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                                                                   EXHIBIT 10.39


                      LONG TERM GAS AGREEMENT EXHIBIT 10.39

This Agreement is made this first day of September 2000, between Midland
Cogeneration Venture Limited Partnership ("MCV" or "Buyer") and Coastal Merchant
Energy, L.P., formerly named Engage Energy US, L.P. ("Seller") for the purpose
of entering into a long term gas supply arrangement on the terms and conditions
that follow. In this Agreement, Seller and Buyer may also be referred to
individually as "Party" or collectively as "Parties."

1.       Definitions. The following terms when used in this Agreement shall have
         the following meanings:

         1.1.   "Agreement" shall mean this Agreement and all Exhibits hereto.

         1.2.   "Btu" shall mean one (1) British Thermal Unit, the amount of
                heat required to raise the temperature of one (1) pound of water
                one (1) degree Fahrenheit at sixty (60) degrees Fahrenheit. BTU
                is measured on a dry basis.

         1.3.   "Business Day" shall mean any Day other than a Day on which
                Federal banks in the United States are allowed by law to be
                closed.

         1.4.   "Contract Year" shall mean any calendar year during the term of
                this Agreement.

         1.5.   "Cubic Foot of Gas" shall mean the volume of Gas contained in
                one (1) cubic foot of space at a pressure of fourteen and
                seventy-three hundredths (14.73) dry Psia, at a temperature of
                sixty degrees (60 degrees) Fahrenheit.

         1.6.   "Day" shall mean a period of twenty-four (24) consecutive hours
                (23 hours when changing from Standard to Daylight time and 25
                hours when changing back to Standard time) beginning and ending
                at 9:00 a.m. Central clock time.

         1.7.   "Disputed Amount" shall have the meaning set forth in Section
                5.1.2.

         1.8.   "Gas" shall mean any mixture of hydrocarbon and noncombustible
                gases in a gaseous form consisting primarily of methane and
                includes natural gas produced from gas wells (gas well gas), gas
                which immediately prior to being produced from a reservoir is in
                solution with crude oil or dispersed in an intimate association
                with crude oil or in contact with crude oil across a gas-oil
                contact (casinghead gas), or residue gas resulting from the
                processing of either or both casinghead gas and gas well gas.

         1.9.   "Material Adverse Change" shall mean: (i) with respect to
                Seller's guarantor or any successor guarantor thereto, having
                consolidated net worth of less than $2.0 billion as presented in
                its financial statements or having a long-term debt rating of
                less than BBB- from Standard & Poor's Corp., and (ii) with
                respect to MCV having Partner's Equity of less than $375,000,000
                or having a Standard & Poor's rating of less than BBB- on
                securities issued by Midland Funding Corp. I or less than BB+ on
                securities issued by Midland Funding Corp. II, or MCV having
                Average Cash Balances of less than $250,000,000. Average Cash
                Balances shall be equal to the average of the most recent four
                calendar quarters of the sum of cash and cash equivalents plus
                restricted cash and cash equivalents plus restricted investment
                securities held-to maturity as reported in MCV's Forms 10K and
                10Q.

         1.10.  "Mcf" shall mean one thousand (1,000) cubic feet of Gas.

         1.11.  "MMBtu" shall mean a quantity of Gas equal to one million
                (1,000,000) Btu, which is equivalent to one (1) dekatherm.

         1.12.  "Month" shall mean the period beginning at 9 a.m. Central clock
                time on the first Day of any calendar month and ending at 9 a.m.
                Central clock time on the first Day of the next succeeding
                calendar month.

         1.13.  "Point of Delivery" shall mean the point where Seller tenders
                Gas to Buyer as set forth in this Agreement.

         1.14.  "Prime Rate" shall mean the fluctuating per annum lending rate
                of interest from time to time published by Wall Street Journal,
                under the "Money Rates" table.

         1.15.  "Psia" shall mean pounds per square inch absolute.

         1.16.  "Transporter" shall mean Trunkline Gas Company.


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         1.17.    "Undisputed Amount" shall have the meaning set forth in
                  Section 5.1.2.

2.       Quantity. Seller agrees to deliver and sell and MCV agrees to receive
         and purchase 5,000 MMBtu/Day, on a firm basis, in accordance with the
         terms and conditions of this Agreement.

3.       Price.

         3.1.     The price to be paid by Buyer to Seller for all quantities of
                  Gas delivered hereunder inclusive of all taxes and other
                  adjustments or costs not provided for herein shall be $3.34
                  per MMBtu for all Gas delivered to the Point of Delivery.

         3.2.     Seller shall be responsible for all taxes prior to the Point
                  of Delivery. MCV shall be responsible for all taxes at and
                  after the Point of Delivery.

4.       Term. Deliveries of Gas shall commence on November 1, 2001, and
         continue through October 31, 2004.

5.       Billing and Payments.

         5.1.     Billing and payment procedures are as follows:

                  5.1.1.  After the delivery of Gas has commenced hereunder,
                          Seller shall, on or about the tenth Day of each month,
                          render to Buyer a statement showing the estimated (or
                          actual if available) quantity of Gas delivered at each
                          Point of Delivery during the prior month and the
                          amounts due Seller hereunder. Seller shall also render
                          to Buyer, if necessary, a separate statement showing
                          the adjustment, if any, required to conform the prior
                          month's estimated and actual deliveries and prices.
                          Payment of the amount due based on such statements
                          shall be made by Buyer to Seller by wire transfer with
                          immediately available funds the later of (a) ten (10)
                          Days following receipt of such statement or (b) the
                          twentieth (20th) Day of the month. If the due date
                          falls on a Day that is not a Business Day, then
                          payment shall be made on the next Business Day. If
                          Buyer bills Seller, the same procedure shall be
                          followed as set forth in this Section 5.1.1.

                  5.1.2.  In the event that either Party shall in good faith
                          dispute any portion of the amount shown in the other
                          Party's statement (hereinafter called the "Disputed
                          Amount"), the disputing Party shall (a) notify the
                          other Party in writing on or before the applicable due
                          date of the Disputed Amount and the basis of such
                          dispute in as much detail as possible, and (b) pay the
                          remaining undisputed portion of the other Party's
                          statement when due (hereinafter, the "Undisputed
                          Amount").

                  5.1.3.  If it is determined that the failure to pay any
                          Undisputed Amount of any statement was not
                          justifiable, interest on such Undisputed Amount shall
                          accrue at a rate per annum equal to the Prime Rate
                          plus one percent (1.0%) from the time payment would
                          have been due until the time payment is made, but in
                          no event shall the interest on such unpaid portion
                          exceed the applicable lawful nonusurious rate of
                          interest. Payment of any previously unpaid Undisputed
                          Amount shall be credited first to all interest accrued
                          and then to principle.

         5.2.     Each Party hereto shall have the right, upon reasonable
                  written notice, during normal business hours and at its own
                  expense to examine the books and records of the other Party to
                  the extent necessary to verify the accuracy of any statement,
                  charge, computation, or demand made under or pursuant to this
                  Agreement. Such examination shall be conducted no more than
                  once in a twelve-month period. Any error or discrepancy in
                  statements furnished pursuant to this Agreement shall be
                  promptly reported to Seller or Buyer, as applicable, and
                  proper adjustment thereof shall be made within thirty (30)
                  Days after final determination of the correct volumes or
                  amounts involved; provided, however, that if no such errors or
                  discrepancies are reported to Seller or Buyer, as applicable,
                  within two (2) years from the end of the calendar year in
                  which such errors or discrepancies occurred, the same shall be
                  conclusively deemed to be correct.

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6.       Deliveries.

         6.1.     Exhibit A hereto sets forth the Point of Delivery under this
                  Agreement. Seller shall not use any other point to deliver Gas
                  without Buyer's written consent, which Buyer may grant or
                  withhold in its sole discretion.

         6.2.     To the extent that the procedures for the delivery of Gas set
                  forth herein conflict with the rules and tariffs of any
                  Transporter, the Transporter's rules and tariffs will control
                  and the Parties shall cooperate fully with each other in
                  complying with such rules and tariffs.

7.       Third Party Gas. Buyer understands and agrees the Gas delivered
         hereunder may be supplied either from Seller's Gas or from Gas
         purchased by Seller from third parties; provided however, if such Gas
         is purchased from third parties, Seller shall be solely responsible for
         the payment of the purchase price of Gas to such third parties.

8.       Title. Title and risk of loss to Gas delivered hereunder shall pass
         from Seller to Buyer at the Point of Delivery.

9.       Delivery Pressure. Seller shall be required to deliver or cause
         delivery of the Gas to the Point of Delivery and for delivering such
         Gas at a pressure sufficient to effect such delivery. Notwithstanding
         anything to the contrary herein, Seller shall have the right but not
         the obligation to install compression to effect deliveries of Gas
         hereunder.

10.      Quality of Gas. The Gas to be delivered by Seller hereunder at the
         Point of Delivery shall comply with the quality requirements of the
         Transporter.

11.      Measurement and Tests of Gas. The quantity and quality of Gas delivered
         to the Buyer's account at the Point of Delivery shall be determined in
         accordance with the established standard terms and conditions
         applicable to the Transporter's gas transportation contracts.

12.      Warranty of Title. Seller hereby warrants (i) title to all Gas sold
         hereunder or the right to sell such Gas, (ii) that it has the right to
         sell same to Buyer, and (iii) that all such Gas shall be free from any
         and all liens and adverse claims of any nature whatsoever. Seller
         agrees to indemnify and hold Buyer harmless, including but not limited
         to, all costs, damages, and expenses (including Buyer's reasonable
         attorney fees) incurred by Buyer in defending against any liens or
         adverse claims of any nature whatsoever, including but not limited to,
         third parties from whom Seller purchased Gas as permitted in Section 7,
         in addition to any other remedies Buyer may have hereunder or at law.

13.      Credit Worthiness.

         13.1.    This Agreement is subject to Seller providing Buyer a guaranty
                  from The Coastal Corporation in the form attached hereto as
                  Exhibit "B". If the Seller's guarantor is merged, acquired or
                  otherwise controlled by another entity and no longer has a
                  long-term credit rating of at least BBB-, Seller will cause a
                  substitute guaranty in the same form without change to any
                  material obligation and in the same amount to be issued by an
                  affiliated entity with a minimum credit rating of BBB-.

         13.2.    At any time, and from time to time during the term of this
                  Agreement (and notwithstanding whether an Event of Default has
                  occurred as defined in Section 21) but not more than once in
                  any seven (7) Day period, if the Termination Payment (as such
                  term is defined in Section 13.5) should exceed $0 as
                  calculated by Seller with respect to MCV, and $4,000,000 as
                  calculated by MCV with respect to Seller (the "Security
                  Threshold"), then either Party may request the other Party to
                  provide additional Performance Assurance in an amount equal to
                  the amount by which the Termination Payment exceeds the
                  Security Threshold (rounding upwards for any fractional amount
                  to the next $100,000). The Performance Assurance shall be
                  delivered within thirty (30) calendar days of the date of the
                  request. A failure to provide Performance Assurance as
                  requested shall constitute an Event of Default under Section
                  21.

         13.3.    Either Party, at its sole expense, may request the other
                  Party's consent to reduce its Performance Assurance then in
                  place if the Termination Payment reverts back to an amount


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                  less than or equal to the sum of the Performance Assurance and
                  the Security Threshold then in place (rounding upwards for any
                  fractional amount to the next $100,000). Such request for
                  reduction shall be no more frequently than weekly, with
                  respect to Letters of Credit and guaranties, and daily, with
                  respect to cash. The consent to such request(s) shall not be
                  unreasonably withheld.

         13.4.    Either Party may at any time make a calculation of the
                  Termination Payment and submit same to the other Party for
                  review. If within thirty (30) Days of the submission of the
                  value of the Termination Payment from one Party to the other,
                  agreement has not been reached by the Parties as to the amount
                  of the Termination Payment, the determination of the amount of
                  the Termination Payment shall be submitted to arbitration as
                  provided for in Section 18 of this Agreement. Notwithstanding
                  the submission of the determination of the amount of the
                  Termination Payment to arbitration, all rights including
                  without limitation those in Section 13.2 and other
                  requirements in Section 13 of this Agreement shall remain in
                  effect.

         13.5.    With respect to this Section 13: (a) "Performance Assurance"
                  means collateral in the form of either cash or Letters of
                  Credit. The requesting Party may also accept a parental
                  guaranty or other collateral deemed sufficient by the
                  requesting Party. If the collateral is in the form of cash,
                  then such cash shall be placed in a segregated,
                  interest-bearing escrow account on deposit with a major U.S.
                  commercial bank having a credit rating of at least "A-" from
                  Standard and Poor's or "A3" from Moody's (interest to accrue
                  to the Party posting the collateral); (b) "Letter of Credit"
                  means one or more irrevocable, transferable standby letters of
                  credit from a major U.S. commercial bank or foreign bank with
                  a U.S. office having a credit rating of at least "A-" from
                  Standard & Poor's or "A3" from Moody's; (c) "Termination
                  Payment" means the amount by which the requesting Party shall
                  aggregate Gains, Losses, and Costs (as those terms are defined
                  in Section 21.2.5 with respect to this Agreement) into a
                  single net amount. The Termination Payment shall include all
                  amounts owed but not yet paid by one Party to the other Party,
                  whether or not such amounts are then due, for performance
                  already performed pursuant to this Agreement.

14.      Right to Terminate Agreement.

         14.1.    In addition to any other remedy of Buyer under law or provided
                  under this Agreement, Buyer shall have the right at its
                  election to terminate this Agreement upon twenty (20) Days
                  written notice to Seller if Seller for any reason other than:
                  (i) Force Majeure, (ii) Buyer's failure to take, or (iii)
                  failure by Buyer to pay any Undisputed Amounts, fails, over a
                  period of at least sixty (60) consecutive Days, to deliver an
                  average of ninety percent (90%) of the agreed quantity, and
                  provided further, that such failure occurred not more than one
                  hundred forty (140) Days immediately preceding the giving of
                  such notice of termination. Seller shall have twenty (20) Days
                  after receipt of such cancellation notice to cure any failure,
                  in which case Buyer's cancellation is null and void, and this
                  Agreement shall remain in full force and effect.

         14.2.    In addition to the other remedies of Seller under law or
                  provided under this Agreement, Seller shall have the right at
                  its election to terminate this Agreement upon twenty (20) Days
                  written notice to Buyer if Buyer for any reason other than:
                  (i) Force Majeure, (ii) Seller's failure to deliver, or (iii)
                  failure by Seller to pay any Undisputed Amounts, fails, over a
                  period of at least sixty (60) consecutive Days, to take a
                  volume of Gas not less than an average of ninety percent (90%)
                  of the agreed quantity, and provided further, that such
                  failure occurred not more than one hundred forty (140) Days
                  immediately preceding the giving of such notice of
                  termination. Buyer shall have twenty (20) Days after receipt
                  of such cancellation notice to cure any failure, in which case
                  Seller's cancellation is null and void, and this Agreement
                  shall remain in full force and effect.

15.      Assignment.

         15.1.    The terms, covenants and conditions hereof shall be binding on
                  the Parties hereto and on their successors and permitted
                  assignees.

         15.2.    Either Party may assign its interest under this Agreement with
                  the consent of the other Party, which consent shall not be
                  unreasonably withheld, to an affiliate or any company that
                  shall succeed, by merger or consolidation, to substantially
                  all of its assets. In the event of any such


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                  assignment, such successor shall be entitled to the rights and
                  shall be subject to the obligations of its predecessor. Seller
                  acknowledges that pursuant to a certain Gas Backup Agreement
                  among Consumers Power Company, The Dow Chemical Company
                  ("Dow"), and Midland Cogeneration Venture Limited Partnership
                  dated January 27, 1987, Buyer may be required to make an
                  assignment to Dow of certain rights under this Agreement.
                  Seller specifically agrees to accept such assignments, if any,
                  made by Buyer to Dow in accordance with the aforementioned Gas
                  Backup Agreement; provided, however, that such assignment
                  shall not relieve Buyer of its obligations under this
                  Agreement absent Seller's written consent.

         15.3.    Except as provided above, neither Party shall assign this
                  Agreement without the prior consent of the other Party, which
                  consent shall not be unreasonably withheld. Nothing herein
                  contained shall prevent or restrict either Party from
                  pledging, granting a security interest in, or assigning as
                  collateral all or any portion of such Party's interest to
                  secure any debt or obligation of such Party under any
                  mortgage, deed of trust, security agreement, or similar
                  instrument.

         15.4.    Either Party desiring to make an assignment for which it has
                  the right pursuant to the foregoing may upon request obtain a
                  written consent within sixty (60) Days to such assignment from
                  the other Party evidencing its consent.

         15.5.    Notwithstanding sections 15.1 through 15.4, Seller shall have
                  the right subject to section 13 to assign this agreement to an
                  affiliate or any company that shall succeed by merger,
                  acquisition or consolidation, to all or substantially all of
                  its assets.

16.      Notices. Except as otherwise herein provided, any notice, request,
         demand, or statement given in writing or required to be given in
         writing by the terms of this Agreement shall be deemed given five (5)
         days after being deposited in the government mail, postage prepaid, as
         certified mail directed to the address of the Parties as provided in
         Sections 16.1 and 16.2 below or at such other address as either Party
         may from time to time specify in writing to the other Party. Notices,
         requests, demands, or statements made by person, telephone, Telecopy,
         Telex, or wire shall be deemed given when received; provided however,
         that if such notices are received after 5:00 p.m. (recipient's local
         time), such notice shall not be effective until the next Business Day.

<TABLE>

<S>                               <C>
         16.1.    TO SELLER:

                  Invoices:         Coastal Merchant Energy, L.P.
                                    Attn:  Client Services
                                    Five Greenway Plaza Suite 1200; Houston TX  77046
                                    Telephone:  713-877-7800  Facsimile:  713-297-1489
                  Other Notices:    Coastal Merchant Energy, L.P.
                                    Attn:  Contract Administration
                                    Five Greenway Plaza  Suite 1200; Houston  TX  77046
                                    Telephone:  713-877-7800  Facsimile:  713-877-3583
                  Wire Transfer:    BANK:  Citibank, N.A., New York, NY
                                    ACCT:  4071-9415
                                    ABA:  0210-0008-9
         16.2.    TO BUYER:

                  Invoices:         Midland Cogeneration Venture Limited Partnership
                                    Attn:  Gas Accounting
                                    100 Progress Place; Midland  MI  48640
                                    Telephone:  517-633-7854  Facsimile:  517-633-7857
                  Other Notices:    Midland Cogeneration Venture Limited Partnership
                                    Attn:  Contract Administration
                                    100 Progress Place; Midland  MI  48640
                                    Telephone:  517-633-7852  Facsimile:  517-633-7857
                  Wire Transfer:    BANK:  U.S. Bank Trust, N.A., Minneapolis, MN
                                    ACCT:  180121167365
                                    ABA:  091000022
                                    DETAILS:  MI Clearing 47300196 - FBO MCV 76608640
</TABLE>


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         16.3.    Gas nomination notices will be in accordance with the terms
                  and conditions applicable to Transporter.

17.      Remedies. In the event Seller fails to deliver the daily quantities for
         reasons not otherwise excused by Force Majeure, Seller shall be
         responsible for any incremental gas costs incurred by MCV in replacing
         such Gas. MCV agrees to use commercially reasonable efforts to purchase
         replacement Gas at the lowest available price. Seller's obligation to
         pay MCV for incremental replacement Gas costs (and any transportation
         penalties or transportation demand charges resulting from unused
         transportation) shall be MCV's sole and exclusive remedy for Seller's
         failure to deliver except as provided in Section 14. In the event that
         MCV fails to take Gas for reasons not otherwise excused by Force
         Majeure, MCV shall pay Seller for any incremental decrease in the
         resale price of such Gas. Seller agrees to use commercially reasonable
         efforts to resell such deficiency Gas at the highest achievable price.
         MCV's obligation to pay Seller for such decrease (and any
         transportation penalties or transportation demand charges resulting
         from unused transportation) shall be Seller's sole and exclusive remedy
         for MCV's failure to take Gas except as provided in Section 14.

18.      Arbitration.

         18.1.    If the Parties are unable to resolve a disagreement arising
                  under this Agreement, such disagreement shall be settled by
                  arbitration. Either Party may then commence arbitration by
                  serving written notice thereof on the other Party designating
                  the issue to be arbitrated.

         18.2.    The Parties shall each appoint one (1) arbitrator and the two
                  (2) arbitrators so appointed will select a third arbitrator,
                  all of such arbitrators to be qualified by education,
                  knowledge, and experience to resolve the dispute or
                  controversy. Such arbitrators shall not be employees, agents,
                  attorneys or representatives or former employees agents,
                  attorneys or representatives of the party appointing such
                  arbitrator. If either Party fails to appoint an arbitrator
                  within ten (10) Days after a request for such appointment is
                  made by the other Party in writing, or if the two (2)
                  appointed fail to agree on a third arbitrator within ten (10)
                  Days after the appointment of the second, the arbitrator or
                  arbitrators necessary to complete a board of three (3)
                  arbitrators will be appointed upon application by either Party
                  therefore to the American Arbitration Association.

         18.3.    The jurisdiction of the arbitrators will be limited to the
                  single issue referred to arbitration and the arbitration shall
                  be conducted pursuant to the guidelines set forth by the
                  American Arbitration Association; provided however, that
                  should there be any conflict between such guidelines and the
                  procedures set forth in this Agreement, the terms of this
                  Agreement shall control.

         18.4.    Within fifteen (15) Days following selection of the third
                  arbitrator, each Party shall furnish the arbitrators in
                  writing its position regarding the issue being arbitrated. The
                  arbitrators may, if they deem necessary, convene a hearing
                  regarding the issue being arbitrated. Within thirty (30) Days
                  following the later of the appointment of the third arbitrator
                  or of the hearing, if one is held, the arbitrators shall
                  notify the Parties in writing as to which of the two (2)
                  positions submitted is most consistent with the meaning of
                  this Agreement with respect to the issue being arbitrated. No
                  other position may be selected. Such decision shall be binding
                  on the Parties hereto subject to any appeals for errors of law
                  and shall remain in effect until and unless changed in
                  accordance with the provisions of this Agreement.

         18.5.    Enforcement of the award may be entered in any court having
                  jurisdiction over the Parties.

         18.6.    Each Party will pay the expenses of the arbitrator selected by
                  or for it, and its counsel, witnesses, and employees. All
                  other costs of arbitration will be equally divided between the
                  Parties.

19.      Force Majeure. The term "Force Majeure" as employed herein for all
         purposes relating hereto, shall mean acts of God, strikes, lockouts, or
         other industrial disturbances, acts of public enemy, wars, blockades,
         insurrections, riots, epidemics, landslides, lightning, earthquakes,
         hurricanes, storms, explosions, fires, arrests and restraints of
         governments and people, civil disturbance, freeze-up of Seller's wells
         or wells from which Seller is furnishing Gas hereunder, or other
         temporary inability of Seller's wells or wells from which Seller is
         furnishing Gas hereunder to produce, mechanical


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         breakdowns or repairs of MCV's plant or pipeline facilities or those of
         any Transporter used to transport Gas hereunder, inability of any Party
         hereto to obtain necessary materials, supplies, or permits due to
         existing or future rules, regulations, orders, laws, or proclamations
         of governmental authorities (federal, state, or local), including both
         civil and military, and any other causes whether of the kind herein
         enumerated or otherwise not within the control of the Party claiming
         suspension in so far as they are affected by such Force Majeure event
         and that by the exercise of commercially reasonable efforts, such Party
         is unable to prevent or overcome. Neither party may rely upon changes
         in market conditions, curtailment of interruptible transportation, or
         denial by a regulatory authority of the pass through of the cost of gas
         purchased under this Agreement as events of Force Majeure. In the event
         of Force Majeure that causes Seller to curtail its deliveries of gas
         hereunder, Seller shall treat Buyer on a pro rata basis with Seller's
         other similarly situated firm customers and Seller shall cease
         deliveries of gas to all of its interruptible markets affected by such
         event of Force Majeure before curtailing deliveries of gas to any of
         Seller's firm markets. In the event of a Force Majeure that causes
         Buyer to curtail its receipts of gas hereunder, Buyer shall treat
         Seller on a pro rata basis with Buyer's other firm gas suppliers and
         Buyer shall cease receipts of gas from all its interruptible suppliers
         before curtailing receipts of gas from any of Buyer's firm gas
         suppliers.

20.      Transportation. Both Parties shall cooperate in an effort to eliminate
         imbalances on either Party's transporting pipeline(s). The Parties
         further agree that if any imbalance penalties or charges (including
         cash out charges) are imposed on a Party as a result of the other
         Party's failure to deliver or accept the required quantities, then the
         failing Party shall reimburse the nonfailing Party for such charges or
         penalties.

21.      Defaults and Remedies.

         21.1.    Event of Default. A Party shall be deemed in default under
                  this Agreement upon the occurrence of any one or more of the
                  following events ("Events of Default"):

                  21.1.1. The unexcused failure by a Party (the "Defaulting
                          Party") to make, when due, any payment required
                          pursuant to this Agreement if such failure is not
                          remedied within three (3) Business Days after written
                          notice of such failure is given to the Defaulting
                          Party by the other Party (the "Non-Defaulting Party")
                          and provided the payment is not a Disputed Amount as
                          described in Section 5.1.2;

                  21.1.2. Any representation or warranty made by a Party herein
                          shall at any time during the term of this Agreement
                          prove to be false or misleading in any material
                          respect;

                  21.1.3. The failure by a Party to perform, in any material
                          respect, any material covenant or provision set forth
                          in this Agreement (other than (i) the events that are
                          otherwise specifically covered in this Section 21.1 as
                          a separate Event of Default and (ii) the events that
                          are covered in Sections 14 and 17) and such failure is
                          not cured within five (5) Business Days (or such
                          longer period of time if reasonably necessary to cure
                          the failure and the Defaulting Party is making
                          continuous and diligent efforts to cure) after written
                          notice thereof to the Defaulting Party unless such
                          failure is excused by Force Majeure;

                  21.1.4. A Party becomes subject to a bankruptcy proceeding; or

                  21.1.5. The failure of a Party, upon the occurrence of a
                          Material Adverse Change, to provide, for so long as
                          the Material Adverse Change is occurring, adequate
                          assurance (in the form of cash or a Letter of Credit
                          to be provided at the election of the Defaulting Party
                          or a guaranty deemed acceptable by the Non-Defaulting
                          Party, which such acceptance of such guaranty may not
                          be unreasonably withheld) of its ability to perform
                          all of its outstanding obligations to the
                          Non-Defaulting Party under this Agreement within a
                          period not to exceed fifteen (15) Days of the
                          Defaulting Party's receipt, in accordance with the
                          notice provisions of Section 16, of a demand therefore
                          by the Non-Defaulting Party.

         21.2.    Remedies Upon an Event of Default.

                  21.2.1. If an Event of Default occurs with respect to a
                          Defaulting Party at any time during the term of this
                          Agreement, the Non-Defaulting Party shall have the
                          right for so long as


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<PAGE>   8

                          the Event of Default is continuing to (i) establish a
                          date (which date shall be between 5 and 10 Business
                          Days after the Non-Defaulting Party delivers written
                          notice to the Defaulting Party of its intent to
                          exercise the remedy described herein) ("Early
                          Termination Date") on which this Agreement shall
                          terminate, and (ii) withhold any payments due;
                          provided however, upon the occurrence of any Event of
                          Default listed in Section 21.1 as it may apply to any
                          Party, this Agreement in respect thereof shall
                          automatically terminate, without notice, and without
                          any other action by either Party as if an Early
                          Termination Date had been declared immediately prior
                          to such event.

                  21.2.2. If an Early Termination Date has been designated, the
                          Non-Defaulting Party shall in good faith calculate its
                          Gains, Losses, and Costs resulting from the
                          termination of this Agreement. The Gains, Losses, and
                          Costs shall be determined by comparing the value of
                          the remaining term, contract quantities, and contract
                          prices under this Agreement, had it not been
                          terminated, to the equivalent quantities and relevant
                          market prices for the remaining term either quoted by
                          a bona fide third-party offer or that are reasonably
                          expected to be available in the market under a
                          replacement contract for the balance of this
                          Agreement. To ascertain the market prices of a
                          replacement contract, the Non-Defaulting Party may
                          consider, among other valuations, settlement prices of
                          NYMEX natural gas futures contracts, quotations from
                          leading dealers in natural gas swap contracts, and
                          other bona fide third party offers, all adjusted for
                          the length of the remaining term and differences in
                          transportation. It is expressly agreed that a Party
                          shall not be required to enter into replacement
                          transactions in order to determine the Termination
                          Amount (as hereinafter defined.)

                  21.2.3. The Non-Defaulting Party shall aggregate such Gains,
                          Losses, and Costs with respect to the balance of this
                          Agreement into a single net amount ("Termination
                          Amount"). The Non-Defaulting Party shall provide the
                          Defaulting Party with a notice and statement
                          containing a clear identification and calculation of
                          the Termination Amount owed by or due to the
                          Defaulting Party and shall be accompanied by
                          sufficient information to enable the Defaulting Party
                          to determine the basis upon which the calculation was
                          made and the accuracy thereof. If the Non-Defaulting
                          Party's aggregate Losses and Costs exceed its
                          aggregate Gains, the Defaulting Party shall, within
                          five (5) Business Days of receipt of such statement,
                          pay the Termination Amount to the Non-Defaulting
                          Party, which amount shall bear interest at the
                          interest rate as set forth in Section 5.1.3 above,
                          from the Early Termination Date until paid. If the
                          Non-Defaulting Party's aggregate Gains exceed its
                          aggregate Losses and Costs, if any, resulting from the
                          termination of this Agreement, the Non-Defaulting
                          Party shall pay such excess to the Defaulting Party on
                          or before the latter of: (i) twenty (20) Days after
                          the end of the month ending on or after the Early
                          Termination Date, and (ii) five (5) Business Days
                          after receipt by the Defaulting Party of the
                          Non-Defaulting Party's notice of the Termination
                          Amount, which amount shall bear interest at the
                          interest rate as set forth in Section 5.1.3 above,
                          from the Early Termination Date until paid.

                  21.2.4. If the Defaulting Party disputes the Non-Defaulting
                          Party's right to terminate this Agreement or disagrees
                          with its calculation of the Termination Amount, in
                          whole or in part, the Defaulting Party shall, within
                          three (3) Business Days of receipt of the
                          Non-Defaulting Party's calculation of the Termination
                          Amount, provide to the Non-Defaulting Party a detailed
                          written explanation of the basis for such dispute or
                          disagreement and, if the Termination Amount is due
                          from the Defaulting Party, shall promptly pay to the
                          Non-Defaulting Party such portion thereof as is
                          conceded to be correct. Upon receipt of the Defaulting
                          Party's explanation, the Parties shall seek to resolve
                          the issues in accordance with mutually agreeable
                          dispute resolution procedures or absent mutual
                          agreement then pursuant to arbitration as provided in
                          section 18.

                  21.2.5. As used herein in this Section 21.2, with respect to
                          each Party: (i) "Costs" shall mean reasonable
                          brokerage fees, commissions, and other similar
                          transaction costs and expenses reasonably incurred by
                          a Party either in terminating or entering into new
                          arrangements which replace this Agreement, and
                          reasonable attorney's fees, if any,


                                                                          Page 8
<PAGE>   9

                          reasonably incurred in connection with enforcing its
                          rights under this Agreement; (ii) "Gains" shall mean
                          an amount equal to the present value (calculated using
                          the interest rate as set forth in Section 5.1.3 above
                          as the prevailing discount rate) of the economic
                          benefit (exclusive of Costs), if any, to a Party
                          resulting from the termination of its obligations with
                          respect to this Agreement, determined in a
                          commercially reasonable manner; and (iii) "Losses"
                          shall mean an amount equal to the present value
                          (calculated using the interest rate as set forth in
                          Section 5.1.3 above as the prevailing discount rate)
                          of the economic loss (exclusive of Costs), if any, to
                          a Party from the termination of its obligations, with
                          respect to this Agreement, determined in a
                          commercially reasonable manner. In no event, however,
                          shall a Party's Costs, Gains, or Losses include any
                          costs or expenses incurred by a Party in terminating
                          or reestablishing any arrangement pursuant to which it
                          has hedged its obligations under this Agreement.

22.      Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUCTED ACCORDING TO
         THE LAWS OF THE STATE OF MICHIGAN.

23.      Miscellaneous.

         23.1.    No waiver by either Seller or Buyer of any default by the
                  other under this Agreement shall operate as a waiver of any
                  future default, whether of like or different character or
                  nature.

         23.2.    The descriptive headings of particular provisions of this
                  Agreement are for the purpose of facilitating administration
                  and shall not be construed as having any substantive effect on
                  the terms of this Agreement.

         23.3.    The Parties agree to proceed with due diligence and make good
                  faith effort to obtain such governmental authorizations as may
                  be necessary to enable performance of this Agreement.

         23.4.    This Agreement is subject to the January 27, 1987, Gas Supply
                  Option between Buyer and Dow and to Dow's rights under a
                  certain Gas Backup Agreement with Buyer and Consumers Energy
                  Company (formerly Consumers Power Company) dated January 27,
                  1987.

         23.5.    If any provision of this Agreement is determined to be
                  invalid, void, or unenforceable by any court having
                  jurisdiction, such determination shall not invalidate, void,
                  or make unenforceable any other provision of this Agreement.

         23.6.    Neither Buyer nor Seller shall disclose to any third Party
                  other than its partners, parents, affiliates, directors,
                  officers, employees, consultants, representatives, agents, or
                  those third parties providing financing to it any information
                  received from the other Party that is explicitly marked
                  "Confidential" (such information hereinafter referred to as
                  "Confidential Information"); provided however, that nothing
                  shall be deemed Confidential Information that:

                  23.6.1. is part of the public domain;

                  23.6.2. becomes publicly known otherwise than through an
                          action or inaction of the receiving Party;

                  23.6.3. is independently developed by the receiving Party; or

                  23.6.4. is required to be disclosed pursuant to any law, rule,
                          or regulation, or pursuant to any order of a
                          governmental instrumentality, provided that the Party
                          receiving the order shall, if feasible, notify the
                          other Party of any such requirement at least ten (10)
                          Days before compliance is required, and if so
                          requested by the other Party, shall use reasonable
                          efforts to oppose the required disclosure, as
                          appropriate under the circumstances, or to otherwise
                          make such disclosure pursuant to a protective order or
                          other similar arrangement for confidentiality.

         23.7.    This Agreement may be amended only by a written instrument
                  executed by the Parties hereto. This Agreement, the Guaranty
                  (Exhibit B attached hereto), and the Consent and Agreement
                  (Exhibit C attached hereto) contain the entire understanding
                  of the Parties with respect to the matter contained in said
                  documents. There are no promises, covenants, or undertakings
                  other than those expressly set forth in said documents.


                                                                          Page 9
<PAGE>   10

         23.8.    Buyer represents and warrants that it has full and complete
                  authority to enter into and to perform this Agreement. Seller
                  represents and warrants that it has full and complete
                  authority to enter into and to perform this Agreement. Each
                  person who executes this Agreement on behalf of Buyer
                  represents and warrants that he or she has full and complete
                  authority to do so, and that Buyer will be bound thereby. Each
                  person who executes this Agreement on behalf of Seller
                  represents and warrants that he or she has full and complete
                  authority to do so, and that Seller will be bound thereby.

         23.9.    Notwithstanding anything to the contrary contained in this
                  Agreement, the liabilities and obligations of MCV arising out
                  of, or in connection with, this Agreement or any other
                  agreements entered into pursuant hereto shall not be enforced
                  by any action or proceeding wherein damages or any money
                  judgment or specific performance of any covenant in any such
                  document and whether based upon contract, warranty,
                  negligence, indemnity, strict liability, or otherwise, shall
                  be sought against the assets of the partners of MCV. By
                  entering into this Agreement, Seller waives any and all right
                  to sue for, seek, or demand any judgment against such partners
                  and their affiliates, other than MCV by reason of the
                  performance by MCV of its obligations under this Agreement or
                  any other agreements entered into pursuant hereto, except to
                  the extent such partners are legally required to be named in
                  any action to be brought against MCV.

24.      Limitations: NEITHER PARTY HERETO SHALL BE LIABLE TO THE OTHER PARTY
         FOR ANY CONSEQUENTIAL, INCIDENTAL, OR PUNITIVE DAMAGES ARISING OUT OF,
         OR RELATED TO, A BREACH OF THIS AGREEMENT.

IN WITNESS WHEREOF, this Agreement is executed in multiple originals effective
as of the day and year first herein above written.


Midland Cogeneration Venture Limited Partnership   Coastal Merchant Energy, L.P.


LeRoy W. Smith                                     James C. Dyer IV
--------------                                     ----------------
Name:  LeRoy W. Smith                              Name:  James C. Dyer IV
Title: Vice President Energy Supply and Marketing  Title: President & CEO



                                                                         Page 10
<PAGE>   11


                                                                       EXHIBIT A

                                POINT OF DELIVERY


          The Trunkline Gas Company-South Texas Pool Delivery Point(s)









                                                                         Page 11
<PAGE>   12
                                                                       EXHIBIT B

                                    GUARANTY


Guaranty dated effective as of the first day of September 2000, by The Coastal
Corporation, a Delaware corporation (hereinafter referred to as the
"Guarantor"), in favor of Midland Cogeneration Venture Limited Partnership, a
Michigan limited partnership (hereinafter referred to as "Creditor").

         WHEREAS, Creditor and Engage Energy US, L.P. (hereinafter referred to
as "Debtor") have entered into a certain Long Term Gas Agreement dated September
1, 2000 (hereinafter referred to as the "Contract"); and

         WHEREAS, as a condition precedent to Creditor's entering into the
Contract, Guarantor has agreed to provide this Guaranty as provided herein;

         NOW, THEREFORE, for and in consideration of the premises, Guarantor
hereby agrees as follows:

1)       Guaranty. Guarantor unconditionally guarantees to Creditor the payment
         of amounts due and payable by Debtor pursuant to the Contract up to a
         maximum amount in the aggregate of $4,000,000 (such obligations being
         hereinafter referred to as the "Obligations"); provided however, that
         as to Obligations which Guarantor is called upon to honor, Guarantor is
         and shall be entitled to assert any and all claims, counterclaims,
         defenses, offsets, and other rights which Debtor could assert against
         Creditor with respect to the Obligations, except as provided in
         paragraph 7 below. In the event Debtor defaults in the payment of any
         of the Obligations, after thirty days written notice to Guarantor at
         the address provided below, Guarantor shall make such payment or
         otherwise cause same to be paid. Guarantor's Obligations are subject to
         its receiving from Creditor copies of any and all notices of defaults
         and events of default given by Creditor to Debtor pursuant to the
         Contract in the same manner and at the same time as such notices are
         given by Creditor to Debtor, except to Guarantor's address for notice
         set forth in this Guaranty.

2)       Termination. This Guaranty is continuing and irrevocable and shall
         remain in full force and effect until such time as all of the
         Obligations have been fully satisfied, performed, and discharged.

3)       Waivers. Except as is otherwise provided in this Guaranty, Guarantor
         waives notice of acceptance of the guaranty contained herein,
         presentment, demand, notice of dishonor, protest and notice of protest,
         and prosecution of litigation in connection with the Obligations.

4)       Assignment. Neither Guarantor nor Creditor may assign its respective
         rights or obligations under this Guaranty without the other's written
         consent. Subject to the foregoing, this Guaranty shall be binding upon
         and inure to the benefit of the parties hereto and their respective
         successors, permitted assigns, and legal representatives.

5)       Notices. Any notice or other communication required or permitted to be
         given to Guarantor under this Guaranty shall be deemed to have been
         given when delivered personally or otherwise actually received or on
         the tenth (10th) day after being deposited in the United States mail if
         registered or certified, postage prepaid, or one (1) day after delivery
         to a nationally recognized overnight courier service, fee prepaid,
         return receipt requested, if in writing and addressed as follows:


                                                                         Page 12
<PAGE>   13

                           The Coastal Corporation
                           Attn:  Secretary
                           Nine Greenway Plaza
                           Houston, Texas  77046

6)       Applicable Law. This Guaranty shall in all respects be governed by,
         enforced under, and construed in accordance with the laws of the State
         of Texas.

7)       Effect of Certain Events. Guarantor agrees that Guarantor's liability
         hereunder will not be released, reduced, impaired, or affected by the
         occurrence of any one or more of the following events:

         a)       The insolvency, bankruptcy, reorganization, or disability of
                  Debtor;

         b)       The renewal, consolidation, extension, modification, or
                  amendment from time to time of the Contract;

         c)       The failure, delay, waiver, or refusal by Creditor to exercise
                  any right or remedy held by Creditor with respect to the
                  Contract;

         d)       The sale, encumbrance, transfer, or other modification of the
                  ownership of Debtor or the change in the financial condition
                  or management of Debtor.

IN WITNESS WHEREOF, Guarantor has duly executed this Guaranty effective as of
the date first written above.

                                              THE COASTAL CORPORATION


                                              James C. Dyer IV
                                              ----------------
                                              Name:  James C. Dyer IV
                                              Title: President & CEO



                                                                         Page 13
<PAGE>   14

                                                                       EXHIBIT C

                              CONSENT AND AGREEMENT


         CONSENT AND AGREEMENT, dated as of September 1, 2000, made by Engage
Energy US, L.P., a Delaware limited partnership, (the "undersigned") to the
parties whose names appear on Schedule A attached hereto (the "Transaction
Parties"), provides as follows:

         1.       Midland Cogeneration Venture Limited Partnership ("MCV"), and
the undersigned entered into the Long Term Gas Agreement dated September 1,
2000, as the same may be amended, modified or supplemented from time to time in
accordance with the provisions thereof and of this Consent and Agreement (the
"Contract"). MCV was the owner of an approximately 1370 MW gas-fired
cogeneration facility in Midland, Michigan (the "Facility"). Pursuant to several
separate Participation Agreements, each dated as of June 1, 1990, MCV sold and
leased-back several separate Undivided Interests in the Facility under several
separate Leases each having a basic term of 25 years. The general structure of
the sale and lease-back transactions is described in more detail in Schedule B
attached hereto.

         2.       The undersigned hereby acknowledges notice of the sale and
lease-back transactions described in Schedule B and receipt of a photocopy of
each Participation Agreement (including Appendix A thereto but excluding other
Appendices, Exhibits and Schedules referenced therein unless specifically
requested). Photocopies of the related Transaction Documents will be made
available by MCV to the undersigned at its request for inspection. The
undersigned further acknowledges and consents to the assignments of and Liens on
the Contract pursuant to the Transaction Documents related to each sale and
lease-back transaction, and hereby agrees with each of the Transaction Parties
(provided, however, that each of the Indenture Trustees will have the rights set
forth herein only until the undersigned receives written notice from such
Indenture Trustee that the related Undivided Interest in the Facility is no
longer subject to the Lien of the Indenture to which such Indenture Trustee is a
party and the Secured Notes issued pursuant to such Indenture have been paid in
full) that:

                  (a)   Each Owner Trustee and each related Indenture Trustee
shall be entitled, after a Lease Event of Default or an Indenture Event of
Default under the Lease or the Indenture, as the case may be, to which such
Person is a party, to exercise any and all rights of MCV under the Contract in
accordance with the terms of the related Lease, the related Lessee Security
Agreement, the related Indentures and this Consent and Agreement, and the
undersigned will comply in all respects with such exercise by any of such
Persons.

                  (b)   The undersigned will give each owner Trustee and
Indenture Trustee prompt written notice of any default of which it has knowledge
under the Contract which, if not cured, would give the undersigned the right to
suspend its performance under, or to terminate, the Contract. Each Owner Trustee
and Indenture Trustee (and their respective designee(s)) shall have the right,
within 30 days (or such longer period, not to exceed 90 days, as may reasonably
be required to cure defaults other than defaults in respect to the nonpayment of
money by MCV) of receipt by each such Person of such written notice, to cure
such default.

                  (c)   In the event any Owner Trustee or Indenture Trustee
succeeds to MCV's rights or interests under the Contract after a Lease Event of
Default or an Indenture Event of Default under the Lease or the Indenture, as
the case may be, to which such Person is a party,


                                                                         Page 14
<PAGE>   15

whether by foreclosure or otherwise, such Person shall have the right to
exercise all rights of MCV under such Contract, and the undersigned will comply
in all respects with such exercise by such Person.

                  (d)   The exercise of remedies under any Lease or foreclosure
of any Indenture, whether by judicial proceedings or under power of sale
contained in such Indenture or otherwise or any conveyance from MCV or any Owner
Trustee to either related Indenture Trustee in lieu thereof, following a Lease
Event of Default or Indenture Event of Default under the Lease or the Indenture,
as the case may be, to which such Person is a party, shall not require the
further consent of the undersigned.

         3.       It is understood and agreed that the Contract and this Consent
and Agreement are subject to all tariffs and all Applicable Laws relating to
such services. Except as required, in the undersigned's reasonable opinion or by
any Applicable Law, the undersigned will not, without the prior written consent
of each Owner Trustee and Indenture Trustee (unless MCV delivers to the
undersigned a certificate stating that such consent is not required by the terms
of the related Transaction Documents), cancel, amend, modify or terminate or
accept any cancellation, amendment, modification or termination thereof, except
if such cancellation or termination is in accordance with the express terms of
the Contract, but subject to the rights of each Owner Trustee and Indenture
Trustee to cure any defaults and to keep the Contract in full force and effect
as provided in Section 2(b) above.

         4.       In the event that any Owner Trustee or Indenture Trustee (or
their respective designee(s)) assumes the Contract or otherwise elects to
perform the duties of MCV under the Contract, such Person shall not have any
personal liability to the undersigned for the performance of MCV's obligations
under the Contract, it being understood that the sole recourse of the
undersigned seeking enforcement of such obligations shall be to such Person's
interest in the Facility and the related rights and Revenues therefrom.

         5.       If the Contract is rejected by a trustee or
debtor-in-possession in any bankruptcy, insolvency or similar proceeding
involving any Persons other than the undersigned, or is terminated for any other
reason (except as a result of a default which was not appropriately cured as
provided herein and in the Contract), and if, (i) within 30 days thereafter, MCV
(in the case of a bankruptcy, insolvency or similar proceeding involving any
Owner Trustee or Owner Participant), any Owner Trustee, Indenture Trustee or
their respective successors or assigns so request and (ii) all payment defaults
under the Contract have been cured, the undersigned will execute and deliver to
the Person or Persons making such request in proportion to their respective
interests in the Contract a new Contract for the services remaining to be
performed under the original Contract and containing the same terms and
conditions as the original Contract (except for any requirements which have been
fulfilled prior to such termination). Such new Contract also shall be subject to
the terms of this Consent and Agreement.

         6.       The undersigned acknowledges that after the end of the
respective Lease Terms and during the respective Residual Terms, each Owner
Trustee, as the assignee of an Undivided Interest in the Contract pursuant to
the related Facility Agreements Assignment, shall have all of the rights and
shall be liable for all of the obligations (to the extent of its respective
Undivided Interest Percentage) on a non-recourse basis of MCV under the
Contract. The undersigned further acknowledges that MCV shall be the initial
Operator of the Facility under the Operating Agreement and further agree that
the Owner Trustees may appoint any Person to serve as a successor Operator
thereunder so long as such Person satisfies the requirements set forth in the
Operating Agreement.


                                                                         Page 15
<PAGE>   16

         7.       No termination, amendment or waiver of any provision of this
Consent and Agreement or consent to any departure by the undersigned from any
provision of this Consent and Agreement shall be effective unless the same shall
be in writing and signed by the Owner Trustees, the Indenture Trustees and MCV
and then such waiver or consent shall be effective only in a specified instance
for the specific purpose for which it was given.

         8.       This Consent and Agreement shall be governed by, and construed
in accordance with, the laws of the State of Michigan, and shall be binding on
the parties hereto and their respective successors and assigns.

         IN WITNESS WHEREOF, the undersigned by its officers thereunto duly
authorized, have duly executed this Agreement as of the day and year first above
written.

                                           Coastal Merchant Energy, L.P.


                                           By:  James C. Dyer IV
                                              -------------------

                                           Title: President & CEO
                                                 ----------------

Seen and Agreed to this
1 Day of September, 2000.

MIDLAND COGENERATION VENTURE
  LIMITED PARTNERSHIP, as
  Lessee


By: LeRoy W. Smith
    --------------
Title: Vice President Energy Supply and Marketing
      -------------------------------------------


                                                                         Page 16
<PAGE>   17
                                   SCHEDULE A



MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP,
as Lessee,


FIRST MIDLAND LIMITED PARTNERSHIP,
DCC PROJECT FINANCE ONE, INC.,
EDISON CAPITAL (formerly, Mission Funding Epsilon),
BELL ATLANTIC CREDIT CORPORATION (formerly, NYNEX Credit Company),
RESOURCES CAPITAL MANAGEMENT CORPORATION,
as the several Owner Participants,


STATE STREET BANK AND TRUST COMPANY
(formerly, Fleet National Bank, Shawmut Bank Connecticut, National Association,
and The Connecticut National Bank),
not in its individual capacity but solely as Owner Trustee
under several separate Trust Agreements,


UNITED STATES TRUST COMPANY OF NEW YORK,
not in its individual capacity but solely as Senior Indenture Trustee
under several separate Senior Trust Indenture, Leasehold Mortgage
and Security Agreements for the benefit of the Senior Secured Notes,


FIRST UNION NATIONAL BANK
(formerly, Meridian Trust Company),
not in its individual capacity but solely as Subordinated Indenture Trustee
under several separate Subordinated Trust Indenture,
Leasehold Mortgage and Security Agreements
for the benefit of the Subordinated Secured Notes, and


MIDLAND FUNDING CORPORATION I AND
MIDLAND FUNDING CORPORATION II,
as purchasers of the Secured Notes.


                                                                         Page 17
<PAGE>   18

                                   SCHEDULE B


         A.       As described below, the Owner Participants named in Schedule A
acquired separate Undivided Interests in the Facility and leased such Undivided
Interests back to MCV through separate Owner Trustees acting on behalf of
separate Owner Trusts. The beneficial interest in each Owner Trust is held by
Owner Participant.

         B.       For purposes of this Schedule B and the Consent and Agreement,
capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in Appendix A to the several separate Amended
and Restated Participation Agreements (the "Participation Agreements"), each
dated as of June 1, 1990, to which MCV, an Owner Participant, the related Owner
Trustee, the related Indenture Trustees, the Funding Corporations, MDC and the
Institutional Senior Bond Purchasers named therein are parties. The rules of
usage set forth in such Appendices also shall apply hereto; provided, that when
the terms defined in Appendix A to a particular Participation Agreement as
relating only to the transaction contemplated therein are used in the plural
herein, such terms are intended to apply to the terms applicable to the
transactions contemplated by all Participation Agreements collectively. In
addition, the word "related", when used with respect to any Person, interest,
instrument, agreement or document, shall denote a Person which is a party to, or
an interest, instrument, agreement or document which is a part of, the
transaction contemplated in a particular Participation Agreement and the
Transaction Documents referred to in such Participation Agreement.

         C.       Pursuant to a related Participation Agreement, MCV sold and
transferred to each Owner Trustee, and each Owner Trustee acquired, subject to
Dow's Prior Rights and Consumers' Prior Rights, an Undivided Interest in the
Facility equal to the respective Undivided Interest Percentage of such Owner
Trustee (with the Undivided Interests in the Initial Assets having been sold and
transferred on the First Closing Date and the Undivided Interests in the Second
Closing Assets being sold and transferred on the Second Closing Date). Each
Owner Trustee leased its Undivided Interest in the Facility back to the Lessee
pursuant to a related Lease, under which MCV has the use, possession and control
of the Undivided Interest in the Facility for the related Lease Term (with the
Undivided Interests in the Initial Assets having been leased on the First
Closing Date and the Undivided Interests in the Second Closing Assets being so
leased on the Second Closing Date).

         D.       On the Second Closing Date, (i) MCV assigned to each Owner
Trustee a separate Undivided Interest in the Facility Agreements and the
Cogeneration Agreements pursuant to a related Facility Agreements Assignment and
a related Cogeneration Agreements Assignment, respectively, (ii) each Owner
Trustee assumed the obligations of MCV under the PPA and the SEPA, to the extent
of its respective Undivided Interest Percentage, pursuant to a related
Cogeneration Agreements Assignment, (iii) pursuant to the related Lease, each
Owner Trustee subassigned its Undivided Interests in the Cogeneration Agreements
and Facility Agreements back to MCV for the respective Lease Term, subject to
the Lien of the related Indentures, and MCV, as lessee, accepted such
subassignment, and (iv) MCV granted to each Owner Trustee a Lien on, without
limitation, MCV's right, title and interest in the related Undivided Interests
in the Cogeneration Agreements and the Facility Agreements (and the Revenues
therefrom) as collateral security for the related Secured Obligations pursuant
to a related Lessee Security Agreement.


                                                                         Page 18
<PAGE>   19

         E.       Each Owner Trustee, as provided in the related Participation
Agreement, financed a portion of the Purchase Price for its Undivided Interest
in the Facility with the proceeds of Senior Secured Notes issued by it to
Midland Funding Corporation I pursuant to a related Senior Trust Indenture and
related Subordinated Secured Notes issued by it to Midland Funding Corporation
II pursuant to a related Subordinated Trust Indenture, and Midland Funding
Corporation I and Midland Funding Corporation II purchased such Secured Notes.

         F.       Each Owner Trustee granted to the related Indenture Trustees
Liens on, among other things, the Owner Trustee's Undivided Interests in the
Facility, the Cogeneration Agreements and the Facility Agreements, the Site
Interest and its interest in certain of the related Transaction Documents as
collateral security for the Owner Trustee's obligations under the related
Secured Notes.

         G.       On the Second Closing Date, the Funding Corporations issued
Bonds pursuant to a Senior Collateral Trust Indenture and a Subordinated
Collateral Trust Indenture, respectively, for the purpose of participating in
the payment of the Purchase Price for each Undivided Interest in the Facility
and acquiring the funds necessary to purchase the Senior Secured Notes and the
Subordinated Secured Notes pursuant to a related Participation Agreement. The
Funding Corporations secured their obligations under the Bonds by a pledge to
the related Collateral Trust Trustees of the related Secured Notes (and the
collateral security therefor) held by the Funding Corporations.

         H.       MCV, each Owner Trustee and Indenture Trustee and the Working
Capital Lender, on the Second Closing Date, entered into an Intercreditor
Agreement with the Collateral Agent providing for the deposit with and
disbursement of all Revenues from the Undivided Interests in the Project by the
Collateral Agent.

         I.       MCV and each Owner Trustee also entered into an Operating
Agreement appointing MCV as the initial operator of the Project during the
respective Residual Terms, commencing on the Operation Commencement Date (as
such term is defined in the Operating Agreement).

         J.       On the Second Closing Date, in order to obtain necessary
working capital for the operation of the Facility, MCV obtained the Working
Capital Line from the Working Capital Lender and granted to the Working Capital
Lender first priority Liens on MCV's right, title and interest (as subassignee
of the separate Undivided Interests in the Cogeneration Agreements and the
Facility Agreements during the respective Lease Terms) in and to (i) all Earned
Receivables, (ii) its Natural Gas Inventory and (iii) the Gas Brokering
Contract.

         K.       Each Owner Trustee has agreed to reassign its Undivided
Interest in the Project (including the Undivided Interest in the Facility
Agreements) and the Site Interest back to MCV at the expiration of the related
Support Term.



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