<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, 2002

                                       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]

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


<PAGE>


                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP

                           ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
<S>               <C>                                                                             <C>
PART I                                                                                            Page

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...................................................................12
                  G.  Regulation..................................................................12
                  H.  Environmental Matters.......................................................16
                  I.  Overall Lease Transaction...................................................18
Item 2.           Properties......................................................................21
Item 3.           Legal Proceedings...............................................................21
Item 4.           Submission of Matters to a Vote of Security Holders.............................21

PART II

Item 5.           Market for Registrant's Common Equity and Related Stockholder Matters...........22
Item 6.           Selected Financial Data.........................................................22
Item 7.           Management's Discussion and Analysis of Financial Condition and Results
                    of Operations.................................................................22
Item 7A.          Quantitative and Qualitative Disclosures about Market Risk......................30
Item 8.           Financial Statements and Supplementary Data.....................................32
Item 9.           Changes in and Disagreements with Accountants on Accounting and Financial
                    Disclosure....................................................................32

PART III

Item 10.          Directors and Executive Officers of the Registrant..............................33
Item 11.          Executive Compensation..........................................................35
Item 12.          Security Ownership of Certain Beneficial Owners and Management..................38
Item 13.          Certain Relationships and Related Transactions..................................38
Item 14.          Controls and Procedures.........................................................39


PART IV

Item 15.          Exhibits, Financial Statement Schedules and Reports on Form 8-K.................40

Signatures            ..........................................................................F-24

Certifications        ..........................................................................F-25
</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 1500 megawatts ("MW") of electricity and
      approximately 1.5 million pounds of process steam per hour. The Facility
      is dependent upon natural gas for its fuel supply.

      The Facility is a cogeneration facility, meaning that it sequentially
      produces electricity and useful thermal energy 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 and El Paso 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 indirect 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. 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 1200-acre site that is leased from Consumers (the "Site").

      The Facility consists of the following:

      -     12 gas turbine generators ("GTGs");

      -     12 heat recovery steam generators ("HRSGs") which create steam using
            heat from the GTG exhaust;

      -     A steam turbine (the "Unit 1 Steam Turbine") capable of producing
            electricity from steam generated by the HRSGs;

      -     A second steam turbine (the "Unit 2 Steam Turbine") which serves as
            a backup to the Unit 1 Steam Turbine;

      -     A back-pressure steam turbine;

      -     Pollution control assets;

      -     A 25-mile gas pipeline connecting interstate and intrastate gas
            pipeline systems to the Facility;

      -     Pipelines to deliver steam to Dow and DCC; and

      -     Various associated equipment and improvements.

      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, 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. A significant issue to MCV is the
      potential for future regulatory denial of recovery by Consumers from its
      customers of above market PPA costs Consumers pays MCV. Over 90% of MCV's
      revenues come from sales pursuant to the PPA. To date, restructuring has
      not negatively impacted MCV, but if restructuring results in denying
      Consumers' recovery of above-market PPA costs, MCV's cash flows may be
      negatively impacted, especially after 2007. (See "Regulation - Michigan
      Electric Industry Restructuring Proceedings and Federal Electric Industry
      Restructuring", Managements Discussion and Analysis of Financial Condition
      and Results of Operations ("MD&A") - Outlook - Michigan Electric Industry
      Restructuring Proceedings and Federal Electric



                                      -2-

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

      Energy Rate and Cost of Production. Since January 1992, MCV has
      experienced an overall reduction in the energy charges it is paid for
      electricity under the PPA, primarily due to declining coal costs at
      Consumers' generating plants. In addition, MCV's costs associated with
      production of electricity have continued to rise. These circumstances have
      negatively affected MCV's cash flow. While MCV has the majority of its
      expected natural gas needs under contract for the next several years,
      sustained periods of high market gas prices could adversely affect MCV's
      earnings and cash flow. (See "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".) In addition, MCV has credit exposure to suppliers who have
      entered into fixed price natural gas contracts with MCV. To the extent
      that the aforementioned suppliers fail to deliver natural gas under their
      fixed price contracts and the cost to replace such gas is in excess of the
      contract rate, MCV could experience higher natural gas prices in the
      future. (See "Contracts - Credit Support Requirements for MCV's Gas
      Arrangements.")

      E.    Contracts

      MCV's material contracts are 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"). On December 31, 2002, MCV
      entered into an agreement covering gas turbine inspection services and
      spare parts with General Electric International, Inc. ("GEII"). This
      agreement will replace the similar agreement with Alstom. MCV's interests
      in all the foregoing contracts, except the SPA, 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).



                                      -3-

<PAGE>

              Fixed Energy Charges. Like the capacity charges, fixed energy
              charges are payable for available kWhs of Contract Capacity. Fixed
              energy charges are adjusted each year based on a fuel inventory
              charge, administrative and general expenses and one-half of
              operation and maintenance expenses (excluding fuel) incurred at
              these plants during either the immediately preceding calendar year
              or the calendar year preceding that year depending on when the
              adjustment is being made. In 1995, an arbitrator ruled that, under
              the PPA, Consumers had the right to withhold that portion of fixed
              energy charges payable on the basis of energy available but not
              delivered since it was not permitted by the MPSC to collect such
              charges from its electric customers. (See "Regulation -- MPSC and
              Other Proceedings Relating to Capacity and Energy Charges.")

              Variable Energy Charges. Variable energy charges are payable for
              energy actually delivered. Variable energy charges are determined
              monthly and are equal to one-half of operation and maintenance
              expenses incurred at these plants, as calculated annually, and the
              actual cost of coal burned at these plants as determined monthly
              based on a rolling twelve-month average (with a two-month lag) and
              converted to an overall cost per kWh.

      The PPA permits Consumers, under certain conditions, to reduce the
      capacity and energy charges payable to MCV and/or to receive refunds of
      capacity and energy charges paid to MCV if the MPSC does not permit
      Consumers to recover from its customers the capacity and energy charges
      specified in the PPA (the "regulatory-out" provision). Until September 15,
      2007, however, the capacity charge may not be reduced below an average
      capacity rate of 3.77 cents per kWh for the available Contract Capacity
      notwithstanding the "regulatory-out" provision. Consumers and MCV are
      required to support and defend the terms of the PPA. (See "Regulation --
      MPSC and Other Proceedings Relating to Capacity and Energy Charges.")

      Under the PPA, MCV must provide 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>                                                   <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).




                                      -4-


<PAGE>

      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. 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 2002 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 2003 and does not anticipate any
      substantial problems or requirements for plant modifications.

      In 1997, Consumers informed MCV of several other potential payment issues
      it would pursue, pursuant to the "regulatory out" and other provisions of
      the PPA. These issues related to Consumers' special contract customers,
      pricing of the energy delivered during off-peak ramp hours (when MCV
      adjusts its output to match Consumers' dispatch) and energy delivered in
      the band width (energy delivered above dispatch, within certain limits).
      In addition, Consumers notified MCV that it did not believe that MCV could
      use the approximately 15 MW of generating capacity and energy attributable
      to the back pressure turbine, which was placed into service in July 1997,
      towards available Contract Capacity or electric deliveries under the PPA.
      Consumers had also indicated that they would take a similar position on
      the incremental energy and capacity resulting from MCV's installation of
      11NM upgrade packages on the GTGs (collectively the "Disputed Issues").
      MCV and Consumers entered into a settlement agreement ("Settlement
      Agreement"), effective January 1, 1999, which resolves (for the various
      time periods specified in the Settlement Agreement) all of the previously
      Disputed Issues under the PPA and includes definitive obligations for
      Consumers to make energy payments calculated in accordance with the PPA,
      irrespective of any MPSC or the reviewing courts decision which may affect
      those issues or payments. The Settlement Agreement also provides that, not
      withstanding modifications to the Facility increasing its capacity, in
      billing Consumers for capacity charges (at the rates set forth in the PPA)
      availability would be capped at 98.5% of the 1240 MW ("98.5% cap") on a
      calendar-year basis for the term of the PPA irrespective of any MPSC or
      the reviewing courts decision, which may affect this issue or payment.
      Provided, however, that if Consumers transfers (subject to MCV's prior
      consent) its rights of up to 1240 MW of capacity and associated energy
      under the PPA to a third party for an extended period of time, the 98.5%
      cap will not apply except that the 98.5% cap is, in any event, reinstated
      on September 15, 2007. Notwithstanding the Settlement Agreement, after
      September 15, 2007, an issue could exist as to whether or not Consumers
      can exercise the "regulatory out" provision to reduce capacity payments to
      MCV based upon the "availability caps" of 88.7% of the 1240 MW (both on
      and off peak) of


                                      -5-

<PAGE>
      contract capacity as provided for in the 915 MW Settlement and the 325
      MW Settlement (See "Regulation - MPSC and Other Proceedings Relating to
      Capacity and Energy Changes). 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 Trans-Elect, Inc.
      ("Trans-Elect"). Such lines were previously owned by Consumers. MCV and
      Consumers previously entered into the Facilities Agreement which provides
      for transmission service of excess capacity and energy available at the
      Facility. The sale of the transmission facilities to Trans-Elect does not
      change, in any respect, the contractual relationship and obligations of
      Consumers under the Facilities Agreement. Trans-Elect is serving as
      Consumers' agent to perform Consumers' obligations under the Facilities
      Agreement.

      Steam and Electric Power Agreement; Related Dow Agreements

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

      In any year, MCV is not obligated to deliver more than 691,900 pounds of
      steam per hour and 60 MW of electricity on an annual average basis except
      as Dow may increase its entitlement as discussed below. Dow has agreed to
      take as much steam as is necessary for the Facility to retain its QF
      status under the FERC regulations in effect on November 1, 1986 (which
      regulations have not been revised in relevant part in any material
      respect). However, Dow's obligation with respect to minimum annual steam
      purchases is an average of 440,000 pounds per hour (less amounts supplied
      by certain standby facilities owned by Dow and less 50% of amounts
      purchased by any other steam customers of MCV) and is binding only for the
      initial 25-year term of the SEPA. During 2002, MCV sold an average of
      508,981 pounds of steam and 61 MW of electricity per hour to Dow.

      Dow may increase its steam or electricity entitlement to 110% of the steam
      or electricity delivered in the previous 12-month period, plus any steam
      or electricity required by any addition to or modification of the Dow
      plant, provided that any increase above an annual average of 1,000,000
      pounds of steam per hour or 75 MW of electricity requires MCV's consent.
      MCV, however, may be required, on an instantaneous basis, to deliver steam
      at a rate of up to 135% of the maximum annual average hourly quantity of
      steam or to deliver power at a rate up to 20 MW greater than the
      applicable annual average. In 1997, Dow increased its electric entitlement
      to 67.75 MW/hr; 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 natural gas for MCV.

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

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



                                      -6-

<PAGE>

      consecutive hours but less than 72 consecutive hours will not give rise to
      a right of termination unless another such contract outage has occurred
      within the previous 60 months.

      A "contract outage" generally occurs when MCV fails to deliver minimum
      operation steam (i.e., an hourly flow rate of at least 75% of the then
      current rate), or fails to meet pressure specifications after having
      failed to deliver steam for 15 consecutive minutes, or fails to meet
      pressure and quantity specifications after having failed to deliver steam
      for seven consecutive days, except in each case as a result of scheduled
      maintenance outages, outages forced at Dow's request or resulting from
      Dow's failure to provide demineralized water or waste water treatment
      services or outages caused by an event of force majeure lasting no more
      than two years. Steam provided to Dow from the Standby Facilities is
      treated as steam delivered by MCV for this purpose. For such a contract
      outage to occur, more than ten of the Facility's GTGs would have to be out
      of service at the same time that Dow's Standby Facilities are unavailable.

      The SEPA and various backup agreements among MCV, Consumers and Dow
      contain various provisions designed to assure a continuous supply of steam
      and electricity to Dow in the event the SEPA is terminated.

      Dow Facilities and Demineralized Water. Dow owns the electrical
      transmission lines, which carry electricity from the Facility to the Dow
      plant. Dow also owns certain steam and demineralized water lines which are
      used in the operation of the Facility, and which have been leased by Dow
      to MCV. Dow has contracted to provide MCV sufficient demineralized water
      to meet the Facility's requirements until 30 months after MCV's obligation
      to supply steam to Dow ceases.

      Steam Purchase Agreement

      In 1995, MCV entered into the SPA with DCC which provides that MCV
      construct, own and operate a steam line and appurtenant equipment to serve
      steam to DCC's Midland plant. DCC has agreed to purchase steam from MCV
      for an initial term of fifteen years with automatic year-to-year renewals
      thereafter. MCV expects to supply steam at the rate of up to 180,000
      pounds per hour with a minimum of 90,000 pounds per hour. The steam MCV
      provides DCC must meet operational and content specifications. The
      provision of steam to DCC is subject to Dow's first preference to the
      steam under the SEPA. MCV began supplying steam to DCC 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 2003 of 209,089
      MMBtu/day. As of January 1, 2003, no single gas contract accounts for more
      than 14.2% of MCV's portfolio, though, El Paso and its subsidiaries now
      account for 36.0% of MCV's portfolio. Gas contracts with U.S. suppliers
      provide for a 2003 annual average purchase of 128,363 MMBtu/day, while gas
      contracts with Canadian suppliers provide for the purchase of 80,726
      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 2002, MCV's gas purchases were
      supplied 73% from long term gas contracts and 27% 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>
              2003                    60,863                118,226                30,000              209,089
              2004                    67,923                110,638                49,000              227,561
              2005                    80,000                 61,695                96,836              238,531
              2006                    74,164                 59,156               105,345              238,665
              2007                    54,329                 16,000               141,367              211,696
              2008                    46,000                  7,500               122,000              175,500
              2009                    36,000                  7,500               120,329              163,829
              2010                    36,000                  7,500                94,151              137,651
              2011                    36,000                  4,863                47,000               87,863
              2012                    32,667                  2,667                43,500               78,833
              2013                        --                     --                 3,395                3,395
</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'
                                       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 (1) the Henry Hub gas
      Mercantile                       contract on the New York Exchange for
                                       the month gas is purchased or (2) the
                                       Alberta, Canada price as published is
                                       the Canadian Gas Price Reporter.

      Current U.S. Long Term Gas Contracts. The U.S. long term gas contracts
      provide for either a "dedication of reserves" 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.

      In addition, MCV previously had two long term gas contracts with
      affiliates of the Enron Corporation ("Enron"), which filed bankruptcy
      petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code
      in December of 2001. The Bankruptcy Court rejected one of the Enron
      contracts in 2002 and due to the uncertain nature of the future viability
      of this contract, MCV expensed $8.2 million of unamortized prepaid gas
      costs associated with this contract in December 2001. MCV has filed a
      claim in the Bankruptcy court to recover its loss on the rejected Enron
      contract. MCV Management cannot predict the outcome of MCV's claim in the
      Enron case at this time. The second of the Enron contracts was purchased
      by an affiliate of El Paso and continues in full effect.

      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 is required to pay a monthly charge whether or not MCV buys any
      natural gas (the "Demand Charge") to each Canadian supplier. This Demand
      Charge covers the transportation charges incurred by the Canadian
      suppliers to have transportation capacity for the MDQ available to the
      U.S.-Canada border. To the extent that MCV takes less than 100% of the MDQ
      from its Canadian contracts, gas costs per unit taken by MCV increase
      because Demand Charges are being paid for the quantity of gas not being
      taken. Two contracts provide discounts to the Commodity Charge where
      monthly takes are in excess of 85% of MDQ.

      The Canadian contracts establish minimum annual takes under the contracts
      that range from 75% to 100% of the stated MDQ. Generally, under the
      contracts that require less than 100% takes, MCV is contractually required
      to make a deficiency payment, which could range from a partial percentage
      to a full percentage of the Commodity Charge multiplied by the deficiency
      take; however, some contracts provide MCV the opportunity to reduce such
      deficiency payment by taking gas in excess of the MDQ during the following
      year. Generally, under the contracts that require 100% daily takes, MCV is
      required to pay the supplier for any unexcused deficiencies, which amount
      is calculated as the sum of (i) the daily deficiency multiplied by the
      positive price differential between market and contract prices and (ii)
      the Demand Charge accessed by transporter.

      Under most of the Canadian contracts, if a Canadian supplier under
      delivers to MCV in any month, subject to certain force 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.



                                      -9-

<PAGE>

      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 currently owns Panhandle and Trunkline (See
      paragraph below). 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.

      On December 22, 2002, CMS Energy announced that it had reached a
      definitive agreement to sell Panhandle and Trunkline to Southern Union
      Pipeline. The sale is subject to the customary closing conditions by the
      Federal Trade Commission and by appropriate state regulators. No change in
      rates or service, under MCV's contracts with these companies, are expected
      as a result of this sale.

      MCV originally entered into long term transportation arrangements with two
      connecting pipelines which link the Facility and its own pipeline to these
      interstate pipelines: Michigan Gas Storage Company (a subsidiary of
      Consumers) and Consumers. In November 2002, Consumers combined the
      operations of Michigan Gas Storage Company and Consumers. As a result of
      this combination, MCV's service is now provided under one agreement. No
      change in rates or service has occurred under the consolidation of these
      service agreements. Michigan gas produced by suppliers is currently
      transported to Consumers' pipeline system by the supplier under contracts
      the suppliers have with MichCon Gathering Company (previously Michigan
      Consolidated Gas Company) ("MichCon"), on the MichCon pipeline system in
      northern Michigan.

      The remaining terms of MCV's agreements with the U.S. transporters range
      from less than 1 to 22 years. The transportation rates of ANR, Panhandle,
      Trunkline and Great Lakes are subject to FERC regulation.

      The suppliers under the Canadian contracts are themselves responsible for
      arranging transportation within Canada, and are responsible for paying the
      transportation rates charged by the Canadian transporters, which are then,
      in most cases, reimbursed by MCV. All suppliers have been allocated firm
      transportation capacity on the relevant pipelines. Great Lakes transports
      Canadian gas from the U.S.-Canada border to Michigan.

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

      Credit Support Requirements for MCV's Gas Arrangements

      Many of MCV's gas supply contracts have credit support requirements that
      can be triggered by changes in the financial condition of MCV or the gas
      supplier, price changes in the forward gas market or the quantity of gas
      purchases. As of December 31, 2002, MCV was supplying no credit support in
      the form of cash or letters of credit for any gas supply agreements. MCV
      was holding on December 31, 2002, a letter of credit for $9 million from a
      gas supplier as collateral support for one of MCV's long term gas
      agreements.

      A number of MCV's gas supply agreements have parent guarantees that are
      supplied by the corporate parents of the entity that is a party to the MCV
      gas contract. The MCV Partners guarantee none of MCV's gas supply
      agreements.


                                      -10-

<PAGE>

      MCV hedges gas with NYMEX contracts that have both initial and variation
      margin requirements. As of December 31, 2002, MCV held 3,453 NYMEX
      contracts and had provided $13.3 million in margin requirements to support
      the acquisition of the aforementioned NYMEX contracts.

      In addition, MCV also has credit support requirements in connection with
      its gas transportation contracts. The present tariff provisions in MCV's
      gas transportation contracts provide that credit support can be required
      based on the credit worthiness of the holder of the contract. As of
      December 31, 2002, MCV had not been required to provide any credit support
      for its gas transportation contracts.

      Gas Turbine Service Agreement

      Under a service agreement between MCV and Alstom, as amended, (the
      "Service Agreement"), Alstom sold MCV spare parts for the GTGs and
      provides qualified service personnel and supporting staff to assist MCV to
      perform scheduled inspections on the GTGs, and to repair the GTGs at MCV's
      request. The Service Agreement, commenced on January 1, 1990, and 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 the Service 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 were
      completed in 2002. In January 1998, MCV and Alstom amended the length of
      the Service Agreement to extend through the sixth series of major GTG
      inspections, which 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 Service Agreement. If
      the Service Agreement is terminated, MCV must pay a cancellation payment
      of $5.0 million.

      MCV has signed a new maintenance service and parts agreement with GEII,
      effective December 31, 2002 ("GEII Agreement"). GEII will provide
      maintenance services and hot gas path parts for MCV's twelve GTG's under
      terms and conditions similar to the MCV/Alstom Service Agreement, as
      described above. The GEII Agreement will cover four rounds of major GTG
      inspections, which are expected to be completed by the year 2015, at a
      savings to MCV as compared to the Service Agreement with Alstom. The GEII
      Agreement is expected to replace the current Alstom Service Agreement
      during the first half of 2004, but in no event later than January 1, 2005.
      The GEII Agreement can be terminated by either party for cause or
      convenience. Should termination for convenience occur, a buy out amount
      will be paid by the terminating party with payments ranging from
      approximately $19.0 million to $.9 million, based upon the number of
      operating hours utilized since commencement of the GEII Agreement.



                                      -11-
<PAGE>

      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 for MCV's GTG's,
      which is expected to increase the overall electrical capacity and
      efficiency of each GTG. MCV has agreed to purchase one set of such blades
      and has the option to purchase an additional eleven sets which would be
      installed during the fifth series of major GTG inspections, which are
      expected to be completed by the third quarter of 2006. 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 in the second quarter of 2003, for approximately
      $4.2 million.

F.    Employees

      As of February 28, 2003, MCV had 131 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 did not exercise
      the wage reopener in either of the last two years. MCV believes that its
      relationship with its employees is good.

G.    Regulation

      Introduction

      MCV and the Facility are not subject to most state and federal public
      utility laws and regulations. The following is a discussion of the
      principal regulatory proceedings and issues which could have an impact on
      MCV and/or the Facility.

      QF Certification

      In order to be a QF under PURPA and to maintain this status, not more than
      50% of the "equity interest" in a facility may be owned by electric
      utilities or their affiliates. In addition, certain operating and
      efficiency standards must be maintained on a calendar-year basis. In the
      case of a topping-cycle generating plant such as the Facility, the
      applicable operating standard requires that the portion of total energy
      output that is put to some useful purpose other than facilitating the
      production of power (the "Thermal Percentage") be at least 5%. In
      addition, the plant must achieve and maintain an average PURPA efficiency
      standard (the sum of the useful power output plus one-half of the useful
      thermal energy output, divided by the energy input) of at least 45% (the
      "Efficiency Percentage"). However, if the plant maintains a Thermal
      Percentage of 15% or higher, the required Efficiency Percentage is reduced
      to 42.5%. Since 1990, the required Thermal and Efficiency Percentages have
      been achieved. During 2002, a Thermal Percentage of 18.6% and an
      Efficiency Percentage of 47.0% were achieved.

      The Facility's QF certification by FERC became effective when portions of
      the Facility were first synchronized to Consumers' system in June 1989. As
      the operator of a QF, MCV (and the Facility) are exempt from various
      provisions of the FPA and the 1935 Act and from certain state laws and
      regulations respecting rate, financial and organizational regulation of
      public utilities. On January 31 and March 1, 1990, FERC recertified the
      Facility as a QF in the context of an ownership structure in which MCV
      owns the Facility and in the context of a leveraged lease transaction in
      which the Facility is owned by owner trustees on behalf of institutional



                                      -12-

<PAGE>
      investors. In 1997, 1998, 2000 and 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 ("915 MW Settlement"), the MPSC approved with
      modifications the Revised Settlement Proposal. Generally, the 915 MW
      Settlement approved cost recovery of Consumers from its rate payers of 915
      MW of MCV capacity subject to certain "availability caps" associated with
      on-peak and off-peak periods of time each day (beginning on September 16,
      2007, the "availability caps" are 88.7% of 915 MW both on and off peak)
      and recovery of energy payments based on coal proxy prices (the formula in
      the PPA). However, instead of capacity and fixed energy payments being
      based on "availability" as provided in the PPA, the 915 MW Settlement
      provided for recovery of such payments on an energy "delivered" basis. The
      MPSC did not order that the PPA be modified to conform with the cost
      recovery approved in the 915 MW Settlement. However, the MPSC found that
      since the capacity charges approved for recovery under the Revised
      Settlement Proposal would not be reflected in the PPA, approval for the
      purposes of Act 81 could not be extended to those capacity charges. The
      MPSC did indicate in its order, however, that its 915 MW Settlement would
      be implemented for rate-making purposes in 1993 and subsequent years.
      Opponents to the Revised Settlement Proposal unsuccessfully filed appeals
      of the 915 MW Settlement which is now final.

      In connection with a dispute between MCV and Consumers regarding the
      payment of certain fixed energy charges which stemmed from the Revised
      Settlement Proposal, on December 10, 1993, Consumers made a written
      irrevocable offer of relief ("Offer of Relief") to MCV. The Offer of
      Relief was for the purpose of facilitating the sale of Senior Secured
      Lease Obligation Bonds, issued in connection with the financing of the
      Overall Lease Transaction (See "Overall Lease Transaction") and held by
      Consumers. Pursuant to the Offer of Relief, which was rendered final and
      irrevocable on December 28, 1993, Consumers committed to pay MCV the fixed
      energy charges on all energy delivered by MCV from the block of Contract
      Capacity above 915 MW. Consumers did not commit to pay MCV for fixed
      energy charges on energy delivered above the "caps" established in the 915
      MW Settlement up to 915 MW. This unilateral commitment, which became
      effective as of January 1, 1993, to pay fixed energy charges on delivered
      energy from the block of Contract Capacity above 915 MW will expire on
      September 15, 2007.



                                      -13-

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

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

      In 1997, Consumers informed MCV of several other potential payment issues
      it would pursue, pursuant to the "regulatory out" and other provisions of
      the PPA. These issues related to Consumers' special contract customers,
      pricing of the energy delivered during off-peak ramp hours (when MCV
      adjusts its output to match Consumers' dispatch) and energy delivered in
      the band width (energy delivered above dispatch, within certain limits).
      In addition, Consumers notified MCV that it did not believe that MCV could
      use the approximately 15 MW of generating capacity and energy attributable
      to the back pressure turbine, which was placed into service in July 1997,
      towards available Contract Capacity or electric deliveries under the PPA.
      Consumers had also indicated that they would take a similar position on
      the incremental energy and capacity resulting from MCV's installation of
      11NM upgrade packages on the GTGs (collectively the "Disputed Issues").
      MCV and Consumers entered into a settlement agreement ("Settlement
      Agreement"), effective January 1, 1999, which resolves (for the various
      time periods specified in the Settlement Agreement) all of the previously
      Disputed Issues under the PPA and includes definitive obligations for
      Consumers to make energy payments calculated in accordance with the PPA,
      irrespective of any MPSC or the reviewing courts decision which may affect
      those issues or payments. The Settlement Agreement also provides that, not
      withstanding modifications to the Facility increasing its capacity, in
      billing Consumers for capacity charges (at the rates set forth in the PPA)
      availability would be capped at 98.5% of the 1240 MW ("98.5% cap") on a
      calendar-year basis for the term of the PPA irrespective of any MPSC or
      the reviewing courts decision, which may affect this issue or payment.
      Provided, however, that if Consumers transfers (subject to MCV's prior
      consent) its rights of up to 1240 MW of capacity and associated energy
      under the PPA to a third party for an extended period of time, the 98.5%
      cap will not apply except that the 98.5% cap is, in any event, reinstated
      on September 15, 2007. Notwithstanding the Settlement Agreement, after
      September 15, 2007, an issue could exist as to whether or not Consumers
      can exercise the "regulatory out" provision to reduce capacity payments to
      MCV based upon the "availability caps" of 88.7% of the 1240 MW (both on
      and off peak) of contract capacity as provided for in the 915 MW
      Settlement and the 325 MW Settlement. The Settlement Agreement is not
      expected to materially affect MCV's earnings and cash flows.

      Michigan Electric Industry Restructuring Proceedings

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




                                      -14-

<PAGE>

      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. In July 2001, FERC issued a Notice of Proposed
      Rulemaking to establish a standard market design ("SMD") in order to
      remedy remaining undue discrimination in transmission and wholesale energy
      markets. The SMD requires all FERC jurisdictional transmission providers
      to transfer control of their transmission facilities to an independent
      transmission provider. The independent transmission provider will provide
      transmission service under a standardized tariff and administer market
      based wholesale energy markets for day-ahead and real-time sales. The SMD
      proposal has drawn strong criticism from certain State regulators in the
      Pacific northwest and southeast, which are asking Congress to block the
      proposal. This criticism has had the effect of delaying issuance of a
      final SMD rule. In addition, apart from the SMD proceeding, the Midwest
      Independent System Operator ("Midwest ISO") has committed to FERC to
      implement in December 2003 a day-ahead and real-time energy market similar
      to that proposed in the SMD proceeding. The Midwest ISO provides
      transmission service in most parts of the Midwest, including Michigan. The
      SMD could impact MCV in selling electricity in the wholesale market. MCV
      Management cannot predict the impact on MCV or the outcome of these
      proceedings.



                                      -15-

<PAGE>

      Other Regulatory Issues

      MCV has been granted a permanent exemption from the Power Plant and
      Industrial Fuel Use Act of 1978, as amended, relating to the use of
      natural gas as its primary energy source. This exemption permits MCV to
      consume gas without restriction as to hours of operation or the capacity
      of the Facility to consume an alternate fuel.

      The Canadian long term gas contracts require permits from both Canadian
      and U.S. authorities. All of the suppliers have received approval from
      Canadian provincial authorities to lift and remove sufficient gas volumes
      to meet MCV's current contract requirements and from the National Energy
      Board ("NEB") to export these volumes. The U.S. long term gas contracts
      are not subject to regulatory approvals.

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. Application for renewal will be submitted to the State of
      Michigan no later than April 1, 2003. On four instances in 2002, MCV
      exceeded its daily maximum discharge limits into the cooling pond. On June
      11, August 19 and September 17, 2002, the daily maximum limit for oil and
      grease were exceeded from the oily waste treatment system. On August 18,
      2002 the daily maximum discharge limit for total suspended solids was
      exceeded. The cause of the exceedances were investigated and identified;
      and corrective action taken to eliminate the potential for reoccurrence.
      The Michigan Department of Environmental Quality ("MDEQ") has taken no
      action nor is it expected that they will.

      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.

      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 initial compliance date has
      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 Clean Air



                                      -16-

<PAGE>

      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, but a subsequent ruling by the D.C. Circuit
      Court of Appeals on May 15, 2001, remanded to the EPA that portion of the
      rule which applied to cogeneration units. The EPA is expected to provide
      its response to the remand in the second quarter of 2003. 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). MCV nevertheless believes it will be able to meet the
      standards in the Section 126 Rulemaking.

      On December 4, 2002, Michigan's revised NOx rule package, addressing the
      requirements of EPA's Nox SIP call, became effective. This rule was
      included in a revision to Michigan's SIP. A public hearing on that SIP
      revision was held on January 22, 2003 with no adverse comments submitted.
      The State of Michigan has advised that the SIP revision will be submitted
      to the EPA for approval during the second quarter of 2003. The EPA has
      indicated that the revision is approvable and formal approval is expected
      within six months of receipt by the EPA. Upon approval of the SIP
      revision, EPA will halt the FIP Plan and Section 126 Rule processes. MCV
      has determined it can meet the requirements specified by the State of
      Michigan in this SIP revision.

      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 of 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.



                                      -17-

<PAGE>

      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"). U.S.
      Bank National Association (formerly known as State Street Bank and Trust
      Company) serves as Owner Trustee under each of the Owner Trusts (in each
      such capacity, an "Owner Trustee" and, collectively, the "Owner
      Trustees"). Each Owner Trustee leases its undivided interest in the
      Facility to MCV under one of five separate leases, each having a 25-year
      base term (the "Basic Lease Term") commencing in 1990. 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 Bank of New York
      (formerly known as United States Trust Company) and Wachovia Bank National
      Association (formerly known as First Union National Bank) are note
      trustees under the Senior Note Indenture and the Subordinated Note
      Indenture, respectively (the "Note Trustees"). There is, 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 U.S. Bank National
      Association as collateral Agent (the "Collateral Agent"), which provides
      for the creation and maintenance of certain reserves, the deposit of all
      revenues generated by the operation of the Facility, the payment of
      operating expenses, and the distribution of remaining revenues according
      to the priorities set forth therein to or for the account of the Working
      Capital Lender, the Note Trustees, the Owner Trustees, MCV and the
      affiliates of certain Partners. MCV has arranged for a $50 million working
      capital line (the "Working Capital Facility") with Bank of Montreal (the
      "Working Capital Lender"), which expires August 29, 2003. 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




                                      -18-
<PAGE>

      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. 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 Tax-Exempt Bonds.
      This refinancing activity reduced the amount of interest expense.

      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, 2003, there remains outstanding
      approximately $556.3 million of equity invested by the Owner Participants
      and $567.2 million of Subordinated Bonds. The remaining balance of the
      Senior Bonds was retired in July 2002.

      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



                                      -19-
<PAGE>

      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. On June 15, 2000, MCV refinanced the
      Tax-Exempt Bonds. 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
      were 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 were 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 proportional 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 were subordinated to the senior lien, security
      interest and assignment securing the Senior Notes issued by such Owner
      Trustee (and pledged to secure the Senior Bonds).

      Additional Senior Notes may be issued (i) to refinance the Senior Notes,
      in whole but not in part, and (ii) to pay certain costs of modifying the
      Facility. Additional Subordinated Notes may be issued (i) to refinance any
      series of Subordinated Notes, and (ii) to pay certain costs of modifying
      the Facility. Any additional Senior and Subordinated Notes will rank
      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.



                                      -20-
<PAGE>

      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, 2002, MCV had funds of $136.6 million in the Reserve Account.
      Excess funds in the Reserve Account are periodically transferred to MCV.

Item 2. PROPERTIES

MCV leases the Facility from the Owner Trustees pursuant to the Leases. For a
description of the Facility, see "The Facility." For a description of the
financing arrangements in connection with the lease of the Facility to MCV,
including a description of the liens on the Facility, see "Overall Lease
Transaction."

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

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

Item 3. LEGAL PROCEEDINGS

In 1997, MCV filed a property tax appeal against the City of Midland at the
Michigan Tax Tribunal contesting MCV's 1997 property taxes. Subsequently, MCV
filed appeals contesting its property taxes for tax years 1998 through 2003 at
the Michigan Tax Tribunal. A trial was held for tax years 1997 - 2000 and for
the appeals for tax years 2001-2003 are being held in abeyance pending the
resolution of the aforesaid trial. MCV is seeking a reduction of its annual
property taxes on the basis that the City of Midland has over assessed the
property's taxable value for ad valorem property tax purposes. MCV Management
cannot predict the outcome of these proceedings.

Other than as discussed in "Regulation" there are no other pending legal
proceedings to which MCV is a party and to which any of its property is subject,
that are material in relation to the consolidated financial statements.

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

Not applicable.




                                      -21-
<PAGE>

                                     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, 2002, 2001,
2000, 1999 and 1998 and for each of the five years ended December 31, 2002 have
been derived from MCV's audited financial statements. This information should be
read in conjunction with "Managements Discussion &Analysis" and the financial
statements and notes thereto included elsewhere herein.

<TABLE>
<CAPTION>
                                                                        (Dollars in Thousands)
                                                     2002          2001          2000          1999          1998
                                                 ------------- ------------- ------------- ------------- -------------

<S>                                              <C>           <C>           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA:
  Operating Revenues                             $   596,819   $   610,813   $   604,547   $   617,352   $   627,054
  Operating Income                                   188,124       157,835       212,813       215,884       222,461
  Cumulative Effect of Change in Method of
   Accounting for Derivative Option Contracts
   (to April 1, 2002) (1)                             58,131            --            --            --            --
  Net Income                                         132,027        48,264        90,121        80,069        80,327

BALANCE SHEET DATA: (2)
  Total Assets                                     2,098,073     2,117,047     2,274,956     2,299,212     2,286,506
  Capitalization
    Partners' Equity                                 734,310       551,712       527,738       437,617       357,548
    Long term Debt, Excluding Current
     Maturities                                    1,153,221     1,243,060     1,429,233     1,584,865     1,723,960
</TABLE>


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

(2)  Balance sheet data consists of the balances at December 31.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS ("MD&A")

Results of Operations

Overview

For the year ended December 31, 2002, MCV recorded net income of $132.0 million,
which includes the April 1, 2002 change in method of accounting for long term
gas derivative option contracts. Certain natural gas contracts that contain
optionality are now being marked-to-market through earnings, as required by SFAS
No. 133. The cumulative effect of this accounting change as of April 1, 2002
increased earnings by approximately $58.1 million and additional quarterly
mark-to-market adjustments as of December 31, 2002 resulted in an additional net
earnings increase of $21.9 million. MCV's recorded net income, without the
effects of the accounting change of $80.0



                                      -22-
<PAGE>

million, was $52.1 million as compared to net income of $48.3 million for the
year 2001. The earnings increase for the year 2002 compared to 2001, was
primarily due to lower fuel usage and two 2001 one-time charges. In December
2001, MCV expensed $8.2 million in relating to the prepayment of gas costs under
a long term contract with an affiliate of Enron Corporation, which was
subsequently terminated. Also in 2001, MCV expensed $6.7 million in development
costs. Other factors contributing to the earnings increase were lower interest
expense on MCV's financing arrangements and higher electric rates under the PPA,
partially offset by higher natural gas prices under MCV's long term gas
contracts, lower interest income on MCV's invested cash reserves and lower
revenues from energy sales outside of the PPA.

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
one-time items contributed to the decrease in 2001 earnings. A provision of $8.2
million was made relating to 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.

Operating Revenues

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

<TABLE>
<CAPTION>
                                                                 2002                2001                2000
                                                              -----------         -----------        ------------
<S>                                                           <C>                 <C>                <C>
Operating Revenues                                            $   596,819         $   610,813        $    604,547

Capacity Revenue                                              $   404,713         $   409,633        $    410,938
   PPA Contract Capacity (MW)                                       1,240               1,240               1,240
   Billed PPA Availability                                          98.5%               98.5%               98.5%

Electric Revenue                                              $   177,569         $   184,707        $    177,989
   PPA Delivery as Percentage of Contract Capacity (1)              70.9%               75.0%               72.1%
   PPA, SEPA and Other Electric Deliveries (MWh)                8,275,229           8,811,950           8,535,548
   Average PPA Variable Energy Rate ($ / MWh)                 $     15.94         $     15.62        $      15.68
   Average PPA Fixed Energy Rate ($ / MWh)                    $      3.89         $      3.75        $       3.57

Steam Revenue                                                 $    14,537         $    16,473        $     15,620
   Steam Deliveries (Mlbs)                                      5,455,050           5,693,240           5,869,454
</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.

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



                                      -23-
<PAGE>

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.

Operating Expenses

For the year ended December 31, 2002, MCV's operating expenses were $408.7
million, which includes $255.1 million of fuel costs, including a $21.9 million
mark-to-market net gain on the natural gas contracts which contain optionality.
During this period, MCV purchased approximately 74.6 Bcf of natural gas, and a
net 2.3 Bcf was used for transportation fuel and as a net change to gas in
storage. During this same period, MCV consumed 74.3 Bcf of which 2.0 Bcf of this
total was gas provided by Dow. The average commodity cost of fuel for the year
2002 was $3.23 per MMBtu, which includes the effects of the disposition of
excess gas supplies not required for generation. 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 injected into storage and used for
transportation fuel. 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.
Fuel costs for the year 2002 compared to 2001 decreased by $11.2 million,
excluding the $21.9 million mark-to-market net gain. This fuel cost decrease was
primarily due to a lower natural gas usage resulting from a reduction in the
electric dispatch under the PPA and from Dow's election to toll gas; and lower
costs associated with the electric dispatch reduction transaction entered into
with Consumers. Also contributing to this decrease was a 2001 one-time expense
for an $8.2 million provision made relating to the prepayment of gas costs under
a long term contract with an affiliate of Enron. Partially offsetting this
decrease are higher natural gas prices under MCV's long term gas contracts.

For the year ended December 31, 2001, MCV's operating expenses increased $61.3
million from the year 2000, which included a $56.1 million increase in fuel
costs. This fuel cost increase was due to 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 relating to the prepayment
of gas costs under a long term contract with an affiliate of Enron Corporation.
The effects of this one-time charge will increase earnings over the next five
years, because the amounts prepaid under the long term contract were being
amortized over the delivery period through 2006.

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

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.

Other Income (Expense)

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

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



                                      -24-
<PAGE>

decrease in interest expense for the year ended December 31, 2001 compared to
2000 of $20.6 million was due to a lower principal balance on MCV's financing
obligation.

Cumulative Effect of Accounting Change:

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

Liquidity and Capital Resources


During the years ended December 31, 2002 and 2001, net cash generated by MCV's
operations was $227.9 million and $122.9 million, respectively. The primary use
of net cash was for the payment of principal on the financing obligation
required under the Overall Lease Transaction and capital expenditures. MCV's
cash and cash equivalents have a normal cycle of collecting six months of
revenues less operating expenses prior to making the semiannual payments under
the financing obligation due in January and July for the next thirteen years.
During 2002 and 2001, MCV paid financing obligation requirements of $304.1
million and $287.1 million, respectively, as required under the Overall Lease
Transaction.

MCV also has a $50 million working capital line ("Working Capital Facility")
from the Bank of Montreal to provide temporary financing, as necessary, for
operations. The Working Capital Facility has been collateralized by MCV's
natural gas inventory and earned receivables. At any given time, borrowings and
letters of credit are limited by the amount of the borrowing base, defined as
90% of earned receivables and 50% of natural gas inventory. The borrowing base
varies over the month as receivables are earned, billed and collected and as
natural gas inventory balances are built and depleted. In addition, earned
receivables borrowing base can be affected by Consumers' credit rating. The
Working Capital Facility term currently expires on August 29, 2003. MCV did not
utilize the Working Capital Facility during the year of 2002, except for letters
of credit associated with normal business practices. As of December 31, 2002,
MCV had no outstanding borrowings or letters of credit. MCV believes that
amounts available to it under the Working Capital Facility along with available
cash reserves will be sufficient to meet any working capital shortfalls that
might occur.

For the foreseeable future, MCV expects to fund current operating expenses,
capital expenditures and financing obligations primarily through cash flows from
operations. Due to uneven future scheduled financing obligation payments (high
summer payment, low winter payment), MCV anticipates that it will be drawing on
its cash reserves to fund temporary cash flow shortfalls. 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, 2002, there was approximately
$299.1 million of cash reserves, of which $136.6 million had been reserved for
the debt portion of the financing obligation.










                                      -25-
<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, 2002, MCV has the following contractual
financial obligations and commitments:

<TABLE>
<CAPTION>
                               Contractual Obligations (In Millions)
                               ---------------------------------------------------------------------------------------

                                 Total        2003         2004         2005        2006       2007      Thereafter
                               ----------- ------------ ------------ ----------- ----------- --------- ---------------

<S>                            <C>         <C>          <C>          <C>         <C>         <C>       <C>
Long term Debt (1)             $  1,973.0  $   208.9    $   242.8    $   174.4   $   156.0   $  150.9  $    1,040.0
                               =========== ============ ============ =========== =========== ========= ===============

Unconditional Purchase         $  2,767.4  $   245.2    $   281.6    $   339.2   $   342.9      327.2  $    1,231.3
    Obligations (2)
Other Long term
    Obligations (3)                 242.5       27.9         20.1         16.0        16.3       16.6         145.6
                               ----------- ------------ ------------ ----------- ----------- --------- ---------------
Total Contractual Cash
    Obligations                $  3,009.9  $   273.1    $   301.7    $   355.2   $   359.2   $  343.8  $    1,376.9
                               =========== ============ ============ =========== =========== ========= ===============
</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, GTG
     compressor parts and the ground lease agreement.
(3)  Represents the cost of current Facility maintenance service agreements and
     spare parts.

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 that could cause actual results or outcomes to differ materially
from those expressed in the forward-looking statements. Accordingly, this "Safe
Harbor" Statement contains additional information about such factors relating to
the forward-looking statements. MCV has made every reasonable effort to ensure
that the information and assumptions on which these statements and projections
are based are correct, reasonable and complete. There is no assurance, however,
that MCV's expectations will be realized or that unexpected events will not have
an adverse impact on MCV's business.

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

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 and cost of maintenance of the Facility's QF status.



                                      -26-
<PAGE>

Operating Outlook. During 2002, approximately 71% 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 98.8% for 2002, 99.5% for the year 2001
and 98.5% for the year 2000. 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.

Energy Rates and Cost of Production. Under the PPA, energy charges are based on
the costs associated with fuel inventory, operations and maintenance, and
administrative and general expenses associated with certain of Consumers' coal
plants. However, MCV's costs of producing electricity are tied, in large part,
to the cost of natural gas. To the extent that the costs associated with
production of electricity with natural gas, rise faster than the energy charge
payments, which are based largely on Consumers' coal plant operation and
maintenance costs, MCV's financial performance would be negatively affected. In
addition, the extent to which the Facility is dispatched by Consumers can
exacerbate the divergence between variable revenues and costs of production. For
the period 2000 through 2002, the energy charge (fixed and variable) paid to MCV
has risen by 2.5%, while the average variable cost of delivered fuel for
approximately the same period has risen by 31.5%. The divergence between
variable revenues and costs will become greater if the energy charge (based
largely on the cost of coal) declines or escalates more slowly than the spot
market or contract prices under which MCV purchases fuel. Currently, MCV
continues to purchase the majority of its natural gas requirements under long
term fixed price 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. In 2002, MCV 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 2003,
although high gas prices for an extended period of time could adversely affect
operating results.

In March 1998, Consumers began economically dispatching the Facility by
scheduling energy deliveries on an economic basis relative to the cost of other
energy resources available to Consumers, resulting in an average dispatch of
approximately 75% from April 1998 through December 2002. Previously, the
Facility was being dispatched on an uneconomic basis (relative to the cost of
other energy resources) averaging approximately 90%. A return to uneconomic
dispatch could negatively affect MCV's financial performance.

Capacity and Energy Payments Under the PPA. The PPA permits Consumers, under
certain conditions, to reduce the capacity and energy charges payable to MCV
and/or to receive refunds of capacity and energy charges paid to MCV if the MPSC
does not permit Consumers to recover from its customers the capacity and energy
charges specified in the PPA (the "regulatory-out" provision). Until September
15, 2007, the capacity charge may not be reduced below an average capacity rate
of 3.77 cents per kWh for the available Contract Capacity notwithstanding the
"regulatory-out" provision. MCV and Consumers entered into a settlement
agreement ("Settlement Agreement"), effective January 1, 1999, which resolves
all of the previously Disputed Issues under the PPA and includes definitive
obligations for Consumers to make energy payments calculated in accordance with
the PPA, irrespective of any MPSC or the reviewing courts decision which may
affect those issues or payments. The Settlement Agreement also provides that,
not withstanding modifications to the Facility increasing its capacity, in
billing Consumers for capacity charges (at the rates set forth in the PPA)
availability would be capped at 98.5% of the 1240 MW ("98.5% cap") on a
calendar-year basis for the term of the PPA irrespective of any MPSC or the
reviewing courts decision, which may affect this issue or payment. Provided,
however, that if Consumers transfers (subject to MCV's prior consent) its rights
of up to 1240 MW of capacity and associated energy under the PPA to a third
party for an extended period of time, the 98.5% cap will not apply except that
the 98.5% cap is, in any event, reinstated on September 15, 2007.
Notwithstanding the Settlement Agreement, after September 15, 2007, an issue
could exist as



                                      -27-
<PAGE>
to whether or not Consumers can exercise the "regulatory out" provision to
reduce capacity payments to MCV based upon the "availability caps" of 88.7% of
the 1240 MW (both on and off peak) of contract capacity as provided for in the
915 MW Settlement and the 325 MW Settlement. Consumers and MCV are required to
support and defend the terms of the PPA.

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

In June 2000, the State of Michigan enacted legislation which, among other
things, states that the Restructuring Orders (being voluntarily implemented by
Consumers) are in compliance with the legislation and enforceable by the MPSC.
The legislation provides that the rights of parties to existing contracts
between utilities (like Consumers) and 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
costs including PPA charges.

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

Federal Electric Industry Restructuring. FERC has jurisdiction over wholesale
energy sales and is moving towards "market" based pricing of electricity as
opposed to traditional cost-based pricing. In April 1996, FERC issued Order No.
888 requiring all utilities that FERC regulates to file uniform transmission
tariffs providing for, among other things, non-discriminatory "open access" to
all wholesale buyers and sellers, including the transmission owner, on terms and
conditions established by FERC. Order No. 888 also requires utilities to
"functionally unbundle" transmission and separate transmission personnel from
those responsible for marketing generation. In December 1999, FERC issued a
final rule, Order No. 2000, designed to encourage all owners and operators of
interstate electric transmission lines to join regional transmission
organizations. In July 2001, FERC issued a Notice of Proposed Rulemaking to
establish a standard market design ("SMD") in order to remedy remaining undue
discrimination in transmission and wholesale energy markets. The SMD requires
all FERC jurisdictional transmission providers to transfer control of their
transmission facilities to an independent transmission provider. The independent
transmission provider will provide transmission service under a standardized
tariff and administer market based wholesale energy markets for day-ahead and
real-time sales. The SMD proposal has drawn strong criticism from certain State
regulators in the Pacific northwest and southeast, which are asking Congress to
block the proposal. This criticism has had the effect of delaying issuance of a
final SMD rule. In addition, apart from the SMD proceeding, the Midwest
Independent System Operator ("Midwest ISO") has committed to FERC to implement
in December 2003 a day-ahead and real-time energy market similar to that
proposed in the SMD proceeding. The


                                      -28-
<PAGE>
Midwest ISO provides transmission service in most parts of the Midwest,
including Michigan. The SMD could impact MCV in selling electricity in the
wholesale market. MCV Management cannot predict the outcome of the NOPR or the
impact it may have on MCV's business, if any, at this time.

Maintaining QF Status. In the case of a topping-cycle generating plant such as
the Facility, to maintain QF Status the applicable operating standard requires
that the portion of total energy output that is put to some useful purpose other
than facilitating the production of power (the "Thermal Percentage") be at least
5%. In addition, the plant must achieve and maintain an average PURPA efficiency
standard (the sum of the useful power output plus one-half of the useful thermal
energy output, divided by the energy input (the "Efficiency Percentage")) of at
least 45%. However, if the plant maintains a Thermal Percentage of 15% or
higher, the required Efficiency Percentage is reduced to 42.5%. The tests are
applied on a calendar year basis. The Facility has achieved the applicable
Efficiency Percentage of 42.5% in each year since commercial operation, and in
the years 1995 through 2002 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 2002, the Facility achieved an Efficiency Percentage of 47.0% and a Thermal
Percentage of 18.6%.

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

Critical Accounting Policies

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

Electric Industry Restructuring. 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 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. A significant issue to MCV is
the potential for future regulatory denial of recovery by Consumers from its
customers of above market PPA costs Consumers pays MCV. Over 90% of MCV's
revenues come from sales pursuant to the PPA. To date, restructuring has not
negatively impacted MCV, but if restructuring results in denying Consumers
recovery of above-market PPA costs, MCV's cash flows may be negatively impacted,
especially 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



                                      -29-
<PAGE>

earnings impact. At this time, MCV Management cannot predict the outcome of
these matters or the magnitude of any possible adjustment.

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

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

The FASB issued Derivative Implementation Group ("DIG") Issue C-16, which became
effective April 1, 2002, regarding natural gas commodity contracts that combine
an option component and a forward component. This guidance requires either that
the entire contract be accounted for as a derivative or the components of the
contract be separated into two discrete contracts. Under the first alternative,
the entire contract considered together would not qualify for the normal
purchases and sales exception under the revised guidance. Under the second
alternative, the newly established forward contract could qualify for the normal
purchases and sales exception, while the option contract would be treated as a
derivative under SFAS No. 133 with changes in fair value recorded through
earnings. At April 1, 2002, MCV had nine long term gas contracts that contained
both an option and forward component. As such, they were no longer accounted for
under the normal purchases and sales exception and MCV began mark-to-market
accounting of these nine contracts through earnings. Based on the natural gas
prices, at the beginning of April 2002, MCV recorded a $58.1 million gain for
the cumulative effect of this accounting change. As of December 31, 2002, MCV
recorded an additional $21.9 million net mark-to-market gain in earnings,
associated with these contracts. During the fourth quarter, MCV removed the
option component from three of the nine long term gas contracts discussed above,
which should reduce the earnings volatility. MCV expects future earnings
volatility on the six remaining long term gas contracts that contain volume
optionality, since changes to this mark-to-market gain will be recorded on a
quarterly basis during the remaining life of approximately five years for these
gas contracts.

Property Tax Appeals. MCV currently accrues property taxes on the basis of the
taxable value as assessed by the taxing authorities. In 1997, MCV filed a
property tax appeal against the City of Midland at the Michigan Tax Tribunal
contesting MCV's 1997 property taxes. Subsequently, MCV filed appeals contesting
its property taxes for tax years 1998 through 2003 at the Michigan Tax Tribunal.
A trial was held for tax years 1997 - 2000 and for the appeals for tax years
2001-2003 are being held in abeyance pending the resolution of the aforesaid
trial. MCV is seeking a reduction of its annual property taxes on the basis that
the City of Midland has over assessed the property's taxable value for ad
valorem property tax purposes. 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 on
quoted market prices. The information presented below should be


                                      -30-
<PAGE>

read in conjunction with Part IV, Item 15, "Notes to Consolidated Financial
Statements - Note 2, Significant Accounting Policies and Note 5, Long Term
Debt".

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

To manage the effects of interest rate volatility on interest income while
maximizing return on permitted investments, MCV has established an interest rate
hedging program. The carrying amounts of MCV's short-term investments
approximate fair value because of the short term maturity of these instruments.
MCV's short-term investments, which are made up of investment securities held to
maturity and as of December 31, 2002, 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:

<TABLE>
<CAPTION>
                                                         Expected Maturity In
                               ------------------------------------------------------------------------      Fair
                               2003     2004      2005        2006       2007      Thereafter     Total      Value
                               ----     ----      ----        ----       ----      ----------     -----      -----
<S>                            <C>      <C>       <C>         <C>        <C>       <C>            <C>        <C>
Debt:
----
Long term Debt Fixed
Rate (in millions)             $208.9     $242.8    $174.4    $156.0   $150.9       $1,040.0     $1,973.0        N/A
     Avg. Interest Rate          9.4%       9.4%      9.4%      9.4%       9.4%         9.4%          9.4%
</TABLE>

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

The following table provides information about MCV's futures and option
contracts that are sensitive to changes in natural gas prices; these futures and
option contracts have maturity dates ranging from February 2003 to December
2005. The table presents the carrying amounts and fair values at December 31,
2002:

<TABLE>
<CAPTION>
                                                             Expected Maturity in 2003/2005             Fair Value
                                                             ------------------------------             ----------
<S>                                                          <C>                                        <C>
Futures Contracts:
-----------------
Contract Volumes (10,000 MMBtu) Long/Buy                                  3,472                                --
Contract Volumes (10,000 MMBtu) Sell/Short                                   19                                --
Weighted Average Price Long (per MMBtu)                                $  3.585                          $  4.307
Weighted Average Price Short (per MMBtu)                               $  5.182                          $  4.789
Contract Amount ($US in Millions)                                      $  123.5                          $  148.6
</TABLE>

Foreign Currency Risk. 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



                                      -31-
<PAGE>

entered into by MCV have maturity dates of less than one year. As of December
31, 2002, MCV had forward purchase contracts involving Swiss Francs in the
notional amount of $5.0 million, with a deferred gain of $1.1 million.


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-23 of this Annual Report on Form 10-K and are hereby
incorporated by reference herein.


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

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








                                      -32-
<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>
<S>                                      <C>       <C>
Management Committee
--------------------

John J. O'Rourke                         (48)      Management Committee Chairman

David W. Joos                            (49)      Management Committee Member
                                                   (Term began in June 2002)

William T. McCormick, Jr.                (58)      Management Committee Chairman
                                                   (Term ended in June 2002)


Executive Officers
------------------

James M. Kevra                           (54)      President and Chief Executive Officer

Bruce C. Grant                           (56)      Vice President of Human Resources, Communications and
                                                   Public Affairs

Barbara E. Lawson                        (44)      Treasurer and Manager of Internal Audit

James A. Mooney                          (63)      Vice President of Engineering, Operations and
                                                   Construction

Gary B. Pasek                            (47)      Vice President, General Counsel and Secretary

James M. Rajewski                        (55)      Chief Financial Officer, Vice President and Controller

Stephen A. Shulman                       (46)      Chief Financial Officer and Treasurer
                                                   (Resigned in April 2002)

LeRoy W. Smith                           (61)      Vice President of Energy Supply and Marketing
</TABLE>

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



                                      -33-
<PAGE>

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

William T. McCormick, Jr. served as Chairman of the Management Committee of MCV
since its creation in January 1987 to June 2002. His term on the Management
Committee ended following Mr. McCormick's resignation as Chairman and Chief
Executive Officer of CMS Energy Corporation. Mr. McCormick had 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.

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.

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

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

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

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

Stephen A. Shulman resigned as Chief Financial Officer and Treasurer of MCV in
April 2002 to accept other employment. He had previously held this position
since February 1999.

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.


















                                      -34-
<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, 2002, 2001 and
2000.

                           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                         2002             277,480              215,984                    54,297 (b)
President and                          2001             268,293                   --                    52,923
Chief Executive Officer                2000             253,638              215,000                    50,731


James A. Mooney                        2002             203,204               81,906                    42,214 (c)
Vice President of                      2001             197,233                   --                    41,326
Engineering, Operations                2000             187,639              114,733                    39,894
and Construction


Gary B. Pasek                          2002             177,621              102,201                    26,609 (d)
Vice President                         2001             172,142                   --                    25,788
General Counsel & Secretary            2000             164,995              101,071                    24,718


LeRoy W. Smith                         2002             178,400              100,505                    29,217 (e)
Vice President of Energy               2001             172,655                   --                    28,362
Supply and Marketing                   2000             163,932              107,504                    27,110


Stephen A. Shulman                     2002              56,040                   --                     8,396 (f)
Chief Financial Officer                2001             154,264                   --                    23,112
and Treasurer                          2000             148,079               88,448                    22,194
(Resigned 4/18/02)

James M. Rajewski                      2002             144,024               82,874                    21,531 (g)
Chief Financial Officer,
Vice President and Controller
</TABLE>
------------------------------
(a)  For years 2002 and 2000, the amounts represent bonuses accrued. For 2001,
     no bonuses were awarded under the Senior Management bonus plan.

(b)  Includes company contributions of $10,000 to the 401(k) Savings Plan,
     $19,000 to the Defined Contribution Retirement Plan and $25,297 to the
     Supplemental Retirement Plan.

(c)  Includes company contributions of $10,000 to the 401(k) Savings Plan,
     $19,000 to the Defined Contribution Retirement Plan and $13,214 to the
     Supplemental Retirement Plan.

(d)  Includes company contributions of $8,870 to the 401(k) Savings Plan and
     $17,739 to the Defined Contribution Retirement Plan.

(e)  Includes company contributions of $8,870 to the 401(k) Savings Plan,
     $17,739 to the Defined Contribution Retirement Plan and $2,608 to the
     Supplemental Retirement Plan.



                                      -35-
<PAGE>

(f)  Includes company contributions of $2,799 to the 401(k) Savings Plan and
     $5,597 to the Defined Contribution Retirement Plan.

(g)  Includes company contributions of $7,177 to the 401(k) Savings Plan and
     $14,354 to the Defined Contribution Retirement Plan.

Long term Incentive Plan

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 was able to make a cash distribution to its
Partners greater than 75% of the Partners' estimated tax obligation, each
participant in the plan could have received 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 was 75% or less of the estimated tax obligation for each of
these three years, no cash payout to participants would occur under this plan.
For the years 2000 through 2002, there were no cash distributions to the
Partners nor cash payouts to participants under this plan and the plan has been
terminated.

Compensation Committee Interlocks and Insider Participation

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

Mr. O'Rourke was elected as Chairman of the Compensation Committee in June 2002.
He has served since March 2001 as a member of MCV's Compensation Committee. He
also serves as Vice President and Managing Director for El Paso Merchant Energy
North America Company. El Paso Midland, Inc. and affiliates of El Paso have
engaged in numerous transactions in the ordinary course of business to provide
services or products to MCV. In 2002, 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 $89.6 million. In
addition, 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, which was repaid to MCV in May
2002. In December 2002, MCV and an El Paso affiliate entered into a master
netting agreement, covering the natural gas purchase agreements, in which
collateral in the form of cash or a letter or credit can be required of either
party based on such party's credit ratings and on the mark-to-market values of
the natural gas purchase agreements. As of December 31, 2002, neither El Paso
nor MCV had provided cash or letters of credit under the master netting
agreement.

Mr. Joos commenced in June 2002 as a member of MCV's Compensation Committee. He
also serves as President, Chief Operating Officer and a member of the Board of
Directors of CMS Energy Corporation. Mr. McCormick was Chairman of the
Compensation Committee of MCV as well as Chairman, President and Chief Executive
Officer and Director of CMS Energy and Consumers. His term on the Compensation
Committee ended in June 2002. CMS Energy and its affiliates have the following
direct and indirect interests in MCV and the Facility. CMS Midland Holdings
Company has an ownership interest in one of the Owner Trusts, representing
indirectly a 35% equity interest in the Facility; CMS Midland has a 49% general
partnership interest in MCV; and Consumers has contractual obligations under the
PPA to purchase electric capacity and related energy from MCV, has contractual
obligations under various backup agreements among MCV, Consumers and Dow to
assure a continuous supply of steam and electricity to Dow in the event the SEPA
is terminated, has contractual obligations to enter into transmission service
agreements with other utilities for MCV's benefit, and has leased undivided
interests in the Site to the Owner Trustees (as MCV's assignees) pursuant to the
Ground Lease. In 2002, Consumers purchased electric capacity and related energy
from the Facility that aggregated approximately $557.1 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 2002, CMS Energy
affiliates engaged in transactions with MCV which included the sale of



                                      -36-
<PAGE>

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 $42.7 million. This level of transactions is expected to
substantially decrease in 2003 as a result of the expected sale of the Panhandle
and Trunkline transportation services to Southern Union Pipeline and due to the
sale of CMS Marketing Services and Trading's (a subsidiary of Consumers) natural
gas contracts to Sempra Energy Trading, the wholesale commodity trading unit of
Sempra Energy. As of February 1, 2003, Consumers or its subsidiaries no longer
hold any natural gas contracts with MCV.

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


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
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.




                                      -37-
<PAGE>

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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


Item 14. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Within the 90 days prior to the date of the filing of this report, MCV carried
out an evaluation, under the supervision and with the participation of MCV's
Management, including the President and Chief Executive Officer, and the Chief
Financial Officer, Vice President and Controller, of the effectiveness of the
design and operation of MCV's disclosure controls and procedures (as defined in
Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as amended).
Based on such review of MCV's disclosure controls and procedures, the President
and Chief Executive Officer, and the Chief Financial Officer, Vice President and
Controller; have concluded that MCV's disclosure controls and procedures are
effective.

Changes in Internal Controls

There have been no significant changes in MCV's internal controls or in other
factors that could significantly affect these controls subsequent to the date
MCV completed its evaluation.




                                      -38-
<PAGE>
                                     PART IV

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

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

      1.   Financial statements.

           The following consolidated financial statements are as of December
           31, 2002 and 2001 or for each of the three years ended December 31,
           2002, 2001 and 2000:
<TABLE>
<CAPTION>
                                                                                                          Page
                                                                                                          ----
<S>                                                                                                       <C>
           Index to Consolidated Financial Statements and Supplemental Schedules                          F-1
           Reports of Independent Public Accountants                                                      F-2
           Consolidated Balance Sheets                                                                    F-4
           Consolidated Statements of Operations                                                          F-5
           Consolidated Statements of Partners' Equity                                                    F-6
           Consolidated Statements of Cash Flows                                                          F-7
           Notes to Consolidated Financial Statements                                                     F-8
</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 2002.




                                      -39-
<PAGE>
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


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

Report of Independent Public Accountants - Arthur Andersen, LLP                                            F-3

Consolidated Balance Sheets as of December 31, 2002 and 2001                                               F-4

Consolidated Statements of Operations for the Years Ended December 31, 2002, 2001, and 2000                F-5

Consolidated Statements of Partners' Equity for the Years Ended December 31, 2002, 2001, and 2000          F-6

Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2001, and 2000                F-7

Notes to Consolidated Financial Statements                                                                 F-8
</TABLE>




                                      F-1
<PAGE>

                           PRICEWATERHOUSECOOPERS LLP


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

In our opinion, the accompanying consolidated balance sheet as of December 31,
2002 and the related consolidated statements of operations, partners' equity and
cash flows present fairly, in all material respects, the financial position of
the Midland Cogeneration Venture Limited Partnership (a Michigan limited
partnership) and subsidiaries (MCV) at December 31, 2002 and the results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of MCV's Management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion. The financial statements of MCV as of December
31, 2001 and for each of the two years in the period ended December 31, 2001,
were audited by other independent accountants who have ceased operations. Those
independent accountants expressed an unqualified opinion on those financial
statements in their report dated January 18, 2002.

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


                                                      PricewaterhouseCoopers LLP



    Detroit, Michigan,
    January 17, 2003



                                      F-2
<PAGE>

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

                               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-3
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31,
                                 (In Thousands)

<TABLE>
<CAPTION>
ASSETS                                                                                      2002                2001
------                                                                                  -------------       -------------
<S>                                                                                     <C>                 <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                             $    160,425        $    140,630
  Restricted cash and cash equivalents                                                            --                 787
  Accounts and notes receivable - related parties                                             48,448             108,780
  Accounts receivable                                                                         32,479              20,490
  Gas inventory                                                                               19,566              19,699
  Unamortized property taxes                                                                  18,355              16,625
  Derivative assets (Note 2)                                                                  73,819                  --
  Broker margin accounts and prepaid expenses                                                  3,323              34,372
                                                                                        -------------       -------------

    Total current assets                                                                     356,415             341,383
                                                                                        -------------       -------------

PROPERTY, PLANT AND EQUIPMENT
  Property, plant and equipment                                                            2,449,148           2,439,541
  Pipeline                                                                                    21,432              21,398
                                                                                        -------------       -------------

    Total property, plant and equipment                                                    2,470,580           2,460,939

  Accumulated depreciation                                                                  (920,614)           (851,539)
                                                                                        -------------       -------------

    Net property, plant and equipment                                                      1,549,966           1,609,400
                                                                                        -------------       -------------

OTHER ASSETS:
  Restricted investment securities held-to-maturity                                          138,701             141,467
  Derivative assets non-current (Note 2)                                                      31,037
  Deferred financing costs, net of accumulated amortization
    of $15,930 and $14,463, respectively                                                       9,035              10,502
  Prepaid gas costs, materials and supplies                                                   12,919              14,295
                                                                                        -------------       -------------

    Total other assets                                                                       191,692             166,264
                                                                                        -------------       -------------
TOTAL ASSETS                                                                            $  2,098,073        $  2,117,047
                                                                                        =============       =============

LIABILITIES AND PARTNERS' EQUITY
--------------------------------
CURRENT LIABILITIES:
  Accounts payable and accrued liabilities                                              $     58,080        $     73,596
  Interest payable                                                                            56,386              60,334
  Current portion of long-term debt                                                           93,928             186,173
                                                                                        -------------       -------------

    Total current liabilities                                                                208,394             320,103
                                                                                        -------------       -------------

NON-CURRENT LIABILITIES:
  Long-term debt                                                                           1,153,221           1,243,060
  Other                                                                                        2,148               2,172
                                                                                        -------------       -------------

    Total non-current liabilities                                                          1,155,369           1,245,232
                                                                                        -------------       -------------

COMMITMENTS AND CONTINGENCIES

TOTAL LIABILITIES                                                                          1,363,763           1,565,335
                                                                                        -------------       -------------

PARTNERS' EQUITY                                                                             734,310             551,712
                                                                                        -------------       -------------
TOTAL LIABILITIES AND PARTNERS' EQUITY                                                  $  2,098,073        $  2,117,047
                                                                                        =============       =============
</TABLE>

        The accompanying notes are an integral part of these statements.


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

<TABLE>
<CAPTION>
                                                                       2002               2001               2000
                                                                   --------------     -------------      -------------
<S>                                                                <C>                <C>                <C>
OPERATING REVENUES:
  Capacity                                                         $     404,713      $    409,633       $    410,938
  Electric                                                               177,569           184,707            177,989
  Steam and other                                                         14,537            16,473             15,620
                                                                   --------------     -------------      -------------

    Total operating revenues                                             596,819           610,813            604,547
                                                                   --------------     -------------      -------------

OPERATING EXPENSES:
  Fuel costs (Note 2)                                                    255,142           288,167            232,127
  Depreciation                                                            88,963            92,176             93,916
  Operations                                                              16,642            16,082             15,117
  Maintenance                                                             12,666            13,739             13,907
  Property and single business taxes                                      27,087            26,410             26,860
  Administrative, selling and general                                      8,195            16,404              9,807
                                                                   --------------     -------------      -------------

    Total operating expenses                                             408,695           452,978            391,734
                                                                   --------------     -------------      -------------

OPERATING INCOME                                                         188,124           157,835            212,813
                                                                   --------------     -------------      -------------

OTHER INCOME (EXPENSE):
  Interest and other income                                                5,555            16,725             24,211
  Interest expense                                                      (119,783)         (126,296)          (146,903)
                                                                   --------------     -------------      -------------

    Total other income (expense), net                                   (114,228)         (109,571)          (122,692)
                                                                   --------------     -------------      -------------

NET INCOME BEFORE CUMULATIVE
  EFFECT OF ACCOUNTING CHANGE                                             73,896            48,264             90,121

Cumulative effect of change in method of
  accounting for derivative option contracts
  (to April 1, 2002)  (Note 2)                                            58,131                --                 --
                                                                   --------------     -------------      -------------

NET INCOME                                                         $     132,027      $     48,264       $     90,121
                                                                   ==============     =============      =============
</TABLE>


        The accompanying notes are an integral part of these statements.


                                      F-5
<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, 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

Comprehensive Income
     Net Income                                                             114,947           17,080          132,027

     Other Comprehensive Income
        Unrealized gain on hedging activities
          since beginning of period                                          33,311            4,950           38,261
        Reclassification adjustments recognized
           in net income above                                               10,717            1,593           12,310
                                                                       -------------    -------------    -------------
        Total other comprehensive income                                     44,028            6,543           50,571

     Total Comprehensive Income                                             158,975           23,623          182,598
                                                                       -------------    -------------    -------------

BALANCE, DECEMBER 31, 2002                                             $    627,947     $    106,363     $    734,310
                                                                       =============    =============    =============
</TABLE>

        The accompanying notes are an integral part of these statements.



                                      F-6
<PAGE>
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
     CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                                    2002              2001              2000
                                                                                -------------     -------------     -------------
<S>                                                                             <C>               <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                    $    132,027      $     48,264      $     90,121

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

  Depreciation and amortization                                                       90,430            93,835            95,295
  Cumulative effect of change in accounting principle                                (58,131)               --                --
  (Increase) Decrease in accounts receivable                                          48,343            55,127           (65,629)
  (Increase) decrease in gas inventory                                                   133            (5,225)             (996)
  (Increase) decrease in unamortized property taxes                                   (1,730)             (415)              599
  (Increase) decrease in broker margin accounts and prepaid expenses                  31,049           (26,587)           (1,817)
  Increase in derivative assets                                                      (20,444)               --                --
  Decrease in prepaid gas costs, materials and supplies                                1,376             8,414               760
  (Increase) decrease in accounts payable and accrued liabilities                      8,774           (43,704)           33,040
  Decrease in interest payable                                                        (3,948)           (7,082)           (8,703)
 (Decrease) increase in other non-current liabilities                                    (24)              245               381
                                                                                -------------     -------------     -------------
    Net cash provided by operating activities                                        227,855           122,872           143,051
                                                                                -------------     -------------     -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Plant modifications and purchases of plant and equipment                           (29,529)          (30,530)          (33,082)
                                                                                -------------     -------------     -------------
    Net cash used in investing activities                                            (29,529)          (30,530)          (33,082)
                                                                                --------------    -------------     -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of financing obligation                                                 (182,084)         (155,632)         (139,095)
  Debt refinancing costs                                                                  --                --            (6,388)
  Maturity of restricted investment securities held-to-maturity                      377,192           538,327           282,091
  Purchase of restricted investment securities held-to-maturity                     (374,426)         (539,918)         (282,164)
                                                                                --------------    -------------     -------------
    Net cash used in financing activities                                           (179,318)         (157,223)         (145,556)
                                                                                --------------    -------------     -------------

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH -
  CURRENT                                                                             19,008           (64,881)          (35,587)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH - CURRENT, AT BEGINNING
  OF PERIOD                                                                          141,417           206,298           241,885
                                                                                --------------    -------------     -------------

CASH, CASH EQUIVALENTS AND RESTRICTED CASH - CURRENT, AT END OF PERIOD          $    160,425      $    141,417      $    206,298
                                                                                ==============    =============     =============
</TABLE>


        The accompanying notes are an integral part of these statements.



                                      F-7
<PAGE>
                          MIDLAND COGENERATION VENTURE
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)   THE PARTNERSHIP AND ASSOCIATED RISKS

      MCV was organized to construct, own and operate a combined-cycle,
      gas-fired cogeneration facility (the "Facility") located in Midland,
      Michigan. MCV was formed on January 27, 1987, and the Facility began
      commercial operation in 1990.

      In 1992, MCV acquired the outstanding common stock of PVCO Corp., a
      previously inactive company. MCV and PVCO Corp. entered into a partnership
      agreement to form MCV Gas Acquisition General Partnership ("MCV GAGP") for
      the purpose of buying and selling natural gas on the spot market and other
      transactions involving natural gas activities. Currently, MCV GAGP is not
      actively engaged in any business activity.


      The Facility was originally designed to provide approximately 1370
      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 1500 MW. MCV
      has entered into three principal energy sales agreements. MCV has
      contracted to (i) supply up to 1240 MW of electric capacity ("Contract
      Capacity") to Consumers Energy Company ("Consumers") under the Power
      Purchase Agreement ("PPA"), for resale to its customers, (ii) supply
      electricity and steam to The Dow Chemical Company ("Dow") under the Steam
      and Electric Power Agreement ("SEPA") and (iii) 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' ability to perform 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. For the twelve months ended December 31, 2002, the
      Facility achieved a Thermal Percentage of 18.6% 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 2003 and beyond, as well as the PURPA ownership
      limitations.

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


                                      F-8
<PAGE>
                          MIDLAND COGENERATION VENTURE
                   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. A significant issue to MCV is the potential for future
      regulatory denial of recovery by Consumers from its customers of above
      market PPA costs Consumers pays MCV. At the state level, the MPSC entered
      a series of orders from June 1997 through February 1998 (collectively the
      "Restructuring Orders"), mandating that utilities "wheel" third-party
      power to the utilities' customers, thus permitting customers to choose
      their power provider. MCV, as well as others, filed an appeal in the
      Michigan Court of Appeals to protect against denial of recovery by
      Consumers of PPA charges. The Michigan Court of Appeals found that the
      Restructuring Orders do not unequivocally disallow such recovery by
      Consumers and, therefore, MCV's issues were not ripe for appellate review
      and no actual controversy regarding recovery of costs could occur until
      2008, at the earliest. In June 2000, the State of Michigan enacted
      legislation which, among other things, states that the Restructuring
      Orders (being voluntarily implemented by Consumers) are in compliance with
      the legislation and enforceable by the MPSC. The legislation provides that
      the rights of parties to existing contracts between utilities (like
      Consumers) and QFs (like MCV), including the rights to have the PPA
      charges recovered from customers of the utilities, are not abrogated or
      diminished, and permitted utilities to securitize certain stranded costs
      including PPA charges.

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



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


      Fuel Costs

      MCV's fuel costs are those costs associated with securing natural gas,
      transportation and storage services necessary to generate electricity and
      steam from the Facility. These costs are recognized in the income
      statement based upon actual volumes burned to produce the delivered
      energy. In addition, MCV engages in certain cost mitigation activities to
      offset the fixed charges MCV incurs for these activities. The gains or
      losses resulting from these activities have resulted in net gains of
      approximately $3.9 million, $5.5 million and $6.1 million for the years
      ended 2002, 2001 and 2000, 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 and Consumers agreed to reduce the dispatch level of the
      Facility, from time to time. In the event of reduced dispatch, MCV agreed
      to share the savings realized by not having to generate the electricity.
      For the twelve months ended December 31, 2002 and December 31, 2001, MCV
      estimates that these electric dispatch reduction transactions resulted in
      net savings of approximately $2.5 million and $7.6 million, respectively,
      a portion of which will be realized in reduced maintenance expenditures in
      future years. MCV anticipates entering into similar transactions in the
      future to mitigate the impact 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, 2002 and 2001, was $7.4
      million and $6.8 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.

      Federal Income Tax

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

      Statement of Cash Flows

      All liquid investments purchased with a maturity of three months or less
      at time of purchase are considered to be current cash equivalents.



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


      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, 2002 and December 31, 2001
      have original maturity dates of approximately one year or less. The unique
      nature of the negotiated financing obligation discussed in Note 5 makes it
      unnecessary to estimate the fair value of the Owner Participants'
      underlying debt and equity instruments supporting such financing
      obligation, since SFAS No. 107 "Disclosures about Fair Value of Financial
      Instruments" does not require fair value accounting for the lease
      obligation.

      Accounting for Derivative Instruments and Hedging Activities

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

         Electric Sales Agreements

         MCV believes that its electric sales agreements currently do not
         qualify as derivatives under SFAS No. 133, due to the lack of an active
         energy market in the State of Michigan, as defined by SFAS No. 133, and
         the transportation cost to deliver the power under the contracts to the
         closest active energy market at the Cinergy hub in Ohio and as such
         does not record the fair value of these contracts on its balance sheet.
         If a market develops in the future, MCV may be required to account for
         these contracts as derivatives.

         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 ninth series of major gas turbine generator ("GTG")
         inspections, which are expected to be completed by year-end 2008. The
         payments due to Alstom under the Amended Service Agreement are adjusted
         annually based on the U.S. dollar to Swiss franc currency exchange
         rate.

         To manage this currency exchange rate risk and hedge against adverse
         currency fluctuations impacting the payments under the Amended Service
         Agreement, MCV 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, 2002 and December 31,
         2001, MCV had forward purchase contracts involving Swiss Francs in the
         notional amount of $5.0 million and $10.0 million, respectively, these
         hedges are considered highly effective, therefore, there is no material
         gain or loss recognized during the periods ended December 31, 2002 and
         December 31, 2001.



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


         Natural Gas Supply Contracts

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

         The FASB issued DIG Issue C-16, which became effective April 1, 2002,
         regarding natural gas commodity contracts that combine an option
         component and a forward component. This guidance requires either that
         the entire contract be accounted for as a derivative or the components
         of the contract be separated into two discrete contracts. Under the
         first alternative, the entire contract considered together would not
         qualify for the normal purchases and sales exception under the revised
         guidance. Under the second alternative, the newly established forward
         contract could qualify for the normal purchases and sales exception,
         while the option contract would be treated as a derivative under SFAS
         No. 133 with changes in fair value recorded through earnings. At April
         1, 2002, MCV had nine long-term gas contracts that contained both an
         option and forward component. As such, they were no longer accounted
         for under the normal purchases and sales exception and MCV began
         mark-to-market accounting of these nine contracts through earnings.
         Based on the natural gas prices, at the beginning of April 2002, MCV
         recorded a $58.1 million gain for the cumulative effect of this
         accounting change. As of December 31, 2002, MCV recorded in "Fuel
         costs" an additional $21.9 million net mark-to-market gain in earnings,
         associated with these contracts and "Derivative assets" in Current
         Assets and Other Assets in the amounts of $48.9 million and $31.0
         million, respectively, representing the mark-to-market gain on these
         long term contracts. During the fourth quarter, MCV removed the option
         component from three of the nine long term gas contracts discussed
         above, which should reduce the earnings volatility. MCV expects future
         earnings volatility on the six remaining long term contracts that
         contain volume optionality, since changes to this mark-to-market gain
         will be recorded on a quarterly basis during the remaining life of
         approximately five years for these gas contracts.

         Natural Gas Supply Futures and Options

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

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

         Cash is deposited with the broker in a margin account at the time
         futures or options contracts are initiated. The change in market value
         of these contracts requires adjustment of the margin account balances.
         The margin balance, recorded as a current asset in "Broker margin
         accounts and prepaid expenses," was $.8 million and $32.0 million as of
         December 31, 2002 and December 31, 2001, respectively.

         Upon the January 1, 2001 adoption of SFAS No. 133, under the
         transaction rules, 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,
         were reflected in other comprehensive income based on previous hedging
         relationships. These futures and options totaled 1.9 billion cubic feet
         ("Bcf") with a total fair value loss of $2.2 million. Fair value
         changes in these contracts were recognized currently in income and the
         amount reflected in other comprehensive income was reclassified to
         income when the



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


         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, 2002, MCV has recognized
         in other comprehensive income, an unrealized $50.6 million increase on
         the futures contracts, which are hedges of forecasted purchases for
         plant use of market priced gas. This resulted in a net $26.3 million
         gain balance in other comprehensive income as of December 31, 2002.
         This balance represents natural gas futures and options with maturities
         ranging from January 2003 to December 2005, of which $20.3 million of
         this gain is expected to be reclassified into earnings within the next
         twelve months. MCV also has recorded, as of December 31, 2002, a $24.9
         million derivative asset in "Derivative assets," representing the
         mark-to-market gain on natural gas futures for anticipated projected
         electric and steam sales accounted for as hedges. In addition, for the
         twelve months ended December 31, 2002, MCV has recorded a net $12.2
         million loss in earnings from hedging activities related to MCV natural
         gas requirements for Facility operations and a net $.4 million gain in
         earnings from cost mitigation activities. For the twelve months ended
         December 31, 2001, MCV recognized an unrealized $40.0 million decrease
         in other comprehensive income on the futures contracts, which are
         hedges of forecasted purchases for plant use of market priced gas,
         resulting in a $24.3 million loss in other comprehensive income as of
         December 31, 2001. As of December 31, 2001, the outstanding derivative
         liability in "Accounts payable and accrued liabilities" was $22.6
         million. For the twelve months ended December 31, 2001, MCV had
         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.

         In addition, MCV had two long-term natural gas supply contracts with
         affiliates of the Enron Corporation ("Enron"), which had filed
         voluntary bankruptcy petitions for reorganization under Chapter 11 of
         the U.S. Bankruptcy Code in December 2001. Both of these contracts had
         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, which was
         subsequently terminated during the bankruptcy proceedings.

         Interest Rate Swaps

         To manage the effects of interest rate volatility on interest income
         while maximizing return on permitted investments, MCV established an
         interest rate hedging program. The notional amounts of the hedges are
         tied directly to MCV's anticipated cash investments, without physically
         exchanging the underlying notional amounts. Cash is deposited with the
         broker in a margin account at the time the interest rate swap
         transactions are initiated. The change in market value of these
         contracts may require further adjustment of the margin account balance.
         The margin balance recorded as a current asset in "Broker margin
         accounts and prepaid expenses," was approximately $25,000 and $30,000
         for the periods ending December 31, 2002 and December 31, 2001,
         respectively.

         As of December 31, 2002 and December 31, 2001, MCV did not have any
         interest rate swap transactions outstanding which qualified for cash
         flow hedge accounting. The January 1, 2001 adoption of SFAS No. 133
         resulted in an immaterial cumulative effect accounting change gain
         recognized in other comprehensive income, and for the twelve months
         ended December 31, 2001, MCV recorded a gain of approximately $.1
         million in earnings for the cash flow hedging activity.

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



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


      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.

      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.

      In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
      Accounting and Disclosure Requirements for Guarantees, Including Indirect
      Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 elaborates on the
      existing disclosure requirements for most guarantees, including loan
      guarantees and standby letters of credit. It also clarifies that at the
      time a company issues a guarantee, the company must recognize an initial
      liability for the fair value, or market value of the obligations it
      assumes under the guarantee and must disclose that information in its
      interim and annual financial statements. The provisions of FIN 45 related
      to recognizing a liability at inception of the guarantee do not apply to
      product warranties or guarantees accounted for as derivatives. The initial
      recognition and initial measurement provisions of FIN 45 apply on a
      prospective basis to guarantees issued or modified after December 31,
      2002. The disclosure provisions are effective for financial statements for
      periods ending after December 15, 2002. As new contracts are entered into,
      MCV will review and determine whether any such guarantees exist that are
      required to be recorded in the consolidated financial statements. MCV's
      guarantees are disclosed herein.

      On January 17, 2003, the FASB issued Interpretation No. 46 "Consolidation
      of Variable Interest Entities, an Interpretation of ARB No. 51" ("FIN
      46"). The primary objective of FIN 46 is to provide guidance on the
      identification of, and financial reporting for, entities over which
      control is achieved through means other than voting rights; such entities
      are known as variable-interest entities (VIEs). Although the FASB's
      initial focus was on special-purpose entities ("SPEs"), the final guidance
      applies to a wide range of entities. FIN 46 has far-reaching effects and
      applies to new entities that are created after the effective date, as well
      as applies to existing entities. Once it goes into effect, FIN 46 will be
      the guidance that determines (1) whether consolidation is required under
      the "controlling financial interest" model of Accounting Research Bulletin
      No. 51, Consolidated Financial Statements, or (b) other existing
      authoritative guidance, or, alternatively (2) whether the
      variable-interest model under FIN 46 should be used to account for
      existing and new entities. MCV believes that FIN 46 will not have a
      material impact on its financial statements.












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


(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:                                                                2002                  2001
          -------                                                            --------------        --------------
<S>                                                                          <C>                   <C>
          Funds restricted for plant modifications                           $          --         $         787
                                                                             ==============        ==============

          Non-current:
          -----------
          Funds restricted for rental payments pursuant to
            the Overall Lease Transaction                                    $     136,554         $     139,301

          Funds restricted for management non-qualified
            plans                                                                    2,147                 2,166
                                                                             --------------        --------------

          Total                                                              $     138,701         $     141,467
                                                                             ==============        ==============
</TABLE>

(4)   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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

<TABLE>
<CAPTION>
                                                                                  2002                  2001
                                                                             --------------        --------------
<S>                                                                          <C>                   <C>
          Accounts payable
             Related parties                                                 $      12,224         $      10,918
             Trade creditors                                                        27,935                24,678
          Property and single business taxes                                        14,842                12,946
          Other                                                                      3,079                25,054
                                                                             --------------        --------------

          Total                                                              $      58,080         $      73,596
                                                                             ==============        ==============
</TABLE>

(5)   LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                                                  2002                  2001
                                                                             --------------        --------------
<S>                                                                          <C>                   <C>
          Financing obligation, maturing through 2015,
          payable in semi-annual installments of
          principal and interest, collateralized by
          property, plant and equipment                                      $   1,247,149         $   1,429,233


          Less current portion                                                     (93,928)             (186,173)
                                                                             --------------        --------------

          Total long-term debt                                               $   1,153,221         $   1,243,060
                                                                             ==============        ==============
</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



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


      commitments, make a capital distribution to the Partners and retire a
      portion of notes issued by MCV to MEC Development Corporation ("MDC") in
      connection with the transfer of certain assets by MDC to MCV. In
      accordance with SFAS No. 98, "Accounting For Leases," the sale and
      leaseback transaction has been accounted for as a financing arrangement.

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

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

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

      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 $1.5 million, $1.7 million and $1.4 million were amortized
      in the years 2002, 2001 and 2000, respectively.

      Interest and fees incurred related to long-term debt arrangements during
      2002, 2001 and 2000 were $118.3 million, $124.6 million and $142.5
      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 2002, 2001 and 2000 were $122.1 million,
      $131.7 million and $151.3 million, respectively.







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


      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>
                    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
                    2007                                     62,916          87,988           150,904
                                                        -------------   -------------     ------------

                                                        $   431,426       $ 501,535       $   932,961
                                                        =============   =============     ============
</TABLE>

      Revolving Credit Agreement

      MCV has also entered into a revolving credit agreement with the Bank of
      Montreal ("Working Capital Lender"), which expires August 29, 2003. Under
      the terms of the existing agreement, MCV can borrow up to the $50 million
      commitment, in the form of short-term borrowings or letters of credit
      collateralized by MCV's natural gas inventory and earned receivables. At
      any given time, borrowings and letters of credit are limited by the amount
      of the borrowing base, defined as 90% of earned accounts receivable and
      50% of natural gas inventory. During 2002, MCV did not utilize the Working
      Capital Facility, except for letters of credit associated with normal
      business practice. At December 31, 2002, MCV had no outstanding borrowings
      or letters of credit.

      Intercreditor Agreement

      MCV has also entered into an Intercreditor Agreement with the Owner
      Trustee, Working Capital Lender, U.S. Bank National Association as
      Collateral Agent ("Collateral Agent") and the Senior and Subordinated
      Indenture Trustees. Under the terms of this agreement, MCV is required to
      deposit all revenues derived from the operation of the Facility with the
      Collateral Agent for purposes of paying operating expenses and rent. In
      addition, these funds are required to pay construction modification costs
      and to secure future rent payments. As of December 31, 2002, MCV has
      deposited $136.6 million into the reserve account. The reserve account is
      to be maintained at not less than $40 million nor more than $137 million
      (or debt portion of next succeeding basic rent payment, whichever is
      greater). Excess funds in the reserve account are periodically transferred
      to MCV. This agreement also contains provisions governing the distribution
      of revenues and rents due under the Overall Lease Transaction, and
      establishes the priority of payment among the Owner Trusts, creditors of
      the Owner Trusts, creditors of MCV and the Partnership.

(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.




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


      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 209,089
      MMBtu per day annual average for 2003. As of January 1, 2003, gas
      contracts with U.S. suppliers provide for the purchase of 128,363 MMBtu
      per day while gas contracts with Canadian suppliers provide for the
      purchase of 80,726 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 2003 through 2007 are $207.8
      million, $245.7 million, $304.6 million, $312.1 million and $304.9
      million, respectively. A portion of these payments may be utilized in
      future years to offset the cost of quantities of natural gas taken above
      the minimum amounts.

      Gas Transportation Agreements

      MCV has entered into firm natural gas transportation agreements with
      various pipeline companies. These agreements require MCV to pay certain
      reservation charges in order to reserve the transportation capacity. MCV
      incurred reservation charges in 2002, 2001 and 2000, of $35.1 million,
      $36.2 million and $35.6 million, respectively. The estimated minimum
      reservation charges required under these agreements for each of the years
      2003 through 2007 are $35.1 million, $35.1 million, $33.9 million, $30.1
      million and $21.7 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



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


      turbines through the fourth series of major GTG inspections, which were
      completed in 2002. In January 1998, MCV and Alstom amended the length of
      the amended Service Agreement to extend through the sixth series of major
      GTG inspections, which are expected to be completed by year end 2008, for
      a lump sum fixed price covering the entire term of the amended Service
      Agreement of $266.5 million (in 1993 dollars, which is adjusted based on
      exchange rates and Swiss inflation indices), payable on the basis of
      operating hours as they occur over the same period. MCV has made payments
      totaling approximately $161.5 million under this amended Service Agreement
      through December 31, 2001.

      MCV has signed a new maintenance service and parts agreement with General
      Electric International, Inc. ("GEII"), effective December 31, 2002 ("GEII
      Agreement"). GEII will provide maintenance services and hot gas path parts
      for MCV's twelve GTG's. The GEII Agreement, under terms and conditions
      similar to the MCV/Alstom Service Agreement, as described above, will
      cover four rounds of major GTG inspections, which are expected to be
      completed by the year 2015, at a savings to MCV as compared to the Service
      Agreement with Alstom. The GEII Agreement is expected to replace the
      current Alstom Service Agreement, during the first half of 2004, but in no
      event later than January 1, 2005. The GEII Agreement can be terminated by
      either party for cause or convenience. Should termination for convenience
      occur, a buy out amount will be paid by the terminating party with
      payments ranging from approximately $19.0 million to $.9 million, based
      upon the number of operating hours utilized since commencement of the GEII
      Agreement.

      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 agreed to purchase one set of
      such blades and has the option to purchase an additional eleven sets which
      would be installed during the fifth series of major GTG inspections, which
      are expected to be completed by the third quarter of 2006. 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 second quarter of 2003 for approximately
      $4.2 million.




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


(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>
                                                                          2002               2001
                                                                      --------------     -------------
<S>                                                                   <C>                <C>
                  Change in benefit obligation:
                  Benefit obligation at beginning of year             $   2,405.1        $   1,937.6
                  Service cost                                              197.3              173.5
                  Interest cost                                             188.7              142.9
                  Unrecognized prior service cost                            --                199.0
                  Actuarial gain (loss)                                     136.6              (43.3)
                  Benefits paid during year                                  (3.5)              (4.6)
                                                                      --------------     -------------
                  Benefit obligation at end of year                       2,924.2            2,405.1
                                                                      --------------     -------------

                  Change in plan assets:
                  Fair value of plan assets at beginning of year          2,088.0            2,015.4
                  Actual return on plan assets                             (230.3)            (153.4)
                  Employer contribution                                     233.3              230.6
                  Benefits paid during year                                  (3.5)              (4.6)
                                                                      --------------     -------------
                  Fair value of plan assets at end of year                2,087.5            2,088.0
                                                                      --------------     -------------

                  Unfunded (funded) status                                  836.7              317.1
                  Unrecognized prior service cost                          (184.6)            (199.0)
                  Unrecognized net gain (loss)                             (652.1)            (118.1)
                                                                      --------------     -------------
                  Accrued benefit cost                                $      --          $      --
                                                                      ==============     =============
</TABLE>

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

<TABLE>
<CAPTION>
                                                                  2002              2001              2000
                                                              -------------     --------------     ------------
<S>                                                           <C>               <C>                <C>
      Components of net periodic benefit cost:
      Service cost                                            $    197.3        $    173.5         $    155.3
      Interest cost                                                188.7             142.9              134.9
      Expected return on plan assets                              (167.0)           (171.3)            (175.7)
      Amortization of unrecognized net (gain) or loss               14.3             (12.6)             (16.5)
                                                              -------------     --------------     ------------

      Net periodic benefit cost                               $    233.3        $    132.5         $     98.0
                                                              =============     ==============     ============
</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):



                                      F-20
<PAGE>
                          MIDLAND COGENERATION VENTURE
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (continued)


<TABLE>
<CAPTION>
                                                                                 1-Percentage        1-Percentage
                                                                                Point Increase      Point Decrease
                                                                               ----------------    -----------------
<S>                                                                            <C>                 <C>
                  Effect on total of service and interest cost components         $      54.0        $       46.2
                  Effect on postretirement benefit obligation                     $     487.5        $      321.1
</TABLE>

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

<TABLE>
<CAPTION>
                                                                     2002               2001             2000
                                                                 --------------     -------------    --------------
<S>                                                              <C>                <C>              <C>
              Discount rate                                          6.75%              7.25%            7.50%
              Long-term rate of return on plan assets                8.00%              8.00%            8.50%
              Inflation benefit amount
                  1998 through 2004                                  0.00%              0.00%            0.00%
                  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 2002,
      2001 and 2000, MCV contributed $1.2 million, $1.1 million and $1.1
      million, respectively under these plans.

      Supplemental Retirement Benefits

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





                                      F-21
<PAGE>
                          MIDLAND COGENERATION VENTURE
                   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, 2002, and the nature and amount of related party transactions
      or agreements that existed with the Partners or affiliates as of December
      31, 2002, 2001 and 2000, 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                Interest  Interest  Related Party Transactions and Agreements       2002     2001       2000
------------------------------------- --------  --------  --------------------------------------------- -------- ---------  --------
<S>                                   <C>       <C>       <C>                                           <C>       <C>       <C>
CMS Energy Company
CMS Midland, Inc.                     $359,812    49.0%   Power purchase agreements                     $557,149  $550,477  $568,838
                                      ========  =======


 General Partner; wholly-owned                            Purchases under gas transportation agreements   23,552    24,059    23,295
 subsidiary of Consumers Energy                           Purchases under spot gas agreements              3,631     3,756     4,735
 Company                                                  Purchases under gas supply agreements           11,306    10,725    12,679
                                                          Gas storage agreement                            2,563     2,563     2,563
                                                          Land lease/easement agreements                     600       600       600
                                                          Accounts receivable                             44,289    48,843    43,278
                                                          Accounts payable                                 3,502     4,772     5,560
                                                          Sales under spot gas agreements                  1,084     7,107    10,521
El Paso Corporation                   $127,682    18.1%
-------------------
Source Midland Limited Partnership                        Purchase under gas transportation agreements    12,463    13,653    14,229
 ("SMLP") General Partner; owned by                       Purchases under spot gas agreement              15,655    45,130    21,563
 subsidiaries of El Paso                                  Purchases under gas supply agreement            47,136     5,912     5,248
 Corporation (1)                                          Gas agency agreement                               365     1,989     2,361
                                                          Deferred reservation charges under gas              --     7,880     6,895
                                                          purchase agreement
                                                          Accounts receivable                                523        --    11,481
                                                          Accounts payable                                 7,706     5,198    11,839
                                                          Sales under spot gas agreements                 14,007    28,451    14,815
                                                          Partner cash withdrawal (including accrued          --    56,714    50,886
                                                          interest) (2)

El Paso Midland, Inc. ("El Paso
 Midland")                              76,609    10.9    See related party activity listed under SMLP.
 General Partner; wholly-owned
 subsidiary of El Paso
 Corporation (1)

MEI Limited Partnership ("MEI")                           See related party activity listed under SMLP.
 A General and Limited Partner;
 50% interest owned by El Paso
 Midland, Inc. and 50% interest
 owned by SMLP (1)
     General Partnership Interest       63,844     9.1

      Limited Partnership Interest       6,383      .9

Micogen Limited Partnership             31,919     4.5    See related party activity listed under SMLP.
 ("MLP") Limited Partner, owned
 subsidiaries of El Paso
 Corporation (1)
                                      --------  -------

     Total El Paso Corporation        $306,437    43.5%
                                      ========  =======

The Dow Chemical Company
The Dow Chemical Company              $ 68,060     7.5%   Steam and electric power agreement              29,385    33,727    31,319
                                      ========  =======
 Limited Partner                                          Steam purchase agreement - Dow Corning Corp      3,746     3,781     3,615
                                                          (affiliate)
                                                          Purchases under demineralized water supply       6,605     6,913     6,570
                                                          agreement
                                                          Accounts receivable                              3,635     3,191     3,536
                                                          Accounts payable                                 1,016       948       745
                                                          Standby and backup fees                            734       696       676
Alanna Corporation                                        Sales of gas under tolling agreement             6,442        --        --
------------------
Alanna Corporation                    $   1(3)  .00001%
                                      ========  =======
  Limited Partner; wholly-owned                           Note receivable                                      1         1         1
  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-22
<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-23
<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, 2003                    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, 2003
---------------------------------------        (Principal Executive Officer)
James M. Kevra




/s/ James M. Rajewski                          Chief Financial Officer                      March 25, 2003
---------------------------------------        Vice President and Controller
James M. Rajewski                              (Principal Accounting Officer)




/s/ John J. O'Rourke                           Chairman, Management Committee               March 25, 2003
---------------------------------------
John J. O'Rourke



/s/ David W. Joos                              Member, Management Committee                 March 25, 2003
---------------------------------------
David W. Joos
</TABLE>




                                      F-24

<PAGE>

                                 CERTIFICATIONS

I, James M. Kevra, certify that:

     1.   I have reviewed this annual report on Form 10-K of Midland
          Cogeneration Venture Limited Partnership;

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report;

     4.   The registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and we have:

               a)   designed such disclosure controls and procedures to ensure
                    that material information relating to the registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others within those entities, particularly during the
                    period in which this annual report is being prepared;

               b)   evaluated the effectiveness of the registrant's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this annual report (the "Evaluation
                    Date"); and

               c)   presented in this annual report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officer and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors (or persons
          performing the equivalent function):

               a)   all significant deficiencies in the design or operation of
                    internal controls which could adversely affect the
                    registrant's ability to record, process, summarize and
                    report financial data and have identified for the
                    registrant's auditors any material weaknesses in internal
                    controls; and

               b)   any fraud, whether or not material, that involves management
                    or other employees who have a significant role in the
                    registrant's internal controls; and

     6.   The registrant's other certifying officer and I have indicated in this
          annual report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.

Date:  March 25, 2003



 /s/ James M. Kevra
-------------------------------------
James M. Kevra
President and Chief Executive Officer


                                      F-25

<PAGE>


I, James M. Rajewski, certify that:

     1.   I have reviewed this annual report on Form 10-K of Midland
          Cogeneration Venture Limited Partnership;

     2.   Based on my knowledge, this annual report does not contain any untrue
          statement of a material fact or omit to state a material fact
          necessary to make the statements made, in light of the circumstances
          under which such statements were made, not misleading with respect to
          the period covered by this annual report;

     3.   Based on my knowledge, the financial statements, and other financial
          information included in this annual report, fairly present in all
          material respects the financial condition, results of operations and
          cash flows of the registrant as of, and for, the periods presented in
          this annual report;

     4.   The registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
          and we have:

               a)   designed such disclosure controls and procedures to ensure
                    that material information relating to the registrant,
                    including its consolidated subsidiaries, is made known to us
                    by others within those entities, particularly during the
                    period in which this annual report is being prepared;

               d)   evaluated the effectiveness of the registrant's disclosure
                    controls and procedures as of a date within 90 days prior to
                    the filing date of this annual report (the "Evaluation
                    Date"); and

               e)   presented in this annual report our conclusions about the
                    effectiveness of the disclosure controls and procedures
                    based on our evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officer and I have disclosed, based
          on our most recent evaluation, to the registrant's auditors and the
          audit committee of registrant's board of directors (or persons
          performing the equivalent function):

               b)   all significant deficiencies in the design or operation of
                    internal controls which could adversely affect the
                    registrant's ability to record, process, summarize and
                    report financial data and have identified for the
                    registrant's auditors any material weaknesses in internal
                    controls; and

               c)   any fraud, whether or not material, that involves management
                    or other employees who have a significant role in the
                    registrant's internal controls; and

     6.   The registrant's other certifying officer and I have indicated in this
          annual report whether or not there were significant changes in
          internal controls or in other factors that could significantly affect
          internal controls subsequent to the date of our most recent
          evaluation, including any corrective actions with regard to
          significant deficiencies and material weaknesses.

Date:  March 25, 2003



 /s/ James M. Rajewski
-----------------------------------------------
James M. Rajewski
Chief Financial Officer, Vice President and Controller



                                      F-26

<PAGE>
                                  EXHIBIT INDEX

Exhibit
Number                             Description

3.1        -    Restated Certificate of Limited Partnership dated June 13, 1988
                ((a), Exhibit 3.1)).

3.2        -    Amended and Restated  Limited  Partnership  Agreement  of MCV
                dated as of June 13,  1988 ((a) (Exhibit 3.2)).

3.2 (a)    -    Amendment No. 1 dated as of May 26, 1989 to Amended and Restated
                Limited Partnership Agreement ((a) (Exhibit 3.3)).

3.2 (b)    -    Amendment No. 2 dated as of  November 28,  1989 to Amended and
                Restated  Limited  Partnership Agreement ((a), Exhibit 3.4)).

3.2 (c)    -    Amendment No. 3 dated as of June 1, 1990 to Amended and Restated
                Limited Partnership Agreement (incorporated by reference to
                Exhibit (2)(b) to CMS Energy Corporation's Form 10-K dated
                March 21, 1990, File No. 1-9513).

3.3        -    Memorandum of Agreement, dated March 2, 1990, relating to
                Amended and Restated  Partnership Agreement ((a),
                (Exhibit 3.6)).

4.1        -    Senior Trust Indenture, Leasehold Mortgage and Security
                Agreement dated as of June 1, 1990 between Shawmut Bank and
                United States Trust Company of New York ((a), Exhibit 4.1)).

4.1 (a)    -    Senior Trust Indenture Supplement No. 1 dated as of June 1, 1990
                ((a), (Exhibit 4.2)).

4.2        -    Subordinated Trust Indenture, Leasehold Mortgage and Security
                Agreement dated as of June 1, 1990 between Shawmut Bank and
                Meridian Trust Company ("Subordinated Trust Indenture") ((a),
                (Exhibit 4.5)).

4.2 (a)    -    Subordinated Trust Indenture Supplement No. 1 dated as of
                June 1, 1990 ((a), (Exhibit 4.6)).

4.2 (b)    -    Subordinated Trust Indenture Supplement No. 2 dated as of
                July 1, 1990 ((a), (Exhibit 4.7)).

4.3        -    Collateral Trust Indenture dated as of June 1, 1990 among
                Midland Funding Corporation I, MCV and United States Trust
                Company of New York (incorporated by reference to Exhibit No.
                (28)(b) to CMS Energy Corporation's Form 10-Q for the quarter
                ended June 30, 1990, File No. 1-9513).

4.3 (a)    -    Collateral Trust Indenture Supplement No. 1 dated June 1, 1990
                ((a), (Exhibit 4.4)).

4.4        -    Collateral Trust Indenture dated as of June 1, 1990 among
                Midland Funding Corporation II, MCV and Meridian Trust Company
                (incorporated by reference to Exhibit No. (28)(d) to CMS Energy
                Corporation's Form 10-Q for the quarter ended June 30, 1990,
                File No. 1-9513).

4.4 (a)    -    Collateral Trust Indenture Supplement No. 1 dated June 1, 1990
                ((a), (Exhibit 4.9)).

4.5        -    Amended and Restated Trust Agreement dated as of March 1, 1990
                between Shawmut Bank and Owner Participant ((a), (Exhibit
                4.10)).

4.6        -    Lease Agreement, dated as of March 1, 1990 between MCV and
                Shawmut Bank ((a), (Exhibit 4.11)).

4.6 (a)    -    Amended and Restated Lease Agreement dated as of June 1, 1990
                between MCV and Shawmut Bank ((a), (Exhibit 4.12)).


                                      E-1
<PAGE>
                                 EXHIBIT INDEX

Exhibit
Number                             Description

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)), as amended.

10.3       -    CMS Transfer Agreement dated as of January 27, 1987, as amended
                as of June 13, 1988, among Consumers Power Company, CMS Midland,
                Inc. and MCV (incorporated by reference to Exhibit (19)(a) to
                Consumers Power Company's Form 10-Q for the quarter ended June
                30, 1988, File No. 1-5611).

10.4      -     Amended and Restated MDC Transfer Agreement dated as of June
                13, 1988, among Consumers Power Company, MEC Development
                Corporation and MCV, as amended by the March 2, 1990 Memorandum
                of Agreement with respect to the Amended and Restated
                Partnership Agreement (incorporated by reference to Exhibit No.
                (19)(b) to Consumers Power Company's Form 10-Q for the quarter
                ended June 30, 1988, File No. 1-5611), as amended by the March
                2, 1990 Memorandum of Agreement with respect to the Amended and
                Restated MDC Transfer Agreement (incorporated by reference to
                Exhibit (2)(b) to CMS Energy Corporation's Form 8-K dated March
                21, 1990, File No. 1-9513).

10.5       -    Amended and Restated Tax Indemnification Agreement, dated as of
                June 1, 1990, among MCV and Owner Participant ((a), (Exhibit
                10.70)).

10.6       -    Capacity Support Agreement dated as of June 9, 1988, between CMS
                Energy Corporation and MCV (incorporated by reference to Exhibit
                No. 10(m) to CMS Energy Corporation's Annual Report on Form
                10-K, for the year ended December 31, 1988, File No. 1-9513).

10.7       -    Registration Rights Agreement dated as of December 17, 1993
                among Midland Funding Corporation I, MCV, Consumers and Morgan
                Stanley & Co. Incorporated and Donaldson, Lufkin & Jenrette
                Securities Corporation ((e), (Exhibit 10.97)).




                                      E-2
<PAGE>
                                 EXHIBIT INDEX


Exhibit
Number                             Description

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

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

10.8 (b)   -    Amendment No. 2 to PPA dated March 18, 1988 ((a), (Exhibit
                10.6)).

10.8 (c)   -    Amendment No. 3 to PPA dated August 28, 1989 ((a), (Exhibit
                10.7)).

10.8 (d)   -    Amendment No. 4A to PPA dated May 25, 1989 ((a), (Exhibit
                10.8)).

10.9       -    Settlement Agreement dated April 5, 1999, between MCV and
                Consumers Energy Company ((j), (Exhibit 10.1)).

10.10      -    Special Facilities/Interconnection Agreement dated as of July 8,
                1988 between MCV and Consumers Power Company ((a), (Exhibit
                10.25)).

10.11      -    Residual Open Access Interconnection Service Purchase Agreement
                between Consumers Power Company and MCV, dated December 5, 1991
                ((c), (Exhibit 10.83)).

10.12      -    Agreement with respect to the transmission of power dated as of
                June 9, 1988, between Consumers Power Company and MCV ((a),
                (Exhibit 10.69)).

10.13      -    MCV Backup Agreement dated June 9, 1988 between MCV and
                Consumers Power Company with respect to Alternative Generating
                Equipment ((a), (Exhibit 10.27)).

10.14      -    Interconnection Option between MCV, Consumers Power Company,
                Michigan Gas Storage Company and The Dow Chemical Company dated
                April 27, 1988 ((a), (Exhibit 10.14)).

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

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

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

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

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

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

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

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

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

10.18      -    Package Boiler Sale and Support Agreement between The Dow
                Chemical Company, Consumers Power Company and MCV dated as of
                January 27, 1987 ((a), (Exhibit 10.32)).


                                      E-3
<PAGE>
                                 EXHIBIT INDEX


Exhibit
Number                             Description

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)).

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)).


                                      E-4
<PAGE>
                                 EXHIBIT INDEX


Exhibit
Number                             Description


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, L.P. ((n), (Exhibit 10.42)).

10.43      -    Long Term Gas Agreement, dated October 5, 2001, between MCV
                and CMS Marketing, Services and Trading Company ((n), (Exhibit
                10.43)).


                                      E-5
<PAGE>
                                 EXHIBIT INDEX


Exhibit
Number                             Description


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 and March 28, 2002. ((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      -    Master Netting, Setoff and Security Agreement dated December
                2, 2002, between El Paso Merchant Energy, L.P. and MCV.

10.56      -    Maintenance Services and Parts Agreement for MCV 11NM Gas
                Turbines Between MCV and General Electric International, Inc.,
                dated December 31, 2002. (**)

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

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

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

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

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


                                      E-6
<PAGE>
                                 EXHIBIT INDEX


Exhibit
Number                             Description


99.1       -    President and Chief Executive Officer Certification Pursuant
                to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
                the Sarbanes-Oxley Act of 2002.

99.2       -    Chief Financial Officer, Vice President and Controller
                Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.3       -    Unaudited - MCV Selected Proforma Operating Cash Flow Data for
                the years ended 2002 and 2001.

      --------------------
      (a)  Incorporated by reference to MCV's registration statement on Form S-1
           (File No. 33-37977) as the bracketed numbered exhibits.

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

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

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

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

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

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

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

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

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

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

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

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

      (n)  Incorporated by reference to MCV's Annual Report on Form 10-K for the
           year ended December 31, 2001 as the bracketed numbered exhibits.

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

      (**) Pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, an
           application for confidential treatment for portions of this exhibit
           has been made, which portions have been omitted from the exhibit and
           have been filed separately with the Securities and Exchange
           Commission.


                                      E-7