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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 
 FORM 10-K þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2004 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from _____________________________ to Commission file number (Under the Securities Act of 1933) 33-37977 MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP 
  MICHIGAN
    
    38-2726166(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)100 PROGRESS PLACE, MIDLAND, MICHIGAN
    
    48640(Address of principal executive offices)
    
    (Zip Code)Registrants telephone number, including area code
    
    (989) 839-6000
 Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o 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. þ Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act). Yes o No þ




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004  
 TABLE OF CONTENTS PagePART IItem 1.
    
    Business
    
    
    1A. General
    
    
    1B. The Facility
    
    
    1C. Major Issues Facing MCV
    
    
    2D. Contracts
    
    
    2E. Employees
    
    
    11F. Regulation
    
    
    11G. Environmental Matters
    
    
    15H. Overall Lease Transaction
    
    
    16Item 2.
    
    Properties
    
    
    18Item 3.
    
    Legal Proceedings
    
    
    19Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    20PART IIItem 5.
    
    Market for Registrants Common Equity and Related Stockholder Matters
    
    
    21Item 6.
    
    Selected Financial Data
    
    
    21Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
    
    
    21Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 8.
    
    Financial Statements and Supplementary Data
    
    
    31Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    31Item 9A.
    
    Controls and Procedures
    
    
    32Item 9B.
    
    Other Information
    
    
    32PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    33Item 11.
    
    Executive Compensation
    
    
    36Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management
    
    
    38Item 13.
    
    Certain Relationships and Related Transactions
    
    
    38Item 14.
    
    Principal Accountant Fees and Services
    
    
    39PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    40Signatures
    
    
    
    
    F-25Exhibit Index
    
    
    
    
    E-1Resource Conservation Agreement, dated February 12, 2004Reduced Dispatch Agreement, dated July 7, 2004Certification of President and Chief Executive Officer to Section 302Certification of Chief Financial Officer, VP and Controller to Section 302Certification of President and Chief Executive Officer to Section 906Certification of Chief Financial Officer, VP and Controller to Section 302




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PART I 
 Item 1. BUSINESS 
  A.
    GeneralIn January 1987, Midland Cogeneration Venture Limited Partnership (MCV) was formed as a
limited partnership to convert a portion of an uncompleted Consumers Energy Company
(Consumers) nuclear power plant into a natural gas-fired, combined-cycle, cogeneration
facility located in Midland County, Michigan (the Facility). The Facility commenced
commercial operation in 1990 (the Commercial Operation Date) and is capable of generating
approximately 1500 megawatts (MW) of electricity and approximately 1.5 million pounds of
process steam per hour. The Facility is dependent upon natural gas for its fuel supply.The Facility is a cogeneration facility, meaning that it sequentially produces electricity and
useful thermal energy (steam) through an integrated system using a single fuel source. The
Facility has been certified by the Federal Energy Regulatory Commission (FERC) as a
qualifying cogeneration facility (QF) under the Public Utility Regulatory Policies Act of
1978, as amended (PURPA). As a QF, the Facility is exempt from various provisions of the
Federal Power Act, as amended (the FPA), the Public Utility Holding Company Act of 1935, as
amended (the 1935 Act), certain state laws regarding rate, financial and organizational
regulation, and is entitled to sell electric capacity and related energy to a public utility
(such as Consumers) at such utilitys incremental cost of alternative electric energy,
otherwise known as avoided cost. A utilitys incremental cost of alternative electric
energy means, with respect to electric energy purchased from a QF, the cost to the electric
utility of the electric energy (determined, at the option of the QF, at either the time of
delivery or at the time the obligation is incurred) which, but for the purchase from such QF,
such utility would generate or purchase from another source. 
  B.
    The FacilityMCVs principal business is the operation of the Facility and the sale of electric capacity
and related energy (principally to Consumers), electricity and steam to The Dow Chemical
Company (Dow) and steam to Dow Corning Corporation (DCC) produced at the Facility. The
Facility is located on an approximately 1200-acre site that is leased from Consumers (the
Site).The Facility consists of the following:  
    12 gas turbine generators (GTGs);
    12 heat recovery steam generators (HRSGs) which create steam using heat
from the GTG exhaust;
    A steam turbine (the Unit 1 Steam Turbine) capable of producing electricity
from steam generated by the HRSGs;
    A second steam turbine (the Unit 2 Steam Turbine) which serves as a backup
to the Unit 1 Steam Turbine;
    A back-pressure steam turbine;
    Pollution control assets;
    A 25-mile gas pipeline connecting interstate and intrastate gas pipeline systems to the Facility;
    Pipelines to deliver steam to Dow and DCC; and
    Various associated equipment and improvements. -1-




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Electricity is produced by the 12 GTGs, and the steam is produced by the 12 HRSGs using the
heat from the GTG exhaust. The Unit 1 Steam Turbine is designed to produce electricity using
the steam generated by the HRSGs and process steam that is provided to Dow and DCC. MCV
purchases demineralized water from Dow. Electricity is sold by MCV to Consumers and other
parties through an interconnect and to Dow through dedicated transmission lines. 
  C.
    Major Issues Facing MCVMCV faces several major issues crucial to its future success. These issues, briefly
summarized here, are discussed more fully in the sections cross referenced below:Electric Industry Restructuring.At both the state and federal level, efforts continue to
restructure the electric industry. In 1997 and 1998, the Michigan Public Service Commission
(MPSC) entered a series of orders, permitting customers to choose their power provider over
a four-year phase-in period which started in 1999 (Restructuring Orders) (these orders are
further described in Item 1, Section F, Regulation  Michigan Electric Industry Restructuring
Proceedings). In addition, Michigan enacted restructuring legislation in June 2000. A
significant issue to MCV is the potential for future regulatory denial of recovery by
Consumers from its customers of above market costs Consumers pays MCV under the parties Power
Purchase Agreement (PPA). Over 90% of MCVs revenues come from sales pursuant to the PPA.
To date, restructuring has not negatively impacted MCV, but if restructuring results in
denying Consumers recovery of above-market PPA costs, MCVs cash flows may be negatively
impacted, especially after 2007. See Item 1, Section F, Regulation  Michigan Electric
Industry Restructuring Proceedings and Federal Electric Industry Restructuring, Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
  Outlook  Michigan Electric Industry Restructuring Proceedings and Federal Electric
Industry Restructuring, and Notes to Consolidated Financial Statements, Note 1, The
Partnership and Associated Risks.Energy Rate and Cost of Production. Since 1990, MCV has experienced an overall reduction in
the energy charges it is paid for electricity under the PPA, primarily due to declining coal
costs at Consumers generating plants. In addition, MCVs costs associated with production of
electricity have continued to rise. These circumstances have negatively affected MCVs cash
flow. While MCV has the majority of its expected natural gas needs under contract for the
next several years, sustained periods of high market gas prices could adversely affect MCVs
earnings and cash flow. See Item 1, Section F, Regulation  MPSC and Other Proceedings
Relating to Capacity and Energy Charges, Item 1, Section D, Contracts  Gas Supply
Agreements, Item 1, Section H, Overall Lease Transaction, and Item 7, MD&A  Liquidity
and Capital Resources. In addition, MCV has credit exposure to suppliers who have entered
into fixed price natural gas contracts with MCV. To the extent that the aforementioned
suppliers fail to deliver natural gas under their fixed price contracts which are not backed
by credit support requirements, and the cost to replace such gas is in excess of the contract
rate, MCV could experience higher natural gas prices in the future. See Item 1, Section D,
Contracts  Credit Support Requirements for MCVs Gas Arrangements. 
  D.
    ContractsMCVs material contracts are the PPA, which provides for the sale to Consumers of electric
capacity and related energy; the Resource Conservation Agreement with Consumers (RCA) and
related Reduced Dispatch Agreement (RDA), which together provide, among other things, for
the economic dispatch of the Facility; the Steam and Electric Purchase Agreement with Dow
(SEPA), which provides for the sale of steam and electricity to Dow; the Steam Purchase
Agreement with DCC (SPA), which provides for the sale of steam to DCC; gas supply, storage
and transportation contracts with a number of companies; an agreement covering gas turbine
inspection services and spare parts with General Electric International, Inc. (GEII); 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 RCA/RDA, SPA, GEII
agreement and the GE agreement, have been assigned to the Owner Trustees, which in turn
subassigned such contracts to MCV and granted a security interest in such contracts to the
Note Trustees. See Item 1, Section H, Overall Lease -2-




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Transaction. The following is intended
to summarize briefly certain provisions of such contracts and is qualified in its entirety by
reference thereto.Power Purchase AgreementUnder the PPA, Consumers contracted to purchase 1240 MW/hour of the Facilitys electric
capacity (the Contract Capacity) until March 15, 2025 and thereafter subject to yearly
extensions that are automatic in the absence of a termination notice from either party. In
allocating the available electrical output of the Facility, MCV must first satisfy Dows
requirements under the SEPA before supplying power to Consumers under the PPA.Consumers has the right of first refusal to purchase any available electric capacity and
related energy produced by the Facility in excess of Contract Capacity if MCV is willing to
sell the same for a period of six months or longer. MCV is entitled to sell excess electric
capacity and related energy to other electric utilities or third parties, and Consumers is
required, if requested by such utilities or MCV, to transmit electrical energy for them
subject to certain conditions.Capacity charges are payable for available Contract Capacity, whether or not electricity is
dispatched. The capacity charges for on-peak and off-peak power average 4.15 cents per
available kilowatt hour (kWh); however, until September 15, 2007, the capacity charge may be
reduced by Consumers to a level of no less than an average of 3.77 cents per kWh.Energy charges are based on costs incurred by Consumers at certain of its coal-fired plants
(i.e., those coal plants wholly or partially owned by Consumers having a net demonstrated
capacity of at least 100 MW, available for generating electrical energy for not less than 5500
hours during the most recent year and having a capacity factor of at least 40% when connected
to Consumers system and generating electrical energy).  Fixed Energy Charges. Like the capacity charges, fixed energy charges are payable for
available kWhs of Contract Capacity. Fixed energy charges are adjusted each year based
on a fuel inventory charge, administrative and general expenses and one-half of
operation and maintenance expenses (excluding fuel) incurred at these plants during
either the immediately preceding calendar year or the calendar year preceding that year
depending on when the adjustment is being made. In 1995, an arbitrator ruled that,
under the PPA, Consumers had the right to withhold that portion of fixed energy charges
payable on the basis of energy available but not delivered since it was not permitted
by the MPSC to collect such charges from its electric customers. See Item 1, Section
F, Regulation  MPSC and Other Proceedings Relating to Capacity and Energy Charges.Variable Energy Charges. Variable energy charges are payable for energy actually
delivered. Variable energy charges are determined monthly and are equal to one-half of
operation and maintenance expenses incurred at these plants, as calculated annually,
and the actual cost of coal burned at these plants as determined monthly based on a
rolling twelve-month average (with a two-month lag) and converted to an overall cost
per kWh.  The PPA permits Consumers, under certain conditions, to reduce the capacity and energy charges
payable to MCV and/or to receive refunds of capacity and energy charges paid to MCV if the
MPSC does not permit Consumers to recover from its customers the capacity and energy charges
specified in the PPA (the regulatory-out provision). Until September 15, 2007, however, the
capacity charge may not be reduced below an average capacity rate of 3.77 cents per kWh for
the available Contract Capacity notwithstanding the regulatory-out provision. Consumers and
MCV are required to support and defend the terms of the PPA. See Item 1, Section F,
Regulation  MPSC and Other Proceedings Relating to Capacity and Energy Charges.Under the PPA, if requested by Consumers, 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 for each succeeding five-year period. MCV believes it has adequate gas supplies
under contract to satisfy its current -3-




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PPA fuel assurance requirements. If MCV is unable to
provide these continuing assurances, Consumers is entitled to withhold in a separate escrow
fund a portion of capacity charges until these assurances are provided. The portion of such
capacity charges is a function of the percentage of unmet fuel needs and an increasing factor
based on the number of consecutive months that capacity charges have been withheld. Assuming
a 3.77 cents per kWh capacity charge, the maximum capacity charges, which could be withheld
and escrowed under this provision, are as follows: Maximum PossibleConsecutive Months That
    
    Reduction inMCV Fails to Provide
    
    Capacity ChargeAdequate Continuing Assurance
    
    (cents/kWh)1-12
    
    .188513-24
    
    .565525-36
    
    1.508037 and thereafter
    
    2.6390
  The PPA does not make any provision for the use of escrowed funds, except that the PPA
provides that interest earned, if any, on the escrowed funds is to be divided equally between
MCV and Consumers. After withholding capacity charges for 48 months without fuel assurances
being provided, Consumers may terminate the PPA. In the event of 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.If any party is rendered unable by force majeureto carry out its obligations under the PPA,
these obligations are suspended during the period of force majeure. Force majeureincludes
all natural calamities; war; curtailments, orders, regulations or restrictions imposed by
governmental authority; and all other causes beyond the reasonable control of the affected
party, but specifically does not include shortages of fuel and supplies (unless caused by
calamity or unusual world events applicable to other major industrial users as well as MCV),
mechanical breakdowns, labor strikes or explosions or fires (unless caused by criminal acts).Consumers schedules all deliveries of electricity from the Facility to its system and is
obligated to do so in a manner consistent with the safe and prudent operation of the Facility.
As long as the annual availability of Contract Capacity equals or exceeds 75% of Contract
Capacity, Consumers must purchase sufficient electrical energy from the Facility to achieve at
least a 60% capacity factor on an annual basis. This purchase obligation decreases, based on
a prescribed formula, if annual availability falls below 75% of Contract Capacity. Annual PPA
availability has exceeded 98.5% since 1997.Consumers must purchase a specified minimum amount of electrical energy at all times, except
during emergencies on its system. MCV determines a minimum level of generation designed to
assure that the Facility operates in a stable manner and that MCV meets its obligations to
supply steam and electricity to Dow, but MCV cannot specify a minimum generating level which
exceeds 350 MW. Outages, other than forced outages, are to be scheduled to accommodate
Consumers requirements to the extent MCV deems practicable.MCV is obligated to have the Facility inspected at least once each year by a consulting
engineer selected by it from a list of engineering firms approved by Consumers. The annual
inspection includes, at a minimum, all equipment, structures, operating procedures and
maintenance practices necessary for the generation and delivery of energy to Consumers. Upon
completion of an annual inspection, the consulting engineer must promptly issue a written
report. Any recommendations in this report regarding equipment, structure and maintenance
practices, which have been approved by MCVs management, must be implemented within a
specified period of time. In its April 2004 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 2005 and does not
anticipate any substantial problems or requirements for plant modifications. -4-




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In 1997, Consumers informed MCV of several potential payment issues it would pursue, pursuant
to the regulatory out and other provisions of the PPA. The issues relate to Consumers
special contract customers, pricing of the energy delivered during off-peak ramp hours (when
MCV adjusts its output to match Consumers dispatch), energy delivered in the band width
(energy delivered above dispatch, within certain limits) and the use of 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 took a similar position on the incremental energy and capacity resulting from MCVs
installation of 11NM upgrade packages on the GTGs. MCV and Consumers entered into a settlement
agreement (Settlement Agreement), effective January 1, 1999, which resolves (for the various
time periods specified in the Settlement Agreement) all of these issues and includes definitive
obligations for Consumers to make energy payments calculated in accordance with the PPA,
irrespective of any MPSC or the reviewing courts decision which may affect those issues or
payments. The Settlement Agreement also provides that, notwithstanding modifications to the
Facility increasing its capacity, in billing Consumers for capacity charges (at the rates set
forth in the PPA) availability would be capped at 98.5% of the 1240 MW (98.5% cap) on a
calendar-year basis for the term of the PPA regardless of any MPSC or the reviewing courts
decision, which may affect this issue or payment. Notwithstanding the Settlement Agreement,
after September 15, 2007, an issue could exist as to whether or not Consumers can exercise the
regulatory out provision to reduce capacity payments to MCV based upon the availability
caps of 88.7% of the 1240 MW (both on and off peak) of Contract Capacity as provided for in
the 915 MW Settlement and the 325 MW Settlement. See Item 1, Section F, Regulation  MPSC
and Other Proceedings Relating to Capacity and Energy Charges. The Settlement Agreement has
not materially affected MCVs earnings and cash flows.During 2004, Consumers declared four system emergencies. The Facility was fully available
during these periods, but Consumers has not paid $272,437 of available capacity and fixed
energy costs associated with these emergencies. MCV is disputing whether these instances
constitute emergencies as defined in the PPA. MCV management cannot predict the outcome of this
issue.MCV currently delivers its electric power to purchasers through transmission lines owned and
operated by Michigan Electric Transmission Company, LLC, an enterprise of Trans-Elect, Inc.
(Trans-Elect). Such lines were previously owned by Consumers. MCV and Consumers previously
entered into the Facilities Agreement which provides for transmission service of excess
capacity and energy available at the Facility. The sale of the transmission facilities to
Trans-Elect does not change, in any respect, the contractual relationship and obligations of
Consumers under the Facilities Agreement. Trans-Elect is serving as Consumers agent to
perform Consumers obligations under the Facilities Agreement.The RCA and RDAIn July 2000, in response to rapidly escalating natural gas prices, MCV entered into a series
of transactions with Consumers whereby Consumers agreed to reduce MCVs dispatch level and MCV
agreed to share with Consumers the savings realized by not having to generate electricity
(Dispatch Mitigation). In 2004, MCV and Consumers entered into the RCA and RDA, which
provide that Consumers will economically dispatch MCV subject to availability of other
generation resources, gas prices and power market prices. Such dispatch is expected to reduce
electric production from the Facility, as well as decrease gas consumption. The RCA provides
that Consumers has a right of first refusal to purchase, at market prices, the gas conserved
under the RCA. Savings realized by not having to generate electricity are first paid to
Consumers for the difference between MCV and replacement power costs, next funding $5 million
annually for renewable energy program(s) established for Consumers by the MPSC and the
remaining savings are split evenly by the parties. The RCA/RDA do not amend the PPA, but
provide for administration of certain features of the PPA including continuing assurances of
gas supply under contract and annual minimum deliveries. The economic
dispatch under RCA/RDA is above certain minimum dispatch levels (not to exceed 550 MW)
specified by MCV. The RCA/RDA are for the term of the PPA but both parties may terminate the
RCA/RDA under certain conditions set forth in those agreements. The RCA and RDA were approved
by an order of the MPSC on January 25, 2005 and MCV and Consumers accepted the terms of the
MPSC order making the RCA and RDA effective as of January 27, 2005. This MPSC order is subject
to appeal by other parties. MCV management cannot predict the outcome of any such appeal. -5-




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Steam and Electric Power Agreement; Related Dow AgreementsSEPA. Pursuant to the SEPA, Dow has agreed to purchase steam from the Facility for an initial
term of 25 years from the Commercial Operation Date and to purchase electricity from the
Facility for 15 years (any electricity to be purchased thereafter at Dows option, although MCV
remains obligated to make certain amounts of electricity available for an additional 10 years).
In 2004, Dow notified MCV that it was extending its option to take electricity through 2008.
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, at a minimum, 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 subject to reduction for
certain amounts supplied by the Standby Facilities (defined below) owned by Dow and less 50%
of amounts purchased by any other steam customers of MCV under contract of at least one year
and is binding only for the initial 25-year term of the SEPA.Dow may increase its steam or electricity entitlement to 110% of the steam or electricity
delivered in the previous 12-month period, plus any steam or electricity required by any
addition to or modification of the Dow plant, provided that any increase above an annual
average of 1,000,000 pounds of steam per hour or 75 MW of electricity requires MCVs consent.
MCV, however, may be required, on an instantaneous basis, to deliver steam at a rate of up to
135% of the maximum annual average hourly quantity of steam or to deliver power at a rate up
to 20 MW greater than the applicable annual average. In 1997, Dow increased its electric
entitlement to 67.75 MW/hr; no such increase has since been requested.Under the SEPA, there is a base charge for steam and electricity which is subject to
adjustment each quarter based on changes in MCVs fuel costs, producer price for capital
equipment and certain compensation per hour indices. Dow also has the option under the SEPA
and subsequent amendments, to provide the gas necessary to generate Dows take of steam and
electricity (toll). Under the provisions of the SEPA, Dow receives a billing credit of 5/8
of its steam and electric charges in exchange for Dow purchasing the natural gas for MCV.In order to assure reliable steam for the Dow plant, Dow owns and maintains standby
facilities, which are not part of the Facility (the Standby Facilities). MCV pays Dow
$350,000 per year to maintain these Standby Facilities. This fee is subject to the same
indexing adjustments each quarter as the base steam charge. In addition, the fee charged by
Dow for each use of the Standby Facilities, necessitated when MCV fails to deliver steam under
the SEPA is $150,000.The terms of the SEPA provide that Dow may terminate the SEPA if one or more contract
outages occur for a cumulative period greater than 24 hours in any year, provided that a
single outage of more than 24 consecutive hours but less than 72 consecutive hours will not
give rise to a right of termination unless another such contract outage has occurred within
the previous 60 months.A contract outage generally occurs when MCV fails to deliver minimum operation steam (i.e.,
an hourly flow rate of at least 75% of the then current rate), or fails to meet pressure
specifications after having failed
to deliver steam for 15 consecutive minutes, or fails to meet pressure and quantity
specifications after having failed to deliver steam for seven consecutive days, except in each
case as a result of scheduled maintenance outages, outages forced at Dows request or
resulting from Dows failure to provide demineralized water or waste water treatment services
or outages caused by an event of force majeurelasting no more than two years. Steam provided
to Dow from the Standby Facilities is treated as steam delivered by MCV for this purpose. For
such a contract outage to occur, more than ten of the Facilitys GTGs would have to be out of
service at the same time that Dows Standby Facilities are unavailable. -6-




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The SEPA and various backup agreements among MCV, Consumers and Dow contain various provisions
designed to assure a continuous supply of steam and electricity to Dow in the event the SEPA
is terminated.Dow Facilities and Demineralized Water. Dow owns the electrical transmission lines, which
carry electricity from the Facility to the Dow plant. Dow also owns certain steam and
demineralized water lines which are used in the operation of the Facility, and which have been
leased by Dow to MCV. Dow has contracted to provide MCV sufficient demineralized water to
meet the Facilitys requirements until 30 months after MCVs obligation to supply steam to Dow
ceases.Steam Purchase AgreementIn 1995, MCV entered into the SPA with DCC which provides that MCV construct, own and operate
a steam line and appurtenant equipment to serve steam to DCCs Midland plant. DCC has agreed
to purchase steam from MCV for an initial term of fifteen years with automatic year-to-year
renewals thereafter. The steam MCV provides DCC must meet operational and content
specifications. The provision of steam to DCC is subject to Dows first preference to the
steam under the SEPA. MCV began supplying steam to DCC in July 1996. The parties have
certain termination rights after the declared in service date but may be subject to penalties
or damages for such termination.Gas Supply ArrangementsThe Facility is wholly dependent upon natural gas for its fuel supply and a substantial
portion of the Facilitys operating expenses consist of the costs of natural gas. MCV
recognizes that its existing gas contracts are not sufficient to satisfy the anticipated gas
needs over the term of the PPA, and, as such, no assurance can be given as to the availability
or price of natural gas after the expiration of the existing gas contracts.MCV has a portfolio of long term natural gas purchase contracts (contracts that provide for
gas purchases for a term of greater than one year), having remaining terms of 1 to 9 years,
with U.S. and Canadian suppliers for an annual average maximum supply of natural gas for 2005
of 238,531 million British thermal units (MMBtu)/day. As of January 1, 2005, no single gas
contract accounts for more than 17.8% of MCVs portfolio, though, El Paso Corporation (El
Paso) and its subsidiaries now account for 38.8% of MCVs portfolio. Gas contracts with U.S.
suppliers provide for a 2005 annual average purchase of 173,336 MMBtu/day, while gas contracts
with Canadian suppliers provide for the purchase of 65,195 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 2004, MCVs gas purchases were
supplied 85% from long term gas contracts and 15% from spot gas contracts. -7-




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MCV Gas Under Contract
Annual Average For Each Year
Maximum Daily Quantity (MMBtu/Day)  Year
    
    Fixed Price
    
    Indexed Price
    
    Floating Price
    
    Total2005
    
    80,000
    
    61,695
    
    96,836
    
    238,5312006
    
    74,164
    
    59,156
    
    105,345
    
    238,6652007
    
    54,329
    
    16,000
    
    156,367
    
    226,6962008
    
    46,000
    
    7,500
    
    137,000
    
    190,5002009
    
    36,000
    
    7,500
    
    135,329
    
    178,8292010
    
    36,000
    
    7,500
    
    109,151
    
    152,6512011
    
    36,000
    
    4,863
    
    62,000
    
    102,8632012
    
    32,667
    
    2,667
    
    43,500
    
    78,8342013
    
    
    
    
    
    3,395
    
    3,395
 The pricing for the above contracted volumes are defined as follows: Fixed Price
    
    Individual contracts utilize either a fixed price through life of contract or a
fixed price with fixed escalator.Indexed Price
    
    Individual contracts utilize either a fixed price with an escalator tied to the
energy index based on Consumers charges under the PPA or an amount based on a combination of
a fixed with escalator and fixed with energy escalator.Floating
Price Mercantile
    
    A price tied to (1) the Henry Hub gas contract on the New York
Exchange for the month gas is purchased or (2) the Alberta, Canada price as published in the
Canadian Gas Price Reporter.
  Current U.S. Long Term Gas Contracts. The U.S. long term gas contracts provide for either a
dedication of reserves, corporate guarantee or warranty of deliverability. Under a dedication
of reserves, specific reserves are dedicated to fulfill the suppliers obligations and under a
corporate guarantee, reserves are not dedicated but generally MCV is indemnified for the cost
of purchasing supplies elsewhere if the gas is not delivered as warranted.Some of the U.S. long term gas contracts contain take-or-pay provisions obligating MCV to
purchase at least a specified percentage (generally 75% to 100%) of the minimum daily quantity
(MDQ) to which MCV is entitled under the contract, unless such failure is due to force
majeure, failure of the gas to meet quality standards or, in some cases, failure of the
supplier to deliver the quantity nominated by MCV. If, over the course of a contract year,
MCV has a take deficiency, it must make a deficiency payment that is based, in most cases, on
the product of the take deficiency and either all or some percentage of the contract price.
In addition, under some of the U.S. long term gas contracts, the producer may terminate the
contract if, for reasons other than force majeure, MCV fails to purchase a specified
percentage of the MDQ (generally between 50 and 100%) within a specified period (generally 120
days). Some U.S. long term gas contracts allow a make-up period ranging from one to five
years to make up the deficiency.Most U.S. long term gas contracts provide that MCV has the right to terminate upon 20 days
written notice if the supplier, for any reason other than force majeure, fails to provide a
specific percentage of the requested volumes of gas for a period of at least 120 consecutive
days. MCV may terminate two other U.S. long term
gas contracts upon 30 days written notice if the producer, for any reason, including force
majeure, fails to deliver 500 MMBtu/day for a period of four consecutive months. -8-




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Current Canadian Long Term Gas Contracts. All Canadian long term gas contracts (Canadian
contracts) warrant the delivery of quantities requested by MCV up to the MDQ, subject to
force majeure,and in one case, a 2% tolerance is allowed. Subject to MCVs obligation to
mitigate, Canadian suppliers have agreed to indemnify MCV for the Facilitys replacement gas
costs, excluding indirect or consequential damages or loss of profit, for any breach of this
supply warranty. One producer may be relieved of its supply warranty under certain
circumstances if its ratio of remaining reserves to annual production is less than ten.Prices under most of the Canadian contracts are based on reference prices indexed to
Consumers energy charges under the PPA, subject in some instances to floor prices below which
the reference price cannot fall, and are denominated in U.S. dollars. All the Canadian
contracts provide for deliveries at the international border near Emerson, Manitoba.In addition to an amount per MMBtu based on the quantity of gas actually delivered (the
Commodity Charge), under most of the Canadian contracts MCV is required to pay a monthly
charge whether or not MCV buys any natural gas (the Demand Charge) to each Canadian
supplier. This Demand Charge covers the transportation charges incurred by the Canadian
suppliers to have transportation capacity for the MDQ available to the U.S.-Canada border. To
the extent that MCV takes less than 100% of the MDQ from its Canadian contracts, gas costs per
unit taken by MCV increase because Demand Charges are being paid for the quantity of gas not
being taken.The Canadian contracts establish minimum annual takes under the contracts that range from 87%
to 100% of the stated MDQ. Generally, under the contracts that require less than 100% takes,
MCV is contractually required to make a deficiency payment, which could range from a partial
percentage to a full percentage of the Commodity Charge multiplied by the deficiency take;
however, some contracts provide MCV the opportunity to reduce such deficiency payment by
taking gas in excess of the MDQ during the following year. Generally, under the contracts
that require 100% daily takes, MCV is required to pay the supplier for any unexcused
deficiencies, which amount is calculated as the sum of (i) the daily deficiency multiplied by
the positive price differential between market and contract prices and (ii) the Demand Charge
accessed by transporter.Under most of the Canadian contracts, if a Canadian supplier under delivers to MCV in any
month, subject to certain force majeureprovisions, the contract price is reduced by a
proportionate share of the Canadian and U.S. transporters Demand Charges. Further, if a
Canadian supplier fails, for reasons other than force majeure, to deliver 90% of quantities
requested up to the MDQ over any 120 consecutive day period then, in most cases 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.Credit Support Requirements for MCVs Gas Arrangements. Many of MCVs gas supply contracts
have credit support requirements that can be triggered by changes in the financial condition
of MCV or the gas supplier, price changes in the forward gas market or the quantity of gas
purchases. As of December 31, 2004, MCV is supplying credit support to two gas suppliers; one
in the form of a letter of credit in the amount of $2.4 million; and cash on deposit with the
other in the amount of $7.3 million. As of December 31, 2004, MCV was holding letters of
credit totaling $208.6 million from two gas suppliers as collateral support for specific MCV
long term gas agreements of which $184.0 million is a letter of credit from El Paso, a related
party. In addition, as of December 31, 2004, MCV is holding $19.6 million of cash on deposit
from two of MCVs brokers.A number of MCVs gas supply agreements have parent guarantees that are supplied by the
corporate parents of the entity that is a party to the MCV gas contract. The MCV Partners
guarantee none of MCVs gas supply agreements. -9-




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MCV hedges gas with NYMEX contracts that have both initial and variation margin requirements.
As of December 31, 2004, MCV held 3,769 NYMEX contracts and had margin requirements of $24.5
million to support the acquisition of the aforementioned NYMEX contracts. These requirements
were supported by the unrealized gains on the open positions.MCV also hedges gas with NYMEX commodity swaps and Alberta Energy Company (AECO) basis
swaps. As of December 31, 2004, MCV had positions totaling 34.6 bcf of NYMEX commodity swaps
and 2.3 bcf of AECO basis swaps in place. These contracts have credit support requirements
that can be triggered by changes in the financial condition of MCV or the counterparty and
price changes in the forward gas market. As of December 31, 2004, MCV had credit requirements
of $9.7 million to support the acquisition of the aforementioned swap arrangements. These
requirements were supported by the unrealized gains on the open positions.In addition, MCV also has credit support requirements in connection with its gas
transportation contracts. The present tariff provisions in MCVs gas transportation contracts
provide that credit support can be required based on the credit worthiness of the holder of
the contract. As of December 31, 2004, MCV had not been required to provide any credit
support for its gas transportation contracts.Gas Transportation and Storage ArrangementsThe location of the Facility permits gas to be transported over a number of U.S. interstate
pipelines. MCV has signed long term transportation contracts with four of these pipelines:
ANR Pipeline Company (ANR); Panhandle Eastern Pipe Line Company (Panhandle); Trunkline Gas
Company (Trunkline); and Great Lakes Gas Transmission Company (Great Lakes). ANR and
Great Lakes are affiliates of El Paso. 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 a long term transportation arrangement with Consumers connecting pipelines which link
the Facility and its own pipeline to Consumers interstate pipelines. Michigan gas produced
by suppliers is currently transported to Consumers pipeline system by the supplier under
contracts the suppliers have with MichCon Gathering Company (previously Michigan Consolidated
Gas Company) (MichCon), on the MichCon pipeline system in northern Michigan.The remaining terms of MCVs agreements with the U.S. transporters range from less than 1 to
21 years. The transportation rates of ANR, Panhandle, Trunkline and Great Lakes are subject
to FERC regulation.The suppliers under the Canadian contracts are themselves responsible for arranging
transportation within Canada, and are responsible for paying the transportation rates charged
by the Canadian transporters, which are then, in most cases, reimbursed by MCV. All suppliers
have been allocated firm transportation capacity on the relevant pipelines. Great Lakes
transports Canadian gas from the U.S.-Canada border to Michigan.MCV has also entered into a gas storage agreement with Consumers for the underground storage
of eight billion cubic feet of gas in exchange for delivery to Consumers of 1.75% of the gas
placed in storage (for fuel) and the payment by MCV to Consumers of an annual storage service
charge of 32.04 cents per MMBtu 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
MMBtu/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 AgreementsUnder a service agreement between MCV and Alstom, as amended, (the Service Agreement),
Alstom sold MCV spare parts for the GTGs and provides qualified service personnel and
supporting staff to assist MCV to -10-




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perform scheduled inspections on the GTGs, and to repair the
GTGs at MCVs request. The Service Agreement, commenced on January 1, 1990, and was
terminated for cause by MCV in February 2004. Alstom disputed MCVs right to terminate for
cause. The parties settled the dispute and the agreement terminated in February 2004.MCV has a maintenance service and parts agreement with GEII, effective December 31, 2002
(GEII Agreement). GEII is providing maintenance services and hot gas path parts for MCVs
twelve GTGs including an initial set of spare parts, providing 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 GEII Agreement covers four rounds of major GTG inspections, which
are expected to be completed by 2015. MCV is to make monthly payments over the life of the
contract totaling approximately $207 million (subject to escalations based on defined
indices). The GEII Agreement can be terminated by either party for cause or convenience.
Should termination for convenience occur, a buy out amount will be paid by the terminating
party with payments ranging from approximately $19.0 million to $.9 million, based upon the
number of operating hours utilized since commencement of the GEII Agreement.Steam Turbine Service AgreementMCV entered into a nine year Steam Turbine Maintenance Agreement with GE effective January 1,
1995, which is designed to improve unit reliability, increase availability and minimize
unanticipated maintenance costs. Effective February 1, 2004, MCV and GE amended this contract
to extend its term through August 31, 2007. MCV is to make monthly payments over the life of
the contract totaling $22.3 million (subject to escalation based on defined indices). The
parties have certain termination rights without incurring penalties or damages for such
termination. Upon termination, MCV is only liable for payment of services rendered or parts
provided prior to termination. 
  E.
    EmployeesAs of March 1, 2005, MCV had 113 employees. Fifty-three of MCVs employees are members of the
Utility Workers Union of America, AFL-CIO Local 564 (the Union), and are subject to the
terms of a collective bargaining agreement between MCV and the Union. MCV and the Union
signed a five-year agreement effective March 1, 2004, with a wage reopener in each of the last
two years. In July 2004, MCV announced a Voluntary Severance Program (VSP) for all
employees (union and non-union employees), subject to certain eligibility requirements. The
VSP entitled participating employees, upon termination, to a lump sum payment, based upon
number of years of service up to a maximum of 52 weeks of wages. Nineteen employees elected
to participate in the VSP. MCV believes that its relationship with its employees is good. 
  F.
    RegulationIntroductionMCV and the Facility are not subject to most state and federal public utility laws and
regulations. The following is a discussion of the principal regulatory proceedings and issues
which could have an impact on MCV and/or the Facility.QF CertificationIn 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, -11-




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the required Efficiency Percentage is reduced to 42.5%. Since 1990, the
required Thermal and Efficiency Percentages have been achieved. During 2004, a Thermal
Percentage of 15.6% and an Efficiency Percentage of 47.6% were achieved.The Facilitys QF certification by FERC became effective when portions of the Facility were
first synchronized to Consumers system in June 1989. As the operator of a QF, MCV (and the
Facility) are exempt from various provisions of the FPA and the 1935 Act and from certain
state laws and regulations respecting rate, financial and organizational regulation of public
utilities. On January 31 and March 1, 1990, FERC recertified the Facility as a QF in the
context of an ownership structure in which MCV owns the Facility and in the context of a
leveraged lease transaction in which the Facility is owned by Owner Trustees on behalf of
institutional investors and operated by MCV. In 1997, 1998, 2000, 2001 and 2003, MCV filed
Notices of Self-Recertification with the FERC to reflect changes in the configuration and
equipment of the Facility, and changes in MCV Partnership ownership (which changes did not
result in a change in the percentage of utility ownership). See Item 7, MD&A  Outlook 
Maintaining QF Status.MPSC and Other Proceedings Relating to Capacity and Energy ChargesBackground. 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 recover energy charges from its
customers could, pursuant to the regulatory out provision of the PPA, result in a reduction
or refund of the fixed and variable portions of the energy charge under the PPA.MPSC and Other Proceedings. In September 1987, in order to obtain a 17-1/2 year rate
protection provided under Michigan law, known as Act 81, MCV requested MPSC approval of the
capacity rate provided for in the PPA. During the pendency of this matter, Consumers, MPSC
staff and others negotiated a revised settlement proposal, which was submitted to the MPSC for
approval (Revised Settlement Proposal).In a 1993 order (the 915 MW Settlement), the MPSC approved with modifications the Revised
Settlement Proposal. Generally, the 915 MW Settlement approved cost recovery of Consumers
from its rate payers of 915 MW of MCV capacity subject to certain availability caps
associated with on-peak and off-peak periods of time each day (beginning on January 1, 1998,
the availability caps were 88.7% of 915 MW both on and off peak) and recovery of energy
payments based on coal proxy prices (the formula in the PPA). However, instead of capacity
and fixed energy payments being based on availability as provided in the PPA, the 915 MW
Settlement provided for recovery of such payments on an energy delivered basis. The MPSC
did not order that the PPA be modified to conform with the cost recovery approved in the 915
MW Settlement. However, the MPSC found that since the capacity charges approved for recovery
under the Revised Settlement Proposal would not be reflected in the PPA, approval for the
purposes of Act 81 could not be
extended to those capacity charges. The MPSC did indicate in its order, however, that its 915
MW Settlement would be implemented for rate-making purposes in 1993 and subsequent years.
Opponents to the Revised Settlement Proposal unsuccessfully filed appeals of the 915 MW
Settlement which is now final.In connection with a dispute between MCV and Consumers regarding the payment of certain fixed
energy charges which stemmed from the Revised Settlement Proposal, on December 10, 1993,
Consumers made a written irrevocable offer of relief (Offer of Relief) to MCV. The Offer of
Relief was for the purpose of -12-




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facilitating the sale of Senior Secured Lease Obligation Bonds,
issued in connection with the financing of the Overall Lease Transaction (See Item 1, Section
H, Overall Lease Transaction) and held by Consumers. Pursuant to the Offer of Relief, which
was rendered final and irrevocable on December 28, 1993, Consumers committed to pay MCV the
fixed energy charges on all energy delivered by MCV from the block of Contract Capacity above
915 MW. Consumers did not commit to pay MCV for fixed energy charges on energy delivered
above the caps established in the 915 MW Settlement up to 915 MW. This unilateral
commitment, which became effective as of January 1, 1993, to pay fixed energy charges on
delivered energy from the block of Contract Capacity above 915 MW will expire on September 15,
2007.In 1993, Consumers exercised its rights under the PPA to obtain a determination through
arbitration proceedings of whether Consumers could exercise the regulatory out provision of
the PPA in view of Consumers acceptance of the 915 MW Settlement. In a Final Order issued in
1995, the arbitrator ruled that Consumers may withhold the fixed energy charges for available
but undelivered energy, as well as for energy delivered between the caps contained in the
915 MW Settlement and 915 MW.In 1995, Consumers and the MPSC staff asked the MPSC to approve a settlement agreement (325
MW Settlement) which proposed recovery by Consumers from its ratepayers of an additional 325
MW of capacity purchased from MCV beginning January 1, 1996 through the term of the PPA. The
costs recovered for this 325 MW of MCV Contract Capacity was essentially the same as the 915
MW Settlement already approved by the MPSC after a phase in of the capacity rate between 1996
and 2004 including the same availability caps as the 915 MW Settlement. On November 14,
1996, the MPSC approved, with modifications not material to MCV, the 325 MW Settlement
effective January 1, 1996 (325 MW Settlement).In 1999, MCV and Consumers entered into a settlement agreement (Settlement Agreement), which
resolves (for the various time periods specified in the Settlement Agreement) disputed issues
under the PPA and includes definitive obligations for Consumers to make energy payments
calculated in accordance with the PPA, irrespective of any MPSC or the reviewing courts
decision which may affect those issues or payments. The Settlement Agreement also provides
that, in billing Consumers for capacity charges (at the rates set forth in the PPA)
availability would be capped at 98.5% of the 1240 MW (98.5% cap) on a calendar-year basis
for the term of the PPA irrespective of any MPSC or the reviewing courts decision, which may
affect this issue or payment. Notwithstanding the Settlement Agreement, after September 15,
2007, an issue could exist as to whether or not Consumers can exercise the regulatory out
provision to reduce capacity payments to MCV based upon the availability caps of 88.7% of
the 1240 MW (both on and off peak) of contract capacity as provided for in the 915 MW
Settlement and the 325 MW Settlement. The Settlement Agreement has not materially affected
MCVs earnings and cash flows.In July 2000, in response to rapidly escalating natural gas prices and since Consumers
electric rates were frozen, MCV entered into a series of transactions with Consumers whereby
Consumers agreed to reduce MCVs dispatch level and MCV agreed to share with Consumers the
savings realized by not having to generate electricity (Dispatch Mitigation). On January 1,
2004, Dispatch Mitigation ceased and Consumers began dispatching MCV pursuant to the 915 MW
Settlement and the 325 MW Settlement availability caps provision (i.e., minimum dispatch of
1100 MW on- and off-peak (Forced Dispatch)). In 2004, MCV and Consumers entered into the
RCA and RDA which, among other things, provide that Consumers will economically dispatch MCV,
if certain conditions are met. Such dispatch is expected to reduce electric production from
what would have occurred under the Forced Dispatch, as well as decrease gas consumption by
MCV. The RCA provides that Consumers has a right of first refusal to purchase, at market
prices, the gas conserved under the RCA. The RCA and RDA provide for the sharing of savings
realized by not having to generate electricity. See Item 1, Section D, Contracts  The RCA
and RDA.Michigan Electric Industry Restructuring ProceedingsThe MPSC issued orders in 1997 and 1998 (collectively the Restructuring Orders). The
Restructuring Orders provide for a transition to a competitive regime whereby electric retail
customers would be able to choose their power supplier and pay negotiated or market-based rates
for such power supply. The Restructuring Orders also mandated that utilities wheel
third-party power to the utilities customers. An -13-




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issue involved in restructuring, which could
significantly impact MCV, is stranded cost recovery. The Restructuring Orders allow recovery
by utilities (including Consumers) of net stranded costs, which include capacity charges from
QFs, including MCV, previously approved by the MPSC, incurred during the regulated era that
will be above market prices during the new competitive regime. However, it appears that
stranded cost recovery of above-market capacity charges in power purchase contracts (including
MCVs PPA) is limited to customers who chose an alternative power supplier and are only paid
for the period 1998 through 2007 (MCVs PPA expires in 2025). Customers who chose to remain
power supply customers of Consumers will continue to pay capacity charges as part of rates
charged by Consumers, subject to MPSC rate regulation. The Restructuring Orders do not
otherwise specifically address the recovery of PPA capacity charges after 2007. MCV, as well
as others, filed appeals in state and federal courts challenging the Restructuring Orders. The
Michigan Court of Appeals found that the Restructuring Orders do not unequivocally disallow
recovery of PPA charges (capacity and energy) by Consumers and, therefore, MCVs issues were
not ripe for appellate review and no actual controversy regarding recovery of costs could occur
until 2008, at the earliest. This order is now final.In June 2000, the State of Michigan enacted legislation which, among other things, states that
the Restructuring Orders (being voluntarily implemented by Consumers) are in compliance with
the legislation and enforceable by the MPSC. The legislation provides that the rights of
parties to existing contracts between utilities (like Consumers) and QFs (like MCV), including
the rights to have the PPA charges recovered from customers of the utilities, are not abrogated
or diminished, and permitted utilities to securitize certain stranded (transition) costs
including PPA charges.In MCVs federal court challenge to the Restructuring Orders, the U.S. District Court granted
summary judgment to MCV declaring, among other things, that the Restructuring Orders are
preempted by federal law to the extent they prohibit Consumers from recovering from its
customers any charge for avoided costs (or stranded costs) to be paid to MCV under PURPA
pursuant to the PPA. In June 2001, the United States Court of Appeals (Appellate Court)
vacated the U.S. District Courts summary judgment and ordered the case dismissed based upon a
finding that no actual case or controversy existed for adjudication between the parties. The
Appellate Court determined that the parties dispute is hypothetical at this point in time and
the QFs (including MCV) claims are premised on speculation about how an order might be
interpreted in the year 2007 or beyond by a future MPSC.Federal Electric Industry RestructuringFERC has jurisdiction over wholesale energy sales and is moving towards market based pricing
of electricity as opposed to traditional cost-based pricing. FERC also has jurisdiction over
the interstate transmission of electricity, including rates. In December 1999, FERC issued a
final rule, Order No. 2000, designed to encourage all owners and operators of interstate
electric transmission lines to join regional transmission organizations. In addition, federal
energy legislation is proposed from time to time with various provisions which could impact
MCV. FERC decisions and/or federal legislation could impact MCV in selling and transmitting
electricity in the wholesale market. MCV management cannot predict the impact that FERC
decisions or federal legislation may have on MCVs business, if any, at this time.Other Regulatory IssuesMCV has been granted a permanent exemption from the Power Plant and Industrial Fuel Use Act of
1978, as amended, relating to the use of natural gas as its primary energy source. This
exemption permits MCV to consume gas without restriction as to hours of operation or the
capacity of the Facility to consume an alternate fuel.The Canadian long term gas contracts require permits from both Canadian and U.S. authorities.
All of the suppliers have received approval from Canadian provincial authorities to lift and
remove sufficient gas volumes to meet MCVs current contract requirements and from the
National Energy Board (NEB) to export these volumes. The U.S. long term gas contracts are
not subject to regulatory approvals. -14-




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G.
    Environmental MattersMCV 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. 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.On July 12, 2004, the Michigan Department of Environmental Quality (DEQ), Air Control
Division, issued MCV a Letter of Violation asserting that MCV violated its Air Use Permit to
Install No. 209-02 (PTI) by exceeding the carbon monoxide emission limit on the Unit 14 GTG
duct burner and failing to maintain certain records in the required format. On July 13, 2004,
the DEQ, Water Division, issued MCV a Notice Letter asserting MCV violated its National
Pollutant Discharge Elimination System Permit by discharging heated process waste water into
the storm water system, failure to document inspections, and other minor infractions (alleged
NPDES violations). MCV has declared all duct burners as unavailable for operational use
(which reduces the generation capability of the Facility by approximately 100 MW) and is
assessing the duct burner issue and has begun other corrective action to address the DEQs
assertions. MCV disagrees with certain of the DEQs assertions. MCV filed responses to these
DEQ letters in August 2004. On December 13, 2004, the DEQ informed MCV that it was pursuing
an escalated enforcement action against MCV regarding the alleged violations of MCVs PTI.
The DEQ also stated that the alleged violations are deemed federally significant and, as such,
placed MCV on the United States Environmental Protection Agencys High Priority Violators List
(HPVL). The DEQ and MCV are pursuing voluntary settlement of this matter, which will
satisfy state and federal requirements and remove MCV from the HPVL. Any such settlement is
likely to involve a fine, but the DEQ has not, at this time, stated what, if any, fine they
will seek to impose. At this time, MCV management cannot predict the financial impact or
outcome of these issues, however, MCV believes it has resolved all issues associated with the
alleged NPDES violations and does not expect any further MDEQ actions on this NPDES matter.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. -15-




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H.
    Overall Lease TransactionGeneralPermanent financing for the Facility has been provided through five separate but
contemporaneous sale and leaseback transactions (the Overall Lease Transaction), pursuant to
which MCV sold undivided interests in all of the fixed assets comprising the Facility to the
Owner Trustee under five separate owner trusts (the Owner Trusts) established for the
benefit of certain institutional investors (Owner Participants). U.S. Bank National
Association (formerly known as State Street Bank and Trust Company) serves as Owner Trustee
under each of the Owner Trusts (in each such capacity, an Owner Trustee and, collectively,
the Owner Trustees). Each Owner Trustee leases its undivided interest in the Facility to
MCV under one of five separate leases, each having a 25-year base term (the Basic Lease
Term) commencing in 1990.Each purchase of an undivided interest in the Facility by an Owner Trustee and the lease of
such undivided interest back to MCV constitutes a separate transaction (each, a Lease
Transaction). The undivided interests are in varying undivided interest percentages
ranging from approximately 4.4% to 75.5%. Each Lease Transaction was effected through
separate, but substantially identical, documents relating to a particular undivided interest,
including a Trust Agreement pursuant to which the Owner Participant established the Owner
Trust with the Owner Trustee and authorized the Owner Trustee to hold title to its undivided
interest on its behalf and lease the same to MCV (each a Trust Agreement), a Participation
Agreement pursuant to which MCV, the Owner Participant, the Owner Trustee and the various
other parties to such Lease Transaction agreed to the terms and conditions thereof (each, a
Participation Agreement), a Lease Agreement pursuant to which the Owner Trustee leases the
undivided interest to MCV (each, a Lease) and two separate Trust Indentures pursuant to
which the Owner Trustee issued Senior Notes (as defined in this Item 1, Section I, Overall
Lease Transaction  The Lease Funding) (each, a Senior Note Indenture) and Subordinated
Notes (as defined in this Item 1, Section H, Overall Lease Transaction  The Lease Funding)
(each, a Subordinated Note Indenture and, together with the Senior Note Indentures, the
Note Indentures). The Bank of New York (formerly known as United States Trust Company) and
Wachovia Bank National Association (formerly known as First Union National Bank) are note
trustees under the Senior Note Indenture and the Subordinated Note Indenture, respectively
(the Note Trustees). There is a single Collateral Agency and Intercreditor Agreement (the
Intercreditor Agreement), executed by the Owner Trustees, MCV, the Note Trustees, the
Working Capital Lender (as defined below) and U.S. Bank National Association as collateral
Agent (the Collateral Agent), which provides for the creation and maintenance of certain
reserves, the deposit of all revenues generated by the operation of the Facility, the payment
of operating expenses, and the distribution of remaining revenues according to the priorities
set forth therein to or for the account of the Working Capital Lender, the Note Trustees, the
Owner Trustees, MCV and the affiliates of certain Partners. MCV currently has arranged for a
$50 million annual working capital line (the Working Capital Facility) with a syndicate of
banks (the Working Capital Lender). As security for its obligation to repay advances made
under the Working Capital Facility, MCV has granted to the Working Capital Lender a first
priority security interest in certain receivables earned by MCV through the sale of
electricity, electric generating capacity, natural gas, or steam to third parties, including
Dow, Consumers and DCC (the Earned Receivables) and in MCVs natural gas inventory (the
Natural Gas Inventory). Payments due under the Working Capital Facility are direct
obligations of MCV and will in
general have a priority in payment over payments under the Leases (and thus on the Notes (see
Item 1, Section H, Overall Lease Transaction  The Lease Funding) and the Bonds).Statement of Financial Accounting Standards (SFAS) No. 98, which applies to sale and
leaseback transactions entered into after June 30, 1988, specifies the accounting required by
generally accepted accounting principles (GAAP) for a seller-lessees sale and simultaneous
leaseback transaction involving real estate, including real estate with equipment. In
accordance with SFAS No. 98, the Overall Lease Transaction must be accounted for as a
financing obligation and not a sale, since MCV has the option to purchase the undivided
interests in the Facility at the end of the Basic Lease Term, which expires on July 23, 2015,
and has other forms of continuing involvement with the Facility throughout the Basic Lease
Term. The Lease obligation is recorded as long term debt, at the present value of future
minimum Lease payments. There was no change to property, plant and equipment, on the
Consolidated Balance Sheet, as the transaction -16-




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was accounted for as a financing arrangement
for financial reporting purposes. Certain Lease transaction expenses of MCV are recorded as
deferred financing costs and amortized using the interest method over the term of the Lease.
On an ongoing basis, the monthly accrual for the semi-annual Lease payments is divided between
interest and principal components using the effective interest method.The Lease FundingEach Owner Trustee financed the purchase of its undivided interest in the Facility through a
combination of equity invested by its related Owner Participant ($556,320,000 in the
aggregate) and debt incurred through the issuance of nonrecourse notes by the Owner Trustee
under the related Note Indentures, consisting of senior secured notes ($1,200,000,000 in the
aggregate) (the Senior Notes) and subordinated secured notes ($567,180,000 in the aggregate)
(the Subordinated Notes, and together with the Senior Notes, the Notes). In order to
facilitate the sale of this debt (other than the debt evidenced by the Subordinated Notes
pledged to secure the Tax-Exempt Bonds) (as defined below), two funding corporations were
established. Midland Funding Corporation I was established for the purpose of issuing various
series of senior bonds (the Senior Bonds), each series secured by a pledge of the
corresponding series of Senior Notes issued by the five Owner Trustees. Midland Funding
Corporation II was established for the purpose of issuing various series of subordinated bonds
(the Subordinated Bonds and, together with the Senior Bonds, the Bonds), each series
secured by a pledge of the corresponding series of the Subordinated Notes issued by the five
Owner Trustees. These pledged Subordinated Notes are secured proportionally with the
Subordinated Notes pledged to secure the Tax-Exempt Bonds issued by the Tax-Exempt Issuer (as
defined below). The use of the funding corporations facilitated the sale of debt by
permitting the offer and sale of three series of Senior Bonds and two series of Subordinated
Bonds, each secured equally and ratably by the corresponding series of Notes issued by each of
the five Owner Trusts, thus eliminating the need to offer a greater number of separate series
of Notes to the investor. In addition, the use of a corporate obligor facilitated compliance
with certain investment laws by certain institutional purchasers of the Senior and
Subordinated Bonds. The aggregate principal amount, maturity date, interest rate, redemption
provisions and other material terms of each series of the Bonds were identical to those of the
Notes pledged as security therefore. The Senior Bonds were retired in July 2002. As of
February 28, 2005, there remains outstanding approximately $556.3 million of equity invested
by the Owner Participants and $392.0 million of Subordinated Bonds.The Economic Development Corporation of the County of Midland (the Tax-Exempt Issuer) issued
certain series of tax-exempt bonds (the Tax-Exempt Bonds), which were issued under and
secured by a tax-exempt collateral trust indenture. The proceeds from the issuance and sale
of the Tax-Exempt Bonds were used to finance certain pollution control assets constituting a
portion of the Facility. Each series of Tax-Exempt Bonds is secured solely by a corresponding
series of Subordinated Notes issued by the Owner Trustees, which are secured by a junior
security interest in the undivided interests of the Owner Trustees in the Facility and certain
of their rights under and to the related Leases, including rents thereunder and the Lease
Collateral, including (subject to the rights of the Working Capital Lender, which include a
prior security interest in certain of MCVs receivables and natural gas inventory securing the
Working Capital Facility) the revenues and other payments received thereunder. The
Subordinated Notes securing the Tax-Exempt Bonds and the
Subordinated Notes issued by the Owner Trustees to secure the Subordinated Bonds are secured
by junior security interests in a shared collateral pool.Security and Sources of PaymentThe sole sources of payment for the Subordinated Bonds were certain pledged Subordinated Notes
issued by each of the five Owner Trustees and pledged under the Subordinated Bond Indenture.
The pledged Subordinated Notes of each Owner Trustee are nonrecourse obligations of such Owner
Trustee payable solely from the rental payments made by MCV under its related Lease and the
other security therefore. The Subordinated Notes were secured by a junior (now senior)
security interest in such Owner Trustees undivided interest in the Facility and certain of
its rights under and to the related Lease, including rents and the Lease collateral, including
(subject to the rights of the Working Capital Lender) the revenues and other payments received
thereunder. The Subordinated Notes are secured on a proportional basis with the Subordinated
Notes pledged to secure the Tax-Exempt Bonds. -17-




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Additional Subordinated Notes may be issued (i) to refinance any series of Subordinated Notes,
and (ii) to pay certain costs of modifying the Facility. Any Subordinated Notes will rank
proportionally with all Subordinated Notes then outstanding. The aggregate principal amount
of Subordinated Bonds that may be issued is unlimited, provided that at no time may the
aggregate principal amount of Subordinated Bonds exceed the aggregate principal amount of
Subordinated Notes, respectively, then outstanding. The future issuance of additional
Subordinated Bonds (other than for refinancing purposes) would create additional claims
against the security for the Note Indentures and the amounts available to repay amounts in
respect of the Bonds currently outstanding in the event of foreclosure.The rental payments under the Leases are established to provide funds sufficient to service
the debt issued by the Owner Trustees and to provide the Owner Participants with a return on
their equity investment. MCV is unconditionally obligated to make rental payments under the
Leases in amounts sufficient to provide for scheduled payments of the principal of, premium,
if any, and interest on the Notes, which amounts, in turn, are equal to scheduled payments of
principal of, premium, if any, and interest on the Bonds. MCV has pledged to each Owner
Trustee an undivided interest percentage of all revenues to be derived from the operation of
the Facility, together with its rights with respect to the PPA, the SEPA, and various other
contracts of MCV relating to the Facility (the Lease Collateral) to secure its rental
obligations under the Leases. Neither the Bonds nor the Notes are direct obligations of, or
guaranteed by, MCV nor do any Partners of MCV have any liability under the terms of the Notes,
the Bonds or the Leases. Neither the Partners nor the Partner affiliates have any obligations
under the Leases, and the obligations of MCV under the Leases and the other documents related
to the Overall Lease Transaction are nonrecourse to the Partners and the Partner affiliates.Any default or foreclosure with respect to the undivided interest of an Owner Trustee relates
solely to such undivided interest. There is no cross-collateralization among Owner Trustees
and the Subordinated Bond trustee as holder of the Subordinated Notes. The Leases, however,
contain identical events of default including an event of default related to a failure by MCV
to pay principal of or interest on any indebtedness for borrowed money or other financing
obligations (including lease obligations) with respect to an amount greater than $10 million.Pursuant to the Intercreditor Agreement, a reserve account has been created for the benefit of
the holders of the Notes, which had been initially funded with $90 million in cash (the
Reserve Account). The Intercreditor Agreement sets forth circumstances under which amounts
in the Reserve Account are to be maintained at not less than $40 million, will be adjusted to
equal the lesser of $137 million or the debt portion of basic rent under the Leases payable on
the next succeeding basic rent payment date, and limited circumstances under which no more
than $10 million contained therein may be withdrawn therefrom to provide working capital. As
of December 31, 2004, MCV had funds of $138.2 million in the Reserve Account. Excess funds in
the Reserve Account are periodically transferred to MCV. 
 Item 2. PROPERTIES MCV leases the Facility from the Owner Trustees pursuant to the Leases. For a description of the
Facility, see Item 1, Section B, The Facility. For a description of the financing arrangements
in connection with the lease of the Facility to MCV, including a description of the liens on the
Facility, see Item 1, Section H, Overall Lease Transaction. The Facility is located on the Site, previously the location of Consumers abandoned Midland
Nuclear Generating Plant in Midland County, Michigan. The Site contains approximately 1,200
acres, including an 880-acre cooling pond. By a lease dated as of December 29, 1987, Consumers,
as fee simple owner, leased the land on which the Facility is located to MCV, CMS Midland and MDC
(the Original Lease), which was amended and restated in its entirety in 1988. By five separate
instruments, each dated as of June 1, 1990, Consumers and MCV created undivided interests in the
amended Original Lease and amended and restated the lease to reflect the creation of such
interests (the Original Lease as so amended and restated is referred to as the Ground Lease).
In connection with -18-




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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 Property Taxes In 1997, MCV filed a property tax appeal against the City of Midland at the Michigan Tax Tribunal
contesting MCVs 1997 property taxes. Subsequently, MCV filed appeals contesting its property
taxes for tax years 1998 through 2004 at the Michigan Tax Tribunal. A trial was held for tax
years 1997  2000. The appeals for tax years 2001-2004 are being held in abeyance. On January 23,
2004, the Michigan Tax Tribunal issued its decision in MCVs tax appeal against the City of
Midland for tax years 1997 through 2000 and has issued several orders correcting errors in the
initial decision (together the MTT Decision). MCV management has estimated that the MTT
Decision will result in a refund to MCV for the tax years 1997 through 2000 of at least
approximately $35.3 million in taxes plus $9.6 million of interest as of December 31, 2004. The
MTT Decision has been appealed to the Michigan Appellate Court by the City of Midland. MCV has
filed a cross-appeal at the Michigan Appellate Court. MCV management cannot predict the outcome
of these legal proceedings. MCV has not recognized any of the above stated refunds (net of
approximately $16.1 million of deferred expenses) in earnings at this time. NOx Allowances The United States Environmental Protection Agency (US EPA) has conditionally approved the State
of Michigans  State Implementation Plan (SIP), which includes an interstate, NOx budget and
allowance trading program administered by the US EPA beginning in 2004. Each NOx allowance
permits a source to emit one ton of NOx during the seasonal control period, which for 2004 was
from May 31 through September 30. NOx allowances may be bought or sold and unused allowances may
be banked for future use, with certain limitations. MCV estimates that it will have excess NOx
allowances to sell under this program. Consumers has given notice to MCV that it believes the
ownership of the NOx allowances under this program belong, at least in part, to Consumers. MCV
has initiated the dispute resolution process pursuant to the PPA to resolve this issue and the
parties have entered into a standstill agreement deferring the resolution of this dispute.
However, either party may terminate the standstill agreement at any time and reinstate the PPAs
dispute resolution provisions. As of December 31, 2004, MCV has sold 1,200 tons of 2004 allowances
for $2.7 million, which has been recorded as a liability pending resolution of ownership of these
credits. MCV management cannot predict the outcome of this issue. Michigan Department of Environmental Quality Enforcement Action On July 12, 2004, the Michigan Department of Environmental Quality (DEQ), Air Control Division,
issued MCV a Letter of Violation asserting that MCV violated its Air Use Permit to Install No.
209-02 (PTI) by exceeding the carbon monoxide emission limit on the Unit 14 GTG duct burner and
failing to maintain certain records in the required format. MCV disagrees with certain of the DEQs assertions. On December 13, 2004, the DEQ informed MCV
that it was pursuing an escalated enforcement action against MCV regarding the alleged violations
of MCVs PTI. The DEQ also stated that the alleged violations are deemed federally significant
and, as such, placed MCV on the United States Environmental Protection Agencys High Priority
Violators List (HPVL). The DEQ and MCV are pursuing voluntary settlement of this matter, which
will satisfy state and federal requirements and remove MCV -19-




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from the HPVL. Any such settlement is
likely to involve a fine, but the DEQ has not, at this time, stated what, if any, fine they will
seek to impose. At this time, MCV management cannot predict the financial impact or outcome of
this issue. Other than as discussed in Item 1, Section F, Regulation, there are no other pending legal
proceedings to which MCV is a party and to which any of its property is subject, that are material
in relation to MCVs consolidated financial statements. 
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. -20-




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PART II 
 Item 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Not applicable. 
 Item 6. SELECTED FINANCIAL DATA (Dollars in Thousands)Years Ended December 31,
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001
    
    
    2000STATEMENT OF OPERATIONS DATA:Operating Revenues
    
    $
    649,659
    
    
    $
    584,412
    
    
    $
    596,819
    
    
    $
    610,813
    
    
    $
    604,547Operating Income
    
    
    75,539
    
    
    
    167,938
    
    
    
    188,124
    
    
    
    157,835
    
    
    
    212,813Net Income (Loss) Before
Cumulative Effect of Accounting
Change
    
    
    (23,619
    )
    
    
    59,791
    
    
    
    73,896
    
    
    
    48,264
    
    
    
    90,121Cumulative Effect of Change in
Method of Accounting for
Derivative Option Contracts (to
April 1, 2002) (1)
    
    
    
    
    
    
    
    
    
    
    58,131
    
    
    
    
    
    
    
    Net Income (Loss)
    
    
    (23,619
    )
    
    
    59,791
    
    
    
    132,027
    
    
    
    48,264
    
    
    
    90,121BALANCE SHEET DATA: (2)Total Assets
    
    
    1,980,377
    
    
    
    2,069,650
    
    
    
    2,098,073
    
    
    
    2,117,047
    
    
    
    2,274,956CapitalizationPartners Equity
    
    
    809,976
    
    
    
    799,076
    
    
    
    734,310
    
    
    
    551,712
    
    
    
    527,738Long term Debt, Excluding
Current Maturities
    
    
    942,097
    
    
    
    1,018,645
    
    
    
    1,153,221
    
    
    
    1,243,060
    
    
    
    1,429,233
   (1) Effective April 1, 2002, the FASB issued guidance regarding natural gas commodity
contracts that combine an option component and a forward component. This guidance requires
either that the entire contract be accounted for as a derivative or the components of the
contract be separated into two discrete contracts. As of April 1, 2002, MCV had nine long
term gas contracts that each contain both an option and forward component. As such, they are
no longer accounted for under the normal purchases and sales exception and MCV began
mark-to-market accounting of these nine contracts through earnings. Based on the natural gas
prices, at the beginning of April 2002, MCV recorded a $58.1 million gain for the cumulative
effect of this accounting change. Subsequent gains and losses were recorded as operating
costs.(2) Balance sheet data consists of the balances at December 31. 
 Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A) Results of Operations Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995. This Annual
Report on Form 10-K contains certain forward-looking statements as defined by the Private
Securities Litigation Reform Act of 1995 (the Act), including without limitation, discussion as
to expectations, beliefs, plans, objectives and future financial performance, or assumptions
underlying or concerning matters discussed reflecting MCVs current expectations of the manner in
which the various factors discussed therein may affect its business in the future. Any matters
that are not historical facts are forward-looking and, accordingly, involve estimates, assumptions,
and
uncertainties that could cause actual results or outcomes to differ materially from those expressed
in the forward-looking statements. Accordingly, this Safe Harbor Statement contains additional
information about such factors -21-




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relating to the forward-looking statements. There is no assurance,
however, that MCVs expectations will be realized or that unexpected events will not have an
adverse impact on MCVs business. Some important factors that could cause actual results or outcomes to differ materially from those
discussed in the forward-looking statements include governmental policies, legislation and other
regulatory actions (including those of the Michigan Legislature, Congress, Federal Energy
Regulatory Commission and the Michigan Public Service Commission) with respect to cost recovery
under the PPA, industry restructuring or deregulation, operation of plant facilities including
natural gas pipeline and storage facilities, Consumers ability to perform its obligations under
the PPA and present or prospective wholesale and retail competition, among other factors. The
business and profitability of MCV is also influenced by other factors such as pricing and
transportation of natural gas, changes in accounting standards (such as accounting for derivative
instruments and hedging activities) and environmental legislation/regulation. All such factors are
difficult to predict, contain uncertainties which may materially affect actual results, and are
beyond the control of MCV. Overview For the year ended December 31, 2004, MCV recorded a net loss of $23.6 million, which includes a
$19.2 million mark-to-market loss. The mark-to-market loss is the result of long term gas
contracts that began being marked-to-market, as required by SFAS 133, Accounting for Derivative
Instruments and Hedging Activities. MCVs net income for the year ended December 31, 2003 was
$59.8 million, which includes a $5.0 million mark-to-market loss on the long term gas contracts.
The earnings decrease for the year 2004 compared to 2003 of $83.4 million is the result of
increased net usage of natural gas from a higher electric dispatch, higher natural gas prices, a
$14.2 million unfavorable change in the long term gas contract mark-to-market value and the
settlement with Alstom. This earnings decrease was slightly offset by lower interest expense. For the year ended December 31, 2003, MCV recorded net income of $59.8 million, which includes a
$5.0 million mark-to-market loss. The mark-to-market loss is the result of long term gas contracts
that began being marked-to-market on April 1, 2002, as required by SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. MCVs net income for the year ended December 31,
2002 was $132.0 million, which includes the April 1, 2002 change in method of accounting. The
cumulative effect of this accounting change as of April 1, 2002 increased earnings by approximately
$58.1 million and the additional quarterly mark-to-market gain recorded as of December 31, 2002
resulted in an additional earnings increase of $21.9 million. The earnings decrease for the year of
2003 compared to 2002 of $72.2 million is the result of the $85.0 million decrease in the long term
gas contract mark-to-market value and lower energy rates under the PPA with Consumers. This
earnings decrease is partially offset by lower net natural gas prices, lower interest expense on
MCVs financing obligation and higher electric and steam energy rates under the SEPA with Dow. -22-




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Operating Revenues The following represents significant operating revenue statistics for the years ended December 31
(dollars in thousands except average rates): 2004
    
    
    2003
    
    
    2002Operating Revenues
    
    $
    649,659
    
    
    $
    584,412
    
    
    $
    596,819Capacity Revenue
    
    $
    405,415
    
    
    $
    404,681
    
    
    $
    404,713PPA Contract Capacity (MW)
    
    
    1,240
    
    
    
    1,240
    
    
    
    1,240Billed PPA Availability
    
    
    98.5
    %
    
    
    98.5
    %
    
    
    98.5
    %Electric Revenue
    
    $
    225,154
    
    
    $
    162,093
    
    
    $
    177,569PPA Delivery as Percentage of Contract Capacity
    
    
    93.0
    %
    
    
    62.8
    %
    
    
    70.9
    %PPA, SEPA and Other Electric Deliveries (MWh)
    
    
    10,663,074
    
    
    
    7,348,969
    
    
    
    8,275,229Average PPA Variable Energy Rate ($ / MWh)
    
    $
    15.90
    
    
    $
    15.71
    
    
    $
    15.94Average PPA Fixed Energy Rate ($ / MWh)
    
    $
    3.89
    
    
    $
    3.67
    
    
    $
    3.89Steam Revenue
    
    $
    19,090
    
    
    $
    17,638
    
    
    $
    14,537Steam Deliveries (Mlbs)
    
    
    4,578,280
    
    
    
    5,634,390
    
    
    
    5,455,050
 For the year 2004, MCVs operating revenues increased $65.2 million from the year 2003. This
increase is due primarily to a higher electric dispatch under Forced Dispatch with Consumers and a
slight increase in the energy rates under the PPA, SEPA and SPA. For the year ended December 31, 2003, MCVs operating revenues decreased $12.4 million from 2002.
This decrease is due primarily to a lower electric dispatch with Consumers resulting from an
increase in the electric dispatch reduction transactions and due to lower energy rates under the
PPA. This decrease was partially offset by higher energy rates under the SEPA with Dow, resulting
from Dows election to cease natural gas tolling. Operating Expenses For the year ended December 31, 2004, MCVs operating expenses were $574.1 million, which includes
$413.1 million of fuel costs, including a $19.2 million mark-to-market loss on certain natural gas
contracts which contain optionality. During this period, MCV purchased approximately 94.7 bcf of
natural gas, and a net 2.0 bcf was used for transportation fuel and as a net change to gas in
storage. During this same period, MCV consumed 92.7 bcf. The average commodity cost of fuel for
the year 2004 was $3.73 per MMBtu, which includes the effects of the disposition of excess gas
supplies not required for generation. For the year ended December 31, 2003, MCVs operating
expenses were $416.5 million, which includes $255.0 million of fuel costs, including a $5.0 million
mark-to-market loss on the natural gas contracts which contain optionality. During this period,
MCV purchased approximately 69.5 bcf of natural gas, and a net 3.0 bcf was used for transportation
fuel and as a net change to gas in storage. During this same period, MCV consumed 66.5 bcf. The
average commodity cost of fuel for the year 2003 was $3.09 per MMBtu, which includes the effects of
the disposition of excess gas supplies not required for generation. Fuel costs for the year 2004
compared to 2003 increased by $158.1 million. This fuel cost increase was due to a $143.7 million
increase from a combination of higher gas usage resulting from the increase in the electric
dispatch, higher natural gas prices and a $14.2 million unfavorable change in the mark-to-market
value of the long term gas contracts with optionality. For the year ended December 31, 2003 compared to 2002, MCVs operating expenses increased $7.8
million, which includes a $0.1 million decrease in fuel costs. This slight fuel cost decrease
includes a $26.9 unfavorable mark-to-market adjustment on certain natural gas contracts which
contain optionality. Fuel costs for the year 2003
compared to 2002 decreased by $27.0 million, excluding the effects of the quarterly mark-to-market
adjustments for both periods of $26.9 million. This fuel cost decrease was due to lower natural gas
costs resulting from increased electric -23-




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dispatch reduction transactions entered into with
Consumers, lower long-term natural gas prices due to the commencement of several new contracts with
favorable pricing terms and lower natural gas hedged prices of market priced gas. This decrease was
partially offset by a higher gas usage resulting from Dows election to cease tolling gas. For the year ended December 31, 2004, operating expenses other than fuel costs decreased $0.4
million from the year 2003, primarily resulting from lower maintenance costs associated with the
transformation from Alstom to GEII for the hot gas path parts agreement expenses due to the
termination of Alstom in February and GEII not commencing until July 2004, lower expenses due to a
2003 provision for an option payment to Alstom for two gas turbines. This decrease was partially
offset by the cost of an Alstom settlement, voluntary severance payments and higher operating and
maintenance costs due to the increased dispatch. All other expenses incurred in these periods were
normal expenditures to achieve the recorded operating revenues. For the year ended December 31, 2003, operating expenses other than fuel costs increased $7.9
million from 2002, primarily resulting from increased property tax expense due to higher 2003
millage rates, a provision for an option payment with Alstom for two gas turbines and higher
compensation cost payments under the senior management bonus plan. All other expenses incurred in
these periods were considered normal expenditures to achieve the recorded operating revenues. Other Income (Expense) For the year ended December 31, 2004 compared to 2003, interest expense decreased $8.6 million due
to a lower outstanding principal balance on MCVs financing obligation. For the year ended December 31, 2003 compared to 2002, interest expense decreased $6.5 million due
to a lower outstanding principal balance on MCVs financing obligation. Cumulative Effect of Accounting Change: Effective April 1, 2002, the FASB issued guidance regarding natural gas commodity contracts that
combine an option component and a forward component. This guidance requires either that the entire
contract be accounted for as a derivative or the components of the contract be separated into two
discrete contracts. At April 1, 2002, MCV had nine long term gas contracts that each contain both
an option and forward component. As such, they are no longer accounted for under the normal
purchases and sales exception and MCV began mark-to-market accounting of these nine contracts
through earnings. Based on the natural gas prices, at the beginning of April 2002, MCV recorded a
$58.1 million gain for the cumulative effect of this accounting change. Liquidity and Capital Resources For the years ended December 31, 2004 and 2003, net cash generated by MCVs operations was $106.8
million and $141.5 million, respectively. Included in MCVs net cash generated as of December 31,
2004 is a net $10.5 million of cash collateral paid to MCV, based upon the net amount of exposure
on MCVs long term natural gas contracts with counterparties. This collateral balance will vary
with changes in market prices, credit provisions and various other factors. MCVs cash and cash
equivalents have a normal cycle of collecting revenues less operating expenses prior to making the
semiannual payments under the financing obligation due in January and July for the next eleven
years. During the years ended December 31, 2004 and 2003, MCV paid financing obligation
requirements of $242.8 million and $208.9 million, respectively, as required under the Overall
Lease Transaction. MCV also has a $50.0 million working capital line (Working Capital Facility), which was renewed
through a syndication in August 2004, to provide temporary financing, as necessary, for operations.
The Working Capital
Facility has been collateralized by MCVs natural gas inventory and earned receivables. At any
given time, borrowings and letters of credit are limited by the amount of the borrowing base,
defined as 90% of earned receivables and 50% of natural gas inventory, capped at $15 million. The
borrowing base varies over the month as receivables are earned, billed and collected and as natural
gas inventory balances are built and depleted. In addition, earned receivables borrowing base can
be affected by Consumers credit rating. The Working Capital Facility term -24-




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##### Table of Contents



currently expires on
August 27, 2005. MCV did not utilize the Working Capital Facility during the year 2004 except for
letters of credit associated with normal business practices. As of December 31, 2004, MCV had
$47.6 million available under its Working Capital Facility. As of December 31, 2004, MCVs
borrowing lease was capped at the maximum amount available of $50.0 million and MCV had outstanding
letters of credit in the amount of $2.4 million. MCV believes that amounts available to it under
the Working Capital Facility along with available cash reserves will be sufficient to meet any
working capital shortfalls that might occur in the near term. In the near term, MCV expects to fund current operating expenses, capital expenditures and
financing obligations primarily through cash flows from operations. Due to uneven scheduled
financing obligation payments (high summer payment, low winter payment), MCV anticipates that it
will be drawing on its cash reserves to fund temporary cash flow shortfalls to the extent available
for such purposes. See Item 7, MD&A  Outlook Energy Rates and Cost of Production. As of
December 31, 2004, there were approximately $265.2 million of cash reserves of which $138.2 million
had been reserved for the debt portion of the financing obligation. Disclosure about Contractual Obligations MCV has assumed various financial obligations and commitments in the normal course of its business.
These obligations are considered to represent expected cash payments that MCV is required to make
under its existing contractual arrangements. As of December 31, 2004, MCV has the following
contractual financial obligations and commitments: Payments Due by Period (In Millions)Less Than
    
    
    One to
    
    
    Three to
    
    
    More ThanContractual Obligations
    
    Total
    
    
    One Year
    
    
    Three Years
    
    
    Five Years
    
    
    Five YearsLong term Debt (1)
    
    $
    1,521.3
    
    
    $
    174.4
    
    
    $
    306.9
    
    
    $
    298.0
    
    
    $
    742.0Unconditional Purchase Obligations(2)
    
    $
    2,791.0
    
    
    $
    420.1
    
    
    $
    892.8
    
    
    $
    727.1
    
    
    $
    751.0Other Long term Obligations (3)
    
    
    207.7
    
    
    
    16.1
    
    
    
    27.9
    
    
    
    23.3
    
    
    
    140.4Total Contractual Cash Obligations
    
    $
    2,998.7
    
    
    $
    436.2
    
    
    $
    920.7
    
    
    $
    750.4
    
    
    $
    891.4
 Amount of Commitment Expiration Per PeriodLess Than
    
    
    One to
    
    
    Three to
    
    
    More ThanCommercial Commitments
    
    Total
    
    
    One Year
    
    
    Three Years
    
    
    Five Years
    
    
    Five YearsWorking Capital Facility
    
    $
    50.0
    
    
    $
    50.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
   (1)
    Represents expected cash payments, including interest.(2)
    Represents estimated minimum commitments under current long term natural gas
contracts, natural gas transportation reservation charges, GTG compressor parts and the ground
lease agreement.(3)
    Represents the cost of current Facility maintenance service agreements and spare
parts.(4)
    No amounts have been included for early termination fees under the PPA, SEPA or SPA. New Accounting Standard In 2003, the Emerging Issues Task Force (EITF) issued EITF 03-1 The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1 addresses
how to determine the meaning of other-than-temporary impairment of certain debt and equity
securities, the measurement of an impairment loss and
accounting and disclosure considerations subsequent to the recognition of an other-than-temporary
impairment. The various sections of EITF 03-1 became effective at various times during 2004. MCV
has adopted this guidance and does not expect the application to materially affect it financial
position or results of operations, since MCVs investments approximate fair value due to the short
maturity of its permitted investments. -25-




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Off-Balance Sheet Arrangements As part of MCVs ongoing business, MCV does not participate in transactions that generate
relationships with unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities (SPEs), which would have been
established for the purpose of facilitating off-balance sheet arrangements or other contractually
narrow or limited purposes. As of December 31, 2004, MCV was not involved in any unconsolidated
SPE transactions. Outlook Results of operations are largely dependent on successfully maintaining availability of the
Facility at or near Contract Capacity levels, the availability of natural gas and the level of
energy rates paid to MCV relative to the cost of fuel used for generation. Operating Outlook.During 2004, approximately 62% of PPA revenues were capacity payments under the
PPA, which were billed on availability, subject to an annual availability cap of 98.5% pursuant to
a settlement agreement between MCV and Consumers. Actual PPA availability was 98.6% for 2004,
99.4% for 2003 and 98.8% for 2002. Availability will depend on the level of scheduled and
unscheduled maintenance outages, and on the sustained level of output from each of the GTGs and the
steam turbines. MCV expects long term PPA availability to meet or exceed the capped level of
98.5%, though prolonged equipment outages could materially reduce the level of availability. Natural Gas.The Facility is wholly dependent upon natural gas for its fuel supply and a
substantial portion of the Facilitys operating expenses consist of the costs of natural gas.
While MCV continues to pursue the acquisition of a portion of its expected fuel supply requirements
in future years, MCV recognizes that its existing long term gas contracts are not sufficient to
satisfy the anticipated gas needs over the term of the PPA and, as such, no assurance can be given
as to the availability or price of natural gas after the expiration of its existing fixed price gas
contracts or for gas that may be required by the Facility in excess of the gas that MCV has under
contract. Energy Rates and Cost of Production.Under the PPA, energy charges are based on the costs
associated with fuel inventory, operations and maintenance, and administrative and general expenses
associated with certain of Consumers coal plants. However, MCVs costs of producing electricity
are tied, in large part, to the cost of natural gas. To the extent that the costs associated with
production of electricity with natural gas rise faster than the energy charge payments, which are
based largely on Consumers coal plant operation and maintenance costs, MCVs financial performance
would be negatively affected. In addition, the extent to which the Facility is dispatched by
Consumers can exacerbate the divergence between variable revenues and costs of production. The
divergence between variable revenues and costs will become greater if the energy charge (based
largely on the cost of coal) declines or escalates more slowly than the spot market or contract
prices under which MCV purchases fuel. Currently, MCV continues to purchase the majority of its
natural gas requirements under long term fixed price gas contracts, with a smaller portion of gas
purchased under long term market priced contracts and on the spot market. MCV maintains a hedging
program to mitigate risk associated with volatile market prices in the gas market. MCV has entered
into natural gas purchase and hedging arrangements with respect to approximately 91% of its 2005
expected gas needs not provided for under its long term fixed price gas contracts. MCV expects
that its purchase and hedging arrangements will mitigate the effects of rises in natural gas prices
in future years, although high gas prices for an extended period of time could adversely affect
operating results. In March 1998, Consumers began economically dispatching the Facility by scheduling energy
deliveries on an economic basis relative to the cost of other energy resources available to
Consumers, resulting in an average dispatch (without dispatch reduction transactions) of
approximately 79% from April 1998 through December
2003. Previously, the Facility was being dispatched on an uneconomic basis (relative to the cost
of other energy resources) under the terms of the 915 MW Settlement and the 325 MW Settlement ,
averaging approximately 90% annual dispatch. In July 2000, in response to rapidly escalating
natural gas prices and since Consumers electric rates were frozen, MCV entered into a series of
transactions with Consumers whereby Consumers agreed to reduce MCVs dispatch level and MCV agreed
to share with Consumers the savings realized by not having to generate electricity (Dispatch
Mitigation). On January 1, 2004, Dispatch Mitigation ceased and Consumers began -26-




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dispatching MCV
pursuant to the 915 MW Settlement and the 325 MW Settlement availability caps provision (i.e.,
minimum dispatch of 1100 MW on- and off-peak (Forced Dispatch)). In 2004, MCV and Consumers
entered into the RCA and RDA which, among other things, provides that Consumers will economically
dispatch MCV, if certain conditions are met. Such dispatch is expected to reduce electric
production from what would have occurred under the Forced Dispatch, as well as decrease gas
consumption by MCV. The RCA provides that Consumers has a right of first refusal to purchase, at
market prices, the gas conserved under the RCA. The RCA and RDA provide for the sharing of
savings realized by not having to generate electricity. Capacity and Energy Payments Under the PPA.The PPA permits Consumers, under certain conditions,
to reduce the capacity and energy charges payable to MCV and/or to receive refunds of capacity and
energy charges paid to MCV if the MPSC does not permit Consumers to recover from its customers the
capacity and energy charges specified in the PPA (the regulatory-out provision). Until September
15, 2007, the capacity charge may not be reduced below an average capacity rate of 3.77 cents per
kWh for the available Contract Capacity notwithstanding the regulatory-out provision. MCV and
Consumers entered into a settlement agreement, effective January 1, 1999 (Settlement Agreement),
which resolves all of the previously disputed issues under the PPA and includes definitive
obligations for Consumers to make energy payments calculated in accordance with the PPA,
irrespective of any MPSC or the reviewing courts decision which may affect those issues or
payments. The Settlement Agreement also provides that, notwithstanding modifications to the
Facility increasing its capacity, in billing Consumers for capacity charges (at the rates set forth
in the PPA) availability would be capped at 98.5% of the 1240 MW (98.5% cap) on a calendar-year
basis for the term of the PPA irrespective of any MPSC or the reviewing courts decision, which may
affect this issue or payment. If Consumers transfers (subject to MCVs prior consent) its rights
of up to 1240 MW of capacity and associated energy under the PPA to a third party for an extended
period of time, the 98.5% cap will not apply except that the 98.5% cap is, in any event, reinstated
on September 15, 2007. Notwithstanding the Settlement Agreement, after September 15, 2007, an
issue could exist as to whether or not Consumers can exercise the regulatory out provision to
reduce capacity payments to MCV based upon the availability caps of 88.7% of the 1240 MW (both on
and off peak) of contract capacity as provided for in the 915 MW Settlement and the 325 MW
Settlement. Consumers and MCV are required to support and defend the terms of the PPA. Two significant issues that could affect MCVs future financial performance are the price of
natural gas and Consumers ability/obligation to pay PPA charges. Natural gas prices have
historically been volatile and presently there is no consensus among forecasters on the price or
range of future prices of natural gas. Even with the approved RCA and RDA, if gas prices continue
at present levels or increase, the economics of operating the Facility may be adversely affected.
Consumers ability/obligation to pay PPA charges may be affected by an MPSC order denying
Consumers recovery from ratepayers. This issue is likely to be addressed in the timeframe of 2007
or beyond. 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. Michigan Electric Industry Restructuring.The MPSC issued orders in 1997 and 1998 (collectively the
Restructuring Orders). The Restructuring Orders provide for a transition to a competitive regime
whereby electric retail customers would be able to choose their power supplier and pay negotiated
or market-based rates for such power supply. The Restructuring Orders also mandated that utilities
wheel third-party power to the utilities customers. An issue involved in restructuring, which
could significantly impact MCV, is stranded cost recovery. The Restructuring Orders allow recovery
by utilities (including Consumers) of net stranded costs, which include capacity charges from QFs,
including MCV, previously approved by the MPSC, incurred during the regulated era that will be
above market prices during the new competitive regime. However, it appears that stranded cost
recovery of above-market capacity charges in power purchase contracts (including MCVs PPA) is
limited to
customers who chose an alternative power supplier and are only paid for the period 1998 through
2007 (MCVs PPA expires in 2025). Customers who chose to remain power supply customers of
Consumers will continue to pay capacity charges as part of rates charged by Consumers, subject to
MPSC rate regulation. The Restructuring Orders do not otherwise specifically address the recovery
of PPA capacity charges after 2007. MCV, as well as others, filed appeals in state and federal
courts challenging the Restructuring Orders. The Michigan Court of Appeals found that the
Restructuring Orders do not unequivocally disallow recovery of PPA charges (capacity and energy) -27-




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by Consumers and, therefore, MCVs issues were not ripe for appellate review and no actual controversy
regarding recovery of costs could occur until 2008, at the earliest. This order is now final. In June 2000, the State of Michigan enacted legislation which, among other things, states that the
Restructuring Orders (being voluntarily implemented by Consumers) are in compliance with the
legislation and enforceable by the MPSC. The legislation provides that the rights of parties to
existing contracts between utilities (like Consumers) and QFs (like MCV), including the rights to
have the PPA charges recovered from customers of the utilities, are not abrogated or diminished,
and permits utilities to securitize certain stranded (transition) costs including PPA charges. In MCVs federal court challenge to the Restructuring Orders, the U.S. District Court granted
summary judgment to MCV declaring, among other things, that the Restructuring Orders are preempted
by federal law to the extent they prohibit Consumers from recovering from its customers any charge
for avoided costs (or stranded costs) to be paid to MCV under PURPA pursuant to the PPA. In
June 2001, the United States Court of Appeals (Appellate Court) vacated the U.S. District Courts
summary judgment and ordered the case dismissed based upon a finding that no actual case or
controversy existed for adjudication between the parties. The Appellate Court determined that the
parties dispute is hypothetical at this time and the QFs (including MCV) claims are premised on
speculation about how an order might be interpreted in the year 2007 or beyond by the MPSC. Federal Electric Industry Restructuring. FERC has jurisdiction over wholesale energy sales and is
moving towards market based pricing of electricity as opposed to traditional cost-based pricing.
FERC also has jurisdiction over the interstate transmission of electricity, including rates. In
December 1999, FERC issued a final rule, Order No. 2000, designed to encourage all owners and
operators of interstate electric transmission lines to join regional transmission organizations.
In addition, federal energy legislation is proposed from time to time with various provisions which
could impact MCV. FERC decisions and/or federal legislation could impact MCV in selling and
transmitting electricity in the wholesale market. MCV management cannot predict the impact that
either FERC decisions or federal legislation may have on MCVs business, if any, at this time. Maintaining QF Status.In the case of a topping-cycle generating plant such as the Facility, to
maintain QF Status the applicable operating standard requires that the portion of total energy
output that is put to some useful purpose other than facilitating the production of power (the
Thermal Percentage) be at least 5%. In addition, the plant must achieve and maintain an average
PURPA efficiency standard (the sum of the useful power output plus one-half of the useful thermal
energy output, divided by the energy input (the Efficiency Percentage)) of at least 45%.
However, if the plant maintains a Thermal Percentage of 15% or higher, the required Efficiency
Percentage is reduced to 42.5%. The tests are applied on a calendar year basis. The Facility has
achieved the applicable Efficiency Percentage of 42.5% in each year since commercial operation, and
in the years 1995 through 2004 the Facility achieved an Efficiency Percentage in excess of 45%. MCV believes that the Facility will be able to maintain QF status and be capable of achieving a 45%
PURPA Efficiency Percentage on a long term basis. In addition, MCV believes annual steam sales
will be sufficient to allow the Facility to exceed the 15% Thermal Percentage. However, no
assurance can be given that factors outside MCVs control will not cause the Facility to fail to
satisfy the annual PURPA qualification requirements and thus lose its QF status. During 2004, the
Facility achieved an Efficiency Percentage of 47.6% and a Thermal Percentage of 15.6%. The loss of QF status could, among other things, cause MCV to lose its right under PURPA to sell
power from the Facility to Consumers at Consumers avoided cost and subject MCV to additional
federal and state regulatory requirements, including the Federal Power Act, as amended (under which
FERC has authority to establish rates for
electricity, which may be different than existing contractual rates). If MCV were to lose QF
status for the Facility, the Partners of MCV, the Owner Participants, the Owner Trustees and their
respective parent companies could become subject to regulation under the Public Utility Holding
Company Act of 1935 (under which, among other things, the Securities and Exchange Commission has
authority to order divestiture of assets under certain circumstances). The loss of QF status would
not, however, entitle Consumers to terminate the PPA. Under the PPA, Consumers is obligated to
continue purchasing power from MCV at FERC-approved rates (provided that the FERC-approved rates do
not exceed the existing contractual rates) and MCV, not Consumers, is entitled to terminate the PPA
(which MCV has covenanted not to do under the Participation Agreements). There can be no -28-




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assurance
that FERC-approved rates would be the same as the rates currently in effect under the PPA. If the
FERC-approved rates are materially less than the rates under the PPA, MCV may not have sufficient
revenue to make financing obligation payments under the Overall Lease Transaction. The loss of QF
status would constitute an Event of Default under the Lease (and a corresponding Event of Default
under the Indenture) unless, among other requirements, FERC approves (or accepts for filing) rates
under the PPA or other contracts of MCV for the sale of electricity sufficient to meet certain
target coverage ratios (as defined in Item 1, Section H, Overall Lease Transaction.) Critical Accounting Policies In preparing MCVs financial statements in accordance with accounting principles generally accepted
in the United States, management must make a number of estimates and assumptions related to the
reporting of assets, liabilities, revenues and expenses. The following areas represent those that
management believes are particularly important to the financial statements and that require the use
of significant estimates and assumptions. Electric Industry Restructuring.As stated in Item 7, MD&A  Outlook, at both the state and
federal level, efforts continue to restructure the electric industry. To date, restructuring has
not negatively impacted MCV, but if restructuring results in denying Consumers recovery of
above-market PPA costs, MCVs cash flows may be negatively impacted, especially in the period after
2007. Over 90% of MCVs revenues come from sales pursuant to the PPA. MCV continues to monitor
and participate in these matters as appropriate, and to evaluate potential impacts on both cash
flows and recoverability of the carrying value of property, plant and equipment. Any future
adjustment to property, plant and equipment, if required, would result in a one-time negative
earnings impact. At this time, MCV management cannot predict the outcome of these matters or the
magnitude of any possible adjustment. Natural Gas Contracts.Effective January 1, 2001, MCV adopted SFAS No. 133, which establishes
accounting and reporting standards requiring that every derivative instrument be recorded on the
balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires
that changes in the derivatives fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges in some cases allows a
derivatives gains and losses to offset related results on the hedged item in the income statement
or permits recognition of the hedge results in other comprehensive income, and requires that a
company formally document, designate, and assess the effectiveness of transactions that receive
hedge accounting. MCV management believes that its long term natural gas contracts, which do not contain volume
optionality or are not designated to satisfy the RCA and RDA requirements, qualify under SFAS No.
133 for the normal purchases and normal sales exception. Therefore, these contracts are currently
not recognized at fair value on the balance sheet. The FASB issued Derivative Implementation Group (DIG) Issue C-16, which became effective April 1,
2002, regarding natural gas commodity contracts that combine an option component and a forward
component. This guidance requires either that the entire contract be accounted for as a derivative
or the components of the contract be separated into two discrete contracts. Under the first
alternative, the entire contract considered together would not qualify for the normal purchases and
sales exception under the revised guidance. Under the second alternative, the newly established
forward contract could qualify for the normal purchases and sales exception, while the option
contract would be treated as a derivative under SFAS No. 133 with changes in fair value recorded
through
earnings. At April 1, 2002, MCV had nine long term gas contracts that contained both an option and
forward component. As such, they were no longer accounted for under the normal purchases and sales
exception and MCV began mark-to-market accounting of these nine contracts through earnings. As of
January 31, 2005, only four contracts of the original nine contracts, which contained an option and
forward component remain in effect. In addition, as a result of implementing the RCA/RDA, effective
January 27, 2005, MCV has determined that as of the effective date of the RCA/RDA, an additional
nine long term contracts (for a total of 13) will no longer be accounted for under the normal
purchases and sales exception, per SFAS No. 133 and will result in additional mark-to-market
activity in 2005 and beyond. MCV expects future earnings volatility on both the remaining long
term gas contracts that contain volume optionality as well as the long term gas contracts under the
RCA/RDA that will require mark-to-market recognition on a quarterly basis. Based on market prices
for natural gas on January 31, 2005, the long term -29-




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gas contracts discussed above could result in an
estimated $100 million gain recorded to earnings in the first quarter of 2005. This estimated gain
will reverse in subsequent quarters. The expiration date of these additional nine contracts range
from 2007 to 2011. Based on the natural gas prices, at the beginning of April 2002, MCV recorded a $58.1 million gain
for the cumulative effect of this accounting change. Since April 2002, MCV has recorded a
mark-to-market loss of $2.3 million for these gas contracts for a cumulative mark-to-market gain
through December 31, 2004 of $55.8 million, which will reverse over the remaining life of the
outstanding contracts, ranging from 2005 to 2007. Property Tax Appeals. MCV currently accrues property taxes on the basis of the taxable value as
assessed by the taxing authorities. In 1997, MCV filed a property tax appeal against the City of
Midland at the Michigan Tax Tribunal contesting MCVs 1997 property taxes. Subsequently, MCV
filed appeals contesting its property taxes for tax years 1998 through 2004 at the Michigan Tax
Tribunal. A trial was held for tax years 1997  2000. The appeals for tax years 2001-2004 are
being held in abeyance. On January 23, 2004, the Michigan Tax Tribunal issued its decision in
MCVs tax appeal against the City of Midland for tax years 1997 through 2000 and has issued
several orders correcting errors in the initial decision (together the MTT Decision). MCV
management has estimated that the MTT Decision will result in a refund to MCV for the tax years
1997 through 2000 of at least approximately $35.3 million in taxes plus $9.6 million of interest
as of December 31, 2004. The MTT Decision has been appealed to the Michigan Appellate Court by
the City of Midland. MCV has filed a cross-appeal at the Michigan Appellate Court. MCV
management cannot predict the outcome of these legal proceedings. MCV has not recognized any of
the above stated refunds (net of approximately $16.1 million of deferred expenses) in earnings at
this time. See Item 8, Financial Statements and Supplementary Data  Note 1 and Note 8 to the Consolidated
Financial Statements for a further discussion of associated risks and contingencies. 
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risks relating to MCVs operations result primarily from changes in commodity prices and
interest rates. To address these risks, MCV enters into various hedging transactions as described
herein. MCV does not use financial instruments for trading purposes and does not use leveraged
instruments. Fair values included herein have been determined based on quoted market prices. The
information presented below should be read in conjunction with Item 15, Notes to Consolidated
Financial Statements  Note 2, Significant Accounting Policies and Note 6, Long Term Debt. Interest Rate Risk.In 1990, MCV obtained permanent financing for the Facility by entering into
sale and leaseback agreements (Overall Lease Transaction) with a lessor group, related to
substantially all of MCVs fixed assets. In accordance with SFAS No. 98, Accounting For Leases,
the sale and leaseback transaction has been accounted for as a financing arrangement. The
financing arrangement, entered into for a basic term of 25 years, maturing in 2015, has an
effective interest rate of approximately 9.4%, payable in semi-annual installments of principal and
interest. Due to the unique nature of the negotiated financing obligation it is unnecessary to
estimate the fair value of the Owner Participants underlying debt and equity instruments
supporting this financing
obligation, since SFAS No. 107 Disclosure about Fair Value of Financial Instruments does not
require fair value accounting for the lease obligation. To manage the effects of interest rate volatility on interest income while maximizing return on
permitted investments, MCV has established an interest rate hedging program. The carrying amounts
of MCVs short-term investments approximate fair value because of the short term maturity of these
instruments. MCVs short-term investments, which are made up of investment securities held to
maturity and as of December 31, 2004, have original maturity dates of approximately one year or
less. -30-




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For MCVs financing obligations, the table below presents principal cash flows and the related
interest rate by expected maturity dates. The interest rate reflects the fixed effective rate of
interest of the financing arrangement: Expected Maturity InFair2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter
    
    
    Total
    
    
    ValueDebt:Long term Debt Fixed
Rate (in millions)
    
    $
    174.4
    
    
    $
    156.0
    
    
    $
    150.9
    
    
    $
    150.9
    
    
    $
    147.1
    
    
    $
    742.0
    
    
    $
    1,521.3
    
    
    
    N/AAvg. Interest Rate
    
    
    9.4
    %
    
    
    9.4
    %
    
    
    9.4
    %
    
    
    9.4
    %
    
    
    9.4
    %
    
    
    9.4
    %
    
    
    9.4
    %
 Commodity Risk.MCV enters into natural gas futures and option contracts in order to hedge against
unfavorable changes in the market price of natural gas in future months when gas is expected to be
needed. These financial instruments are being utilized principally to secure anticipated natural
gas requirements necessary for projected electric sales and to lock in sales prices of natural gas
previously obtained in order to optimize MCVs existing gas supply, storage and transportation
arrangements. The following table provides information about MCVs futures and option contracts that are
sensitive to changes in natural gas prices; these futures and option contracts have maturity dates
ranging from January 2005 to December 2009. The table presents the carrying amounts and fair values
at December 31, 2004: Expected Maturity in 2005/2009
    
    Fair ValueFutures Contracts:Contract Volumes (10,000 MMBtu) Long/Buy
    
    
    3,796
    
    
    
    Contract Volumes (10,000 MMBtu) Sell/Short
    
    
    27
    
    
    
    Weighted Average Price Long (per MMBtu)
    
    $
    5.060
    
    
    $
    6.126Weighted Average Price Short (per MMBtu)
    
    $
    6.483
    
    
    $
    6.137Contract Amount ($US in Millions)
    
    $
    190.3
    
    
    $
    230.9
 Expected Maturity in 2005/2007
    
    Fair ValueNYMEX Commodity Swap Contracts:Contract Volumes (10,000 MMBtu) Long/Buy
    
    
    3,456.3
    
    
    
    Weighted Average Price Long (per 10,000 MMBtu)
    
    $
    4.566
    
    
    $
    5.231Contract Amount ($US in Millions)
    
    $
    157.8
    
    
    $
    180.8
 Expected Maturity in 2005
    
    Fair ValueCanadian (AECO) Basis Swap Contracts:Contract Volumes (10,000 MMBtu) Long/Buy
    
    
    225
    
    
    
    Weighted Average Price Long (per 10,000 MMBtu)
    
    ($
    0.743
    )
    
    ($
    0.742
    )Contract Amount ($US in Millions)
    
    ($
    1.7
    )
    
    ($
    1.7
    )
 
 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Report of Independent Registered Public Accounting Firm and Financial Statements are set forth
on pages F-2 to F-23 of this Annual Report on Form 10-K and are hereby incorporated by reference
herein. 
 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -31-




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Item 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures MCVs management, including the President and Chief Executive Officer, and the Chief Financial
Officer, Vice President and Controller, after evaluating the effectiveness of MCVs disclosure
controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) or
15d-15(e)) as of the end of the period covered by this report, have concluded that based on the
evaluation of these controls and procedures required by paragraph (b) of Exchange Act Rules 13a-15
or 15d-15, that MCVs disclosure controls and procedures were effective. Managements Report on Internal Control Over Financial Reporting MCVs management is responsible for establishing and maintaining an adequate system of internal
control over financial reporting of MCV. This system is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with accounting principles generally accepted in the United States
of America. MCVs internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of MCV; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of MCV are being
made only in accordance with authorizations of management and the Management Committee of MCV; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of MCVs assets that could have a material effect on the financial
statements. Because of its inherent limitations, a system of internal control over financial reporting can
provide only reasonable assurance and may not prevent or detect misstatements. Further, because of
changes in conditions, effectiveness of internal controls over financial reporting may vary over
time. Our system contains self-monitoring mechanisms, and actions are taken to correct
deficiencies as they are identified. MCV management conducted an evaluation of the effectiveness of the system of internal control over
financial reporting based on the framework in Internal Control  Integrated Frameworkissued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation,
management concluded that MCVs system of internal control over financial reporting was effective
as of December 31, 2004. MCV managements assessment of the effectiveness of MCVs internal
control over financial reporting has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their report which is included herein. Changes in Internal Control Over Financial Reporting There were no changes in MCVs internal control over financial reporting identified in connection
with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred
during our last fiscal
quarter that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting. 
 Item 9B. OTHER INFORMATION MCV has no additional information required to be disclosed in a report on Form 8-K, which occurred
during the fourth quarter of the year covered by this Form 10-K, but not reported. -32-




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PART III 
 Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below is information with respect to those individuals who serve as executive officers of
MCV as well as those individuals who serve as members of its Management Committee, with their ages
in parenthesis. The executive officers of MCV are each appointed by the Management Committee and
serve until his or her successor is duly chosen or until his or her death, ineligibility to serve,
resignation or removal by the Management Committee. Members of the Management Committee are each
appointed by a General Partner and serve until his or her successor is appointed by the appropriate
General Partner. Members of the Management Committee receive no compensation from MCV for serving
on the Management Committee. For a discussion of the relationships between members of the
Management Committee, Executive Officers and the Partners, the ownership interests of each of the
general and limited partners of MCV, and the voting percentages of each of the members of the
Management Committee, see Item 12, Security Ownership of Certain Beneficial Owners and Management
and Item 13, Certain Relationships and Related Transactions. Management Committee David W. Joos
    
    
    (51
    )
    
    Management Committee ChairmanStephen R. McKemy
    
    
    (51
    )
    
    Management Committee MemberJohn J. ORourke
    
    
    (50
    )
    
    Management Committee Chairman (term ended in November 2004)
 Executive Officers James M. Kevra
    
    
    (56
    )
    
    President and Chief Executive OfficerBruce C. Grant
    
    
    (58
    )
    
    Vice President of Human Resources, Communications and Public AffairsGary B. Pasek
    
    
    (49
    )
    
    Vice President, General Counsel and SecretaryJames M. Rajewski
    
    
    (57
    )
    
    Chief Financial Officer, Vice President and ControllerLaurie M. Valasek
    
    
    (37
    )
    
    TreasurerBarbara E. Lawson
    
    
    (46
    )
    
    Treasurer and Manager of Internal Audit (resigned in October 2004)James A. Mooney
    
    
    (65
    )
    
    Vice President of Engineering, Operations and
Construction (resigned in October 2004)LeRoy W. Smith
    
    
    (63
    )
    
    Vice President of Energy Supply and Marketing (resigned in October 2004)
 David W. Joos has served as a member of the Management Committee since June 2002 and is currently
serving as the Chairman. Mr. Joos is President, Chief Executive Officer of CMS Energy Corporation,
a position he was elected to in October 2004. He is also a member of the Board of Directors of CMS
Energy Corporation, a position he was elected to in September 2001. Previously he has served as
President, Chief Operating Officer of CMS
Energy since September 2001 and Executive Vice President and Chief Operating Officer  Electric of
CMS Energy since December 2000 and President and Chief Executive Officer  Electric of Consumers
Energy since 1997. -33-




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Stephen R. McKemy has served as a member of the Management Committee since November 2004. Mr.
McKemy is currently a director within El Pasos non-regulated group, responsible for managing
various businesses, and has held that position since March 2004. Prior to serving in his current
position, Mr. McKemy has held several other senior management positions in the financial and
transportation areas of El Paso and ANR Freight Systems since July of 1978. John J. ORourke had served as a member of the Management Committee since March 2001 and was
elected as Chairman of the Management Committee in June 2002 and had served in such capacity until
November 2004. His employment with El Paso was terminated in December 2004. Mr. ORourke has
served as Vice President and Managing Director for El Paso Merchant Energy North America Company
since May 2000. James M. Kevra has served as President and Chief Executive Officer of MCV since July 1995. Bruce C. Grant has served as Vice President of Human Resources, Communications and Public Affairs
of MCV since February 1998. From May 1988 to February 1998 he served as the Director of Human
Resources and Communications of MCV. Gary B. Pasek has served as General Counsel and Secretary of MCV since May 1995 and was elected
Vice President in February 1998. James M. Rajewski was appointed by the Management Committee in May 2002 to the position of Chief
Financial Officer, Vice President and Controller of MCV. He had served as Vice President and
Controller of MCV since January 1988. Laurie M. Valasek was appointed by the Management Committee in September 2004 to the position of
Treasurer. Ms. Valasek has held various positions within MCVs Energy Supply and Marketing
department since 1997. Barbara E. Lawson resigned in October 2004 under the Voluntary Severance Program. She previously
served as Treasurer and Manager of Internal Audit of MCV since May 2002. James A. Mooney resigned in October 2004 under the Voluntary Severance Program. He previously
served as Vice President of Engineering, Operations and Construction of MCV since October 1987. LeRoy W. Smith resigned in October 2004 under the Voluntary Severance Program. He previously
served as Vice President of Energy Supply and Marketing of MCV since October 1998. From July 1988
to September 1998, he served as Vice President of Gas Supply of MCV. Audit Subcommittee Financial Expert MCVs Management Committee has established an audit subcommittee for the purpose of overseeing the
accounting and financial reporting processes of the MCV and audits of the financial statements of
the MCV. The audit subcommittees members consist solely of representatives from each of MCVs
three Partners. MCV believes that the experience, education and ethics of the subcommittee members
qualify them to oversee the accounting and financial reporting process and audits of the financial
statements of MCV. The MCVs Management Committee has determined Ronald C. Edmonds of The Dow
Chemical Company (a limited partner of the MCV Partnership), a member of the audit subcommittee, to
be the audit subcommittee financial expert, based upon his education and work experience. Mr.
Edmonds is currently the Global Accounting Director of The Dow Chemical Company and has held this
position since 2001. Prior to serving as Global Accounting Director, he has held various other
positions with Dow, serving as leader of the Global Procurement Service Center, Global Payables
Manager, Controller for Payables Accounting and Latin American Audit Manager. Mr. Edmonds is a
Certified Public Accountant (CPA) and a member of the American Institute of CPAs, Michigan
Association of CPAs and the
Financial Executives International. Because the MCV does not have a class of securities listed on
any national securities exchange or in an automated inter-dealer quotation system, the Securities
and Exchange Commissions (SEC) independence requirements for audit subcommittee members do not
apply to the MCV. The SEC rules do -34-




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require that the MCV disclose whether its audit subcommittee
financial expert is independent, using a definition for audit subcommittee member independence of a
national securities exchange or a national securities association that has been approved by the
SEC. Using the definition for audit subcommittee member independence set forth in the New York
Stock Exchanges Listed Company Manual, Mr. Edmonds is not independent because of his status as an
accounting officer of Dow, which has a material relationship with MCV. Code of Ethics MCV has adopted a Code of Conduct and Ethics (Code), in compliance with applicable rules of the
SEC requirements, that applies to its principal executive officer, principal financial officer,
principal accounting officer or controller, and persons performing similar functions. This Code
also extends to others within MCV that have an active role in the development of MCVs financial
data. A copy of the Code is available, without charge, upon written request to: Midland Cogeneration Venture Limited PartnershipAttn: Chief Financial Officer100 Progress PlaceMidland, MI 48640
 -35-




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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, 2004, 2003 and 2002. Summary Compensation Table Annual CompensationName and
    
    
    
    
    
    
    
    
    
    Other Annual
    
    
    All OtherPrincipal Position
    
    Year
    
    Salary ($)
    
    Bonus ($)(a)
    
    
    Compensation ($)
    
    
    Compensation ($)James M. Kevra
    
    2004
    
    300,525
    
    
    25,000
    
    
    
    57,599
    (b)
    
    
    President and
    
    2003
    
    279,766
    
    
    171,692
    
    
    
    54,484
    
    
    
    Chief Executive Officer
    
    2002
    
    277,480
    
    
    215,984
    
    
    
    54,297
    
    
    
    Gary B. Pasek
    
    2004
    
    205,266
    
    
    91,309
    
    
    
    30,679
    (e)
    
    
    Vice President
    
    2003
    
    183,239
    
    
    135,665
    
    
    
    27,377
    
    
    
    General Counsel & Secretary
    
    2002
    
    177,621
    
    
    102,201
    
    
    
    26,609
    
    
    
    James M. Rajewski
    
    2004
    
    169,136
    
    
    81,195
    
    
    
    25,213
    (f)
    
    
    Chief Financial Officer,
    
    2003
    
    152,600
    
    
    67,556
    
    
    
    22,738
    
    
    
    Vice President and Controller
    
    2002
    
    144,024
    
    
    82,874
    
    
    
    21,531
    
    
    
    Bruce C. Grant
    
    2004
    
    120,260
    
    
    34,173
    
    
    
    17,918
    (g)
    
    
    Vice President Human
Resources, Communications
and Public AffairsJames A. Mooney
    
    2004
    
    171,339
    
    
    73,168
    
    
    
    37,380
    (c)
    
    
    266,977
    (h)Vice President of
    
    2003
    
    209,406
    
    
    90,979
    
    
    
    43,088
    
    
    
    Engineering, Operations
    
    2002
    
    203,204
    
    
    81,906
    
    
    
    42,214
    
    
    
    and Construction
(Resigned 10/1/04)LeRoy W. Smith
    
    2004
    
    150,484
    
    
    62,056
    
    
    
    24,971
    (d)
    
    
    228,964
    (h)Vice President of Energy
    
    2003
    
    184,866
    
    
    80,761
    
    
    
    29,985
    
    
    
    Supply and Marketing
    
    2002
    
    178,400
    
    
    100,505
    
    
    
    29,217
    
    
    
    (Resigned 10/1/04)
   (a)
    
    The amounts represent bonuses accrued.(b)
    
    Includes company contributions of $10,250 to the 401(k) Savings Plan, $17,750 to the Defined
Contribution Retirement Plan and $29,599 to the Supplemental Retirement Plan.(c)
    
    Includes company contributions of $8,489 to the 401(k) Savings Plan, $16,559 to the Defined
Contribution Retirement Plan and $12,332 to the Supplemental Retirement Plan.(d)
    
    Includes company contributions of $7,454 to the 401(k) Savings Plan, $14,542 to the Defined
Contribution Retirement Plan and $2,975 to the Supplemental Retirement Plan.(e)
    
    Includes company contributions of $10,226 to the 401(k) Savings Plan, $17,774 to the Defined
Contribution Retirement Plan and $2,679 to the Supplemental Retirement Plan.(f)
    
    Includes company contributions of $8,404 to the 401(k) Savings Plan and $16,809 to the
Defined Contribution Retirement Plan. -36-




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(g)
    
    Includes company contributions of $5,973 to the 401(k) Savings Plan and $11,945 to the
Defined Contribution Retirement Plan.(h)
    
    Includes severance payment, retirement funding on severance and vacation payout resulting
from the Voluntary Severance Program. Long-Term Performance Award Pursuant to a resolution of MCVs Organization and Compensation Subcommittee issued in June 2004,
MCV is to provide additional compensation in the amount of $400,000 to Mr. Pasek for his
performance associated with MCVs property tax trial. The payment is contingent on satisfactory
resolution of the matter by court order or settlement. MCV has recognized this contingent
obligation in Non-current liabilities  other. Organization and Compensation Subcommittee, Interlocks and Insider Participation The members of the Management Committee also serve as members of MCVs Organization and
Compensation Subcommittee (O&CS). Members of the O&CS 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
O&CS was or is an officer or employee of MCV. Members of the O&CS receive no compensation from
MCV. Mr. Joos commenced in June 2002 as a member of MCVs O&CS and is currently serving as the Chairman.
He also serves as President, Chief Executive Officer and a member of the Board of Directors of CMS
Energy Corporation. CMS Energy and its affiliates have the following direct and indirect interests
in MCV and the Facility. CMS Midland Holdings Company has an ownership interest in one of the
Owner Trusts, representing indirectly a 35% equity interest in the Facility; CMS Midland Inc. has a
49% general partnership interest in MCV; and Consumers has contractual obligations under the PPA to
purchase electric capacity and related energy from MCV, has contractual obligations under various
backup agreements among MCV, Consumers and Dow to assure a continuous supply of steam and
electricity to Dow in the event the SEPA is terminated, has contractual obligations to enter into
transmission service agreements with other utilities for MCVs benefit, and has leased undivided
interests in the Site to the Owner Trustees (as MCVs assignees) pursuant to the Ground Lease. In
2004, Consumers purchased electric capacity and related energy from the Facility that aggregated
approximately $601.5 million. In addition, CMS Energy affiliates have engaged in numerous
transactions in the ordinary course of business to provide services or products to MCV. In 2004,
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 $12.5 million. This level of transactions decreased
substantially from the prior years levels as a result of the sale of certain of its transportation
services and due to the sale of certain natural gas contracts. Mr. McKemy has served as a member of MCVs O&CS since November 2004, replacing Mr. ORourke. Mr.
McKemy is also a director within El Pasos non-regulated group, responsible for managing various
businesses. El Paso Midland, Inc. and affiliates of El Paso have engaged in numerous transactions
in the ordinary course of business to provide services or products to MCV. In 2004, El Paso
affiliates engaged in transactions with MCV, which included the sale of natural gas, sale of
natural gas transportation and various natural gas marketing services that amounted in aggregate to
approximately $82.6 million. In December 2002, MCV and an El Paso affiliate entered into a master
netting agreement, covering the natural gas purchase agreements, in which collateral in the form of
cash or a letter or credit can be required of either party based on such partys credit ratings and
on the mark-to-market values of the natural gas purchase agreements. As of December 31, 2004, El
Paso had provided to MCV letters of credit under the master netting agreement in the amount of
$184.0 million. For further detailed discussions of MCVs contracts and leases with Partners, see Item 1, Section
D, Contracts, Item 2, Properties and Item 8, Financial Statements and Supplementary Data 
Note 7 to the Consolidated Financial Statements. -37-




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Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following information is given with respect to the Partners of MCV, its Management Committee
members and all Management Committee members and officers as a group. Security Ownership of Certain Beneficial Owners Amount and Nature of Beneficial OwnershipApproximate Percent of
    
    
    Approximate Percent ofName and Address of Beneficial Owner
    
    Title of Class
    
    
    Voting Rights (a)
    
    
    Partnership InterestEl Paso CorporationEl Paso Building1001 Louisiana StreetHouston, TX 77002Source 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 Company212 West Michigan AvenueJackson, MI 49201CMS Midland, Inc.
    
    General Partnership Interest
    
    
    49.0
    %
    
    
    49.0
    %The Dow Chemical Company2030 Dow CenterMidland, MI 48674
    
    Limited Partnership Interest
    
    
    
    
    
    
    7.5
    %Alanna Corporationc/o MCV Limited Partnership100 Progress PlaceMidland, MI 48640
    
    Limited Partnership Interest
    
    
    
    
    
    
    0.00001
    %100.0
    %
    
    
    100.0
    %
   (a)
    Each partner has sole voting and investment power with respect to its general partnership
interest. Limited partners have no voting rights, except to certain specified acts of the
Management Committee. MCV is a limited partnership wholly owned by its Partners. Beneficial
interests in the partnership are not available to any persons other than the Partners.
Accordingly, none of the members of the Management Committee and none of the executive
officers of MCV has any beneficial ownership in MCV. 
 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS See Item 11, Executive Compensation  Organization and Compensation Subcommittee, Interlocks and
Insider Participation. -38-




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Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES Fees The aggregate of all fees billed to MCV by its independent auditor, PricewaterhouseCoopers, LLP
(PwC), were $341,000 during fiscal year 2004 and $191,000 during fiscal year 2003. All fees billed
to MCV for both periods were for audit fees. These audit fees were for professional services
rendered by the principal accountant for the audit of MCVs annual financial statements and review
of financials statements included in MCVs Form 10-Q, as well as services that are normally
provided in connection with statutory and regulatory filings or engagements. During fiscal year
2004 and 2003, MCV was not billed by PwC for any fees for services considered audit-related fees,
tax services for tax compliance, tax advice or tax planning or any other fees, other than those
described above. Audit Subcommittee Pre-Approval Policies and Procedures All services provided by MCVs independent auditors, PwC, are subject to pre-approval by MCVs
audit subcommittee. The audit subcommittee charter does provide the delegation of pre-approval for
some minor services to MCVs management in the event that there is a need for such approval prior
to the next full audit subcommittee meeting. However, a full report of any such interim approvals
must be given at the next audit subcommittee meeting. -39-




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##### Table of Contents



PART IV 
 Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following documents are filed as part of this report:  1.
    Financial statements.The following consolidated financial statements are as of
December 31, 2004 and 2003 or for each of the three years ended
December 31, 2004, 2003 and 2002: PageIndex to Consolidated Financial Statements
    
    F-1Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets
    
    F-4Consolidated Statements of Operations
    
    F-5Consolidated Statements of
Partners Equity
    
    F-6Consolidated Statements of Cash Flows
    
    F-7Notes to Consolidated Financial Statements
    
    F-8
  2.
    All schedules are omitted because they are inapplicable, not required or the
information is included in the financial statements or notes thereto.3.
    The Exhibits that are filed or incorporated by reference as part of this report are
listed in the Exhibit Index filed herewith. -40-




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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Referencein Annual Reporton Form 10-KReport of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of December 31, 2004 and 2003
    
    F-4Consolidated Statements of Operations for the Years Ended December 31, 2004, 2003, and 2002
    
    F-5Consolidated Statements of Partners Equity for the Years Ended December 31, 2004, 2003, and 2002
    
    F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003, and 2002
    
    F-7Notes to Consolidated Financial Statements
    
    F-8
 F-1




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PRICEWATERHOUSECOOPERS LLP 
 Report of Independent Registered Public Accounting Firm To the Partners and the Management Committee of
Midland Cogeneration Venture Limited Partnership: We have completed an integrated audit of Midland Cogeneration Venture Limited Partnership 2004
consolidated financial statements and of its internal control over financial reporting as of
December 31, 2004 and audits of its December 31, 2003 and December 31, 2002 financial statements in
accordance with the standards of the Public Company Accounting Oversight Board (United States).
Our opinions, based on our audits, are presented below. Consolidated financial statements In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of operations, partners equity and cash flows present fairly, in all material respects,
the financial position of the Midland Cogeneration Limited Partnership (a Michigan limited
partnership) and its subsidiaries (MCV) at December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the three years in the period ended December 31, 2004
in conformity with accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the MCVs management. Our responsibility is to
express an opinion on these financial statements based on our audits. We conducted our audits of
these statements in accordance with the standards of the Public Company Accounting Oversight Board
(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 of
financial statements includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. As explained in Note 2 to the financial statements, effective April 1, 2002, Midland Cogeneration
Venture Limited Partnership changed its method of accounting for derivative and hedging activities
in accordance with Derivative Implementation Group (DIG) Issue C-16. Internal control over financial reporting Also, in our opinion, managements assessment, included in the accompanying Managements Report
on Internal Control Over Financial Reporting appearing under Item 9(a), that the MCV maintained
effective internal control over financial reporting as of December 31, 2004 based on criteria
established in Internal Control - Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects,
based on those criteria. Furthermore, in our opinion, the MCV maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2004, based on
criteria established in Internal Control - Integrated Frameworkissued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The MCVs management is responsible
for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express
opinions on managements assessment and on the effectiveness of the MCVs internal control over
financial reporting based on our audit. We conducted our audit of internal control over
financial reporting in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. An audit of internal control over financial reporting
includes obtaining an understanding of internal control over financial reporting, evaluating
managements assessment, testing and evaluating the design and operating effectiveness of F-2




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internal control, and performing such other procedures as we consider necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinions. A companys internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A
companys internal control over financial reporting includes those policies and procedures that (i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the companys assets that could have a material effect on the
financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate. /s/ PricewaterhouseCoopers LLP  Detroit, Michigan
February 25, 2005 F-3




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP 
   2004
    
    
    2003ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    125,781
    
    
    $
    173,651Accounts and notes receivable  related parties
    
    
    54,368
    
    
    
    43,805Accounts receivable
    
    
    42,984
    
    
    
    38,333Gas inventory
    
    
    17,509
    
    
    
    20,298Unamortized property taxes
    
    
    18,060
    
    
    
    17,672Derivative assets
    
    
    94,977
    
    
    
    86,825Broker margin accounts, and prepaid gas costs and expenses
    
    
    13,147
    
    
    
    8,101Total current assets
    
    
    366,826
    
    
    
    388,685PROPERTY, PLANT AND EQUIPMENT:Property, plant and equipment
    
    
    2,466,944
    
    
    
    2,463,931Pipeline
    
    
    21,432
    
    
    
    21,432Total property, plant and equipment
    
    
    2,488,376
    
    
    
    2,485,363Accumulated depreciation
    
    
    (1,062,821
    )
    
    
    (991,556
    )Net property, plant and equipment
    
    
    1,425,555
    
    
    
    1,493,807OTHER ASSETS:Restricted investment securities held-to-maturity
    
    
    139,410
    
    
    
    139,755Derivative assets non-current
    
    
    24,337
    
    
    
    18,100Deferred financing costs, net of accumulated amortization
of $18,498 and $17,285, respectively
    
    
    6,467
    
    
    
    7,680Prepaid gas costs, spare parts deposit, materials and supplies
    
    
    17,782
    
    
    
    21,623Total other assets
    
    
    187,996
    
    
    
    187,158TOTAL ASSETS
    
    $
    1,980,377
    
    
    $
    2,069,650LIABILITIES AND PARTNERS EQUITYCURRENT LIABILITIES:Accounts payable and accrued liabilities
    
    $
    82,693
    
    
    $
    57,368Gas supplier funds on deposit
    
    
    19,613
    
    
    
    4,517Interest payable
    
    
    47,738
    
    
    
    53,009Current portion of long-term debt
    
    
    76,548
    
    
    
    134,576Total current liabilities
    
    
    226,592
    
    
    
    249,470NON-CURRENT LIABILITIES:Long-term debt
    
    
    942,097
    
    
    
    1,018,645Other
    
    
    1,712
    
    
    
    2,459Total non-current liabilities
    
    
    943,809
    
    
    
    1,021,104COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)TOTAL LIABILITIES
    
    
    1,170,401
    
    
    
    1,270,574PARTNERS EQUITY
    
    
    809,976
    
    
    
    799,076TOTAL LIABILITIES AND PARTNERS EQUITY
    
    $
    1,980,377
    
    
    $
    2,069,650
 The accompanying notes are an integral part of these statements. F-4




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP 
   2004
    
    
    2003
    
    
    2002OPERATING REVENUES:Capacity
    
    $
    405,415
    
    
    $
    404,681
    
    
    $
    404,713Electric
    
    
    225,154
    
    
    
    162,093
    
    
    
    177,569Steam
    
    
    19,090
    
    
    
    17,638
    
    
    
    14,537Total operating revenues
    
    
    649,659
    
    
    
    584,412
    
    
    
    596,819OPERATING EXPENSES:Fuel costs
    
    
    413,061
    
    
    
    254,988
    
    
    
    255,142Depreciation
    
    
    88,712
    
    
    
    89,437
    
    
    
    88,963Operations
    
    
    18,769
    
    
    
    16,943
    
    
    
    16,642Maintenance
    
    
    13,508
    
    
    
    15,107
    
    
    
    12,666Property and single business taxes
    
    
    28,834
    
    
    
    30,040
    
    
    
    27,087Administrative, selling and general
    
    
    11,236
    
    
    
    9,959
    
    
    
    8,195Total operating expenses
    
    
    574,120
    
    
    
    416,474
    
    
    
    408,695OPERATING INCOME
    
    
    75,539
    
    
    
    167,938
    
    
    
    188,124OTHER INCOME (EXPENSE):Interest and other income
    
    
    5,460
    
    
    
    5,100
    
    
    
    5,555Interest expense
    
    
    (104,618
    )
    
    
    (113,247
    )
    
    
    (119,783
    )Total other income (expense), net
    
    
    (99,158
    )
    
    
    (108,147
    )
    
    
    (114,228
    )NET INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE
    
    
    (23,619
    )
    
    
    59,791
    
    
    
    73,896Cumulative effect of change in method of
accounting for derivative option contracts
(to April 1, 2002) (Note 2)
    
    
    
    
    
    
    
    
    
    
    58,131NET INCOME (LOSS)
    
    $
    (23,619
    )
    
    $
    59,791
    
    
    $
    132,027
 The accompanying notes are an integral part of these statements. F-5




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP 
   General
    
    
    LimitedPartners
    
    
    Partners
    
    
    TotalBALANCE, DECEMBER 31, 2001
    
    $
    468,972
    
    
    $
    82,740
    
    
    $
    551,712Comprehensive IncomeNet Income
    
    
    114,947
    
    
    
    17,080
    
    
    
    132,027Other Comprehensive IncomeUnrealized gain on hedging activitiessince beginning of period
    
    
    33,311
    
    
    
    4,950
    
    
    
    38,261Reclassification adjustments recognizedin net income above
    
    
    10,717
    
    
    
    1,593
    
    
    
    12,310Total other comprehensive income
    
    
    44,028
    
    
    
    6,543
    
    
    
    50,571Total Comprehensive Income
    
    
    158,975
    
    
    
    23,623
    
    
    
    182,598BALANCE, DECEMBER 31, 2002
    
    $
    627,947
    
    
    $
    106,363
    
    
    $
    734,310Comprehensive IncomeNet Income
    
    
    52,056
    
    
    
    7,735
    
    
    
    59,791Other Comprehensive IncomeUnrealized gain on hedging activitiessince beginning of period
    
    
    34,484
    
    
    
    5,125
    
    
    
    39,609Reclassification adjustments recognizedin net income above
    
    
    (30,153
    )
    
    
    (4,481
    )
    
    
    (34,634
    )Total other comprehensive income
    
    
    4,331
    
    
    
    644
    
    
    
    4,975Total Comprehensive Income
    
    
    56,387
    
    
    
    8,379
    
    
    
    64,766BALANCE, DECEMBER 31, 2003
    
    $
    684,334
    
    
    $
    114,742
    
    
    $
    799,076Comprehensive IncomeNet Loss
    
    
    (20,563
    )
    
    
    (3,056
    )
    
    
    (23,619
    )Other Comprehensive IncomeUnrealized gain on hedging activitiessince beginning of period
    
    
    62,292
    
    
    
    9,256
    
    
    
    71,548Reclassification adjustments recognizedin net income above
    
    
    (32,239
    )
    
    
    (4,790
    )
    
    
    (37,029
    )Total other comprehensive income
    
    
    30,053
    
    
    
    4,466
    
    
    
    34,519Total Comprehensive Income
    
    
    9,490
    
    
    
    1,410
    
    
    
    10,900BALANCE, DECEMBER 31, 2004
    
    $
    693,824
    
    
    $
    116,152
    
    
    $
    809,976
 The accompanying notes are an integral part of these statements. F-6




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP 
   2004
    
    
    2003
    
    
    2002CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (23,619
    )
    
    $
    59,791
    
    
    $
    132,027Adjustments to reconcile net income to net cash provided by
operating activitiesDepreciation and amortization
    
    
    89,925
    
    
    
    90,792
    
    
    
    90,430Cumulative effect of change in accounting principle
    
    
    
    
    
    
    
    
    
    
    (58,131
    )(Increase) decrease in accounts receivable
    
    
    (15,214
    )
    
    
    (1,211
    )
    
    
    48,343(Increase) decrease in gas inventory
    
    
    2,789
    
    
    
    (732
    )
    
    
    133(Increase) decrease in unamortized property taxes
    
    
    (388
    )
    
    
    683
    
    
    
    (1,730
    )(Increase) decrease in broker margin accounts and prepaid expenses
    
    
    (5,046
    )
    
    
    (4,778
    )
    
    
    31,049(Increase) decrease in derivative assets
    
    
    20,130
    
    
    
    4,906
    
    
    
    (20,444
    )(Increase) decrease in prepaid gas costs, materials and supplies
    
    
    3,841
    
    
    
    (8,704
    )
    
    
    1,376Increase (decrease) in accounts payable and accrued liabilities
    
    
    25,775
    
    
    
    (712
    )
    
    
    8,774Increase in gas supplier funds on deposit
    
    
    15,096
    
    
    
    4,517
    
    
    
    Decrease in interest payable
    
    
    (5,271
    )
    
    
    (3,377
    )
    
    
    (3,948
    )Increase (decrease) in other non-current liabilities
    
    
    (1,197
    )
    
    
    311
    
    
    
    (24
    )Net cash provided by operating activities
    
    
    106,821
    
    
    
    141,486
    
    
    
    227,855CASH FLOWS FROM INVESTING ACTIVITIES:Plant modifications and purchases of plant equipment
    
    
    (20,460
    )
    
    
    (33,278
    )
    
    
    (29,529
    )Maturity of restricted investment securities held-to-maturity
    
    
    674,553
    
    
    
    601,225
    
    
    
    377,192Purchase of restricted investment securities held-to-maturity
    
    
    (674,208
    )
    
    
    (602,279
    )
    
    
    (374,426
    )Net cash used in investing activities
    
    
    (20,115
    )
    
    
    (34,332
    )
    
    
    (26,763
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repayment of financing obligation
    
    
    (134,576
    )
    
    
    (93,928
    )
    
    
    (182,084
    )Net cash used in financing activities
    
    
    (134,576
    )
    
    
    (93,928
    )
    
    
    (182,084
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (47,870
    )
    
    
    13,226
    
    
    
    19,008CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    173,651
    
    
    
    160,425
    
    
    
    141,417CASH AND EQUIVALENTS AT END OF PERIOD
    
    $
    125,781
    
    
    $
    173,651
    
    
    $
    160,425
 The accompanying notes are an integral part of these statements. F-7




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP 
  (1) THE PARTNERSHIP AND ASSOCIATED RISKS MCV was organized to construct, own and operate a combined-cycle, gas-fired cogeneration
facility (the Facility) located in Midland, Michigan. MCV was formed on January 27, 1987,
and the Facility began commercial operation in 1990. In 1992, MCV had acquired the outstanding common stock of PVCO Corp., a previously inactive
company. MCV and PVCO Corp. then 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. PVCO Corp. and MCV
GAGP were dissolved on January 30, 2004 and July 2, 2004, respectively, due to inactivity. The Facility has a net electrical generating capacity of approximately 1500 MW and
approximately 1.5 million pounds of process steam capacity per hour. MCV has entered into three
principal energy sales agreements. MCV has contracted to (i) supply up to 1240 MW of electric
capacity (Contract Capacity) to Consumers Energy Company (Consumers) under the Power
Purchase Agreement (PPA), for resale to its customers through 2025, (ii) supply electricity
and steam to The Dow Chemical Company (Dow) through 2008 and 2015, respectively, under the
Steam and Electric Power Agreement (SEPA) and (iii) supply steam to Dow Corning Corporation
(DCC) under the Steam Purchase Agreement (SPA) through 2011. From time to time, MCV enters
into other sales agreements for the sale of excess capacity and/or energy available above MCVs
internal use and obligations under the PPA, SEPA and SPA. Results of operations are primarily
dependent on successfully operating the Facility at or near contractual capacity levels and on
Consumers ability to perform its obligations under the PPA. Sales pursuant to the PPA have
historically accounted for over 90% of MCVs revenues. The PPA permits Consumers, under certain conditions, to reduce the capacity and energy charges
payable to MCV and/or to receive refunds of capacity and energy charges paid to MCV if the
Michigan Public Service Commission (MPSC) does not permit Consumers to recover from its
customers the capacity and energy charges specified in the PPA (the regulatory-out
provision). Until September 15, 2007, however, the capacity charge may not be reduced below an
average capacity rate of 3.77 cents per kilowatt-hour for the available Contract Capacity
notwithstanding the regulatory-out provision. Consumers and MCV are required to support and
defend the terms of the PPA. The Facility is a qualifying cogeneration facility (QF) originally certified by the
Federal Energy Regulatory Commission (FERC) under the Public Utility Regulatory Policies Act
of 1978, as amended (PURPA). In order to maintain QF status, certain operating and
efficiency standards must be maintained on a calendar-year basis and certain ownership
limitations must be met. In the case of a topping-cycle generating plant such as the Facility,
the applicable operating standard requires that the portion of total energy output that is put
to some useful purpose other than facilitating the production of power (the Thermal
Percentage) be at least 5%. In addition, the Facility must achieve a PURPA efficiency standard
(the sum of the useful power output plus one-half of the useful thermal energy output, divided
by the energy input (the Efficiency Percentage)) of at least 45%. If the Facility maintains
a Thermal Percentage of 15% or higher, the required Efficiency Percentage is reduced to 42.5%.
Since 1990, the Facility has achieved the applicable Thermal and Efficiency Percentages. For
the twelve months ended December 31, 2004, the Facility achieved a Thermal Percentage of 15.6%
and an Efficiency Percentage of 47.6%. The loss of QF status could, among other things, cause
MCV to lose its rights under PURPA to sell power from the Facility to Consumers at Consumers
avoided cost and subject MCV to additional federal and state regulatory requirements. The Facility is wholly dependent upon natural gas for its fuel supply and a substantial portion
of the Facilitys operating expenses consist of the costs of natural gas. MCV recognizes that
its existing gas contracts are not sufficient to satisfy the anticipated gas needs over the
term of the PPA and, as such, no assurance can be given as to the availability or price of
natural gas after the expiration of the existing gas contracts. In addition, to the extent
that the costs associated with production of electricity rise faster than the energy
charge payments, MCVs financial performance will be negatively affected. The extent of such
impact will depend upon the amount of the average energy charge payable under the PPA, which is
based upon costs incurred at F-8




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  Consumers coal-fired plants and upon the amount of energy scheduled by Consumers for
delivery under the PPA. However, given the unpredictability of these factors, the overall
economic impact upon MCV of changes in energy charges payable under the PPA and in future fuel
costs under new or existing contracts cannot accurately be predicted.At both the state and federal level, efforts continue to restructure the electric industry. A
significant issue to MCV is the potential for future regulatory denial of recovery by Consumers
from its customers of above market PPA costs Consumers pays MCV. At the state level, the MPSC
entered a series of orders from June 1997 through February 1998 (collectively the
Restructuring Orders), mandating that utilities wheel third-party power to the utilities
customers, thus permitting customers to choose their power provider. MCV, as well as others,
filed an appeal in the Michigan Court of Appeals to protect against denial of recovery by
Consumers of PPA charges. The Michigan Court of Appeals found that the Restructuring Orders do
not unequivocally disallow such recovery by Consumers and, therefore, MCVs issues were not
ripe for appellate review and no actual controversy regarding recovery of costs could occur
until 2008, at the earliest. In June 2000, the State of Michigan enacted legislation which,
among other things, states that the Restructuring Orders (being voluntarily implemented by
Consumers) are in compliance with the legislation and enforceable by the MPSC. The legislation
provides that the rights of parties to existing contracts between utilities (like Consumers)
and QFs (like MCV), including the rights to have the PPA charges recovered from customers of
the utilities, are not abrogated or diminished, and permits utilities to securitize certain
stranded costs, including PPA charges.In 1999, the U.S. District Court granted summary judgment to MCV declaring that the
Restructuring Orders are preempted by federal law to the extent they prohibit Consumers from
recovering from its customers any charge for avoided costs (or stranded costs) to be paid to
MCV under PURPA pursuant to the PPA. In 2001, the United States Court of Appeals (Appellate
Court) vacated the U.S. District Courts 1999 summary judgment and ordered the case dismissed
based upon a finding that no actual case or controversy existed for adjudication between the
parties. The Appellate Court determined that the parties dispute is hypothetical at this time
and the QFs (including MCV) claims are premised on speculation about how an order might be
interpreted by the MPSC, in the future.Two significant issues that could affect MCVs future financial performance are the price of
natural gas and Consumers ability/obligation to pay PPA charges. Natural gas prices have
historically been volatile and presently there is no consensus among forecasters on the price
or range of future prices of natural gas. Even with the approved Resource Conservation
Agreement and Reduced Dispatch Agreement, if gas prices continue at present levels or increase,
the economics of operating the Facility may be adversely affected. Consumers
ability/obligation to pay PPA charges may be affected by an MPSC order denying Consumers
recovery from ratepayers. This issue is likely to be addressed in the timeframe of 2007 or
beyond. MCV continues to monitor and participate in these matters as appropriate, and to evaluate potential
impacts on both cash flows and recoverability of the carrying value of property, plant and
equipment. MCV management cannot, at this time, predict the impact or outcome of these
matters.(2)
    SIGNIFICANT ACCOUNTING POLICIESThe preparation of financial statements in conformity with accounting principles generally
accepted in the United States of America 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 ConsolidationThe consolidated financial statements included the accounts of MCV and its wholly-owned
subsidiaries, PVCO Corp. and MCV GAGP. Previously, all material transactions and balances
among entities, which F-9




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  comprise MCV, had been eliminated in the consolidated financial
statements. The 2004 dissolution of these wholly-owned subsidiaries had no impact on the
financial position and results of operations.Revenue RecognitionMCV recognizes revenue for the sale of variable energy and fixed energy when delivered.
Capacity and other installment revenues are recognized based on plant availability or other
contractual arrangements.Fuel CostsMCVs fuel costs are those costs associated with securing natural gas, transportation and
storage services necessary to generate electricity and steam from the Facility. These costs are
recognized in the income statement based upon actual volumes burned to produce the delivered
energy. In addition, MCV engages in certain cost mitigation activities to offset the fixed
charges MCV incurs for these activities. The gains or losses resulting from these activities
have resulted in net gains of approximately $6.7 million, $7.7 million and $3.9 million for the
years ended 2004, 2003 and 2002, respectively. These net gains are reflected as a component of
fuel costs.In July 2000, in response to rapidly escalating natural gas prices and since Consumers
electric rates were frozen, MCV entered into a series of transactions with Consumers whereby
Consumers agreed to reduce MCVs dispatch level and MCV agreed to share with Consumers the
savings realized by not having to generate electricity (Dispatch Mitigation). On January 1,
2004, Dispatch Mitigation ceased and Consumers began dispatching MCV pursuant to a 915 MW
settlement and a 325 MW settlement availability caps provision (i.e., minimum dispatch of
1100 MW on- and off-peak (Forced Dispatch)). In 2004, MCV and Consumers entered into a
Resource Conservation Agreement (RCA) and a Reduced Dispatch Agreement (RDA) which, among
other things, provides that Consumers will economically dispatch MCV, if certain conditions
are met. Such dispatch is expected to reduce electric production from what is occurring under
the Forced Dispatch, as well as decrease gas consumption by MCV. The RCA provides that
Consumers has a right of first refusal to purchase, at market prices, the gas conserved under
the RCA. The RCA and RDA provide for the sharing of savings realized by not having to
generate electricity. The RCA and RDA were approved by an order of the MPSC on January 25,
2005 and MCV and Consumers accepted the terms of the MPSC order making the RCA and RDA
effective as of January 27, 2005. This MPSC order is subject to appeal by other parties. MCV
management cannot predict the final outcome of any such appeal. While awaiting approval of
this order, effective October 23, 2004, MCV and Consumers entered into an interim Dispatch
Mitigation program for energy dispatch above 1100 MW up to 1240 MW of
Contract Capacity under the PPA. This interim program, which was structured very similarly to
the RCA and RDA, was terminated on January 27, 2005 with the effective date of the RCA/RDA.
For the twelve months ended December 31, 2004, 2003 and 2002, MCV estimates that these
programs have resulted in net savings of approximately $1.6 million, $13.0 million and $2.5
million, a portion of which is realized in reduced maintenance expenditures in future years.Accounts ReceivableAccounts receivable and accounts receivable-related parties are recorded at the billed amount
and do not bear interest. MCV evaluates the need for an allowance for doubtful accounts using
MCVs best estimate of the amount of probable credit losses. At December 31, 2004 and 2003,
no allowance was provided since typically all receivables are collected within 30 days of each
month end.InventoryMCV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 F-10




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  December 31, 2004 and 2003, was $10.3 million and
$8.4 million, respectively. Inventory cost, determined on a FIFO basis, approximates current
replacement cost.Materials and SuppliesMaterials and supplies are stated at the lower of cost or market using the weighted average
cost method. The majority of MCVs materials and supplies are considered replacement parts for
MCVs Facility.DepreciationOriginal plant, equipment and pipeline were valued at cost for the constructed assets and at
the asset transfer price for purchased and contributed assets, and are depreciated using the
straight-line method over an estimated useful life of 35 years, which is the term of the PPA,
except for the hot gas path components of the GTGs which are primarily being depreciated over a
25-year life. Plant construction and additions, since commercial operations in 1990, are
depreciated using the straight-line method over the remaining life of the plant which currently
is 22 years. Major renewals and replacements, which extend the useful life of plant and
equipment are capitalized, while maintenance and repairs are expensed when incurred. Major
equipment overhauls are capitalized and amortized to the next equipment overhaul. Personal
property is depreciated using the straight-line method over an estimated useful life of 5 to 15
years. The cost of assets and related accumulated depreciation are removed from the accounts
when sold or retired, and any resulting gain or loss reflected in operating income.Federal Income TaxMCV is not subject to Federal or State income taxes. Partnership earnings are taxed directly
to each individual partner.Statement of Cash FlowsAll 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 InstrumentsThe 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, 2004 and December 31,
2003 have original maturity dates of approximately one year or less. The unique nature of the
negotiated financing obligation discussed in Note 6 makes it unnecessary to estimate the fair
value of the Owner Participants underlying debt and equity instruments supporting such
financing obligation, since SFAS No. 107 Disclosures about Fair Value of Financial
Instruments does not require fair value accounting for the lease obligation.Accounting for Derivative Instruments and Hedging ActivitiesEffective January 1, 2001, MCV adopted SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities which was issued in June 1998 and then amended by SFAS No. 137, Accounting
for Derivative Instruments and Hedging Activities  Deferral of the Effective Date of SFAS No.
133, SFAS No. 138 Accounting for Certain Derivative Instruments and Certain Hedging
Activities  An amendment of FASB Statement No. 133 and SFAS No. 149 Amendment of Statement
133 on Derivative Instruments and Hedging Activity (collectively referred to as SFAS No.
133). SFAS No. 133 establishes accounting and reporting standards requiring that every
derivative instrument be recorded on the balance sheet as either an asset or liability measured
at its fair value. SFAS No. 133 requires that changes in a derivatives fair value be
recognized currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges in some cases allows a derivatives gains and losses to offset
related results on the hedged F-11




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  item in the income statement or permits recognition of the hedge
results in other comprehensive income, and requires that a company formally document, designate
and assess the effectiveness of transactions that receive hedge accounting.Electric Sales AgreementsMCV believes that its electric sales agreements currently do not qualify as derivatives
under SFAS No. 133, due to the lack of an active energy market (as defined by SFAS No.
133) in the State of Michigan and the transportation cost to deliver the power under the
contracts to the closest active energy market at the Cinergy hub in Ohio and as such does
not record the fair value of these contracts on its balance sheet. If an active energy
market emerges, MCV intends to apply the normal purchase, normal sales exception under
SFAS No. 133 to its electric sales agreements, to the extent such exception is applicable.Natural Gas Supply ContractsMCV management believes that its long-term natural gas contracts, which do not contain
volume optionality, qualify under SFAS No. 133 for the normal purchases and normal sales
exception. Therefore, these contracts are currently not recognized at fair value on the
balance sheet.The FASB issued DIG Issue C-16, which became effective April 1, 2002, regarding natural
gas commodity contracts that combine an option component and a forward component. This
guidance requires either that the entire contract be accounted for as a derivative or the
components of the contract be separated into two discrete contracts. Under the first
alternative, the entire contract considered together would not qualify for the normal
purchases and sales exception under the revised guidance. Under the second alternative,
the newly established forward contract could qualify for the normal purchases and sales
exception, while the option contract would be treated as a derivative under SFAS No. 133
with changes in fair value recorded through earnings. At April 1, 2002, MCV had nine
long-term gas contracts that contained both an option and forward component. As such,
they were no longer accounted for under the normal purchases and sales exception and MCV
began mark-to-market accounting of these nine contracts through earnings. As of January
31, 2005, only four contracts of the original nine contracts, which contained an option
and forward component remain in effect. In addition, as a result of implementing the
RCA/RDA, effective January 27, 2005, MCV has determined that as of the effective date of
the RCA/RDA, an additional nine long term contracts (for a total of 13) will no longer be accounted for under the normal purchases and
sales exception, per SFAS No. 133 and will result in additional mark-to-market activity in 2005
and beyond. MCV expects future earnings volatility on both the remaining long term gas
contracts that contain volume optionality as well as the long term gas contracts under the
RCA/RDA that will require mark-to-market recognition on a quarterly basis.Based on the natural gas prices, at the beginning of April 2002, MCV recorded a $58.1
million gain for the cumulative effect of this accounting change. From April 2002 to
December 2004, MCV recorded an additional net mark-to-market loss of $2.3 million for
these gas contracts. The cumulative mark-to-market gain through December 31, 2004 of
$55.8 million is recorded as a current and non-current derivative asset on the balance
sheet, as detailed below. These assets will reverse over the remaining life of these gas
contracts, ranging from 2005 to 2007. For the twelve months ended December 31, 2004 and
2003, MCV recorded in Fuel costs losses of $19.2 million and $5.0 million, respectively,
for net mark-to-market adjustments associated with these contracts. In addition, as of
December 31, 2004 and 2003, MCV recorded Derivative assets in Current Assets in the
amount of $31.4 million and $56.9 million, respectively, and for the same periods recorded
Derivative assets non-current in Other Assets in the amount of $24.3 million and $18.1
million, respectively, representing the mark-to-market value on these long-term natural
gas contracts.Natural Gas Supply Futures and OptionsTo manage market risks associated with the volatility of natural gas prices, MCV
maintains a gas hedging program. MCV enters into natural gas futures contracts, option
contracts, and over the counter swap transactions (OTC swaps) in order to hedge against
unfavorable changes in the market price of natural gas F-12




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  in future months when gas is expected to be needed. These financial instruments are being utilized principally to
secure anticipated natural gas requirements necessary for projected electric and steam
sales, and to lock in sales prices of natural gas previously obtained in order to optimize
MCVs existing gas supply, storage and transportation arrangements.These financial instruments are derivatives under SFAS No. 133 and the contracts that are
utilized to secure the anticipated natural gas requirements necessary for projected
electric and steam sales qualify as cash flow hedges under SFAS No. 133, since they hedge
the price risk associated with the cost of natural gas. MCV also engages in cost
mitigation activities to offset the fixed charges MCV incurs in operating the Facility.
These cost mitigation activities include the use of futures and options contracts to
purchase and/or sell natural gas to maximize the use of the transportation and storage
contracts when it is determined that they will not be needed for Facility operation.
Although these cost mitigation activities do serve to offset the fixed monthly charges,
these cost mitigation activities are not considered a normal course of business for MCV
and do not qualify as hedges under SFAS No. 133. Therefore, the resulting mark-to-market
gains and losses from cost mitigation activities are flowed through MCVs earnings.Cash is deposited with the broker in a margin account at the time futures or options
contracts are initiated. The change in market value of these contracts requires
adjustment of the margin account balances. The margin account balance as of December 31,
2004 and 2003 was recorded as a current asset in Broker margin accounts and prepaid
expenses, in the amount of $1.4 million and $4.1 million, respectively.For the twelve months ended December 31, 2004, MCV has recognized in other comprehensive
income, an unrealized $34.5 million increase on the futures contracts and OTC swaps, which
are hedges of forecasted purchases for plant use of market priced gas. This resulted in a
net $65.8 million gain in other comprehensive income as of December 31, 2004. This
balance represents natural gas futures, options and OTC swaps with maturities ranging from
January 2005 to December 2009, of which $33.4 million of this gain is expected to be
reclassified into earnings within the next twelve months. MCV also has recorded, as of
December 31, 2004, a $63.6 million current derivative asset in Derivative assets,
representing the mark-to-market gain on natural gas futures for anticipated projected
electric and steam sales accounted for as hedges. In addition, for the twelve months ended December 31, 2004, MCV has recorded a net $36.5
million gain in earnings from hedging activities related to MCV natural gas requirements for
Facility operations and a net $1.8 million gain in earnings from cost mitigation activities.For the twelve months ended December 31, 2003, MCV recognized an unrealized $5.0 million
increase in other comprehensive income on the futures contracts, which are hedges of
forecasted purchases for plant use of market priced gas, which resulted in a $31.3 million
gain balance in other comprehensive income as of December 31, 2003. As of December 31,
2003, MCV had recorded a $29.9 million current derivative asset in Derivative assets.
For the twelve months ended December 31, 2003, MCV had recorded a net $35.0 million gain
in earnings from hedging activities related to MCV natural gas requirements for Facility
operations and a net $1.0 million gain in earnings from cost mitigation activities.New Accounting StandardIn 2003, the Emerging Issues Task Force (EITF) issued EITF 03-1 The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments. EITF 03-1
addresses how to determine the meaning of other-than-temporary impairment of certain debt and
equity securities, the measurement of an impairment loss and accounting and disclosure
considerations subsequent to the recognition of an other-than-temporary impairment. The various
sections of EITF 03-1 became effective at various times during 2004. MCV has adopted this
guidance and does not expect the application to materially affect it financial position or
results of operations, since MCVs investments approximate fair value due to the short maturity
of its permitted investments. F-13




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  (3)
    RESTRICTED INVESTMENT SECURITIES HELD-TO-MATURITYNon-current restricted investment securities held-to-maturity have carrying amounts that
approximate fair value because of the short maturity of these instruments and consist of the
following at December 31 (in thousands): 2004
    
    
    2003Funds restricted for rental payments
pursuant to the Overall Lease
Transaction
    
    $
    138,150
    
    
    $
    137,296Funds restricted for management
non-qualified plans
    
    
    1,260
    
    
    
    2,459Total
    
    $
    139,410
    
    
    $
    139,755
  (4)
    ACCOUNTS PAYABLE AND ACCRUED LIABILITIESAccounts payable and accrued liabilities consist of the following at December 31 (in
thousands): 2004
    
    
    2003Accounts payableRelated parties
    
    $
    12,772
    
    
    $
    7,386Trade creditors
    
    
    53,476
    
    
    
    34,786Property and single business taxes
    
    
    11,833
    
    
    
    12,548Other
    
    
    4,612
    
    
    
    2,648Total
    
    $
    82,693
    
    
    $
    57,368
  (5)
    GAS SUPPLIER FUNDS ON DEPOSITPursuant to individual gas contract terms with counterparties, deposit amounts or letters of
credit may be required by one party to the other based upon the net amount of exposure. The
net amount of exposure will vary with changes in market prices, credit provisions and various
other factors. Collateral paid or received will be posted by one party to the other based on
the net amount of the exposure. Interest is earned on funds on deposit. As of December 31,
2004, MCV is supplying credit support to two gas suppliers; one in the form of a letter of
credit in the amount of $2.4 million; and cash on deposit with the other in the amount of $7.3
million. As of December 31, 2004, MCV is holding $19.6 million of cash on deposit from two of
MCVs brokers. In addition as of December 31, 2004, MCV is also holding letters of credit
totaling $208.6 million from two gas suppliers, of which $184.0 million is a letter of credit
from El Paso Corporation (El Paso), a related party. F-14




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  (6)
    LONG-TERM DEBTLong-term debt consists of the following at December 31 (in thousands): 2004
    
    
    2003Financing obligation, maturing through
2015, payable in semi-annual installments
of principal and interest, collateralized
by property, plant and equipment
    
    $
    1,018,645
    
    
    $
    1,153,221Less current portion
    
    
    (76,548
    )
    
    
    (134,576
    )Total long-term debt
    
    $
    942,097
    
    
    $
    1,018,645
  Financing ObligationIn June 1990, MCV obtained permanent financing for the Facility by entering into sale and
leaseback agreements (Overall Lease Transaction) with a lessor group, related to
substantially all of MCVs fixed assets. Proceeds of the financing were used to retire
borrowings outstanding under existing loan commitments, make a capital distribution to the
Partners and retire a portion of notes issued by MCV to MEC Development Corporation (MDC) in
connection with the transfer of certain assets by MDC to MCV. In accordance with SFAS No. 98,
Accounting For Leases, the sale and leaseback transaction has been accounted for as a
financing arrangement.The financing obligation utilizes the effective interest rate method, which is based on the
minimum lease payments required through the end of the basic lease term of 2015 and
managements estimate of additional anticipated obligations after the end of the basic lease
term. The effective interest rate during the remainder of the basic lease term is
approximately 9.4%.Under the terms of the Overall Lease Transaction, MCV sold undivided interests in all of the
fixed assets of the Facility for approximately $2.3 billion, to five separate owner trusts
(Owner Trusts) established for the benefit of certain institutional investors (Owner
Participants). U.S. Bank National Association (formerly known as State Street Bank and Trust
Company) serves as owner trustee (Owner Trustee) under each of the Owner Trusts, and leases
undivided interests in the Facility on behalf of the Owner Trusts to MCV for an initial term of 25 years. CMS Midland Holdings Company (CMS Holdings), currently a
wholly owned subsidiary of Consumers, acquired a 35% indirect equity interest in the Facility
through its purchase of an interest in one of the Owner Trusts.The Overall Lease Transaction requires MCV to achieve certain rent coverage ratios and other
financial tests prior to a distribution to the Partners. Generally, these financial tests
become more restrictive with the passage of time. Further, MCV is restricted to making
permitted investments and incurring permitted indebtedness as specified in the Overall Lease
Transaction. The Overall Lease Transaction also requires filing of certain periodic operating
and financial reports, notification to the lessors of events constituting a material adverse
change, significant litigation or governmental investigation, and change in status as a
qualifying facility under FERC proceedings or court decisions, among others. Notification and
approval is required for plant modification, new business activities, and other significant
changes, as defined. In addition, MCV has agreed to indemnify various parties to the sale and
leaseback transaction against any expenses or environmental claims asserted, or certain
federal and state taxes imposed on the Facility, as defined in the Overall Lease Transaction.Under the terms of the Overall Lease Transaction and refinancing of the tax-exempt bonds,
approximately $25.0 million of transaction costs were a liability of MCV and have been
recorded as a deferred cost. F-15




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  Financing costs incurred with the issuance of debt are deferred
and amortized using the interest method over the remaining portion of the 25-year lease term.
Deferred financing costs of approximately $1.2 million, $1.4 million and $1.5 million were
amortized in the years 2004, 2003 and 2002, respectively.  Interest and fees incurred related to long-term debt arrangements during 2004, 2003 and 2002
were $103.4 million, $111.9 million and $118.3 million, respectively.Interest and fees paid during 2004, 2003 and 2002 were $108.6 million, $115.4 million and
$122.1 million, respectively.Minimum payments due under these long-term debt arrangements over the next five years are (in
thousands): Principal
    
    
    Interest
    
    
    Total2005
    
    $
    76,548
    
    
    $
    97,835
    
    
    $
    174,3832006
    
    
    63,459
    
    
    
    92,515
    
    
    
    155,9742007
    
    
    62,916
    
    
    
    87,988
    
    
    
    150,9042008
    
    
    67,753
    
    
    
    83,163
    
    
    
    150,9162009
    


70,335
    
    


76,755
    
    


147,090$
    341,011
    
    
    $
    438,256
    
    
    $
    779,267
  Revolving Credit AgreementMCV has also entered into a working capital line (Working Capital Facility), which expires
August 27, 2005. Under the terms of the existing agreement, MCV can borrow up to the $50.0
million commitment, in the form of short-term borrowings or letters of credit collateralized
by MCVs natural gas inventory and earned receivables. At any given time, borrowings and
letters of credit are limited by the amount of the borrowing base, defined as 90% of earned
receivables and 50% of natural gas inventory, capped at $15 million. MCV did not utilize the
Working Capital Facility during the year 2004, except for letters of credit associated with
normal business practices. At December 31, 2004, MCV had $47.6 million available under its
Working Capital Facility. As of December 31, 2004, MCVs borrowing base was capped at the
maximum amount available of $50.0 million and MCV had outstanding letters of credit in the
amount of $2.4 million. MCV believes that amounts available to it under the Working Capital Facility
along with available cash reserves will be sufficient to meet any working capital shortfalls
that might occur in the near term.Intercreditor AgreementMCV has also entered into an Intercreditor Agreement with the Owner Trustee, Working Capital
Lender, U.S. Bank National Association as Collateral Agent (Collateral Agent) and the Senior
and Subordinated Indenture Trustees. Under the terms of this agreement, MCV is required to
deposit all revenues derived from the operation of the Facility with the Collateral Agent for
purposes of paying operating expenses and rent. In addition, these funds are required to pay
construction modification costs and to secure future rent payments. As of December 31, 2004,
MCV has deposited $138.2 million into the reserve account. The reserve account is to be
maintained at not less than $40 million nor more than $137 million (or debt portion of next
succeeding basic rent payment, whichever is greater). Excess funds in the reserve account are
periodically transferred to MCV. This agreement also contains provisions governing the
distribution of revenues and rents due under the Overall Lease Transaction, and establishes
the priority of payment among the Owner Trusts, creditors of the Owner Trusts, creditors of
MCV and the Partnership. F-16




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  (7)
    COMMITMENTS AND OTHER AGREEMENTSMCV has entered into numerous commitments and other agreements related to the Facility.
Principal agreements are summarized as follows:Power Purchase AgreementMCV 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 AgreementMCV and Dow executed the SEPA for the sale to Dow of certain minimum amounts of steam and
electricity for Dows facilities.If the SEPA is terminated, and Consumers does not fulfill MCVs commitments as provided in the
Backup Steam and Electric Power Agreement, MCV will be required to pay Dow a termination fee,
calculated at that time, ranging from a minimum of $60 million to a maximum of $85 million.
This agreement provides for the sale to Dow of steam and electricity produced by the Facility
for terms of 25 years and 15 years, respectively, commencing on the commercial operation date
and year-to-year thereafter.Steam Purchase AgreementMCV 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 AgreementsMCV has entered into gas purchase agreements with various producers for the supply of natural
gas. The current contracted volume totals 238,531 MMBtu per day annual average for 2005. As
of January 1, 2005, gas contracts with U.S. suppliers provide for the purchase of 173,336
MMBtu per day while gas contracts with Canadian suppliers provide for the purchase of 65,195
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 2005 through 2009 are $384.6 million, $402.1
million, $436.7 million, $358.8 million and $324.0 million, respectively. A portion of these
payments may be utilized in future years to offset the cost of quantities of natural gas taken
above the minimum amounts.Gas Transportation AgreementsMCV 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 2004, 2003 and 2002,
of $35.5 million, $34.8 million and F-17




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  $35.1 million, respectively. The estimated minimum
reservation charges required under these agreements for each of the years 2005 through 2009
are $34.3 million, $30.0 million, $21.6 million, $21.6 million and $21.6 million,
respectively. These projections are based on current commitments.Gas Turbine Service AgreementsUnder a Service Agreement, as amended, with Alstom, which commenced on January 1, 1990 and was
set to expire upon the earlier of the completion of the sixth series of major GTG inspections
or December 31, 2009, Alstom sold MCV an initial inventory of spare parts for the GTGs and
provided 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 was
terminated for cause by MCV in February 2004. Alstom disputed MCVs right to terminate for
cause. The parties settled the dispute and the agreement terminated in February 2004.MCV has
a maintenance service and parts agreement with General Electric International, Inc. (GEII),
which commenced July 1, 2004 (GEII Agreement). GEII will provide maintenance services and
hot gas path parts for MCVs twelve GTGs, including providing an initial inventory of spare
parts for the GTGs and providing 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.
Under terms and conditions similar to the MCV/Alstom Service Agreement, as described above the
GEII Agreement will cover four rounds of major GTG inspections, which are expected to be
completed by the year 2015, at a savings to MCV as compared to the Service Agreement with
Alstom. MCV is to make monthly payments over the life of the contract totaling approximately
$207 million (subject to escalations based on defined indices. The GEII Agreement can be
terminated by either party for cause or convenience. Should termination for convenience
occur, a buy out amount will be paid by the terminating party with payments ranging from
approximately $19.0 million to $.9 million, based upon the number of operating hours utilized
since commencement of the GEII Agreement.Steam Turbine Service AgreementMCV entered into a nine year Steam Turbine Maintenance Agreement with General Electric Company
effective January 1, 1995, which is designed to improve unit reliability, increase
availability and minimize unanticipated maintenance costs. In addition, this contract
includes performance incentives and penalties, which are based on the length of each scheduled outage and the number of forced outages during
a calendar year. Effective February 1, 2004, MCV and GE amended this contract to extend its
term through August 31, 2007. MCV will continue making monthly payments over the life of the
contract, which will total $22.3 million (subject to escalation based on defined indices).
The parties have certain termination rights without incurring penalties or damages for such
termination. Upon termination, MCV is only liable for payment of services rendered or parts
provided prior to termination.Site LeaseIn 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. F-18




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  (8)
    CONTINGENCIESProperty TaxesIn 1997, MCV filed a property tax appeal against the City of Midland at the Michigan Tax
Tribunal contesting MCVs 1997 property taxes. Subsequently, MCV filed appeals contesting its
property taxes for tax years 1998 through 2004 at the Michigan Tax Tribunal. A trial was held
for tax years 1997  2000. The appeals for tax years 2001-2004 are being held in abeyance. On
January 23, 2004, the Michigan Tax Tribunal issued its decision in MCVs tax appeal against
the City of Midland for tax years 1997 through 2000 and has issued several orders correcting
errors in the initial decision (together the MTT Decision). MCV management has estimated
that the MTT Decision will result in a refund to MCV for the tax years 1997 through 2000 of at
least approximately $35.3 million in taxes plus $9.6 million of interest as of December 31,
2004. The MTT Decision has been appealed to the Michigan Appellate Court by the City of
Midland. MCV has filed a cross-appeal at the Michigan Appellate Court. MCV management cannot
predict the outcome of these legal proceedings. MCV has not recognized any of the above
stated refunds (net of approximately $16.1 million of deferred expenses) in earnings at this
time.NOx AllowancesThe United States Environmental Protection Agency (US EPA) has approved the State of
Michigans  State Implementation Plan (SIP), which includes an interstate NOx budget and
allowance trading program administered by the US EPA beginning in 2004. Each NOx allowance
permits a source to emit one ton of NOx during the seasonal control period, which for 2004 was
from May 31 through September 30. NOx allowances may be bought or sold and unused allowances
may be banked for future use, with certain limitations. MCV estimates that it will have
excess NOx allowances to sell under this program. Consumers has given notice to MCV that it
believes the ownership of the NOx allowances under this program belong, at least in part, to
Consumers. MCV has initiated the dispute resolution process pursuant to the PPA to resolve
this issue and the parties have entered into a standstill agreement deferring the resolution
of this dispute. However, either party may terminate the standstill agreement at any time and
reinstate the PPAs dispute resolution provisions. MCV management cannot predict the outcome
of this issue. As of December 31, 2004, MCV has sold 1,200 tons of 2004 allowances for $2.7
million, which is recorded in Accounts payable and accrued liabilities, pending resolution
of ownership of these credits.Environmental IssuesOn July 12, 2004 the Michigan Department of Environmental Quality (DEQ), Air Quality
Division, issued MCV a Letter of Violation asserting that MCV violated its Air Use Permit to
Install No. 209-02 (PTI) by exceeding the carbon monoxide emission limit on the Unit 14 GTG
duct burner and failing to maintain certain records in the required format. On July 13, 2004
the DEQ, Water Division, issued MCV a Notice Letter asserting MCV violated its National
Pollutant Discharge Elimination System Permit by discharging heated process waste water into
the storm water system, failure to document inspections, and other minor infractions (alleged
NPDES violations).MCV has declared all duct burners as unavailable for operational use (which reduces the
generation capability of the Facility by approximately 100 MW) and is assessing the duct
burner issue and has begun other corrective action to address the DEQs assertions. MCV
disagrees with certain of the DEQs assertions. MCV filed responses to these DEQ letters in
July and August 2004. On December 13, 2004, the DEQ informed MCV that it was pursuing an
escalated enforcement action against MCV regarding the alleged violations of MCVs PTI. The
DEQ also stated that the alleged violations are deemed federally significant and, as such,
placed MCV on the United States Environmental Protection Agencys High Priority Violators List
(HPVL). The DEQ and MCV are pursuing voluntary settlement of this matter, which will
satisfy state and federal requirements and remove MCV from the HPVL. Any such settlement is
likely to involve a fine, but the DEQ has not, at this time, stated what, if any, fine they
will seek to impose. At this time, MCV management cannot predict the financial impact or
outcome of these issues, however, MCV believes it has F-19




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MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  resolved all issues associated with the
alleged NPDES violations and does not expect any further MDEQ actions on this NPDES matter.(9)
    VOLUNTARY SEVERANCE PROGRAMIn July 2004, MCV announced a Voluntary Severance Program (VSP) for all employees (union and
non-union employees), subject to certain eligibility requirements. The VSP entitled
participating employees, upon termination, to a lump sum payment, based upon number of years
of service up to a maximum of 52 weeks of wages. Nineteen employees elected to participate in
the VSP and MCV has recorded $1.7 million of severance costs in Operating Expenses related
to the nineteen employees.(10)
    RETIREMENT BENEFITSPostretirement Health Care PlansIn 1992, MCV established defined cost postretirement health care plans (Plans) that cover
all full-time employees, excluding key management. The Plans provide health care credits,
which can be utilized to purchase medical plan coverage and pay qualified health care
expenses. Participants become eligible for the benefits if they retire on or after the
attainment of age 65 or upon a qualified disability retirement, or if they have 10 or more
years of service and retire at age 55 or older. The Plans granted retroactive benefits for
all employees hired prior to January 1, 1992. This prior service cost has been amortized to
expense over a five-year period. MCV annually funds the current year service and interest
cost as well as amortization of prior service cost to both qualified and non-qualified trusts.
The MCV accounts for retiree medical benefits in accordance with SFAS 106, Employers
Accounting for Postretirement Benefits Other Than Pensions. This standard required the full
accrual of such costs during the years that the employee renders service to the MCV until the
date of full eligibility. The accumulated benefit obligation of the Plans were $4.9 million
at December 31, 2004 and $3.3 million at December 31, 2003. The measurement date of these
Plans was December 31, 2004.The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was
signed into law in December 2003. The Act expanded Medicare to include, for the first time,
coverage for prescription drugs. At December 31, 2003, based upon FASB staff position, SFAS
No. 106-1, Employers Accounting for Postretirement Benefits Other Than Pensions, MCV had
elected to defer financial recognition of this legislation until issuance of final accounting
guidance. The final SFAS No. 106-2 was issued in second quarter 2004 and supersedes SFAS No.
106-1, which MCV adopted during this same period. The adoption of this standard had no impact
to MCVs financial position because MCV does not consider its Plans to be actuarially
equivalent. The Plans benefits provided to eligible participants are not annual or on-going
in nature, but are a readily exhaustible, lump-sum amount available for use at the discretion
of the participant. F-20




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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)  The following table reconciles the change in the Plans benefit obligation and change in Plan
assets as reflected on the balance sheet as of December 31 (in thousands): 2004
    
    
    2003Change in benefit obligation:Benefit obligation at beginning of year
    
    $
    3,276.0
    
    
    $
    2,741.9Service cost
    
    
    232.1
    
    
    
    212.5Interest cost
    
    
    174.8
    
    
    
    178.2Actuarial gain (loss)
    
    
    1,298.0
    
    
    
    147.4Benefits paid during year
    
    
    (8.3
    )
    
    
    (4.0
    )Benefit obligation at end of year
    
    
    4,972.6
    
    
    
    3,276.0Change in Plan assets:Fair value of Plan assets at beginning of year
    
    
    2,826.8
    
    
    
    2,045.8Actual return on Plan assets
    
    
    292.7
    
    
    
    527.5Employer contribution
    
    
    206.5
    
    
    
    257.5Benefits paid during year
    
    
    (8.3
    )
    
    
    (4.0
    )Fair value of Plan assets at end of year
    
    
    3,317.7
    
    
    
    2,826.8Unfunded (funded) status
    
    
    1,654.9
    
    
    
    449.2Unrecognized prior service cost
    
    
    (155.9
    )
    
    
    (170.3
    )Unrecognized net gain (loss)
    
    
    (1,499.0
    )
    
    
    (278.9
    )Accrued benefit cost
    
    $
    
    
    
    $
    
  Net periodic postretirement health care cost for years ending December 31, included the
following components (in thousands): 2004
    
    
    2003
    
    
    2002Components of net periodic benefit cost:Service cost
    
    $
    232.1
    
    
    $
    212.5
    
    
    $
    197.3Interest cost
    
    
    174.8
    
    
    
    178.2
    
    
    
    188.7Expected return on Plan assets
    
    
    (216.1
    )
    
    
    (163.7
    )
    
    
    (167.0
    )Amortization of unrecognized net (gain)
or loss
    
    
    15.7
    
    
    
    30.5
    
    
    
    14.3Net periodic benefit cost
    
    $
    206.5
    
    
    $
    257.5
    
    
    $
    233.3
  Assumed health care cost trend rates have a significant effect on the amounts reported for the
health care plans. A one-percentage-point change in assumed health care cost trend rates
would have the following effects (in thousands): 1-Percentage-Point
    
    
    1-Percentage PointIncrease
    
    
    DecreaseEffect on total of service and interest cost components
    
    $
    51.6
    
    
    $
    44.7Effect on postretirement benefit obligation
    
    $
    514.8
    
    
    $
    447.1
 F-21




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##### Table of Contents



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: 2004
    
    
    2003
    
    
    2002Discount rate
    
    
    5.75
    %
    
    
    6.00
    %
    
    
    6.75
    %Long-term rate of return on Plan assets
    
    
    8.00
    %
    
    
    8.00
    %
    
    
    8.00
    %Inflation benefit amount1998 through 2004
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %2005 and later years
    
    
    5.00
    %
    
    
    4.00
    %
    
    
    4.00
    %
  The long-term rate of return on Plan assets is established based on MCVs expectations of
asset returns for the investment mix in its Plan (with some reliance on historical asset
returns for the Plans). The expected returns for various asset categories are blended to
derive one long-term assumption.Plan Assets. Citizens Bank has been appointed as trustee (Trustee) of the Plan. The
Trustee serves as investment consultant, with the responsibility of providing financial
information and general guidance to the MCV Benefits Committee. The Trustee shall invest the
assets of the Plan in the separate investment options in accordance with instructions
communicated to the Trustee from time to time by the MCV Benefit Committee. The MCV Benefits
Committee has the fiduciary and investment selection responsibility for the Plan. The MCV
Benefits Committee consists of MCV Officers (excluding the President and Chief Executive
Officer).The MCV has a target allocation of 80% equities and 20% debt instruments. These investments
emphasis total growth return, with a moderate risk level. The MCV Benefits Committee reviews
the performance of the Plan investments quarterly, based on a long-term investment horizon and
applicable benchmarks, with rebalancing of the investment portfolio, at the discretion of the
MCV Benefits Committee.MCVs Plans weighted-average asset allocations, by asset category are as follows as of
December 31: Asset Category:
    
    2004
    
    
    2003Cash and cash equivalents
    
    
    1
    %
    
    
    11
    %Fixed income
    
    
    19
    %
    
    
    17
    %Equity securities
    
    
    80
    %
    
    
    72
    %Total
    
    
    100
    %
    
    
    100
    %
  Contributions. MCV expects to contribute approximately $.4 million to the Plan in
2005.Retirement and Savings PlansMCV 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 2004, 2003 and 2002, MCV contributed $1.4 million, $1.3 million and $1.2 million,
respectively under these plans.Supplemental Retirement BenefitsMCV provides supplemental retirement, postretirement health care and excess benefit plans for
key management. These plans are not qualified plans under the Internal Revenue Code;
therefore, earnings of the trusts maintained by MCV to fund these plans are taxable to the
Partners and trust assets are included in the assets of MCV. F-22




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##### Table of Contents



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) (11) 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, 2004, and the nature and amount of related
party transactions or agreements that existed with the Partners or affiliates as of December 31,
2004, 2003 and 2002, and for each of the twelve month periods ended December 31 (in thousands). Beneficial Owner, Equity Partner,
    
    EquityType of Partner and Nature of Related Party
    
    Interest
    
    
    Interest
    
    
    Related Party Transactions and Agreements
    
    2004
    
    
    2003
    
    
    2002CMS Energy CompanyCMS Midland, Inc.
    
    $
    396,888
    
    
    
    49.0
    %
    
    Power purchase agreements
    
    $
    601,535
    
    
    $
    513,774
    
    
    $
    557,149General Partner; wholly-owned
    
    
    
    
    
    
    
    
    
    Purchases under gas transportation agreements
    
    
    9,349
    
    
    
    14,294
    
    
    
    23,552subsidiary of Consumers Energy
    
    
    
    
    
    
    
    
    
    Purchases under spot gas agreements
    
    
    
    
    
    
    663
    
    
    
    3,631Company
    
    
    
    
    
    
    
    
    
    Purchases under gas supply agreements
    
    
    
    
    
    
    2,330
    
    
    
    11,306Gas storage agreement
    
    
    2,563
    
    
    
    2,563
    
    
    
    2,563Land lease/easement agreements
    
    
    600
    
    
    
    600
    
    
    
    600Accounts receivable
    
    
    50,364
    
    
    
    40,373
    
    
    
    44,289Accounts payable
    
    
    1,031
    
    
    
    1,025
    
    
    
    3,502Sales under spot gas agreements
    
    
    
    
    
    
    3,260
    
    
    
    1,084El Paso Corporation
    
    $
    141,397
    
    
    
    18.1
    %Source Midland Limited Partnership
    
    
    
    
    
    
    
    
    
    Purchase under gas transportation agreements
    
    
    12,334
    
    
    
    13,023
    
    
    
    12,463(SMLP) General Partner; owned by
    
    
    
    
    
    
    
    
    
    Purchases under spot gas agreement
    
    
    
    
    
    
    610
    
    
    
    15,655subsidiaries of El Paso Corporation
    
    
    
    
    
    
    
    
    
    Purchases under gas supply agreement
    
    
    70,000
    
    
    
    54,308
    
    
    
    47,136Gas agency agreement
    
    
    264
    
    
    
    238
    
    
    
    365Deferred reservation charges under gas purchase
    
    
    3,152
    
    
    
    4,728
    
    
    
    agreementAccounts receivable
    
    
    
    
    
    
    
    
    
    
    523Accounts payable
    
    
    10,997
    
    
    
    5,751
    
    
    
    7,706Sales under spot gas agreements
    
    
    
    
    
    
    3,474
    
    
    
    14,007El Paso Midland, Inc. (El Paso Midland)
    
    
    84,838
    
    
    
    10.9
    
    
    See related party activity listed under SMLP.General Partner; wholly-owned subsidiary
of El Paso Corporation
    
    
    
    
    
    
    
    
    
    See related party activity listed under SMLP.MEI Limited Partnership (MEI)
    
    
    
    
    
    
    
    
    
    See related party activity listed under SMLP.A General and Limited Partner;
50% interest owned by El Paso Midland, Inc.
and 50% interest owned by SMLP
General Partnership Interest
    
    
    70,701
    
    
    
    9.1Limited Partnership Interest
    
    
    7,068
    
    
    
    .9Micogen Limited Partnership
    
    
    35,348
    
    
    
    4.5
    
    
    See related party activity listed under SMLP.(MLP) Limited Partner, owned
subsidiaries of El Paso CorporationTotal El Paso Corporation
    
    $
    339,352
    
    
    
    43.5
    %The Dow Chemical CompanyThe Dow Chemical Company
    
    $
    73,735
    
    
    
    7.5
    %
    
    Steam and electric power agreement
    
    
    39,055
    
    
    
    36,207
    
    
    
    29,385Limited Partner
    
    
    
    
    
    
    
    
    
    Steam purchase agreement - Dow Corning Corp (affiliate)
    
    
    4,289
    
    
    
    4,017
    
    
    
    3,746Purchases under demineralized water supply agreement
    
    
    8,142
    
    
    
    6,396
    
    
    
    6,605Accounts receivable
    
    
    4,003
    
    
    
    3,431
    
    
    
    3,635Accounts payable
    
    
    744
    
    
    
    610
    
    
    
    1,016Standby and backup fees
    
    
    766
    
    
    
    731
    
    
    
    734Sales of gas under tolling agreement
    
    
    
    
    
    
    
    
    
    
    6,442Alanna CorporationAlanna Corporation
    
    $
    1
    (1)
    
    
    .00001
    %
    
    Note receivable
    
    
    1
    
    
    
    1
    
    
    
    1Limited Partner; wholly-owned subsidiary
of Alanna Holdings Corporation
  Footnotes to Partners Equity and Related Party Transactions(1) Alannas capital stock is pledged to secure MCVs obligation under the lease and
other overall lease transaction documents. F-23




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##### Table of Contents



SUPPLEMENTAL INFORMATION  Supplemental information is to be furnished with reports filed pursuant to Section 15 (d) of the
Act by registrants, which have not registered securities pursuant to Section 12 of the Act. No
such annual report or proxy statement has been sent to security holders. F-24




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##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. MIDLAND COGENERATION VENTURE
            
 LIMITED PARTNERSHIPDate: February 25, 2005
    
    By
    
    /s/ James M. KevraJames M. KevraPresident and Chief Executive Officer
 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the date
indicated. Signature
    
    Title
    
    Date/s/ James M. Kevra
    
    President and Chief Executive Officer
    
    February 25, 2005(Principal Executive Officer)James M. Kevra/s/ James M. Rajewski
    
    Chief Financial Officer,
    
    February 25, 2005Vice President and ControllerJames M. Rajewski
    
    (Principal Accounting Officer)/s/ David W. Joos
    
    Chairman, Management Committee
    
    February 25, 2005David W. Joos/s/ Stephen R. McKemy
    
    Member, Management Committee
    
    February 25, 2005Stephen R. McKemy
 F-25




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    
    
    Description3.1
    
    -
    
    Restated Certificate of Limited Partnership dated June 13, 1988 ((a), Exhibit 3.1)).3.2
    
    -
    
    Amended and Restated Limited Partnership Agreement of MCV dated as of June 13, 1988 ((a) (Exhibit 3.2)).3.2 (a)
    
    -
    
    Amendment No. 1 dated as of May 26, 1989 to Amended and Restated Limited Partnership Agreement ((a)
(Exhibit 3.3)).3.2 (b)
    
    -
    
    Amendment No. 2 dated as of November 28, 1989 to Amended and Restated Limited Partnership Agreement
((a), Exhibit 3.4)).3.2 (c)
    
    -
    
    Amendment No. 3 dated as of June 1, 1990 to Amended and Restated Limited Partnership Agreement
(incorporated by reference to Exhibit (2)(b) to CMS Energy Corporations Form 10-K dated March 21,
1990, File No. 1-9513).3.3
    
    -
    
    Memorandum of Agreement, dated March 2, 1990, relating to Amended and Restated Partnership Agreement
((a), (Exhibit 3.6)).4.1
    
    -
    
    Senior Trust Indenture, Leasehold Mortgage and Security Agreement dated as of June 1, 1990 between
Shawmut Bank and United States Trust Company of New York ((a), Exhibit 4.1)).4.1 (a)
    
    -
    
    Senior Trust Indenture Supplement No. 1 dated as of June 1, 1990 ((a), (Exhibit 4.2)).4.2
    
    -
    
    Subordinated Trust Indenture, Leasehold Mortgage and Security Agreement dated as of June 1, 1990
between Shawmut Bank and Meridian Trust Company (Subordinated Trust Indenture) ((a), (Exhibit 4.5)).4.2 (a)
    
    -
    
    Subordinated Trust Indenture Supplement No. 1 dated as of June 1, 1990 ((a), (Exhibit 4.6)).4.2 (b)
    
    -
    
    Subordinated Trust Indenture Supplement No. 2 dated as of July 1, 1990 ((a), (Exhibit 4.7)).4.3
    
    -
    
    Collateral Trust Indenture dated as of June 1, 1990 among Midland Funding Corporation I, MCV and United
States Trust Company of New York (incorporated by reference to Exhibit No. (28)(b) to CMS Energy
Corporations Form 10-Q for the quarter ended June 30, 1990, File No. 1-9513).4.3 (a)
    
    -
    
    Collateral Trust Indenture Supplement No. 1 dated June 1, 1990 ((a), (Exhibit 4.4)).4.4
    
    -
    
    Collateral Trust Indenture dated as of June 1, 1990 among Midland Funding Corporation II, MCV and
Meridian Trust Company (incorporated by reference to Exhibit No. (28)(d) to CMS Energy Corporations
Form 10-Q for the quarter ended June 30, 1990, File No. 1-9513).4.4 (a)
    
    -
    
    Collateral Trust Indenture Supplement No. 1 dated June 1, 1990 ((a), (Exhibit 4.9)).4.5
    
    -
    
    Amended and Restated Trust Agreement dated as of March 1, 1990 between Shawmut Bank and Owner
Participant ((a), (Exhibit 4.10)).4.6
    
    -
    
    Lease Agreement, dated as of March 1, 1990 between MCV and Shawmut Bank ((a), (Exhibit 4.11)).4.6 (a)
    
    -
    
    Amended and Restated Lease Agreement dated as of June 1, 1990 between MCV and Shawmut Bank ((a),
(Exhibit 4.12)).4.6 (b)
    
    -
    
    Amendment No. 1 dated as of January 1, 1992 to Amended and Restated Lease Agreement ((d), (Exhibit
4.17)).
 E-1




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    
    
    Description4.6 (c)
    
    -
    
    Second Amended and Restated Agreement of Lease [Part A] dated as of June 1, 1990 among Consumers, MCV,
CMS Midland, Inc. and MEC Development Corporation ((a), (Exhibit 4.14)).4.7
    
    -
    
    Amended and Restated Participation Agreement dated as of June 1, 1990 among MCV, Owner Participant,
Shawmut Bank, United States Trust Company, Meridian Trust Company, Midland Funding Corporation I,
Midland Funding Corporation II, MDC and Institutional Senior Bond Purchasers ((a), (Exhibit 4.13)).4.8
    
    -
    
    Ground Lease Assignment and Assumption Agreement dated as of June 1, 1990 among Shawmut Bank and MCV
((a), (Exhibit 4.15)).4.9
    
    -
    
    Collateral Agency and Intercreditor Agreement dated as of June 1, 1990 between Shawmut Bank, MCV,
United States Trust Company, Meridian Trust Company, Bank of Montreal and Manufacturers National Bank
of Detroit ((a), (Exhibit 4.16)).10.1
    
    -
    
    Tax Exempt Collateral Trust Indenture dated as of July 1, 1990 among The Economic Development
Corporation of the County of Midland, MCV and Meridian Trust Company (incorporated by reference to
Exhibit No. (28)(g) to CMS Energy Corporations Form 10-Q for the quarter ended June 30, 1990, File No.
1-9513).10.1 (a)
    
    -
    
    Tax Exempt Collateral Trust Indenture Supplement No. 1 dated July 1, 1990 ((a), (Exhibit 10.2)).10.2
    
    -
    
    Credit Agreement dated as of June 16, 1990 among Bank of Montreal as Agent, the Lenders named therein
and MCV ((a), (Exhibit 10.3)), as amended.10.3
    
    -
    
    CMS Transfer Agreement dated as of January 27, 1987, as amended as of June 13, 1988, among Consumers
Power Company, CMS Midland, Inc. and MCV (incorporated by reference to Exhibit (19)(a) to Consumers
Power Companys Form 10-Q for the quarter ended June 30, 1988, File No. 1-5611).10.4
    
    -
    
    Amended and Restated MDC Transfer Agreement dated as of June 13, 1988, among Consumers Power Company,
MEC Development Corporation and MCV, as amended by the March 2, 1990 Memorandum of Agreement with
respect to the Amended and Restated Partnership Agreement (incorporated by reference to Exhibit No.
(19)(b) to Consumers Power Companys Form 10-Q for the quarter ended June 30, 1988, File No. 1-5611),
as amended by the March 2, 1990 Memorandum of Agreement with respect to the Amended and Restated MDC
Transfer Agreement (incorporated by reference to Exhibit (2)(b) to CMS Energy Corporations Form 8-K
dated March 21, 1990, File No. 1-9513).10.5
    
    -
    
    Amended and Restated Tax Indemnification Agreement, dated as of June 1, 1990, among MCV and Owner
Participant ((a), (Exhibit 10.70)).10.6
    
    -
    
    Capacity Support Agreement dated as of June 9, 1988, between CMS Energy Corporation and MCV
(incorporated by reference to Exhibit No. 10(m) to CMS Energy Corporations Annual Report on Form 10-K,
for the year ended December 31, 1988, File No. 1-9513).10.7
    
    -
    
    Registration Rights Agreement dated as of December 17, 1993 among Midland Funding Corporation I, MCV,
Consumers and Morgan Stanley & Co. Incorporated and Donaldson, Lufkin & Jearette Securities Corporation
((e), (Exhibit 10.97)).10.8
    
    -
    
    Power Purchase Agreement, dated as of July 17, 1986, between MCV and Consumers Power Company (PPA)
((a), (Exhibit 10.4)).10.8 (a)
    
    -
    
    Amendment No. 1 to PPA dated September 10, 1987 ((a), (Exhibit 10.5)).
 E-2




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    
    
    Description10.8 (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
    
    -
    
    Resource Conservation Agreement, dated February 12, 2004, between MCV and Consumers Energy Company.10.16
    
    -
    
    Reduced Dispatch Agreement, dated July 7, 2004, between MCV and Consumers Energy Company.10.17
    
    -
    
    Steam and Electric Power Agreement between The Dow Chemical Company and MCV dated January 27, 1987 (the
SEPA) ((a), (Exhibit 10.10)).10.17 (a)
    
    -
    
    First Amendment to SEPA ((a), (Exhibit 10.11)).10.17 (b)
    
    -
    
    Exhibit A to SEPA ((a), (Exhibit 10.13)).10.17 (c)
    
    -
    
    Fourth Amendment to SEPA ((a), (Exhibit 10.15)).10.17 (d)
    
    -
    
    Fifth Amendment to SEPA ((a), (Exhibit 10.16)).10.17 (e)
    
    -
    
    Sixth Amendment to SEPA, dated November 20, 1989 ((f), (Exhibit 10.14(e))).10.17 (f)
    
    -
    
    Seventh Amendment to SEPA, dated November 22, 1994 ((f), (Exhibit 10.14(f))).10.18
    
    -
    
    Demineralized Water Supply Agreement dated as of January 27, 1987 between MCV and The Dow Chemical
Company ((a), (Exhibit 10.31)).10.19
    
    -
    
    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)).10.20
    
    -
    
    Equipment Lease dated as of January 27, 1987 between The Dow Chemical Company and MCV (the Equipment
Lease) ((a), (Exhibit 10.71)).
 E-3




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    
    
    Description10.20 (a)
    
    -
    
    First Amendment to Equipment Lease effective March 1, 1988 and dated as of May 4, 1988 ((a), (Exhibit
10.72)).10.20 (b)
    
    -
    
    Second Amendment to Equipment Lease effective December 1, 1989 and dated November 20, 1989 ((a),
(Exhibit 10.73)).10.21
    
    -
    
    Equipment Lease Easement dated as of January 27, 1988 between The Dow Chemical Company and MCV ((a),
(Exhibit 10.74)).10.21 (a)
    
    -
    
    First Amendment to Equipment Lease Easement effective March 1, 1988 and dated May 4, 1988 ((a),
(Exhibit 10.75)).10.21 (b)
    
    -
    
    Second Amendment to Equipment Lease Easement effective December 1, 1989 and dated November 20, 1989
((a), (Exhibit 10.76)).10.22
    
    -
    
    Service Agreement dated as of June 9, 1988 between MCV and ABB Alstom Power, Inc. (Previously ABB
Energy Services, Inc.) ((a), (Exhibit 10.22)).10.22 (a)
    
    -
    
    Hot Gas Path Parts Addendum to the Service Agreement dated March 22, 1994 ((e), (Exhibit 10.99)).10.22 (b)
    
    -
    
    Amendment No. 1 to the Service Agreement dated April 1, 1995 ((g), (Exhibit 10.20(b))).10.22 (c)
    
    -
    
    Amendment No. 2 to the Service Agreement dated January 15, 1998 ((h), (Exhibit 10.19 (c))).10.23
    
    -
    
    Operating Agreement, dated as of June 1, 1990, between MCV and Shawmut Bank, as Owner Trustee ((a),
(Exhibit 10.23)).10.24
    
    -
    
    Lessee Mortgage and Security Agreement, dated as of June 1, 1990, between Shawmut Bank, as Owner
Trustee, and MCV ((a), (Exhibit 10.24)).10.25
    
    -
    
    Cogeneration Agreements Assignment, dated as of June 1, 1990, between Shawmut Bank, Owner Trustee, and
MCV ((a), (Exhibit 10.26)).10.26
    
    -
    
    Support Facilities License and Easement Agreement dated as of June 1, 1990 between MCV and Shawmut Bank
((a), (Exhibit 10.29)).10.27
    
    -
    
    Facility Agreements and Governmental Actions Assignment Agreement dated as of June 1, 1990 between MCV
and Shawmut Bank ((a), (Exhibit 10.30)).10.28
    
    -
    
    Development Agreement, dated as of June 1, 1990 between MCV, Shawmut Bank, as Owner Trustee, and MCV2
((a), (Exhibit 10.33)).10.29
    
    -
    
    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)).10.30
    
    -
    
    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)).10.31
    
    -
    
    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




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    
    
    Description10.31 (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)).10.31 (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)).10.32
    
    -
    
    Natural Gas Purchase Agreement, dated as of May 13, 1988 between ANR Production Company and MCV ((a),
(Exhibit 10.41)).10.33
    
    -
    
    Natural Gas Purchase Contract dated August 18, 1994, between Coastal Gas Marketing and MCV ((f),
(Exhibit 10.32)).10.34
    
    -
    
    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)).10.35
    
    -
    
    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)).10.36
    
    -
    
    Natural Gas Purchase Agreement, dated as of June 2, 1997 between MCV and CMS Marketing, Services and
Trading Company ((h), (Exhibit 10.33)).10.37
    
    -
    
    Gas Sales Agreement, dated July 1, 1999, between MCV and CMS Marketing Services and Trading Company
((k), (Exhibit 10.0)).10.38
    
    -
    
    Gas Sales Agreement, dated November 15, 1998, between MCV and Engage Energy US, L.P. ((l), (Exhibit
10.37)).10.39
    
    -
    
    Gas Sales Agreement, dated September 20, 1999, between MCV and Engage Energy US, L.P. ((l), (Exhibit
10.38)).10.40
    
    -
    
    Long Term Gas Agreement, dated September 1, 2000, between MCV and Coastal Merchant Energy, L.P. ((m),
(Exhibit 10.39)).10.41
    
    -
    
    Long Term Gas Agreement, dated October 10, 2000, between MCV and El Paso Merchant Energy Gas, L.P., as
amended ((m), (Exhibit 10.40)).10.42
    
    -
    
    Long Term Gas Agreement, dated October 10, 2000, between MCV and CMS Marketing, Services and Trading
Company ((m), (Exhibit 10.41)).10.43
    
    -
    
    Long Term Gas Agreement, dated October 5, 2001, between MCV and El Paso Merchant Energy, L.P. ((n),
(Exhibit 10.42)).10.44
    
    -
    
    Long Term Gas Agreement, dated October 5, 2001, between MCV and CMS Marketing, Services and Trading
Company ((n), (Exhibit 10.43)).10.45
    
    -
    
    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)).10.46
    
    -
    
    Transportation Agreement (#17800) dated November 24, 1993 between ANR Pipeline Company and MCV ((f),
(Exhibit 10.35)).
 E-5




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    
    
    Description10.47
    
    -
    
    Transportation Agreement (#17850) dated November 24, 1993 between ANR Pipeline Company and MCV ((f),
(Exhibit 10.36)).10.48
    
    -
    
    Gas Transportation Agreement (Firm Service), dated as of March 2, 1988, between Michigan Gas Storage
and MCV and amendment thereto dated September 21, 1988 and March 28, 2002. ((a), (Exhibit 10.64)).10.49
    
    -
    
    Transportation Agreement (Firm Contract #011456), dated as of May 1, 1993 between Panhandle Eastern
Pipeline Company and MCV, as amended ((e), (Exhibit 10.90)).10.50
    
    -
    
    Transportation Agreement (Firm Contract #011457), dated as of May 1, 1993 between Panhandle Eastern
Pipeline Company and MCV, as amended ((e), (Exhibit 10.91)).10.51
    
    -
    
    Transportation Agreement (Firm Contract #011458), dated as of May 1, 1993 between Panhandle Eastern
Pipeline Company and MCV, as amended ((e), (Exhibit 10.92)).10.52
    
    -
    
    Firm Transportation Service Form of Transportation Agreement (#013296), dated November 1, 1993 between
Trunkline Gas Company and MCV ((e), (Exhibit 10.93)).10.53
    
    -
    
    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)).10.54
    
    -
    
    Gas Storage Agreement (Firm Service) between MCV and Consumers Power Company dated March 2, 1988 ((a),
(Exhibit 10.68)).10.55
    
    -
    
    The Gas Supply Option dated as of January 27, 1987, between The Dow Chemical Company and MCV ((a),
(Exhibit 10.67)).10.56
    
    -
    
    Master Netting, Setoff and Security Agreement dated December 2, 2002, between El Paso Merchant Energy,
L.P. and MCV ((o), (Exhibit 10.55)).10.57
    
    -
    
    Maintenance Services and Parts Agreement for MCV 11NM Gas Turbines Between MCV and General Electric
International, Inc., dated December 31, 2002, ((o), (Exhibit 10.56)), (**).10.57 (a)
    
    -
    
    Maintenance Services and Parts Agreement for MCV 11NM Gas Turbines Between MCV and General Electric
International, Inc., Guaranty Agreement dated January 22, 2003, ((p), (Exhibit 10.55 (a))).10.57 (b)
    
    -
    
    Maintenance Services and Parts Agreement for MCV 11NM Gas Turbines Between MCV and General Electric
International, Inc., Amendment One dated March 21, 2003, ((p), (Exhibit 10.55 (b))).10.58
    
    -
    
    MCV Senior Management Incentive Plan ((p), (Exhibit 10.58)), (*).10.59
    
    -
    
    MCV Supplemental Retirement Plan dated July 6, 1992 ((d), (Exhibit 10.87)), (*).10.60
    
    -
    
    MCV Supplemental Benefit Plan dated January 1, 1989 ((d), (Exhibit 10.88)), (*).10.61
    
    -
    
    MCV Excess  Benefit Plan dated July 1, 1989 ((d), (Exhibit 10.89)), (*).21
    
    -
    
    Subsidiaries of Registrant  MCV subsidiaries are in the
aggregate not significant subsidiaries as defined in Rule 1-02 (v) of
Regulation S-X.31.1
    
    -
    
    Certification of President and Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 E-6




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    
    
    Description31.2
    
    -
    
    Certification of Chief Financial Officer, Vice President
and Controller Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    -
    
    Certification of President and Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    -
    
    Certification of Chief Financial Officer, Vice President
and Controller Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
   (a)
    
    Incorporated by reference to MCVs registration statement on Form S-1 (File No.
33-37977) as the bracketed numbered exhibits.(b)
    
    Incorporated by reference to MCVs registration statement on Form S-1 (File No.
33-37977) originally filed on November 23, 1990, as amended, in Amendment No. 1 to
File No. 33-37977 as the bracketed numbered exhibits.(c)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 1991 as the bracketed numbered exhibits.(d)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 1992 as the bracketed numbered exhibits.(e)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 1993 as the bracketed numbered exhibits.(f)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 1994 as the bracketed numbered exhibits.(g)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 1995 as the bracketed numbered exhibits.(h)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 1997 as the bracketed numbered exhibits.(i)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 1998 as the bracketed numbered exhibits.(j)
    
    Incorporated by reference to MCVs Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1999 as the bracketed numbered exhibits.(k)
    
    Incorporated by reference to MCVs Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1999 as the bracketed numbered exhibits.(l)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 1999 as the bracketed numbered exhibits.(m)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 2000 as the bracketed numbered exhibits.(n)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 2001 as the bracketed numbered exhibits.(o)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 2002 as the bracketed numbered exhibits. E-7




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##### Table of Contents



EXHIBIT INDEX ExhibitNumber
    
    Description(p)
    
    Incorporated by reference to MCVs Annual Report on Form 10-K for the year ended
December 31, 2003 as the bracketed number exhibits.(*)
    
    Exhibits represent Management Contracts and Compensatory Plans and Arrangements.(**)
    
    Pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, confidential
treatment for portions of this exhibit has been made, which portions have been
omitted from the exhibit and have been filed separately with the Securities and
Exchange Commission.
 E-8