<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                       ----------------------------------

                                    FORM 10-K

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

For the fiscal year ended December 31, 2001

                                       OR

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

For the transition period from _________________ to __________________

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

                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

            MICHIGAN                                             38-2726166
----------------------------------------                     -------------------
(State or other jurisdiction of                               (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             (989) 839-6000
                                                               --------------

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

      NONE

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

      NONE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP

                           ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I                                                                                    Page
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<S>                                                                                       <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.................................................    16

Item 2.  Properties....................................................................    19

Item 3.  Legal Proceedings.............................................................    20

Item 4.  Submission of Matters to a Vote of Security Holders...........................    20

PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.........    21

Item 6.  Selected Financial Data.......................................................    21

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
           of Operations...............................................................    21

Item 7A. Quantitative and Qualitative Disclosures About Market Risk....................    29

Item 8.  Financial Statements and Supplementary Data...................................    31

Item 9.  Changes In and Disagreements with Accountants on Accounting and Financial
           Reporting Matters...........................................................    31

PART III

Item 10. Directors and Executive Officers of the Registrant............................    32

Item 11. Executive Compensation........................................................    34

Item 12. Security Ownership of Certain Beneficial Owners and Management................    37

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>
                                     PART I

Item 1. BUSINESS

A.    General

      In January 1987, Midland Cogeneration Venture Limited Partnership ("MCV")
      was formed as a limited partnership to convert a portion of an uncompleted
      Consumers Energy Company ("Consumers") nuclear power plant into a natural
      gas-fired, combined-cycle, cogeneration facility located in Midland
      County, Michigan (the "Facility"). The Facility commenced commercial
      operation in 1990 (the "Commercial Operation Date") and is capable of
      generating approximately 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"), providing for the sale to
      Consumers of electric capacity and related energy from the Facility for a
      term of 35 years commencing on the Commercial Operation Date. 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"), 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, commencing on
      the Commercial Operation Date. 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 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, El Paso Midland, Inc., formerly
      known as Coastal Midland, Inc. ("El Paso 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
      El Paso Corporation ("El Paso"). MCV's other limited partners are Dow,
      Micogen Limited Partnership ("Micogen"), owned by subsidiaries of El Paso,
      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 El Paso CNG Company, an affiliate of El Paso.
      On January 29, 2001, El Paso announced that it had completed its merger
      with The Coastal Corporation ("Coastal"). Coastal is the parent company of
      El Paso Midland, SMLP, Micogen and, through SMLP, MEI. After the merger,
      Coastal became a wholly-owned subsidiary of El Paso and has changed its
      name to El Paso CGP Company. 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>
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 by the 12 GTGs, and the steam is produced by the
      12 HRSGs using the heat from the GTG exhaust. The Unit 1 Steam Turbine is
      designed to produce electricity using the steam generated by the HRSGs and
      process steam that is provided to Dow and DCC. Subsequent improvements to
      the Facility have increased the net electrical generating capacity to
      approximately 1500 MW. MCV purchases demineralized water from Dow.
      Electricity is sold by MCV to Consumers and other parties through an
      interconnect and to Dow through dedicated transmission lines.

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, 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, Michigan
      enacted restructuring legislation in June 2000. Proposed restructuring
      legislation also exists at the federal level. One significant issue to MCV
      is the possible future regulatory denial of stranded cost recovery by
      Consumers of above-market PPA costs. Over 90% of MCV's revenues come from
      sales pursuant to the PPA. To date, restructuring has not negatively
      impacted MCV, but if restructuring results in denying stranded cost
      recovery of above-market PPA costs, MCV's cash flows may be negatively
      impacted, especially in the period after 2007. (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


                                       2
<PAGE>
      Industry Restructuring Proceedings and Federal Electric Industry
      Restructuring", and Notes to Consolidated Financial Statements, Note 1,
      "The Partnership and Associated Risks".)

      Energy Rate and Cost of Production. Since January 1992, MCV has
      experienced an overall reduction in the energy charges it is paid for
      electricity under the PPA, primarily due to declining coal costs at
      Consumers' generating plants. In addition, MCV's costs associated with
      production of electricity have continued to rise. These circumstances have
      negatively affected MCV's cash flow. While MCV has the majority of its
      expected natural gas needs under contract for the next several years,
      sustained periods of high market gas prices, such as the prices
      experienced in 2000 and the first half of 2001, could adversely affect
      MCV's financial health. (See "Regulation -- MPSC and Other Proceedings
      Relating to Capacity and Energy Charges", "Overall Lease Transaction", and
      MD&A -- Liquidity and Financial Resources" and "Contracts - Gas Supply
      Agreements".)

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 Alstom Power Inc.
      ("Alstom"); 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, 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


                                       3
<PAGE>
      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 assurances that it has adequate gas
      supplies under contract to generate at least 60% of the maximum annual
      output of Contract Capacity. 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. MCV believes it has
      adequate gas supplies under contract to satisfy its PPA fuel assurance
      requirements. If MCV is unable to provide these continuing assurances,
      Consumers is entitled to withhold in a separate escrow fund a portion of
      capacity charges until these assurances are provided. The portion of such
      capacity charges is a function of the percentage of unmet fuel needs and
      an increasing factor based on the number of consecutive months that
      capacity charges have been withheld. Assuming a 3.77 cents per kWh
      capacity charge, the maximum capacity charges, which could be withheld and
      escrowed under this provision, are as follows:

<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 currently dispatches the
      Facility by scheduling energy deliveries on an economic basis relative to
      the cost of other energy resources. Beginning in July 2000, in response to
      the rapidly escalating cost of natural gas, MCV entered into transactions
      with Consumers whereby Consumers agreed to reduce the dispatch level of
      the Facility. In the event of reduced dispatch, MCV agreed to share the
      savings realized by not having to generate electricity.


                                       4
<PAGE>
      MCV anticipates using the same or similar transactions in the future to
      mitigate the impact of high market gas prices, if circumstances warrant
      such use.

      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 2001 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 2002 and does not anticipate any
      substantial problems.

      In 1997, Consumers informed MCV of several 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 the Disputed Issues in an
      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 Disputed Issues
      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. As part of the Settlement
      Agreement, MCV agreed with Consumers to cap PPA availability at 98.5% in
      each calendar year until such time as Consumers transfers capacity and
      associated energy under the PPA in the wholesale market for an extended
      period of time. The Settlement Agreement is not expected to materially
      affect MCV's earnings and cash flows.

      MCV currently delivers its electric power to purchasers through
      transmission lines owned and operated by Michigan Electric Transmission
      Company ("METC"), a wholly owned subsidiary of Consumers, pursuant to the
      Facilities Agreement. The Facilities Agreement, between MCV and Consumers,
      provides for transmission service of excess capacity and energy available
      at the Facility. In 1999, the FERC issued an order that encouraged
      utilities like Consumers to either transfer operating control of their
      transmission facilities to a regional transmission operator or sell their
      transmission facilities to an independent company. In addition, in June
      2000, the Michigan legislature passed Michigan's Customer Choice Act
      ("MCCA"), which requires utilities to transfer the operating authority of
      their transmission facilities to an independent company. In October 2001,
      Consumers executed an agreement to sell METC to a subsidiary of
      Trans-Elect, Inc. ("Trans-Elect"), an unrelated third-party company.
      Regulatory approvals and operational transfer are expected to take place
      in the second quarter of 2002. The sale of the METC transmission
      facilities to Trans-Elect does not change, in any respect, the contractual
      relationship and obligations of Consumers under the Facilities


                                       5
<PAGE>
      Agreement. MCV expects that Trans-Elect will serve as Consumers' agent to
      perform Consumers obligations under the Facilities Agreement.

      Steam and Electric Power Agreement; Related Dow Agreements

      SEPA. Pursuant to the SEPA, Dow has agreed to purchase steam from the
      Facility for an initial term of 25 years from the Commercial Operation
      Date and to purchase electricity from the Facility for 15 years (any
      electricity to be purchased thereafter at Dow's option, although MCV
      remains obligated to make certain amounts of electricity available for an
      additional 10 years). The SEPA is subject to automatic extensions for up
      to 10 additional years after its 25-year term in the absence of a
      three-year notice of termination from either party.

      In any year, MCV is not obligated to deliver more than 691,900 pounds of
      steam per hour and 60 MW of electricity on an annual average basis except
      as Dow may increase its entitlement as discussed below. Dow has agreed to
      take as much steam as is necessary for the Facility to retain its QF
      status under the FERC regulations in effect on November 1, 1986 (which
      regulations have not been revised in relevant part in any material
      respect). However, Dow's obligation with respect to minimum annual steam
      purchases is an average of 440,000 pounds per hour (less amounts supplied
      by certain standby facilities owned by Dow and less 50% of amounts
      purchased by any other steam customers of MCV) and is binding only for the
      initial 25-year term of the SEPA. During 2001, MCV sold an average of
      530,890 pounds of steam and 60 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; no such increase has since been requested. 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.

      Under the SEPA, there is a base charge for steam and electricity which is
      subject to adjustment each quarter based on changes in MCV's fuel costs,
      producer price for capital equipment and certain compensation per hour
      indices. Dow also has the option under the SEPA and subsequent amendments,
      to provide the gas necessary to generate Dow's take of steam and
      electricity ("toll"). Under the provisions of the SEPA, Dow receives a
      billing credit of 5/8 of its steam and electric charges in exchange for
      Dow purchasing the gas for MCV.

      In order to assure reliable steam for the Dow plant, Dow owns and
      maintains standby facilities, which are not part of the Facility (the
      "Standby Facilities"). The SEPA amendment also provided that Dow would
      retire certain of the Standby Facilities located on the MCV site and
      reduce the annual standby fees payable to Dow to $350,000 per year in 1998
      and thereafter. This fee is subject to the same indexing adjustments each
      quarter as the base steam charge. In addition, the fee charged by Dow for
      each use of the Standby Facilities, necessitated when MCV fails to deliver
      steam under the SEPA is $150,000.

      The terms of the SEPA provide that Dow may terminate the SEPA if one or
      more "contract outages" occur for a cumulative period greater than 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


                                       6
<PAGE>
      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 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 1 to 11 years, with U.S. and Canadian suppliers
      for an annual average maximum supply of natural gas for 2002 of 197,525
      MMBtu/day. As of January 1, 2002, no single gas contract accounts for more
      than 16.4% of MCV's portfolio, though, El Paso and its subsidiaries now
      account for 37.5% of MCV's portfolio. Gas contracts with U.S. suppliers
      provide for a 2002 annual average purchase of 118,288 MMBtu/day , while
      gas contracts with Canadian suppliers provide for the purchase of 79,237
      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 2001, MCV's gas purchases were
      supplied 76% from long term gas contracts and 24% from spot gas contracts.


                                       7
<PAGE>
                             MCV Gas Under Contract
                          Annual Average For Each Year
                       Maximum Daily Quantity (MMBtu/Day)

<TABLE>
<CAPTION>
              YEAR                FIXED PRICE           INDEXED PRICE         FLOATING PRICE           TOTAL
              ----                -----------           -------------         --------------           -----
<S>                               <C>                   <C>                   <C>                      <C>
              2002                    59,663                117,680                20,182              197,525
              2003                    75,863                117,298                20,000              213,161
              2004                    80,000                108,908                24,500              213,408
              2005                    90,000                 59,209                47,836              197,045
              2006                    85,329                 56,047                56,345              197,721
              2007                    54,329                 14,019                64,597              132,945
              2008                    46,000                  5,367                46,000               97,367
              2009                    36,000                  5,245                44,329               85,574
              2010                    36,000                  5,144                34,329               75,473
              2011                    36,000                  4,265                26,000               66,265
              2012                    32,667                  3,671                21,667               58,005

</TABLE>

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

      Fixed Price       Individual contracts utilize either a fixed price
                        through life of contract or a fixed price with fixed
                        escalator.

      Indexed Price     Individual contracts utilize either a fixed price with
                        an escalator tied to the energy index based on Consumers
                        Energy Company's charges under the PPA or an amount
                        based on a combination of a fixed with escalator and
                        fixed with energy escalator.

      Floating Price    A price tied to the Henry Hub gas contract on the New
                        York Mercantile Exchange for the month gas is purchased.

      Current U.S. Long Term Gas Contracts. The U.S. long term gas contracts
      provide for either a "dedication of reserves" or a corporate "warranty of
      deliverability." 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%
      to 100%) of the minimum daily quantity ("MDQ") to which MCV is entitled
      under the contract, unless such failure is due to force majeure, failure
      of the gas to meet quality standards or, in some cases, failure of the
      supplier to deliver the quantity nominated by MCV. If, over the course of
      a contract year, MCV has a take deficiency, it must make a deficiency
      payment that is based, in most cases, on the product of the take
      deficiency and either all or some percentage of the contract price. In
      addition, under some of the U.S. long term gas contracts, the producer may
      terminate the contract if, for reasons other than force majeure, MCV fails
      to purchase a specified percentage of the MDQ (generally between 50 and
      100%) within a specified period (generally 120 days). Some U.S. long term
      gas contracts allow a "make-up period" ranging from one to five years to
      make up the deficiency.

      Most U.S. long term gas contracts provide that MCV has the right to
      terminate upon 20 days' written notice if the supplier, for any reason
      other than force majeure, fails to provide a specific percentage of the
      requested volumes of gas for a period of at least 120 consecutive days.
      MCV may terminate two other U.S. long term


                                       8
<PAGE>
      gas contracts upon 30 days' written notice if the producer, for any
      reason, including force majeure, fails to deliver 500 Mcf/day for a period
      of four consecutive months.

      Current Canadian Long Term Gas Contracts. All Canadian long term gas
      contracts ("Canadian contracts") warrant the delivery of quantities
      requested by MCV up to the MDQ, subject to force majeure, and in one case,
      a 2% tolerance is allowed. Subject to MCV's obligation to mitigate,
      Canadian suppliers have agreed to indemnify MCV for the Facility's
      replacement gas costs, excluding indirect or consequential damages or loss
      of profit, for any breach of this supply warranty. One producer may be
      relieved of its supply warranty under certain circumstances if its ratio
      of remaining reserves to annual production is less than ten.

      Prices under most of the Canadian contracts are based on reference prices
      indexed to Consumers' energy charges under the PPA, subject in some
      instances to floor prices below which the reference price cannot fall, and
      are denominated in U.S. dollars. All the Canadian contracts provide for
      deliveries at the international border near Emerson, Manitoba.

      In addition to an amount per MMBtu based on the quantity of gas actually
      delivered (the "Commodity Charge"), under most of the Canadian contracts
      MCV 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
      contracts, gas costs per unit taken by MCV increase because Demand Charges
      are being paid for the quantity of gas not being taken. Two contracts
      provide discounts to the Commodity Charge where monthly takes are in
      excess of 85% of MDQ.

      The Canadian contracts establish 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 contracts.

      Under most of the Canadian contracts, if a Canadian supplier under
      delivers 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 El Paso. 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. Consumers is in the process of combining the
      pipeline service operations of Michigan Gas Storage Company and Consumers.
      It is anticipated that within the next year MCV's service will be provided
      under a combined contract. No change in rates or service is expected under
      the consolidation of these service agreements. Michigan gas produced by
      suppliers is currently transported to Consumers' pipeline


                                       9
<PAGE>
      system by the supplier under contracts the suppliers have with MichCon
      Gathering Company (previously Michigan Consolidated Gas Company)
      ("MichCon"), on the MichCon pipeline system in northern Michigan. The
      remaining terms of MCV's agreements with the U.S. transporters range from
      less than 1 to 23 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 contracts are themselves responsible for
      arranging transportation within Canada, and are responsible for paying the
      transportation rates charged by the Canadian transporters, which are then,
      in most cases, reimbursed by MCV. All suppliers have been allocated firm
      transportation capacity on the relevant pipelines. Great Lakes transports
      Canadian gas from the U.S.-Canada border to Michigan.

      MCV has also entered into a gas storage agreement with Consumers for the
      underground storage of eight billion cubic feet of gas in exchange for
      delivery to Consumers of 1.75% of the gas placed in storage (for fuel) and
      the payment by MCV to Consumers of an annual storage service charge of
      32.04 cents per Dth times the eight billion cubic feet of storage service
      provided. Consumers is obligated to provide deliveries from storage up to
      a rate of 120,000 Mcf/day, subject to certain restrictions relating to
      levels of storage gas maintained in inventory by MCV. This storage
      capability allows MCV to meet fluctuating daily operating requirements and
      to take advantage of opportunities to make spot purchases during periods
      of the year when gas prices are favorable.

      Gas Turbine Service Agreement

      Under a service agreement between MCV and Alstom (the "Service
      Agreement"), Alstom sold MCV spare parts for the GTGs and provides
      qualified service personnel and supporting staff to assist MCV to perform
      scheduled inspections on the GTGs, and to repair the GTGs at MCV's
      request. The Service Agreement, 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. Alstom 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 monthly 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 Alstom'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 Alstom rate. Alstom 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 Alstom 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 a remobilization fee. Upon termination
      of the Service Agreement (except for nonperformance by Alstom), MCV must
      pay a cancellation payment.

      MCV and Alstom amended the Service Agreement effective December 31, 1993
      under which Alstom provides hot gas path parts for MCV's twelve gas
      turbines through the fourth series of major GTG inspections which are
      expected to be completed in 2002. In January 1998, MCV and Alstom amended
      the length of the amended Service Agreement to extend through the sixth
      series of major GTG inspections, which are expected to be completed by
      year-end 2008, for a lump sum fixed price covering the entire term of the
      amended Service Agreement of $266.5 million (in 1993 dollars, which is
      adjusted based on exchange rates and Swiss inflation indices), payable on
      the basis of operating hours as they occur over the same period. The
      amendment is severable and may be terminated separately from the existing
      Service Agreement.


                                       10
<PAGE>
      In addition, MCV also purchased from Alstom and installed 11NM GTG upgrade
      packages for all twelve of the gas turbine generators for a total of
      approximately $44.3 million. 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. 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).

      Gas Turbine Generator Compressor Blade Agreement

      MCV has entered into an agreement with MTS Machinery Tools & Services AG
      ("MTS"), effective January 18, 2002. Under this agreement MTS will design,
      manufacture and install new design compressor blades in MCV's twelve
      GTG's, which is expected to increase the overall electrical capacity and
      efficiency of each GTG. MCV has the right to terminate the agreement after
      the installation of the first set of new compressor blades. The cost of
      this project to upgrade all twelve GTG's, including the purchase of spare
      parts, is approximately $32.7 million, in 2001 dollars, payable based upon
      performance milestones. The first set of new compressor blades is expected
      to be installed by the third quarter of 2003, and if successful, the
      remaining eleven sets would be installed during the fifth series of major
      GTG inspections, which are expected to be completed by the third quarter
      of 2006.

F.    Employees

      As of February 28, 2002, MCV had 132 employees. Fifty-three of MCV's
      employees are members of the Utility Workers Union of America, AFL-CIO
      Local 564 (the "Union"), and are subject to the terms of a collective
      bargaining agreement between MCV and the Union. MCV and the Union signed a
      new agreement effective March 1, 1999. It is a five year contract with a
      wage reopener in each of the last two years. The Union has not exercised
      the first year wage reopener. 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


                                       11
<PAGE>
      Thermal and Efficiency Percentages. During 2001, the Facility achieved a
      Thermal Percentage of 18.3% 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, 2000 and
      March 2001, MCV filed Notices of Self-Recertification with the FERC to
      reflect changes in the configuration and equipment of the Facility, and
      changes in MCV Partnership ownership (which changes did not result in a
      change in the percentage of utility ownership). (See "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 which is now final.

      In connection with a dispute between MCV and Consumers regarding the
      payment of certain fixed energy charges which stemmed from the Revised
      Settlement Proposal, on December 10, 1993, Consumers made a written
      irrevocable offer of relief ("Offer of Relief") to MCV. The Offer of
      Relief was for the purpose of facilitating the sale of Senior Secured
      Lease Obligation Bonds, issued in connection with the financing of the
      Overall Lease Transaction (See "Overall Lease Transaction") and held by
      Consumers. Pursuant to the Offer of


                                       12
<PAGE>
      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. 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.

      In 1993, Consumers exercised its rights under the PPA to obtain a
      determination through arbitration proceedings of whether Consumers could
      exercise the "regulatory out" provision of the PPA in view of Consumers'
      acceptance of the Settlement Order. In a Final Order issued in 1995, the
      arbitrator ruled that Consumers may withhold the fixed energy charges for
      available but undelivered energy, as well as for energy delivered between
      the "caps" contained in the Settlement Order and 915 MW.

      In 1995, Consumers and the MPSC staff asked the MPSC to approve a
      settlement agreement ("325 MW Settlement") which proposed approving the
      jurisdictional cost recovery of an additional 325 MW of capacity purchased
      from MCV beginning January 1, 1996 through the term of the PPA. The costs
      recovered for this 325 MW of MCV Contract Capacity was essentially the
      same as the 915 MW already approved by the MPSC after a phase in of the
      capacity rate between 1996 and 2004. On November 14, 1996, the MPSC
      approved, with modifications not material to MCV, the 325 MW Settlement
      effective January 1, 1996 ("325 MW Settlement Order"). The 325 MW
      Settlement Order is now final.

      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. 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. The Settlement Agreement is not
      expected to materially affect MCV's earnings and cash flows.

      Michigan Electric Industry Restructuring Proceedings

      The MPSC issued orders on June 5, 1997, October 29, 1997, January 14, 1998
      and February 11, 1998 (collectively the "Restructuring Orders"). The
      Restructuring Orders provide for a transition to a competitive regime
      whereby electric retail customers would be able to choose their power
      supplier and pay negotiated or market-based rates for such power supply.
      The Restructuring Orders also mandated that utilities "wheel" third-party
      power to the utilities' customers. An issue involved in restructuring,
      which could significantly impact MCV, is stranded cost recovery. The
      Restructuring Orders allow recovery by utilities (including Consumers) of
      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 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.


                                       13
<PAGE>
      MCV, as well as others, filed appeals in state and federal courts
      challenging the Restructuring Orders. The Michigan Court of Appeals found
      that the Restructuring Orders do not unequivocally disallow recovery of
      PPA charges (capacity and energy) by Consumers and, therefore, MCV's
      issues were not ripe for appellate review and no actual controversy
      regarding recovery of costs could occur until 2008, at the earliest. This
      order is now final. In June 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. In September 1999, Consumers filed a statement with the MPSC
      stating that it intends to begin voluntarily implementing the
      Restructuring Orders. In June 2000, the state of Michigan enacted
      legislation which, among other things, states that the Restructuring
      Orders (being voluntarily implemented by Consumers) are in compliance with
      the legislation and enforceable by the MPSC. The legislation provides that
      the rights of parties to existing contracts between utilities (like
      Consumers) and QF's (like MCV), including the rights to have the PPA
      charges recovered from customers of the utilities, are not abrogated or
      diminished, and permitted utilities to securitize certain stranded
      (transition) costs including PPA charges.

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

      Federal Electric Industry Restructuring

      FERC has jurisdiction over wholesale energy sales and is moving towards
      "market" based pricing of electricity as opposed to traditional cost-based
      pricing. In April 1996, FERC issued Order No. 888 requiring all utilities
      FERC regulates to file uniform transmission tariffs providing for, among
      other things, non-discriminatory "open access" to all wholesale buyers and
      sellers, including the transmission owner, on terms and conditions
      established by FERC. Order No. 888 also requires utilities to
      "functionally unbundle" transmission and separate transmission personnel
      from those responsible for marketing generation. In December 1999, FERC
      issued a final rule, Order No. 2000, designed to encourage all owners and
      operators of interstate electric transmission lines to join regional
      transmission organizations. 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 and subsequent
      related orders are pending before the United States Court of Appeals for
      the D.C. Circuit. 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


                                       14
<PAGE>
      volumes to meet MCV's current contract requirements and from the National
      Energy Board ("NEB") to export these volumes. The U.S. long term gas
      contracts are not subject to regulatory approvals.

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. 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 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. On three instances in 2001, MCV exceeded the two
      hour limit for adequate denox steam injection rate. Causes of the
      exceedances were low main denox header pressure, outage of the main denox
      header and a trip on the Unit 1 condensate pumps. The Michigan Department
      of Environmental Quality (MDEQ) has taken no action nor is it expected
      that they will.

      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 the proposed Section 126 Rule. 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 SIP Call Rule's compliance dates have since
      been extended to May 31, 2004. The FIP Plan includes the same NOX
      reduction requirements and modified 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 or otherwise fails to require
      applicable NOX emission reduction requirements to be in place. The Section
      126 Rule deals 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
      industry-based appeals have been filed on all three of these rulemaking
      actions. In May 1999, the United States Court of Appeals for the D.C.
      Circuit remanded EPA's "8-hour" ozone measurement standard, set forth in
      the SIP Call Rule, as being unconstitutional. It left intact, the EPA's "1
      hour" standard. 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" ("Section 126
      Rulemaking"). In the Section 126 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 Section 126 Rulemaking also finalizes the Federal NOX Budget
      Trading Program as the control remedy for sources affected by the rule.
      The Section 126 Rulemaking was effective February 17, 2000. It presently
      requires compliance by May 1, 2003, but the EPA has recently stated that
      the compliance date will be moved to May, 2004. MCV is identified in the
      Section 126 Rulemaking as a large EGU subject to NOX emissions averaging
      of .15 lb/MMBtu during the ozone season (May through September). If the
      court challenge to the rule is unsuccessful, MCV nevertheless believes it
      will be able to meet the standards in the Section 126 Rulemaking, which is
      subject to rehearing and/or further appeal. The State of Michigan is
      presently engaged in a rulemaking effort which would impose NOX controls
      which are similar to, or less stringent than, the federal emission
      limitations EPA seeks to impose. Again, MCV believes it will be able to
      meet the emission levels sought by the State of Michigan in response to
      the federal program directives.



                                       15
<PAGE>
      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. In
      addition, brine pipelines previously crossed the Site, some which were
      capped and abandoned in place. 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 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.

      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


                                       16
<PAGE>
      (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 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 operation of the
      Facility, the payment of operating expenses, and the distribution of
      remaining revenues according to the priorities set forth therein to or for
      the account of the Working Capital Lender, the Note Trustees, the Owner
      Trustees, MCV and the affiliates of certain Partners. MCV has arranged for
      a $45 million working capital line (the "Working Capital Facility") with
      Bank of Montreal (the "Working Capital Lender"), which expires August 31,
      2002. 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 is divided between interest and principal components using
      the effective interest method.


                                       17
<PAGE>
      On June 15, 2000, MCV closed on the sale of $200 million of tax-exempt
      bonds, the proceeds of which were used on July 24, 2000 to refund a like
      amount of previously issued bonds.

      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 purpose of issuing various series
      of subordinated bonds (the "Subordinated Bonds" and, together with the
      Senior Bonds, the "Bonds"), each series secured by a pledge of the
      corresponding series of the Subordinated Notes issued by the five Owner
      Trustees. These pledged Subordinated Notes are secured proportionally with
      the Subordinated Notes pledged to secure the Tax-Exempt Bonds issued by
      the Tax-Exempt Issuer (as defined below). The use of the funding
      corporations facilitated the sale of debt by permitting the offer and sale
      of three series of Senior Bonds and two series of Subordinated Bonds, each
      secured equally and ratably by the corresponding series of Notes issued by
      each of the five Owner Trusts, thus eliminating the need to offer a
      greater number of separate series of Notes to the investor. In addition,
      the use of a corporate obligor 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. As of February 28, 2002, there remains outstanding
      approximately $99.9 million of Senior Bonds and $567.2 million of
      Subordinated Bonds.

      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 proportionally 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).


                                       18
<PAGE>
      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
      proportionally 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.

      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, 2001, MCV had funds of $139.3 million in the Reserve Account.
      Excess funds in the Reserve Account are periodically transferred to MCV.

Item 2. PROPERTIES

MCV leases the Facility from the Owner Trustees pursuant to the Leases. For a
description of the Facility, see "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


                                       19
<PAGE>
equal to such Owner Trustee's undivided interest percentage. Each Owner Trustee
in turn subleased its undivided interest back to MCV pursuant to separate
subleases of the Site.

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

Item 3. LEGAL PROCEEDINGS

MCV has filed property tax appeals contesting MCV's property taxes for 1997 and
1998 and the taxable value for 1999 and 2000, which are pending before the
Michigan Tax Tribunal. MCV has also appealed its 2001 and 2002 property taxes.
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.


                                       20
<PAGE>
                                     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, 2001, 2000,
1999, 1998 and 1997 and for each of the five years ended December 31, 2001 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>
                                                     2001          2000          1999          1998          1997
                                                 -----------   -----------     ---------     ---------     ---------
<S>                                              <C>           <C>             <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA:
  Operating Revenues                             $   610,813   $   604,547     $ 617,352     $ 627,054     $ 651,581
  Operating Income                                   157,835       212,813       215,884       222,461       216,499
  Cumulative Effect on Prior Years (to                    --            --            --            --        15,533
   December 31, 1996) of Change in Method of
   Accounting for Property Taxes (1)
  Net Income                                          48,264        90,121        80,069        80,327        77,737

BALANCE SHEET DATA: (2)
  Total Assets                                     2,117,047     2,274,956     2,299,212     2,286,506     2,351,271
  Capitalization
    Partners' Equity                                 551,712       527,738       437,617       357,548       277,221
    Long-Term Debt, Excluding Current
     Maturities                                    1,243,060     1,429,233     1,584,865     1,723,960     1,788,291
</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).
(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, 2001, MCV recorded net income of $48.3 million,
a decrease of $41.8 million as compared to 2000 net income of $90.1 million. Two
significant one-time items contributed to the decrease in 2001 earnings. A
provision of $8.2 million was made in association with the prepayment of gas
costs under a long-term contract with an affiliate of Enron Corporation. Also in
2001, MCV expensed $6.7 million in development costs associated with the
potential plant expansion previously under consideration. Other factors
contributing to the earnings decrease for 2001 compared to 2000 were higher fuel
costs resulting from higher natural gas prices in the long-term gas contracts
and the short-term market, lower operating margins resulting from a higher
electric dispatch under the PPA with Consumers and lower interest income on
MCV's invested cash reserves. This earnings decrease was partially offset by
lower interest expense on MCV's financing arrangements.


                                       21
<PAGE>
For the year ended December 31, 2000, MCV recorded net income of $90.1 million,
an increase of $10.0 million as compared to 1999 net income of $80.1 million.
The earnings increase was primarily due to lower interest expense on MCV's
financing obligation, decreased fuel costs resulting from the disposition of
natural gas, increased capacity revenue under the PPA and increased interest
income on MCV's investments. This increase was partially offset by two one-time
events, specifically the 1999 increase in operating revenues arising from a
Settlement Agreement between MCV and Consumers effective January 1, 1999, as
well as expenses arising from MCV's refinancing of its tax-exempt bonds in June
2000. The earnings increase was also partially offset by slightly lower energy
rates under the PPA.

Operating Revenues

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

<TABLE>
<CAPTION>
                                                                 2001                2000               1999
                                                              -----------         -----------        -----------
<S>                                                           <C>                 <C>                <C>
Operating Revenues                                            $   610,813         $   604,547        $   617,352

Capacity Revenue                                              $   409,633         $   410,938        $   407,429
   PPA Contract Capacity (MW)                                       1,240               1,240              1,240
   Billed PPA Availability                                          98.5%               98.5%              98.5%

Electric Revenue                                              $   184,707         $   177,989        $   196,301
   PPA Delivery as Percentage of Contract Capacity (1)              75.0%               72.1%              78.2%
   PPA, SEPA and Other Electric Deliveries (MWh)                8,811,950           8,535,548          9,205,083
   Average PPA Variable Energy Rate ($ / MWh)                 $     15.62         $     15.68        $     16.00
   Average PPA Fixed Energy Rate ($ / MWh)                    $      3.75         $      3.57        $      3.52

Steam Revenue                                                 $    16,473         $    15,620        $    13,622
   Steam Deliveries (Mlbs)                                      5,693,240           5,869,454          5,803,863
</TABLE>

(1)   Beginning in July 2000, in response to the rapidly escalating cost of
      natural gas, MCV entered into transactions with Consumers whereby
      Consumers agreed to reduce the dispatch level of the Facility. In the
      event of reduced dispatch, MCV agreed to share the savings realized by not
      having to generate the electricity. In the years 2001 and 2000, MCV
      estimates these transactions resulted in net savings of approximately $7
      million and $9 million, respectively. MCV anticipates using the same or
      similar transactions in the future to mitigate the impacts of high market
      gas prices, if circumstances warrant such use.

For the year ended December 31, 2001, MCV's operating revenues increased $6.3
million from 2000. This increase is due primarily to an increase in the electric
dispatch under the PPA with Consumers and due to higher energy rates under the
PPA and SEPA with Dow. This increase was slightly offset by lower capacity
payments under the PPA due to fewer billing days in 2001 and lower third party
energy sales.

For the year ended December 31, 2000, MCV's operating revenues decreased $12.8
million from 1999. This decrease is due primarily to the first quarter 1999
recognition of a one-time net $6.4 million increase in operating revenues due to
the Settlement Agreement between MCV and Consumers, which resolved all of the
previously disputed issues under the PPA and included definitive obligations for
Consumers to make energy payments calculated in accordance with the PPA. Also
decreasing revenues was a lower electric dispatch and lower energy rates under
the PPA with Consumers. This decrease was partially offset by increased electric
and steam rates under the SEPA with Dow and higher capacity revenues from
Consumers under the PPA and third parties.


                                       22
<PAGE>
Operating Expenses

For the year ended December 31, 2001, MCV's operating expenses were $453.0
million, which includes $288.2 million of fuel costs. During this period, MCV
purchased approximately 84.0 Bcf of natural gas, and a net 4.9 Bcf was used for
transportation fuel and as a net change to gas in storage. During this same
period, MCV consumed 79.1 Bcf. The average commodity cost of fuel for the year
2001 was $2.94 per MMBtu, which includes the effects of the disposition of
excess gas supplies not required for generation. Without the effects of the
disposition of the excess gas supplies, the average commodity cost of fuel for
2001 would have been $3.15 per MMBtu. For the year ended December 31, 2000,
MCV's operating expenses were $391.7 million, which includes $232.1 million of
fuel costs. During this period, MCV purchased approximately 77.0 Bcf of natural
gas, and a net 1.6 Bcf was used for transportation fuel and as a net change to
gas in storage. During this same period, MCV consumed 76.2 Bcf, of which .8 Bcf
of this total was gas provided by Dow. The average commodity cost of fuel for
the year of 2000 was $2.55 per MMBtu, which includes the effects of the
disposition of excess gas supplies not required for generation. Without the
effects of the disposition of the excess gas supplies, the average commodity
cost of fuel for 2000 would have been $2.76 per MMBtu. Fuel costs for the year
2001 compared to 2000 increased by $56.1 million. This fuel cost increase was
due to higher fuel costs resulting from higher natural gas prices in long-term
gas contracts and the short-term gas market; and higher gas usage resulting from
the increase in electric dispatch. Also contributing to this increase was a
one-time expense for an $8.2 million provision made in association with the
prepayment of gas costs under a long-term contract with an affiliate of Enron
Corporation. The effects of this charge will be reversed over the next five
years, since the amounts prepaid under the long-term contract were being
amortized over the delivery period through 2006.

For the year ended December 31, 2000, MCV's operating expenses decreased $9.7
million from the year 1999, which included a $12.2 million decrease in fuel
costs. This fuel cost decrease was due primarily to a lower gas usage resulting
from the decrease in electric dispatch due in part, to dispatch reduction
transactions entered into with Consumers and disposition of natural gas
previously hedged or purchased under contract but not required for electricity
generation.

For the year ended December 31, 2001, operating expenses other than fuel costs
increased $5.2 million from the year 2000, primarily resulting from expensing of
approximately $6.8 million of development costs associated with the potential
plant expansion previously under consideration. This increase was partially
offset by a revision of the useful lives of the gas turbine generator equipment
and changes to the amortization of payments under the amended Service Agreement,
that occurred in July 2000. All other expenses incurred in these periods were
considered normal expenditures to achieve the recorded operating revenues.

For the year ended December 31, 2000, operating expenses other than fuel costs
increased $2.5 million from the year 1999, primarily resulting from higher plant
maintenance costs and increased property taxes. This increase was partially
offset by a change resulting from a revision to the useful lives of the gas
turbine generator equipment and changes to the amortization of payments under
the amended Service Agreement, that occurred in July 2000. All other expenses
incurred in these periods were considered normal expenditures to achieve the
recorded operating revenues.

Other Income (Expense)

For the year ended December 31, 2001, interest and other income decreased $7.5
million compared to 2000, primarily resulting from lower interest rates on MCV's
invested cash and a lower average invested balance. The decrease in interest
expense for the year ended December 31, 2001 compared to 2000 of $20.6 million
is due to a lower principal balance on MCV's financing obligation.

For the year ended December 31, 2000, interest and other income increased $4.3
million compared to 1999, primarily resulting from higher interest rates on
MCV's investments. The decrease in interest expense for the year ended December
31, 2000 compared to 1999 of $8.8 million is due to a lower principal balance on
MCV's financing obligation. This decrease was partially offset by expenses
arising from MCV's refinancing of its tax-exempt bonds in June 2000.


                                       23
<PAGE>
New Accounting Standards

Effective January 1, 2001, MCV adopted SFAS No. 133, "Accounting for Derivatives
Instruments and Hedging Activities, as amended and interpreted." For a detailed
discussion of the effects of the standard, including earnings volatility, and
the financial impact upon adoption, see Notes to Consolidated Financial
Statements -- Note 2 "Accounting for Derivative Instruments and Hedging
Activities."

Liquidity and Capital Resources

During the years ended December 31, 2001 and 2000, net cash generated by MCV's
operations was $122.9 million and $143.1 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, and since the Reserve Account was
funded to the maximum amount of $137 million in 1994, per the Intercreditor
Agreement, funds totaling $1.0 million, $13.5 million and $10.3 million were
retained by MCV as working capital in 2001, 2000 and 1999, respectively. 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 thirteen years. During 2001, 2000 and 1999 MCV paid the basic rent
requirements of $287.1 million, $288.6 million and $221.7 million, respectively,
as required under the Overall Lease Transaction.

MCV also has arranged for a $45 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. The Working Capital
Facility term currently expires on August 31, 2002. MCV did not utilize the
Working Capital Facility during 2001, except for letters of credit associated
with normal business practices. MCV believes that amounts available to it under
the Working Capital Facility along with available cash reserves will be
sufficient to meet any working capital shortfalls which might occur.

For the foreseeable future, MCV expects to fund current operating expenses and
payments under the amended Service Agreement primarily through cash flows from
operations. Due to uneven future scheduled rent payments (high summer payment,
low winter payment), MCV anticipates that it will be drawing on its cash
reserves to fund temporary cash flow shortfalls. These cash flow shortfalls are
anticipated to be replenished annually. If necessary, MCV could fund any ongoing
operating cash flow shortfalls from cash reserves to the extent available for
such purposes. As of December 31, 2001, there was approximately $267 million
which includes approximately $4 million reserved for capital improvements and
spare parts purchases, including accrued interest, in available reserves for
such purposes.


                                       24
<PAGE>
Disclosure about Contractual Obligations

MCV has assumed various financial obligations and commitments in the normal
course of its business. These obligations are considered to represent expected
cash payments that MCV is required to make under its existing contractual
arrangements. As of December 31, 2001, MCV has the following contractual
financial commitments and obligations:

CONTRACT OBLIGATIONS:

<TABLE>
<CAPTION>
(In Millions)                 Total         2002         2003         2004         2005         2006     Thereafter
                            --------      --------     --------     --------     --------     --------   ----------
<S>                         <C>           <C>          <C>          <C>          <C>          <C>        <C>
Long-Term Debt (1)          $2,277.1      $  304.1     $  208.9     $  242.8     $  174.4     $  156.0     $1,190.9
                            ========      ========     ========     ========     ========     ========     ========
Unconditional Purchase
    Obligations (2)         $2,427.1      $  206.6     $  163.4     $  252.6     $  262.4     $  244.3     $1,297.8
Other Long-Term
    Obligations (3)         $  159.5      $   25.7     $   27.4     $   26.2     $   27.2     $   28.2     $   24.8
                            --------      --------     --------     --------     --------     --------     --------
Total Contractual Cash
    Obligations             $2,586.6      $  232.3     $  190.8     $  278.9     $  289.5     $  272.5     $2,586.6
                            ========      ========     ========     ========     ========     ========     ========
</TABLE>

(1)   Represents expected cash payments including interest.

(2)   Represents estimated minimum commitments under current long-term natural
      gas contracts, natural gas transportation reservation charges, spare parts
      purchases and ground lease agreement.

(3)   Represents the cost of current Facility maintenance service agreements.

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 Consumer's energy charges under the PPA, or a combination thereof - which
permits the seller to increase the price by the 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
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 other factors. The business
and profitability of MCV is also influenced by other factors such as pricing and
transportation of commodities, changes in accounting standards (such as
accounting for derivative instruments and hedging activities) and environmental
legislation/regulation, among other factors. All


                                       25
<PAGE>
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. During the year 2001, approximately 72% of PPA revenues were
capacity payments under the PPA, which are billed on availability, subject to an
annual availability cap of 98.5% pursuant to a Settlement Agreement between MCV
and Consumers. Actual PPA availability was 99.5% for the year 2001, 98.5% for
the year 2000 and 99.7% for the year 1999. Availability will depend on the level
of scheduled and unscheduled maintenance outages, and on the sustained level of
output from each of the GTGs and the steam turbines. MCV expects long-term PPA
availability to meet or exceed the capped level of 98.5%, though prolonged
equipment outages could materially reduce the level of availability.

Natural Gas. The Facility is wholly dependent upon natural gas for its fuel
supply and a substantial portion of the Facility's operating expenses consist of
the costs of natural gas. While MCV continues to pursue the acquisition of a
portion of its expected fuel supply requirements in future years, MCV recognizes
that its existing long term gas contracts are not sufficient to satisfy the
anticipated gas needs over the term of the PPA and, as such, no assurance can be
given as to the availability or price of natural gas after the expiration of its
existing fixed price gas contracts or for gas that may be required by the
Facility in excess of the gas that MCV has under contract.

In addition, some of MCV's long-term gas contracts contain pricing terms that
float with natural gas spot market prices (See "Business - Contracts - MCV Gas
Under Contract (Table)"). No assurance can be made regarding the prices to be
paid for natural gas under these Floating Price gas supply contracts.

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 1999 through 2001, the unit energy charge (fixed and variable) paid
to MCV has risen by 3.5%, while the average unit variable cost of delivered fuel
for the same period has risen by 19.7%. 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. MCV continues to purchase the majority of its
natural gas requirements under long-term fixed-price contracts, with a smaller
portion of gas purchased on the spot market. MCV has maintained a hedging
program to mitigate risk associated with volatile prices in the spot market. For
the year 2002, MCV has entered into gas purchase and hedging arrangements with
respect to most of its expected gas needs not provided for under its long-term
contracts. MCV expects that its purchase and hedging arrangements will mitigate
the effects of rises in natural gas prices for 2002, although high gas prices
for an extended period of time could adversely affect operating results.

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.

Michigan Electric Industry Restructuring Proceedings. The MPSC issued orders on
June 5, 1997, October 29, 1997, January 14, 1998 and February 11, 1998
(collectively the "Restructuring Orders"). The Restructuring Orders provide for
a transition to a competitive regime whereby electric retail customers would be
able to choose their power supplier and pay negotiated or market-based rates for
such power supply. The Restructuring Orders also mandated that utilities "wheel"
third-party power to the utilities' customers. An issue involved in
restructuring,


                                       26
<PAGE>
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 (including MCV's PPA) is limited to customers who chose an alternative
power supplier and are only paid for the period 1998 through 2007 (MCV's PPA
expires in 2025). Customers who chose to remain power supply customers of
Consumers will continue to pay capacity charges as part of rates charged by
Consumers, subject to MPSC rate regulation. The Restructuring Orders do not
otherwise specifically address the recovery of PPA capacity charges after 2007.

MCV, as well as others, filed appeals in state and federal courts challenging
the Restructuring Orders. The Michigan Court of Appeals found that the
Restructuring Orders do not unequivocally disallow recovery of PPA charges
(capacity and energy) by Consumers and, therefore, MCV's issues were not ripe
for appellate review and no actual controversy regarding recovery of costs could
occur until 2008, at the earliest. This order is now final. In June 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.
In September 1999, Consumers filed a statement with the MPSC stating that it
intends to begin voluntarily implementing the Restructuring Orders. In June
2000, the state of Michigan enacted legislation which, among other things,
states that the Restructuring Orders (being voluntarily implemented by
Consumers) are in compliance with the legislation and enforceable by the MPSC.
The legislation provides that the rights of parties to existing contracts
between utilities (like Consumers) and QF's (like MCV), including the rights to
have the PPA charges recovered from customers of the utilities, are not
abrogated or diminished, and permitted utilities to securitize certain stranded
(transition) costs including PPA charges.

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

Federal Electric Industry Restructuring. FERC has jurisdiction over wholesale
energy sales and is moving towards "market" based pricing of electricity as
opposed to traditional cost-based pricing. In April 1996, FERC issued Order No.
888 requiring all utilities FERC regulates to file uniform transmission tariffs
providing for, among other things, non-discriminatory "open access" to all
wholesale buyers and sellers, including the transmission owner, on terms and
conditions established by FERC. Order No. 888 also requires utilities to
"functionally unbundle" transmission and separate transmission personnel from
those responsible for marketing generation. In December 1999, FERC issued a
final rule, Order No. 2000, designed to encourage all owners and operators of
interstate electric transmission lines to join regional transmission
organizations. 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 and subsequent related orders are pending before the United
States Court of Appeals for the D.C. Circuit. 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


                                       27
<PAGE>
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 2001 the Facility achieved an
Efficiency Percentage in excess of 45%.

MCV believes that the Facility will be able to maintain QF status and be capable
of achieving a 45% PURPA Efficiency Percentage on a long-term basis. In
addition, MCV believes annual steam sales will be sufficient to allow the
Facility to exceed the 15% Thermal Percentage. However, no assurance can be
given that factors outside MCV's control will not cause the Facility to fail to
satisfy the annual PURPA qualification requirements and thus lose its QF status.
In 2001, MCV achieved an Efficiency Percentage of 47.0% and a Thermal Percentage
of 18.3%.

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 Trustees 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).

Terrorist Attacks. Since the September 11, 2001 terrorist attack in the United
States, MCV has increased security at the Facility and will continue to evaluate
and make changes, as necessary, to the Facility security on an ongoing basis.
The increased costs related to the additional security are not expected to have
a material impact on MCV's financial position or results of operations.

Critical Accounting Policies

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

Electric Industry Restructuring. At both the state and federal level, efforts
continue to restructure the electric industry. In 1997 and 1998, the MPSC
entered a series of orders, now final, permitting customers to choose their
power provider over a four-year phase-in period, which started in 1999. In
addition, Michigan enacted restructuring legislation in June 2000. Proposed
restructuring legislation also exists at the federal level. One significant
issue to MCV is the possible future regulatory denial of stranded cost recovery
by Consumers of above-market PPA costs. Over 90% of MCV's revenues come from
sales pursuant to the PPA. To date, restructuring has not negatively impacted
MCV, but if restructuring results in denying stranded cost recovery of
above-market PPA costs, MCV's cash flows may be negatively impacted, especially
in the period after 2007. MCV continues to monitor and participate in these
matters as appropriate, and to evaluate potential impacts on both cash flows and
recoverability of the carrying value of property, plant and equipment. Any
future adjustment to property, plant and equipment, if required, would result in
a one-time negative earnings impact. At this time, MCV Management cannot predict
the outcome of these matters or the magnitude of any possible adjustment.


                                       28
<PAGE>
Natural Gas Contracts. Effective January 1, 2001, MCV adopted Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which was issued in June, 1998 and then
amended by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities - Deferral of the Effective Date of SFAS No. 133" and SFAS No. 138
"Accounting for Certain Derivative Instruments and Certain Hedging Activities -
An amendment of FASB Statement No. 133" (collectively referred to as "SFAS No.
133"). SFAS No. 133 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. SFAS No. 133 requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges in some cases allows a derivative's gains and losses to offset
related results on the hedged item in the income statement or permits
recognition of the hedge results in other comprehensive income, and requires
that a company formally document, designate, and assess the effectiveness of
transactions that receive hedge accounting.

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

In addition, on September 19, 2001 the FASB cleared the implementation guidance
regarding natural gas commodity contracts, which combine an option component and
a forward component. This guidance requires either that the entire contract be
accounted for as a derivative or that the components of the contract be
separated into two discrete contracts. Under the second alternative, the newly
established forward contract could qualify for the normal purchases and sales
exception while the option contract would be treated as a derivative under SFAS
No. 133, with changes in fair value recorded through earnings. This guidance
will become effective April 1, 2002. MCV currently has nine long-term gas
contracts that contain both an option and forward component. MCV is currently
working to reduce the quantity of gas presently covered by these contracts,
which will reduce the potential earnings volatility. At this time it is not
possible to predict the mark to market amount that will be recorded in the
future in MCV's earnings.

Property Tax Appeals. MCV currently accrues property taxes on the basis of the
taxable value as assessed by the taxing authorities. MCV has filed property tax
appeals contesting its property taxes for 1997 through 2002. If MCV is
successful in lowering its taxable value for these years, a one-time favorable
earnings adjustment would be recorded. In addition, future property tax expense
would be reduced. At this time, MCV Management cannot predict the outcome of
these appeals.

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

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risks relating to MCV's operations result primarily from changes in
commodity prices, interest rates and foreign exchange rates. To address these
risks, MCV enters into various hedging transactions as described herein. MCV
does not use financial instruments for trading purposes and does not use
leveraged instruments. Fair values included herein have been determined based
upon quoted market prices. The information presented below should be read in
conjunction with Note 2, " Significant Accounting Policies" and Note 5,
"Long-Term Debt" to the Notes to 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 basic term of 25 years, maturing in 2015, has an


                                       29
<PAGE>
effective interest rate of approximately 9.4%, payable in semi-annual
installments of principal and interest. Due to the unique nature of the
negotiated financing obligation it is impractical to estimate the fair value of
the Owner Participants' underlying debt and equity instruments supporting this
financing obligation.

To manage the effects of interest rate volatility on interest income while
maximizing return on permitted investments, MCV has established an interest rate
hedging program. The carrying amounts of MCV's short-term investments
approximate fair value because of the short term maturity of these instruments.
MCV's short-term investments are made up of investment securities held to
maturity and as of December 31, 2001, have original maturity dates of
approximately one year or less.

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, 2001:

<TABLE>
<CAPTION>
                                                        Expected Maturity In
                               ------------------------------------------------------------------------
                                                                                                              Fair
                               2002        2003      2004      2005       2006     Thereafter     Total       Value
                               ----        ----      ----      ----       ----     ----------     -----       -----
<S>                           <C>         <C>       <C>       <C>        <C>       <C>           <C>          <C>
Debt:
Long-Term Debt Fixed
   Rate (in millions)         $304.1      $208.9    $242.8    $174.4     $156.0     $1,190.9     $2,277.1        N/A
     Avg. Interest Rate          9.4%        9.4%      9.4%      9.4%       9.4%         9.4%         9.4%
Interest Rate Swaps:
Floating to Floating          $ 20.0                                                                            $ .6
   (in millions)
     Avg. Pay Rate              1.84%
     Avg. Receive Rate          4.64%
</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 principally to secure
anticipated natural gas requirements necessary for projected electric sales and
to lock in sales prices of natural gas previously obtained in order to optimize
MCV's existing gas supply, storage and transportation arrangements.

The following table provides information about MCV's futures and option
contracts that are sensitive to changes in natural gas prices; these futures and
option contracts have maturity dates ranging from two to fifteen months. The
table presents the carrying amounts and fair values at December 31, 2001:

<TABLE>
<CAPTION>
                                                             Expected Maturity in 2002/2003             Fair Value
                                                             ------------------------------             ----------
<S>                                                          <C>                                        <C>
Futures Contracts:
Contract Volumes (10,000 MMBtu) Long/Buy                                   1,832                               --
Contract Volumes (10,000 MMBtu) Short/Sold                                    77                               --
Weighted Average Price Long (per MMBtu)                                   $3.998                           $2.769
Weighted Average Price Short (per MMBtu)                                  $2.887                           $2.570
Contract Amount ($US in Millions)                                          $71.0                            $48.7
</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 Alstom. The gains and losses on these transactions,
accounted for as hedges, are included in the measurement of the underlying
capitalized major renewal costs when incurred. Forward contracts entered into by
MCV have maturity dates of less than one year. As of December 31, 2001, MCV had
forward purchase contracts involving Swiss Francs in the notional amount of
$10.0 million, with a deferred $.4 million gain.


                                       30
<PAGE>
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-20 of this Annual Report on Form 10-K and are hereby
incorporated by reference herein.

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

None.


                                       31
<PAGE>
                                    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.          (57)      Management Committee Chairman

John J. O'Rourke                   (47)      Management Committee Member
                                             (Term began in March 2001)

David A. Arledge                   (57)      Management Committee Member
                                             (Term ended in March 2001)

Executive Officers

James M. Kevra                     (53)      President and Chief Executive Officer

Bruce C. Grant                     (55)      Vice President of Human Resources, Communications
                                             and Public Affairs

James A. Mooney                    (62)      Vice President of Engineering, Operations and
                                             Construction

Gary B. Pasek                      (46)      Vice President, General Counsel and Secretary

James M. Rajewski                  (54)      Vice President and Controller

Stephen A. Shulman                 (45)      Chief Financial Officer and Treasurer

LeRoy W. Smith                     (60)      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 added
the title of President of CMS Energy in December 2000. He has also served as
Chairman of Consumers since November 1985, and added the title of President and
Chief Executive Officer of Consumers in December 2000.

John J. O'Rourke has served as a member of the Management Committee since March
2001. Mr. O'Rourke has served as Vice President and Managing Director for El
Paso Merchant Energy North America Company since May 2000. Prior to becoming
Vice President and Managing Director for El Paso Merchant Energy North America


                                       32
<PAGE>
Company, Mr. O'Rourke has held several other senior management positions in the
energy business over the past 20 years with FPL Energy and Ebasco Services, Inc.

David A. Arledge served as a member of the Management Committee from July 1988
to March 2001. His term on the Management Committee ended with the merger of
Coastal and El Paso. Mr. Arledge was Chairman, President and Chief Executive
Officer of The Coastal Corporation, a diversified energy holding company, prior
to the merger with El Paso.

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

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.


                                       33
<PAGE>
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, 2001, 2000 and
1999.

                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                          Annual Compensation
                                                      --------------------------------------------------------------
          Name and                                                                                   All Other
     Principal Position                Year           Salary ($)          Bonus ($)(a)           Compensation ($)
------------------------------        -------         ------------     --------------------     --------------------
<S>                                   <C>             <C>              <C>                      <C>
James M. Kevra                         2001             268,293                   --                    52,923(b)
President and                          2000             253,638              215,000                    50,731
Chief Executive Officer                1999             241,965              178,360                    48,942

James A. Mooney                        2001             197,233                   --                    41,326(c)
Vice President of                      2000             187,639              114,733                    39,894
Engineering, Operations                1999             183,592               94,352                    39,312
and Construction

Gary B. Pasek                          2001             172,142                   --                    25,788(d)
Vice President                         2000             164,995              101,071                    24,718
General Counsel & Secretary            1999             158,683               80,148                    23,776

LeRoy W. Smith                         2001             172,655                   --                    28,362(e)
Vice President of Energy               2000             163,932              107,504                    27,110
Supply and Marketing                   1999             158,105               76,805                    26,210

Stephen A. Shulman                     2001             154,264                   --                    23,112(f)
Chief Financial Officer                2000             148,079               88,448                    22,194
and Treasurer                          1999             142,673               70,630                    21,378
</TABLE>

----------

(a)   For 2001, no bonuses were awarded under the Senior Management bonus plan;
      for the years 2000 and 1999 the amounts represent bonuses accrued.

(b)   Includes company contributions of $8,500 to the 401(k) Savings Plan,
      $16,000 to the Defined Contribution Retirement Plan and $28,423 to the
      Supplemental Retirement Plan.

(c)   Includes company contributions of $8,500 to the 401(k) Savings Plan,
      $16,000 to the Defined Contribution Retirement Plan and $16,826 to the
      Supplemental Retirement Plan.

(d)   Includes company contributions of $8,500 to the 401(k) Savings Plan,
      $16,000 to the Defined Contribution Retirement Plan and $1,288 to the
      Supplemental Retirement Plan.

(e)   Includes company contributions of $8,500 to the 401(k) Savings Plan,
      $16,000 to the Defined Contribution Retirement Plan and $3,862 to the
      Supplemental Retirement Plan.

(f)   Includes company contributions of $7,704 to the 401(k) Savings Plan and
      $15,408 to the Defined Contribution Retirement Plan.


                                       34
<PAGE>
                       2001 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                                  1-2 years                               50,000
James A. Mooney                                 1-2 years                               37,000
Gary B. Pasek                                   1-2 years                               32,000
LeRoy W. Smith                                  1-2 years                               32,000
Stephen A. Shulman                              1-2 years                               29,000
</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. For the years 2001
      and 2000, no cash payouts to participants under this plan occurred.

Compensation Committee Interlocks and Insider Participation

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

Mr. O'Rourke commenced in March 2001, as a member of MCV's Compensation
Committee. He also serves as Vice President and Managing Director for El Paso
Merchant Energy North America Company. Mr. Arledge was a member of the
Compensation Committee of MCV as well as Chairman, President and Chief Executive
Officer and a Director of Coastal. His term on the Compensation Committee ended
in March 2001. Prior to the merger with El Paso, he was Director of Coastal
Midland, Inc. El Paso Midland, Inc. and affiliates of El Paso have engaged in
numerous transactions in the ordinary course of business to provide services or
products to MCV. In 2001, El Paso 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 $96.0 million. A similar level of
transactions is expected to occur in 2002. In addition, as of December 31, 2001,
El Paso had an outstanding cash withdrawal from the Partnership in the amount of
$56.7 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, President and Chief Executive Officer 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,


                                       35
<PAGE>
Consumers and Dow to assure a continuous supply of steam and electricity to Dow
in the event the SEPA is terminated, has contractual obligations to enter into
transmission service agreements with other utilities for MCV's benefit, and has
leased undivided interests in the Site to the Owner Trustees (as MCV's
assignees) pursuant to the Ground Lease. In 2001, Consumers purchased electric
capacity and related energy from the Facility that aggregated approximately
$550.5 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 2001, 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 $48.8 million. A similar level of transactions is
expected to occur in 2002.

For further detailed discussions of MCV's contracts and leases with Partners,
see "Contracts", "Properties" and "Financial Statements and Supplementary Data
-- Note 8 to the Consolidated Financial Statements."


                                       36
<PAGE>
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>
El Paso Corporation (b)
El Paso Building
1001 Louisiana Street
Houston, TX 77002

      Source Midland Limited Partnership      General Partnership Interest            24.2%                      18.1%

      El Paso Midland, Inc.                   General Partnership Interest            14.6%                      10.9%

      MEI Limited Partnership                 General Partnership Interest            12.2%                       9.1%
                                              Limited Partnership Interest              --                        0.9%

      Micogen Limited Partnership             Limited Partnership Interest              --                        4.5%
                                                                              ----------------------     ----------------------
           Total El Paso Ownership                                                    51.0%                      43.5%

CMS Energy Company
212 West Michigan Avenue
Jackson, MI 49201

      CMS Midland, Inc.                       General Partnership Interest            49.0%                      49.0%

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

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 has any beneficial ownership in MCV.

(b)   On January 29, 2001, El Paso Corporation ("El Paso") completed its merger
      with The Coastal Corporation ("Coastal"). El Paso is the parent company of
      El Paso Midland, Inc. (formerly Coastal Midland, Inc.), Source Midland
      Limited Partnership ("SMLP"), Micogen Limited Partnership and, through
      SMLP, MEI Limited Partnership, which are Partners of MCV. After the
      merger, Coastal became a wholly-owned subsidiary of El Paso and has
      changed its name to El Paso CGP Company.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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


                                       37
<PAGE>
                                     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, 2001 and 2000 or for each of the three years ended December 31,
            2001, 2000 and 1999.

<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.

      No reports on Form 8-K were filed during the last quarter of 2001.


                                       38
<PAGE>
                   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, 2001 and 2000                                                 F-3

Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000, and 1999                  F-4

Consolidated Statements of Partners' Equity for the Years Ended December 31, 2001, 2000, and 1999            F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 2001,
2000, and 1999                                                                                               F-6

Notes to Consolidated Financial Statements                                                                   F-7
</TABLE>


                                      F-1
<PAGE>
                               ARTHUR ANDERSEN LLP

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

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

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

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

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


                                                Arthur Andersen LLP

Detroit, Michigan,
January 18, 2002


                                      F-2
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31,
                                 (In Thousands)

<TABLE>
<CAPTION>
ASSETS                                                               2001              2000
                                                                 -----------       -----------
<S>                                                              <C>               <C>
CURRENT ASSETS:
  Cash and cash equivalents                                      $   140,630       $   205,550
  Restricted cash and cash equivalents                                   787               748
  Accounts and notes receivable - related parties                    108,780           109,181
  Accounts receivable                                                 20,490            75,216
  Gas inventory                                                       19,699            14,474
  Unamortized property taxes                                          16,625            16,210
  Broker margin accounts and prepaid expenses                         34,372             7,785
                                                                 -----------       -----------

    Total current assets                                             341,383           429,164
                                                                 -----------       -----------

PROPERTY, PLANT AND EQUIPMENT
  Property, plant and equipment                                    2,439,541         2,433,798
  Pipeline                                                            21,398            21,222
                                                                 -----------       -----------

    Total property, plant and equipment                            2,460,939         2,455,020

  Accumulated depreciation                                          (851,539)         (783,974)
                                                                 -----------       -----------

    Net property, plant and equipment                              1,609,400         1,671,046
                                                                 -----------       -----------

OTHER ASSETS:
  Restricted investment securities held-to-maturity                  141,467           139,876
  Deferred financing costs, net of accumulated amortization
    of $14,463 and $12,804, respectively                              10,502            12,161
  Prepaid gas costs, materials and supplies                           14,295            22,709
                                                                 -----------       -----------

    Total other assets                                               166,264           174,746
                                                                 -----------       -----------
TOTAL ASSETS                                                     $ 2,117,047       $ 2,274,956
                                                                 ===========       ===========

LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and accrued liabilities                       $    73,596       $    93,010
  Interest payable                                                    60,334            67,416
  Current portion of long-term debt                                  186,173           155,632
                                                                 -----------       -----------

    Total current liabilities                                        320,103           316,058
                                                                 -----------       -----------

NON-CURRENT LIABILITIES:
  Long-term debt                                                   1,243,060         1,429,233
  Other                                                                2,172             1,927
                                                                 -----------       -----------

    Total non-current liabilities                                  1,245,232         1,431,160
                                                                 -----------       -----------

COMMITMENTS AND CONTINGENCIES

TOTAL LIABILITIES                                                  1,565,335         1,747,218
                                                                 -----------       -----------

PARTNERS' EQUITY                                                     551,712           527,738
                                                                 -----------       -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY                           $ 2,117,047       $ 2,274,956
                                                                 ===========       ===========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                       F-3
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
     CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31,
                                 (In Thousands)

<TABLE>
<CAPTION>
                                              2001            2000            1999
                                           ---------       ---------       ---------
<S>                                        <C>             <C>             <C>
OPERATING REVENUES:
  Capacity                                 $ 409,633       $ 410,938       $ 407,429
  Electric                                   184,707         177,989         196,301
  Steam and other                             16,473          15,620          13,622
                                           ---------       ---------       ---------

    Total operating revenues                 610,813         604,547         617,352
                                           ---------       ---------       ---------

OPERATING EXPENSES:
  Fuel costs                                 288,167         232,127         244,350
  Depreciation                                92,176          93,916          95,350
  Operations                                  16,082          15,117          14,699
  Maintenance                                 13,739          13,907          12,076
  Property and single business taxes          26,410          26,860          25,744
  Administrative, selling and general         16,404           9,807           9,249
                                           ---------       ---------       ---------

    Total operating expenses                 452,978         391,734         401,468
                                           ---------       ---------       ---------

OPERATING INCOME                             157,835         212,813         215,884
                                           ---------       ---------       ---------

OTHER INCOME (EXPENSE):
  Interest and other income                   16,725          24,211          19,913
  Interest expense                          (126,296)       (146,903)       (155,728)
                                           ---------       ---------       ---------

    Total other income (expense), net       (109,571)       (122,692)       (135,815)
                                           ---------       ---------       ---------

NET INCOME                                 $  48,264       $  90,121       $  80,069
                                           =========       =========       =========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                       F-4
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
  CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31,
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                      General         Limited
                                                      Partners       Partners         Total
                                                     ---------       --------       ---------
<S>                                                  <C>             <C>            <C>
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

     Net income                                         78,462         11,659          90,121
                                                     ---------       --------       ---------

BALANCE, DECEMBER 31, 2000                           $ 448,100       $ 79,638       $ 527,738

Comprehensive Income
     Net Income                                         42,020          6,244          48,264

     Other Comprehensive Income
        Cumulative effect of accounting change          13,688          2,034          15,722
        Unrealized loss on hedging activities          (42,444)        (6,307)        (48,751)
        Reclassification adjustments recognized
           in net income above                           7,608          1,131           8,739
                                                     ---------       --------       ---------
        Total other comprehensive income               (21,148)        (3,142)        (24,290)

     Total Comprehensive Income                         20,872          3,102          23,974
                                                     ---------       --------       ---------

BALANCE, DECEMBER 31, 2001                           $ 468,972       $ 82,740       $ 551,712
                                                     =========       ========       =========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                       F-5
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
     CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                     2001            2000            1999
                                                                                  ---------       ---------       ---------
<S>                                                                               <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                      $  48,264       $  90,121       $  80,069

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

  Depreciation and amortization                                                      93,835          95,295          96,359
  (Increase) decrease in accounts and notes receivable                               55,127         (65,629)        (14,453)
  (Increase) decrease in gas inventory                                               (5,225)           (996)          1,666
  (Increase) decrease in unamortized property taxes                                    (415)            599          (1,067)
  (Increase) in prepaid expenses and other                                          (26,587)         (1,817)         (1,937)
  (Increase) decrease in prepaid gas costs, materials and supplies                    8,414             760          (3,221)
  Increase (decrease) in accounts payable, accrued and other liabilities            (43,704)         33,040            (748)
  Decrease in interest payable                                                       (7,082)         (8,703)         (2,840)
  Increase in other non-current liabilities                                             245             381             556
                                                                                  ---------       ---------       ---------
    Net cash provided by operating activities                                       122,872         143,051         154,384
                                                                                  ---------       ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Plant modifications and purchases of plant and equipment                          (30,530)        (33,082)        (53,838)
                                                                                  ---------       ---------       ---------
    Net cash used in investing activities                                           (30,530)        (33,082)        (53,838)
                                                                                  ---------       ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of financing obligation                                                (155,632)       (139,095)        (64,331)
  Debt refinancing costs                                                                 --          (6,388)             --
  Maturity of restricted investment securities held-to-maturity                     538,327         282,091         336,094
  Purchase of restricted investment securities held-to-maturity                    (539,918)       (282,164)       (332,453)
                                                                                  ---------       ---------       ---------
    Net cash used in financing activities                                          (157,223)       (145,556)        (60,690)
                                                                                  ---------       ---------       ---------

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH -
  CURRENT                                                                           (64,881)        (35,587)         39,856

CASH, CASH EQUIVALENTS AND RESTRICTED CASH - CURRENT, AT BEGINNING OF PERIOD
                                                                                    206,298         241,885         202,029
                                                                                  ---------       ---------       ---------

CASH, CASH EQUIVALENTS AND RESTRICTED CASH - CURRENT, AT END OF PERIOD
                                                                                  $ 141,417       $ 206,298       $ 241,885
                                                                                  =========       =========       =========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                       F-6
<PAGE>
                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 8.

      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 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 2001, the Facility achieved a Thermal
      Percentage of 18.3% 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 2002 and beyond.

      The Facility is wholly dependent upon natural gas for its fuel supply and
      a substantial portion of the Facility's operating expenses consist of the
      costs of natural gas. MCV recognizes that its existing gas contracts are
      not sufficient to satisfy the anticipated gas needs over the term of the
      PPA and, as such, no assurance can be given as to the availability or
      price of natural gas after the expiration of the existing gas contracts.
      In addition, to the extent that the costs associated with production of
      electricity rise faster than the energy charge payments,


                                      F-7
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

      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 1997 through
      February 1998 (collectively the "Restructuring Orders"), mandating that
      utilities "wheel" third-party power to the utilities' customers, thus
      permitting customers to choose their power provider. MCV, as well as
      others, filed an appeal in the Michigan Court of Appeals to protect
      against denial of recovery by Consumers of PPA charges. The Michigan Court
      of Appeals found that the Restructuring Orders do not unequivocally
      disallow such recovery by Consumers and, therefore, MCV's issues were not
      ripe for appellate review and no actual controversy regarding recovery of
      costs could occur until 2008, at the earliest. In June 2000, the state of
      Michigan enacted legislation which, among other things, states that the
      Restructuring Orders (being voluntarily implemented by Consumers) are in
      compliance with the legislation and enforceable by the MPSC. The
      legislation provides that the rights of parties to existing contracts
      between utilities (like Consumers) and QF's (like MCV), including the
      rights to have the PPA charges recovered from customers of the utilities,
      are not abrogated or diminished, and permitted utilities to securitize
      certain stranded (transition) costs including PPA charges.

      In 1999, the U.S. District Court granted summary judgment to MCV declaring
      that the Restructuring Orders are preempted by federal law to the extent
      they prohibit Consumers from recovering from its customers any charge for
      avoided costs (or "stranded costs") to be paid to MCV under PURPA pursuant
      to the PPA. In 2001, the United States Court of Appeals ("Appellate
      Court") vacated the U.S. District Court's 1999 summary judgment and
      ordered the case dismissed based upon a finding that no actual case or
      controversy existed for adjudication between the parties. The Appellate
      Court determined that the parties' dispute is hypothetical at this point
      in time and the QFs' (including MCV) claims are premised on speculation
      about how an order might be interpreted by a future MPSC.

      MCV continues to monitor and participate in these industry restructuring
      matters as appropriate, and to evaluate potential impacts on both cash
      flows and recoverability of the carrying value of property, plant and
      equipment. MCV Management cannot, at this time, predict the impact or
      outcome of these matters.

(2)   SIGNIFICANT ACCOUNTING POLICIES

      The preparation of financial statements in conformity with accounting
      principles generally accepted in the United States requires management to
      make estimates and assumptions that affect the reported amounts of assets
      and liabilities and disclosure of contingent assets and liabilities at the
      date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ from
      those estimates. Following is a discussion of MCV's significant accounting
      policies.

      Principles of Consolidation

      The consolidated financial statements include the accounts of MCV and its
      wholly owned subsidiaries. All material transactions and balances among
      entities, which comprise MCV, have been eliminated in the consolidated
      financial statements.

      Revenue Recognition

      MCV recognizes revenue for the sale of variable energy and fixed energy
      when delivered (see Note 6). Capacity and other installment revenues are
      recognized based on plant availability or other contractual arrangements.


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

      Fuel Costs

      MCV's fuel costs are those costs associated with securing natural gas and,
      transportation and storage services necessary to generate electricity and
      steam from the Facility. These costs are recognized in the income
      statement based upon actual volumes burned to produce the delivered
      energy. In addition, MCV engages in certain cost mitigation activities to
      offset the fixed charges MCV incurs for these activities. The gains or
      losses resulting from these activities have resulted in net gains of
      approximately $5.5 million, $6.1 million and $4.7 million for the years
      ended 2001, 2000 and 1999, respectively. These net gains are reflected as
      a component of fuel costs.

      Beginning in July 2000, in response to the rapidly escalating cost of
      natural gas, MCV entered into transactions with Consumers whereby
      Consumers agreed to reduce the dispatch level of the Facility. In the
      event of reduced dispatch, MCV agreed to share the savings realized by not
      having to generate the electricity. In the years 2001 and 2000, MCV
      estimates these transactions resulted in net savings of approximately $7
      million and $9 million, respectively, a portion of which will be realized
      in reduced maintenance expenditures in future years. MCV anticipates using
      the same or similar transactions in the future to mitigate the impacts of
      high market gas prices, if circumstances warrant such use.

      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, 2001 and 2000, was $6.8
      million and $3.8 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.

      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. Major equipment overhauls are capitalized and
      amortized to the next equipment overhaul. Personal property is depreciated
      using the straight-line method over an estimated useful life of 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 operating income.

      Effective July 1, 2000, MCV made two accounting estimate changes. First,
      MCV prospectively revised the remaining estimated useful lives of certain
      components of the gas turbines and certain related capital spare parts to
      more closely reflect the expected economic useful lives based upon current
      operating performance. Secondly, MCV prospectively revised its
      amortization of the payments for the hot gas path parts under the amended
      Service Agreement so as to better match the cost of replacement parts used
      in the gas turbines with the expected completion date under the amended
      Service Agreement. The effect of these changes in accounting estimate
      resulted in a decrease in operating expenses of approximately $7.2 million
      and $3.6 million for the years ended December 31, 2001 and December 31,
      2000, respectively.

      Federal Income Tax

      MCV is not subject to Federal income tax. Partnership earnings are taxed
      directly to each individual partner.


                                      F-9
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

      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, 2001 and December 31, 2000
      have original maturity dates of approximately one year or less. The unique
      nature of the negotiated financing obligation discussed in Note 5 makes it
      impractical to estimate the fair value of the Owner Participants'
      underlying debt and equity instruments supporting such financing
      obligation.

      Accounting for Derivative Instruments and Hedging Activities

      Effective January 1, 2001, MCV adopted Statement of Financial Accounting
      Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and
      Hedging Activities" which was issued in June, 1998 and then amended by
      SFAS No. 137, "Accounting for Derivative Instruments and Hedging
      Activities - Deferral of the Effective Date of SFAS No. 133" and SFAS No.
      138 "Accounting for Certain Derivative Instruments and Certain Hedging
      Activities - An amendment of FASB Statement No. 133" (collectively
      referred to as "SFAS No. 133"). SFAS No. 133 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. SFAS No. 133 requires that changes in a derivative's fair value be
      recognized currently in earnings unless specific hedge accounting criteria
      are met. Special accounting for qualifying hedges in some cases allows a
      derivative's gains and losses to offset related results on the hedged item
      in the income statement or permits recognition of the hedge results in
      other comprehensive income, and requires that a company formally document,
      designate, and assess the effectiveness of transactions that receive hedge
      accounting.

            Electric Sales Contracts

            On June 27, 2001, and subsequently on December 19, 2001, the
            Financial Accounting Standards Board ("FASB") issued final guidance
            extending the normal purchase and sales exception to electric power
            purchase or sales agreements that meet specific criteria. MCV
            believes that its power supply agreements meet these criteria and as
            such, does not record the fair value of these contracts on its
            balance sheet.

            Forward Foreign Exchange Contracts

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

            To manage this currency exchange rate risk and hedge against adverse
            currency fluctuations impacting the payments under this amended
            Service Agreement, MCV maintains a foreign currency hedging program.
            Under this program, MCV periodically enters into forward purchase
            contracts for Swiss francs. Under SFAS No. 133, the forward foreign
            currency exchange contracts qualify as fair value hedges, since they
            hedge the identifiable foreign currency commitment of the amended
            Service Agreement. The gains and losses on these forward contracts
            as well as the change in value of the firm commitment are to be
            recognized currently in earnings. Since the currency, notional
            amounts and maturity dates on the hedged transactions and forward
            contracts essentially match, the January 1, 2001, adoption of SFAS
            No. 133 resulted in an immaterial cumulative effect accounting
            change and is expected to have an immaterial earnings impact on an
            ongoing basis. The final gains and losses on these transactions,
            accounted for as hedges, will be included in the measurement of the
            underlying capitalized major renewal costs when incurred. As of
            December 31, 2001,


                                      F-10
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

            MCV had forward purchase contracts involving Swiss Francs in the
            notional amount of $10.0 million, this hedge is considered highly
            effective, therefore, there is no material gain or loss recognized
            during the period ended December 31, 2001. As of December 31, 2000,
            MCV had forward purchase contracts involving Swiss Francs in the
            notional amount of $10.0 million, with a deferred $.3 million gain
            recorded in current liabilities. These contracts were closed and
            settled in January 2001.

            Natural Gas Supply Contracts, Futures and Options

            MCV Management believes that its long-term natural gas contracts
            qualify under SFAS No. 133 for the normal purchases and normal sales
            exception. Therefore, these contracts are currently not recognized
            at fair value on the balance sheet.

            On September 19, 2001 the FASB cleared the implementation guidance
            regarding natural gas commodity contracts, which combine an option
            component and a forward component. This guidance requires either
            that the entire contract be accounted for as a derivative or the
            components of the contract be separated into two discrete contracts.
            Under the second alternative, the newly established forward contract
            could qualify for the normal purchases and sales exception while the
            option contract would be treated as a derivative under SFAS No. 133,
            with changes in fair value recorded through earnings. This guidance
            will become effective April 1, 2002. MCV currently has nine
            long-term gas contracts that contain both an option and forward
            component. MCV is currently working to reduce the quantity of gas
            presently contained in these contracts, which will reduce the
            potential earnings volatility. At this time it is not possible to
            predict the mark to market amount that will be recorded in the
            future in MCV's earnings.

            To manage market risks associated with the volatility of natural gas
            prices, MCV maintains a gas hedging program. MCV enters into natural
            gas futures and option contracts in order to hedge against
            unfavorable changes in the market price of natural gas in future
            months when gas is expected to be needed. These financial
            instruments are being utilized principally to secure anticipated
            natural gas requirements necessary for projected electric and steam
            sales and to lock in sales prices of natural gas previously obtained
            in order to optimize MCV's existing gas supply, storage and
            transportation arrangements.

            These financial instruments are derivatives under SFAS No. 133 and
            the contracts that are utilized to secure the anticipated natural
            gas requirements necessary for projected electric sales qualify as
            cash flow hedges under SFAS No. 133, since they hedge the price risk
            associated with the cost of natural gas. MCV also engages in cost
            mitigation activities to offset the fixed charges MCV incurs in
            operating the Facility. These cost mitigation activities include the
            use of futures and options contracts to purchase and/or sell natural
            gas to maximize the use of the transportation and storage contracts
            when it is determined that they will not be needed for Facility
            operation. Although these cost mitigation activities do serve to
            offset the fixed monthly charges, these cost mitigation activities
            are not considered a normal course of business for MCV and as such
            do not qualify as hedges under SFAS No. 133. Therefore, the
            resulting mark to market gains and losses from cost mitigation
            activities are flowed through MCV's earnings.

            Cash is deposited with the broker in a margin account at the time
            futures or options contracts are initiated. The change in market
            value of these contracts requires adjustment of the margin account
            balances. The margin balance, recorded in "Prepaid expenses and
            other," was $32.0 million and $3.8 million as of December 31, 2001
            and December 31, 2000, respectively.

            Effective January 1, 2001, MCV's gains and losses on futures
            contracts qualifying as hedges are recorded as a component of other
            comprehensive income and will be offset by the corresponding
            underlying transaction and then included in operating expenses in
            the same period the natural gas is burned to operate the Facility.
            MCV's gains and losses on futures and options contracts that do not
            qualify as hedges are recognized currently in earnings with no
            offsetting physical gas purchase. This could cause increased
            earnings volatility when these contracts are adjusted to fair value
            in earnings with no offsetting transaction. Under the transition
            rules of SFAS No. 133, on January 1, 2001, the cumulative effect
            accounting gain related to the fair value of the derivative
            instruments held for cost mitigation activities and derivatives that
            do not qualify for hedge accounting, has been reflected in other
            comprehensive income based on previous hedging relationships. These
            futures and options totaled 1.9 bcf with a total fair value loss of
            $2.2 million. Fair value changes in


                                      F-11
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

            these contracts were recognized currently in income and the amount
            reflected in other comprehensive income was reclassified to income
            when the original underlying transactions occurred during the first
            quarter of 2001. The adoption of SFAS No. 133 resulted in a total
            cumulative effect accounting gain, including cost mitigation
            activities, of $15.7 million, which was recognized in other
            comprehensive income.

            For the twelve month period ended December 31, 2001, MCV has
            recognized in other comprehensive income, an unrealized and realized
            $40.0 million decrease on futures contracts which are hedges of
            forecasted purchases for plant use of market priced gas, resulting
            in a $24.3 million loss balance in other comprehensive income as of
            December 31, 2001. This balance represents natural gas futures and
            options with maturity dates ranging from one to fifteen months of
            which $24.0 million of this loss is expected to be reclassified into
            earnings within the next twelve months. As of December 31, 2001, the
            outstanding derivative liability in "Accounts payable and accrued
            liabilities" is $22.6 million. For the twelve months ended December
            31, 2001, MCV's has recorded a net $6.6 million loss in earnings
            from hedging activities related to MCV natural gas requirements for
            Facility operations, which includes a $.4 million gain which was
            reclassified into earnings as a result of the discontinuance of
            several cash flow hedges since it was probable that the original
            forecasted transaction would not occur. In addition, for the twelve
            months ended December 31, 2001, MCV has recorded a net $1.0 million
            loss in earnings from cost mitigation activities.

            MCV has two long-term natural gas supply contracts with affiliates
            of the Enron Corporation ("Enron"), which has filed voluntary
            bankruptcy petitions for reorganization under Chapter 11 of the U.S.
            Bankruptcy Code. Both of these contracts have been accounted for
            under SFAS No. 133 as normal purchases exempt from mark to market
            accounting under the normal purchases and normal sales exception. In
            December 2001, due to the uncertain nature of the future viability
            of these contracts MCV expensed $8.2 million of unamortized prepaid
            gas costs associated with one of the Enron contracts.

            Interest Rate Swaps

            To manage the effects of interest rate volatility on interest income
            while maximizing return on permitted investments, MCV established an
            interest rate hedging program. The notional amounts of the hedges
            are tied directly to MCV's anticipated cash investments, without
            physically exchanging the underlying notional amounts. Cash 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 $30,000 and $.4 million as of December 31,
            2001 and December 31, 2000.

            The January 1, 2001 adoption of SFAS No. 133 resulted in an
            immaterial cumulative effect accounting change gain recognized in
            other comprehensive income and is expected to have an immaterial
            earnings impact on an ongoing basis. As of December 31, 2001, MCV
            did not have any interest rate swap transactions outstanding which
            qualified for cash flow hedge accounting, while for the year ended
            December 31, 2000 MCV had a net loss of approximately $.1 million
            recorded in Prepaid expenses and other.

            MCV has one interest rate swap, with a notional amount of $20
            million and a period of performance that extends until December 1,
            2002, which does not qualify as a hedge under SFAS No. 133. The
            gains and losses on this swap are recorded currently in earnings.
            For the twelve months ended December 31, 2001, MCV recorded a $1.1
            million gain in earnings.

      New Accounting Rules

      In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
      Retirement Obligations", which provides accounting requirements for
      retirement obligations associated with tangible long-lived assets. SFAS
      No. 143 requires entities to record the fair value of a liability for an
      asset retirement obligation in the period in which it is incurred. This is
      done by capitalizing the estimated asset retirement cost which will then
      be depreciated over the life of the asset. This standard is effective for
      fiscal years beginning after June 15, 2002. MCV has reviewed its current
      commitments and key contracts to operate the MCV Facility. Based on this
      review, MCV finds no material asset retirement obligations that need to be
      accrued upon the adoption of this standard.


                                      F-12
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

      In October 2001, the FASB issued SFAS No. 144, "Accounting for the
      Impairment or Disposal of Long-Lived Assets", which supercedes SFAS No.
      121, "Accounting for the Impairment of Long-Lived Assets and for
      Long-Lived Assets to be Disposed of" and APB 30, "Reporting Results of
      Operations - Reporting the Effects of Disposal of a Segment of a
      Business." SFAS No. 144, amends accounting and reporting standards for the
      disposal of segments of a business and addresses various issues related to
      the accounting for impairments or disposals of long-lived assets. The
      standard is effective beginning January 1, 2002. At this time, MCV does
      not anticipate this standard will have a significant impact on MCV's
      financial position.

      Reclassifications

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

(3)   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:                                                2001          2000
                                                                  --------      --------
<S>                                                               <C>           <C>
            Funds restricted for plant modifications              $    787      $    748
                                                                  ========      ========

            Non-current:
            Funds restricted for rental payments pursuant to
              the Overall Lease Transaction                       $139,301      $137,942

            Funds restricted for management non-qualified
              plans                                                  2,166         1,934
                                                                  --------      --------

            Total                                                 $141,467      $139,876
                                                                  ========      ========
</TABLE>

(4)   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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

<TABLE>
<CAPTION>
                                                                    2001          2000
                                                                  --------      --------
<S>                                                               <C>           <C>
            Accounts payable
               Related parties                                    $ 10,918      $ 18,144
               Trade creditors                                      24,678        41,601
            Property and single business taxes                      12,946        13,560
            Other                                                   25,054        19,705
                                                                  --------      --------

            Total                                                 $ 73,596      $ 93,010
                                                                  ========      ========
</TABLE>


                                      F-13
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

(5)   LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                                  2001              2000
                                                              -----------       -----------
<S>                                                           <C>               <C>
            Financing obligation, maturing through 2015,
            payable in semi-annual installments of
            principal and interest, secured by property,
            plant and equipment                               $ 1,429,233       $ 1,584,865

            Less current portion                                 (186,173)         (155,632)
                                                              -----------       -----------

            Total long-term debt                              $ 1,243,060       $ 1,429,233
                                                              ===========       ===========
</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.

      The financing obligation utilizes the effective interest rate method,
      which is based on the minimum lease payments required through the end of
      the basic lease term of 2015 and management's estimate of additional
      anticipated obligations after the end of the basic lease term. The
      effective interest rate during the remainder of the basic lease term is
      approximately 9.4%.

      Under the terms of the Overall Lease Transaction, MCV sold undivided
      interests in all of the fixed assets of the Facility for approximately
      $2.3 billion, to five separate owner trusts ("Owner Trusts") established
      for the benefit of certain institutional investors ("Owner Participants").
      State Street Bank and Trust Company serves as owner trustee ("Owner
      Trustee") under each of the Owner Trusts, and leases undivided interests
      in the Facility on behalf of the Owner Trusts to MCV for an initial term
      of 25 years. CMS Midland Holdings Company ("CMS Holdings"), currently a
      wholly owned subsidiary of Consumers, acquired a 35% indirect equity
      interest in the Facility through its purchase of an interest in one of the
      Owner Trusts.

      The Overall Lease Transaction requires MCV to achieve certain rent
      coverage ratios and other financial tests prior to a distribution to the
      Partners. Generally, these financial tests become more restrictive with
      the passage of time. Further, MCV is restricted to making permitted
      investments and incurring permitted indebtedness as specified in the
      Overall Lease Transaction. The Overall Lease Transaction also requires
      filing of certain periodic operating and financial reports, notification
      to the lessors of events constituting a material adverse change,
      significant litigation or governmental investigation, and change in status
      as a qualifying facility under FERC proceedings or court decisions, among
      others. Notification and approval is required for plant modification, new
      business activities, and other significant changes, as defined. In
      addition, 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.

      On June 15, 2000, MCV closed on the sale of $200 million of tax-exempt
      bonds, the proceeds of which were used on July 24, 2000 to refund a like
      amount of previously issued bonds.


                                      F-14
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

      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. Financing costs incurred with the issuance of
      debt are deferred and amortized using the interest method over the
      remaining portion of the 25-year lease term. In 2000, MCV also incurred
      approximately $6.4 million of debt refinancing fees associated with the
      refinancing of the tax exempt bonds. Deferred financing costs of
      approximately $1.7 million, $1.4 million and $1.0 million were amortized
      in the years 2001, 2000 and 1999, respectively.

      Interest and fees incurred related to long-term debt arrangements during
      2001, 2000 and 1999 were $124.6 million, $142.5 million and $154.7
      million, respectively. In addition, as of December 31, 2000, MCV has
      expensed approximately $3.0 million of costs associated with MCV's
      refinancing of its tax-exempt bonds.

      Interest and fees paid during 2001, 2000 and 1999 were $131.7 million,
      $151.3 million and $157.5 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>
            2002      $182,084      $  122,002      $  304,086
            2003        93,928         114,963         208,891
            2004       134,576         108,233         242,809
            2005        76,547          97,836         174,383
            2006        63,459          92,515         155,974
                      --------      ----------      ----------

                      $550,594      $  535,549      $1,086,143
                      ========      ==========      ==========
</TABLE>

      Revolving Credit Agreement

      MCV has also entered into a revolving credit agreement with the Bank of
      Montreal ("Working Capital Lender"), which expires August 31, 2002. Under
      the terms of the existing agreement, MCV can borrow up to the $45 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. During 2001, MCV did not utilize the Working Capital Facility,
      except for letters of credit associated with normal business practice. At
      December 31, 2001, MCV had letters of credit outstanding of $17.3 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, 2001, MCV has deposited $139.3 million
      into the reserve account and $.8 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.


                                      F-15
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

(6)   COMMITMENTS AND OTHER AGREEMENTS

      MCV has entered into numerous commitments and other agreements related to
      the Facility. Principal agreements are summarized as follows:

      Power Purchase Agreement

      MCV and Consumers have executed the PPA for the sale to Consumers of a
      minimum amount of electricity, subject to the capacity requirements of Dow
      and any other permissible electricity purchasers. Consumers has the right
      to terminate and/or withhold payment under the PPA if the Facility fails
      to achieve certain operating levels or if MCV fails to provide adequate
      fuel assurances. In the event of early termination of the PPA, MCV would
      have a maximum liability of approximately $270 million if the PPA were
      terminated in the 12th through 24th years. The term of this agreement is
      35 years from the commercial operation date and year-to-year thereafter.

      Steam and Electric Power Agreement

      MCV and Dow executed the SEPA for the sale to Dow of certain minimum
      amounts of steam and electricity for Dow's facilities.

      If the SEPA is terminated, and Consumers does not fulfill MCV's
      commitments as provided in the Backup Steam and Electric Power Agreement,
      MCV will be required to pay Dow a termination fee, calculated at that
      time, ranging from a minimum of $60 million to a maximum of $85 million.
      This agreement provides for the sale to Dow of steam and electricity
      produced by the Facility for terms of 25 years and 15 years, respectively,
      commencing on the commercial operation date and year-to-year thereafter.

      Steam Purchase Agreement

      MCV and DCC executed the SPA for the sale to DCC of certain minimum
      amounts of steam for use at the DCC Midland site. Steam sales under the
      SPA commenced in July 1996. Termination of this agreement, prior to
      expiration, requires the terminating party to pay to the other party a
      percentage of future revenues, which would have been realized had the
      initial term of 15 years been fulfilled. The percentage of future revenues
      payable is 50% if termination occurs prior to the fifth anniversary of the
      commercial operation date and 33-1/3% if termination occurs after the
      fifth anniversary of this agreement. The term of this agreement is 15
      years from the commercial operation date of steam deliveries under the
      contract and year-to-year thereafter.

      Gas Supply Agreements

      MCV has entered into gas purchase agreements with various producers for
      the supply of natural gas. The current contracted volume totals 197,525
      MMBtu per day annual average for 2002. As of January 1, 2002, gas
      contracts with U.S. suppliers provide for the purchase of 118,288 MMBtu
      per day while gas contracts with Canadian suppliers provide for the
      purchase of 79,237 MMBtu per day. Some of these contracts require MCV to
      pay for a minimum amount of natural gas per year, whether or not taken.
      The estimated minimum commitments under these contracts based on current
      long term prices for gas for the years 2002 through 2006 are $168.5
      million, $190.0 million, $205.3 million, $227.8 million and $240.7
      million, respectively. A portion of these payments may be utilized in
      future years to offset the cost of quantities of natural gas taken above
      the minimum amounts.

      Gas Transportation Agreements

      MCV has entered into firm natural gas transportation agreements with
      various pipeline companies. These agreements require MCV to pay certain
      reservation charges in order to reserve the transportation capacity. MCV
      incurred reservation charges in 2001, 2000 and 1999, of $36.2 million,
      $35.6 million and $35.3 million,


                                      F-16
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

      respectively. The estimated minimum reservation charges required under
      these agreements for each of the years 2002 through 2006 are $35.2
      million, $35.0 million, $35.0 million, $33.9 million and $30.1 million,
      respectively. These projections are based on current commitments.

      Gas Turbine Service Agreement

      MCV entered into a service agreement, as amended, with Alstom, which
      commenced on January 1, 1990 and 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, Alstom sold MCV an initial
      inventory of spare parts for the GTGs and provides qualified service
      personnel and supporting staff to assist MCV, to perform scheduled
      inspections on the GTGs, and to repair the GTGs at MCV's request. Upon
      termination of the Service Agreement (except for nonperformance by
      Alstom), MCV must pay a cancellation payment. MCV and Alstom amended the
      Service Agreement, effective December 31, 1993, to include the supply of
      hot gas path parts. Under the amended Service Agreement, Alstom provides
      hot gas path parts for MCV's twelve gas turbines through the fourth series
      of major GTG inspections which are expected to be completed in 2002. In
      January 1998, MCV and Alstom amended the length of the amended Service
      Agreement to extend through the sixth series of major GTG inspections,
      which are expected to be completed by year end 2008, for a lump sum fixed
      price covering the entire term of the amended Service Agreement of $266.5
      million (in 1993 dollars, which is adjusted based on exchange rates and
      Swiss inflation indices), payable on the basis of operating hours as they
      occur over the same period. MCV has made payments totaling approximately
      $161.5 million under this amended Service Agreement through December 31,
      2001.

      In addition, MCV also purchased and installed from Alstom 11NM GTG upgrade
      packages for all twelve of the gas turbine generators for $44.3 million.
      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.

      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) over the nine year term.

      Site Lease

      In December 1987, MCV leased the land on which the Facility is located
      from Consumers ("Site Lease"). MCV and Consumers amended and restated the
      Site Lease to reflect the creation of five separate undivided interests in
      the Site Lease as of June 1, 1990. Pursuant to the Overall Lease
      Transaction, MCV assigned these undivided interests in the Site Lease to
      the Owner Trustees, which in turn subleased the undivided interests back
      to MCV under five separate site subleases.

      The Site Lease is for a term which commenced on December 29, 1987, and
      ends on December 31, 2035, including two renewal options of five years
      each. The rental under the Site Lease is $.6 million per annum, including
      the two five-year renewal terms.

      Gas Turbine Generator Compressor Blade Agreement

      MCV has entered into an agreement with MTS Machinery Tools & Services AG
      ("MTS"), effective January 18, 2002. Under this agreement MTS will
      redesign, manufacture and install new design compressor blades in MCV's
      twelve GTG's, which is expected to increase the overall electrical
      capacity and efficiency of each GTG. MCV has the right to terminate the
      agreement after the installation of the first set of new compressor


                                      F-17
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

      blades. The cost of this project to upgrade all twelve GTG's, including
      the purchase of spare parts, is approximately $32.7 million, in 2001
      dollars, payable based upon performance milestones. The first set of
      compressor blades is expected to be installed by the third quarter of
      2003, and if successful, the remaining eleven sets would be installed
      during the fifth series of major GTG inspections, which are expected to be
      completed by the third quarter of 2006.

(7)   RETIREMENT BENEFITS

      Postretirement Health Care Plans

      In 1992, MCV established defined cost postretirement health care plans
      that cover all full-time employees, excluding key management. The plans
      provide health care credits, which can be utilized to purchase medical
      plan coverage and pay qualified health care expenses. Participants become
      eligible for the benefits if they retire on or after the attainment of age
      65 or upon a qualified disability retirement, or if they have 10 or more
      years of service and retire at age 55 or older. The plans granted
      retroactive benefits for all employees hired prior to January 1, 1992.
      This prior service cost has been amortized to expense over a five year
      period. MCV annually funds the current year service and interest cost as
      well as amortization of prior service cost to both qualified and
      non-qualified trusts.

      The 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>
                                                                  2001           2000
                                                                --------       --------
<S>                                                             <C>            <C>
            CHANGE IN BENEFIT OBLIGATION
            Benefit obligation at beginning of year             $1,937.6       $1,586.0
            Service cost                                           173.5          155.3
            Interest cost                                          142.9          134.9
            Unrecognized prior service cost                        199.0           66.0
            Actuarial gain (loss)                                  (43.3)            --
            Benefits paid during year                               (4.6)          (4.6)
                                                                --------       --------
            Benefit obligation at end of year                    2,405.1        1,937.6
                                                                --------       --------

            CHANGE IN PLAN ASSETS
            Fair value of plan assets at beginning of year       2,015.4        2,067.9
            Actual return on plan assets                          (153.4)         (47.9)
            Employer contribution                                  230.6             --
            Benefits paid during year                               (4.6)          (4.6)
                                                                --------       --------
            Fair value of plan assets at end of year             2,088.0        2,015.4
                                                                --------       --------

            Unfunded (funded) status                               317.1          (77.8)
            Unrecognized prior service cost                       (199.0)            --
            Unrecognized net gain (loss)                          (118.1)         175.8
                                                                --------       --------
            Accrued benefit cost                                $     --       $   98.0
                                                                ========       ========
</TABLE>


                                      F-18
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

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

<TABLE>
<CAPTION>
                                                                   2001          2000          1999
                                                                 -------       -------       -------
<S>                                                              <C>           <C>           <C>
            COMPONENTS OF NET PERIODIC BENEFIT COST
            Service cost                                         $ 173.5       $ 155.3       $ 198.4
            Interest cost                                          142.9         134.9         117.3
            Expected return on plan assets                        (171.3)       (175.7)       (146.5)
            Amortization of unrecognized net (gain) or loss        (12.6)        (16.5)         (4.3)
                                                                 -------       -------       -------

            Net periodic benefit cost                            $ 132.5       $  98.0       $ 164.9
                                                                 =======       =======       =======
</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
      (in thousands):

<TABLE>
<CAPTION>
                                                                               1-Percentage-Point    1-Percentage
                                                                                  Increase          Point Decrease
                                                                               ------------------   --------------
<S>                                                                            <C>                  <C>
                  Effect on total of service and interest cost components         $      41.0        $       36.6
                  Effect on postretirement benefit obligation                     $     294.4        $      253.3
</TABLE>

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

<TABLE>
<CAPTION>
                                                                     2001               2000             1999
                                                                     ----               ----             ----
<S>                                                                  <C>                <C>              <C>
              Discount rate                                          7.25%              7.50%            7.75%
              Long-term rate of return on plan assets                8.00%              8.50%            8.50%
              Inflation benefit amount
                  1998 through 2004                                  0.00%              0.00%            4.00%
                  2005 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 2001,
      2000 and 1999, MCV contributed $1.1 million in each of these three years
      under these plans.

      Supplemental Retirement Benefits

      MCV provides supplemental retirement, postretirement health care and
      excess benefit plans for key management. These plans are not qualified
      plans under the Internal Revenue Code; therefore, earnings of the trusts
      maintained by MCV to fund these plans are taxable to the Partners and
      trust assets are included in the assets of MCV.


                                      F-19
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)

(8)   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, 2001, and the nature and amount of related party transactions
      or agreements that existed with the Partners or affiliates as of December
      31, 2001, 2000 and 1999, and for each of the twelve month periods ended
      December 31 (in thousands).

<TABLE>
<CAPTION>
  Beneficial Owner, Equity Partner,
    Type of Partner and Nature of            Equity                Related Party Transactions and
            Related Party                   Interest     Interest              Agreements                 2001      2000      1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>          <C>       <C>                                  <C>       <C>       <C>
CMS Energy Company
CMS Midland, Inc.                           $270,338       49.0%   Power purchase agreements            $550,477  $568,838  $585,838
 General Partner; wholly-owned              --------       -----   Purchases under gas transportation     24,059    23,295    20,158
 subsidiary of Consumers Energy                                    agreements
 Company                                                           Purchases under spot gas agreements     3,756     4,735       991
                                                                   Purchases under gas supply
                                                                   agreements                             10,725    12,679    10,187
                                                                   Gas storage agreement                   2,563     2,563     2,563
                                                                   Land lease/easement agreements            600       600       600
                                                                   Accounts receivable                    48,843    43,278    48,697
                                                                   Accounts payable                        4,772     5,560     7,845
                                                                   Sales under spot gas agreements         7,107    10,521     1,805
El Paso Corporation                         $ 94,587       18.1%
Source Midland Limited Partnership                                 Purchase under gas transportation      13,653    14,229    13,581
("SMLP") General Partner; owned by                                 agreements
subsidiaries of El Paso Corporation (1)                            Purchases under spot gas agreement     45,130    21,563     6,892
                                                                   Purchases under gas supply
                                                                   agreement                               5,912     5,248     4,528
                                                                   Gas agency agreement                    1,989     2,361     1,898
                                                                   Deferred reservation charges under      7,880     6,895     5,910
                                                                   gas purchase agreement
                                                                   Accounts receivable                        --    11,481       738
                                                                   Accounts payable                        5,198    11,839     2,602
                                                                   Sales under spot gas agreements        28,451    14,815     3,473
                                                                   Partner cash withdrawal (including     56,714    50,886    21,049
                                                                   accrued interest) (2)

El Paso Midland, Inc. ("El Paso Midland")     56,752       10.9    See related party activity listed
 (formerly known as Coastal Midland, Inc.)                         under SMLP.
 General Partner; wholly-owned subsidiary
 of El Paso Corporation (1)

MEI Limited Partnership ("MEI")                                    See related party activity listed
 A General and Limited Partner;                                    under SMLP.
 50% interest owned by El Paso Midland,
 Inc. and 50% interest owned by SMLP (1)
     General Partnership Interest             47,295        9.1
     Limited Partnership Interest              4,728         .9

Micogen Limited Partnership                   23,646        4.5    See related party activity listed
 ("MLP") Limited Partner, owned                                    under SMLP.
 subsidiaries of El Paso Corporation (1)
                                            --------     ------
    Total El Paso Corporation               $227,008       43.5%
                                            ========     ======

The Dow Chemical Company
The Dow Chemical Company                    $ 54,365        7.5%   Steam and electric power agreement     33,727    31,319    26,897
 Limited Partner                            ========     ======    Steam purchase agreement - Dow          3,781     3,615     3,329
                                                                   Corning Corp (affiliate)
                                                                   Purchases under demineralized water     6,913     6,570     6,375
                                                                   supply agreement
                                                                   Accounts receivable                     3,191     3,536     2,772
                                                                   Accounts payable                          948       745       649
                                                                   Standby and backup fees                   696       676       656
Alanna Corporation
Alanna Corporation                          $      1(3)  .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 January 29, 2001, El Paso Corporation ("El Paso") announced that it had
      completed its merger with The Coastal Corporation ("Coastal"). Coastal was
      the previous parent company of El Paso Midland (formerly known as Coastal
      Midland, Inc.), SMLP, MLP and, through SMLP, MEI. After the merger,
      Coastal became a wholly-owned subsidiary of El Paso and has changed its
      name to El Paso CGP Company.
(2)   A letter of credit has been issued and recorded as a note receivable from
      El Paso Midland, this amount includes their share of cash available, as
      well as, cash available to MEI, MLP and SMLP.
(3)   Alanna's capital stock is pledged to secure MCV's obligation under the
      lease and other overall lease transaction documents.


                                      F-20
<PAGE>
                            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-21
<PAGE>
                                   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 25, 2002                   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 25, 2002
-------------------------------        (Principal Executive Officer)
James M. Kevra

/s/ Stephen A. Shulman                 Chief Financial Officer and Treasurer        March 25, 2002
-------------------------------        (Principal Financial Officer)
Stephen A. Shulman

/s/ James M. Rajewski                  Vice President and Controller                March 25, 2002
-------------------------------        (Principal Accounting Officer)
James M. Rajewski

/s/ William T. McCormick, Jr.          Chairman, Management Committee               March 25, 2002
-------------------------------
William T. McCormick, Jr.

/s/ John J. O'Rourke                   Member, Management Committee                 March 25, 2002
-------------------------------
John J. O'Rourke
</TABLE>


                                      F-22
<PAGE>
                                  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>
                                  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).
</TABLE>


                                      E-2
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number                                   Description
                  --------------------------------------------------------------
<S>               <C>
10.7        -     Registration Rights Agreement dated as of December 17, 1993
                  among Midland Funding Corporation I, MCV, Consumers and Morgan
                  Stanley & Co. Incorporated and Donaldson, Lufkin & Jearette
                  Securities Corporation ((e), (Exhibit 10.97)).

10.8        -     Power Purchase Agreement, dated as of July 17, 1986, between
                  MCV and Consumers Power Company ("PPA") ((a), (Exhibit 10.4)).

10.8 (a)    -     Amendment No. 1 to PPA dated September 10, 1987 ((a), (Exhibit
                  10.5)).

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)).
</TABLE>


                                      E-3
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number                                   Description
                  --------------------------------------------------------------
<S>               <C>
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)).

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>
                                  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. ((l), (Exhibit 10.37)).

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

10.39       -     Long Term Gas Agreement, dated September 1, 2000, between MCV
                  and Coastal Merchant Energy, L.P. ((m), (Exhibit 10.39)).

10.40       -     Long Term Gas Agreement, dated October 10, 2000, between MCV
                  and El Paso Merchant Energy Gas, L.P., as amended. ((m),
                  (Exhibit 10.40)).

10.41       -     Long Term Gas Agreement, dated October 10, 2000, between MCV
                  and CMS Marketing, Services and Trading Company. ((m),
                  (Exhibit 10.41)).

10.42       -     Long Term Gas Agreement, dated October 5, 2001, between MCV
                  and El Paso Merchant Energy, LP. [L038].
</TABLE>


                                      E-5
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number                                   Description
                  --------------------------------------------------------------
<S>               <C>
10.43       -     Long Term Gas Agreement, dated October 5, 2001, between MCV
                  and CMS Marketing, Services and Trading Company. [L039].

10.44       -     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)).

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

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

10.47       -     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)).

10.48       -     Transportation Agreement (Firm Contract #011456), dated as of
                  May 1, 1993 between Panhandle Eastern Pipeline Company and
                  MCV, as amended ((e), (Exhibit 10.90)).

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

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

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

10.52       -     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)).

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

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

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

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

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

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

10.59       -     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.

99.01       -     Unaudited - MCV Selected Proforma Operating Cash Flow Data for
                  the years ended 2001 and 2000.
</TABLE>


                                      E-6
<PAGE>
                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number                                   Description
            -------------------------------------------------------------------
<S>         <C>
      (a)   Incorporated by reference to MCV's registration statement on Form
            S-1 (File No. 33-37977) as the bracketed numbered exhibits.

      (b)   Incorporated by reference to MCV's registration statement on Form
            S-1 (File No. 33-37977) originally filed on November 23, 1990, as
            amended, in Amendment No. 1 to File No. 33-37977 as the bracketed
            numbered exhibits.

      (c)   Incorporated by reference to MCV's Annual Report on Form 10-K for
            the year ended December 31, 1991 as the bracketed numbered exhibits.

      (d)   Incorporated by reference to MCV's Annual Report on Form 10-K for
            the year ended December 31, 1992 as the bracketed numbered exhibits.

      (e)   Incorporated by reference to MCV's Annual Report on Form 10-K for
            the year ended December 31, 1993 as the bracketed numbered exhibits.

      (f)   Incorporated by reference to MCV's Annual Report on Form 10-K for
            the year ended December 31, 1994 as the bracketed numbered exhibits.

      (g)   Incorporated by reference to MCV's Annual Report on Form 10-K for
            the year ended December 31, 1995 as the bracketed numbered exhibits.

      (h)   Incorporated by reference to MCV's Annual Report on Form 10-K for
            the year ended December 31, 1997 as the bracketed numbered exhibits.

      (i)   Incorporated by reference to MCV's Annual Report on Form 10-K for
            the year ended December 31, 1998 as the bracketed numbered exhibits.

      (j)   Incorporated by reference to MCV's Quarterly Report on Form 10-Q for
            the quarterly period ended March 31, 1999 as the bracketed numbered
            exhibits.

      (k)   Incorporated by reference to MCV's Quarterly Report on Form 10-Q for
            the quarterly period ended September 30, 1999 as the bracketed
            numbered exhibits.

      (l)   Incorporated by reference to MCV's Annual Report on Form 10-K for
            the year ended December 31, 1999 as the bracketed numbered exhibits.

      (m)   Incorporated by reference to MCV's Annual Report on Form 10-K for
            the year ended December 31, 2000 as the bracketed numbered exhibits.

      (*)   Exhibits represent Management Contracts and Compensatory Plans and
            Arrangements.
</TABLE>


                                      E-7