<PAGE>   1
                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


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

For the fiscal year ended December 31, 1999

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 [NO FEE REQUIRED]

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                     (I.R.S. Employer
       incorporation or organization)                   Identification No.)

    100 PROGRESS PLACE, MIDLAND, MICHIGAN                      48640
----------------------------------------------             ------------
  (Address of principal executive offices)                  (Zip Code)

Registrant's telephone number, including area code    (517)   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]


<PAGE>   2
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP

                           ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I                                                                                         Page
                                                                                               ----
<S>            <C>                                                                             <C>
Item 1.        Business.........................................................................1
               A.  General......................................................................1
               B.  The Partners.................................................................1
               C.  The Facility.................................................................2
               D.  Major Issues Facing MCV......................................................2
               E.  Contracts....................................................................3
               F.  Employees...................................................................11
               G.  Regulation..................................................................11
               H.  Environmental Matters.......................................................15
               I.  Overall Lease Transaction...................................................17

Item 2.        Properties......................................................................20

Item 3.        Legal Proceedings...............................................................21

Item 4.        Submission of Matters to a Vote of Security Holders.............................21


PART II

Item 5.        Market for Registrant's Common Equity and Related Stockholder Matters...........22

Item 6.        Selected Financial Data.........................................................22

Item 7.        Management's Discussion and Analysis of Financial Condition and Results
                 of Operations.................................................................22

Item 8.        Financial Statements and Supplementary Data.....................................30

Item 9.        Changes In and Disagreements with Accountants on Accounting and Financial
                 Reporting Matters.............................................................30

PART III

Item 10.       Directors and Executive Officers of the Registrant..............................31

Item 11.       Executive Compensation..........................................................33

Item 12.       Security Ownership of Certain Beneficial Owners and Management..................36

Item 13.       Certain Relationships and Related Transactions..................................37


PART IV

Item 14.       Exhibits, Financial Statement Schedules and Reports on Form 8-K.................38
</TABLE>



<PAGE>   3
                                     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 Power Company, now known as 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 (the
      "Commercial Operation Date") in 1990 and is capable of generating
      approximately 1,500 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 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.

      MCV has entered into three principal energy sales agreements. The first is
      a Power Purchase Agreement (the "PPA") effective in 1990, providing for
      the sale to Consumers of electric capacity and related energy from the
      Facility for a term of 35 years. Under the terms of the PPA, MCV will
      supply up to 1240 MW of electric capacity and related energy to Consumers
      for resale to its customers. The second is a Steam and Electric Power
      Agreement (the "SEPA") also effective in 1990, providing for the sale to
      The Dow Chemical Company ("Dow") of steam and electricity produced by the
      Facility for terms of 25 years and 15 years, respectively. The third is a
      Steam Purchase Agreement (the "SPA") effective in 1996, providing for the
      sale of steam produced by the Facility to Dow Corning Corporation ("DCC")
      for a term of 15 years. From time to time, MCV enters into other
      short-term sales agreements for the sale of excess capacity and/or energy
      available above MCV's internal use and obligations MCV has to Consumers,
      Dow and DCC.

B.    The Partners

      The current general partners of MCV are CMS Midland, Inc. ("CMS Midland"),
      a wholly-owned subsidiary of Consumers, Coastal Midland, Inc. ("Coastal
      Midland"), Source Midland Limited Partnership ("SMLP") and MEI Limited
      Partnership ("MEI"), which is a general and limited partner, all of which
      are wholly-owned subsidiaries of The Coastal Corporation ("Coastal").
      MCV's other limited partners are Dow, Micogen Limited Partnership, owned
      by subsidiaries of Coastal, and Alanna Corporation ("Alanna"), a
      wholly-owned subsidiary of Alanna Holdings Corporation ("Alanna Holding").
      The capital stock of Alanna Holding is owned by Dow, CMS Energy
      Corporation ("CMS Energy"), an affiliate of Consumers and Coastal Natural
      Gas Company, an affiliate of Coastal. Effective January 1, 2000, Coastal,
      through its subsidiaries, acquired all of the partnership interests in
      SMLP and MEI from MCN Energy Group Inc., the previous parent company. The
      general partners and limited partners of MCV are referred to herein as the
      "Partners." The ownership interests of the Partners are shown in "Security
      Ownership of Certain Beneficial Owners and Management."

                                       1
<PAGE>   4
C.    The Facility

      MCV's principal business is the operation of the Facility and the sale of
      electric capacity and related energy (principally to Consumers) and steam
      (to Dow and DCC) produced at the Facility. The Facility is located on an
      approximately 1,200-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.

      The Facility was originally designed to have a net electrical generating
      capacity of approximately 1370 MW and to produce approximately 1.5 million
      pounds per hour of process steam under design ambient conditions.
      Electricity is produced from the 12 GTGs, and the steam is produced by the
      12 HRSGs using the heat from the GTG exhaust. Subsequent improvements to
      the Facility have increased the net electrical generating capacity to
      approximately 1500 MW. The Unit 1 Steam Turbine is designed to produce
      electricity from the steam generated by the HRSGs and process steam that
      is provided to Dow and DCC. Demineralized water is sold by Dow to MCV from
      the Dow plant. Electricity is sold by MCV to Consumers and other parties
      through an interconnect and to Dow through dedicated transmission lines.

      MCV is considering adding new generating equipment at its site.
      Discussions have been held and are continuing with, among others, power
      purchasers, manufacturers of generation equipment, and sources of
      financing.

D.    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, now final at the MPSC level, 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
      "Regulation - Michigan Electric Industry Restructuring Proceedings"). In
      addition, proposed deregulation legislation exists at the state and
      federal level. One significant issue to MCV is the issue of stranded
      assets or transition cost recovery by utilities for PPA charges. Over 90%
      of MCV's revenues come from sales pursuant to the PPA. To date,
      restructuring has not negatively impacted MCV, but if the Restructuring
      Orders deny

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<PAGE>   5
      stranded cost recovery of above-market PPA costs, MCV's cash flows may be
      negatively impacted, especially in the period after 2007. MCV, among
      others, filed appeals in state and federal courts challenging the
      Restructuring Orders. On July 7, 1999, the U.S. District Court granted
      summary judgment to MCV declaring that the Restructuring Orders are
      preempted by federal law to the extent that they prohibit Consumers from
      recovering from its customers any charge for avoided costs (or "stranded
      costs") to be paid to MCV under PURPA. MCV continues to monitor and
      participate in these matters, as appropriate. (See "Regulation - Michigan
      Electric Industry Restructuring Proceedings and Federal Electric Industry
      Restructuring", 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 cash flow. (See "Regulation -- MPSC and Other
      Proceedings Relating to Capacity and Energy Charges", "Overall Lease
      Transaction", and MD&A -- Liquidity and Financial Resources.")

     E.    Contracts

      MCV's material operating contracts include the PPA, which provides for the
      sale to Consumers of electric capacity and related energy; the SEPA, which
      provides for the sale of steam and electricity to Dow; the 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 ABB Alstom Power
      Inc., formerly known as ABB Power Generation, Inc. ("ABB Power") and an
      agreement covering steam turbine inspection services and parts with
      General Electric Company ("GE"). MCV's interests in all the foregoing
      contracts, except the SPA, 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 "Overall Lease Transaction.")
      The 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, 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,

                                       3
<PAGE>   6

      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 "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 "Regulation --
      MPSC and Other Proceedings Relating to Capacity and Energy Charges.")

      Under the PPA, MCV must provide initial assurances that it has adequate
      gas supplies under contract to generate at least 60% of the maximum annual
      output of Contract Capacity for the period commencing on the Commercial
      Operation Date through 1999. Consumers has acknowledged that MCV has
      provided such initial assurances to Consumers. In addition, commencing in
      1998 and each year thereafter, MCV must provide at Consumers' request
      continuing annual assurances of such capability for each succeeding
      five-year period. In November 1999, Consumers requested information for
      the continuing fuel assurance requirements covering the period 2000-2004.
      Consumers has reviewed MCV's fuel supply information for the period 2000
      through 2004 and has provided MCV with a letter stating that MCV has
      satisfied the fuel assurance requirement for that period. 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:

                                       4
<PAGE>   7
<TABLE>
<CAPTION>

                                                                  Maximum Possible
                 Consecutive Months That                            Reduction in
                     MCV Fails to Provide                          Capacity Charge
            Adequate Continuing Assurance                            (cents/kWh)
            -----------------------------                            -----------

<S>                                                               <C>
                      1-12........................................      .1885
                      13-24.......................................      .5655
                      25-36.......................................     1.5080
                      37 and thereafter...........................     2.6390
</TABLE>



      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 majeure to carry out its
      obligations under the PPA, these obligations are suspended during the
      period of force majeure. Force majeure includes 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. Consumers' determination of the amount
      of energy that it dispatches from the Facility is subject to its
      contractual relationships with The Detroit Edison Company, with which
      Consumers established a Michigan Electric Coordinated System ("MECS") to
      coordinate generation between the two utilities. The operation and
      management of the MECS is subject to FERC Order 888 - "Open Access and
      Stranded Costs Rulemaking". Consumers currently dispatches the Facility by
      scheduling energy deliveries on an economic basis relative to the cost of
      other energy resources, in contrast to the higher dispatch levels
      experienced in the years 1993-1998.

      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% 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 1999 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, 2000 and does not anticipate any
      substantial problems.

                                       5
<PAGE>   8
       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 have addressed all of these issues in the Settlement
      Agreement. 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, but in no
      event sooner than 2002) 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
      decision which may affect those issues or payments. MCV recognized a
      one-time net $6.4 million increase in electric revenues in the first
      quarter of 1999 based upon the resolution of these issues. On an ongoing
      basis and for the various time periods specified in the Settlement
      Agreement, the Settlement Agreement is not expected to materially affect
      MCV's earnings and cash flows.




      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 commencing in 1990 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. During 1999, MCV sold an average of
      552,057 pounds of steam and 61 MW of electricity per hour to Dow.

      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 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 beginning April 1, 1997; no such increase was requested
      during 1998 and 1999.

      In 1994, MCV and Dow amended the SEPA to provide that Dow would install a
      steam line to the Dow Corporate Center to deliver MCV-generated steam for
      heating and air conditioning purposes. In return, MCV agreed to a 30%
      price discount on steam used at the corporate center for a period of five
      years for up to 262.8 million pounds of steam per year (an average of
      30,000 pounds per hour). In 1995, steam deliveries to the Dow Corporate
      Center began under this provision.

                                       6
<PAGE>   9
      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 to provide the gas
      necessary to generate Dow's take of steam and electricity ("toll"). In
      1996, MCV and Dow entered into an agreement (the "April 15, 1996
      Agreement") concerning gas tolling. The April 15, 1996 Agreement provides
      that Dow may toll up to 9,000 MMBtu per day, subject to certain
      limitations and conditions, until January 1, 2002, at which time Dow's
      tolling rights revert to the provisions in the SEPA. 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 gas from MCV. Dow has
      been tolling gas under the April 15, 1996 Agreement since April 1, 1997.
      In addition, Dow made 36 consecutive quarterly installment payments of
      $3,817,500 each, through the year 1998, to MCV in consideration for the
      delivery of steam and electricity.

      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 would
      progressively reduce the annual standby fees payable to Dow from $700,000
      per year to a level of $350,000 per year in 1998 and thereafter. These
      fees are subject to adjustment each quarter based on changes in fuel
      costs, capital equipment costs and wage rates. In addition, the fee
      charged by Dow for each use of the Standby Facilities, necessitated by
      MCV's failure to deliver steam under the SEPA, was increased from $100,000
      to $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 60
      hours in the first year after the Commercial Operation Date, 40 hours in
      the second year and 24 hours in any subsequent 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 majeure lasting 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. MCV expects to supply steam at the rate of up to 180,000
      pounds per hour with a minimum of 90,000 pounds per hour. 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

                                       7
<PAGE>   10
      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.

      Gas Supply Arrangements

      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 3 months to 11 years, with U.S. and Canadian
      suppliers for a maximum supply of natural gas as of January 1, 2000 of
      237,462 MMBtu/day. No single gas contract currently accounts for more than
      11% of MCV's portfolio, and no single supplier accounts for more than 18%
      of MCV's portfolio. Gas contracts with U.S. suppliers provide for the
      purchase of 156,500 MMBtu/day as of January 1, 2000, while gas contracts
      with Canadian suppliers provide for the purchase of 80,962 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 1999, MCV's plant needs were supplied 82% from long term
      gas contracts and 18% from spot gas contracts.

      Approximately 92% of MCV's long term gas contracts are based on fixed
      prices with escalation tied to various methods. The distribution of the
      escalation methods are: 32% - a fixed escalator; 22% - an escalator tied
      to the energy index based on Consumers' energy charges under the PPA and
      38% - a combination of the fixed escalator and energy index escalator.
      Approximately 8% of MCV's long term gas contracts are tied to the price of
      the Henry Hub natural contract on the New York Mercantile Exchange for the
      month the gas is purchased.

      Current U.S. Long Term Gas Contracts. The U.S. long term gas contracts
      provide for either a corporate "warranty of deliverability" or a
      "dedication of reserves." Under a dedication of reserves, specific
      reserves are dedicated to fulfill the supplier's obligations and under a
      corporate warranty, reserves are not dedicated but generally MCV is
      indemnified for the cost of purchasing supplies elsewhere if the gas is
      not delivered as warranted.

      Most of the U.S. long term gas contracts contain "take-or-pay" provisions
      obligating MCV to purchase at least a specified percentage (generally 75%)
      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). Most U.S. long term gas contracts allow a
      "make-up period" ranging from one to five years to make up the deficiency.
      One supplier currently has the right to reduce the MDQ under one of its
      contracts by 5,000 Mcf/day because MCV purchased gas quantities at less
      than 75% of the MDQ during the first five years of the contract.

      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 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 less than ten.

                                       8
<PAGE>   11
      Prices under the Canadian long term gas 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 long term gas 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"), MCV pays each Canadian supplier a
      Demand Charge to cover the transportation demand 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 long term gas 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 long term gas contracts establish specific minimum annual
      takes (generally 75%). Generally, MCV is required to make deficiency
      payments to the Canadian suppliers equal to all or some percentage of the
      Commodity Charge multiplied by any deficiency. MCV has make-up rights in
      some circumstances under some of the Canadian long term gas contracts.

      If a Canadian supplier underdelivers to MCV in any month, subject to
      certain force majeure provisions, 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 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"); CMS
      Panhandle Eastern Pipe Line Company ("Panhandle"); CMS Trunkline Gas
      Company ("Trunkline"); and Great Lakes Gas Transmission Company ("Great
      Lakes"). ANR and Great Lakes are affiliates of Coastal. CMS Energy, the
      parent company of Consumers, owns Panhandle and Trunkline. 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 has also 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. Michigan gas produced by suppliers is currently
      transported to Consumers' pipeline system by the supplier under contracts
      the suppliers have with Michigan Consolidated Gas Company ("MichCon"), a
      wholly-owned subsidiary of MCN Energy Group Inc., on the MichCon pipeline
      system in northern Michigan.

      The remaining terms of MCV's agreements with the U.S. transporters range
      from 2 to 25 years. The transportation rates of ANR, Panhandle, Trunkline,
      Great Lakes and Michigan Gas Storage Company are subject to FERC
      regulation.

      The suppliers under the Canadian long term gas 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 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.

                                       9
<PAGE>   12
      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.

      Gas Turbine Service Agreement

      Under a service agreement between MCV and ABB Power (the "Service
      Agreement"), ABB Power 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, as amended, commenced on January 1, 1990,
      and will expire upon the earlier of the completion of the sixth series of
      major GTG inspections or December 31, 2009. ABB Power does 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.

      Under this agreement MCV must pay a $392,885 (in 1999 dollars) per month
      inspection fee which is adjusted based upon various wage level indices, is
      payable on the basis of operating hours as they occur over the same
      period, and may be increased under certain events of force majeure or
      change of laws. In addition, MCV pays maintenance and repair fees equal to
      material and other direct costs, amounts payable to subcontractors, and
      ABB Power's out-of-pocket costs, plus 15% except in the case of fees
      relating to certain service engineers, supervisors and specialists where
      the maintenance fee shall be equal to the ABB Power rate. ABB Power
      warrants that all repairs performed and all spare parts supplied by it
      will be free of defects for one year from the date of completion or date
      of use, respectively.

      The Service Agreement terminates (i) if either ABB Power or MCV fails to
      perform the duties outlined under the Service Agreement, at the option of
      the other party; or (ii) at MCV's option, if MCV is unable to operate the
      Facility for 60 consecutive days due to force majeure. Upon cessation of
      the force majeure, the Service Agreement may be reinstated by either party
      upon 60 days' notice, together with payment by MCV of a $.4 million
      remobilization fee. Upon termination of the Service Agreement (except for
      nonperformance by ABB Power), MCV must pay a cancellation payment ($1.0
      million in 2000 and $.5 million in any year thereafter, escalated in 1988
      dollars).

      On March 22, 1994, MCV and ABB Power signed an agreement effective
      December 31, 1993, to amend the Service Agreement with respect to
      supplying hot gas path parts. Under the amended Service Agreement, ABB
      Power will provide hot gas path parts for MCV's twelve gas turbines
      through the fourth series of major GTG inspections. In January 1998, MCV
      and ABB Power 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. The amendment is severable and may be
      terminated separately from the existing Service Agreement.

      In addition to the January 1998 amendment to the term of the amended
      Service Agreement, MCV contracted to purchase from ABB Power 11NM GTG
      upgrade packages for eleven of the gas turbine generators for $41.6
      million. The purchase of these upgrades was made after successfully
      testing one upgrade package at the Facility in 1997. All eleven upgrade
      packages have been installed in 1998 and 1999. The upgrade packages on all
      twelve gas turbines have added to available capacity and significantly
      improved the efficiency of the Facility. Maintenance and spare parts for
      the upgrade packages are covered by the amended Service Agreement.


                                       10
<PAGE>   13
      If the amended Service Agreement is terminated, MCV must pay a
      cancellation payment of $15.0 million, which is reduced to $5.0 million
      upon completion of the fourth major inspection or July 1, 2003, whichever
      comes last. As part of this amended Service Agreement, MCV has purchased a
      spare GTG rotor to facilitate maintenance activities and improve
      reliability.

      Steam Turbine Service Agreement

      MCV has 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. MCV is to make monthly payments over the life of the contract
      totaling $13.0 million (in 1995 dollars).

F.    Employees

      As of February 29, 2000, MCV had 132 employees, including 89 engineering,
      operating and maintenance personnel. Fifty-eight 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 new
      agreement effective March 1, 1999. It is a five year contract with a wage
      reopener in each of the last two years. MCV believes that its relationship
      with its employees is good.

G.    Regulation

      Introduction

      The Facility is 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 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 Facility has achieved the required Thermal and
      Efficiency Percentages. During 1999, the Facility achieved a Thermal
      Percentage of 18.0% and an Efficiency Percentage of 47.0%.

      The Facility's QF certification by FERC became effective when portions of
      the Facility were first synchronized to Consumers' system in June 1989. As
      a QF, the Facility is 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 a leveraged lease transaction in which the Facility is owned by owner
      trustees on behalf of institutional investors. In 1997, 1998 and January
      2000, 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

                                       11
<PAGE>   14
      ownership (which changes did not result in a change in the percentage of
      utility ownership). (See "MD&A -- Outlook -- Maintaining QF Status".)

      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 "Settlement Order") the MPSC approved with
      modifications the Revised Settlement Proposal. Generally, the Settlement
      Order approved cost recovery of 915 MW of MCV capacity subject to certain
      "availability caps" associated with on-peak and off-peak periods of time
      each day 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
      Settlement Order 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 Settlement Order. 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
      Settlement Order would be implemented for rate-making purposes in 1993 and
      subsequent years. Opponents to the Revised Settlement Proposal
      unsuccessfully filed appeals of the Settlement Order and the decision 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 "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
      Settlement Order up to 915 MW. The Offer of Relief represented a "floor"
      for the arbitration of this dispute below which payments to MCV of fixed
      energy charges in dispute could not fall. Consumers would schedule
      deliveries of this energy in accordance with the provisions of the PPA.
      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.

                                       12
<PAGE>   15
      On June 23, 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 Settlement Order. In a Final Order issued on February
      16, 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 Settlement Order and 915 MW,
      subject to completion of appellate review in all regulatory and judicial
      proceedings with respect to the Settlement Order and then pending MPSC
      cases. Those regulatory and judicial proceedings are complete and no
      changes resulted which would effect the arbitrator's ruling.

      On September 8, 1995, Consumers and the MPSC staff asked the MPSC to
      create a consolidated proceeding for the purpose of reviewing a settlement
      agreement ("325 MW Settlement") entered into between the MPSC staff and
      Consumers. The 325 MW Settlement proposed approving one-hundred percent
      jurisdictional cost recovery of an additional 325 MW of capacity purchased
      from MCV. Cost recovery approval for the 325 MW of MCV Contract Capacity
      was in addition to the 915 MW already approved by the MPSC with recovery
      from Consumers retail customers to begin January 1, 1996. On November 14,
      1996, the MPSC approved, with modifications, the 325 MW Settlement
      effective January 1, 1996 ("325 MW Settlement Order"). The modifications
      were related to issues not material to MCV. After appeals by various
      parties were unsuccessful, the Attorney General of Michigan filed a late
      appeal to the Michigan Supreme Court, which has not yet acted upon the
      appeal. MCV Management cannot predict the outcome of this proceeding.

      PPA - 1998 PSCR Rate Freeze. In January 1998, the MPSC suspended Consumers
      annual Power Supply Cost Recovery ("PSCR") plan and reconciliation cases
      (annual proceedings in which the MPSC, among other things, sets Consumer's
      recovery of MCV energy rates) and set a PSCR "rate freeze" effective
      January 1, 1998. This PSCR rate freeze is subject to a further adjustment
      which was approved in Consumers' 1997 PSCR reconciliation case. This case
      determined the level at which Consumers' PSCR rates will be frozen during
      the period 1998 through 2001. Beginning with the payment of the March 1998
      invoice, Consumers, without MCV's consent, began paying MCV fixed energy
      payments based upon MCV's availability up to 915 MW and on deliveries
      above 915 MW. MCV took exception to Consumers payments at the lower level.
      However, under the MCV/Consumers Settlement Agreement, Consumers will pay
      MCV the fixed energy rates set forth in the PPA based on availability for
      the first 915 MW and on delivered energy above 915 MW and up to the 1,240
      MW of contract capacity through September 15, 2007 (See "PPA - Settlement
      of PPA Issues.").

      PPA - Settlement of PPA Issues. 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, but in no event sooner than 2002)
      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 decisions which may
      affect those issues or payments. MCV recognized a one-time net $6.4
      million increase in electric revenues in the first quarter of 1999 based
      upon the resolution of these issues. On an ongoing basis and for the
      various time periods specified in the Settlement Agreement, the Settlement
      Agreement is not expected to materially affect MCV's earnings and cash
      flows.

      Michigan Electric Industry Restructuring Proceedings

                                       13
<PAGE>   16
      On December 20, 1996, the MPSC issued an order on its own motion to
      consider the restructuring of the electric industry in Michigan and issued
      orders on June 5, 1997, October 29, 1997, January 14, 1998 and February
      11, 1998 (collectively the "Restructuring Orders"). While the
      Restructuring Orders are not entirely clear, they provide for a transition
      to a competitive regime whereby electric retail customers will be able to
      chose their power supplier and pay negotiated or market-based rates for
      such power supply. The Restructuring Orders also mandate that utilities
      "wheel" third-party power to the utilities' customers. An issue involved
      in this restructuring which could significantly impact MCV is stranded
      cost recovery. The Restructuring Orders allow recovery by utilities
      (including Consumers) of 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 (i.e., MCV's
      PPA) is limited to customers who chose an alternate 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.

      In the restructuring cases before the MPSC, MCV has advocated, among other
      things, full recovery of PPA charges (capacity and energy) for the life of
      the PPA from all customers. MCV, as well as others, filed appeals in state
      and federal courts challenging the Restructuring Orders. In June 1999, the
      Michigan Supreme Court issued an opinion in an MPSC "retail wheeling"
      experiment case holding, among other things, that the MPSC lacks the
      statutory authority to mandate that utilities transmit power of third
      parties to the utilities' customers ("Michigan Supreme Court Order").
      While the Michigan Supreme Court Order was not directed at the
      Restructuring Orders, the MPSC has effectively applied it to them by
      entering an order on August 17, 1999, making retail wheeling under the
      Restructuring Orders voluntary on the part of the utilities. On September
      1, 1999, Consumers filed a statement with the MPSC stating that it intends
      to voluntarily implement the Restructuring Orders.

      On July 7, 1999, the U.S. District Court granted summary judgment to MCV
      declaring that the Restructuring Orders are preempted by federal law to
      the extent that they prohibit any utility from recovering from its
      customers any charge for avoided costs (or "stranded costs") to be paid to
      MCV under PURPA pursuant to the PPA. The order further provides that the
      MPSC's prior orders approving the avoided cost rates for MCV takes
      precedence over the Restructuring Orders. The Defendants in the lawsuit
      (the Commissioners of the MPSC) were permanently enjoined from enforcing
      the Restructuring Orders in any manner which denies or precludes
      Consumers' recovery of the avoided costs set for MCV, including but not
      limited to interpreting or enforcing the Restructuring Orders to preclude
      them from recovering all or any portion of the avoided costs previously
      approved by the MPSC from its customers, whether before, during, or after
      the year 2007. This order and the Commission's August 17, 1999 order are
      being appealed. The Michigan legislature has also begun the process to
      consider electric industry restructuring and deregulation. While
      restructuring could have a material impact on MCV, MCV Management cannot,
      at this time, predict the impact or the outcome of these administrative,
      judicial and legislative proceedings.

      Federal Electric Industry Restructuring

      FERC has jurisdiction over wholesale energy sales and is moving towards
      "market" based pricing of electricity in some circumstances as opposed to
      traditional cost-based pricing. In April 1996, FERC issued Order No. 888
      requiring all utilities 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.
      Appeals of Order No. 888 and subsequent related orders are pending before
      the United States Court of Appeals for the D.C. Circuit. On December 20,
      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. Order No. 2000 is intended to
      increase competition and remedy

                                       14
<PAGE>   17
      continuing problems with wholesale transmission access and reliability.
      Order No. 2000 does not directly impact MCV since MCV does not own
      transmission lines, but could indirectly impact MCV in selling electricity
      in the wholesale market. Order No. 2000 is subject to rehearing and
      appeal. In addition, several bills have been introduced in Congress to
      require states to permit consumers to choose their supplier of electricity
      and manage other issues such as transition cost recovery and FERC
      jurisdiction of retail electric sales. MCV Management cannot predict the
      impact on MCV or the outcome of these proceedings.

      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 contract requirements until November 1, 2004 and from the
      National Energy Board ("NEB") to export these volumes. An application by
      Husky Oil Operations Limited to provide 5,000 MMBtu/day of additional gas
      to MCV for the period November 1, 2004 through October 31, 2007 is
      presently under review by the NEB. The U.S. long term gas contracts are
      not subject to regulatory approvals.

      PPA - Sale and Assignment

      On March 10, 1999, Consumers announced that it signed a contract with PECO
      Energy Company ("PECO") whereby Consumers will sell 1240 MW of capacity
      and associated energy to PECO from the MCV PPA beginning January 1, 2002
      and ending in September 2007. The agreement calls for Consumers to sell
      PECO between 100 MW to 150 MW through 2001. The announcement also states
      the contract with PECO is subject to satisfactory regulatory approvals. On
      April 30, 1999, the MPSC entered an order, which was subsequently amended
      and clarified, which conditionally permitted the transaction to go
      forward. Consumers has asked the MPSC for further clarification, but the
      MPSC has not yet ruled on Consumers' latest request. At this time, MCV
      Management cannot predict whether Consumers will accept the MPSC's orders.
      MCV does not expect the sale of Consumers' rights to capacity and
      associated energy under the PPA to materially affect its financial
      position or results of operations.

H.    Environmental Matters

      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.

      Water Quality. On two instances in 1999, MCV exceeded the discharge limits
      of oil and grease from the oily waste treatment system. The system along
      with various plant sumps were cleaned and pumped out after each incident.
      The Michigan Department of Environmental Quality ("MDEQ") has taken no
      action to date on this issue. MCV's National Pollutant Discharge
      Elimination System permit was reissued in August 1999 for the period of
      October 1, 1999 to October 1, 2003.

      Air Quality. MCV's Renewable Operating Permit ("ROP") was issued June 4,
      1999 with an expiration date of June 4, 2004. This permit details the
      applicable requirements which apply to all the emission unit/process
      groups at MCV and did not apply more stringent limits on the site than was
      already in the Permit to Install.


                                       15
<PAGE>   18

      In September 1998, the United States Environmental Protection Agency
      ("EPA") announced three rulemaking actions to address interstate and
      regional transport of ground level ozone, namely the NOXSIP Call Final
      Rule ("SIP Call Rule"), Proposed Federal Implementation Plan ("FIP Plan")
      and Section 126 Petitions. The SIP Call Rule requires 22 states (including
      Michigan) to submit state implementation plans ("SIPs") which address the
      regional transport of ground level ozone through reductions in nitrogen
      oxide ("NOX") emissions from combustion sources, including gas turbines.
      States were to submit plans to meet certain overall reduction percentages
      established in the SIP Call Rule by September 30, 1999, with emission
      reduction measures in place by May 1, 2003 and overall compliance by
      September 30, 2007. The FIP Plan includes the same NOX reduction
      requirements and time tables contained in the SIP Call Rule. The FIP Plan
      provides that it would be implemented in any state which fails to submit
      an approvable NOX SIP by September 30, 1999 or otherwise fails to require
      applicable NOX emission reduction requirements to be in place. The Section
      126 Petitions deal with petitions filed by northeastern states under Clean
      Air Act, Section 126, against sources in "upwind" states in the Midwest,
      including Michigan. Public hearings were held and comments and appeals
      have been filed on all three of these rulemaking actions. In two separate
      decisions, in May 1999 the United States Court of Appeals for the D.C.
      Circuit Court remanded EPA's 8-hour standard, set forth in the SIP Call
      Rule, as being unconstitutional and stayed the submission dates required
      by the SIP Call Rule. EPA proposes reinstatement of previously assigned
      attainment designations/classifications and the 1-hour ozone standard.
      Midland is one of six counties that would become a
      nonattainment/unclassified area. That attainment designation may bring
      more rigorous permitting requirements if new generating equipment were
      added to the site. On January 18, 2000, the EPA issued its "Finding of
      Significant Contribution and Rulemaking on Section 126 Petitions for the
      Purposes of Reducing Interstate Ozone Transport" ("EPA Ozone Rulemaking").
      In the EPA Ozone Rulemaking, the EPA made findings that a number of large
      electric generating units ("EGUs") named in the petitions emit in
      violation of the Clear Air Act prohibition against significantly
      contributing to nonattainment or maintenance problems in the petitioning
      States. The EPA Ozone Rulemaking also finalizes the Federal NOx Budget
      Trading Program as the control remedy for sources affected by the rule.
      The final rule is effective February 17, 2000 and requires compliance by
      May 1, 2003. MCV is identified in the EPA Ozone Rulemaking as a large EGU
      subject to NOx emissions averaging .15 lb/MMBtu during the ozone season
      (May through September). MCV believes it will be able to meet the
      standards in the EPA Ozone Rulemaking which is subject to rehearing and/or
      appeal. MCV Management cannot predict the outcome of these proceedings.

      Dow Operations. Portions of the Site were previously owned by Dow. At one
      time, Dow had a brine pond, a portion of which was on the Site. Brine
      pipelines previously crossed the Site. Some underground brine lines were
      capped and abandoned in place. Dow had brine lines running near the Site.
      One brine well was used by Dow on the Site. Dow brine pipeline spills off
      the Site are listed on Michigan's "List of Sites of Environmental
      Contamination" established under Michigan Environmental Response Act
      ("MERA"). The principal contaminant of concern at the pipeline spill
      locations is brine. The Site also may have been used for the testing of
      explosives during the 1950s or the 1960s.

      The Dow Plant, immediately across the Tittabawassee River from the Site,
      is on Michigan's "List of Sites of Environmental Contamination"
      established under MERA. The principal contaminants of concern at the Dow
      Plant are dioxins believed to have originated from chemical product
      manufacturing.

      While it is possible that MCV or Consumers could incur liability under the
      Comprehensive Environmental Response, Compensation, and Liability Act of
      1980 ("CERCLA") or MERA for Site conditions from previous Dow activities,
      MCV does not know of any conditions on the Site that MCV believes require
      cleanup. In any event, to the extent that such liability could be shown to
      be due to Dow's activities, MCV or Consumers would seek contribution from
      Dow for any costs incurred in connection with Dow's activities.

      Noise. To minimize noise from normal plant operations, MCV has installed
      silencers in all of the exhaust stacks, a silencer on the hogging air
      ejector and anti-noise insulation on the gas knockout drum. Additionally,
      steam venting silencers have been installed on all 12 HRSGs to control
      noise in connection with startup and shutdown operation. In 1996, MCV
      installed mufflers on the atmospheric dump valves to reduce noise in the
      event of a steam turbine trip or during periods when the steam turbines
      are out of service.

                                       16
<PAGE>   19
      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.


I.    Overall Lease Transaction

      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"). 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. The Overall
      Lease Transaction was closed in two phases. The first closing (involving
      pollution control and certain related assets) occurred on March 16, 1990,
      (the "First Closing" or the "First Closing Date") and the second closing
      (involving the remainder of the Facility) occurred on June 16, 1990 (the
      "Second Closing" or the "Second Closing Date").

      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

                                       17
<PAGE>   20

      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 Section I, "Overall Lease Transaction -- The Lease Funding") (each, a
      "Senior Note Indenture") and Subordinated Notes (as defined in this
      Section I, "Overall Lease Transaction -- The Lease Funding") (each, a
      "Subordinated Note Indenture" and, together with the Senior Note
      Indentures, the "Note Indentures"). The United States Trust Company and
      First Union National Bank are note trustees under the Senior Note
      Indenture and the Subordinated Note Indenture, respectively (the "Note
      Trustees"). There is, however, 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 US Bank Trust as collateral Agent (the "Collateral
      Agent"), which provides for the creation and maintenance of certain
      reserves, the deposit of all revenues generated by 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 has arranged for a $50 million working
      capital line (the "Working Capital Facility") with Bank of Montreal (the
      "Working Capital Lender") which expires August 31, 2001. 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, as defined in this Section "Overall Lease Transaction
      -- The Lease Funding," and the Bonds).

      Pursuant to separate Tax Indemnification Agreements between MCV and the
      Owner Participants (the "Tax Indemnification Agreements"), MCV has agreed
      to indemnify the Owner Participants against certain adverse federal income
      tax consequences.

      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 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
      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 are divided between interest and principal components using
      the effective interest method.

      The Lease Funding

      Each Owner Trustee has 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 have been 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

                                       18
<PAGE>   21
      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 pari passu 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 facilitates
      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 are identical to those of the
      Notes pledged as security therefore.

      The Economic Development Corporation of the County of Midland (the
      "Tax-Exempt Issuer") has issued certain series of tax-exempt bonds (the
      "Tax-Exempt Bonds"), which are 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.

      Security and Sources of Payment

      The sole sources of payment for the Senior Bonds and Subordinated Bonds
      are certain pledged Senior Notes and pledged Subordinated Notes,
      respectively, issued by each of the five Owner Trustees and pledged under
      the Senior Bond Indenture and Subordinated Bond Indenture, respectively.
      The pledged Senior Notes and 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 therefor. The Senior Notes are secured by a 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
      Pledged Subordinated Notes are secured on a pari passu basis with the
      Subordinated Notes pledged to secure the Tax-Exempt Bonds, by a junior
      lien on and security interest in such collateral. Such lien, security
      interest and assignment are subordinated to the senior lien, security
      interest and assignment securing the Senior Notes issued by such Owner
      Trustee (and pledged to secure the Senior Bonds).

      Additional Senior Notes may be issued (i) to refinance the Senior Notes,
      in whole but not in part, and (ii) to pay certain costs of modifying the
      Facility. 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 additional Senior and Subordinated Notes will rank pari
      passu with all Senior and Subordinated Notes, respectively, then
      outstanding. The aggregate principal amount of Senior and Subordinated
      Bonds that may be issued is unlimited, provided that at no time may the
      aggregate principal amount of Senior and Subordinated Bonds exceed the
      aggregate principal amount of Senior and Subordinated Notes, respectively,
      then outstanding. The future issuance of additional Senior and
      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.


                                       19
<PAGE>   22
      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 pledged 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 will be adjusted to equal the greater (for so long as
      the Senior Bonds are outstanding) or the lesser (after the Senior Bonds
      have been paid in full) 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, 1999, MCV had funds of $138.5 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 "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 "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 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.

                                       20
<PAGE>   23

Item 3.    LEGAL PROCEEDINGS

MCV has filed property tax appeals contesting MCV's property taxes for 1997,
1998 and 1999, which are pending before the Michigan Tax Tribunal. MCV has also
filed a property tax appeal for 2000. MCV Management cannot predict the outcome
of these proceedings.

Other than as discussed in "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 the consolidated financial statements.

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

Not applicable.


                                       21
<PAGE>   24
                                     PART II

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

Not applicable.

Item 6.       SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data of MCV. The
selected operating and financial position data as of December 31, 1999, 1998,
1997, 1996 and 1995 and for each of the five years ended December 31, 1999 have
been derived from audited financial statements. This information should be read
in conjunction with "MD&A" and the financial statements and notes thereto
included elsewhere herein.

<TABLE>
<CAPTION>
                                                                           Years Ended December 31,
                                                   -------------------------------------------------------------------------
                                                       1999           1998          1997           1996           1995
                                                   -------------------------------------------------------------------------
                                                                            (Dollars in Thousands)
<S>                                                  <C>            <C>           <C>             <C>           <C>
STATEMENT OF OPERATIONS DATA:
  Operating Revenues                                 $ 617,352      $ 627,054     $ 651,581       $ 645,168     $ 617,818
  Operating Income                                     215,884        222,461       216,499         227,883       232,347
  Cumulative Effect on Prior Years (to                      --             --        15,533              --            --
   December 31, 1996) of Change in Method of
   Accounting for Property Taxes (1)
  Net Income (Loss)                                     80,069         80,327        77,737          65,524        60,936

BALANCE SHEET DATA: (2)
  Total Assets                                       2,299,212      2,286,506     2,351,271       2,363,945     2,360,530
  Capitalization
    Partners' Equity                                   437,617        357,548       277,221         199,484       133,960
    Long-Term Debt, Excluding Current Maturities
                                                     1,584,865      1,723,960     1,788,291       1,929,241     2,007,815
</TABLE>

(1)Effective January 1, 1997, MCV changed its method of accounting for property
   taxes so that such taxes are expensed monthly during the fiscal period of the
   taxing authority for which the taxes are levied. This change provides a
   better matching of property tax expense with both the payment for services
   and those services provided by the taxing authorities. Prior to January 1,
   1997, the Partnership expensed property taxes monthly during the year
   following the assessment date (December 31). Also see MD&A "Cumulative Effect
   of Accounting Change" and Notes to Consolidated Financial Statements, Note 3,
   "Change in Method of Accounting for Property Taxes."
(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

Overview

For the year ended December 31, 1999, MCV recorded net income of $80.1 million,
a decrease of $.2 million as compared to 1998 net income of $80.3 million. The
decrease was primarily due to lower contract payments from Dow, lower energy
rates under the PPA with Consumers and the recording in 1998 of a non-recurring
interest refund from Great Lakes. This decrease was partially offset by a
Settlement Agreement between MCV and Consumers effective January 1, 1999, which
resolved a number of disputed issues under the PPA between the

                                       22
<PAGE>   25

parties. Also partially offsetting this decrease in earnings was lower interest
expense on MCV's financing obligation, additional power sales outside of the
PPA, and lower depreciation expense.

For the year ended December 31, 1998, MCV's recorded net income was $2.6 million
higher than the 1997 net income of $77.7 million. The increase in 1998 earnings
is primarily the result of lower interest expense on MCV's financing obligation,
lower depreciation expense and higher available PPA capacity. This increase was
partially offset by the 1997 change in method of accounting for property taxes
(the cumulative effect on prior years of this change increased 1997 earnings by
$15.5 million) and an increase in the average cost of gas.

Operating Revenues

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

<TABLE>
<CAPTION>
                                                               1999                  1998                   1997
                                                         ------------------    ------------------     -----------------

<S>                                                             <C>                   <C>                   <C>
Operating Revenues                                              $  617,352            $  627,054            $  651,581

Capacity Revenue                                                $  407,429            $  407,518            $  405,488
   PPA Contract Capacity (MW)                                        1,240                 1,240                 1,240
   Billed PPA Availability (1)                                       98.5%                 99.4%                 98.9%

Electric Revenue                                                $  196,301            $  192,258            $  218,219
   PPA Delivery as Percentage of Contract Capacity                   78.2%                 79.3%                 91.2%
   PPA, SEPA and Other Electric Deliveries (MWh)                 9,205,083             9,194,474            10,455,717
   Average PPA Variable Energy Rate ($ / MWh)                   $    16.00            $    16.76            $    16.87
   Average PPA Fixed Energy Rate ($ / MWh)                      $     3.52            $     3.75            $     3.94

Steam Revenue                                                   $   13,622            $   12,008            $   12,604
   Steam Deliveries (Mlbs)                                       5,803,863             5,584,273             5,717,720

Other Revenue                                                   $       --            $   15,270            $   15,270
</TABLE>



    (1) As part of the Settlement Agreement (See "Capacity and Energy Payments
    Under the PPA" and Notes to Consolidated Financial Statements, Note 8,
    "Contingencies, PPA - Settlement of PPA Issues"), effective January 1, 1999,
    MCV agreed with Consumers to cap PPA availability at 98.5% in each calendar
    year for so long as Consumers did not resell the capacity and energy under
    the PPA in the wholesale market.

For the year ended December 31, 1999, MCV's operating revenues decreased by $9.7
million from 1998. This decrease is due to the expiration of the installment
payments under the SEPA with Dow, lower energy rates under the PPA and lower
capacity revenues under the PPA resulting from the capping of the capacity
payments under the Settlement Agreement. This decrease was partially offset by a
one-time net $6.4 million increase in electric revenues as a result of the
Settlement Agreement with Consumers and additional capacity and electric sales
revenues outside of the PPA.

For the year ended December 31, 1998, MCV's operating revenues decreased $24.5
million from 1997. This decrease primarily resulted from lower electric
deliveries under the PPA with Consumers, resulting from Consumers' change to
economic dispatch of the facility (See "Outlook - Operating Outlook") and to
lower variable and fixed energy rates. This decline in electric revenue was
largely offset by a decline in fuel costs also associated with the decrease in
dispatch. The decrease in energy related revenues was partially offset by higher
capacity payments generated under the PPA.

Operating Expenses


                                       23
<PAGE>   26
For the year ended December 31, 1999, MCV's operating expenses were $401.5
million, which included $244.4 million of fuel costs. During this period, MCV
purchased approximately 82.8 Bcf of natural gas for plant use, of which a net
2.5 Bcf was used for transportation fuel and as a net change to gas in storage.
During this same period, MCV consumed 82.3 Bcf, of which 1.9 Bcf of this total
was gas provided by Dow. The average commodity cost of fuel for 1999 was $2.50
per MMBtu. For the year 1998, MCV's operating expenses were $404.6 million,
which included $244.7 million of fuel costs. During this period, MCV purchased
approximately 87.5 Bcf of natural gas for plant use, of which a net 4.4 Bcf was
used for transportation fuel and as a net change to gas in storage. During this
same period, MCV consumed 84.1 Bcf, of which 2.9 Bcf of this total was gas
provided by Dow. The average commodity cost of fuel for 1998 was $2.45 per
MMBtu. Fuel costs for 1999 compared to 1998 decreased $.3 million. This decrease
was primarily due to a lower electric dispatch by Consumers under the PPA,
partially offset by a higher 1999 average cost of gas due to increases in the
long term natural gas prices.

In 1999, operating expenses other than fuel costs decreased $2.8 million from
1998, primarily resulting from lower depreciation expense. All other expenses
incurred in these periods were considered normal expenditures to achieve the
recorded operating revenues.

For the year ended December 31, 1998, MCV's operating expenses decreased $30.5
million from the year 1997, which included a $21.7 million decrease in fuel
costs. This decrease was primarily due to lower gas usage resulting from a lower
electric dispatch by Consumers, and Dow's election to provide its own gas to
generate part of its take of steam and electricity. This decrease was partially
offset by a higher 1998 average cost of gas due to increases in long-term
natural gas prices.

In 1998, operating expenses other than fuel costs decreased $8.8 million from
1997. This decrease was primarily due to lower depreciation expense, resulting
from a revision to the useful lives of the gas turbines and certain related
capital spares to more closely reflect the economic lives of these assets. Other
expenses incurred in these periods were considered normal expenditures to
achieve the recorded operating revenues.

Other Income (Expense)

The decrease in interest and other income in the year 1999 compared to 1998
reflected the 1998 accrual for the interest income refund from Great Lakes. The
decrease in interest expense in 1999 from 1998 is due to a lower principal
balance on MCV's financing obligation.

The increase in interest and other income for the year 1998 compared to 1997
reflected an interest income refund from Great Lakes. The decrease in interest
expense for the year 1998 compared to 1997 was due to a lower principal balance
on MCV's financing obligation.

Cumulative Effect of Accounting Change

Effective January 1, 1997, MCV changed its method of accounting for property
taxes so that such taxes are expensed monthly during the fiscal period of the
taxing authority for which the taxes are levied. This change provides a better
matching of property tax expense with both the payment for services and those
services provided by the taxing authorities. Prior to January 1, 1997, the
Partnership expensed property taxes monthly during the year following the
assessment date (December 31). The cumulative effect on prior years of this
change increased earnings for the year 1997 by approximately $15.5 million while
the current year effect increased 1997 earnings by approximately $.6 million.

Market Risk Sensitivity

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 below. MCV does
not use financial instruments for trading purposes and does not use leveraged
instruments. Fair values included herein have been determined based upon quoted
market prices. The information presented below should

                                       24
<PAGE>   27
be read in conjunction with Note 2, " Significant Accounting Policies" and Note
6, "Long-Term Debt" to the Consolidated Financial Statements of MCV.

Interest Rate Risks. 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. 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 the Owner Trusts
established for the benefit of the Owner Participants. The financing
arrangement, entered into for a term of 25 years, maturing in 2015, has an
effective interest rate of approximately 8.7%, payable in semi-annual
installments of principal and interest. Due to the unique nature of the
negotiated financing obligation it is impractical to estimate the fair value of
the Owner Participants' underlying debt and equity instruments supporting this
financing obligation.

In addition, 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 are made up of investment securities
held to maturity and as of December 31, 1999 have original maturity dates of
less than one year.

For MCV's debt 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. For the
interest rate swap transactions, the table presents the notional amounts and
related interest rates by fiscal year of maturity. The variable rates presented
are the average of the forward rates for the term of each contract, as valued at
December 31, 1999.

<TABLE>
<CAPTION>
                                                               Expected Maturity Date
                          --------------------------------------------------------------------------------------------------
                             2000        2001        2002        2003        2004     Thereafter     Total      Fair Value
                             ----        ----        ----        ----        ----     ----------     -----      ----------
<S>                       <C>        <C>          <C>         <C>         <C>        <C>           <C>          <C>
Debt:
Long-Term Debt
Fixed Rate                $288.6      $292.2      $309.2      $214.0      $247.9      $1,542.6     $2,894.5        N/A
    (in millions)
Avg. Interest Rate        8.7%        8.7%        8.7%        8.7%        8.7%        8.7%         8.7%

Interest Rate Swaps:
Variable to Fixed         $45.0                                                                                 Immaterial
    (in millions)
Avg. Pay Rate             6.67%
Avg. Receive Rate         6.32%

Floating to Floating                              $20.0                                                         Immaterial
    (in millions)
Avg. Pay Rate                                     6.93%
Avg. Receive Rate                                 6.67%
</TABLE>

Commodity Risk. MCV is a purchaser of natural gas. 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 only to secure
anticipated natural gas requirements necessary for projected electric sales at a
cost of gas less than that available under MCV's long term natural gas contracts
and to hedge sales of natural gas previously obtained in order to optimize MCV's
existing gas supply, storage and transportation arrangements. The natural gas
futures and option contracts qualify as hedges under SFAS No. 80, "Accounting
for Futures Contracts," since the contracts cover probable future transactions.
MCV's futures and forward contracts generally have maturities not exceeding
twelve months.


                                       25
<PAGE>   28
The following table provides information about MCV's futures contracts that are
sensitive to changes in natural gas prices; these futures contracts have
maturity dates ranging from one to seven months. The table presents the carrying
amounts and fair values at December 31, 1999:

<TABLE>
<CAPTION>
                                                        Expected Maturity in 2000        Fair Value
                                                        -------------------------        ----------
Futures Contracts:
<S>                                                     <C>                              <C>
Contract Volumes (10,000 MMBtu) Long/Buy                           307                        --
Contract Volumes (10,000 MMBtu) Short/Sold                        (122)                       --
Weighted Average Price Long (per 10,000 MMBtu)                    $2.447                    $2.342
Weighted Average Price Short (per 10,000 MMBtu)                   $2.470                    $2.329
Contract Amount ($US in Millions)                                 $4.5                      $4.3
</TABLE>

Foreign Currency Risks. MCV periodically enters into foreign exchange forward
purchase contracts for Swiss Francs to hedge its foreign currency exposure
against adverse currency fluctuations impacting the payments under the amended
Service Agreement with ABB Power. The gains and losses on these transactions,
accounted for as hedges, are deferred on the balance sheet and included in the
measurement of the underlying capitalized major renewal costs when incurred.
Forward contracts which are entered into have maturity dates of less than one
year. MCV did not have any such forward purchase contracts for Swiss Francs
outstanding as of December 31, 1999.

Liquidity and Financial Resources

During the years ended December 31, 1999 and 1998, net cash generated by MCV's
operations was $154.4 million and $162.9 million, respectively. The primary use
of net cash was for the payment of principal on the financing obligation and
capital expenditures. No distributions to the Partners for federal tax
obligations were made in the last three years; instead, funds totaling $10.3
million, $23.2 million and $13.2 million were retained by MCV as working capital
in 1999, 1998 and 1997, respectively, since the Reserve Account was funded to
the maximum amount of $137 million in 1994, per the Intercreditor Agreement.
MCV's cash and cash equivalents have a normal cycle of collecting six months of
revenues less operating expenses prior to making the semiannual interest and
principal payments of the financing obligation due in January and July for the
next fifteen years. During 1999, 1998 and 1997, MCV paid the basic rent
requirements of $221.7 million, $309.0 million and $254.6 million, respectively,
as required under the Overall Lease Transaction.

MCV also has arranged for a $50 million working capital line ("Working Capital
Facility") from the Bank of Montreal to provide temporary financing, as
necessary, for operations. The Working Capital Facility has been secured 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. The borrowing base varies over the
month as receivables are earned, billed and collected. At December 31, 1999, the
borrowing base was $46.4 million. The Working Capital Facility term currently
extends to August 31, 2001. MCV did not utilize the Working Capital Facility
during 1999, except for letters of credit associated with normal business
practices. MCV believes that amounts available to it under the Working Capital
Facility will be sufficient to meet any working capital shortfalls which might
occur.

For the foreseeable future, MCV expects to fund current operating expenses,
payments under the amended Service Agreement and rental payments primarily
through cash flow from operations. If necessary, MCV could fund any operating
cash flow shortfalls from cash reserves to the extent available for such
purposes. As of December 31, 1999, there was $312.0 million (which includes
$63.4 million reserved for capital improvements and spare parts purchases),
including accrued interest, in available reserves for such purposes.

Inflation

MCV does not expect inflation to have a significant effect on future results of
operations in the near term. The majority of MCV's gas purchases are based on
contracts with a fixed price in a base year which is subject to adjustment under
various methods -- a fixed price, a fixed price with an escalator, an index
based on Consumers' energy charges under the PPA, or a combination thereof --
which permits the seller to increase the price by the

                                       26
<PAGE>   29
greater of the fixed escalator or the energy charge index. Management believes
these provisions provide a measure of relief from inflation risks. Under the
terms of MCV's financing obligations under the Overall Lease Transaction, all of
the outstanding long-term borrowings are at fixed rates.

Outlook

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995. The following discussion of the outlook for MCV 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 which 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 relating to
the forward-looking statements. There is no assurance 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 the
final outcome of the MPSC Restructuring Orders and challenges thereto,
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 and construction of plant
facilities including natural gas pipeline and storage facilities, and present or
prospective wholesale and retail competition, among others. The business and
profitability of MCV is also influenced by other factors such as pricing and
transportation of commodities and environmental legislation/regulation, among
other important factors. All such factors are difficult to predict, contain
uncertainties which may materially affect actual results, and are beyond the
control of MCV.

Results of operations are largely dependent on successfully operating the
Facility at or near contractual capacity levels, the availability of natural
gas, the level of energy rates paid to MCV relative to the cost of fuel used for
generation, Consumers' performance of its obligations under the PPA and
maintenance of the Facility's QF status.

Operating Outlook. In 1999, approximately 70% of PPA revenues were capacity
payments which are billed on availability, subject to an annual availability cap
of 98.5% pursuant to the Settlement Agreement, which was effective January 1,
1999. Actual PPA availability was 99.7% in 1999, 99.4% in 1998 and 98.9% in
1997. 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.

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, instead of at the higher dispatch levels experienced in 1997
and earlier years. Although MCV has experienced a decline in both electric
operating revenues and operating costs as a result of this change in dispatch;
this change has not resulted in a material adverse affect on MCV's financial
position.

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
portion of its fuel supply beyond the year 2005, 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.

                                       27
<PAGE>   30
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. For
the period April 1990 through December 1999, the energy charge (fixed and
variable) paid to MCV has declined by 16.5% per kWh, while the average variable
cost of delivered fuel for the period 1990 - 1999, has risen by 13.8% per MMBtu.
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
(contract prices generally escalate at a fixed price, a fixed price with an
escalator, an index based on Consumers' energy charges under the PPA, or a
combination thereof).

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. Consumers and MCV are required to support and defend
the terms of the PPA.

MCV and Consumers entered into a Settlement Agreement, effective January 1,
1999, which resolves (for the various time periods specified in the Settlement
Agreement, but in no event sooner than 2002) 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
decisions which may affect those issues or payments. MCV recognized a one-time
net $6.4 million increase in electric revenues in the first quarter of 1999
based upon the resolution of these issues. On an ongoing basis and for the
various time periods specified in the Settlement Agreement, the Settlement
Agreement is not expected to materially affect MCV's earnings and cash flows.

PPA - Sale and Assignment. On March 10, 1999, Consumers announced that it signed
a contract with PECO Energy Company ("PECO") whereby Consumers will sell 1240 MW
of capacity and associated energy to PECO from the MCV PPA beginning January 1,
2002 and ending in September 2007. The agreement calls for Consumers to sell
PECO between 100 MW to 150 MW through 2001. The announcement also states the
contract with PECO is subject to satisfactory regulatory approvals. On April 30,
1999, the MPSC entered an order, which was subsequently amended and clarified,
which conditionally permitted the transaction to go forward. Consumers has asked
the MPSC for further clarification, but the MPSC has not yet ruled on Consumers'
latest request. At this time, MCV Management cannot predict whether Consumers
will accept the MPSC's orders. MCV does not expect the sale of Consumers' rights
to capacity and associated energy under the PPA to materially affect its
financial position or results of operations.

Michigan Electric Industry Restructuring Proceedings. On December 20, 1996, the
MPSC issued an order on its own motion to consider the restructuring of the
electric industry in Michigan and issued orders on June 5, 1997, October 29,
1997, January 14, 1998 and February 11, 1998 (collectively the "Restructuring
Orders"). While the Restructuring Orders are not entirely clear, they provide
for a transition to a competitive regime whereby electric retail customers will
be able to chose their power supplier and pay negotiated or market-based rates
for such power supply. The Restructuring Orders also mandate that utilities
"wheel" third-party power to the utilities' customers. An issue involved in this
restructuring which could significantly impact MCV is stranded cost recovery.
The Restructuring Orders allow recovery by utilities (including Consumers) of
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 (i.e., 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


                                       28
<PAGE>   31

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.

In the restructuring cases before the MPSC, MCV has advocated, among other
things, full recovery of PPA charges (capacity and energy) for the life of the
PPA from all customers. MCV, as well as others, filed appeals in state and
federal courts challenging the Restructuring Orders. In June 1999, the Michigan
Supreme Court issued an opinion in an MPSC "retail wheeling" experiment case
holding, among other things, that the MPSC lacks the statutory authority to
mandate that utilities transmit power of third parties to the utilities'
customers ("Michigan Supreme Court Order"). While the Michigan Supreme Court
Order was not directed at the Restructuring Orders, the MPSC has effectively
applied it to them by entering an order on August 17, 1999, making retail
wheeling under the Restructuring Orders voluntary on the part of the utilities.
On September 1, 1999, Consumers filed a statement with the MPSC stating that it
intends to voluntarily implement the Restructuring Orders.

On July 7, 1999, the U.S. District Court granted summary judgment to MCV
declaring that the Restructuring Orders are preempted by federal law to the
extent that they prohibit any utility from recovering from its customers any
charge for avoided costs (or "stranded costs") to be paid to MCV under PURPA
pursuant to the PPA. The order further provides that the MPSC's prior orders
approving the avoided cost rates for MCV takes precedence over the Restructuring
Orders. The Defendants in the lawsuit (the Commissioners of the MPSC) were
permanently enjoined from enforcing the Restructuring Orders in any manner which
denies or precludes Consumers' recovery of the avoided costs set for MCV,
including but not limited to interpreting or enforcing the Restructuring Orders
to preclude them from recovering all or any portion of the avoided costs
previously approved by the MPSC from its customers, whether before, during, or
after the year 2007. This order and the Commission's August 17, 1999 order are
being appealed. The Michigan legislature has also begun the process to consider
electric industry restructuring and deregulation. While restructuring could have
a material impact on MCV, MCV Management cannot, at this time, predict the
impact or the outcome of these administrative, judicial and legislative
proceedings.

Federal Electric Industry Restructuring. FERC has jurisdiction over wholesale
energy sales and is moving towards "market" based pricing of electricity in some
circumstances as opposed to traditional cost-based pricing. In April 1996, FERC
issued Order No. 888 requiring all utilities 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. Appeals of Order No.
888 and subsequent related orders are pending before the United States Court of
Appeals for the D.C. Circuit. On December 20, 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. Order
No. 2000 is intended to increase competition and remedy continuing problems with
wholesale transmission access and reliability. Order No. 2000 does not directly
impact MCV since MCV does not own transmission lines, but could indirectly
impact MCV in selling electricity in the wholesale market. Order No. 2000 is
subject to rehearing and appeal. In addition, several bills have been introduced
in Congress to require states to permit consumers to choose their supplier of
electricity and manage other issues such as transition cost recovery and FERC
jurisdiction of retail electric sales. MCV Management cannot predict the impact
on MCV or the outcome of these proceedings.

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 1999 the Facility achieved an Efficiency Percentage in
excess of 45%.


                                       29
<PAGE>   32
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.
In 1999, MCV achieved an Efficiency Percentage of 47.0% and a Thermal Percentage
of 18.0%.

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 FPA (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 Trustee and their respective parent companies could
become subject to regulation under the 1935 Act (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 rent 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 the
Overall Lease Transaction).

Year 2000
MCV utilizes information technologies and non-information technologies
(collectively "Systems") in the Facility, some of which could have been affected
by the year 2000 ("Y2K") date change. As a result of MCV's efforts over the past
two years, the GTGs, steam turbine and back pressure steam turbine and all
critical plant and business systems operated effectively (no Y2K problems)
during the transition period on January 1, 2000. MCV expensed approximately
$300,000 to make its computer systems Y2K compliant, with additional minor
expenditures for new software capitalized and to be amortized over the
software's useful life.

"Financial Statements and Supplementary Data -- Notes 1 and 8 to the
Consolidated Financial Statements" for a further discussion of associated risks
and contingencies.

Item 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Report of Independent Public Accountants and Financial Statements are set
forth on Pages F-2 to F-21 of this Annual Report on Form 10-K and are hereby
incorporated herein.

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

None.


                                       30
<PAGE>   33
                                    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 "Security
Ownership of Certain Beneficial Owners and Management" and "Certain
Relationships and Related Transactions."

<TABLE>
<CAPTION>
Management Committee
--------------------

<S>                                      <C>       <C>
William T. McCormick, Jr.                (55)      Management Committee Chairman

David A. Arledge                         (55)      Management Committee Member

Joseph L. Roberts, Jr.                   (45)      Management Committee Member

Executive Officers
------------------
James M. Kevra                           (51)      President and Chief Executive Officer

Bruce C. Grant                           (53)      Vice President of Human Resources, Communications
                                                   and Public Affairs

James A. Mooney                          (60)      Vice President of Engineering, Operations and
                                                   Construction

Gary B. Pasek                            (44)      Vice President, General Counsel and Secretary

James M. Rajewski                        (52)      Vice President and Controller

Stephen A. Shulman                       (43)      Chief Financial Officer and Treasurer

LeRoy W. Smith                           (58)      Vice President of Energy Supply and Marketing
</TABLE>


William T. McCormick, Jr. has served as Chairman of the Management Committee of
MCV since its creation in January, 1987. Mr. McCormick has served as Chairman of
the Board, Chief Executive Officer and Director of CMS Energy (diversified
energy holding company) since it was incorporated in February 1987 and as
Chairman of Consumers since November 1985.

David A. Arledge has served as a member of the Management Committee since July
1988. Mr. Arledge is Chairman, President and Chief Executive Officer of The
Coastal Corporation, a diversified energy holding company. Prior to becoming
Chief Executive Officer in October 1995, Mr. Arledge was Chief Operating Officer
of The Coastal Corporation from March, 1994. He is also a Director of Coastal
and of Coastal Midland, Inc., a subsidiary of Coastal and has held these
positions since February 1988 and April 1989, respectively. He has also held
various other executive positions in Coastal and numerous subsidiaries of
Coastal during the last five years.


                                       31
<PAGE>   34
Joseph L. Roberts, Jr. served as a member of the Management Committee from May
1997 to January 5, 2000. Mr. Roberts is President and Chief Executive Officer of
MCNIC Power Company since July 1998 and a member of the Board of Directors of
MCN Investment Corporation since August 1997. His term on the Management
Committee ended with the transfer of MCNIC's MCV partnership interests to
affiliates of Coastal.

James M. Kevra has served as President and Chief Executive Officer of MCV since
July 1995. Mr. Kevra has served as a member of the Management Committee from
April 1992 to June 1995. Mr. Kevra has previously served as President of Pan
National Gas Sales, Inc. (engaged in the marketing of liquefied natural gas), a
subsidiary of PanEnergy, and held that position from February 1995 to June 1995,
was Vice President of Centana Energy Corporation (engaged in the gathering and
processing of natural gas), a subsidiary of PanEnergy, and was Vice President of
Planning for Panhandle Eastern Pipe Line Company (engaged in the interstate
transportation of natural gas). Mr. Kevra also served as the President of Source
Cogeneration Company, Inc., and served in that capacity from April 1992 to June
1995.

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.

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. From 1991 until joining MCV,
Mr. Pasek was Assistant General Counsel and Assistant Secretary of the Illinois
Power Company ("IP") (an investor owned electric and gas utility) as well as
General Counsel and Secretary of Illinova Generating Company ("IGC") (an
independent power generation company); both IP and IGC were affiliates of
Illinova Corporation, which was acquired by Dynegy Inc.

James M. Rajewski has served as Vice President and Controller of MCV since
January 1988.

Stephen A. Shulman has served as Chief Financial Officer and Treasurer of MCV
since February 1999. From February 1994 to January 1999, he served as Vice
President of Finance and Treasurer of MCV.

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.


                                       32
<PAGE>   35
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, 1999, 1998 and
1997.

<TABLE>
<CAPTION>
                                               Summary Compensation Table
                                               --------------------------

                                                                              Annual Compensation
                                                      ---------------------------------------------------------------------
          Name and                                                                                        All Other
     Principal Position                Year           Salary ($)             Bonus ($)(a)              Compensation($)
------------------------------        -------         ------------        --------------------      ----------------------

<S>                                    <C>              <C>               <C>                       <C>
James M. Kevra                         1999             241,965                 178,360                     48,942(b)
President and                          1998             226,008                 225,000                     46,519
Chief Executive Officer                1997             221,750                 127,302                     45,942


James A. Mooney                        1999             183,592                  94,352                     39,312(c)
Vice President of                      1998             176,900                 122,559                     38,279
Engineering, Operations                1997             169,139                  63,639                     37,126
and Construction


Gary B. Pasek                          1999             158,683                  80,148                     23,776(d)
Vice President                         1998             152,169                 106,287                     22,794
General Counsel & Secretary            1997             142,380                  51,195                     21,329


LeRoy W. Smith                         1999             158,105                  76,805                     26,210(e)
Vice President of Energy               1998             152,335                 103,173                     25,321
Supply and Marketing                   1997             145,505                  59,813                     24,306


Stephen A. Shulman                     1999             142,673                  70,630                     21,378(f)
Chief Financial Officer                1998             137,100                  95,116                     20,538
and Treasurer                          1997             129,932                  46,303                     19,465
</TABLE>

------------------------------

(a)  Represents bonuses accrued under the Senior Management Incentive Plan.

(b)  Includes company contributions of $8,000 to the 401(k) Savings Plan,
     $12,000 to the Defined Contribution Retirement Plan and $28,942 to the
     Supplemental Retirement Plan.

(c)  Includes company contributions of $8,000 to the 401(k) Savings Plan,
     $12,000 to the Defined Contribution Retirement Plan and $19,312 to the
     Supplemental Retirement Plan.

(d)  Includes company contributions of $7,925 to the 401(k) Savings Plan,
     $12,075 to the Defined Contribution Retirement Plan and $3,776 to the
     Supplemental Retirement Plan.

(e)  Includes company contributions of $7,867 to the 401(k) Savings Plan,
     $12,133 to the Defined Contribution Retirement Plan and $6,210 to the
     Supplemental Retirement Plan.

(f)  Includes company contributions of $7,126 to the 401(k) Savings Plan,
     $12,874 to the Defined Contribution Retirement Plan and $1,378 to the
     Supplemental Retirement Plan.


                                       33
<PAGE>   36
                       1999 Long-Term Incentive Plan Table
                       -----------------------------------

<TABLE>
<CAPTION>

                                     Performance or Other Periods          Estimated Future Payout Under
            Name                    Until Maturation or Payout (a)           Non-Stock Price Based Plan
------------------------------     ---------------------------------     -----------------------------------
                                                                                    Maximum ($)
                                                                                    -----------
<S>                                           <C>                                      <C>
James M. Kevra                                2-4 years                                75,000
James A. Mooney                               2-4 years                                57,000
Gary B. Pasek                                 2-4 years                                50,000
LeRoy W. Smith                                2-4 years                                49,000
Stephen A. Shulman                            2-4 years                                45,000
</TABLE>

(a)  In 1998, MCV established a new long-term incentive plan under which
     officers and certain management personnel could receive cash payouts based
     on achieving certain targeted cashflows on a projected basis, thus enabling
     cash distributions to be made to the Partners for their annual federal tax
     obligations pursuant to provisions in the Participation Agreement. If, in
     any of the years 2000 through 2002, MCV is able to make a cash distribution
     to its Partners greater than 75% of the Partners' estimated tax obligation,
     each participant in the plan could receive a payout equal to a range of
     1%-30% of their base salary depending on the specific amount of cash
     distributed to the Partners and the year that such distribution occurs.
     Where the cash distribution to the Partners is 75% or less of the estimated
     tax obligation for each of these three years, no cash payout to
     participants will occur under this 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. Arledge is a member of the Compensation Committee of MCV as well as
Chairman, President and Chief Executive Officer and a Director of Coastal and a
Director of Coastal Midland, Inc. Coastal Midland, Inc. and affiliates of
Coastal have engaged in numerous transactions in the ordinary course of business
to provide services or products to MCV. In 1999, Coastal affiliates engaged in
transactions with MCV which included the sale of natural gas, sale of natural
gas transportation, various natural gas marketing services and the purchase of
electricity that amounted in aggregate to approximately $31.4 million. A similar
level of transactions is expected to occur in 2000. In addition, as of December
31, 1999, Coastal had an outstanding cash withdrawal from the Partnership in the
amount of $21.0 million (including accrued interest) in exchange for a letter of
credit, pursuant to the Participation Agreement.

Mr. McCormick is Chairman of the Compensation Committee of MCV as well as
Chairman of the Board and Director of CMS Energy and Consumers. 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 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


                                       34
<PAGE>   37
Ground Lease. In 1999, Consumers purchased electric capacity and related energy
from the Facility that aggregated approximately $585.8 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 1999, 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 $36.3
million. A similar level of transactions is expected to occur in 2000.

Mr. Roberts was a member of the Compensation Committee of MCV until January 5,
2000, as well as President and Chief Executive Officer of MCNIC Power Company
and a member of the Board of Directors of MCN Investment Corporation. Affiliates
of MCN have engaged in numerous transactions in the ordinary course of business
to provide services or products to MCV. In 1999, MCN affiliates engaged in
transactions with MCV which included the sale of natural gas and the purchase of
natural gas that amounted in aggregate to approximately $18.4 million. In
addition, as of December 31, 1999, MCN had an outstanding cash withdrawal from
the Partnership in the amount of $23.9 million (including accrued interest) in
exchange for a letter of credit, pursuant to the Partnership Agreement, which
was repaid to MCV on January 4, 2000, due to the sale of MCN's partnership
interests.

For further detailed discussions of MCV's contracts and leases with Partners,
see "Contracts", "Properties" and "Financial Statements and Supplementary Data
-- Note 10 to the Consolidated Financial Statements."




                                       35
<PAGE>   38
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

<TABLE>
<CAPTION>

                                                                                Amount and Nature of Beneficial Ownership
                                                                             -------------------------------------------------
                                                                              Approximate Percent       Approximate Percent
 Name and Address of Beneficial Owner              Title of Class            of Voting Rights (a)          of Partnership
                                                                                                              Interest
----------------------------------------    -----------------------------    ----------------------    -----------------------

<S>                                         <C>                                      <C>                       <C>
CMS Midland, Inc.                           General Partnership Interest             49.0%                     49.0%
212 West Michigan Avenue
Jackson, MI 49201

Source Midland Limited Partnership          General Partnership Interest             24.2%                     18.1%
Coastal Tower
Nine Greenway Plaza
Houston, TX  77046

Coastal Midland, Inc.                       General Partnership Interest             14.6%                     10.9%
Coastal Tower
Nine Greenway Plaza
Houston, TX 77046

MEI Limited Partnership (b)                 General Partnership Interest             12.2%                      9.1%
Coastal Tower                               Limited Partnership Interest              --                        0.9%
Nine Greenway Plaza
Houston, TX  77046

The Dow Chemical Company                    Limited Partnership Interest              --                        7.5%
2030 Dow Center
Midland, MI 48674

Micogen Limited Partnership                 Limited Partnership Interest              --                        4.5%
Coastal Tower
Nine Greenway Plaza
Houston, TX 77046

Alanna Corporation                          Limited Partnership Interest              --                      0.00001%
c/o MCV Limited Partnership
100 Progress Place
Midland, MI 48640

                                                                             ----------------------    -----------------------
                                                                                    100.0%                     100.0%
</TABLE>


(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 have any beneficial ownership in MCV.

(b)    MCN, the previous parent company of SMLP and a previous 50% partner of
       MEI through SMLP, both partners of MCV, announced on October 5, 1999 that
       it had signed a definitive merger agreement with DTE Energy Company.
       Since the pending merger would cause SMLP and MEI to become electric
       utilities under PURPA, MCN announced that it would sell its interest in
       the MCV partnerships in order to keep the electric utility ownership in
       MCV in compliance with PURPA QF ownership requirements. On January 5,
       2000,

                                       36
<PAGE>   39
       MCN sold all of its partnership interest in SMLP and MEI to wholly-owned
       subsidiaries of Coastal. As a result of this sale, Coastal, through its
       subsidiaries, has acquired all of the equity and voting interests of SMLP
       and MEI in MCV. After this transaction, MCV continues to meet ownership
       requirements of PURPA.

Item 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See "Executive Compensation -- Compensation Committee Interlocks and Insider
Participation."


                                       37
<PAGE>   40
                                     PART IV

Item 14.      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, 1999 and 1998 or for each of the three years ended December 31,
           1999, 1998 and 1997.

<TABLE>
<CAPTION>
                                                                          Page
<S>                                                                       <C>
           Index to Consolidated Financial Statements
            and Supplemental Schedules                                     F-1
           Report of Independent Public Accountants                        F-2
           Consolidated Balance Sheets                                     F-3
           Consolidated Statements of Operations                           F-4
           Consolidated Statements of Partners' Equity                     F-5
           Consolidated Statements of Cash Flows                           F-6
           Notes to Consolidated Financial Statements                      F-7
</TABLE>
      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 5, 2000, covering matters reported pursuant
to "Item 5, Other Events."




                                       38
<PAGE>   41

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>


                                                                                                  Page Reference
                                                                                                  in Annual Report
                                                                                                  on Form 10-K
                                                                                                  ----------------
<S>                                                                                               <C>
Report of Independent Public Accountants                                                                F-2

Consolidated Balance Sheets as of December 31, 1999 and 1998                                            F-3

Consolidated Statements of Operations for the Years Ended December 31, 1999, 1998 and 1997              F-4

Consolidated Statements of Partners' Equity for the Years Ended December 31, 1999, 1998 and 1997        F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 1999, 1998 and 1997              F-6

Notes to Consolidated Financial Statements                                                              F-7

</TABLE>

                                      F-1
<PAGE>   42

                               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, 1999 and 1998, and the related
consolidated statements of operations, partners' equity and cash flows for each
of the three years in the period ended December 31, 1999. 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,
1999 and 1998, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.

As discussed in Note 3 to the financial statements, effective January 1, 1997,
MCV changed its method of accounting for property taxes.


                                                   Arthur Andersen LLP


     Detroit, Michigan,
     January 19, 2000


                                      F-2
<PAGE>   43

<TABLE>
<CAPTION>

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

ASSETS                                                                                      1999                 1998
------                                                                                  --------------       -------------
<S>                                                                                     <C>                  <C>
CURRENT ASSETS:
  Cash and cash equivalents (Note 2)                                                       $ 236,205            $ 193,116
  Restricted cash and cash equivalents (Notes 2 and 4)                                         5,680                8,913
  Accounts and notes receivable (Notes 6 and 10)                                             118,768              104,315
  Gas inventory (Notes 2 and 6)                                                               13,478               15,144
  Unamortized property taxes (Note 3)                                                         16,809               15,742
  Prepaid expenses and other                                                                   5,968                4,031
                                                                                        --------------       -------------

    Total current assets                                                                     396,908              341,261
                                                                                        --------------       -------------

PROPERTY, PLANT AND EQUIPMENT (Notes 2 and 6):
  Property, plant and equipment                                                            2,421,677            2,392,829
  Pipeline                                                                                    21,222               21,222
                                                                                        --------------       -------------

    Total property, plant and equipment                                                    2,442,899            2,414,051

  Accumulated depreciation                                                                  (711,019)            (640,659)
                                                                                        --------------       -------------

    Net property, plant and equipment                                                      1,731,880            1,773,392
                                                                                        --------------       -------------

OTHER ASSETS:
  Restricted investment securities held-to-maturity (Notes 2 and 4)                          139,803              143,444
  Deferred financing costs, net of accumulated amortization of $11,425 and $10,416,
    respectively (Notes 2 and 6)                                                               7,152                8,161
  Prepaid gas costs, materials and supplies (Note 2)                                          23,469               20,248
                                                                                        --------------       -------------

    Total other assets                                                                       170,424              171,853
                                                                                        --------------       -------------
TOTAL ASSETS                                                                             $ 2,299,212          $ 2,286,506
                                                                                        ==============       =============

LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and accrued liabilities (Notes 5 and 10)                                 $ 59,970             $ 60,718
  Interest payable (Note 6)                                                                   76,119               78,959
  Current portion of long-term debt (Note 6)                                                 139,095               64,331
                                                                                        --------------       -------------

    Total current liabilities                                                                275,184              204,008
                                                                                        --------------       -------------

NON-CURRENT LIABILITIES:
  Long-term debt (Note 6)                                                                  1,584,865            1,723,960
  Other                                                                                        1,546                  990
                                                                                        --------------       -------------

    Total non-current liabilities                                                          1,586,411            1,724,950
                                                                                        --------------       -------------

COMMITMENTS AND CONTINGENCIES (Notes 1, 6, 7 and 8)

TOTAL LIABILITIES                                                                          1,861,595            1,928,958
                                                                                        --------------       -------------

PARTNERS' EQUITY (Note 10)                                                                   437,617              357,548
                                                                                        --------------       -------------
TOTAL LIABILITIES AND PARTNERS' EQUITY                                                   $ 2,299,212          $ 2,286,506
                                                                                        ==============       =============
</TABLE>


                                      F-3
<PAGE>   44

<TABLE>
<CAPTION>


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


                                                                            1999                1998                1997
                                                                         ------------        ------------        ------------
<S>                                                                      <C>                 <C>                 <C>
OPERATING REVENUES (Notes 2, 7, 8 and 10):
  Capacity                                                                  $407,429            $407,518          $ 405,488
  Electric                                                                   196,301             192,258             218,219
  Steam and other                                                             13,622              27,278              27,874
                                                                         ------------        ------------        ------------

    Total operating revenues                                                 617,352             627,054             651,581
                                                                         ------------        ------------        ------------

OPERATING EXPENSES:
  Fuel costs                                                                 244,350             244,670             266,417
  Depreciation                                                                95,350              97,239             104,755
  Operations                                                                  14,699              14,880              16,080
  Maintenance                                                                 12,076              12,596              13,403
  Property and single business taxes                                          25,744              25,687              26,044
  Administrative, selling and general                                          9,249               9,521               8,383
                                                                         ------------        ------------        ------------

    Total operating expenses                                                 401,468             404,593             435,082
                                                                         ------------        ------------        ------------

OPERATING INCOME                                                             215,884             222,461             216,499
                                                                         ------------        ------------        ------------

OTHER INCOME (EXPENSE):
  Interest and other income                                                   19,913              21,092              19,645
  Interest expense                                                          (155,728)           (163,226)           (173,940)
                                                                         ------------        ------------        ------------

    Total other income (expense), net                                       (135,815)           (142,134)           (154,295)
                                                                         ------------        ------------        ------------

INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE                           80,069              80,327              62,204

Cumulative effect on prior years (to December 31, 1996) of change in
  method of accounting for property taxes (Note 3)                                --                  --              15,533
                                                                         ------------        ------------        ------------

NET INCOME                                                                  $ 80,069            $ 80,327            $ 77,737
                                                                         ============        ============        ============
</TABLE>



                                      F-4
<PAGE>   45

<TABLE>
<CAPTION>



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


                                                                                     General        Limited
                                                                                     Partners       Partners          Total
                                                                                    -----------    ------------    -------------
<S>                                                                                 <C>            <C>             <C>
BALANCE, DECEMBER 31, 1996                                                           $ 162,312        $ 37,172       $ 199,484

Net income                                                                              67,680          10,057          77,737
                                                                                    -----------    ------------    -------------

BALANCE, DECEMBER 31, 1997                                                             229,992          47,229         277,221

Net income                                                                              69,935          10,392          80,327
                                                                                    -----------    ------------    -------------

BALANCE, DECEMBER 31, 1998                                                             299,927          57,621         357,548

Net income                                                                              69,711          10,358          80,069
                                                                                    -----------    ------------    -------------

BALANCE, DECEMBER 31, 1999                                                           $ 369,638        $ 67,979       $ 437,617
                                                                                    ===========    ============    =============
</TABLE>



                                      F-5
<PAGE>   46

<TABLE>
<CAPTION>


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

                                                                                        1999            1998              1997
                                                                                   ------------    ------------     --------------
<S>                                                                                <C>             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                          $ 80,069        $ 80,327           77,737

  Adjustments to reconcile net income to net cash provided by operating
   activities

  Depreciation and amortization                                                         96,359          98,297          105,882
  Cumulative effect of change in accounting principle                                       --              --          (15,533)
  Increase in accounts and notes receivable                                            (14,453)        (10,641)         (19,863)
  (Increase) decrease in gas inventory                                                   1,666          (2,234)             629
  (Increase) decrease in unamortized property taxes                                     (1,067)            355             (564)
  (Increase) decrease in prepaid expenses and other                                     (1,937)            547             (500)
  (Increase) decrease in prepaid gas costs, materials and supplies                      (3,221)            418          (14,816)
  Increase (decrease) in accounts payable, accrued and other liabilities                  (748)          1,776           (8,597)
  Decrease in interest payable                                                          (2,840)         (6,224)          (3,469)
  Increase in other non-current liabilities                                                556             306              229
                                                                                   ------------    ------------     --------------
    Net cash provided by operating activities                                          154,384         162,927          121,135
                                                                                   ------------    ------------     --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Plant modifications and purchases of plant and equipment                             (53,838)        (49,928)         (36,186)
                                                                                   ------------    ------------     --------------
    Net cash used in investing activities                                              (53,838)        (49,928)         (36,186)
                                                                                   ------------    ------------     --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of financing obligation                                                    (64,331)       (140,950)         (78,574)
  Purchase of restricted investment securities held-to-maturity                       (332,453)       (414,541)        (138,898)
  Maturity of restricted investment securities held-to-maturity                        336,094         409,995               --
  Decrease in restricted non-current cash and cash equivalents                              --              --          143,049
                                                                                   ------------    ------------     --------------
    Net cash used in financing activities                                              (60,690)       (145,496)         (74,423)
                                                                                   ------------    ------------     --------------

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND
 RESTRICTED CASH - CURRENT                                                              39,856         (32,497)          10,526

CASH, CASH EQUIVALENTS AND RESTRICTED CASH - CURRENT,
 AT BEGINNING OF PERIOD                                                                202,029         234,526          224,000
                                                                                   ------------    ------------     --------------

CASH, CASH EQUIVALENTS AND RESTRICTED CASH - CURRENT,
 AT END OF PERIOD                                                                    $ 241,885       $ 202,029        $ 234,526
                                                                                   ============    ============     ==============
</TABLE>

                                      F-6
<PAGE>   47


                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)  THE PARTNERSHIP AND ASSOCIATED RISKS

     Midland Cogeneration Venture Limited Partnership ("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 entered into commercial operation in
     1990. The Partners, their respective equity interests and interests in the
     profit and losses of the Partnership and transactions between MCV and
     affiliates of the Partners are discussed in Note 10.

     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 was originally designed to provide approximately 1,370
     megawatts ("MW") of electricity and approximately 1.5 million pounds of
     process steam per hour. Subsequent improvements to the Facility have
     increased net electrical generating capacity to approximately 1,500 MW. MCV
     has entered into three principal energy sales agreements. MCV has
     contracted to supply up to 1,240 MW of electric capacity ("Contract
     Capacity") to Consumers Energy Company ("Consumers") under the Power
     Purchase Agreement ("PPA"), for resale to its customers, to supply
     electricity and steam to The Dow Chemical Company ("Dow") under the Steam
     and Electric Power Agreement ("SEPA") and to supply steam to Dow Corning
     Corporation ("DCC") under the Steam Purchase Agreement ("SPA"). From time
     to time, MCV enters into other short-term 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' honoring its obligations
     under the PPA with MCV. 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. During 1999, the Facility achieved a Thermal
     Percentage of 18.0% and a PURPA Efficiency Percentage of 47.0%. 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
     and the corresponding Efficiency Percentages in 2000 and beyond.

     MCN Energy Group Inc. ("MCN"), the parent company of Source Midland Limited
     Partnership ("SMLP") and a 50% partner of MEI Limited Partnership ("MEI")
     through SMLP, both partners of MCV, announced on October 5, 1999 that it
     had signed a definitive merger agreement with DTE Energy Company. Since the
     pending merger would cause SMLP and MEI to become electric utilities under
     PURPA, MCN announced that it


                                      F-7
<PAGE>   48

                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



     would sell its interest in the MCV partnerships in order to keep the
     electric utility ownership in MCV in compliance with PURPA QF ownership
     requirements. On January 5, 2000, MCN sold all of its partnership interest
     in SMLP and MEI to wholly-owned subsidiaries of The Coastal Corporation
     ("Coastal"). As a result of this sale, Coastal, through its subsidiaries,
     has acquired all of the equity and voting interests of SMLP and MEI in MCV.
     After this transaction, MCV continues to meet the ownership requirements of
     PURPA.

     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.
     Commencing in 1998, and each year thereafter, MCV must provide at Consumers
     request, continuing annual assurances of such capability for each
     succeeding five-year period. 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. In
     November 1999, Consumers requested information for the continuing fuel
     assurance requirements covering the period 2000-2004. Consumers has
     reviewed MCV's fuel supply information for the period 2000 through 2004 and
     has provided MCV with a letter stating that MCV has satisfied the fuel
     assurance requirement for that period. 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 amount of such impact will depend upon the 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. One significant issue to MCV is the issue of stranded
     assets or transition cost recovery by utilities for PPA charges. At the
     state level, the MPSC entered a series of orders from June 5, 1997 through
     February 11, 1998 (collectively the "Restructuring Orders"), now final at
     the MPSC level, 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. In June 1999, the Michigan Supreme Court issued an opinion in the
     appeal of an order in an MPSC "retail wheeling" experiment case holding,
     among other things, that the MPSC lacks the statutory authority to mandate
     that utilities transmit power of third parties to the utilities' customers
     ("Michigan Supreme Court Order"). While the Michigan Supreme Court Order
     was not directed at the Restructuring Orders, the MPSC has effectively
     applied it to them by entering an order on August 17, 1999, making retail
     wheeling under the Restructuring Orders voluntary on the part of the
     utilities. On September 1, 1999, Consumers filed a statement with the MPSC
     stating that it intends to voluntarily implement the Restructuring Orders.

     At the federal level, MCV filed a complaint in the U.S. District Court for
     the Western District of Michigan challenging the Restructuring Orders. On
     July 7, 1999, the U.S. District Court granted summary judgment to MCV
     declaring that the Restructuring Orders are preempted by federal law to the
     extent that they prohibit any utility from recovering from its customers
     any charge for avoided costs (or "stranded costs") to be paid to MCV under
     PURPA pursuant to the PPA. The order further provides that the MPSC's prior
     orders approving the avoided cost rates for MCV take precedence over the
     Restructuring Orders. The Defendants in the lawsuit (the Commissioners of
     the MPSC) were permanently enjoined from enforcing the Restructuring Orders
     in any manner which denies or precludes Consumers' recovery of the avoided
     costs set for MCV, including but not limited to interpreting or enforcing
     the Restructuring Orders to preclude them from recovering all or any
     portion of the avoided costs previously approved by the MPSC from its
     customers, whether before, during, or after the year 2007. This order and
     the Commission's August 17, 1999 order are being appealed.

     To date, these restructuring efforts have not negatively impacted MCV's
     cash flow, but if the MPSC's Restructuring Orders are construed so as to
     deny stranded cost recovery of above-market PPA costs, and if such order is
     not reversed on appeal, MCV's cash flows may be negatively impacted in the
     period after 2007.


                                      F-8
<PAGE>   49
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued )


     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. 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 generally
     accepted accounting principles 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 (see Notes 7 and 8). Capacity and other installment revenues
     are recognized based on plant availability or other contractual
     arrangements.

     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, 1999 and 1998, was $3.3 million and $2.7
     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.

     Deferred Financing Costs

     Financing costs incurred with the issuance of debt are deferred and
     amortized using the interest method over the life of the related financing
     obligation. Deferred financing costs of approximately $1.0 million were
     amortized in 1999 and $1.1 million were amortized in each of the years 1998
     and 1997.

     Depreciation

     Plant, equipment and pipeline are valued at cost for new construction 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
     3 to 35 years. Major renewals and replacements which extend the useful life
     of plant and equipment are capitalized, while maintenance and repairs are
     expensed when incurred. Personal property is depreciated using the
     straight-line method over an estimated useful life of 3 to 15 years. The
     cost to remove an asset is assumed to equal the proceeds of any asset
     disposition. 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 operations.



                                      F-9

<PAGE>   50

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


     Effective January 1, 1998, MCV prospectively revised its useful lives of
     the gas turbine generators ("GTGs") and certain related capital spares, to
     more closely reflect the economic useful lives of these assets. These
     assets are serviced and maintained by ABB Alstom Power Inc., formerly ABB
     Power Generation ("ABB Power") under the amended service agreement, which
     will extend through the sixth series of major GTG inspections, with
     expected coverage through 2008. The effect of this change in accounting
     estimate resulted in a decrease to operating expenses of approximately $9.0
     million for the year ending December 31, 1998.

     Federal Income Tax

     MCV is not subject to Federal income tax. 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, 1999 have original maturity
     dates of less than one year. The unique nature of the negotiated financing
     obligation discussed in Note 6 makes it impractical to estimate the fair
     value of the Owner Participants' underlying debt and equity instruments
     supporting such financing obligation.

     Forward Foreign Exchange Contracts

     An amended service agreement was entered into between MCV and ABB Power
     (the "amended Service Agreement"), under which ABB Power will provide hot
     gas path parts for MCV's twelve gas turbines through the sixth series of
     major GTG inspections, which are expected to be completed by year-end 2008.
     The payments due to ABB Power under this amended Service Agreement are
     adjusted annually based on the ratio of the U.S. dollar to Swiss franc
     currency exchange rate. MCV maintains a foreign currency hedging program to
     be used only with respect to MCV payments subject to foreign currency
     exposure under the amended Service Agreement.

     To manage this currency exchange rate risk and hedge against adverse
     currency fluctuations impacting the payments under this amended Service
     Agreement, MCV periodically enters into forward purchase contracts for
     Swiss francs. The forward foreign currency exchange contracts qualify as
     hedges under Statement of Financial Accounting Standards ("SFAS") No. 52,
     "Foreign Currency Translation," since they hedge the identifiable foreign
     currency commitment of the amended Service Agreement. The gains and losses
     on these transactions, accounted for as hedges, are deferred on the balance
     sheet and included in the measurement of the underlying capitalized major
     renewal costs when incurred. On December 29, 1999, MCV closed out its
     forward purchase contracts involving Swiss francs in the notional amount of
     $11.0 million, resulting in a deferred loss of approximately $.6 million,
     recorded in prepaid expenses and other. On December 29, 1998, MCV closed
     out its forward purchase contracts involving Swiss francs in the notional
     amount of $10.0 million, resulting in a deferred gain of approximately $1.0
     million, recorded in current liabilities.

     Natural Gas Options and Futures

     To manage market risks associated with the volatility of natural gas
     prices, MCV maintains a gas hedging program. MCV enters into natural gas
     options and futures 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


                                      F-10
<PAGE>   51

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


     financial instruments are being utilized only to secure anticipated natural
     gas requirements necessary for projected electric sales at a cost of gas
     less than that available under MCV's long-term natural gas contracts and to
     hedge sales of natural gas previously obtained in order to optimize MCV's
     existing gas supply, storage and transportation arrangements. The natural
     gas futures contracts qualify as hedges under SFAS No. 80, "Accounting for
     Futures Contracts," since the contracts cover probable future transactions.

     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
     balance, recorded in prepaid expenses and other, was $1.6 million and $.5
     million as of December 31, 1999 and December 31, 1998, respectively. MCV's
     deferred gains and losses on futures and options contracts, recorded in
     current liabilities, will be offset by the corresponding underlying
     physical transaction and then included in operating expenses as part of
     fuel cost in the same period the natural gas is burned to operate the
     Facility. As of December 31, 1999, MCV had net open futures and options
     contracts of 1.9 Bcf with a deferred loss of $.2 million. As of December
     31, 1998, MCV had net open futures and options contracts of 1.7 Bcf with a
     deferred gain of $.9 million. In addition, MCV recorded approximately $.6
     million in net deferred gains on contracts closed prior to December 31,
     1999, related to 2000 purchase and sales commitments, and had approximately
     $.2 million in net deferred gains on contracts closed prior to December 31,
     1998, related to 1999 sales commitments.

     Interest Rate Swap Hedges

     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 may be deposited with the broker 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
     balance recorded in prepaid expenses and other, was approximately $.3
     million and $.2 million, as of December 31, 1999 and December 31, 1998,
     respectively. As of December 31, 1999, MCV had three separate interest rate
     swap hedges with a notional amount totaling $65 million, with various
     periods of performance ranging between April 1, 1998 through December 1,
     2002. The difference between the amounts received and paid under the
     interest rate swap transactions is accrued and recorded as an adjustment to
     the interest income over the life of the hedged agreement. For the year
     ended December 31, 1999, MCV recorded a net loss under the interest rate
     swap hedges of approximately $42,000, while for the year ended December 31,
     1998, MCV had a net loss under the December 1997 interest rate swap hedge
     of approximately $61,000.

     New Accounting Standard

     In 1998, the American Institute of Certified Public Accountants issued
     Statement of Position 98-1, Accounting for the Cost of Computer Software
     Developed or Obtained for Internal Use. This statement established guidance
     on accounting for the costs incurred related to internal-use software. MCV
     has implemented this statement in 1999. Application of this standard has
     not had a material impact on MCV's financial position, liquidity or results
     of operations.

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
     No. 133, "Accounting for Derivative Instruments and Hedging Activities".
     This statement establishes accounting and reporting standards requiring
     that every derivative instrument be recorded in the balance sheet as either
     an asset or liability measured at its fair value. The statement 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. In June 1999, the FASB issued SFAS No. 137,
     "Accounting for Derivative Instruments and Hedging Activities -


                                      F-11
<PAGE>   52

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


     Deferral of the Effective Date of FASB Statement No. 133." This statement
     defers the effective date of SFAS No. 133 to fiscal years beginning after
     June 15, 2000. MCV expects to adopt the new statement effective January 1,
     2001. MCV is continuing to study the impact of SFAS No. 133 and has not yet
     quantified the effects of adoption on MCV's financial statements.



     Reclassifications

     Certain prior year amounts have been reclassified for comparative purposes.
     These reclassifications have no effect on net income.


(3)  CHANGE IN METHOD OF ACCOUNTING FOR PROPERTY TAXES

     Effective January 1, 1997, MCV changed its method of accounting for
     property taxes so that such taxes are expensed monthly during the fiscal
     period of the taxing authority for which the taxes are levied. This change
     provides a better matching of property tax expense with both the payment
     for services and those services provided by the taxing authorities. Prior
     to January 1, 1997, the Partnership expensed property taxes monthly during
     the year following the assessment date (December 31). The cumulative effect
     of this change in accounting for property taxes increased earnings for the
     year 1997 by approximately $15.5 million. The pro forma effect on 1997 and
     prior years' consolidated net income, including all interim periods, of
     retroactively recording property taxes as if the new method of accounting
     had been in effect for all periods presented is not material.


(4)  RESTRICTED CASH AND CASH EQUIVALENTS AND INVESTMENT SECURITIES HELD-TO-
     MATURITY

     Current and non-current restricted cash and cash equivalents consist of the
     following at December 31 (in thousands):
<TABLE>
<CAPTION>

     Current:                                                                1999                  1998
     -------                                                             --------------        --------------

<S>                                                                      <C>                    <C>
     Funds restricted for plant modifications                            $       5,680          $      8,913
                                                                         ==============        ==============

     Non-current:
     Funds restricted for rental payments pursuant
       to the Overall Lease Transaction                                  $     138,258          $    142,453

     Funds restricted for management non-qualified
       plans                                                                     1,545                   991
                                                                         --------------        --------------

     Total                                                               $     139,803          $    143,444
                                                                         ==============        ==============
</TABLE>



                                      F-12
<PAGE>   53

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


(5)  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

     Accounts payable and accrued liabilities consist of the following at
December 31 (in thousands):
<TABLE>
<CAPTION>

                                                                             1999                  1998
                                                                         --------------        --------------
<S>                                                                      <C>                   <C>
     Accounts payable
        Related parties                                                  $      13,016         $      17,231
        Trade creditors                                                         30,394                27,457
     Property and single business taxes                                         12,973                11,822
     Other                                                                       3,587                 4,208
                                                                         --------------        --------------

     Total                                                               $      59,970         $      60,718
                                                                         ==============        ==============
</TABLE>



(6)  LONG-TERM DEBT

     Long-term debt consists of the following at December 31 (in thousands):
<TABLE>
<CAPTION>

                                                                             1999                  1998
                                                                         --------------        --------------

<S>                                                                      <C>                   <C>
     Financing obligation, maturing through
     2015, effective interest rate of approximately
     8.7%, payable in semi-annual installments
     of principal and interest, secured by
     property, plant and equipment                                        $  1,723,960          $  1,788,291


     Less current portion                                                     (139,095)              (64,331)
                                                                         --------------        --------------

     Total long-term debt                                                 $  1,584,865          $  1,723,960
                                                                         ==============        ==============
</TABLE>

     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.

     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"). 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



                                      F-13
<PAGE>   54

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



     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, 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, approximately $18.6
     million of transaction costs were a liability of MCV and have been recorded
     as a deferred cost. These costs are being amortized using the interest
     method over the 25-year lease term.

     Revolving Credit Agreement

     MCV has also entered into a revolving credit agreement with the Bank of
     Montreal ("Working Capital Lender") which expires August 31, 2001. Under
     the terms of the existing agreement, MCV can borrow up to the $50 million
     commitment, in the form of revolving credit loans or letters of credit
     secured by MCV's natural gas inventory and earned receivables. Outstanding
     borrowings under this agreement are limited to 90% of earned accounts
     receivable. At December 31, 1999, the borrowing base calculated under this
     agreement was $46.4 million. During 1999, MCV did not utilize the Working
     Capital Facility, except for letters of credit associated with normal
     business practice. At December 31, 1999, MCV had letters of credit
     outstanding of $17.2 million related to gas purchase transactions.

     Intercreditor Agreement

     MCV has also entered into an Intercreditor Agreement with the Owner
     Trustee, Working Capital Lender, First Trust Michigan 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, 1999, MCV has deposited $138.3 million
     into the reserve account and $5.7 million into the construction repair
     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.

     Summary

     Interest and fees incurred related to long-term debt arrangements during
     1999, 1998 and 1997 were $154.7 million, $162.1 million and $172.8 million,
     respectively.

     Interest and fees paid during 1999, 1998 and 1997 were $157.5 million,
     $168.3 million and $176.2 million, respectively.

     Minimum payments due under these long-term debt arrangements over the next
     five years are (in thousands):
<TABLE>
<CAPTION>

                                                         Principal        Interest           Total
                                                        -------------   -------------     ------------

<S>                                                     <C>             <C>               <C>
                    2000                                $   139,095     $   149,554       $   288,649
                    2001                                    155,210         136,999           292,209
                    2002                                    185,791         123,379           309,170
</TABLE>


                                      F-14

<PAGE>   55
<TABLE>
<CAPTION>
                                          MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                            (Continued)



<S>                                                     <C>             <C>               <C>
                    2003                                    103,109         110,866          213,975
                    2004                                    146,275         101,617          247,892
                                                        -------------   -------------     ------------

                                                        $  729,480        $ 622,415        $1,351,895
                                                        =============   =============     ============
</TABLE>

(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. In addition to the
     contractual steam and electric charges, Dow paid 36 quarterly payments,
     pursuant to the agreement, of $3.8 million each. These installment payments
     commenced in the first quarter of 1990 and continued through the fourth
     quarter of 1998, notwithstanding performance of the Facility.

     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 237,462 MMBtu
     per day as of January 1, 2000. As of January 1, 2000, gas contracts with
     U.S. suppliers provide for the purchase of 156,500 MMBtu per day while gas
     contracts with Canadian suppliers provide for the purchase of 81,962 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 for gas for the years 2000 through 2004
     are $126.4 million, $121.8 million, $132.5 million, $147.9 million and
     $163.0 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.


                                      F-15
<PAGE>   56


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


     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. MCV
     incurred reservation charges in 1999, 1998 and 1997, of $35.3 million,
     $35.9 million and $34.4 million, respectively. The estimated minimum
     reservation charges required under these agreements for each of the years
     2000 through 2004 are $36.0 million, $35.8 million, $35.4 million, $35.2
     million and $35.3 million, respectively. These projections are based on
     current commitments.

     Gas Turbine Service Agreement

     MCV entered into a service agreement, as amended, with ABB Power which
     commenced on January 1, 1990 and will 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, ABB Power 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 ABB
     Power), MCV must pay a cancellation payment of $1.0 million in 2000 and $.5
     million in any year thereafter escalated in 1988 dollars. MCV and ABB Power
     amended the Service Agreement, effective December 31, 1993, to include the
     supply of hot gas path parts. Under the amended Service Agreement, ABB
     Power will provide hot gas path parts for MCV's twelve gas turbines through
     the fourth series of major GTG inspections. In January 1998, MCV and ABB
     Power 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 $118.8 million under this
     amended Service Agreement through December 31, 1999.

     In addition to the January 1998 amendment to the term of the amended
     Service Agreement, MCV contracted to purchase from ABB Power 11NM GTG
     upgrade packages for eleven of the gas turbine generators for $41.6
     million. The purchase of these upgrades was made after successfully testing
     one upgrade package at the Facility in 1997. All eleven upgrade packages
     have been installed in 1998 and 1999. The upgrade packages on all twelve
     gas turbines have added to available capacity and significantly improved
     the efficiency of the Facility. Maintenance and spare parts for the upgrade
     packages are covered by the amended Service Agreement. As part of this
     amended Service Agreement, MCV has purchased a spare GTG rotor to
     facilitate maintenance activities and improve reliability.

     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. MCV is
     making monthly payments over the life of the contract, which will total
     $13.0 million (in 1995 dollars).

     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


                                      F-16
<PAGE>   57

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


     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.

(8)  CONTINGENCIES

     PPA - Settlement of PPA 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, but in no event sooner
     than 2002) 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 decisions which may
     affect those issues or payments. MCV recognized a one-time net $6.4 million
     increase in electric revenues in the first quarter of 1999 based upon the
     resolution of these issues. On an ongoing basis and for the various time
     periods specified in the Settlement Agreement, the Settlement Agreement is
     not expected to materially affect MCV's earnings and cash flows.

     PPA  Sale and Assignment

     On March 10, 1999, Consumers announced that it signed a contract with PECO
     Energy Company ("PECO") whereby Consumers will sell 1240 MW of capacity and
     associated energy to PECO from the MCV PPA beginning January 1, 2002 and
     ending in September 2007. The agreement calls for Consumers to sell PECO
     between 100 MW to 150 MW through 2001. The announcement also states the
     contract with PECO is subject to satisfactory regulatory approvals. On
     April 30, 1999, the MPSC entered an order, which was subsequently amended
     and clarified, which conditionally permitted the transaction to go forward.
     Consumers has asked the MPSC for further clarification, but the MPSC has
     not yet ruled on Consumers' latest request. At this time, MCV Management
     cannot predict whether Consumers will accept the MPSC's orders. MCV does
     not expect the sale of Consumers' rights to capacity and associated energy
     under the PPA to materially affect its financial position or results of
     operations.


(9)  RETIREMENT BENEFITS

     Postretirement Health Care Plans

     In 1992, MCV established defined cost postretirement health care plans that
     cover all full-time employees. 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 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.


                                      F-17
<PAGE>   58


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


     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):
<TABLE>
<CAPTION>

                                                                          1999               1998
                                                                      --------------     -------------
<S>                                                                   <C>                <C>
                  CHANGE IN BENEFIT OBLIGATION
                  Benefit obligation at beginning of year             $   1,682.0          $ 1,413.1
                  Service cost                                              214.4              200.9
                  Interest cost                                             128.0              119.5
                  Actuarial gain                                           (277.8)             (51.5)
                  Benefits paid during year                                  (7.3)             --
                                                                      --------------     -------------
                  Benefit obligation at end of year                       1,739.3            1,682.0
                                                                      --------------     -------------

                  CHANGE IN PLAN ASSETS
                  Fair value of plan assets at beginning of year          1,724.1            1,400.0
                  Actual return on plan assets                              186.2              148.0
                  Employer contribution                                     164.9              176.1
                  Benefits paid during year                                  (7.3)              --
                                                                      --------------     -------------
                  Fair value of plan assets at end of year                2,067.9            1,724.1
                                                                      --------------     -------------

                  Unfunded (funded) status                                 (328.6)             (42.1)
                  Unrecognized net gain                                     561.0              252.9
                                                                      --------------     -------------
                  Accrued (prepaid) benefit cost                      $     232.4         $    210.8
                                                                      ==============     =============
</TABLE>

     Net periodic postretirement health care cost for years ending December 31,
     included the following components (in thousands):
<TABLE>
<CAPTION>

                                                                            1999              1998              1997
                                                                        -------------    ---------------    -------------
<S>                                                                     <C>              <C>                <C>
               COMPONENTS OF NET PERIODIC BENEFIT COST
               Service cost                                             $    214.4       $    200.9         $    146.8
               Interest cost                                                 128.0            119.5               92.7
               Expected return on plan assets                               (146.5)          (119.0)             (97.0)
               Amortization of unrecognized net (gain) or loss                (9.4)            (4.2)              (6.8)
                                                                        -------------    ---------------    -------------

               Net periodic benefit cost                                $    186.5       $    197.2           $  135.7
                                                                        =============    ===============    =============
</TABLE>

     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:
<TABLE>
<CAPTION>

                                                                               1-Percentage-        1-Percentage
                                                                               Point Increase      Point Decrease
                                                                               ----------------    -----------------
<S>                                                                             <C>                <C>
                  Effect on total of service and interest cost components       $       29.3       $         51.8
                  Effect on postretirement benefit obligation                   $      161.9       $        410.0
</TABLE>

     Assumptions used in accounting for the Post-Retirement Health Care Plan
     were as follows:
<TABLE>
<CAPTION>

                                                                              1999          1998           1997
                                                                            ----------    ----------    -----------
<S>                                                                          <C>           <C>          <C>
                  Discount rate                                                7.75%           6.75%        7.00%
                  Long-term rate of return on plan assets                      8.50%           8.50%        8.50%
                  Inflation benefit amount
</TABLE>



                                      F-18
<PAGE>   59

                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Continued )
<TABLE>


<S>                                                                            <C>             <C>          <C>
                      1997 through 2001                                        4.00%           0.00%        0.00%
                      2002 and later years                                     4.00%           4.00%        4.00%
</TABLE>

     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 1999, 1998, and 1997, MCV
     contributed $1.1 million, $1.0 million and $1.0 million, respectively,
     under these plans.

     Supplemental Retirement Benefits

     MCV provides supplemental retirement 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.


                                      F-19

<PAGE>   60


                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, 1999, and the nature and amount of related party
       transactions or agreements that existed with the Partners or affiliates
       as of December 31, 1999 and 1998, and for each of the twelve month
       periods ended December 31, (in thousands).
<TABLE>
<CAPTION>


 Equity Partner, Type of Partner and   Equity
       Nature of Related Party         Interest   Interest Related Party Transactions and Agreements     1999       1998       1997
------------------------------------------------------------------------------------------------------------------------------------

<S>                                    <C>        <C>     <C>                                        <C>         <C>        <C>
CMS Midland, Inc.                      $214,432   49.0%   Power purchase agreements                  $585,838    $583,662   $608,640
  General Partner; wholly-owned                           Purchases under gas transportation
  subsidiary of Consumers Energy                          agreements                                   20,158       9,678      9,713
  Company (formerly Consumers                             Purchases under spot gas agreements             991         520      6,490
  Power Company)                                          Purchases under gas supply agreements        10,187       9,855      9,543
                                                          Gas storage agreement                         2,563       2,563      2,563
                                                          Land lease/easement agreements                  600         600        600
                                                          Accounts receivable                          48,697      48,652     53,513
                                                          Accounts payable                              7,845      13,682      9,276
                                                          Gas sales under spot gas agreements           1,805       1,148      1,674

The Dow Chemical Company                 45,808    7.5    Steam and electric power agreement           26,897      42,141     42,937
  Limited Partner                                         Steam purchase agreement - Dow Corning        3,329       3,256      3,167
                                                              Corp (affiliate)
                                                          Purchases under demineralized water           6,375       6,280      7,336
                                                              supply agreement
                                                          Accounts receivable                           2,772       2,246      1,896
                                                          Accounts payable                                649         580        678
                                                          Standby and backup fees                         656         743        792

Source Midland Limited Partnership       73,907   18.1    SMLP - Under Ownership of MCNIC Power Co
  ("SMLP") General Partner; wholly-                       ----------------------------------------
  owned limited partnership of MCN                        Purchases under spot gas agreements           4,590       6,810        578
  Energy Group Inc. (1) (6)                               Purchases under gas supply agreements        13,814      13,230      8,364
                                                          Accounts receivable                             901          --      1,125
                                                          Accounts payable                              1,921       1,178        588
                                                          Partner cash withdrawal (incl. Accrued       23,855      18,341     11,922
                                                          interest) (2)
                                                          Gas sales under spot gas agreements           7,262         169      1,845

                                                          SMLP - Under Ownership of Pan Energy Corp
                                                          -----------------------------------------
                                                          Purchases under gas transportation               --          --      4,648
                                                          agreements
                                                          Purchases under spot gas agreements              --          --        911
                                                          Gas sales under spot gas agreements              --          --         50
                                                          Accounts Payable                                 --          --         --

Coastal Midland, Inc. ("Coastal          44,344   10.9    Purchases under gas transportation           13,581      13,547     13,593
Midland")                                                     agreements
  General Partner; wholly-owned                           Purchases under spot gas agreement            6,892      10,382      9,920
  subsidiary of The Coastal                               Purchases under gas supply agreement          4,528       4,339      4,188
  Corporation                                             Gas agency agreement                          1,898       1,604      1,497
                                                          Deferred reservation charges under gas        5,910       4,925      3,940
                                                              purchase agreement
                                                          Accounts receivable                             738          16      2,271
                                                          Accounts payable                              2,602       1,791      4,569
                                                          Gas sales under spot gas agreements           3,473       5,253      5,486
                                                          Partner cash withdrawal (incl. Accrued       21,049      16,157      7,343
                                                          interest) (2)

MEI Limited Partnership ("MEI") (3)(6)                    MEI - Under Ownership of Coastal and SMLP
                                                          -----------------------------------------
  A General and Limited Partner;                          See related party activity listed under
  50% interest owned by Coastal                               Coastal Midland, Inc.
  Midland, Inc. and 50% interest                             and Source Midland Limited Partnership
  owned by SMLP
                                                          MEI - Under Ownership of ASEA Brown Boveri, Inc.
                                                          ------------------------------------------------
      General Partnership Interest       36,955    9.1    Gas turbine maint. and spare parts               --      23,377     29,900
                                                            agreement
      Limited Partnership Interest        3,694     .9    Accounts payable                                 --          --         88
                                                          Partner cash withdrawal (including               --          --         --
                                                            accrued interest) (2)




 Equity Partner, Type of Partner and   Equity
       Nature of Related Party         Interest   Interest Related Party Transactions and Agreements     1999       1998       1997
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      F-20
<PAGE>   61
<TABLE>
                                          MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                                             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                                             (Continued)



<S>                                      <C>       <C>    <C>                                              <C>      <C>        <C>
Micogen Limited Partnership              18,476    4.5    MLP - Under Ownership of The Coastal
                                                          ------------------------------------
 ("MLP") Limited Partner; owned                               Corporation
  by subsidiaries of The Coastal                              -----------
  Corporation (4)                                         See related party activity listed under
                                                          Coastal Midland Inc.

                                                          MLP - Under Ownership of Fluor
                                                          ------------------------------
                                                              Corporation
                                                              -----------
                                                          Partner cash withdrawal (including               --          --      3,142
                                                              accrued interest) (2)

C-E Midland Energy, Inc. ("C-E") (5)         --   --      C-E  - Under Ownership of ASEA Brown
                                                          ------------------------------------
 Interest in MCV acquired by MEI                              Boveri, Inc.
  Limited Partnership                                         -----------
                                                          Service Agreement                                --       1,252      2,195


Alanna Corporation                        1 (7)   .00001  Note receivable                                   1           1          1
  Limited Partner; wholly-owned
  Subsidiary of Alanna Holdings
  Corporation
</TABLE>


Footnotes to Partners' Equity and Related Party Transactions

(1)  On May 16, 1997, MCNIC Power Company acquired all of the partnership
     interests in Source Midland Limited Partnership ("SMLP") from PanEnergy
     Corp. The SMLP amounts listed Under Ownership of MCNIC Power Company are as
     of December 31, 1998 and for the twelve month period ended December 31,
     1998; and as of December 31, 1997 and for the period May 16, 1997 to
     December 31, 1997. The SMLP amounts listed Under Ownership of PanEnergy
     Corp. are for the period January 1, 1997 to May 15, 1997; and for the
     twelve month period ended December 31, 1996, and as of December 31, 1996.
(2)  Letters of credit have been issued and recorded as notes receivables from
     various equity partners, pursuant to the Participation Agreement. In the
     case of SMLP, the amount includes their share of the cash available to MEI
     Limited Partnership ("MEI"). In the case of Coastal Midland, Inc. ("Coastal
     Midland"), the amount includes their share of cash available of MEI and
     Micogen Limited Partnership ("MLP").
(3)  On June 16, 1998, Coastal Midland and SMLP, each acquired a 50% interest in
     MEI. All MEI related party activity under the ownership of Coastal Midland
     and SMLP is shown under the equity partners, Coastal Midland and SMLP. All
     MEI related party activity under the ownership of ASEA Brown Boveri, Inc.
     is for the period January 1, 1998 to June 16, 1998, and as of December 31,
     1997 and 1996 and for the twelve month periods ended December 31, 1997 and
     1996.
(4)  On April 30, 1998 Coastal and an affiliate of The Coastal Corporation
     acquired all of the partnership interests in MLP from Fluor Corporation
     ("Fluor"). All MLP related party activity under the ownership of The
     Coastal Corporation is shown under the equity partner, Coastal Midland,
     which is also wholly-owned by The Coastal Corporation.
(5)  C-E Midland Energy, Inc.'s ("C-E") limited partnership interest was
     acquired by MEI, which was subsequently acquired by Coastal and SMLP. All
     C-E related party activity under the ownership of ASEA Brown Boveri, Inc.
     is for the period January 1, 1998 to June 16, 1998, and for the twelve
     month periods ended December 31, 1997 and 1996.
(6)  On January 5, 2000, Coastal, through its subsidiaries, acquired all of the
     partnership interests in Source Midland and MEI from MCN Energy Group Inc.
(7)  Alanna's capital stock is pledged to secure MCV's obligation under the
     lease and other overall lease transaction documents.



                                      F-21
<PAGE>   62



                            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-22

<PAGE>   63



                                   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 24, 2000                      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.

<TABLE>

<CAPTION>

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



<S>                                            <C>                                          <C>
/s/ James M. Kevra                             President and Chief Executive Officer        March 24, 2000
---------------------------------------        (Principal Executive Officer)
James M. Kevra



 /s/ Stephen A. Shulman                        Chief Financial Officer and Treasurer        March 24, 2000
---------------------------------------        (Principal Financial Officer)
Stephen A. Shulman



/s/ James M. Rajewski                          Vice President and Controller                March 24, 2000
---------------------------------------        (Principal Accounting Officer)
James M. Rajewski


/s/ William T. McCormick                       Chairman, Management Committee               March 24, 2000
---------------------------------------
William T. McCormick, Jr.



/s/ David A. Arledge                           Member, Management Committee                 March 24, 2000
---------------------------------------
David A. Arledge

</TABLE>


                                      F-23
<PAGE>   64
                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number                             Description
------        ---------------------------------------------------------------------------------------------------------------------
<S>           <C>
 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)).
</TABLE>

                                      E-1
<PAGE>   65
                                 EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number                             Description
------        ----------------------------------------------------------------------------------------------------------
<S>           <C>
 4.6 (b)   -  Amendment No. 1 dated as of January 1, 1992 to Amended and Restated Lease Agreement ((d), (Exhibit 4.17)).

 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)).

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)).
</TABLE>

                                      E-2
<PAGE>   66
                                 EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number                             Description
------        ---------------------------------------------------------------------------------------------------------
<S>           <C>
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)).

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      -  Summer Peaking Call Option Agreement dated April 5, 1999, between MCV and Consumers Energy Company ((j),
              (Exhibit 10.2)).

10.16      -  Steam and Electric Power Agreement between The Dow Chemical Company and MCV dated January 27, 1987 (the
              "SEPA") ((a), (Exhibit 10.10)).

10.16 (a)  -  First Amendment to SEPA ((a), (Exhibit 10.11)).

10.16 (b)  -  Exhibit "A" to SEPA ((a), (Exhibit 10.13)).

10.16 (c)  -  Fourth Amendment to SEPA ((a), (Exhibit 10.15)).

10.16 (d)  -  Fifth Amendment to SEPA ((a), (Exhibit 10.16)).

10.16 (e)  -  Sixth Amendment to SEPA, dated November 20, 1989 ((f), (Exhibit 10.14(e)).

10.16 (f)  -  Seventh Amendment to SEPA, dated November 22, 1994 ((f), (Exhibit 10.14(f)).

10.17      -  Demineralized Water Supply Agreement dated as of January 27, 1987 between MCV and The Dow Chemical Company
              ((a), (Exhibit 10.31)).

10.18      -  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)).
</TABLE>

                                      E-3
<PAGE>   67
                                 EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number                             Description
------        -------------------------------------------------------------------------------------------------------------
<S>           <C>
10.19      -  Equipment Lease dated as of January 27, 1987 between The Dow Chemical Company and MCV (the "Equipment  Lease")
              ((a), (Exhibit 10.71)).



10.19 (a)  -  First Amendment to Equipment Lease effective March 1, 1988 and dated as of May 4, 1988 ((a), (Exhibit 10.72)).

10.19 (b)  -  Second Amendment to Equipment Lease effective December 1, 1989 and dated November 20, 1989 ((a), (Exhibit
              10.73)).

10.20      -  Equipment Lease Easement dated as of January 27, 1988 between The Dow Chemical Company and MCV (( a),  (Exhibit
              10.74)).

10.20 (a)  -  First Amendment to Equipment Lease Easement effective  March 1, 1988 and dated May 4, 1988 ((a), (Exhibit
              10.75)).

10.20 (b)  -  Second Amendment to Equipment Lease Easement effective December 1, 1989 and dated November 20, 1989 ((a),
              (Exhibit 10.76)).

10.21      -  Service Agreement dated as of June 9, 1988 between MCV and ABB Alstom Power, Inc. (Previously ABB Energy
              Services, Inc.) ((a), (Exhibit  10.22)).

10.21 (a)  -  Hot Gas Path Parts Addendum to the Service Agreement dated March 22, 1994 ((e), (Exhibit 10.99)).

10.21 (b)  -  Amendment No. 1 to the Service Agreement dated April 1, 1995 ((g), (Exhibit 10.20(b))).

10.21 (c)  -  Amendment No. 2 to the Service Agreement dated January 15, 1998 ((h), (Exhibit 10.19 (c))).

10.22      -  Operating Agreement, dated as of June 1, 1990, between MCV and Shawmut Bank, as Owner Trustee ((a), (Exhibit
              10.23)).

10.23      -  Lessee Mortgage and Security Agreement, dated as of June 1, 1990, between Shawmut Bank, as Owner Trustee, and
              MCV ((a), (Exhibit 10.24)).

10.24      -  Cogeneration Agreements Assignment, dated as of June 1, 1990, between Shawmut Bank, Owner Trustee, and MCV
              ((a), (Exhibit 10.26)).

10.25      -  Support Facilities License and Easement Agreement dated as of June 1, 1990 between MCV and Shawmut Bank ((a),
              (Exhibit 10.29)).

10.26      -  Facility Agreements and Governmental Actions Assignment Agreement dated as of June 1, 1990 between MCV and
              Shawmut Bank ((a), (Exhibit 10.30)).

10.27      -  Development Agreement, dated as of June 1, 1990 between MCV, Shawmut Bank, as Owner Trustee, and MCV2 ((a),
              (Exhibit 10.33)).

10.28      -  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)).
</TABLE>

                                      E-4
<PAGE>   68
                                 EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number                             Description
------        -------------------------------------------------------------------------------------------------------------
<S>           <C>
10.29      -  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)).

10.30      -  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)).


10.30 (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)).

10.30 (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)).

10.31      -  Natural Gas Purchase Agreement, dated as of May 13, 1988 between ANR Production Company and MCV ((a),
              (Exhibit 10.41)).

10.32      -  Natural Gas Purchase Contract dated August 18, 1994, between Coastal Gas Marketing and MCV ((f), (Exhibit
              10.32)).

10.33      -  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)).

10.34      -  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)).

10.35      -  Natural Gas Purchase Agreement, dated as of June 2, 1997 between MCV and CMS Marketing, Services and Trading
              Company ((h), (Exhibit 10.33)).

10.36      -  Gas Sales Agreement, dated July 1, 1999, between MCV and CMS Marketing Services and Trading Company ((k),
              (Exhibit 10.0)).

10.37      -  Gas Sales Agreement, dated November 15, 1998, between MCV and Engage Energy US, L.P.

10.38      -  Gas Sales Agreement, dated September 20, 1999, between MCV and Engage Energy US, L.P.

10.39      -  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)).

10.40      -  Transportation Agreement (#17800) dated November 24, 1993 between  ANR Pipeline Company and MCV ((f),
              (Exhibit 10.35)).

10.41      -  Transportation Agreement (#17850) dated November 24, 1993 between ANR Pipeline Company and MCV ((f), (Exhibit
              10.36)).

10.42      -  Gas Transportation Agreement (Firm Service), dated as of March 2, 1988, between Michigan Gas Storage and MCV
              and amendment thereto dated September 21, 1988 ((a), (Exhibit 10.64)).
</TABLE>

                                      E-5
<PAGE>   69
                                 EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number                             Description
------        -------------------------------------------------------------------------------------------------------------
<S>           <C>
10.43      -  Transportation Agreement (Firm Contract  #011456), dated as of May 1, 1993 between Panhandle Eastern Pipeline
              Company and MCV, as amended ((e), (Exhibit 10.90)).

10.44      -  Transportation  Agreement (Firm Contract  #011457), dated as of May 1, 1993 between Panhandle Eastern Pipeline
              Company and MCV, as amended ((e), (Exhibit 10.91)).

10.45      -  Transportation  Agreement (Firm Contract  #011458), dated as of May 1, 1993 between Panhandle Eastern Pipeline
              Company and MCV, as amended ((e), (Exhibit 10.92)).



10.46      -  Firm  Transportation  Service Form of Transportation Agreement (#013296), dated November 1, 1993 between
              Trunkline Gas Company and MCV ((e), (Exhibit 10.93)).

10.47      -  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)).

10.48      -  Gas Storage Agreement (Firm Service) between MCV and Consumers Power Company dated March 2, 1988 ((a),
              (Exhibit 10.68)).

10.49      -  The Gas Supply Option dated as of January 27,  1987,  between The Dow Chemical Company and MCV ((a), (Exhibit
              10.67)).

10.50      -  MCV Senior Management Incentive Plan ((i), (Exhibit 10.42)), (*).

10.51      -  MCV Supplemental Retirement Plan dated July 6, 1992 ((d), (Exhibit 10.87)), (*).

10.52      -  MCV Supplemental Benefit Plan dated January 1, 1989 ((d), (Exhibit 10.88)), (*).

10.53      -  MCV Excess - Benefit Plan dated July 1, 1989 ((d), (Exhibit 10.89)), (*).

10.54      -  MCV Long-Term Incentive Plan ((i), )Exhibit 10.46)). (*)

21         -  Subsidiaries of Registrant -- MCV subsidiaries  are in the aggregate not  significant  subsidiaries as defined
              in Rule 1-02 (v) of Regulation S-X.

27         -  Financial Data Schedule for year Ended 1999.

99.01      -  Unaudited - MCV Selected Proforma Operating Cash Flow Data for the years ended 1999 and 1998.
</TABLE>

      --------------------
      (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-6
<PAGE>   70
                                 EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number                                   Description
------         -------------------------------------------------------------------------------------------------------------
<S>             <C>


 (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.

 (*)            Exhibits represent Management Contracts and Compensatory Plans and
                Arrangements.

</TABLE>
                                      E-7