<PAGE>   1
                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


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

For the fiscal year ended December 31, 2000

                                       OR

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

For the transition period from                    to
                               ------------------   ----------------

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

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

               MICHIGAN                                      38-2726166
----------------------------------------              ----------------------
  (State or other jurisdiction of                         (I.R.S. Employer
   incorporation or organization)                        Identification No.)

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

Registrant's telephone number, including area code       (517) 839-6000
                                                      ----------------------

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

    NONE

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

    NONE

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

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


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                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP

                           ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I                                                                                                      Page
------                                                                                                      ----
<S>               <C>                                                                                       <C>
Item 1.           Business...................................................................................1
                  A.  General................................................................................1
                  B.  The Partners...........................................................................1
                  C.  The Facility...........................................................................2
                  D.  Major Issues Facing MCV................................................................2
                  E.  Contracts..............................................................................3
                  F.  Employees.............................................................................11
                  G.  Regulation............................................................................11
                  H.  Environmental Matters.................................................................15
                  I.  Overall Lease Transaction.............................................................16

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

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

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


PART II
-------

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

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

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

Item 8.           Financial Statements and Supplementary Data...............................................29

Item 9.           Changes In and Disagreements with Accountants on Accounting and Financial
                    Reporting Matters.......................................................................29

PART III
--------

Item 10.          Directors and Executive Officers of the Registrant........................................30

Item 11.          Executive Compensation....................................................................32

Item 12.          Security Ownership of Certain Beneficial Owners and Management............................35

Item 13.          Certain Relationships and Related Transactions............................................35


PART IV
-------

Item 14.          Exhibits, Financial Statement Schedules and Reports on Form 8-K...........................36
</TABLE>



<PAGE>   3
                                     PART I

Item 1.       BUSINESS

A.    General

      In January 1987, Midland Cogeneration Venture Limited Partnership ("MCV")
      was formed as a limited partnership to convert a portion of an uncompleted
      Consumers Energy Company ("Consumers"), nuclear power plant into a natural
      gas-fired, combined-cycle, cogeneration facility located in Midland
      County, Michigan (the "Facility"). The Facility commenced commercial
      operation (the "Commercial Operation Date") in 1990 and is capable of
      generating approximately 1,500 megawatts ("MW") of electricity and
      approximately 1.5 million pounds of process steam per hour. The Facility
      is dependent upon natural gas for its fuel supply.

      The Facility is a cogeneration facility, meaning that it sequentially
      produces electricity and useful thermal energy through an integrated
      system using a single fuel source. The Facility has been certified by the
      Federal Energy Regulatory Commission ("FERC") as a qualifying cogeneration
      facility ("QF") under the Public Utility Regulatory Policies Act of 1978,
      as amended ("PURPA"). As a QF, the Facility is exempt from various
      provisions of the Federal Power Act, as amended (the "FPA"), the Public
      Utility Holding Company Act of 1935, as amended (the "1935 Act"), certain
      state laws regarding rate, financial and organizational regulation, and is
      entitled to sell electric capacity and related energy to a public utility
      (such as Consumers) at such utility's incremental cost of alternative
      electric energy, otherwise known as "avoided cost". A utility's
      "incremental cost of alternative electric energy" means, with respect to
      electric energy purchased from a QF, the cost to the electric utility of
      the electric energy (determined, at the option of the QF, at either the
      time of delivery or at the time the obligation is incurred) which, but for
      the purchase from such QF, such utility would generate or purchase from
      another source.

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

B.    The Partners

      The current general partners of MCV are CMS Midland, Inc. ("CMS Midland"),
      a wholly-owned subsidiary of Consumers, El Paso Midland, Inc., formerly
      known as Coastal Midland, Inc. ("El Paso Midland"), Source Midland Limited
      Partnership ("SMLP") and MEI Limited Partnership ("MEI"), which is a
      general and limited partner, all of which are wholly-owned subsidiaries of
      El Paso Corporation ("El Paso"). MCV's other limited partners are Dow,
      Micogen Limited Partnership ("Micogen"), owned by subsidiaries of El Paso,
      and Alanna Corporation ("Alanna"), a wholly-owned subsidiary of Alanna
      Holdings Corporation ("Alanna Holding"). The capital stock of Alanna
      Holding is owned by Dow, CMS Energy Corporation ("CMS Energy"), an
      affiliate of Consumers and Coastal Natural Gas Company, an affiliate of El
      Paso. On January 29, 2001, El Paso announced that it had completed its
      merger with The Coastal Corporation ("Coastal"). Coastal is the parent
      company of El Paso Midland, SMLP, Micogen and, through SMLP, MEI. After
      the merger, Coastal became a wholly-owned subsidiary of El Paso and has
      changed its name to El Paso CGP Company. The general partners and limited
      partners of MCV are referred to herein as the "Partners." The ownership
      interests of the Partners are shown in "Security Ownership of Certain
      Beneficial Owners and Management."



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<PAGE>   4

C.    The Facility

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

      The Facility consists of the following:

      -  12 gas turbine generators ("GTGs");

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

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

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

      -  A back-pressure steam turbine;

      -  Pollution control assets;

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

      -  Pipelines to deliver steam to Dow and DCC; and

      -  Various associated equipment and improvements.

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

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

D.    Major Issues Facing MCV

      MCV faces several major issues crucial to its future success. These
      issues, briefly summarized here, are discussed more fully in the sections
      cross referenced below:

      Electric Industry Restructuring. At both the state and federal level,
      efforts continue to restructure the electric industry. In 1997 and 1998,
      the Michigan Public Service Commission ("MPSC") entered a series of
      orders, now final at the MPSC level, permitting customers to choose their
      power provider over a four-year phase-in period which started in 1999
      ("Restructuring Orders"), (these orders are further described in
      "Regulation - Michigan Electric Industry Restructuring Proceedings"). In
      addition, Michigan enacted restructuring legislation in June 2000.
      Proposed restructuring legislation also exists at the federal level. One
      significant issue to MCV is the issue of stranded cost recovery by
      Consumers of above-market PPA costs. Over 90% of MCV's revenues come from
      sales pursuant to the PPA. To date, restructuring has not negatively
      impacted MCV, but if restructuring results in denying stranded cost
      recovery of above-market PPA costs, MCV's cash flows may be negatively
      impacted, especially in the period after 2007. (See "Regulation - Michigan
      Electric




                                       2
<PAGE>   5

      Industry Restructuring Proceedings and Federal Electric Industry
      Restructuring", Managements Discussion and Analysis of Financial Condition
      and Results of Operations ("MD&A") - Outlook - Michigan Electric Industry
      Restructuring Proceedings and Federal Electric Industry Restructuring",
      and Notes to Consolidated Financial Statements, Note 1, "The Partnership
      and Associated Risks".)

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

E.    Contracts

      MCV's material operating contracts include the PPA, which provides for the
      sale to Consumers of electric capacity and related energy; the SEPA, which
      provides for the sale of steam and electricity to Dow; the SPA, which
      provides for the sale of steam to DCC; gas supply, storage and
      transportation contracts with a number of companies; an agreement covering
      gas turbine inspection services and spare parts with Alstom Power Inc.,
      formerly known as ABB Alstom Power Inc. ("Alstom") and an agreement
      covering steam turbine inspection services and parts with General Electric
      Company ("GE"). MCV's interests in all the foregoing contracts, except the
      SPA, have been assigned to the Owner Trustees, which in turn subassigned
      such contracts to MCV and granted a security interest in such contracts to
      the Note Trustees. (See "Overall Lease Transaction.") The following is
      intended to summarize briefly certain provisions of such contracts and is
      qualified in its entirety by reference thereto.

      Power Purchase Agreement

      Under the PPA, Consumers contracted to purchase specified amounts (the
      "Contract Capacity") of the Facility's electric capacity until March 15,
      2025 and thereafter subject to yearly extensions that are automatic in the
      absence of a termination notice from either party. Contract Capacity is
      1240 MW/hour.

      In allocating the available electrical output of the Facility, MCV must
      first satisfy Dow's requirements under the SEPA before supplying power to
      Consumers.

      Consumers has the right of first refusal to purchase any available
      electric capacity and related energy produced by the Facility in excess of
      Contract Capacity if MCV is willing to sell the same for a period of six
      months or longer. MCV is entitled to sell excess electric capacity and
      related energy to other electric utilities, and Consumers is required, if
      requested by such utilities or MCV, to transmit electrical energy for them
      subject to certain conditions.

      Capacity charges are payable for available Contract Capacity, whether or
      not electricity is dispatched. The capacity charges for on-peak and
      off-peak power average 4.15 cents per available kilowatt hour ("kWh");
      however, until September 15, 2007, the capacity charge may be reduced by
      Consumers to a level of no less than an average of 3.77 cents per kWh.

      Energy charges are based on costs incurred by Consumers at certain of its
      coal-fired plants (i.e., those coal plants wholly or partially owned by
      Consumers having a net demonstrated capacity of at least 100 MW, available
      for generating electrical energy for not less than 5500 hours during the
      most recent year and having a capacity factor of at least 40% when
      connected to Consumers' system and generating electrical energy).

              Fixed Energy Charges. Like the capacity charges, fixed energy
              charges are payable for available kWhs of Contract Capacity. Fixed
              energy charges are adjusted each year based on a fuel inventory
              charge, administrative and general expenses and one-half of
              operation and maintenance expenses (excluding fuel) incurred at
              these plants during either the immediately preceding calendar year
              or the



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<PAGE>   6

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

      The PPA does not make any provision for the use of escrowed funds, except
      that the PPA provides that interest earned, if any, on the escrowed funds
      is to be divided equally between MCV and Consumers. After withholding
      capacity charges for 48 months without fuel assurances being provided,
      Consumers may terminate the PPA. In the event of termination, MCV must pay
      an early termination charge.

      If any party is rendered unable by force majeure to carry out its
      obligations under the PPA, these obligations are suspended during the
      period of force majeure. Force majeure includes all natural calamities;
      war; curtailments, orders, regulations or restrictions imposed by
      governmental authority; and all other causes beyond the reasonable control
      of the affected party, but specifically does not include shortages of fuel
      and supplies (unless caused by calamity or unusual world events applicable
      to other major industrial users as well as MCV), mechanical breakdowns,
      labor strikes or explosions or fires (unless caused by criminal acts).

      Consumers schedules all deliveries of electricity from the Facility to its
      system and is obligated to do so in a manner consistent with the safe and
      prudent operation of the Facility. Consumers currently dispatches the
      Facility by scheduling energy deliveries on an economic basis relative to
      the cost of other energy resources, in contrast to the higher dispatch
      levels experienced in the years 1993-1998. Beginning in July 2000, MCV



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<PAGE>   7

      entered into a series of transactions with Consumers in response to the
      rapidly escalating cost of natural gas 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.

      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 2000 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 2001 and does not anticipate any
      substantial problems.

       In 1997, Consumers informed MCV of several potential payment issues it
      would pursue, pursuant to the "regulatory out" and other provisions of the
      PPA. These issues related to Consumers' special contract customers,
      pricing of the energy delivered during off-peak ramp hours (when MCV
      adjusts its output to match Consumers' dispatch) and energy delivered in
      the band width (energy delivered above dispatch, within certain limits).
      In addition, Consumers notified MCV that it did not believe that MCV could
      use the approximately 15 MW of generating capacity and energy attributable
      to the back pressure turbine, which was placed into service in July 1997,
      towards available Contract Capacity or electric deliveries under the PPA.
      Consumers had also indicated that they would take a similar position on
      the incremental energy and capacity resulting from MCV's installation of
      11NM upgrade packages on the GTGs (collectively the "Disputed Issues").
      MCV and Consumers have addressed all of the Disputed Issues in an
      agreement ("Settlement Agreement"), effective January 1, 1999, which
      resolves (for the various time periods specified in the Settlement
      Agreement, but in no event sooner than 2002) all of the Disputed Issues
      and includes definitive obligations for Consumers to make energy payments
      calculated in accordance with the PPA irrespective of any MPSC decision
      which may affect those issues or payments. On an ongoing basis and for the
      various time periods specified in the Settlement Agreement, the Settlement
      Agreement is not expected to materially affect MCV's earnings and cash
      flows.

      Steam and Electric Power Agreement; Related Dow Agreements

      SEPA. Pursuant to the SEPA, Dow has agreed to purchase steam from the
      Facility for an initial term of 25 years commencing in 1990 and to
      purchase electricity from the Facility for 15 years (any electricity to be
      purchased thereafter at Dow's option, although MCV remains obligated to
      make certain amounts of electricity available for an additional 10 years).
      The SEPA is subject to automatic extensions for up to 10 additional years
      after its 25-year term in the absence of a three-year notice of
      termination from either party.

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



                                       5
<PAGE>   8

      of the SEPA. During 2000, MCV sold an average of 552,011 pounds of steam
      and 61 MW of electricity per hour to Dow.

      Dow may increase its steam or electricity entitlement to 110% of the steam
      or electricity delivered in the previous 12-month period, plus any steam
      or electricity required by any addition to or modification of the Dow
      plant, provided that any increase above an annual average of 1,000,000
      pounds of steam per hour or 75 MW of electricity requires MCV's consent.
      MCV, however, may be required, on an instantaneous basis, to deliver steam
      at a rate of up to 135% of the maximum annual average hourly quantity of
      steam or to deliver power at a rate up to 20 MW greater than the
      applicable annual average. In 1997, Dow increased its electric entitlement
      to 67.75 MW/hr beginning April 1, 1997; no such increase 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. In return, MCV agreed to a 30%
      price discount on steam used at the corporate center for a period of five
      years for up to 262.8 million pounds of steam per year (an average of
      30,000 pounds per hour). This steam price discount was in effect for the
      five year period ended October 2000.

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

      In order to assure reliable steam for the Dow plant, Dow owns and
      maintains standby facilities, which are not part of the Facility (the
      "Standby Facilities"). The SEPA amendment also provided that Dow would
      retire certain of the Standby Facilities located on the MCV site and would
      progressively reduce the annual standby fees payable to Dow from $700,000
      per year to a level of $350,000 per year in 1998 and thereafter. These
      fees are subject to adjustment each quarter based on changes in fuel
      costs, capital equipment costs and wage rates. In addition, the fee
      charged by Dow for each use of the Standby Facilities, necessitated by
      MCV's failure to deliver steam under the SEPA, was increased from $100,000
      to $150,000.

      The terms of the SEPA provide that Dow may terminate the SEPA if one or
      more "contract outages" occur for a cumulative period greater than 60
      hours in the first year after the Commercial Operation Date, 40 hours in
      the second year and 24 hours in any subsequent year, provided that a
      single outage of more than 24 consecutive hours but less than 72
      consecutive hours will not give rise to a right of termination unless
      another such contract outage has occurred within the previous 60 months.

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

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

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



                                       6
<PAGE>   9

      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 12 years, with U.S. and Canadian suppliers
      for a maximum supply of natural gas as of January 1, 2001 of 205,563
      MMBtu/day. As of January 1, 2001, no single gas contract accounts for more
      than 16.8% of MCV's portfolio, though, with the merger of El Paso and
      Coastal, El Paso and its subsidiaries now account for 34.0% of MCV's
      portfolio. Gas contracts with U.S. suppliers provide for the purchase of
      124,500 MMBtu/day as of January 1, 2001, while gas contracts with Canadian
      suppliers provide for the purchase of 81,063 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 2000, MCV's gas purchases were supplied 85% from long term gas
      contracts and 15% from spot gas contracts.

      To manage market risks associated with the volatility of natural gas
      prices, MCV maintains a gas hedging program. MCV enters into natural gas
      futures contracts in order to hedge against unfavorable changes in the
      market price of natural gas in future months when gas is expected to be
      needed. These financial instruments are being utilized only to secure
      anticipated natural gas requirements necessary for projected electric
      sales and to hedge sales of natural gas previously obtained in order to
      optimize MCV's existing gas supply, storage and transportation
      arrangements. As of January 1, 2001, MCV had open natural gas futures of
      9.1 bcf to hedge natural gas requirements for future months of 2001, at an
      average price of $4.00.



                                       7
<PAGE>   10

                             MCV Gas Under Contract
                        As of the Beginning of Each Year
                       Maximum Daily Quantity (MMBtu/Day)

<TABLE>
<CAPTION>
              YEAR                FIXED PRICE           INDEXED PRICE         FLOATING PRICE           TOTAL
              ----                -----------           -------------         --------------           -----
<S>                               <C>                   <C>                   <C>                     <C>
              2001                    55,000                140,344                10,219              205,563
              2002                    75,000                118,226                10,219              203,445
              2003                    65,000                118,226                     0              183,226
              2004                    65,000                118,226                     0              183,226
              2005                    80,000                 61,695                37,000              178,695
              2006                    80,000                 61,695                42,000              183,695
              2007                    46,000                 16,000                62,000              124,000
              2008                    36,000                  7,500                25,000               68,500
              2009                    36,000                  7,500                25,000               68,500
              2010                    26,000                  7,500                15,000               48,500
              2011                    26,000                  7,500                15,000               48,500
              2012                    26,000                      0                15,000               41,000
</TABLE>


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

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

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

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

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

      Most of the U.S. long term gas contracts contain "take-or-pay" provisions
      obligating MCV to purchase at least a specified percentage (generally 75%
      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>   11

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

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

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

      In addition to an amount per MMBtu based on the quantity of gas actually
      delivered (the "Commodity Charge"), under most of the Canadian contracts
      MCV pays each Canadian supplier a Demand Charge to cover the
      transportation demand charges incurred by the Canadian suppliers to have
      transportation capacity for the MDQ available to the U.S.-Canada border.
      To the extent that MCV takes less than 100% of the MDQ from its Canadian
      long term gas contracts, gas costs per unit taken by MCV increase because
      Demand Charges are being paid for the quantity of gas not being taken. Two
      contracts provide discounts to the Commodity Charge where monthly takes
      are in excess of 85% of MDQ.

      The Canadian long term gas contracts establish specific minimum annual
      takes (generally 75%). Generally, MCV is required to make deficiency
      payments to the Canadian suppliers equal to all or some percentage of the
      Commodity Charge multiplied by any deficiency. MCV has make-up rights in
      some circumstances under some of the Canadian long term gas contracts.

      Under most of the Canadian contracts, if a Canadian supplier under
      delivers to MCV in any month, subject to certain force majeure provisions,
      the contract price is reduced by a proportionate share of the Canadian and
      U.S. transporters' Demand Charges. Further, if a Canadian supplier fails,
      for reasons other than force majeure, to deliver 90% of quantities
      requested up to the MDQ over any 120 consecutive day period then, in most
      cases following a cure period, MCV can reduce the MDQ or, under certain
      circumstances, terminate the agreement. If the MDQ is reduced, MCV can
      request the Canadian supplier to assign to it, to the extent permitted,
      the quantity of firm transportation capacity on Canadian transporters that
      corresponds to the reduction in MDQ. One of the Canadian suppliers may
      terminate its contract if MCV fails to take specified percentages of the
      MDQ.

      Gas Transportation and Storage Arrangements

      The location of the Facility permits gas to be transported over a number
      of U.S. interstate pipelines. MCV has signed long-term transportation
      contracts with four of these pipelines: ANR Pipeline Company ("ANR"); CMS
      Panhandle Eastern Pipe Line Company ("Panhandle"); CMS Trunkline Gas
      Company ("Trunkline"); and Great Lakes Gas Transmission Company ("Great
      Lakes"). ANR and Great Lakes are affiliates of El Paso (previously
      Coastal). CMS Energy, the parent company of Consumers, owns Panhandle and
      Trunkline. In addition, certain of the gas suppliers arrange with
      pipelines for the gathering and transportation of gas from their supply
      sources to the interconnection points with the major interstate pipelines
      with which MCV has contracts.

      MCV has also entered into long-term transportation arrangements with two
      connecting pipelines which link the Facility and its own pipeline to these
      interstate pipelines: Michigan Gas Storage Company (a subsidiary of
      Consumers) and Consumers. Michigan gas produced by suppliers is currently
      transported to Consumers' pipeline system by the supplier under contracts
      the suppliers have with Michigan Consolidated Gas Company ("MichCon"), on
      the MichCon pipeline system in northern Michigan.



                                       9
<PAGE>   12

      The remaining terms of MCV's agreements with the U.S. transporters range
      from 1 to 24 years. The transportation rates of ANR, Panhandle, Trunkline,
      Great Lakes and Michigan Gas Storage Company are subject to FERC
      regulation.

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

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

      Gas Turbine Service Agreement

      Under a service agreement between MCV and Alstom (the "Service
      Agreement"), Alstom sold MCV spare parts for the GTGs and provides
      qualified service personnel and supporting staff to assist MCV to perform
      scheduled inspections on the GTGs, and to repair the GTGs at MCV's
      request. The Service Agreement, as amended, commenced on January 1, 1990,
      and will expire upon the earlier of the completion of the sixth series of
      major GTG inspections or December 31, 2009. Alstom does not assure any
      level of performance by the GTGs in the Service Agreement but warrants all
      repairs made by it pursuant to the Service Agreement.

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

      The Service Agreement terminates (i) if either Alstom or MCV fails to
      perform the duties outlined under the Service Agreement, at the option of
      the other party; or (ii) at MCV's option, if MCV is unable to operate the
      Facility for 60 consecutive days due to force majeure. Upon cessation of
      the force majeure, the Service Agreement may be reinstated by either party
      upon 60 days' notice, together with a remobilization fee. Upon termination
      of the Service Agreement (except for nonperformance by Alstom), MCV must
      pay a cancellation payment.

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

      In addition to the January 1998 amendment to the term of the amended
      Service Agreement, MCV purchased and installed from Alstom 11NM GTG
      upgrade packages for eleven of the gas turbine generators for $41.6



                                       10
<PAGE>   13

      million. The installation of these upgrades was made after successfully
      testing one upgrade package at the Facility in 1997. The upgrade packages
      on all twelve gas turbines have added to available capacity and
      significantly improved the efficiency of the Facility. Maintenance and
      spare parts for the upgrade packages are covered by the amended Service
      Agreement.

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

      Steam Turbine Service Agreement

      MCV has entered into a nine year Steam Turbine Maintenance Agreement with
      GE effective January 1, 1995, which is designed to improve unit
      reliability, increase availability and minimize unanticipated maintenance
      costs. MCV is to make monthly payments over the life of the contract
      totaling $13.0 million (in 1995 dollars).

F.    Employees

      As of February 28, 2001, MCV had 132 employees, including 89 engineering,
      operating and maintenance personnel. 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. MCV believes that its relationship
      with its employees is good.

G.    Regulation

      Introduction

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

      QF Certification

      In order to be a QF under PURPA and to maintain this status, not more than
      50% of the "equity interest" in a facility may be owned by electric
      utilities or their affiliates. In addition, certain operating and
      efficiency standards must be maintained on a calendar-year basis. In the
      case of a topping-cycle generating plant such as the Facility, the
      applicable operating standard requires that the portion of total energy
      output that is put to some useful purpose other than facilitating the
      production of power (the "Thermal Percentage") be at least 5%. In
      addition, the plant must achieve and maintain an average PURPA efficiency
      standard (the sum of the useful power output plus one-half of the useful
      thermal energy output, divided by the energy input) of at least 45% (the
      "Efficiency Percentage"). However, if the plant maintains a Thermal
      Percentage of 15% or higher, the required Efficiency Percentage is reduced
      to 42.5%. Since 1990, the Facility has achieved the required Thermal and
      Efficiency Percentages. During 2000, the Facility achieved a Thermal
      Percentage of 19.1% and an Efficiency Percentage of 47.3%.

      The Facility's QF certification by FERC became effective when portions of
      the Facility were first synchronized to Consumers' system in June 1989. As
      a QF, the Facility is exempt from various provisions of the FPA and the
      1935 Act and from certain state laws and regulations respecting rate,
      financial and organizational regulation of public utilities. On January 31
      and March 1, 1990, FERC recertified the Facility as a QF in the context of
      an ownership structure in which MCV owns the Facility and in the context
      of a leveraged lease transaction in which the Facility is owned by owner
      trustees on behalf of institutional investors. In 1997, 1998, 2000 and
      March 2001, MCV filed Notices of Self-Recertification with the FERC to
      reflect changes in the configuration and equipment of the Facility, and
      changes in MCV Partnership ownership (which changes did not result in a
      change in the percentage of utility ownership). (See "MD&A -- Outlook --
      Maintaining QF Status".)



                                       11
<PAGE>   14

      MPSC and Other Proceedings Relating to Capacity and Energy Charges

      Background. The PPA contains a "regulatory out" provision which permits
      Consumers, under certain conditions, to reduce the capacity and/or energy
      charges payable to MCV and/or to receive refunds of capacity and/or energy
      charges paid to MCV under the PPA if the MPSC does not permit Consumers to
      recover from its customers the capacity and energy charges specified in
      the PPA. Until September 15, 2007, however, the PPA further provides that
      Consumers may not reduce the average capacity charge below 3.77 cents per
      kWh notwithstanding the MPSC's failure to approve either the amount of
      capacity Consumers has agreed to purchase from MCV under the PPA or the
      capacity charge specified in the PPA for such purchase.

      Energy charges payable by Consumers under the PPA are separate and
      distinct from the capacity charge in that no 17-1/2 year protection
      against the exercise of the "regulatory out" provision for energy charges
      is provided for in the PPA. Although prior approval of energy charges is
      not required or provided for under Michigan law, the MPSC has asserted the
      authority to disallow Consumers' recovery of a portion of such energy
      charges paid to MCV. Any disallowance by the MPSC of Consumers' ability to
      pass energy charges through to its customers could, pursuant to the
      "regulatory out" provision of the PPA, result in a reduction or refund of
      the fixed and variable portions of the energy charge under the PPA.

      MPSC and Other Proceedings. In September 1987, in order to obtain a 17-1/2
      year rate protection provided under Michigan law, known as Act 81, MCV
      requested MPSC approval of the capacity rate provided for in the PPA.
      During the pendency of this matter, Consumers, MPSC staff and others
      negotiated a revised settlement proposal, which was submitted to the MPSC
      for approval ("Revised Settlement Proposal").

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

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

      On June 23, 1993, Consumers exercised its rights under the PPA to obtain a
      determination through arbitration proceedings of whether Consumers could
      exercise the "regulatory out" provision of the PPA in view of Consumers'
      acceptance of the Settlement Order. In a Final Order issued on February
      16, 1995, the arbitrator ruled that Consumers may withhold the fixed
      energy charges for available but undelivered energy, as well as for energy
      delivered between the "caps" contained in the Settlement Order and 915 MW,
      subject to completion of appellate review in all regulatory and judicial
      proceedings with respect to the Settlement Order and then pending MPSC
      cases. Those regulatory and judicial proceedings are complete and no
      changes resulted which would affect the arbitrator's ruling.



                                       12
<PAGE>   15

      On September 8, 1995, Consumers and the MPSC staff asked the MPSC to
      create a consolidated proceeding for the purpose of reviewing a settlement
      agreement ("325 MW Settlement") entered into between the MPSC staff and
      Consumers. The 325 MW Settlement proposed approving one-hundred percent
      jurisdictional cost recovery of an additional 325 MW of capacity purchased
      from MCV. Cost recovery approval for the 325 MW of MCV Contract Capacity
      was in addition to the 915 MW already approved by the MPSC with recovery
      from Consumers retail customers to begin January 1, 1996. On November 14,
      1996, the MPSC approved, with modifications, the 325 MW Settlement
      effective January 1, 1996 ("325 MW Settlement Order"). The 325 MW
      Settlement Order is now final.

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

      PPA - Settlement of PPA Issues. In 1997, Consumers informed MCV of several
      other potential payment issues it would pursue, pursuant to the
      "regulatory out" and other provisions of the PPA. These issues related to
      Consumers' special contract customers, pricing of the energy delivered
      during off-peak ramp hours (when MCV adjusts its output to match
      Consumers' dispatch) and energy delivered in the band width (energy
      delivered above dispatch, within certain limits). In addition, Consumers
      notified MCV that it did not believe that MCV could use the approximately
      15 MW of generating capacity and energy attributable to the back pressure
      turbine, which was placed into service in July 1997, towards available
      Contract Capacity or electric deliveries under the PPA. Consumers had also
      indicated that they would take a similar position on the incremental
      energy and capacity resulting from MCV's installation of 11NM upgrade
      packages on the GTGs (collectively the "Disputed Issues"). MCV and
      Consumers entered into a settlement agreement ("Settlement Agreement"),
      effective January 1, 1999, which resolves (for the various time periods
      specified in the Settlement Agreement, but in no event sooner than 2002)
      all of the previously Disputed Issues under the PPA and includes
      definitive obligations for Consumers to make energy payments calculated in
      accordance with the PPA, irrespective of any MPSC decisions which may
      affect those issues or payments. On an ongoing basis and for the various
      time periods specified in the Settlement Agreement, the Settlement
      Agreement is not expected to materially affect MCV's earnings and cash
      flows.

      Michigan Electric Industry Restructuring Proceedings

      On December 20, 1996, the MPSC issued an order on its own motion to
      consider the restructuring of the electric industry in Michigan and issued
      orders on June 5, 1997, October 29, 1997, January 14, 1998 and February
      11, 1998 (collectively the "Restructuring Orders"). The Restructuring
      Orders provide for a transition to a competitive regime whereby electric
      retail customers will be able to choose their power supplier and pay
      negotiated or market-based rates for such power supply. The Restructuring
      Orders also mandate that utilities "wheel" third-party power to the
      utilities' customers. An issue involved in restructuring, which could
      significantly impact MCV, is stranded cost recovery. The Restructuring
      Orders allow recovery by utilities (including Consumers) of stranded
      costs, which include capacity charges from QFs, including MCV, previously
      approved by the MPSC, incurred during the regulated era that will be above
      market prices during the new competitive regime. However, it appears that
      stranded cost recovery of above-market capacity charges in power purchase
      contracts (i.e., MCV's PPA) is limited to customers who chose an alternate
      power supplier and are only paid for the period 1998 through 2007 (MCV's
      PPA expires in 2025). Customers who chose to remain power supply customers
      of Consumers will continue to pay capacity charges as part of rates
      charged by Consumers, subject to MPSC rate regulation. The Restructuring
      Orders do not otherwise specifically address the recovery of PPA capacity
      charges after 2007.

      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



                                       13
<PAGE>   16

      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. 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 permits
      utilities to securitize certain stranded (transition) costs including PPA
      charges.

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

      Federal Electric Industry Restructuring

      FERC has jurisdiction over wholesale energy sales and is moving towards
      "market" based pricing of electricity in some circumstances as opposed to
      traditional cost-based pricing. In April 1996, FERC issued Order No. 888
      requiring all utilities FERC regulates to file uniform transmission
      tariffs providing for, among other things, non-discriminatory "open
      access" to all wholesale buyers and sellers, including the transmission
      owner, on terms and conditions established by FERC. Order No. 888 also
      requires utilities to "functionally unbundle" transmission and separate
      transmission personnel from those responsible for marketing generation. On
      December 20, 1999, FERC issued a final rule, Order No. 2000, designed to
      encourage all owners and operators of interstate electric transmission
      lines to join regional transmission organizations. Order No. 2000 is
      intended to increase competition and remedy continuing problems with
      wholesale transmission access and reliability. Order No. 2000 does not
      directly impact MCV since MCV does not own transmission lines, but could
      indirectly impact MCV in selling electricity in the wholesale market.
      Order No. 2000 and subsequent related orders are pending before the United
      States Court of Appeals for the D.C. Circuit. In addition, several bills
      have been introduced in Congress to require states to permit consumers to
      choose their supplier of electricity and manage other issues such as
      transition cost recovery and FERC jurisdiction of retail electric sales.
      MCV Management cannot predict the impact on MCV or the outcome of these
      proceedings.

      Other Regulatory Issues

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

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


                                       14
<PAGE>   17
H.    Environmental Matters

      MCV has obtained all material federal, state and local environmental
      permits necessary to construct and operate the Facility. MCV believes that
      the Facility complies in all material respects with all applicable
      federal, state and local environmental regulations and laws. There is no
      litigation or, to the knowledge of MCV, any administrative proceeding or
      investigation pending or threatened with respect to environmental issues
      at the Facility. It is possible that applicable environmental laws and
      regulations may change, making compliance more costly, time consuming and
      difficult. Any such changes, however, are likely to apply to similarly
      situated power plants and not only to the Facility.

      Water Quality. MCV's National Pollutant Discharge Elimination System
      permit was reissued in August 1999 for the period of October 1, 1999 to
      October 1, 2003.

      Air Quality. MCV's Renewable Operating Permit ("ROP") was issued June 4,
      1999 with an expiration date of June 4, 2004. This permit details the
      applicable requirements, which apply to all the emission unit/process
      groups at MCV and did not apply more stringent limits on the site than was
      already in the Permit to Install. On two instances in 2000, MCV exceeded
      the two hour limit for adequate denox steam injection rate. Cause of the
      exceedances were low denox header pressure and frozen instrumentation
      along with a faulty denox spray valve. The Michigan Department of
      Environmental Quality (MDEQ) has taken no action nor is it expected they
      will.

      In September 1998, the United States Environmental Protection Agency
      ("EPA") announced three rulemaking actions to address interstate and
      regional transport of ground level ozone, namely the NOXSIP Call Final
      Rule ("SIP Call Rule"), Proposed Federal Implementation Plan ("FIP Plan")
      and Section 126 Petitions. The SIP Call Rule requires 22 states (including
      Michigan) to submit state implementation plans ("SIPs") which address the
      regional transport of ground level ozone through reductions in nitrogen
      oxide ("NOX") emissions from combustion sources, including gas turbines.
      States were to submit plans to meet certain overall reduction percentages
      established in the SIP Call Rule by September 30, 1999, with emission
      reduction measures in place by May 1, 2003 and overall compliance by
      September 30, 2007. The SIP Call Rule's compliance dates have since been
      extended by one year. 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 by September 30, 2000 or otherwise fails
      to require applicable NOX emission reduction requirements to be in place.
      The Section 126 Petitions deal with petitions filed by northeastern states
      under Clean Air Act, Section 126, against sources in "upwind" states in
      the Midwest, including Michigan. Public hearings were held and comments
      and 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 Court remanded EPA's "8-hour" ozone measurement standard,
      set forth in the SIP Call Rule, as being unconstitutional and it stayed
      the submission dates required by the SIP Call Rule. On January 18, 2000,
      the EPA issued its "Finding of Significant Contribution and Rulemaking on
      Section 126 Petitions for the Purposes of Reducing Interstate Ozone
      Transport" ("EPA Ozone Rulemaking"). In the EPA Ozone Rulemaking, the EPA
      made findings that a number of large electric generating units ("EGUs")
      named in the petitions emit in violation of the Clear Air Act prohibition
      against significantly contributing to nonattainment or maintenance
      problems in the petitioning States. The EPA Ozone Rulemaking also
      finalizes the Federal NOX Budget Trading Program as the control remedy for
      sources affected by the rule. The final rule is effective February 17,
      2000 and requires compliance by May 1, 2003. MCV is identified in the EPA
      Ozone Rulemaking as a large EGU subject to NOX emissions averaging of .15
      lb/MMBtu during the ozone season (May through September). If the court
      challenge to the rule is unsuccessful, MCV nevertheless believes it will
      be able to meet the standards in the EPA Ozone Rulemaking, which is
      subject to rehearing and/or further appeal. The State of Michigan is
      presently engaged in a rulemaking effort which would impose NOX controls
      which are similar to, or less stringent than, the federal emission
      limitations EPA seeks to impose. Again, MCV believes it will be able to
      meet the emission levels sought by the State of Michigan in response to
      the federal program directives.

      Dow Operations. Portions of the Site were previously owned by Dow. At one
      time, Dow had a brine pond, a portion of which was on the Site. Brine
      pipelines previously crossed the Site. Some underground brine lines were
      capped and abandoned in place. Dow had brine lines running near the Site.
      One brine well was used by



                                       15
<PAGE>   18

      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.

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

      Environmental Indemnity Agreements. CMS Energy has executed environmental
      indemnity agreements in favor of the Senior Bond Trustee, the Subordinated
      Bond Trustee, the Tax-Exempt Trustee (all as defined in "Overall Lease
      Transaction"), MCV and the holders, from time to time, of the Bonds.
      Pursuant to these indemnity agreements, CMS Energy has agreed to indemnify
      these parties and certain related parties against all expense, damage and
      liability incurred by them, which is caused by certain classes of
      environmental matters to the extent these occurred at the Site before June
      15, 1990 (with certain exceptions). These matters include (i) the presence
      of any environmentally hazardous materials at the Site, (ii) any
      environmentally hazardous activity at the Site and (iii) any event which
      is a violation of environmental laws affecting the Site (including
      amendments and supplements to such laws whenever enacted except, in the
      case of such enactments after June 15, 1990, to the extent they would
      require installation or modification of equipment). CMS Energy has entered
      into a similar environmental indemnity agreement for the benefit of the
      Owner Trustee (in its individual and trust capacities), the Owner
      Participants (as defined in "Overall Lease Transaction") and certain
      related parties. In the agreement in favor of MCV, payments by CMS Energy
      are subject to a deductible of $20,000 per occurrence and $240,000 in the
      aggregate. The agreement in favor of MCV terminates when all the Senior
      Bonds (as defined in "Overall Lease Transaction") have been paid in full
      and all the holders of the Bonds (as defined in "Overall Lease
      Transaction") have been paid all amounts owed under the general indemnity
      in the Participation Agreements, except that such indemnity shall not
      terminate with respect to certain rights arising prior to such final
      payment.

      MCV has also executed an environmental indemnification agreement in favor
      of CMS Energy under which it has agreed to indemnify CMS Energy in
      connection with (i) any violation of the environmental laws by MCV with
      respect to the Site after June 5, 1988, (ii) the release or disposal of
      any hazardous materials at, on or to the Site after June 5, 1988 (unless
      caused by CMS Energy or resulting from hazardous materials at or on the
      Site prior to June 5, 1988), and (iii) any hazardous activities at the
      Site after June 5, 1988, provided that CMS Energy may satisfy these
      obligations only from amounts that are otherwise available for
      distribution to Partners under the Participation Agreements.

I.    Overall Lease Transaction

      General

      Permanent financing for the Facility has been provided through five
      separate but contemporaneous sale and leaseback transactions (the "Overall
      Lease Transaction"), pursuant to which MCV sold undivided interests in all
      of the fixed assets comprising the Facility to the Owner Trustee under
      five separate owner trusts (the "Owner Trusts") established for the
      benefit of certain institutional investors ("Owner Participants"). State



                                       16
<PAGE>   19

      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 United States Trust
      Company and First Union National Bank are note trustees under the Senior
      Note Indenture and the Subordinated Note Indenture, respectively (the
      "Note Trustees"). There is, however, a single Collateral Agency and
      Intercreditor Agreement (the "Intercreditor Agreement"), executed by the
      Owner Trustees, MCV, the Note Trustees, the Working Capital Lender (as
      defined below) and US Bank Trust as collateral Agent (the "Collateral
      Agent"), which provides for the creation and maintenance of certain
      reserves, the deposit of all revenues generated by the Facility, the
      payment of operating expenses, and the distribution of remaining revenues
      according to the priorities set forth therein to or for the account of the
      Working Capital Lender, the Note Trustees, the Owner Trustees, MCV and the
      affiliates of certain Partners. MCV has arranged for a $50 million working
      capital line (the "Working Capital Facility") with Bank of Montreal (the
      "Working Capital Lender"), which expires August 31, 2001. As security for
      its obligation to repay advances made under the Working Capital Facility,
      MCV has granted to the Working Capital Lender a first priority security
      interest in certain receivables earned by MCV through the sale of
      electricity, electric generating capacity, natural gas, or steam to third
      parties, including Dow, Consumers and DCC (the "Earned Receivables") and
      in MCV's natural gas inventory (the "Natural Gas Inventory"). Payments due
      under the Working Capital Facility are direct obligations of MCV and will
      in general have a priority in payment over payments under the Leases (and
      thus on the Notes, as defined in this Section "Overall Lease Transaction
      -- The Lease Funding," and the Bonds).

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

      Statement of Financial Accounting Standards ("SFAS") No. 98, which applies
      to sale and leaseback transactions entered into after June 30, 1988,
      specifies the accounting required by generally accepted accounting
      principles for a seller-lessee's sale and simultaneous leaseback
      transaction involving real estate, including real estate with equipment.
      In accordance with SFAS No. 98, the Overall Lease Transaction must be
      accounted for as a financing obligation and not a sale, since MCV has the
      option to purchase the undivided interests in the Facility at the end of
      the Basic Lease Term, which expires on July 23, 2015, and has other forms
      of continuing involvement with the Facility throughout the Basic Lease
      Term.

      The Lease obligation is recorded as long-term debt, at the present value
      of future minimum Lease payments. There was no change to property, plant
      and equipment, on the Consolidated Balance Sheet, as the transaction was
      accounted for as a financing arrangement for financial reporting purposes.
      Certain Lease transaction expenses of MCV are recorded as deferred
      financing costs and amortized using the interest method over the




                                       17
<PAGE>   20

      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 bonds. The refinancing of this portion of the
      outstanding debt has lowered MCV's effective interest rate on its
      long-term debt arrangement from approximately 8.7% to 8.3% , which is
      still scheduled to mature in year 2015.

      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 pari passu with the
      Subordinated Notes pledged to secure the Tax-Exempt Bonds issued by the
      Tax-Exempt Issuer (as defined below). The use of the funding corporations
      facilitated the sale of debt by permitting the offer and sale of three
      series of Senior Bonds and two series of Subordinated Bonds, each secured
      equally and ratably by the corresponding series of Notes issued by each of
      the five Owner Trusts, thus eliminating the need to offer a greater number
      of separate series of Notes to the investor. In addition, the use of a
      corporate obligor facilitates compliance with certain investment laws by
      certain institutional purchasers of the Senior and Subordinated Bonds. The
      aggregate principal amount, maturity date, interest rate, redemption
      provisions and other material terms of each series of the Bonds are
      identical to those of the Notes pledged as security therefore. As of
      February 28, 2001, there remains outstanding approximately $273.6 million
      of Senior Bonds and $567.2 million of Subordinated Bonds.

      The Economic Development Corporation of the County of Midland (the
      "Tax-Exempt Issuer") has issued certain series of tax-exempt bonds (the
      "Tax-Exempt Bonds"), which are issued under and secured by a tax-exempt
      collateral trust indenture. The proceeds from the issuance and sale of the
      Tax-Exempt Bonds were used to finance certain pollution control assets
      constituting a portion of the Facility. Each series of Tax-Exempt Bonds is
      secured solely by a corresponding series of Subordinated Notes issued by
      the Owner Trustees, which are secured by a junior security interest in the
      undivided interests of the Owner Trustees in the Facility and certain of
      their rights under and to the related Leases, including rents thereunder
      and the Lease Collateral, including (subject to the rights of the Working
      Capital Lender, which include a prior security interest in certain of
      MCV's receivables and natural gas inventory securing the Working Capital
      Facility) the revenues and other payments received thereunder. The
      Subordinated Notes securing the Tax-Exempt Bonds and the Subordinated
      Notes issued by the Owner Trustees to secure the Subordinated Bonds are
      secured by junior security interests in a shared collateral pool.

      Security and Sources of Payment

      The sole sources of payment for the Senior Bonds and Subordinated Bonds
      are certain pledged Senior Notes and pledged Subordinated Notes,
      respectively, issued by each of the five Owner Trustees and pledged under
      the Senior Bond Indenture and Subordinated Bond Indenture, respectively.
      The pledged Senior Notes and pledged Subordinated Notes of each Owner
      Trustee are nonrecourse obligations of such Owner Trustee payable solely
      from the rental payments made by MCV under its related Lease and the other
      security therefor. The Senior Notes are secured by a senior security
      interest in such Owner Trustee's undivided interest in the Facility and
      certain of its rights under and to the related Lease, including rents and
      the Lease collateral, including (subject to the rights of the Working
      Capital Lender) the revenues and other payments received



                                       18
<PAGE>   21

      thereunder. The Pledged Subordinated Notes are secured on a pari passu
      basis with the Subordinated Notes pledged to secure the Tax-Exempt Bonds,
      by a junior lien on and security interest in such collateral. Such lien,
      security interest and assignment are subordinated to the senior lien,
      security interest and assignment securing the Senior Notes issued by such
      Owner Trustee (and pledged to secure the Senior Bonds).

      Additional Senior Notes may be issued (i) to refinance the Senior Notes,
      in whole but not in part, and (ii) to pay certain costs of modifying the
      Facility. Additional Subordinated Notes may be issued (i) to refinance any
      series of Subordinated Notes, and (ii) to pay certain costs of modifying
      the Facility. Any additional Senior and Subordinated Notes will rank pari
      passu with all Senior and Subordinated Notes, respectively, then
      outstanding. The aggregate principal amount of Senior and Subordinated
      Bonds that may be issued is unlimited, provided that at no time may the
      aggregate principal amount of Senior and Subordinated Bonds exceed the
      aggregate principal amount of Senior and Subordinated Notes, respectively,
      then outstanding. The future issuance of additional Senior and
      Subordinated Bonds (other than for refinancing purposes) would create
      additional claims against the security for the Note Indentures and the
      amounts available to repay amounts in respect of the Bonds currently
      outstanding in the event of foreclosure.

      The rental payments under the Leases are established to provide funds
      sufficient to service the debt issued by the Owner Trustees and to provide
      the Owner Participants with a return on their equity investment. MCV is
      unconditionally obligated to make rental payments under the Leases in
      amounts sufficient to provide for scheduled payments of the principal of,
      premium, if any, and interest on the Notes, which amounts, in turn, are
      equal to scheduled payments of principal of, premium, if any, and interest
      on the Bonds. MCV has pledged to each Owner Trustee an undivided interest
      percentage of all revenues to be derived from the operation of the
      Facility, together with its rights with respect to the PPA, the SEPA, and
      various other contracts of MCV relating to the Facility (the "Lease
      Collateral") to secure its rental obligations under the Leases. Neither
      the Bonds nor the Notes are direct obligations of, or guaranteed by, MCV
      nor do any Partners of MCV have any liability under the terms of the
      Notes, the Bonds or the Leases. Neither the Partners nor the Partner
      affiliates have any obligations under the Leases, and the obligations of
      MCV under the Leases and the other documents related to the Overall Lease
      Transaction are nonrecourse to the Partners and the Partner affiliates.

      Any default or foreclosure with respect to the undivided interest of an
      Owner Trustee relates solely to such undivided interest. There is no
      cross-collateralization among Owner Trustees and the Subordinated Bond
      trustee as holder of the pledged Subordinated Notes. The Leases, however,
      contain identical events of default including an event of default related
      to a failure by MCV to pay principal of or interest on any indebtedness
      for borrowed money or other financing obligations (including lease
      obligations) with respect to an amount greater than $10 million.

      Pursuant to the Intercreditor Agreement, a reserve account has been
      created for the benefit of the holders of the Notes, which had been
      initially funded with $90 million in cash (the "Reserve Account"). The
      Intercreditor Agreement sets forth circumstances under which amounts in
      the Reserve Account will be adjusted to equal the greater (for so long as
      the Senior Bonds are outstanding) or the lesser (after the Senior Bonds
      have been paid in full) of $137 million or the debt portion of basic rent
      under the Leases payable on the next succeeding basic rent payment date,
      and limited circumstances under which no more than $10 million contained
      therein may be withdrawn therefrom to provide working capital. As of
      December 31, 2000, MCV had funds of $137.9 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



                                       19
<PAGE>   22

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

MCV has filed property tax appeals contesting MCV's property taxes for 1997 and
1998 and the taxable value for 1999 and 2000, which are pending before the
Michigan Tax Tribunal. MCV expects to appeal its 2001 property taxes. MCV
Management cannot predict the outcome of these proceedings.

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

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

Not applicable.




                                       20
<PAGE>   23

                                     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, 2000, 1999,
1998, 1997 and 1996 and for each of the five years ended December 31, 2000 have
been derived from audited financial statements. This information should be read
in conjunction with "MD&A" and the financial statements and notes thereto
included elsewhere herein.

<TABLE>
<CAPTION>
                                                                            Years Ended December 31,
                                                    -------------------------------------------------------------------------
                                                        2000           1999           1998           1997          1996
                                                    -------------- -------------- -------------- ------------- --------------
                                                                             (Dollars in Thousands)
<S>                                                 <C>            <C>            <C>            <C>           <C>
STATEMENT OF OPERATIONS DATA:
  Operating Revenues                                $   604,547      $ 617,352      $ 627,054      $ 651,581      $ 645,168
  Operating Income                                      212,813        215,884        222,461        216,499        227,883
  Cumulative Effect on Prior Years (to                       --             --             --         15,533             --
   December 31, 1996) of Change in Method of
   Accounting for Property Taxes (1)
  Net Income                                             90,121         80,069         80,327         77,737         65,524

BALANCE SHEET DATA: (2)
  Total Assets                                        2,274,956      2,299,212      2,286,506      2,351,271      2,363,945
  Capitalization
    Partners' Equity                                    527,738        437,617        357,548        277,221        199,484
    Long-Term Debt, Excluding Current Maturities      1,429,233      1,584,865      1,723,960      1,788,291      1,929,241
</TABLE>

(1) Effective January 1, 1997, MCV changed its method of accounting for property
taxes so that such taxes are expensed monthly during the fiscal period of the
taxing authority for which the taxes are levied. This change provides a better
matching of property tax expense with both the payment for services and those
services provided by the taxing authorities. Prior to January 1, 1997, the
Partnership expensed property taxes monthly during the year following the
assessment date (December 31).
(2)  Balance sheet data consists of the balances at December 31.

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

Results of Operations

Overview

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

For the year ended December 31, 1999, MCV recorded net income of $80.1 million,
a decrease of $.2 million as compared to 1998 net income of $80.3 million. The
decrease was primarily due to lower contract payments from



                                       21
<PAGE>   24

Dow, lower energy rates under the PPA with Consumers and the recording in 1998
of a non-recurring interest refund from Great Lakes. This decrease was partially
offset by the Settlement Agreement between MCV and Consumers effective, January
1, 1999, which resolved a number of disputed issues under the PPA between the
parties. Also partially offsetting this decrease in earnings was lower interest
expense on MCV's financing obligation, additional power sales outside of the
PPA, and lower depreciation expense.

Operating Revenues

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

<TABLE>
<CAPTION>
                                                                 2000             1999             1998
                                                            ------------     ------------     ------------
<S>                                                         <C>              <C>              <C>
Operating Revenues                                          $  604,547       $  617,352       $  627,054

Capacity Revenue                                            $  410,938       $  407,429       $  407,518
   PPA Contract Capacity (MW)                                    1,240            1,240            1,240
   Billed PPA Availability (1)                                    98.5%            98.5%            99.4%

Electric Revenue                                            $  177,989       $  196,301       $  192,258
   PPA Delivery as Percentage of Contract Capacity (2)            72.1%            78.2%            79.3%
   PPA, SEPA and Other Electric Deliveries (MWh)             8,535,548        9,205,083        9,194,474
   Average PPA Variable Energy Rate ($ / MWh)               $    15.68       $    16.00       $    16.76
   Average PPA Fixed Energy Rate ($ / MWh)                  $     3.57       $     3.52       $     3.75

Steam Revenue                                               $   15,620       $   13,622       $   12,008
   Steam Deliveries (Mlbs)                                   5,869,454        5,803,863        5,584,273

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


    (1) As part of the Settlement Agreement (See "Capacity and Energy Payments
    Under the PPA" and Notes to Consolidated Financial Statements, Note 7,
    "Contingencies, PPA - Settlement of PPA Issues"), effective January 1, 1999,
    MCV agreed with Consumers to cap PPA availability at 98.5% in each calendar
    year for so long as Consumers did not resell the capacity and energy under
    the PPA in the wholesale market.

    (2) Beginning in July 2000, in response to the rapidly escalating cost of
    natural gas, MCV entered into a series of transactions with Consumers
    whereby Consumers agreed to reduce the dispatch level of the Facility. In
    the event of reduced dispatch, MCV agreed to share the savings realized by
    not having to generate the electricity. In 2000, MCV estimates that this
    program resulted in net savings of approximately $9.0 million. MCV
    anticipates continuing the use of this or similar programs to mitigate the
    impacts of high market gas prices.

For the year ended December 31, 2000, MCV's operating revenues decreased $12.8
million from 1999. This decrease is due primarily to the first quarter 1999
recognition of a one-time net $6.4 million increase in operating revenues due to
the Settlement Agreement between MCV and Consumers, which resolved (for the
various time periods specified in the Settlement Agreement, but in no event
sooner than 2002) all of the previously disputed issues under the PPA and
included definitive obligations for Consumers to make energy payments calculated
in accordance with the PPA. Also decreasing revenues was a lower electric
dispatch and lower energy rates under the PPA with Consumers. This decrease was
partially offset by increased electric and steam rates under the SEPA with Dow
and higher capacity revenues from Consumers under the PPA and third parties.

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


                                       22
<PAGE>   25

as a result of the Settlement Agreement with Consumers and additional capacity
and electric sales revenues outside of the PPA.

Operating Expenses

For the year ended December 31, 2000, MCV's operating expenses were $391.7
million, which includes $232.1 million of fuel costs. During this period, MCV
purchased approximately 77.0 Bcf of natural gas, and a net 1.6 Bcf was used for
transportation fuel and as a net change to gas in storage. During this same
period, MCV consumed 76.2 Bcf, of which .8 Bcf of this total was gas provided by
Dow. The average commodity cost of fuel for the year of 2000 was $2.55 per
MMBtu, which includes the effects of the disposition of excess gas supplies not
required for generation. For the year ended December 31, 1999, MCV's operating
expenses were $401.5 million, which includes $244.4 million of fuel costs.
During this period, MCV purchased approximately 82.8 Bcf of natural gas, and a
net 2.5 Bcf was used for transportation fuel and as a net change to gas in
storage. During this same period, MCV consumed 82.2 Bcf, of which 1.9 Bcf of
this total was gas provided by Dow. The average commodity cost of fuel for the
year 1999 was $2.50 per MMBtu. Fuel costs for the year 2000 compared to 1999
decreased by $12.3 million. This fuel cost decrease was due primarily to a lower
gas usage resulting from the decrease in electric dispatch due in part, to
dispatch reduction transactions entered into with Consumers and disposition of
natural gas previously hedged or purchased under contract but not required for
electricity generation.

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

For the year ended December 31, 1999, MCV's operating expenses decreased $3.1
million from the year 1998, which included a $.3 million decrease in fuel costs.
This decrease was primarily due to a lower electric dispatch by Consumers under
the PPA, partially offset by a higher 1999 average cost of gas due to increases
in the long term natural gas prices.

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

Other Income (Expense)

For the year ended December 31, 2000, interest and other income increased $13.1
million compared to 1999, primarily resulting from higher interest rates on
MCV's investments and a decrease in interest expense due to a lower principal
balance on MCV's financing obligation. This decrease was partially offset by
expenses arising from MCV's refinancing of its tax-exempt bonds in June 2000.

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

Market Risk Sensitivity

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

Interest Rate Risks. In 1990, MCV obtained permanent financing for the Facility
by entering into sale and leaseback agreements ("Overall Lease Transaction")
with a lessor group, related to substantially all of MCV's fixed assets. In


                                       23
<PAGE>   26

accordance with SFAS No. 98, "Accounting For Leases," the sale and leaseback
transaction has been accounted for as a financing arrangement. Under the terms
of the Overall Lease Transaction, MCV sold undivided interests in all of the
fixed assets of the Facility for approximately $2.3 billion, to the Owner Trusts
established for the benefit of the Owner Participants. The financing
arrangement, entered into for a term of 25 years, maturing in 2015, had an
effective interest rate of approximately 8.7%, payable in semi-annual
installments of principal and interest. On June 15, 2000, MCV closed on the sale
of $200 million of tax-exempt bonds, the proceeds of which were used on July 24,
2000 to refund a like amount of previously issued bonds. The refinancing of this
portion of the outstanding debt has lowered MCV's effective interest rate on its
long-term debt arrangement from approximately 8.7% to 8.3%, which is still
scheduled to mature in year 2015. Lower interest rates on the recently issued
tax-exempt bonds should result in MCV incurring lower interest payments of
approximately $5.1 million annually through July 2007, with somewhat smaller
savings through the bonds' final maturity in July 2009. Due to the unique nature
of the negotiated financing obligation it is impractical to estimate the fair
value of the Owner Participants' underlying debt and equity instruments
supporting this financing obligation.

In addition, to manage the effects of interest rate volatility on interest
income while maximizing return on permitted investments, MCV has established an
interest rate hedging program. The carrying amounts of MCV's short-term
investments approximate fair value because of the short term maturity of these
instruments. MCV's short-term investments are made up of investment securities
held to maturity and as of December 31, 2000 have original maturity dates of
less than one year.

For MCV's debt obligations, the table below presents principal cash flows and
the related interest rate by expected maturity dates. The interest rate reflects
the fixed effective rate of interest of the financing arrangement. For the
interest rate swap transactions, the table presents the notional amounts and
related interest rates by fiscal year of maturity. The variable rates presented
are the average of the forward rates for the term of each contract, as valued at
December 31, 2000:

<TABLE>
<CAPTION>
                                                              Expected Maturity Date
                            --------------------------------------------------------------------------------------------
                                                                                                            Change in
                              2001       2002       2003       2004       2005     Thereafter     Total     Fair Value
                              ----       ----       ----       ----       ----     ----------     -----     ----------
<S>                          <C>        <C>        <C>        <C>       <C>      <C>            <C>       <C>
Debt:
Long-Term Debt Fixed
Rate                         $287.1     $304.1     $208.9     $242.8    $174.4      $1,346.9     $2,564.2         N/A
    (in millions)
Avg. Interest Rate              8.3%       8.3%       8.3%       8.3%      8.3%          8.3%         8.3%

Interest Rate Swaps:
Variable to Fixed            $ 45.0                                                                                --
    (in millions)
Avg. Pay Rate                  5.58%
Avg. Receive Rate              5.93%

Floating to Floating                    $ 20.0                                                                  $ (.3)
    (in millions)
Avg. Pay Rate                             5.67%
Avg. Receive Rate                         5.12%
</TABLE>

Commodity Risk. MCV is a purchaser of natural gas. MCV enters into natural gas
futures and option contracts in order to hedge against unfavorable changes in
the market price of natural gas in future months when gas is expected to be
needed. These financial instruments are being utilized principally to secure
anticipated natural gas requirements necessary for projected electric sales and
to hedge sales of natural gas previously obtained in order to optimize MCV's
existing gas supply, storage and transportation arrangements. The natural gas
futures and option contracts qualify as hedges under SFAS No. 80, "Accounting
for Futures Contracts," since the contracts cover probable future transactions.



                                       24
<PAGE>   27

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 one to eleven months. The
table presents the carrying amounts and fair values at December 31, 2000:

<TABLE>
<CAPTION>
                                                                Expected Maturity in 2001               Fair Value
                                                                -------------------------               ----------
<S>                                                             <C>                                     <C>
Futures Contracts:
Contract Volumes (10,000 MMBtu) Long/Buy                                   1,108                               --
Contract Volumes (10,000 MMBtu) Short/Sold                                   (56)                              --
Weighted Average Price Long (per MMBtu)                                   $4.305                           $6.018
Weighted Average Price Short (per MMBtu)                                  $7.500                           $9.775
Contract Amount ($US in Millions)                                         $ 43.5                           $ 61.2
</TABLE>


Foreign Currency Risks. MCV periodically enters into foreign exchange forward
purchase contracts for Swiss Francs to hedge its foreign currency exposure
against adverse currency fluctuations impacting the payments under the amended
Service Agreement with Alstom. The gains and losses on these transactions,
accounted for as hedges, are deferred on the balance sheet and included in the
measurement of the underlying capitalized major renewal costs when incurred.
Forward contracts, which are entered into, have maturity dates of less than one
year. As of December 31, 2000, MCV had forward purchase contracts involving
Swiss Francs in the notional amount of $10.0 million, with a deferred $.3
million gain.

New Accounting Standards

Effective January 1, 2001, MCV will adopt SFAS No. 133, "Accounting for
Derivatives Instruments and Hedging Activities, as amended and interpreted." For
a detailed discussion of the effects of the standard, including earnings
volatility, and the financial impact upon adoption, see Financial Statements and
Supplementary Data -- Note 2 "Significant Accounting Policies - New Accounting
Standard, Forward Foreign Exchange Contracts, Natural Gas Futures and Options
and Interest Rate Swaps" to the Consolidated Financial Statements.

Liquidity and Financial Resources

During the years ended December 31, 2000 and 1999, net cash generated by MCV's
operations was $143.1 million and $154.4 million, respectively. The primary use
of net cash was for the payment of principal on the financing obligation and
capital expenditures. No distributions to the Partners for federal tax
obligations were made in the last three years; instead, funds totaling $13.5
million, $10.3 million and $23.2 million were retained by MCV as working capital
in 2000, 1999 and 1998, respectively, since the Reserve Account was funded to
the maximum amount of $137 million in 1994, per the Intercreditor Agreement.
MCV's cash and cash equivalents have a normal cycle of collecting six months of
revenues less operating expenses prior to making the semiannual interest and
principal payments of the financing obligation due in January and July for the
next fourteen years. During 2000, 1999 and 1998, MCV paid the basic rent
requirements of $288.6 million, $221.7 million and $309.0 million, respectively,
as required under the Overall Lease Transaction.

MCV also has arranged for a $50 million working capital line ("Working Capital
Facility") from the Bank of Montreal to provide temporary financing, as
necessary, for operations. The Working Capital Facility has been secured by
MCV's natural gas inventory and earned receivables. At any given time,
borrowings and letters of credit are limited by the amount of the borrowing
base, defined as 90% of earned receivables. The borrowing base varies over the
month as receivables are earned, billed and collected. At December 31, 2000, the
borrowing base was $37.5 million. The Working Capital Facility term currently
extends to August 31, 2001. MCV did not utilize the Working Capital Facility
during 2000, except for letters of credit associated with normal business
practices. MCV believes that amounts available to it under the Working Capital
Facility will be sufficient to meet any working capital shortfalls which might
occur.

For the foreseeable future, MCV expects to fund current operating expenses,
payments under the amended Service Agreement and rental payments primarily
through cash flow from operations. If necessary, MCV could fund any operating
cash flow shortfalls from cash reserves to the extent available for such
purposes. As of December 31,



                                       25
<PAGE>   28

2000, there was approximately $321 million (which includes approximately $58
million reserved for capital improvements and spare parts purchases), including
accrued interest, in available reserves for such purposes.

Inflation

MCV does not expect inflation to have a significant effect on future results of
operations in the near future term. The majority of MCV's gas purchases are
based on contracts with a fixed price in a base year which is subject to
adjustment under various methods - a fixed price, a fixed price with an
escalator, an index based on Consumer's energy charges under the PPA, or a
combination thereof - which permits the seller to increase the price by the
greater of the fixed escalator or the energy charge index. Management believes
these provisions provide a measure of relief from inflation risks. Under the
terms of MCV's financing obligations under the Overall Lease Transaction, all of
the outstanding long-term borrowings are at fixed rates.

Outlook

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995. The following discussion of the outlook for MCV contains certain
"forward-looking statements" as defined by the Private Securities Litigation
Reform Act of 1995 (the "Act"), including without limitation, discussion as to
expectations, beliefs, plans, objectives and future financial performance, or
assumptions underlying or concerning matters discussed reflecting MCV's current
expectations of the manner in which the various factors discussed therein may
affect its business in the future. Any matters that are not historical facts are
forward-looking and, accordingly, involve estimates, assumptions, and
uncertainties, which could cause actual results or outcomes to differ materially
from those expressed in the forward-looking statements. Accordingly, this "Safe
Harbor" Statement contains additional information about such factors relating to
the forward-looking statements. There is no assurance that MCV's expectations
will be realized or that unexpected events will not have an adverse impact on
MCV's business.

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

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

Operating Outlook. During the year 2000, approximately 70% 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, which was effective January 1, 1999. Actual PPA availability was
98.5% in 2000, 99.7% in 1999 and 99.4% in 1998. 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.



                                       26
<PAGE>   29

Energy Rates and Cost of Production. Under the PPA, energy charges are based on
the costs associated with fuel inventory, operations and maintenance, and
administrative and general expenses associated with certain of Consumers' coal
plants. However, MCV's costs of producing electricity are tied, in large part,
to the cost of natural gas. To the extent that the costs associated with
production of electricity with natural gas rise faster than the energy charge
payments, which are based largely on Consumers' coal plant operation and
maintenance costs, MCV's financial performance would be negatively affected. For
the period April 1990 through December 2000, the unit energy charge (fixed and
variable) paid to MCV has declined by 16.5%, while the average unit variable
cost of delivered fuel for the period 1990 - 2000, has risen by 15.9%. The
divergence between variable revenues and costs will become greater if the energy
charge (based largely on the cost of coal) declines or escalates more slowly
than the spot market or contract prices under which MCV purchases fuel (contract
prices generally escalate at a fixed price, a fixed price with an escalator, an
index based on Consumers' energy charges under the PPA, or a combination
thereof). 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 and has entered into gas
purchase and hedging arrangements with respect to most of its expected gas needs
for 2001, for requirements 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 2001, although high gas prices for an extended
period of time could adversely affect operating results.

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

PPA - Sale and Assignment. In March 1999, Consumers signed a contract with PECO
Energy Company ("PECO") whereby Consumers would have sold 1240 MW of capacity
and associated energy to PECO from the MCV PPA until September 2007. The
contract with PECO was subject to regulatory treatment satisfactory to
Consumers. Consumers did not get the regulatory approvals it sought and
terminated its contract with PECO.

Michigan Electric Industry Restructuring Proceedings. The MPSC issued orders on
June 5, 1997, October 29, 1997, January 14, 1998 and February 11, 1998
(collectively the "Restructuring Orders"). The Restructuring Orders provide for
a transition to a competitive regime whereby electric retail customers would be
able to choose their power supplier and pay negotiated or market-based rates for
such power supply. The Restructuring Orders also mandated that utilities "wheel"
third-party power to the utilities' customers. An issue involved in
restructuring, which could significantly impact MCV, is stranded cost recovery.
The Restructuring Orders allow recovery by utilities (including Consumers) of
stranded costs, which include capacity charges from QFs, including MCV,
previously approved by the MPSC, incurred during the regulated era that will be
above market prices during the new competitive regime. However, it appears that
stranded cost recovery of above-market capacity charges in power purchase
contracts (i.e., MCV's PPA) is limited to customers who chose an alternative
power supplier and are only paid for the period 1998 through 2007 (MCV's PPA
expires in 2025). Customers who chose to remain power supply customers of
Consumers will continue to pay capacity charges as part of rates charged by
Consumers, subject to MPSC rate regulation. The Restructuring Orders do not
otherwise specifically address the recovery of PPA capacity charges after 2007.

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. 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



                                       27
<PAGE>   30

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, on July 7, 1999,
the U.S. District Court granted summary judgment to MCV declaring that the
Restructuring Orders are preempted by federal law to the extent 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. The order
further provides that the MPSC's prior orders approving the avoided cost rates
for MCV take precedence over the Restructuring Orders. The Defendants in the
lawsuit (the Commissioners of the MPSC) were permanently enjoined from enforcing
the Restructuring Orders in any manner which denies or precludes Consumers'
recovery of the avoided costs set for MCV, including but not limited to
interpreting or enforcing the Restructuring Orders to preclude them from
recovering all or any portion of the avoided costs previously approved by the
MPSC from its customers, whether before, during, or after the year 2007. This
order and the Commission's August 17, 1999 order are being appealed. 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
proceedings.

Federal Electric Industry Restructuring. FERC has jurisdiction over wholesale
energy sales and is moving towards "market" based pricing of electricity in some
circumstances as opposed to traditional cost-based pricing. In April 1996, FERC
issued Order No. 888 requiring all utilities FERC regulates to file uniform
transmission tariffs providing for, among other things, non-discriminatory "open
access" to all wholesale buyers and sellers, including the transmission owner,
on terms and conditions established by FERC. Order No. 888 also requires
utilities to "functionally unbundle" transmission and separate transmission
personnel from those responsible for marketing generation. On December 20, 1999,
FERC issued a final rule, Order No. 2000, designed to encourage all owners and
operators of interstate electric transmission lines to join regional
transmission organizations. Order No. 2000 is intended to increase competition
and remedy continuing problems with wholesale transmission access and
reliability. Order No. 2000 does not directly impact MCV since MCV does not own
transmission lines, but could indirectly impact MCV in selling electricity in
the wholesale market. Order No. 2000 and subsequent related orders are pending
before the United States Court of Appeals for the D.C. Circuit. In addition,
several bills have been introduced in Congress to require states to permit
consumers to choose their supplier of electricity and manage other issues such
as transition cost recovery and FERC jurisdiction of retail electric sales. MCV
Management cannot predict the impact on MCV or the outcome of these proceedings.

Maintaining QF Status. In the case of a topping-cycle generating plant such as
the Facility, to maintain QF Status the applicable operating standard requires
that the portion of total energy output that is put to some useful purpose other
than facilitating the production of power (the "Thermal Percentage") be at least
5%. In addition, the plant must achieve and maintain an average PURPA efficiency
standard (the sum of the useful power output plus one-half of the 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 2000 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 2000, MCV achieved an Efficiency Percentage of 47.3% and a Thermal Percentage
of 19.1%.

The loss of QF status could, among other things, cause the Facility to lose its
right under PURPA to sell power to Consumers at Consumers' "avoided cost" and
subject the Facility to additional federal and state regulatory requirements,
including the FPA (under which FERC has authority to establish rates for
electricity, which may be different than existing contractual rates). If the
Facility were to lose its QF status, the Partners of MCV, the Owner



                                       28
<PAGE>   31

Participants, the Owner Trustee and their respective parent companies could
become subject to regulation under the 1935 Act (under which, among other
things, the Securities and Exchange Commission has authority to order
divestiture of assets under certain circumstances). The loss of QF status would
not, however, entitle Consumers to terminate the PPA. Under the PPA, Consumers
is obligated to continue purchasing power from MCV at FERC-approved rates
(provided that the FERC-approved rates do not exceed the existing contractual
rates) and MCV, not Consumers, is entitled to terminate the PPA (which MCV has
covenanted not to do under the Participation Agreements). There can be no
assurance that FERC-approved rates would be the same as the rates currently in
effect under the PPA. If the FERC-approved rates are materially less than the
rates under the PPA, MCV may not have sufficient revenue to make rent payments
under the Overall Lease Transaction. The loss of QF status would constitute an
Event of Default under the Lease (and a corresponding Event of Default under the
Indenture) unless, among other requirements, FERC approves (or accepts for
filing) rates under the PPA or other contracts of MCV for the sale of
electricity sufficient to meet certain target coverage ratios (as defined in the
Overall Lease Transaction).

See "Financial Statements and Supplementary Data -- Notes 1 and 7 to the
Consolidated Financial Statements" for a further discussion of associated risks
and contingencies.

Item 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

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

None.



                                       29
<PAGE>   32

                                    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>
Management Committee

William T. McCormick, Jr.      (56)   Management Committee Chairman

John J. O'Rourke               (46)   Management Committee Member
                                      (Term began in March 2001)

David A. Arledge               (56)   Management Committee Member
                                      (Term ended in March 2001)
Executive Officers

James M. Kevra                 (52)   President and Chief Executive Officer

Bruce C. Grant                 (54)   Vice President of Human Resources, Communications and
                                      Public Affairs

James A. Mooney                (61)   Vice President of Engineering, Operations and
                                      Construction

Gary B. Pasek                  (45)   Vice President, General Counsel and Secretary

James M. Rajewski              (53)   Vice President and Controller

Stephen A. Shulman             (44)   Chief Financial Officer and Treasurer

LeRoy W. Smith                 (59)   Vice President of Energy Supply and Marketing
</TABLE>


William T. McCormick, Jr. has served as Chairman of the Management Committee of
MCV since its creation in January 1987. Mr. McCormick has served as Chairman of
the Board, Chief Executive Officer and Director of CMS Energy (diversified
energy holding company) since it was incorporated in February 1987, and added
the title of President of CMS Energy in December 2000. He has also served as
Chairman of Consumers since November 1985, and added the title of President and
Chief Executive Officer of Consumers in December 2000.

John J. O'Rourke has served as a member of the Management Committee since March
2001. Mr. O'Rourke has served as Managing Director, Commercial Management for El
Paso Merchant Energy since May 2000. Prior to becoming Managing Director for El
Paso Merchant Energy, 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.



                                       30
<PAGE>   33

David A. Arledge served as a member of the Management Committee from July 1988
to March 2001. His term on the Management Committee ended with the merger of
Coastal and El Paso. Mr. Arledge was Chairman, President and Chief Executive
Officer of The Coastal Corporation, a diversified energy holding company, prior
to the merger with El Paso. Prior to becoming Chief Executive Officer in October
1995, Mr. Arledge was Chief Operating Officer of The Coastal Corporation from
March 1994. He is also a Director of Coastal and of Coastal Midland, Inc., a
subsidiary of Coastal and has held these positions since February 1988 and April
1989, respectively. He has also held various other executive positions in
Coastal and numerous subsidiaries of Coastal during the last five years.

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

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

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

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

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

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

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


                                       31
<PAGE>   34

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, 2000, 1999 and
1998.

                           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                         2000             253,638              215,000                    50,731(b)
President and                          1999             241,965              178,360                    48,942
Chief Executive Officer                1998             226,008              225,000                    46,519


James A. Mooney                        2000             187,639              114,733                    39,894(c)
Vice President of                      1999             183,592               94,352                    39,312
Engineering, Operations                1998             176,900              122,559                    38,279
and Construction


Gary B. Pasek                          2000             164,995              101,071                    24,718(d)
Vice President                         1999             158,683               80,148                    23,776
General Counsel & Secretary            1998             152,169              106,287                    22,794


LeRoy W. Smith                         2000             163,932              107,504                    27,110(e)
Vice President of Energy               1999             158,105               76,805                    26,210
Supply and Marketing                   1998             152,335              103,173                    25,321


Stephen A. Shulman                     2000             148,079               88,448                    22,194(f)
Chief Financial Officer                1999             142,673               70,630                    21,378
and Treasurer                          1998             137,100               95,116                    20,538

</TABLE>


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

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

(b)   Includes company contributions of $8,500 to the 401(k) Savings Plan,
      $11,000 to the Defined Contribution Retirement Plan and $31,231 to the
      Supplemental Retirement Plan.

(c)   Includes company contributions of $8,500 to the 401(k) Savings Plan,
      $11,000 to the Defined Contribution Retirement Plan and $20,394 to the
      Supplemental Retirement Plan.

(d)   Includes company contributions of $8,239 to the 401(k) Savings Plan,
      $11,261 to the Defined Contribution Retirement Plan and $5,218 to the
      Supplemental Retirement Plan.

(e)   Includes company contributions of $8,167 to the 401(k) Savings Plan,
      $11,333 to the Defined Contribution Retirement Plan and $7,610 to the
      Supplemental Retirement Plan.

(f)   Includes company contributions of $7,398 to the 401(k) Savings Plan,
      $12,102 to the Defined Contribution Retirement Plan and $2,694 to the
      Supplemental Retirement Plan.



                                       32
<PAGE>   35

                       2000 Long-Term Incentive Plan Table


<TABLE>
<CAPTION>

                                      Performance or Other Periods          Estimated Future Payout Under
             Name                    Until Maturation or Payout (a)           Non-Stock Price Based Plan
------------------------------     ----------------------------------    -----------------------------------
                                                                                     Maximum ($)
<S>                                <C>                                   <C>
James M. Kevra                                  1-3 years                               77,000

James A. Mooney                                 1-3 years                               57,000

Gary B. Pasek                                   1-3 years                               50,000

LeRoy W. Smith                                  1-3 years                               49,000

Stephen A. Shulman                              1-3 years                               45,000
</TABLE>

(a)  In 1998, MCV established a new long-term incentive plan under which
     officers and certain management personnel could receive cash payouts based
     on achieving certain targeted cashflows on a projected basis, thus enabling
     cash distributions to be made to the Partners for their annual federal tax
     obligations pursuant to provisions in the Participation Agreement. If, in
     any of the years 2000 through 2002, MCV is able to make a cash distribution
     to its Partners greater than 75% of the Partners' estimated tax obligation,
     each participant in the plan could receive a payout equal to a range of
     1%-30% of their base salary depending on the specific amount of cash
     distributed to the Partners and the year that such distribution occurs.
     Where the cash distribution to the Partners is 75% or less of the estimated
     tax obligation for each of these three years, no cash payout to
     participants will occur under this plan. For the year 2000, no cash payout
     to participants under this plan occurred.

Compensation Committee Interlocks and Insider Participation

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

Mr. O'Rourke commenced in March 2001, as a member of MCV's Compensation
Committee. He also serves as Managing Director, Commercial Management for El
Paso Merchant Energy. Mr. Arledge was a member of the Compensation Committee of
MCV as well as Chairman, President and Chief Executive Officer and a Director of
Coastal. His term on the Compensation Committee ended in March 2001. Prior to
the merger with El Paso, he was Director of Coastal Midland, Inc. Coastal
Midland, Inc. and affiliates of Coastal have engaged in numerous transactions in
the ordinary course of business to provide services or products to MCV. In 2000,
Coastal affiliates engaged in transactions with MCV, which included the sale of
natural gas, sale of natural gas transportation, various natural gas marketing
services and the purchase of electricity that amounted in aggregate to
approximately $67.7 million. A similar level of transactions is expected to
occur in 2001. In addition, as of December 31, 2000, Coastal had an outstanding
cash withdrawal from the Partnership in the amount of $50.9 million (including
accrued interest) in exchange for a letter of credit, pursuant to the
Participation Agreement.

Mr. McCormick is Chairman of the Compensation Committee of MCV as well as
Chairman, President and Chief Executive Officer and Director of CMS Energy and
Consumers. CMS Energy and its affiliates have the following direct and indirect
interests in MCV and the Facility: CMS Midland Holdings Company has an ownership
interest in one of the Owner Trusts, representing indirectly a 35% equity
interest in the Facility; CMS Midland has a 49% general partnership interest in
MCV; and Consumers has contractual obligations under the PPA to purchase
electric capacity and related energy from MCV, has contractual obligations under
various backup agreements among MCV, Consumers and Dow to assure a continuous
supply of steam and electricity to Dow in the event the SEPA is



                                       33
<PAGE>   36

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 2000, Consumers purchased electric capacity and related energy
from the Facility that aggregated approximately $568.8 million. In addition, CMS
Energy affiliates have engaged in numerous transactions in the ordinary course
of business to provide services or products to MCV. In 2000, CMS Energy
affiliates engaged in transactions with MCV which included the sale of natural
gas, the sale of natural gas transportation, the sale of natural gas storage and
the purchase of natural gas that amounted in aggregate to approximately $54.4
million. A similar level of transactions is expected to occur in 2001.

For further detailed discussions of MCV's contracts and leases with Partners,
see "Contracts", "Properties" and "Financial Statements and Supplementary Data
-- Note 9 to the Consolidated Financial Statements."



                                       34
<PAGE>   37

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          of Partnership
  Name and Address of Beneficial Owner              Title of Class            of Voting Rights (a)             Interest
-----------------------------------------     ----------------------------    ----------------------     ----------------------
<S>                                           <C>                             <C>                        <C>
El Paso Corporation (b)
El Paso Building
1001 Louisiana Street
Houston, TX 77002

      Source Midland Limited Partnership      General Partnership Interest            24.2%                      18.1%

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

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

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


CMS Energy Company
212 West Michigan Avenue
Jackson, MI 49201

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

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

Alanna Corporation                            Limited Partnership Interest             --                      0.00001%
c/o MCV Limited Partnership
100 Progress Place
Midland, MI 48640
                                                                              ----------------------     ----------------------
                                                                                     100.0%                     100.0%
</TABLE>

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

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

Item 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

                                       35
<PAGE>   38

                                     PART IV

Item 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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

      1.   Financial statements.

           The following consolidated financial statements are as of December
           31, 2000 and 1999 or for each of the three years ended December 31,
           2000, 1999 and 1998.

<TABLE>
<CAPTION>
                                                                                      Page
                                                                                      ----
<S>                                                                                  <C>
           Index to Consolidated Financial Statements and Supplemental Schedules      F-1
           Report of Independent Public Accountants                                   F-2
           Consolidated Balance Sheets                                                F-3
           Consolidated Statements of Operations                                      F-4
           Consolidated Statements of Partners' Equity                                F-5
           Consolidated Statements of Cash Flows                                      F-6
           Notes to Consolidated Financial Statements                                 F-7
</TABLE>

      2.   All schedules are omitted because they are inapplicable, not required
           or the information is included in the financial statements or notes
           thereto.

      3.   The Exhibits that are filed or incorporated by reference as part of
           this report are listed in the Exhibit Index filed herewith.

(b)   Reports on Form 8-K.

      Current report dated January 29, 2001, covering matters reported pursuant
to "Item 5, Other Events."


                                       36
<PAGE>   39
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


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

Consolidated Balance Sheets as of December 31, 2000 and 1999                                               F-3

Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999, and 1998                F-4

Consolidated Statements of Partners' Equity for the Years Ended December 31, 2000, 1999, and 1998          F-5

Consolidated Statements of Cash Flows for the Years Ended December 31, 2000,
1999, and 1998                                                                                             F-6

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

<PAGE>   40



                               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, 2000 and 1999, and the related
consolidated statements of operations, partners' equity and cash flows for each
of the three years in the period ended December 31, 2000. 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,
2000 and 1999, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.



                                                     Arthur Andersen LLP


  Detroit, Michigan,
  January 19, 2001

                                      F-2

<PAGE>   41


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

<TABLE>
<CAPTION>
ASSETS                                                                                      2000               1999
------                                                                                 --------------     -------------
<S>                                                                                    <C>               <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                              $   205,550       $   236,205
  Restricted cash and cash equivalents                                                           748             5,680
  Accounts and notes receivable - related parties                                            109,181            98,014
  Accounts receivable                                                                         75,216            20,754
  Gas inventory                                                                               14,474            13,478
  Unamortized property taxes                                                                  16,210            16,809
  Prepaid expenses and other                                                                   7,785             5,968
                                                                                         -----------       -----------

    Total current assets                                                                     429,164           396,908
                                                                                         -----------       -----------

PROPERTY, PLANT AND EQUIPMENT
  Property, plant and equipment                                                            2,433,798         2,421,677
  Pipeline                                                                                    21,222            21,222
                                                                                         -----------       -----------

    Total property, plant and equipment                                                    2,455,020         2,442,899

  Accumulated depreciation                                                                  (783,974)         (711,019)
                                                                                         -----------       -----------

    Net property, plant and equipment                                                      1,671,046         1,731,880
                                                                                         -----------       -----------

OTHER ASSETS:
  Restricted investment securities held-to-maturity                                          139,876           139,803
  Deferred financing costs, net of accumulated amortization of $12,804 and $11,425,
    respectively                                                                              12,161             7,152
  Prepaid gas costs, materials and supplies                                                   22,709            23,469
                                                                                         -----------       -----------

    Total other assets                                                                       174,746           170,424
                                                                                         -----------       -----------
TOTAL ASSETS                                                                             $ 2,274,956       $ 2,299,212
                                                                                         ===========       ===========

LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable and accrued liabilities                                               $    93,010       $    59,970
  Interest payable                                                                            67,416            76,119
  Current portion of long-term debt                                                          155,632           139,095
                                                                                         -----------       -----------

    Total current liabilities                                                                316,058           275,184
                                                                                         -----------       -----------

NON-CURRENT LIABILITIES:
  Long-term debt                                                                           1,429,233         1,584,865
  Other                                                                                        1,927             1,546
                                                                                         -----------       -----------

    Total non-current liabilities                                                          1,431,160         1,586,411
                                                                                         -----------       -----------

COMMITMENTS AND CONTINGENCIES

TOTAL LIABILITIES                                                                          1,747,218         1,861,595
                                                                                         -----------       -----------

PARTNERS' EQUITY                                                                             527,738           437,617
                                                                                         -----------       -----------
TOTAL LIABILITIES AND PARTNERS' EQUITY                                                   $ 2,274,956       $ 2,299,212
                                                                                         ===========       ===========

</TABLE>


        The accompanying notes are an integral part of these statements.

                                      F-3
<PAGE>   42


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


<TABLE>
<CAPTION>
                                              2000            1999            1998
                                           ---------       ---------       ---------
<S>                                        <C>             <C>             <C>
OPERATING REVENUES:
  Capacity                                 $ 410,938       $ 407,429       $ 407,518
  Electric                                   177,989         196,301         192,258
  Steam and other                             15,620          13,622          27,278
                                           ---------       ---------       ---------

    Total operating revenues                 604,547         617,352         627,054
                                           ---------       ---------       ---------

OPERATING EXPENSES:
  Fuel costs                                 232,127         244,350         244,670
  Depreciation                                93,916          95,350          97,239
  Operations                                  15,117          14,699          14,880
  Maintenance                                 13,907          12,076          12,596
  Property and single business taxes          26,860          25,744          25,687
  Administrative, selling and general          9,807           9,249           9,521
                                           ---------       ---------       ---------

    Total operating expenses                 391,734         401,468         404,593
                                           ---------       ---------       ---------

OPERATING INCOME                             212,813         215,884         222,461
                                           ---------       ---------       ---------

OTHER INCOME (EXPENSE):
  Interest and other income                   24,211          19,913          21,092
  Interest expense                          (146,903)       (155,728)       (163,226)
                                           ---------       ---------       ---------

    Total other income (expense), net       (122,692)       (135,815)       (142,134)
                                           ---------       ---------       ---------


NET INCOME                                 $  90,121       $  80,069       $  80,327
                                           =========       =========       =========

</TABLE>

        The accompanying notes are an integral part of these statements.


                                      F-4
<PAGE>   43

                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, 1997      $229,992      $ 47,229      $277,221

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

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

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

BALANCE, DECEMBER 31, 1999      $369,638      $ 67,979      $437,617

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

BALANCE, DECEMBER 31, 2000      $448,100      $ 79,638      $527,738
                                ========      ========      ========
</TABLE>

        The accompanying notes are an integral part of these statements.


                                      F-5
<PAGE>   44


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

<TABLE>
<CAPTION>
                                                                                     2000            1999            1998
                                                                                  ---------       ---------       ---------
<S>                                                                               <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                      $  90,121       $  80,069       $  80,327

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

  Depreciation and amortization                                                      95,295          96,359          98,297
  Increase in accounts and notes receivable                                         (65,629)        (14,453)        (10,641)
  (Increase) decrease in gas inventory                                                 (996)          1,666          (2,234)
  (Increase) decrease in unamortized property taxes                                     599          (1,067)            355
  (Increase) decrease in prepaid expenses and other                                  (1,817)         (1,937)            547
  (Increase) decrease in prepaid gas costs, materials and supplies                      760          (3,221)            418
  Increase (decrease) in accounts payable, accrued and other liabilities             33,040            (748)          1,776
  Decrease in interest payable                                                       (8,703)         (2,840)         (6,224)
  Increase in other non-current liabilities                                             381             556             306
                                                                                  ---------       ---------       ---------
    Net cash provided by operating activities                                       143,051         154,384         162,927
                                                                                  ---------       ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Plant modifications and purchases of plant and equipment                          (33,082)        (53,838)        (49,928)
                                                                                  ---------       ---------       ---------
    Net cash used in investing activities                                           (33,082)        (53,838)        (49,928)
                                                                                  ---------       ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of financing obligation                                                (139,095)        (64,331)       (140,950)
  Debt refinancing costs                                                             (6,388)             --              --
  Maturity of restricted investment securities held-to-maturity                     282,091         336,094         409,995
  Purchase of restricted investment securities held-to-maturity                    (282,164)       (332,453)       (414,541)
                                                                                  ---------       ---------       ---------
    Net cash used in financing activities                                          (145,556)        (60,690)       (145,496)
                                                                                  ---------       ---------       ---------

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH -
  CURRENT                                                                           (35,587)         39,856         (32,497)

CASH, CASH EQUIVALENTS AND RESTRICTED CASH - CURRENT, AT BEGINNING OF PERIOD
                                                                                    241,885         202,029         234,526
                                                                                  ---------       ---------       ---------

CASH, CASH EQUIVALENTS AND RESTRICTED CASH - CURRENT, AT END OF PERIOD
                                                                                  $ 206,298       $ 241,885       $ 202,029
                                                                                  =========       =========       =========
</TABLE>




        The accompanying notes are an integral part of these statements.



                                      F-6
<PAGE>   45

                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)   THE PARTNERSHIP AND ASSOCIATED RISKS

      Midland Cogeneration Venture Limited Partnership ("MCV") was organized to
      construct, own and operate a combined-cycle, gas-fired cogeneration
      facility (the "Facility") located in Midland, Michigan. MCV was formed on
      January 27, 1987, and the Facility entered into commercial operation in
      1990. The Partners, their respective equity interests and interests in the
      profit and losses of the Partnership and transactions between MCV and
      affiliates of the Partners are discussed in Note 9.

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

      The Facility was originally designed to provide approximately 1,370
      megawatts ("MW") of electricity and approximately 1.5 million pounds of
      process steam per hour. Subsequent improvements to the Facility have
      increased net electrical generating capacity to approximately 1,500 MW.
      MCV has entered into three principal energy sales agreements. MCV has
      contracted to supply up to 1,240 MW of electric capacity ("Contract
      Capacity") to Consumers Energy Company ("Consumers") under the Power
      Purchase Agreement ("PPA"), for resale to its customers, to supply
      electricity and steam to The Dow Chemical Company ("Dow") under the Steam
      and Electric Power Agreement ("SEPA") and to supply steam to Dow Corning
      Corporation ("DCC") under the Steam Purchase Agreement ("SPA"). From time
      to time, MCV enters into other short-term sales agreements for the sale of
      excess capacity and/or energy available above MCV's internal use and
      obligations under the PPA, SEPA and SPA. Results of operations are
      primarily dependent on successfully operating the Facility at or near
      contractual capacity levels and on Consumers' honoring its obligations
      under the PPA with MCV. Sales pursuant to the PPA have historically
      accounted for over 90% of MCV's revenues.

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

      The Facility is a qualifying cogeneration facility ("QF") originally
      certified by the Federal Energy Regulatory Commission ("FERC") under the
      Public Utility Regulatory Policies Act of 1978, as amended ("PURPA"). In
      order to maintain QF status, certain operating and efficiency standards
      must be maintained on a calendar-year basis and certain ownership
      limitations must be met. In the case of a topping-cycle generating plant
      such as the Facility, the applicable operating standard requires that the
      portion of total energy output that is put to some useful purpose other
      than facilitating the production of power (the "Thermal Percentage") be at
      least 5%. In addition, the Facility must achieve a PURPA efficiency
      standard (the sum of the useful power output plus one-half of the useful
      thermal energy output, divided by the energy input (the "Efficiency
      Percentage")) of at least 45%. If the Facility maintains a Thermal
      Percentage of 15% or higher, the required Efficiency Percentage is reduced
      to 42.5%. Since 1990, the Facility has achieved the applicable Thermal and
      Efficiency Percentages. During 2000, the Facility achieved a Thermal
      Percentage of 19.1% and a PURPA Efficiency Percentage of 47.3%. 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 2001 and beyond.

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



                                      F-7
<PAGE>   46
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

      MCV's financial performance will be negatively affected. The amount of
      such impact will depend upon the amount of the average energy charge
      payable under the PPA, which is based upon costs incurred at Consumers'
      coal-fired plants and upon the amount of energy scheduled by Consumers for
      delivery under the PPA. However, given the unpredictability of these
      factors, the overall economic impact upon MCV of changes in energy charges
      payable under the PPA and in future fuel costs under new or existing
      contracts cannot accurately be predicted.

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

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

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

      Principles of Consolidation

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


                                      F-8
<PAGE>   47

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


      Revenue Recognition

      MCV recognizes revenue for the sale of variable energy and fixed energy
      when delivered (see Notes 6 and 7). Capacity and other installment
      revenues are recognized based on plant availability or other contractual
      arrangements.

      Fuel Costs

      MCV's fuel costs are those costs associated with securing natural gas and,
      transportation and storage services necessary to generate electricity and
      steam from the Facility. These costs are recognized in the income
      statement based upon actual volumes burned to produce the delivered
      energy. In addition, MCV engages in certain cost mitigation activities to
      offset the fixed charges MCV incurs for these activities. The gains or
      losses resulting from these activities have resulted in net gains of
      approximately $6.1 million, $4.7 million and $2.9 million for the years
      ended 2000, 1999 and 1998, respectively. These net gains are reflected as
      a component of fuel costs.

      Beginning in July 2000, in response to the rapidly escalating cost of
      natural gas, MCV entered into a series of 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
      through the sales of excess natural gas. In 2000, MCV estimates that this
      program resulted in net savings of approximately $9.0 million, which were
      also reflected as a component of fuel costs. MCV anticipates continuing
      the use of this or similar programs to mitigate the impacts of high market
      gas prices.

      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, 2000 and 1999, was $3.8
      million and $3.3 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 operations.

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



                                      F-9
<PAGE>   48


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

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

      Federal Income Tax

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

      Statement of Cash Flows

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

      Fair Value of Financial Instruments

      The carrying amounts of cash and cash equivalents and short-term
      investments approximate fair value because of the short maturity of these
      instruments. MCV's short-term investments, which are made up of investment
      securities held-to-maturity, as of December 31, 2000 have original
      maturity dates of less than one year. The unique nature of the negotiated
      financing obligation discussed in Note 5 makes it impractical to estimate
      the fair value of the Owner Participants' underlying debt and equity
      instruments supporting such financing obligation.

      New Accounting Standard

      The Financial Accounting Standards Board issued Statement of Financial
      Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
      Instruments and Hedging Activities" in June, 1998, which was then amended
      by SFAS No. 137, "Accounting for Derivative Instruments and Hedging
      Activities - Deferral of the Effective Date of SFAS No. 133" and SFAS No.
      138 "Accounting for Certain Derivative Instruments and Certain Hedging
      Activities - An amendment of FASB Statement No. 133" (collectively
      referred to as "SFAS No. 133"). SFAS No. 133 establishes accounting and
      reporting standards requiring that every derivative instrument be recorded
      in the balance sheet as either an asset or liability measured at its fair
      value. SFAS No. 133 requires that changes in the derivative's fair value
      be recognized currently in earnings unless specific hedge accounting
      criteria are met. Special accounting for qualifying hedges in some cases
      allows a derivative's gains and losses to offset related results on the
      hedged item in the income statement or permits recognition of the hedge
      results in other comprehensive income, and requires that a company
      formally document, designate, and assess the effectiveness of transactions
      that receive hedge accounting. MCV adopted SFAS No. 133 effective January
      1, 2001. In addition, MCV's long-term natural gas contracts and power
      supply contracts qualify as derivatives but are excluded from derivative
      accounting, pursuant to the normal purchases and normal sales exception of
      SFAS No. 133.

      Forward Foreign Exchange Contracts

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

      To manage this currency exchange rate risk and hedge against adverse
      currency fluctuations impacting the payments under this amended Service
      Agreement, MCV maintains a foreign currency hedging program. Under this
      program, MCV periodically enters into forward purchase contracts for Swiss
      francs. The forward foreign currency exchange contracts have qualified as
      hedges under SFAS No. 52, "Foreign Currency Translation," since they hedge
      the identifiable foreign currency commitment of the amended Service
      Agreement. The gains



                                      F-10
<PAGE>   49

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

      and losses on these transactions, accounted for as hedges, are deferred on
      the balance sheet and included in the measurement of the underlying
      capitalized major renewal costs when incurred. As of December 31, 2000,
      MCV had forward purchase contracts involving Swiss francs in the notional
      amount of $10.0 million, with a deferred $.3 million gain recorded in
      current liabilities. As of December 31, 1999, MCV had forward purchase
      contracts involving Swiss francs in the notional amount of $11.0 million,
      with a deferred $.6 million loss recorded in prepaid expenses and other.

      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.

      Natural Gas and 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
      options and futures contracts in order to hedge against unfavorable
      changes in the market price of natural gas in future months when gas is
      expected to be needed. These financial instruments are being utilized
      principally to secure anticipated natural gas requirements necessary for
      projected electric and steam sales and to hedge sales of natural gas
      previously obtained in order to optimize MCV's existing gas supply,
      storage and transportation arrangements. The natural gas futures and
      option contracts qualified as hedges under SFAS No. 80, "Accounting for
      Futures Contracts," since the contracts cover probable future
      transactions.

      Cash is deposited with the broker in a margin account at the time futures
      or options contracts are initiated. The change in market value of these
      contracts requires adjustment of the margin account balances. The margin
      balance, recorded in prepaid expenses and other, was $3.8 million and $1.6
      million as of December 31, 2000 and December 31, 1999, respectively. Prior
      to implementation of SFAS No. 133, MCV deferred gains and losses on
      futures and options contracts, recorded in current liabilities, were
      offset by the corresponding underlying transaction and then included in
      operating expenses in the same period the natural gas is burned to operate
      the Facility. As of December 31, 2000, MCV had net open futures and
      options contracts of 10.5 Bcf with a deferred gain of $17.7 million. As of
      December 31, 1999, MCV had net open futures and options contracts of 1.9
      Bcf with a deferred loss of $.2 million. In addition, MCV recorded
      approximately $1.4 million in net deferred losses on contracts closed
      prior to December 31, 2000, related to 2001 purchase and sales
      commitments, and had approximately $.6 million in net deferred gains on
      contracts closed prior to December 31, 1999, related to 2000 purchase and
      sales commitments.

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

      Effective January 1, 2001, MCV's gains and losses on futures contracts
      qualifying as hedges will be recorded as a component of other
      comprehensive income and will be offset by the corresponding underlying
      transaction and then included in operating expenses in the same period the
      natural gas is burned to operate the Facility. MCV's gains and losses on
      futures and options contracts that do not qualify as hedges are recognized
      currently in earnings with no offsetting physical gas purchase. This could
      cause increased earnings volatility when these contracts are adjusted to
      fair value in earnings with no offsetting transaction. Under the
      transition



                                      F-11
<PAGE>   50

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

      rules under SFAS No. 133, on January 1, 2001, the cumulative effect
      accounting gain related to the fair value of the derivative instruments
      held for cost mitigation activities has been reflected in other
      comprehensive income based on previous hedging relationships. These
      futures and options totaled 1.4 bcf with a total fair value loss of $2.2
      million. Future fair value changes in these contracts will be recognized
      currently in income and the amount reflected in other comprehensive income
      will be reclassified in income when the original underlying transactions
      occurs during the first quarter of 2001. The January 1, 2001, 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.

      Interest Rate Swaps

      To manage the effects of interest rate volatility on interest income while
      maximizing return on permitted investments, MCV established an interest
      rate hedging program. The notional amounts of the hedges are tied directly
      to MCV's anticipated cash investments, without physically exchanging the
      underlying notional amounts.

      Cash may be deposited with the broker at the time the interest rate swap
      transactions are initiated. The change in market value of these contracts
      may require further adjustment of the margin account balance. The margin
      balance recorded in prepaid expenses and other, was approximately $.4
      million and $.3 million, as of December 31, 2000 and December 31, 1999,
      respectively. As of December 31, 2000, MCV had two separate interest rate
      swap hedges with a notional amount totaling $45 million, with periods of
      performance ranging up to six months. The difference between the amounts
      received and paid under the interest rate swap transactions is accrued and
      recorded as an adjustment to interest income over the life of the hedged
      agreement. For the year ended December 31, 2000, MCV recorded a net loss
      under the interest rate swap hedges of approximately $.1 million; while
      for the year ended December 31, 1999, MCV had a net loss of approximately
      $42,000.

      Under SFAS No. 133, these interest rate swap transactions qualify as cash
      flow hedges. The gains and losses on these transactions are recorded
      monthly as an adjustment to other comprehensive income and the difference
      between the amounts received and paid under interest rate swap
      transactions is accrued and recorded as an adjustment to interest income
      over the life of the hedged agreement. The January 1, 2001 adoption of
      SFAS No. 133 resulted in an immaterial cumulative effect accounting change
      recognized in other comprehensive income and is expected to have an
      immaterial earnings impact on an ongoing basis.

      The MCV has a third interest rate swap, with a notional amount of $20
      million and a period of performance that extends until December 1, 2002,
      that did not qualify as a hedge during 2000 and will not qualify as a
      hedge under SFAS No. 133. The gains and losses on this swap, which do not
      qualify for hedge accounting treatment, are recorded currently in
      earnings. The total loss recorded in income during 2000 was approximately
      $.1 million and the fair value loss of the swap was $.3 million as of
      December 31, 2000.

      Reclassifications

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


                                      F-12
<PAGE>   51

                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   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:                                                2000          1999
      --------                                              --------      --------
      <S>                                                   <C>           <C>
      Funds restricted for plant modifications              $    748      $  5,680
                                                            ========      ========

      Non-current:
      Funds restricted for rental payments pursuant to
        the Overall Lease Transaction                       $137,942      $138,258

      Funds restricted for management non-qualified
        plans                                                  1,934         1,545
                                                            --------      --------

      Total                                                 $139,876      $139,803
                                                            ========      ========
</TABLE>


(4)   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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


<TABLE>
<CAPTION>
                                               2000         1999
                                              -------      -------
      <S>                                     <C>          <C>
      Accounts payable
         Related parties                      $18,144      $13,016
         Trade creditors                       41,601       30,394
      Property and single business taxes       13,560       12,973
      Other                                    19,705        3,587
                                              -------      -------

      Total                                   $93,010      $59,970
                                              =======      =======

</TABLE>

(5)   LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                                                          2000              1999
                                                                                      -----------       -----------
      <S>                                                                             <C>               <C>
          Financing obligation, maturing through 2015, effective interest rate
          of approximately 8.3% and 8.7% for 2000 and 1999, respectively,
          payable in semi-annual installments of principal and interest, secured
          by property, plant and equipment                                            $ 1,584,865       $ 1,723,960


          Less current portion                                                           (155,632)         (139,095)
                                                                                      -----------       -----------

          Total long-term debt                                                        $ 1,429,233       $ 1,584,865
                                                                                      ===========       ===========
</TABLE>

                                      F-13
<PAGE>   52
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

      Financing Obligation

      In June 1990, MCV obtained permanent financing for the Facility by
      entering into sale and leaseback agreements ("Overall Lease Transaction")
      with a lessor group, related to substantially all of MCV's fixed assets.
      Proceeds of the financing were used to retire borrowings outstanding under
      existing loan commitments, make a capital distribution to the Partners and
      retire a portion of notes issued by MCV to MEC Development Corporation
      ("MDC") in connection with the transfer of certain assets by MDC to MCV.
      In accordance with SFAS No. 98, "Accounting For Leases," the sale and
      leaseback transaction has been accounted for as a financing arrangement.

      On June 15, 2000, MCV closed on the sale of $200 million of tax-exempt
      bonds, the proceeds of which were used on July 24, 2000 to refund a like
      amount of previously issued bonds. The refinancing of this portion of the
      outstanding debt has lowered MCV's effective interest rate on its
      long-term debt arrangement, which is still scheduled to mature in year
      2015, from approximately 8.7% to 8.3%.

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

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

      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 $1.4 million, $1.0 million and $1.1 million were amortized
      in the years 2000, 1999 and 1998, respectively.

      Revolving Credit Agreement

      MCV has also entered into a revolving credit agreement with the Bank of
      Montreal ("Working Capital Lender"), which expires August 31, 2001. Under
      the terms of the existing agreement, MCV can borrow up to the $50 million
      commitment, in the form of revolving credit loans or letters of credit
      secured by MCV's natural gas inventory and earned receivables. Outstanding
      borrowings under this agreement are limited to 90% of earned accounts
      receivable. At December 31, 2000, the borrowing base calculated under this
      agreement was $37.5 million. During 2000, MCV did not utilize the Working
      Capital Facility, except for letters of credit associated with normal
      business practice. At December 31, 2000, MCV had letters of credit
      outstanding of $17.2 million related to gas purchase transactions.

                                      F-14
<PAGE>   53
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)



      Intercreditor Agreement

      MCV has also entered into an Intercreditor Agreement with the Owner
      Trustee, Working Capital Lender, First Trust Michigan as Collateral Agent
      ("Collateral Agent") and the Senior and Subordinated Indenture Trustees.
      Under the terms of this agreement, MCV is required to deposit all revenues
      derived from the operation of the Facility with the Collateral Agent for
      purposes of paying operating expenses and rent. In addition, these funds
      are required to pay construction modification costs and to secure future
      rent payments. As of December 31, 2000, MCV has deposited $137.9 million
      into the reserve account and $.7 million into the construction repair
      account. The reserve account is to be maintained at not less than $40
      million nor more than $137 million (or debt portion of next succeeding
      basic rent payment, whichever is greater). Excess funds in the reserve
      account are periodically transferred to MCV. This agreement also contains
      provisions governing the distribution of revenues and rents due under the
      Overall Lease Transaction, and establishes the priority of payment among
      the Owner Trusts, creditors of the Owner Trusts, creditors of MCV and the
      Partnership.

      Summary

      Interest and fees incurred related to long-term debt arrangements during
      2000, 1999 and 1998 were $142.5 million, $154.7 million and $162.1
      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 2000, 1999 and 1998 was $151.3 million,
      $157.5 million and $168.3 million, respectively.

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

<TABLE>
<CAPTION>
                 Principal        Interest         Total
                ----------      -----------     ----------
      <S>       <C>             <C>             <C>
      2001      $  155,632      $  131,493      $  287,125
      2002         186,172         117,914         304,086
      2003         102,959         105,932         208,891
      2004         145,697          97,112         242,809
      2005          89,453          84,930         174,383
                ----------      ----------      ----------

                $  679,913      $  537,381      $1,217,294
                ==========      ==========      ==========
</TABLE>


(6)   COMMITMENTS AND OTHER AGREEMENTS

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

      Power Purchase Agreement

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

      Steam and Electric Power Agreement

      MCV and Dow executed the SEPA for the sale to Dow of certain minimum
      amounts of steam and electricity for Dow's facilities. In addition to the
      contractual steam and electric charges, Dow paid 36 quarterly

                                      F-15
<PAGE>   54
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

      payments, pursuant to the agreement, of $3.8 million each. These
      installment payments commenced in the first quarter of 1990 and continued
      through the fourth quarter of 1998, notwithstanding performance of the
      Facility.

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

      Steam Purchase Agreement

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

      Gas Supply Agreements

      MCV has entered into gas purchase agreements with various producers for
      the supply of natural gas. The current contracted volume totals 205,563
      MMBtu per day as of January 1, 2001. As of January 1, 2001, gas contracts
      with U.S. suppliers provide for the purchase of 124,500 MMBtu per day
      while gas contracts with Canadian suppliers provide for the purchase of
      81,063 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 2001 through 2005 are $123.5 million,
      $140.4 million, $154.6 million, $170.6 million and $219.2 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 2000, 1999 and 1998, of $35.6 million,
      $35.3 million and $35.9 million, respectively. The estimated minimum
      reservation charges required under these agreements for each of the years
      2001 through 2005 are $35.5 million, $35.1 million, $34.9 million, $35
      million and $33.9 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 will
      provide hot gas path parts for MCV's twelve gas turbines through the
      fourth series of major GTG inspections. In January 1998, MCV and 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



                                      F-16
<PAGE>   55

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

      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 $140.7 million under this amended
      Service Agreement through December 31, 2000.

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

      Steam Turbine Service Agreement

      MCV entered into a nine year Steam Turbine Maintenance Agreement with
      General Electric Company effective January 1, 1995, which is designed to
      improve unit reliability, increase availability and minimize unanticipated
      maintenance costs. In addition, this contract includes performance
      incentives and penalties, which are based on the length of each scheduled
      outage and the number of forced outages during a calendar year. MCV is
      making monthly payments over the life of the contract, which will total
      $13.0 million (in 1995 dollars).

      Site Lease

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


(7)   CONTINGENCIES

      PPA - Settlement of PPA Issues

      MCV and Consumers entered into a settlement agreement ("Settlement
      Agreement"), effective January 1, 1999, which resolves (for the various
      time periods specified in the Settlement Agreement, but in no event sooner
      than 2002) all of the previously disputed issues under the PPA and
      includes definitive obligations for Consumers to make energy payments
      calculated in accordance with the PPA, irrespective of any MPSC decisions
      which may affect those issues or payments. MCV recognized a one-time net
      $6.4 million increase in electric revenues in the first quarter of 1999
      based upon the resolution of these issues. On an ongoing basis and for the
      various time periods specified in the Settlement Agreement, the Settlement
      Agreement is not expected to materially affect MCV's earnings and cash
      flows.


(8)   RETIREMENT BENEFITS

      Postretirement Health Care Plans

      In 1992, MCV established defined cost postretirement health care plans
      that cover all full-time employees. The plans provide health care credits,
      which can be utilized to purchase medical plan coverage and pay



                                      F-17
<PAGE>   56

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

      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>
                                                             2000           1999
                                                          ----------     ----------
      <S>                                                 <C>            <C>
      CHANGE IN BENEFIT OBLIGATION
      Benefit obligation at beginning of year             $  1,739.3     $  1,682.0
      Service cost                                             168.4          214.4
      Interest cost                                            147.8          128.0
      Actuarial gain                                            69.2         (277.8)
      Benefits paid during year                                 (4.6)          (7.3)
                                                          ----------     ----------
      Benefit obligation at end of year                      2,120.1        1,739.3
                                                          ----------     ----------

      CHANGE IN PLAN ASSETS
      Fair value of plan assets at beginning of year         2,067.9        1,724.1
      Actual return on plan assets                             (47.9)         186.2
      Employer contribution                                     --            164.9
      Benefits paid during year                                 (4.6)          (7.3)
                                                          ----------     ----------
      Fair value of plan assets at end of year               2,015.4        2,067.9
                                                          ----------     ----------

      Unfunded (funded) status                                 104.7         (328.6)
      Unrecognized net gain                                    245.8          561.0
                                                          ----------     ----------
      Accrued benefit cost                                $    350.5     $    232.4
                                                          ==========     ==========
</TABLE>

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

<TABLE>
<CAPTION>
                                                             2000          1999          1998
                                                           -------       -------       -------
      <S>                                                  <C>           <C>           <C>
      COMPONENTS OF NET PERIODIC BENEFIT COST
      Service cost                                         $   168.4     $   214.4     $   200.9
      Interest cost                                            147.8         128.0         119.5
      Expected return on plan assets                          (175.7)       (146.5)       (119.0)
      Amortization of unrecognized net (gain) or loss          (22.4)         (9.4)         (4.2)
                                                           ---------     ---------     ---------

      Net periodic benefit cost                            $   118.1     $   186.5     $   197.2
                                                           =========     =========     =========
</TABLE>


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

<TABLE>
<CAPTION>
                                                                               1-Percentage-Point    1-Percentage
                                                                                  Increase          Point Decrease
                                                                               ----------------    -----------------
<S>                                                                             <C>                <C>
                  Effect on total of service and interest cost components       $       27.9       $         32.5
                  Effect on postretirement benefit obligation                   $      201.8       $        176.2
</TABLE>

                                      F-18
<PAGE>   57

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

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

<TABLE>
<CAPTION>
                                                                     2000               1999             1998
                                                                 --------------     -------------    --------------
<S>                                                              <C>                <C>                <C>
              Discount rate                                         7.50%              7.75%              6.75%
              Long-term rate of return on plan assets               8.50%              8.50%              8.50%
              Inflation benefit amount
                  1998 through 2001                                 0.00%              4.00%              0.00%
                  2002 and later years                              4.00%              4.00%              4.00%
</TABLE>

      Retirement and Savings Plans

      MCV sponsors a defined contribution retirement plan covering all
      employees. Under the terms of the plan, MCV makes contributions to the
      plan of either five or ten percent of an employee's eligible annual
      compensation dependent upon the employee's age. MCV also sponsors a 401(k)
      savings plan for employees. Contributions and costs for this plan are
      based on matching an employee's savings up to a maximum level. In 2000,
      1999, and 1998, MCV contributed $1.1 million, $1.1 million and $1.0
      million, respectively, under these plans.

      Supplemental Retirement Benefits

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



                                      F-19
<PAGE>   58

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

(9)   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, 2000, and the nature and amount of related party transactions
      or agreements that existed with the Partners or affiliates as of December
      31, 2000, 1999 and 1998, and for each of the twelve month periods ended
      December 31, (in thousands).


<TABLE>
<CAPTION>
  Equity Partner, Type of Partner and   Equity
        Nature of Related Party         Interest  Interest Related Party Transactions and Agreements     2000       1999       1998
--------------------------------------- --------- ------- ------------------------------------------- ---------- ---------- --------
<S>                                     <C>       <C>     <C>                                         <C>        <C>        <C>
CMS Midland, Inc.                       $258,591  49.0%   Power purchase agreements                   $ 568,838  $585,838   $583,662
  General Partner; wholly-owned                           Purchases under gas transportation
  subsidiary of Consumers Energy                              agreements                                 23,295    20,158      9,678
  Company                                                 Purchases under spot gas agreements             4,735       991        520
                                                          Purchases under gas supply agreements          12,679    10,187      9,855
                                                          Gas storage agreement                           2,563     2,563      2,563
                                                          Land lease/easement agreements                    600       600        600
                                                          Accounts receivable                            43,278    48,697     48,652
                                                          Accounts payable                                5,560     7,845     13,682
                                                          Sales under spot gas agreements                10,521     1,805      1,148

The Dow Chemical Company                  52,567   7.5    Steam and electric power agreement             31,319    26,897     42,141
  Limited Partner                                         Steam purchase agreement - Dow Corning
                                                              Corp (affiliate)                            3,615     3,329      3,256
                                                          Purchases under demineralized water
                                                              supply agreement                            6,570     6,375      6,280
                                                          Accounts receivable                             3,536     2,772      2,246
                                                          Accounts payable                                  745       649        580
                                                          Standby and backup fees                           676       656        743

Source Midland Limited Partnership        90,241  18.1    SMLP - Under Ownership of MCNIC Power Co
  ("SMLP") General Partner; owned                         ----------------------------------------
  by subsidiaries of El Paso                              Purchases under spot gas agreements                --     4,590      6,810
  Corporation (1) (6)                                     Purchases under gas supply agreements              --    13,814     13,230
                                                          Accounts receivable                                --       901         --
                                                          Accounts payable                                   --     1,921      1,178
                                                          Partner cash withdrawal (incl. Accrued
                                                              interest) (2)                                  --    23,855     18,341
                                                          Sales under spot gas agreements                    --     7,262        169

El Paso Midland, Inc. ("El Paso           54,145  10.9    Purchases under gas transportation
   Midland")                                                  agreements                                 14,229    13,581     13,547
  (formerly known as Coastal                              Purchases under spot gas agreement             21,563     6,892     10,382
  Midland, Inc.) General                                  Purchases under gas supply agreement            5,248     4,528      4,339
  Partner; wholly-owned                                   Gas agency agreement                            2,361     1,898      1,604
  subsidiary of El Paso                                   Deferred reservation charges under gas
  Corporation (1)                                             purchase agreement                          6,895     5,910      4,925
                                                          Accounts receivable                            11,481       738         16
                                                          Accounts payable                               11,839     2,602      1,791
                                                          Sales under spot gas agreements                23,356     3,473      5,253
                                                          Partner cash withdrawal (incl. Accrued
                                                              interest) (2)                              50,886    21,049     16,157

MEI Limited Partnership                                   MEI - Under Ownership of El Paso and SMLP
  ("MEI")(1)(3)(6)                                        -----------------------------------------
  A General and Limited Partner;                          See related party activity listed under
  50% interest owned by El Paso                               El Paso Midland, Inc. and Source
  Midland, Inc. and 50% interest                              Midland Limited  Partnership
  owned by SMLP
      General Partnership Interest        45,123   9.1    MEI - Alstom Power Inc.
                                                          -----------------------
      Limited Partnership Interest         4,511    .9
                                                          Gas turbine maint. and spare parts                 --        --     23,377
                                                              agreement


Micogen Limited Partnership               22,559   4.5    See related party activity listed under
 ("MLP") Limited Partner; owned                               El Paso Midland Inc.
  by subsidiaries of El Paso
  Corporation (1) (4)


C-E Midland Energy, Inc. ("C-E") (5)          --  --      C-E  - Under Ownership of Alstom Power Inc.
  Interest in MCV acquired by MEI                         -------------------------------------------
  Limited Partnership                                     Service Agreement                                  --        --      1,252

</TABLE>



                                      F-20
<PAGE>   59

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


<TABLE>
<CAPTION>
  Equity Partner, Type of Partner and   Equity
        Nature of Related Party         Interest  Interest Related Party Transactions and Agreements     2000       1999       1998
--------------------------------------- --------- ------- ------------------------------------------- ---------- ---------- --------
<S>                                     <C>       <C>     <C>                                         <C>        <C>        <C>
Alanna Corporation                         1 (7)  .00001  Note receivable                                    1          1          1
  Limited Partner; wholly-owned
  Subsidiary of Alanna Holdings
  Corporation
</TABLE>

   Footnotes to Partners' Equity and Related Party Transactions

   (1)   On January 29, 2001, El Paso Corporation ("El Paso") announced that it
         had completed its merger with The Coastal Corporation ("Coastal").
         Coastal is the parent company of El Paso Midland, Inc. ("El Paso
         Midland", formerly known as Coastal Midland, Inc.), SMLP, MLP and,
         through SMLP, MEI, which are Partners of MCV. After the merger, Coastal
         became a wholly-owned subsidiary of El Paso and has changed its name to
         El Paso CGP Corporation.
   (2)   Letters of credit have been issued and recorded as notes receivables
         from various equity partners, pursuant to the Participation Agreement.
         In the case of SMLP, the amount includes their share of the cash
         available to MEI Limited Partnership ("MEI"). In the case of El Paso
         Midland, the amount includes their share of cash available of MEI and
         Micogen Limited Partnership ("MLP").
   (3)   On June 16, 1998, El Paso Midland and SMLP, each acquired a 50%
         interest in MEI. All MEI related party activity under the ownership of
         El Paso Midland and SMLP is shown under the equity partners, El Paso
         Midland and SMLP. All MEI related party activity under the ownership of
         Alstom Power Inc. is for the period January 1, 1998 to June 16, 1998.
   (4)   On April 30, 1998 El Paso (formerly Coastal) and an affiliate of El
         Paso acquired all of the partnership interests in MLP from Fluor
         Corporation ("Fluor"). All MLP related party activity under the
         ownership of El Paso is shown under the equity partner,
         El Paso Midland, which is also wholly-owned by El Paso.
   (5)   C-E Midland Energy, Inc.'s ("C-E") limited partnership interest was
         acquired by MEI, which was subsequently acquired by El Paso and SMLP.
         All C-E related party activity under the ownership of Alstom Power Inc.
         is for the period January 1, 1998 to June 16, 1998.
   (6)   On January 5, 2000, wholly-owned subsidiaries of El Paso acquired
         all of the partnership interests in Source Midland and MEI from
         MCN Energy Group Inc.
   (7)   Alanna's capital stock is pledged to secure MCV's obligation under the
         lease and other overall lease transaction documents.


                                      F-21
<PAGE>   60
                MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)

                            SUPPLEMENTAL INFORMATION


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


                                      F-22
<PAGE>   61

                                   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 23, 2001                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 23, 2001
---------------------------------------        (Principal Executive Officer)
James M. Kevra



 /s/ Stephen A. Shulman                        Chief Financial Officer and Treasurer        March 23, 2001
---------------------------------------        (Principal Financial Officer)
Stephen A. Shulman



/s/ James M. Rajewski                          Vice President and Controller                March 23, 2001
---------------------------------------        (Principal Accounting Officer)
James M. Rajewski



/s/ William T. McCormick, Jr.                  Chairman, Management Committee               March 23, 2001
---------------------------------------
William T. McCormick, Jr.



/s/ John J. O'Rourke                           Member, Management Committee                 March 23, 2001
---------------------------------------
John J. O'Rourke
</TABLE>


                                      F-23

<PAGE>   62
                             EXHIBIT INDEX

Exhibit
Number                            Description
-------         ----------------------------------------------------------------

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4.6 (b)    -    Amendment No. 1 dated as of January 1, 1992 to Amended and
                Restated Lease Agreement ((d), (Exhibit 4.17)).


                                      E-1
<PAGE>   63
                             EXHIBIT INDEX

Exhibit
Number                            Description
-------         ----------------------------------------------------------------

4.6 (c)    -    Second Amended and Restated Agreement of Lease [Part A] dated as
                of June 1, 1990 among Consumers, MCV, CMS Midland, Inc. and MEC
                Development Corporation ((a), (Exhibit 4.14)).

4.7        -    Amended and Restated Participation Agreement dated as of June 1,
                1990 among MCV, Owner Participant, Shawmut Bank, United States
                Trust Company, Meridian Trust Company, Midland Funding
                Corporation I, Midland Funding Corporation II, MDC and
                Institutional Senior Bond Purchasers ((a), (Exhibit 4.13)).

4.8        -    Ground Lease Assignment and Assumption Agreement dated as of
                June 1, 1990 among Shawmut Bank and MCV ((a), (Exhibit 4.15)).

4.9        -    Collateral Agency and Intercreditor Agreement dated as of June
                1, 1990 between Shawmut Bank, MCV, United States Trust Company,
                Meridian Trust Company, Bank of Montreal and Manufacturers
                National Bank of Detroit ((a), (Exhibit 4.16)).

10.1       -    Tax Exempt Collateral Trust Indenture dated as of July 1, 1990
                among The Economic Development Corporation of the County of
                Midland, MCV and Meridian Trust Company (incorporated by
                reference to Exhibit No. (28)(g) to CMS Energy Corporation's
                Form 10-Q for the quarter ended June 30, 1990, File No. 1-9513).

10.1 (a)   -    Tax Exempt Collateral Trust Indenture Supplement No. 1 dated
                July 1, 1990 ((a), (Exhibit 10.2)).

10.2       -    Credit Agreement dated as of June 16, 1990 among Bank of
                Montreal as Agent, the Lenders named therein and MCV ((a),
                (Exhibit 10.3)).

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)).

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


                                      E-2
<PAGE>   64

                             EXHIBIT INDEX

Exhibit
Number                            Description
-------         ----------------------------------------------------------------

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)).

10.19      -    Equipment Lease dated as of January 27, 1987 between The Dow
                Chemical Company and MCV (the "Equipment Lease") ((a), (Exhibit
                10.71)).


                                      E-3
<PAGE>   65

                             EXHIBIT INDEX

Exhibit
Number                            Description
-------         ----------------------------------------------------------------

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)).

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)).


                                      E-4
<PAGE>   66

                             EXHIBIT INDEX

Exhibit
Number                            Description
-------         ----------------------------------------------------------------

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.

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

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

10.42      -    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)).

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

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

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


                                      E-5
<PAGE>   67

                             EXHIBIT INDEX

Exhibit
Number                            Description
-------         ----------------------------------------------------------------

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

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

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

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

10.50      -    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)).

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

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

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

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

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

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

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

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

99.01      -    Unaudited - MCV Selected Proforma Operating Cash Flow Data for
                the years ended 2000 and 1999.

      --------------------
      (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.


                                      E-6
<PAGE>   68

                             EXHIBIT INDEX

Exhibit
Number                            Description
-------         ----------------------------------------------------------------

      (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.


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


                                      E-7