCV has also entered into an Intercreditor Agreement with the Owner
Trustee, Working Capital Lender, U.S. Bank National Association as
Collateral Agent (Collateral Agent) and the Senior and Subordinated
Indenture Trustees. Under the terms of this agreement, MCV is required to
deposit all revenues derived from the operation of the Facility with the
Collateral Agent for purposes of paying operating expenses and rent. In
addition, these funds are required to pay construction modification costs
and to secure future rent payments. As of December 31, 2003, MCV has
deposited $137.3 million into the reserve account. The reserve account is
to be maintained at not less than $40 million nor more than $137 million
(or debt portion of next succeeding basic rent payment, whichever is
greater). Excess funds in the reserve account are periodically transferred
to MCV. This agreement also contains provisions governing the distribution
of revenues and rents due under the
Overall Lease Transaction, and establishes the priority of payment among
the Owner Trusts, creditors of the Owner Trusts, creditors of MCV and the
Partnership.

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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|(7) |  | COMMITMENTS AND OTHER AGREEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | MCV has entered into numerous commitments and other agreements related to
the Facility. Principal agreements are summarized as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | Power Purchase Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | MCV and Consumers have executed the PPA for the sale to Consumers of a
minimum amount of electricity, subject to the capacity requirements of Dow
and any other permissible electricity purchasers. Consumers has the right
to terminate and/or withhold payment under the PPA if the Facility fails to
achieve certain operating levels or if MCV fails to provide adequate fuel
assurances. In the event of early termination of the PPA, MCV would have a
maximum liability of approximately $270 million if the PPA were terminated
in the 12th through 24th years. The term of this agreement is 35 years
from the commercial operation date and year-to-year thereafter.                                                                                                                                                                                                                    
|   
|    |  | Steam and Electric Power Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | MCV and Dow executed the SEPA for the sale to Dow of certain minimum
amounts of steam and electricity for Dows facilities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | If the SEPA is terminated, and Consumers does not fulfill MCVs commitments
as provided in the Backup Steam and Electric Power Agreement, MCV will be
required to pay Dow a termination fee, calculated at that time, ranging
from a minimum of $60 million to a maximum of $85 million. This agreement
provides for the sale to Dow of steam and electricity produced by the
Facility for terms of 25 years and 15 years, respectively, commencing on
the commercial operation date and year-to-year thereafter.                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | Steam Purchase Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | MCV and DCC executed the SPA for the sale to DCC of certain minimum amounts
of steam for use at the DCC Midland site. Steam sales under the SPA
commenced in July 1996. Termination of this agreement, prior to
expiration, requires the terminating party to pay to the other party a
percentage of future revenues, which would have been realized had the
initial term of 15 years been fulfilled. The percentage of future revenues
payable is 50% if termination occurs prior to the fifth anniversary of the
commercial operation date and 33-1/3% if termination occurs after the fifth
anniversary of this agreement. The term of this agreement is 15 years from
the commercial operation date of steam deliveries under the contract and
year-to-year thereafter.                                                                                                                       
|   
|    |  | Gas Supply Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | MCV has entered into gas purchase agreements with various producers for the
supply of natural gas. The current contracted volume totals 227,561 MMBtu
per day annual average for 2004. As of January 1, 2004, gas contracts with
U.S. suppliers provide for the purchase of 149,423 MMBtu per day while gas
contracts with Canadian suppliers provide for the purchase of 78,138 MMBtu
per day. Some of these contracts require MCV to pay for a minimum amount
of natural gas per year, whether or not taken. The estimated minimum
commitments under these contracts based on current long term prices for gas
for the years 2004 through 2008 are $267.3 million, $338.6 million, $344.1
million, $340.4 million and $283.9 million, respectively. A portion of
these payments may be utilized in future years to offset the cost of
quantities of natural gas taken above the minimum amounts.
|   
|    |  | Gas Transportation Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | MCV has entered into firm natural gas transportation agreements with
various pipeline companies. These agreements require MCV to pay certain
reservation charges in order to reserve the transportation capacity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-17



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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



| |  | MCV incurred reservation charges in 2003, 2002 and 2001, of $34.8 million,
$35.1 million and $36.2 million, respectively. The estimated minimum
reservation charges required under these agreements for each of the years
2004 through 2008 are $34.9 million, $33.8 million, $30.0 million, $21.6
million and $21.6 million, respectively. These projections are based on
current commitments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Gas Turbine Service Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | MCV entered into a Service Agreement, as amended, with Alstom, which
commenced on January 1, 1990 and was set to expire upon the earlier of the
completion of the sixth series of major GTG inspections or December 31,
2009. Under the terms of this agreement, Alstom sold MCV an initial
inventory of spare parts for the GTGs and provides qualified service
personnel and supporting staff to assist MCV, to perform scheduled
inspections on the GTGs, and to repair the GTGs at MCVs request. Upon
termination of the Service Agreement (except for nonperformance by Alstom),
MCV must pay a cancellation payment. MCV and Alstom amended the Service
Agreement, effective December 31, 1993, to include the supply of hot gas
path parts. Under the amended Service Agreement, Alstom provides hot gas
path parts for MCVs twelve gas turbines through the fourth series of major
GTG inspections, which were completed in 2002. In January 1998, MCV and
Alstom amended the length of the amended Service Agreement to extend
through the sixth series of major GTG inspections, which are expected to be
completed by year end 2008, for a lump sum fixed price covering the entire
term of the amended Service Agreement of $266.5 million (in 1993 dollars,
which is adjusted based on exchange rates and Swiss inflation indices),
payable on the basis of operating hours as they occur over the same period.
MCV has made payments totaling approximately $200.7 million under this
amended Service Agreement through December 31, 2003.
|
| |  | MCV signed a new maintenance service and parts agreement with General
Electric International, Inc. (GEII), effective December 31, 2002 (GEII
Agreement). GEII will provide maintenance services and hot gas path parts
for MCVs twelve GTGs. Under terms and conditions similar to the
MCV/Alstom Service Agreement, as described above the GEII Agreement will
cover four rounds of major GTG inspections, which are expected to be
completed by the year 2015, at a savings to MCV as compared to the Service
Agreement with Alstom. The GEII Agreement is expected to replace the
current Alstom Service Agreement commencing July 1, 2004. The GEII
Agreement can be terminated by either party for cause or convenience.
Should termination for convenience occur, a buy out amount will be paid by
the terminating party with payments ranging from approximately $19.0
million to $.9 million, based upon the number of operating hours utilized
since commencement of the GEII Agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | MCV terminated the Alstom Service Agreement in February 2004, for cause and therefore does not owe the approximately $5.8 million termination payment to Alstom. MCV has a claim against Alstom for approximately $3.0 million for
adjustments due to reduced equivalent operating hours experienced under the
Service Agreement, that was paid by MCV and a claim against Alstom for one set of hot gas path spare parts (valued within a
range of $3.0 million to $7.0 million). These matters may be disputed by
Alstom and other disputes may arise. MCV will seek final resolution of all claims that may arise between the parties. At
this time, MCV has not recognized any liability to or receivable from Alstom in connection with these claims or termination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Steam Turbine Service Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | MCV entered into a nine year Steam Turbine Maintenance Agreement with
General Electric Company effective January 1, 1995, which is designed to
improve unit reliability, increase availability and minimize unanticipated
maintenance costs. In addition, this contract includes performance
incentives and penalties,
which are based on the length of each scheduled outage and the number of
forced outages during a calendar year. Effective February 1, 2004, MCV and
GE amended this contract to extend its term through August 31, 2007. MCV
will continue making monthly payments over the life of the contract, which
will total                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|    |  | $22.3 million (subject to escalation based on defined indices). The
parties have certain termination rights without incurring penalties or
damages for such termination. Upon termination, MCV is only liable
for payment of services rendered or parts provided prior to
termination.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Site Lease                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|    |  | In December 1987, MCV leased the land on which the Facility is located from
Consumers (Site Lease). MCV and Consumers amended and restated the Site
Lease to reflect the creation of five separate undivided interests in the
Site Lease as of June 1, 1990. Pursuant to the Overall Lease Transaction,
MCV assigned these undivided interests in the Site Lease to the Owner
Trustees, which in turn subleased the undivided interests back to MCV under
five separate site subleases.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | The Site Lease is for a term which commenced on December 29, 1987, and ends
on December 31, 2035, including two renewal options of five years each.
The rental under the Site Lease is $.6 million per annum, including the two
five-year renewal terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | Gas Turbine Generator Compressor Blade Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | MCV entered into an agreement with MTS Machinery Tools & Services AG
(MTS), in January 2002. Under this agreement MTS redesigned and will
manufacture and install new design compressor blades for MCVs twelve
GTGs, which is expected to increase the overall electrical capacity and
efficiency of each GTG. MCV has purchased three sets of such blades and
has the option to purchase an additional nine sets. The first set of
compressor blades was installed in the second quarter of 2003 for
approximately $4.2 million. At this time, an additional two sets have been
ordered at a cost of $4.1 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(8) |  | PROPERTY TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | In 1997, MCV filed a property tax appeal against the City of Midland at the
Michigan Tax Tribunal contesting MCVs 1997 property taxes. Subsequently,
MCV filed appeals contesting its property taxes for tax years 1998 through
2003 at the Michigan Tax Tribunal. A trial was held for tax years 1997 
2000. The appeals for tax years 2001-2003 are being held in abeyance. On
January 23, 2004, the Michigan Tax Tribunal issued its decision in MCVs
tax appeal against the City of Midland for tax years 1997 through 2000.
MCV management has estimated that the decision will result in a refund to
MCV for the tax years 1997 through 2000 of approximately $29 million in
taxes plus $7 million of interest. The decision is subject to
reconsideration at the Tribunal and may be appealed to the Michigan
Appellate Court and Michigan Supreme Court. The City of Midland has filed
a motion for reconsideration at the Michigan Tax Tribunal, asking the
Tribunal to make certain technical corrections, as well as substantive
changes to the decision. MCV has opposed this motion. MCV management
cannot predict the outcome of these further legal proceedings. MCV has not
recognized any of the above stated refunds (net of approximately $15.5
million of deferred expenses) in earnings at this time.
|   
|(9) |  | RETIREMENT BENEFITS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | Postretirement Health Care Plans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | In 1992, MCV established defined cost postretirement health care plans
(Plans) that cover all full-time employees, excluding key management.
The Plans provide health care credits, which can be utilized to purchase
medical plan coverage and pay qualified health care expenses. Participants
become eligible for the
benefits if they retire on or after the attainment of age 65 or upon a
qualified disability retirement, or if they have 10 or more years of
service and retire at age 55 or older. The Plans granted retroactive
benefits for all employees hired prior to January 1, 1992. This prior
service cost has been amortized to expense over a five                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

F-19



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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



| |  | year period. MCV annually funds the current year service and interest
cost as well as amortization of prior service cost to both qualified and
non-qualified trusts. The MCV accounts for retiree medical benefits in
accordance with SFAS 106, Employers Accounting for Postretirement Benefits
Other Than Pensions. This standard required the full accrual of such
costs during the years that the employee renders service to the MCV until
the date of full eligibility. The accumulated benefit obligation of the
Plans were $3.3 million at December 31, 2003 and $2.7 million at December
31, 2002. The measurement date of these Plans was December 31, 2003.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On December 8, 2003, President Bush signed into law the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (the Act).
The Act expanded Medicare to include, for the first time, coverage for
prescription drugs. At this time, because of various uncertainties related
to this legislation and the appropriate accounting methodology, MCV has
elected to defer financial recognition of this legislation until the FASB
issues final accounting guidance. When issued, that final guidance could
require MCV to change previously reported information. This deferral
election is permitted under SFAS 106-1.                                    
|
| |  | The following table reconciles the change in the Plans benefit obligation
and change in Plan assets as reflected on the balance sheet as of December
31 (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|                                               |  |      |         |      |  |   |         |  
|---------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                               |  | 2003 |         | 2002
|                                               |  |      |         |     
|Change in benefit obligation:                  |  |      |         |      |  |   |         |  
|Benefit obligation at beginning of year        |  | $    | 2,741.9 |      |  | $ | 2,405.1 |  
|Service cost                                   |  |      | 212.5   |      |  |   | 197.3   |  
|Interest cost                                  |  |      | 178.2   |      |  |   | 188.7   |  
|Actuarial gain (loss)                          |  |      | 147.4   |      |  |   | (44.6   | )
|Benefits paid during year                      |  |      | (4.0    | )    |  |   | (4.6    | )
|                                               |  |      |         |      |  |   |         |  
|Benefit obligation at end of year              |  |      | 3,276.0 |      |  |   | 2,741.9 |  
|                                               |  |      |         |      |  |   |         |  
|Change in Plan assets:                         |  |      |         |      |  |   |         |  
|Fair value of Plan assets at beginning of year |  |      | 2,045.8 |      |  |   | 2,088.0 |  
|Actual return on Plan assets                   |  |      | 527.5   |      |  |   | (270.9  | )
|Employer contribution                          |  |      | 257.5   |      |  |   | 233.3   |  
|Benefits paid during year                      |  |      | (4.0    | )    |  |   | (4.6    | )
|                                               |  |      |         |      |  |   |         |  
|Fair value of Plan assets at end of year       |  |      | 2,826.8 |      |  |   | 2,045.8 |  
|                                               |  |      |         |      |  |   |         |  
|Unfunded (funded) status                       |  |      | 449.2   |      |  |   | 696.1   |  
|Unrecognized prior service cost                |  |      | (170.3  | )    |  |   | (184.6  | )
|Unrecognized net gain (loss)                   |  |      | (278.9  | )    |  |   | (511.5  | )
|                                               |  |      |         |      |  |   |         |  
|Accrued benefit cost                           |  | $    |        |      |  | $ |        |  
|                                               |  |      |         |      |  |   |         |  



| |  | Net periodic postretirement health care cost for years ending December 31,
included the following components (in thousands):
| |  | ----------------------------------------------------------------------------------------------------------------------------

|                                                |  |      |        |      |  |      |        |   |  |   |        |  
|----------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                |  | 2003 |        | 2002 |  | 2001
|                                                |  |      |        |      |  |     
|Components of net periodic benefit cost:        |  |      |        |      |  |      |        |   |  |   |        |  
|Service cost                                    |  | $    | 212.5  |      |  | $    | 197.3  |   |  | $ | 173.5  |  
|Interest cost                                   |  |      | 178.2  |      |  |      | 188.7  |   |  |   | 142.9  |  
|Expected return on Plan assets                  |  |      | (163.7 | )    |  |      | (167.0 | ) |  |   | (171.3 | )
|Amortization of unrecognized net (gain) or loss |  |      | 30.5   |      |  |      | 14.3   |   |  |   | (12.6  | )
|                                                |  |      |        |      |  |      |        |   |  |   |        |  
|Net periodic benefit cost                       |  | $    | 257.5  |      |  | $    | 233.3  |   |  | $ | 132.5  |  
|                                                |  |      |        |      |  |      |        |   |  |   |        |  

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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



| |  | Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change
in assumed health care cost trend rates would have the following effects
(in thousands):
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                        |  |                    |       |                    |  |   |       | 
|------------------------------------------------------- |  | ------------------ | ----- | ------------------ |  | - | ----- | 
|                                                        |  | 1-Percentage-Point |       | 1-Percentage-Point
|                                                        |  | Increase           |       | Decrease          
|                                                        |  |                    |       |                   
|Effect on total of service and interest cost components |  | $                  | 48.6  |                    |  | $ | 41.8  | 
|Effect on postretirement benefit obligation             |  | $                  | 358.1 |                    |  | $ | 310.9 | 



| |  | Assumptions used in accounting for the Post-Retirement Health Care Plan
were as follows:
| |  | ----------------------------------------------------------------------------------------

|                                        |                      |  |      |      |      |  |      |      |   |  |      |      |  
|--------------------------------------- | -------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  | ---- | ---- | -
|                                        |                      |  | 2003 |      | 2002 |  | 2001
|                                        |                      |  |      |      |      |  |     
|Discount rate                           |                      |  | 6.00 | %    |      |  | 6.75 | %    |   |  | 7.25 | %   
|Long-term rate of return on Plan assets |                      |  | 8.00 | %    |      |  | 8.00 | %    |   |  | 8.00 | %   
|Inflation benefit amount                |                      |  |      |      |      |  |      |      |   |  |      |     
|                                        | 1998 through 2004    |  |      | 0.00 | %    |  |      | 0.00 | % |  |      | 0.00 | %
|                                        | 2005 and later years |  |      | 4.00 | %    |  |      | 4.00 | % |  |      | 4.00 | %



| |  | The long-term rate of return on Plan assets is established based on MCVs
expectations of asset returns for the investment mix in its Plan (with some
reliance on historical asset returns for the Plans). The expected returns
for various asset categories are blended to derive one long-term
assumption.                                                                                                                                                                                                                                                                                                                                              
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Plan Assets. Citizens Bank has been appointed as trustee (Trustee) of
the Plan. The Trustee serves as investment consultant, with the
responsibility of providing financial information and general guidance to
the MCV Benefits Committee. The Trustee shall invest the assets of the
Plan in the separate investment options in accordance with instructions
communicated to the Trustee from time to time by the MCV Benefit Committee.
The MCV Benefits Committee has the fiduciary and investment selection
responsibility for the Plan. The MCV Benefits Committee consists of MCV
Officers (excluding the President and Chief Executive Officer).
|
| |  | The MCV has a target allocation of 80% equities and 20% debt instruments.
These investments emphasis total growth return, with a moderate risk level.
The MCV Benefits Committee reviews the performance of the Plan investments
quarterly, based on a long-term investment horizon and applicable
benchmarks, with rebalancing of the investment portfolio, at the discretion
of the MCV Benefits Committee.                                                                                                                                                                                                                                             
|
| |  | MCVs Plans weighted-average asset allocations, by asset category are as
follows as of December 31:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                          |       |  |      |     |      |  |    |     |  
|------------------------- | ----- |  | ---- | --- | ---- |  | -- | --- | -
|                          |       |  | 2003 |     | 2002
|                          |       |  |      |     |     
|Asset Category:           |       |  |      |     |      |  |    |    
|Cash and cash equivalents |       |  | 11   | %   |      |  | 1  | %  
|Fixed income              |       |  | 17   | %   |      |  | 23 | %  
|Equity securities         |       |  | 72   | %   |      |  | 76 | %  
|                          |       |  |      |     |      |  |    |    
|                          | Total |  |      | 100 | %    |  |    | 100 | %
|                          |       |  |      |     |      |  |    |    



| |  | Contributions. MCV expects to contribute approximately $.2 million to the
Plan in 2004.                                                                                                                                                                                                                                                                                                                                       
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Retirement and Savings Plans                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | MCV sponsors a defined contribution retirement plan covering all employees.
Under the terms of the plan, MCV makes contributions to the plan of either
five or ten percent of an employees eligible annual compensation dependent
upon the employees age. MCV also sponsors a 401(k) savings plan for
employees. Contributions and costs for this plan are based on matching an
employees savings up to a maximum level. In

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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



| |  | 2003, 2002 and 2001, MCV contributed $1.3 million, $1.2 million and $1.1
million, respectively under these plans.                                                                                                                                                                                                                         
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Supplemental Retirement Benefits                                                                                                                                                                                                                                                                                                          
|
| |  | MCV provides supplemental retirement, postretirement health care and excess
benefit plans for key management. These plans are not qualified plans
under the Internal Revenue Code; therefore, earnings of the trusts
maintained by MCV to fund these plans are taxable to the Partners and trust
assets are included in the assets of MCV.

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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)



|(10) |  | PARTNERS EQUITY AND RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                   
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|     |  | The following table summarizes the nature and amount of each of MCVs
Partners equity interest, interest in profits and losses of MCV at December
31, 2003, and the nature and amount of related party transactions or
agreements that existed with the Partners or affiliates as of December 31,
2003, 2002 and 2001, and for each of the twelve month periods ended December
31 (in thousands).

|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  |  |  | 
|------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------ | ---------------------------- | ------- | -------- | ------- | ----------------------------------------- | ---- | ------ | ------------------------------------ | --------------------------------------------------------- | ------------------------------------------------------- | ------ | ------- | ------ |  | ------ | ------- | ------ |  | ------ | ------- | ------ |  |  |  | 
|Beneficial Owner, Equity Partner,                                                                            |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  | 
|Type of Partner and Nature of Related Party                                                                  |                                                                                                              | Equity Interest              |         | Interest |         | Related Party Transactions and Agreements |      | 2003   |                                      | 2002                                                      |                                                         | 2001  
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |       
|CMS Energy Company                                                                                           |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  | 
|CMS Midland, Inc.                                                                                            |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Power purchase agreements                                 |                                                         | $      | 513,774 |        |  | $      | 557,149 |        |  | $      | 550,477 |       
|                                                                                                             | General Partner; wholly-owned subsidiary of Consumers Energy
Company                                         |                              |         |          |         |                                           |      |        |                                      |                                                           | Purchases under gas transportation agreements           |        |         | 14,294 |  |        |         | 23,552 |  |        |         | 24,059 | 
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Purchases under spot gas agreements                       |                                                         |        | 663     |        |  |        | 3,631   |        |  |        | 3,756   |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Purchases under gas supply agreements                     |                                                         |        | 2,330   |        |  |        | 11,306  |        |  |        | 10,725  |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Gas storage agreement                                     |                                                         |        | 2,563   |        |  |        | 2,563   |        |  |        | 2,563   |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Land lease/easement agreements                            |                                                         |        | 600     |        |  |        | 600     |        |  |        | 600     |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Accounts receivable                                       |                                                         |        | 40,373  |        |  |        | 44,289  |        |  |        | 48,843  |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Accounts payable                                          |                                                         |        | 1,025   |        |  |        | 3,502   |        |  |        | 4,772   |       
|                                                                                                             |                                                                                                              | $                            | 391,546 |          |         |                                           | 49.0 | %      |                                      | Sales under spot gas agreements                           |                                                         |        | 3,260   |        |  |        | 1,084   |        |  |        | 7,107   |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  | 
|El Paso Corporation                                                                                          |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  | 
|Source Midland Limited Partnership
(SMLP) General Partner; owned by
subsidiaries of El Paso Corporation(1) |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Purchase under gas transportation agreements              |                                                         |        | 13,023  |        |  |        | 12,463  |        |  |        | 13,653  |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        | Purchases under spot gas agreement   |                                                           |                                                         | 610    |         |        |  | 15,655 |         |        |  | 45,130 |        
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        | Purchases under gas supply agreement |                                                           |                                                         | 54,308 |         |        |  | 47,136 |         |        |  | 5,912  |        
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Gas agency agreement                                      |                                                         |        | 238     |        |  |        | 365     |        |  |        | 1,989   |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Deferred reservation charges under gas purchase agreement |                                                         |        | 4,728   |        |  |        |        |        |  |        | 7,880   |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Accounts receivable                                       |                                                         |        |        |        |  |        | 523     |        |  |        |        |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Accounts payable                                          |                                                         |        | 5,751   |        |  |        | 7,706   |        |  |        | 5,198   |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Sales under spot gas agreements                           |                                                         |        | 3,474   |        |  |        | 14,007  |        |  |        | 28,451  |       
|                                                                                                             |                                                                                                              | $                            | 139,421 |          |         |                                           | 18.1 | %      |                                      | Partner cash withdrawal (including accrued interest)(2)   |                                                         |        |        |        |  |        |        |        |  |        | 56,714  |       
|El Paso Midland, Inc. (El Paso Midland)
General Partner; wholly-owned subsidiary
of El Paso Corporation(1) |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | See related party activity listed under SMLP.             |                                                         |        |         |        |  |        |         |        |  |        |         |       
|                                                                                                             |                                                                                                              | 83,653                       |         |          |         | 10.9                                      |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        | 
|MEI Limited Partnership (MEI)                                                                              |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | See related party activity listed under SMLP.             |                                                         |        |         |        |  |        |         |        |  |        |         |       
|                                                                                                             | A General and Limited Partner;
50% interest owned by El Paso Midland, Inc.
and 50% interest owned by SMLP(1) |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  |  | 
|                                                                                                             |                                                                                                              | General Partnership Interest |         |          | 69,714  |                                           |      |        | 9.1                                  |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  |  |  | 
|                                                                                                             |                                                                                                              | Limited Partnership Interest |         |          | 6,969   |                                           |      |        | .9                                   |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  |  |  | 
|Micogen Limited Partnership                                                                                  |                                                                                                              |                              | 34,854  |          |         |                                           | 4.5  |        |                                      | See related party activity listed under SMLP.             |                                                         |        |         |        |  |        |         |        |  |        |         |       
|                                                                                                             | (MLP) Limited Partner, owned
subsidiaries of El Paso Corporation(1)                                        |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  |  | 
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  | 
|                                                                                                             |                                                                                                              | Total El Paso Corporation    |         | $        | 334,611 |                                           |      |        | 43.5                                 | %                                                         |                                                         |        |         |        |  |        |         |        |  |        |         |        |  |  |  | 
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  | 
|The Dow Chemical Company                                                                                     |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  | 
|The Dow Chemical Company                                                                                     |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Steam and electric power agreement                        |                                                         |        | 36,207  |        |  |        | 29,385  |        |  |        | 33,727  |       
|                                                                                                             | Limited Partner                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           | Steam purchase agreement - Dow Corning Corp (affiliate) |        |         | 4,017  |  |        |         | 3,746  |  |        |         | 3,781  | 
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Purchases under demineralized water supply agreement      |                                                         |        | 6,396   |        |  |        | 6,605   |        |  |        | 6,913   |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Accounts receivable                                       |                                                         |        | 3,431   |        |  |        | 3,635   |        |  |        | 3,191   |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Accounts payable                                          |                                                         |        | 610     |        |  |        | 1,016   |        |  |        | 948     |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Standby and backup fees                                   |                                                         |        | 731     |        |  |        | 734     |        |  |        | 696     |       
|                                                                                                             |                                                                                                              | $                            | 72,918  |          |         |                                           | 7.5  | %      |                                      | Sales of gas under tolling agreement                      |                                                         |        |        |        |  |        | 6,442   |        |  |        |        |       
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  | 
|Alanna Corporation                                                                                           |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  | 
|Alanna Corporation                                                                                           |                                                                                                              |                              |         |          |         |                                           |      |        |                                      | Note receivable                                           |                                                         |        | 1       |        |  |        | 1       |        |  |        | 1       |       
|                                                                                                             | Limited Partner; wholly-owned subsidiary
of Alanna Holdings Corporation                                      |                              | $       | 1        | (3)     |                                           |      | .00001 | %                                    |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  |  | 
|                                                                                                             |                                                                                                              |                              |         |          |         |                                           |      |        |                                      |                                                           |                                                         |        |         |        |  |        |         |        |  |        |         |        |  | 

Footnotes to Partners Equity and Related Party Transactions



|(1) |  | On January 29, 2001, El Paso Corporation (El Paso) announced that it
had completed its merger with The Coastal Corporation (Coastal).
Coastal was the previous parent company of El Paso Midland (formerly known
as Coastal Midland, Inc.), SMLP, MLP and, through SMLP, MEI. After the
merger, Coastal became a wholly-owned subsidiary of El Paso and has
changed its name to El Paso CGP Company.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | A letter of credit has been issued and recorded as a note receivable from
El Paso Midland, this amount includes their share of cash available, as
well as, cash available to MEI, MLP and SMLP.                                                                                                                                                                                                         
|   
|(3) |  | Alannas capital stock is pledged to secure MCVs obligation under the
lease and other overall lease transaction documents.                                                                                                                                                                                                                                                                             

F-23



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##### Table of Contents



SUPPLEMENTAL INFORMATION

Supplemental information is to be furnished with reports filed pursuant to
Section 15 (d) of the Act by registrants, which have not registered securities
pursuant to Section 12 of the Act. No such annual report or proxy statement
has been sent to security holders.

F-24



---



##### Table of Contents






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.

|                    |  |                                                  |  |                                      
|------------------- |  | ------------------------------------------------ |  | -------------------------------------
|                    |  | MIDLAND COGENERATION VENTURE
LIMITED PARTNERSHIP
|                    |  |                                                  |  |                                      
|Date: March 1, 2004 |  | By                                               |  | /s/ James M. Kevra                   
|                    |  |                                                  |  |                                      
|                    |  |                                                  |  | James M. Kevra                       
|                    |  |                                                  |  | President and Chief 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 date indicated.

|                                         |  |                                                                                       |  |              
|---------------------------------------- |  | ------------------------------------------------------------------------------------- |  | -------------
|Signature                                |  | Title                                                                                 |  | Date         
|                                         |  |                                                                                       |  |              
|/s/ James M. Kevra

James M. Kevra       |  | President and Chief Executive Officer
(Principal Executive Officer)                   |  | March 1, 2004
|                                         |  |                                                                                       |  |              
|/s/ James M. Rajewski

James M. Rajewski |  | Chief Financial Officer,
Vice President and Controller
(Principal Accounting Officer) |  | March 1, 2004
|                                         |  |                                                                                       |  |              
|/s/ John J. ORourke

John J. ORourke   |  | Chairman, Management Committee                                                        |  | March 1, 2004
|                                         |  |                                                                                       |  |              
|/s/ David W. Joos

David W. Joos         |  | Member, Management Committee                                                          |  | March 1, 2004

F-25



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##### Table of Contents






EXHIBIT INDEX

|        |  |   |  |                                                                                                                                                                                                                                                                                        
|------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                                                                        
|Number  |  |   |  | Description                                                                                                                                                                                                                                                                            
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|3.1     |  | - |  | Restated Certificate of Limited Partnership dated June 13, 1988 ((a), Exhibit 3.1)).                                                                                                                                                                                                   
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|3.2     |  | - |  | Amended and Restated Limited Partnership Agreement of MCV dated as of June 13, 1988 ((a) (Exhibit 3.2)).                                                                                                                                                                               
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|3.2 (a) |  | - |  | Amendment No. 1 dated as of May 26, 1989 to Amended and Restated Limited Partnership Agreement ((a) (Exhibit
3.3)).                                                                                                                                                                    
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|3.2 (b) |  | - |  | Amendment No. 2 dated as of November 28, 1989 to Amended and Restated Limited Partnership Agreement ((a),
Exhibit 3.4)).                                                                                                                                                               
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|3.2 (c) |  | - |  | Amendment No. 3 dated as of June 1, 1990 to Amended and Restated Limited Partnership Agreement (incorporated
by reference to Exhibit (2)(b) to CMS Energy Corporations Form 10-K dated March 21, 1990, File No. 1-9513).                                                              
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|3.3     |  | - |  | Memorandum of Agreement, dated March 2, 1990, relating to Amended and Restated Partnership Agreement ((a),
(Exhibit 3.6)).                                                                                                                                                             
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.1     |  | - |  | Senior Trust Indenture, Leasehold Mortgage and Security Agreement dated as of June 1, 1990 between Shawmut
Bank and United States Trust Company of New York ((a), Exhibit 4.1)).                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.1 (a) |  | - |  | Senior Trust Indenture Supplement No. 1 dated as of June 1, 1990 ((a), (Exhibit 4.2)).                                                                                                                                                                                                 
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.2     |  | - |  | Subordinated Trust Indenture, Leasehold Mortgage and Security Agreement dated as of June 1, 1990 between
Shawmut Bank and Meridian Trust Company (Subordinated Trust Indenture) ((a), (Exhibit 4.5)).                                                                                
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.2 (a) |  | - |  | Subordinated Trust Indenture Supplement No. 1 dated as of June 1, 1990 ((a), (Exhibit 4.6)).                                                                                                                                                                                           
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.2 (b) |  | - |  | Subordinated Trust Indenture Supplement No. 2 dated as of July 1, 1990 ((a), (Exhibit 4.7)).                                                                                                                                                                                           
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.3     |  | - |  | Collateral Trust Indenture dated as of June 1, 1990 among Midland Funding Corporation I, MCV and United
States Trust Company of New York (incorporated by reference to Exhibit No. (28)(b) to CMS Energy
Corporations Form 10-Q for the quarter ended June 30, 1990, File No. 1-9513).
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.3 (a) |  | - |  | Collateral Trust Indenture Supplement No. 1 dated June 1, 1990 ((a), (Exhibit 4.4)).                                                                                                                                                                                                   
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.4     |  | - |  | Collateral Trust Indenture dated as of June 1, 1990 among Midland Funding Corporation II, MCV and Meridian
Trust Company (incorporated by reference to Exhibit No. (28)(d) to CMS Energy Corporations Form 10-Q for
the quarter ended June 30, 1990, File No. 1-9513).                
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.4 (a) |  | - |  | Collateral Trust Indenture Supplement No. 1 dated June 1, 1990 ((a), (Exhibit 4.9)).                                                                                                                                                                                                   
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.5     |  | - |  | Amended and Restated Trust Agreement dated as of March 1, 1990 between Shawmut Bank and Owner Participant
((a), (Exhibit 4.10)).                                                                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.6     |  | - |  | Lease Agreement, dated as of March 1, 1990 between MCV and Shawmut Bank ((a), (Exhibit 4.11)).                                                                                                                                                                                         
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.6 (a) |  | - |  | Amended and Restated Lease Agreement dated as of June 1, 1990 between MCV and Shawmut Bank ((a), (Exhibit
4.12)).                                                                                                                                                                      
|        |  |   |  |                                                                                                                                                                                                                                                                                        
|4.6 (b) |  | - |  | Amendment No. 1 dated as of January 1, 1992 to Amended and Restated Lease Agreement ((d), (Exhibit 4.17)).                                                                                                                                                                             

E-1



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##### Table of Contents



EXHIBIT INDEX

|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|-------- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|Number   |  |   |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.6 (c)  |  | - |  | Second Amended and Restated Agreement of Lease [Part A] dated as of June 1, 1990 among Consumers, MCV, CMS
Midland, Inc. and MEC Development Corporation ((a), (Exhibit 4.14)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.7      |  | - |  | Amended and Restated Participation Agreement dated as of June 1, 1990 among MCV, Owner Participant, Shawmut
Bank, United States Trust Company, Meridian Trust Company, Midland Funding Corporation I, Midland Funding
Corporation II, MDC and Institutional Senior Bond Purchasers ((a), (Exhibit 4.13)).                                                                                                                                                                                                                                                                                                                                                          
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.8      |  | - |  | Ground Lease Assignment and Assumption Agreement dated as of June 1, 1990 among Shawmut Bank and MCV ((a),
(Exhibit 4.15)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|4.9      |  | - |  | Collateral Agency and Intercreditor Agreement dated as of June 1, 1990 between Shawmut Bank, MCV, United
States Trust Company, Meridian Trust Company, Bank of Montreal and Manufacturers National Bank of Detroit
((a), (Exhibit 4.16)).                                                                                                                                                                                                                                                                                                                                                                                                                          
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.1     |  | - |  | Tax Exempt Collateral Trust Indenture dated as of July 1, 1990 among The Economic Development Corporation of
the County of Midland, MCV and Meridian Trust Company (incorporated by reference to Exhibit No. (28)(g) to
CMS Energy Corporations Form 10-Q for the quarter ended June 30, 1990, File No. 1-9513).                                                                                                                                                                                                                                                                                                                                                  
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.1 (a) |  | - |  | Tax Exempt Collateral Trust Indenture Supplement No. 1 dated July 1, 1990 ((a), (Exhibit 10.2)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.2     |  | - |  | Credit Agreement dated as of June 16, 1990 among Bank of Montreal as Agent, the Lenders named therein and
MCV ((a), (Exhibit 10.3)), as amended.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.3     |  | - |  | CMS Transfer Agreement dated as of January 27, 1987, as amended as of June 13, 1988, among Consumers Power
Company, CMS Midland, Inc. and MCV (incorporated by reference to Exhibit (19)(a) to Consumers Power
Companys Form 10-Q for the quarter ended June 30, 1988, File No. 1-5611).                                                                                                                                                                                                                                                                                                                                                                          
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.4     |  | - |  | Amended and Restated MDC Transfer Agreement dated as of June 13, 1988, among Consumers Power Company, MEC
Development Corporation and MCV, as amended by the March 2, 1990 Memorandum of Agreement with respect to the
Amended and Restated Partnership Agreement (incorporated by reference to Exhibit No. (19)(b) to Consumers
Power Companys Form 10-Q for the quarter ended June 30, 1988, File No. 1-5611), as amended by the March 2,
1990 Memorandum of Agreement with respect to the Amended and Restated MDC Transfer Agreement (incorporated
by reference to Exhibit (2)(b) to CMS Energy Corporations Form 8-K dated March 21, 1990, File No. 1-9513).
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.5     |  | - |  | Amended and Restated Tax Indemnification Agreement, dated as of June 1, 1990, among MCV and Owner
Participant ((a), (Exhibit 10.70)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.6     |  | - |  | Capacity Support Agreement dated as of June 9, 1988, between CMS Energy Corporation and MCV (incorporated by
reference to Exhibit No. 10(m) to CMS Energy Corporations Annual Report on Form 10-K, for the year ended
December 31, 1988, File No. 1-9513).                                                                                                                                                                                                                                                                                                                                                                                                        
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.7     |  | - |  | Registration Rights Agreement dated as of December 17, 1993 among Midland Funding Corporation I, MCV,
Consumers and Morgan Stanley & Co. Incorporated and Donaldson, Lufkin & Jearette Securities Corporation
((e), (Exhibit 10.97)).                                                                                                                                                                                                                                                                                                                                                                                                                              
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.8     |  | - |  | Power Purchase Agreement, dated as of July 17, 1986, between MCV and Consumers Power Company (PPA) ((a),
(Exhibit 10.4)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|         |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|10.8 (a) |  | - |  | Amendment No. 1 to PPA dated September 10, 1987 ((a), (Exhibit 10.5)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

E-2



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##### Table of Contents



EXHIBIT INDEX

|          |  |   |  |                                                                                                                                                                    
|--------- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   |  |   |  |                                                                                                                                                                    
|Number    |  |   |  | Description                                                                                                                                                        
|          |  |   |  |                                                                                                                                                                    
|10.8 (b)  |  | - |  | Amendment No. 2 to PPA dated March 18, 1988 ((a), (Exhibit 10.6)).                                                                                                 
|          |  |   |  |                                                                                                                                                                    
|10.8 (c)  |  | - |  | Amendment No. 3 to PPA dated August 28, 1989 ((a), (Exhibit 10.7)).                                                                                                
|          |  |   |  |                                                                                                                                                                    
|10.8 (d)  |  | - |  | Amendment No. 4A to PPA dated May 25, 1989 ((a), (Exhibit 10.8)).                                                                                                  
|          |  |   |  |                                                                                                                                                                    
|10.9      |  | - |  | Settlement Agreement dated April 5, 1999, between MCV and Consumers Energy Company ((j), (Exhibit 10.1)).                                                          
|          |  |   |  |                                                                                                                                                                    
|10.10     |  | - |  | Special Facilities/Interconnection Agreement dated as of July 8, 1988 between MCV and Consumers Power
Company ((a), (Exhibit 10.25)).                              
|          |  |   |  |                                                                                                                                                                    
|10.11     |  | - |  | Residual Open Access Interconnection Service Purchase Agreement between Consumers Power Company and MCV,
dated December 5, 1991 ((c), (Exhibit 10.83)).            
|          |  |   |  |                                                                                                                                                                    
|10.12     |  | - |  | Agreement with respect to the transmission of power dated as of June 9, 1988, between Consumers Power
Company and MCV ((a), (Exhibit 10.69)).                      
|          |  |   |  |                                                                                                                                                                    
|10.13     |  | - |  | MCV Backup Agreement dated June 9, 1988 between MCV and Consumers Power Company with respect to Alternative
Generating Equipment ((a), (Exhibit 10.27)).           
|          |  |   |  |                                                                                                                                                                    
|10.14     |  | - |  | Interconnection Option between MCV, Consumers Power Company, Michigan Gas Storage Company and The Dow
Chemical Company dated April 27, 1988 ((a), (Exhibit 10.14)).
|          |  |   |  |                                                                                                                                                                    
|10.15     |  | - |  | Steam and Electric Power Agreement between The Dow Chemical Company and MCV dated January 27, 1987 (the
SEPA) ((a), (Exhibit 10.10)).                            
|          |  |   |  |                                                                                                                                                                    
|10.15 (a) |  | - |  | First Amendment to SEPA ((a), (Exhibit 10.11)).                                                                                                                    
|          |  |   |  |                                                                                                                                                                    
|10.15 (b) |  | - |  | Exhibit A to SEPA ((a), (Exhibit 10.13)).                                                                                                                        
|          |  |   |  |                                                                                                                                                                    
|10.15 (c) |  | - |  | Fourth Amendment to SEPA ((a), (Exhibit 10.15)).                                                                                                                   
|          |  |   |  |                                                                                                                                                                    
|10.15 (d) |  | - |  | Fifth Amendment to SEPA ((a), (Exhibit 10.16)).                                                                                                                    
|          |  |   |  |                                                                                                                                                                    
|10.15 (e) |  | - |  | Sixth Amendment to SEPA, dated November 20, 1989 ((f), (Exhibit 10.14(e)).                                                                                         
|          |  |   |  |                                                                                                                                                                    
|10.15 (f) |  | - |  | Seventh Amendment to SEPA, dated November 22, 1994 ((f), (Exhibit 10.14(f)).                                                                                       
|          |  |   |  |                                                                                                                                                                    
|10.16     |  | - |  | Demineralized Water Supply Agreement dated as of January 27, 1987 between MCV and The Dow Chemical Company
((a), (Exhibit 10.31)).                                 
|          |  |   |  |                                                                                                                                                                    
|10.17     |  | - |  | Package Boiler Sale and Support Agreement between The Dow Chemical Company, Consumers Power Company and MCV
dated as of January 27, 1987 ((a), (Exhibit 10.32)).   
|          |  |   |  |                                                                                                                                                                    
|10.18     |  | - |  | Equipment Lease dated as of January 27, 1987 between The Dow Chemical Company and MCV (the Equipment
Lease) ((a), (Exhibit 10.71)).                              
|          |  |   |  |                                                                                                                                                                    
|10.18 (a) |  | - |  | First Amendment to Equipment Lease effective March 1, 1988 and dated as of May 4, 1988 ((a), (Exhibit
10.72)).                                                     
|          |  |   |  |                                                                                                                                                                    
|10.18 (b) |  | - |  | Second Amendment to Equipment Lease effective December 1, 1989 and dated November 20, 1989 ((a), (Exhibit
10.73)).                                                 

E-3



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##### Table of Contents



EXHIBIT INDEX

|          |  |   |  |                                                                                                                                                                                                                                                        
|--------- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   |  |   |  |                                                                                                                                                                                                                                                        
|Number    |  |   |  | Description                                                                                                                                                                                                                                            
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.19     |  | - |  | Equipment Lease Easement dated as of January 27, 1988 between The Dow Chemical Company and MCV ((a),
(Exhibit 10.74)).                                                                                                                                 
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.19 (a) |  | - |  | First Amendment to Equipment Lease Easement effective March 1, 1988 and dated May 4, 1988 ((a), (Exhibit
10.75)).                                                                                                                                      
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.19 (b) |  | - |  | Second Amendment to Equipment Lease Easement effective December 1, 1989 and dated November 20, 1989 ((a),
(Exhibit 10.76)).                                                                                                                            
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.20     |  | - |  | Service Agreement dated as of June 9, 1988 between MCV and ABB Alstom Power, Inc. (Previously ABB Energy
Services, Inc.) ((a), (Exhibit 10.22)).                                                                                                       
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.20 (a) |  | - |  | Hot Gas Path Parts Addendum to the Service Agreement dated March 22, 1994 ((e), (Exhibit 10.99)).                                                                                                                                                      
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.20 (b) |  | - |  | Amendment No. 1 to the Service Agreement dated April 1, 1995 ((g), (Exhibit 10.20(b))).                                                                                                                                                                
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.20 (c) |  | - |  | Amendment No. 2 to the Service Agreement dated January 15, 1998 ((h), (Exhibit 10.19 (c))).                                                                                                                                                            
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.21     |  | - |  | Operating Agreement, dated as of June 1, 1990, between MCV and Shawmut Bank, as Owner Trustee ((a), (Exhibit
10.23)).                                                                                                                                  
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.22     |  | - |  | Lessee Mortgage and Security Agreement, dated as of June 1, 1990, between Shawmut Bank, as Owner Trustee,
and MCV ((a), (Exhibit 10.24)).                                                                                                              
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.23     |  | - |  | Cogeneration Agreements Assignment, dated as of June 1, 1990, between Shawmut Bank, Owner Trustee, and MCV
((a), (Exhibit 10.26)).                                                                                                                     
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.24     |  | - |  | Support Facilities License and Easement Agreement dated as of June 1, 1990 between MCV and Shawmut Bank
((a), (Exhibit 10.29)).                                                                                                                        
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.25     |  | - |  | Facility Agreements and Governmental Actions Assignment Agreement dated as of June 1, 1990 between MCV and
Shawmut Bank ((a), (Exhibit 10.30)).                                                                                                        
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.26     |  | - |  | Development Agreement, dated as of June 1, 1990 between MCV, Shawmut Bank, as Owner Trustee, and MCV2 ((a),
(Exhibit 10.33)).                                                                                                                          
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.27     |  | - |  | Amended and Restated Consent and Agreement, dated as of June 1, 1990, between The Dow Chemical Company,
Shawmut Bank, as Owner Trustee, Meridian Trust Company and United States Trust Company, MCV and Consumers
Power Company ((a), (Exhibit 10.34)).
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.28     |  | - |  | Consent and Agreement, dated as of June 1, 1990, between Consumers Power Company, MCV, Shawmut Bank, as
Owner Trustee, Meridian Trust Company and United States Trust Company ((a), (Exhibit 10.35)).                                                  
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.29     |  | - |  | Natural Gas Purchase Agreement, dated as of May 1, 1989 between Northern Michigan Gas Exploration Company
(Nomeco), CMS Energy Corporation and MCV ((a), (Exhibit 10.39)).                                                                           
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.29 (a) |  | - |  | Amendment dated March 1, 1992 to the Natural Gas Purchase Agreement dated as of May 1, 1989 between Nomeco,
CMS Energy Corporation and MCV ((e), (Exhibit 10.95)).                                                                                     
|          |  |   |  |                                                                                                                                                                                                                                                        
|10.29 (b) |  | - |  | Amendment dated May 11, 1994 to the Natural Gas Purchase Agreement dated as of May 1, 1989 between Nomeco,
CMS Energy and MCV,((f), (Exhibit 10.29(b)).                                                                                                

E-4



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##### Table of Contents



EXHIBIT INDEX

|        |  |   |  |                                                                                                                                                                                                                                              
|------- |  | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |   |  |                                                                                                                                                                                                                                              
|Number  |  |   |  | Description                                                                                                                                                                                                                                  
|        |  |   |  |                                                                                                                                                                                                                                              
|10.30   |  | - |  | Natural Gas Purchase Agreement, dated as of May 13, 1988 between ANR Production Company and MCV ((a),
(Exhibit 10.41)).                                                                                                                      
|        |  |   |  |                                                                                                                                                                                                                                              
|10.31   |  | - |  | Natural Gas Purchase Contract dated August 18, 1994, between Coastal Gas Marketing and MCV ((f), (Exhibit
10.32)).                                                                                                                           
|        |  |   |  |                                                                                                                                                                                                                                              
|10.32   |  | - |  | Natural Gas Purchase Agreement, dated May 1, 1989 between CoEnergy Trading Company (previously Northern
Michigan Gas Exploration Company before being assigned to CoEnergy Trading Company on March 14, 1995) and
MCV ((a), (Exhibit 10.40)).
|        |  |   |  |                                                                                                                                                                                                                                              
|10.33   |  | - |  | Natural Gas Purchase Agreement, dated February 1, 1992 between CoEnergy Trading Company (previously Nomeco
Oil and Gas Company before being assigned to CoEnergy Trading Company on July 22, 1994) and MCV ((d),
(Exhibit 10.84)).           
|        |  |   |  |                                                                                                                                                                                                                                              
|10.34   |  | - |  | Natural Gas Purchase Agreement, dated as of June 2, 1997 between MCV and CMS Marketing, Services and Trading
Company ((h), (Exhibit 10.33)).                                                                                                 
|        |  |   |  |                                                                                                                                                                                                                                              
|10.35   |  | - |  | Gas Sales Agreement, dated July 1, 1999, between MCV and CMS Marketing Services and Trading Company ((k),
(Exhibit 10.0)).                                                                                                                   
|        |  |   |  |                                                                                                                                                                                                                                              
|10.36   |  | - |  | Gas Sales Agreement, dated November 15, 1998, between MCV and Engage Energy US, L.P. ((l), (Exhibit 10.37)).                                                                                                                                 
|        |  |   |  |                                                                                                                                                                                                                                              
|10.37   |  | - |  | Gas Sales Agreement, dated September 20, 1999, between MCV and Engage Energy US, L.P. ((l), (Exhibit 10.38)).                                                                                                                                
|        |  |   |  |                                                                                                                                                                                                                                              
|10.38   |  | - |  | Long Term Gas Agreement, dated September 1, 2000, between MCV and Coastal Merchant Energy, L.P. ((m),
(Exhibit 10.39)).                                                                                                                      
|        |  |   |  |                                                                                                                                                                                                                                              
|10.39   |  | - |  | Long Term Gas Agreement, dated October 10, 2000, between MCV and El Paso Merchant Energy Gas, L.P., as
amended ((m), (Exhibit 10.40)).                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                              
|10.40   |  | - |  | Long Term Gas Agreement, dated October 10, 2000, between MCV and CMS Marketing, Services and Trading Company
((m), (Exhibit 10.41)).                                                                                                         
|        |  |   |  |                                                                                                                                                                                                                                              
|10.41   |  | - |  | Long Term Gas Agreement, dated October 5, 2001, between MCV and El Paso Merchant Energy, L.P. ((n),
(Exhibit 10.42)).                                                                                                                        
|        |  |   |  |                                                                                                                                                                                                                                              
|10.42   |  | - |  | Long Term Gas Agreement, dated October 5, 2001, between MCV and CMS Marketing, Services and Trading Company
((n), (Exhibit 10.43)).                                                                                                          
|        |  |   |  |                                                                                                                                                                                                                                              
|10.43   |  | - |  | Transportation Service Agreement, dated as of May 25, 1988 between Great Lakes Gas Transmission Company and
MCV and letter agreements dated May 25, 1988 and May 26, 1988 ((a), (Exhibit 10.60)).                                            
|        |  |   |  |                                                                                                                                                                                                                                              
|10.44   |  | - |  | Transportation Agreement (#17800) dated November 24, 1993 between ANR Pipeline Company and MCV ((f),
(Exhibit 10.35)).                                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                              
|10.45   |  | - |  | Transportation Agreement (#17850) dated November 24, 1993 between ANR Pipeline Company and MCV ((f),
(Exhibit 10.36)).                                                                                                                       
|        |  |   |  |                                                                                                                                                                                                                                              
|10.46   |  | - |  | Gas Transportation Agreement (Firm Service), dated as of March 2, 1988, between Michigan Gas Storage and MCV
and amendment thereto dated September 21, 1988 and March 28, 2002. ((a), (Exhibit 10.64)).                                      

E-5



---



##### Table of Contents



EXHIBIT INDEX

|          |  |   |  |                                                                                                                                                                               
|--------- |  | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit   |  |   |  |                                                                                                                                                                               
|Number    |  |   |  | Description                                                                                                                                                                   
|          |  |   |  |                                                                                                                                                                               
|10.47     |  | - |  | Transportation Agreement (Firm Contract #011456), dated as of May 1, 1993 between Panhandle Eastern Pipeline
Company and MCV, as amended ((e), (Exhibit 10.90)).              
|          |  |   |  |                                                                                                                                                                               
|10.48     |  | - |  | Transportation Agreement (Firm Contract #011457), dated as of May 1, 1993 between Panhandle Eastern Pipeline
Company and MCV, as amended ((e), (Exhibit 10.91)).              
|          |  |   |  |                                                                                                                                                                               
|10.49     |  | - |  | Transportation Agreement (Firm Contract #011458), dated as of May 1, 1993 between Panhandle Eastern Pipeline
Company and MCV, as amended ((e), (Exhibit 10.92)).              
|          |  |   |  |                                                                                                                                                                               
|10.50     |  | - |  | Firm Transportation Service Form of Transportation Agreement (#013296), dated November 1, 1993 between
Trunkline Gas Company and MCV ((e), (Exhibit 10.93)).                  
|          |  |   |  |                                                                                                                                                                               
|10.51     |  | - |  | Gas Exchange Agreement (Firm Service), dated as of March 2, 1988, between Consumers Power Company and MCV,
as amended September 21, 1988 ((a), (Exhibit 10.63)).              
|          |  |   |  |                                                                                                                                                                               
|10.52     |  | - |  | Gas Storage Agreement (Firm Service) between MCV and Consumers Power Company dated March 2, 1988 ((a),
(Exhibit 10.68)).                                                      
|          |  |   |  |                                                                                                                                                                               
|10.53     |  | - |  | The Gas Supply Option dated as of January 27, 1987, between The Dow Chemical Company and MCV ((a), (Exhibit
10.67)).                                                          
|          |  |   |  |                                                                                                                                                                               
|10.54     |  | - |  | Master Netting, Setoff and Security Agreement dated December 2, 2002, between El Paso Merchant Energy, L.P.
and MCV ((o), (Exhibit 10.55)).                                   
|          |  |   |  |                                                                                                                                                                               
|10.55     |  | - |  | Maintenance Services and Parts Agreement for MCV 11NM Gas Turbines Between MCV and General Electric
International, Inc., dated December 31, 2002, ((o), (Exhibit 10.56)) (**).
|          |  |   |  |                                                                                                                                                                               
|10.55 (a) |  | - |  | Maintenance Services and Parts Agreement for MCV 11NM Gas Turbines Between MCV and General Electric
International, Inc., Guaranty Agreement dated January 22, 2003.           
|          |  |   |  |                                                                                                                                                                               
|10.55 (b) |  | - |  | Maintenance Services and Parts Agreement for MCV 11NM Gas Turbines Between MCV and General Electric
International, Inc., Amendment One dated March 21, 2003.                  
|          |  |   |  |                                                                                                                                                                               
|10.56     |  | - |  | MCV Senior Management Incentive Plan (*).                                                                                                                                     
|          |  |   |  |                                                                                                                                                                               
|10.57     |  | - |  | MCV Supplemental Retirement Plan dated July 6, 1992 ((d), (Exhibit 10.87)), (*).                                                                                              
|          |  |   |  |                                                                                                                                                                               
|10.58     |  | - |  | MCV Supplemental Benefit Plan dated January 1, 1989 ((d), (Exhibit 10.88)), (*).                                                                                              
|          |  |   |  |                                                                                                                                                                               
|10.59     |  | - |  | MCV Excess - Benefit Plan dated July 1, 1989 ((d), (Exhibit 10.89)), (*).                                                                                                     
|          |  |   |  |                                                                                                                                                                               
|21        |  | - |  | Subsidiaries of
Registrant  MCV subsidiaries are in the aggregate not significant subsidiaries as defined
in Rule 1-02 (v) of Regulation S-X.                                
|          |  |   |  |                                                                                                                                                                               
|31.1      |  | - |  | Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.                                                             
|          |  |   |  |                                                                                                                                                                               
|31.2      |  | - |  | Certification of Chief Financial Officer, Vice President and Controller Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.                                            
|          |  |   |  |                                                                                                                                                                               
|32.1      |  | - |  | Certification of
President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                             
|          |  |   |  |                                                                                                                                                                               
|32.2      |  | - |  | Certification of
Chief Financial Officer, Vice President and Controller Pursuant to
Section 906 of the
Sarbanes-Oxley Act of 2002.                                            

E-6



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##### Table of Contents



|     |  |                                                                                                                                                                                                                                                                    |  | 
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | 
|     |  |                                                                                                                                                                                                                                                                   
|(a)  |  | Incorporated by reference to MCVs registration statement on
Form S-1 (File No. 33-37977) as the bracketed numbered exhibits.                                                                                                                                     
|    
|(b)  |  | Incorporated by reference to MCVs registration statement on
Form S-1 (File No. 33-37977) originally filed on November 23, 1990,
as amended, in Amendment No. 1 to File No. 33-37977 as the
bracketed numbered exhibits.                                          
|    
|(c)  |  | Incorporated by reference to MCVs Annual Report on Form 10-K
for the year ended December 31, 1991 as the bracketed numbered
exhibits.                                                                                                                            
|    
|(d)  |  | Incorporated by reference to MCVs Annual Report on Form 10-K
for the year ended December 31, 1992 as the bracketed numbered
exhibits.                                                                                                                            
|    
|(e)  |  | Incorporated by reference to MCVs Annual Report on Form 10-K
for the year ended December 31, 1993 as the bracketed numbered
exhibits.                                                                                                                            
|    
|(f)  |  | Incorporated by reference to MCVs Annual Report on Form 10-K
for the year ended December 31, 1994 as the bracketed numbered
exhibits.                                                                                                                            
|    
|(g)  |  | Incorporated by reference to MCVs Annual Report on Form 10-K
for the year ended December 31, 1995 as the bracketed numbered
exhibits.                                                                                                                            
|    
|(h)  |  | Incorporated by reference to MCVs Annual Report on Form 10-K
for the year ended December 31, 1997 as the bracketed numbered
exhibits.                                                                                                                            
|    
|(i)  |  | Incorporated by reference to MCVs Annual Report on Form 10-K
for the year ended December 31, 1998 as the bracketed numbered
exhibits.                                                                                                                            
|    
|(j)  |  | Incorporated by reference to MCVs Quarterly Report on Form
10-Q for the quarterly period ended March 31, 1999 as the bracketed
numbered exhibits.                                                                                                                
|    
|(k)  |  | Incorporated by reference to MCVs Quarterly Report on Form
10-Q for the quarterly period ended September 30, 1999 as the
bracketed numbered exhibits.                                                                                                            
|    
|(l)  |  | Incorporated by reference to MCVs Annual Report on Form 10-K
for the year ended December 31, 1999 as the bracketed numbered
exhibits.                                                                                                                            
|    
|(m)  |  | Incorporated by reference to MCVs Annual Report on Form 10-K
for the year ended December 31, 2000 as the bracketed numbered
exhibits.                                                                                                                            
|    
|(n)  |  | Incorporated by reference to MCVs Annual Report on Form 10-K
for the year ended December 31, 2001 as the bracketed numbered
exhibits.                                                                                                                            
|    
|(o)  |  | Incorporated by reference to MCVs Annual Report on Form 10-K
for the year ended December 31, 2002 as the bracketed numbered
exhibits.                                                                                                                            
|    
|(*)  |  | Exhibits represent Management Contracts and Compensatory Plans
and Arrangements.                                                                                                                                                                                  
|    
|(**) |  | Pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, confidential treatment for portions of this exhibit has been
made, which portions have been omitted from the exhibit and have
been filed separately with the Securities and Exchange Commission.

E-7